Ping An in 10 bln yuan share buyback after profit beats forecast

Financial giant Ping An Insurance Group Co. of China Ltd. (02318.HK, 601318.CN) said it will return up to 10 billion yuan (US$1.5 billion) to shareholders through its first share buyback, after posting a forecast-beating jump in annual profit, Reuters reports.

China’s largest insurer by market value said it planned to use 5-10 billion yuan of its own funds to repurchase its Shanghai-listed A shares. Should it reach the top end of this range, it would be the fifth-largest buyback by a Chinese company, according to Refinitiv data.

The profit result and buyback plan highlight Ping An’s strength compared with smaller players at a time of increased scrutiny of insurers’ use of leverage, which has seen some punished for risky practices.

Buybacks are often seen as a sign managers believe company shares are undervalued and can help boost the stock. Ping An’s executives have repeatedly said its stock has been undervalued by investors.

Ping An Insurance's Shanghai shares were 2.2 percent higher in afternoon trading on Wednesday, in a broader market down 0.9 percent. "It's more as a mechanism whereby if the market is volatile and the management team believes the stocks are undervalued, this is one of the ways we can give back to the shareholders and at the same time stabilize the stock price," Ping An's co-chief executive, Jessica Tan, told Reuters in an interview in Hong Kong on Wednesday.

The move announced late on Tuesday comes after Chinese securities regulators last year loosened rules governing buybacks by listed companies, Tan said.

“We want to be one of the first ones to have the flexibility to do so,” she said, adding Ping An would consider more buybacks in future as long as the regulatory environment permitted.

The repurchase price for Ping An’s A shares would not exceed 101.24 yuan a share, the company said in a statement as it released its annual results. That is up to 46 percent higher than the shares’ closing price at 69.25 yuan on Tuesday, before the results and buyback were announced.

Strong earnings

The company said full-year profit rose 20.6 percent to 107.4 billion yuan (US$16 billion) in 2018, boosted by strong growth in its core life and health insurance business. That was above the 101 billion yuan Refinitiv-compiled SmartEstimate, which is weighted in favor of more accurate analysts.

As China’s most diversified insurer, Ping An has in recent years focused on technology and maintains a commitment to invest 1 percent of its annual revenue in research and development, although fintech and health technology accounted for about 7 percent to the group’s total earnings last year.

The only insurer in Asia deemed by regulators globally systemically important currently has 11 technology companies, six of which are still at an incubation stage and just two of which – online wealth management platform Lufax and online car purchase platform Autohome – are profitable.

“We will continue to invest. It’s easy for us to be a lot more profitable, but if we are serious about being a tech company we need to continue to do so,” Tan said.

Boosting Ping An’s bottom line in 2018 was its life and health insurance business, where net profit jumped 62 percent to 57.9 billion yuan from a year earlier.

The company’s gross written premiums grew 19 percent to 719.6 billion yuan. The number of its retail customers rose 11 percent, hitting 184 million, with each customer holding 2.53 contracts on average, up 9 percent.

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