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QuestionsCategory: Financials QuadrantPing An Financial Analysis Queries
Wei Liang Lim asked 5 months ago

Hi,
I have a few questions:

  1. Since the insurance and banking businesses tend to cause the total assets and liabilities to be extremely high. Which components of the financial ratios are relevant to Ping An?
  2. Also, I could not find the inventories and cogs inside the financial statements. Do help.
  3. Do you agree that Ping An is a complex business since the company deals with insurance, banking, financial technologies, Securities, Reits etc?

I have attached the financial analysis for your review. It will be great if you have an existing Ping An financial analysis for my comparison too.

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2 Answers
Victor Chng answered 5 months ago

Hi Wei Liang,
 
The investment quadrant system cannot be use to analyse insurance, bank and REITs business as all this asset classes required different perspective and ratios to analyse them. Their financial numbers are all different from normal operating businesses. Hence, your collection of financial numbers are all invalid.

Wei Liang Lim answered 5 months ago

Hi Victor,
Thanks for the information. In this case, which financial ratios are applicable for insurance and banks?

Jieren Zheng replied 5 months ago

You can start with combined ratio, returned on embedded value, solvency ratio for insurance.

Hope it helps.

Wei Liang Lim replied 5 months ago

Hi Jieren,

Is combined ratio, returned on embedded value and solvency ratio useful for calculating the intrinsic value of Ping An? If yes, how should I calculate the intrinsic value based on the combined ratio, returned on embedded value and solvency ratio?

Victor Chng replied 5 months ago

Here is the source for bank ratio:

https://corporatefinanceinstitute.com/resources/knowledge/finance/bank-specific-ratios/

Also do note that for most operating business having cash in the their bank is good but for banks and insurance case, it is not a good sign as their job is to utilise the cash for growth.

Wei Liang Lim replied 5 months ago

Hi Victor, Thank you!

Jieren Zheng replied 5 months ago

Just a reminder that valuation is only one part of the picture.

Comparison of similar peers for their strengths and weaknesses and then see the valuations could also help see why some of them are priced higher or lower etc.