For earnings analysis, there are two wonderful industry, one is on the one said the bank, the other is today to talk about insurance. Before, we also from the perspective of the customer analysis of insurance products, and today we talk from the perspective of investors how insurance companies how to do business to see how insurance is “deceptive”.
2, property insurance, insurance or contract responsibility, short-term, in accordance with the actual loss compensation; 3, accident insurance and medical insurance, insurance, insurance, insurance, Paul’s personal, fixed and actual pay are. Life insurance and property insurance are long and short, the length of the funds during the allocation requirements are very different, in order to avoid the misappropriation of the risk of payment, the general regulatory agencies will require the two separate business. In the insurance license control, but also different treatment. The third type of insurance covers the edge of life insurance and property insurance, life insurance and property insurance companies will operate.
1, business model
In short, the insurance is usually everyone out of money, to form a pool of funds, who in case of being difficult, from which a large sum of money to help him. Of course, the insurance company is not a charity, as an organizer, it will be part of the pool from the pool, used to cover their own operating costs, and generate profits.
Money never sleep, money pool money will not lie at home to sleep, insurance companies can invest, to fight for the capital pool inside the capital appreciation, that customers provide better protection for their own higher profits The In simple terms, from the perspective of the income statement, premium + investment income = insurance costs + insurance company costs and profits. Insurance companies use the difference between premium income and compensation, as well as the time difference between the income and expenditure of investment income, to make money, specifically, the insurance company’s profits mainly from three aspects, death, spreads, spreads.
We know that insurance is actually doing the probability of simple and crude said that if a person in the insurance period, 40% of the possible claims, insured 1 million, then the cost of the policy is 400,000 claims, the policy price is 400,000 Plus other expenses. Insurance companies to sell 100 such products, it is necessary to wait for claims, if expired, the real claims of less than 40 people, the insurance company earned, this part due to the expected incidence and the actual incidence of the The difference between the profits generated by the death rate, on the contrary, if the compensation for more than 40 people, then the insurance company on the loss, this part of the loss is called dead loss.
Insurance costs, in addition to the cost of claims, but also included in a certain cost, including staff commission, insurance handling, claims and other procedures arising from the various costs, if expired, the estimated costs and actual expenses are inconsistent, Of the profits or losses, it is called a fee difference or fee difference loss.
Followed by a more difficult part of the understanding, for long-term life insurance, the general use of a balanced rate, that is to say that each period to pay the same amount of premium, but the greater the age of the higher the risk of compensation, so relative to the actual needs of the premium , The pre-will pay more, the latter will be less cross, and the pre-pay part of the need to follow a product pricing time to book a good interest rate for value-added, to make up for the late pay premium gap, the final premium to the overall balance, if the actual investment The yield is higher than the initial interest rate, so much profit is the benefit difference, and vice versa is the loss of interest loss.
Business model, the insurance is actually similar to the bank, the insurance company is selling the service, into and out of only money, and are highly leveraged. But the bank’s debt side is the depositor’s deposit, the insurance liability side is the customer’s premium; deposit due debt service, insurance is to meet the conditions after the payment of insurance; bank asset side lending income, insurance is to invest value The
With the ordinary company’s operating income is different, the insurance company’s premium income, according to different statistical caliber, there are many variants, can be said to be confused, look at enough to be prohibitive, and today love the money on the determination, not afraid of sacrifice, Eliminate all difficulties, to give you one by one description, please also play the spirit, ready to Sike.
Insurance companies to receive all the income received by the policy, the insurance company’s own sales of various types of products, regardless of men and women young and old, tall and thin, according to the actual sales income and statistics to form the total amount of premiums. The scale premiums can also be divided into new business scale premiums (new policies for the year) and renewal scale premiums (stockpiles), of which new business scale premiums can reflect the growth performance of insurance companies.
There are two main types of payment and payment of life insurance, the former is a hammer trading, the latter is surging river endless, it is clear that the sum of twenty thousand dollars, as a pay 2 Million dollar contribution to the insurance company, which is representative of the back 20 or 30 years, each year will receive 20,000 dollars Oh.
Standard premium refers to the different types of new business in the current year in accordance with the life insurance company’s profit or value of the contribution of the size of a certain coefficient, the conversion after the formation of the premium income, that is, different types of scale premium multiplied by the corresponding coefficient And then add. Generally, the coefficient of low contribution period is low, and the length of the payment period is high.
The scale premium mainly reflects the current income, while the standard premium reflects the sustainability of the income, after the conversion of the same premium income has a considerable intrinsic value (later will be devoted to what is the embedded value). The standard premium set by the CIRC is calculated as follows:
Standard premium = one year or more new single payment premium income × conversion coefficient + one year or more new single insurance premium income × 0.1 + one year and less short-term insurance premium income × 1.0
For the one-year period of more than 10 years to pay the premium period of the conversion factor for the “payment period / 10”, 10 years or more paid premium income conversion coefficient of 1.0, for monthly payment, quarterly premium income will be converted to years The premium is then converted according to the above factor according to the contribution period.
Also called the retention premium, mainly on the scale of premiums for major insurance risk testing and insurance mixed contract spin-off, the premium part of the wealth management to get rid of only part of the income of the insurance section (this part is somewhat similar to the bank can not absorb the deposit Count as income, only interest income). Please recall, love money before the introduction of universal insurance and investment insurance, for the investment account inside the money, the insurance company is just a crossing God of Wealth, can not be counted as their income.
Premium income = size premium – size of premiums that have not passed the major insurance risk test – universal, disassociated products are split into part of the premium deposit (the “insurance deposit and investment funds” account in the balance sheet).
Original premium income
The original premium income is mainly to distinguish the reinsurance premium income, the state provides insurance companies receive premiums, must be in accordance with a certain percentage of the insurance, to accept the insurance separation of the company’s premium is reinsurance premium income, entirely by the company’s own business Premium income is the original premium income. Premium income can also be the original premium income + reinsurance premium income.
For property insurance and one or less years of accident insurance and health insurance, since the validity period of the policy is often inconsistent with the fiscal year (the fiscal year is generally the natural year, the insurance year generally from the policyholder pay), in the accounting year , The insurance company to the full amount of insurance policy to mention the reserve requirement, the insurance liability has not yet expired, should belong to the next year part of the insurance premium deposit to form a non-expired liability reserve.
The income is less than the amount of income has not been due to earn the premium, for example, the policy is signed in the year, the end of the insurance period has been the past six months, there are remaining six months, if the income is considered inappropriate this year, Next year there are six months of risk responsibility, this time when the profits have been made, you need to subtract the remaining six months of the outstanding liability reserve.
Earned premium = premium income + transferred back to non-expired liability reserve – withdrawn unexpired liability reserve + back to long-term liability reserve – deposit long-term liability reserve.
Insurance companies get insurance premiums, get a low-cost debt, but also the story opened a head, can not make money, how much money, one depends on the money in the asset side can produce much income, two depends on how much income inside the need Pay out.
The investment income of an insurance company can be divided into the following sources:
First, the income: mainly including a variety of deposits, bonds, interest, and stock dividends;
Second, the transaction spread: mainly refers to the sale of stocks, bonds, bought and sold by the spread of the transaction generated income;
Third, asset impairment: provision for asset impairment, resulting in negative income;
(4) the fair value of the transactional financial assets;
V. Revenue from fair value of available-for-sale financial assets.
Net investment income: the first part of the income, net investment rate of return = net investment income / weighted average investment assets.
Total investment income: the first, second, third and fourth part of the total income, the total investment rate of return = total investment income / weighted average investment assets.
Consolidated investment income (or net investment growth rate, true investment rate of return): the sum of all investment income, comprehensive investment rate of return = comprehensive investment income / weighted average investment assets.
Comprehensive cost rate
The total cost mainly includes: operating costs (cost of insurance, labor costs and other necessary costs), commissions, indemnity and actual expenditure, the first two are the cost, corresponding to the overall cost Rate, followed by a compensation, corresponding to the overall rate of compensation. The lower the overall cost ratio, the stronger the profitability of the company, if the comprehensive cost rate is less than 100%, indicating that the company has underwriting profits.
China Ping An Annual Report, the comprehensive compensation rate and the comprehensive cost rate is defined as follows:
Consolidated Payments = (Payout Expenditure – Paid Overdue Expenditure + Extract Insurance Liability Reserve – Spreadback Insurance Liability Reserve) / earned premium
Consolidated Cost Ratio = (Payout Expenditure – Paid Overdue Expenditure + Extraction Insurance Liability Reserve – Spreadback Insurance Liability Reserve + Assurance Fee + Non-investment-related business tax and surcharges + insurance business fees and commissions
Out of non – investment – related business and management fees – discounted premiums + non – investment assets impairment losses) / earned premiums.
The overall cost rate is mainly for one-year property insurance business, love money Jun personal understanding, may be mainly due to life insurance is generally longer, income and compensation is not easy to match the corresponding, so do not apply this indicator, the problem came, Life insurance company how to measure the value of it, it leads to the analysis of life insurance big killer – embedded value.
3, inclusive value
The inclusion value is a unique financial indicator of the life insurance company, which is defined by the life insurance company’s adjusted net asset minus the amount of the solvency margin plus the discounted value of future earnings. Compared with the “net assets”, the embedded value reflects the real net asset status of the firm. The inclusion of the value calculation process requires a lot of actuarial assumptions. As an ordinary investor, it is very difficult for us to figure out how this value is, But we need to understand the meaning of this indicator, to understand what assumptions are inside, the following love money to try to use the words to explain the definition of embedded value.
Life insurance liability reserve
As mentioned earlier, life insurance generally adopts a balanced premium payment method. In the early stage, the premium paid by the insured will be greater than the natural premium (or expenditure), and the equilibrium premium paid in the later period will be less than the natural premium (or expenditure). For the early payment of the insured more than part of the premium, can not be treated as the company’s business surplus, can only be regarded as the insurer’s liability to the insured (for the customer, that is, the cash value of the policy ), Need to be kept and put into use in order to ensure the implementation of future insurance payment obligations, the annual debt is the life insurance liability reserve (broadly speaking, can also be understood as an unexpired liability reserve).
The life insurance liability reserve can be seen as an insurance company’s preparation for future expectations of the insured, including: the principal and interest due to the insured, the special reserve for dividends and omnipotent smooth reserve, expected compensation. Theoretically, the liability reserve for a life insurance company should be equal to the balance of the premium paid by the insured and the interest it generates, after deducting the death costs that should be apportioned in that year.
For the safe operation of the insurance company’s requirements, life insurance liability reserve is generally more conservative, the so-called conservative, mainly reflected in the harsh conditions on some of the stringent requirements, for example, the company for the predetermined interest rate (also can be understood as premium Of the investment rate of return) assumptions can not be too high, before the official provisions of the highest 2.5%, 2103 years after the lifting of restrictions, we are generally more conservative. Because the expected interest rate is low, it is expected that the future investment income will be low, so it is necessary to set aside the reserve fund to deal with the future risks. If the future real income is high, with endless reserves, and then to profit situation into the owner of the rights and interests, which is actually the life insurance company’s main form of conversion.
There are a few words, if the insured is in accordance with the natural rate to pay premiums, there is no need to mention the liability reserve, but the natural rate will be a problem, the older, the higher the premium to Later, no one is willing to buy. The market is not for the elderly life insurance products, is not discrimination against the elderly, mainly because the old rate is too high, the product will not be someone to buy out
Life insurance is not a hammer trading, the policy of the time span of less than ten years, decades, long life, in the policy life cycle, the actual investment rate of return higher than the expected interest rate profit, is said in front of the spread income. For domestic life insurance companies, the planned price of product pricing is often less than 3%, while the actual investment rate of return to about 5%, so in the coming year, the policy will continue to contribute to the new profits, Liability reserves are transferred from liabilities to owners’ equity. Therefore, the life insurance company’s net assets, and can not reflect the company’s total net assets, in order to more objective that the life insurance company’s net assets, the introduction of the concept of life insurance value.
Solvency adequacy ratio
Similar to banks, insurance is also a highly leveraged industry, theoretically, do not need their own funds can be the same for prudential principles, the regulatory authorities will pay the insurance company to monitor the ability to require a certain percentage of insurance companies Own funds, analogy to the bank’s core capital, the insurance company is the solvency margin.
The minimum solvency margin required by the supervisory authority is directly related to the risk reserve and can be understood as a reserve * 4% + 0.3% of the risk insured. Actual solvency of insurers = recognized assets – recognized liabilities. The so-called recognized assets, mainly on different types of financial assets to consider the level of its risk adjustment value, which is similar to the bank’s risk-weighted assets. General infrastructure and real estate bonds can be credited to 100%, the stock will be multiplied by a coefficient of less than 100%, in addition, the insurance company’s subordinated debt can also be counted as approved assets, which is similar to the bank’s secondary capital. Recognized liabilities are mainly life insurance liability reserves.
The ratio of the actual solvency margin to the minimum solvency margin is the solvency rate.
The cost of holding the solvency margin
According to the regulatory requirements, the minimum solvency of an insurance company can only keep the risk of compensation, the shareholders can not divide up (although this part belongs to the owner’s equity), but the left pocket or the right pocket problem, at the asset side, whether you Is the debt or the owner