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Since 2023, the cash flow paid by United Life's dividend insurance and universal insurance has been greater than the cash flow received, and it is facing very severe payment pressure.

Text/Daily Financial Report Li Jia

How is United Life Insurance doing now? It was previously "stuck" in the real estate quagmire, resulting in losses of more than 500 million in 2021, more than 2 billion in 2022, and about 1.2 billion in 2023, with a cumulative loss of more than 3.8 billion yuan in three years.

Recently, with United Life Insurance’s announcement of its second quarter 2024 solvency report, we are able to get a glimpse of its overall operating conditions in the first half of this year.

Data shows that by the end of the second quarter of this year, Union Life Insurance achieved insurance business income of 12.154 billion yuan, a year-on-year decrease of 7.6%; net profit turned from a loss of 173 million yuan in the same period last year to a profit of 211 million yuan. Judging from the financial statements, it has finally turned losses into profits.

The return on equity indicator, which measures whether an insurance company's ability to make money is strong enough, has also increased for United Life from -13.97% in the same period last year to 5.43% today, indicating that its ability to make money is temporarily back on track.

At the same time, in the first half of this year, the investment return rate of United Life Insurance was the same as the same period last year, with only a year-on-year increase of 0.01 percentage points to 1.28%; the comprehensive investment return rate grew well, reaching 5.14%, an increase of 3.25 percentage points year-on-year.

So, apart from the mixed performance of the core performance indicators, how has the life insurance business of United Life developed this year? Has the situation of "red lights" on solvency, which has been a concern of the market, improved?

The net cash flow of participating insurance and universal insurance account business turned from positive to negative

How much pressure?

In the latest solvency report of United Life Insurance, there are two indicators that are worthy of our in-depth discussion, namely the net cash flow of dividend account business and the net cash flow of universal account business. We can perceive the development of United Life Insurance's dividend insurance and universal insurance business through relevant data.

By comparing the company's solvency report data for the second quarter of 2023 and 2024, the Daily Financial Report found that these two indicators turned directly from positive to negative, which also means thatOver the past year or so, the cash flow paid out by Union Life's dividend insurance and universal insurance has been greater than the cash flow received, and it is facing very severe payment pressure.。

Let's first look at the company's dividend insurance business. As we all know, dividend insurance is a life insurance policy where the insurance company distributes the surplus of its actual operating results that are better than the pricing assumptions to policyholders according to a certain proportion.

The final long-term cumulative return difference of dividend insurance customers mainly depends on the actual dividends during the policy validity period. The actual dividends and the uncertain dividend benefit demonstration in the product sales plan and product manual can be mainly referenced by the dividend realization rate announced each year. Therefore, it can be simply understood that the high or low dividend realization rate indirectly represents the high or low final benefits of the customer.

After sorting out the realization rates of the dividend insurance of Union Life in 2022 and 2023, the Daily Financial Report found that the cash dividend realization rates of all 39 cash dividend insurance products have not exceeded 100% in the past two years. In 2022, the cash dividend realization rates of most of these products were between 50% and 75%, with an average of 69%.

By 2023, the company's dividend realization rate has dropped significantly, with most products achieving a cash dividend realization rate of only 25%, and the average value is even pitifully low, at only 23%, in sharp contrast to the figures disclosed last year. Among them, there are three dividend insurance products whose cash dividend realization rates are lower than single digits, all at 9%, namely: Taizhong Hengying Lifetime Whole Life Insurance (Dividend Type), Hezhong Anying Life Annuity Insurance (Dividend Type), and Hezhong Anying Lifetime Annuity Insurance (Dividend Type).

With such a low realization rate of dividend insurance, as of the end of the second quarter of 2024, the net cash flow of the dividend account business of United Life Insurance was -326 million yuan, while this figure was 194 million yuan in the same period of 2023. In other words, during this one-year period, the company's net cash flow from the dividend account business continued to be under pressure.

Some analysts pointed out that this may be because a large number of dividend insurance products of United Life Insurance have entered the repayment period and need to pay dividends. Judging from the products currently announced, almost all of them are cash dividend products, and the meager profits are not enough to cover the large dividend expenses. This has led to the company's dividend account cash flow continuing to be negative.

Similarly, let's look at the company's universal insurance. According to the query data on the official website of United Life Insurance, we found that since the beginning of this year, the settlement interest rate of the company's universal insurance products has continued to decline. For example, in January 2024, the annualized settlement interest rate of 30 universal insurance products under United Life Insurance was between 2.5% and 3.8%.

However, by July, the annualized settlement rates of these universal insurance products were visibly shrinking, and none of them exceeded 3.3%. Most of them were concentrated in the range of 2%-3%. There is a product called "Hezhong Jinyu No. 5 Whole Life Insurance (Universal Type)", whose policy effective date is before 2019-12-31 (inclusive) and between 2020-01-01 (inclusive) and 2020-12-31 (inclusive). The annualized settlement rate is the lowest among all products, at only 1.75%, while this figure was 2.5% in January.

With the reduction of universal account interest rates, the pressure of maturity payment of universal insurance products has increased, which has directly affected the financial performance of United Life Insurance. Data shows that the company's universal account business net cash flow has dropped sharply from 221 million yuan at the end of the second quarter of 2023 to -2.478 billion yuan today. The decline is not small and is particularly worthy of vigilance.

Rated C for 15 consecutive quarters

Solvency still not up to standard

According to the "Insurance Company Solvency Management Regulations", the Financial Regulatory Administration and its dispatched agencies will evaluate the overall risks of insurance companies by assessing their operational risks, strategic risks, reputation risks and liquidity risks, combined with their core solvency ratio and comprehensive solvency ratio, to determine their comprehensive risk rating, divide them into Class A, Class B, Class C and Class D, and adopt differentiated regulatory measures.

For Class C and Class D insurance companies that meet the core solvency ratio and comprehensive solvency ratio requirements but have large or severe risks in one or more of the operational risk, strategic risk, reputation risk, and liquidity risk, the State Financial Regulatory Administration and its dispatched agencies should take targeted regulatory measures based on the causes and degree of risks.

Among the 60 non-listed life insurance companies that have disclosed their solvency reports for the second quarter of 2024, the solvency of four institutions, namely Huahui Life Insurance, Peking University Founder Life Insurance, Three Gorges Life Insurance and United Life Insurance, failed to meet the standards.

Among the four companies, United Life Insurance has had its solvency "unsatisfactory" for the longest time. It should be noted that since the fourth quarter of 2020, the company's risk rating has been rated C for 15 consecutive quarters.

As for the main reason for being rated as Class C, United Life Insurance stated in the report that it was due to the company's high operational risks. For this type of problem, the company will gradually advance the relevant rectification work in accordance with the established rectification plan.

However, in reality, such statements are more like "copy and paste", and the same statements can be seen in almost every quarterly solvency report since 2021. In other words, three years have passed, and the solvency situation of United Life Insurance is still spinning in the same place, with no signs of improvement, which can be said to be "difficult to reverse".

In response to this situation, Union Life Insurance stated in its solvency report for the second quarter of this year that the company had taken a series of risk management improvement measures in the first half of the year. On the one hand, the solvency risk management system was continuously improved. According to the new regulations on operational risk management and combined with internal management requirements, the company comprehensively sorted out the operational risk management structure, division of responsibilities, basic management processes and management requirements, and revised and issued operational risk management methods and management rules. On the other hand, for the self-assessment of solvency risk management capabilities, risk self-inspection, and risk problems discovered during the operation process, the responsible departments have formulated corresponding action plans and gradually rectified them according to the plans. At the same time, the risk management functional departments regularly tracked the rectification progress and reported to the management.

Let's look at the solvency ratio indicators. As of the end of the second quarter of this year, China United Life's core solvency ratio and comprehensive solvency ratio were 102.78% and 177.03% respectively. Although both have increased compared with the first quarter, according to its forecast, the company's core and comprehensive solvency ratios will drop to 98.2% and 169.73% respectively in the next quarter, facing certain downward pressure.

Frequent fines for compliance issues, and severe policy cancellations

In addition to performance pressure and substandard solvency, China United Life's compliance and internal management issues are also prominent.

According to the company's official website, the name "United Life" means adhering to the traditional concept of "harmony" and winning customers with the best products and services. However, from the actual situation, the frequent penalties from regulatory authorities and consumer complaints in the past one or two years have all shown that United Life is still far from its ideal goal.

According to the penalty information released on the website of the State Financial Regulatory Bureau, the Daily Financial Report found that since the beginning of this year, United Life has received nearly 10 fines, with a total fine of more than 1 million yuan. Illegal and irregular behaviors include "deceiving policyholders and inducing insurance agents to engage in activities that violate the obligation of good faith"; "deceiving policyholders, insured persons or beneficiaries"; "compilation and provision of false information" and "using product promotional materials containing misleading statements to train agents".

Looking at the long-term trend, in 2022 and 2023, United Life Insurance was punished by regulatory authorities 13 and 25 times respectively.

Of course, in addition to being frequently punished by regulatory authorities, United Life Insurance also performed poorly in terms of consumer feedback. According to the report on insurance consumer complaints in the first half of 2023 issued by the Hunan Regulatory Bureau of the State Financial Regulatory Administration, the median number of complaints for life insurance companies per 100 million yuan of premiums was about 0.95 cases/100 million yuan, while United Life Insurance had as high as 3.73 cases/100 million yuan, ranking third in terms of complaints per 100 million yuan of premiums.

This situation is more evident in the latest surrender amount and surrender rate of United Life Insurance. Data shows that as of the end of the second quarter of this year, the company's comprehensive surrender rate reached 2.75%, up 1.2 percentage points from the first quarter. Among them, there is a product called "United Supplementary No. 1 Major Illness Insurance (Premium Edition)". Although the surrender scale in the second quarter was not high, at 390,200 yuan, the surrender rate in the current period was the highest, reaching 61.48%.

In terms of surrender funds, the second quarter solvency report shows that as of the end of June, the surrender amount of the top three products of United Life Insurance has exceeded 2 billion yuan this year, about 2.021 billion yuan, accounting for 16.63% of the current insurance business income. Moreover, these three products are the universal insurance products we mentioned above, which also indirectly shows that with the reduction of universal account interest rates, United Life Insurance's universal insurance has also encountered a large-scale surrender wave.

In general, the performance of Union Life Insurance in the first half of this year did not give the market too many surprises. Although the net profit turned from loss to profit, it has to be admitted that it is currently facing considerable pressure on insurance product payment and surrender, and the solvency failures over the years have not been effectively resolved. At the same time, the frequent penalties caused by regulatory compliance and internal control issues are also worthy of long-term reflection and key solutions for Union Life Insurance.

Meicai.com Statement: This article is based on public information. The information or opinions expressed do not constitute investment advice to anyone and are for reference only. The picture material comes from the Internet. Please delete if it infringes.

2024

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