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Ping An rolls dice on unpopular overseas banking model

(China Daily)
Updated: 2010-02-25 11:17

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 US 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 said 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, partly 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 US 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 Hong Kong 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 ($13.2 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 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.

Bloomberg News