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

Good evening, ladies and gentlemen. Welcome to the 2024 Q3 results announcement of CPSC Group. I'm Su Shaojun Group Board Secretary. We have with us Mr. Zhang Yonggang, Group President, and Mr. Su Gang, Group Vice President and CIO, and also Ms. Zhang Yuanhan, Group Chief Actuary. First of all, Mr. Zhang will give you a presentation on our results in first three quarters, and then we'll have a Q&A. I'll give the floor to Mr. Zhao. Good evening, ladies and gentlemen. I'm Zhao Yonggang, president of CPIC Group. Next, I'm going to give you a brief introduction of our first three quarters results. SQ3 2024, guided by the new 10 articles for insurance industry issued by the State Council and to build a first-class insurance group with international influence. We adhered to high-quality development and healthy progress. We played up our role as a shock absorber and stabilizer to contribute to five key areas of finance, improved the quality and efficiency of insurance services, and also strengthened our core competitiveness while delivering steady progress on business performance. We mainly focused on insurance business and saw rising premium income and profits In the first three quarters, our insurance revenue amounted to 209.4 billion yuan, up 2.3% year-on-year. Among them, CPIC Life achieved 62.3 billion, down 2.5% year-on-year, while CPIC PNC delivered 145.2 billion yuan, up 4.1% year-on-year. The group realized a net profit of 38.3 billion, up 65.5% year-on-year. Our key strategies include the big health, big region, and big data strategies. Through them, we strive to strengthen our strategic control and synergy and enhance customer management. To meet health and retirement needs, we accelerated the construction of the pension management plus pension insurance PLUS ELDERLY CARE SYSTEM. WE OPENED A CPIC CARE HOME IN WUHAN AND SPEEDED UP INNOVATION AND SYNAGY IN KEY AREAS AND MAINTAINED HEALTHY PREMIUM GROWTH AND QUALITY OF BUSINESS. IN TERMS OF THE DIGITAL WORKFORCE, ON TOP OF AI AUDIT, WE ADDED AI COACHING FOR OUR LIFE AGENTS, AI REVIEW OF HEALTH INSURANCE CLAIMS, AND ONLINE CLAIMS ASSISTANT FOR PNC BUSINESS. We take very seriously the protection of investors and the consumer rights and interests and has been awarded a rating for insurance disclosure of listed companies on the SSE for 11 consecutive years. Both CPIC Life and CPIC PNC have been rated number one in the industry for their consumer rights protection assessment results in 2023. In terms of key performances of our business line, committed to Changhang action plan and transformation, CPIC Live continued to focus on customer value creation. Our CPIC Live GWP was $230.5 billion, up 3.3%. New business value was $14.2 billion, up 37.9%. And the new business margin was 20.0%. up 6.2 percentage points. Our agency continues to improve its professionalism and KPIs. For example, our first three quarters GWP grew 4.1% and our new business GWP grew 16.3%. Secondly, our number of core agents stabilized with improving quality. The monthly number of core agents was up 2.4% year-on-year. And thirdly, the number of our new agents was 15.5% up year-on-year and the FYP was 35% increase. The 13th persistency ratio of our individual customers increased by 2 percentage points year-on-year to 97.5%. While 25-month persistency grew 8.2 percentage points to 92.3%, the bank channel adhered to value approach to focus on key regions and strategic channels. Its GWP in the first three quarters increased by 6.2%, of which individual long-term insurance regular pay new premiums increased by 23% year-on-year. GROUP CHANNEL UPGRADED ITS WORK-SIDE BD AND IMPROVED THE MIX OF ITS SHORT-TERM BUSINESS THE GWP DECREASED BY 12.8% YEAR-ON-YEAR BUT THE WORK-SIDE BUSINESS GREW BY 18.3% YEAR-ON-YEAR OUR PRODUCT MIX CONTINUES TO IMPROVE STARTING FROM SEPTEMBER OUR PRODUCT MIX HAS IMPROVED SIGNIFICANTLY The share of health protection and participating products doubled, and the CPIC Care Home keeps to empower our business. Its average number of monthly residents rose steadily, and the number of entry qualification and first-year new premium and total premium payable grew by 20% year-on-year. CPIC P&C maintained a focus on sustainable, high-quality growth, In the first three quarters, its GWP was $159.8 billion, up 7.7% year-on-year, of which auto premiums was up 3.3% year-on-year, while non-auto grew by 12.2% year-on-year. The combined ratio was 98.7%, unchanged from the same period last year. For auto insurance, we complied with regulatory requirements by effectively controlling expenses and further optimize costs with innovative new energy vehicle business model. For non-auto insurance, we serve the real economy and people's well-being, developed emerging new areas, strengthened innovation, enriched supply of products and services, and better served our customers with integrated risk solutions. For the asset management side, we maintain the prudent SAA while flexibly adjusting TAA. That is to say, we allocate long-term flexible income assets to extend duration and strengthen active management of equity. We buy equity with low duration, high dividend, and long-term profitability. We actively respond to low interest rate market environment with above market performance results. As of the end of Q3, our total group's total AUM was $2.58 trillion, 14.9% higher than the end of last year. And our net investment yield was 2.9%, down 0.1 percentage points year-on-year. Our gross investment return was 4.7%, up 2.3 percentage points year-on-year. The above net and gross investment yields are not annualized. Looking ahead, CPIC will strictly implement new regulatory rules and messages from the third plenary session of the 20th CPC Central Committee Meeting and the Central Financial Working Conference and integrate itself into the construction of Chinese modernization and achieve high-quality growth while safeguarding people's well-being and serving the real economy. To be specific, we will continue to enrich the supply of products and services improve the pricing mechanism to better meet people's need for insurance protection and wealth management. Secondly, we will continue to focus on service, optimize service process, improve the quality and the protection of consumer rights and interest. And thirdly, we will give long-term, given the long-term nature of our insurance funds, we will focus on China's major strategies and key areas to better serve the real economy and Technology Innovation and Modern Industries. Fourthly, we will accelerate digital transformation, strengthen data governance, and promote emerging technologies to better empower the company's operation and management. And the number five, we will strengthen risk management and internal control, enhance asset liability management, promote long-term healthy development. With that, I end my presentation. Welcome your comments and questions. Thank you. Well, thank you, Mr. Zhao, for your presentation. Now we start the Q&A session. Now, please listen for Q to ask your questions. Now, please, if you want to ask question, please press star and the one to Q. Please identify yourself and your employer before asking questions. Please ask no more than two questions. First, Sun Tingting from Haitong Securities. Thank you, Mr. Zhao. I'm Sun Tingting from Zhongzheng Securities. I have two questions on life business. First one, you mentioned that In September, can you share more numbers on the share of your products? And secondly, the grand opening for the next year, how are you going to plan it? What's the pace of the sales? What kind of product mix are you going to have for 2025? And because you'll see for 2024, your starting point is quite high. So how can you achieve growth for the next year? And next question on agency. For 2024, the bank channel have new regulations on commissions reporting. So your margin improved a great deal. Now, what about the rules, similar rules for the agency channel? Are they going to Have what kind of impact on your business? How is it going to impact your margin? Well, let's answer your first question in terms of the power business. For 2024, the first three quarters, our health products and incremental life products Well, the offerings, we offered more of these kind of products. Our product improved a lot in September. That's mainly because of the pricing rate has not been changed in September. So in Q3, participants in life felt much better than in the previous quarters, as Mr. Zhao mentioned. It more than doubled in September in terms of the sales of participating life insurance. And starting from October, new business from participating business insurance also doubled in share in terms of the share. Of course, in October, the absolute number was smaller. And that's because of a seasonality issue. But our capability to sell participating insurance is improving. And we did more training to train our skills on selling participating insurance products. We trained more than 1,000 trainers, sales trainers. So we believe this laid a good foundation for next year. And for next year, you see on the whole, in terms of the preparation for the grand opening of 2025, we will continue to pursue diversified channels to focus on customer needs and also taking consideration of the changes in macro environment. So we will be diversified. We focus on value while improving our product mix. We have a lot of mature experience in selling participating products to boost the business. So for the next year, we believe the MBV growth, we are quite confident about MBV growth. To answer your second question about the rules on commissions reporting to regulators, for the agency channel, Now, for the agency channel, we believe overall trend is a good one. We will have better team with better quality. We will closely follow the new regulatory development regarding commissions reporting to the regulator for the agency channel. We believe we'll go back to the fundamentals of the insurance business. So this kind of measures will actually benefit CPIC so that we can cross the cycles and boost high quality growth of the agency channel. CPIC Live is doing the Changhang transformation. We are trying to build our agency, help into a professional one, helping our agents to become more professional so that they can be more successful in the new era. And leading insurer in China, we do enjoy some benefits from advantages, if I may. So we can better offer integrated solutions to our customers, so that we can comply better with regulations, we can better boost the income of our agents. As far as we can see, the long-term savings products, I mean, the margin is quite stable, I mean, be it participating or traditional saving products. I mean, after the shift to lower rates of pricing rates, I believe our margin actually improved. Thank you. Thank you, Mr. Zhang, for your answer. Let's welcome the next caller. Well, next we'll have Li Jian from Huatai Securities. Thank you. I'm Li Jian from Huatai Securities. Two questions, one for investment, one for life. Now, for this quarter, I mean Q3, new business premium increased a lot for life. Now, what's the reason for the increase? Is it because of the, well, sales boom because of the product termination? Is it sustainable? I mean, especially for new business growth. Now, you mentioned that you will have better new business value Now what about the new business premium for next year? Second question about investment. Now you mentioned that you are going to allocate more in terms of high yielding stocks. Thank you for the questions. Now, your first question, actually starting from this year, we pursued our Changpeng transformation plan to focus on customer value. We actually wanted to increase Weidong Zhang, Mingchao Wang, Yonggang Zhao, Xin Ma Weidong Zhang, Mingchao Wang, Yonggang Zhao, Xin Ma Weidong Zhang, Mingchao Wang, Yonggang Zhao, Xin Ma Well, several reasons. Pricing rates were cut down. MBV margin improved a little bit. So number secondly, it's also a result of our diversified channel development. For example, agency improved its performance. Our banker channel also focused on value of business. So we believe for the whole year, MBV will have a good trend of And of course, lowering of pricing rates will present challenges in the short term. But in the long term, it is actually favorable for us because it would help us to better manage the interest rate spread risk. So we believe we need to seize on these opportunities to turn it into, well, business improvement. So far, we have finished the development of the participating live products to be used in the 2025 grand opening. We believe we need to have value not only Not only volume, but also business value. We have a mature model for that. For 2025, we are quite confident about continued growth of MBV in 2025. Now, let me answer your second question. As you mentioned, CPIC always pays a lot of attention to the equities with high dividend return. Now we have been doing this for the last three to two to three years with very good results. And not only us, other companies are also doing this. We believe it's a good strategy, especially under the new accounting rules. Actually, we have been improving the OTI class equity assets. Of course, This is a ongoing process. Now the share is above 20%. But of course, you can look at the issue from different angles. We can take it offline after the meeting if you have different approaches to this issue. Thank you. Well, thank you for the answers. Now let's welcome the next call. Next, from Liu Xinqi from Guotai General Securities. Well, first of all, congratulations on your good performance. I'm Liu Xinqi from Guotai General Securities. Two questions from me. Number one, new life strategy for you. As you mentioned, the Changhang Transformation Plan, phase one, phase two. After all that, agency improved a lot. with better core agents, better quality. So my question is, what's your focus for further or future reform? And the next question about the gap between net investment yield and the gross investment yield, 1.8 percentage points. So what's the reason for that? Now, going forward, how are you going to maintain kind of a stability of investment yield? How are going to use asset allocation to maintain the stability of investment yields? Now, the number one question about the life strategy, right? Yes. Correct. I mean, after Changhang transformation, the quality of life business improved. So was your agency channel. But what about your future priorities for life transformation? Now, in the long term, I mean, we remain unchanged for life agency. We need to be the best in terms of the service experience of our customers. But of course, there are macro environment changes and also demographical changes in China and also industry trends. So these changes plus regulatory changes may affect our reform. So going forward for the CPIC life, I mean, we need to recalibrate based on those changes. But we still will focus on customer value, our social and economic value. And based on all that, we will design our big strategies. So our customer, our channel strategy, our product strategy all need to be based on all those factors. It's still ongoing. It's early stages. After we have matured plans, we will share them with you. And as you mentioned, the new 10 articles for Life insurance sector has just been released. So we need to better study the document, better, well, do more study and research before finalizing our plans. Well, I'm the chief investment officer, Su Gang. Now, thank you for your question. Now, of course, you see, we need to look at our net and the growth and the comprehensive investment yields. We need to look at all these indicators. But objectively speaking, the net investment yield has been under pressure for the entire industry because we know the interest rate is going down in China. So previously, some of our high yielding fixed income assets matured and we need to reinvest. But the reinvestment yield was lower than before. But we have took some measures to offset that effect. Compared to peers, our net investment yields decline was actually smaller than a lot of our peers. But of course, admittedly, capital market changes also influenced us, especially after September, the end of September, The stock market spike in China also had a huge effect, especially the fair value change fluctuated a lot. So this kind of spike will invariably change our or impact our growth investment yield and comprehensive investment yield. So the gap between the net and the gross investment yield become wider. But of course, if we look at the reasons for those kinds of yields, I mean, attributing factors in terms of debt and the fixed assets, debt and the equity, I believe the share is 50-50, but in Q3, Equity, of course, made a bigger contribution in Q3. Our fair value change impact was very favorable in Q3, much better than the TPL assets. Thank you. Let's welcome the next caller from Citigroup. Thank you. Good evening. Thank you for the opportunity. I'm Ma Yuqing from Citibank. Two questions from me. Number one, P&C, in first half of this year, actually you improved in terms of profitability. But if we look at the first nine months, We believe the combined ratio remains the same as last year. For Q3, there's a lot of disasters happening in China. So in Q3, I mean, what about the Q3's profitability? Maybe also I'll share a little bit on the auto and non-auto side. Second question, par life sales is growing, is improving month by month. So far, how many of your agents have have received the qualification to sell participate par life products or have already sold par life products. Well, let me answer your first question about combined ratio of PNC business. Of course, you'll see the numbers. This year, our combined ratio, I mean, maintain the stable growth, overall growth, need our lifted peers, Our target remains unchanged. We need to focus on sustainability of growth and focus on value. We need to have a good control of our quality. But of course, we will have more disasters in China this year. In Q3, we have a lot of typhoons. Well, we are impacted. So far, if we look at the numbers, this kind of catastrophe loss was much higher than last year, than previous years even. So this negatively impacted combined ratio in Q3. In terms of the line of business, our non-auto suffered most of the damages. Our agricultural insurance, our property insurance. So these catastrophe losses impact would be above three percentage points for Q3, which can be evened out across the whole year. So given this kind of impact, our combined ratio for the first three quarters remained stable. We believe with the extension of time, for the whole year, our profitability will be quite good. To answer your second question, compared to last year, our par life regulatory pay was very low. In the first nine months of this year, we sold 100 million. That's for last year. But for this year, in first six months, the volume was 400 million. And for September, it doubled again. And in October, par life, regular pay, sales also grew fast. So if we look at the September par regular life, we believe in terms of a share of the par life regular pay, we ranked in the middle of the industry. Thank you. The next caller from Guangfa Securities. Thank you very much for the opportunity. I'm Liu Qi from Guangdong Development Securities. First question, for the whole year, the profit growth was quite fast. What about dividend payment and the payment ratio? Are you going to actually maintain a ratio of more than 30%. Second question. In the first three quarters, in terms of claims payout, how much was it from VFS? To answer your questions, Of course, we always take very seriously return to dividend to shareholders. Now, temporarily, because of the new accounting standards, given the capital market volatilities, we have not paid out a mid-term dividend payout. We were going to do that later on. We look at the OPAT and also look at our business performance and the shareholder return, all these factors to decide on a dividend standard. So that's the first question. Second question, in terms of underwriting loss, our VBA is relatively And our liability cost ratio was down a little bit. Now, most of it comes from VFA groups. Thank you. Now, next caller from CICC. Thank you for the opportunity. Good evening. I'm Mao Qingqing from CICC. Now, I have one question from other comprehensive income. In Q3, it's negative $4.8 billion. Now, the tools side, the impact was offset, the impact on traditional insurance. Now, in Q3, it's a negative number. What's the reason? and OCI trend for the future. How do you look at it? Is it going to remain a gap? Let me answer your question. In Q3, it's a unique case because on the liability side, OCI changes were based on the 50-day assessment rate. and others. The SSI interest rate curve is a real-time interest rate curve. So by the end of the quarter, it picked up again. So that's the change. We believe this kind of change can be tolerated and it is a natural gap between the two rates And this happened in Q1 last year. So we believe it's normal. Well, of course, for the long run, we believe our asset liability matching is relatively good. Going forward, we might, based on our ALM, and do some research based on interest rate movements. Thank you. Let's welcome the next caller. Next, a caller from Goldman Sachs. Thank you. I have two questions. Number one, OPAT, you mentioned OPAT. Now, what about the growth for OPAT this year in Q3 or the first half of this year? Now, second question, maybe share a little bit more. Profit is good in Q3. Net profit in Q2, Q3, pretty much the same. In Q3, A share in China performed very good. So why wasn't there a big increase in net profit in Q3? Now, first of all, for the first three quarters, OPAT year-on-year growth was very small, mainly because of the Q3 catastrophe losses for our P&C business. So our underwriting profit went down month-on-month, so the growth narrowed compared to last year. So from the net profit perspective, in Q3, our net profit was benefited from the capital market movements. In Q3 last year, our performance was quite stable. So that is why this year, Q3, we didn't see a huge increase in net profit. So we believe We had quite a stable growth mode, stable business mode. Thank you. Thank you. Let's welcome the next call. Next, Zhao Yao from Morgan Stanley. Thank you for the opportunity. I have two questions. Number one, on the number of agents for the PNC agency of life agency. Now, first of all, how do you define your core agents and actually a slight decline in core agent numbers? MBV, the contribution from this kind of core agents in terms of MBV and in terms of number, are they going to remain unchanged at 60,000? Second question about your investment in high dividend paying stocks. What's your consideration? If such a stock is already in GPL, and we want to move it to OCI, how are we going to do it? Thank you. Let me answer them. In the first three quarters, the agency, I believe, is improving. I believe the number and the quality of our core teams improved. For example, the number of core agents improved by 2.4%. And for three consecutive quarters, we saw this kind of a growth. For example, first year premium for core agents also improved by more than 10%. And in Q3, single quarter, Our recruitment and also total number of our agents were very good. If you look at the more details, I believe the agency, I mean the strategy for agency is also customer-centered. With Changkang Transformation, when we continue to push our To be more professional and to focus on quality recruitment and training and agent development. For example, in key cities in China, we are trying to build this kind of a retirement and pension related advisors. And we recruit high quality new agents. and train them. Secondly, we have a system to develop these new agents, to protect them in the first of six to 12 months, to train them, to turn them into high performance for the first year so that these core agent teams can be stabilized. On the whole, I would say we focus on both the quality and volume. For example, we boost our productivity, boost recruitment, and stabilize the volume or the size of our agents, especially core agents. So we're stabilizing number of core agents and the agent leaders We can improve our agency business. Well, I'm Su Gang. Maybe I'll add more on the high dividend stocks. In terms of selecting those stocks, it's also a systematic approach. For example, we look at the industries. We look at first of all the big industries. Is it a promising industry? So that's the basic consideration. And based on that, then we look at the specific subject matter. For example, the company, is it competitive in the industry? And we also look at the valuation of that particular company and the company's dividend payout ratio, et cetera, et cetera. So does it meet our definition of high-yield, high-dividend stock? And we look at also market factors. So there is not a single simple criteria to say which stock is a high-dividend stock. So it's an ongoing fluid process. In terms of the strategy, This is a long-term strategy for CPIC investment. Starting from 2014, we have been utilizing this strategy and treating it as a fundamental strategy for our stock selection. On the whole, we will stick to SAA and then with expanding AOM, Under SAA limits, our total volume of equity investment is improving. So that is why we say investment funds is a long-term fund, is a long-term money, patient money. We have this kind of space to play up our advantages in allocation. So he's not saying that we must move out those high dividend stocks from TPL. So currently the share is 2%. We were actually looking to increase it further. We hope to better reflect the long-term nature of our insurance money. Now in terms of you mentioned about the facilities, monitoring facilities, now the new policies on these swap facilities, this is a further indication of a Chinese government's commitment to the capital market. So market liquidity will be improved, market dynamism will be improved, the market confidence will be further improved, So for insurance companies, especially a state-owned insurance company, we will stick to the directions of the central government. And based on our investment strategies, we must follow the policy to serve the real economy and to serve the national strategy. We will study the new policy and try to development scenarios where we can utilize these policies. So we combine the long-term nature of our insurance money with short-term swamp monetary facilities. Thank you. Thank you. And also thank all the questions. In the interest of time, we only have the time for the last question. Well, next, a caller from the CM Securities. Thank you. And CM Securities, Zheng Jisha. Now, two questions from me. In terms of the liability, could you share more information on that? For example, we know The regulators are trying to lower the pricing rate to lower the liability cost. So do you have some numbers? I mean comprehensive liability cost including the channel expenses, operating expenses. I mean comprehensive liability margin. How much is it lowered? What's the level of comprehensive liability cost? Maybe give us a cumulative number or a marginal number. So that is on the side of the lowering of liability cost. And what about next year? How will the liability cost change in next year? And how low can they reach in next year? And the second question on investment on the fixed asset side. Now, your strategy on fixed asset investment, could you elaborate a little bit your share of bonds? and the share of your alternative investment. What's your specific strategy? Are you going to over-invest in the fixed asset investment assets? Now, first question about liability cost. With the lowering of the pricing rate for traditional products and also for par life, Universal Life. Of course, liability cost of a company for the new business went down a great deal. And of course, we now offer lower guarantee rates. To put it simply, our liability cost, that is to say, the comprehensive liability cost, that cost would be slightly are all lower than the pricing rate by 20 to 30 basis points. So overall, new business liability cost dropped quite fast. For example, at 2.0%, you can calculate the liability cost for us yourself. Now for the in-force business, with the lowering of interest rate in China, Overall, par life and universal life settlement rate will go down for the whole industry and significantly lower the risk of interest rate spread risk. Now, apart from guaranteed business, I'm talking about the variable parts, floating parts we offer to our customers. As I mentioned before, our overall liability cost, including PAR, was lower than 2.5%. Under extreme cases, CPIC, of course, we don't want the extreme cases. CPICs, if we do not pay out dividend yield, dividend payout, We believe the 2.5% liability cost can be further lowered. Now, second on our strategy on fixed asset investment, of course, fixed asset takes a lion's share in our SAA, maybe 80% something. Now, for a very long term, we have this kind of a dumbbell strategy for SAA. Now the biggest one factor is we continue to enhance allocation in T-bond, government bond. We are doing this all the time. We believe this is favorable to our long-term asset liability matching. Given the current situation, we need to allocate very actively in long-term and ultra-long-term T-Bond because going forward, we believe T-Bond yield are very likely to go down. So at this time point, we believe it's wise to invest in long-term T-Bond. We believe China is going to issue more T-Bonds and equity market improvement will impact The bond market, either from primary or secondary market. So we believe it's a good time to invest in long-term and the super long-term T-bond bond market, bond assets. Now, in terms of credit bonds, CPIC will focus on prudent strategy. That is to say, we believe credit The bond spread is very small as of now. So credit bond is also a good option. And maybe on a temporary basis, we might look at this kind of a phasal opportunities to look at the maybe bank deposits to improve the yield. For alternative non-standard investment, we are prudent on the whole. Of course, we have an asset synchronization license. We have our own mutual fund. So we will do some innovation, for example, for risk investments. So we are trying to explore innovative fixed asset investments. so as to achieve some risk premiums. For the next year, on the whole, we believe we are going to maintain interest rate bond and maintain stable maneuver or stable allocation in bonds so that in either bonds We will have this kind of a balance. Thank you. Thank you all for the answers and the questions. Thank you for your attention to CPIC. If you have more questions, please reach out to our IR team. Thank you. That ends the meeting. Thank you all. Thank you. That's the end of the meeting. Thank you. Goodbye.