Earnings Call: Q3 2018

Oct 26, 2018

Earnings release

My name is Li Yinghui. I am the Securities Representative of the company. Mr. Li Mingguang, Vice President, Chief Actuary, Board Secretary, and general managers of relevant departments participate in the briefing. Today's briefing will start with a five-minute presentation on the company's third quarter performance, followed by a Q&A session for about 20 minutes. Now let me hand over to Ms. Hou, Head of the IR Division, for the presentation. Thank you, Madam Li. Now I would like to report our first, third quarter report to everyone. In the first three quarters of 2018, facing the complicated and severe external environment, the company adheres to strategic consistency and tactical flexibility, and steadily pushed forward various tasks according to the requirements for high-quality development. Firstly, the company firmly remained a market-leading position and renewal premiums became stronger driving force for the business development. In the first three quarters of 2018, the company achieved revenues from insurance business of CNY 468 million, an increase of 4.1% year-on-year, maintaining its leading position in the market. In particular, the company recorded renewal premiums of CNY 300 and 106 million, an increase of 28.7% year-on-year, which demonstrated a strong driving force of the renewal business. Secondly, the company promoted the product diversification strategy in great depth, and its business structure was constantly optimized. The percentage of premiums from the top five insurance categories in long-term personal premiums decreased by 70 percentage points year-on-year, and the long-term protection-oriented business developed at a faster speed. As at end of September, the surrender rate was 4.5%. Thirdly, the sales force remained stable in its size with enhanced quality, and the sales transformation began to take effect. As at the end of September, the scale of the company's sales force reached 1.83 million, which was basically flat as compared to the end of June. In particular, the number of our exclusive individual agents in the exclusive individual agent channel reached 1.4 million, an increase of 40,000 agents from the end of June. Meanwhile, the average agents on a monthly basis for the sales protection-oriented products increased by 49.7% year-on-year, with the quality of the sales force improved. Fourthly, the allocation of fixed income assets was satisfactory, but equity investment income was under pressure. At the end of September, the company's investment assets was over CNY 2.7 trillion. In the third quarter of 2018, the company continued to seize the opportunity of the interest rate hike and increased investment in fixed income assets with long duration. The company also consistently optimized the structure of its equity asset allocation. However, the equity assets income of the company in the open market declined significantly due to the impact of the prolonged downturn in the domestic stock markets. In the first three quarters, gross investment yield was 3.3%, a decrease of 1.8 percentage points year-on-year. Net investment yield was 4.6, a decrease of 0.39 percentage point year-on-year. As affected by the continuous decline of the capital markets, net profit attributable to equity holders of the company was CNY 90,869 million, a decrease of 26% year-on-year. Finally, the company's comprehensive strengths were enhanced. As at end of September, the company's total assets reached over CNY 3.1 trillion, an increase of 7.6% as compared to end of 2017, ranking third in the industry. Both of the company's core solvency ratio and the comprehensive solvency ratio reached 262%. For the next stage, we will focus on our annual targets and take proactive actions to fulfill the overall task for the whole year by sticking to the general keynote of making steady progress and requirements for high-quality development, and adhering to the operating guideline of prioritizing value, strengthening sales force, optimizing business structure, achieving stable growth, and safeguarding against risk. Moreover, we will develop specific plans for the year 2019 and forge ahead with courage and persistent efforts for the purpose of achieving satisfactory results. Thank you. Okay, thank you, Ms. Hou. Now we begin the Q&A session, which will be conducted in consecutive interpretation. In the interest of time, please limit your questions to no more than two, and tell us your name and institution you represent. Now the first question, please. Ladies and gentlemen, if you would like to ask a question, please press star one. Ladies and gentlemen, star one please for questions. Our first question comes from Liang Ji, Daiwa. Hi. Thank you management. My name is Liang from Daiwa. I have two questions. The first one is on your agency team. In fact, just now in the presentation, management mentioned that average agent headcounts for the sale of protection-oriented products increased by almost 50% year-on-year. However, if we look at the renewal premium disclosed, we understand that actually your FYP declined by around 30% in the third quarter. So if management can help us reconcile this set of data, these two metrics, why FYP has been declined by around 30%, but protection-oriented products increased by 49.7%. Is it because of the decline productivity or the active ratio in the agency team, or actually the channel that has contributed to the decline of the FYP is actually bancassurance rather than agency? What is the reason behind the different directions of these two major metrics there? Second question is on the management of the group company. We understand that China Life Insurance Group just welcomed a new chairman from one of your competitors. If management can share with us any new initiatives or strategies which will be brought about by the new chairman of the group company. Thank you very much. 来自大和证券。首先想问的是关于代理人队伍。尽管我们知道我们销售保障型的队伍人数上大幅增长到了50%，但是如果考虑到我们续期保费的增长，那么新单保费其实是有达到30%的下降，所以能否解释一下这两个数据方面的这个不一致性？那么新单保费下降是来自于代理人活动率的下降，或者是营运效率的影响。第二个问题是关于我们新任的集团的董事长。我们也注意到，中国人寿集团是迎来了新的董事长，能不能分享一下新董事长的一些计划或者战略。好，先回答第一个。我来自个险部，我先回答第一个关于代理人的这个问题。那么今年的新单保费的这个一定幅的增长，其实主要是来源于我们这个分红型的这个业务，因为受监管政策的影响，以及市场环境的这个影响，出现了一定程度的这个下降。而代理人销售的保障型产品呢，它的从这个销售的人员这个大幅，销售人员是大幅增长，并且这个相应的对应的产品类型的保费也有一个相当大的增长。First, from the individual insurance department, I will answer your question about the agency. In the first three quarters this year, we have negative growth of our FYP, mainly coming from the impact of the new regulation policies, and it affected the participating product sales because of the different market environment. On the other hand, the sales for the protection type of product has increased, and the premium from the protection type also increased. 好。关于你提出的第二个问题，那个我们集团的董事长是，刚刚王敏董事长担任了我们这个集团的董事长。 About your second question, yes, we have a new chairman, Mr. Wang Bin. He is now the new chairman of the China Life Group. 那么本公司的这个经营在今年的这个经营方针，刚才我已经说了，将继续坚持重价值、强队伍、优结构、稳增长、防风险，按照这个思路继续努力。 For our overall strategy for our business, as we have mentioned in our presentation, we will keep adhering to the guideline of prioritizing value, strengthening sales force, optimizing business structure, achieving stable growth, and safeguarding against risks. This is still the direction we are working towards. 回答完毕。 Thank you. Thank you very much. Our next question comes from Kailesh Mistry from HSBC. Oh, hi. Thank you very much for taking my questions. It's Kailesh Mistry from HSBC. The key ones were, firstly, of FYP, what proportion in the nine months was regular premium? Also, can you give us an idea of the mix between protection and savings? A follow-up question from Liang Ji on the agents for protection business, which increased 50%. What is the number of these agents out of the 1.455 million total agents? Lastly, for year 2018, is there any further update on guidance for either net profit or new business value or FYP? Thank you. 第二个问题来自于汇丰银行的分析师。首先他想问关于新单保费方面，想知道一下我们前九个月的这个首年保费里面大概有多少部分，大概是这个期交是占多少的比例？那么在期交当中能不能再分享一下这个保障型和储蓄型大概是。另外是关于销售保障型的代理人队伍，尽管增长增速很快，能不能分享一下在整个代理人队伍当中，具体的数字是多少？然后关于18年全年的业绩目标，有没有什么关于一些关键指标的最新的变化。好，我来回答第一个问题。不光是今年，其实这几年公司一直是进行业务结构调整，其中一个调整比较大的项目就是银保趸交业务。 Actually, for the several years so far, we have been doing the transformation of our business. One major task is to transform the bancassurance channel business and reduce the single payment premium. 那今年这个趸交业务是调整力度比较大的，你也知道今年半年的时候，趸交保费只做了不到100亿左右。 For this year, we have made the greatest effort to reduce the single payment business in the bancassurance channel. By the first half of this year, the single payment premium only amounted to about CNY 10 billion. 详细的信息你可以看一下我们的半年报。 You may refer to our midterm report for this. 所以由此而言，你可以看出，我们公司新单保费中，期交保费的占比现在是非常高的。 For that case, for the first three quarters of this year, the proportion of the regular premium accounts for a very large proportion of the FYP. 那么从保障型业务的占比上，应该说我们公司没有披露具体的保障型保费的占比，原因是现在也没有统一的定义。按照我们自身计算，保障型保费量的增长还是非常快的。 For the proportion of the protection type and for the protection people, we did not disclose the exact number because in the whole industry, there is still no uniform definition of the protection type of business. But as in our own measurement, our protection type business has seen very rapid growth so far this year. 那么从下半年开始到930，应该说单季度来看，保障型的业务的占比，比上半年要提高了好多。 For the third quarter itself, the proportion of the protection type business accounted for a much larger part of the whole business compared with the first half of this year. 好，我回答完毕。 That is also my part of answer. 我来回答第二个问题，就是关于保障型产品销售队伍的增长的问题。那么应该是也是适应我们整个监管的政策变化，包括市场环境的变化。我们过去都是以分红险的销售为主，那么我们代理人群中也同样，其人群结构也反映出同样的特征。 I will answer your question about the sales force increase. In the past, a lot of our sales force may focus on the participating products. The structure of our productive agents was also in line with that feature. 那么今年以来，我们其实是把整个保障型产品的转型，包括加大保障型产品的销售和训练的力度，作为我们转型中的一个核心策略。保障型产品销售人群的增长，也是这个策略应该是初步体现的一个结果。那么我们预期未来仍然是保持一个比较好的增幅，并且人群的占比也会越来越高。回答完毕。 For the transformation to focus more on the protection type, that is our core strategy to make more efforts to sell the protection type of products and to focus more on the training of such products. So the increase of our sales force for protection type has shown the preliminary results of such initiatives and we hope that such trend will continue for the future, and we hope the new recruited agents will also follow this direction. Thank you. Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Steven Lam, Bloomberg Intelligence. Hi, management. Nice meeting you again. Thanks for the opportunity for questions. Are you able to hear me? Yes. Yes. Thank you. I just want to follow up on a few things. I asked about investment before, so I will jump on other stuff. I want to get some insights from Li Zheng on the accounting front. I am curious, what is the outlook for reserve releases? Due to the gradual improvement in bond yields, would you say that the amount of reserve release in the fourth quarter will be bigger than what you had in third quarter? And then what is the outlook of first half of next year? I am curious on the reserve release that we have had in the past three to six months, how much of those is just coming from because of the bond yield increase, but not any fine-tune or adjustments in terms of or so-called risk margin? So that is on the accounting front. The second one is more on a broader aspect. As we have heard that there is some consultation in terms of tax deductions. I am curious from the agency standpoint, when the agents- Excuse me, Steven Lam's line just got cut off. Maybe we will wait for him to reconnect. 第二个问题是关于代理人纳税的那个，在这个减税的。第一个问题是关于这个会计估计方面的。我们想知道一下管理层对于未来的利率，还有对于准备金的影响是一个什么看法？嗯。在第四季度这个准备金是不是会多于三季度？还有2019年上半年展望也是一个什么样的趋势？还有对于一到两个季度，我们的准备金，还有预定的变化，多少是来自于这个利率的变化，多少是来自于风险溢价的调整。就是过去三到六个月。第二个问题是关于这个减税对代理人队伍的影响，但他还没有说完。不好意思, excuse me, Mr. Steven Lam is back on the line. Hello? [Foreign language] I was just going to ask just from the tax deductions from the agents, when they are discussing with the clients, do you think that the clients will feel a little bit better in terms of their income? What are the conversations that you are hearing from the agents when they go out and talk to the clients? Are the clients still very eager to buy policies or they are starting to get pessimistic about the livelihood, the income pressure and things like that? Thank you. 第二个问题是关于减税对于我们保单销售的影响，我们在代理人和客户交流的时候，是否会因为最近的减税政策使得客户更愿意买我们的产品，或者说在买保单的时候，客户还会更多地对于收入和生活的压力有一些顾虑，对于这个减税对于他们有没有实际性的影响。好，我来回答你的问题。第一个问题就是关于这个折现率。折现率这个主要是750天的这个国债收益率曲线的变化。你也看到了，就是第三季度我们披露的这个，因为移动平均曲线的变化，影响的税前量是40多个亿吧。对。所以来讲的话，就是因为它是750天，我们现在简单地做了一个预测，应该是大概率事件，到年底这个曲线的影响还是正的，应该还是增加税前的利润，大致影响跟这个三季度里增加的量差不了多少，我们估算。 OK, thank you. [Foreign language] 然后第二个你问的问题，就是相关税率的变化对消费者购买保险的影响。我个人认为，所有的有利于增加消费者收入的手段都会促进保险的消费。因为即使是没有这些政策，其实保障性业务的消费也是显示出来这个巨大的潜力。回答完毕。 First question about the reserve assumption. As we have disclosed, the impact from the 750-day curve on the profit on the first three quarters is about CNY 4 billion. That is an increase of the pre-tax profit. According to our prediction, by the end of this year, it is highly possible that the 750-day curve will still bring a positive impact to the profit, and amount may be more or less the same with the first three quarters. Your second question about the impact of the tax deduction policy to our customers. We think that for all the policies that is conducive to the increase of people's income will be beneficial to the sales of the insurance products. Actually, we think that for the protection-oriented products, even though with the same level of income, there is still very large potential for this market. That is all. Thank you. Thank you. Our next question comes from David from Comgest. Thanks for taking my question. I understand you probably don't have perfect clarity on this, but could you give us some indication, given the quality uplift in the FYP that we're seeing, of what your estimated VONB margins might be for the third quarter? Because obviously we're seeing some weakness in the total volume of premiums, but with a much higher quality, perhaps we're seeing some improving margin trends. Could you give us any visibility on that? 他是想了解一下我们对于业务质量的改善有没有什么可以分享的。在这个新单保费的新业务价值率方面，第三季度是否比上半年有一些提升。我们在披露的时候，相关的信息已经讲了，就是说尤其是前三季度，我们的长期保障型业务在快速增长。而且我们讲的那个长期保障型业务，是我们按照内部口径划定的。我们指定内部的长期保障型业务，其中价值创造也是一个选择标准。 We have disclosed some of the statements in our third quarter report. We mentioned that the sales of the long-term protection-oriented sales increased relatively fast. For the definition used by China Life, we have our own measurements for protection-oriented business. The creation and contribution to the new business value growth is a very important indicator. 回答完毕。 That's all. Thank you. 没有问题了。 Thank you. As there is no more questions, we would now turn back the time to the management. Since we are also running out of time, I think we can bring the briefing to the end. If you have any further questions, please feel free to contact our IR team at any time. Thank you for your participation.