Ping an of China King liabilities margins or key

"Contributing authors Trustno1" three home insurance Enterprise 2010 annual report has been finished, many China life (601,628. SH,2628.HK, hereinafter referred to as "China") shareholders are consider sth difficult: China now as if the value of chicken, tasteless, be unwilling to cast away. 2010 ping an of China (601318.SH,2318.HK, hereinafter referred to as "peace") indicators are far beyond China. Key indicators ROE (net profit/shareholders ' equity), a safe 15.3%, Kunihisa as 15.8%. Size of the total assets of ping an almost Yu Guoshou, from the perspective of assets, both seem to have is equal, that is China growth is much slower than in the past 2-3 years of peace. From that point of view, Kunihisa fundamentals did things go wrong. Recommended reading insurance weekly: variable annuity pilot started five first elected to the insurance enterprises in violation of Beijing-Shanghai promotions fined 500,000 insurance circles "Wang yawei" surfaced exaggerating the gains did not mention the risk of banking and insurance disputes should continuously give families "pillar" feet on joint insurance regardless of non-indemnity insurance is zehui Shi Qiming disc to create the superior lectures of immortal, but this conclusion appears to be too hasty. Why peace can maintain this fast growth? Backwardness of China where the problem? ROE is many investors prefer to use metric, but it is of obvious defects, does not apply to highly leveraged financial firms. Only this indicator represents the capacity of an enterprise can create value for our shareholders, and not reflect production capacity. ROA (net profit/total assets) can objectively reflect the financial enterprises of production capacity. However, according to different ways of financial operations of the enterprise, it also has some restrictions on the applicability of, especially on Yu Guoshou and peace the two enterprises, measured by ROA number of questions. Kunihisa's problem is that the company would invest assets divided into two pools of assets, liabilities corresponds to the assets in the pool, as a result of delivery payment limit in the policy annually, Kunihisa short-term speculation in the choice of method. Shareholders ' equity assets under investment quality stock to form a pool, Kunihisa on this asset pool strategy is value investing principles and long term, many stock held for more than 5 years, not only failed to sell, but also constantly gallon. Therefore the profit/loss in equity will not be reflected in the net profit. Ping an is different from China. Green select shareholders to acquired companies, or as established for the other branch and subsidiary of initial capital. Therefore, peace has a most of the assets and profits from the joint venture. Operation of the joint venture does not reflect the safe operation of their businesses. After all, peace is still relying on the main industry in profit, stripped assets/profits in this area is necessary. Based on several on reason, comparison of ping an of China and more precise method is to use a margin of indebtedness (net profit/liabilities). Liability margins of secret, insurance company net profit was not real, hard as a short-term evaluation standards. So you can use this indicator to 5 years in the history changes to inspection. 5 years is a relatively long period of time, some short-term profits in the policy will release complete within this time period, long insurance profits have had the dramatic fluctuation of 1-2 year period at the beginning, to a stable release stage. Comparison between China and peace 2006-2010 debt margin changes can be found, data is through the partial peace tables of profit split to the different business, split most of the Consortium after profits and liabilities into the other, but it's worth noting is, 2010 safe acquisition of deep development (000001. SZ), profits of $ 1.145 billion in contributions to the development of deep values need to be removed. Only look at the 2010 data, excluding deep contributions to the development of, ping an ROE was dropped, which sharp drop in the insurance liabilities of the business profit margins. From a historical point of view, in addition to 2007, in that each element of the Green Group in the 5-year liabilities created by the basic profit at 0.017; margins of ping an life insurance liabilities is also not high, 0.018. Peace index fluctuations is significant. Put aside huge due to investment in Fortis made in 2008, the difference between the highest and lowest values 0.007. China not considering per cent in 2005, margins of indebtedness is 0.023 per cent in other years. Even in 2008, still able to maintain very high margins of indebtedness. Two companies leverage (liabilities/shareholders ' equity) is different. Maintaining peace for three years at about 10 times times, two years remain at 7 times. Only 2007 was 4 times times leverage, because peace list, raise capital for acquisitions, retained in shareholders ' equity in the making. If excluding finance income of 38.222 billion yuan, 7 times times leveraged. Kunihisa's leverage, only two years is to maintain in the vicinity of 5.9 times times, other years are 5 times times. Advantages and pitfalls of peace peace very low business profitability, this is its first flaw. 0.018 the highest values or even significantly lower than the Turbo in China (601,601, unit) (601,601. SH,2601.HK, hereinafter referred to as "Turbo") of 0.024. Ping an indebtedness so low spot high profit margins and it's foreign claims payment policies obviously do not match. Pay policy do indeed much in the period of peace, but its profit may not be high. This shows that low investment capacity of peace, making it carry effects far below China and Turbo, thereby offsetting the pay policy of the high fee difference effect. Due to the low business profitability, safely to achieve annual 15% ROE, only expanding leverage. However, the high capital cost of the insurance industry, their business profits are low, if you overcharge to expand liability risk premiums are very large risks. Therefore peace aimed at the Bank. Now long-term negative interest rate policy of China made the Bank's cost of capital is relatively much less insurance, one-year deposit only 2% per cent, well below the cost of life insurance 4%-cent. As the Chinese 2%-cent difference of usury, after deducting the cost of Bank profits generally per Yuan liabilities profit margins can be maintained in the vicinity of 0.015. Through the casualty compensation, securities business, can be maintained at around 0.017, after 9 times times more leverage, ROE can be maintained at 15%. Therefore, peace around acquisitions, integrated financial platform strategy, andIs non-aggressive attitude on its strategy, not to cross-sell promotion sales capacity, for now just to make up for insufficient profits to their main business. This practice in certain cases do have advantages. But the advantages of peace exists only in theory. Since the beginning of 2010 of the interest rate cycle, excluding deep contributions to the development of, ping an bank liabilities margins only 0.007, slightly better than the cent in 2009, as a result of this is the current monetary policy in China. Due to higher reserves, banks must be a large number of deposit-taking to maintenance of loan balances to create profits, ping an Bank reserves is 2010 Yuan, an increase of 37%; deposit was 182.118 billion yuan, an increase of 22%. Banks in order to maintain a loan balance must express deposit-taking, but high speed deposit-taking is a zero-profit at the expense of a massive increase of indebtedness. Of profit so this part of the gap where to fill it? only from insurance liabilities to fill, that is 34.1178 billion zero-profit debt must be filled by the corresponding insurance liability, property assessed $ 13.1 billion, life sharing $ 20.9 billion. According to the macro-economic and interest rate movements in 2009, 2010, insurance should be mass shrinkage to avoid interest rate risk. 2010 year of peace under the liabilities of the life insurance industry profit margins from the cent in 2009 down to 0.011 per cent up to 63%; Kunihisa 0.039 to 0.028 in the same period, fell by only 39%, this is the result of China intends to control the size, and peace this sharp decline is due to the scale. Safe in 2009-2010 big premium surface scenery, is actually in the business for banks to fill holes, or company-wide ROE will be collapsed. Current Central Bank monetary policy makes Bank of peace operations and liabilities of the insurance industry profit margins are a massive drop, seesaw hedging effect was gone, only diluted each other. Cross effect of the number of comprehensive financial? This is a very large question mark. Cross effect can be a positive effect can also be negative effects. Comprehensive financial success for the future development of the platform of peace does not lie with banks, property and security of these new business development, and is the main life insurance liabilities of the business profit margin improved significantly. Ping an intention is the largest acquisition of deep development is at a low cost expansion of liabilities, domestic banks are already have a "in-laws", only the deep development of shareholder Newbridge was dominated by speculative and non-commercial. According to the author of deep indebtedness for the development of profit margins, 2010 should only 0.005, even after interest rate hike this year is estimated to peace Bank. To expect the profitability of the two banks to the China Merchants Bank (600,036, unit) (600,036. SH,3968.HK) and Industrial Bank (601166.SH), and its degree of difficulty. Relative to the China shareholders, green shareholders without a value-added growth of shareholders ' rights, a leverage risk, this is the second flaw of peace. Although business profit growth of peace more quickly, but this is a green advantage of expanding liabilities shareholders ' rights, that is to say peace has also the ability to do their best to take advantage of shareholders ' equity increased profits, profit growth as a whole reflect the overall profitability of peace, and thus reflected in the share price now. China a small lever alone can reach peace the same profit growth, for the remaining shareholders by investing in stocks for value added. On this part of the increase is not reflected in the profit, naturally it is difficult to reflect in the share price in China. Therefore there is a big mistake, this is green shareholders cannot get. Different patterns of risk assets for different China pool is separated into two pools of assets. Insurance asset pool are fried in response to the claim and in the short-short, the group account that shareholders ' interests is the real value of investments, their income significantly higher insurance accounts. Miao Jianmin said: "our bond allocation of the highest in the industry may be, in accordance with existing regulations, our individual subscription is the maximum of its issuing of credit debt 10%. Because our funds are large, such as a $ 3 billion of investment credit debt ceiling but the scale of $ 300 million, $ 300 million for small company enough, but for us, more than 1 trillion worth of assets, can only buy $ 300 million Yuan. So, on the allocation of credit debts we always go, is a closely-behind us than one or two of asset management company, credit debt ratio is also a difference of nearly half. "This is in fact reveal the situation of China life insurance fundamentals. Kunihisa is investment, is the basic capabilities of business sales also has not changed, affected by the constraints of national policy. Kunihisa now equivalent to dance with chains, and jump much better than green. If the insurance policy gradually relaxed, Kunihisa formed a large positive and looking back at peace, where are the opportunities for it? For now, Kunihisa's business is totally barges on the time period according to the asset allocation to hedge interest rate risk, not the other way around. Therefore, completely different on management pattern of Kunihisa and peace, growth not only different, but it has to face different risks. Kunihisa equity investment stock, its liquidity far better than acquisitions, if investment mistakes, is selling up to or reduction, China does not need distractions to deal with the company's business. Peace be taken, after the acquisition of company's development strategy, the need to maintain the acquired company's business to grow, in the event of loss, to sell the business can be very expensive.