The moat of the next big tech will be discussed after some history. The very first article I wrote on EngineerInvest.com was on Ping An Insurance. Back then, I was still working full time. Hence did not really have much time to write frequently, it was like 1 article every 3-4 months (with just 30-40 views)? Thanks for your support, the number of views has since grown to the highest being the article on Zengame which has over 2900 views and the stock (Zengame) also returned me a 40% gain in 2 months. Of course, the number of views are still very little compared to the other famous bloggers out there. I saw an ex-colleague, ex-ex-colleagues, uni friend and even a relative joining my telegram channel but I shall keep my identity secret for now until years to come🤣.
Over the course of my investing journey, I’ve witnessed several major crashes such as SARS, Sub Prime, and the recent COVID-19 crisis (which I blogged on how I determined it was time to re-enter the market early April). I started off with investing in Singapore and Malaysia stock market and later in 2015, I’ve swapped most of my Singapore holdings to China stocks. You can check out my portfolio timeline here. I still remember the times when I had to go to an ATM machine just to apply for SMRT IPO at 60 cents (if I recall correctly), also some of the great deals I’ve gotten such as buying SGX at S$1.68. Subsequently, I sold all my stake in SGX during the hype when the President of NASDAQ became SGX CEO or during the period when lots of Chinese companies came to list in Singapore. Can’t remember clearly already.
The very first Chinese stock I bought was Ping An (SEHK:2318). If you’ve been following my blog, you probably saw my receipt screenshots of my buy transactions at the price of HK$30+, HK$40+. I shall not repost it here again. Usually, a single company will not be more than 10% of my entire portfolio. However, Ping An has exceeded my set threshold for a single holding and also crossed the HK$1 million-mark last year. Glad that my Alibaba holdings is also almost hitting the HK$1 million-mark from the single-day buy transaction of S$108k as shared in my article where I bought stocks massively early April 2020. I hope my Tencent holdings will reach the same mark by end of this year. Regretted that I didn’t buy more Tencent at HK$133 per share that time (buy receipts shown in portfolio timeline).
I digressed a little. The next big tech I will be touching on is neither Alibaba nor Tencent but Ping An Insurance. Some might be thinking, how can an insurance company be a tech company? Ping An is more than just the typical traditional insurance company. Even its insurance business alone has an incredible moat already. Let’s first touch on their core businesses followed by its tech business.
Over the years, Ping An’s brand value have been climbing up the ranks steadily. In 2019, they are ranked 29th in the Fortune Global 500, 7th in the Forbes Global 2000, 40th in the BrandZ Top 100 Most Valuable Global Brands list and being the top amongst global insurance brands [1].
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Business / Moat (Insurance):
China’s insurance market has had eye-catching performance and is forecasted to continue performing. It has been growing rapidly at a CAGR (Compound Annual Growth Rate) pace of 17.2% from 2013 – 2018 [2].
Furthermore, it is projected that China’s insurance market would quadruple in 14 years, outsizing US, the current world leader [3]. These figures are supported by trends such as ageing population, low insurance density and penetration rate [4].
The fund used to support the public health insurance scheme termed Basic Medical Insurance is expected to build up a debt of RMB 735 billion by 2024. This could mean opportunity for private insurers [5].
My guess is that Ping An is well positioned to capture this growth being the second largest in terms of market share for both life [6] and non-life insurance [7].
China Life is not part of the top 3 non-life insurance companies, just as PICC is not part of the top 3 life insurers [7]. In addition, Ping An is on track to become the market leader in both. As a rough estimate by taking the figures from Statista [8]:
Their cross-selling potential further boosts the strong position in both markets, vice versa.
From a micro view, in the life insurance business, Ping An also boasts a much higher new business value (NBV) per agent than its peers. The figure did not stagnate and grew to 56,791 in 2019, a 16.4% increase [1]. Ping An has also been using AI in their sales agent recruitment interviews [1] which alludes to their technological capabilities.
In the non-life business, their combined ratio (the lower the better) is impressive as well. More on combined ratio can be found here [11].
[1, 12]
Although Ping An reported a 29.7% drop in net profit in their 2020 interim results, their interim dividend climbed to RMB 0.80 per share, 6.7% year on year increase [16]. COVID-19 affected the profits of many companies and even caused some to make losses. However, Ping An only suffered a fall in profits and its customer base even grew [16].
[13] BTW I'm not like that, just sharing
Business / Moat (Tech):
Despite the company’s name, it isn’t a traditional insurance company and have delved considerably into tech, transforming into an InsurTech. China has been commented to be leading InsurTech solutions and the company near the forefront is Ping An Insurance [3]. Back in 2018 when I wrote on Ping An, they had a total of 3030 patents applications. In 2019, Ping An’s patent applications surged to 21,383, a 700% increase! Of which, approximately 96% were invention patents and 4,845 were filed under the Patent Cooperation Treaty (PCT) and abroad [1]. Ping An Technology (Shenzhen) Co., Ltd. (Ping An Technology) ranks 8th worldwide with 1,691 patent applications in the 2019 PCT international patent applications released by the World Intellectual Property Organization (WIPO). Ping An Technology's patent applications included 679 in artificial intelligence (AI), 58 in blockchain and 48 in cloud computing, illustrating their leading technological research prowess and innovation [14]. To consolidate the figures mentioned above, in 2019, Ping An achieved first in fintech and second in digital healthtech by published patent applications in global rankings [1]. Imagine a traditional insurance company filing for that many patents.
There are many technological highlights from Ping An that hit the news and the below touches on a few of them.
Ping An’s Tech Businesses:
China is home to four out of five largest unicorns in the world. One of the four belongs to Ping An. It is its fintech arm, Lufax [17] which is seeking for listing this year [18]. Lufax is China’s biggest online wealth management platform. It had 36.8 million registered users and more than 350 billion yuan in assets under management by June 2018 [19]. Everyone is interested in Alibaba’s Ant Group IPO but Ping An’s Lufax has similar plans too! The below are the list of Ping An’s promising tech businesses.
[15]
Ping An categorises their tech companies into 4 stages of incubation and the various companies’ progress are as follows:
[20]
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“Stock Market & COVID-19” where I cautioned (a month prior to the crash) of the possible market tumble & how to protect your portfolio published Jan 2020
“EngineerInvest.com’s go-to Charts to Determine Market Bottom” The all-time favourite article where I shared how I determined it was time to buy stocks published early April 2020
“10% Dividend Small Cap Stock & a Potential Multibagger” published 16 May 2020. This stock is later sold at more than 40% gain in a month since the post. The transaction was shared in “A 40% Gain Stock (Since our post last month), Recent Trades & “China’s Goldman Sachs”
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Ping An’s core finance businesses such as Insurance / Banking / Asset Management, together with the 5 eco-systems (various tech businesses mentioned earlier) are powered via their inhouse core technologies which includes AI, blockchain and cloud. The number of internet users in Ping An’s ecosystems has jumped from 241.57 million in 2015 to 560 million in 2020 [16].
[21]
[21]
Ping An’s fintech arm OneConnect has carried over 185,000 anti-fraud checks, 4.3 million credit risk assessments and processed over 13,000 auto insurance claims. OneConnect served all China’s major banks and 99% of city commercial banks [22]. OneConnect is also riding with the Belt and Road Initiative, having overseas presence in 15 countries and regions, such as Singapore, South Korea, Japan and Germany and continually expanding into countries involved in the Belt and Road Initiative [23].
Recently, “Ola-Bond Default Analysis” developed by Ping An Technology (Shenzhen) Co., Ltd. came in first in the financial direction scenario challenge at the World Artificial Intelligence Conference (WAIC). More details can be found here [25].
Ping An Good Doctor’s services spreads across the customer experience providing 24/7 online consultations, second medical opinions, prescriptions, referrals, appointments and drug deliveries. These are backed by an inhouse medical team and proprietary artificial intelligence (AI)-based medical system. Ping An Good Doctor is China's largest online health care services platform. It has more than 315 million registered users, averages 729,000 daily consultations and a network of more than 3,000 hospitals and 94,000 pharmacies. Ping An Good Doctor’s growth was further propelled during COVID-19. The number of new registered users grew by 10 times from 22 January to 6 February as compared with the same period from 1 January to 21 January. Over the same period, the average number of daily online consultations grew nine times [27]. On 19 February, Ping An launched its COVID-19 smart image-reading system to aid doctors with efficient and accurate diagnosis. The product is able to read CT images of a patient suspected of COVID-19 in about 15s and is more than 90% accurate [28].
In 2018, Mr. Masayoshi Son, Chief Executive of SoftBank Group has commented that , "Ping An Good Doctor's AI healthcare technology is the most advanced in the world." [29]. During the period when Ping An Good Doctor filed for IPO, they are termed as China’s largest one-stop healthcare portal [30].
[30]
In 2013, Ping An, Tencent and Alibaba collaborated to launch Zhong An, China’s pioneer digital insurer. Zhong An is a property insurance company that does selling of its policies and handling of claims online. Zhong An is the first and only company in China that is licensed to sell insurance over the internet and has underwritten more than 630 million insurance policies and served 150 million clients within just the first year of operations [32]. Just recently in mid-August 2020, Zhong An Online reported that its net profit grew 4 times YoY [33]. Its share price also jumped more than 22% in a single day.
The scope of Ping An’s tech business is too wide and I cannot cover every aspect of it in this article. More details can be found here ([35], page 2) under “2018 Ping An Investor Day” and various “Ping An Core Technologies”.
Unlike Alibaba or Tencent, Ping An is not a constituent of the Hang Seng Tech Index [36] with the exception of Ping An Good Doctor (SEHK:1833) which is one of their tech unicorn company. Many of their other unicorns has been coined as tech firms such as fintech arms Lufax and OneConnect. A catalyst someday could also cause Ping An to be valued as a Fintech company or a Tech company, achieving its goal to be a world-leading technology-powered retail financial services group.
Stay tuned for Part 2 where I will touch on the other aspects of Ping An apart from business / story point of view.
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Reference Links:
1.Ping An 2019 Annual Report
2.https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/insurance/insurance-outlook-pdfs/ey-global-insurance-outlook-china.pdf
3.https://www.scmp.com/business/article/2189033/china-will-become-worlds-biggest-insurance-market-mid-2030s-speeding-past
4.https://secure.fundsupermart.com/fsm/article/view/rcms204281/this-industry-will-emerge-as-a-long-term-winner-thanks-to-china-s-older-and-wealthier-population
5.https://www.ey.com/Publication/vwLUAssets/EY-the-rise-of-private-health-insurance-in-china/$FILE/EY-the-rise-of-private-health-insurance-in-china.pdf
6.https://secure.fundsupermart.com/fsm/article/view/14959/china-is-getting-older-and-wealthier-this-sector-is-set-to-profit-greatly-from-the-trend
7.https://www.swissre.com/dam/jcr:4e236d6d-8142-441a-b682-ba9f0a8580ae/chinese_ins_market_feb2018_en.pdf
8.https://www.statista.com/
9.https://secure.fundsupermart.com/fsm/article/view/rcms207190/your-once-in-a-lifetime-opportunity-to-invest-in-the-ping-an-ecosystem-story
10.Ping An 2018 Annual Results Presentation
11.https://www.investopedia.com/terms/c/combinedratio.asp
12.PICC Annual Reports
13.https://twitter.com/StockMarketMeme/status/1058366904727822336/photo/1
14.https://www.prnewswire.com/news-releases/ping-an-ranks-8th-in-2019-international-patent-applications-demonstrating-leading-position-in-technology-rd-301044371.html#:~:text=Ping%20An%20Insurance%20Group%20Ltd.&text=(Ping%20An%20Technology)%20ranked%208,Intellectual%20Property%20Organization%20(WIPO)
15.Ping An 2020 First Quarter Results Presentation
16.Ping An 2020 Interim Report
17.https://www.scmp.com/tech/start-ups/article/3095968/china-home-four-worlds-five-largest-unicorns-led-alibabas-ant-group
18.https://www.reuters.com/article/us-lufax-ipo/chinas-lufax-seeks-u-s-ipo-as-early-as-this-year-sources-idUSKCN24N0SF
19.https://sg.news.yahoo.com/lufax-international-unit-eyes-asia-020100169.html
20.Ping An 2019 Interim Results Presentation
21.Ping An Investor Day Slides, http://www.pingan.cn/en/ir/relation-promotion.shtml
22.http://www.chinadaily.com.cn/a/202008/15/WS5f3782d7a31083481726081e.html
23.http://www.chinadaily.com.cn/a/202008/24/WS5f431339a310834817262255.html
24.OneConnect 2019 Fourth Quarter Results Presentation
25.https://finance.yahoo.com/news/ping-ans-bond-default-analysis-091400226.html
26.http://webcast.live.wisdomir.com/pingan_gooddoctor_19ar/ppt.pdf
27.https://www.asiaone.com/business/technology-empowers-ping-ans-health-care-amid-coronavirus
28.https://www.prnewswire.com/news-releases/ping-an-launches-covid-19-smart-image-reading-system-to-help-control-the-epidemic-301013282.html
29.https://markets.businessinsider.com/news/stocks/masayoshi-son-ping-an-good-doctor-s-ai-healthcare-technology-is-the-most-advanced-in-the-world-1027385380#
30.https://www.thegeniusworks.com/2019/09/ping-an-healthcares-good-doctor-now-has-over-300-million-users-the-worlds-leading-online-healthcare-ecosystem-platform/
31.https://kr-asia.com/key-stat-tencent-backed-healthtech-wedoctor-plans-hong-kong-ipo
32.https://www.the-digital-insurer.com/dia/zhong-an-chinas-first-complete-online-insurance-company/#:~:text=Ping%20An%2C%20Tencent%20and%20Alibaba,online%20along%20with%20handling%20claims.
33.http://www.aastocks.com/en/stocks/analysis/stock-aafn-con/06060/NOW.1038889/all
34.Google Finance
35.http://www.pingan.cn/en/ir/relation-promotion.shtml
36.https://www.drwealth.com/hang-seng-tech-index-tracking-the-rise-of-tech-stocks-in-the-east/