Core view
From the first generation to the second generation, the solvency supervision system has been reformed several times and has formed a stable three pillar supervision system. Since 1978, after nearly half a century of development and improvement, the solvency supervision system with Chinese characteristics has been formed and gradually improved. The first phase of the second generation of solvency was completed in 2015, and the second phase was officially implemented in the first quarter of 2022, and fully implemented by 2025 at the latest. The three pillar regulatory system covers quantitative capital requirements that can be quantified, scientific and detailed qualitative regulatory requirements, as well as transparent and open market restraint mechanisms, and considers the solvency of insurance enterprises from all angles. Under a sound system, there are constantly reasonably detailed institutional rules. We believe that the fully improved second generation phase II project is more scientific, effective and comprehensive, and plays a positive role in promoting the long-term development of the insurance industry.
Strict capital recognition, solid capital quality and structure, and downward pressure on solvency. The first pillar is more strict in capital recognition, and the second phase project optimizes the capital structure and compacts the capital quality. Specifically, the recognized value measurement method of investment real estate is changed to the cost mode. Asset impairment shall be fully accrued for long-term equity investment, and the proportion of future surplus of insurance policy included in core capital is limited to 35% of core capital. The actual capital probability shows a downward trend, but the capital quality under the new regulations is more solid. In addition, the minimum capital requirements for different businesses have also been adjusted, such as adding disease trend factors, increasing longevity risk, adjusting mortality factors, strengthening penetration measurement, etc. the minimum capital under the new regulations is expected to increase significantly. Although the solvency adequacy ratio has downward pressure under the dual influence, a scientific and reasonable measurement method is conducive to the optimization of capital structure and the effective control of future risks.
The debt side policy catalyzes and guides the development of long-term guaranteed products. New trend factors for serious diseases were added to guide the continuous optimization of the development and design of serious disease health insurance, and the product recognition was continuously improved; Relying on the strong policy guidance and the development of the third pillar, the endowment savings insurance is expected to stimulate its vitality under the catalysis of the capital discount of the phase II project; Under the background of commercial vehicle fee reform, the excess refund is cancelled, and small and medium-sized insurance enterprises may seize the opportunity to strengthen the development of vehicle insurance; The policy agricultural insurance with the lowest capital discount and the separate credit guarantee insurance have great business potential, and the market space is worth looking forward to.
The investment side is subject to penetrating and strict supervision to control investment risks. Affected by the actual capital compaction and the increase of minimum capital requirements caused by the impairment provision and the sharp rise of basic factors, the proportion of long-term equity investment allocation may decline, and insurance companies may hedge the downward pressure on solvency by reducing their holdings; With active market trading and continuous guidance of supervision, we believe that the upward elasticity of equity investment is more significant; Although the investment real estate is under two-way pressure from the contraction of actual capital and the increase of minimum capital, it is still at a low level of allocation. We believe that the allocation will be more cautious in the future, the allocation demand for high-quality targets is still, and the significant downward pressure is limited
Investment proposal and investment object
The implementation of the second generation of compensation phase II project has a great downward pressure on the solvency adequacy ratio of insurance enterprises, but large insurance enterprises can still achieve a solvency level much higher than the regulatory red line with their rich capital strength. We believe that the overall impact on them is limited. Major insurance enterprises will still promote business development according to their own strategic needs, Some small and medium-sized insurance enterprises with weak capital strength may meet regulatory requirements by adjusting asset allocation and liability structure, or by raising capital. Therefore, we believe that the head concentration effect of debt side expansion is expected to be further strengthened, and small and medium-sized insurance enterprises need to improve capital accumulation in a short time. It is suggested to pay attention to large insurance enterprises with scale advantages and comprehensive insurance enterprises with solid certainty of automobile insurance growth.
Maintain the positive rating of the industry. It is suggested to pay attention to Ping An Insurance (Group) Company Of China Ltd(601318) (601318, buy) to strengthen the reform of life insurance and gradually recover the return on investment; At the same time, it is recommended to pay attention to the release of the “long aviation partner” plan to build a high-quality agent team and China Pacific Insurance (Group) Co.Ltd(601601) (601601, not rated) with solvency adequacy ratio leading in the industry.
Risk tips
The sales of new orders are less than expected, the long-term interest rate is down, the equity market fluctuates, the impairment risk of equity investment is accrued, the progress of comprehensive reform of automobile insurance is less than expected, policy risk, and the assumption is not established.
