On April 28, China Reinsurance (hereinafter referred to as “China Reinsurance”) issued an announcement on “Key Solvency Indicators as of the End of the First Quarter of 2024”. In the first quarter of 2024, China Reinsurance's consolidated total premium income was 50,086 billion yuan (the currency is RMB, the same below), down 13.8% year on year, mainly due to the decline in premium income from personal reinsurance savings businesses; consolidated net profit was 1,374 billion yuan, up 11.3% year on year, mainly due to the company's efforts to improve operating efficiency and improve underwriting performance.
1. Underwriting increases efficiency and pursues high-quality growth
In the first quarter, China Re Insurance's business revenue was 12.401 billion yuan, down 6.8% year on year; net profit was 516 million yuan, up 53.1% year on year. The comprehensive cost ratio of domestic business remained stable in the first quarter, and underwriting profit increased year-on-year; overseas business continuously improved contract conditions and continuously optimized the business structure, and underwritten profit was superior to the same period last year.
In the first quarter, China Re Life Insurance's business revenue was 16.345 billion yuan, down 35.9% year on year; net profit was 180 million yuan, up 287 million yuan year on year.
Looking further, the savings business sub-premium income declined year-on-year, mainly due to differences in the pace of underwriting between years; the company strictly controlled business costs and optimized underwriting plans, and losses on the first day of the new savings-type business declined year-on-year. As interest rates enter a long-term downward channel, the pressure on the investment side of insurance companies has increased, but unlike direct insurance companies, China's restorage savings businesses often have shorter debt periods, which are more consistent with the long-term duration of assets, and the corresponding exposure to interest spreads and losses is low. From the perspective of new business, the company undertakes new business on the premise of meeting interest spread income requirements, seizes low-cost business opportunities in domestic and foreign markets, adheres to the principles of long-term matching and yield matching, and enhances interest spread earnings.
In terms of insured business, due to weak sales of insured products from direct insurance companies, China Reinsurance's insured business also declined year-on-year in the first quarter. However, benefiting from the continuous optimization of the business structure, the insured business still achieved underwriting profits during the current period, and the comprehensive cost ratio was superior to the same period last year.
II. Looking at the long-term value of China's reinsurance from an ESG perspective
In recent years, ESG-themed investments have become the focus of the market. The logic behind it is that ESG gives investors a new non-financial perspective and can more comprehensively examine the sustainable development capabilities of a listed company. To some extent, ESG practice results can also reflect a company's long-term value.
As a leader in the industry, China Reinsurance's ESG rating also continues to rise and remains at the forefront of the industry. In 2023, China Reinsurance received the Wind ESG rating of “AA”, ranking first among the 17 participating insurance institutions. In the fourth quarter of 2023, China Reinsurance received a “A-” ESG rating from Shangdao Ronglu, ranking first among the Hong Kong stock insurance institutions participating in the evaluation.
Being widely recognized by the industry is inseparable from China's preservation of good environmental, social, and governance practices, and deep integration with its own business.
First, there's the environmental aspect.
Various natural disasters and extreme weather have been frequent in recent years, seriously affecting the safety of people's lives and property. China Insurance has deepened research on the Group's overall catastrophe and underwriting risk management platform (CREST), iteratively upgraded the self-developed earthquake, typhoon, and flood catastrophe models, and linked them to the Group's other underwriting pricing risk models to create a multi-level unified underwriting risk management system including catastrophes.
From a longer-term perspective, the “dual carbon” goal has brought unprecedented development opportunities to the transformation and upgrading of various industries. China is also actively investing in it. While promoting the achievement of the “double carbon” goal, it has also brought an increase in its own business development. The insured amount for the full year of 2023 in the green development sector was 3.1 trillion yuan, an increase of 26.8% over the previous year.
For example, new energy vehicles are not only an important industry driving the implementation of the “dual carbon” target, but also the main driving force for the car insurance industry. However, it is undeniable that the pricing problem of related insurance products has objectively limited the penetration rate of new energy vehicles. To this end, China also participated deeply in the formulation of the “Exclusive Provisions for Commercial Insurance for New Energy Vehicles (Trial)”, completed the upgrading and commercialization demonstration of the NEV insurance “Further Journey” model in 2023, and established a complete vehicle insurance pricing risk control technology system.
In addition, China Reinsurance has also continued to increase its support for green energy in recent years. In 2023, it will provide comprehensive insurance for the entire life cycle of green energy projects such as wind power and photovoltaics, from construction to operation. During the year, it will serve 8110 projects, providing coverage of nearly 400 billion yuan.
Furthermore, it's a social level.
Serving major national strategies such as the “Belt and Road” and a healthy China is a concentrated expression of China's active social responsibility.
In a context where “going overseas” has become an incremental opportunity for many companies in recent years, the importance of protecting the rights and interests of domestic enterprises in overseas markets is increasing. As a reinsurance leader, China Reinsurance provided 271.73 billion yuan of risk protection for 418 “Belt and Road” projects in 2023, an increase of 13.7% over the previous year.
Furthermore, the China “Belt and Road” Reinsurance Community, with China Reinsurance as the chairman and management agency, covered overseas assets of 38.2 billion yuan in 2023, an increase of 102% over the previous year; there were 41 underwriting projects, an increase of 37% over the previous year. At the same time, the Community continues to maintain its leading position in political violence insurance. The number of chief underwriting projects is 20, an increase of 67% over the previous year, and is the head of more than 60% of projects.
On the other hand, at a time when the degree of aging is deepening, the pace at which China Reinsurance promotes the construction of a healthy China is also constantly accelerating. In 2023, China Reinsurance helped Health China serve 210 million people, an increase of 78.5% over the previous year. In this process, China Reinsurance has continuously strengthened the development of health and welfare related insurance products, actively enhanced product service innovation capabilities and coverage levels, and is committed to building a complete health and welfare insurance system. In 2023, China Re Life Insurance developed and launched a total of 29 livelihood insurance products; by the end of 2023, it had participated in supporting 128 Huimin Insurance reinsurance projects, serving more than 127 million people.
Finally, there's the governance level.
Furthermore, China continues to optimize its corporate governance structure, continuously deepens informed guarantees for directors and supervisors, and promotes the compliance, scientific and efficient operation of corporate governance. In 2023, China Reinsurance changed the name of the “Strategy and Investment Committee” to the “Strategy and Sustainable Development Committee”, adding the committee's responsibilities in ESG, green finance, climate change management, etc., and incorporating ESG management responsibilities into the existing corporate governance structure and authorized management system.
China Reinsurance is committed to maintaining healthy interaction with the investor community, fully and accurately disclosing relevant information in strict accordance with relevant regulations, strengthening communication with investors through various channels, and actively conveying corporate values. In 2023, China Reinsurance will flexibly conduct performance meetings in the form of conference calls, live video broadcasts, and offline roadshows, actively receive investor research, participate in brokerage strategy meetings, and promptly communicate with the market on topics such as the company's main business development and strategic implementation results, covering 14,000 investors and analysts.
III. Concluding Remarks
Based on the present, in the context of increasing macroeconomic fluctuations and deep transformation of the industry, China is now adhering to the business philosophy of “large-scale development, increased insurance efficiency, and steady investment” to increase underwriting profits and achieve a more qualitative growth paradigm.
From a longer-term perspective, more and more professional investors will consider outstanding companies with outstanding ESG performance, which in turn will bring significant valuation premiums to these companies. As China Re further integrates ESG concepts into business development, better ESG performance and higher external evaluations will help enhance China's long-term value center.