Losses are getting worse! What are the difficulties encountered by this power insurance company?

Affected by the external market environment, the operation and development of insurance companies have become more difficult, especially for small and medium-sized companies.

Recently, various insurance companies have successively released solvency reports for the first quarter of 2024, and judging from the report card, there are few joys and more sorrows.

Yingda Life, a power insurance company "born with a golden key", further aggravated its losses. According to the data, in the first quarter of 2024, Yingda Life achieved an insurance business income of 5.646 billion yuan and a net profit loss of 1.291 billion yuan, further expanding the loss amount from the whole year of 2023.

Originally, with a strong shareholder background, Yingda Life was once favored by the industry, but in recent years, its operation has deteriorated, and there has even been a quarterly loss of more than one billion.

Behind the deepening losses

In the past, Yingda Life performed well.

Data shows that since its inception in 2007, Yingda Life has experienced losses in the first seven years. From 2007 to 2013, its net profit was -71 million yuan, -209 million yuan, -179 million yuan, -345 million yuan, -321 million yuan, -192 million yuan and -152 million yuan respectively. However, since 2014, Yingda Life has entered a period of continuous profitability, and from 2014 to 2021, its net profit was 0.09 million yuan, 24 million yuan, 119 million yuan, 143 million yuan, 149 million yuan, 204 million yuan, 283 million yuan, and 377 million yuan respectively.

Such a profit rhythm will be broken in 2022. According to the data, in 2022, Yingda Life will lose 389 million yuan, and in 2023, this data will further expand, with a loss of 840 million yuan.

The reasons behind the analysis are not only the sluggish investment income caused by the fluctuation of the external capital market, but also related to the continuous increase in surrender premiums, handling fees and commission expenses of Yingda Life.

From the investment side, in 2022, Yingda Life's investment income will be about 2.986 billion yuan, a decrease of 158 million yuan from 3.144 billion yuan in 2021, and in 2023, its investment income will drop again to 2.733 billion yuan. The recession of investment is positively related to factors such as the unstable external development environment and the fluctuation of the entire capital market, which is a common problem faced by the industry.

As of the first quarter of 2024, the investment return rate and comprehensive investment return rate of Yingda Life are 0.17% and 2.27% respectively, which is not far from the average investment return rate of 4.53% and the average comprehensive investment return rate of 3.44% in the past three years. Meanwhile, in the first quarter of 2024, Yingda Life's return on equity was -68.09%, which is a big change from 2023, which is -38.11% in 2023.

Return on equity, also known as return on equity / return on equity / return on equity / return on equity / return on equity / return on equity / return on equity, is the percentage of net profit to average shareholders' equity, and is the percentage ratio obtained by dividing the company's after-tax profit by net assets. This indicator reflects the level of return on shareholders' equity and is used to measure the efficiency of a company's use of its own capital. The higher the index value, the higher the return on investment, which reflects the ability of own capital to obtain net returns.

In addition, in terms of surrender benefits, in 2022, the surrender benefits of Yingda Life will be 1.475 billion yuan, an increase of 1.062 billion yuan from 2021, a year-on-year increase of 257.14%; In 2023, the surrender benefit of Yingda Life will reach 2.917 billion yuan, a year-on-year increase of 97.76% compared with 2022. From 2021 to 2023, Yingda Life's handling fees and commission expenses will be 1.194 billion yuan, 2.294 billion yuan and 2.576 billion yuan respectively.

The business structure needs to be optimized

As a national life insurance company founded in 2007, relying on the State Grid, the market is full of expectations.

According to the official website of Yingda Life, "serving the main business of the power grid; Promote the in-depth participation of commercial health insurance in the reform of the multi-level medical security system of the State Grid Corporation, alleviate the pain points and difficulties of the State Grid employees, such as 'expensive medical treatment, difficult medical treatment, and complicated settlement', and provide strong insurance protection for the State Grid Corporation to build an international leading energy Internet enterprise with Chinese characteristics", which is enough to reflect the dependence of Yingda Life on shareholders.

However, market-oriented enterprises need to polish in the market, and Yingda Life is also constantly expanding into new areas, and the bancassurance channel is a major breakthrough.

Taking 2023 as an example, four of the top five products in terms of premium income come from the bancassurance channel and one is an insurance channel. Among them, the first four products from the bancassurance channel have a total premium income of 15 billion yuan, accounting for nearly 70% of the annual premium, especially the "Yingda Life Privilege Family Whole Life Insurance", which has a predetermined interest rate of 3.5% and a premium of 10.192 billion yuan. There is also an increased whole life insurance product, Yingda Xinxi Family Whole Life Insurance, which also has a predetermined interest rate of 3.5%.

In the current environment of declining interest rates, the increased whole life insurance with high predetermined interest rates will also face a certain risk of interest rate loss, which has been reminded many times by regulators before, and issued a document to regulate the predetermined interest rate from 3.5% to 3%.

In addition, in 2023, there will be two wealth management products among the top 5 products in Yingda Life's premium income, one is Yingda Yuanxi Insurance (dividend), with a premium income of 3.198 billion yuan, and the other is Yingda Yuantai Annuity Insurance, with a premium income of 504 million yuan.

The high-cost bancassurance channel, coupled with wealth management products, is a big challenge for small and medium-sized companies. In the solvency report for the first quarter of 2024, Yingda Life said that it will continue to optimize its business structure, improve business quality, strengthen asset and liability management, and enhance the company's solvency in the future.

It is worth mentioning that in June 2023, the State Administration of Financial Supervision issued the "Announcement on Adjusting the List of Critical Illness Insurance for Urban and Rural Residents of the Head Office of Insurance Companies", and four insurance companies, including Yingda Life, were transferred out of the list of operating critical illness insurance.

The battle was unsuccessful, and the capital increase continued

In addition to the pressure on business operations, Yingda Life has also been tested in terms of corporate risk control.

From the perspective of compliance management, in October 2023, the State Administration of Financial Supervision disclosed a fine, pointing out that the standardized data report submitted to the regulatory authorities by Yingda Life was untrue; The related parties and related party transaction information reported to the regulatory authorities were untrue, and Yingda Life was fined 2.8 million yuan, and the relevant responsible persons were fined a total of 280,000 yuan.

From the perspective of the company's internal structure, in July 2023, Yingda Life announced on its official website the disclosure of major matters in equity investment management capabilities (indirect equity investment), the organizational structure of the company's asset management department (investment management department) was adjusted, and there was no independent equity investment department (team) within the asset management department responsible for equity investment, resulting in investment management capabilities not meeting the ability standards, so it suspended the independent development of indirect equity investment-related business.

Many unstable factors may have affected the development of Yingda Life to a certain extent. Yingda Life is also trying to change, such as actively increasing capital to lead the war, but so far there is still no result.

It is reported that in July 2021, Yingda Life disclosed the mixed-ownership reform project at the Beijing Equity Exchange, proposing to introduce 1-2 strategic investors with synergistic value with the company's business or with insurance business management experience and insurance business resources by increasing capital and expanding shares (or purchasing old shares).

Now, after nearly three years, this capital increase and share expansion has not come true. In the solvency report for the first quarter of 2024, Yingda Life said that the company will actively promote capital increase and study the use of various capital replenishment tools to replenish capital.

As of April 2024, it is the first anniversary of the change of chairman of Yingda Life. It is still worth paying attention to how the company will change its formation in the future.