Profits fell by more than 99%, how much did Chinese Shou stock speculation lose?

On October 26, Chinese Life released its third quarterly report, which is also the first listed insurance company to announce its financial report.

Financial report data shows that in the first three quarters of 2023, Chinese life insurance premium income reached 578.799 billion yuan, a year-on-year increase of 4.5%, and new single premiums reached 196.656 billion yuan, a year-on-year increase of 14.8%.

Chinese Shou Third Quarterly Report

In terms of profit, the net profit attributable to the parent of Chinese Life in the first three quarters fell by 47.8% year-on-year to 16.209 billion yuan. The profit in the third quarter was only 53 million yuan, down 99.1% from the third quarter of last year.

It is worth noting that the asset impairment loss in the first three quarters of Chinese Life was as high as 32.569 billion yuan, a significant increase of 120.4% year-on-year. Among them, as of the end of the second quarter, Chinese Life's asset impairment loss was 12.835 billion yuan. This means that the company's impairment loss increased by about 19.7 billion yuan in the third quarter, and a considerable part of it was affected by the A-share market.

In this regard, at the third quarter results conference held on the evening of the 26th, the management of Chinese Life further responded to the profit fluctuations and asset impairment losses of more than 30 billion yuan that the market was concerned about. According to management, the asset impairment loss was not caused by individual stocks, but was generated by equity varieties as a whole. In addition, the fluctuation of investment income in the third quarter does not represent the company's real investment management ability, and it is hoped that the investment value and inherent volatility of equity assets are viewed rationally.

At today's open, Chinese Shou A-shares opened 4.62% lower and fell more than 6% at one point, and finally closed down 1.33%.

Revenue is at the top, profits are at the bottom

From the perspective of operation and income, Chinese Shou's third-quarter answer is actually quite good.

In the first three quarters, the new business value of Chinese life insurance business increased by 14.0% year-on-year, and the new policy premium was 196.656 billion yuan, an increase of 14.8% year-on-year. Among them, the first-year premium was RMB105.982 billion, a year-on-year increase of 16.0%.

Looking at its operating indicators such as premium income, new policy premiums, and the scale and growth rate of first-year premiums, we can find that they have all set new highs in the same period of history in the past three years.

In terms of the number of insurance sales on the cost side, as of the end of the third quarter, the number of Chinese life insurance sales was 660,000, 8,000 fewer than at the end of last year, and the personnel has been further optimized.

However, it is worth noting that the surrender payment of Chinese Life in the first three quarters was 38.468 billion, a year-on-year increase of 34.32%, and the surrender rate was 0.88%, an increase of 0.14 percentage points year-on-year, still at a high level in the industry.

Chinese Shou has been subject to public opinion storms over surrender for a long time, such as the vigorous "real-name reporting of former employees" incident in February 2021, in which the Chinese Shou Heilongjiang Nenjiang branch company involved was exposed to business fraud, and manager Sun Xiaogang was exposed to commission fraud and corruption, resulting in a large number of surrenders.

Later, after investigation, it was determined that during Sun Xiaogang's term of office, the Nenjiang Branch Company had compared with bank savings products and promised additional income when selling annuity insurance products, and the team's manpower was not real, the activity management was not strict, and there were problems such as inflated expenses and arbitrage commissions.

How much money did Life lose in stock trading?

Then, since the business revenue increase is progressing well, the reason for the profit pulling is naturally that the investment is unfavorable, and one of the core reasons is naturally that the A-share market is not very competitive in the third quarter.

According to financial report data, in the first three quarters, Chinese Life achieved a total investment income of 109.997 billion yuan, and the total investment return was only 2.81%.

In addition to the pressure brought by the decline in the stock market, Chinese Life Investment's other major bond market is also not easy to do.

Since the beginning of this year, the low fluctuation of mainland domestic bond interest rates, the further downward movement of the hub, and the pressure on fixed income asset allocation have continued, which has led to the huge performance downward pressure of leading companies such as Life Insurance.

The asset impairment loss in the first three quarters of Chinese Life reached 32.569 billion yuan, a significant increase of 120.4% year-on-year. Among them, as of the end of the second quarter, Chinese Life's asset impairment loss was 12.835 billion yuan. This means that the company's impairment loss increased by about 19.7 billion yuan in the third quarter.

It is worth noting that the accrued loss is not an actual loss, and once the stock market improves, these pre-accrued losses may become future excess profits.

So does it mean that Chinese Shou is just trapping death?

Let's do a simple calculation.

Looking at the financial reports, it can be found that in the first three quarters, Chinese Life had a total investment income of 109.997 billion yuan, a net investment income of 148.34 billion yuan, a fair value change gain and loss of 1.821 billion yuan, and recorded an asset impairment loss of 32.569 billion yuan.

According to the calculation method of the remarks in the financial report, we add the net investment income of 148.34 billion yuan plus the fair value appreciation of 1.821 billion yuan, minus the impairment of assets of 32.569 billion yuan, which is equal to 117.592 billion yuan, and the difference between this value and 109.997 billion yuan in the financial report is the income from the difference between the purchase and sale price of investment assets. Calculations show that Chinese Shou lost as much as 7.595 billion yuan in the third quarter.

According to the data of the half-year report, the profit from the buying and selling price difference of Chinese Life in June, that is, the so-called stock speculation income of falling into the bag, was 277 million yuan, that is, in the third quarter alone, Chinese Shou really lost about 8 billion yuan.

Executives: The decline in performance is not entirely due to investment

However, for the performance fell by 99.1%, Chinese Shou's management also had its own views.

At the earnings conference that night, life executives said that in addition to the decline in equity investment, the adjustment of accounting standards also affected the performance data.

For the change of accounting standards, Life said: last year's comparable statements unilaterally adopted IFRS17, did not use IFRS9, in this case there was a difference in the comparables, the company simulated the data under IFRS17 and IFRS9 standards, the fluctuation is not as large as the current one.

It is worth noting that the net profit growth rate in the first 9 months under the old standard was -47.8% year-on-year, corresponding to the net profit growth rate of -99.1% in the third quarter;

Under the new standard, the net profit for the first nine months was -36.0% year-on-year, corresponding to a loss of 610 million yuan in the third quarter.

For the asset impairment loss, life executives also explained.

Chinese Shou's management responded that the impairment was not caused by individual stocks, but was generated by equity varieties as a whole. "The impairment generated this year has increased compared with previous years, and the overall impairment is generated by equity varieties. From the perspective of equity investment, the long-term relatively high level of income and short-term volatility are also the two sides of equity investment. The market is indeed under pressure this year, and we have also seen that the total index of the market-wide equity-biased hybrid fund fell by 9% in the first three quarters, so in such a situation, the company's impairment is not due to individual stocks, but to a situation in the overall market index. ”

The management further dismantled the occurrence of large asset impairment losses, "mainly some equity assets that increased their positions in 2022, and formed some floating losses this year, which was reflected in the loss of price difference and the increase of impairment losses, which put the company's overall investment income under pressure in stages." Objectively speaking, there was a sharp retracement in the equity market in 2022, and as an institutional investor, based on long-term investment judgment, the company deployed some equity assets at a relatively low level last year. However, since the beginning of this year, the capital market has remained low and volatile, which has indeed posed a challenge to large institutional investors. In this case, after the company's equity portfolio has been held for more than one year, a certain equity spread loss will be formed. If it is below cost, a certain amount of equity impairment will be accrued in accordance with accounting standards. ”

However, Chinese Shou's management also stressed that it believes that last year's equity layout was an investment at a low market level, and it is expected to obtain better returns in the long run. "As a long-term fund, the fluctuation of investment income in the third quarter cannot represent the company's real investment management ability, and it is also hoped that it can rationally view the investment value and inherent volatility of equity assets, and the company will also focus on the long-term perspective to evaluate the investment situation and adhere to the long-term investment strategy across the cycle." At present, if the end of September is the time, the company's impairment in the fourth quarter will definitely be significantly lower than the third quarter, and if the market recovers, the company's investment income will also be relatively good. ”