China Pacific Insurance (Group) Co., Ltd. Class H

Hello, everyone. This is Shaojun of CPIC Group Board Secretary. Welcome to this presentation. We have with us Group President, Mr. Fu Fan, Group CFO and Chief Factory, Mr. Zhang Yuanhan, and Group Chief Investment Officer, Mr. Su Gang, and CPIC PNC General Manager, Mr. Zhen Yi, and CPIC Life General Manager, Mr. Cai Qiang. First, Mr. Fu will give a presentation on the performance of the first three quarters. Let's give the floor to Mr. Fu. Well, good afternoon, everyone. First of all, I'll give you a presentation of the performance in the first three quarters. We remain committed to pursuing high-quality growth and enhancing value creation so as to drive business development and strategy. In the first three quarters, our revenue was 204.8 billion, up 7.4% year-on-year. Among them, CPIC Life produced 63.9 billion, down 5.2% year-on-year. CPICPNC delivered 139.5 billion, up 13.9% year-on-year. Affected by the volatility of the capital market, our net attributable profit under the new standards were 23.1 billion, down 24.4%. In terms of our strategies, we accelerated the product innovation and service layout in healthcare. We upgraded our home security 2.0 for sub-healthy applicants to offer more customers health protection options. We launched a service plan Qingxin Growth for youngsters and unveiled its flagship experience store in Shanghai. We also set up a partnership with Xihua Hospital and Joint Innovation Center and jointly launched a first digital guarantee health service product. We have also completed a heavy assessment for CPIC Home, and we'll continue to strengthen our community's operation. In terms of big data, we launched the 513 project, which clearly defined the roles and responsibilities to create synergy. And also, we are promoting big data benchmarking to empower the innovation of digital business, to create digital productivity. For example, we have launched the digital auditing employee. We also promoted the closed-loop management of enterprise-level architecture and the unified architecture management platform. And this strengthened intellectual property management and encouraged patent application for innovations. In terms of development in key areas, we continue to make breakthroughs in product innovation in the Bay Area. and achieved great results in high-end customer business model and online and offline integration. We also mobilized resources to boost BD in Chengdu, Chongqing region. And also with special funds for innovation, we focused on supporting the innovation in customer management, green insurance, and digital empowerment. On the life side, we insisted on Weidong Zhang, Mingchao Wang, Yonggang Zhao, Xin Ma Weidong Zhang, Mingchao Wang, Yonggang Zhao, Xin Ma Weidong Zhang, Mingchao Wang, Yonggang Zhao, Xin Ma Weidong Zhang, Mingchao Wang, Yonggang Zhao, Xin Ma Weidong Zhang, Mingchao Wang, Yonggang Zhao, Xin Ma was actually for RP business was 10.3. Our agency continued to perform, promote transformation, and our business quality continued to improve. Our 13-month persistence ratio reached 95.5%, an increase of 7.5% year-on-year. On the people side, The monthly production income per core agent improved a lot year-on-year, and our 13-month retention grew significantly. At the same time, we continue to diversify our channels to develop value-based bank assurance to focusing on value outlet and value product and high-quality team. In the first three quarters, bank GWP increased 31.1% year-on-year, of which new RP premium increased by more than 289% year-on-year. For the PC side, with strengthened capacity building, in the first three quarters, PC's GWP was $148.5 billion, up 11.8%, of which auto insurance increased by 5.5%, and Nan Auto increased by 19.3%. Well, on the cost side, actually our combined ratio was 98.7%, up by one percentage point year on year. We are guided by regulatory requirement to strengthen expense management and cost control. We also strengthen customer insight to offer differentiated product and service solutions also to improve policy renewals. At the same time, we enhanced risk reduction to offer better service in response to disaster and assist in the resumption of work and production after the disaster so as to help the disaster-stricken organizations. In terms of asset management, we maintained our stability of our SAA based on our liability profile while actively allocating long-term fixed income assets to extend our asset duration. And we also leveraged tactical asset allocation to cope with the impact of the new accounting standards and also proactively manage our equity assets. By the end of Q3, the group's invested assets amounted to $2,172.7 billion, up 11.1% compared to the end of the previous year. The net investment for the first three quarters was 3.0%, down by 0.2 percentage points year on year, while total investment was 2.4%. down by 0.8 percentage points year-on-year. In the first quarter, we are, despite those internal and external uncertainties, will go all out to stick with long-term value growth to, well, stimulate operational momentum and continue to move forward in the direction of high-quality development leader for the industry. Thank you very much. Thank you, Mr. Fu, for your presentation. Now we start the Q&A session. First of all, you will be given how to raise the questions. If you want to ask a question, please press star and the 1 to queue for question. And before you ask your question, please identify your name and employer and ask no more than two questions. First, we have someone from Haitong Securities. Well, thank you, Mr. Fu, for your presentation, and congratulations on your good performance. I have two questions. Number one, about the profit. Now, you see a decline in profit in Q3, but compared to China Life, and then UCI. Actually, they were producing losses in Q3. So you did better than your peers. So why is that? And how about your dividend payout policy for this year? Second question about life business. As we mentioned, you have the Changhang Action Plan 02. So Phase 2 of Changhang Action Plan So how is it doing? What's the progress? And also Q3, new PV increased quite a lot in Q3. So given this kind of fast growth, would it present more pressure for the MBV growth for 2024? Now that's my question. Well, let me answer your first question. In Q3 quarters, actually our net profit dropped by 24%, mainly because of the capital markets going downward and also because of the new accounting standards. And we did not, I mean, the report did not regress to I-9. So, Actually, the performance earlier was not low in terms of investment. So given this kind of downward trend of the capital market and our investment return was lower than last year, in terms of dividend payout, for CPIC as a whole, Under the new accounting standards, we actually stick with our target to perform stable growth. We will deliver long-term stable return to our shareholders. Of course, also considering our company's performance and the cash flow situation, et cetera. So given all that, we will use the OPAT as a factor to decide our dividend level. At the same time, in Q3, in the first three quarters, we have quite stable OPAT. Well, let me answer your questions on life. Now, Changhang Action Plan Phase 2, it was actually started at the beginning of last year. We believe the first 18 months has met our expectations. That is to say, we focus on the channel transformation. So by the middle of this year, at least June 30th of this year, we enter the second phase of Changhang Action Plan. It will be this kind of a deeper level organizational structure change. For example, We want our agency outlets to be more independent in terms of operation, business operation. We believe we have finished the high-level design. Now the HQs and the branches are becoming more empowering, and we are seeing more streamlined organizations with more delegation, more empowerment. Actually, we have cut down the layer of and the organization by one-third. So you see this kind of streamlining at the branch level, provincial branch level. We are expected to complete those streamlining by the end of the year. We believe the progress is on track. So in the following 18 months, We hope to see more progress in terms of people optimization, more empowering, empowerment, and more autonomy for business outlets. So with the next year, we believe that all these initiatives will produce more results under the second phase of Changhang Action Plan. So that's There will be more matching between roles and responsibilities and the performance. Now, for Q3, admittedly, you can see that the Changhang Action Plan, in terms of people transformation, is producing results. So by the end of Q3, we have saw positive growth for five consecutive quarters. Meeting our initial design expectation. Now I believe that is the result of a change of ideology or philosophy. So it's not product driven. It's more like a long term career based development. You can see first of all we see the compensation scheme is renewed. Now agents Feel like they are doing their own business for themselves. And also, we see progress in terms of quality recruitment. Especially in the second half of this year, we can see more progress. But of course, in July, you can see the Well, termination of the 3.5% interest rate products also actually spiked the sales for some time. It also made a contribution. Now, you ask about pressure for next year. I believe it boils down to the people's growth, I mean, our capability to develop buildings. So we should not rely on products, should not rely on contest. If so, we will face pressure each year, same thing year and year round. As of now, we believe our core agents, the number of our core agents are stabilizing. So we feel assured about our performance. Secondly, actually contribution from new agents also grew significantly. And retention of the new agents actually improved by around the 10 percentage points to 30%. And we also are seeing better business mix. Actually, starting from August, our sales of critical illness insurance are positive. And the share of CI products is now more than 10%. So that is a good progress in product mix readjustment. Going forward, we are going to focus more on long-term par life insurance to better improve our product mix. So I believe it's on track. Well, thank you. Thank you, Mr. Tsai and Mr. Zhang for answering the two questions. Thank you for telling us about our profit and also how we are doing in terms of Changhang Action Plan. Now let's welcome the next question. The next question comes from UBS, Zhou Chen. Thank you, Mr. Su. I'm Zhou Chen from UBS. I have two questions. Number one, you mentioned that Q3 capital market is quite difficult. In Q4, the trend will continue. So given this kind of volatile capital market, how are you going to cope, especially in terms of the matching or duration management for assets and liabilities? So are you going to lower your Thank you. Thank you. Thank you. Well, thank you for your question. Now, in terms of the capital market, we believe everyone face the same pressure. But insurance company is unique in that we are in it for the long run. We are long-term investors. Of course, liability side, we of course face some pressure. But the key for us is to, for the long term, I mean, How can we use SAA to go through these cycles to remediate? Well, you see, for the last few years, we stick with this dumbbell asset allocation with more refined allocation, actually, more refined management. If we see our past record, we believe this kind of a strategy is worth working. and is working also. So despite these volatilities, we believe actually it might as well be more of an opportunity rather than a challenge for long-term investors. For example, if you look at the news, you can see actually the market, especially the social, well, The social insurance fund actually expressed optimism for the long-term development of China's capital market. We believe the capitalization level for the current market is low. As long as we stick with long-term investment, as long as we can actually remain or stick with our investment strategy, We believe compared to peers, we will achieve a relatively better investment yield. But of course, it's also challenging to manage our liability costs. Thank you. In terms of managing our liability costs, we are making active efforts. to monitor and manage it. For example, the 3.5% product to 3.0% product, we are communicating to the industry association. So this is just the beginning. I mean, this kind of the lowering of the crediting rate is giving us a very good opportunity to Actually, improve our product mix. So, with this kind of lowering of guaranteed rates, we actually share the risks with our customers and also share the, well, yield or return, investment return with our customers. As I mentioned, the share of our The sales of CI products actually is increasing. MBV of CI products actually amounted to around 30% of the total. So going forward, we hope that the share of the Power Life will be around 30%, traditional products about 30%, and the CI products around 40%. So this kind of a mixture, mix, would it be ideal for an insurance company? So that is to answer your question about liability cost. About the new regulatory requirements regarding the Kai Meng Hong or the grand opening, first of all, we actually welcome the regulatory changes on this issue. Actually, this is a move towards long-term management, long-term development. I believe we have basically, we have finished the communication and the product filing regarding this kind of consistency between what you reported to the regulator and what you actually did, what you actually do, how you actually do it. So actually, that would actually help us to focusing more on long-term service provision and long-term Business Development. So actually, we believe for the next year, we will see more initiatives under these changes for agency channel. We believe it is aligned with the strategy of our Changhang Action Plan. For agency channel, we don't have any under the table costs, I mean, We go everything by the book, by our compensation scheme or what we call the basic law. We're actually starting from last year. We said we don't do grand opening. Every day is a grand opening. So we need to visit our customers three times each day. So we have this kind of normalization of our business. If you look at this year's business, we believe you can see the business is quite spread out evenly across the year without specific spikes and the bottoms. So we believe this aligns with, I mean, the new regulatory changes align with our strategy for the agency. We don't believe it will be a lot of impact for our business for next year. We will continue to focus on the transformation, on good recruitment, on improving our product mix, on improving our production, productivity. Of course, with still a lot of room for improvement, our productivity is still lower. Then our benchmark, then some of our strong peers, be it the productivity for agents and the case size. So there's still a long way to go. Thank you. Thank you for the questions from UBS. Our CIO answered the question about our asset allocation strategy. And Mr. Cai Qiang answered the question and talked about how to actually improve our product mix, and what kind of impact will the new regulatory changes have on our business. Well, actually, it's good news for CPIC. Well, let's welcome the next question. Well, the next question comes from CICC, Mao Qingqing. Thank you for the opportunity. I'm Mao Qingqing from CICC. I have two questions. Number one, about agency team, you mentioned, well, your agency sales force is stabilizing with improving KPIs. Now, that's good news for us. So the question is, How do you view this trend? Is it because of your Changheng Action Plan or is it because of the improving market situation? How is your prediction about next year? Second is about P&C. Of course, in Q3, we had a lot of flooding and natural disaster, but your performance is quite stable in Q3. So if we exclude this natural catastrophe impact, how will it be for your PC business? Well, let me answer your first question about the trend for this agency team. In terms of the total number of agents, it was downward. It's dropping, but it's slowing down. The pace is slowing down. We believe the total number of our agents will go down further. We will remove some of those poor performing or fake agents. So it will be still ongoing, I mean, going forward. So the team will become more and stronger and stronger. So, compared to the total industry, I mean, the whole industry will see further drop of total number of agents. But this is not necessarily a bad thing. Actually, we believe the quality of the sales force is improving. If you look at the productivity, it's improving. We believe especially the productivity of our core agents will improve steadily. Now this is because thanks of the activity management and also improving product mix. Because now they are not selling product one policy at a time. It's more like needs-based sales. Families would need Not only health, but also life, but also CI, retirement, etc. So, our agents, they will sell multiple policies. And certainly, our agents, they have better skills. For example, they are now better at selling CI products, selling long-term products, 20-pay products, 30-pay products. And also, as we can see, better recruitment will produce momentum. Better recruitment, better training. You can see our number of new agents grew double digit. And the 13th month retention also improved quite a lot. We hope that next year will, first of all, on one hand, improve the quality of our new agents and also improve the total number of our new agents. On the whole, I'm very optimistic. My second question may be, Mr. Chen, you can answer it. Thank you for your question. On the P&C side, you can see For Q3, we did have a lot of natural disasters. For example, if you can see, it moves across the east and the western region of China, and also covered both southern and the northern part of China. Well, it's quite rarely seen, actually, in China in recent years. For CPI, CPNC, We actually improved our efforts to cope with these disasters. So actually you can see our senior executives, seven of us, we actually went to where the disaster struck, went to the front line, we actually, yeah, We improved our efficiency. We were there with our customers. We provided fast track claims payout. We help our customers to reduce risks. So if we look at the results, of course, there's quite a lot of pressure there. You can see in the first three quarters, Losses from catastrophe would be about 4.3 billion, and for the whole year, it will reach about 4.8 billion. So the impact on the combined ratio would be around 2 percentage points. So it's more or less than 2% for combined ratio. If we look at our business lines, for auto insurance, disaster loss would be about $1 billion. Non-auto, $1.5 billion. And agricultural insurance, $1.8 to $1.9 billion. So in Q3, agricultural insurance was particularly impacted by the natural disasters. So in Q3, Our auto insurance see combined ratio of lower than 100%. For non-auto, just above 100% for Q3, I mean. Now, agriculture insurance is 101% combined ratio. As you mentioned, the CPIC, PNC itself, On the whole, for Q3, a single quarter, our total overall combined ratio is 100.1%, up a little bit. So you can see we did have quite a lot of and many more. Thank you. Thank you. We are quite experienced with the traditional cars or combustion, internal combustion cars rather than new energy vehicles. Well, that's basically it. Let's welcome the next question. Well, the next question is Li Jian from Huatai Securities. Thank you. I have two questions. Number one, as Mr. Fu Fan mentioned about asset management, we would consider the new accounting standards to actively manage equity assets. Now, there's a lot of volatility for the capital market. So for our life business, how much is your equity or what is the strategy for equity investment? for different lines of business, for life business. And also MBV size grow quite good. But for the life business, you can see new business margin is worsening. So what's your take on next year? Next year, are we going to see MBV growth or new business margin growth? Well, thank you for the first question. Now, your question is a very good one. Now, you see FAA or TAA. Now, insurance companies unique how to actually adopt, adapt to the new accounting standards. Now, actually, we have a dumbbell allocation. On one hand, we enhance our Weidong Zhang, Mingchao Wang, Yonggang Zhao, Xin Ma and so on. So for this year we stick with this strategy and we did see some good results in terms of stabilizing our investment return. We will stick with this strategy going forward. Well, thank you. To answer your question simply, I believe we don't need to wait until next year. Our MB margin, new business margin, already improved. But in terms of strategy, we actually, we will not actively manage the margin intentionally because NPV is the KPI here, stable growth of NPV. But of course, on some level, the margin, NP margin, newbie margin, newbies margin, if it is too low, that would mean the channel, is losing its touch in terms of selling products to some degree, I mean. If you are able to sell profitable high-margin products, it means that you have very good selling skills. So if you are only able to sell short-term products, savings products, then your agency channel is becoming more and more like bank insurance. So that's a rough analogy. I mean, it would be bad for the industry, for the agency channel. So next year, as I mentioned, last year and this first half of this year, we focused on the transformation of the channel. Next, we are going to focus on transforming the product Now CI, you can see starting from September, we see more sales of CI, more BV coming from CI, better share of CI. That's good news. So our agents need to improve their skills to sell protection products, to sell long-term saving products. That's their key competitiveness. So you see, we need to be able to compete in these areas. So that is to say, margin, yeah, we do want better margins. The same goes for bank channels. We would want Bank Channel to sell more protection products, more long-term products. So on top of this year's progress, we plan to further improve our margin. Thank you. Let's move on to the next question. Well, we'll have Xie Yusheng from Guo Taijun. and Jingran Securities. First of all, on the product side, you mentioned that you're going to improve the sales of annuity products, power annuity products. But we see this is quite hard from the efforts from peers. Now maybe it's a sales skills issue and also maybe because the customers don't want this kind of power life products. So how is your forecast for this? I mean, when are you going to achieve One third share of annuity products. Second question, about regulatory changes. Now, how are you going to cooperate on the CPIC life side? And how do you think why the regulator launched these new changes? Is it because to Do they want to better control expenses or to crack down on under-the-table expenses? Well, I know CPIC did very well in terms of not giving under-the-table money expenses. But anyway, what's your take on this? Now, the first question on product is, I mean, par life product. Now, actually, we are going to have a launch ceremony for par life product. I mean, it's really hard to compare the product on its own. We must have an overall packaged solution. So, it's more about... The product itself is more about solutions to our customers, especially this kind of a long-term savings par life product. So I believe this long-term par life is better than long-term fixed rate product because for the longer run, you see, If we set a rate, a very low rate, guaranteed rate for our customers for the long term, but that would not be as good as offering a par life for the long term with some low guarantee plus, well, dividend payout. You mentioned, yeah, right, there are some other peers, they have promoted this par life. but didn't see very good results. I believe it will take some time. Maybe it takes about two or three years to bring the share of Power Life to one-third. But we still believe there's a huge impact, a huge demand from the customers. Now, second question about the new regulatory changes. In terms of expense reporting, we believe the direction from the regulators is very clear. First of all, the control of the sales channel. How can we better utilize the expenses for sales? And secondly, to crack down on this kind of fierce, reckless competition in terms of expense or commissions under the table payment to be exact. And thirdly, the regulator would want to see better and more transparent expense management. So we believe given this kind of guidelines, the agency channel will also benefit. I mean, under the table, the expense should be eliminated. There shouldn't be this or this altogether. Otherwise, there will be, well, a lot of customer complaints. So with our new compensation of the basic law, we already see a lot of improvement in this regard. In terms of compliance, in terms of legitimate expense utilization, effective utilization, we will become more compliant, more effective going forward. So we welcome these new regulatory changes. Well, thank you. I believe the question is... Really hot topic. Well, on the face of it, you can see that, well, it is a crackdown on these under-the-table illegal maneuvers or behaviors. However, it's a signal from the regulators that we're going to better protect the rights and interests of our customers, of the consumers. We would want more transparency, All these is conducive to the long-term healthy development of the whole industry and aligns with the direction of our Changhang Action Plan, our transformation. But in the interest of time, we will have the last question. Well, the last question from Wang Huan from Goldman Sachs. Thank you. I'm Wang Huan from Goldman Sachs. I have actually an accounting-related question. Now, our net assets decreased this quarter. Other comprehensive gains, well, the fair value didn't grow much. I don't know how to understand these numbers because the interest rate didn't change a lot in the third quarter. So, but liability increased, net asset decreased. Why? First of all, interest rate assessment curve is 50-day average. So, it didn't go down a lot. So, it actually stabilized towards the end of the quarter. Previously, it dropped quite a lot. So that you see the other comprehensive income under it, the financial assets, the insurance contract fair value change is mainly affected by the Thank you all for your attention and questions. If you have follow-up questions, please contact our IR team after the meeting. Thank you very much. That's the end of the meeting. Thank you.