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China Pacific Insurance: Summary of Q&A of CPIC 2021 AGM







Summary of Q&A of CPIC 2021 AGM

(June 2022)

1Q: The market environment this year has become increasingly challenging, with regulatory tightening, industry structural reform and resurgence of COVID. What is management view on the company’s strategic directions?

  1. The world is experiencing profound changes and shifting cycles, and mankind is facing a lot of emerging challenges. Under such circumstances, it is important for insurance companies to learn useful lessons from the past and other markets, formulate business strategies based on the changing environment, ensure consistent strategy execution and strive for sustainable development.
    Given the trends and dynamics of the insurance market, we will focus on 3 things: first, ensure reasonable profitability and liquidity from the underwriting business; second, asset allocation shall be compatible with profiles of liabilities and cover their cost; third, pursue sustainable value growth instead of short-term high returns. This would help us weather the ups and downs of economic cycles and achieve the targets of our transformation which we put forward a few years ago: best in customer experience, business quality and risk control capabilities, with industry leadership in healthy and steady development.

Looking ahead, we will stay the course, focus on things that are within our power, and continue to uphold value and long-term oriented strategies.

We know clearly where we are going in spite of increasing uncertainty: first is the paradigm shift away from sales orientation towards customer orientation so that CPIC Service could become our differentiating edge; second is pressing ahead with market-oriented reform to enhance professionalism; third is to pursue bold steps in deployment along emerging areas such as health care, big data and integrated regional initiatives.

2Q: How do you think of Transformation 2.0 which you initiated a few years ago? How do you balance between mid- and long-term development objectives and short-term pressure on your business?

  1. We launched Transformation 2.0 in 2017, which was a strategic and pre-emptive move the board took based on changing market environment to pave the way for high-quality development. Aiming for industry leadership in healthy and steady development, the transformation implemented a series of projects centering on talent, digitalization, collaboration, governance and deployment. This further enhanced our ability to identify, respond to and pursue changes in the face of growing uncertainties, and as a result, the company has

become more dynamic, innovative and resilient. Such changes better injected new vitality into the long-term development of the company. However, transformation will never be easy, and ours was a process of twists and turns, with the new replacing the old. We persisted in the long term, took a pragmatic approach starting with problem-solving, upheld customer orientation, optimized resources allocation, and focused effort in key levers such as organizational health, core business development and emerging growth opportunities, and delivered impressive results in line with our expectations. In the past 5 years, operating revenue has grown from more than 300bn to 440bn; net profits nearly doubled; EV grew from less than 300bn to nearly 500bn; number of customers reached 168mn, a net growth of more than 500mn; premium income of property and casualty insurance exceeded 150bn, and that of life insurance 200bn; Group AuM increased from 1.4tr to 2.6tr, and we achieved marked improvement in intra-Group synergy, innovation and governance, and further consolidated standings on the market.

Transformation in the past 5 years not only improved our business performance, but also prepared us to cope with uncertainty and challenges down the road. Its vision and objectives, which could be summarised as “3 Mosts and 1 Leadership”, point to the direction of long-term and sustainable development. Going forward, we will continue to pursue high-quality development, deepen transformation in health

care, regional development and big data so as to promote healthy and

steady development of the company.

3Q: Your life subsidiary launched the Changhang Action Program in an all-around way on January 1 this year. How are things going? Was the progress in line with management expectation? When can we expect improvement in KPIs like NBV?

  1. In July last year, we initiated the design of Phase I of the Changhang Action Program, which identified 8 projects in, say, distribution channels, products + service, optimization of existing business, organization & culture and publicity & communication. The implementation of the road-map started earlier this year. Of this, the career agent project was kicked off on Jan. 1 2022, with the launch of the amended Basic Law, seeking to build a new operational mode of the agency channel centering on professionalism, career-based development and digitalization. Besides, we optimized the agent recruitment system, developed the NBS sales support system, upgraded the on-line platform, enhanced the training system and accelerated renovation of work-places, with interim progress in agency force quality, and the new KPIs were largely in line with our expectation.
    In Q1, core manpower began to stabilize and recover, which, on a monthly average basis rose by 33.7% from the second half of 2021;

average core manpower FYC increased by 75% from the second half of 2021 and by double digits year-on-year; 13-month retention ratio for new recruits improved month by month. In channel diversification, bancassurance gained further momentum, and achieved encouraging results. In optimizing existing business, we took a host of steps to cut costs and enhance profitability, with 13-month persistence ratio rising by 5.3pt year-on-year to 89% and the loss ratio for long-term insurance down by 5.6pt . We also made plans to drastically cut space for work-sites in the next 3 years.

That being said, no transformation can be done overnight. In spite of the interim progress, we still face formidable challenges ahead. We will strictly abide by regulatory requirements, refrain from boosting sales during the jump-start via short-term incentives or sales pitch exploiting product withdrawals. Instead, we strive for more balanced business development, and foster the new bevaviours of “daily visits, weekly management and monthly planning” among agents so that they can gradually form the long-term habit of customer visits. For the whole year, given changes to domestic and international economic environment, and resurgence of COVID, there is a lot of uncertainties surrounding the trend of NBV. However, in the medium and long term, our transformation will deliver more tangible benefits, which would translate into steady improvement of KPIs like NBV.

Disclaimer

China Pacific Insurance (Group) Co. Ltd. published this content on 24 June 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 June 2022 09:35:01 UTC.

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All news about CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

Analyst Recommendations on CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

Sales 2022 369 B
55 021 M
55 021 M
Net income 2022 24 201 M
3 613 M
3 613 M
Net Debt 2022 27 237 M
4,067 M
4,067 M
P / E ratio 2022 9.26x
Yield 2022 4.05%
Capitalization 207 B
30 958 M
30 958 M
EV / Sales 2022 0.64x
EV / Sales 2023 0.62x
Nbr of Employees 107,000
Free-Float 68.3%

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Income Statement Evolution

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Mean consensus OUTPERFORM
Number of Analysts 24
Last Close Price 23.76 CNY
Average target price 27.51 CNY
Spread / Average Target 15.8%


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