Prudential, Ping An report strong policy sales in first two months of 2023 as end of pandemic measures spurs growth
South China Morning Post
5 min read
The end of pandemic restrictions in Hong Kong and mainland China is reviving policy sales and improving the 2023 outlook for major insurance companies Prudential and Ping An, after both companies reported profit declines for 2022.
Sales of new policies at Prudential grew 15 per cent in Asia in the first two months of the year, with the insurer crediting the strong growth to the scrapping of Covid-19 restrictions across the region and the reopening of borders between Hong Kong and mainland China.
Meanwhile, Ping An Insurance, the largest insurer in mainland China, reported that its premium income from life-insurance policies across the country rose 5 per cent year on year in the first two months of 2023 to 13.55 billion yuan (US$1.97 billion).
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UK-based Prudential said in an exchange filing on Wednesday that sales were back on track following a slump last year because of the pandemic, adding that its investment returns were affected by market volatility.
Prudential reported a 55 per cent year-on-year decline in net profit to US$1.007 billion for 2022, the first full-year results after its restructuring as a pure Asia and Africa focused insurer. Analysts polled by Bloomberg had estimated an 83 per cent decline in profit.
"We have delivered a resilient performance against a backdrop of Covid-19-related disruption and broader macroeconomic volatility," said Anil Wadhwani, the new CEO of Prudential in his first result announcement after joining the insurer last month. "The results reflect the advantage of our diversified business model across the Asia region."
The company's shares fell 1.2 per cent to close at HK$108.8 on Wednesday after the earnings announcement during the midday break.
The insurer said it saw business grow in the second half of last year across markets it operates in, including Hong Kong, mainland China, Taiwan and Southeast Asia such as Singapore, Indonesia and Malaysia, as Covid-19 controls started to ease before they were fully removed at the start of this year.
"In Hong Kong, we have seen a gradual increase in cross-border traffic from the Chinese mainland as travel restrictions are eased," Wadhwani said. "Demand for savings products across the Hong Kong business is drove the increase in annual premium equivalent sales in the first two months of 2023."
"The initial demand we are receiving is in savings products," he added.
Prudential joined its peers AIA, HSBC Life and Standard Chartered in reporting strong sales this year following the border reopening. Some half a million visitors from mainland China travelled to Hong Kong in January, compared with 604,564 for the whole of 2022.
Mainland Chinese visitors, the biggest spenders on Hong Kong insurance policies before the pandemic brought cross-border travel to a standstill for three years, started to return to the city to buy products in the fourth quarter of last year, when Hong Kong scrapped its hotel quarantine rule in September before a full reopening in January. Hong Kong regulation requires that mainland visitors buy policies in person.
Mainlanders spent HK$1.1 billion on life policies in Hong Kong in the fourth quarter, exceeding the HK$1 billion in sales during the first nine months. Total sales to mainland visitors last year stood at HK$2.1 billion, more than triple in 2021, but much lower than the HK$43.3 billion in 2019, before the pandemic struck.
Ping An, meanwhile, reported that net profit in 2022 declined 17.6 per cent year on year to 83.77 billion yuan, or 4.8 yuan per share, missing Bloomberg's estimates of no change at 101.7 billion yuan. The drop is mainly due to a 29.3 per cent decline in total investment income to 101.83 billion, according to the company.
The sales value of new policies, an important indicator of Ping An's core insurance business, fell by a sharp 24 per cent year on year to 28.82 billion yuan in 2022, as the company is restructuring its agency by favouring productive agents over a huge salesforce. The number of agents it employed dropped 26 per cent to 445,000 at the end of last year, compared with 600,000 a year earlier.
Shares of Ping An rose 3 per cent on Wednesday to close at HK$52.25 before the results announcement.
"Ping An Insurance's net profit has a chance to increase by 30 per cent in 2023, as sales are set to recover, mainly benefiting from the mainland's relaxation of control measures since the beginning of this year," said Kenny Ng Lai-yin, a strategist at Everbright Securities International.
"The compensation for the recent Tsim Sha Tsui fire has not been officially announced yet," Ng said. "But even if it involves Ping An, the impact on the net profit may be relatively mild compared to the sheer size of the insurer."
