The truth about the profits behind Ping An Insurance (Group) Company of China's aggressive shareholding increases
Author | Wang Hanyu
Editor | Zhang Fan
China Ping An's spree of buying bank and insurance stocks continues.
Recently, Ping An Life Insurance once again increased its stake in Agricultural Bank of China. On September 2nd, it announced that after increasing its holdings of Agricultural Bank of China's H-shares on August 26th, it reached 15% of the bank's H-share equity on that day. Previously, Ping An Life Insurance had increased its stake in Agricultural Bank of China's H-shares on February 17th and May 12th respectively, with the number of H-shares it held exceeding 5% and 10% of the total H-shares respectively.
Since the beginning of this year, companies under China Ping An have frequently increased their stakes in bank stocks and even peer companies, such as Pacific Insurance and China Life Insurance.
At the 2025 mid-year performance press conference held on August 27th, Xie Yonglin, General Manager and Co-CEO of China Ping An, specifically mentioned when responding to the above trend that "increasing stake" is just a term used in accordance with information disclosure rules after the shareholding reaches a certain proportion, rather than "sinister intentions". He also said that Ping An Group will continue to moderately increase its equity allocation around two directions: new productive forces and high dividends.
Looking at the group's semi-annual report, as of the end of the reporting period, the total amount of China Ping An's stocks and equity funds was 778.422 billion yuan, accounting for 12.6%. Against the background that the current 10-year Treasury bond yield is only around 1.7%, there is indeed room for an increase in its equity investment ratio.
On the other hand, under the view of the industry's "golden development period", the decline in China Ping An's net profit attributable to the parent company in the first half of the year triggered pessimism among some investors. On the first day after the release of the semi-annual report, China Ping An's stock price fell by 3.02%.
On one hand, there is the frequent "buying spree" of increasing stakes, and on the other hand, there is the "performance pressure" of declining net profit. How should the market view China Ping An's investment value?
Behind the decline in net profit attributable to the parent company
Financial report data shows that in the first half of 2025, China Ping An achieved a net profit attributable to the parent company of 68.047 billion yuan, a year-on-year decrease of 8.8%.
However, further examination of the financial report details reveals that among China Ping An's 6.2 trillion yuan of investment assets, 58% are classified as "financial assets measured at fair value through other comprehensive income". This means that the rise and fall of this part of the assets will not be reflected in the current net profit attributable to the parent company, and will only be converted into profit when the assets are sold.
China Ping An's investment portfolio in the first half of the year. Source: Company's financial report
At the performance meeting, Fu Xin, Deputy General Manager and Chief Financial Officer of China Ping An, also mentioned that in the past two years, the group has allocated a large amount of stock assets, of which 67% are included in OCI (i.e., "other comprehensive income"). This part of the floating profit of about 60 billion yuan is not reflected in the income statement, but actually increases the net assets. Reflecting on the operation level, it can improve the comprehensive solvency adequacy ratio of insurance companies and provide a solid foundation for dividends.
In addition, the fluctuation of the net profit attributable to the parent company is also affected by short-term non-operating factors. According to the explanation in the semi-annual report, the one-time impairment of 3.4 billion yuan brought about by the consolidation of Ping An Good Doctor and the valuation adjustment resulting from the issuance of H-share convertible bonds together dragged down the growth rate of China Ping An's net profit attributable to the parent company by about 6%.
These factors are all short-term and accidental events and are not sustainable. If their impact is excluded, the year-on-year decline of the net profit attributable to the parent company will narrow to 2.8%, basically in line with the overall performance of the industry.
Based on the special investment income accounting rules of the insurance industry, for insurance companies, the core indicator that truly reflects their operating quality should be the operating profit. After excluding non-operating factors such as short-term investment fluctuations and one-time gains and losses, this indicator can more truly reflect the continuous income created by insurance companies through their main businesses such as underwriting and services.
The financial report shows that in the first half of the year, China Ping An achieved an operating profit attributable to shareholders of the parent company of 77.732 billion yuan, a year-on-year increase of 3.7%, accelerating by 1.3 percentage points compared with the first quarter, showing a quarterly improvement trend.
The balance of the contract service margin resumes positive growth
The growth of the operating profit mainly stems from the reform of China Ping An's core life insurance business.
As of the end of June this year, the balance of China Ping An's contract service margin was 733.2 billion yuan, a 0.3% increase from the end of last year. Although it only increased by 0.3%, this indicator resumed positive growth for the first time since 2022. On the one hand, it benefited from the trend of residents' wealth management needs driving the transfer of deposits to life insurance under the downward interest rate environment. On the other hand, it also reflects that the life insurance reform has begun to show results.
Simply put, the contract service margin can be understood as the profit accumulated historically. Since insurance premiums are usually paid in installments, the premiums received by insurance companies in the current period cannot be fully recognized as profit. Instead, they need to be gradually released as the current operating profit in the future decades of the policy validity period corresponding to obligations such as claims, payments, and services. Therefore, the contract service margin is equivalent to a "reservoir" of profit.
The increase in the "reservoir" water level, that is, the growth of the contract service margin balance, means that the scale of profit that can be released in the future is expanding, which reflects the subsequent profit potential of insurance companies.
Previously, affected by factors such as the transformation of the life insurance industry and the adjustment of the agent channel, the balance of the contract service margin of Ping An Life Insurance continued to decline. The resumption of positive growth in the first half of this year is mainly based on the growth of the new business value (NBV) and the new business value rate (NBVR).
The financial report shows that in the first half of the year, the NBV of Ping An Life Insurance and Health Insurance business was 22.335 billion yuan, a year-on-year increase of 39.8%, accelerating by 4.9% compared with the first quarter; the NBVR increased to 38.9%, a year-on-year increase of 9%.
From the perspective of the channel, although the number of agents decreased by 6.3% again in the first half of the year, the NBV increased by 17% year-on-year, and the per capita NBV of agents increased by 21.6% year-on-year, which means that the per capita productivity has increased. At the same time, the contribution ratio of the non-agent channel to NBV increased to 33.9%, compared with 18.7% for the whole of last year. This means that non-agent channels such as bank insurance and community finance contributed more increments, among which the NBV of the bank insurance channel increased by 168.6% year-on-year.
Source: Soochow Securities Research Institute
Last year, Wu Jianwei, the former deputy president of Zheshang Bank, joined Ping An Life Insurance to be in charge of the bank insurance business department. At the semi-annual performance meeting, Guo Xiaotao, Co-CEO and Deputy General Manager of China Ping An, mentioned this personnel change again when talking about the bank insurance channel, saying that the dual-channel layout of "exclusive cooperation with Ping An Bank + in-depth linkage with external large banks" currently covers more than 80% of the mainstream bank outlets in the country, reducing the dependence on a single agent channel.
Can the AI strategy drive the revaluation of value?
Although the new business is showing potential, China Ping An's current valuation level is still at a historical low.
As of September 3rd, its dynamic PE of A-shares is about 8.7 times, and the PB is about 1.1 times. It is not only lower than that of international peers such as AIA Group (PE of about 16.0 times) and UnitedHealth Group (PE of about 13.0 times), but also lower than the PE level of 10.3 times of China Life Insurance. Moreover, its PB lags behind domestic leading life insurance companies such as New China Life Insurance, China Life Insurance, China Pacific Insurance, and People's Insurance Company (Group) of China.
Comparison of the valuation levels of insurance companies among peers. Data as of September 3rd. Source: Wind
This low valuation situation may be partly due to the market's perception of its business structure.
Different from other listed insurance companies focusing on life insurance business, China Ping An's business map covers multiple fields such as life insurance, property insurance, banking, securities, trust, and medical care.
Among them, Ping An Property Insurance and Ping An Bank are the two important profit sources besides life insurance. In the first half of the year, Ping An Property Insurance achieved an operating profit attributable to the parent company of 10.01 billion yuan, accounting for 12.9%; Ping An Bank achieved an operating profit attributable to the parent company of 14.41 billion yuan, accounting for 18.5%. The two major sectors together contributed more than 31% of the group's operating profit attributable to the parent company.
Composition of China Ping An's operating profit in the first half of the year. Source: Company's financial report
The market generally values the property insurance and banking sectors lower than the life insurance sector. The PE of bank stocks is about 6 times, and the PE of property insurance stocks is about 7 times. The "discount on business structure" has led to a lower overall valuation of China Ping An.
At the performance meeting, Guo Xiaopeng said that China Ping An's future valuation will come from two aspects: continuous strategic leadership and technology empowerment. He believes that comprehensive finance and medical and elderly care are two large-scale, high-growth, and highly synergistic sectors. When the two businesses generate synergy and are combined with the group's continuous investment and innovation in the field of AI, the company's valuation will have more room for growth.
However, the profit model of AI empowering finance and medical care is not yet clear. Although China Ping An's financial report lists many achievements of AI empowerment, such as the number of calls to the Ping An large model reaching 818 million in the first half of the year, the number of applications in multiple scenarios exceeding 650; Ping An Property Insurance's intelligent anti-fraud claims interception and loss reduction reaching 6.44 billion yuan; AI agents assisting in sales of 66.15 billion yuan, etc., most of them are concentrated in the aspects of optimizing experience and reducing costs.
Considering the capital expenditure, in the first half of the year, China Ping An's total "business and management expenses" reached 40.916 billion yuan, an 11% increase compared with 36.84 billion yuan in the same period last year.
Composition of China Ping An's operating expenses in the first half of the year. Source: Company's financial report
Usually, the core expenditure of a company's investment in AI R & D is reflected in management expenses. Comparing with technology companies like Tencent, whose management expenses increased by about 25% year-on-year in the first half of the year, and the main reason for the increase includes the increase in AI R & D investment, China Ping An's investment does not seem to reflect its potential for AI to empower business growth.
At the same time, through the content of the financial reports of many companies, it can also be found that leading listed insurance companies such as People's Insurance Company (Group) of China, China Life Insurance, China Pacific Insurance, and New China Life Insurance have also taken AI as their core strategy and uniformly mentioned that they will increase the penetration of AI in the links of insurance application, claims settlement, and customer service, showing no obvious difference from China Ping An's strategy. Therefore, for China Ping An to achieve a valuation increase, it still needs to show the market where its AI moat lies.
In addition, there are also uncertain risks in the application prospects of AI in key fields such as finance and medical care. If the regulatory authorities raise the access threshold for AI technology in relevant fields in the future, China Ping An may have to invest a large amount of resources for compliance adjustment.
Back to the present, dividend assets are in the limelight, and insurance stocks with stable dividends and high dividend yields are expected to continue to be favored by funds in the short term.
Along with the release of the semi-annual report, China Ping An's board of directors announced that the company plans to distribute an interim cash dividend of 0.95 yuan per share to shareholders, a 2.2% increase year-on-year. This is the 13th consecutive year that it has maintained an increasing dividend. Looking at the trend since the listing of the stock, China Ping An's cumulative total financing amount is 38.87 billion yuan, and the cumulative total dividend amount is 346.898 billion yuan, with a dividend-to-financing ratio of about 8.92.
In a low-interest rate environment, this "quasi-fixed income + growth" attribute may attract more and more long-term funds seeking stable returns to buy.
On the other hand, Xie Yonglin clearly stated at the performance meeting the two main lines of the group's future investment: "One is to focus on new productive forces and layout in fields that meet national strategies such as high-end manufacturing, new energy, and semiconductors; the other is to focus on high-dividend assets and increase the allocation of blue-chip stocks with a dividend yield of more than 4% and stable performance."
Paying attention to new productive forces and increasing the allocation of high-dividend stocks, if the asset side can achieve better returns in the future as these two directions are gradually implemented, China Ping An may be expected to achieve a valuation increase through its dividend asset attribute.
*Disclaimer:
The content of this article only represents the