Edited Transcript of 601336.SS earnings convention name or presentation 26-Aug-20 1:30am GMT

Second, management funding, dangers and seize alternatives. That’s to optimize our volumes to power down funding dangers, whereas now we have to grab the structural alternatives introduced by the pandemic. Third, to strengthen utility of innovation and promote expertise empowerment to strengthen the digital and clever utility in advertising and marketing, assist, customer support and operation. Additionally now we have to enhance analysis and improvement, functionality and effectivity.

Fourth, improve compliance and consolidate threat management. We are going to enhance the mechanism for threat monitoring, evaluation and prevention, enhance complete threat administration system, strengthen inside management and auditing.

We stay true to our authentic aspiration and to meet our social duties. By New China Life basis, now we have launched the general public welfare exercise named NCI accompanies you in constructing lovely cities. We donated insurance coverage to sanitation staff. Since 2017, this undertaking has coated 102 giant and medium-sized cities and benefited 750,000 sanitation staff with some assured over CNY 187 billion to battle COVID-19. This basis donated insurance coverage to almost 200,000 medicals in Wuhan with whole some assured of about CNY 60 billion.

Additionally now we have made different donations with over RMB 7.6 million. This basis additionally launched the street to prosperity in all features NCI accompanies you to alleviate poverty.

These tasks have benefited (inaudible). Within the Mongolian, altogether, 11 provinces helped 50,000 poor folks with whole sum assured over RMB 5 billion.

Subsequent, I might wish to current the outcomes of insurance coverage enterprise. In H1 2020, NCI realized GWP progress by way of each long-term and short-term insurance coverage enterprise. FYP, from long-term insurance coverage enterprise, RMB 29.9 billion, up by 155%, accounting for 30.8% of GWP, a rise of 15 proportion factors. Renewal premiums, CNY 62.7 billion, up by 7.4%, taking on 64.7% of GWP, appearing as a anchor for fast premium progress. Premiums from short-term insurance coverage enterprise, RMB 4.Three billion, up by 11.3% year-on-year.

Now let’s come to product construction. To fulfill the diversified wants of consumers, we saved boosting to steadiness the event of long-term insurance coverage enterprise. FYP from long-term conventional and medical health insurance accounted for 45%, whereas FYP from long-term taking part insurance coverage accounted for 55%. Attributable to a big renewal enterprise base, medical health insurance premiums, RMB 32 billion, up 14.4% year-on-year.

Subsequent slide is GWP breakdown by channels. The agent channel realized premiums of RMB 66.Three billion, up by 10.5%, accounting for 68.4%. Bancassurance channel, CNY 29.1 billion, up by 133.8%, accounting for 30.1% within the GWP. Group insurance coverage channel, CNY 1.5 billion, down by 4.1%.

For the agent channel to develop each enterprise value and value, this channel continued to advertise the event of high-value enterprise consolidate the product construction of medical health insurance, annuity and riders. It generated premiums of RMB 66.Three billion, up by 10.5%. FYP from long-term insurance coverage enterprise, CNY 10.Three billion, up by 14%. FYRP from long-term insurance coverage enterprise, CNY 9.Eight billion, up by 8.3%. Renewal premiums, CNY 53 billion, up by 9.2%. Premiums from short-term insurance coverage enterprise, CNY 2.Eight billion, up by 22%.

For the workforce constructing on this channel, agent channel stepped up efforts to construct gross sales workforce and promote the recruitment of latest brokers. The headcounts hit a file excessive. By June 30, the headcounts reached 526,000, up by 36.5%. The pandemic posed larger challenges to advertising and marketing and decreased lively agent headcounts. The month-to-month common variety of certified brokers was 135,000, down by 3.5%. Month-to-month common certified fee, 26.4%, down by 12.Four proportion factors.

Now I want to introduce the bancassurance channel. It has absolutely unleashed its potential and put in place the technique of boosting enterprise quantity and value progress. Realized premiums, CNY 29.1 billion, up by 133.8%. FYP from long-term insurance coverage enterprise, CNY 19.5 billion, up 635.3%. FYRP from long-term insurance coverage enterprise, CNY 3.7 billion, up 38.0%. Renewal premiums, CNY 9.6 billion, remaining mainly flat.

As for enterprise high quality, the corporate strengthened administration and enterprise high quality remained secure. The 13-month persistency ratio had been 91%, up by 0.9 proportion factors. And 25-month persistency ratio, 84.6%, down by 1.9 proportion factors. The give up fee dropped to 0.7%, down by 0.Three proportion factors. That is all for the insurance coverage enterprise.

Now let’s give the ground to Mr. Zheng Yang.

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Zheng Yang, New China Life Insurance coverage Firm Ltd. – VP, CFO & Monetary Controller [3]

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Thanks, Mr. Li. Subsequent, I’ll transient you on the corporate’s financials and funding enterprise. When you take a look at the 17th web page of the PowerPoint, the whole revenues reached CNY 116.1 billion, up 30.3%. Web written premiums and coverage charges reached CNY 95.425 billion, up 31.1%. Web revenue attributable to shareholders of the corporate was down by 22.1%. The lower is principally as a result of a excessive revenue base final yr due to the adjustment of pretax deduction base.

Earnings per share was down 22.2%. As for funding efficiency, in face of the volatility of worldwide monetary market due to COVID-19, the corporate carefully centered on absolute return goal in asset administration enterprise and successfully responded to fluctuations available in the market.

Funding property reached CNY 900.Three billion, up 7.3%. Annualized whole funding yield was 5.1%, up 0.Four proportion factors. Annualized internet funding yield was 4.6%, down 0.Four proportion factors.

As for our funding portfolio, we will see that the funding portfolio is secure. Time period deposits, CNY 95.5 billion, its proportion up Three proportion factors. The debt monetary asset, CNY 554.5 billion, accounting for 61.6%, down Four proportion factors. The proportion of debt monetary property was down due to final reinvestment in nonstandard debt property. The fairness monetary asset reached CNY 184.Four billion, accounting for 20.5%.

As for our nonstandard funding portfolio, within the 20th web page, the whole nonstandard property was down CNY 7.Three billion. It’s down 2.Eight proportion factors. We will see that the nonstandard debt funding was down 7 proportion factors and fairness funding was up 7 proportion factors. We will see that the nonstandard funding is of excessive credit score and at a excessive degree.

As for solvency, the core solvency margin ratio hit 271.79%, down by 11.85 proportion factors. The excellent solvency ratio hit 281.78%, down 1.86 proportion factors. The corporate issued capital complement steadiness in May this yr, supplementing precise capital of RMB 10 billion, as complement for the great solvency margin ratio. The corporate’s enterprise developed quickly. And due to different components, the corporate’s solvency has decreased, however continues to be at a excessive degree.

Now let’s welcome Mr. Gong Xingfeng to introduce the actuary half.

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Xingfeng Gong, New China Life Insurance coverage Firm Ltd. – VP, Chief Actuary, Board Secretary & Joint Firm Secretary [4]

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Good morning, I might wish to share the embedded value. The EV of the corporate was up by 9.6% from CNY 205 billion to CNY 225 billion, of which value of in-force enterprise rose from CNY 82 billion to CNY 92 billion, up by 11.9%. And adjusted internet worth from CNY 123 billion to CNY 133 billion, up 8.1%. And that is the motion evaluation that exhibits the expansion supply of EV in 1H 2020. The principle contributors to EV progress had been NBV and anticipated return, which contributed 3% and 4% to EV progress, respectively.

Worth of latest enterprise enriched CNY 5.2 billion, down by 11.4% year-on-year. FYP-based VNB margin was 15.3%. That is all for embedded value. Thanks.

That is all for the presentation of 2020 interim outcomes. Let’s come to the Q&A session.

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Questions and Solutions

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Xingfeng Gong, New China Life Insurance coverage Firm Ltd. – VP, Chief Actuary, Board Secretary & Joint Firm Secretary [1]

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(Operator Directions) Right here comes the primary query.

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Unidentified Analyst, [2]

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Hello (inaudible) Securities, Ms. (inaudible). Congratulations on the H1 outcomes, together with investments and workforce constructing.

I am (inaudible) from (inaudible) Securities. I’ve 2 questions. First is in regards to the workforce constructing. We noticed an enormous improve of the headcounts, particularly towards the backdrop of pandemic. We wish to ask in regards to the elimination of nonperforming brokers. And what’s your goal for the entire yr workforce constructing. Additionally we observed that the productiveness of agent is lowering. What measures will you are taking to enhance their productiveness? That is all for the primary query.

The second query is in regards to the actuarial half. We observed that you’ve got completed adjustment, modify the low cost fee assumption. What’s your consideration on that? And what scenario will you down modify the long-term funding assumption?

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Yuan Li, New China Life Insurance coverage Firm Ltd. – VP [3]

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Thanks to your query. In H1 2020, we noticed a rise within the headcount and reduce in productiveness, as you talked about within the query. It’s because since February, we’re hit by the pandemic. We discovered it arduous to go to prospects and conduct offline gross sales. Due to the pandemic, it was arduous to satisfy nose to nose, and now we have to recruit to handle our agent workforce and to promote from on-line channels. And the high-value product gross sales was negatively affected. That is why there was a rise in headcount, however a lower in productiveness.

For the second half of this yr, now we have set a goal. That’s to extend sure headcounts and to construct a 3-high workforce; excessive productiveness, excessive retention and top quality. The significance is connected to high-quality brokers. Brokers develop into youthful. That’s our intention. We wish to recruit extra brokers that was born in 1980s and never even 1990s. Additionally we set some allowance and subsidies for wonderful expertise brokers. And in addition, now we have made Four measures. The primary is the essential legislation of the agent workforce, which is able to put in force since July 1, to guard brokers’ rights from issues strategies and measures. And the second is to domesticate the ambiance of gross sales to enhance the certified fee and improve certified brokers. Third is to make use of some promotion actions. For instance, the dwell streaming promotion exercise to assist them promote. The fourth is to duty to supply extra complete safety to our prospects and to extend the sum assured of every coverage. Additionally we wish to strengthen our coaching to enhance the workforce’s high quality. We at all times mentioned that now we have 2 excellents. That’s wonderful new recruits. And the second is great managers. We are going to present trainings to totally different brokers catering to their wants to assist them develop into wonderful managers.

Additionally we are going to enlarge our monetary enter to our 500,000 brokers. That is all for this query.

As for the second query, we could have our Chief Actuary to reply it.

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Xingfeng Gong, New China Life Insurance coverage Firm Ltd. – VP, Chief Actuary, Board Secretary & Joint Firm Secretary [4]

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In regards to the threat low cost fee, it’s a complete indicator. It displays the investor and the automotive market impression and analysis in regards to the firm. There are various components affecting it. There are risk-free fee and asset scale. And in addition the premiums of some dangers. In fact, it additionally contains the estimation of an organization of the entire market.

As for NCI, since our itemizing in 2011, now we have used the danger low cost fee of 11.5%. In almost in 10 years, in fact, the home setting has modified so much, we will see that there are the next major modifications. The primary one is that the risk-free fee has modified. In fact, the nationwide bond yield is now going downward. Everyone seems to be anticipating low in regards to the future. However, we will see from our itemizing, our internet asset has doubled. And in addition, the whole asset has elevated, and now we have gained our manufacturers in the entire market.

We will see that {our capability} in innovation and in enterprise progress in addition to our manufacturers have elevated. On this circumstance, we will see that NCI is now having the chance and talent to regulate the danger low cost fee. It won’t affect the solvency ratio and the long-term enterprise progress of the corporate. However, it is going to be helpful to the long-term improvement. In fact, this adjustment is from 11.5% to 11%. The change isn’t massive. And in historical past of NCI, now we have — did some sensitivity take a look at from 11.5, 11 and likewise even 12. The sensitivity take a look at has been disclosed in our interim outcomes stories. So in case you have every other wanderings or different impression in regards to the firm’s threat degree, and in case you see it from your individual judgment of the NBV or of the value of the corporate, you’ll have a proper reply for it.

And in addition, in a downward setting of rate of interest, you requested whether or not the corporate will change the assumptions of different indicators. In fact, from NCI’s perspective, the funding yield for the reason that final 20 — 10 years, now we have reached our goal, and it’s carefully linked to our long-term funding yield analysis.

For the long run prospect of funding yield, there are 2 components. The primary one is the present property. The second is the reinvestment. For the two components, we see that they’re very difficult. Funding yield is affected by the risk-free fee and the asset allocation of the corporate. Our asset allocation may be very diversified, together with mounted revenue and likewise fairness and different different investments, we at the moment are increasing. For instance, the non-public fairness and REITs and different rising instruments.

So total, the funding yield of the corporate might be secure in the long run. And naturally, we could have a continued estimation of the entire market. And we are going to take into account the change of the entire market and the necessities of the investor to have a present and an accurate estimation of the funding yield.

Subsequent query from Business Securities, Mr. (inaudible).

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Jing Jing Zhou, Changjiang Securities Co., Ltd., Analysis Division – Analysis Analyst [5]

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I am (inaudible). I’ve 2 questions. The primary is that’s the persistency ratio — we observed that 13-month persistency ratio improved, but 25-month persistency ratio deteriorated. However in comparison with our friends all present deterioration of each indicators. So I wish to ask towards the pandemic, how do you consider and to enhance these 2 indicators?

The second query is in regards to the marketing strategy for the remaining Four months of this yr. You talked about that you just did not modify down the annual goal even towards the pandemic. So what’s your goal for 2020? And the way do you obtain these targets? What’s your plan for the fourth quarter? Additionally the jump-start interval.

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Yuan Li, New China Life Insurance coverage Firm Ltd. – VP [6]

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You talked about the persistency ratio. The 13-month persistency ratio elevated whereas 25-month persistency ratio decreased. That is totally different from our market friends. The reason being that the corporate stepped up its efforts to guage persistency ratio and connected extra significance to the enterprise high quality.

Second is our workforce develop into extra secure. The 13-month persistency ratio really exhibits the gross sales and the insurance policies that was bought 13 months in the past. If the product or gross sales model 13 months in the past was not accepted by the market, then this indicator will go down. So the necessities on our workforce is the explanation for the development of this indicator.

The third motive is the product change. Final yr, within the first half, we bought each medical health insurance and annuity merchandise. Additionally we bought some riders. NCI’s riders is a spotlight and helped to take care of prospects and to enhance buyer’s weak point. And in addition to optimize our service of declare settlement.

You talked about our plan for the second half yr. I might wish to reply this query from the agent channel perspective. I might wish to say that there are Four measures. The primary is to — led by the occasion constructing. The second is to strengthen our agent workforce. The H2 noticed an enchancment of our agent headcounts and likewise high quality. The third is to extend value. Agent channel is a value-oriented channel.

For the second half of this yr, now we have adopted (inaudible), a high-value rider product to extend the NBV. Additionally we are going to promote medical health insurance product to know the chance introduced by the pandemic. The fourth, additionally we are going to promote some high-value annuity merchandise as dietary supplements to leverage the benefit of iron triangle. That’s medical health insurance, annuity merchandise and the riders. This can be a very secure construction.

The fourth is to innovate. That’s to make use of expertise. We made some efforts, particularly for on-line actions, like new recruits and coaching. On July 8, Mr. Li Quan additionally attended the New China dwell streaming exercise to advertise new recruits and product promotion. This was for the primary time over 300,000 folks watched these dwell streaming video. And we recruited about 100,000 new brokers. That is for the recruitment.

Additionally we did some on-line gross sales, which exhibits some good results. On-line coaching can be crucial. We developed lessons and lessens to assist our workforce develop and promote merchandise. We additionally strengthened on-line administration by way of (inaudible).

So I believe these Four features solutions your query in regards to the subsequent half yr plan. We have not decided — we do not intend to regulate our annual goal. We hope to make concerted efforts to achieve the established targets.

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Quan Li, New China Life Insurance coverage Firm Ltd. – CEO, President & Govt Director [7]

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I want to do some addition to the reply of Mr. Li Yuan. In fact, in regards to the second query, now we have a comparatively complete reply. Within the second half, the corporate will make concerted efforts and do many measures to make up for the underdevelopment within the first half to meet the annual goal of this yr. In fact, we don’t now have plan to regulate our annual targets, as now Mr. Li Yuan mentioned, there are numerous measures taken within the particular person insurance coverage channel and on the identical time in different features. There are much more measures. The primary one is that we are going to shift and focus extra within the high-value merchandise. As now the COVID-19 is underneath management, the necessities of well being demand of our prospects is fairly excessive. So we are going to promote largely the medical health insurance and improve the medical health insurance product and likewise difficulty our major annuity merchandise and riders to extend and to meet the annual goal.

Total, we will see that the FYP goal could be fulfilled for the entire yr. However there are nonetheless some difficulties, for instance, in our value, particularly in NBV, that we are going to make concerted efforts to meet the technique and the objective of the due improvement of quantity and value. And on the identical time, the corporate will set up our platform, a really complete platform to acquire prospects and supply service for our prospects. And on the identical time, present custom-made merchandise for teams — totally different teams of our prospects.

In bancassurance channel, we are going to deepen the operation of our core channels. And on the identical time, focus extra on high-value merchandise. I believe you may relaxation assured for the event progress of the corporate as a result of we’re extra market-oriented in our product improvement and likewise our gross sales regime, particularly in product innovation, channel service and prospects’ expertise in addition to expertise empowerment. We are going to make investments extra on this respect and take extra measures to meet our goal. Thanks.

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Xingfeng Gong, New China Life Insurance coverage Firm Ltd. – VP, Chief Actuary, Board Secretary & Joint Firm Secretary [8]

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(Operator Directions) The following query comes from CICC, Mr. Dan Tian, now you may increase your questions.

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Dan Tian, China Worldwide Capital Company Restricted, Analysis Division – Analyst [9]

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I am Mr. Dan Tian from CICC. I wish to ask Mr. Li Quan, final yr, you issued that you’ll have a method of asset legal responsibility twin engine driving each value and quantity progress. Within the first half, we will see that you’ve got some progress, however is it inside your expectation? What is the good aspect and what is the unhealthy aspect? What would be the adjustment made within the second half?

The second is in regards to the medical health insurance. We will see that the medical health insurance enterprise is down a bit of bit within the first half. What is the motive for it? Is it due to the COVID-19, a short-term fluctuation? Or is it due to product combine shift or due to the market demand?

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Quan Li, New China Life Insurance coverage Firm Ltd. – CEO, President & Govt Director [10]

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I’ll reply your first query. Final yr, the corporate proposed the event technique of asset legal responsibility twin engine driving quantity and value progress. Within the first half of 2020, the entire firm has adhered to this technique. Till now, we will see that the progress of this technique is getting good outcomes and inside our expectation total. And naturally, the expectation of the Board. From the frequent improvement of each quantity and value, within the — due to the nice begin in January this yr and our resilience in our enterprise, we will see that the whole premiums was CNY 96 billion, up 30.9%, hit a file excessive. And our FYP has additionally elevated by 155%. And in addition our insurance coverage from short-term enterprise was CNY 4.5 billion (sic) [CNY 4.3 billion], up 11.3%.

So in each GWP, FYP and likewise short-term insurance coverage enterprise, now we have elevated, and a few of them, by a big margin. Everyone seems to be speaking about COVID-19. In fact, in February, it impacted so much. And in addition in March, now we have been largely hindered by it. Since April, its affect has went down, however nonetheless had a comparatively giant affect. So the FYP’s improve by 30.9% is comparatively arduous one. And it’s within the hostile of the entire market pattern. In value, as a result of our authentic plan is to promote a extra scale-oriented product within the first half, and since now we have a really early lunar spring pageant, and we wish to promote the annuity within the January and February. And within the later a part of the primary quarter after which the second quarter, we want to promote high-value merchandise. However due to the COVID-19, our high-value product sale has been impacted. And it has a really giant crush on the face-to-face improvement and face-to-face gross sales for our gross sales workforce that due to the COVID-19 now as being underneath management, due to the management of the occasion, and now we — the lower of our margin is — of our margin in VNB is now underneath management.

So within the second half, we are going to push ahead our targets to have at the least half of our goal fulfilled. In fact, we will see that for the NBV margin and NBV, now we have made concerted efforts, and it is rather arduous one. However from our consequence, now we have a comparatively good one.

And in addition from the asset legal responsibility twin engine, on the 1 hand, within the asset aspect, now we have optimized our asset allocation and meet the necessities of our prospects. In order to push ahead, the legal responsibility aspect, the FYP progress to have a balanced improvement of product. However, the legal responsibility aspect, gross sales improve has supplied very giant cash stream for the asset aspect.

Although there are very giant impacts of the COVID-19, we nonetheless seized many structural alternatives and reached an excellent consequence of the funding yield. Within the first half, we realized 200 — CNY 21 billion funding yield, up 24.6%. And our whole funding yield elevated by 0.Four proportion level. It’s a comparatively good consequence. We will see that the entire capital market is shrinking within the first half, however we seized many good alternatives. And we consider that the general improvement technique of the corporate has been nicely executed and is inside our expectation.

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Xingfeng Gong, New China Life Insurance coverage Firm Ltd. – VP, Chief Actuary, Board Secretary & Joint Firm Secretary [11]

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I want to reply the second query in regards to the medical health insurance, the FYP of medical health insurance is comparatively apparent. And much more underneath the entire spectrum of the high-speed improvement and improve of the FYP total. The lower of the FYP of the medical health insurance continues to be throughout the common degree of the entire business. On this yr, particularly within the early of this yr, our FYP progress was primarily comes from the bancassurance channel, the only premiums. For particular person channel, its product construction and our prospects’ calls for haven’t modified. In medical health insurance, we will see there are each subjectory and objectory causes for it. And the objectory causes takes the bigger proportion. We will see the primary motive is COVID-19, and everyone seems to be feeling it. We have now much less face-to-face assembly alternatives, much less contact. However medical health insurance depends closely on the face-to-face communication of our prospects and our gross sales power to seek out the calls for of the medical health insurance of our prospects. Up to now, now we have completed that. And our gross sales power has been used to this sort of platform. And the COVID-19 impacted — the COVID-19 impacted it so much. And the gross sales workforce has been hindered in its functionality and in itself.

And the second affect of the COVID-19 is that it influenced the entire marketing strategy of the corporate. To start with of this yr, now we have a really clear plan set for the entire yr. We want to promote the scale-oriented product to start with of the primary quarter after which shift to the medical health insurance and high-value insurance coverage, nevertheless it has been hindered by the COVID-19.

And the second objectory motive is that the financial savings calls for for our prospects, particularly in a downward fee — rate of interest setting, is now going up as a result of they’ve a extra long-term expectation for the long run. And now the authorities are issuing new insurance policies on the asset allocation and different features. So if the insurance coverage product can present a assure rate of interest, and it’s of excessive yield, particularly in dividends, then it is going to be of fine gross sales. So in our gross sales and operation, we observed that within the COVID-19, the severity of it has shifted our prospects’ demand from 2 or extra financial savings product sort. And the opposite motive is that in NCI, in its product combine, now we have some unbalanced degree. We will see that previously, now we have the next proportion in medical health insurance. However now since now we have issued new improvement technique, we consider that in medical health insurance we should always focus extra and make investments extra that’s totally different from others’ technique. And in addition we are going to make up for our shortcomings and promote extra annuity and financial savings merchandise. However in fact, from our firm’s personal perspective, a balanced improvement of quantity and value and balanced improvement of asset legal responsibility is a really massive subject.

On this shift in course of, we are going to take totally different measures, and measures can change within the course of. And naturally, we’re doing changes always in the entire progress.

And simply now Mr. Li Yuan talked about that 1+2+1 technique, now we have had some execution about it. And in addition in product combine in channels operation and in product, in value product and value-oriented product, now we have some modifications. So there are another subjectory causes. As you talked about, is there — prospects’ demand modified? The corporate believes that the necessities and calls for for insurance coverage, particularly for well being, is now going up. And within the COVID-19, the attention of the entire buyer of the entire society is now going up.

That is all for this query. Thanks.

(Operator Directions) Subsequent query comes from (inaudible).

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Unidentified Analyst, [12]

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I am (inaudible). I’ve 2 questions. The primary is the asset aspect. We observed the web asset yield decreased within the first half and likewise a rise within the time period deposit. We wish to ask in regards to the yield of time period deposit and likewise the yield of the newly added nonstandard property. What is the motive for the slight lower within the internet property yield? For the whole asset yield, we noticed the fairness have delivered good outcomes. Will this wave of markets proceed? The second query is in regards to the legal responsibility aspect. The NBV margin noticed apparent lower. May you please disclose the NBV margin for the primary and second quarter, respectively? If the margin has decreased within the second quarter, what is the motive behind that, is it due to the product construction?

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Zheng Yang, New China Life Insurance coverage Firm Ltd. – VP, CFO & Monetary Controller [13]

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Thanks to your query. I might wish to reply the primary investment-related query. I believe it is inside your expectation that the web asset yield noticed a slight lower. It is as a result of the worldwide financial downward pattern. Additionally China’s financial adjustment and the downward rate of interest, our funding yield stays related and the identical with the macroeconomic pattern. We expect it — additionally in regards to the fairness funding in the beginning of this yr, Mr. Li Quan has defined part of this query. We adopted measures to know alternatives and likewise use of timing to reply to the decision of the long-term funding of the market. We did not ask to promote fairness and stocks.

For the time period deposit, we elevated a bit of bit within the first half, about RMB 30 billion improve. The primary motive is that the stock market confirmed some constructive indicators. However within the long-term, the low rate of interest or Zero rate of interest property is uncommon. So we predict it’s good for us to place some cash into risk-free property. It is also a complement to the general asset allocation. The phrases of those deposits are usually not lengthy, round 2 to three years, and the yield is round 4%. Though these are simply time period deposits, we additionally made some researches on the counterparties and the asset themselves. Subsequently, I can assure that these time period deposits are protected and the yields can meet the necessities of the corporate to match the property with our legal responsibility to regulate our threat publicity that is why we elevated a bit of bit in time period deposits.

For the second half of this yr, now we have the aptitude to know alternatives towards the market fluctuation. We are going to comply with the long-term funding precept and barely elevated fairness funding. That is all.

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Xingfeng Gong, New China Life Insurance coverage Firm Ltd. – VP, Chief Actuary, Board Secretary & Joint Firm Secretary [14]

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I am going to reply the second query in regards to the NBV margin. The second quarter in contrast with the primary quarter, each the NBV and the NBV margin has narrowed the hole. That is due to the construction of product. We step up the gross sales of high-value merchandise. That is the top of the reply.

The following comes from (inaudible) Securities, Ms. (inaudible).

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Unidentified Analyst, [15]

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I’ve 2 questions. The primary one is in regards to the bancassurance technique. We will see that the corporate issued a second take off technique and pushed ahead the event of bancassurance channel. And within the first half, the premiums of bancassurance channel elevated by a big margin, however now we have estimation in regards to the NBV margin is about 1%. Then what is the improvement technique sooner or later? And the way will you steadiness your value and quantity?

And second query is in regards to the competitors of the entire business. I wish to know what is the firm’s perspective on the affect of the Web insurance coverage, particularly the mutual assist plans that’s now highly regarded on-line, will it have a damaging affect to the gross sales of the corporate?

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Yuan Li, New China Life Insurance coverage Firm Ltd. – VP [16]

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I’ll reply the primary query in regards to the technique of the bancassurance channel. In fact, for the reason that institution of the brand new Board and new administration, now we have issued the event technique of asset legal responsibility to engine driving quantity and value progress. In bancassurance channel, it’s a crucial one. It pursues, in fact, quantity first and value second. And simply now you talked about in NBV margin, really, within the first half, now we have elevated the gross sales of the only premiums. It dropped — it made the NBV margin drops. However for bancassurance channel, now we have Three benefits in single premiums. The primary one is that the banks have excessive demand for this sort of product. So if we promote high-value product or common premiums, then it is going to be very arduous within the bancassurance channel. And the second is that now we have the calls for coming from our prospects. Their demand isn’t just for high-margin merchandise, but in addition financial savings product to assist them defend their wealth, particularly in annuity and to assist them to have some defend when they’re owed. And our second — our third benefit is that the only premium gross sales may help us to promote our common premiums as a result of we are going to acquire quite a lot of high-end prospects, then we will contact them once more to promote common premiums. That is why we predict that the only premiums product gross sales continues to be very related and really vital for our product combine, however in fact, coming from the statistics in bancassurance channel, you may see that in each quantity and value in each single premiums and common premiums, now we have elevated by a big margin. And the NBV, not simply the NBV margin, has elevated. The NBV elevated, and we predict that is what issues. That is all of this reply.

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Quan Li, New China Life Insurance coverage Firm Ltd. – CEO, President & Govt Director [17]

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I’ll do some addition to it. For the reply of Mr. Yuan. Firstly, for the bancassurance channel, if we see it by way of from a administration perspective, now we have to see it very totally. Now in fact, as you talked about, NBV margin may be very low within the bancassurance channel. However why will we nonetheless develop it, for bancassurance channel, it’s a crucial channel for our entire firm. From NCI’s perspective, we should always adhere to the technique of growing it. In historical past, bancassurance channel has helped so much by the dimensions — of the dimensions progress of NCI. And now we have gained a long-term improvement by way of bancassurance and likewise our model affect in the entire market by way of bancassurance. For bancassurance channel itself, now we have totally different measures or totally different improvement methods. However in fact, it’s of low margin, nevertheless it nonetheless have margin. And we will see from the primary half that the margin of the bancassurance channel has elevated. And the general value of the whole premiums has elevated within the first half. So the goal of value of our personal firm could be fulfilled in the entire yr.

So if a bancassurance channel has margin after which it has a really giant quantity, then it is going to contribute to our total NBV. And it is going to be the concerted efforts coming from our gross sales workforce. And now we will see that we nonetheless lagged by a bit of bit within the value ultimately of the primary half, and now now we have fulfilled it. For NCI, now we have a really specialised workforce in bancassurance channel with over 10,000 folks. But when we don’t promote the bancassurance channel, then there might be meanness on this wholesale workforce. So if we promote the bancassurance channel, it is going to on the one hand contribute to the general NBV of the corporate after which contribute to the revenue of our gross sales workforce.

Final yr, the bancassurance channel has a really low margin due to a comparatively small quantity. And now since our bancassurance channel has a big quantity, then now we have a constructive margin. And naturally, and on the identical time, the authority is requiring us to maintain the roles secure. So we at the moment are adhering to the necessities of the authority. And on the identical time, our NBV has turned — our margin has turned constructive within the bancassurance channel. We have now an excellent expectation in the entire improvement prospects of the insurance coverage channel of the corporate.

The marginal value is now lowering due to the dimensions impact of the bancassurance channel. And there are — one other benefit is that we will have a second communication with the shoppers that we have collected within the gross sales of the only premiums and promote common premiums to those prospects. So we will see that the FYP total is superb within the bancassurance channel in comparison with different channels. With the event and likewise the amount progress of the corporate, it is going to have a scale impact. We could have a greater model and a well-received buyer base. And this might be superb for the entire firm’s gross sales and the entire firm’s long-term improvement. So once we see this, once we see bancassurance channel, we can’t merely examine its NBV margin with the person channel. It is simply not comparable.

And in addition for the query that you just talked about, the web insurance coverage gross sales, we will see that many insurance coverage corporations on-line, they’re promoting short-term insurance coverage corporations, that if they do not have sufficient scale and quantity, then they won’t have good improvement. However in fact, the insurance coverage isn’t actually comparable with the web gross sales of insurance coverage. However we nonetheless consider that the bancassurance channels promotion is an effective determination made, and we are going to take into account totally about learn how to improve the margin of the bancassurance channel. That is my perspective on the bancassurance channel.

In regards to the on-line insurance coverage — in regards to the on-line insurance coverage gross sales, I wish to say that the COVID-19 has pushed ahead our on-line insurance coverage gross sales. In fact, there’s expertise empowerment in our firm’s total technique. However in fact, we ought to be sensible. On this perspective, we nonetheless want quite a lot of progress and quite a lot of efforts made to rank on the prime of the business. In order now, we don’t say that we wish to develop after which even put out for the entire business. We nonetheless lag behind. So we are going to do a lot efforts.

Now now we have a cloud program occurring. Its major goal is to push ahead the expertise empowerment and to construct our platform and our customer support in addition to our coverage underwritten. And this platform has following capabilities. The primary one is to optimize the shoppers’ expertise and to seek out what is the class of the shoppers in order that they are going to have a greater expertise of shopping for insurance coverage. And the second is to supply a platform for our gross sales power to contact their prospects and to extend the aptitude in on-line gross sales. And the third one is to extend our platform constructing in order that we will present a one-stop resolution for our prospects underwritten and likewise coverage upkeep.

We will see that this entire program is now at a center degree. And ultimately of this yr, we could have the totally different capabilities of the entire program on-line. And in addition, we could have some wealth administration product to promote on this platform in order that to meet the necessities of various prospects. Subsequently, NCI attaches nice essential to expertise empowerment. Particularly, I’ve talked about within the first quarter’s outcomes announcement, that in February, we can’t have face-to-face communication with our prospects. However by way of our on-line insurance coverage gross sales, now we have a CNY 89 million gross sales by way of our on-line insurance coverage. And in addition, we at the moment are selling on-line service to our prospects.

Ultimately of July this yr, now we have issued the (inaudible) riders, and we bought it on-line and offline in order that the shoppers will really feel it extra custom-made and extra handy. In fact, offline gross sales can be obtainable. So I consider that sooner or later on-line gross sales and web and expertise empowerment of the entire firm could have a vivid prospect as the web apps that you just simply talked about that they’ll promote insurance coverage. In fact, they’re very rising instruments, new instruments. They’re opponents for us. However we’re totally different from them. The most important distinction is that we’re underneath strict management of the CBIRC. We’re a really mature monetary establishment. However this on-line gross sales platforms do not have the permission of the CBIRC. However in fact, we’ll have some progress on this facet. That is why we predict that it’ll affect the insurance coverage gross sales offline and of the standard corporations sooner or later. And we consider that within the management of the CBIRC and with the corporate’s expertise empowerment technique, we can present higher expertise for our prospects and fulfill our annual goal and supply increased high quality service for our prospects. On the identical time, we are going to study from these on-line insurance coverage corporations to advertise our effectivity and use high-tech instruments, equivalent to massive knowledge and AI to realize expertise in on-line insurance coverage gross sales and strengthen the operation of on-line insurance coverage. And I consider we could have extra measures taken on this facet. And the brand new product that the corporate difficulty might be each on-line and offline.

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Xingfeng Gong, New China Life Insurance coverage Firm Ltd. – VP, Chief Actuary, Board Secretary & Joint Firm Secretary [18]

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Attributable to time restrict, lets welcome the final investor.

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Unidentified Analyst, [19]

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Good morning, administration I am (inaudible) from (inaudible) Securities. I’ve 2 questions. The primary is EV associated. In H1, the operation expertise variance made constructive contributions to the EV progress. What’s the contribution of the expense? And the second is in regards to the funding aspect. The corporate may underneath stress within the funding aspect, particularly when the rate of interest goes down, and a few nonstandard property come to maturity, what’s your fairness funding technique? What’s your technique on the tradable securities and long-term fairness funding? Additionally the macro financial system isn’t so good. What is the threat publicity of nonstandard property and the bonds property?

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Xingfeng Gong, New China Life Insurance coverage Firm Ltd. – VP, Chief Actuary, Board Secretary & Joint Firm Secretary [20]

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I might wish to reply the primary query in regards to the operation expertise. The constructive contribution primarily comes from the 13-month persistency ratio. That’s the enchancment of the enterprise high quality.

That is all.

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Quan Li, New China Life Insurance coverage Firm Ltd. – CEO, President & Govt Director [21]

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The second query is in regards to the asset allocation. I might wish to reply this query. First, I might like to speak in regards to the asset high quality. Our property, overtly talking, are wholesome and protected. Among the many present asset allocation, over half of them are credit score property. Just like the treasury bonds, all bonds issued by native authorities or government-controlled banks, they occupy a majority of our mounted revenue property. For nonstandard property, we made some credit score enhancement measures just like the assure of collateral. By far, we will say that they haven’t any important threat default. However such as you mentioned, there nonetheless exists some dangers. Our funding asset managers and employees are very cautious and made nice efforts underneath the lowering rate of interest learn how to allocate our property? I believe, usually talking, we should always keep on with the underside line of compliance and threat management to enhance our professionalism.

First, we should always do some issues sure like to extend fairness and debt property in sure durations. For instance, to match the only cost merchandise we bought in bancassurance channel, we chosen proper property and tremendous subscriber to the proper asset class in order to attain yields. Nonstandard property is CNY 15.1 billion. Debt is round a 37%, and the fairness is 8%. Additionally now we have different funds. The general allocation and the yields is nice and might meet our expectation necessities. The CBIRC introduced some asset administration arms with excessive solvency functionality. And these establishments can improve fairness funding. New China Life asset is one among them. As an institutional investor, now we have superb analysis capability, and now we have long-term capital. We are inclined to spend money on the nice listed corporations and likewise non-public corporations to generate long-term yields. For instance, the Finish Finance, NCI can be one among its buyers. That is simply an instance to indicate our analysis and our willpower to concentrate on long-term funding. Since its founding, NCI has remained secure and cautious and search absolute return in funding. The asset allocation match nicely with the legal responsibility aspect. Additionally we meet the necessities of the actuary assumption.

That is all. Thanks.

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Xingfeng Gong, New China Life Insurance coverage Firm Ltd. – VP, Chief Actuary, Board Secretary & Joint Firm Secretary [22]

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Earlier than this announcement, now we have despatched letters. And a few buyers despatched us their questions in regards to the operation and the enterprise of NCI. Right here, I might wish to say thanks to your consideration and assist. We have now chosen 2 most involved questions. The primary is the foremost motive for the primary half yr progress.

Certainly, the primary half yr of 2020 noticed large hit of the pandemic. The corporate has made progress and outcomes towards such headwinds. The main causes as follows. As Mr. Quan Li talked about, I want to make some dietary supplements, the primary is due to the competitiveness and the sturdy enterprise resilience to ensure a robust progress momentum. After a collection of black swan occasions, the corporate responded shortly to the market and stayed true to our goal buyer and workforce constructing. To realize our targets in premium progress, monetary funding, customer support and all different features.

The second motive is the drive quantity and value progress with property and legal responsibility engine. On one hand, we optimize asset allocation to satisfy the shoppers’ wants for wealth administration and likewise to assist the gross sales of legal responsibility — promoting merchandise in legal responsibility aspect to assist push up FYP progress and likewise assist steadiness the product construction. However, the premium progress within the legal responsibility aspect generated cash stream for the asset aspect to assist NCI gross market alternative throughout the fluctuation and obtain higher funding yield. The second query is whether or not the corporate will take into account stock dividend and switch of reserve to frequent shares. I might wish to make it clear that now we have no plan to regulate our annual dividend coverage.

Thanks to your participation and all of your questions. In case you have additional questions, please contact our IR workforce. That is the conclusion of NCI’s 2020 interim outcomes announcement. Thanks once more.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]