I read this really interesting profile on the Chinese insurance giant, Ping An, this weekend which I highly recommend. However, since it’s a fairly long piece, I will summarize the key take-aways here alongside relevant quotes from the piece. In a couple of places, I’ve supplanted the analysis with quotes from an older FT piece.
FYI: Ping-An did over $163B in revenues last year, has 184M+ customers and has over 375k+ employees. It also owns a 10% share in ZhongAn (Chinese insurtech valued at ~$28B). Anyways, below are my key takeaways alongside the most interesting passages:
There are certain innovations which are an 10x improvement over existing processes. Such innovations are revolutionary not only for customers but are fundamentally transformative to the unit economics of an industry.
“In 2017, Ping An, China’s second-largest insurer and its biggest non-state-owned company by revenue, rolled out a “Superfast Onsite Investigation” system—enabling policyholders to submit claims by simply opening a smartphone app and answering a few questions. But the app’s niftiest feature offers the option to not even wait for an inspector. Instead, customers can snap photos of a damaged vehicle and send them to a Ping An computer, which can respond with a repair estimate in three minutes or less. If the customer accepts the estimate, then wancheng! (“Done!”) Ping An can transfer funds immediately.
Last year, Ping An’s customers used this feature to settle 7.3 million claims, or 62% of the total. The service saves the company more than $750 million each year by reducing bogus claims and human error.”
If you have something working for you, figure out a way to license it to your competition and experience the benefits of the ‘flywheel effect’.
“By licensing big-data tech to other companies, the insurance giant creates a virtuous circle in which Ping An collects still more data through the relationships, enabling it to improve its models and thereby attract more clients. There are now 22 auto insurers using the “Superfast” accident-claim platform. Some 460 Chinese banks and over 1,800 other small- and medium-size financial services firms use Ping An’s OneConnect financial platform. And Ping An’s proprietary cloud lets the company scale up these offerings at relatively little expense, helping the circle grow bigger, faster.
In the same vein, Ping An has built a popular A.I.-driven model for assessing consumer credit risk. Alibaba, Tencent, and Ping An have all been granted provisional licenses to offer credit-bureau services, but Ping An’s is the favorite of financial institutions; it’s being used by about 200 banks. While Alibaba’s and Tencent’s models rely on analysis of e-commerce data to underwrite small loans for purchases by their own customers, the value of such loans rarely exceeds a few thousand yuan—a few hundred dollars. Ping An’s model “can give a small-business owner a loan for a few hundred thousand completely unsecured, no problem,” says Tan, “because we have been doing this for years.” “
With acquisitions, patience and resilience is key.
“Ping An made missteps. Efforts to expand through acquisition were particularly ill-fated. In 2008, Ping An bought a 50% stake in Brussels-based financial conglomerate Fortis, just before that company collapsed. The 2010 acquisition of Shenzhen Development Bank, a troubled commercial lender, has been slow to bear fruit.”
Despite a string of failed acquisitions from the last decade, the CEO was not deterred. Last year, he was rumored to be mulling a $50B+ acquisition for Prudential’s Asia unit. Today, a significant portion of the company’s value is actually tied to its successful acquisitions of assets like Autohome and Ping Identity.
The company’s new ventures like Ping An Healthcare Technology, Oneconnect and Autohome have been nurtured as separate venture-like investments. As a result, this and similar high cash-burn projects go gone through separate stages of seed, Series A/B type financings. This technique imposes financial discipline on new projects while allowing Ping An access to external capital, network and resources.
(Pin An Healthcare Technology IPO’ed for $7.5B+ in a Hong Kong listing last year)
We are all technology companies now.
“Ping An earmarks 1% of revenue for investments in innovation. Over the past 10 years, the group has plowed more than $7 billion into research and development, and Ma has vowed to invest $15 billion more in the decade to come. That endowment has nurtured 11 technology affiliates, of which two—Good Doctor and Autohome, a platform for car buyers—are publicly traded and three are privately held “unicorns” with multibillion-dollar valuations For now, only two of those five are profitable. Even so, the combined value of the group’s tech ventures tops $70 billion.
To support his high-flying high-tech strategy, Ma has assembled a formidable talent pool. Ping An employs more than 24,000 software engineers, 800 data scientists, and 180 A.I. specialists. The company says it has filed more than 15,000 technology patent applications. Ping An also controls a gaggle of venture and private equity funds, including the Global Voyager Fund, a $1 billion war chest launched in 2017. Larsen, who helms Voyager, says the fund focuses on early-stage ventures in fintech and health care—securing stakes in platforms or technologies Ping An has yet to develop itself. "
“An AI-powered end-to-end offering is the other key to Ping An’s digital transformation. In the past decade, Ping An has invested US$7 billion in R&D for AI, cloud computing, and blockchain and now expects to invest a further $15 billion in the coming 10 years. The firm now has seven research institutes, 25 research labs, and more than 24,000 R&D staff members, 1,000 of whom focus on emerging tech.”
Develop a holistic data strategy first before moving ahead with new products for cross-sell and cross-risk pricing.
“.. automated auto inspection is only one of myriad marvels that illustrate how Ping An is using A.I. and big data to transform everyday life in China. There’s also the facial-recognition technology the Shenzhen-based conglomerate uses in its consumer lending business; Ping An claims its A.I. can read 54 distinct “micro-expressions” to determine whether loan applicants are lying
These products and services have a vital feature in common: They match online data, generated by China’s digitally native consumer masses, with a vast storehouse of “offline” data and insight amassed over three decades in the insurance business. Ping An believes that this offline information—which encompasses elements as disparate as business-loan default rates, symptoms of skin cancer, and the resale value of a car with sprung shocks—means that its data services are based on better data. “That’s where our advantage comes in,” says Jessica Tan, the deputy CEO who oversees Ping An’s technology companies. “We’re able to connect to the full picture.” "