Principally engaged in providing life insurance in RMB and foreign currencies (including various life insurance, health insurance, and accident and casualty insurance); acting as an agent for domestic and foreign insurance institutions for insurance, verification and claim settlement; insurance consulting; and engaging in capital utilization in accordance with relevant regulations.
1Q results for the 3 months ended 31-03-2019. No dividend was declared. (Announcement Date: 26 Apr 2019)
Business Review - For the year ended December 31, 2018
i. Insurance business
In 2018, in the face of complicated changes in macroeconomic situation, insurance industry and regulation situation, the Company has pushed ahead with transformation, strengthened the development of protection business, given full play to the advantages of renewalpremium- driven growth model, promoted the steady growth of GWP, improved the business quality and structure constantly.
First, GWP grew rapidly. In 2018, the Company realized GWP of RMB122,286 million, increasing by 11.9% year on year, which was higher than the overall growth rate of the industry. Given that the growth of annuity business was bleak in the first quarter of 2018, the Company promptly adjusted the market strategy and strengthened the development of protection business. The FYP from long-term insurance business amounted to RMB20,811 million, representing the decrease of 27.3% year on year, which was much lower than early 2018. In 2018, the Company realized the value of one year’s new business of RMB12,210 million, increasing by 1.2% year on year. The embedded value reached RMB173,151 million, increasing by 12.8% year on year. And the residual margin(1) was RMB195,637 million, increasing by 14.8% compared with RMB170,435 million at the end of last year.
Second, business structure constantly optimized. In terms of premium structure, the renewal premiums contributed 78.4% to GWP, increasing by 8.2 percentage points year on year. The renewal-premium-driven growth model was further consolidated. The first year regular premiums from long-term insurance business accounted for 99.6% of FYP from long-term insurance business. The advantages of transformation were prominent. With respect to term and product structure, FYP from long-term health insurance accounted for 58.7% of the total FYP from long-term insurance business, increasing by 26.0 percentage points year on year. Therefore, the first year premiums from regular premium products with payment periods of ten years or more accounted for 60.8% of first year regular premiums.
Third, business quality improved constantly. The persistency ratio increased, among which 13-month and 25-month persistency ratios of individual life insurance business were 90.7% and 84.9%, increasing by 1.3 and 1.9 percentage points respectively compared with the year 2017. The surrender rate dropped to 4.8%, decreasing by 0.4 percentage points with surrender value down by 2.6% year on year.
ii. Asset management business
The Company continued to stick to prudent and moderate principle in accordance with the liability feature of insurance business and the fluctuation circle of capital market in terms of asset management business. While stressing on investment return and risk management, the Company optimized investment portfolios and sought steady and sustainable returns under projecting the economic situation and investment climate.
In 2018, the total investment yield was 4.6% and the net investment yield was 5.0%. The main reason for the decrease in the total investment yield is the fluctuation of capital market.
The debt financial assets amounted to RMB459,902 million, accounting for 65.7% of total investment assets, decreasing by 1.6 percentage points compared with the end of last year. Credit risks were released at an accelerated pace in capital market and defaults occurred frequently in 2018. The Company attached great importance to risk prevention and safety, closely followed and eliminated the risks of assets and strictly controlled the qualification of newly-added assets, which effectively avoided the impact of credit risks. There has been no single credit risk event occurred throughout the whole year for the Company. The Company grasped the opportunity in bond investment during interest rate changes, increased the allocation of interest rate bonds and railway bonds. We actively allocated financial products and term deposits when the interest rate was high while balancing yield and principal security.
The equity financial assets amounted to RMB116,058 million, accounting for 16.6% of the total investment assets, reducing by 2.5 percentage points compared with the end of last year. The stock market plummeted in 2018 with gloomy mood among investors. The Company was committed to defensive strategy instead of blindly increasing positions in equity financial assets. We continued to take value investment as criterion rather than speculation, adhered to time the market and actively seized the structural opportunities. The Company pursued investment certainty in stock investment, built up investment portfolio through carefully selecting stocks, strengthened the strategic stocks research and grasped the investment opportunity. We enhanced retracement mechanism in fund investment, maintained low volatility and gained earnings through swing trading.
Furthermore, the Company continued to research domestic and abroad equity investment and domestic real estate investment and prudently carried out relevant investment to explore the diversification of asset allocation.
Business Outlook - For the year ended December 31, 2018
Looking into the future, China’s economy will maintain a long-term positive trend, and the sustained release of domestic demand will provide strong support for the smooth operation of the economy. In 2019, China will intensify its efforts to cut taxes and fees, which will effectively stimulate the resilience, potential and innovation vitality of economic development. The external environment facing the insurance industry will improve with increasing market competition.
From the perspective of regulation, greater requirements can be expected for high-quality development of the industry. The regulator’s power has strengthened since the establishment of CBIRC. It is expected that a series of regulatory measures will be launched one after another, and the high-quality development of the industry will speed up. At the same time, risk prevention efforts will also maintain a high-handed posture.
From the perspective of demand, unleash of residents’ security demand will accelerate. As residents’ income rises, people will have a stronger desire for a better life, and customers’ risk awareness and risk prevention ability will gradually improve, and their ability to select insurance products will be further strengthened. Health insurance, accident insurance and other protection businesses will be the industry’s biggest growth point. Long-term saving products will continue to rise, and annuity insurance will occupy a certain proportion in the first-year business.
From the perspective of supply, the supply-side reform of the industry will be deepened. Protectiontype products will be further enriched and customer service improved. In 2018, transforming product structure, broadening service supply and improving service quality were the main measures for the industry to pursue high-quality development. It is expected that the above measures will be further implemented in 2019, and protection business will see more fierce competition.
In 2019, the Company will resolutely implement the central government’s general requirements of “steady growth, structural adjustment, risk prevention”, adhere to the general principle of “maintaining steady growth”. We will intensify the supply-side reform, give full play to the advantages of life insurance business, strengthen its synergy with health and pension insurance, continue to optimize products pipeline, sales team and service, and explore the path of highquality development with NCI characteristics to ease the concern of health care, pension and wealth preservation and appreciation for customers.
The Company will take the following measures in 2019:
First, speed up the development of core business. The Company will respond to customer demands in time, enrich the supply of protection products with the “whole-life, comprehensive and family-wide” principle. We will focus on sales of health insurance and riders to lay a solid foundation for deepening product transformation.
Second, strengthen and enlarge the sales team. With an objective to build a team featuring “high performance rate, high retention rate and high productivity”, we will continue to forge a team with NCI characteristics and advance the transformation towards “risk managers”. On the basis of improving the existing sales team, the Company will actively recruit new agents, strengthen training and enhance management system.
Third, improve customer experience. The Company will apply more new technologies to enhance operation efficiency and expand service to win customers recognition and offer sense of gain.
Fourth, enhance investment management. The Company will stick to prudent investment strategy and proactively prevent and control risks. We will beef up the study of macro-economy, regulatory policies and market trends, grasp investment opportunities and deepen the synergy between assets and liabilities at both strategic and tactical levels.
Fifth, actively and prudently prevent and control risks. The Company will firmly implement the Central Party Committee’s risk prevention requirements, step up efforts to prevent and control risks, continue to improve the risk control system, innovate risk management tools, and clarify risk prevention and control responsibilities while keeping stringent auditing and inspection.
Source: New China Life Ins (01336) Annual Results Announcement