China Pacific Insurance (Group) Co., Ltd. (601601) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the 2024 Annual Results Announcement of CPIC Group. I'm Su Shaojun, Board Secretary. Now we are conducting this event on Shanghai and Shenzhen. We'll give you a presentation on our performance last year and also listen to your ideas and suggestions to protect our small- and medium-sized investors and also make this event cover more people, we also do it via online broadcasting. After this meeting, you can also watch the playback on the link of our official website. First of all, allow me to introduce the managers on the Shanghai side, we have Mr. Fu Fan, Group Chairman; Mr. Yu Bin, Group Vice Chairman; Mr. Su Gang, Group Vice Chairman -- Vice President and CIO and Finance Responsible Person; and Mr. Li Jinsong, General Manager of CPIC Life. On the Shenzhen side, we have Mr. Zhao Yonggang, Group President; Mr. Ma Xin, Group Vice President; and Mr. Zhang Yuanhan, Group Chief Actuary; and Mr. [ Yong Chen Hu ], CPIC P&C General Manager; and Mr. Yu Rongquan, General Manager of CPIC AMC. Our independent directors will also attend this event online. First of all, I'll give the floor to President, Zhao Yonggang to give the -- to brief us on our last year's performance, followed by Q&A.

Good afternoon, ladies and gentlemen. I'm Zhao Yonggang, President of CPIC Group. It's my great pleasure to meet you on this occasion. In 2024, we had many challenges in China in terms of economic growth, but we maintained a steady growth and fundamental remain unchanged. the insurance sector deepened its transformation and have a lot of new opportunities. The state council issued opinions on strengthening supervision, preventing risks and promoting high-quality development for the insurance industry, which underscores an increasingly important part of the sector in China's modernizational drive. Given these challenges and opportunities, we are committed to value creation and stay focused on the core business of insurance with steady growth of overall business results and sustained improvement of comprehensive strength and progress in high-quality development. In terms of business numbers, last year, our group operating income reached CNY 404 billion, up 24.7%. Group OPAT reached CNY 34.4 billion, up 2.5%. Net profit attributable to shareholders rose 64% to CNY 45 billion. Group EV reached CNY 562.1 billion, up 6.2 billion (sic) [6.2%]. And our number of customers reached 183 million, our total AUM reached 3.5 trillion, up 21.2% from the end of 2023. Our comprehensive solvency was 256% and the core solvency ratio was 182%, both of them above the regulatory minimum levels. Going forward, we will maintain a responsible level of capital cushion to withstand systematic risk while considering our long-term capital planning, regulatory requirements and needs for sustainable growth. Under the new accounting rules, net profit become more sensitive to capital market movement. OPAT, on the other hand, is a more useful measure of our underlying long-term performance. Last year, excluding short-term investment volatility and material one-off items, group OPAT amounted to CNY 34.4 billion, up 2.5% of this. that of CPIC Life, it was CNY 27.6 billion, up 6.1%. In terms of EV, we also maintained a steady growth, up by 6.2% from the end of 2023. In terms of composition, adjusted net worth amounted to CNY 349 billion up 19.8% from the end of 2023. In terms of the drivers of EV movement, positive contributions mainly came from expected return on EV, NBV and net investment return variance. At the same time, EV movement was also influenced by changes to methods, assumptions, models and profit distribution. Last year, we aligned ourselves with the 5 financial priorities, enhanced service capabilities to contribute to the new quality productive forces. To be concrete, in terms of technology finance, we enhanced research on risks of tech companies across their whole life cycle, launched many industry-first insurance products for emerging sectors, such as integrated circles, biopharmaceutical companies, AI, low altitude economy so as to provide risk protection and funding to those sectors. In terms of green finance, green insurance, we expanded risk cover for key sectors such as new energy, green transportation, et cetera. We also established an investment -- invested in green debt investment scheme. Green equity investment in industry fund and also enhanced the data management of carbon emissions. For inclusive insurance, we continue to upgrade programs for terminal illnesses, Huiminbao and the long-term care and agricultural insurance to boost the coverage and availability of insurance. For pension finance, we built an integrated system of preventive care diagnosis treatment, rehabilitation and elderly nursing. We were involved in pilot programs of individual deferred pension scheme, specialist commercial pension. We also manage over CNY 740 billion in corporate annuity funds and the CPIC home community have been up and running in 15 cities, with 8,800 beds and our brick-and-mortar longevity retreat program rolled out in 127 cities. In terms of digitalization, we have strived to build a new model of insurance service and technology. With customer-centric business philosophy, and the vision of offering integrated services to one customer via one interface, we continue to enhance our service capabilities, optimize system ecosystem to build a differentiated smart service system to push for steady growth of customer value contribution. At the end of last year, the number of individual customers and the number of individual customers with 2 policies and above. And the number of customers with total payable premium of CNY 100,000 and above. And also a number of customers with SA of CNY 3 million and above, all delivered positive growth. And we also have a total of 1,024 strategic accounts, which were included under the collaborative development model in 2024. Also, CPIC P&C and CPIC Life maintained the leading positions at the regulatory evaluation of industry consumer protection and the service quality index. We continue to generate sustainable and predictable returns. We recommended a DPS of CNY 1.08, up 5.9% from 2023, so that our shareholders can share in the development of the company. Of course, this is pending approval from the annual SGM. Next, I will turn to the specific sectors. For the Life business, the Changhang Transformation has delivered tangible benefits, with increased value contribution from diversified channels and better foundation of value growth. Of this CPIC Life reached CNY 261 billion in written premiums up 3.3%. Of this, regular pay new business reached CNY 40.9 billion, up 12%. NBV and the NBV margin grew by 57.7% and 8.6 pt year-on-year before adjustment of economic assumptions, 13th month persistent ratio of individual customer improved by 1.7 pt to 19.4%, while 25 months policy persistency ratio rose by 8.5 pt to 19.2%. For the Agency Channel, we started with customer insights based on customer segmentation and also deepened activity management. We diversified products and services offerings and continue to build a professional sales force. We also so as to provide tailor-made solutions to meet diversified needs in wealth inheritance, retirement, education and health protection, we also tried very much to step up efforts to improved high-quality recruitment and coaching. The Channel -- Agency Channel raised CNY 202.5 billion in premiums, up 3.6%. And of this regular premium outcome accounted to CNY 28.7 billion, up by 9.7%. Our number of core agents remained stable. Total agent headcount stood at 188,000, up 2.7% versus June 30, 2024. Our monthly average FYP per core agent reached 54,000, up 17.9% and monthly average FYC per core agent was nearly CNY 7,000 , up 7.1% year-on-year. We continue to -- on the bank side, foster its competitive edge to boost long-term development. Last year, it realized CNY 40.9 billion in written premiums up 7.4% year-on-year. Of this regular premium new business amounted to CNY 10.9 billion, up 20.5%, NBV from the bank channel reached CNY 4.4 billion, up 134.8% and the NBV margin was 15.5%, up 9.9 pt. In terms of P/C business, we supported the real economy, enhanced customer resource management and responded to natural disasters in an efficient way. Last year, the premium income was CNY 201 billion, up 6.8% of this auto business accounted for CNY 107 billion, up 3.7%. Non-auto business grew by 10.7% to NCY 93.9 billion. Due to natural disasters underwriting combined ratio was 98.6%, up by 0.9 pt, still within normal range. Of this underwriting loss ratio was 70.8%, up by 1.7 pt. Underwriting expense ratio was down by 0.8 pt to 27.8%. In terms of auto insurance, we continue to enhance precise management and deepened presence in NEV business. Auto insurance combined ratio was 98.2%, up 0.6% and the underwriting loss ratio stood at 73.3%, up by 2.7 pt. Expense ratio was down by 2.1 pt to 24.9%. Now policy renewal ratio for individual customers rose by 1.4 pt to 76.8%. For NEV business, last year, the business premium accounted for 17% of total auto insurance premiums, up by 1.0 pt and cumulatively provided rick cover to over 4.6 million vehicle owners. For non-auto business, we continue to optimize business mix and to reduce risk in an all-rounded way. The premium income for the sector as a whole saw rapid growth. Liability insurance delivered CNY 22.2 billion, up 13%; health insurance, CNY 20.3 billion, up 16.9%, agriculture insurance, 19.3% (sic) [ CNY 19.3 billion ] and commercial property insurance up 15% to CNY 7.8 billion. Now the combined ratio was up by 1.4 pt to 99.1%. For asset management, we continue to be long -- to ensure long-term sustainable insurance asset liability management. Continue to build capabilities in professional investment research and to strictly control the risks of reinvestment and consider the impact of the new accounting standards, adjust accounting classification of financial assets. As a result, by the end of 2024, group AUM exceeded CNY 3.5 trillion, rising 21.2% from the end of 2023. We also maintained a stable SAA. To be specific, share of debt financial assets was 75.9%, up 1.4 pt. Equity financial assets was 14.5%, flat, and stock and equity funds accounted for 11.2%, up 0.5 pts. We followed and fine-tuned the dumbbell shaped asset allocation strategy so as to actively respond to the dual challenge of equity market volatility and the secular decline of interest rates. In particular, the long-term core share dividend strategy has delivered positive results. Our net investment income totaled CNY 82.8 billion, up by 6.5%. This mainly comes from dividend income. Net investment yield reached 3.8%, down by 0.2 pt. Total investment income amounted to CNY 120.4 billion, up by 130% year-on-year, which was mainly because of the gains from fair value change and the total investment yield was 5.6% up by 3 pt year-on-year. Comprehensive investment yield rose by 3.3 pt to 6%, largely because of the increased impact from equity financial assets at both fair value through P&L and the fair value through other comprehensive income. We set great store by credit risk management and proactively managed and mitigated risks. On the whole, our underlying projects of nonpublic financing instruments, cover sectors such as infrastructure, communications, transportation, et cetera, with a nominal yield of 4.4% and an average duration of 8.1 years. Going forward, we will implement a new development philosophy, strive to build a top-notch insurance financial group with global influence enhance core functions and competitiveness especially in terms of CRM, ALM, synergy and risk management and also secure our market standing improve risk management and continue to consolidate the foundation of our high-quality development. So that ends my presentation. Thank you.

Thank you, Mr. Zhao. Now let's start the Q&A session. First of all, we will welcome those who are on site to ask questions, and then we will have also people ask questions over the phone. [Operator Instructions] First of all, we turn to the Shanghai side.

I'm with Shanghai Securities newspaper, we have noticed -- you mentioned for the first time, the big health care and also AI plus and the internationalization as our strategic direction. So what are the logic behind this? What are your specific planning and measures?

Thank you for your attention and also support to the company. Now you see insurance industry is transforming from scale expansion to value creation amid multiple opportunities and challenges. So given this kind of a complex environment, we need to maintain our strategic focus and seize opportunities. So this is because this is very important to drive corporate transformation. Given this, we launched the 3 major strategies: big health and elderly care, AI plus and internationalization. So this is a continuation of our previous strategies and also pillars for our journey towards high-quality development. For big health and elderly care strategy, well, it's one of our key initiatives to address population aging and support China's healthy China initiative. As a responsible insurance provider, we aim to fulfill our mission by contributing to the development of the social security system and to meet diversified customer needs of insurance products. The AI plus innovation strategy acts as a vital engine for development. It use technology empowerment to inject new growth into traditional business operations. The internationalization strategy focused on enhancing cross-border market capabilities, which served as a key way to build our core competitiveness and also aligns with national objectives and support China's company going forward, going globe. For more details for the big health strategy, have big health and elderly care, we will prioritize customer needs, deepen integration of insurance products and services and refined industrial layouts and promote high-quality development of insurance products. We need to accelerate the development of commercial health insurance with a focus on products tailored to high-risk groups, those with preexisting conditions and substandard health. And also, we need to expand the inclusive financial products. For example, the Huiminbao and we need to enhance multi-tier prevention, diagnosis, treatment, rehabilitation and the elderly care service system to strengthen synergy between service delivery and customer engagement so as to reduce risks through proactive health management. And also we need to leverage the advantages of long-term insurance capital to support the silver economy to focus on commercial health insurance and also leverage and to advance elderly care finance and the 3 pillar system. For AI plus strategy, we will embrace technology innovation to accelerate integration of technology and business to reduce risks and also improve service quality in key areas because AI is not only a technology revolution, but is also a revolutionary revolution for productive forces. So it is very important. It's likely to bring interruption. So for the insurance industry, AI is more like empowerment tool, for example, for our agents, AI can help in terms of the sales skills and their knowledge of insurance and products. We are also going to promote application of foundation models so that our -- we can do a better job at customer engagement, agent empowerment, sales automation, underwriting and claims and risk management. At the same time, we will strengthen AI infrastructure and also AI training for all our CPIC employees so that everyone in CPIC can embrace AI. AI not only brings empowerment, but also bring more business scenarios for the industry. We will speed up relevant research. For example, AI protection for customer information, customer data, et cetera. I believe AI has a lot of room for development. For example, cyber risk insurance, according to statistics, the total business size is USD 80 billion in size, but it's still in early stage in China because in China, we have a lot more Internet users in China. So the potential for cybersecurity risk should be huge in China. For internationalization strategy, we will focus on sustainable global growth to expand the market reach and serve our Chinese companies going global. We will be customer focused. We follow these Chinese companies to -- for example, along the Belt and Road Initiative, and also enhance investment management and capital allocation across economic cycles to optimize overseas asset allocation and improve capital efficiency, refine our government structure -- governance structure and also benchmark global best practices for long-term strength. Looking forward, we will focus on the big health and elderly care, AI innovation and internationalization strategy to seize opportunities to transform the company into a world-class insurer and financial services group with global influence. Thank you.

Thank you, Mr. Fu. Now let's welcome the next question.

I'm [indiscernible] Securities. First of all, congratulations on your good performance especially the profit, EV, net assets, very good numbers. Now I have 2 questions, actually. Number one, about the overall performance. Now, how about 2025, Q1 has -- well, it's going to finish. So what are your targets and the measures going forward? Secondly, ALM, do you have more details to share on the ALM issue. Now second is on the Life side. For example, a lot of the changes for CPIC Life. So the new management team of CPIC Life. So do you have -- well, what kind of a long term or mid- to long-term plans for CPIC Life. And also you -- well, of course, you have Changhang Transformation plan. Now you have the Northern Star, the plan. So what do you mean by that?

Well, allow me to answer your first question. Thank you for your endorsement of our performance. As I mentioned, so for 2024, as you can see under the leadership of the Board, we tackled internal and external challenges and delivered steady growth with new achievements. For example, our revenue grew by 24.7% and net profit was up by 64.9%. EV grew by 6.2%, and the AUM increased by 21.2%. For 2025, we'll continue to maintain this big principle and focus on the 5 priorities of the Chinese financial industry and also, well, guided by the national policies, the so called 10 measures. And also, also make more efforts in terms of serving national strategy, increasing business quality, consolidating our market standing. And better manage our risks. For P&C, we need to maintain our size of business, but better improve the business mix. For the Life side, we need to focus on 3 key priorities: customer, service, products and our sales agents. And for asset management business, we need to focus on value creation so as to improve our capability to cross the economic cycles. So we need to be more specific, enhance our capabilities in the following 4 areas. Number one, CRM capabilities because now customers are having more diversified needs. So we need to be customer-centric. So it's a starting point of everything we do. So starting from customer, we need to improve our business logic, improve product innovation, improve CRM based on different customer segmentation and to serve our customers' diversified needs for insurance, wealth management and elderly care and pension. Secondly, we need to improve our ability for ALM matching or ALM, now the rates are going down. So we had a lot of pressure in terms of liability management and investment yields. So we need to enhance investment research and investment management so as to come up with a logic so to beat or cross this kind of circles so as to balance long term and short term, absolute return and relative yield so that we can achieve a better matching between assets and liabilities and make it long term. Thirdly, we need to enhance our synergy. As a group CPIC, we believe we have a quite comprehensive business layout -- business setup. For example, we have a very big customer base. So we believe this is a source of our value. We need to use this kind of synergy and focus on KPI, organizational model, business model, our processes, our innovation, our technology empowerment so that we can achieve better synergy between Life and P&C, asset and liability product and service. And fourthly, we need to enhance our risk management capability. Of course, we have more and more faster and faster innovation. So with this kind of innovation and the new business models, we must better identify and manage those risks. And all this kind of -- and with this kind of regulatory trends, we are under more pressure to better -- to have a more compliant business operation, and we will do so, not only for home office, but also for the branches and all level of our outlets so as to safeguard our long-term value growth.

Now I will answer your next question. Thank you for your interest and interest in the CPIC Life company. Of course, the new management team of CPIC Life pays a lot of attention to the mid- to long-term growth of CPIC Life company. We are guided by all those meetings from the central government and also focus on not only national but also international trends and came up with a new 3-year development plan. We believe the plan is quite good in terms of the high-level design, we come up with a concept of a golden triangle. That is to say we focus on customer, product and service and sales team, that is agency team. So this kind of 3 triangle and focused on customer value to drive up economic value and social value. In terms of the specific contents, we have 6 priorities. To be specific, in terms of customer strategy, we have segmented or differentiated target customers so as to move or better manage the customers to move them up to the higher level. In terms of area of growth, we're going to focus on a range of key development areas. For product and service, we are going to focus on the need for retirement, for health and for wealth management. In terms of the channel, we launched a 2+ N channel upgrade. The 2 means the agency channel and the bank insurance channel and the N means other channels. So for different channels, we'll have different strategies to make them more professional. And for the big operation strategy, we are going to focus on the value management system and ALM system for the life company. And lastly, for the digital strategy, we are going to focus on empowerment, digital empowerment covering the whole process. In terms of the second phase of Changhang Transformation, the Northern Star plan, well, it's basically an extension of the 6 priorities so as to answer where can we get the business? Where can we get that value and where -- these 2 questions. Where can we find the business? Now first of all, we'll have a digital CRM and utilize our existing in-force customers and also synergy between elderly care and retirement and also PAA, PSA development model and also synergy between agency and banker. And second question, where does the value come from? Well, the answer is come from -- we believe we come from the management, value management of the life business and also ALM management. But of course, we also need to develop our proactive risk management and build our digital capabilities. Thank you.

Now if I may just add a little bit. Now you see on the Shanghai side, Mr. Li and Mr. [ Chan ], and they are the General Manager of Life and P&C. It's their first time to meet you in the results announcement event. Going forward, I believe you will have more opportunity to share ideas. Now next come from the Shenzhen side.

Well, thank you for the opportunity. I'm [indiscernible] from CICC. I have 2 questions. Number one, about our asset allocation. For the 2025, what's your view on the macroeconomic trends and the stock market and the interest movement, so number one. Number two, about your product strategy for Life company. Now given internal and external situation, everyone is talking about product transformation. So what do you -- what kind of plan do you have? For example, increase of the share of per Life products?

Thank you for the question. Number one, to be honest, for 2025, I believe China's economy is still in a critical phase of a transition. Now you can see a lot of economic numbers from the start of the year. We see a recovery of real economy in China. And also according to the government report, the GDP growth for 2025 will be about 5%. So that is to say, given this kind of background, China's economy is likely to further grow steadily. As we know, international situation is -- well, it is still very uncertain. There's a lot of uncertainties. But China's economy has become more certain and displaying more upward momentum. So you're going to see China's tech in sector had a lot of innovation. You see there's a lot more risk premium preference on the market. But of course, on the whole, the stock indexes are still fluctuating, flattening out. For 2025, there will be opportunities and challenges for the stock market. But on the whole, we believe earning -- the company's earning will be the key factor. So for the stock market, there will be structural opportunities this year. For the rates, on the rate side, interest rate side, to push for the transformation of traditional sectors and emerging sectors, there will be, I mean, less policy, monitoring policy, with rates kept low so as to support growth of the real economy. In the short term, the interest rate fluctuation will be influenced by the market liquidity and also open market maneuvers and also cross-border flow of money. So this is for the short term, as we can see at the start of the year. But for the long-term view, for the long run, given the changes of the return on capital, we believe the interest will move -- interest rate will move steadily down over the mid- to long term. So it will -- I mean, this will present some pressure -- more pressure and more challenges to our long-term investment, long-term asset allocation. But of course, for CPIC, we always seek to cross the circles -- cross the cycles. So we will maintain discipline for investment, but remain flexible. We will stick with our dumbbell shaped SAA, remain vigilant for risks and so as to seize structural opportunities amid market changes. For example, long-term rates, long-term fixed assets will be our focus so as to shorten or narrow the asset liability gap. And also, we will be more flexible in terms -- so as to drive up the return for long-term investment. For example, some equity investment, investment in non-listed equity. Of course, risk management will always be our focus. We will need to focus on security of our assets. To sum up, we need to balance the long-term growth and the long-term stability to balance long term -- short term, balance absolute return and relative return so as to meet our investment target. Second question. Now since the long-term rate is going down, and there's a lot of adjustment to our preset rates for our insurance products. We need to pay a lot of attention in this regard. In 2025, CPIC Life will focus on the needs of our customers in terms of health, retirement, pension, elderly care, et cetera, and also try to better match ALM to be more specific in terms of product offering, we need to further enhance our innovation in terms of product development, for example, better serve customer needs to build a more enriched metric of our products. For example, with variable -- products with variable returns. Secondly, we need to reconsolidate our pricing foundations, so as to be more innovative. We need to better -- for example, in terms of the midterm care and also disability care and also disability income, should -- these areas should be better served. And also in terms of our agents, we need to better train them in terms of how to sell different types of products. And also, we need to focus on different strategies in different areas, different regions. And the last -- and the next, we need to have a differentiated resource investment for different segments of business and different branches.

Well, we'll continue to -- with the Shenzhen side.

I'm [indiscernible] Securities. First of all, congratulations on the performance of your stock prices. I have the questions. Number one, on a group strategy and that is for the elderly care, big health strategy. Now everyone else, I mean, your peers is doing this. So what's your achievement for the retirement or elderly care? What's your unique strengths in this regard? And your P&C combined ratio is relatively high compared to Taiping and China Life CPIC. So what are the reasons? What kind of ways do you have to better control your combined ratio, especially for new -- for NEV, new energy vehicle?

Thank you for your attention and interest in the health care. I mean in our retirement, elderly care strategy. Of course, CPIC focus on insurance. So our elderly care business also serve this purpose. So, we need to reduce risks. Let me give you an example. In one of our CPIC home community in Putuo, CPIC home in Putuo, Shanghai. One of our customer, age 92, suffers from Alzheimer's disease. But given our professional care, she slowly recovered and become healthier. And we also have a Taibao, Internet Taibao, that is an online medical consultation. We cumulatively have given consultation to more than 7 million customers. For example, some customers had a seizure over the high-speed rail -- high speed rail transportation and some customers will become -- had a high fever, an infant, actually, in the middle of the night. They can just use our online medical consultation service and receive feedback, receive treatment. And also, for example, some old customers, they just fell down to the floor in the middle of the night. And our online service can help them receive timely medical care. Also in Shanghai, we have a customer called Mr. Yuan, who has an 11-year-old child, who had a condition with his spine and our [ Tianjin growth ] team, well, helped him with professional coaching. After 4 years of coaching and rehabilitation, his spine condition basically recovered and become healthy again. So all these examples happen every day. And our service scenarios is improving the product advantages of CPIC. We are not doing compensation after treatment. We are doing more than that. For example, the retirement care scenario, it helps customer with mid- to long-term health growth and our health scenario are also contributing to the growth of our non-auto business. We have been doing elderly care and the big health strategy for over 5 years. We did a lot of the models. For example, we have some -- we build ourselves. We work with others to build communities and we also make investment. We have online consultation, rehabilitation, high-end medical treatment and also medical care services. So as of the end of last year, more than 10 million customers have used CPIC's elderly care services. So going forward, we need to become stronger in this area. As President Fu mentioned about the big health strategy. I mean, service is the key, is the foundation. The purpose is to enhance our CRM as a whole to help our insurance business, so that we can seize the opportunity for health insurance and for pension insurance. We're going to make concrete efforts to do that, to combine top-level design with day-to-day rollout so that we can deliver more results for the big health strategy.

Well, about the combined ratio question. I will answer you. Thank you for your interest and attention. You see for 2024, CPIC P&C has delivered quite good results. Our premium income was more than CNY 200 billion, up by 12.8% year-on-year. And for P&C company, our underwriting profit was CNY 2.6 billion and the net profit was CNY 7.3 billion. But of course, you also noticed that for last year, combined ratio for the P&C company increased. Now let me give you some very brief reasons. On the whole, for the year 2024, the combined ratio was 98.6%. Now but if we look at the expense ratio, it was down by 0.8 pt. The loss ratio is -- well, 2.8%. So that is why we had a higher combined ratio. Why the higher loss ratio? Number one, more natural disasters for China. For example, we had CNY 8.68 billion in payout for major claims. If you can recall, we had this kind of a rainstorm and also flood and also in September in 2024, we had a very big typhoon in Guangdong, Guangdong province. For example, a lot of our -- well, we had a lot of loss for new energy business and the PV business. And also, in July, we had a typhoon, which also hit Shanghai which caused a loss of over CNY 1 billion for CPIC. So all these kind of big payouts, claims payout, had a negative impact on our combined ratio, so that our loss ratio was up by 0.9 pt year-on-year. On our internal reasons, for example, some channels, especially for liability insurance and health insurance, we also had some part of the business, which is high risk and high loss. Now as we mentioned for 2025, we actually have a lot of strategies and measures. But I will try to be brief. Just to highlight a little bit. Number one, we need to have the big insurance mindset. We need to serve the national strategy, serve the real economy. That is to say, for example, as I mentioned, the 5 priorities of finance, so as to secure business for these kind of big projects. So we believe a P&C company, I mean in -- within the CPIC Group, I mean, we -- our business is more about -- I mean, we can do more in terms of being political correct -- politically correct. But of course, we need to also serve real economy, for example, new energy vehicle, agricultural insurance, et cetera, and health insurance. So all these is related -- I mean, it's about the livelihood of our people, about the well-being of our people. Next, we need to focus on transformation of high-quality growth. To be specific, first of all, we need to continue to do risk mitigation. Now the regulators and also peers are on the same page. That is to say we need to do a better job. We need to leverage our expertise in reducing risks. Secondly, we need to better manage product mix and the quality of business. As I mentioned, for some high-risk, high-cost business, we need to restructure those businesses. Thirdly, we need to continue to improve underwriting and claims, high-quality underwriting and claims. So these 3 things are what we need to do. And thirdly, we need to further improve our CRM for high-quality growth. Now that is to say we need to strengthen our CRM system. Starting from 2021 on both individual customer and the group customer we have built some institutions, some systems, especially for 2025, for individual and group customers, we need to better serve and better transform our organization based on their needs. Secondly, about talent and the people evaluation and the technology empowerment. These are great enablers. For example, the A+ strategy can better empower our business. So for 2025, based on requirements from the CPIC Group, P&C company will further consolidate our work. I believe, and I'm quite confident we will deliver better results in 2025. And also about new energy vehicle. Actually, this is a topic regularly mentioned on various meetings. NEV is a big important direction for China. And not only in China, but also for overseas market, CPIC also made an effort, we made quite a lot of contribution in terms of risk protection for the new EV sector. For last year, total premium for NEV is CNY 18.3 billion or 17% for our total P&C premium, up by over 40% year-on-year. And our NEV business also is showing better quality. Combined ratio for NEV was down by 4 pt. So NEV business model has just been established. So our peers, everyone is making explorations for NEV business. And we will also have some experience to share. We had a vertical management model, you'll see there's a lot of OEM car manufacturers. So to better serve the customers and also serve the OEM car manufacturers, we refined our previous processes. And in the meantime, to cut our cost and enhance our service efficiency. Secondly, centralized claims because NEV claims -- and because this kind of NEV is new for -- even for car manufacturers. So for something new, we need to have standards for claims, I mean, prices for spare parts and also numbers for claims, I mean, data, a lot of data, raw data for claims. We need to combine them all so as to further reduce the claims cost of NEV. So as to make it cheaper to repair NEVs, not only CPIC but also the whole sector, insurance sector is making efforts in this regard. For example, the so-called auto driving is a key topic for the industry. We have contacted quite a lot of the manufacturers, car manufacturers in this regard in auto driving sectors. So we try to improve the NEV business. Now let's move back to the Shanghai side.

Thank you for the opportunity. I'm Joe Chen from Credit Suisse. First all, congratulations on your performance last year. Now my first question is about the dividend payout. Now your cash dividend, you mentioned that your cash dividend payout will be linked to OPAT. Now, going forward, can you give us more details? Can you give us more explanation? Is it because it's a -- well, a key topic for investors? Second question is about technology. What kind of investment are you making in terms of technology? For example, AI, so how you're going to do this? And maybe a very short third question, that is your new business. CSM grew by 57% year-on-year. And the new business also grew quite a lot. CSM and the relationship between NEV and the CSM, is there -- are they related? Because other -- your peers have different pictures in terms of CSM and NBV.

Now first of all, let me answer your first question. Thank you for your question. Now I would say CPIC has always attached great importance to shareholder return. We did some calculation. Since the listing in 2007, we have distributed a cumulative total of CNY 119 billion in dividends. And we have also just released our policy for dividend because we know we need to consider all factors, for example, the dividend policy, market confidence and the return for shareholders because you see any -- you see last state council issued the 9 national measures which set requirements on listed companies' quality and investment returns which requires us to enhance to enhance the stability, continuity and predictability of dividends. So we believe we should have a clear dividend policy. It's -- well, it's a communication between the market and the company. It can enhance market confidence and also reflect the effectiveness of corporate strategy, planning and governance and also serve as a constraint on the management. Secondly, we believe with the new accounting standards, insurers -- because for insurers, the share of equity assets measured at fair value through profit and loss is much higher than that of the securities and the banks. So we believe a big share of performance volatility stemmed from fluctuation investment returns, which overwhelmed contributions from core insurance operations. So this has also weakened the reflection of the company's actual and long-term profitability, which leads to some kind of a confusion in market valuation and perception of investment value. So both the market and the company -- so that is why both the company and the shareholders want to establish a more stable, sustainable and predictable mid- to long-term dividend guidelines. Also, at the end of last year, the CSRC released China's first capital market guidelines on market value management, requiring listed companies to enhance shareholder return capabilities. So we formulated our market value management measures. After reviewing historical practices, we established a forward-looking mid- to long-term dividend policy. It stipulates that the profit distribution will consider factors such as the company's solvency, long-term investments, short-term returns and financial flexibility. The determination factors for cash dividends include the growth rate of attributable OPAT and also positive investment contributions. Compared to net profit, OPAT excludes short-term investment volatility, it can better reflect the logic of long-term value creation and aligns better with shareholders' long-term interests. At the same time, we fully consider shareholders' demand for immediate returns. When net profit consistently outperforms OPAT, we will increase dividends to share operational achievements with shareholders. So these principles have been released -- have been included in our release last night. So that is a little, I mean, explanation on our dividend policies. We hope you can -- well, we can receive your understanding so as to better improve our dividend policy so that you can understand our confidence in high-quality, long-term growth. Well, thank you for your interest in technology issue of CPIC. Now to answer your question, we have been doing a lot to combine business with technology. To be specific, First of all, we have started the DPI -- digital transformation program to empower business with technology. For example, we -- first of all, we need to empower our agents using AI. In terms of service of customers, our AI customer service covered 46% of our customer service. In terms of claims, our Big Model technology achieved a breakthrough for claims [ candiment ]. Some of the Health claims can be done within just 1 minute. And the Huhuibao claims settlement rates, auto settlement rates reached 62%. In terms of risk reduction, we use the Internet of Things and Big Data technology to reduce before, during and after incidents. And we saw some breakthrough -- model breakthrough in terms of cybersecurity and elevator security. In terms of claims control, we introduced image control system technology to intercept fake claims. For example, we scanned more than 60 million images for claims cases and actually prevented a lot of the floors, for example, fake, materials, repetitive claims, et cetera. And for asset management, we also developed a model to identify to cover nonstandard investment and issuers. Secondly, in terms of government data governance, we also did a lot of work. We have become the first insurer in China to receive the DCMM Level 5 certification. And the CPIC technology company also entered a national excellent list. Thirdly, we also did a good job in terms of securing financial data security. We had this kind of active model to enhance BCM and have built a data security protection system for the whole life cycle of the data. We had basically 3 phases -- 3 stages. First stage, the traditional development of AI. From 2020 to 2022, we did a lot of in-house development of AI, service mid-office. So starting from 2021, AI utilization was 212 million users. And by 2024, the usage reached 1.5 million -- 1.5 billion users. Secondly, we -- second phase is the big model for insurance. Starting from 2023, we started to build this large model for insurance. Now we had 30 of them and covered 2,600 CPIC employees. The third stage is the AI+ strategy. We believe AI can bring a lot of the influence, big impact, for example, influencing customer behavior, business logic and the competitive landscape. We are going to focus on several things. Number one, the exploration or innovation of a model, new business model. Secondly, we need to focus on internal digital capability to enhance our efficiency and the effectiveness. We need to make AI more inclusive. That is to say we need to empower more agents and employees so as to expand our -- the limit of our capabilities. Secondly, to accelerate the training of AI for employees, so that this kind of top-down AI innovation can reach the frontline can drive up innovation for processes, organizations and models. Thirdly, we need to have a more innovative AI organization and governance structure. We need to combine further business and technology and refine the relationship between AI supply and demand but also do a good job in terms of AI compliance and risk management. Now to answer your third question, for 2024, CSM up 56.8%, mainly because of new business growth and also market risk reduction, et cetera. Now NBV also need to consider taxation and the capital requirement. So usually, CSM is bigger than the NBV margin for new business. Excluding the assumption and the economic impact, CSM and the NBV margin growth, I mean, the relation -- the ratio is 1.9%. Now excluding the assumption -- impact from assumption, the ratio is 1.7%. So there is a strong correlation. But of course, it's also byproduct, for -- that is for 2023. For 2024, CSM was up 56%, but the NBV margin was up by 20%, why the difference? Because last year, we adjusted the investment yield assumption and also risk discount rate. For 2024, the risk discount assumption was only lowered by 0.5 bps. So this is the difference. And for CSM, CSM locks up an interest rate at the end of each month. If we look at the big picture, it's an average -- yearly average for the interest rate. But NBV margin, that is -- that utilizes a year-end interest rate. So that is another difference.

Now let's have some questions over the telephone -- over the phone. [Operator Instructions] Now we have [indiscernible] from Morgan Stanley.

I have 2 questions, number one, about the overall level. Now you mentioned a lot on the 5 priorities. Now could you give me more details on your specific plans? And the second question on the investment side, especially equity side, I mean, high dividend stock strategy. Now what's your plan for this year, for the future? For example, the Hong Kong stocks, so are you going to -- well, further enhance your investment in Hong Kong stocks or stocks in Hong Kong?

Now let me answer your first question, starting from 2024. We focused on the 5 priorities. Well, proactively responded to national policies, guidelines so as to better serve national strategy, to better serve the real economy and the people's well-being. On the whole, I would say, we have already established relevant mechanisms and come up with some innovative models and actually rolled out specific projects. At the same time, these also supported our business growth. In terms of technology finance, we actually have set up specific departments in places where there's a lot of tech companies. For example, in specific areas like cybersecurity, new materials, we have achieved breakthroughs. And we also pushed forward this kind of insurance plus risk mitigation model. Our overall investment in technology finance amounted to CNY 100 billion. In terms of Green Insurance, we focused on areas, for example, clean energy, environment, governance, ecocarbon and green supply chain. We have rolled out 7 industry-first products. We also improved our Green Investment System and further explored the possibility to include climate change factors and environment-related factors into our investment decision-making. Our overall investment in the Green Investment exceeded CNY 26 billion. For Inclusive Insurance, we rolled out a lot of Agricultural Insurance products for the whole year, we covered a total of 80 million customers -- Agricultural Insurance customers with SA above CNY 640 billion with -- across -- well, and also we have developed more than 1,200 new agricultural insurance products. For the whole year, we served cumulatively more than 400 million people in terms of inclusive health insurance. And for example, we have provided services to this kind of new occupation practitioners. For example, this kind of courier for delivery companies, we served more than 490 of those riders. For the pension business, we also achieved a 3-year high in terms of the managed -- well, pension assets under management. For example, we became the manager for the talent annuity program of [ Lingang ], Shanghai. We also take active part in third pillar annuity program. And for our CPIC home community, development, we have now 16,000 beds in reserve and 9 of our CPIC home communities are up and running. In terms of digital finance, we are improving our infrastructure and the scenario development and is improving our data management capability. Together with Huawei, we have built an insurance smart calculation demo store. And we have already rolled out a lot of big model applications with digital employee covering over 3,000 people and productivity -- digital productivity improving over 20%. We are going to do more and better in 2025, focusing on the 5 priorities, so as to become -- well, so as to build our unique competitive strengths, we need to, well, explore and replicate and then roll out our innovations to become a leader in Green Insurance and also further promote the coverage of our Inclusive Insurance and also boost more rollout and the take-up of AI, so as to better serve the company's drive to become a financial power and modern China. Well, lastly, the 2025 dividend payout. Now of course, payout, I mean, cash payout is key for CPIC. We consider the long-term nature of insurance money, insurance funding. Actually, I believe, starting from 10 years ago, we have been doing this. I believe the strategy is a good one. It's consistently delivering good dividend. If we look at the -- well, annualized return over the last 10 years is -- the rate is 15.3%. It's a really big number. I mean, this kind of a dividend, I mean, long-term good performance. So I would say by focusing on the high dividend payout stocks, I mean, we can have a very good performance for investment yields. Of course, we have some other prior -- other strategies. For example, our satellite strategy. For example, we have a [indiscernible] select which actually delivered more than 50% in yield. So for 2023, number 1 Insurance affiliated AMC products. Also, I mean, we are also the champion #1 ranking product, Insurance Asset Management company product. But anyway, on the whole, I would say, for our core and the satellite strategy, I believe we did quite a good job. And for 2025, investment direction apart from our traditional strategy, for example, focusing on high dividend stocks. This is something we cannot change. We need certainty for the long term. But on the margin, we are going to enhance growth components. That is to say especially for AI, any robot technology NEV, we do see good opportunities. So we are seeing this increase in these fronts. So on the whole, for resources, for technology, for consumption, types of stocks, we are going to add allocation in AI. Another strategy is to invest in funds -- mutual funds. We're going to have more investment in equity or active equity funds, mutual funds. We believe -- I mean, this year, these kind of active equity funds outperformed the market. So going forward, we believe that we have -- we can have some opportunity in this regard. And then investment, I mean, peer -- in peer, we can see a lot of this kind of investment. Now it's mainly because of the high dividend payout in the Hong Kong stock market, because it can help our net investment yield because the bond yield is going down, so we need to pay more attention to a high dividend payout ratio to offset the reduction in bond yields. So we see a lot of this kind of investment in Hong Kong stocks. We also did some. We covered more sectors, for example, for CPIC, we based this decision on our industry strategy. We want to diversify the portfolio, so as to reduce the long-term fluctuation, long-term volatility of our portfolio, we make it more diversified. We focus more on the shop ratio and the long-term information ratio. So that is our strategy for investment. In terms of the share of H share -- share of H stocks, you see for Hong Kong market, it is still a very vibrant or still the stock market with the lowest capitalization, lowest valuation in the world. Because for overseas market, you can see as long as the RMB remained stable, so the Hong Kong's dividend -- high dividend stocks are still attractive. But be it in Hong Kong or in Mainland China, we would look mainly at the long-term competitiveness of those stocks.

I'm afraid we only have time for one more question. [indiscernible] from Goldman Sachs.

I'm [indiscernible] from Goldman Sachs. I have 2 questions. Number one, for 2024, NBV grew quite fast. What's your forecast for 2025? And what are the drivers? Second question, CSM and net assets. You see CSM and net assets grew quite fast. Now of course, different companies have different financial or accounting treatment. So what's your forecast for the next 2 to 3 years?

Well, let me answer your first question. Now for 2024, our NBV of Life company grew quite fast. That is mainly because of the upgrade of the 2+ N channel model. We kept increasing our capability to create value. We pushed forward the transformation of our Agency Channel, improve the differentiated segment-based customer insight and improve our product plus services supply offering. Secondly, we continue to deepen the agency teams transformation to improve its productivity, we focus on high-quality recruitment, training to change their behavior to help their retention and to empower them with technology and to help them do a better job at CIM. Thirdly, we continue to improve business mix to drive up regular premium development. We offer this kind of a plus -- product plus service comprehensive solutions to drive up the share of RP business. Fourthly, we continue to strengthen the supply of our services to improve customer experience. We combine off-line and online, we will integrate Insurance with Retirement Care, Elderly Care. And fifthly, we improved refined management to improve NBV margin. Starting from the product, we focus on value to have more refined management to have a better matching between assets and liability. Going forward, we'll continue with all this. We are quite confident for the future. Thank you. To answer your second question, first of all, growth of net asset. Last year, it grew by 6.8%. And for 2024, it's mainly because of the matching of asset and liability and net profit. Now last year, interest rate dropped a lot, reserve for life went up. But we did a lot of -- we did some treatment. For example, better -- well, we better match asset and liability, expanded the duration for investments. And for investment yield, we saw very good improvement, thanks to suitable SAA and the TAA. So our CSM margin improved by 5.6%. For 2024, our CSM margin went up by 5.6% faster than 2023. That is mainly because of -- because the contribution from new business and also better but the contribution from improved investment yield. CSM margin changes was influenced not only by new business and operational variance, but also influenced by interest rate and the capital market fluctuation. So going forward, CSM margin will have some uncertainty. We see that -- well, the negative spread of VFA, we are quite confident. And also, we believe we also see positive trends in terms of the alignment of reported rates and actual rates. So going forward, without a big fluctuation of the capital market, our VSM, CSM will continue to go up, will increase. And also looking at peers, their CSM changes is different from ours. Now the main reason for the difference is because of the par life evaluation rates, discount rates is different. Now we have a curve for this. It's based on our investment -- expected investment yield. For par and universal life, they must use this kind of curve based on the investment yield of the Investment portfolios, we are quite prudent in this regard. Thank you.

Thank you for the answers and question. We also collected questions from small and medium companies -- medium investors, which send many -- were about the long-term strategy of the company, dividend guideline of the company, product strategy and also our managers and SAAs. I believe these questions have been touched upon previous, just now. And we also have launched the market value management measures, which has already been approved. Going forward, we will continue to push forward high-quality growth and increase our investment value and capability to return to shareholders. If you have further questions, please contact our Investor Relations team. Thank you for your attention and time. That ends the presentation. Thank you. Bye-bye.