As a professional health insurance company, Kunlun Health failed to take advantage of the dividends such as policies and market demand, but walked on the verge of "collapse".
* |China Insurer magazine under Manager Media.
Reporter He Le.
*** Public Gallery.
According to the official website, on August 1, 2023, Kunlun Health Insurance Co., Ltd. *** hereinafter referred to as "Kunlun Health") stopped selling Kangfulai long-term care insurance and Jinfuhua long-term care insurance, of which these two products ranked among the top 5 in the original insurance premium income in 2021. In 2023, the company stopped selling or discontinuing 28 products, and from 2020 to 2023, the company stopped selling or discontinued a total of 259 products. At present, there are 36 products on sale, including critical illness insurance, accident insurance, long-term care insurance, etc.
Based on the data before Kunlun Health's suspension of disclosure of its annual report, as well as the increase in litigation in the past two years, Kunlun Health is "precarious" in terms of business performance, management, and brand credibility. Although the future market for health insurance is broad, the development path of professional health insurance companies does not seem to be easy.
The 2021 results before the annual report was stopped showing that Kunlun Health's operating income and net profit decreased year-on-year respectively. 98%, of which the income of insurance business plummeted by 4231%, the company's loss exceeded 1.2 billion yuan. In addition, the issue of Kunlun Health's illegal equity withdrawal has not been resolved so far, and the company still has risks in terms of management.
Up to now, Kunlun Health has not disclosed the solvency report for 7 consecutive quarters, what is the current status of the company's development? Will we be able to seize the dividends of health insurance and achieve a reversal in the future?
Solvency reports have not been disclosed for seven consecutive quarters
Kunlun Health is a professional health insurance company established on January 12, 2006 with the formal approval of the former China Insurance Regulatory Commission. As one of the first professional health insurance companies in China, Kunlun Health has not been developing smoothly since its establishment. Moreover, public information shows that during the period from 2011 to 2021, Kunlun Health only achieved profitability in four years: 2015, 2016, 2019 and 2020. Interestingly, after the disclosure of the 2021 financial report data, as of now, Kunlun Health has not disclosed the solvency report for 7 consecutive quarters.
The latest disclosed 2021 financial report shows that Kunlun Health achieved an operating income of 639.2 billion yuan, net profit of -124.4 billion yuan, both down year-on-year. 98% (Figure 1). Among them, in 2021, Kunlun's health insurance business revenue will be 485.5 billion yuan, up from 84.5 billion yuan in the same period of the previous year1.5 billion yuan plummeted by 4231%。In terms of insurance types, Kunlun Health mainly operates health insurance and accident insurance, and the two will achieve revenue of 48 in 20213.3 billion yuan, 02.2 billion yuan. In health insurance, the revenue from long-term health insurance business was 480.8 billion yuan, accounting for 99 percent of insurance business income03%, while the income of this insurance type decreased by 4232%。
Regarding the sharp decline in business income and net profit loss in 2021, Kunlun Health said in an interview with other ** that the company followed the guidance of the concept of "insurance surname insurance" proposed by the regulator, and launched strategic adjustment in 2021, that is, around the business policy of "moderate scale, transformation of futures delivery, and value first", it will significantly reduce the business plan of single delivery and focus on the development of futures delivery business. According to the company, the annual annual premium payment of new policies and the value of new business increased year-on-year in 2020, and the value transformation has achieved substantial results. However, in 2021, affected by factors such as the adjustment of domestic industrial policies, the overall investment income did not meet expectations.
It can be seen that although Kunlun Health has made efforts to transform, the effect is not obvious.
From 2015 to 2020, Kunlun Health's operating income was 92.9 billion yuan, 154 billion yuan, 183.5 billion yuan, 175.9 billion yuan, 462.6 billion yuan, 1096.8 billion yuan, a year-on-year increase. 08%；The net profit was 15.2 billion yuan, 00.9 billion yuan, -82.6 billion yuan, -77 billion yuan, 13.4 billion yuan, 29.3 billion yuan, a year-on-year increase.
Among them, the income of insurance business in the same period was 13.3 billion yuan, 20.9 billion yuan, 160.5 billion yuan, 190 billion yuan, 338 billion yuan, 841.5 billion yuan (Chart 2), the insurance business ushered in rapid growth in 2017, and since then it has shown a steady growth trend, and in 2021, it will decline sharply. The reason for the fluctuation of Kunlun Health's net profit from 2015 to 2021 is mainly due to the fluctuation of the company's investment. From 2015 to 2021, Kunlun Health's investment income was 65 billion yuan, 112.7 billion yuan, 20.6 billion yuan, -11.1 billion yuan, 115.9 billion yuan, 228 billion yuan, 15$4.5 billion (Chart 3). It can be seen that from 2017 to 2018, Kunlun Health's investment income declined sharply, and it lost 11.1 billion yuan. In 2021, Kunlun Health's insurance business income will not only be cut in half, but the scale of surrender will also rise sharply, from 15.9 billion yuan, an increase of 23459% to 5$3.2 billion; Investment income also shrank by 32 percent compared to 202024%。
In addition to the fluctuations in performance, Kunlun Health's solvency adequacy ratio is also not optimistic.
In terms of solvency, Kunlun Health's solvency report was last disclosed to the fourth quarter of 2021, and it has not been disclosed for 7 consecutive quarters from 2022 to 2023, but it has not issued an announcement to explain.
According to the 2021 solvency report, since Kunlun Health's actual capital and core capital are the same, the company's core solvency adequacy ratio and comprehensive solvency adequacy ratio are the same, both from the first quarter to the fourth quarter. 96%, showing a sequential downward trend, and the core solvency adequacy ratio and comprehensive solvency adequacy ratio in the fourth quarter of 2021 were higher than 159 in the fourth quarter of 202088% down 3592 percentage points.
Moreover, since the third quarter of 2020, Kunlun Health's comprehensive risk rating has been B for six consecutive quarters after being downgraded from Class A to Class B in the second quarter. Although the comprehensive risk rating of B is still up to standard, the company's development prospects do not seem to be optimistic based on Kunlun Health's fluctuating net profit and the sharp decline in insurance business in 2021, the company's serious losses, and the failure to disclose solvency reports for several quarters.
In addition, on January 20, 2023, the Insurance Association of China issued the "Announcement on the Results of the 2021 Business Evaluation of Insurance Company Legal Entities", which includes a total of 160 property and life insurance companies.
Among them, Kunlun Health Insurance was rated as Class C. It is understood that the evaluation of the Insurance Association of China includes three aspects: speed and scale, efficiency and quality, and social contribution. In the evaluation results, Class C companies refer to companies that have problems in terms of speed, scale, efficiency, quality, and social contribution.
According to the enterprise investigation, in the past two years, from 2022 to 2023, Kunlun Health, as the defendant, has been involved in 13 and 17 cases of life insurance contract disputes and health insurance contract disputes, respectively, compared with single digits in previous years.
Insurance + investment is the two legs of insurance companies, if one of them changes, it will affect the whole body. From the 2021 annual report, it can be seen that Kunlun's health insurance business is operating "poorly", and the investment side is also affected by the volatility of the capital market. After 2021, Kunlun Health has not disclosed the company's solvency report and annual report for seven consecutive quarters.
The issue of the dismissal of illegal shareholders is still pending
In addition to the company's operational problems, Kunlun Health's internal management is also at risk.
Dating back to the first half of 2017, Kunlun Health's equity issue was twice subject to regulatory inquiries, and at the end of that year, the former China Insurance Regulatory Commission issued the "Decision on Revocation of Administrative License", requiring Kunlun Health to clear the illegal equity and introduce compliant shareholders.
After investigation, Shenzhen Hongchangyu Enterprise Management Consulting Co., Ltd. and other 7 companies provided false financial reports in the process of investing in Kunlun Health and applying for relevant administrative licenses, and made false statements such as funds ** for their own funds and no related relationship between shareholders, and there were acts of preparing and providing false materials. To this end, the original China Insurance Regulatory Commission revoked Kunlun Health's permission to change shareholders and change registered capital, and cleared the equity obtained by shareholders in violation of regulations. At the same time, the former China Insurance Regulatory Commission ordered Kunlun Health to introduce compliant shareholders within 3 months, and not to return the capital to the violating shareholders before the completion of the capital introduction, so as to ensure that the company's solvency is sufficient.
However, the issue of the removal of illegal shareholders of Kunlun Health has been unresolved. Until April 2019, Kunlun Health decided to introduce Jincheng Fusheng Iron and Steel Construction and Taizhou Sanfu Shipbuilding Engineering as new shareholders, but the process was not smooth, and on November 17, 2020, China Construction announced the termination of 52.5 billion yuan to subscribe to Kunlun Health 1495% equity. The other two companies have yet to officially become their new shareholders.
On July 4, 2020, the former China Banking and Insurance Regulatory Commission (CBIRC) made public for the first time the list of 38 shareholders of banking and insurance institutions with major violations of laws and regulations, of which 5 shareholders of Kunlun Health were on the list.
Specifically, according to the solvency report for the first quarter of 2020, these five shareholders are Fuxin Group, the largest shareholder of Kunlun Health, accounting for 19% of the shares; The fourth largest shareholder, Shenzhen Hongchangyu Enterprise Management Consulting, holds 103%；The fifth largest shareholder, Shenzhen Zhengyuan Technology, holds 768%；The sixth largest shareholder, Shenzhen Taiteng Materials, holds 74%；The eighth largest shareholder, Shenzhen Zhenglaida Industrial Co., Ltd., holds 55%。The total shareholding of the five shareholders is 4988%。
However, according to the solvency report for the fourth quarter of 2021, these five shareholders have not been liquidated, and their shareholding ratio has not changed. To date, the introduction of new compliant shareholders by Kunlun Health has not yet been settled. According to the enterprise investigation, there are currently 14 shareholders of Kunlun Health, including the above 5 illegal shareholders.
Equity is the foundation of corporate governance, Kunlun Health's illegal equity has not been cleared so far, will it affect the company's future decision-making and operation? Hao Chen, an associate professor at the China Institute of Corporate Governance at Nankai University, said that Kunlun Health has a high proportion of illegal equity, so it takes a long time to dispose of its equity. Under the premise that there is no change in the registered capital, the adjustment of the shareholders of the insurance company will generally not have a direct impact on its operation, but it will have a certain impact on corporate governance, which is mainly reflected in the stability of the senior management and the board of directors in the process of equity disposal, as well as the changes in directors and senior management after the equity disposal, and the adjustment of the board of directors structure, and the adjustment in the context of no actual controller or controlling shareholder, which further amplifies the impact.
The development of health insurance has a long way to go
Health insurance refers to the insurance that the insurance company pays the insurance money to the insured due to health reasons or the occurrence of medical behavior, and is classified according to the content of the underwriting, and the health insurance mainly includes medical insurance, illness insurance, loss of disability income insurance, nursing care insurance and medical accident insurance.
In recent years, with the improvement of national health awareness and the impact of an aging population, the demand for health insurance has shown an upward trend. Moreover, the State Administration of Financial Supervision and Administration positions health insurance as an important part of the national multi-level medical security system, and includes medical accident insurance to promote the establishment and improvement of a multi-level medical security system and meet the diverse health security needs of the people.
As early as 2002, in order to accelerate the development of China's health insurance and establish a health insurance development model adapted to China's national conditions, the former China Insurance Regulatory Commission issued the "Guiding Opinions on Accelerating the Development of Health Insurance". Up to now, there are 7 professional health insurance companies in China, namely Ping An Health, PICC Health, CPIC Health, Harmony Health, Kunlun Health, Ruihua Health, and Fosun United Health. The industry calls them the "Seven Sons of Professional Health Insurance".
In order to promote the sharing of information between basic medical insurance and commercial health insurance and promote the development of health insurance, in June 2023, the State Administration of Financial Supervision and the National Health Insurance Administration issued the Agreement on Promoting Information Sharing between the Commercial Health Insurance Information Platform and the National Medical Security Information Platform (Draft for Comments), which clearly proposes to build an information sharing mechanism with standardized processes, perfect systems and advanced technology during the "14th Five-Year Plan" period, so that the value of medical insurance data elements is expected to be released at an accelerated pace and empower the development of health insurance.
With the increasing demand of people and the support of national policies, commercial health insurance has broad prospects in the future, and the blue ocean market effect is obvious. However, the current development of health insurance is not as expected. According to the data, as of 2021, the proportion of health insurance payouts to personal health expenditure was 190%, accounting for only 5 percent of total health expenditure2%, there is still a huge room for improvement in the role of commercial health insurance in medical financing, considering that health insurance claims are mostly paid for critical illness (for the purpose of income compensation, rather than direct reimbursement of medical expenses), so in fact, the contribution of commercial health insurance claims to health expenditure is lower.
According to the "Opinions on Promoting the Development of Commercial Insurance in the Field of Social Services" jointly issued by 13 departments including the former China Banking and Insurance Regulatory Commission in 2020, it is clearly stated that "by 2025, the scale of the commercial health insurance market will exceed 2 trillion yuan", but the scale of health insurance in 2022 will only be 865.3 billion yuan.
The reasons for the slower than expected development of health insurance are mainly the lack of medical data of insurance companies, insufficient product innovation and serious homogeneous competition. At present, there are many enterprises in the layout of health insurance, with large comprehensive insurance companies such as Ping An of China and Chinese Life as the first echelon, and they play a leading role in the market with the resources accumulated over the years. However, professional health insurance companies, such as Kunlun Health, have not yet formed a differentiation from comprehensive insurance companies, and their professional advantages are not obvious, and they are facing greater competition and survival pressure.
As a professional health insurance company, Kunlun Health does not have advantages in its product form. According to the 2021 annual report, the top 5 insurance products of Kunlun Health's original insurance premium income are Kangfulai Long-term Care Insurance, Jinfuhua Long-term Care Insurance, Health Insurance (Multiple Version) Critical Illness Insurance, and Health Insurance Critical Illness Insurance (2.).0 version), health insurance inclusive multi-fold version of critical illness insurance, the premium of these five products accounts for 83% of the company's total premium. The first two are long-term care insurance, and the last three are critical illness insurance. However, the first two products have been discontinued in 2023.
As the aging population accelerates, health insurance is becoming more and more popular. Under the influence of factors such as the deepening of the aging population and the inflation of medical costs, China's health expenses continue to be **. The participation of commercial health insurance is expected to cooperate with medical insurance, alleviate the pressure of medical insurance** and individual out-of-pocket payment, and solve the medical security gap of residents. Therefore, national policies continue to support the development of insurance companies to expand the protection role of health insurance for residents.
However, it will take time to verify whether Kunlun Health, which is mainly engaged in health insurance, can seize the dividends of health insurance and achieve a reversal.