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The operating conditions of life insurance companies in the first half of 2024 have gradually become clear.

According to statistics from the 21st Century Business Herald, 61 non-listed life insurance companies have disclosed their solvency reports for the second quarter. In terms of profitability, the 61 life insurance companies achieved a total net profit of 9.217 billion yuan in the first half of the year, an increase of 54.86% over the same period last year. Among them, 31 life insurance companies made profits, 29 life insurance companies suffered losses, and 1 life insurance company did not disclose its profit situation in the first half of the year.

Specifically, the industry's "Matthew effect" is obvious, with Taikang Life Insurance and China Post Life Insurance leading the way, with a combined net profit of 11.737 billion yuan in the first half of the year. Taikang Life Insurance's net profit was 6.047 billion yuan, ranking first; China Post Life Insurance's net profit was 5.69 billion yuan, ranking second; and Agricultural Bank of China Life Insurance's net profit was 1.121 billion yuan, ranking third.

In terms of solvency, although the comprehensive solvency ratio and core solvency ratio of 61 life insurance companies met regulatory requirements, there were still four companies whose solvency did not meet the standards because their comprehensive risk rating did not meet the requirements.

The Matthew effect is prominent

In the first half of 2024, 31 life insurance companies made profits, with a total net profit of 19.952 billion yuan; 29 life insurance companies suffered losses, with a total loss of 10.735 billion yuan.

Among them, the top three in net profit in the first half of 2024 were Taikang Life Insurance, China Post Life Insurance and Agricultural Bank of China Life Insurance, with net profits of 6.047 billion yuan, 5.69 billion yuan and 1.121 billion yuan respectively.

There is a huge gap in profitability among the 61 life insurance companies. In the first half of the year, the combined net profit of Taikang Life, China Post Life, and Agricultural Bank of China Life has far exceeded the total net profit of the 61 companies. There is also a huge gap in net profit among the above three companies. The second-ranked China Post Life's net profit exceeded the third-ranked Agricultural Bank of China Life by 4.569 billion yuan.

Among the 61 life insurance companies, only the top three companies had a net profit exceeding the 1 billion yuan mark, and another seven companies had a net profit in the range of 500 million to 1 billion yuan, namely, China-Britain Life Insurance, China-Italian Life Insurance, ICBC-AXA, Bocom Life Insurance, CCB Life Insurance, China Life Pension and Minsheng Life Insurance.

It is worth noting that China Post Life Insurance suffered a huge loss of 2.881 billion yuan in the first half of last year. In the first half of this year, it not only turned losses into profits, but also made a profit of more than 5 billion yuan.

In this regard, China Post Life Insurance said that it has strengthened the monitoring of strategic risk indicators such as solvency adequacy ratio, total profit, premium growth rate, and long-term standard insurance new business value rate. It has carried out quarterly plan implementation assessments, strengthened tracking and monitoring of key tasks, promoted continuous optimization of business structure, and continuously improved value creation capabilities.

Some insurance companies performed strongly while some others faced challenges. Among the 61 life insurance companies in the first half of the year, those with net profit losses of more than 500 million yuan included CITIC Prudential, Taikang Life, Everbright Life, Prudential Life, and Peking University Founder Life, with losses of 3.441 billion yuan, 1.45 billion yuan, 867 million yuan, 836 million yuan, and 582 million yuan, respectively.

In addition, compared with the same period last year, 10 companies turned losses into profits, namely China Post Life Insurance, CCB Life Insurance, United Life Insurance, China Merchants Renhe Life Insurance, Ruihua Health Insurance, Hotai Life Insurance, HSBC Life Insurance, Xiaokang Life Insurance, Guobao Life Insurance, and Dehua AnGu.

There are 11 companies that turned from profit to loss, namely Xinhua Life Insurance, Fosun United Health, Aixin Life Insurance, Tongfang Life Insurance, Junlong Life Insurance, Lujiazui Cathay Pacific, Caixin Jixiang Life Insurance, Yingda Life Insurance, Everbright Life Insurance, Taikang Life Insurance, and CITIC Prudential.

There are 12 companies that have achieved positive growth compared with the same period last year, namely, ABC Life Insurance, China-UK Life Insurance, China-Italy Life Insurance, ICBC-AXA, Bocom Life Insurance, China Life Pension, Minsheng Life Insurance, National Pension, Great Wall Life Insurance, CIGNA, BOC Samsung, and Sino-Dutch Life Insurance.

Bank-related insurance companies performed strongly

Overall, bank-affiliated insurance companies performed well in the first half of 2024. In terms of profitability, the 10 bank-affiliated insurance companies achieved a total net profit of 5.05 billion yuan in the first half of the year, compared with a loss of 1.483 billion yuan in the same period last year.

Among the 61 life insurance companies ranked by net profit, two of the top three are bank-affiliated insurance companies, and five of the top ten are bank-affiliated insurance companies. Moreover, eight of the ten bank-affiliated insurance companies had positive net profits in the first half of 2024, with only two suffering losses.

Bank-affiliated insurance companies are directly or indirectly controlled by banks, with equity relations as the bond. Bank-affiliated insurance companies are more likely to obtain support from banks. Bank-affiliated insurance companies have always relied on the channel resources and customer base of their parent banks to more conveniently sell products and provide customer services, especially in terms of bank-insurance channels.

However, on May 9 this year, the State Financial Supervision and Administration Bureau issued the "Notice on Matters Concerning Commercial Banks' Insurance Agency Business" (hereinafter referred to as the "Notice"), which changed the previous regulations that "each branch of a commercial bank can only carry out insurance agency business cooperation with no more than three insurance companies in the same fiscal year."

The cancellation of the "1 to 3" restriction on cooperation between bank branches and insurance companies will weaken the advantages of bank-affiliated insurance companies and increase the competitive pressure on bank-affiliated insurance companies in the market. The Financial Regulatory Bureau stated that the implementation of the "Notice" will help better leverage the advantages of commercial banks and insurance companies, promote long-term and in-depth cooperation between the two parties, and explore new paths for transformation and development; it will help broaden the scope of cooperation between commercial banks and insurance companies, and enhance the value of bank-agent insurance business and consumer satisfaction.

4 companies failed to meet solvency standards

In addition to financial data, the core solvency ratio and the comprehensive solvency ratio are also indicators to measure the sound operating ability of insurance companies. In January 2021, the former China Banking and Insurance Regulatory Commission revised the "Regulations on Solvency Management of Insurance Companies" (hereinafter referred to as the "Regulations") to expand the solvency supervision indicators to three organically linked indicators: core solvency ratio, comprehensive solvency ratio, and comprehensive risk rating.

The Regulations require that solvency standards must meet three requirements, namely, the core solvency ratio is not less than 50%; the comprehensive solvency ratio is not less than 100%; and the comprehensive risk rating is B or above.

According to statistics from a reporter from 21st Century Business Herald, in the first half of 2024, the core solvency adequacy ratio and comprehensive solvency adequacy ratio of the above 61 life insurance companies all met regulatory requirements. Among them, Ai Xin Life Insurance had the lowest core solvency adequacy ratio of 70.13%; Xin Tai Life Insurance had the lowest comprehensive solvency adequacy ratio of 117.93%.

Although all 61 life insurance companies met the requirements in terms of solvency adequacy ratio, four companies failed to meet the solvency standards because their comprehensive risk rating did not meet the requirements.

Specifically, the comprehensive risk rating of United Life Insurance and Huahui Life Insurance is C, while the comprehensive risk rating of Peking University Founder Life Insurance and Three Gorges Life Insurance is D.

In the past two years, the comprehensive risk rating of Three Gorges Life Insurance has further declined. In the first quarter of 2023, the comprehensive risk rating of Three Gorges Life Insurance changed from C to D. At that time, Three Gorges Life Insurance said that the main risks it was facing were solvency pressure and related strategic and capitalizable risks, and it was continuing to promote solvency improvement work to ensure the long-term and healthy development of the company.

Peking University Founder Life Insurance's solvency has been failing to meet standards since the fourth quarter of 2022, and its comprehensive risk rating has been downgraded from B to D in the third quarter of 2022.

At the end of the third quarter of 2023, the core and comprehensive solvency ratios of Peking University Founder Life Insurance fell to negative values. However, in September last year, Peking University Founder Life Insurance issued a capital increase announcement, saying that it planned to increase capital by 1.7 billion yuan. Subsequently, the core and comprehensive solvency ratios of Peking University Founder Life Insurance in the fourth quarter of 2023 rebounded to 82.28% and 133.62%, respectively, but the comprehensive risk rating remained D. At the end of the second quarter of 2024, the two indicators of Peking University Founder Life Insurance declined to 71.74% and 124.72%, respectively.

Peking University Founder Life Insurance said that the comprehensive solvency surplus at the end of this quarter has decreased to a certain extent compared with the end of the previous quarter. In the future strategic formulation, the company's management will continue to optimize the product structure, strengthen asset-liability management, improve business quality and operational management level, and integrate the risk capital management requirements under Solvency II Phase II into the company's strategic planning to optimize capital utilization efficiency.

Regarding the comprehensive risk rating of D, PKU Founder Life Insurance said that in terms of capitalizable risk, the solvency adequacy ratio in the fourth quarter met the standard, but due to factors such as the time dimension of the indicator, the capitalizable score was still at a low level, which affected the rating result. In accordance with the requirements of Solvency II supervision, the company will continue to improve its risk management capabilities and strengthen the management and control of major risks and their sub-categories in the comprehensive risk rating.

According to the Regulations, the Financial Regulatory Bureau and its dispatched agencies evaluate the overall risk of insurance companies by assessing their operational risk, strategic risk, reputation risk and liquidity risk, combined with their core solvency ratio and comprehensive solvency ratio, and divide them into categories A, B, C and D. For insurance companies that meet the core solvency ratio and comprehensive solvency ratio requirements but have a comprehensive risk rating of C and D, the National Financial Regulatory Bureau and its dispatched agencies should take targeted regulatory measures based on the causes and degree of risk.