New China Insurance’s performance in the first three quarters fell by 7%, profit fell by 56%, revenue in the third quarter fell by 10.5%, profit fell by 99.8%, and the profit attributable to the parent was 3 million yuan. I think it is easy for everyone to think about it. It manages trillions of assets 3 million profit is a financial face project. It is a misleading conclusion to see the news that Xinhua Insurance’s profit has dropped sharply, which is caused by the downturn in the investment market. It covers up its own operational problems. As early as when the first quarterly report came out, I objectively predicted that the annual performance of New China Insurance would not be good. Looking at it now, the operating conditions of New China Insurance are worse than I predicted, and it will be very poor next year. Because from the lack of profit in the third quarter, it is very simple to infer that there is a problem with its main business operations. I personally think that it cannot be caused by thunderstorms in one or two investment projects, nor can it be simply said that the investment income is low, but the overall sales The promised yield of insurance products is higher than the industry average (for competitive promotion), which exceeds the current investment return capacity, and, sells too many short-term high-return financial products with a maturity of less than 5 years, not only the return and investment income are inverted, but also a large number of The new business needs to be supplemented in the future. The problem is that the new business is difficult to contract and the investment is even more difficult. If a life insurance company honestly sells insurance with premium payments of 10 to 20 years, the premiums collected over the years will be matched to the long-term investment projects corresponding to the payment year in time, the return on returns has been determined, the income of a large number of main assets is stable, and the level of profitability It will not be affected, only new business premiums and renewal premiums involve new investments in the current investment market. This kind of normal operation will not result in a dive in performance. It will only experience a slow decline in profit growth like Ping An Insurance, which is still remarkable. After the semi-annual report came out, on July 14th, I posted on Xueqiu.com that the annual performance of Xinhua Insurance will continue to decline significantly. I made a very objective explanation. After reading it, I understood that my conclusion is not a prediction, but an inference. After reading the three quarterly reports, according to the operating characteristics of life insurance companies, my latest speculation is that the performance of New China Insurance will be worse next year.
Attached “New China Insurance’s Annual Results Will Still Decline Significantly”
When New China Insurance ‘s first-quarter report was released, many investors were wondering whether the second quarter could improve. I analyzed it and believed that the decline in New China Insurance’s performance in 2022 could not be changed. This is determined by the characteristics of life insurance investment. If the profit at the end of the year improves significantly That’s called abnormal.
The fundamental of insurance is protection. For life insurance, selling sickness insurance, nursing care insurance, accident insurance, and pure long-term pension insurance is the foundation; the longer the insurance payment period, the more beneficial it is to the insurance company, which is convenient for long-term stable investment and high returns. . The bad practice of life insurance is: think that the above insurance is too professional and the insurance agent skills are not enough, it is better to sell investment and wealth management products, the average amount of money is high, and the funds come quickly. As a result, the agent is not talking about insurance protection, but deceiving customers with a return of 5% or higher. The most standardized in this regard is AIA , which only sells protection insurance. Although it is difficult, it relies on training skills and does not engage in financial products that do not work properly, because the predetermined interest rate of pure insurance products is very low, and there are conservative rates and mortality assumptions , without the pressure of high return on investment. Secondly, Ping An of China is also relatively conservative, followed by Pacific Ocean and China Life Insurance , and New China Insurance is relatively poor, because it has participated in the vicious competition of small and medium-sized companies to a considerable extent, focusing on wealth management products and promising high returns. In the past few years, in order to achieve immediate performance, many insurance companies compared high promises, selling products with an annual return of 5 to 7%, plus management costs and commissions. It is difficult to achieve, and wealth management products are generally only about 5 years old, which is different from the real pension insurance that pays more than 20 years. The pressure to pay is enormous. In this way, everyone basically understands that whether the performance is good or not is the cause that was planted in the past few years. And here is a wonderful company in the Chinese market: AIA, as a US-funded company, strictly follows actuarial principles to design products, and the risk assumption is extreme. According to AIA products, the investment income is 0% and there will be no loss. Because they fully consider the mortality rate, expense rate, and interest rate. To put it bluntly, the premium is relatively expensive, which is not good for people who buy insurance, and it is very beneficial to investors. Because the business personnel recruited by AIA are highly educated, have good overall quality, and focus on ideas, they do not compete on prices, and the products are expensive and sold.
From this, it can be inferred that in the era of low interest rates in the future, AIA will have very stable performance, worry-free profits, and a stock price that is resistant to declines. Any short-term decline is a good buying opportunity. Except for Ping An Insurance, which is the second most expensive product, you must be careful. This can well explain why the performance of the first two years was not as good as that of Ping An Insurance and New China Life (the best performance), but the stock price was much higher, and there were many people in the Hong Kong market who were proficient in principles.
Next, analyze the performance trends of insurance companies. Since most of the money received by life insurance is fixed for many years, I like to invest in projects of 10 years or more, especially AIA , which mainly pays premiums for 20 years, and the proportion of new premiums each year is only about 5%. Most of the investment returns are For stable long-term projects, the performance will not change significantly due to the decline in short-term interest rates. That is to say, good performance will not easily fall, and if bad performance does occur, it will not improve immediately. In addition to the cost advantages mentioned above, AIA is a long-term fixed-income project, which is very effective against risks. Let’s look at companies such as Xinhua Insurance that were keen on short-term fast financing in the past few years. In order to compete in the market, they are now under huge investment pressure by selling wealth management products with high returns. In fact, it is difficult to sustain. Another disadvantage is that this type of product has a short payment time and usually expires in 5 years. It cannot match the long-term high-return investment project, and the management cost is very high. They are now relying on large-scale supplementation of new premiums, but the market has changed, where can they match high-return projects?
Generally speaking, the profit curve of insurance companies is smooth. If there is a sudden decline, and it is not a thunderstorm for an investment project, then you have to be careful, indicating that there is a problem with the product and operation. The previous business problems have begun to be exposed and will worsen. If this happens, it will not be reversed in the short term, because the proportion of investment in new premiums is very low, and the overall performance has declined. It cannot be reversed by investment in new premiums that account for less than 10%. . Therefore, the thunderstorm of New China Insurance in the first quarter is impossible to reverse in the second quarter or even this year. In the era of low interest rates, it is difficult for other insurance stocks to perform well except for AIA in the next few years.
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