The United States: (1) investment environment: the developed capital market provides the life insurance industry with rich investment options and considerable investment returns. By the end of 2021, the scale of stock market accounted for nearly 300% of GDP in 2021, and the three indexes increased by about 1.7-6.8 times compared with that before the financial crisis in 2008; The scale of bond market accounts for more than twice of GDP, with rich types of bonds and high yield. (2) The life insurance industry has set up two accounts: the investment style of general accounts is conservative and the investment of independent accounts is flexible. It helps insurance institutions to better isolate risks, give full play to the subjective initiative of investment, and implement more flexible differentiated allocation strategies. (3) Asset allocation: relying on the developed capital market, high allocation of corporate bonds and stocks. Since 2005, the allocation of corporate bonds has been between 32% – 40% and stocks have been about 30%. We can deal with low interest rates through credit sinking and prolonging the duration. (4) Investment performance: the fluctuation range of investment yield of American life insurance industry is less than that of ten-year Treasury bonds, and the asset allocation strategy is more effective.
Japan: (1) China’s investment environment is poor: the development of the stock market lags behind and the return is low. The bond market is dominated by government bonds, and the development of corporate bonds is slow. (2) Asset allocation of life insurance industry: reduce the allocation of China’s fixed income, and the proportion of four types of China’s fixed income assets decreased from 68.1% to 54.5% (20082020); The additional allocation of overseas securities is the second largest investment target (31% in 2020). After 2008, the investment style has changed significantly, and steady investment has become the main tone. The proportion of national debt investment has increased by 22pct (32% in 2007 – 54% in 2008), and the allocation will remain 46% by 2020. (3) Investment performance: the absolute value of the rate of return is greatly affected by China’s low interest rate, but the prudent investment strategy has achieved some results. From 2006 to 2020, the yield of Japan’s 10-year Treasury bond fell by nearly 1.75 PCT, while the investment yield of the life insurance industry basically remained at about 2%, which was less affected by the downward interest rate.
Germany: (1) investment environment: the development of German financial system is mainly “stable”, and the expansion of capital market is relatively rational. (2) Asset allocation of life insurance industry: reduction of fixed income, increase of equity, and increase of alternative investment; In addition, the German life insurance industry has distinct characteristics of fixed income allocation, with a high proportion of loans and investment through funds, accounting for 30.9% and 30.3% respectively in 2020. (3) Investment performance: Overall, the net investment yield of German life insurance industry decreased slightly, but it was not affected by the yield of ten-year Treasury bonds.
China: (1) investment environment: the interest rate shows a downward trend, but it is still significantly higher than that of major developed countries such as the United States, Japan and Germany. Although the capital market started late, it developed rapidly, the scale of the bond market continued to expand, and the stock market was gradually built and improved. (2) Fund allocation: the proportion of bank deposits is relatively high, but the proportion of investment in bonds and bank deposits has shown an obvious downward trend in recent years; Asset allocation tends to be flexible and diverse: the proportion of other investments dominated by non-standard creditor’s rights and equity assets continues to rise, becoming one of the most important investment directions; Investment in stocks and securities funds has increased, but the proportion is still low and there is more room for adjustment. (3) Investment performance: fixed income assets provide a stable safety margin, which is greatly affected by stock market fluctuations.
Investment suggestions: (1) based on China’s investment environment: appropriately allocate more stocks and continue to explore flexible and diverse asset allocation methods. Pay attention to the construction of solvency: in terms of stocks, companies with high solvency ratio will be allowed to allocate a higher proportion of risk assets; In terms of public infrastructure fund investment, solvency adequacy ratio is taken as the investment threshold; In terms of bond investment, insurance companies with high solvency adequacy ratio are qualified to sink credit. (2) Learn from overseas experience: appropriate credit sinking, lengthening the duration, and appropriate allocation of funds and overseas assets according to market conditions.
The relatively low interest rate environment puts forward higher requirements for the asset allocation ability of insurance enterprises. At the same time, the regulatory restrictions on the asset side of insurance enterprises are developing step by step. The companies with stronger risk control and risk tolerance are subject to looser control over the upper limit of risk asset allocation, which is expected to show a pattern of “the strong is always strong”. Recommend China Pacific Insurance (Group) Co.Ltd(601601) (a + H) and Ping An Insurance (Group) Company Of China Ltd(601318) (a + H) with good investment return and solvency adequacy in recent years.
Risk tip: the interest rate is lower than expected; Changes in the macroeconomic situation; Changes in industry regulation, etc.
