Earnings Call: Q3 2020

Oct 28, 2020

Earnings release

Good evening, ladies and gentlemen. Welcome to China Life 2020 third quarter results briefing teleconference. My name is Li Yinghui, securities representative of the company. Liming Wang, vice president, chief actuary, and board secretary, Huang Xiumei, vice president, Zhan Zhong, vice president, as well as heads of relevant departments participate in today's briefing. The briefing will start with a five-minute presentation on the company's third quarter results, followed by a Q&A session for around 20 minutes, during which our management will take your questions. Let me hand over to Grace for the briefing introduction. Hello, everybody. Good evening and good morning. This is Grace speaking. I see except that we have one representative for the English session this time, so thank you for your time. In the first three quarters of 2020, under the complicated and severe external environment, China Life closely adhered to the strategic deployment of China Life revitalization, proceeding well with both pandemic control and business development, and actively pushed forward all tasks according to the requirements for high quality development, thus maintaining the leading market position with a good development momentum. Firstly, major progress in business development. In the first three quarters of this year, we achieved the revenues from the insurance business of CNY 543 billion, an increase of 9.4% year-on-year. First-year regular premiums amounted to CNY 106 billion, an increase of 7.1% year-on-year. Our renewal premiums amounted to CNY 368 billion, an increase of 10% year-on-year. In short term, amounted to CNY 66 billion, an increase of 9.3% year-on-year. Secondly, achieved a continued growth in our business value. Our percentage of first-year regular premiums in premiums from new long-term insurance policies was 98%, an increase of 0.13 percentage point from the corresponding period of 2019. Also, our first-year regular premiums with the payment duration of 10 years or longer amounted to CNY 48 billion, which accounted for 45.8% in our first-year regular premiums. Prioritizing our business value growth, we continued to accelerate development of our protection-oriented business, and the percentage of premiums from designated protection-oriented products and first-year regular premiums increased by one percentage point year-on-year. The value of new business for the first three quarters of 2020 grew by 2.7% year-on-year, and likely, I think we are still the only positive result in the sector. The surrender rate was 0.85%, a decrease of 0.82 percentage point year-on-year. Thirdly, the sales force remains stable. With the sales function restructuring, a strengthened individual agent business sector in coordination with other business channels, which is the definition of 一体多元 being completed, we maintained our sales force strategy of improving quality while expanding the size, and focused on our day-to-day management and quality enhancement, aiming for the high-quality development of our sales force. As at the end of the third quarter, our total sales force was 1.66 million, including 1.58 million agents in our individual agent business sector, which remains very stable in general. Fourthly, constantly enhanced our investment capability. As at the end of the reporting period, our investment assets reached CNY 3.88 trillion, an increase of 8.5% from the end of 2019. The company deepened the market-oriented reform of its investment management system, coordinated asset allocation, and entrusted investment management at current level, and enhanced our investment capabilities through research of asset types and optimization of investment strategies. In the third quarter of 2020, we seized a very good opportunity of interest rate hike to increase our allocation to government bonds with long durations, flexibly control the exposure of open market equity investments by taking advantage of market fluctuations, optimize the structure of our equity holdings, and two gains, one appropriate. In the first three quarters, we achieved the growth investment income of CNY 147 billion, an increase of 9.3% year-on-year. Our gross investment yield reached 5.36%, which is also quite good. Net investment income was CNY 123 billion, an increase of 7.7% year-on-year, and net investment yield reached 4.47%, which is higher than the first half results. Our net profit also was CNY 47 billion, a decrease of 18% year-on-year. Our core solvency ratio and the comprehensive ratio company still very solid, reached 255% and 264% respectively. For the next stage, we will continue to adhere to the strategic deployment of China Life revitalization, take proactive efforts to fulfill the overall target for the whole year, and make proper planning for the year of 2021. In addition to the regular pandemic control and focus of ensuring stability on the six fronts and maintaining security in the six areas, which is a very heated topic in China now, we will, according to the requirements for high-quality development Strengthen business value creation, push forward reform and innovation in greater depth. Firmly maintain the bottom line of risk management and control, and strive to promote China Life revitalization to a new stage. Thank you, loads. Okay, now we are ready to take your questions. Please. Thank you. Ladies and gentlemen, we will now pull for questions. If you would like to register for a question, please press star 1 on your telephone. Thank you. Once again, ladies and gentlemen, if you would like to register for a question, please press star 1 on your telephone. Thank you. Our first question comes from Leon Ji with Daiwa. Please go ahead. Thank you. Oh, hi. This is Leon from Daiwa, and thanks for taking my question. My first question is on our next step strategy for China Life revitalization. Since 2 years ago when we launched the China Life revitalization strategy, I think all our operating metrics have seen very steady improvements. At this point of time, given our steady improvements in VNB, margin, agency headcount, etc., it seems further improvements on that matrix might not be that kind of low hanging fruits compared with 2 years ago. What specific measures and what are the specific areas that we want to focus on in our next step of our China revitalization to actually go for an extra mile in our strategy down the road for 2021? We do understand that in particular from a relative basis, now we are facing a much higher basis than 2 years ago. Secondly, a question on Ant. China Life, both your major shareholder, the group company and also the listed company, are one of the biggest external investors for Ant Financial, especially after its IPO. I think we might be trying to explore more strategic operations with Ant. If management could share more insights on our expectations and plans in order to realize the strategic and operational synergies with Ant, that will be much appreciated. Thanks. 第一个问题是来自大和证券的分析师，他有两个问题，第一个问题是关于重振国寿的下一步的举措。公司提出重振国寿的战略到现在已经接近两年了，我们的所有的经营指标都有了大幅的提升，包括我们的新业务价值、新业务价值率，还有代理人产能方面都看到了很强的进步。那么在未来我们会采取哪些措施，或者说有哪些其他的领域来保证我们的重振国寿的战略能够顺利地推行下去？因为分析师他理解，在2020年，我们的业绩是有去年的一个相对比较低的基数，而今年的基数是非常高的，所以我们会有哪些更强有力的措施来保证增长的持续性。第二个问题是关于蚂蚁集团的。我们中国人寿集团以及上市公司都参与了前期的蚂蚁的融资，所以在蚂蚁集团进行IPO以后，能否分享一些公司对于双方未来的进一步合作方面的规划，以及我们将希望产生何种的业务的协同效应。张总回答第一个问题，来。重振国寿的话，我们现在主要的载体就是通过鼎新工程在做一个改革。那鼎新工程实际上是涵盖了我们的前台、中台、后台。前台的话，一体多元的布局，我们会继续持续深化，包括我们的大个险，以及我们多元板块，我们继续会去做这种深化。那中台的话，实际上在我们的运营，我们的客服，我们的财务，都会去做很多的这种改变。First question about the next step for China Life revitalization. Our reform mainly carried out through Dingxin project. In this project, we have measures on our front end, middle end and back end. At the front end that we have mentioned, we will deep the integration and the coordination of 一体多元. That means that strengthen the individual channel in coordination with other channels. In the middle end, we will deepen the cooperation and the synergy from the operations, finance and supporting functions. 我们在明年的话，会去完成我们共享服务中心的这样一个建设，进一步地去加强我们运营和财务的这种服务共享能力，并且延伸到我们的销售端和风控端。这样的话，实现更好的专业化的分工。同时，我们的研发分中心也会在明年会有比较好的这种布局，来提高我们科技的运用。同时我们在投资端，我们也会有比较好的这种市场化的机制会引入，会去运用。 In the middle and next year, we plan to set up a shared service center. That means we will have shared integrated operation center and finance center that can service our sales channels as well as the risk control. That means we will have better specialization. We also plan to set up the R&D subcenter to support the technology application. In terms of investment management, we will also have the market-oriented mechanism for our investment team. 我想这个是我们去应对明年业务发展的一个基础面。同时我们在明年的一些具体工作当中，我们会以价值为核心，做好我们的客户服务，做好我们销售队伍的整个发展。明年会有比较大的挑战，但是我们有信心去战胜这些挑战。 Those measures I mentioned all tackle the fundamentals of the company that can help our company improve our fundamentals to address the challenges of next year. We will continue to carry out the strategy of prioritizing our business value, and also to provide better service for our customers. Even though there are challenges for next year, we are confident, and we are prepared to work hard to address those challenges。我来回答关于蚂蚁的这个问题。确实如您所了解的，中国人寿集团和上市公司参与了蚂蚁的前几轮的融资。这次蚂蚁的成功的上市，相信会给像我们这样的投资者带来比较丰厚的回报。这是想说的第一点。第二点，就是我们参与蚂蚁的这个投资是从财务的角度进入的。但是由于蚂蚁是一个能够提供支付解决金融服务，包括微贷等等的全方位的服务的这样一个有一定金融属性的科技企业，那我们相信在未来，在很多领域是存在合作的机会和可能的，也是需要我们视它未来的业务发展，以及我们公司的业务的需要，来探索在多个领域的合作的机会和可能。About your question on expectation for our cooperation with Ant Group. As you know, China Life Group and the listed company both participated in the previous series of financing of the Ant Group, and its IPO will bring abundant financial return to investors like China Life. Although our investment was first from the perspective of financial in the first place. As we know, the Ant Group is the leading company in terms of payments solutions, and also service of the financial, and also micro loans to small companies. We think there are possibilities for the future cooperation with China Life, and we will proceed from the demand of our business and to explore more opportunities for cooperation of the two sides. Thank you very much. Thank you. Our next question comes from Scott Russell with Macquarie in Hong Kong. Just go ahead. Thank you. Yeah, good evening, everyone. Just one question really about the sales in the third quarter, the first-year regular premiums, they were up 7% year-to-date, but that means they were down 25% in the September quarter. That weakness seems odd given all of the observations around China getting back to normal. I would be interested to understand whether your agents are now able to do face-to-face meetings, or to what extent the residual effects of the pandemic are impacting their ability to do business. Maybe also a comment on consumer demand. Do people now want to buy life insurance products, or have you seen demand fall away? Just some explanation of the weak sales number in Q3, please. 下一个问题是来自麦格里的分析师。据他观察，我们的五年期交在单三季度是有25%的下滑。所以这个公司能不能解释一下三季度销售如此弱的原因，特别是在国内疫情防控已经取得了比较好的成效之后，为什么还是有这样的负增长，以及疫情残留的影响对于寿险有多大？代理人是不是还是不能恢复到正常的线下销售，以及在客户的需求方面，是否看到了对于保险产品的需求有比较好的恢复？下滑的话，你看到了，可能这两天陆陆续续的各个公司的季报都出了，这个是个行业性的问题，可能不光是中国人寿。我想首先它是一个共性的问题。 As our main listed companies all release their third quarter results, you can see there is a common big growth of the sales in the third quarter itself for the whole sector. 第二个就是疫情其实对整个国家，包括客户，包括队伍，都还是有比较大的影响。当然这种影响它的程度能够持续到什么时候，我觉得我们现在还不能做出一个非常准确的判断。当然在这个过程当中，疫情防控和业务发展在共同推进的过程当中，业务发展是肯定受到了一些制约的。我想这也是在这种新常态，每一家公司，包括我们在内，要不断地去探索一种新的方法的这样一个基础吧。 The COVID-19 still has very deep and profound impact on our national economy, as well as on the life insurance industry and on the agent team of different companies. As for how long the impact will linger on, they are still too early to make precise judgments. We should say it actually indeed brings restrictions on the business development, and we should regard it as a new normal and to explore new ways of development for the life insurance business. 当然三季度我们也做了非常多的这种工作，一方面是本身季度今年的业务的这种发展，包括队伍的重新整理，同时我们也在准备明年的一些开门红，包括产品，包括客户积累等诸多的这样一些工作。 Also in the third quarter, we have done a lot of work. Apart from the regular sales, we have further tidied up our team and to enhance the fundamentals of the team, and also to make preparations for the jump start of next year. 最后您谈到的一点客户需求这块，我们认为它是两面性的。一方面这个疫情的话，对于客户在保险的这种需求上面，其实激发了他的这种保险需求。但另外一方面，其实这种疫情带来了部分客户的经济收入的下滑。 You also mentioned the customer demand. We should say the impact from COVID-19 on customer demand are two sides. On the one side, it aroused the customers' awareness of the protection and it may increase some customer demand. But on the other side, it also reduced the family income of some customers and also bring some difficulties for the sales. That's all for the answer. Thank you. Can I quickly follow up? A separate question, just quickly. There was an impairment loss in the third quarter of CNY 6.3 billion. Is that equities or bonds? Can you confirm whether there was a default? Given the stock market rose, it's more likely to be fixed income. Just interested in where that came from. 另外就是想快速地确认一下，三季度我们计提的减值，它具体是来自于债券还是权益类的，是不是有违约？我们三季度的减值全部是来自于权益。今年以来我们的债券组合是没有出现任何的违约的情形的。So all of our impairment loss comes from the equity investments. In this year, there's no defaults on our bond portfolio. 补充说一句，和同业相比，我们的减值政策是更加严格的，也是更加审慎的。One thing to be explained, compared with our peers, our standards for impairment loss recording is more strict and more prudent. That's all for the answer. Okay, thank you. Thank you. Our next question comes from Kailesh Mistry, with HSBC in Hong Kong. Please go ahead. Thank you. Hi, good evening. Thank you for taking my question. Just to follow up on Scott's first question, actually. Given the slowdown in new business growth and FYP in the third quarter, do you still expect to achieve positive NBV growth in full year 2020? What strategies are you putting in place for 2021 or any targets that you're setting yourself in terms of agent growth, new business growth, and any quotas you're putting around jump start? Thank you. 下一个问题是来自HSBC的分析师，他也是想接着刚才的第一个关于新业务价值的问题，继续问一下。考虑到三季度的新业务价值增长，还有新单增长都比较弱，那么公司全年是否还能实现新业务价值的正增长？在2021年，关于新业务价值，还有关于队伍方面，有什么样的希望或者是目标，在开门红阶段又有哪些实现目标的举措？是这样，其实你这两个问题我用一句话都能概括，我们今年的核心追求跟明年的核心追求是不变的，都是以价值为中心的。 Our pursuit for this year and next year will all be the same one, that is to prioritize the new business value. 那么今年到第三季度增长率2.7%，实际上刚才丹荣也介绍了，我们三季度还是干了很多事情，包括队伍加强，包括客户积累，包括为明年一季度的业务发展做各项准备，也是做了很多事情。 We achieved 2.7% growth in the new business value for the first three quarters. As we have mentioned earlier, in the third quarter, we actually did a lot of things. We reinforced our agent team and also accumulated more customer resources and also prepared for the jump start of next year. We have done a lot of work apart from the regular business development. 所以这些工作的开展，实际上也是回答你刚才的问题，既考虑今年的result，又考虑明年的projection，两个都考虑了。 That is also part of our answer. We should do both things in the third quarter. At the same time, we consider not only the result of this year but also the project for the next year. Okay, this is the final question, and it wraps up the Q3 results briefing today. If you have further questions, please keep in touch with our IR team. Thank you for your participation. Bye. Bye bye.