Premium income surges, business management steadily optimized
On Aug 31, China Reinsurance (Group) Corporation (China Re Group or the Group; Hong Kong Stock Exchange stock code: 1508) held a conference on its 2020 interim results. The Group's management team introduced in detail the Company's overall performance and strategic implementations for the first half of 2020. The "conference call + video live" conference format allowed full interaction with analysts and investors, gaining the attention and recognition from the capital market.
As a leading domestic reinsurer, China Re Group focused on high-quality development in the first half of 2020 amid the global pandemic, coordinating outbreak prevention and control and business management, while turning challenges into opportunities. These efforts contributed to the Group's rapid growth in premium income and steady progress in all business sectors.
Rapid growth in premiums. In the first half of 2020, gross written premiums of the Group increased 20.5 percent year-on-year (YoY) to 102.123 billion yuan ($14.89 billion), of which the gross written premiums by the P&C reinsurance business increased 17.6 percent YoY to 27.078 billion yuan; gross written premiums by L&H reinsurance business increased 31.4 percent YoY to 50.5 billion yuan; and gross written premiums of pPrimary P&C insurance business saw an increase of 5.7 percent YoY to 25.763 billion yuan.
Outperformance of investment results. With the decline in interest rates and the volatile capital markets, the Group seized opportunities to optimize its portfolio allocation. Annualized total investment yield was 5.48 percent, representing a YoY increase of 29 basis points (bps), making the Group's equity investments outperform the market.
Steady profitability excluding the effects of COVID-19 to overseas operations. As Covid-19 continues to affect the world, the Group's operations showed strong resilience. With orderly resumption of work and production in China, the Group has developed opportunities amid the crisis. In the first half of 2020, net profit was 2.749 billion yuan. Profit before tax of the Group excluding the COVID-19 effect on overseas P&C reinsurance business achieved a year-on-year increase of 2.7 percent.
Continued focus on risk management. In the first half of 2020, the comprehensive solvency adequacy ratios for all insurance entities of the Group remained above 200 percent. The Group maintained international ratings of "A" by S&P Global and "A (Excellent)" by A.M Best.
Accelerated implementation of strategic initiatives. Fruitful results were made in the implementation of the "platform-based, technology-based and globalization" strategy. These includes: the China Belt and Road Reinsurance Pool (CBRRP) was established in July 2020, and China Re Group being the presidency of CBRRP, will pool together industry resources to provide comprehensive risk protection for the Belt and Road initiative; China Re P&C Malaysia Branch will soon commence operations, another breakthrough in the Group's overseas presence; A proprietary China earthquake catastrophe model has been developed and applied commercially among a number of insurers; led the revision of China's critical illness table, opening up to new business opportunities; co-launched the "Lifelong Cancer Medical Insurance" to explore the fee adjustment mechanism for long-term medical insurance; co-launched the "Specific Drug Insurance" in a bid to develop the "Insurance + Specific Drug" market; launched the "China Continent Super APP" platform, integrating the six elements of service, diversion, underwriting, interaction, claims and management into one, transforming from a traditional product model to a technological innovation model.
Despite the pandemic, China Re Group turned challenges into opportunities and its business units performed solidly with the following highlights:
P&C reinsurance business increased rapidly. Premiums of domestic P&C reinsurance reached a new record of 18.021 billion yuan, representing an increase of 20.8 percent YoY, growing faster than the primary insurance industry. The combined ratio of domestic P&C reinsurance was 99.80 percent, with continued improvement in overall business quality. Overseas P&C reinsurance recorded 14.9 percent YoY growth in gross written premiums to 9.725 billion yuan. The Group's combined ratio excluding the effect of COVID-19 was 92.08 percent, with better business quality compared with the previous year.
L&H reinsurance business grew swiftly, as protection type business was strategically developed. In the first half of 2020, reinsurance premiums of domestic protection-type business increased 24.4 percent YoY to 11.559 billion yuan. Since 2017, the compounded annual growth rate of this business was 47.9 percent. The Group will continue to enhance its 'Data+' and 'Product+' strategies, further exploring the integration of health insurance to achieve better business quality. The combined ratio of short-term protection type business was 97.26 percent, representing a year-on-year dip of 30 bps.
Primary P&C insurance premiums climbed with a focus on better business quality. In the first half of 2020, motor insurance premiums in primary P&C insurance grew 2.3 percent YoY to 14.238 billion yuan. Non-motor premiums rose 9.7 percent YoY to 11.231 billion yuan. Quality of the motor insurance business became significantly better, as private car coverage now accounted for more than 70 percent of the business. In surety insurance, the Group has enhanced client access standards, resulting in a gradual decline in bad debt ratio.
Asset management business secure excess investment returns. While adhering to a value and long-term investment philosophy, the Group actively seized opportunities amid the volatile and low interest rate environment. Total investment income in the first half of 2020 grew 22.8 percent YoY to 7.565 billion yuan. The annualized total investment yield was 5.48 percent, representing a YoY increase of 29 bps.
Going forward in the post COVID-19 era, the insurance market will face various changes including a sharp increase in demand, technological disruptions and business transformation. Meanwhile, the reinsurance market is full of opportunities as insurers seek to cede risks, barriers to enter the reinsurance industry have become higher as market leaders strengthened their positions. In the second half of 2020, China Re Group will adhere to its operational goals of "stabilising growth, adjusting structure, controlling risks and increasing profitability", striving to achieve its annual business targets and attain a new level of high-quality development.