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

Good afternoon, ladies and gentlemen. Welcome to the CPIC Group 2026 Interim Results Announcement. I'm Su Shaojun, CPIC Group Board Secretary. It's my great pleasure to talk to the investors, analysts and friends from media about our performance and business in first half of this year and also to listen to your views on us. To protect the interest of small and midsized investors, we are conducting this event online and offline so as to cover more investors. After the meeting, you can also view this -- you can access the view of this event from -- on our website. Now let me introduce the executives, Mr. John Qiang, CPIC Group President; and Mr. Su Gang, CPIC Group Vice President and CFO; Mr. Chen Hui, CPIC P&C General Manager; and also Mr. Li Jinsong, General Manager of CPIC Life. Our independent directors will also join this event on offline and online. First of all, Mr. Zhao Yonggang, our President, will give you an introduction of our performance in the first half of this year to be followed by a Q&A session.

Good afternoon, ladies and gentlemen, friends from the investment community and media. It's a great pleasure to meet you. In the first half of this year in a very complex and fast-changing environment, we stayed focused on our core business of insurance, seized the opportunity arising from China's demographic change, industrial transformation and also application of AI technologies. And overall, we delivered a steady improvement in overall operating profit and sustained growth in competitive strengths. To give you some numbers, our group operating income amounted to CNY 212 billion, up 5.8% year-on-year. Group OPAT reached CNY 21.1 billion, up 6.2%. Group net profit reached CNY 30.8 billion, up 10.4%. Net assets attributable to parent shareholders stood at CNY 319.2 billion, up 5.6% from the end of 2025. Our new business value of life business grew 12.7% year-on-year, and the combined ratio of P&C business improved by 1.3 percentage points. Our group AUM surpassed CNY 4 trillion mark for the first time and our comprehensive -- our core solvency margin remained well above the regulatory requirements. We have been improving disclosure of operating profit. And following the implementation of the new accounting standards, net profit has become more sensitive to capital market movement. And OPAT presents a clearer view of the company's long-term operating performance. In recent years, our group OPAT maintained steady growth. In the first half of this year, OPAT from Life business was CNY 15.9 billion, up 5.9% year-on-year, while P&C business reached CNY 6.3 billion, up 26% year-on-year. On the issue of contractual service margin, well, CSM is a key financial indicator. It reflects the sustainability of the future profit. Our CSM has continued to grow since 2023, reaching CNY 368.8 billion at the end of the first half of this year, up 3.3% from the end of 2025. By the end of June this year, our group net assets stood at CNY 319 billion, up 5.6% year-on-year. Well, this is achieved on the back of a steady profit contribution and a solid foundation in that in asset liability matching. We also have a solid capital position. At the end of June this year, the comprehensive and the core solvency margin ratios well above the regulatory requirements. We are committed to shareholder returns with a clearly defined medium- and long-term dividend policy based on -- dividend policy based on operating profit. Since 2007, we have distributed a total of CNY 130 billion in cash dividends to the shareholders. And for the first half of this year, we optimized the dividend distribution arrangement and implemented an interim dividend for the first time with an interim DPS of CNY 0.42 and a total interim dividend amount of CNY 4.04 billion, further enhancing investors' experience. Next, I'll talk about the performance of our life business, P&C business and also asset management business. For the Life business, we remain committed to value growth and focus on regular premium business. We saw steady improvement in business quality and operational efficiency. To be specific, the written premium reached -- total written premium reached CNY 190 billion, up -- down 1.6% year-on-year. Regular FYP amounted to CNY 30.7 billion, up 28%. And the 30 months and the 25 months persistency ratio were 96.8% and 94.8%, respectively. In terms of new business, our NBV for the first half of this year grew 12.7% to CNY 10.8 billion. This was mainly driven by the agency channel. And in terms of NBV margin, it improved by 2.5 percentage points year-on-year to 17.5%. On the agency channel, we strengthened the systematic capacity building, which includes conducting customer engagement on the multiple scenarios and driving the upward shift in the customer mix and also provide the differentiated insurance and service solutions and also try to build an agency sales force of professional career based digital savvy, younger agents. To be specific, our monthly average agent head count was 183,000 and our FYP per core agent and the monthly average FYC per agent both achieved double-digit growth. Our AI strategy also played a positive role in supporting our agents. For example, we launched the Xiao Lan AI agent to empower our sales agents. Actually, the average number of agents using Xiao Lan was nearly 90,000 and those who use Xiao Lan frequently saw increases in the FYP per agent, FYC per agent, active ratio and the average number of long-term policies. Now these indicators have all improved by double digits. For the bancassurance business, we strictly implemented regulatory requirement for consistency between filed and actual expenses. Also, we adhere to the value-oriented strategy. To be specific, our FYP -- regular FYP growth from bank channel picked up quarter-by-quarter. Now the number of active bank outlets measured by RP business was nearly 5,000, up 4.9%. And the average regular premium per active bank outlet reached nearly 300,000. We also have Jianxiangjia, health management program for bank channel customers. Actually, the number of requests from Jianxiangjia by mid-tier customers with about 10,000 in the first half of this year. Pacific Care Home is also a brand for premium retirement community. It also helped to maintain customer relation from the bank channel and nearly 30% of the total FYPs are generated from -- by using this platform. Under the share of mid-tier customers and above increased by 6.6 -- 5.6 percentage points to 34.2%. And the agency channel focused on mid-tier and high net wealth customers. In terms of product strategy, we continue to advance investment innovation in variable products. For example, the written premium for power business reached CNY 65 billion, up 76% year-on-year and the participating business as a share of total FYPs rose to 55.5%, which was up by more than 160% year-on-year. In terms of the strategy on the P&C side, we continue to support national strategies. In the first half of this year, we achieved a steady premium growth on top of optimization of business mix. To be specific, is direct return premium reached CNY 114 billion, up by 1.4% year-on-year, and the premium growth for the second quarter was 3.6%, much better than the first quarter. And in terms of the auto insurance, because of the decline in new sales -- car sales in China, our DWPs from auto insurance was CNY 53 billion, up by 0.2% year-on-year. Non-auto DWPs was CNY 60.6 billion, up by 2.5% year-on-year. We continue to focus on quality and profitability to the underwriting discipline and expense management. In the first half of this year, the combined ratio of P&C was 95% down by 1.3 percentage points and of which the loss ratio was 68.7%, down by 0.8 percentage points, and the underwriting expense ratio was 26.3%, down by 0.5 pts. So you can see our underwriting profits grew by 35.7% year-on-year. In terms of our capacity building, we continue to make efforts in this regard. As we mentioned, the underwriting combined ratio of auto insurance was 94.6%, down by 0.7 pts, and the under expense ratio improved by 0.7%. And we continue to improve precise management so that our auto insurance renewal rate was 79.2%, 2 percentage points better year-on-year. We also continue to accelerate the development of new energy vehicle business. Its growth in the first half of this year was 20.9%, and this total share in -- it was 23.9%, up by 0.1 percentage points year-on-year. In terms of business mix, we continue to improve business mix and advance the risk reduction system. For non-auto insurance, the combined ratio was 95.3% improving by 2.3 percentage points. And the top 4 non-auto business lines produced underwriting profitability. Health insurance and the liability insurance maintained a healthy growth. To be specific, health insurance recorded CNY 17.1 billion in DWPs, up 10.4% and the liability insurance recorded CNY 13.7 billion in DWPs up by 6.6% year-on-year and the underwriting combined ratio improved by 0.4 percentage points year-on-year. In terms of asset management, we continue to adhere to the principle of value, long-term, prudent and responsible investment and strictly followed ALM requirements to improve our SAA and we continue to refine our down bell-shaped asset allocation strategy. By the end of June this year, our AUM maintained a steady growth and surpassing CNY 4 trillion for the first time. Our investment assets include -- investment asset grew by 4.4%. And the AUM grew by 6.3%. And of this, equity assets improved by 7 -- was the share of equity assets were 17.1%, up by 0.4 percentage points. And the core equity investment was 13.9%, down by 0.5 percentage point. And the debt financial assets stood at 71.4%, down by 1 percentage point. We continue to explore opportunities in alternative instruments such as risk and ABS. And we continue to explore a new model for diversified asset liability matching centering on net investment yield plus. We continue to track the matching of liability costs and asset return across multiple levels. Based on the life numbers, maturity investment yield on the new fixed income investment covered guaranteed interest rate on new policies. The 3-year average net investment yield covered the guaranteed interest rate. Under the 3-year average comprehensive investment yield covered the cost of liabilities, which help us to maintain a reasonable safety margin in ALM. We also continue to optimize fixed income asset portfolios and increased allocation to long-term government bond. Now the average asset duration of our fixed income investment reached 11.7 years. In the first half of this year, we see structural divergence for the capital market. And the long-term risk-free interest rate stayed at low levels, we proactively seize the structural investments -- investment opportunities and also maintained a margin of safety to manage the downward trends in a volatile market. The net total and comprehensive investment yields were 1.5%, 2.4% and 1.8%, respectively. The market price of our dividend value equity portfolio experienced significant fluctuations which led to a short-term pressure on our comprehensive investment yield. But on the long run, we can navigate the market cycles and maintain comprehensive -- competitive, comprehensive investment yield. In terms of credit risk management, our enterprise bond holdings and the financial bond holdings issued by nongovernment-sponsored banks maintained a high debt and issue current ratings, investments in nonpublic financing instruments as a share of total investment further declined. Well, that is the numbers and performance of our core business lines. To sum up, I would say the international market is quite complex and challenging. In domestic side -- on the domestic side, China is also restructuring its economy. The government is also trying to improve safety, social safety net and the people, which will create more opportunity for the insurance industry. We will strive towards its vision of a top-tier insurance service conglomerate with market leadership, international competitiveness and overall strength, and continue to create value for shareholders, customers, employees and society. We are going to further improve the quality and the productivity of the agency channel sharpened the competitiveness of regular premium business of bank channel. And in terms of P&C business, we will put profitability first, continue to strengthen business quality control, improve catastrophe response mechanism and improve risk reduction to have a sustainable growth in terms of risk management and asset management we will uphold long-term thinking persist in ALM and cease investment opportunity to generate steady, sustainable investment return. That concludes my presentation. Thank you.

Well, thank you, Mr. Zhao for your detailed presentation. Now we will open the floor to questions. [Operator Instructions] First of all, we will have some questions on site.

I'm from Guotai Haitong Security Solutions [indiscernible]. First of all, congratulations on your steady performance. I have 2 questions on the liability side, first of all, about the new requirements from the regulators. Now what was your NBV outlook because for the -- you see for the first half of this year, your NBV, I mean, NBV achieved double-digit growth. But what about July onwards with Document 65 from the regulators, we saw some pressures from -- on the market in terms of premium growth. So what is your NBV outlook for the second half of this year and also for next year? Second question, regarding payment liability structure. Now a lot of the insurance pays a lot of attention to the growth of small. Now your share on par life business is already 55%. We believe given the low interest rates, the too high share of par life is not necessarily a good thing, because in terms of -- well, sometimes, you should utilize traditional insurance to secure low liability cost. So what is your plan for your participating business, because if the customer prefers participate in life, are you going to -- how are you going to allocate and maintaining the balance between par and the balance and the traditional business?

Well, thank you for your questions and your attention. Now first of all, regarding your question around NBV, no I believe, first of all, if we look at the first half numbers, Mr. Zhao has given you a lot of numbers in the first 6 months, I believe CPIC -- well, our second quarter business was better than the first quarter, I believe CPIC is quite unique in this regard. Now if we look at the first half of this year, I believe we're going to pursue NBV growth from several areas. First of all, continue to improve customer segmentation, secondly, improve product mix, product structure, for example, by promoting protection-type business, for example, this kind of long-term care products. Well, these products -- well, grew very popular on the market. On the other hand, we will also improve the share of our participating insurance. And also, we focus on developing our team, first of all, our -- well, I mean, back office managers, for example, the building, developing of these managers. And also on the front line, our agency team also is improving, for example, by becoming more professional, by becoming more digitally savvy, younger, et cetera. So our agency team is also improving. If we look at the bank channel, we are always improving building this kind of high-quality bank channel team so that we can have more opportunity for the bank business development. We also improved our refined development -- refine the management. We focus on value growth, we focus on efficiency. And also, we promoted this kind of AI or digital empowered. For example, the AI + strategy is a key priority project for CPIC. CPIC Life is, well, is actively promoting our AI digital strategy. For example, by improving our processes and procedures. And in terms of claims, settlement, underwriting, we are also adopting AI tools, improving the AI empowerment so that we can achieve further growth in value. And also we [indiscernible] our risk management and compliance management. So all these factors made it possible for us to grow for the 2 quarters of the first half of this year. But of course, there are regulatory trends, regulatory changes. There are pressures for next year, for the second half of this year. This is an issue for the whole industry. But on the whole, we are quite optimistic about our business perspective outlook. Now first of all, in terms of the timing, if we look at the last 3 years, you see NBV grew quite fast for us. These are all double-digit growth for the last 3 years. So we believe we are sustainable in terms of the timing, in terms of the pace of business. And also in terms of our strategies, we are quite balanced in terms of meeting customer needs and keeping up the seasonality or business pace. And if we look at our team, we have -- currently, we focus -- we still have room for improvement in this kind of Tier 1 cities. In terms of bank channel, we focus more on Tier 1 city rather than, well, Tier 3, Tier 4 smaller cities. So bank channel strategy is different from the agency business. So they complement each other. I mean, the 2 channels. And in terms of the growth model, we, on the one hand, promote agency and the bank channel. And we also now are developing our work site marketing. So I believe based on all these, although we have a quite high baseline, we were still optimistic. And secondly, in terms of the liability for CPIC Life, we actually set or anchor our liability cost based on our product. For example, we are promoting, participating insurance since the second half of last year, and we saw very good results. Going forward, how are we going to approach this? I believe as a big insurance company, first of all, we need to meet customer needs. And on top of that, we need to improve our liabilities. So in the second half of this year, in terms of our product strategy for the agency channel, since we'll have more higher end customers, we are going to promote whole life participating products and whole life incremental life. And so for the second half of the year, we are going to meet the different needs from different customer segments. While focusing on participating live, we are going to also balance it with traditional life. For example, also long-term care products will be launched. On the one hand, long-term care products will be combined with participating annuity, and we are going to launch this kind of government tax sponsored long-term care products and to better serve our customers, we are going to promote CPIC medical insurance, working together, I mean, CPIC Life and the CPIC Health working together to promote the CPIC Blue health insurance products to be sold via the agency channel. For the bank channel, we are going to focus on value, focus on high-end customers, participating whole life incremental products and also participate in annuity products so as to reduce our liability costs and better serve our customers.

Now let's welcome the next question.

I'm from [indiscernible] Securities. First of all, congratulations on your solid performance both on the life side and the P&C side, you improved your combined ratio by 1.3 pts I have 2 questions. Number one, as Mr. Zhao mentioned, well, give us a lot of numbers on your performance. We're happy to see a lot of good numbers, but we still like to see -- what's your view on your performance so far this year? And also going forward for the industry as a whole, what are the changes and how are you going to respond to these changes. And for the whole year, what's your annual targets? What's your view on the annual targets? Second question about the new regulatory rules. Actually, on your slide on Page 20 of your slides, we don't see specific numbers on Page 20. Now in terms of the new regulatory KPIs, how are you coping? What's your calculation on these new indicators? And what are -- how you're going to do in terms of the asset side and the liability side?

Well, maybe I'll answer your first question. Thank you for your attention. No, I would say in the first half of this year, we continued to seek progress while maintaining stability and guided by the 15th year plan, we are actually delivering quite stable improvement in our key KPIs. Our overall strength has also improved especially given this kind of a complicated environment, I believe I -- we have demonstrated a lot of resilience. Now if you want me to comment on the performance so far, I would say we can see 4 features. Number one, our core business is stable. Secondly, we are seeing new momentum. And thirdly, we see better synergy. And fourthly, we see better technology empowerment. Now for our core insurance business, we continue to focus on quality growth. As we mentioned, our Life business, our regular premium growth was very good, up by 28% year-on-year. NBV margin also grew quite stably. And behind that, we would see this product mix and our customer mix also improved. Now for the P&C business, our combined ratio improved one of our best levels in recent years, now standing at 95%. And we also see new energy vehicle also give us quite steady growth in terms of asset management business. Now we are sticking to our long-term investment strategy. We focus a lot on SAA. We remained disciplined and remain resolute on our SAA and paid a lot of attention to our ALM. So our investment performance was quite stable. Now secondly, as we mentioned, we saw this kind of new growth momentum, new areas of growth. Now for example, we are actively promoting technology insurance, green insurance and actually and the premium income from technology insurance grew nearly 18% year-on-year. And we also saw a lot of progress in terms of serving the new production force. And we -- our green insurance premium reached nearly CNY 40 billion. In terms of the health insurance, we are also developing our presence, expanding our presence, our commercial health insurance new premium grew by double digits. And also, we saw double digit for the coverage of government-mandated long-term care insurance. And our AUM in the first and the second pillar of pension schemes exceeded CNY 1 trillion. So that's the second point. And thirdly, better coordination and the synergy. That is to say to better develop this kind of cross-selling and the synergy and the coordination, we focus more on in the customer orientation. For example, coordination between life and the P&C subsidiaries and also integration of products and services and assets and liability coordination. So this kind of a synergy and coordination helped to generate a lot of good results. And of course, we also cultivated our strategic customers, we integrated our insurance, service and investment size. And we developed a series of strategic customers and major projects. And you can see the number of multi-policy customers and the rate of cross-selling both rose steadily. And firstly, we strengthened technology empowerment to boost the quality and the efficiency of our core business. For example, we are actively promoting AI+ strategy to, well, put in place our vertical domain large models. And we are happy to see the rollout of some of the key projects. For example, as I mentioned, for the Life business, we launched the Xiao Lan agent -- AI agent for -- our sales agent for our life agents. And we also launched the projects to help P&C business to better manage its claims. And also, we paid a lot of attention to data security. We are the first in China to pass the data security capacity maturity model, DSM and Level 4 certification. So I would say, if we look at the first half of this year, I believe these 4 points stood out. But of course, the industry is developing quite fast with a complicated backdrop. CPIC has maintained a stable growth. We are serving the real economy and the people's well-being. And given this, we do see some opportunities, for example, for life business. We believe our life products has become a very important tool for people for household wealth allocation. For example, variable insurance sold very well. And this also improved the company's ability cost. Now for auto insurance, well, new energy vehicle insurance supported our premium growth. And this development of a new productive force and the green transition reinforced our role as an economic shock absorber and social stabilizer. On the investment side, structural divergence in the equity market increased the volatility. It will have a notable impact on our profits. On the regulatory front, tight supervision continued. Well, it is guiding the industry towards long-term, healthy and high-quality development. For the first -- for the second half of this year, CPIC will continue to pursue high-quality growth. We need to focus on 3 areas: number one, we need to serve China's 15th 5-year plan and seize new opportunities. For example, we need to align ourselves with the government's big strategies and also the development of the industries, for example, the technology innovation, green development and shipping safety, et cetera. On the other hand, we also need to focus on areas, for example, health and elderly care for the key population groups so that we can uncover opportunities in new fields and new models. Secondly, we need to focus on improving the quality and the efficiency of our business, insurance business. For the Life business, for the life side, we need to coordinate product and channel strategy, accelerate breakthrough in key areas and improve customer segmentation to drive sustained value growth and also improve the high-quality sales force and diversified profit sources. For the P&C business, we need to consolidate our business base and the seize opportunities in key areas. For example, this kind of new areas. And on the investment side, we need to improve long-term mechanism for asset liability coordination and better respond to, for example, regulatory rules, new rules, strengthen our investment research, diversified asset allocation strategy so as to deliver stable and sustainable returns. And thirdly, we should also advance our 3 core strategies or priorities and build core competitiveness. For example, our big health care strategy, we need to improve product innovation and model optimization. In terms of internationalization strategy, we should focus on improving overseas capability and strengthen our Hong Kong operations. For the AI+ strategy, we should accelerate the R&D and the large-scale deployment of high-value AI applications. This is a new see. This can speed up in digital intelligent transformation and also help to empower our business. To sum up, I would say we should remain committed to these principles. We should pursue higher quality, better resilience more solid foundation and more breakthroughs for our business so as to better meet our annual targets. Thank you.

Thank you. I'll answer your second question. And maybe I will just add a little bit. Now the new rules on asset liability for insurance business received a lot of attention. I would say, well, it will have a very profound impact on insurance business, asset allocation, asset management. Now this new regulatory document it's like a combination of previous rules, is now very comprehensive. No, I would say we should focus on 4 areas because, first of all, we focus on the governance of insurance companies. Secondly, it enhances the quantitative indicators. And thirdly, it broadened the evaluation horizon. Now, actually, before document officially released, we have been actually making preparations for the first coming rules. For example, we studied the preliminary documents. We have been a participant of relevant seminars and the studies for the industry. And we are also trying to revise relevant data reporting mechanism so as to meet the new requirements. Now given this kind of regulatory indicators and monetary indicators, I would say Life and P&C, we are doing -- both are doing quite well. For example, for P&C traditional account, our coverage ratio was 115% and for Life business, the interest rate hedging ratio is more than 80%. And other indicators, we also scored quite well. So if we look at these indicators, if you want to see the future performance of CPIC, you can look at the stress testing. You can look at the metrics parameters. For example, during the stress testing equity asset reduction, we are for 1 year to 3 years. I believe that's a top order. But for CPIC, our SAA strategy is already aligned with regulatory requirements. So I believe these indicators will be more under control going forward, especially for the Life business, for the liability side, you can see it's very diversified. And also on the asset side, China's interest rate is going downwards. So we have long been discussing or starting this. Now, for example, we have come up with a net investment yield plus strategy now because the life business has very long liability -- very long fixed liabilities, so we need to take a holistic approach. We need to consider a lot of factors so that we can come up with a more refined, more consolidated tools, platforms so as to better coordinate assets and liability matching. We believe we should start from the product, we should anchor against the liability and drive asset allocation on top of that. So for SAA, we need to be prudent. We need to be resolute, we need to have diversification and the differentiation. For TAA, we need to be more dynamic so as to cope with the rapid changes of the market. We need to be disciplined. We need to be controllable so that the long-term investment yield can better cover our liability costs in terms of fixed income, we will remain more timely to seize very fast this allocation opportunities so that our interest bond can give us good results. And we'll also look at the opportunities, these kind of new emerging opportunities, alternative opportunities. We need to consider the valuation and market structure so as to adjust our occasions so that we can improve our long-term returns and also improve our multiple manager approach. Of course, we will further improve alternative investment in terms of equity investment and other kind of alternative investment. On the whole, based on the new ALM requirements, we are going to improve our internal structure, internal organization with adjusted APIs, evaluation mechanism, et cetera, so that we can meet new regulatory rules.

Let's welcome the next question.

I'm [indiscernible] from Securities newspaper. Now you have -- for the first time, you have an interim dividend. So what are the factors you considered? And what's the overall yearly outlook? And do you have any future plans?

Now as you see this year, we optimized the structure of dividend payout and launched for the first time, the interim dividend, we want to make it long term so that we can improve the cash return for our investors and improve their experience. Now interim dividend is a very important part of our annual dividend payout. We anchor against OPAT and also consider this kind of solvency ratio and also the -- well, needs of investors so as to decide ratio between interim dividend and year-end dividend. For example, this time, we are going to pay out CNY 0.42 per share. So if we calculate by OPAT, the ratio is 19%. Now this ratio well is comparable against peers. But if we calculate by net profit, then the dividend rate is 13.1%, now this number is higher than most of our peers. Regarding the total year dividend. First of all, our long-term and midterm dividend payout policy is quite stable. That is to say, we look at our OPAT. We look at our solvency, we look at our -- look at our business. Secondly, now Life and spread and the P&C profitability are key factors for our dividend payout. I believe these factors will continue to grow stably going forward. So I believe we pay a lot of attention to return to customers to investors. We are confident we can deliver stable long-term foreseeable return to our investors.

Well, let's continue the questions.