Abstract: Under the influence of the switch of financial instrument standards, the decline in the scale of short-term insurance premiums, and the decline in investment performance, CPIC's net profit declined last year, and the progress of future life insurance reform and management changes have become the focus
Text: Ding Yan
Edited by Yang Rui
The transformation of the insurance industry has entered the deep water area, and China Pacific Insurance (Group) Co., Ltd. (hereinafter referred to as "CPIC", 601601. SH, 2601.HK) has attracted much attention for its reform effectiveness and prospects.
On March 28, CPIC announced its 2023 performance report, which showed that in 2023, CPIC achieved an annual operating income of 323.945 billion yuan, of which insurance service income was 266.167 billion yuan, a year-on-year increase of 6.6%, a net profit of 27.257 billion yuan, a year-on-year decrease of 27.1%, a group's operating profit of 35.518 billion yuan, a year-on-year decrease of 0.4%, and an increase of 1.9% from the end of the previous year Assets under management amounted to RMB2,922.308 billion, an increase of 10.1% over the end of the previous year.
At the end of 2023, the change of CPIC's top management has attracted the attention of investors, with the former chairman Kong Qingwei retiring and former president Fu Fan taking over as the group's party secretary and taking over as chairman, and Zhao Yonggang, who grew up in CPIC and transferred to Haitong Securities as deputy secretary of the party committee two years ago, returned to the position of president.
This year, Fu Fan attended the 2023 results conference of CPIC for the first time as chairman, and Zhao Yonggang made his debut. When asked about the direction of the new management's future high-quality development plan for the company, Fu Fan, President of CPIC Group, said that the new board of directors will continue to adhere to the long-term principle, on the one hand, actively grasp the development opportunities brought by the five major articles in finance, enhance development capabilities and core competitiveness, and on the other hand, do a good job in key risk management and control, and constantly improve corporate governance.
At the results conference on March 29, CPIC executives responded to investors' concerns one by one on the latest progress of the long-term transformation of life insurance, the development strategy of new energy vehicle insurance, and future investment strategies.
(Image source: on-site shooting)
Regarding the arrangement of CPIC's future dividend policy, Zhang Yuanhan, chief actuary and head of finance of CPIC Group, said that the company's dividend policy will refer to operating profit in the future, and operating profit is expected to increase slightly in the next two years.
It is also worth noting that Cai Qiang, general manager (CEO) of CPIC Life Insurance this year, did not attend the results conference. In response to previous market rumors that Cai Qiang, general manager of CPIC Life Insurance, will expire his three-year market-oriented employment term and is about to step down, Fu Fan responded that in April 2021, the board of directors of life insurance appointed Cai Qiang as the CEO of CPIC Life Insurance, which has made positive contributions to the transformation of life insurance Changhang. Fu Fan emphasized, "The selection and appointment of the new management of life insurance will continue to uphold the principles of professionalism and marketization. According to a person familiar with the matter, at the beginning of this year, Cai Qiang went to some areas to investigate the latest progress of the second phase of the Long Voyage Operation.
For CPIC's board of directors, the industry is also concerned about the sustainability of its life insurance reform strategy. According to a senior executive close to CPIC, CPIC's board of directors is not based on a single person's mechanism, but on a corporate governance structure. At present, CPIC's board of directors has gathered many directors with an international vision, so the continuity of life insurance reform can be guaranteed.
1. Life insurance: reform continues to deepen
At present, the reform and transformation of CPIC Life Insurance has achieved initial results. According to the data of CPIC's 2023 performance report, the company's new business value was 10.962 billion yuan, a year-on-year increase of 19.1%, the new business value rate was 13.3%, an increase of 1.7 percentage points year-on-year, the scale premium was 252.817 billion yuan, a year-on-year increase of 3.2%, of which the new insurance increased by 3.7% year-on-year, the operating profit of life insurance was 27.257 billion yuan, a year-on-year increase of 0.4%, and the marginal balance of contract services was 323.974 billion yuan, a year-on-year decrease of 0.8%.
(Image source: CPIC 2023 performance report)
In terms of new business value, Hu Xiang, chief analyst of non-bank finance at Soochow Securities, said that the growth rate of CPIC's NBV (new business value) has been positive for six consecutive quarters. Under the new economic assumption, the contribution of the individual insurance/bancassurance channel to NBV in 2023 will be 83.0% and 17.0%, respectively.
From the perspective of agent channels, in 2023, the agent channel will achieve a scale premium of 195.478 billion yuan, a year-on-year increase of 3.0%, of which the regular premium of new insurance will be 26.175 billion yuan, a year-on-year increase of 32.3%. In 2023, there will be an average of 210,000 monthly insurance marketers, 199,000 insurance marketers at the end of the period, and the average monthly first-year premium per insurance marketer will be 12,837 yuan, an increase of 51.8% year-on-year. Among them, the monthly per capita first-year premium of core manpower was 43,503 yuan, a year-on-year increase of 26.6%, and the average monthly first-year commission income per capita of core manpower was 6,051 yuan, a year-on-year increase of 46.3%.
(Image source: CPIC 2023 performance report)
It is understood that following the transformation 1.0 and transformation 2.0, in the face of many changes in the internal and external environment, in January 2021, China Pacific Life Insurance launched the "Long Voyage Action" plan, which has been comprehensively promoted and transformed since one year, and the first phase of the first 18-month transformation project will be completed by the end of June 2023.
In response to the latest progress of CPIC's "Long Voyage Action", Pan Yonghong, Chairman of CPIC Life Insurance, responded that in the second half of 2023, the entire life insurance company implemented the largest and most extensive organizational change in history with the strong support of the group. By streamlining various structures, optimizing organizational structures, and managing the market-oriented selection and recruitment of cadres, the organizational efficiency has been significantly optimized, and the organizational vitality has been further stimulated. At the same time, the company launched the second phase of the "Long Voyage" project, taking organizational change as the guide, focusing on customer-centric value creation, and continuing to promote the "Long Voyage" action in depth.
According to Pan Yanhong, the company is currently planning the "second phase of the long voyage action" to promote the main aspects: first, to further build multiple channels, to accelerate the formation of new business models; secondly, to carry out the construction of customer middle platform, to further form customer hierarchical classification, organic integration of products and services, more concise and efficient operation, excellent customer experience of operation service support; third, value management closed-loop to go further, continue to stimulate the vitality of the organization.
"After the practice of CPIC Life's long-term transformation in the past three years, the company's consensus on the direction of transformation has become more consistent, and the direction of transformation will continue to be adhered to, the direction will be firmer, and the path will be clearer. Pan Yanhong said.
In addition, in response to the current interest rate loss problem faced by the life insurance industry, Zhang Yuanhan responded that the company has sold more increased whole life insurance in the past two years, but after measurement, the overall debt cost has only increased by a few basis points. On the one hand, with the market lowering the pricing rate, the company's overall guaranteed interest rate or debt cost is gradually decreasing, on the other hand, in terms of new business options, from the market level, the public's demand for asset appreciation and inheritance is still huge.
"In this case, the company will reduce the pricing guarantee rate and increase the adjustable income component of the product, such as the dividend product or universal product to increase the protection ratio, so that the sensitivity of the overall interest rate will be reduced. Zhang Yuanhan said.
2. Property and casualty insurance: new energy vehicle insurance underwriting "first sees the light"
From the perspective of property insurance, the underwriting profit of CPIC's property insurance business remains at a good level. According to the data of CPIC's 2023 performance report, the company's underwriting comprehensive ratio was 97.7%, an increase of 0.7 percentage points year-on-year. Among them, the underwriting comprehensive expense ratio was 28.5%, down 0.3 percentage points year-on-year, the underwriting comprehensive loss ratio was 69.2%, up 1.0 percentage points year-on-year, and the original insurance premium income was 190.614 billion yuan, up 11.4% year-on-year. Among them, non-motor insurance premium income increased by 19.1% year-on-year, accounting for 45.6%, an increase of 2.9 percentage points.
(Image source: CPIC 2023 performance report)
Gu Yue, chairman of CPIC Property & Casualty, said that the company's performance has reached the expected development goals, which is inseparable from the development and transformation in previous years: first, it will make a long-term strategic layout based on the changes in social and economic development needs, and second, it will predict the risk of regional intelligent disasters under frequent natural disasters. Taking 2023 as an example, the losses of catastrophes such as heavy rains, floods, and freezing rain have increased significantly. The short-term losses are large, but the impact on the overall volume of CPIC is limited, and third, the company uses robots to replace labor to reduce costs.
In response to the impact of last year's freezing rain loss on CPIC's property insurance, Gu Yue said that in just 10 days, the disaster loss of freezing rain was huge, exceeding 500 million yuan. Although the short-term losses are large, the overall impact on the size of the company is limited. In the past two years, CPIC has been attaching great importance to the construction of risk early warning and risk reduction management system.
As for the expectations for 2024, Gu Yue said that 2024 will have complexity, volatility and a high degree of uncertainty that have not been seen before. From the perspective of the property insurance industry, the overall demand is definitely downward, and at the same time, the risk exposure is expanding, which requires us to enhance our sense of crisis and urgency. He stressed that there are many opportunities brought about by industrial upgrading, consumption upgrading, scientific and technological revolution and green revolution, which require us to enhance our sensitivity and forward-looking. Companies should pay special attention to the new trend of frequent catastrophes and intensifying natural disasters.
At the same time, in terms of new energy vehicle insurance, which has attracted much attention in the industry, Gu Yue revealed that the company predicted the future development trend of new energy vehicles as early as three years ago, so three years ago, the company did a project research on the new energy vehicle market, and the overall core content is how to establish a new business model under the rapid development of new energy vehicles. After several years, the project research has achieved results at the end of 2022, and it began to be promoted on a large scale in the second half of last year. The new business model mainly solves the problem of high cost of new energy vehicle insurance, focusing on both the sales side and the service side. Judging from the current implementation situation, the model has achieved initial results.
"Although the comprehensive cost ratio of the company's new energy vehicles is still in a state of loss, it has shown a significant downward trend in the past year, so we are full of expectations for the development of new energy vehicles in the future. Gu Yue revealed that it is understood that the regulatory authorities are also actively formulating policies to support the industrial revolution of new energy vehicles.
According to Gu Yue, the current high cost of new energy vehicle insurance is mainly affected by multiple factors such as high intelligent integration of new energy vehicles, different body structures, completely different driving behaviors from fuel vehicles, and the use of many new energy private vehicles as commercial vehicles, so the insurance rate of new energy vehicles is 1 times higher than that of oil vehicles.
3. Investment: Adhere to a high-dividend investment strategy
In 2023, the capital market will be volatile, and what is the "report card" of CPIC investment, which is known for its stability?
According to CPIC's 2023 performance report, the comprehensive investment return on the Group's investment assets was 2.7%, up 0.4 percentage points year-on-year, mainly due to the increase in the impact of changes in equity assets measured at fair value through other comprehensive income in the current period, the total investment return was 2.6%, down 1.5 percentage points year-on-year, and the net investment return was 4.0%, down 0.3 percentage points year-on-year.
At the same time, the company achieved a net investment income of 77.739 billion yuan, a year-on-year increase of 2.3%, mainly due to the increase in dividend and dividend income. Among them, debt financial assets accounted for 74.5%, an increase of 5.4 percentage points from the beginning of the year, and equity financial assets accounted for 14.5%, a decrease of 0.3 percentage points from the beginning of the year, of which core equity accounted for 10.7%, a decrease of 0.8 percentage points from the beginning of the year. In addition, the company's assets under management were 2,922.308 billion yuan, an increase of 10.1% over the end of the previous year, of which the scale of assets under third-party management was 672.235 billion yuan, a decrease of 3.7% from the end of the previous year.
CPIC said that from the perspective of investment concentration, the company's investment holdings are mainly concentrated in the financial industry, transportation, infrastructure and other industries, and the ability to resist risks is strong. The company's equity asset investment varieties are fully diversified, and the comprehensive strength of the debt-paying entities of fixed income asset investment is generally relatively strong, and the main counterparties include large enterprises such as China State Railway Group Co., Ltd. and large state-owned commercial banks, except for government bonds.
Su Gang, chief investment officer of CPIC, said at the results meeting that CPIC has adhered to a high-dividend strategy in the stock market for about a decade, and has consolidated its position in core stocks by selecting stocks with low valuations, high dividends and good earnings. At present, CPIC is further strengthening the whole process management of volatility, with a particular emphasis on post-investment economic improvement, and continuing to explore diversified assets. From the formulation of investment budget indicators to regular performance analysis, as well as the management and control of major investment projects, CPIC has relevant control mechanisms.
Su Gang believes that from a long-term perspective, in order to better realize asset-liability matching management, we will not only pay attention to the issue of interest rate spreads, but also include term matching, income and cost matching, and carry out all-dimensional matching. At present, in CPIC's portfolio, a category with a high dividend allocation is specifically set in the asset class.
(Image source: CPIC 2023 performance report)
As of the close of trading on March 29, CPIC's share price was 23 yuan per share, with a total market value of 221.3 billion yuan, a circulating market value of 157.4 billion yuan, a turnover rate of 0.69%, and a dynamic price-earnings ratio of 8.12 times.