China Pacific Insurance Group Co Ltd Q2 2024 Earnings Call (Chinese, English) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Li Jiang - Huatai Securities - Analyst : Li Jiang from Huatai Securities. Two questions, number one for Mr. Fu. Now, as we mentioned and as you see the local government and the central government has raised a lot of the requirements regarding the capitalization of market value management for listed companies. So what's your measures in CPIC? Second question about the agents. Now you have 60,000 equations and the 183,000 agents in total. So are you reaching a turning point? So my question is that the 60,000 call agents, how do you see the number going forward? Is it going up or down? What do you think about their income, their productivity going forward? And there are some rumours, that there's going to be some kind of commission related rules agency channel. So what's your take on that now? Unidentified Company Representative I think you know a cap, the value and the market value is -- Now of course, important is a key KPI for this new company. Now with this kind of policy is launched to our opinion, a lot of attention to this. I believe this is a new requirement in the era. And this is how people exactly what I mean we CPIC, we always spend a lot of attention to our management of capitalization, our market value. We always focus on return to investors and the sustainable growth of our capital value. And now we have actually lost them was a specific KPI for capitalization management, focusing mainly on maximization of shareholder value and the Company value, We believe the databases used how to create a value that is to say we need to create value in the first to maximize our EV. And secondly, of course, the ultimate goal is to realize value so that EV can be where we can actually disclosure and disclose our information, we to the investor to analysts going forward, we are going to, first of all, to reinforce our fundamentals and have a very clear strategy to boost our value growth, especially EV. And also we'll become more investor oriented, to have honest and transparent communication with the market with investors and analysts. And of course, we need to boost our value performance. And lastly, we will continue to maintain our healthy level of dividend payout so as to well achieve a win-win solution for both the Company and the capital market. Now for your second question, I would say our agency channel, we can see we utilized our new basic law to improve the agency team with the improved number of agents and the improved level of new agent retention and productivity. Core agent is very important and notably, if quality is a key indicator for our agency channel, you will see, of course, we based on the realities of Chinese market, for example, the average income on the society we actually changed our KPI for core agents. In the first half of this year, our core agents grew by 0.8%, with the new basic law, we actually saw positive growth in terms of the team performance and team behavior. Of course, there is this kind of the commission related rules for agents, we will comply. So they have to be more compliant and also to better service the team development. And in terms of team development, we are going to focus on quality recruitment and agent development and also change or improve the agent team mix. And we are going to have this kind of a differentiated or phasal training for new agents. And we're going to focus on some key outlets to serve as the pilot projects to enhance the development of new agents. So ultimately, we can keep improving the quantity and the number of our core agents. Thank you. Unidentified Participant (inaudible) I have two question number one on in bank channel, the performance was quite good for H1, no you mentioned the commission related rules. So but what about your business plan and targets from bank channel? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 30, 2024 / 8:00AM, 601601.SS - Q2 2024 China Pacific Insurance Group Co Ltd Earnings Call (Chinese, English) And the second question on the PLC side. Now, first of all, congratulations improvement for this year, but what are the reasons and secondly, for the long term, the combined ratio of PNC, what is the target and how are you going to achieve the target? Thank you. Unidentified Company Representative Thank you for your question. No, we believe this commission related rules, commission rules and also the easing of the number of issuers a bank can cooperate with these kinds of new channels, it's better for the virtuous circle for competition. So our bank channel will continue to improve our professionalism and to improve our competitiveness to be with this kind of a high-quality service mechanism and to better cooperate with banks to serve, diversify need for the customers. Now for the bank channel, we will continue to stay focused on value growth to boost other dynamism, to boost the momentum and also focus on the value contribution to be specific -- first of all, we need to be specific or need to be focused especially focusing on these provincial capitals in the key cities. And in terms of the partner banks, we will focus more on strategic partners with differentiated policy for each bank partners. And secondly, we need to leverage our expertise in terms of product and service. We have this kind of golden triangle to serve the customers' wealth protection needs, health needs and retirement needs. For example, we have this kind of (inaudible) Customer Club to give them better value added services and CPIC home, is also a competitive strategy, preventative a ball. And of course, people is always the key. We need to have high quality, high performance. He was a bank channel and of course, we keep where we want to keep this kind of high-quality bank channel. Actually, our per capita bank productivity, is already leading peer, not for the P&C side, combined ratio, 97.1% up a improvement of 0.8 pts. In terms of the drivers, first of all, we enhanced the expense management for auto insurance. Secondly, we did a lot of work in terms of some key cost areas. For example, in the health and liability insurance, these sectors saw improvement in tons of claims. For health insurance for example, we've become more diversified. We had a better share of high and the mid end health insurance, and we had a more selective way become more selective in terms of policy sponsored health insurance business. At the same time, we enhanced our own management of intelligent risk management and of course, at the same time, also crackdown on the insurance fraud. In terms of liability insurance, we continue to focus on the high quality areas and to remove the high risk tolerances. And also we help our customers to also managing their risks, managing their damages. And you'll see PNC business, we always focus on the sustainability of our P&C business. We focus on policy business going forward. We're going to set more KPIs to become more professional, to make risk reduction. More system-based to leverage technology to reduce costs so that our combined ratio can be more in line with our major peers. Thank you. Shaojun Su - China Pacific Insurance Group Co Ltd Now we will welcome online questions. (Event Instructions) (inaudible) from Morgan Stanley. Unidentified Participant Thank you for the opportunity. I'm (inaudible) from Morgan Stanley. Two questions come from the number one on Life side. You see at the end of June, your core solvency of in CPIC Life is 121%. up slightly compared to last quarter. What are the reasons? And are you satisfied with this ratio whilst the future 5G solvency ratio? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 30, 2024 / 8:00AM, 601601.SS - Q2 2024 China Pacific Insurance Group Co Ltd Earnings Call (Chinese, English) For the second question is, I see there's a lot of disasters, natural disasters. So there's a lot of damages from these disasters. So from CPIC perspective, commercial insurance companies, I mean, what are your challenges and opportunities in these areas. Unidentified Company Representative Now let me answer your first question. In terms of solvency ratio, in CPIC with solvency ratio, we issued a perpetual bond here. It helps with our solvency ratio and because of our internal capital accumulation. Now we have a core solvency ratio at about 121%. Now we believe the current level of solvency ratio these are still mixed news, a slight gap, I would say that's mainly given the external environment and business growth requirement and also given regulatory requirements and the operational needs. In the future, we also need to consider in the next expansion. Well, we I mean, we need to keep it at a proper level. So as to see the opportunity on the market. At the moment, I would say with interest rates going down, interest linked products and the equity investment will go up. So we believe there's still a gap, but we will continue, we believe we can do it ourselves with improve our product margin, so as to improve our solvency adequacy ratio. Now let me answer your second question. Thank you for your question, of course climate disasters. Climate risks is a risk not only for insurance companies, but also for the whole society. We see a lot extreme weather events. Last year, you can see according to government data, a natural disaster damage reached, RMB345 billion, mainly from (inaudible). According to Swiss Re last year insurance related disaster damage is USD108 billion. We took measures. First of all, we enhanced our risk management capability, innovate our disaster insurance products and improve our management of carbon emission. We developed our carbon emission mechanism. We actually included into our group suggested strategy, actually, under the group -- the Group Board, we have a seperate ESG committee. And at all levels of CPIC, we had ESG. related the working group and the green insurance and the low carbon sectors will offset KPIs for them. We continue to improve relevance evaluation mechanism, but also have our risk radar to better assess and look these risks. We also help our customers to reduce these related risks. And in terms of the innovation of our products, we launched a lot of the products for the climate response, green energy and EV vehicles. So in H1 this year, we actually our premium growth premium from green insurance reached RMB34 billion in terms of low catastrophe insurance, our total SA for H1 this year was RMB500 billion. And in terms of the carbon in of our investment portfolio, we did some calculation of our carbon emission from our investment portfolios. I would say we are one of the first among our peers to conduct this final calculation. So that's to give us more basis for valuation in terms of our green credentials, we also have helped this kind of high carbon enterprises to reduce their carbon footprint. Of course, all this is still in its early stage. Well go into for more and the Chinese government are going to launch more in terms of the energy transition in economy, CPIC will contribute in this regard. Thank you.