The Group mainly provides integrated financial products and services and is engaged in property and casualty (“P&C”) insurance, life and health insurance, asset management and other businesses.
1Q results for the 3 months ended 31-03-2019. No dividend was declared. (Announcement Date: 29 Apr 2019)
Business Review - For the year ended December 31, 2018
(1) P&C Insurance Business
In 2018, with continued economic transformation and upgrading in China and further implementation of the supply-side structural reforms, the economic structure continued to improve, the new drivers for development continued to grow, and the vitality of development continued to increase. The overall economy showed a good momentum of “stability with progress and changes made”. In the property insurance sector, market competition has continued to intensify, regulatory reforms have been further implemented, supervision has been continuously strengthened, reforms in premium rate for commercial motor vehicle insurance have been continuously reformed, adjustments in market structure and formation of new business models have been accelerated, bringing significant opportunities and challenges to the development of entities in the industry.
Facing opportunities and challenges, the P&C insurance segment accurately followed the development trend, adhered to the bottom line of no systemic risks, actively served the economy and society, promoted the integration of policy-based business and commercial business, and deepened the integration of business model changes and technological changes, implemented innovationdriven development and digital strategy, implemented the integration strategy deeply, promoted the internationalization strategy steadily, implemented the regional development strategy fully, continued to innovate in product supply, improved service quality continuously, and accelerated the transformation of the Company to high-quality development, and recorded a operating result of stability with progress.
1. PICC P&C
During the reporting period, the Chinese economy continued to transform and upgrade, the supply-side structural reforms were further implemented, and the economic structure continued to improve. PICC P&C actively responded to the challenges, made more efforts in reform and innovation, and recorded steady growth in insurance premiums income. In 2018, the GWPs for PICC P&C of the Group was RMB388,769 million, representing an increase of 11.0% as compared to last year.
GWPs for motor vehicle insurance increased by 3.9% to RMB258,904 million in 2018 from RMB249,232 million in 2017. In 2018, PICC P&C actively responded to the challenges caused by the decline in new car sales and the continuous reform of premium rate for commercial motor vehicle insurance, which led to the decline in premium rate for motor vehicle insurance, further strengthened the market orientation, optimized the outlay of channels, so as to ensure the stability of new insurance business, strengthen the renewal insurance business and optimize the transferred-in insurance business. On the one hand, we will continue to promote the resources management and channel cooperation, broaden the space for business development, and improve the acquisition capacity of new motor vehicle insurance business; on the other hand, we will monitor the renewal insurance business and transferred-in insurance business closely, continue to strengthen the process of tracking and node management, develop and promote of models for renewal insurance, continue to strengthen team building, and continuously improve the quality of service, so as to achieve a higher renewal and transfer rate of quality business and a steady increase in GWPs for motor vehicle insurance.
GWPs for accidental injury and health insurance increased by 32.0% to RMB40,444 million in 2018 from RMB30,646 million in 2017. In 2018, PICC P&C implemented the “Healthy China” strategy and served the social governance, and continued to consolidate the development of critical illness insurance business while putting great effort in exploring business in new fields, such as poverty alleviation, medical assistance, nursing-care, and supplementary work injury; actively promoted commercial health insurance business such as personal and family health insurance, and promoted the traditional pillar businesses such as student and infant insurance, people’s livelihood insurance, corporate businesses insurance, and construction accidental injury insurance, and integrated the development of driver and passengers accidental injury insurance and accidental injury insurance of agricultural network, to promote an overall rapid development of the accidental injury and health insurance business.
GWPs for agricultural insurance increased by 21.0% to RMB26,718 million in 2018 from RMB22,090 million in 2017. In 2018, PICC P&C fully integrated the state’s rural revitalization and precise poverty alleviation strategy, deepened the construction of the agricultural network platform, and put great effort in exploring the agricultural insurance market, consolidated the traditional agricultural insurance business by focusing on expanding the scope, raising bids and increasing products, while expanding and strengthening the classic agricultural insurance business, accelerated the development of innovative businesses such as income insurance and output/output insurance, created the “deep poverty insurance”, the first innovation project in the industry, actively developed agricultural insurance product features poverty alleviation, and took other measures to effectively promote the rapid development of agricultural insurance business.
GWPs for liability insurance increased by 27.9% to RMB21,706 million in 2018 from RMB16,975 million in 2017. In 2018, PICC P&C accurately followed the economic and social development trends, actively served the development of real economy, served the national governance and poverty alleviation strategy, increased its efforts in product development, improved the quality of service and professionalism, fully utilized the advantages of outlets, and promoted the rapid development of traditional pillar businesses such as employer, public liability insurances. At the same time, new policy-oriented businesses such as the first set of major technical equipment, new materials, government (poverty alleviation) relief, safe production, and building quality insurance also grew rapidly.
GWPs for commercial property insurance increased by 6.3% to RMB13,413 million in 2018 from RMB12,623 million in 2017. In 2018, PICC P&C overcame the adverse effects of intensified competition in market, fully motivated base-level employees to expand business, continued to strengthen renewal of insurance and put more efforts in securing new insurance and competition, and promoted the steady development of corporate property insurance business.
GWPs for credit insurance increased by 134.2% to RMB11,575 million in 2018 from RMB4,942 million in 2017. In 2018, PICC P&C seized the opportunities in the growth of import and export trade and the development of online consumer finance, further consolidated its competitiveness in export credit insurance, engineering performance guarantee insurance, tariff guarantee insurance and others, and put more efforts in the construction of infrastructure for online consumer finance business and business practices, and achieved good development results and promoted the rapid development of the overall credit business.
GWPs for cargo insurance increased by 19.6% to RMB3,864 million in 2018 from RMB3,232 million in 2017. In 2018, PICC P&C seized the opportunities brought by the stabilization of the domestic economy and the recovery of the global economy, optimized the business expanding model and channel construction, continuously expanded traditional insurance such as import and export, road, railway and multi-way transportation insurance, while promoting its individual decentralized business and internet business, and effectively promoted the rapid growth of the cargo insurance as as whole.
GWPs for other insurances increased by 14.9% to RMB12,145 million in 2018 from RMB10,574 million in 2017. In 2018, PICC P&C actively responded to the market situation, guided the upgrading of business structure through resource allocation and internal assessment, and achieved a balanced development of family property insurance, engineering insurance, special risk insurance, and hull insurance.
2. PICC Hong Kong
The Group mainly conducts overseas business through PICC Hong Kong. As of 31 December 2018, PICC Hong Kong’s total assets amounted to RMB2.51 billion, and the net assets equivalent to RMB0.56 billion. In 2018, the insurance income amounted to RMB1.06 billion, the combined ratio was 105.0%, and the net profit amounted to RMB13 million.
(2) Life and Health Insurance
1. PICC Life
In 2018, China’s economy maintained a stable and positive operation, supply-side structural reforms were further implemented, financial regulation was tightened continuously, and the Life insurance industry is facing greater downward pressure. Faced with complicated economic and financial situation and the pressure that the Life insurance industry’s “unsatisfactory at the beginning”, PICC Life was determined to “change the way, optimize the structure, and change the momentum”, and firmly adheres to the principle of “stable growth, focus on value and strong foundation”, implemented the “3411 Project” of the Group, focused on the value in regular payment business, continuously consolidated the foundation for the transformation to high-quality development, and strictly adheres to the bottom line of no systemic risks. In 2018, the first-year regular premium of PICC Life amounted to RMB16,836 million, the proportion of regular payment (including renewal) significantly increased by 17.4% to 60.0%, the ten-year or more regular premiums amounted to RMB4,490 million, representing an increase of 3.5% as compared to the previous year, and value of new business amounted to RMB5,735 million, representing an increase of 0.8% as compared to the previous year. The value creation capability continues to improve.
The original premiums income of life insurance decreased by 14.0% to RMB75,992 million in 2018 from RMB88,383 million in 2017, mainly due to PICC Life actively reduced the scale of existing short and medium-term business and optimized the business structure in accordance with the strategy for transforming to high-quality development.
The original premiums income of health insurance decreased by 0.4% to RMB15,762 million in 2018 from RMB15,827 million in 2017, mainly due to PICC Life actively responded to the requirements that insurance should for protection purposes, and suspended the sales of group supplementary medical products. At the same time, it benefited from the increase of health care demand in the market and the growth of individual health insurance business.
The original premiums income of accident insurance decreased by 3.3% to RMB1,960 million in 2018 from RMB2,028 million in 2017, mainly due to it voluntarily gave up some short-term accident insurance business with poor efficiency so as to strengthen the management of business risk and the management of premiums receivable.
In terms of TWPs, in 2018, the TWPs of general life insurance, participating life insurance, and universal life insurance amounted to RMB29,412 million, RMB47,062 million and RMB5,507 million, respectively. TWPs of health insurance and accident insurance amounted to RMB15,768 million and RMB1,961 million, respectively.
2. PICC Health
In 2018, PICC Health implemented the “3411 Project” in depth, adhered to the guiding ideology of “Speed up transformation and develop through innovation”, and promoted comprehensive and deep reforms in accordance with the requirements of “professionalism, efficiency, competency and flat structure”, implemented flat management, demonstrated its professionalism, realise innovativeness and offered special features, actively served the “Healthy China” strategy and the construction of a national multi-level medical security system, accelerated the transformation to high-quality development, showing a good situation with optimized business structure, improved profitability, enhanced professional capabilities, and solid foundation for development. First-year regular premium increased by 152.2%; the value of new business increased by 8.3% as compared to the same period in the previous year, which indicates a continuously enhancing value creation capabilities.
(3) Asset management business
In 2018, the Group’s asset management segment overcame certain adverse factors, such as decline of bond yield and significant fluctuation in stock market and frequent occurrence of credit risk. It actively seized the opportunity when bond yield peaked and increased allocation in bonds. On the basis of developing traditional debt and equity products, it actively promoted the innovations of financial products such as inclusive finance and agriculture and SME support, and coordinated the development of major insurance business which helped to maintain a stable investment return and effectively reduced investment risk. The insurance asset management products of the asset management segment had a registered scale of RMB58,300 million, ranked third in the industry. Among them, the registered debt amounted to RMB48,800 million and the registered equity amounted to RMB4,500 million and the approved scale for asset-backed products amounted to RMB5,000 million. As of 31 December 2018, the scale of third-party assets management products of the asset management segment amounted to RMB278 billion.
The investment income of the asset management segment of the Group does not include the investment income generated by the investment assets managed by our asset management segment on behalf of the Group’s insurance segments. The investment income generated by the investment assets managed by the asset management segment on behalf of other segments has already been included in the investment income of the relevant segments.
(4) Investment Portfolio and Investment Income
In 2018, the global economic environment was complicated, and the Chinese economy showed a momentum of stability with progress, while in the second half, the effect of “counter-cyclical” adjustment in monetary policy and fiscal policy emerged gradually, yields of bond continued to fall, and A-share market fell sharply. The Company seized the window for allocation at the peak of interest rate in the beginning of the year to increase allocation in long-duration bonds and nonstandard debt products and reasonably controlled the proportion of equities and equity funds which effectively reduced investment risk.
Business Outlook - For the year ended December 31, 2018
In 2019, the Group will adhere to new development concepts, the overall keynote of seeking progress while maintaining stability and serving the real economy, and coordinate efforts in stabilising growth and earnings, promoting reform, lowering cost and preventing risks in tandem with its “3411 Project” and in accordance with the requirement of high quality development. It will actively push forward business model reform, strengthen corporate governance structure, put more effort into marketoriented reform and actively cut cost and increase profits and enhance the quality of its human captial. The Group will also strengthen the Party’s leadership, accelerate quality, efficiency and momentum reforms, and solidly propel the Group’s transforming to a high quality development. PICC P&C will unswervingly deepen “two integrations”, pursue dis-intermediary, lower costs, improve services and strengthen customer stickiness. It will thoroughly accomplish key tasks of fostering a sound marketing culture, building up the marketing team, strengthening the development of company controlled direct marketing channel and maintaining its cost-leading position. It will consolidate the development of motor vehicle insurance and policy-based business while putting more effort in the development of commercial non-vehicle insurance, pursuing success in the “central city attacking battle” and “county market defending battle”, consolidating advantages and maintaining leading market position. PICC Health will insist on deepening comprehensive reform, strengthen professional capability, drive the flattening of organisational structure, optimize resource allocation, emphasize on product innovation, enhance expense control of medical insurance, optimize and achieve excellence in commercial health insurance, and promote the outstanding features, business size and value creation of health management services. PICC Life will persistently strengthen the building of the individual insurance sales team, reinforce policy, senior management and back office foundation, upgrade product mix, enhance embedded value of businesses, strengthen internal control and accountability and ensure steady business development. The investment segment will actively develop wealth management business while providing good services to its principal business. PICC AMC will strengthen cooperation with the entrusted parties to make appropriate allocation to major asset classes, playing a major role in stabilising investment income of the Group while actively accelerate public fund and third party asset management business. PICC Investment Holding will expedite its transformation and development, properly carry out assets operation business, strengthen active management, proactively expand the scales of direct investment entrusted business and financial product business. PICC Capital will seize investment opportunities amid economic restructuring and increase development and allocation of non-standard products to satisfy the Group’s need of insurance asset allocation. The emerging segments will strengthen the building up of professional capability in their respective sectors, create boutique companies and further integrate into the overall development of the Group. PICC Financial Services will play a bigger role in advancing the Group’s internet transformation and fin-tech application. PICC Reinsurance will thoroughly explore the Group’s resources in outward reinsurance, accelerate development of third party market business and develop reinsurance business in respect of life and health insurance. PICC Pension will establish sound market-oriented operation regime, create endogenous vitality in development, consolidate the foundation for sustainable development, grasp opportunities in the occupational annuities market, increase the scale of entrusted annuities and enhance investment management capability. PICC Hong Kong will explore the Hong Kong market and act as a platform for business in Southeast Asia in accordance with the development requirement of being a professional, mid-sized boutique company with special characteristics.
Source: PICC Group (01339) Annual Results Announcement