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Chapter 20: Exploring the “digital logic” of China Life Insurance’s world-leading market value

Chapter 20: Exploring the “digital logic” of China Life Insurance’s world-leading market value

Recently, a number of listed insurance companies have successively disclosed premium income data from January to September 2023. Among them, the premium income of China Life Insurance Co., Ltd. (hereinafter referred to as “China Life Insurance”) from January to September was 578.8 billion yuan, a year-on-year increase of 24.7 billion yuan, a record high for the same period in history, and the premium scale ranked first among life insurance companies.

1. 20 years after its listing, China Life Insurance has witnessed the take-off of China’s insurance industry

As a life insurance company of the same age as the Republic of China, China Life Insurance has also experienced many landmark events in its development over the past 70 years, such as the company’s resumption of business in 1978, decentralization in 1996, shareholding reform in 2002, etc. . Among them, the successful overseas listing in 2003 left a mark in the development history of China Life Insurance.

Twenty years ago, China Life Insurance raised US$3 billion in IPO, creating the largest IPO in the global capital market that year. After its listing, China Life Insurance has been highly recognized by the international capital market, and its market value has continued to increase. At the end of November 2006, the total market value of China Life Insurance exceeded HK$500 billion, making it the world’s leading listed life insurance company by market value at that time.

On January 9, 2007, China Life Insurance returned to the A-share market and became the first mainland life insurance company to be listed in three places at the same time, once again causing a sensation in the capital market. This time around, China Life issued 1.5 billion A-share shares at a price of 18.88 yuan per share. Less than a month after returning to A-shares, on January 23, 2007, China Life Insurance A-shares entered the SSE 180, SSE 50, CSI 300, CSI 100, CSI 800 and Xiaokang Index. Two months later, on March 12, China Life Insurance’s H shares were added to the Hang Seng Index constituent stocks, becoming China’s first blue-chip insurance stock to be included in the Hang Seng Index. China Life Insurance responded to the capital market with its outstanding operating performance. Expectation and favor.

In the past 20 years, our country has experienced a stage of long-term and sustained rapid economic development. In such an environment of prosperous national destiny, the insurance industry has also taken advantage of the momentum, advanced by leaps and bounds, and achieved leapfrog development. In 2003, my country’s total insurance premiums ranked only 11th in the world, with a total volume of less than 50 billion US dollars and a global share of only 1.6%. But 20 years later, in 2022, my country’s total premiums have exceeded 4.7 trillion yuan, and the global share has increased to 10%. The scale of premiums has ranked second in the world since 2016.

At the same time, domestic insurance companies have also grown rapidly in the past 20 years. Among the Global Fortune 500 in 2003, there was only one insurance company from mainland China, China Life, but in 2022, there were seven insurance companies from mainland China shortlisted for the Fortune 500. China Life has become the first domestic insurance company to be listed in the Global Fortune 500 for 20 consecutive years. While leading the industry, it has also witnessed the take-off of the domestic insurance industry in the past 20 years.

2. Digital changes in the past 20 years, looking at China Life’s stable and long-term development

In 20 years, China Life’s premium income has increased from less than 150 billion yuan in 2003 to 600 billion yuan in 2022, its embedded value has increased from 90 billion yuan to 1.23 trillion yuan, and its total assets have increased from 328.7 billion yuan to 5.25 trillion yuan. , the scale of investment assets has expanded from 279.2 billion yuan to 5.06 trillion yuan, and all indicators have achieved major leaps. In addition, the number of customers served by the company has increased from 250 million to over 500 million, the number of effective long-term insurance policies has increased from 48 million to 326 million, the number of annual claims has increased from 789,000 to 19.17 million, and the annual claims amount has increased from 2.8 billion yuan to 51.5 billion yuan, both achieving huge improvements. In the past 20 years, the industry has experienced many changes, and the company’s operations will never be smooth sailing. Behind these changes in numbers may be able to reflect China Life’s operating logic.

(1) Company scale: developing from a leading life insurance company in the country to a leading life insurance company in the world

In the past 2022, the premium income of my country’s personal insurance companies reached 3.2 trillion. In 2003, the overall premiums of personal insurance companies were less than 300 billion. In the past 20 years, the scale of premiums of my country’s personal insurance companies has increased 10 times, with a compound growth rate of 10 times. The rate exceeded 13%. During this period, my country’s GDP also increased from 13.74 trillion in 2003 to 121.02 trillion by the end of 2022, with a compound growth rate of more than 12%. It can be seen that in the past 20 years, the premium growth of personal insurance companies has basically been consistent with the growth of GDP, which is also in line with the development pattern of the personal insurance business. With the strengthening of the country’s economic strength and the increase of national income, people’s demand for insurance has entered a new stage of growth, which has also provided development opportunities for domestic personal insurance companies.

As the leader in the personal insurance industry, China Life Insurance’s premium income was 135.2 billion yuan when it was listed in 2003. It was the well-deserved leader in the personal insurance industry at that time, but it has not yet entered the top ten in the world. In 2022, relying on the general development trend of the country in 20 years, China Life Life Insurance’s premium income will reach 615.2 billion yuan. It is the only life insurance company in the industry with premiums exceeding 600 billion yuan, consolidating its leading position in the industry.

Although it has caught up with the dividend window of the past 20 years, China Life Insurance has not blindly pursued the expansion of premium scale, but has sought a balance between premium growth and business quality. Judging from the annual report disclosed by China Life Insurance, China Life Insurance’s individual insurance business has maintained a high new business value rate since 2016. Even though the industry has fallen into a trough in the past three years, China Life Life Insurance has not relaxed its focus on business quality. requirements, the new business value rate is still far better than the industry.

In the first half of 2023, China Life Insurance achieved new policy premiums of over 171.2 billion yuan, a year-on-year increase of 22.9%. While new business rebounded strongly, premium income in the first half of the year was 470.115 billion yuan, a year-on-year increase of 6.9%. The premium scale is at a historical high. Continue to consolidate its leading position in the industry.

The growth in premiums has also driven the rapid growth in the company’s assets. After 20 years of accumulation, China Life Insurance’s total assets reached 5.25 trillion yuan in 2022, becoming my country’s first life insurance company with assets exceeding 5 trillion yuan, an increase of 15 times from the 328.7 billion yuan when it was listed in 2003. .

As an insurance company with assets of RMB 5 trillion, China Life will continue to strengthen compliance risk management, build a solid bottom line for high-quality development, and ensure the company’s stable and long-term development.

(2) Profit contribution: Steady and long-term development, and practice the investment philosophy with asset and liability management as the core

Since its listing in 2003, China Life Insurance has achieved a cumulative net profit of more than 500 billion yuan, also far ahead among personal insurance companies. Among them, the net profit exceeded 10 billion in 2006, the net profit exceeded 30 billion in 2009, and exceeded 50 billion for three consecutive years from 2019 to 2021.

Judging from the past 20 years, affected by changes in the market environment, China Life Insurance’s net profits have also fluctuated to a certain extent in each year, which is also a normal phenomenon for insurance companies. But for a listed insurance company, shareholders value more whether it can provide long-term and stable returns. Judging from the data of the past 20 years, the average ROE of China Life Life Insurance has exceeded 10%, ranking among the top among listed insurance companies, reflecting its strong development resilience.

As a life insurance company, China Life’s investment business is rooted in and serves the development of its main insurance business and has always been an important source of value creation. In the past 20 years, China Life Insurance’s investment assets have grown from 279.2 billion yuan in 2003 to 5.06 trillion yuan in 2022, an increase of 17 times. Faced with a massive asset of RMB 5 trillion, China Life Insurance has always firmly implemented its mid- to long-term strategic asset allocation plan, carried out stable investment management across cycles, and achieved the coordination and unity of asset safety, profitability and liquidity.

China Life Insurance’s annual report data from 2004 to 2022 shows that the company’s average annual investment return rate exceeds 5%. In recent years, its investment return rate has caught up with the industry average. Combined with China Life’s business quality control mentioned earlier, this investment rate of return can be said to be a good match for the needs of the liability side, providing corporate customers with a steady and considerable return on investment, and strongly supporting the development of the underwriting business.

Thanks to the huge increase in assets accumulated over the past 20 years, China Life Insurance’s net investment income has increased from 9.825 billion yuan in 2003 to 190.3 billion yuan in 2022. This fully reflects the long-term investment strategy of China Life Insurance and also brings benefits to shareholders. to achieve long-term and stable income.

(3) Digital transformation: from “China Life Technology” to “China Life Technology”

China Life Insurance has always closely followed the development trend of technology, kept pace with the digital era, comprehensively implemented new development concepts, took technological innovation as the guide, deeply implemented the “Technology China Life” development strategy, built technological core competitiveness, and innovated platform business models. Empowering the digital transformation of industries has paved the way for technological construction that is open, agile, real-time, and green.

Since its listing, China Life Insurance has successively completed the nationwide launch of its core business system, national data centralization, and preparations for the establishment of an R&D center and a data center. It has carried out the tasks of a life insurance company with the world’s leading market capitalization, huge workload, and complex management. Operations and management have laid the foundation for the in-depth advancement of “Technology China Life”.

Since 2012, China Life Life Insurance has proactively planned and implemented the “big backend + small frontend” IT layout based on the concept of cloud computing, built the industry-leading China Life hybrid cloud, achieved elastic resource scalability supply and “senseless” switching of deployment, and successfully transformed the enterprise. Move to the “cloud”. Organically combining technology with inherent advantages such as customers, teams, and outlets, taking networking, intelligence, and digitalization as the transformation direction, we have built the largest digital platform in the industry based on the Internet, using technology to aggregate resources, empower businesses, and build an ecosystem. , connects with more than 400,000 external services and activities, and direct claims payment covers more than 20,000 medical institutions across the country, providing customers with better insurance ecological services.

In recent years, the company has thoroughly implemented the national major deployment of “self-reliance and self-reliance through science and technology” and is the first in the financial industry to complete the 100% distributed architecture transformation of its core business system. On this basis, the company has grasped new data elements and comprehensively improved its data capabilities, becoming the first in the insurance industry. The first company to receive the highest level of national Data Management Capability Maturity (DCMM).

China Life uses technology to promote business model innovation, and provides various services covering the entire value chain of operations such as sales, services, transactions, management, risk control, and office collaboration through digital platforms, fully empowering the insurance value chain. China Life Insurance has provided online consultation, insurance and other services to a total of 90 million users, achieving 99% of policy services completed online. The intelligent model is effectively used in underwriting, customer acquisition, risk control and other aspects, achieving a 92.7% intelligent review pass rate for underwriting, more than 60 million customer positioning recommendations, and a suspicious transaction identification rate of 92%.

(4) Risk management: The comprehensive risk rating has remained Category A for 21 consecutive quarters.

Over the past 20 years, China Life Insurance has always adhered to the business philosophy of stability, integrity and compliance, continued to improve the risk management system, strengthened risk management in key areas, and continuously innovated risk prevention and control methods. The company strictly abides by the laws, regulations and industry regulatory requirements of the place where it is listed, and continues to strengthen internal control and risk management. We have established a risk preference normalization management system with risk preference statements as the carrier and risk tolerance and limit indicators as the starting point, organically integrating risk preference with all lines of operation and management, and significantly improving risk management capabilities. Since the formal implementation of the C-ROSS Phase II regulatory rules in 2022, the company has actively implemented the new benchmarking regulations, and its solvency risk management capability assessment score has firmly ranked among the top in the industry. As of the second quarter of 2023, the company’s comprehensive risk rating has maintained a Class A rating for 21 consecutive quarters.

(5) Brand value: Brand value continues to rank first in China’s insurance industry

On June 15, 2023, the World Brand Laboratory released the 2023 “China’s 500 Most Valuable Brands” rankings. The China Life brand continued to rank fifth, with a brand value of RMB 485.567 billion, an increase of RMB 33.028 billion from 2022. , ranking first in China’s insurance industry. This is the 20th consecutive year that China Life has been included in the “China’s 500 Most Valuable Brands” list. The brand value has increased by 442.8 billion yuan compared with the first time it was selected. The brand’s social influence and credibility continue to expand.

3. Start from a new starting point and build a world-class life insurance company

As the leading enterprise in the domestic life insurance industry, China Life Insurance has always occupied the leadership position in the domestic insurance market for many years. Judging from the development of the past 20 years, China Life Insurance has also become the “mainstay” of China’s insurance industry. All the past is prologue. Facing the current new development stage of the insurance industry, China Life Insurance, as the industry leader, is also prepared to face more challenges.

At the beginning of 2023, China Life Insurance launched a new business strategy to lay out and lead future development – “Eight Major Projects”.

The “Eight Major Projects” focus on innovation and breakthroughs in party building leadership, mechanism optimization, marketing reform, resource integration, management innovation, ecological drive and other aspects. It is led by the “Party Building Leading Foundation Building Project” and supported by the “Talent Building Consolidation Project” , with the “Sales Channel Strengthening Project”, “Comprehensive Marketing Convergence Project”, “Customer Management Jinshan Project”, “Government-Enterprise Cooperation People’s Heart Project” and “Healthy Elderly Care Ecological Project” as the main body, and based on the “Financial Technology Digitalization Project”, in-depth implementation Rebuild the foundation and tackle difficult problems, actively target new customer groups, new models, and new capabilities, comprehensively upgrade the company’s development momentum, and accelerate quality, efficiency, and power changes.

Looking forward to the future, China Life Insurance will take the 20th anniversary of its listing as a new starting point, continue to deepen reform and innovation, focus on key areas to promote transformation and upgrading, continue to inject new momentum into high-quality development, and provide more “simple, high-quality, warm” insurance protection services, continue to enhance the people’s sense of gain, happiness and security, and move towards the goal of building a world-class life insurance company.

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