On December 19, Cathay Property Insurance announced that it would subscribe to capital according to the existing equity structure and increase the registered capital by 1 billion yuan in total. If the plan is approved by the China Banking and Insurance Regulatory Commission, the registered capital of Cathay Property Insurance will be changed from 1.633 billion yuan to 2.633 billion yuan.
This is also the second capital increase of Cathay Property Insurance by Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. (hereinafter referred to as " Ant Financial "). Previously, in July 2016, Ant Financial's capital increase of 833 million yuan was approved to become the controlling shareholder of Cathay Property Insurance.
Cathay Property Insurance responded to the Times Weekly reporter that this move is "to better focus on small-scale fragmented innovative products, help the real economy, and allow the public to enjoy inclusive insurance. It is also to strengthen the capital strength of Cathay Property Insurance and meet the company's subsequent healthy and sustainable development."
solvency declined
In August 2008, Cathay Property Insurance was established in Shanghai. It was originally built by 50% of the shares of the Taiwanese-funded enterprise Cathay Financial Holdings Co., Ltd., and Cathay Century Products Insurance Co., Ltd., each holding 50% of the shares, with a registered capital of 400 million yuan.
As of now, Cathay Property Insurance has experienced three rounds of capital increase. The third capital increase began in 2015. In September of that year, Cathay Property Insurance held an interim board of directors and subscribed 1.2 billion yuan as a strategic investor through Ant Financial. If the capital increase case is completed, the paid-in capital will increase from 800 million yuan to 2 billion yuan, and Ant Financial will hold a 60% stake. However, the plan has not been approved by the China Insurance Regulatory Commission.
In the end, Ant Financial's capital increase was 833 million yuan approved by regulatory authorities, with a shareholding ratio of 51%, thus gaining the status of the largest shareholder. After the capital injection was completed, Cathay Property Insurance's solvency increased from 38.89% to 613.43%.
But by the end of 2017, Cathay Property Insurance's solvency adequacy ratio had dropped to 303.21%. In this regard, Cathay Property Insurance explained in its annual report: "The company is seeking strategic transformation and business structure adjustment stages. The comprehensive cost rate remains high and the strategic investment is large. The actual capital decreased in 2018; the Internet insurance business growth rate is significant, and the capital at the lowest insurance risk increases."
Cathay Property Insurance's solvency further continued to decline in the first three quarters of 2018, with core and comprehensive solvency in the first quarter, second quarter and third quarter respectively.
Therefore, Cathay Property Insurance proposed a new capital increase plan. With the written consent of shareholders on December 4, Cathay Property Insurance decided to subscribe to capital in proportion to the existing equity structure and increase its capital by 1 billion yuan, of which Ant Financial subscribed 510 million yuan, Cathay Century Property Insurance subscribed 245 million yuan, and Cathay Life Insurance subscribed 245 million yuan.
After Ant Financial Holdings in 2016, the positions of chairman and general manager of Cathay Property Insurance have changed, but the management has changed again this year. The new chairman has been approved to serve, and the general manager who has only been in office for one year has resigned.
In April 2018, the chairman was changed from Zhao Ying to Han Xinyi; in September 2018, the general manager Long Quan resigned.
Among them, Zhao Ying was approved as chairman in April 2017. She was also the vice president of Ant Financial at that time, but her position was no longer found in the third quarter of 2017 solvency report. At present, there is no further information on Ant Financial's official website. A reporter from the Times Weekly confirmed to Ant Financial that it is currently working at Alibaba Group. Han Xinyi previously served as the director of Cathay Property Insurance and is currently the vice president of Ant Financial.
Longquan was approved as general manager in June 2017. He had previously served as general manager of China Ping An Property Insurance Beijing Branch and assistant to general manager of Lufax. But just one year later, Cathay Property Insurance's solvency report for the third quarter of 2018 has disappeared, and there is news that it has returned to Ping An.
Deputy Director of the Insurance Research Office of the Financial Research Institute of the State Council Development Research Center Zhu Junsheng pointed out to the Times Weekly reporter: "Insurance requires long-term cultivation. Once the strategy is determined, it will be effective. If executives change too hard, many strategies will end at the beginning, which is a pity. But this is a common problem in the entire insurance industry at present."
Ten years since its establishment, Cathay Property Insurance has been in a loss state. From 2009 to 2017, Cathay Property Insurance's net profit suffered losses of RMB 17 million, RMB 47 million, RMB 49 million, RMB 138 million, RMB 186 million, RMB 71 million, RMB 147 million, RMB 162 million and RMB 92 million, respectively.
During the same period, Cathay Property Insurance Insurance's insurance business revenue was RMB 23 million, RMB 70 million, RMB 163 million, RMB 268 million, RMB 525 million, RMB 549 million, RMB 645 million, RMB 651 million and RMB 1.303 billion, respectively.
Transformation of Internet insurance has achieved results
Copying Cathay Property Insurance's operating data, it was found that Cathay Property Insurance, after Ant Financial Holdings, doubled its premium income in 2017 and reduced its net profit.
In the first three quarters of 2018, Cathay Property Insurance's premium income reached 2.22 billion yuan, and its net profit was -29.8099 million yuan, but it showed a meager profit in the second and third quarters.
Cathay Property Insurance told the Times Weekly reporter: "Since the increase in capital and shares of Ant Financial in 2016, after two years of transformation and development, through the empowerment of Ant Financial's technology, Cathay Property Insurance has achieved initial results in its transformation and development. In the past two years, Cathay Property Insurance has insisted on transformation and development, strived to focus on the Internet scenario, and innovated products that benefit the public through technology + insurance."
2017 annual report shows that liability insurance replaced auto insurance for the first time and became the largest insurance type of Cathay Property Insurance. Premium income increased by more than 6 times year-on-year to 794 million yuan, accounting for 60.94%. The premium income of auto insurance is insufficient to 40% of liability insurance is only 316 million yuan, a year-on-year decrease of 1/3, accounting for only 24.28% of the total premium.
In this regard, Longquan said in an interview with the media that since Ant Financial Holdings, the company has adjusted its positioning of its auto insurance development strategy. Thanks to the high prosperity of technology insurance in recent years, the company has developed rapidly in account security insurance and other liability insurance businesses.
Data from the China Insurance Industry Association shows that in the first half of 2018, Cathay Property Insurance's Internet property insurance premium income was 1.308 billion yuan, almost close to the original insurance premium income of 1.358 billion yuan in the first half of the year, and both were Internet non-auto insurance businesses.
In November 2018, the "Supplementary Agreement on the Cooperation Agreement for Related Transaction Framework" released by Cathay Property Insurance and Ant Financial showed that as of the end of the third quarter of 2018, the cumulative amount of related transactions between the two parties was 604 million yuan. The main content is to use the Internet platforms and information technology of Ant Financial and its affiliated companies to provide insurance services to end users, such as account safety insurance, worry-free accident injury insurance for riding, accident insurance for bus scanning, Sesame Credit Hotel mortgage-free insurance, etc. Ant Financial and its affiliated companies pay premiums to the company, while Cathay Property Insurance pays information technology service fees.
Related transaction data in the first three quarters of 2018 showed that the cumulative amount of insurance business and insurance agency business was 428 million yuan, accounting for 1/5 of the original insurance premium income during this period.
At the same time, the 2017 annual report shows that business and management fees are the second largest operating expenses after compensation expenses. If you look closely at its composition, you will find that consulting fees have become the main expenditure, soaring from 45 million yuan in 2016 to 244 million yuan, ranking third in 2016 in 2016 to 16.71%, and ranked first in 2017 to 57.55% of the absolute position.
It can also be seen from the 2017 annual report of Cathay Property Insurance that guarantee insurance has become the only insurance type that has made profits among the top five types of insurance. By looking through the annual reports of other property insurance companies, you can also find out the situation where some companies guarantee insurance profits.
PwC China Financial Industry Management Consulting Partner Zhou Jin pointed out from the perspective of industry development to the Times Weekly reporter that guarantee insurance, especially credit guarantee insurance, is the business of property insurance companies as innovative business development in recent years. Its characteristics are high risks and high returns, so the contribution to profits will indeed be relatively large, but there are high risks at the same time, so some companies have exploded.
Zhu Junsheng added that there is objective demand for insurance, especially when the economy is not very prosperous, many people have difficulty in financing. The role of insurance credit enhancement can help financing, and at the same time, it also underwrites credit risks. Credit insurance is closely related to the economic situation and also poses great moral risks.
In this regard, Zhou Jin emphasized that the core of this type of business is to have business selection and risk control capabilities.
(Editor in charge: Guo Weiying)
