CILJF - China Life Insurance Company Limited (CILJF) Q3 2023 Earnings Call Transcript

2023-10-27 06:09:02 ET

China Life Insurance Company Limited (CILJF)

Q3 2023 Earnings Conference Call

October 26, 2023, 07:00 AM ET

Company Participants

Hu Jin - Chief Financial Officer

Conference Call Participants

Thomas Wong - Goldman Sachs

Michelle Ma - Citi

Tang Shengbo - Namura

MW Kim - JPMorgan

Presentation

Unidentified Company Representative

I'm sure you've already got your printed [indiscernible] points of the Q3 results. To have more time for questions, let's get into the Q&A directly. The briefing in English will last for 30 minutes. There will be a consecutive interpretation for questions and answers. Please limit your questions to no more than two, and let us know your name and the institution you represent.

Now I invite the first question, please.

Question-and-Answer Session

Operator

Thank you. And our first question is coming from Thomas Wong with Goldman Sachs. And Thomas, please go ahead.

Thomas Wong

Thank you. A couple of questions. Firstly, on the net profit result under the new accounting basis, I understand management attribute this to equity market weakness. I'm just looking at CSI performance. CSI 300 Index performance was minus 5% in second quarter and minus 4% in third quarter, but profit was much weaker in the third quarter. Can you just help me to understand why that's the case?

And the second question is on the dividend outlook. Can you talk about how should we think about full year '23 dividend please?

[Foreign Language]

Unidentified Company Representative

[Foreign Language]

[Interpreted] So, about the difference in the -- for the profit in the new accounting standard is mainly because the rules of accounting change for the recognition of measurement and presentation of the insurance contract under IFRS 17. And for some traditional business in the old accounting standards, some laws were reflected in the current period profit -- P&L, but under the new accounting standard that is measured into the OCI.

And for the dividend policy in this year, because of the discrepancy in the A and H share reporting, because of the old and new accounting standard, we are aware of the difference and we are carrying out research in this regard. For the dividend policy, we will consider the full year result and also consider the capital market return, also the return to the shareholders expectations from the market, and also the requirements for the solvency. Thank you.

We can take the second question, please.

Operator

Thank you. [Operator Instructions] And our next question is coming from Michelle Ma with Citi. And Michelle, please go ahead.

Michelle Ma

Thank you, management, for giving this opportunity to ask question. I have two questions. So first one, that's actually a follow up from the Chinese session. So, I think in the last call, Mr. Bai actually mentioned we are still very confident on the outlook of 2024. And we expect steady progress and that [we see] (ph) the results for next year. Just want to confirm, can I comprehend this comment as we expect continued growth for next year? And also, for the -- just want to confirm for the jumpstart sales, because the regulator very recently commented that they actually discovered the pre-sales of jumpstart sales for the business we already completed this year. So, will this be recognized in the Q4 as a one-off practice to be classified in the Q1 next year? So that's my first question.

And the second question is also about investments. So, if we look at our balance sheet for the equity investment, so for the stock, currently, I noticed just a 10% of the equities, they are classified under fair value through other comprehensive income. And 90%, that's fair value through P&L. So, given the high volatility of the equity market, will we consider to invest in more stocks in the category of fair value through other comprehensive income?

[Foreign Language]

Unidentified Company Representative

[Foreign Language]

[Interpreted] The first question about the jumpstar sale, we think that the jumpstar is a systematic project. It includes the preparation in three different projects. Firstly, preparation on the agent team side. It includes the high-quality recruitment of new agents and coordination of new agents and also enhancement of the agent skills. Secondly, the preparation on the product side. In the fourth quarter of this year, we will launch new products, including endowment, immunity, and whole life, to enhance the diversified product offering to the clients. And thirdly, the preparation on the client side. We need to revisit our old customers. It actually takes the opportunity of the 20th anniversary of listing of the company.

We think that the regulator's notice on October 18 just mentioned to regulate the pre-sale activities. So the cooperation in the three aspects I mentioned will not be suspended. In the first quarter of 2024, we think the business will be minorly affected by this notion. And we will still try our best to train our team and to transform the product offering and we still think there is great potential on the customer demand. And we are still confident about achieving positive growth in the full year 2024.

And about the premium, we already collected in the pre-sale this year. We took the view that we will continue to provide good service to the customers.

Second question about the categorization of the stock assets, currently, the percentage into the FVOCI financial asset is relatively low. That is because we consider the two sets of accounting standards will co-exist for three years. And we try to categorize the assets in line with the asset liability matching of the company. And we will consider the stability of the profit, especially under the Chinese accounting standard and also consider the requirements of the new IFRS. And in the future, we will try to increase the percentage of FVOCI to further allocate into some stable high dividend stocks that have good corporate governance and to further stabilize the financial return.

Okay, next question.

Operator

Thank you. And our next question is coming from Tang Shengbo with Namura. And please go ahead.

Tang Shengbo

Thank you very much for the opportunity. So my question is - My name is Tang Shengbo from Namura. The question is what will be the impact of the recent regression on the bank insurance rule? So because due to the rule, according to the news report, the commission paid to the banks will be cut by roughly 30% or even more. So, what will be the impact going forward? And also what will be our strategy on the bank insurance? Thanks.

[Foreign Language]

Hu Jin

[Foreign Language]

[Interpreted] The regulator's requirement [indiscernible] to quickly regulate to quickly align the sales practice with the regulated filing. As you mentioned, it helps the industry to decrease the cost and decrease the commission by at least 50%. So, it is beneficial for the company to decrease our cost on the liability side. And it also gives us more room in the product design and also in the efficiency and profitability enhancement. So, next year, we will continue our strategy of seeking progress while maintaining [indiscernible]. And in the Life Insurance China, we will continue to put emphasis on both scale and the new [indiscernible] to further enhance the diversified product strategy.

Okay, next question.

Operator

Thank you. And our next question is coming from MW Kim with JPMorgan. And MW, please go ahead.

MW Kim

Good evening. Thank you for taking my question. So, this is MW Kim from JPMorgan. I have two questions. One is the follow up about the dividend. So, I just want to ask about the mid-term, the share -- dividend policy of the company. The financial market now becomes very volatile and this makes that the dividend forecast becomes increasingly difficult. So, if we actually look at the many insurers adopting IFRS 17, we are observing that insurance companies start to upgrade their dividend policies from payout base to the more the DPS increase base. So I just want to learn from the management view about the progress of the dividend policy moving forward. So that's my first question.

And then, the second question is, if China 10-year bond remains below 3% level by end of the year and even the next year, is it reasonable to assume that the relatively large impact on your CSM movement moving forward? Or do you have any sensitivity related to the CSM under the different interest rates scenario? Thank you.

Unidentified Company Representative

[Foreign Language]

[Interpreted] First, about the dividend policy. We are aware that many investors are now paying more attention to stabilize the resolute amount of the DPS. So, just as Hu Jin mentioned in the previous question, we are fully aware of the requirements of the investors and analysts. And we also fully recognize the big quantity in the profit under different accounting standards. And we are accelerating our research on the dividend payout policy. We are actively making the research and we believe in the foreseeable future, we will have answers that satisfy the investors and analysts.

And the second question will be taken by [indiscernible].

Unidentified Company Representative

[Foreign Language]

[Interpreted] The decline in the interest rate will reduce the growth rate of the new business CSM. And you can see that in the first half results for companies that disclose the reporting under new accounting standards, the growth rate of CSM is apparently lower than growth rate of the [indiscernible]. So the impact is relatively larger on the CSM growth. And for the insurance company in China, the main two business types are participating and traditional. For the traditional business, the impact will not be absorbed, but for the participating, it will be absorbed. So, for the impact in general, it is impossible to compare company to company because their business mix is different.

Unidentified Company Representative

Okay, this brings to the end of our Q3 results briefing. If you have any further questions, please feel free to contact our IR team at any time. Thank you for your participation. Bye.

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