In the just-concluded semi-annual report disclosure season, the net profit performance of the top five A-share listed insurance companies was not impressive. A reporter from China Business News combed through the semi-annual reports and found that the net profit of the five major insurance companies in the first half of this year totaled 134.277 billion yuan, down 24.4% year-on-year, and the decline ranged from 10% to 30%.
The five major insurance companies whose net profit growth rate exceeded 50% in the semi-annual report last year, encountered profit "Waterloo" in the first half of this year, and experienced double-digit year-on-year declines without exception.
Is this completely the cause of the epidemic?
The answer is not so. According to the analysis of the semi-annual reports of various companies, the CBN reporter found that the high base in the same period last year, the adjustment of the discount rate assumptions caused by the decline in the long-end interest rate in the first half of this year, and the fluctuation of investment income together caused the listed insurance in the first half of the year. The company's net profit fell.
This decline in collective profits was anticipated by the market in the first quarter. However, Xinhua Insurance’s premium income has grown rapidly, and China Life’s double-increasing scale and value have become a highlight in the semi-annual report, exceeding market expectations, and forming a clear contrast with the transformation of CPIC Life and Ping An Life. Under the volatility of the capital market in the first half of the year, the total investment yield of various insurance companies also showed different trends.
Net profit of five major insurance companies fell
The decline in net profit has become a common "keyword" in the half-year reports of the five major listed insurance companies. Among the more than 24% year-on-year decline in net profit attributable to its parent, Ping An of China (601318.SH, 02318.HK) was the most serious decline. The net profit attributable to its parent in the first half of the year fell 29.7% year-on-year; while Xinhua Insurance (601336.SH) , 01336.HK)’s net profit attributable to the parent also fell more than 20% year-on-year, reaching 22.1%; China Life Insurance (601628.SH, 02628.HK), PICC (601319.SH, 01339.HK), China Pacific Insurance (601601) .SH, 02601.HK) decreased by 18.8%, 18.8% and 12% respectively.
The collective decline in net profit is bound to encounter industry reasons. The executives of a number of listed insurance companies said that the high base brought by the preferential tax policy last year and the excessive provision of reserves in the first half of this year were the main reasons for the decline in net profit.
The "Policy on Pre-tax Deduction of Service Fees and Commission Expenses for Insurance Companies" released in May 2019 increased the pre-tax deduction ratios of handling fees and commission expenses for property insurance and life insurance, making the semi-annual report for 2019 enjoy a one-off The adjustment of "dividends" has therefore contributed to the fact that the net profit of listed insurance companies for the first half of 2019 has generally increased by more than 50%.
The high base of the same period last year and this year's epidemic have made this year's net profit growth even more difficult. For listed insurance companies, the epidemic not only has an impact on product sales channels on the debt side, but the decline in long-term interest rates during the epidemic has also had a significant impact on both the debt side and the investment side. On the investment side, the decline in interest rates led to a decline in the reinvestment income of insurance companies. The net investment yields of the five A-share listed insurance companies coincided with a drop of 0.2 to 0.4 percentage points. On the debt side, due to the 10-year 10-year moving average of 750 days The yield to maturity of Treasury bonds appears as the discount rate of traditional insurance reserves of various insurance companies. Therefore, in the first half of the year, insurance companies generally adjusted the discount rate assumptions, which resulted in an increase in reserves and profits. It is reduced accordingly.
According to statistics from a reporter from China Business News, in the first half of this year, the decline in pre-tax profits of the five A-share listed insurance companies due to the above-mentioned discount rate assumption adjustment has reached 25.5 billion yuan.
In the view of listed insurance companies, the above-mentioned reasons are all short-term fluctuations. Excluding them, the long-term trend of the insurance business of insurance companies can be better seen.
In the semi-annual report, Ping An of China and China Pacific Insurance disclosed their own operating profit indicators. After excluding short-term factors including short-term investment fluctuations, discount rate adjustments, and one-off adjustments, they were attributable to the operations of the parent company in the first half of this year. The profit evenly changed its downward trend, rising by 1.2% and 28.1% year-on-year respectively.
Life insurance differentiation appears
Although the net profit of the five A-share listed insurance companies has experienced a decline, the life insurance indicators of Xinhua Insurance and China Life have contributed some bright spots.
Specifically, Xinhua Insurance's insurance business revenue in the first half of the year rose by 30.9% year-on-year, significantly surpassing other listed peers. The scale and value of life insurance premiums of China Life and PICC have both risen against the trend. Among them, the life insurance leader, China Life, started its "good start" earlier, evading the impact of the epidemic to a certain extent, while superimposing the effect of its "big insurance" reform Since the first quarter, it has been generally considered that its performance has led other peers, and its key life insurance indicators have formed a clear differentiation from CPIC Life Insurance and Ping An Life, which have been affected by the epidemic during the transition period.
According to data from the semi-annual report, the insurance business income of Xinhua Insurance, China Life and PICC Life and Health Insurance business increased by 30.9%, 13.1%, and 3.9% respectively over the same period last year, while CPIC Life increased slightly by 0.1% year-on-year, while Ping An Life's insurance business Revenue fell sharply by 11% year-on-year.
However, Xinhua Insurance, which leads in scale growth, is no longer glaring in terms of value indicators. According to the data in the semi-annual report, the value of new business of Xinhua Insurance fell by 11.4% year-on-year, while the value of new business of China Pacific Insurance and Ping An both fell by more than 24% year-on-year. Among the A-share listed insurance companies in the first half of the year, only China Life and PICC's new business value achieved a year-on-year increase, with year-on-year increases of 6.7% and 21.3% respectively.
The number of agents of China Life and Xinhua Insurance has shown an upward trend. Among them, the scale of human resources of Xinhua Insurance at the end of June even increased by 36.5% year-on-year. The average monthly number of agents of China Pacific Insurance and China Ping An both showed a year-on-year decline.
Behind the differentiation of various indicators of life insurance is the different strategies of each company. According to the judgment of industry analysts, China Life has launched the "good start" ahead of schedule, largely avoiding the impact of the epidemic, and due to last year's good "good start" performance, the renewal premiums continued to drive. Xinhua Insurance has clearly defined the strategy of “simultaneous growth of scale and value”. The single premium payment of the bancassurance channel has largely supported its scale indicators in the first half of the year, but the value indicators and agent capacity indicators still need to be improved.
CPIC Life Insurance and Ping An Life Insurance started life insurance reforms last year. Both believe that the "head age" is over, and high-quality recruitment is needed to improve the quality of the team. CPIC Life is building the three "key teams" in the agent channel, and Ping An Life is personally "in command" by Ma Mingzhe, chairman of Ping An Group, to start the road to reform.
At the semi-annual report performance conference, the executives of both companies responded to the life insurance reform. Pan Yanhong, general manager of CPIC Life Insurance, said that the construction of the three “key teams” of life insurance agents is still proceeding in an orderly manner according to the company's top-level design, and the current team status has improved. At the same time, according to the transformation situation, CPIC Life will also comprehensively upgrade the "Basic Law" as the core management method for agents. Chen Xinying, the co-CEO of Ping An of China, said that in the second half of the year, Ping An Life Insurance will focus on reforms in four aspects: first, reform of the development model, from scale to scale + quality; second, reform of the marketing system, from “personal management” to digital management ; The third is product strategy reform to promote "comprehensive finance +" and "life insurance service +"; the fourth is channel reform and online and offline integration. It is expected to see the effect of reform next year.
The net investment rate of return is generally falling, and the total investment rate of return is mixed
In the first half of the year, net profits fell, and several insurance companies, including China Life, attributed part of the reason to fluctuations in investment income.
A reporter from China Business News combed the investment yields of five A-share listed insurance companies and found that their net investment yields had fallen without exception, ranging from 0.2 to 0.4 percentage points.
An investment manager of an insurance asset management company told a reporter from China Business News that the interest rate level in the first half of the year fell first and then rose, but overall it is still in the era of low interest rates. The interest rate level has dropped significantly compared with the previous two years. Some insurance funds invested The return on reinvestment of debt products after maturity is lower than before, and the phenomenon of "upside-down" has appeared. Therefore, it is expected that the net investment return of listed insurance companies with bond interest income as the main income will generally fall.
Although the net investment yield has generally fallen because of the decline in interest rates, the total investment yield of listed insurance companies has experienced two rises, two declines and one level under the volatility of the capital market in the first half of the year.
Among them, Xinhua Insurance and PICC's total investment yield increased by 0.4% and 0.1% respectively, while China Life and China Ping An dropped by 0.43% and 1.1%.
Among the five A-share listed insurance companies, Ping An’s total investment yield and net investment yield not only fell the most in the first half of the year, but also the lowest after the fall.
But in fact, Ping An of China and several other A-share listed insurance companies use different accounting standards, and it has taken the lead in using new accounting standards for financial instruments. In the new accounting standards, fluctuations in the market value of stocks will be fully included in the net profit. Therefore, fluctuations in the capital market have a greater impact on the total investment yield and net profit. Ping An’s investment strategy will also be part of the new accounting standards. Adjustment. In the original accounting standards, fluctuations in the market value of some equity assets will not be directly included in the net profit, and will only affect the net profit when they are sold or when they are impaired. Therefore, Ping An and several other A-share listed insurance companies At present, the basis of comparison is different in terms of investment performance.
Regarding the investment outlook for the second half of the year, senior executives of various insurance companies believe that the equity market is worth looking forward to, but short-term fluctuations are inevitable, and there are still certain challenges to insurance investment.
Zhang Di, head of China Life Investment Management Center, said that in the long run, there are many factors driving the long-term improvement of the stock market, including the long-term improvement of the Chinese economy, the gradual release of dividends from capital market reforms, and changes in the structure of residents’ asset allocation. At the same time, market liquidity is also very sufficient, so I am very confident in the equity market in the long run. However, in the short term, we still need to pay attention to some risk factors, including geopolitics, epidemic rebound, etc., so we will adopt more flexible strategies around the center and upper limit of strategic asset allocation, grasp structural opportunities, and do a good job in controlling short-term fluctuations and gaining long-term Balance between benefits.
China Pacific Insurance President Fu Fan said: “From the perspective of the equity market, after July 1, there has been a wave of good market conditions in the capital market. Our positions have remained basically stable and we have enjoyed the benefits of the equity market. The decline in long-term interest rates in the second half of the year is inevitable. Various external factors, including the implementation of the registration system on the Growth Enterprise Market, will increase the volatility of the capital market, and will also pose a relatively large uncertainty to our investment business."