China Life's Leadership Shifts Amid Mixed Mid-term Results
Another trillion-yuan insurance giant has experienced significant personnel changes.
Bai Tao, Chairman of China Life, has been relieved of his duties as Party Secretary of the group, and has been succeeded by the former president of the group, Cai Xi Liang.
This appointment has sparked widespread speculation that there may be changes at the top of the group.
According to convention, the Party Secretary and Chairman of state-owned enterprises are often held by the same person.
In the first half of 2024, the leading life insurance company, China Life (601628.SH, 02628.HK), appeared to be "prosperous" on the surface, but "mixed with joy and sorrow" on the inside.
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The joy is that revenue, net profit, and new business value have all achieved double-digit growth.
The concern is that due to reforms and regulatory impacts, the company's new policy premiums and bank insurance channel premiums have declined significantly.
Moreover, as another leg of profit sources, it seems to have "limped".
Under the turmoil of the capital market, the company's investment income has plummeted by more than 80%.
It is worth noting that the core subsidiary of the group's property insurance sector, China Life Property Insurance, has seen a double-digit decline in net profit, which is inferior to the top three property insurance companies.
On the eve of China Life's release of the 2024 interim report, the group suddenly announced a change of leadership, which has shaken the entire insurance industry.
On the morning of August 28, the person in charge of the Central Organization Department attended the cadre meeting of China Life Insurance (Group) Company and announced that Bai Tao was relieved of his duties as Party Secretary of China Life Group, and Cai Xi Liang was appointed as the new Party Secretary.
Although the reason for Bai Tao's dismissal is not clear, the outside world generally speculates that the head of China Life will change.
It seems to have become an industry convention for large insurance companies to have the Party Secretary as the Chairman.
It is worth noting that on June 27, 2024, at the 2023 annual shareholders' meeting, Bai Tao was just elected as an executive director of the eighth board of directors of China Life.
On the same day, the first meeting of the eighth board of directors was held, and Bai Tao was elected as the Chairman.
Looking at Bai Tao's resume, he has been involved in many financial fields such as investment and insurance.
Bai Tao has been the Party Secretary of the group since January 2022 and the Chairman of the group since March of the same year, only more than two years.
He has served as the Chairman of the State Development and Investment Corporation, the Deputy General Manager of China Investment Corporation, and the Vice President of China Life Group.
The successor, Cai Xi Liang, also comes from the financial circle.
He has been the Deputy Secretary of the Party Committee of China Life Group since April 2022, and the Vice Chairman and President of the group since July 2022.
He has served as the Deputy Secretary of the Party Committee, Vice Chairman, and General Manager of China Export and Credit Insurance Corporation; a member of the Party Committee and Deputy General Manager of CITIC Group Co., Ltd.
The official website of China Life Group has been updated, and currently Cai Xi Liang only has the title of Party Secretary, which means that the position of group president is vacant, and who the successor is has attracted much attention from the market.
In addition to Cai Xi Liang, the group's management team also includes five vice presidents: Wang Kai, Yang Liping, Li Mingguang, Lin Chaohui, and Huang Ben Yao.
The change of the group's top two leaders has an impact on the listed insurance company China Life, and whether there will be a major strategic adjustment is a concern for the outside world.
In the first half of 2024, the group's life insurance company, China Life, achieved a revenue of 234.216 billion yuan, a year-on-year increase of 23.27%; the net profit attributable to the parent company was 38.278 billion yuan, a year-on-year increase of 10.58%.
The increase in profits mainly relies on the dual pull of insurance service revenue and fair value change gains.
During the period, the company's insurance service revenue increased by 15.97% year-on-year, and the fair value change gain increased by 44.576 billion yuan.
In the first half of 2024, thanks to the pull of renewal premiums, the company's total premiums were 489.566 billion yuan, a year-on-year increase of 4.14%.
Specifically, renewal premiums increased by 10.17% year-on-year to 329.3 billion yuan.
It is worth noting that due to the "unification of reporting and operation" of the bank insurance channel and the high base last year, the new policy premiums of life insurance companies are generally under pressure.
As a leading company in the life insurance industry, China Life is no exception.
In the first half of 2024, China Life's new policy premiums were 160.266 billion yuan, a year-on-year decline of 6.39%, a decrease of 10.947 billion yuan.
Among them, the lump-sum premium was halved, from 19.805 billion yuan in the same period of 2023 to 4.928 billion yuan, a year-on-year decline of 75.12%.
This change may be related to the economic environment, regulatory policies, and self-awareness.
The implementation of the "unification of reporting and operation" policy has led to a significant decline in the scale of business in the bank insurance channel, which has a major impact on lump-sum premiums in the short term; lump-sum business requires higher capital occupation and yield requirements for insurance companies, and some insurance companies have taken the initiative to contract.
From the perspective of insurance types, life insurance and health insurance premiums increased by 4.14% and 5.97% year-on-year to 404.645 billion yuan and 77.423 billion yuan, respectively; while the relatively small proportion of accident insurance premiums continued to narrow, with a year-on-year decline of 11.78%, falling to 7.498 billion yuan.
According to the channel, the mainstream individual insurance channel accounted for nearly 80%, reaching 390.134 billion yuan, a year-on-year increase of 7.74%.
In addition to this, the premiums of the bank insurance and group insurance channels both declined.
The bank insurance channel accounted for 10.16%, with 49.73 billion yuan, a year-on-year decline of 19.88%; the group insurance channel premiums declined by 7.19% year-on-year to 14.778 billion yuan.
The number of agents of listed insurance companies has always been a topic of concern in the industry.
As of the end of the first half of 2024, the company's individual insurance sales force was 629,000 people, a decrease of 32,000 people compared to the same period in 2023.
However, it decreased by 5,000 people compared to the end of 2023, showing a trend of stabilization.
New business value, as a core indicator of life insurance companies, has attracted much attention in the industry.
In the first half of 2024, the company created a new business value of 32.262 billion yuan, a significant year-on-year increase of 18.61%.
In the first half of 2024, the new business value of A-share listed insurance companies generally showed a high growth situation, but the growth rate has a large difference.
The fastest year-on-year growth rate of Renbao Life Insurance reached 90%, Xinhua Insurance's year-on-year growth rate exceeded 50%, and Taiping Life Insurance's year-on-year growth rate exceeded 20%.
In contrast, the growth rate of new business value of China Life and Ping An Life and Health Insurance is slower, especially the new business value of Ping An Life and Health Insurance, which is only 11% at the tail.
Investment income, as an important source of profit for China Life, its fluctuation directly affects the performance.
Especially under the impact of economic downturn and the decline of long-term interest rates, China Life's investment decisions and asset allocation have attracted the attention of investors.
As of the first half of 2024, China Life's total assets and investment assets both exceeded 6 trillion yuan, reaching 6.22 trillion yuan and 6.09 trillion yuan, respectively.
According to the classification of investment objects, the company's bond allocation accounted for 57.36%, and the stock allocation accounted for 7.26%.
It is worth noting that in late August, China Life announced that "based on the need for asset allocation," it plans to reduce its holdings of Hangzhou Bank (600926.SH) by no more than 110 million shares within three months through centralized bidding or block trading at market prices.
It is reported that China Life holds 1.86% of Hangzhou Bank's equity, and the corresponding number of shares is exactly 110 million shares, which may be a clearance reduction.
According to the closing price of Hangzhou Bank on September 5, "12.33 yuan," China Life will cash out 13.56 billion yuan.
In addition, China Life has a close relationship with the troubled Ocean Group.
China Life holds 29.59% of the equity of Ocean Group and is its largest shareholder.
In 2021, it signed a "Financial Product Transaction Framework Agreement" with it.
The validity period is from January 1, 2022, to December 31, 2024, for a period of three years.
It is agreed that the maximum amount of financial products subscribed by China Life each year does not exceed 5 billion yuan or equivalent foreign currency.
At the end of 2023, the company's impairment of Ocean Group reached 58.62 billion yuan, and in March this year, it stated that it had completed the impairment work of Ocean Group, and there will be no new adverse effects in the future.
However, the aftermath is still there.
In June this year, China Life and Swire Properties jointly invested 4 billion yuan to take over about 64.8% of the equity and related debts of the second phase of Ocean Group's Beijing Yitian Port.
Among them, China Life invested 3.1 billion yuan, and Swire Properties invested 900 million yuan, obtaining 49.90% and 14.90% of the equity of the project, respectively.
At present, the real estate industry is still in the recovery period, and the situation where "bank insurance and real estate" are inseparable has changed greatly.
Insurance companies, out of a cautious attitude, have contracted their investment layout in real estate.
As of the end of the first half of 2024, China Life's balance of investment real estate was 12.62 billion yuan, accounting for only 0.21%, a decline compared to the same period in 2023.
The net investment income from investment real estate was 570 million yuan, a year-on-year decline of 8.06%.
In the first half of 2024, the company's total investment income was 122.366 billion yuan, a significant year-on-year increase of 50.25%; net investment income was 92.413 billion yuan, a slight year-on-year increase of 1.78%.
However, from the perspective of investment return rate, the pressure situation is obvious.
In the first half of the year, the company's net investment return rate was 3.03%, far from the average net investment return rate of 4.05% in the past three years; the total investment return rate was 3.59%, slightly lower than the average total investment return rate of 3.87% in the past three years.
It is worth noting that the company's profit and loss statement shows that investment income is only 15.269 billion yuan, a significant year-on-year decline of 83.22% compared to 91.013 billion yuan in the same period of 2023.
Among them, life insurance business, health insurance business, and accident insurance business all declined by 83.73%, 84.58%, and 85.92% year-on-year, respectively.
In the first half of 2024, affected by a comprehensive impact such as the downward trend of the solvency reserve assessment interest rate curve, the redemption of capital replenishment bonds, dividend distribution, and changes in the scale and structure of investment assets, the company's comprehensive solvency adequacy ratio was 205.23%, and the core solvency adequacy ratio was 151.90%, respectively, a decline of 13.31 percentage points and 6.29 percentage points year-on-year from the end of 2023.
Under the economic downturn and the fluctuation of the capital market, the stock price of listed insurance companies has been repeatedly polished.
As of the closing on September 5, China Life's A-share price was 34.11 yuan, with a total market value of 788.2 billion yuan.
Compared with the historical high stock price in 2007, it has fallen by more than 40%, and the total market value has evaporated by more than 1.3 trillion yuan.To boost investor confidence, China Life is participating in an interim dividend for the first time.
Based on the number of shares issued, it is proposed to distribute a cash dividend of RMB 0.20 per share (inclusive of tax) to all shareholders, totaling approximately RMB 5.653 billion.
Focusing solely on the property insurance sector of China Life Group, the performance in the first half of the year is hardly optimistic.
In the first half of 2024, China Life Property Insurance experienced "increased revenue but not profit."
The insurance business revenue reached RMB 57.784 billion, a 3.37% increase compared to the same period in 2023; net profit was RMB 1.745 billion, a significant decline of 16.19% year-on-year.
The decline in net profit was mainly influenced by a 10% year-on-year increase in claims expenditure and a 35.77% year-on-year surge in the provision for insurance liabilities.
From an industry perspective, China Life Property Insurance is in a leading profit position among non-listed insurance companies, being the most profitable among 75 non-listed property insurance companies.
However, when compared to other A-share listed property insurance companies, it falls short.
Compared to the top three property insurance companies in the market, China Life Property Insurance is still the "younger brother."
In the first half of 2024, PICC Property Insurance had the highest net profit of RMB 17.457 billion; Ping An Property Insurance's net profit was RMB 9.954 billion, a year-on-year increase of 7.2%; and China Pacific Property Insurance's net profit was RMB 4.792 billion, a year-on-year increase of 18.6%.
During the reporting period, China Life Property Insurance achieved a policy premium of RMB 55.6 billion.
Among them, the agency channel's policy premium was RMB 39.954 billion, accounting for 70%.
Motor and non-motor insurance businesses are advancing in tandem, with the motor insurance business's policy premium accounting for 55.56%.
In the first half of 2024, China Life Property Insurance had a relatively high combined cost ratio of 99.42%.
It increased by 1.06 percentage points compared to the same period in 2023, approaching the 100% break-even red line, which means that underwriting profits have narrowed.
Among them, the comprehensive expense ratio was 26.80%; mainly due to the comprehensive claim ratio increasing by 3.57 percentage points to 72.62%, raising the level of the combined cost ratio.
The fluctuation in the capital market intensified, and the company's investment income slightly declined in the first half of the year.
China Life Property Insurance's investment income was RMB 1.878 billion, a slight decrease of 1.93% year-on-year.
Over the same period, the cumulative investment return rate was 1.88%, and the cumulative comprehensive investment return rate was 1.55%.
This is lower than the average investment return rate of 3.66% and the average comprehensive investment return rate of 2.39% over the past three years.
In terms of solvency, as of the end of the first half of 2024, under the transitional policy, China Life Property Insurance's core solvency adequacy ratio was 182.12%, and the comprehensive solvency adequacy ratio was 223.71%.
This is still lower than the industry's property insurance companies' core solvency adequacy ratio of 210.2% and comprehensive solvency adequacy ratio of 237.9%.
It is worth noting that after the implementation of the second phase of the solvency II, the regulatory authorities have given some insurance companies with significantly affected solvency adequacy ratios a transitional period of up to three years (2022-2024).
Currently, there are less than four months left before the end of the transitional period.
The solvency of China Life Property Insurance after the end of the transitional policy period is worth further attention.