Summary
The predetermined interest rate of insurance products has been reduced one after another, the investment income has been declining continuously, and the risk of "interest spread loss" is in the process of being resolved. For all these reasons, the reasons and trends behind the changes in the core indicators of life insurance companies are worthy of in-depth exploration. Core indicators such as net profit, insurance business income, solvency, return on investment, and comprehensive surrender rate will be extracted, and the new changes in the insurance market in the first quarter will be interpreted in the first and second chapters
Article| Ding Yan Yang Rui
edit | Yuan Man
Although the overall profit of the insurance market in the first quarter was under pressure, it was slowly recovering and transforming, and looking for improvement paths in structural optimization.
After a period of silence, insurance stocks since April have resumed their upward trend. Judging from the increase in the past month, CPIC 、 China Life 、 Ping An, China 、 Xinhua Insurance 、 PICC The growth rates were 21.85%, 15.04%, 12.43%, 15.31% and 3.98% respectively. Behind the rise, it is mainly related to factors such as the performance of listed insurance companies in the first quarter was better than market expectations, and asset side expectations improved.
Up to now, 76 life insurance companies have disclosed their profits in the first quarter of 2024. Judging from their profit list, the net profits of most listed insurance companies are among the top five, and Ping An Life Insurance ranks first, with a net profit of 23.967 billion yuan; China Life Insurance ranked second with a net profit of 20176 million yuan. The net profits of Taibao Life Insurance and Xinhua Insurance, which ranked third and fourth, were 9.594 billion yuan and 4.589 billion yuan respectively.
(Data source: solvency report of life insurance companies in the first quarter of 2024)
However, looking at the industry as a whole, 40 of the 76 life insurance companies in the first quarter of this year lost money and 36 made profits, which means that more than 50% of the life insurance companies lost money, and the overall profit of the industry was close to 60 billion yuan.
From the top ten of the loss list of 76 life insurance companies, they are PICC Life, Yingda Life, CCB Life, CITIC Prudential Life, Everbright Yongming Life, BOCOM Life, Hengqin Life, Great Wall Life Lujiazui Cathay Pacific and Tongfang Global Life lost 1.312 billion yuan, 1.291 billion yuan, 1.253 billion yuan, - 808 million yuan, - 624 million yuan, - 466 million yuan, - 382 million yuan, - 355 million yuan, - 303 million yuan and - 298 million yuan respectively.
(Data source: solvency report of life insurance companies in the first quarter of 2024)
It is worth noting that PICC Life Insurance ranked first in the loss list, far exceeding market expectations. According to insiders, PICC Life Insurance suffered a loss of 1.312 billion yuan in the first quarter, mainly based on the old accounting standards, and made a profit of 3.8 billion yuan under the current new accounting standards. In addition, there are also four banks and insurance companies on the list.
According to the business situation of life insurance companies in March 2024 disclosed by the State Administration of Financial Supervision, as of the end of the first quarter, the original premium income of China's life insurance reached 1663.9 billion yuan, a year-on-year increase of 5.1% on a comparable basis, down from 8.86% in the same period last year.
The predetermined interest rate of insurance products has been reduced one after another, the investment income has been declining continuously, and the risk of "interest spread loss" is in the process of being resolved. For all these reasons, the reasons and trends behind the changes in the core indicators of life insurance companies are worthy of in-depth exploration. Core indicators such as net profit, insurance business income, solvency, return on investment, and comprehensive surrender rate will be extracted to explain the new changes in the insurance market in the first quarter in the first and second chapters.
Loss list: 40 companies lost money,
Small and medium-sized companies are more difficult
From the top ten loss lists of 76 life insurance companies in the first quarter of 2024, they are PICC Life Insurance, Yingda Life Insurance, CCB Life Insurance, CITIC Prudential Life Insurance, Everbright Yongming Life Insurance, BOCOM Life Insurance, Hengqin Life Insurance, Great Wall Life Insurance, Lujiazui Guotai, Tongfang Global Life Insurance, with losses of 1.312 billion yuan, 1.291 billion yuan, 1.253 billion yuan, 0.808 billion yuan, 0.624 billion yuan -466 million yuan, - 382 million yuan, - 355 million yuan, - 303 million yuan, - 298 million yuan.
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(Data source: solvency report of life insurance companies in the first quarter of 2024)
It is worth noting that PICC Life Insurance, the top life insurance company, ranked first in the list of losses in the first quarter of this year. According to a person familiar with the matter, PICC Life Insurance lost 1.312 billion yuan in the first quarter, mainly based on the old accounting standards. The current profit under the new accounting standards is 3.8 billion yuan, and the difference between the new and old accounting standards is more than 5 billion yuan. "Under the new and old accounting standards, the stability of the insurance company's statements is a test of the company's actuarial level. It is not easy to achieve relative stability."
The 11th to 21st place in the loss list of the first quarter of this year are Caixin Jixiang Life, Huatai Life, Peking University Founder Life, Guohua Life, Guolian Life, Haibao Life, Beijing Life, Fosun Prudential Life, Simei Life, Dingcheng Life and China Life, with losses of - 286 million yuan, - 286 million yuan, - 282 million yuan, - 220 million yuan, - 202 million yuan -200 million yuan, - 183 million yuan, - 128 million yuan, - 118 million yuan, - 101 million yuan, - 188 million yuan.
Looking at the list of losses in the first quarter of this year, losses are mainly concentrated in small and medium-sized life insurance companies. As for the reason for its loss, an industry actuary explained that, first, as the market interest rate continued to decline, the 750 curve under the old accounting standards fell and the cost of debt rose; Secondly, the capital market in the past two years was not good, and the accumulated impairment should be withdrawn this year. The net profit of some small and medium-sized insurance enterprises declined, which was greatly affected by the increase of reserves; Third, during the good start of the first quarter of this year, most of its sales were businesses with low profits or even losses, which means that it may fall into the strange circle of "more sales, more losses and greater risks".
Why is the impact on small and medium-sized life insurance companies more obvious? Yang Jun, Chairman of Centennial Insurance Asset Management, said in a public article at the beginning of the year that due to the influence of economic cycle, competitive environment, business philosophy, corporate governance and other factors, some companies' assumptions about predetermined interest rates, rates and mortality rates in product pricing are often radical, leading to high debt costs. For example, small and medium-sized insurance companies usually use the "predetermined interest rate ceiling" set by the regulator to price their products, improve their competitiveness, and lead to high policy costs.
On April 26, the State Administration of Financial Supervision and Administration released the operation of the insurance industry in March 2024. In the first quarter of this year, the premium income of life insurance business was 1.78 trillion yuan, and the original insurance payout was 735.2 billion yuan. On a comparable basis, the industry's aggregate original insurance premium income increased by 5.1% year on year, and the original insurance compensation expenditure increased by 47.8%. This means that while the overall income of the industry is declining, the cost of compensation expenses is still increasing.
Looking at the return on investment of 76 life insurance companies in the first quarter of this year, their return on investment ranged from -4.85% to 2.92%. The bottom five in terms of return on investment are mainly concentrated in small and medium-sized life insurance companies, namely, Haibao Life, CCB Life, Lujiazui Cathay Life, Yingda Life and Junlong Life, with return on investment of - 1.91%, 0.08%, 0.16%, 0.17% and 0.26% respectively.
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(Data source: solvency report of life insurance companies in the first quarter of 2024)
Profit list: 36 companies are profitable,
Large companies contribute more
Recently, five A-share listed insurance companies have announced their premium income in April before 2024. China Life Insurance, PICC, Ping An Insurance, CPIC and Xinhua Insurance earned a total premium income of 1.25 trillion yuan in the first four months, up 1.47% year on year. Among them, the total life insurance premium income of five listed insurance companies was about 859.42 billion yuan, a slight increase of 0.4% year on year.
Specifically, the premium income of China Life Insurance, Ping An Insurance, PICC, CPIC and Xinhua Insurance was 371.2 billion yuan, 330.377 billion yuan, 300.117 billion yuan and 181.667 billion yuan respectively, up 3.89%, 2.38%, 1.25% and 0.99% year on year respectively. Xinhua Insurance was the only listed insurance company with negative growth in the previous four months. Its premium income in the previous four months was 67.224 billion yuan, down 11.69% year on year.
(Data source: announcement of listed insurance companies)
From the top ten of 76 life insurance companies in the first quarter of 2024, most of them are top life insurance companies. Ping An Life Insurance ranked first with a net profit of 23.967 billion yuan; The life insurance company with a profit of more than 2 million yuan also has China Life Insurance, which ranks second in the profit list, with a net profit of 20176 million yuan.
In addition, the third to tenth places on the profit list are Taibao Life Insurance, Xinhua Insurance, China Post Life Insurance, Sunshine Life Insurance, Taikang Life Insurance, Taiping Life Insurance, Sino British Life Insurance and AIA Life Insurance, with net profits of 9.594 billion yuan, 4.589 billion yuan, 2.754 billion yuan, 1.835 billion yuan, 1.778 billion yuan, 1.596 billion yuan, 621 million yuan and 348 million yuan respectively.
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(Data source: solvency report of life insurance companies in the first quarter of 2024)
It is worth noting that in the first quarter of this year, the new business value of all major life insurance companies achieved rapid growth.
Specifically, China Life's new business value in the first quarter of 2024 achieved the highest growth rate in recent years, 26.3% higher than the new business value after resetting in the first quarter of 2023; In the first quarter of this year, the value of new business of PICC Life Insurance increased by 81.6% year on year on a comparable basis; The new business value of Ping An's life insurance and health insurance business reached 12.89 billion yuan, a year-on-year increase of 20.7% on a comparable basis; The new business value of Taibao Life Insurance reached 5.191 billion yuan, up 30.7% year on year; Although Xinhua Insurance did not disclose specific new business value data, the company also disclosed in the first quarterly report that the optimization of business structure and improvement of business quality promoted the company's new business value to grow significantly.
When talking about the reasons for the overall recovery of life insurance business, some analysts from securities companies said that on the one hand, it was mainly due to the optimization of the product and term structure of each company, and the recovery growth of long-term payment business; In addition, in the context of low interest rates and the downturn of competitive financial products, the industry has basically digested the impact of the "speculation suspension" of the scheduled interest rate by the end of July 2023, the long-term payment business has recovered growth, the advantages of insurance products have emerged, and consumers have more favor.
In addition, listed insurance companies implemented cost reduction and efficiency increase, implemented the "integration of reporting and banking" in the bancassurance channel, and focused on the exploration of commission deferral in the individual insurance channel, optimized the design of the basic law, and improved the efficiency of expense investment.
It is worth noting that on the evening of April 23, the head of the relevant department of the Central Bank said in an interview that the current long-term treasury bond yield deviated from the long-term economic growth expectations, which mentioned that "the long-term treasury bond yield will always run within a reasonable range matching the long-term economic growth expectations".
Soochow Securities The research paper concluded that, on the one hand, the central bank is optimistic about the prospect of economic growth for a long time; On the other hand, although the main logic of driving down the interest rate of government bonds has not changed significantly, the long-term interest rate will gradually find out the periodic bottom after the central bank's statement this time, with low volatility as the main trend. Industry insiders believe that the upward trend of interest rate bottom will be further transmitted to the asset side of the insurance sector, and the signs of reversal may gradually appear.
"Banking" list: four companies lost money,
Performance reversal of China Post Life Insurance
In the first quarter of this year, the premium growth of bank insurance companies was very eye-catching. The insurance business income of 10 bank insurance companies totaled 187.6 billion yuan, up 23% year on year. Among them, China Post Life Insurance ranked first with a premium income of 73.658 billion yuan, far away from similar institutions, and also ranked top in the overall ranking of life insurance institutions.
From the perspective of net profit data, the differentiation of banks and insurance companies is serious. Under the dual background of declining interest rates and the strict implementation of the policy of "reporting to banks in one", most of the banking insurance companies are also facing the phenomenon of increasing income without increasing profits, with six of the ten institutions making profits and four losing.
(Data source: solvency report of life insurance companies in the first quarter of 2024)
Among them, the most noteworthy one is China Post Life Insurance. From the "king of losses" to the most profitable bank insurance enterprise in the first quarter, the net profit and premium scale of China Post Life Insurance increased in the first quarter of this year, while the annual loss of China Post Life Insurance in 2023 exceeded 10 billion yuan.
For the loss in 2023, China Post Life Insurance said that the loss was mainly due to the lower than expected discount rate of reserves and investment income. In 2023, the discount rate of reserves will directly reduce the profit of China Post Insurance by 11.21 billion yuan; At the same time, due to the impact of many factors such as the capital market being less than expected, the company's investment income has experienced a large net value fluctuation in the process of continuous optimization of asset allocation, which is lower than the expected goal in stages. It is necessary to further balance short-term volatility and long-term layout.
The performance reversal in the first quarter is highly related to the new accounting standards. China Post Life openly said that the improved performance in the first quarter was the result of deepening reform and innovation and pursuing value transformation in the past two years. In addition, thanks to the first implementation of new accounting standards and forward-looking optimization of asset negative matching and asset structure, many indicators in the first quarter improved significantly.
Among the 9 bank insurance companies other than China Post Life Insurance, CCB Life Insurance has become the bank insurance company with the highest loss, with a loss of more than 1.2 billion yuan. CITIC Prudential Life Insurance, Everbright Yongming Life Insurance and BOCOM Life Insurance also suffered losses to varying degrees.
In terms of insurance revenue, China Post Life Insurance exceeded 70 billion yuan, including nearly 20 billion yuan from ICBC AXA, ABC Life Insurance, CCB Life Insurance and China Merchants Sinosure, while other institutions were far away.
From the perspective of investment return, among the 10 banks that are insurance companies, only CITIC Prudential Life has an investment return rate of more than 2%. The return on investment of CCB Life, ICBC AXA Life, ABC Life, China Merchants Sinosure Life and BOCOM Life is less than 1%, of which the return on investment of CCB Life is only 0.08%.
According to the analysis of a person from a banking insurance company, the "interest spread loss" problem of banking insurance companies is particularly prominent. The product structure is mainly investment and wealth management products. The more the business scale grows, the greater the pressure on the investment side.
(The writer is a reporter of Caijing)
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