Morning, ladies and gentlemen. Welcome to the CPIC Q1 results announcement. I'm Su Shaojun, Board Secretary of the CPIC Group. Now we have released our Q1 report. In order to deliver our information in a more timely fashion, we hold this session. Now, we have with us, Group VP and CFO, Mr. Su Gang, and also Group Deputy Chief Accountant Xu Zheng, and CPIC Life General Manager Li Jinsong, and CPIC PAC Deputy GM, CFO, Board Secretary Lu Zhengbó. First of all, we'll give a presentation of Q1 results to be followed by Q&A session.
Well, good morning, everyone, and welcome to today's results announcement. I'm Su Gang, CFO of CPIC Group. Next, I'll give you a brief account of our Q1 performance. In Q1 this year, CPIC focused on our main business and continued to enhance service and operational and efficiency.
We delivered a insurance revenue of RMB 70.2 billion, up 0.1%. Our profitability maintained a steady growth and delivered net profit of RMB 10.04 billion, up 4.3% year-on-year. Our operating profit after tax stood at RMB 10.5 billion, up 3.6% from last year. Looking at our main business lines, CPIC Life continued to deepen its transformation efforts based on value growth and have achieved steady business results. We have strong performance in regular premium new business and new business value. In Q1, it delivered total premium income of RMB 116 billion, a total regular premium new business value of RMB 18.9 billion, up 41.4%. Our new business value was at RMB 6.3 billion, up 9.6% year-on-year.
If we look at the agency channel, to achieve a stable growth and stable agency sales force, we offered enriched products and services and achieved remarkable results. For the bank channel, we are focused on regular premium new business, optimized product mix, and implemented the premium rate compliance policy. For our group and the worksite channel, we explored new models of workplace-based services and continue to expand the coverage of inclusive insurance products. For P&C side, we enhanced the risk reduction efforts, and in Q1, its total premium was RMB 63.02 billion down 0.3% year-on-year. Auto insurance was RMB 26.8 billion, up 0.1% year-on-year.
For the non-auto business, it was down 0.5% due to business mix optimization, at RMB 36.1 billion. Combined ratio improved to 96.4%, improved by 1 percentage point. For auto insurance, we strengthened and refined the quality management and deepened research on risk of our new energy vehicles. For non-auto business, we focused on serving national strategies, real economy, and people's livelihood to continue to optimize our product supply and the service quality. For asset management, we adhere to the principle of value investment, long-term investment, and prudent investment. Driven by SAA, we conducted a disciplined and flexible TAA and implemented a refined dumbbell asset allocation strategy. We continue to enhance our market insight and judgment and to explore to identify fixed income asset allocation opportunities.
We continue to intensify active equity management efforts and effectively elevate the allocation ratio of equity assets to promote the core and the satellite allocation strategy. By the end of the first quarter, the group's investment assets reached RMB 3.12 trillion, up 2.8% from the end of last year. Our non-annualized net investment yield was 0.7%, down 0.1 percentage points year-on-year, and the non-annualized total investment yield was 0.8%, down 0.2 percentage points year-on-year. Well, that's the end of my presentation. Now we'll have the Q&A.
Now the first question. Now, if you want to ask any question, please press star one, please identify yourself and your employer before you ask questions.
Please ask no more than two questions. The first question comes from Dongwu Securities.
Thank you. Thank you, Mr. Su, for your presentation. I'm [Sen Ting] from Dongwu Securities. First of all, congratulations on your strong performance, including the RP business premium and from life side and the OPAT and the net profit. Also on the investment side, I believe you had a better than peers investment yields. I have two questions. Number one, on the life side asset, liability side. You see the regular premium business did well for life and for agency and the bank channel. What about the share of a par life business? The second question is concentration of risks. For example, the concentration of par life products.
You see the pricing rate is quite low, but the actual liability rates is quite high. The margin is low. How will this affect your product strategy going forward? That is the first question on the liability side. Second, on the investment side, I believe in Q1 you did a pretty good job in terms of investment. As we see the macroeconomy is not good in China or in other countries. What was your concerns about the interest rate movements and also stock market, and also how will it affect your SAA, if any?
Well, thank you for your question. Number one, Mr. Li, could you answer the first question on the life business?
Well, thank you. Maybe it's a very good question.
Now, as you see, as of the end of Q1 this year, our life business, the share of our par life business, is at a proper level, is quite high I believe. Now, it's a quite high percentage of par life products. It's mainly because of the customer demand. Of course, the customer demand is affected by the capital market, by the bank interest rate, et cetera, and also affected by their personal preferences. Now, of course, the share of our par life also is affected by our company's orientation, value orientation. Now, of course, different customer have different needs. High-end customers prefer par life products, and the massive customer prefers a fixed rate products. We will take that into account. We'll offer differentiated products.
In terms of the value orientation from the company side, we continue with continued focus on the value and the profitability. We continue to offer traditional products, but we do it in an innovative way. If we look at our asset and liability matching, we will look at our own capabilities and also do it in a prudential way so as to enhance our asset liability matching capability, so as to support the long-term effective, long-term competitiveness of our par life products. Now, as you mentioned, the margin might be affected by this high rate of par life products. We're also looking into this question. To us, of course, par life margin is lower than traditional products. Now, how should we address this issue? How to address, make sure that we have a healthy margin?
We believe there's still a lot of room for further adjustment. First of all, we look at the structure of the products. For example, the mix between par life and the traditional life. Actually during the last year, we moved from traditional to par products, but we can reverse the trend if necessary. Secondly, we should look at the well, duration of payment. Three pay, five pay, 10 year or 20 pay. That can also be adjusted. Thirdly, the products could be long-term, midterm, or whole life protection. This is also room for maneuver. More importantly, we can also adjust the function of those products. Presently, saving is the main purpose of those products. The value, so the margin is lower than the normal average.
If we focus on protection, more on protection, then the margin will be much higher. We believe we will make adjustment in the four aspects I just mentioned so as to continue to enhance our margin, product margins, to which in turn will drive the value growth.
Well, thank you. To answer your second question on the investment side, I believe China's economy actually achieved a sort of a recovery, and the PPI is also improving. The inflation expectation, deflation expectation is reversed, especially China's export is going strong. I would say China's fundamentals is very good. Given this, I believe China's domestically speaking, the interest rate in the long term will maintain a fluctuation, a trend of fluctuation. In terms of going downward, I don't believe the interest rate in China will go down very quickly.
Of course, on the other side, will the interest rates go up? Well, there's also a lot of factors. For example, how to further boost China's real economy. Also you see the real estate debt needs to be paid back, and the local government need to pay back their debt. I believe the interest rate is having a hard time to go up. On the whole, I would say given this kind of fluctuation of the long-term interest rate in China, so I would say there will be very different opportunities for those kind of institutional funding. For insurance funding, insurance money, we are going to try to seek opportunities for long-term asset allocation.
If we look at the stock market on the macro trend, I believe China's stock market is going to have a long-term slow bull market. I believe in China, the stock market will have this kind of structural opportunities. If we look at the earnings, the overall earning capability is on the rise. With structural opportunities, for example, we do see some sectors, for example, AI and the new consumption and, you know, the medicine, et cetera. These structural change, structural opportunities still exist. If we will look at the liquidity, China will maintain a lot of liquidity in this year. Household saving, household deposit will try to. Well, people will think about their new savings, where to put their money. We believe this gives a lot of liquidity to the market.
If we look at the supply and demand, a lot of demand for A-shares, there will be a lot of money looking at the A-share market. If we look at the valuation of the A-share market, I believe the total valuation, overall valuation is quite low. If we look at the CSI 300 Index, et cetera, there's a lot of still attraction and opportunity. The average valuation is still at the historical average range. On the whole, I will say CPIC will continue to maintain its well, main business of insurance. We'll continue to look at a healthy ALM asset liability matching. We'll try to, you know, base our SAA on the long-term trend of the macro environment.
We will maintain healthy SAA and healthy asset liability duration gap, also try to properly manage our investment, including the net investment yield, try to diversify the source of the net investment income. Also, we are going to enhance alternative investment, for example, unlisted equity PE and REITs, et cetera, explore opportunities for overseas investment so as to better enhance the long-term efficiency of our management of financial of insurance money.
Okay, another question from [UBS] .
I actually am an analyst from UBS, congratulations to the management for your profit numbers and net assets. Now, I have two questions. Number one on the NBV. Now, for agency channel and the bank channel, how do they do in terms of NBV?
If we look at the new business premium, I mean, agency and the bank did differently. For example, as you mentioned, you mentioned that you strictly follow the rules regarding the integrity of reported expense rates. Given this, is it why that the bank's NBV is weaker? What's your expectation for the whole year? The second question is about the net profit. Your net profit, well, maybe part of the, is because of the income, I mean, income tax issue. What is the income tax rate? The difference between this year and next, the previous year, it is a one-off effect, one-off event. Lastly, I would call on the company, I mean, maybe could you disclose your comprehensive investment yield? Maybe this number, this indicator, is a better one.
You can better compare it with your comprehensive investment yield with that of your peers. That is why I call on you to disclose this comprehensive investment yield in the future. Thank you.
The interpreter currently cannot hear anything from the Chinese channel. Now I believe we are back online. Thank you.
Thank you for your attention. In Q1, for in terms of NBV, it was improved by 0.9%. For agency, it improved by double- digits. For the bank channel, the growth was not that high. Because the bank channel, first of all, if you look at the new business of the bank channel. Actually that was a pretty big drop in terms of new business.
If you look at the structure, regular premium new business improved by 37%. Single-pay business, new business dropped a lot. Last year, single SP business accounted for 60%. That was a very high percentage in last year. We now adjusted the structure between RP and SP. We actually, well, we voluntarily reduced the share of the SP, single- pay products. If we look at the margin, last Q1 last year, the bank channel, well, mainly sold traditional products, this year, par life products accounted for above 90% of all the products sold. We believe those two traditional products and par life products have different margins. There's the change in terms of product mix. Secondly, we believe we compare to peers, we lag a little bit behind.
I need to point out that we are fully compliant. We strictly follow the rules on the integrity of reported rates, the expense rates, especially for the bank channel. If we look at the expense spread, actually our expenses improved a lot this year. I believe this is also a negative impact on our business growth at the bank channel. Going forward, I would say for the bank business, the NBV, I believe there will be a positive growth in terms of NBV. I'm quite confident, number one, because first of all, in terms of the regulator.
The Chinese channel is down again. The interpreter cannot hear anything on the Chinese channel. We are back online.
For the CPIC as a whole.
I believe the microphone is down again on the Chinese channel.
Sorry, maybe the speaker made some kind of mistake. Anyway, we are back online. Now for CPIC, we are going to follow regulatory requirements going forward as we, as the pace of business pick up. I believe actually during the last results announcement, I mentioned that we pay a lot of attention to the discipline or the even distribution of our business. If we look at Q4, our Q4, the share of business growth in Q4 is much better than our peers. That is to say, we pay a lot of attention to the even business growth by quarter. If we look at our quarterly numbers, maybe our Q2, Q3 numbers, it will be better than Q1. I believe CPIC is different in this compared to others.
I believe with the passing of time. As we grow quarter by quarter and as we continue to improve our product mix, we believe our NBV for the bank channel will pick up, will improve. That's to answer your first questions. Thank you.
Maybe the second question, Ms. Xu.
In Q1, the net profit improved by 4.3%. That's thanks to life and the P&C business, pretty good insurance performance. In terms of investment, as we also mentioned, investment, although there's a lot of market fluctuation, our investment yield. Well, the market actually went down year-on-year, but we surpassed our A-share market benchmark. Secondly, we have a convertible bond. Convertible bonds, there is a positive contribution of RMB 500 million from the convertible bond treatment.
On the other hand, as I mentioned, in terms of income tax, we always are prudent in this regard, the treating of income tax. You see we have deferred income tax to assets. Well, the total size, absolute size is quite small. When we judge whether income tax can be deferred or not, we will look at the nature of the tax. Can we make it up in the future? If we cannot make it up in the future, then, I will not treat it as a deferred income tax. At different time period, when we try to determine the income tax, we need to also look at the current period, deductible tax, deductible income.
Now, for Q1, if we look at income tax on the whole, the taxable income is negative. That's mainly because of the life business, CPIC Life. Why? Two reasons. Number one, deductible income. Well, in recent years, we bought a lot of, increased our allocation in T-bonds, so we had a lot more deductible incomes because of this. When will it be booked? I mean, the timing, the booking is quite even distributed. Our profitability won't be affected by the capital market. Also the new accounting standards. Under the new accounting standard, the impact, I mean, on impact on our profits will be more felt, more impacted by capital market movements.
In terms of determining the income tax, on the one hand, we had quite a big increase in the deductible incomes, tax deductible income. Secondly, the impact from the capital market fluctuation is quite big. For Q1, well, the deductible income is actually bigger than our pre-tax profit. You see we actually have a income tax to assets. You would see a negative number for the income tax in Q1. This accounting treatment, I mean, is consistent with our previous treatment. Of course, as I mentioned, this is a transitory issue. Last year, in Q1 last year, our deductible income, well, was smaller than pre-tax income. Pre-tax profit, rather. Last year, the number was positive, and this year, Q1 this year, the income tax number is negative.
If you look at the whole year, however, because the release of the deductible income is evenly distributed, our profit, pre-tax profit number will go up in Q2, Q3, Q4. Going forward, you will see the income tax number will not be negative. In terms of your, your call, I mean, in terms of disclosing our comprehensive investment yield, well, let me just explain. In our interim report and also our annual reports, we will disclose the comprehensive investment yield, we will also exclude certain impact based on ALM disciplines. Regarding your call on our disclosure of comprehensive investment yield, we will discuss internally. We will try to disclose a lot of indicators so that investors can have a better picture of our long-term investment yields.
In Q1, as Xu Zheng mentioned, we had a very good SAA and investment yield. Our investment has met our expectations, especially cross-equity investment did much better than the market benchmark.
Let's go move on to the next question. From Liu Xingqi from Guotai Junan Securities.
Thank you. I'm Liu Xingqi from Guotai Junan Securities. Congratulations to your steady performance. I have two questions. Number one, as Xu Zheng mentioned, your Q1 investment yield is quite prudent, quite steady. That's very good. Your equity share in your equity allocation is lower than the peers. Also, you mentioned you are quite positive about equity market. Going forward, are you going to improve your share of equity asset allocation?
Second question, OCI and TPL, I mean, the share between OCI and TPL, are you going to make some adjustment between OCI and the TPL? This is a commonly asked question. Are you going to make any changes? That's on the asset side. Second, on the liability side. You mentioned in Q1, CPIC pays a lot of attention to value growth in terms of the duration, I mean, especially for the bank channel. In terms of the structure, you're going to improve the product mix and the margin will improve, your business growth will face some kind of pressure. How are you going to balance value and premium growth?
Well, thank you. Let me answer your first question.
Now, I believe you also, well, want to know, most of us would like to know how the capital market volatility will impact on the insurance company. As the market changes, I believe CPIC, we are consistent. We always stick to our investment principles. That is, we need to be prudent and we need to look at for the long term so that we can have the capabilities to cross the cycles so as to maintain a healthy asset liability matching. As first of all, as we mentioned, we need to have a refined dumbbell style, investment style, so that our investment can be sophisticated and we can effectively manage risk and properly manage our investment. It's a basic logic.
Secondly, in terms of asset allocation, we will maintain prudent SAA and improve our investment research capabilities. We will look at the big asset categories so that we can have a flexible TAA. We will be flexible and disciplined so that we can better seize the structural opportunities on the market. We will improve our TAA structure and strategies so that we can better respond to the, well, temporary or short-term structural opportunities. That's for equity market. I believe we need to look at our asset liability matching, asset liability profile. Each company should have its SAA and the TAA, which are to be based on asset liability profile.
We should not simply compare the share of equity asset allocation, for example, across different insurance companies, because we need to look at our asset liability profiles. On the long term, I would say our SAA and TAA, I believe, they are at proper levels. Regarding the new accounting standards, I would say the new accounting standards would like to reflect the actual picture of insurance companies in a more effective way. Regardless of the standards, I believe the long-term return will not be affected. I mean, long-term returns will be there whatever accounting standards you use. Of course, CPIC, for example, OCI, the high dividend equity allocation will be booked under OCI. For OCI, we will continue to improve the accounting categorization.
Of course, for insurance companies, asset allocation, we have a lot of, w e need to look at a lot of different asset class. We need to diversify our risks. We need to improve the stability of our investment portfolio. We need to look at new opportunities, new areas, so as to improve our returns. We should seize upon the opportunities generated by market fluctuation so that we can ultimately have a long-term result from SAA.
Well, thank you, Mr. Li , for answering the question. You also have a question about the bank channel's margin.
For the bank channel, we restarted our bank channel. At the beginning of the restarting, there were some restrictions, for example, from the bank partners, and we have a quite a big concentration of geography.
For example, previously we started in 10 cities. Now we expanded to more than 70 cities. Now, for the bank channel, most of our customers are in those cities. They have their specific needs. Now, actually, we started from 2020. In the past, last five years, last year, for example, for each of the last five years, our SP business exceeded RMB 20 billion. Last year, it was more than RMB 20 billion. The ratio between SP and RP can be as high as 10/ 1, and last year it was 5/ 1. The ratio is going down. I mean, the ratio between SP to RP. Now, how to improve the margin of the bank channel? Now, we do it in a quite simple way. We need to actually control the amount of SP business.
This kind of, we will reduce the sales of single-pay business. For the RP business, actually it grew by 37% year-on-year in Q1. Now the RP to SP ratio is about 1/ 1.2. If we look at the margin, we need to, I mean, separate, break it down by RP and SP. Previously, we adjust to this kind of, pure SP. That is to just pay premium for one year and get protection for five years. We should look at another indicator. We should, for example, we just pay this kind of a hybrid of RP and SP. For example, the payment is just for several years, but the protection is for the whole life. These kind of products, hybrid products, also have quite high margin.
What we call this kind of single type regular premium. This is a hybrid, the in-between. We also should look at RP. Now, if we look at the peers. Our RP business compared with our peers, I mean, in terms of the percentage, the share, and in terms of margin, we were both high. The margin could be 20% already. Also in terms of the premium paying period, we can make it five pay or even 10 pay. In Q2, starting from Q2, we will focus on products more than five pay so as to further expand margin. In terms of the format of the products, we will also make some adjustment. For example, the share between whole life and the traditional life. Thirdly, we need to explore opportunities to actually offer some protection products in the bank channel.
Well, thank you. That's my answer to this question.
Welcome the next question. Next question from CICC.
Oh, thank you. I'm [Mao Tingting] from CICC. I have two questions. Number one, about life agency channel. Q1, you did better than expected. Now, did you see this kind of a long-term recovery, recovering trend in terms of the size of the sales force? For bank channel, I mean, there's a lot of competition between big insurance. How do you think about the importance of agency channel? What are your main strategies going forward? Second question is about the finance. You don't disclose the insurance performance. You didn't break it down by life and P&C. The insurance servicing performance improved by 20%. That's by our own calculation. Is it true? How do you break it down by life and P&C?
Maybe if going forward, maybe you can do some more disclosure, well, under the new accounting standard.
Thank you for your attention to our life business. That's a very good question. We should not only care about bank channel, but also agency channel. That's very good. For CPIC, agency is always very important to CPIC. I would believe our agency channel is our, it's like a cornerstone to CPIC. The transformation of agency hinges on the transformation of the team sales force. In Q1, if you look at the agency force, there's a slight positive growth in terms of total sales force, total headcount. Actually, by April, we have more than 190,000 agents. The trend is positive. Of course, we did a lot of work to make this happen.
Number one, we focused on recruitment to stabilize the team in terms of selecting and the training of the agents. We did a lot to stabilize the size so that this, we have a well-stabilized number. Secondly, we pay a lot of attention to the structure of the sales force, of the agency sales force. Now, actually, starting from Q2 last year, we started to focus on the customer, the products, the agents. We have a differentiated approach to the customers. Especially this year, we paid the most attention to the agency structure. For example, we now look at high-performing and average teams. We look at agents who are with us for longer and shorter period. For example, we will look if the agent is a agent leader or if just a high-performing agent.
We divide them into different segments. For example, our core teams improved by 20% in terms of performance, and the share of our core teams improved by 1 percentage point. Secondly, we try to improve the productivity of those teams. We focus on the productivity and production. For example, first year premium improved by 40% of our core teams, our core agents. The first year commission improved by 20% for our core agents. You see these numbers are improving. Aside from that, we also look at one other indicator. That is, we focus on the compliance. We focus on the integrity of the reported rates, expenses. Starting from April 1st last year, Q2 performance show significant difference. Actually we had a new basic law for agency channel from last April.
We improved our commission structure, improved the management of our agent behavior. The cost improved, expense were better managed. We had a more rigor for this channel. We believe given this, as long as we do the right thing, as long as we do it in our daily management, our agency channel will continue to have healthy growth. Agency channel will maintain its, well, its role as a cornerstone of the company.
No. No, we will do not actually disclose information separately on the insurance servicing performance. No, we can look at some related numbers. For P&C side, our combined ratio improved by 1 percentage point. If we look at the life side, we also saw improvement in underwriting profitability. Our net profit improved by 9%.
That is to say we have a improvement both for life and the P&C in terms of insurance service, servicing performance. Actually, starting from last year, we have been improving our business mix. We are also doing a lot of work to reduce risks. For life business, there are several aspects. For example, as we mentioned, regulatory requirement regarding the integrity of reported rates, expense, we did a lot to manage expenses. We saw improvement in terms of expense spread, expense spread margin. Secondly, with the implementation of the new accounting standards, we pay more attention to the margin of our insurance contracts including this year. I believe this supported our healthy insurance service performance. You now see quite good results in terms of the insurance service performance in Q1 this year.
Going forward, we will look at the ways to disclose this information in this regard.
Now, because of the time, if you have I believe we only have time for one last question.
Well, we'll have a question from Goldman Sachs Securities.
Well, thank you for the opportunity. I have two questions. Number one, on the insurance service performance issue. Now, if we look at the four quarters of last year, I believe there's quite a bit of fluctuation between quarters. Why the differences between the between each quarter? Now, what about P&C side? For P&C side, underwriting profit is good, but the premium growth is slow. Now, why? Why is that? What's your expectation for the P&C growth for the whole year? Well, thank you for your attention.
Maybe we'll answer the P&C issue question first. Thank you. In Q1, P&C business grew flat, so very slow. Auto business, we grow faster than peers because of our good performance in terms of new energy vehicles. For non-auto business, we left behind our peers in terms of growth. That's because, as we mentioned, we are trying to improve our business mix, business structure starting from last year. For example, we are adjusting our agricultural insurance. That is why in Q1 our non-auto business grew quite slow. That is also why the P&C as a whole had a negative growth in Q1. We are quite confident for the coming quarters. For Q2, Q3, we believe the growth of P&C business will return to normal.
We're quite confident about that.
Now I'll answer the next question. Now you see on the whole our insurance service performance is quite evenly distributed. Secondly. Well, of course, if when I say evenly distributed, there might be slight differences between quarters. Now, as I mentioned, CSM amortization is a main source. This is quite evenly, quite even. The second one will be operational variance and the P&C profitability. They are to be affected on a seasonal basis. Quarterly, there will be some, well, time difference. For example, you might be impacted by our business strategy. For P&C, you see the combined ratio might be affected, impacted by catastrophes. There might be some kind of seasonality involved. Slight fluctuation is there mainly because of the main factors I mentioned above.
Well, thank you.
If you have more question, you can contact our IR team. That's the end of the session. Thank you.