The challenges and opportunities for the Life Insurance market are the downward adjustment of the reserve interest rate and the deepening of the report and bank integration in the individual insurance channel. In the first half of the year, China Life Insurance's allocation of equity products surpassed 600 billion yuan. The current A-share market has long-term allocation value, and the strategy will increase the allocation of high dividend stocks and actively buy high-quality stocks with cost performance.
On August 30th, Caixin reported that China Life Insurance held its Mid-term Performance Conference for 2024. President Li Mingguang responded to the slower growth of new business value in the first half of the year compared to the first quarter, stating that the slowdown in the second quarter was mainly due to increased market demand, which is a common phenomenon in the industry. Starting from September, the reserve interest rate of insurance products will be comprehensively lowered, and he said that the transition preparations have been made. Vice President Bai Kai stated that the downward adjustment of the reserve interest rate and the deepening of the report and bank integration in the individual insurance channel are challenges and opportunities for the life insurance market.
Vice President Liu Hui revealed that in the first half of the year, China Life Insurance's allocation of equity products surpassed 600 billion yuan. She determined that the current A-share market has long-term allocation value, and the strategy will increase the allocation of high dividend stocks and actively buy high-quality stocks with cost performance. In response to mid-term dividends, Li Mingguang stated that mid-term dividends account for about 15% of profits, equivalent to 50% of last year's dividends.
In response to the growth rate of new business value and the downward adjustment of the reserve interest rate
Li Mingguang said that the growth rate of new business value in the first half of the year was 18.6%, lower than the 26% in the first quarter. The growth rate slowed down in the second quarter, but still achieved double-digit growth. The main reason is that the market demand increased in the second quarter of 2023, resulting in a higher business base, which is a common phenomenon in the industry.
"In this context, China Life Insurance achieved double-digit growth in the second quarter of 2024 through sales organization management and quality control, making a contribution to the 18.6% growth rate of new business value in the first half of the year," said Li Mingguang.
As of June 30, 2024, China Life Insurance's total premium scale reached 489.566 billion yuan, a year-on-year increase of 4.1%; among them, the total premium of life insurance business was 404.645 billion yuan, a year-on-year increase of 4.1%, ranking first in the industry in terms of premium scale. According to new regulatory rules, the comprehensive reduction of the reserve interest rate for insurance products starting from September will have what kind of impact on insurance companies?
Li Mingguang revealed that in the face of the downward adjustment of the reserve interest rate for insurance products, they have already carried out related work in an orderly manner, including strengthening the link between assets and liabilities, improving the quality and efficiency of product supply, strengthening investment management, transforming and upgrading the team, and reducing costs and increasing efficiency to improve fine management. In terms of products, he stated that they will adhere to a diversified product strategy, strengthen product research and development capabilities, improve the adjustment mechanism linked to market interest rates, establish a matching product management system, and improve the speed and efficiency of market demand impact.
Bai Kaize frankly admitted that the downward adjustment of the reserve interest rate is indeed a challenge, and deepening the integration of reporting and banking into the individual insurance channel is also a challenge that needs to be faced correctly. "The stable economic fundamentals in the first half of the year have provided a solid foundation for the growth of the insurance industry. The continuing downward trend in market interest rates has led consumers to pursue stability and safety in assets and funds, and the demand for insurance will continue to be released."
In the first half of the year, equity allocation exceeded 600 billion, actively buying high-quality stocks with cost-effective price-to-earnings ratios.
Liu Hui said that as of the end of June, China Life Insurance has allocated more than 600 billion in equity products, making it one of the largest institutional investors in the market. In the context of low interest rate asset shortages, the importance of equity asset allocation is increasing. However, at the same time, in the current situation of market volatility and structural differentiation in the equity market, the difficulty of equity asset investment is also increasing.
Regarding the current equity market, Liu Hui believes that the overall valuation of A-shares is at the bottom of the market and has long-term allocation value. With the introduction of a series of regulatory new rules for capital market reforms, it is positive in promoting the ecological development of the capital market and improving long-term returns. At the same time, under the background of solid promotion of high-quality development and the vigorous development of new production forces, fields such as technological innovation, advanced manufacturing, and green development contain rich long-term investment opportunities.
In terms of equity asset allocation strategy, Liu Hui said, first, adhere to a stable and balanced equity position, comprehensively consider market conditions, risk preferences, solvency, etc., and continuously optimize the internal structure of equity. Second, adhere to a diversified and multi-strategy investment strategy, strengthen the absolute yield orientation. Increase the allocation of high-dividend stocks to enhance the stability of equity investment. Third, adhere to a long-term investment layout, give play to the advantages of insurance funds, long-term capital, and patient capital. Implement the concept of long-cycle assessment, timely and moderately conduct counter-cyclical investments, pay attention to risk factors when there is generally optimism, and look for marginal positives when there is generally pessimism. Actively buy high-quality stocks that have dropped out with cost-effective price-to-earnings ratios, and focus on the direction of high-quality transformation and development of the economy, serving the development of new production forces.
Regarding mid-term dividends, Li Mingguang stated that the company's cumulative cash dividends have exceeded 200 billion, with a maximum dividend ratio of 65%. In 2023, in order to consider the difference in profits under different criteria, the company deliberately increased the dividend ratio to 58%.
"In the middle of this year, in order to further reward investors, we have increased mid-year dividends, accounting for about 15% of profits, which is equivalent to 50% of last year's dividends. In the future, we will continue to follow the basic rules that have been in place for a long time, and under the premise of meeting regulatory requirements, comprehensively consider the company's operating conditions, shareholder returns, and business development needs to determine the annual dividend ratio, amount, and level," Li Mingguang pointed out.