China Reinsurance (Group) Corporation (1508) Earnings Call Transcript & Summary

[Audio Gap] Q3 results announcement. I am Liu Shukai, the Director of the BoD office. In order to implement the requirement of Hong Kong Stock Exchange, we have postponed the time for this announcement and I'm really sorry for the inconvenience that we created. I'd like to give you a brief introduction towards the executives who are presenting here. We have Mr. Zuo Huiqiang, who is responsible for the business sectors of China Re; and Mr. [indiscernible] who is responsible for the China P&C; Mr. [indiscernible], responsible with China Re Life; and Mr. [indiscernible], who is responsible for the China Continental Insurance; and Mr. [indiscernible], who is responsible for the China Re Asset. According to the previous experience, we are going to divide today's meeting into 2 parts. The first part is going to be given to Mr. Zuo Huiqiang to give you a brief introduction toward the operations or results of the first 3 quarters of this year and the second part is going to be the Q&A session. [Operator Instructions] Now the floor is going to be given to Mr. Zuo.

Dear investors, analysts, good afternoon. I am Zuo Huiqiang responsible for the strategies and management of China Re Group. I'd like to give you a brief introduction. Toward at the end of the third quarter or [indiscernible] first, the operation indicators of the China Re Group. For the first 3 quarters, China Re Group has achieved an integrated income of RMB 40,321 million, that is 45% downwards year-on-year, and this is affected by the shrinking domestic demand after an adjustment of the allocations of the business sectors. And we have also made [ adjustments ] the factors in the [ PMA section ]. We have also done some of the comprehensive analyzing. The changes of the industry is also in line with the changes of China Re Group. In the first 3 quarters, the insurance income on a consolidated basis of China Re Group has achieved 1 -- [ RMB 10.11 million ], that is 54% downward compared last year. For the different sectors, the premiums of quality is registered at RMB 327 million, that is 28.8% growth. And the comparative -- the co-solvency adequate ratio is 247%, that is 40% up by last year, which Life has also achieved 460 -- [ RMB 36 million ] that is a 38% growth and the net asset is downward by 27%. The aggregating solvency adequacy ratio is achieving 37% downward. China Continental Insurance has registered [ RMB 337 million ], that is 12.7% downwards. And the net insurance income, not perfect, is seen 41% down. The acquisition solvency adequacy ratio is up by 5%. Thank you very much. I think that I'm going to answer you the detailed questions during the Q&A session. Thank you.

Thank you, Mr. Zuo for your kind introduction. Now we are going to open up the floor to questions. [Operator Instructions] So we are going to give the floor to the first investor. Thank you.

[Operator Instructions] The first question is coming [indiscernible] coming from CICC.

I'm [indiscernible] from CICC. I have 2 questions. The first question is about the second phase of the program of C-ROSS. So what kind of an impact will it have for the reinsurance sectors? The second question is the company's latest maneuver in the health care and nursing cost sector. Can you give us a brief introduction?

So I'm going to cut back the questions of the C-ROSS project too. It's a very important followup and a complementary project of the first phase of the C-ROSS reform. I think it is evident for those of the active of reinsurance companies. It is going to see some of the negative impacts. The capital quality and capital threshold is quite high compared with the current standard, and it also requires us to have a detailed scrutiny of [indiscernible] towards the disaster and asset management. And for the -- we are also going to adopt a quite great monitoring. For our company, the comprehensive C-ROSS reform is not only going to affect the P&C sector. It is also going to affect the life sector among other different sectors. And let's talk about the client demand. The lending capacity is going to be expected, but our measures to make up for the solvency capacity is by participating in a series of the project. And I believe that by participating in this project, we are going to make up for the losses. Second step that we are going to adopt that I think the C-ROSS reform is going to incentivize or stimulate the insurance company, and we are also going to control the risks for the insurance company, and that the rule of reinsurance being fully played in front of [indiscernible]. This is our understanding to the second phase of C-ROSS reform. The second question is about China Re Group's latest strategies in the health care sector and our understanding that we are making up for the shortcomings. We have seen that there are so many different trajectories for the development of the industry. The first line that we have made some bridge to is for the elderly people. And if we look into the other country's experience, including Japan and South Korea, they are also having an aging population, and these countries also witnessing a transfer from a young people-dominated society to now elderly people-dominated society. That's the reason why it accrues with our strategies towards health care gear project. We are also going to introduce [ nursing ] sectors and also the [ cabin ] sector to -- this part. The second part is our innovations in the insurance. In the recent 2 years, we have cultivated 2 markets. We are going to introduce more medical devices into the market of the insurance. And we are also going to introduce more and more [indiscernible] medical treatment method, medical trials and medical devices for -- toward those areas where the general public cannot afford it. The third part is that I think we are trying to integrate the insurance works together with the health care works. We are going to build a higher level network together with international partners. No matter that we are going to covering more medium- and high-end market or we are going to expand our network wider. We are definitely going to benefit from that. Fourthly, we need to think that the insurance can work as a solvency, as an important guarantee, but we believe there is going to be more and more operational management and risk control, which is going to lap the medical resources being operated in a more rational manner. The final part is that it is going to integrate the capital work. And we used to look at where the losses is, and we hope the losses could trigger our initiation, but under such a lower interest environment with a loss resulted in cash. We hope that we could invest in some of the [indiscernible] work, which is going to benefit for the interaction between the capital world and medical world. That is my report. Thank you.

We're going to present to the second question, [indiscernible] from [ North America ].

I'm from [indiscernible]. I have 2 questions. The first question is about the premium of the China Re Life. So what is the group's domestic and abroad for China Re Life? The second question is that we have talked about China Re Life reinsurance. The premium has been [ internally ] with the whole structure being adjusted. Can you give us more introduction towards the business readjustment? And what do you want to develop in the future?

Thank you very much for your question. I'm going to divert the first question to Mr. Zuo.

Thank you very much for your question. The first question is about the China Re Life growth domestic and abroad. I think during my introduction towards the comprehensive business performance, I mentioned that for the China Re Group, our premium income in the third quarter is in line with the basic trajectories of the market. For the detailed sectors, it might be a little bit different for the domestic market. The domestic P&C insurance market, to our knowledge, and the first quarter domestic insurance company, our domestic insurance business remains the same compared with last year. But for the reinsurance of China Re, we have overcome all kinds of difficulties, including the changes in the reinsurance sector. We have adjusted -- we have achieved a mild growth, that is around 1% domestically year-on-year, and it is a little bit higher than the P&C market domestically, but the trajectories are in line with each other. From the international business, we have a very quick growth. And the growth might be higher in the domestic business. It is also in line with our expectations at the beginning of this year and also the changes that is in the market. The growth of the domestic -- the international performance is being benefited by 2 factors. The first factor is that because for the past few years there is huge losses in the climate disaster insurance. The insurance rate -- or the interest rate has been bounced back. We have lapped this real opportunity for the bouncing back of interest rate and enlarge our total premium steel. The second factor is that we -- the [indiscernible] platform, [ right here with ] the very rapid growth of the premium. And we have been benefited by the 2 factors. Let me sum it up. China Re P&C domestic market is growing quite mild, right? While for the international business, it is also growing quite rapidly. The major trend for the growth is quite in line with the trend in the domestic market. So that is my answer to second question -- to the first question.

For further demand of the China Re Life, I'd like to follow up Mr. Zuo's answer. I think the demand is what we call a necessary demand. Our understanding towards the necessary demand is that the demand indicating how many of the desire of the demand distributed in the market. But for the majority of the demand, we are [ staggered ] in the different scenarios. But if it's in line with my eyes, I think that it should be matching adequate or it should meet up the end and China Re has stepped forward with all kinds of stabilities. We do see some of the changes last year, [ no matter from the steel ] or the profit, we are growing quite rapidly. But for on [ future ] this year, the total capital market or the investment atmosphere is much better. This year, I think that you can see that our understanding towards this part is very stable. We did not prepare or we're not nervous. So that's the reason why we think that all the demands are affecting demand through the long-term impact. No matter towards timing. At beginning of this year, there are some of the problems. Once we have scrapped all kinds of the structures, it does not represent that we have no opportunities. Once the opportunity occurs, we are going to make it larger and better. And what about our possibilities that the fewer circulations domestic and abroad. Moving into the future, the 2 market is not only going to be benefited from the timing and also the locations, and they can also select the type of the currencies. From the long term, the international market is going to stay at an environment of lower interest. We are also open up some of the overseas R&D or cooperative, and we hope to utilize these opportunities to provide us with motion. We are also going to install some of the best trading strategies, and these are our analysis to the market. On top of this, we are going to classify the general time schedule, and then we are going to select those of the assets which do not have a long-term impact. And the final part is about a better currency. We are going to choose a better currency, multiple currency to make our business basic. Thank you. That is my understanding.

Now the floor is given to the next investor. [Operator Instructions] The next question is coming from [ Chari ].

So high-level executives goes up now. I'm [ Chari ]. So can I have a number toward the total premium of the China Re Group? So how will China Re Group control the project of people benefiting insurance projects?

Thank you very much for your question. I'm going to direct this question to Mr. [indiscernible].

The premium of [indiscernible] limited by today or the company requirements, I'm not allowed to unveil the total number. I should see that we are the major players in the reinsurance market with a total market value of several thousands of the [ buildings ]. I think it's sometimes larger than RMB 50 million. That was the whole market still. You have also been talking about the solvency ratios of that product is higher in some of the regions. Let me give you a brief introduction towards the market. If a market is starting from scratch, from 0 to 1 and then from 1 to 100. But the early adequacy has been decided by the name, people benefit insurance. If we cannot pay people, we are not going to call ourselves people benefiting insurance. So for one product -- for one company, it cannot make it pretty larger moving into the future. We are trying to tailor-made the project for each one of these regions. We are trying to promote [indiscernible]. And I believe from 0 to 1 is stage 1 and from 1 to 100 is stage 2. I don't think that this project is entered into the second phase. Some of the older people is joining this program and this is also creating higher premiums. But moving into the next stage, we are going to reach into some of the active markets. We could see Hangzhou and Suzhou, all of these highly developed regions. They are going to be a part of our network in the future. I think all the insurance is following one example. If we are going to lower down the risk by enlarging the poor, we are definitely going to roll it over. If we can make a very good mechanisms between the commercial insurance and medical insurance, it is also under our control. To sum it up, how do we move into this market, it is from 0 to 1 from 1 to 100. Solvency is definitely going to grow under this model, but this model, until it's being recognized by the government, it is developed quite healthily, and we are also building a very good denial interaction mechanisms. The use of this denial interaction mechanisms is buying and the elderly people, the inbound people, and we have also controlled our projects. We should use that -- transform the total consumptions of the pharmacy [indiscernible] project, and we are also going to use big data to control the pharmaceutical market.

Now the floor is going to be given to next investor. Thank you.

The next investor is coming from Olivia.

I am Olivia. I have the following questions. The first one is that China Continental has seen a drop premium since Q3. The second question is what is latest update of the automobile insurance? The third problem or third question is about the interest on a consolidated basis, what do you make of that?

Thank you very much for your questions. We are going to direct this question to Mr. [indiscernible] from the China Continental Insurance.

I'd like to answer your question. The first question you mentioned is about the third quarter performance of the China Continental Reinsurance -- China Continental Insurance. I have personally added on the list for the first part of the region, it is being based on the 2 factors. Because of this insurance, we are at a negative growth. It is around 20% because of the vehicle insurance is registered by a negative growth. Our general premium is being sustained at a pilot project. Second, for our personal loan sector, the total number is dropping. In personal loans, grew by 26.6% this year, and it is actually creating a lot of impact towards these sectors because of the reasons that I mentioned above. It has dragged down the total performance of our company and generally the benefiting is reaching 3%. I have also been influenced by the [indiscernible] [ heavy floods ]. But for this quarter, we are seeing that there is some of the heavy floods in Shanxi. Compared with the second quarter, the flood in Shanxi do registered less and less death tolls in the Hunan flood. This is my answer to the first question. The answer to the second question is that by the end of the first 3 quarters, the total premium is reaching RMB 46.78 billion, while the aggregated cost adequacy ratio is seeing a 9.8% drop. We have also mentioned about the vehicle insurance. It is accelerating in the market, but the revenue or profit is not accelerating. The final part of my introduction is towards the staff investment our [ tannery ] group in [indiscernible]. I talked about the market interest rate first. When the market is reaching in September, the total premium is actually dropped by 1% in terms of interest ratio compared with August. No matter from the growth of the premium, we do see a lower down compared with last year. And if you compare other different sectors, it is growing up. It is also being affected by the COVID-19 pandemic. For our company, the general changes in the year 2020 and 2025 is a box that we have rented a larger office. By the end of 2022, September, the net assets or the net profit is going to be registered at RMB 200 million. Thank you.

Thank you very much for your comprehensive answer. For the interest of time, the third quarter results announcement of 2021st of China Re Group is going to be wrapping up here. Thank you for all the investors and analysts for your yearly support. If you have any other questions or information you need answered are known from our companies, please contact our information office. Thank you very much. That marks the conclusion of today's meeting. [Statements in English on this transcript were spoken by an interpreter present on the live call.]