Ping An

BROKER CALL - Ping An H-share target price raised to 88 hkd - Citigroup2008-4-30 12:21:00 p.m. HKT, XFNA

Citigroup raised its target price for the Hong Kong-listed H-shares of Ping An Insurance (Group) Co of China Ltd to 88 hkd from 78.50 and reiterated its "buy" call after the insurer reported better-than-expected first quarter results. "The strong earnings came from lower-than-expected policy liability costs due to superior product management strategy where Ping An has been avoiding bancassurance and reducing reliance on 'spread' income," the brokerage said. It also noted strong general cost controls by Ping An. Ping An's first quarter to March net profit rose 23.6 pct to 7.1 bln due to expansion in its insurance, banking and securities business lines. This was in stark contrast to China Life Insurance Co Ltd's more than 50 pct net profit decline in the same period. "The results continued to highlight the advantages of Ping An's unique diversified financial operating model," Citigroup said. It raised its 2008 and 2009 earnings forecasts for Ping An by 10 pct and 4 pct respectively. Amid the A-share market correction, Ping An's net asset value (NAV) fell by just 9 pct quarter-on-quarter, easing the fear that overall embedded value growth from new business will be wiped out by NAV losses due to falling A-share markets, Citigroup said. "Ping An remains our preferred pick in regional insurance space. We reiterate our view that Ping An's expanding agency force will continue to deliver strong new business value growth in 2008 while its focus on universal life and less reliance on bancassurance products will see less margin squeeze pressure when compared to its peers," Citigroup said. It forecasts over 30 pct new business value growth for Ping An in 2008.