FINANCIAL giant Ping An Insurance Group Co. of China Ltd. will return up to 10 billion yuan (US$1.5 billion) to shareholders through its first share buyback, after posting a forecast-beating jump in annual profit.

Ping An, China’s largest insurer by market value, plans to use 5-10 billion yuan in its own funds to repurchase its Shanghai-listed A shares. Should it reach the top end of this range, it would be the fifth-largest buyback by a Chinese company, according to Refinitiv data.

The profit result and buyback plan highlight Ping An’s strength compared with smaller players at a time of increased scrutiny of insurers’ use of leverage, which has seen some punished for risky practices.

Buybacks are often seen as a sign managers believe company shares are undervalued and can help boost the stock. Ping An’s executives have repeatedly said its stock has been undervalued by investors.

“It’s more as a mechanism whereby if the market is volatile and the management team believes the stocks are undervalued, this is one of the ways we can give back to the shareholders and at the same time stabilize the stock price,” said Ping An’s co-chief executive, Jessica Tan.

The move announced late Tuesday comes after the Chinese securities regulators last year loosened rules governing buybacks by listed companies, according to Tan.

“We want to be one of the first ones to have the flexibility to do so,” she said, adding Ping An would consider more buybacks in future as long as the regulatory environment permitted.

The repurchase price for Ping An’s A shares would not exceed 101.24 yuan a share, the company said in a statement as it released its annual results Tuesday. That is up to 46 percent higher than the shares’ closing price at 69.25 yuan Tuesday, before the results and buyback were announced.

The company said full-year profit rose 20.6 percent to 107.4 billion yuan in 2018, boosted by strong growth in its core life and health insurance business. That was above the 101 billion yuan Refinitiv-compiled SmartEstimate, which is weighted in favor of more accurate analysts.

As China’s most diversified insurer, Ping An has in recent years focused on technology and maintains a commitment to invest 1 percent of its annual revenue in research and development, although fintech and health technology accounted for about 7 percent to the group’s total earnings last year.

(SD-Agencies)