Chen Dongsheng, Chairman and CEO of Taikang Life Insurance Co., Ltd.
Topic: China Development Forum 2009 Annual Meeting
Chen Dongsheng, Chairman and CEO of Taikang Life Insurance Co., Ltd. spoke.
Ladies and gentlemen: Good afternoon. I am very glad to have the opportunity to share with you the experience of enterprises’ countermeasures under the financial crisis. I mainly combine our life insurance industry and my own enterprise to talk about three points.
First, the financial crisis challenges us. Second, what opportunities and opportunities have the financial crisis brought to us? Third, seize the opportunity and direction.
After the subprime mortgage crisis in the United States, especially the spread risk brought by derivatives, many people were very worried. When you saw me, did you buy it? I said that Lehman and Merrill Lynch came to see us, but we didn’t buy it. He said you were really smart, and I said you weren’t smart. It wasn’t because I had a foresight and thought these products were risky that I didn’t buy them. In fact, we didn’t buy them because we didn’t understand. If you don’t understand and don’t buy it, you dodged a bullet.
Indeed, the financial crisis has had a great impact on China. Life insurance is also a completely domestic financial and insurance service industry, so it has little to do with the international community. However, after China’s economy is affected, especially stocks and securities, the whole financial investment market has a great impact. Let me say a simple figure. In 2007, the investment income of the entire insurance industry was about 270 billion. By 2008, the entire investment income had shrunk by nearly 75%. That is to say, only a quarter of the proceeds. Around 2007, all insurance companies were very happy and made a lot of money. But in 2008, only a quarter of about 100 insurance companies made money. And in a quarter of the companies, only a few five or six companies made more money. Most of them are just a little profit. What does this phenomenon mean? China’s life insurance industry, if the financial crisis continues and the stock and bond markets are depressed, the income of China’s life insurance industry and China’s insurance industry will be greatly challenged. The direct result is of course that the solvency of the insurance industry and our capital strength will be greatly challenged. Many companies will face the pressure of increasing capital. This is our biggest challenge.
This round of bull market in China stock market has made Chinese feel the opportunity to make a fortune. So it also educated the whole people. About 130 million stock accounts are opened, that is, one in every 10 people is speculating in stocks, so the era of investment and financial management has come for Chinese. Therefore, the insurance industry also sold a lot of investment products. So when many ordinary people lose money, they just look for the government. If the government goes to the insurance company again, even if you should not pay for it, you should return the money to him. In fact, this round of people lost money in buying insurance, which caused great disputes in the sales process of insurance. This is also a huge challenge to our insurance industry. I think these two challenges are the biggest challenges to the insurance industry in this financial crisis.
At the same time, in the process of challenges and difficulties, we also see opportunities and opportunities. I think the biggest opportunity is that many experts have also made speeches this morning, saying that when the financial crisis comes, the government will probably take these measures: the first measure is to cut interest rates. The second measure is to inject capital. The third measure is to close the market. All of them cut interest rates, both good and bad. When the long-term bank deposit and loan interest rates were high in the past, it was bad for insurance and bad for insurance sales. At present, the interest rate of banks has dropped quite low, which has brought great benefits to the sales of insurance. Especially in times of difficulty and crisis, people’s desire to buy insurance is increasing. In fact, in January and February this year, the insurance industry in China was still growing. Therefore, the financial crisis is beneficial to the sales of insurance.
Second, during the financial crisis, the cost dropped greatly. One is labor cost, and the other is operating cost. Last week or so, our asset management company wanted to recruit five employees, and we limited it to Peking University, Tsinghua, Fudan University and Jiaotong University, and 2,000 people came to bid for these five positions. I was very happy to be the chairman, and I was able to recruit talents from all over the world during the financial crisis. In fact, it is of great benefit for enterprises to take this opportunity to adjust your talent structure and improve the quality of human resources in the financial crisis.
In addition, as we all know, 20 million migrant workers have returned to their hometowns, which is a good thing for the insurance industry. Last year, Taikang Life Insurance was the same as Chairman Wang, and we also vigorously developed county insurance. Last year, 150,000 insurance agents were recruited in counties and townships, and my premium doubled last year. So the 150,000 rural sales force. I went to many towns and villages. In the past, as we all know, when I went to the villages, the agricultural machinery stations and veterinary stations were basically my direct insurance stations. Now the society has changed. When I went there, I first saw "China Mobile", the store where Chairman Wang sold mobile phones and telecommunications services, and the insurance store of "Taikang Life Insurance". So now, insurance and communication have become important promoters of new rural construction. Suddenly, I found that the new image of the new farmer came out.
What is the image of a new farmer in China’s new socialist countryside? Riding a motorcycle, using a mobile phone and holding Taikang life insurance policy, this is the new farmer. You should see the opportunities brought to you by the crisis. So I talk about a lot of talent and insurance development opportunities, and at the same time I will see the cost. So I called our CFO and held a meeting every day. Where the rent is due next month, you cut me 20% of the rent. In fact, the rent has also dropped.
Another story is that we have the practice of rewarding sales champions every year. Last year, I took 420 people to Sydney and spent 13 million yuan. Next month, I will take 500 people to Hawaii in the United States. Hawaii is farther than Sydney, but my cost is 4 million less. Not only did it cost 4 million, but two five-star hotels in Hawaii knew that Taikang Life Insurance was going there, and they found Beijing and said that they would give us this business and go to our hotel. The hotel said that they would come to our hotel instead of that hotel. Therefore, the decline in costs is good for business operations. This is the opportunity I want to talk about.
What is the future development? Everyone is talking about what opportunities the global financial crisis has for China. As a large developing country, China’s economy is still in a high-speed growth. There are three kinds of generalizations: one is that China has long been based on an export-oriented economy, and it must move towards an economic model with a balance between export-oriented and domestic demand, with domestic demand as the main factor. This is a transformation. The second transformation is our long-term economic model based on manufacturing economy, which should be balanced between manufacturing and service industry development, that is, from external demand to domestic demand, from manufacturing to service. All economists criticized China this morning, and they must change it, stop saving money and spend money. Our savings-oriented economy should be transformed into a consumption-oriented economy. At the core of these three transformations, I think the government, academic circles and business circles in China have reached a high consensus. That is to say, how easy is it to build China into a consumption-oriented country? We must carry out a series of reforms and a series of constructions. What reforms and constructions have been carried out? The core construction is the social security system. Therefore, the insurance industry as a social security system, whether it is endowment insurance or medical insurance. As commercial insurance, it is one of the three pillars of the security system. Therefore, it is full of prospects and hopes for our life insurance company.
The future development of health insurance, the future development of old-age insurance, and the large amount of funds we have accumulated in health, old-age care and life insurance can also be invested in health facilities and health industries. It can also be invested in pension facilities and pension industries. In fact, you get the money and have a way out for investment. So I think the development of life insurance industry in the future is a big way out in health insurance and endowment insurance.
Thank you all.
Editor: Chen Xixia