Blue Whale Insurance is concerned that a few days ago, Dagong International Credit Rating Co., Ltd. (hereinafter referred to as "Dagong International") disclosed the latest credit issue of Changan Liability Insurance Co., Ltd. (hereinafter referred to as "Changan Insurance") and "16 Changan Insurance". The status tracking rating report confirms that the long-term credit rating of Changan Insurance's main body is maintained at A+, and the rating outlook remains negative.
From the perspective of performance, Changan Insurance has continued to lose money since 2017. As of the end of 2021, Changan Insurance's undistributed profit at the end of the period reached -3.012 billion yuan, and its profitability needs to be improved.In addition, at the end of the first quarter of this year, Changan’s core responsibility and comprehensive solvency adequacy ratios were 62.93% and 125.86%, respectively, far lower than the industry average of 136.6% and 219.3%. The solvency adequacy ratio also needs to be improved.
Changan Insurance's undistributed profit at the end of 2021 - 3.012 billion yuan
In the rating report, Dagong International pointed out that during the tracking period, Changan Insurance's insurance business expansion pressure has eased, while the overall liquidity remains at a good level; on the other hand, Changan Insurance's market competitiveness still needs to be improved, due to credit guarantees. The scale and proportion of subrogation receivables arising from the insurance business are still relatively large, and the recovery amount of the stock assets disposal cycle is subject to great uncertainty. The recovery situation requires continuous attention, and Changan Insurance is still in a state of underwriting losses, and its profitability remains to be determined. improve.
In the first quarter solvency report, Changan Insurance stated that since 2020, the company has been continuously strengthening the disposal and transfer of recovery assets and accelerating the return of funds. The financial impact has been greatly reduced, and the liquidity risk of the credit insurance business is controllable.
As the first comprehensive property and casualty insurance company featuring liability insurance, Changan Insurance's business scope covers liability insurance, auto insurance, property loss insurance, credit and guarantee insurance, short-term health insurance and accident insurance, and reinsurance of the above businesses.
In 2018, due to the risk event of "stepping on thunder" credit guarantee insurance, Changan Insurance's solvency once plummeted and was ordered to increase capital by regulators.In 2019, Changan Insurance implemented a capital increase and share expansion plan, raising a total of 1.63 billion yuan in capital, increasing the registered capital from 1.622 billion yuan to 3.252 billion yuan.Among them, Guohou Asset subscribed for 1.03 billion yuan and held 31.68% of the shares after the capital increase, becoming the largest shareholder of Changan Insurance. Bengbu High-tech Investment subscribed for 600 million yuan and held 18.45% of the shares.
When he joined Changan Insurance, Li Houwen, chairman of Guohou Assets, proposed that in the future, Changan Insurance will strive to achieve the goal of "double hundred" with a premium scale of over 10 billion and total assets of over 10 billion within 3-5 years.However, judging from the actual business situation in recent years, Changan Insurance is still quite far away.
According to public data, since 2017, Changan Insurance has not achieved profitability until now.From 2017 to 2021, Changan Insurance's operating income was 3.127 billion yuan, 3.01 billion yuan, 2.859 billion yuan, 3.495 billion yuan, and 3.281 billion yuan; net profit was -195 million yuan, -1.833 billion yuan, -0.58 billion yuan. , -131 million yuan, -113 million yuan.In the first quarter of 2022, Changan Insurance had a net loss of 29 million yuan.
In addition, Blue Whale Insurance also noted that as of the end of 2021, the undistributed profit of Changan Insurance at the end of the period was as high as -3.012 billion yuan.
An insurance scholar introduced to Blue Whale Insurance that "undistributed profit" is used to calculate the net profit (or net loss), profit distribution and undistributed profit (or unrecovered loss) realized by the insurance company throughout the year. The profit to be distributed in future years is also an integral part of the owner's equity. "Undistributed profit is a cumulative number. A negative value indicates that Changan Insurance has been in a state of accumulated losses since its operation over the years. Long-term losses indicate that profitability needs to be strengthened."
The operating performance of insurance companies is closely related to operating expenses such as underwriting and claim costs, fees and commissions, business and management fees.In terms of rates, in 2021, the comprehensive rate of the property insurance industry will be about 100.8%, down 0.1 percentage points year-on-year; the comprehensive rate will be 30.4%, down 7.1 percentage points year-on-year.The comprehensive cost ratio of Changan Insurance reached 108.14%, of which the comprehensive loss ratio was 69.82%, and the comprehensive expense ratio was 41.72%, all of which have certain room for optimization.
The proportion of equity pledged reaches 40.50%, and all the equity held by the major shareholder is pledged
In addition to profitability, Changan Insurance's solvency adequacy ratio also needs to be improved.
In the first quarter of 2022, the second phase of the C-ROSS project will be officially implemented. Compared with the original rules, the second phase of the rules will be more stringent on the capital identification of insurance companies, which not only improves the actual capital and minimum capital measurement standards for long-term equity investment, but also greatly improves. At the same time, it is clearly stipulated that insurance companies shall not include the appraisal and appreciation of investment real estate in actual capital.
The industry generally believes that after the implementation of the second phase of C-ROSS, the solvency adequacy ratio of most insurance companies has declined, and some insurance companies that are more affected may need to replenish capital to meet regulatory requirements.For insurance companies whose solvency adequacy ratio has fallen sharply due to the switch between the old and new rules, or has fallen below the critical point of regulatory action (such as 100%, 120%, 150%, etc.) Years of transition policy to achieve a smooth transition between the old and new rules.
Changan Insurance has applied for a transitional period policy, which has ensured that its solvency adequacy ratio, which was originally not high, has dropped significantly.In the first quarter of 2022, Changan's comprehensive solvency adequacy ratio was 125.86%, and the core solvency adequacy ratio was 62.93%.During the same period, the average comprehensive solvency adequacy ratio and core solvency adequacy ratio of the life insurance companies included in the review were 219.3% and 136.6%, respectively.
"Affected by profit losses, Changan Insurance's actual capital and core capital continued to decline, and the company's solvency adequacy ratio further declined and was far below the industry average. The solvency adequacy ratio needs to be improved," Dagong International pointed out.
In addition, as of the end of March 2022, the shareholding ratio of Changan Insurance was pledged to 40.50%, of which Guohou Asset, the largest shareholder, pledged all of its Changan Insurance shares.Dagong International said that the share of Changan Insurance has been pledged relatively high, and the stability of corporate governance needs continuous attention.
At the annual work conference at the beginning of this year, Zhang Ziliang, president of Changan Insurance, put forward three key points of "reducing costs", "strengthening capacity" and "adjusting structure", which can give a glimpse of the development path of Changan Insurance.
The first is to reduce costs, requiring Changan Insurance to continuously improve its business quality, not to relax the “increasing discounts and controlling fees” in auto insurance lines, optimizing the existing business structure in non-auto insurance, expanding agricultural insurance, and providing safety, food, and environmental liability insurance. It seeks breakthroughs in government insurance projects such as insurance and IDI, and actively expands liability insurance, director liability insurance, and non-financing guarantee insurance; the second is to strengthen capabilities, strengthen comprehensive management capabilities, strengthen product research and development capabilities, and strengthen sales and development capabilities; Adjust the structure, focus on strengthening budget constraints, and put forward the "four and six strategies" in terms of business scale, benefit indicators, cost allocation, and performance appraisal. The proportion of vehicles increased to 40%.
Industry insiders pointed out that at present, property and casualty insurance companies all hope to make their own characteristics in the development of non-auto insurance, refined operation of auto insurance, and channel construction, so as to transform into value-growing insurance companies.To this end, it is necessary to actively integrate into the market and find a precise positioning, adjust the business structure according to the market characteristics, and need to focus on improving the ability to improve the specialization of non-auto insurance business at all levels and channels, and carry out effective management and control.(Li Danping from Blue Whale Insurance)
(Editor in charge: Hua Qingjian)
