Recently, Ping An Health (01833) announced a proposed dividend of 10 billion, attracting market attention.

At the same time, major shareholder Anxin (a wholly-owned subsidiary of Ping An Group) proposed a possible mandatory unconditional cash offer, making a mandatory general offer for all offer shares in accordance with Rule 26 of the Takeover Code, and making an appropriate offer for all unexercised stock options in accordance with Rule 13 of the Takeover Code to cancel all unexercised stock options (regardless of whether they are vested).

With the completion of this equity change, Ping An Health will become an indirect non-wholly owned subsidiary of Ping An Group, and the company's financial performance will be included in the consolidated financial statements of Ping An Group.

Financial consolidation highlights the synergy effects with the group.

According to the offer, this acquisition of Ping An Health shares by Ping An Group is to reinforce its control by using stock as a substitute for dividends. After the acquisition is completed, Ping An Group's shareholding will increase from 39.41% to 52.74%.

With the news of the acquisition, there are also concerns in the market about the company’s privatization. However, in this announcement, the group clearly stated that it has no intention to redeploy any fixed assets or terminate employment of employees, has no intention to privatize Ping An Health, and believes there is no reasonable possibility of privatization, hoping Ping An Health will continue its existing core business to dispel the major concerns previously held by the market.

It is worth mentioning that this time, Ping An Group intends to carry out the acquisition through a stock dividend method, which will benefit both the group and Ping An Health. On one hand, the stock dividend plan serves as an alternative to cash dividends, allowing the group to increase its holding in Ping An Health without incurring additional transaction costs; on the other hand, Ping An Health distributing dividends in shares will retain the cash that should have been paid out as operating capital, further enhancing the company's risk resilience in business expansion.

Moreover, with the completion of this acquisition, Ping An Health will maintain its independent operations while strengthening its ties with the group, allowing it to better utilize the group's rich resources in finance, technology, and medical fields, thereby consolidating its competitiveness in medical services and health management.

According to the Zhito Finance APP, currently Ping An Health is continuously focusing on the construction of two core hubs: "Family Doctors" and "Retirement Managers". It has now developed into a professional, comprehensive, high-quality, one-stop medical health and retirement management service provider in China and has become the flagship and entry point of Ping An Group's medical retirement ecosystem, which is central to the group's Global Strategy.

In response, some industry insiders have stated that as Ping An Health is consolidated in the future, the synergy between the company, as the flagship core, and the group will become more pronounced. In the first half of 2024, the company showed strong fundamentals and achieved semi-annual profitability for the first time since its listing; Ping An Group's decision to consolidate Ping An Health at this time may also reflect a bullish outlook on Ping An Health's future financial expectations.

Deeply cultivating the retirement track, the medical and nursing business aligns with the national strategy.

According to the Zhito Finance APP, as the flagship of Ping An Group's medical retirement ecosystem, the company is continuously focusing on the construction of two core hubs: "Family Doctors" and "Retirement Managers", and has gradually explored a distinctive Chinese version of the "managed care model".

Li Dou, Chairman of the Board of Directors and CEO of the company, stated at the earnings release conference that "Commercial Insurance + Medical Retirement" and corporate health management are the two tracks that Ping An Health insists on deeply cultivating, which represent the foundation of the company's retirement track.

Data shows that during the "14th Five-Year Plan" period, China's elderly population aged 60 and above will exceed 0.3 billion. With improvements in living standards and medical conditions, the physical fitness and life expectancy of China's elderly have significantly increased, and their demand for quality of life continues to upgrade. Moreover, due to cultural and economic factors, the "9073" pattern remains the basic structure of retirement in China, where 90% of the elderly choose to spend their twilight years at home. Therefore, the demand for "Chinese-style" home-based retirement services that suit the current situation of Chinese society has become particularly urgent.

In recent years, the Ministry of Civil Affairs has vigorously promoted the development of Retirement Services, with a focus shifting towards home and Community care. On the one hand, it has increased policy support and explored innovative service models that provide multi-level and diverse home Community retirement services. It encourages the construction of embedded retirement service institutions within communities to enhance the supply capacity of home and Community retirement services, with the goal of establishing 500 exemplary community home retirement service networks during the '14th Five-Year Plan' period.

In this context, Ping An Health actively responds to social needs and innovatively launched the 'Ping An Family Doctor' brand. In June of this year, the comprehensive upgrade of the family doctor brand, 'Ping An Family Doctor,' became a major highlight, promoting the transformation and upgrading of medical health services towards 'management,' signaling the beginning of a new chapter in the coordinated development of medical retirement and Insurance Business.

Ping An Health's president Wu Jun stated that in the first half of 2024, Ping An Family Doctor and Ping An Life will once again create a good model for cooperative medical and insurance synergy. With a unique service entry point from a family doctor, it will provide high-quality medical health services that 'proactively manage health, effectively manage chronic diseases, and provide comprehensive disease management' for the client group with sixth-level rights of life insurance customers. Currently, market user feedback is very positive, empowering the main business to exceed expectations.

From the results, this unique managed medical model has been successfully implemented in a commercial sense. According to Zhitong Finance APP, in the first half of 2024, the company's F-end revenue and users both grew, with the number of paying users reaching about 14.8 million, a year-on-year growth of approximately 7%, and revenue of 1.12 billion yuan, a year-on-year growth of 3.4%. Ping An Health continues to deepen the synergy between medical health and retirement services with its 'Insurance + Medical Health' service scene construction, deeply participating in the health management of policyholders.

In terms of valuation, in the month following Ping An Health's announcement of dividends, the company's stock price has been hovering around 6.2-7 Hong Kong dollars, with the central bottom almost confirmed. Currently, the company's stock price's PB is below 1, indicating that it is severely undervalued by the market. As the core flagship of Ping An Group's medical retirement ecosystem, the company’s medical and retirement business aligns with national strategy, and its future potential merits attention.