Ping An Insurance, China's second-largest life insurer, posted a 140% gain in first-half profit late on Thursday, driven by a contribution from its banking operations and strong investment returns amid a booming domestic stock market.
This year, analysts expect Ping An's non-insurance business -- a fledgling banking arm cemented by the purchase of Shenzhen Commercial Bank in late 2006 and the establishment of Ping An Bank in 2005 -- to help galvanize the bottom line.
Ping An, which trails market leader China Life Insurance, reported earnings of 9.969 billion yuan (US$1.31 million) in the six months ending June 30, compared with 4.162 billion yuan in the year-earlier period.
On average, three analysts polled by Reuters expected the Shenzhen-based company to earn 9.43 billion yuan.
Last month, Ping An said it expected its first-half net profit to more than double based on domestic accounting standards, boosted by increased returns from its banking and investment businesses.
JP Morgan said in a recent note that Shenzhen Commercial Bank should generate more than 1 billion yuan in profit for Ping An this year, adding that the lender only contributed 15 days of profit to Ping An in 2006 following the completion of the acquisition at the end of last year.
Banking contributed 1.086 billion yuan in net profit in the first half, versus 1 million yuan a year earlier. Banking business accounted for 10.9% of its first-half total profit.
Ping An's gross written premiums rose about 15.1% to 43.138 billion yuan in first-half, with individual life and automobile insurance policies leading the way.
Due to the strength in China's A-share market, Ping An reported 9.93 billion yuan in net investment income in the first-half, up 73.5% compared with same period last year, and its net investment yield inched up to 4.9% from 4.2% a year ago.
The Shanghai Composite Index had risen 82% this year through Wednesday, when it hit a record high before retreating amid the global selloff on Thursday.
Beijing recently allowed Chinese insurers to invest 10% of their assets in domestic stocks, up from 5%. It also allowed insurers to invest up to 15% of their assets abroad. Previously, Ping An and its peers could only invest a portion of their foreign currency holdings overseas.
The assets of all insurance firms operating in China were 2.53 trillion yuan (US$333 billion) at the end of June, potentially making 380 billion yuan (US$50 billion) available for overseas investment.
Ping An and larger rival China Life Insurance have enjoyed sharp share price rises in recent years, hitting record highs in July.