① Haibao Life released the industry's first solvency report for the first quarter of this year. The comprehensive solvency ratio decreased by 5 percentage points from the end of the previous quarter. ② According to the research institution, the pressure on the solvency of insurance companies has been reduced, and interest spreads are still the sword of Damocles. ③ Less than a year has passed since the transition period granted by the regulation, and at least 6 life insurance companies still have insufficient solvency standards.
Financial Services Association, April 23 (Reporter Zou Juntao) The insurance industry's first solvency report for the first quarter of this year has been released.
On the afternoon of April 23, the China Insurance Association website showed that Haibao Life released its solvency report for the first quarter of 2024. The report shows that in the first quarter of this year, Haibao Life Insurance business revenue increased by 70.65% over the same period last year, and the comprehensive solvency ratio decreased by 5 percentage points from the end of the previous quarter.
A Financial Services Association reporter noticed that since the implementation of the “Second Generation and Phase II Reimbursement Project”, the solvency situation of insurers has long been the focus of attention. Dongwu Securities pointed out that benefiting from the increase in new channels to supplement core capital and relieving the pressure on insurance companies' solvency to a certain extent, interest spreads and losses are the “sword of Damocles” hanging over insurance companies.
Haibao Life released the industry's first solvency report this year
According to Haibao Life's latest solvency report, by the end of the first quarter of 2024, the company had achieved original insurance premium income of 687 million yuan, an increase of 70.65% over the previous year. However, the scale of losses also continued to expand. In the first quarter of this year, Haibao Life lost nearly 200 million yuan, compared to a loss of 48 million yuan in the same period last year.
Judging from past performance, from 2018 to 2023, Haibao Life achieved insurance business revenue of 282 million yuan, 1,174 million yuan, 1,429 million yuan, 892 million yuan, 831 million yuan, and 1,129 million yuan, respectively. Net profit was -57 billion yuan, -97 million yuan, -118 million yuan, -180 million yuan, and -318 million yuan, respectively.
It is worth mentioning that Haibao Life's total assets rebounded in the first quarter, but there is still a gap from the same period last year. The report shows that as of the end of the first quarter of this year, Haibao Life's total assets were 5.935 billion yuan, an increase of about 636 million yuan over the beginning of the year. Total assets at the end of the first quarter of 2023 were $6.144 billion.
In terms of solvency, Haibao Life's comprehensive solvency ratio at the end of the first quarter of this year was 164.01%, down 5 percentage points from 169.04% at the end of the previous quarter, but the decline was narrower than the same period in the first quarter of 2023.
However, Haibao Life's comprehensive risk rating results for the third quarter of 2023 were downgraded from BB to B, and it is already on the verge of regulatory red line. Haibao Life said in its solvency report that the decline in ratings was mainly affected by factors such as the comprehensive solvency adequacy ratio of less than 150%. The company takes measures such as controlling the business scale of high-capital-intensive insurance products and adjusting the asset allocation structure to improve solvency and core liquidity risk supervision indicators with a view to improving rating scores.
According to data, Haibao Life Insurance was founded in May 2018 with a registered capital of RMB 1.5 billion. It is the first national insurance legal institution to be established and opened in Hainan.
On the shareholders' side, Haibao Life was jointly funded and established by 8 shareholders of Haima Group, Hisilicon Pharmaceutical Group Co., Ltd., Yilianzhong Information Technology Co., Ltd., Shenzhen Zhixin Lida Investment (Group) Co., Ltd., Shenzhen Zhongshan Yuhua Investment and Development Co., Ltd., Hainan Xinjianqiao Economic Development Co., Ltd., and Benyuan Construction Investment (Beijing) Asset Management Co., Ltd. Currently, Haima Group holds 32% of Haibao Life's shares and is the company's largest shareholder.
The pressure on solvency has abated, and institutions say that interest spreads and losses are the “sword of Damocles”
At the end of 2021, the “Insurance Company Solvency Supervision Rules (II)” (“Repayment II Phase II Project” for short) came into effect. According to regulatory requirements, insurance companies need to implement it from the first quarter of 2022. Since repayment of the second-generation second-phase project requires insurance companies to identify the final investment of funds in accordance with the principle of “full penetration and penetration to the end”. The industry generally believes that most insurance companies' solvency ratios will decline after the implementation of the second-generation second-phase project.
On April 11, Dongwu Securities published a research report stating that in the fourth quarter of 2023, industry perpetual bonds were issued, opening up new channels for core capital replenishment. In September 2023, the “Notice on Optimizing Insurance Companies' Solvency Supervision Standards” implemented differentiated adjustment of minimum capital requirements and optimization of capital measurement standards and risk factors, which reduced the pressure on the solvency of insurance companies to a certain extent.
According to the official website of the State Financial Supervision and Administration, data on the main regulatory indicators of the banking and insurance industry for the fourth quarter of 2023 shows that the insurance industry's solvency is sufficient and stable.
According to the data, at the end of the fourth quarter of 2023, the insurance industry's comprehensive solvency adequacy ratio was 197.1%, and the core solvency adequacy ratio was 128.2%, both higher than the 100% and 50% compliance standards. Among them, the comprehensive solvency adequacy ratios of property insurance companies, personal insurance companies, and reinsurance companies were 238.2%, 186.7%, and 285.3%, respectively; the core solvency adequacy ratios were 206.2%, 110.5%, and 245.6%, respectively.
Dongwu Securities said that we believe insurers themselves should improve their endogenous capital capacity by optimizing their business structure and asset structure, so as to maintain sufficient solvency. Currently hanging over the valuation of life insurance stocks is still the sword of Damocles: interest spreads and losses. Concerned about the possibility that interest rates will be lowered again in the second half of 2024, the safe-haven advantage of financial insurance stocks will continue.
It is worth noting that the regulation will grant a transition period of up to 3 years for some insurers whose solvency adequacy ratio is seriously affected after the implementation of the second generation of repayment. There are currently less than three quarters left until the end of the transition period.
A Financial Services Association reporter noticed that according to the solvency report for the fourth quarter of 2023, Huahui Life, United Life Insurance, Changsheng Life Insurance, and Bohai Life Insurance had a comprehensive risk rating of C for the previous quarter, while the comprehensive risk ratings for the previous quarter of Three Gorges Life Insurance and Peking University Fangzheng Life Insurance had a comprehensive risk rating of D for the previous quarter. According to regulatory requirements, those with a comprehensive risk rating below Class B are insolvent.