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

Prospective investors, analysts, ladies and gentlemen, good morning. Welcome to attend China Reinsurance Group's 2022 First Quarter Result Announcement. I'm the moderator, Lianhua Xiong, and I'm also the Director of the Board of the office. Today, we have with us Mr. Zuo Huiqiang, who is the General Manager of China Re P&C; and also Mr. [indiscernible], China Re Life; the Deputy Director of the China Continental Insurance, Mr. Lu Xiaowei; and Mr. Ruohong Luo, the Deputy Director of the China Re Asset Management as well as the team related. In today's session, we are going to be divided into 2 parts. The first one is that we are going to have with us Mr. Zuo Huiqiang to introduce our performance in the first quarter of the year 2022. And for the second quarter -- for the second part, we are going to open up the floor for questions. [Operator Instructions] So first, we are going to give the floor to Mr. Zuo Huiqiang to introduce the performance of the China Re Group in the first quarter of 2022.

Dear analysts, dear investors, good morning. I'd like to brief you in the first quarter of 2022, China Re Group's performance. Since the beginning of this year, China's economy has faced a shrinking demand side while there are some that complex free on their supply side. The industrial restructure is accelerating. While the debt ratio for the U.S. dollar is accelerating, the complex between China and -- between Russia and Ukraine is affecting China's economy. The Asian market and H-share market as well as the Chinese market is being decreased in terms of its value. By the end of the March 31, 2022, the core capital of China Re Group is full RMB 43 billion. That is a 33.6% growth. This is due to the rapid development of the life insurance and our overseas business affected by the fluctuations in the capital markets and a further weakening performance in the capital markets. Our return has been affected. The combined investment yields is RMB 460 million. The China Re P&C have a total investment and total assets of RMB 22 million. That is 22% growth compared to last year. And China Re Life is benefiting from a growing nonagricultural sectors. At the same time, our overseas business is registered a total premium growth at around 20%. This is because of the Chaucer's good performance and expanding its advantages over its rivals. So in terms of the undertaking ratios, in the first quarter, we have kept a very steady performance. Our overseas is affected by the Russia-Ukraine complex as well as fluctuations in the U.S. market. So the total cost has raised. The China Re Life registered a total premium income at 256, RMB 22.5 billion, that is benefited by the second wealth reform and the Chinese capital market. In terms of the surety market, the company is trying to use innovations to find the breakthroughs in the volatile market while trying to figure out and meet the market demand, as well as trying to figure out the core competitiveness of the surety products. In the first quarter, the registered revenues of surety product is registered as a 7% growth. At the same time, because of the -- [ out tier ] attitude for the underwriting, the total cost is [ 14 ] compared with last year. China Continental Insurance is registered income of RMB 1.2 billion, that is 1.14% growth compared with last year. The company has actually adapt itself with the changes in the auto insurance market, and they are trying to optimize the qualities of undertakings. Based on the performance of the Reinsurance and also the nature of the Reinsurance, recently, we have experienced fluctuations in terms of our performance, but the general performance is in line with our yearly expectations. So thank you very much for listening, and we are going to open up the floor for questions.

Thank you very much, Mr. Zuo, for your kind introduction. We are going to enter into the Q&A session. [Operator Instructions]

The first question is from [ Linda ] with CIC.

I am from CIC. So I have 2 questions. The first question is that can you introduce us, in the first quarter and the P&C insurance performance. I would say you have mentioned the overall cost for our overseas business is rising. So my question is what is the impact of the Russia-Ukraine conflict on our overseas performance? Are there any major disaster or potential disaster affecting our performance? The second question is that facing the uncertainties domestic and aboard, there are number of fluctuations in the market. So can I have the numbers of the overseas investment assets ratio to the total assets? Are there going to be any adjustment? That is my 2 questions. The first one is about the P&C performance overseas. The second one is the ratio of overseas assets compared with total assets.

Thank you very much for your questions. The first question is going to be answered by Mr. Xiaowei Lu. The second question is going to be answered by Mr. Luo Ruohong from China Re Asset.

Thank you very much for your question. For your first question, so far, in the first quarter of the 2022, the international exchange ratio is come quite a low. It has registered a rapid growth in terms of its premium. For the China Re Group, we have marked these opportunities in the market and achieved a rapid growth. The general premium is registered at 22.9% growth year-on-year. This is in line with the trend in the international markets, but affected by the Russia-Ukraine complex as well as the flood in Malaysia and in Australia. Our overseas business in the first quarter of [ 2022 ] is seeing a widening integrated cost ratio. We have seen that the rising factor is because of the risk exposures triggered by the Russia-Ukraine complex. And with me, we have a reserved ratio that is RMB 8.8 billion. But so far, we have not taken any orders affected by the Russia-Ukraine complex. That is to say if we eliminated the performance of Russia-Ukraine complex, we are going to keep our growth momentum. Generally speaking, this performance is in line with our expectations before and I think that we register a better performance in the future.

I'm going to answer the question about the overseas investment. In the recent few years, with the rapid growth of our overseas performance, we do -- have managed a certain ratio of the overseas assets, but this is not a very large share of the total assets that we managed. When it comes to investments, there are some fluctuations in the overseas market. With the changes of the monetary policy in the [ February ] results, we have adopted a stable investment strategy in terms of a phased investment, with certain environment of increasing of the interest rate. We have controlled total investment. Well -- as well as the credit risk in terms of the loan investments. Our investment is focusing on certain high-quality companies. We are also trying to take on certain big target, which is stable. We have also invested with a [ folding ] product with high dividends. This is also going to help us to reduce the fluctuations in the market for the product with high dividends. And with the stability, I think that it is going to increase the quality for all of us. Thank you.

Thank you very much Mr. Lu and Mr. Luo for your kind answer. We are going to give the present to the next investor.

So the next question is coming with [ Wendy ] coming from [ Redburn ].

I have 2 questions. The first question is that you have introduced in terms of the surety product of the China Re Life and there is an increase in the first quarter. This is quite good. But currently, I understand the insurance market is under pressure. So what is your expectations to the yearly performance? And what sort of measures are you going to adopt to mitigate the impact in the insurance market? The second question is, what kind of a product that really registered the growth? Are there any changes in terms of the different products' performance?

Thank you very much for your question. For your first question, a surety product in the life insurance -- Reinsurance product, we are going to give the floor to Mr. Li coming from China Re Life. For the second question, we are going to give the question to Mr. Ruohong Luo as well as [indiscernible].

So let me answer the first question. For the surety product actually, this year we have faced difficulty in the insurance and the industry. China Re Life is confronting the question and the challenges directly. Firstly, we are focusing on some of the key areas and key [ products ] as well as the key companies, and the elderly health insurance as well as the medical care insurance. While coming up with series of a new product, we are starting to translate the results of R&D into the real benefit. And secondly, we are working together with a few laboratories to come up with some of the new products. Thirdly, we are trying to figure out and the reserved market in terms of the million health care market. We are trying to cover more medicines as well as the medical [ training ] as well as companies they -- insurance to cover these medical products. This measures is going to enrich our positive line as well as strengthen our core competitiveness.

I'm going to answer the second question. In the first quarter this year, the rapid growth in our domestic premium has registered the growth ratio at 9.1%. This is due to the rapid growth of the non-auto sector. In the non-auto sector, we are seeing a lot of positive growth. The most rapid one is the property insurance, health insurance as well as in surety products. We have undertaken some of these impacts done by the previous reform, and we have kept a very steady performance in terms of the overall underwriting ratio and the first quarter of -- we have kept a very steady performance.

Thank you very much, Mr. Li and Mr Ruohong for your answer.

So the next question is coming from Donghu Securities, Mr. [indiscernible].

I am [indiscernible] from Donghu Securities. So my question is about the performance of the China Continental Insurance. The question is about the performance in the first quarter and the -- in the first quarter of the performance of the China Continental Insurance, I think it is affecting the outside insurance market. Can you tell us what is the ratio for the COR to C-ROSS issues in terms of the auto insurance in the first quarter? The second question is I can see the adequacy visions of the China Continental Insurance actually better -- is higher than the average industry research. Can you tell us what is the impacting factors of this performance?

Thank you very much for your questions. The 2 questions you put to the China Continental Insurance is going to be answered by Mr. Lu from China Continental Insurance.

Thank you very much for your questions. In the first quarter of this year, the pandemics [ ascertain ], Shanghai, among other major cities in China, these do impact the performance of the China Continental Insurance. The first one is because our day to day -- is impacting our day-to-day operations because China Continental Insurance is headquartered in Shanghai. For certain departments, certain sectors and our office, we can only do the remote officing because of our technical support, there is not so much issues. This has guaranteed a normal operation. And the second part is about the business. The first one is about the business development. Since we cannot contact our clients in the office, there are certain sluggish growth in certain sectors. Even if the growth in the first quarter in terms of life insurance, property insurance is higher than the average in the market, but our performance in the auto insurance is lagging behind. But from another perspective, this is affecting the solvency ratios of the auto insurance since there is less and less usage of vehicles when the city is locking down. So there is not too much of the solvency ratio. And I could see that there's a very small growth in this terms of the reinsurance. And we have also -- as you have mentioned about the auto insurance performance in the first quarter and also its underwriting premium, generally speaking, the general underwriting ratio, compared with the performance last quarter has registered a rapid difference. This is because of the measures that we have taken in terms of management of auto insurance. We have managed the surety [ input ] in terms of the auto insurance. And I think there are some more room for further optimization, and it is under our internal discussion because China Continent Insurance have a different performance structures compared with our other companies. The new retail, industry retail, accounting for a large share of the market, that is what we see e-commerce platform, affected by the human resources or the logistics plan. The e-commerce platform is also being affected. That is to say, we have registered a flattish growth in the first quarter of the year 2022. I think with the recovery of the COVID-19 pandemic in the city of Shanghai, we are going to be better. And the second part is about the solvency ratio. China Continental Insurance has a higher solvency ratios. It is being benefited by the 8 strategic investors that we have introduced in the year 2018. So the adequacy solvency ratio is higher than the performance in the market. But after the launching of the C-ROSS reform, these large-scale assets accounting from the last year, and this is affecting largely. And after we have conducted the second [ fleet ], the solvency ratio has dropped. But for this question, we are going to launch a series of reforms and increased condition for the large-scale vehicles.

Thank you very much for your kind answer, Mr. Lu. Let's give the floor to the next [ investor ].

The next question is coming from [indiscernible].

I have 2 questions for the performance. The first question is that for the first quarter of the [ Huatai ] Insurance product, what is the performance? And are you going to continue cooperation in the [ Huatai ] Insurance? The second question is that for the current adequacy ratio, have you excluded the dividend? Is it going to impact the performance in the second quarter?

The first question is about the [ Huatai ] reinsurance product. We are going to give the floor to Mr. Ruohong to answer the question. He is the Vice President of the China Re Insurance. And the second question is about the rate dividends.

Thank you very much for your question. For the [ Huatai ] products, we have divided into 2 factors. After we have not undertaken any ongoing [ reinsurance ] products, we started to undertaking the commercial [ Huatai ] insurance products. And from the performance this year, generally speaking, we have registered some of the [ gross ] that is with the end range of our expectations. And we have also accumulated the strategic and professional advantages. We are also coordinating and communicating with the China [ Huatai ] Reinsurers, and we are going to cap our collaboration. Our expectation is going to -- is that we are going to have a very stable corporation relations with China [ Huatai ] Insurance. While using our technical advantage, we hope that we could register a stable undertaking capacity.

Thank you very much for your question. For the second round of the regulations and the C-ROSS [ II ] reform, I'd like to give you a simple answer. You can see that we have released all the numbers in terms of the adequacy ratio. Under the reform of C-ROSS [ II ], I think that we have adequate solvency ratio. Let me explain something. This has included the numbers that we've seen affected by the [solvency] reform. Generally speaking, this transitional policy has provided us a very good buffer time. But we have noted that in this transitional period, it is quite valuable time for us to mitigate the impact. We are still [ replicating ] all the entities to research into this topic, and we should also prepare in advance and also keep our performance after this transitional period. We are going to register the very stable growth. This is the answer to the first question. The second question is that the social security on the C-ROSS reform is going to affect the equity. Our evaluation and our performance is limited. And also the dividend policies in the company, is affected by multiple sectors. If we included the multiple factors, estimated that the current dividend process is going to create a lot of stable income for the shareholders. Also in terms of the asset allocation strategies affected by the second phase of the C-ROSS reform, it has enhanced the performance of the asset management as well as the strategies with the trading partners. We have also -- we allocated some of [ the strategies ]. For example, we are going to enhance and abound the investment assets. We are also going to allocate the assets. And for example, recently, we are focusing on -- for the high dividend, we have also allocated the investments in the high dividend stock market. The second one is that the C-ROSS reforming is [ tax free ], has designed to prevent the wild growth in the financial market. We are going to avoid a scattered investment. Thirdly, we have also clearly stated the requirements for the trading partners. This is going to eliminate the potential risk. Generally speaking, our company is adjusting ourselves according to the requirement of the second phase of the C-ROSS reform. Moving into the next page, we are going to optimize the investment portfolio. Thank you very much for your question.

Thank you very much, Mr. Luo. For the interest of the time, the results announcement of the first quarter and the year 2022 of China Re Group has concluded here. Thank you very much for your yearly support to the performance of the China Re Group. If you want to contact with the China Re Group or if you have further questions, please contact our team. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]