The Malaysian Reserve

Chinese tech-obsessed insurer may cast a long shadow over Asia

An employee sits behind a reception desk at the Ping An Insurance (Group) Co. headquarters in Shenzhen, China, on Friday, Jan. 8, 2010. Ping An will boost its holdings of bonds such as corporate debt this year as inflation drives up yields, Chen Dexin, deputy chief investment officer of China's second-largest insurer, said in an interview. Photographer:Qilai Shen/ Bloomberg

Marrying tech prowess with an instant customer base would make Ping An a potentially huge threat

by BLOOMBERG

BEIJINGChina’s Ping An Insurance (Group) Co Ltd has 23,000 research staff, 500 big-data scientists and spends billions of dollars a year on research and development (R&D).

Last year, it attracted 46 million new customers, equivalent to the population of Spain — almost all of them in its home market.

The bad news for competitors outside China is that Ping An may be getting ready for another growth leap.

China’s largest insurer by market value has evaluated buying Prudential plc’s Asia business, people familiar with the matter said last week.

Such a deal would immediately extend its reach to insurance markets from Singapore to Indonesia, bringing it into more direct competition with international brands like AIA Group Ltd and Manulife Financial Corp.

A mega-acquisition like the Prudential unit would mark an abrupt departure from Ping An’s strategy of incubating various tech businesses and then spinning them off, while incorporating the technology in its main financial and insurance operations. That strategy helped Ping An supercharge growth, and won it plaudits among analysts as one of Asia’s most technologically advanced insurers.

Marrying that tech prowess with an instant customer base across Asia would make Ping An a potentially huge threat.

Fifty years ago, Prudential had just a handful of branch offices in the region, which catered mainly for the expat community. Now, it serves almost 15 million customers in 14 markets.

Tech Strategy

When Ping An presented its technology strategy in November, analysts were immediately enthused. Deutsche Bank AG and Nomura Holdings Inc raised their price targets, in the German bank’s case by 38%.

The company wants to eventually generate half its earnings from technology and said in its slideshow that fintech may increase banks’ return on equity globally by 44% by 2025.

Technology has “materially” bolstered Ping An’s performance in terms of customer analytics, channel development, risk management and client services, Morgan Stanley analyst Jenny Jiang wrote at the time, citing the insurer’s big-data analysis that can identify prospective clients and generate sales leads more accurately.

Ping An had amassed 436 million Internet users as of Dec 31 last year, mainly through the tech units it’s built over the past few years, such as online lending platform Lufax and heathcare portal Ping An Healthcare & Technology Co Ltd, or Good Doctor.

About 18.7 million of those users last year also became clients of Ping An’s financial-services offering, which spans insurance, banking and asset management.

Cross-selling efforts mean about almost a third of Ping An’s 166 million individual clients hold products from more than one unit, the company’s 2017 annual report shows. The group’s individual clients, or those that have actually bought products, are distinct from the total number of people who access its Internet portals.

“Ping An’s tech capabilities are driving a lot of cross-selling for the full financial services provider,” said Steven Lam, a Hong Kong-based analyst with Bloomberg Intelligence. “It’s sensible to think whether Ping An can leverage its tech prowess to take a leading role in South-East Asia’s insurance markets.”

Prudential is seeking to take greater advantage of potential growth in Asia and plans to roll out retirement solutions it developed in the US as the local population ages.

Contribution to Prudential’s operating profit from the region’s markets, led by Indonesia, Hong Kong and Singapore, rose to about 42% in the first half of this year from 35% for all of last year, data compiled by Bloomberg show.

Younger Customers

Ping An may be poised to expand its technological lead.

The group plans to plow more than 100 billion yuan (RM59.86 billion) into R&D over the next decade. Prudential, by comparison, is aiming to spend about £300 million (RM1.57 billion) a year on technology in Asia, Nic Nicandrou, the CEO of its regional business, said in an interview in April.

Automation and online sales and support are important to younger customers who increasingly expect instant service, he said.

One thing that might facilitate a marriage: Several Ping An executives have worked at Prudential, said Zhongtai’s Lu. Ping An’s chief insurance business officer Lee Yuan Siong used to work at Prudential in Taiwan and at its China joint venture.

“Prudential can really make use of Ping An’s technologies” Lam said. “That would be a powerful combination.” — Bloomberg