Short term monetary tightening on the insurance industry performance boost

If said banking, and securities industry of operating financial status height depends on scale, so effect insurance industry profit ability of factors should more complex: while, unless appears extreme of situation, otherwise scale of expanded on insurance company assets liabilities structure of stability (to against risk of ability) has must positive role; but on the, scale expanded also means with can investment assets of increased, corresponding to, investment combination management of difficulty improve, to may on investment performance formation drag, in domestic speculation funds active, and and can investment assets relative insufficient of environment Xia especially so. Recommended reading insurance weekly: increased warehouse investment over 30,000,000,004 months insurance funded deposits moved near billions of cast even insurance May then case Waterloo income differentiation country life cast even insurance success escape top 5 name foreign executives joined China peace Qian May Beijing insurance intermediary was penalty million history with shares mass insurance holding 20% Qiming: shocks city in the how mining Daniel unit given insurance industry of financial accounting guidelines and General Enterprise, and other financial enterprise has larger differences, while CSI 300 index insurance industry components unit number less, therefore, here attempts to by analysis single company of assets liabilities project, to assessment currency policy steering of potential effect. Business life insurance, property insurance, or other types of insurance, insurance company broadly similar business model: access to capital through the sale of insurance products, and investments in various types of assets. If future income derived from investments of more than product during the period of liabilities and expected responsibilities, the excess part of the operating profit for the company. Of course, different kinds of insurance has its own characteristics, such as life insurance forms tend to have a longer duration of liabilities and low liquidity requirements for the current period for the investment portfolio and property insurance liabilities typically have a shorter duration for the formation of, and because of the pay scale of time and uncertainty, its portfolio of requirements (partial) have a higher degree of liquidity of assets. Domestic insurance companies portfolio how to build? A case study of a company, data display, available for sale financial assets, investments held to maturity and term deposits are a company of one of the three major asset classes. Annual report 2008 data indicate that, due to market conditions vary in different periods, various asset allocation during a certain degree of change but on the whole, three per cent of the total assets of the company during roughly the proportion of 40%, 20%, respectively. A company specific configuration details of the three asset classes, it indicates that "interest rate environment to benefit insurance stocks" common notions worthy of criticism. The company of annual report among on interest rate adjustment on company effect of description following: on December 31, 2010, dang all other variable keep does not variable and does not consider income tax effect, if market interest rate improve or reduce 50 a basis points, because floating interest rate of cash and the cash equivalents, and regularly deposits, and save out capital margin and the claims type investment increased or reduced of interest income and transactions sexual financial assets due to fair value changes produced of losses or income, and consider on the group meet policy dividend changes changes of effect, the group this year of tax Qian profit will increased or reduced RMB 1.066 billion yuan (on December 31, 2009: year of tax Qian profit will increased or reduced RMB 823 million yuan); in consider has on meet policy dividend changes changes effect Hou, capital public product will due to can for sold financial assets fair value of changes and reduced or increased RMB 8.771 billion yuan (on December 31, 2009: RMB 7.583 billion yuan). Thus, while probably because most for sale policy (liabilities) interest cost of fixed and floating interest rate of the proportion of investment assets relatively large, floating interest rate can make a modest upgrade our short-term performance. But in contrast, its negative impact on the fair value of available for sale financial assets are more substantial. From related data see,-a company of claims type investment (including all of holds to due investment, and can for sold financial assets among of claims investment part) of total up to 600 billion yuan, accounted for the company all can investment assets of half around; in addition, about 35% of can investment assets to regularly deposits form holds, and which period in three years above of medium-and long-term deposits occupy larger proportion. Higher interest rates will inevitably lead to required rate of return (discount rate) increased, allowing debt investments as well as fixed rate term deposit value of damage. Although the changes in the fair value of available for sale financial assets (can lead to changes in net assets) does not affect the net profit for the current period, but unless the future monetary policy steering and the lowering of interest rates again, when these financial assets for sale at present, its current fair value declined by net profit reflected in the corresponding period in the future. In other words, the interest rate environment may allow short-term performance improves in the insurance industry, but its effect on the State of industry in the long-term operation, but may be neutral or even negative. We previously mentioned "different kinds of insurance has its own characteristics". We choose the business more balanced b company, observing their 2009 and 2010 the major categories of asset allocation detailed conditions. B main asset allocation status of the company, and earlier in a company-related data for comparison, you can see that the significant difference between the two: b company portfolio with remaining term to maturity of shorter, and is it available for sale financial assets and greater overall risk of investments held to maturity. Specifically, company b term deposits, short-term deposits than in under 3 years more than half, far higher than the ratio of 30% per cent of a company and, in available for sale financial assets and investments held to maturity securities investment section, more risky corporate debt are also nearly half, well above the company a ratio of about 20%. The main reason for these differences, is that different types of difference. Different from general investors, insurance companies ' investment portfolios in addition to pursuing yields, more important goal is to match the structure of assets and liabilities. Because and paid period more long, and paid amount relative determine of life insurance compared, property insurance formation of liabilities usually has more short of long period, and lost pay of time and scale has larger of uncertainty; therefore, operating which of insurance company need holds liquidity more strong of assets, while more to investment Yu income higher of varieties, to should accident event (as natural disasters,) by brings of beyond expected of pay demand.In currency policy steering of background Xia, above assets structure of differences may brings industry different company performance performance (to shares) of a species differences: regardless of interest rates environment on insurance industry "Lee more" or "bad", because b company (and c company insurance Division) assets overall has more short of long period, its assets configuration of flexibility more strong; therefore, its by by effect and-a company compared smaller. In other words, the other conditions under the same conditions, for some time ago a combination of performance and price fluctuations may be slightly smaller than the latter. To sum up, in the case of listed companies in the insurance industry, tightening of monetary policy will make it the current value of the assets and liabilities, fell. Although liability costs generally locked, its short-term results can be somewhat boosted, but in the medium and long term, it available for sale financial assets fair value will increasingly reflect the adverse effects of the decline. At the same time, tightening of monetary policy context, the added capital cost of the insurance industry will be significantly improved, so that its operating financial situation depends more on the future of the medium and long term return on investment. (GF futures Jichao Liu edited Liang Wei)