By Bloomberg News Feb. 24 (Bloomberg) — Ping An Insurance (Group) Co., the world’s second-biggest life insurer, aims to sell banking and investing services to its 50 million customers with a one-stop shopping model being abandoned by U.S. and European companies. Ping An, listed in Hong Kong and Shanghai, expects banking, asset management and insurance to each contribute a third of profit within about 10 years. Five years after Citigroup Inc. sold Travelers Life & Annuity and 17 months after Allianz SE agreed to sell Dresdner Bank, President Louis Cheung says Ping An will succeed in its bank-assurance ambition because it developed each business. “Universal banking is dead, but we are not the same,” he said in an interview in his Shenzhen office. “We built from scratch each of our businesses, and we have such a young client group that grows continuously during the process.” Ping An, part owned by HSBC Holdings Plc, may find it hard to convince some investors to back its vision as memories linger of Citigroup and Allianz’s retreat, and as some U.S. politicians propose reinstituting Depression-era strictures barring bank holding companies from other financial businesses. Ping An’s insurance unit accounted for 77 percent of its profit in the first half of last year, dwarfing banking operations’ 10 percent share and the 13 percent contribution of asset management. “I have no strong preference to own a financial conglomerate,” said Winson Fong , who helps manage $2.5 billion at SG Asset Management H.K. Ltd. “Not many success stories in history and conglomerates tend to trade at discount valuation.” Allianz, Citigroup Allianz bought Dresdner in 2001 for $20 billion in its biggest acquisition, with the aim of selling more insurance products through bank branches. Instead, mounting loan losses at Dresdner and falling stock markets dragged on its own shares and profit. Munich-based Allianz agreed to sell the unit in September 2008 to Commerzbank AG for 9.8 billion euros ($13.4 billion). Travelers Insurance Group’s $70 billion merger with Citicorp in 1998 created the world’s biggest financial services company. Citigroup agreed to sell the life unit and most of its international insurance business to MetLife Inc. in January 2005 for $11.5 billion to focus on what it expected would be more profitable areas. Bank-assurance groups tend to lack “singular focus” on each business line as the top management’s expertise isn’t as diversified, said Arjan van Veen , a Sydney-based insurance analyst at Credit Suisse Group AG who doesn’t cover Ping An. “There are some synergies, but they’re generally not enough to make up for the pitfalls of the bank-assurance model.” Bullish Analysts Still, that hasn’t deterred 18 of the 28 analysts who cover Ping An from rating the stock a “buy” compared with just one “sell” recommendation, according to data compiled by Bloomberg. Chairman Peter Ma in 2004 hired Dominic Leung , who had three decades of experience with insurers including Prudential Plc, to manage the group’s life insurance business. Richard Jackson, who worked for Citigroup for 20 years, joined in 2005 and now heads banking operations. Ping An shares have dropped 12 percent in Hong Kong trading this year, while the benchmark Hang Seng Index slid 5.7 percent. Larger rival China Life Insurance Co. stock is down 9.1 percent. Shenzhen-based Ping An has often been the first mover among China’s insurers. Set up by Ma in 1988 in a then state- monopolized market, the company was the first local insurer to get a commercial insurance license, usher in foreign investors and use personal agents to distribute life policies. Home Ground Ping An is expanding at home after suffering a setback in its plans to expand overseas asset management operations through acquisitions. It wrote off 22.8 billion yuan ($3.3 billion) in 2008 on a stake in Brussels-based Fortis, which was bailed out by three European governments after becoming a casualty of the credit crunch. The Chinese insurer remains committed to that goal, although it will mainly focus on growing its Hong Kong asset management unit for the near term as financial markets have yet to stabilize after the crisis, Cheung said. Today, Ping An has secured a rare spectrum of financial licenses in a nation where the insurance, banking and securities industries are still separately regulated. It owns units in life, property insurance, pension, banking, securities, trust, and is awaiting regulatory approvals for a fund management venture with Singapore’s United Overseas Bank Ltd. Expanding Market China’s insurance market, which was the world’s sixth largest in 2008, expanded by an average 30 percent annually since 1978 to 1.1 trillion yuan last year. The life insurance market alone may grow to as much as $275 billion in gross premiums by 2015, making it at least the fifth largest, according to McKinsey & Co. China’s per capita spending on life insurance was $71.70 in 2008, compared with $1,901 in the U.S., according to a Nov. 24 report by Ping An Securities Co., giving Ma room to penetrate a client base that’s growing more than 10 percent a year. “The important thing is to satisfy these 35- to 40-year- old clients,” whose needs for non-insurance products will emerge gradually, President Cheung said. “As long as they approve us adequately, our services can catch up and we can keep the cost of selling new products lower than others.” ‘Explosive Growth’ The company added more than 8 million new customers last year, bigger than the population of Switzerland. The new clients, over 90 percent of whom are policyholders, average 35 years of age, compared with 40 years old for the entire client base. “We want our insurance market share to keep growing” providing a platform for selling other products, Leung, now Ping An’s chief insurance officer, said in an interview. The group’s property insurance premiums rose 44 percent last year, overtaking China Pacific Insurance (Group) Co. as the nation’s second-biggest non-life insurer, while life premiums surged 31 percent. Not content with that, “we hope to see explosive growth in banking, and we want asset management to develop faster,” Leung added. Ping An Asset Management Co. will oversee about 1 trillion yuan of the group’s insurance funds by the end of 2013, up from about 650 billion yuan now, Deputy Chief Investment Officer Chen Dexian said. The trust unit is forecast to be managing about 500 billion yuan of clients’ money by then, compared with more than 100 billion yuan now. Banking Growth Ping An Securities, which underwrote the most initial public offerings in China last year, contributed 6.1 percent of the group’s profit in the first half. The banking arm is already selling 60 percent of its credit cards, which total almost 3.4 million currently, to existing insurance clients, keeping issuing costs at a “very low” level, Cheung said. That’s just a start, said Jackson , president of Ping An Bank Co. “Once the customer has made a decision to become a customer of the banking business as well, then that opens up the full range of banking products and services.‘’ — Zhang Dingmin . Editors: Malcolm Scott , Andreea Papuc To contact the Bloomberg News staff for this story: Zhang Dingmin in Beijing at Dzhang14@bloomberg.net
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