China Life Insurance Company Limited (CILJF) Q1 2023 Earnings Call Transcript

China Life Insurance coverage Firm Restricted (OTCPK:CILJF) Q1 2023 Earnings Convention Name April 27, 2023 7:00 AM ET

Firm Individuals

Grace HOU – Head of Investor Relations

Convention Name Individuals

Shengbo Tang – Nomura

Michelle Ma – Citigroup

Rick Chow – Morgan Stanley

Operator

Good night, girls and gents. Welcome to China Life’s 2023 First Quarter Outcomes Briefing. My title is Li Yinghui [indiscernible] of the corporate; Mr. Zhao Peng, President; [indiscernible], Proposed Vice President; Mr. Ruan Qi, Vice President; Ms. Yang Hong, Vice President; Mr. Zhao Guodong, Assistant President and Board Secretary; Mr. Bai Kai, Assistant President; Ms. Cheng-Hsien, Impartial Director in addition to heads of related departments in right this moment’s briefing.

The briefing will begin with a five-minute presentation on the Firm’s first quarter outcomes, adopted by a Q&A session for about 25 minutes and is carried out in consecutive interpretation.

Now let me hand over to Grace, Head of the IR Division, for the presentation of first quarter outcomes.

Grace HOU

Girls and gents, good night. That is Grace talking. So within the first quarter, China Life pursued high-quality improvement and prioritized the enterprise worth progress, sustaining a solidified market-leading place within the business.

Firstly, our new enterprise grew quickly with each gross written premiums and new enterprise worth sustaining primary within the business. We achieved revenues from insurance coverage enterprise of RMB 327.2 billion, a rise of three.9% year-on-year. Our premium from new insurance policies amounted to RMB 117.7 billion, a rise of 16.6% year-on-year. Additionally, the worth of recent enterprise for the primary quarter elevated by 7.7% year-on-year, which recovered optimistic progress from the detrimental and past consensus of the market.

First, the common premiums reached a historic excessive at RMB 71.5 billion, a year-on-year enhance of 9.4%. Specifically, our first common premiums with a cost length of 10 years or longer had been RMB 20.1 billion, a rise of 5.1% year-on-year and proportion within the first common premiums was 28.1%.

Renewal premiums amounted to RMB 209.6 billion, a lower of two.1% year-on-year and short-term insurance coverage premiums amounted to RMB 35 billion, a rise of 0.7% year-on-year. Additionally, the give up charge was 0.4%, a rise of 0.12 share factors year-on-year.

Secondly, our gross sales pressure was steadily stabilized with enhanced high quality, regaining mortality steadily. Centered on implementation of the gross sales channel strengthening program, the corporate continued to drive insurance coverage enterprise improvement by way of protecting brokers, reinforce agent recruitment and improvement and consolidated the inspiration for its improvement in order to push ahead the transformation of the gross sales crew to be extra specialised {and professional}.

On the finish of first quarter, our complete gross sales pressure was RMB 0.72 million, of which particular person agent sector was RMB 0.66 million, typically secure as in comparison with the earlier quarter, exhibiting a outstanding signal of stabilization. Meantime, the standard of our gross sales crew continued to enhance with the month-to-month common first common premium per agent, rising by 28.8% year-on-year.

Thirdly, the corporate adhered to the asset availability interplay, releasing a year-over-year enhance in funding revenue. We accelerated our allocation to steadiness by profiting from alternatives led to by rate of interest hikes in area to mitigate its strain in asset allocation. Additionally, intently follow-up adjustments in fairness markets as realized unfold revenue by feeding acceptable alternatives with the intention to reinforce our funding yield.

First quarter, we achieved a gross funding revenue of RMB 52.9 billion, a rise of 18.8% year-on-year. Our annualized progress charge funding yield reached 4.21%, a year-on-year enhance of 33 foundation factors. Additionally, our non-investment revenue was RMB 45.6 billion. Annualized web funding yield was 3.62%.

In the meantime, our complete belongings and funding belongings had been RMB 5.46 trillion at RMB 5.24 trillion, respectively. Because of the influence of the change in funding revenue an replace of low cost charge assumption of outcomes of the corporate’s conventional insurance coverage contracts, our web revenue beneath the previous accounting requirements was RMB 17.9 billion, a rise of 18% year-on-year, whereas beneath the brand new accounting commonplace, our web revenue was RMB 27.3 billion, a rise of 78% year-on-year.

Please be reminded that for higher market understanding of the shift between previous and new requirements, China Life adopted completely different requirements for reporting ranging from this yr. Any comparability between firms needs to be primarily based on the identical commonplace to keep away from misunderstanding.

Our core and complete solvency ratio had been 447.53% and 210.19%, respectively, the rise of three.94 and three.41 share factors from the tip of final yr, respectively, which continues to stay at comparatively excessive ranges with probably the most strict full implementation of C-ROSS Part II. Thanks.

Unidentified Firm Consultant

Thanks, Grace. We now start the Q&A session. Within the curiosity of time, please restrict your inquiries to not more than two, and please tell us your title and your establishment. Now let’s have the primary query, please.

Query-and-Reply Session

Operator

Thanks, girls and gents. We are going to now ballot for questions. [Operator Instructions] Our first query comes from Shengbo Tang with Nomura. Please go forward. Thanks.

Shengbo Tang

Hello. Thanks very a lot, administration, for the alternatives and congratulations particularly on the superb outcomes. So my query is concerning the agent quantity. And will you give us some steerage on the variety of brokers as a result of we see first quarter, your variety of brokers already fairly regular. So it is a chance, we could have a optimistic variety of agent progress for this yr.

And likewise concerning the enterprise of agent first yr premium, our understanding first quarter was fairly robust by way of sale of recent enterprise, primarily due to the financial institution insurance coverage. So may you give us extra coloration on the way in which of recent enterprise within the agent channel? Thanks.

Grace HOU

[Foreign Language]

Unidentified Firm Consultant

[Foreign Language]

Grace HOU

So concerning the agent quantity. We’re pleased to say that the overall gross sales pressure quantity has been stabilized within the first quarter, though it nonetheless recorded a 1% detrimental progress in contrast with the tip of final yr. We see an excellent signal that it has been enhancing from month to month in March this yr after 24 months consecutive detrimental progress. For the primary time, we see a optimistic progress, single-month progress within the agent quantity.

So this reveals that our exhausting work in final yr to enhance the agent crew constructing has proven superb outcomes. In final yr, China Life had the most effective agent gross sales declining and recorded the very best progress within the per brokers productiveness progress.

And this yr, we proceed to implement the agent reform applications and can perform a collection of reform because the agent crew reform and the system reform and we’ll have extra measures to reinforce the outcomes of the reform.

So this yr, our pointers or our goal will obtain efficient enhancement on the agent high quality in addition to stabilize for progress of the agent scale. We need to see that the standard progress is on the first place. On the situation that we are able to enhance the standard, we’ll begin to focus extra on the dimensions of the gross sales pressure. However all the dimensions progress needs to be primarily based on enhanced high quality. That is all for my reply, thanks.

Let me take the second query. We focus each on the dimensions of the enterprise and in addition the enterprise worth progress and we prioritize the enterprise facet of progress. Within the first quarter, our first yr common premium recorded amounted to greater than RMB 70 billion with a rise in charge of 9.4%. And the enterprise of 10-year or longer cost length amounted to greater than RMB 20 billion and with a progress charge of 5.1%. That is the most effective outcomes we have now been reaching after the get away of the pandemic.

From completely different channels within the particular person agent enterprise sector, the FYRP progress charges was 5.9%. And the enterprise with 10-year or longer cost length, the expansion charge was 5.1%. As from our data with this efficiency has been higher than most of our friends.

And within the bancassurance channel, the FYRP progress charge was 33.6%. It is a little bit decrease than the business common. That’s as a result of we take note of each scale and the enterprise worth. We bought extra enterprise with cost length of 5 years or longer. So our product combine is best than our friends.

And the gross sales from the development after April this yr, we have now been seeing enchancment in the entire indicators of enterprise. So on this yr, we’re absolutely assured concerning the progress of the brand new enterprise in addition to the brand new enterprise worth. Thanks. Let’s take the subsequent query.

Operator

Thanks. Our subsequent query comes from Michelle Ma with Citi. Please go forward, Michelle. Thanks.

Michelle Ma

Thanks. Thanks, administration for giving me this chance to lift my query, and first, congratulations on the primary quarter outcomes. So I’ve two questions. So first is concerning the 3.5% entire life – the entire life long-term financial savings product. So plainly China Life is extra disciplined or have really has extra concern over the sort of product versus our friends. Might I do know the rationale behind and in addition possibly within the second half, what’s our product technique? That is the primary query.

And second query is concerning the earnings and the completely different accounting requirements, it seems to be like there’s a large distinction. I ponder given the very sound solvency place we have now at the moment after the complete adoption of the solvency C-ROSS II scheme, I’m questioning whether or not we’ll take into account if our dividend cost base is predicated on the unique commonplace, then ought to we take into account to pay out extra for dividend? That is my second query. So I’ll translate myself.

[Foreign Language]

Grace HOU

Okay. For the entire life that we expect that the curiosity danger and the chance for our asset and legal responsibility is greater than the opposite merchandise as a result of the durations for these merchandise could be very lengthy. So we’re prudent for growing these merchandise. Particularly for the Q1, we expect that it’s not a superb time to have the long-term bond funding.

We pay extra significance for our asset legal responsibility administration. In order that the proportion of our entire life merchandise enterprise are comparatively a lot decrease than our friends. And for the long run, we’ll hope that we’ll pay extra consideration to the curiosity danger administration. And we can pay extra consideration to the tempo of growing completely different sort of product along with our – the prospect of asset allocation, particularly the long-term, lengthy length asset allocation. So that is my reply. Thanks.

Michelle Ma

[Foreign Language]

Grace HOU

Okay. We’ve got time for the subsequent query. Effectively, the dividend coverage as a result of we have now adopted a transitional interval coverage. So this yr, the web revenue will probably be completely different beneath every share and every share reporting. And concerning the particular intervals in payout basis, we have now been finishing up analysis on this regard.

And concerning the dividend coverage in 2023, primarily based on the precise efficiency outcomes and in addition according to the regulation from the regulator and in addition according to the articles of affiliation of the corporate. We are going to take into account our dividend coverage with consideration to the shareholder rewarding and in addition the solvency necessities in addition to the requirement from the administration and operations.

Unidentified Firm Consultant

Okay. Subsequent query, please.

Operator

Thanks. Our subsequent query comes from Rick Chow with Morgan Stanley. Please go forward. Thanks.

Rick Chow

Okay. Thanks, administration for the chance. Congratulations on the outcomes. That is Rick from Morgan Stanley. So simply two questions from my facet. The primary is concerning the long-term [indiscernible] product. And we have now the 5% FYP progress of 10 extra years cost length. Simply questioning the breakdown product if CI vital models and the long-term saving merchandise all achieved optimistic progress and what is the administration’s expectation of CI merchandise? Have we seen the restoration in current months?

And the second query is about web funding yield. In first quarter, firm’s web funding yield is 3.6%. However I bear in mind for the primary quarter 2022 and in addition for the fiscal yr 2022, all of us achieved 4% web funding yield. So we noticed just a little bit lower. And so can administration give us extra coloration on web funding yield and the judgment of rate of interest.

[Foreign Language]

Grace HOU

And concerning the first query, we have now been paying extra consideration to the enterprise with a 10-year or longer cost length. Within the first quarter, we achieved progress charge of 5.1%. And until now, these progress charges have been higher than this Q1 quantity.

However concerning the vital unit enterprise, sadly, the brand new enterprise nonetheless had a detrimental progress. And the entire business additionally recorded a big web yield progress within the vital models enterprise and I believe a number of causes attributed to this detrimental progress.

And firstly, prior to now few years, the business achieved a file progress within the vital models enterprise, according to the file progress of the gross sales pressure and in addition due to some insurance policies within the healthcare system of China. And secondly, in 2021, there was a revision on the life desk of the life insurance coverage business that launched a few of the prospects’ demand upfront. And thirdly, due to the development within the healthcare expertise and well being checks abilities, there are quite a lot of irregular state of affairs for our potential policyholders. In order that they have some limitation in making use of for coverage and in addition to use for greater than a brief.

Nonetheless, we expect the vital models nonetheless had a big potential area for progress. Firstly, due to the insurable individuals, the group of people who will probably be eligible for the vital models merchandise will probably be rising. And secondly, at the moment, the sum assures common is barely RMB 100,000. We expect that within the subsequent decade, there’ll – this determine will enhance 2x to 3x.

And eventually, with the development in our danger management measures, we could have extra space for the vital models merchandise in addition to insurance coverage/service and insurance coverage/expertise, extra wider scope of enterprise. And likewise with this management enchancment, we are able to present insurance coverage to individuals with a minor illness or continual illness. This can even present large area for future improvement.

And from the corporate’s perspective, we paid nice consideration on the expansion of the vital models enterprise. We need to improve the gross sales of long-term medical insurance. And primarily based on this, we have now been making full preparations by way of KPI of the branches and in addition product choices in addition to the service to prospects. We need to obtain restoration progress on the vital models enterprise. However we should always admit that the expansion of this regard will probably be slower than the restoration of the long-term financial savings or enterprise out of the wealth administration goal.

And second query concerning the web funding yield. In first quarter, our web funding yield was 3.62%. That’s 35 bps decrease than the corresponding interval final yr.

First purpose is that the timing of the dividend is completely different. So final yr, we enhanced the allocation into funds and in addition fairness kind non-standard monetary belongings. And we did not obtain a few of these dividends within the first quarter. And so the dividend revenue this yr is decrease than first quarter final yr. And this example will enhance as time goes later this yr.

And positively, as a result of the rate of interest is declining in China, the fastened revenue asset funding return has been declining. The newly added fastened revenue had a decrease funding yield than final yr. And likewise a few of the present fastened revenue belongings additionally mature this yr. So normally, the fastened revenue investments yield is decrease than the previous years. It is a widespread phenomenon in the entire business.

To deal with this challenge, we’ll proceed to hold out the funding pointers primarily based on long-term investments, prudent funding, and in addition value-oriented investments to deal with the challenges of the rate of interest downturn. And we’ll improve the allocation into countercyclical belongings and to allocate extra to the long-term monetary belongings and a few to extend the allocation into the excessive dividend shares in addition to the choice belongings with secure funding return. Thanks.

Operator

Okay. We’ve got already run over the time restrict. Are there different questions on-line nonetheless? No. This concludes right this moment’s briefing. When you have any additional questions, please be happy to get in contact with our IR crew at any time. Thanks for participation. Goodbye.