Source: Beijing Business Daily
The rapid growth of compensation expenditure has once again focused the attention of the industry on the "payment peak". On the evening of May 24, the General Administration of Financial Supervision announced the operation of the insurance industry in the first four months of 2024. According to regulatory data, in the first four months, the industry's aggregate original insurance premium income increased by 4.63% year on year. In sharp contrast, the original insurance compensation expenses increased by 43.55%. On the one hand, the interest rate continues to decline, and on the other hand, there is a substantial increase in compensation. It is conceivable that the insurance industry is under pressure on both sides of its assets and liabilities this year. Then, what is the reason for the "scissors gap" in the growth rate of insurance premium income and compensation expenditure? Will this trend continue?
Compensation growth rate far exceeds premium
According to the data of the State Administration of Financial Supervision, the original insurance premium income of the insurance industry in the first four months of this year was 2.54 trillion yuan. Of which, the original premium income of property insurance was 479.239 billion yuan, and that of life insurance was 2.06 trillion yuan. In terms of compensation, the original insurance compensation expenditure of the insurance industry in the first four months was 902.713 billion yuan.
However, from the perspective of growth, the premium income and compensation expenditure of the insurance industry are not balanced, and even there is a "scissors gap". The data shows that in the first four months, the industry's aggregate original insurance premium income increased by 4.63% year on year, in sharp contrast to this, the original insurance compensation expenditure increased by 43.55%.
In vertical comparison, it is no accident that this situation has continued from the beginning of the year to the present. The Beijing Business Daily reporter found that the insurance industry's compensation expenses in the first two months increased by 58.8% year on year, and the insurance industry's compensation expenses in the first three months increased by 47.8%. Although the growth rate decreased, it remained at a high level. Moreover, the rapid growth of compensation mainly occurs in the field of life insurance. According to the data disclosed by the regulator, the compensation expenses of life insurance and property insurance increased by 68% and 13% respectively in the first four months.
Why is the insurance industry's compensation expenditure growing rapidly this year? Li Wenzhong, deputy director of the Rural Insurance Research Institute of Capital University of Economics and Trade, told Beijing Business Daily that the rapid growth of life insurance compensation should be mainly related to the rapid growth of life insurance product compensation. In 2013, China launched the market-oriented reform of life insurance rates, which led to the rapid growth of life insurance premiums. The average term of life insurance policies in China is about 10 years, which means that the life insurance policies with rapid growth at the beginning will expire in recent years. Secondly, according to the data released by the Emergency Management Department, the direct economic losses caused by natural disasters in China in the first quarter of this year were the highest in the same period of the last five years, which may lead to an increase in property insurance compensation expenditures, and also affect the compensation expenditures in the field of life insurance.
Zhou Shuran, chief architect of Qixianqin (Shanghai) Medical Engineering Co., Ltd., added that in 2024, partial endowment insurance of more than five years will expire, and the "deposit relocation" of wealth management insurance such as increased life insurance will also result in a lot of compensation increases. In addition, after the epidemic, medical and health expenses increased, and joint insurance compensation increased.
May continue in the short term
It is common that the growth rate of short-term compensation expenditure is higher than the growth rate of premium, but if the growth rate of compensation expenditure continues to be higher than the growth rate of premium, it will bring greater compensation pressure to insurance companies.
If the time line is extended, this trend will appear in 2023. In 2023, China's insurance industry will achieve an original insurance premium income of 5.12 trillion yuan, with a year-on-year growth of 9.13% on a comparable basis; The original insurance payout of the insurance industry was 1.89 trillion yuan, up 21.94% year on year.
In the future, how long will the rapid growth trend of insurance compensation expenditure last? Li Wenzhong believed that the compensation changes of property insurance companies were mainly affected by insurance accidents, especially major accidents and disasters. In terms of life insurance, especially life insurance, the current rapid growth of compensation brought by the rapid growth of business in the past will be difficult to change in the short term, and I'm afraid it will continue for some time.
For insurance companies, long-term high compensation expenses will undoubtedly increase operating pressure and even affect cash flow. Zhou Shuran predicted that the overall insurance payout will remain at a high level in the next 1-2 years. With the economic recovery and the arrival of a new round of insurance golden period, the past large-scale insurance payout will also tend to be stable. In addition, the management of insurance companies will be more standardized, and the medium - and long-term insurance payout ratio will decline and gradually move towards a rationalization range. Beijing Business Daily reporter Li Xiumei
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Medium term dividend of insurance companies begins. Will market confidence rise
"Under the condition that the company has distributable profits in the half year of 2024, implement the interim dividend distribution in 2024."
On May 24, Xinhua Insurance According to the announcement, according to the reviewed financial report for the first half of 2024, the company will implement interim dividend distribution in 2024 on the condition that the company has distributable profits for the first half of 2024, with reasonable consideration of current performance, capital status and risk control indicators.
On April 12 this year, the State Council issued Several Opinions on Strengthening Supervision and Risk Prevention to Promote the High Quality Development of the Capital Market (i.e. the new "National Ninth Article"), which proposed to strengthen the supervision of cash dividends of listed companies, enhance the stability, sustainability and predictability of dividends, and promote multiple dividends, pre dividends and dividends before the Spring Festival in a year.
The announcement issued by Xinhua Insurance also shows that the proportion of the total dividend in the middle of the year to the net profit attributable to the shareholders of the parent company in the half year of 2024 is no more than 30%. When formulating the profit distribution plan for 2024, the distributed medium-term profit distribution factors will be considered.
The above proposal has been unanimously approved by the board of directors of Xinhua Insurance. The company said that the company will formulate a specific plan for 2024 interim profit distribution according to the resolution of the general meeting of shareholders, and implement it after performing the corporate governance procedures in accordance with relevant laws and regulations and the relevant provisions of the Articles of Association.
As for the reasons why A-share listed insurance companies want to increase the dividend frequency, Wu Gaobin, executive chairman of the Digital Reform Commission of the China People's Association, believes that the main factors to consider include the company's overall business situation, investment environment, shareholder returns, long-term interests of the company, etc.
Wang Zhaojiang, Executive Director of Shenzhen Beishan Changcheng Fund Investment Research Institute, said that this mid-term profit distribution of Xinhua Insurance had launched the first shot of insurance companies to respond to the new policy of "nine national rules", which first reflected the company's emphasis on national policy guidance and shareholder returns; Secondly, the action shows the company's excellent business strength; More importantly, it will drive other insurance companies to participate in the implementation of more dividend plans.
Cash dividends are considered to be the best way to give back to shareholders. In particular, increasing cash dividends for listed insurance companies is conducive to improving investors' willingness to invest in insurance companies. A large proportion of cash dividends will generally win the welcome of investors, especially institutional investors.
In the past 2023, the five A-share listed insurance companies proposed a total cash dividend of about 75.5 billion yuan (including the dividend in the middle of 2023, including tax). In contrast, although the profit distribution plans of listed insurance companies are different, in the opinion of insiders, in the future, the cash dividend frequency of A-share listed insurance companies may show an increasing trend, and the dividend policy will also pay more attention to stability, sustainability and predictability.
Insurance companies can enhance the enthusiasm of investors to allocate dividends in the current market environment. Based on this, Wang Zhaojiang said that the assets of insurance companies are of good quality and the subject matter is scarce; If we can continue to pay a high proportion of dividends, we will certainly strengthen the confidence and stability of long-term capital; For small and medium-sized shareholders with low risk appetite, it will also be very attractive. In addition, as various funds recognize the stock advantages of insurance companies, it will boost the valuation level of the entire industry sector.
In the past month, insurance stocks have risen significantly under the multiple positive support. Next, is the positive performance of insurance companies in dividend distribution also expected to boost market confidence in the sector?
Wu Gaobin believes that the dividend distribution of insurance companies will affect stock prices. The positive performance of insurance companies in dividend distribution is expected to boost the market's confidence in the insurance sector, and the valuation is expected to be further repaired, thus driving insurance stocks to continue to rise. Because cash dividend is the best way to give back to shareholders, the stability and sustainability of dividend policy can increase the confidence of investors and have a positive impact on the long-term development of the company. Xinhua Insurance plans to implement the mid-term dividend distribution in 2024, marking a new trend in the frequency and proportion of cash dividends of listed insurance companies. While conforming to the regulatory policy guidance, it will also have a positive impact on the company's share price, which is expected to further boost the market's confidence in the insurance sector.
Beijing Business Daily reporter Hu Yongxin
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