Speaker #1: And the social agreement, both 70 of CPSE Group. Today, after the market closing, we released the Q3 report. It's our pleasure to have you with us for this Q3 results announcement.
Speaker #1: Welcome, you all. Well, on the CPSE side, we have Mr. Zhang Yougang, CPSE Group President; Mr. Su Gang, CPSE Group VP and CFO; and Mr. Li Jing Song, General Manager of CPSE Life; and Mr. Liu Zhenbo, Deputy General Manager of CPSE P&C; and also CFO.
Speaker #1: First of all, Mr. Zhang will give you a presentation on the results of the first three quarters, to be followed by a Q&A. Now, I'll hand the floor to Mr. Zhang.
Speaker #1: Thank you. Distinguished guests, investors, good evening. I'm Zhang Yougang. I'll give you a brief introduction of the results and performance in the first three quarters.
Speaker #1: As we all know, since the beginning of the year, with disruption in the macroeconomic environment and capital markets, we have continued to deepen high-quality growth and strengthen asset-liability coordination in the first three quarters.
Speaker #1: Our performance has remained stable. In the first three quarters, our insurance service revenue was ¥218 billion, up ¥0.1 billion year-on-year. With the steady increase in the amortization of the CSM and also improvement in the property insurance underwriting profit, our operating profit grew by 5.6% year-on-year to ¥30 billion.
Speaker #1: Affected by short-term factors such as the capital market volatility, our net profit decreased by 20.3% yuan a year to 36.4 billion yuan. If we look at the business lines, regarding CPSE Life, it focuses on value growth and is a core operating performance remains stable.
Speaker #1: To be specific, its GWP was ¥267 billion, up 1.4%. New business volume value was ¥14.3 billion, down 6.5%. If we look at the channels, the value of the agency maintained steady growth.
Speaker #1: And the bank insurance was under pressure for the value growth due to a high base from last year. And also, because of the faced changes in product mix, and changes in the market environment.
Speaker #1: Our agency channel is pursuing steady growth and team optimization. It focuses on customer differentiation and optimized product supply to match customers' diversified needs.
Speaker #1: Its GWP was ¥185.3 billion in the first three quarters, up 0.5% year-on-year. And we also see the share of mid-tier and above customers increase by 6.3 percentage points to 33.6%.
Speaker #1: Thirdly, the team size remains stable. At the end of the third quarter, there were 182,000 agents, and the monthly average first-year premium per core agent was ¥91,000, up 27%.
Speaker #1: For the bank channel, it's still value-oriented. It strove to improve capacity building in channel cooperation, customer management, product and service system, team development, and digital empowerment.
Speaker #1: In the first three quarters, we deepened strategic cooperation and tailor-made products and services. Accordingly, we improved the resilience of the channel structure. The bank's GWP was ¥62.4 billion, up by 7.1%.
Speaker #1: And for our group channel, we played up. It's our strengths to explore new models of work site marketing, and inclusive finance. In the first three quarters, its GWP was 16.3 billion yuan, up 0.3%, of which work site marketing achieved new regular premium of 1.14 billion, up by 14.4% yuan a year.
Speaker #1: And we have served over 280 million people under inclusive insurance schemes. If you look at the P&C side, it enjoyed stable growth and improving underwriting profitability.
Speaker #1: For the first three quarters, it continued to focus on customer management and the service system. Its primary GWP was ¥163.2 billion, up 1.9%. It strengthened business quality control and optimized its risk reduction management.
Speaker #1: It also accurately assessed catastrophe risks and improved disaster prevention and response. And achieved a combined ratio of 96.2%, down 1.4 percentage points. For the auto insurance side, it continued to promote business quality and efficiency.
Speaker #1: And achieved 80.5 billion yuan in GWP, up 0.1%. We continue to optimize business mix, structure optimization, with the share of private vehicle auto premiums, up 0.4 percentage points yuan a year.
Speaker #1: We also improved customer management to enhance customer service and upgraded our mid-office platform to improve customer reach and management. The renewal rate of auto insurance policies for individual customers increased by 9.19 percentage points.
Speaker #1: For the non-auto insurance, we continue to optimize business structure and quality. The GWP was ¥82.7 billion, up 3.7%. We also deepened group customer management and expanded service scenarios in key industries.
Speaker #1: At the same time, we are also building different scenario-based products and leveraging the mid-office service platform to build a one-stop, full-service smart service system.
Speaker #1: And continue to cultivate new growth points for non-auto insurance. For agricultural insurance, we continue to optimize the claim processes and improve service quality and efficiency.
Speaker #1: If we look at asset management, facing the new low interest rate environment and capital market volatility, we continue to strengthen our market judgment to maintain risks properly.
Speaker #1: With predefined SAA, we executed disciplined and flexible TAA. Captured fixed income asset allocation opportunities amid interest rate fluctuations. And maintained resilient investment performance, as of the end of the third quarter, the group's investment assets exceeded 3.2 trillion yuan, up by 6.4% from the end of the previous year.
Speaker #1: Our annualized net investment yield was 2.4%, down by 0.2 percentage points. The annualized total investment yield was 2.5%, down by 2.7 percentage points.
Speaker #1: Well, that was my presentation on the performance in the first three quarters. Thank you. Let's start the Q&A. Thank you, Mr. Zhao, for your presentation.
Speaker #1: Now we'll start the Q&A. Well, if you want to ask any questions, please press star and one. And please identify yourself and your employer before asking any questions please ask no more than two questions.
Speaker #1: Well, we have the first question from Dongwu Securities. Thank you. Thank you. Thank you, Mr. Zhao, for your presentation. I'm Xuan Ting from Dongwu Securities.
Speaker #1: Of course, if we look at Q3, the profit and BVV are under stress, but CPS's numbers are quite solid compared to your peers. For example, your operating profit for life is growing, and the profitability of P&C business is also up by a lot.
Speaker #1: I have two questions. First of all, on the asset side, I remember last year you mentioned something about the 2026 prospects.
Speaker #1: Now, my question is also regarding the grand opening in 2027 in terms of the asset line. On the liability side, of course, we did not expect this kind of pressure for the second half of this year.
Speaker #1: So, what about 2027? Regarding the bank channel or your product strategy, etc.? Secondly, on the investment side, we know CPIC is a conservative or cautious investor.
Speaker #1: Now, actually, your investment yield is quite good. So my question is, in terms of SAA, in terms of equity investment, what's your view or idea?
Speaker #1: What's your view on the position or share of equity investment? Any specific ideas, etc.? Thank you. Thank you for the questions. Now, first of all, on behalf of Life, regarding the grand opening next year, we have already made the preparations.
Speaker #1: First of all, you see, we combined the grand closing with the grand opening. I believe we have told you before in the previous meeting for CPIC; we have quite an even-paced business.
Speaker #1: So I would say we have equal emphasis on the grand opening and grand closing. We focus on value. We continue to focus on our customer.
Speaker #1: So we strive to push our business. So we are cautiously optimistic about the grand opening for next year. For the next year, as a whole, well, since interest rate is going down, now, you see, actually, Q3 this year, we faced a lot of pressure because of the actually a lot of product termination in Q3 last year.
Speaker #1: And secondly, if we look at the regulatory trends, well, more and more stricter rules regarding market practice integrity, and also we need to be aware that there's a lot of market demand. So if we look at the preparation of our grand opening for next year, for the agency channel, we are going to focus on all levels of our customer segments. For products, we focus on, well, power life, and also health products, annuity products, and we will try to target or tailor-make our products to our customer needs.
Speaker #1: So for the grand opening, we will focus on, well, power incremental life and the power annuity. And for the agency, in terms of our sales force, we need to focus on organization growth and new recruitment and training especially focusing on the core agents.
Speaker #1: And in terms of the customer, we will use digital tools to improve their satisfaction and also increase the conversion ratio.
Speaker #1: In terms of the bank channel, well, this year we would say the bank channel faced quite some pressure. This year as a whole, but I don't think it's a fatal issue.
Speaker #1: Now, this year, I would say in terms of volume, well, in Q1, it's quite a lot of pressure, but in Q2, Q3, things were better.
Speaker #1: Now, for next year's grand opening for the bank channel, first of all, regarding the channel strategy, we are going to focus on big state-owned banks.
Speaker #1: Now, first, of course, the focus will be on the branches of those state banks. In terms of product, we are going to focus on value growth.
Speaker #1: We should have more competitive products. Especially what we need to match the products with the specific channels. For example, our whole life products, and annuity products, will be the focuses.
Speaker #1: And we are going to further increase the value for our customers. As for the bank channel, that's all I have to say regarding the bank channel.
Speaker #1: Well, thank you. I'll answer the second question. Especially on the investment side, in terms of quality—sorry, equity investment as a whole—we actually look at our overall SAA, our risk preference, and tolerance.
Speaker #1: Now, equity investment has a lot to do with the long-term economic growth of China. If we look at the macro side, in the long term, we are still positive.
Speaker #1: We do see a lot of resilience from China's economy. So I would say going forward, in terms of, well, technology growth and also other areas, the economy of China is still bullish.
Speaker #1: So, I believe the fundamentals are still very solid. Therefore, there is a possibility of a slow bull market, or a long-term slow bull market.
Speaker #1: So that gives us a lot of room for maneuver. But of course, SAA, and also the proper share of equity investment—well, all these questions—are company-specific issues.
Speaker #1: I would say any company should base these on its asset liability requirements, its strategy, and various constraints, so that they can come up with a more appropriate SAA or TAA, or share of equity allocation.
Speaker #1: For the macroeconomy, I would say that given the low interest rates in China, fixed income investment will face a lot of pressure in terms of achieving high returns.
Speaker #1: Especially for new investments. So equity investment should be able to bring in the high returns to improve our net investment yield, to complement the fixed asset investments.
Speaker #1: So it's inevitable. But how to better manage the volatility so that the equity investment will be placed under the overall SAA it can bring not only long-term risk-based return but also not to produce short-term impact on our investment yield.
Speaker #1: So, for CPIC, I would say guided by SAA, given all these kinds of limits or constraints, we are going to do it in a prudent way, in a proper and incremental way. We will not take one-sided or aggressive actions.
Speaker #1: We need to balance the yield, volatility, and long-term return and the current period financial challenges. I would say this is the way for us to for equity investment to contribute to our overall investment activities so that we can better manage or cover our long-term liabilities.
Speaker #1: But of course, equity investment is quite a complicated issue. There are various or different segments or styles for equity investment. We need to look very closely at the different sectors and how to do it on a regular basis. Of course, I believe there's a lot of rotation.
Speaker #1: Rotation of sectors. In the first half of this year, in Q3, we also see a very quick reversal of those rotations of those sectors.
Speaker #1: So I would say it's a very complex market out there. Our dividend high dividend high dividend strategy high dividend stocks strategy is still valid.
Speaker #1: So that we can have a quite good long-term comprehensive yield, is a very balanced approach. We will stick to it. It's a very well-tested strategy.
Speaker #1: I mean, the high yielding shares or stocks strategy. And given that, since the market now we are facing has a lot of new features, we need to also focus on growth areas for example, high-tech sectors we need to look out for new opportunities, new areas of growth.
Speaker #1: Of course, we need to look a lot of do a lot of work in this regard. So that is what we call the core plus core plus strategy.
Speaker #1: So we can have not only the long-term stable return but also when the market rotates we will be able to seize upon these opportunities.
Speaker #1: For example, recently we have seen quite a lot of adjustments in the high-tech sectors, but on the whole, we believe China still presents a lot of potential for growth in these high-tech sectors.
Speaker #1: So this kind of adjustment is also where the opportunity lies. Especially you can see there's a lot of free cash flow there. Many of those companies have a lot of you see barriers, entry barriers.
Speaker #1: So I believe there is still opportunity there. We will keep doing it, keep utilizing a diversified investment strategy to secure and accumulate our assets for the long run, to better utilize the satellite strategy so that these strategies can complement our core strategy.
Speaker #1: That is the high yielding stock strategy. Well, thank you. Let's welcome the next question. Well, I have a gentleman from Guota Haitong. Thank you.
Speaker #1: I have two questions. Number one, about next year's asset prospects or liability prospects. To be specific, actually starting from the July of this year, you are promoting power annuity which gives a lot of or more commission for the channels.
Speaker #1: So that your agents can get money so what about your grand opening for power annuity? Now, what about what's your target for volume for volume of business for the grand opening?
Speaker #1: Secondly, in terms of solvency ratio, given this kind of big volatility of the stock market, your solvency is quite stable. What are the reasons?
Speaker #1: Is it because of the, well, dropping interest rates? No. For example, if the stock market fluctuated by 10%, how will it affect your solvency?
Speaker #1: Thank you. I'll ask you the I'll answer your question. Number one, for the prospects, business prospects of next year. For bank assurance, I believe bank assurance will grow better than agency.
Speaker #1: That's my personal view. Secondly, I would say if we look at agency and the banker for agency, in terms of product—no, actually, what we have said in our interim report is that our products must be based on customer needs.
Speaker #1: We need to further improve it or optimize it. But of course, China is very big. There are a lot of differences between eastern China, western China, northern China, and southern China.
Speaker #1: So I would say we need to diversify our product offering. For example, of course, we are going to offer power products and also traditional products.
Speaker #1: We all have annuity and also whole of life products. So on these four dimensions, we are going to boost our sales so for next year's grand opening, I would say I would say for power annuity and power whole life products, we'll be our absolute focuses.
Speaker #1: For example, the share of power annuity will be higher than this year's share. And if we look at traditional products, they will become complementary products.
Speaker #1: For the agency channel. For the bank channel, it's similar to agency but different. It will focus on Power Incremental Life and Power Annuity for other products.
Speaker #1: Well, they will not be focused on that much. Well, second question regarding solvency. Thank you for your interest. Well, you actually did a lot of well, did some calculation.
Speaker #1: I would say our solvency by June is above 200%, and it's still about above 200% now. In terms of core solvency ratio, it was 144%.
Speaker #1: Actually, one percentage point higher than the previous number. So I would say our solvency adequacy ratio are always prudent or stable. That is thanks to our effective asset liability matching.
Speaker #1: Let me give you an example. Actually, our net asset grew by 9.3% by the end of Q3 this year. So I would say our self-driven capability is quite strong.
Speaker #1: With effective ALM and control on our business growth, as well as effective capital planning, I would say that through all these measures, through our self-driven profitability, we can replenish our actual capital, which is very good for our solvency ratio numbers.
Speaker #1: Especially if we look at the insurance side, we had a lot of a boost or underpinning from the insurance business. So we can accumulate internally our capital, and for the PNC side, the combined ratio is improving, business is growing, so I would say this is very positive and also for the solvency.
Speaker #1: So, of course, the market interest rate is actually quite low. It's dropping slowly, so it would have some influence on our solvency numbers.
Speaker #1: Now, the equity market volatility but of course, it will have some negative impact on our solvency numbers unlike the interest rate. Trend. But on the whole, I would say we have quite a stable solvency numbers.
Speaker #1: We are less impacted by the equity market volatilities. Now, you mentioned about the sensitivity issue. Well, of course, we can do some more thorough do some more complex calculation after the meeting.
Speaker #1: No, thank you. Let's welcome the next question. Now, we'll have a question from quite a Swiss. I have two questions. Number one, on MBV—no, actually, your MBV number dropped by 7%.
Speaker #1: What is your yearly target? Are you going to have a positive growth for the whole year? How can you make up for this? And the second question about the ALM.
Speaker #1: Now, I believe you have previously mentioned some indicators for the well. I mean, during your midterm or interim report—what about the numbers in September?
Speaker #1: So could you elaborate a little bit on this? That is to say your duration gap. Is it good? Do you have an effective measures?
Speaker #1: What is your target for your duration gap, etc., etc.? Now, let me answer your question. As of the end of Q3, our MBV negative growth was 6.5%.
Speaker #1: Well, that was kind of expected because well, we had quite high base last year, Q3 last year. So actually, it's not only CPIC, our peers, they are also having negative growth in Q3.
Speaker #1: Now, for the whole year, we are still aiming for positive growth of MBV, to be specific, number one. We need to play up our diversified channel strategy.
Speaker #1: That is agency, and also bank channel, and we also have a worksite marketing channel, or the group channel. So we will rely on all these channels.
Speaker #1: Secondly, for agency channel itself, we are going to focus on well, protection type products and the health insurance products. So that we can have more growth in terms of value.
Speaker #1: And for the bank channel, you're going to see that we're going to focus on high-end value growth. For worksite marketing, we're going to be more targeted. I believe our business model is more sophisticated.
Speaker #1: And if we look at the company as a whole, we're going to manage better manage our cost input and output. And for HQ and the branches, we need to have more we need to have more coordination, synergy, and better combination or integration of grant closing with grant opening.
Speaker #1: So that we can have a positive MBV growth for the whole year. Thank you. Let me answer the second question regarding the ALM. No, of course, there's some new rules regulatory rules on ALM of insurance companies.
Speaker #1: We also paid a lot of attention to the new rules. We will conducted a lot of research and study sessions. We will develop the relevant systems.
Speaker #1: We will adjusted some of our rules and the structures. Actually, even today, we actually we will actually on the group level, we are going to set up a standalone ALM body.
Top a standalone ULM body.
Actually, and a little bit more than the expectations.
So,
I want to say in the next 3, 5 5 years.
I believe the trend.
Will still be a downward 1 maybe slowly downward.
But the absolute interest rate is, is getting lower.
So, how much more can we go down? Further—go down further.
And maybe.
Short time there might be some kind of a short-term recovery rebound.
this, any
Any kind of marketers, fluctuation?
We will have this kind of long-term pattern and short-term volatility.
on the whole if we look at China as a whole,
And China has a very large economy, and the population is aging.
so, I would say,
With lowering return on Capital.
On the whole.
I mean, business or the economy is slowing down.
That is to say.
In the mid to long term, the interest rate is, is pointing downward.
And the macroeconomic controls are actually long-term.
Uh, interfere in intervention.
It is less focused, and is focusing less on short-term stimulus.
The Chinese government also wants to have better quality growth.
So, on the whole, I would say,
The mid- to long-term interest rate in China is going to decline slowly.
if you look at the structure,
Previously, we focused on real estate and infrastructure. Now, we are focusing on technology.
New and sustainability.
Now, previously, we focused on high Leverage.
No, we don't need this kind of very big meat and long-term financing.
So, I believe there will be more.
There will be less need for this kind of very large financing demand.
So, we need to prepare ourselves for these long-term changes.
But I don't think the interest rate will drop fast quickly.
I don't think it will do that.
because,
First of all, you see there are constraints.
For example, the interest rates bad for the banks also faced pressure.
For the Chinese government, they are going to use this kind of interest rate corridor.
To better help the banks better manage their spread.
And China's economy.
Is still recovering.
Uh, it's a process.
I would say.
You see some kind of old productivity is going out. Then there is going to be new quality productivity in China.
Production in China.
Should you see the global market—the overseas market—they are having higher or growing interest rates. So, China will be cautious.
Is it about low interest rates?
so, I believe
Overall, in the midterm and long-term, the interest rate will go down slowly, with short-term volatility.
Now, of course given this, uh, well, the equity investment will be a big issue.
Oci share for cic Equity. Investor is about 33%.
Uh,
up. I mean, higher a little bit than the first first half. Now, what do you say? Proper number of oci number. I don't think there is a consensus on this issue. Different companies have different approaches to this,
So there is no long-term consensus on the oci number. What is a proper 1?
Well, it depends on the product mix, ULM looks at preference and also tolerance for interest rate fluctuation. It's a very complex issue. I believe for CPIC, we would want a balanced approach.
Uh, balanced approach in terms of.
Accounting categorization.
Well, eventually I believe
Well, you will be highly correlated with our investment strategy.
We want to have high-yielding dividends, high dividend yield in stocks.
and also, at the same time,
Have some more new areas of investment yield.
So not only will we secure the long-term investment yield, but we will also secure some short-term investment—high investment yield. But of course, it will be difficult to do.
You will find it hard to locate the proper assets.
So you will be hard to satisfy on both fronts.
So, we are also thinking about this.
maybe we need to further, optimize our
High dividend yielding stock strategy.
If you want to have a stable net investment yield,
We should, uh, look for, well, better yielding.
Stocks.
But if we want to be new from short-term volatilities, we need to have a where we should have a higher oci share.
We also want to have a
very appropriate.
Price Gap. Trading Gap.
and also,
We would want.
Contribution.
to the
current period profit.
So, to do that, we—we—we—we can also...
Put these assets under the TPL category.
So it depends on the asset's performance in the market, so it should be considered on a case-by-case basis.
Issue.
No, uh, since the meeting is about to end, we'll only have time for one last question.
Thank you.
I'm noi from Guang. Gwanggong development, Security's number 1 on PNC.
Now command ratio improved to 96.2%. Now my question is that what's your prospect for the whole year and for next year
And if we look at the premium growth, well, not a lot of good growth there.
What will be the gross area?
and also the at
is lower than the net profit.
So,
Short-term investment yield is negative. So, why is OPAT smaller than the net profit?
Okay.
To answer your question on the PNC side, for PNC, the Q3 combined ratio improved.
I would say that's very good news because we kept improving our quality of business.
So be it: auto insurance, non-auto insurance, and combined ratio.
Uh, are declining.
now, if we look at the quarter on quarter basis,
If we say Q3 is always having a lot of natural disasters and catastrophes,
and we also had this year, I mean had a lot of disasters,
So, Q3 did worse than Q2 because of the catastrophes.
Bigger impact for Q3 this year.
But excluding that, I would say,
The trend is very positive.
and if we look at Q4,
if there is I mean if a disaster a natural disaster remain the same as last year, then, for the whole year, I believe the trend is improving all the way.
So, we are quite confident about our profitability.
Uh, for PNC business.
So for business development this year, because you see, if the new, if China's the the vehicle Market, that's a positive growth. So our auto insurance premium actually
Actually slow down.
And Q4, I don't think there will be a reboot of a new car sales in China.
And uh, of our side.
where,
Actually our group customers very hard.
And also, we are improving our customer service.
Uh, especially I see. You can see for the non auto business, the trends are more positive. There's growth expected.
The secondly on the opat issue. You see op a t and for the cpic is quite stable up by 5.6% year on year to 3.
This is, well, this has met our expectations—OPAT and the net profit—because of the different caliber and the calculation.
So for the new net profit under the new accounting standards—and it includes more contents, I mean.
It involves 1 of factors.
Etc., one issue, one item now—occurring items for OPAT.
Well, for some in Insurance Groups.
Actually, we use OPAT to reflect the sustainability of our insurance business. So, OPAT is an indication of a stable business.
Development.
And OPAT actually excluded short-term volatility.
Short-term investment volatility, for example.
So, some of these are kind of short-term,
uh,
Unrealized gains and unrealized losses will be excluded.
So that's different from the net profit, and the OPAT actually excluded a lot of the non-recurring or one-off gains or losses.
And we also have this kind of non-insurance subsidies.
And actually, we don't look at their long-term investment yield.
So, that is also a factor, OPAT, and the net profit. Uh, we also have different actual assumptions.
So it's not, um, 100% comparable, so it's only natural that there will be a difference.
Between OPAT and the net profit.
So, I wouldn't say OPAT should always be bigger than net profit.
So,
Sometimes it is just natural.
Well, thank you very much for your attention and also for your questions. If you have a more questions, please contact our IR team after the meeting.
Teleconference. Thank you very much. Bye-bye.
