On March 19, Kingfa Sci.& Tech.Co.Ltd(600143) announced that the preparatory group of Huacheng life insurance and its sponsors recently agreed to terminate the preparation of Huacheng life insurance after comprehensive consideration of the macroeconomic environment and financial policy changes in recent years.
This is not the first case of cross-border insurance “retreat” of A-share listed companies. According to incomplete statistics by the reporter of Securities Daily, since 2020, up to now, 15 A-share companies have announced the termination or withdrawal of the establishment and preparation of insurance companies.
As for the reasons for the termination of involvement in the insurance industry, insurance companies and experts interviewed by the reporter of Securities Daily believe that first, the industry has entered a trough in the past two years, and the actual roe and expectation of investment in insurance companies have decreased; Second, the macroeconomic downturn, the limited investment ability of shareholders and the “weakness” of investment insurance enterprises; Third, the supervision is stricter. Some investors have capital strength, but do not meet other regulatory requirements.
when the “dream of insurance license sector” shines into reality
In recent years, listed companies have successively terminated plans to establish insurance companies. According to the incomplete statistics of the reporter, since 2020, as of March 20, 2022, 15 companies including Guangdong Highsun Group Co.Ltd(000861) , Xiangxue Pharmaceutical Co.Ltd(300147) , Yonyou Network Technology Co.Ltd(600588) , St Tiancheng, Yinjiang shares, Hainan Haiqi Transportation Group Co.Ltd(603069) , Beingmate Co.Ltd(002570) , Hainan Strait Shipping Co.Ltd(002320) , etc. have withdrawn or terminated the establishment of insurance companies, and the insurance licenses involved include property insurance, life insurance and health insurance.
Further combing, it is found that the above-mentioned companies’ proposals for participating in the establishment of insurance companies mostly occurred around 2016, and there were four reasons for becoming the “climax” of listed companies’ participation in shares and initiating the establishment of insurance companies at that time: first, strengthening the systematic effect with the main business; The second is to reduce the financing cost and the debt cost of insurance companies is low; Third, the roe of investment insurance companies is high, and the industry is on the rise; Fourth, the value of insurance license is high and has the attribute of premium.
According to the data, in 2016, more than 70 listed companies announced their intention to participate in the investment and establishment of insurance companies; In 2017, this number dropped to 31, while 4 listed companies announced their withdrawal from participating in the establishment of insurance companies; In 2018, the number of listed companies to participate in initiating the establishment and deciding to withdraw was 5 and 3 respectively; In 2019, only three listed companies planned to participate in the establishment of insurance enterprises, and four decided to withdraw.
Due to changes in the macroeconomic environment and financial policies, long preparation time, difficulty in ensuring the expected return on investment and low correlation with the company’s development planning, many listed companies find that the investment in insurance companies is not as “beautiful” as expected. For example, Hainan Strait Shipping Co.Ltd(002320) 2021 announced that the preparation of Nanhua property insurance has not been completed for nearly four years, during which three shareholders and initiators withdrew one after another. Considering that the basic conditions of the original Nanhua property insurance investment evaluation have changed greatly, the policy and environment are difficult to ensure the expected return of investment, and the correlation with the company’s development plan is not high, the company decides to terminate this foreign investment.
In addition, it is also a common way to indirectly take shares in insurance companies through the acquisition of existing shareholders. However, the equity trading of insurance companies is also cold. According to the information of Alibaba judicial auction platform, since last year, 10 of the 18 insurance equity auctions have failed or failed due to no bid, including some insurance equity with high starting amount and large number of single equity. For example, Fuzhou Tiance Industrial Co., Ltd. held a 3.2% share of an insurance enterprise, with a starting price of 160 million yuan. There was still no bid at the end of the auction on February 11 this year.
new problems in the past
In addition to the above problems, insiders also mentioned that the current downward trend, fierce competition and stricter supervision of the insurance industry are becoming new problems to curb capital from entering the insurance industry.
In an interview with the Securities Daily, Zhou Jin, the management consulting partner of PWC China’s financial industry, mentioned three reasons for pressing the “pause button” in the process of establishing listed companies and participating in insurance companies: first, as the transformation and reform of the insurance industry has entered the deep-water area, the challenges facing development have increased, the growth rate has slowed down, and the return level and expectation of shareholders have decreased, which has reduced its attraction to investors; Secondly, affected by the macro environment and the epidemic situation, many enterprises have encountered difficulties in operation. The profitability and cash flow of some original shareholders or potential investors of insurance companies are under pressure, and the investment ability is affected; Finally, the supervision has become stricter. The CBRC has strengthened the penetration and standardized management of shareholders’ qualifications and capital sources. The SASAC has also strictly controlled the industry’s investment in finance, and some shareholders who are willing to contribute cannot travel.
From the current development situation of the industry, the growth rate of the insurance industry has slowed down significantly in the past two years. According to the data disclosed by the CBRC, the original insurance premium income of the whole insurance industry increased by 4.05% year-on-year in 2021. From a longer time line, in 2020, 2019 and 2018, the values were 6.12%, 12.2% and 3.92% respectively. It can be seen that the growth rate in 2021 is relatively low.
From the perspective of industry profitability, in 2021, 23 of the 75 unlisted property insurance companies suffered losses; Of the 64 unlisted life insurance companies, 19 suffered losses. Whether property insurance companies or life insurance companies, they are not guaranteed to earn without losing. Individual insurance companies have even suffered losses for many consecutive years.
Moreover, with the expansion of the number of insurance companies, the industry competition is becoming increasingly fierce. Bai Wenxi, chief economist of IPG, told reporters that in the past two years, the enthusiasm of listed companies to apply for the establishment of insurance companies has gradually cooled, and the cross-border insurance of listed companies has frequently failed. The reason may be that more and more insurance companies have entered the market, intensifying industry competition and making it difficult for newly established insurance companies to survive. However, when the cash flow has not entered the positive cycle, it is difficult to implement the mode of relying on floating deposit investment profit, which leads to listed companies being forced to press the “pause key” one after another. At present, the main reason for the cold of insurance equity trading is that under the condition of loss and unclear profit prospect, the investment value decreases and there are few potential takers.
In addition to the industry entering a trough, strong supervision also puts forward higher requirements for the high-quality development of the insurance industry. The measures for equity management of insurance companies, which was implemented on April 10, 2018, is a basic system in the supervision of the insurance system. It explains the entry threshold conditions of investors, shareholders’ behavior and the consequences of problems, and standardizes shareholders’ behavior through the management mechanism in advance, during and after the event.
“In recent years, the supervision of the insurance industry has become more standardized and strict, especially for the code of conduct and qualification of major shareholders of insurance companies.” Dong Dengxin, director of the Institute of Finance and securities of Wuhan University of science and technology, told the Securities Daily that in the past, some listed companies tried to finance their business by participating in the establishment of insurance companies, or through equity participation to achieve some related party transactions with insurance companies and share the dividends brought by the insurance market.
In Zhou Jin’s view, the existing insurance companies have obvious homogeneity characteristics in target customer groups, products and business models, and the competition is also fierce. Therefore, the new insurance companies that will be released under supervision in the future should mainly be some institutions that have differentiated characteristics in products and operations and can form a better supplement to the existing market.
