2004 Results. April 19, 2005

Transcription

1 2004 Results April 19, 2005

2 Agenda Topic Overview Speaker Dr. Peter Ma Position Chairman & CEO Financial Highlights Dr. Louis Cheung COO & CFO Business Review Dominic Leung Chairman & CEO, Ping An Life Investment Highlights Philip Young Chief Investment Officer Embedded Value Stephen Meldrum Chief Actuarial Officer 1

3 a Memorable Year Successful listing of Ping An on SEHK on June 24, 2004 Sustained quality improvement in every segment of our business Continuous reform of Life and P&C insurance businesses More substantial leverage of our broad customer base for cross-selling Back-office centralization underway to further improve operating efficiency A multi financial services platform to realize new growth opportunities 2

4 a Record Year Record high in net profit Net profit: RMB 3,116 million +34.3% Capital was strengthened Equity: RMB 28,253 million % Total assets increased Asset: RMB 264,496 million +28.4% 3

5 Outlook for 2005 The company will continue its efforts to achieve profitable growth: Enhance the profitability of its core insurance businesses Continue to develop its securities, trust and banking businesses Capture new business opportunities in pension and health insurance Centralize back-office processing to improve customer service and product offerings with better operating efficiency Leverage its extensive customer base and further promote crossselling 4

6 Financial Highlights

7 Strong Business Operating Performance despite unfavorable total investment returns Continuous improvement in product mix paid off Strong source of profits from expense gain and mortality gain from long-term regular premium business Effective cost control, disciplined underwriting and commission savings further enhanced profitability Effective tax rate reduced mainly due to proper investment strategy to increase exposure to tax exempt government bonds as yield picked up 6

8 Sources of Profit Outlook Sources of Profit Our Assessment Cost of liability continues to decline given new business growth Investment Gain Mortality/ Morbidity Gain Positive upward trend in investment returns Higher proportion of longer dated fixed income securities Direct equity investment, overseas investment and possible investment in domestic infrastructure project and investment properties Selling more protection and short-term accident and health products General improvement in mortality Improving underwriting and risk selection skills Expense Gain Strong renewal premiums contribute to increasing economies of scale Cost control programs in place to improve cost efficiency Back office centralization will further enhance operating efficiency 7

9 Accounting for Universal Life Products The company launched its universal life products in The IFRS accounting treatment for premiums received from these products is as follow: Premium Income (per PRC basis) Premium Income (per IFRS basis) Part of the premiums, including cost of insurance charge, expense loadings, and investment spread are recorded as revenue in the income statement. Premium Deposits(per IFRS basis) Part of the premiums, which are allocated to the policyholders investment account, are recorded as a liability item Policyholders contract deposits in balance sheet. 8

10 Income Statement Highlights (RMB million) Growth Gross written premiums 60,049 63, % Total Investment income 6,488 6, % Total revenue 63,251 66, % Insurance related payment (1) (48,179) (52,318) -7.9% General and administrative expense (5,922) (5,505) 7.6% Operating profit 3,747 2, % Net profit 3,116 2, % (1) Includes claims and policyholders benefits, change in DAC and policyholders reserves 9

11 Net Equity and EPS (RMB million) (RMB yuan) 30,000 Total Equity EPS 28, ,000 20, ,000 11,687 12, ,000 5, EPS for 2004 is calculated on the weighted average number of 5,588,324,591 shares 10

12 2004 Segment Results (RMB millions) Life P&C Group Total Gross written premiums 49,899 10,150 60,049 Total Investment income 5, ,488 Total revenue 55,244 7,180 63,251 Insurance related payment (1) (43,929) (4,250) (48,179) General and administrative expense (3,653) (1,742) (5,922) Operating profit 3, ,747 Net profit 2, ,116 Net Profit Growth Rate 38.7% 126.0% 34.3% (1) Includes claims and policyholders benefits, change in DAC and policyholders reserves 11

13 General and Administrative Expense Cost control to improve efficiency General and Administrative Expense(RMB million) 54,729 G&A expense Gross premium and premium deposits 58,854 Life expense ratio (1) 3, % 4, % ,764 Net expense Net earned premium 5,043 P&C expense ratio (2) 1, % 1, % 2004 (1) Life expense ratio is computed by dividing general & administrative expenses by gross written premiums, policy fees and premium deposits. (2) P&C expense ratio is computed by dividing net expenses by net earned premium where net expenses is the sum of general & administrative expenses, commission,finance costs, provision for insurance guarantee fund, change in DAC and reinsurance commission income

14 Solvency Margin (RMB millions) Life Insurance 11,335 (RMB millions) P&C Insurance 1,754 9,206 Solvency ratio: 123.1% 1,105 Solvency ratio: 158.7% statutory solvency margin actual solvency margin statutory solvency margin actual solvency margin 13

15 Business Review

16 Life Insurance Gross Written Premiums, Policy Fees and Premium Deposits (RMB million) Growth Individual 40, % 37, % 6.9% Bancassurance 5, % 10, % -44.0% Group 8, % 10, % -19.4% Life total 54, % 58, % -7.0% Individual life business gross written premiums, policy fees and premium deposits grew 6.9%, and the proportion of Individual life business grew to 73.4% from 63.8%. 15

17 Individual Life Premium Income and Premium Deposits (RMB million) Individual Life First year premiums and policy fees First year universal life premium deposits First year investment-linked premium deposits Total first year premiums, policy fees and deposits Growth 7,628 1, ,961 9, , % N/A N/A -0.7% Renewal premiums and policy fees Renewal investment-linked premium deposits Total premiums, policy fees and deposits 28,321 2,882 40,164 25,594 2,948 37, % -2.2% 6.9% Flat growth for first year premiums, policy fees and deposits. Renewal premiums and policy fees increased 10.7% Total individual life business premiums and deposits increased 6.9%. 16

18 Bancassurance and Group Insurance Premium Income and Premium Deposits (RMB million) Growth Bancassurance First year premium and policy fees First year universal life premium deposits Total first year premium, policy fees and deposits 5, ,720 10, , % N/A -45.2% Renewal premium and policy fees Total premium, policy fees and deposits 197 5, , % -44.0% Group Insurance Gross premium and policy fees Investment-linked premium deposits Total premium, policy fees and deposits 8, ,648 9, , % -37.9% -19.4% Managed the product mix for Bancassurance and Group Insurance business. 17

19 Steady Quality Improvement for Life Business Policy Persistency Ratio 95.0% 92.5% 13-month 25-month 90.0% 87.5% 85.0% 82.5% 80.0% 86.1% 85.7% 79.6% 87.5% 80.3% 77.5% 75.0% 75.5%

20 P&C Business Gross Premium Income Managing profitability through business mix P&C Business (RMB million) Growth Auto 6, % 4, % 35.8% Non-Auto 3, % 3, % 5.8% Accident&Health % % 147.0% P&C total 10, % 8, % 25.4% 19

21 P&C s Combined Ratio Improved 120% 100% 99.7% 2.5% decrease 97.2% 80% 60% 40% 20% 0% 78.5% 77.0% 21.2% 20.2% Loss ratio Expense ratio 20

22 Cross-selling is Even More Promising Life Customer Purchasing P&C Insurance Products (PRC Premiums, RMB million) P&C Customer Purchasing Life Insurance Products (PRC Premiums, RMB million) Growth = 97.1% 468 Growth = 15.4%

23 Investment Highlights

24 Investment Highlight Rising Interest Rate Environment Investment Results 5.50% 5.00% 10 Year Government Bond Yield Improved asset allocation of investment portfolio and lengthened assets duration. Majority of new money were invested in bonds which achieved an average yield of 4.8%. 4.50% 4.00% 3.50% 3.00% Weeks in 2004 Government bonds, which enjoy tax exemption, increased as a percentage of total bond investments. Net investment income yield remained at 4.1%. Total investment yield decreased to 3.6% mainly due to short-term equity market downturn. 23

25 Investment Income and Yield Growth Total Investment Income 6,488 6, % Total Investment Yield 3.6% 4.5% -90bp Net Investment Income 7,261 5, % Net Investment Income Yield 4.1% 4.1% 0bp 24

26 Investment Portfolio % =RMB 201,444 million % =RMB 155,920 million Investment properties 0.7% Equity investments 3.0% Other fixed maturity investments 0.3% Investment properties 0.9% Equity investments 3.1% Other fixed maturity investments 2.1% Investment Portfolio Breakdown Term deposits 39.9% Bond investments 56.1% Term deposits 50.2% Bond investments 43.7% Government Bond as % of Total Bond Portfolio 62.4% 56.1% Bond investments include the carrying value of derivatives embedded with the host contract. Equity investments include equity funds,direct equity investments and investment in an associate. 25

27 Embedded Value

28 Negative Spread As Our New Business Growth Has Diluted the Impact High Interest Guaranteed Policies ( 5%) as % of Total Statutory Reserves Weighted Average Pricing Rate (Cost of Liability) 68.5% 53.3% 26% Decrease 45.3% 42.0% 5.77% 5.30% 97 bps Decrease 5.00% 4.80%

29 Embedded Value as at December 31, 2004 (RMB millions) Adjusted net asset value Value of in-force business written prior to 6/1999 Value of in-force business written since 6/1999 Cost of holding required solvency margin Embedded value 25,161-16,743 33,127-4,297 37,248 13,631-22,102 29,752-2,202 19,078 *Figures may not be additive due to rounding 28

30 Embedded Value Breakdown by Key Components Embedded Value Component 2004 (RMB million) Central Case 33,127 (4,297) 37,248 25,161 (16,743) Adjusted NAV Value of in-force business written prior 6/1999 Value of in-force businss written since 6/1999 Cost of Solvency Margin Embedded Value 29

31 Embedded Value Key Economic Assumptions The non investment-linked fund s earning rate, adjusted for tax or 12.5% has been assumed as the central risk discount rate for the in-force life business. A level 12.5% risk discount rate has been assumed for the calculation of one-year s new business value. Future investment return, has been assumed to be 4.35% in 2005 and increased by 0.1% every year to 4.75% in 2009 and thereafter for non-investment linked business. For investment-linked business, a 5.25% per annum investment return has been assumed. These investment return assumptions have been derived by consideration of the Group s current and expected future asset allocation and associated investment returns for a range of major asset classes. A 18.5% average income tax rate has been assumed. In addition, a 5.5% business tax rate has been applied to the gross premium of the short-term accident business. 30

32 Embedded Value Movement Analysis Movement in Breakdown by Key Components (RMB millions) 13,279 37,248 19,078 1,181 3,913 1,380 3,437 (3,764) (1,321) 657 (592) Embedded Value as at 31/12/2003 Expected return on yearstart embedded value One year new business value Risk Discount Rate Change Assumption and modeling changes Market Value Adjustment Investment return variance Other experience variance Dividend paid Capital injection (IPO proceeds) Embedded Value as at 31/12/

33 One Year s New Business Value Despite FYP decreased The overall new business margin improved 27,920 (RMB millions) 21, % 15.23% 4,252 3,

34 Embedded Value Sensitivity Analysis The Group has investigated the effect, on the value of in-force business and the value of one year s new business, of varying independently certain assumptions regarding future experience. The following changes in assumptions have been tested: Risk discount rate A level 4.5% investment return for non investment-linked funds and 5.5% for investment-linked funds A 10% reduction in policy discontinuance rates A 10% reduction in the mortality and morbidity rates for assured lives and loss ratios for the short-term business A 10% reduction in maintenance expense 33

35 Sensitivity Analysis Risk Discount Rate (RMB millions) Risk Discount Rates Earned Rate /10.0% Earned Rate /12.5% Earned Rate /15.0% 12.5% Value of In-force Business 14,606 12,086 9,972 13,936 Embedded Value 39,768 37,248 35,133 39,097 10% 12.5% 15.0% Earned Rate /12.5% One Year s New Business Value 4,937 3,913 3,174 4,989 34

36 Sensitivity Analysis Other Actuarial Assumption Changes Assumptions Value of In-force Business One Year s New Business Value Central Case 12,086 3, %/5.5% Investment Return Rate 8,682 3,814 10% Reduction in Policy Discontinuance Rates 12,175 4,076 10% Reduction in Mortality and Morbidity Rates 12,263 3,973 10% Reduction in Maintenance Expenses 12,787 4,013 Risk discount rate were earned rate/12.5% and 12.5% for value of inforce business and one year s new business value respectively. 35

37 Questions and Answers