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Ping An Insurance (Group) Company of China (HKG: 2318), whose name translates to “China’s Peace”, is one of the fastest-growing insurance companies in the world. The China-focused insurance giant has seen its revenue increase eight-fold in the last 10 years, while net profit increased by more than five-fold.
It is, hence, no surprise to see its shares have also done tremendously well over the last 11 years, rising more than 500%, while the company has managed to dish out a dividend each and every year since then.
More importantly, for investors, its growth story is far from complete. Here are three reasons why I believe Ping An Insurance is likely to continue rewarding shareholders well into the future.
1. Insurance market in China has more room to grow
From 2009 to 2018, China’s insurance market tripled in size. But there is more to come. According to an analyst report from DBS Group Holdings Ltd, China’s life insurance and property and casualty insurance markets had penetration rates of just 2.3% and 1.8% respectively.
Comparatively, other developed nations had penetration rates of 5.1% and 3.1% respectively. These numbers suggest that there is a large addressable market in China that Ping An’s insurance business could tap into.
2. Runway to expand its market share
At the same time, Ping An has room to grow its market share. The insurer has a history of winning market share in the property and casualty market business, increasing its market share from around 10% in 2007 to just over 20% in 2018.
In 2018, Ping An had a market share of around 18% of the entire insurance premiums collected in China, giving it plenty of room to grow its share in the future.
3. Dipping into other sources of growth
Besides insurance, Ping An also has a stake in a few other businesses. The group has a banking segment, which it first entered into through an acquisition of a Chinese bank in 2003. It also owns stakes in US-listed Autohome, a content platform for the automobile market in China and Hong Kong-listed Ping An Healthcare and Technology Company Limited. On top of that, it has stakes in other private companies that delve into Fintech and asset management among others.
These businesses are becoming an increasingly important source of income for the group, contributing around 25% of the group’s entire profit in 2018.
I believe that Ping An has invested in a good mix of other businesses. Its banking arm allows it to cross-sell its products with its clients, providing good synergies with its core insurance business.
Foolish bottom line
Ping An Insurance seems to tick all the right boxes for long-term investors. The group’s core business is in a rapidly-growing industry and it has a history of winning market share – the perfect concoction for growth.
Its stakes in other businesses also provide the company with wider growth opportunities and the potential for cross-selling and synergies. Despite the potential for growth, Ping An has an undemanding valuation of 10x earnings and a decent dividend yield of 2.4%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Jeremy Chia does not own shares in any companies mentioned.