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What is the difference between solvency and profitability? Centennial Life intends to increase capital and expand shares
Several high-performance and cost-effective products launched by Centennial Life have been favored by the market. On the one hand, the company’s revenue has increased substantially, and the unfavorable side is the low solvency due to the consumption of capital.
"Investor Network" Hu Zhaohui
The administrative penalty decision announced by the Banking Regulatory Commission website on April 2 (Black and Silver Insurance Regulatory Penalty  No. 21) shows that the Heilongjiang Branch of Centennial Life Insurance Co., Ltd. has illegal activities of stagnation sales. The Heilongjiang Insurance Regulatory Bureau ordered it to make corrections and imposed a fine of 300,000 yuan.
In this regard, Centennial Life admitted in the "Investor Network" investigation, the 100-year life Heilongjiang branch did violate the "commercial banks can not allow insurance company personnel to station in the banking outlets".
As a small and medium-sized insurance company that has been established for 10 years, recently, Centennial Life has attracted attention from the market due to several high-performance products.
But there are also industry experts who say their products and marketing strategies are more radical.
In addition to the marketing strategy being accused, Centennial Life has also been questioned in terms of solvency. According to the solvency report for the fourth quarter of 2018, Centennial Life's third-quarter risk comprehensive rating is C-level, and its comprehensive solvency adequacy ratio has been between 100% and 120%, approaching the regulatory red line.
Explosive money was approved for marketing radical solvency implicated
Centennial Life Insurance officially opened in June 2009, and its headquarters is located in Dalian. The registered capital of the company is 2.36 billion yuan, and the shareholders include Oriental Assets.Guodian Power, Rongda Investment,Dalian PortGroup, Dashang Group,Times Wanheng17 companies including Xinguang Group and One Real Estate.
From the beginning of its establishment to 2014, the 100-year life has lost more than 1.4 billion yuan in four years.
Since 2015, Centennial Life has finally achieved profitability and profits have gradually increased. Even in 2018, when the overall life insurance growth is slow, Centennial Life has achieved a net profit of more than 300 million yuan.
In this regard, Centennial said that the reason for the company's better performance is to continuously optimize product and business structure, strengthen cost control, and reduce the cost of debt.
In fact, the rapid profitability of Centennial Life is closely related to the launch of several “explosive models”.
Products such as Kang Hui Bao, "Guardian No. 1", "Tong Jia Times" and "Ding Hui Bao" under the 100-year life insurance have been well received by the market due to their high cost performance.
Data show that from 2011 to 2017, the income of the 100-year life insurance business has grown rapidly, and the growth rate of insurance business income in 2017 reached 54.36%.
However, Centennial Life has to face an embarrassing reality as its business expands rapidly and continues to be profitable – the continual decline in solvency.
At the end of 2018, the average comprehensive solvency adequacy ratio of 178 insurance companies included in the audit was 242%, and the average core solvency adequacy ratio was 231%. The 100-year life comprehensive and core solvency adequacy ratios were 100.65% and 88.13%, respectively, both approaching the regulatory red line.
According to regulatory requirements, the core solvency adequacy ratio of insurance companies is not less than 50%, the comprehensive solvency adequacy ratio is not less than 100%, and the comprehensive risk rating is above Class B. The three indicators are also met at the same time, which is the solvency compliance company.
Some people in the insurance industry pointed out that the reason why Centennial Life can make the price of the product so low is mainly because of the low insurance accident rate and cost assumption in the pricing of the product. This also makes the capital requirement for unit premiums relatively higher, which in turn leads to the company's solvency continues to fall.
In this regard, a hundred years of people said that many of the company's products have been reinsurance, product risks and incidence and cost assumptions have been recognized by the reinsurance company. However, it failed to respond positively to the reasons why the company's solvency continued to fall.
"Investor Network" also noted that this year, Centennial Life has stopped selling at least six products. For the reasons for the product to go offline, some insiders believe that the above products have uncontrollable claims.
In this regard, the 100-year life has not been commented.
Issuing debt to increase capital, waiting for capital increase and share expansion
In order to achieve the solvency as soon as possible, Centennial Life has also made great efforts.
On March 14, the China Insurance Regulatory Commission approved the debt issue request of Centennial Life. Centennial Life was approved to issue 2 billion yuan of 10 year redeemable capital supplementary bonds in the national inter-bank bond market in accordance with the "Announcement on Issues Related to the Issuance of Capital Supplementary Bonds by Insurance Companies".
In the “Investor Network” survey, Centennial Life confirmed that it has successfully issued 2 billion yuan of bonds.
At the company level, the 100-year life itself is self-help. But what makes the 100-year life trouble is that the equity is too scattered, and the major shareholder Wanda Group also transferred its shares in January this year.
In 2014, Dalian Wanda received the 100-year life shares held by Guodian Power and Oriental Asset Management, and the shareholding ratio increased to 11.55%, ranking first largest shareholder. However, after four years, Dalian Wanda It is also preparing to sell the 100-year life shares that are already in the profit period.
According to the change shareholders' announcement issued by the official website of China Insurance Industry Association, on January 8, 2019, Dalian Wanda Group Co., Ltd. has transferred 900 million shares of 100-year life insurance to Greentown Real Estate Group Co., Ltd., accounting for the total share capital of Centennial Life. 11.55%.
On January 15th, shortly thereafter, Corey Group also transferred 700 million of its 800 million shares in the 100-year life insurance company to the National Geotechnical Information Technology Industrial Park Group.
In addition to the solvency is not optimistic, the net assets of Centennial Life have also continued to decline. At the end of 2016, the net assets of 100-year life was 7.478 billion yuan, which was lower than the company's current registered capital of 7.797 billion yuan. By the end of 2017 and the end of 2018, the net assets of Centennial Life have dropped to 6.568 billion yuan and 2.86 billion yuan respectively.
In this regard, Centennial Life said that the above equity transfer has yet to be approved by the regulatory authorities, and Centennial Life is also planning to increase capital and expand shares to solve the problem of excessive decline in net assets.
According to the data, Centennial Life has received a total increase of 7.794 billion yuan from 2012 to 2015, but has not implemented any capital increase plan for the next two years. After the new shareholder is stationed, will it increase investment, so that the solvency of the 100-year life insurance will be improved, and the market can only wait and see.
Editor in charge: Li Limeng RF13188
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