The market value of the US health insurance giant increased by 11 times The transformation of domestic life insurance may have another stone

Securities Times reporter Liu Jingyuan

How can the domestic life insurance industry get out of the predicament? Where's the direction? This is a frequently discussed issue in the industry this year.

He is the stone of the mountain and can attack jade.

In the United States, the largest insurance country, the health insurance giant United Health Group, which represents the health management model, is now worth nearly $400 billion, 12.4 times that of 2008, while the market value of the largest life insurance company, MetLife, is only more than $50 billion, which is only 1.9 times that of 2008. The two major life insurance giants with different business models have shown great divergence in the past decade or so.

Behind the difference in the valuation of the capital market is the different interpretation of the development and prospects of the two models. Will the history of the U.S. life insurance industry repeat itself in China's insurance industry, and then reveal the direction of the development of the industry? Many people in the industry hold a positive view on this.

U.S. insurance stocks diverged

Health insurance is on the rise

Will a single life insurer be at a disadvantage in the industry competition? Judging from the situation in the United States over the past decade, the capital market seems to have not been denied.

In the past decade, the performance growth and market valuation of the head health insurance company in the United States are much higher than that of life insurance companies. According to Wind data, the market value of MetLife, the largest life insurance company in the United States, is currently more than $50 billion, while the market value of the largest health insurance company, United Health Group, is close to $400 billion. Since the 2008 financial crisis, MetLife's market capitalization has less than doubled to date, while United Health Group's market capitalization has increased by more than 11 times, making it the world's largest listed health insurance company.

At present, the domestic life insurance industry is in deep trouble, or based on the consideration of learning from the "stone of his mountain", recently CICC, Guotai Junan and other head brokerage research institutes specially released research reports to consider the relevant prospects of China's insurance industry, especially the life insurance industry, from the development of the United Health Group in the United States.

Guotai Junan Research Report pointed out that from the listing performance of American life insurance companies, the valuation of managed medical institutions in recent years is generally higher than that of traditional life insurance companies. Managed medical institutions are represented by United Health, ON Onsen Insurance and Cigna Insurance, and the price-to-book ratio (P/B) at the end of 2020 is 5.10 times, 2.35 times and 1.57 times, respectively, which is significantly higher than that of traditional life insurance companies, such as XinAn Financial, MetLife, and Prudential Financial, which are only 0.87 times, 0.58 times and 0.47 times, respectively.

The research report believes that the core reason for the higher valuation of managed medical institutions is that it has higher profitability and higher certainty of profitability than traditional life insurance companies. For example, for a long time, the return on net assets (ROE) level of United Health Group has basically remained at 15% to 25%, and the market predictability is strong, while the ROE of the traditional life insurance company Prudential Financial fluctuates greatly, and the market predicts its performance weakly.

Founded in 1977, United Health Group links insurance payments with medical and health services, and health insurance business and health service business are the two major business layouts. In 2020, the company's total revenue was $257.1 billion, up 6.2% year-over-year, and net income was $15.4 billion, up 11.3% year-over-year.

According to the research report released by CICC, the health insurance business of United Health is the main contributor to revenue, while the operating margin of the health service business is higher. At the same time, United Health has opened up insurance claims and medical services, using insurance as a payment method, on the one hand, to improve the convenience of customers to purchase drugs through insurance claims; on the other hand, to reduce the cost of reimbursement by integrating resources to exchange prices for quantity and medical costs. Customers interact with insurance companies more frequently, and medical insurance is given a stronger consumer product attribute.

Insurance cross-border medical care

It's happening in China

"Will such a story as the change in the U.S. life insurance industry happen in China? We feel like it's happening. Liu Tingjun, president of Taikang Insurance Group, said at the 2021 China Life Insurance Industry Transformation and Development Summit recently.

At present, domestic head insurance institutions have laid out medical, health and pension services to varying degrees. For example, Taikang's pension community has blossomed all over the country, and there are also hospitals and other medical institutions layout; Chinese Life has built a big health platform, launched a health management APP Wild Cow Health, and created a national life Jiayuan pension community; China Taibao has determined the big health strategy, created the Taibao homeland pension industry, and built an ecosystem of "insurance + health + pension"; China Taiping has built a high-end pension community in Taiping Town in many places, forming a Rehabilitation Hospital of Taiping; Xinhua Insurance not only has a rehabilitation hospital, a health management center, but also a pension community Ping An has deeply laid out the medical ecosystem, providing four-in-one services of health management, sub-health management, chronic disease management and serious disease management, from the treatment of diseases to the treatment of pre-existing diseases, and the ecological aspects of the elderly have a new layout.

Liu Tingjun said that practice has proved that insurance entering the medical and nursing industry is vertical, which is a different concept from entering the traditional diversified financial industry such as securities and trust. Entering the medical care is the deep cultivation of the insurance industry in the vertical industrial chain, which will reduce management costs, sales costs, and ultimately benefit consumers.

The research report released by Guotai Junan draws on the experience of U.S. health insurance, and also believes that the establishment of a health management service system will help insurance companies control losses and reduce fees and improve profitability.

Liu Tingjun analyzed that the reason why the life insurance industry should regard the medical and nursing care industry as an important starting point for transformation comes from the inherent, long-term and profound changes in the structure of the Chinese mouth. China is moving towards an era of longevity, accompanied by long-term trends such as low fertility, low mortality, and longer life expectancy. At the same time, as the life expectancy of the population increases, there will be a huge demand for health and old-age care. In order to achieve the whole life cycle medical and health service model, it is necessary to truly change the traditional life insurance from risk protection to the supply of actual services on the supply side, so that payment and service are coordinated, so as to truly solve the needs of customers for health security and pension services, in order to break through the "inner volume".

"In the future, we will see a lot of insurance companies look more and more different, and there may be insurance companies becoming health management companies, becoming big data companies... These forms of emergence are actually to better meet the needs of consumers and customer groups. Huang Zhiwei, president of Hengqin Life, also mentioned.

Recently, PwC and Sun Life Everbright released the "Full Life Cycle Risk Protection Business Model Research Report", which proposes that insurance companies will move towards a full life cycle risk protection service model, and the whole life cycle risk protection solution requires a full range of service capabilities, covering customers' diagnostic medical treatment, health management, pension services, disability care and other aspects. Insurance companies themselves cannot have all the resources and capabilities, so adopting the way of ecological cooperation, grafting and complementary capabilities, and achieving ecological win-win should be an inevitable strategic choice.

Adapt to local conditions

Long-term deep ploughing

However, while the development of the industry extends to the field of medical care and gathers more and more consensus, there are also voices that insurance companies are cross-border and do not do business, and question the management ability of insurance companies.

Liu Tingjun explained with Taikang's more than ten years of cross-border medical and nursing practice that the so-called professional management ability is to focus on continuous exploration and accumulation in the medical and nursing industry and gradually establish it. "The medical care industry is different from other industries, it is a long-term, slow-return, asset-heavy industry, so it really needs long-termism rather than business opportunism, and it needs long-term deep cultivation."

At the same time, domestic insurance companies also expect that the joint healthy business model and high profitability will be difficult to achieve in China in the short term, and in the long run, it will need to be combined with the actual situation in China.

For the health insurance model that has been popularized in the United States, the research report released by CICC believes that the development of United Health depends on several major factors, such as the free medical system and mature health insurance market in the United States, the government's expectation of medical control through market forces, and the company's correct and clear strategy. Specific to China, China's insurance innovation payment is still facing the obstacles of medical service and commercial insurance, and in the context of the gradual improvement of the bargaining power of the commercial insurance end, the future insurance innovation payment model with Chinese characteristics may appear, and whether it can be adapted to local conditions is the key.

"The development of the medical and nursing industry still has to have its own exploration and find out its own laws." On the whole, our country has not promoted market-oriented reform in the pension industry for many years, so the gap between supply and demand is very large, so the development space is still huge, and we are still in the long cycle of rising. Liu Tingjun said.