China Life Insurance Co Ltd (LFC) 2022 Q1 法說會逐字稿

Good evening, ladies and gentlemen. Welcome to China 2022 first-quarter results (inaudible) conference. My name is [Elaine] (inaudible), the (inaudible) of the company. [Cindy Mingwa], Vice President, Chief Actuary and (inaudible); Mr. (inaudible), Vice President; Ms. (inaudible), Assistant Vice President and CIO and also Head of (inaudible) Department (inaudible) today's briefing.

女士們、先生們，晚上好。歡迎參加中國2022年第一季業績（聽不清楚）發表會。我的名字是 [Elaine] (聽不清楚)，是公司的 (聽不清楚)。 [Cindy Mingwa]，副總裁兼首席精算師和（聽不清楚）； （聽不清楚）副總統先生；今天的簡報會上，助理副總裁兼首席資訊長兼部門主管 (聽不清楚) 女士 (聽不清楚)。

The briefing will start with a 5 minute presentation on the company's first-quarter results followed by a Q&A session for about 25 minutes. And management will respond to your questions during the Q&A session. Now let me hand over to Andrew, the Head of the IR division, for the briefing.

簡報將以 5 分鐘的公司第一季業績介紹開始，接著是約 25 分鐘的問答環節。管理層將在問答環節回答您的問題。現在，讓我將簡報交給 IR 部門主管 Andrew。

Thank you. Since the beginning of 2022, China's economic growth has generally remained at a reasonable range. However, there were increasing complexity and uncertainty in both domestic and international environments, some of which went beyond (inaudible). With the recent sporadic outbreaks of the pandemic, China has faced a new downward pressure and its economy, and the insurance industry has also experienced a further slowdown in (inaudible).

謝謝。自2022年以來，中國經濟成長整體維持在合理區間。但國內外環境複雜不確定性增加，有的甚至超越（聽不清楚）。隨著近期疫情的零星爆發，我國經濟面臨新的下行壓力，保險業也經歷了進一步放緩。

During the reporting period the company proactively responded to a variety of challenges and well proceeded in various tasks by closely upholding the high quality development requirements and its market-leading position was solidified.

報告期內，公司緊緊圍繞高品質發展要求，積極應對各種挑戰，各項工作進展順利，市場領先地位得到鞏固。

Firstly, the company's business development have the momentum of stable growth despite being under constant pressures as affected by the COVID-19 pandemic, the demand for insurance consumption were hotly released improved. And the development of the company's new policy business was still under pressure. However, there was improvement in its business structure.

一是受新冠疫情影響，保險消費需求旺盛釋放，公司業務發展雖面臨持續壓力，但仍維持穩定成長動能。公司新保單業務發展仍面臨壓力。但其業務結構有所改善。

In the first quarter the company achieved revenues from the insurance business of RMB315 billion, a decrease of 2.7% year on year. In particular, premiums from new policies amounted to RMB100.9 billion, a decrease of 1.5% year on year. Renewal premiums amounted to RMB214.1 billion, a decrease of 3.3% year on year. Last year regular premiums were RMB5.4 billion, a (inaudible) of 43%. The decline was significantly narrow as compared to a corresponding period of 2021.

一季度，公司實現保險業務收入3,150億元，較去年同期下降2.7%。其中，新保費1009億元，年減1.5%。續期保費達2,141億元，較去年同期下降3.3%。去年期交保費為人民幣54億元，佔43%。與 2021 年同期相比，降幅明顯收窄。

This year regular premiums with a payment duration of 10 years or longer were RMB19.1 billion, the percentage of which rose slightly in the first year regular premium. Short-term insurance premiums amounted to RMB34.7 billion, an increase of 3.5% year on year. The value of new business for the first quarter decreased by 14.3% year on year. The surrender rate was 0.28%, a decrease of 0.1 percentage point year on year.

今年十年期以上交保費為191億元，首年期交保費佔比略有上升。短期險保費收入347億元，較去年成長3.5%。一季新業務價值年減14.3%。退保率為0.28%，較去年同期下降0.1個百分點。

Secondly, the company continued to focus on improving its sales force quality while stabilizing its scale. With its commitment to the strategy of productive agents driven business, the company competently dedicated more resources to attracting and nurturing the high-performance agents and strengthened its day to day management so as to pull forward the transformation of sales teams to be more specialized, professional and digitalized.

其次，公司在穩定銷售規模的同時，也持續專注於提升銷售團隊素質。公司堅持高效率代理人驅動策略，增加資源投入，吸引及培養高績效代理人，加強日常管理，推動銷售團隊朝向專業化、職業化、數位轉型。

As at the end of the reporting period, the number of the company's total sales force was 446,000, of which the number of agents of the individual agent business sector were 780,000, which declined slightly as compared to the previous quarter. However, the quality metrics of sales force were stable and its foundation remained solid.

截至報告期末，公司總銷售隊伍數44.6萬人，其中個險業務板塊銷售人員數78萬人，較上季略有下降。但銷售隊伍的品質指標穩定，基礎依然牢固。

Thirdly, the company adopted various measures to keep a balance between short-term asset volatility and long-term investment deployment. As at the end of the reporting period, the company's investment assets reached RMB4.72 trillion. In the first quarter, China's interest rate was still at a low level and the equity market witnessed a great drawdown which had a negative impact on the company's investment income.

三是採取多種措施，平衡短期資產波動與長期投資配置。截至報告期末，公司投資資產規模達4.72兆元。一季度，我國利率仍處於低位，股票市場出現較大幅度回落，對公司投資收益造成負面影響。

The company insisted on the philosophy of long-term US [lending], prudent investment and value investment, appropriately slowed down its allocation to long-duration assets and increased investment in short- to medium-term fixed income categories to lessen its asset allocation pressure. The company also made a long-term asset allocation deployment in a prudent manner by taking advantage of the medium- to long-term opportunities in the equity market.

本公司堅持長期美債、穩健投資、價值投資的概念，適當放緩長期資產配置，增加中短期固定收益類投資，緩和資產配置壓力。公司也把握股市中長期機會，審慎進行長期資產配置。

In the first quarter the company registered gross investment income of RMB44.6 billion and the annualized gross investment yield reached 3.88%. The net investment income was RMB45.8 billion, an increase of 10.7% year on year, and the annualized net investment yield was 4%.

一季公司總投資收益446億元，年化總投資報酬率達3.88%。投資淨收益458億元，年增10.7%，年化淨投資收益率4%。

Fourthly, the company consistently maintained high solvency levels from the quarterly solvency report for the first quarter. The insurance industry started to implement C-ROSS Phase 2 regulation, entered the regulation as at the end of the reporting period. The core and comprehensive solvency ratios of the company were 176.39% and 247.6%, respectively, reflecting the accuracy of the core and overall capital and the relatively high levels of solvency of the company.

四是從第一季償付能力報告看，公司持續維持較高的償付能力水準。保險業啟動償二代監管，報告期末已進入監理階段。公司核心及綜合償債能力充足率分別為176.39%及247.6%，反映公司核心及整體資本充足率準確，償付能力水準較高。

Meanwhile under the C-ROSS Phase 1 regulation, the estimated core and comprehensive solvency ratios of the company were 241.7% and 249.[95]% on a pro forma basis, respectively. In the first quarter, due to the combined effect of the volatility in the equity markets and a higher base for the corresponding period of 2021, the company's investment income decreased on a year-on-year basis as a result of which net profit attributable to equity holders of the company was RMB15.2 billion, a decrease of 46.9% year on year.

同時，在償二代第一期監管下，該公司預計核心償付能力充足率和綜合償付能力充足率分別為241.7%和249.[95]%。一季度，受股市波動及2021年同期基數較高等因素影響，公司投資收益較去年同期下降，導致歸屬於上市公司股東的淨利為152億元，較去年同期下降46.9%。

Facing a complicated and severe external environment and multiple challenges, the company will uphold the sideline of making progress while maintaining stability. But here too the original role of insurance and constantly deepened the supply-side reforms so as to push forward the steady development -- deployment of its business with great effort.

面對複雜嚴峻的外在環境與多重挑戰，公司將堅持穩中求進的工作總基調。但這裡也要發揮保險的原有作用，不斷深化供給面改革，大力推動保險業務的穩定發展。

Furthermore, the company will vigorously carry out reforms and innovations in greater depth, further optimize its operations and services, consistently strengthen the protection of the customers' rights and interests, and vigorously reinforce the risk prevention and control with a will to firmly pursuing its high quality development. Thank you.

本公司將大力深化改革創新，進一步優化經營服務，持續加強客戶權益保障，大力加強風險防控，堅定不移地推動公司高品質發展。謝謝。

Okay let's move to the Q&A session. We'll take the first question.

好的，讓我們進入問答環節。我們將回答第一個問題。

(Operator Instructions). Leon Qi, Daiwa.

（操作員指令）。 Leon Qi，大和。

Thank you very much for taking my question. This is Leon Qi from Daiwa. I have a question on your solvency. I appreciate the very strong core solvency margin number which closed under the latest C-ROSS Phase 2. It is much higher than the regulatory minimum of 50%. Do you have an ideal level of a core solvency margin over the long term in your business?

非常感謝您回答我的問題。我是 Daiwa 的 Leon Qi。我對您的償付能力有疑問。我很欣賞在最新的償二代下，核心償付能力充足率數字非常強勁。它遠高於 50% 的監管最低標準。您的企業長期的核心償債能力充足率是否為理想水準？

And just wondering if you have done any internal estimations going that -- forward assuming your current run rate of new business and dividend payouts, will this core solvency margin be going up or going down? Namely can this ratio be self-sufficient or it is just too high. So, just want to hear some color from the management on how you think of this very strong core solvency number and the latest regulation. Thank you very much.

我只是想知道您是否做過任何內部估計 - 假設您當前的新業務和股息支付運行率，這個核心償付能力保證金會上升還是下降？也就是說這個比例能不能自給自足，或是這個比例是不是太高了。所以，我只是想聽聽管理階層對這個非常強勁的核心償付能力數字和最新法規的看法。非常感謝。

(Spoken in Foreign Language).

（用外語說）。

(Spoken in Foreign Language).

（用外語說）。

(Interpreted) The core solvency ratio remained high at 176% under C-ROSS Phase 2. We think that really the result of the company's implementation of asset liability matching and our good risk control and prevention.

(解讀)償二代下核心償付能力充足率仍維持在176%的高位，我們認為這主要是公司實施資產負債匹配以及做好風險管控和防範的結果。

And if we continue doing this and if we continue to carry out the risk control in our own way, we think that this could be maintained and will be -- have a good direction and a reduction in our operation and governance. And our business will maintain very good interaction with the added questions.

如果我們繼續這樣做，並繼續以我們自己的方式進行風險控制，我們認為這種情況可以維持下去，並且會有一個好的方向，並減少我們的營運和治理。而我們的業務也會和增加的問題保持很好的互動。

And we carry out internally regular testing from time to time to have the internal assessment and testing of our adequacy -- capital adequacy and also the cash flow, etc. And that also includes under the stress scenario, as you mentioned.

我們會不時進行內部定期測試，並對我們的充足性（資本充足率、現金流量等）進行內部評估和測試。正如您所說，這也包括壓力情境下的測試。

And the purpose is to maintain a relatively strong solvency (inaudible). And internally, despite the perspective of meeting the requirements of the C-ROSS regulation, to have the adequate capital in our business and operations through another perspective. So, that's the answer. Thank you.

目的是維持相對強勁的償付能力（聽不清楚）。而對內，除了要滿足償二代監管的要求，還要從另一個角度去確保我們業務和營運有足夠的資本。這就是答案。謝謝。

MW Kim, JPMorgan.

摩根大通 (JPMorgan) MW Kim。

Thank you for the opportunity. I have one question about the new business [by your] growth rate. So, there was a change of the solvency, the framework into the C-ROSS 2. So, I just want to check whether the Q1 2021, the (inaudible) was recalculated on the C-ROSS 2 for the apples-to-apples [completion]. Or no need to do so due to the recent impact under the new solvency framework. That's my question. Thank you.

感謝您提供的機會。我有一個關於新業務成長率的問題。因此，償付能力和框架在償二代中發生了變化。因此，我只想檢查一下 2021 年第一季的（聽不清楚）是否在償二代上進行了同類比較 [完成]。或者由於最近新償付能力框架的影響，沒有必要這樣做。這就是我的問題。謝謝。

(Spoken in Foreign Language).

（用外語說）。

(Spoken in Foreign Language).

（用外語說）。

(Interpreted) So, the decrease reported in the first quarter was 14.3% decrease, was calculated under the existing rules of Solvency 1 -- C-ROSS 1. And we also carried out the calculation based on the Phase 2 regulation and also the characteristic of the risks. So, based on this internal calculation, the new business value resolute amount and the decrease was similar to that 14.3% decrease.

(解讀)所以，第一季報告的降幅是14.3%，是按照現有的償二代——償二代的規定計算的，而且我們也是根據二期監管的規定，以及風險的特徵進行的計算。因此，根據內部計算，新業務價值確定金額和下降幅度與14.3％的下降幅度相似。

Steven Lam, Bloomberg Intelligence.

彭博產業研究的 Steven Lam。

Hi, thanks for the opportunity for the questions. I've got two sets of questions. Firstly, just want to know -- I understand your new business value fell 14%. Could you paint a picture for us on the decline in terms of new business margin?

你好，謝謝你給我提問的機會。我有兩組問題。首先，我只是想了解一下——我了解到您的新業務價值下降了 14%。您能為我們描述一下新業務利潤率下降的情況嗎？

Based on my rough calculation I think there's probably at least a few percentage points drop. Could you give us an idea of what's the reason behind it? Is it because of a more competitive pricing environment or this is mostly driven by changes in product mix? That's number one.

根據我的粗略計算，我認為可能至少會下降幾個百分點。您能告訴我們背後的原因嗎？這是因為定價環境更具競爭力還是主要由產品組合的變化所驅動？這是第一點。

And then number two, I want to get your thoughts on the dollar and the yuan situation. Given the sharp moves in the Chinese yuan versus the dollar, would it make sense to perhaps increase your overseas investment allocation in the near term? If I'm not mistaken your allocation overseas are still very small, probably 2% to 3% of your total investments.

第二，我想聽聽您對美元和人民幣形勢的看法。鑑於人民幣兌美元的大幅波動，短期內增加海外投資配置是否合理？如果我沒記錯的話，你們在海外的配置仍然很少，大概佔總投資的 2% 到 3%。

So, if that's the case, how much money do you have already outside of mainland China that you can deploy right away if you want to increase your allocation? It could be in US dollar assets or maybe in Hong Kong dollar assets. And I guess in association to that, what's your view on the Hong Kong stocks? Would you think about increasing your allocation sometime this year given the low valuation? Thank you.

那麼，如果是這樣的話，如果您想增加配置，您在中國大陸以外已經擁有多少資金可以立即部署？它可能是美元資產，也可能是港幣資產。我想與此相關，您對香港股票有何看法？鑑於估值較低，您是否會考慮在今年某個時候增加您的配置？謝謝。

(Spoken in Foreign Language).

（用外語說）。

(Spoken in Foreign Language).

（用外語說）。

(Interpreted) About your first question, your observation is correct. The main change that led to a decrease in the new business margin is a change in the business mix, which is a result of the pandemic situation and also the change in the customer demand.

（翻譯）關於你的第一個問題，你的觀察是正確的。導致新業務利潤率下降的主要變化是業務組合的變化，這是疫情以及客戶需求變化的結果。

And about the investment side, yes, of course we have made a (inaudible) plan for asset allocation globally. And we want to match our exposure to the global markets, not only because the exchange rates but also for the risk adjusted return to improve our portfolio. But there's two challenged right now for us. One is the geopolitical risk, especially this year. And second, we see there is a potential risk in the global market, especially in the -- not only in the equity side but also in the fixed income side.

關於投資方面，是的，我們當然制定了（聽不清楚）全球資產配置計畫。我們希望匹配我們在全球市場的敞口，不僅因為匯率，也為了風險調整後的回報來改善我們的投資組合。但現在我們面臨兩個挑戰。一是地緣政治風險，特別是今年。其次，我們看到全球市場有潛在風險，尤其是──不僅在股票方面，而且在固定收益方面。

So, we are very cautious about that. We will enlarge our exposure to the global market step-by-step and very cautiously. And about the Hong Kong equity markets, yes, we see there's a very attractive valuation in the Hong Kong market. But still there's some risk we are concerning, so we will be very cautious. Thank you.

因此，我們對此非常謹慎。我們將逐步、謹慎地擴大對全球市場的影響力。關於香港股票市場，是的，我們看到香港市場的估值非常有吸引力。但我們仍然擔心一些風險，因此我們會非常謹慎。謝謝。

(Operator Instructions). Steven, Bloomberg Intelligence.

（操作員指令）。史蒂文，彭博情報。

Hi, thank you. It's me again. On the first part, thank you for the answer. So, can I expand the question to ask your outlook for the new business margin for the rest of the year, assuming let's say the COVID situation -- it could be resolved maybe in a few months' time and be normalized? Do you see a possibility that the decline can ease -- maybe the margin decline can ease due to the fact that there could be more ability to sell long-term protection products?

你好，謝謝。又是我。關於第一部分，感謝您的回答。那麼，我能否擴展這個問題，詢問您對今年剩餘時間新業務利潤率的展望，假設 COVID 的情況——可能在幾個月內得到解決並恢復正常？您是否認為利潤率下降的趨勢可能會有所緩解——也許由於銷售長期保護產品的能力增強，利潤率的下降趨勢可能會有所緩解？

And for the second part, just a quick follow-up. Do you mind to remind us -- say sort of how much foreign currency that you can be -- readily deploy if you need to invest overseas? Or there's plenty of quota for you to convert from R&B into foreign currencies. Thank you.

對於第二部分，只需快速跟進。您介意提醒我們嗎—如果您需要在海外投資，您可以輕鬆部署多少外幣？或者您有足夠的配額可以將 R&B 兌換成外幣。謝謝。

(Spoken in Foreign Language).

（用外語說）。

(Spoken in Foreign Language).

（用外語說）。

(Interpreted) The first question about the outlook for the new business margin, this is a very hard question. So firstly, from the single product perspective, in this [new year] we're having enhanced tools to increase the value creation. For example, we have been using technology to empower our business. And we have achieved a decrease of the cost and an increase the efficiency thanks to the technology empowerment.

（口譯）第一個問題關於新業務利潤率的前景，這是一個非常困難的問題。首先，從單一產品的角度來看，在新的一年裡，我們將擁有增強的工具來增加價值創造。例如，我們一直在利用科技來增強我們的業務。並透過科技賦能，實現了成本的降低、效率的提升。

And apart from this, in other aspects like the morbidity and mortality rate of the risk, that is also changing all the time because of the improvement in the technology, in the medical treatment technology and also some privacy protection. So, all these factors, taking each factor alone, it will affect the profitability of specific products.

除此之外，其他方面，例如風險的發病率和死亡率，也隨著科技的進步、醫療技術的進步以及隱私保護的提高而不斷變化。所以，所有這些因素，單獨考慮每個因素，都會影響特定產品的獲利能力。

And also from the degree of the competition of different products, but also varied to a different extent, we have some (inaudible) in the insurance product and also some small areas of (inaudible). And also during the implementation of our product optimization strategy, we have been under the impact of the pandemic (inaudible). So, as a result the [tempo] and the recovery of the business, it still has a lot of uncertainty.

而且從不同產品的競爭程度來看，也有不同的程度，我們在保險產品方面有些（聽不清楚），在某些小領域也有一些（聽不清楚）。而且在實施產品優化策略的過程中，我們也受到了疫情的影響（聽不清楚）。因此，業務的[節奏]和復甦仍然存在許多不確定性。

And also because of the change in the people's income after pandemic results, there was also a decrease in the demand [relief] because of the insurance product and the nonessential product. So, under the current situation we shall not really pursue the increase in the new business margin. We should -- that's our objective of meeting the customers demand in an all-around way.

而且由於疫情後人們的收入發生了變化，對保險產品和非必需品的需求也有所減少。所以，在目前的情況下，我們不應該真正追求新業務利潤率的成長。我們應該－這是我們的目標，全面滿足客戶的需求。

And on the condition of meeting the customers' demands in an all-around way, we can achieve the relevant margin increase naturally. That is our goal for the new business margin. So, that's the answer for the first part.

而在全面滿足客戶需求的情況下，相應的利潤自然就能提升。這就是我們對新業務利潤的目標。這就是第一部分的答案。

According to the regulator we can invest 50% of our total investment assets offshore China. And now we have only 3% [closure] on -- 3% closure. And actually if we want to enlarge our investment overseas, we need to get quota from the state.

根據監管機構的規定，我們可以將總投資資產的50%投資於中國境外。現在我們的結案率只有 3%——3%。實際上，如果我們想擴大海外投資，就需要獲得國家的配額。

So, (inaudible) is a quota from the state. We have USD10 billion and we already -- yes, need to explore (inaudible) in the near future (inaudible). USD1 billion. There's one question (inaudible). So, we'll take the last question, please.

所以，（聽不清楚）是來自國家的配額。我們有 100 億美元，而且我們已經——是的，需要在不久的將來探索（聽不清楚）（聽不清楚）。 10億美元。有一個問題（聽不清楚）。那麼，我們來回答最後一個問題。

[Kelesh Mustri], HSBC.

[Kelesh Mustri]，匯豐銀行。

Hello, good evening. Thank you for taking my question. My question is around C-ROSS 2. Could you just help me to understand the movements from 254 to 107? How much of the change is due to movements in the advancement of residual margin? How much is due to (inaudible) from using (inaudible) maturity asset within the solvency calculation? And then are there other significant movements within that? So, any detail on that would be helpful. Thank you.

你好，晚上好。感謝您回答我的問題。我的問題是關於 C-ROSS 2 的。您能幫我理解從 254 到 107 的變動嗎？其中有多少變化是由於剩餘邊際增長的變動所致？在償付能力計算中使用（聽不清楚）到期資產需要多少（聽不清楚）？那麼其中還有其他重要的動向嗎？因此，任何有關這方面的詳細資訊都會有幫助。謝謝。

(Spoken in Foreign Language).

（用外語說）。

(Spoken in Foreign Language).

（用外語說）。

(Interpreted) So, we will disclose our quarterly solvency report tomorrow. So, all of your questions will be answered in that report. And due to time limitations we'll not go into detail today. So, as you mentioned, there are very complicated factors that -- affecting the changes of the number under the C-ROSS 2. So, after you read that report we are open to further discussion on the specific explanation. Thank you.

（翻譯）所以，我們明天將揭露季度償付能力報告。因此，您的所有問題都將在該報告中得到解答。由於時間限制，我們今天就不詳細討論。所以，正如您所說，影響償二代數位變化的因素非常複雜。因此，在您閱讀該報告後，我們願意就具體解釋進行進一步討論。謝謝。

Okay, (inaudible) for our first quarter results [statement]. If you have any further questions, please contact the (inaudible). Thank you for (inaudible). Good-bye.

好的，（聽不清楚）關於我們第一季的業績[聲明]。如果您還有其他問題，請聯絡（聽不清楚）。謝謝你（聽不清楚）。再見。