Summary of Key Points
Beida Founder Life Insurance barely met the solvency requirements in the second quarter, but it is predicted that its solvency will fall below the regulatory threshold in the next quarter. The company has experienced a decline in premiums, increased losses, and a rising surrender rate. Although the management team comes from the experienced Ping An group, their ability to turn around the situation is uncertain due to their short tenure, the company's historical burdens, and the complex shareholder structure. The coming quarters will be critical for the company's survival.
I. Red Lights on Solvency: Possible Drop Below Regulatory Threshold in the Next Quarter
What is solvency? Simply put, it refers to whether an insurance company has enough funds to pay its customers. The regulatory thresholds are a comprehensive solvency of ≥100% and a core solvency of ≥50%.
Beida Founder Life Insurance's figures for the second quarter show a comprehensive solvency of 109.75% (just above the threshold) and a core solvency of 54.26% (close to the 50% mark). However, the company predicts that its solvency will drop to 84.6% in the next quarter (below the 100% threshold), with the core solvency also approaching 50%.
Why is there such a rapid decline? This is mainly due to three major risks that consume capital:
- Market Risk: Fluctuations in interest rates (such as lower long-term deposit rates) and stock market volatility, which account for the majority of market risks;
- Surrender Risk: Many customers are surrendering their policies, requiring the company to pay out cash;
- Credit Risk: Potential defaults on invested bonds.
Although the company's capital increased by 400 million this quarter, this is not enough to cover these risks.
II. Alarming Operating Conditions: Declining Premiums, High Losses, and Rising Surrender Rates
1. Negative Premium Growth, Insufficient Profitability
Premiums are the lifeblood of an insurance company. Premiums decreased by 5.09% year-on-year in the second quarter. Fewer new policies means less income, while payouts and surrender costs continue to drain cash.
2. Severe Losses, Nearly Expiring Net Assets
The net asset return rate for the second quarter was -273.61%, indicating that nearly three times the company's net assets were lost in one quarter (although the base is small, the absolute loss is significant). Where did the money go? Investment returns were poor, with an investment yield of only 0.95% in the second quarter, half of what it was in the previous quarter. Meanwhile, liability costs (such as promised returns to customers) remained high, resulting in a “interest rate spread loss” — the company spent more on payouts than it earned.
3. Rising Surrender Rates: Issues with Products or Sales
The surrender rate increased from 0.98% to 1.61% in the second quarter. Particularly concerning is the “Health Insurance (Zhenxiang Edition)” product, which had a surrender rate of 59.58% for that quarter and an annual cumulative rate of 155.72% — more than half of the buyers of this product have surrendered it. Although the amount involved is not large, this suggests that there may be issues with the product design or sales approach that led to customer dissatisfaction.
III. The Challenges Faced by the Ping An-Hired Management Team
The core management of Beida Founder Life Insurance comes mostly from Ping An: General Manager Han Guang (former vice president of Ping An Life Insurance), Executive Vice President Wang Hailong (a long-time employee of Ping An), and Chief Actuary Wei Chunping (with a background in actuarial work at Ping An). Despite their experience, they are struggling to improve the company's performance for several reasons:
1. Short Tenure: Han Guang only took office in August 2024, and the other executives have also been in position for a short time. Life insurance companies typically need 1-2 years to transform, and this is just the beginning.
2. Heavy Historical Burdens: The company has lost over 3 billion yuan in the past four years, with ongoing issues such as interest rate spread losses and mis-matched assets (e.g., long-term policies paired with short-term investments) that cannot be resolved immediately by a new management team.
3. Difficulties in Coordinating Shareholders: The company has three shareholders (New Founder Holdings 51%, Ming An Zhitian 29.24%, Haier Jinying 19.76%) with different backgrounds and interests (some seeking quick profits, others long-term investment), limiting the management's ability to make decisions.
IV. The Vicious Cycle: What Happens If the Threshold is Broken?
If the solvency does drop to 84.6% in the next quarter, regulatory authorities will take action:
- First, they will issue a warning;
- Then, they may restrict business activities (e.g., prohibit new insurance sales);
- In severe cases, they could even stop new business entirely.
With new business halted, income will decrease further, cash flow will become even tighter, and the company's solvency will decline even more — creating a vicious cycle. Time is running out for the Ping An-led management team; they must quickly address the issues or face stricter regulatory measures.
Conclusion
Beida Founder Life Insurance is in a precarious situation: its solvency is at risk, and its operations are not improving. Despite having experienced management, the company faces numerous challenges. The coming quarters will be critical. If it cannot turn things around, the consequences could be severe. Ordinary consumers should pay more attention to the solvency of insurance companies when purchasing policies to avoid potential pitfalls.
(Produced by “Zhengjing Society”)