On the afternoon of March 28, The People’S Insurance Company (Group) Of China Limited(601319) (hereinafter referred to as ” The People’S Insurance Company (Group) Of China Limited(601319) group” or “company”) held the annual performance conference of 2021 online.
The key points of its performance are as follows:
1. The insurance business income was 585.4 billion yuan, a year-on-year increase of 3.9%.
2. The net profit attributable to the parent company was 21.6 billion yuan, a year-on-year increase of 7.8%.
3. The net assets attributable to the parent company reached 219.1 billion yuan, an increase of 8.4% over the beginning of the year.
4. The profit of auto insurance underwriting continues to be better than that of the industry, and the comprehensive cost rate is 97.3%; Non auto insurance developed rapidly, and the premium income increased by 16.1% year-on-year.
5. The embedded value of life insurance at the end of the year reached 127.6 billion yuan, an increase of 8.8% over the beginning of the year.
\u3000\u30006.、 The annual total investment income was 63.1 billion yuan, a year-on-year increase of 11.2%, and the total investment return was 5.8%.
7. In 2021, the total dividend per share was 0.164 yuan, with a year-on-year increase of 5.1%, and the dividend proportion was 33.5%.
At the meeting, the management of the company also responded to the hot issues concerned by the outside world and investors one by one.
continuously expand incremental premium resources
How does the company view future development opportunities?
Luo Xi, chairman of the company: at the beginning of this year, when implementing the central economic work conference, the group made a series of work arrangements to “give full play to the guarantee role of insurance in serving the overall situation of the country”, which is based on our basic judgment that China’s Insurance Industry is still in an important period of strategic opportunities. From the perspective of policy, industry and demand, the company has important development opportunities.
From the perspective of policy environment, the central government clearly proposed that this year’s economic work should be stable and seek progress while maintaining stability. Insurance can play an important role in serving “seeking progress while maintaining stability”. Many policies recently issued also put forward clear requirements for the insurance industry. For example, in terms of rural revitalization, the central rural work conference made clear arrangements for ensuring food security and accelerating the promotion of full cost insurance and planting income insurance, which is conducive to promoting the transformation of agricultural insurance from “ensuring cost” to “ensuring output and income”.
In terms of health pension, the recently issued national plan for the development of the cause of aging and the pension service system during the 14th five year plan clearly proposes to promote and standardize the development of the third pillar pension insurance, promote the development of individual pension, steadily establish a long-term care insurance system, build a policy framework for the long-term care insurance system, support insurance funds, and increase investment in the pension service industry. All these provide new development opportunities for the insurance industry and PICC.
Everyone says that “everyone has a dream of joint health”. However, in China, we have not yet established a mature business mechanism for health management and health insurance. Although PICC Health is the leader in the industry, we have made a series of thoughts in this regard. Recently, we are studying and formulating the transformation plan of “health project” to carry out in-depth transformation of PICC Health. We have basically completed the discussion process, It is ready to be determined in April.
In the past year, by Solidly Promoting the “six strategic services”, we have significantly improved our ability and level of serving the national strategy. In the future, we will continue to expand incremental premium resources in serving the overall situation, which is The People’S Insurance Company (Group) Of China Limited(601319) the biggest development opportunity. From the perspective of industry development, although China’s insurance industry is the second largest insurance market in the world, the insurance depth and density are still relatively low and have not reached the global average level. One of the important reasons is that the structure of insurance types is not balanced. For example, in the field of property insurance, automobile insurance still accounts for the largest proportion, and the proportion of liability insurance, catastrophe insurance and insurance for managing emerging risks is still very low; In the field of life insurance, the product structure is still dominated by traditional life insurance, and the development of endowment insurance and health insurance with security and service functions lags behind. At present, PICC is also accelerating the optimization of business structure, which will create new development momentum.
From the perspective of insurance demand, a large number of insurance “real needs” of individuals, legal persons and the government have not been met. For example, in terms of government business, the Chinese government is deepening the reform of “release, management and service”, and many public services and social governance functions can be undertaken through the insurance mechanism. In the past year, we strengthened cooperation with the Ministry of emergency management, the National Meteorological Administration and other ministries and commissions, customized service lists for 14 provinces (cities) such as Shanghai and Beijing, and promoted all kinds of governance insurance. This is an important development direction in our future. Overall, we believe that there are still many business opportunities to tap in the future by deepening the structural reform of the insurance supply side and meeting the changes in customer demand.
what is the impact of the second generation on the company’s solvency
What is the impact of solvency phase II on the solvency, dividend paying ability and investment strategy of the group and its major insurance subsidiaries?
Wang tingke, President of the company: according to the notice on matters related to the implementation of the regulatory rules on the solvency of insurance companies (II) issued by the China Banking and Insurance Regulatory Commission, the insurance industry has implemented the second generation and phase II rules since the first quarter of 2022. Compared with the previous generation, the solvency rate of the company in the second generation has changed greatly.
Specifically: first of all, the second generation and phase II rules have factors to reduce solvency.
In terms of actual capital, it is mainly to classify the future surplus of the insurance policy according to the remaining term and discount results of the insurance policy, and include it into the core Tier-1 and tier-2 capital and subsidiary Tier-1 and tier-2 capital respectively, so as to reduce the core solvency adequacy ratio.
In terms of minimum capital, the factors that reduce the solvency adequacy ratio mainly include: first, cancel the excess accumulation of all insurance types and improve most basic factors. Second, the basic factors of long-term equity investment have been greatly improved. Third, increase the capital with the lowest concentration risk.
Secondly, the second generation and phase II rules also have factors to improve solvency.
In terms of actual capital, the funds deposited in designated banks for policy business are not assets that cannot be disposed of or are limited to disposal when due; In terms of minimum capital, the measurement range of interest rate risk asset side has become larger, the minimum capital requirements for catastrophe risk of agricultural insurance have been cancelled, the proportion coefficient of policy business has been increased for agricultural insurance and health insurance, and the minimum capital of exclusive endowment insurance products has been discounted. These factors are conducive to improving the solvency adequacy ratio of the company.
To sum up, on the whole, the solvency of the insurance industry will decline after the implementation of the second generation phase II. PICC has also calculated the impact of the second generation phase II switch on the solvency adequacy ratio at the end of 2021 according to the newly issued solvency supervision rules. The results show that although the solvency adequacy ratio of the group, PICC Property Insurance and PICC Life Insurance decreased after the implementation of the second generation of compensation, it is still significantly higher than the regulatory standard, which has no significant impact on the company’s dividend paying ability and asset allocation.
At the same time, according to the relevant provisions of the China Banking and Insurance Regulatory Commission, the China Banking and Insurance Regulatory Commission implements the transition period policy for the second generation of insurance companies, allowing some rules to be implemented step by step, which is conducive to the smooth transition of the company’s solvency under the second phase rules.
new energy auto insurance business keeps up with the overall auto insurance
What are the advantages of the company in the field of auto insurance after the comprehensive reform? What is the development and profitability expectation of auto insurance business in 2022? What is the comprehensive cost rate target of policy caliber in 2022? What is your confidence in new energy auto insurance?
Yu Ze, vice president of the company: the company’s core competitive advantages are mainly reflected in the following five aspects:
First, data advantages: the company has the largest customer group in the industry and has accumulated data advantages unmatched by other subjects.
Through many risk factors such as people, vehicles and users, an industry-leading risk identification model is established.
Second, pricing advantage: the company has industry-leading customer pricing ability, selects high-quality customers through accurate price fee linkage, and its business structure is superior to the industry, and its business quality is superior to the industry.
Third, channel advantages: after the company’s “Sanwan adaptation”, the auto insurance channel positioning is more accurate, the strategy is clearer, the formation is more reasonable, the team is more professional, and the channel sales ability and efficiency are significantly improved. In 2022, the company’s overall auto insurance renewal rate was 73.1%, an increase of 2.1 percentage points year-on-year. Among them, the self owned car renewal rate was 75.9%, an increase of 2.8 percentage points year-on-year. Home owned car business accounted for 71.4%, an increase of 1.0 percentage points year-on-year.
Fourth, cost advantage: the company’s auto insurance market share ranks first in the industry and has the largest number of customers. First, it has the strongest bargaining power when purchasing four value-added services such as road rescue, safety monitoring, driving on behalf and inspection on behalf of third parties, and the cost of value-added services is at the lowest level in the industry; Second, it also has the strongest bargaining power when negotiating spare parts and man hour fees with automobile maintenance institutions, and the claim settlement cost has a strong comparative advantage over other subjects; Third, compared with other entities, the advantage of premium scale dilutes the fixed cost and brings the comparative advantage of fixed cost rate.
Fifth, service advantages: in addition to the front-end underwriting, the back-end claim settlement service determines the customer experience. Providing professional and efficient claim settlement service is not only a necessary condition for insurance companies to fulfill their contractual commitments, but also an inevitable requirement for regulators to resolve accident contradictions and assume social responsibility. Traffic accident cases, especially those involving personal injury, require the professional claim settlement personnel of the insurance company to participate in the whole process of responsibility determination and deal with compensation disputes. The insurance company needs to have a service network and professional claim settlement team all over urban and rural areas, and the achievement of the two requires long-term construction, accumulation and investment. The professional service capability of the back end also constitutes the core competitive advantage of insurance companies.
The company’s auto insurance operation will adhere to the bottom line of profitability and ensure the stability of share as the main line, deeply practice the concept of effective development, “de intermediary” concept, the concept of optimizing business structure, differentiated operation, refined management concept and innovation driven development concept, and constantly promote the transformation of auto insurance to high-quality development. Specifically, it includes the following three initiatives:
First, adhere to the principle of effective development of auto insurance. The target comprehensive cost rate shall be classified and locked, and the price fee linkage shall be strictly implemented to ensure the basic matching between price fee and risk, so as to realize the annual profit of the policy.
Second, focus on the development of household vehicles and continuously optimize the business structure. Strengthen resource integration and increase the share of new household vehicles. For the stock business, adhere to the working idea of “providing and renewing insurance and transferring premium insurance”, continue to improve the renewal rate and improve the quality of reinsurance business.
Third, insist on strengthening the construction of direct selling direct control channels, go to intermediaries and improve customer stickiness and loyalty. In 2022, the loss ratio and expense ratio of traditional auto insurance will maintain a relatively stable level. As the new energy vehicle clause was officially launched in December 2021, the new energy vehicle compensation ratio under the new clause increased and the expense ratio decreased. It is expected that the company’s vehicle insurance compensation ratio will increase slightly and the expense ratio will decrease slightly in 2022, and the overall comprehensive cost ratio will remain stable. It is expected that the annual comprehensive cost rate of the policy in 2022 will be controlled within the set target.
At the same time, the company attaches great importance to the strategic development opportunities of new energy vehicles. As early as the development of new energy demonstration clauses in the industry, the company began to reserve big data application technologies. Through cooperation with battery suppliers, new energy vehicle enterprises and other parties, the company strengthened the cross-border integration of data resources, realized the accurate identification of the use nature of new energy customers and other vehicle behaviors, and formulated a clearer pricing strategy.
Judging from the data currently available, we are confident that the company’s new energy auto insurance operation will remain profitable and keep up with the overall auto insurance.
equity market is at the bottom stage in the short term
How to judge the rights and interests of the market? How about the impairment pressure of credit assets this year?
Li Zhuyong, vice president of the company: since the beginning of 2022, major capital markets around the world have fluctuated significantly. China’s economic development faces triple pressures of “shrinking demand, supply shock and weakening expectation”. In such an internal and external environment, China’s capital market inevitably suffered great pressure in the first quarter.
Looking forward to the future, we believe that the equity market is at the bottom stage in the short term, but the medium and long-term allocation value has been highlighted. In the short term, the meeting of the Finance Committee on March 16 studied the current economic situation and the capital market, gave a clear response to the major problems affecting the capital market, and released a positive signal. The extremely pessimistic expectation of the market is gradually reversed, and the market confidence is gradually restored.
In the medium and long term, the equity market has strategic allocation value.
First of all, we believe that the macroeconomic environment of steady growth in 2022 has laid a good foundation for the development of the equity market, and the medium and long-term trend of China’s economy has not changed. Secondly, the continuous improvement of the capital market system has created a good environment for investors to share the fruits of China’s economic growth. Thirdly, the current market valuation is relatively low. As of March 23, 2022, the dynamic valuations of Shanghai stock index, CSI 300 and gem index are below the 30% quantile of the past decade respectively. Finally, looking back on history, the short-term impact of major events such as war and epidemic will eventually subside, which will not change the long-term trend of the capital market.
As an insurance investment institution, the company will adhere to the concept of long-term investment, value investment and prudent investment, actively support the national strategy, serve the real economy and fully maintain the stable operation of the capital market:
First, within the scope of risk tolerance, equity investment focuses on the allocation center of strategic assets (SAA), actively improves the allocation proportion and actively carries out rebalancing operation at a relatively low valuation.
Second, in terms of specific equity varieties, we should not only actively grasp the phased investment opportunities brought by the steady growth policy, the traditional economy and the return of the average value of industry valuation, but also focus on the structural investment opportunities brought by the rapid growth of emerging strategic industries such as consumption upgrading, scientific and technological innovation, healthy elderly care and green and low-carbon, so as to build an investment portfolio in line with the direction of economic development and through the cycle.
With regard to the impairment of credit investment assets, the company has continuously strengthened credit risk management in the use of insurance funds and always adhered to the bottom line of risk prevention. At present, the credit rating of bonds and non-standard fixed income products invested accounts for more than 98%, and the overall credit risk is controllable. The fixed income assets held by the company, including bonds, deposits and alternative financial products, did not have credit default last year. In 2022, the company will further improve its credit risk management ability, strengthen credit risk management, and continuously optimize the qualification and structure of credit positions. It is expected that there will be little pressure on credit impairment.
various ways to stabilize and boost the stock price
Since PICC returned to a in 2018, the stock price performance has been concerned by investors. No corresponding measures to boost the stock price?
Li Zhuyong, vice president of the company: the stock price is determined by the market. In the long run, it mainly depends on the fundamentals, while in the short term, it is affected by multiple factors. The poor performance of the share price of the insurance sector in 2021 is mainly due to the fact that in the process of transforming the life insurance industry to high-quality development, due to the switching of kinetic energy, the past business mode has been unsustainable. Most companies choose to change the crowd mode through in-depth channel and product reform, slow down the existing growth, and achieve higher quality growth in the future. Therefore, the major life insurance companies have experienced a temporary decline in business growth.
In addition, some investors are worried that the comprehensive reform of automobile insurance and major natural disasters will affect the future profitability of the property insurance industry. The short-term factors of these industries combined with macroeconomic pressure led to certain difficulties in the operation and development of the insurance industry last year, and the stock price performance was not satisfactory.
The company’s share price has shown strong resilience in the environment of general decline in the share price of the industry The People’S Insurance Company (Group) Of China Limited(601319) is a listed company with property insurance as its main business, which is different from the investment value of life insurance companies, especially in H shares. The company’s H shares were not affected by the reduction of holdings by major shareholders of a shares. The share price performed better relative to the peers in 2021. It also rose to a certain extent when the index and peers generally fell.
From a valuation perspective, our share price is undervalued. At present, the dividend rates corresponding to the share prices of A-Shares and H shares are 3.7% and 8.0% respectively, which are worthy of long-term holding. Investors can share the company’s long-term development achievements while obtaining higher cash dividends.
We will stabilize and boost the company’s share price in a variety of ways: first, further promote the implementation of the “excellent insurance strategy”, continuously improve the company’s performance, create sustainable growth value for investors, and support the company’s share price with good performance; Second, continuously improve the return to investors. Since its listing in 2012, The People’S Insurance Company (Group) Of China Limited(601319) cash dividend per share has always maintained an increasing trend, which will be maintained as much as possible in the future, so that investors can obtain stable dividend income. Third, vigorously strengthen communication with investors, so that the market can have an in-depth understanding of the company’s operation and management, business characteristics dominated by property insurance, unique competitive advantages and good investment value.
In short, we are optimistic and confident about the long-term development of the insurance industry and the company. From the perspective of valuation and dividend yield, the company’s share price is at the bottom of history, so we are confident that the share price will improve in the long term in the future.
