CPIC Announces 2020 Interim Results

HONG KONG, Aug. 25, 2020 /PRNewswire/ -- China Pacific Insurance (Group) Co., Ltd. (the "CPIC" or the "Group"; Stock code: 2601.HK, 601601.SH, CPIC.LSE) is pleased to announce the 2020 interim results of the Group.

This year, in the face of growing uncertainties in domestic and overseas economic environments, increasing risks and challenges, and normalisation of the pandemic prevention and control effort, we took matters into our own stride, maintained consistency in strategies, and continued to work hard and make progress.

We achieved a milestone in the history of our development. In the first half of 2020, we issued and listed global depositary receipts (GDRs) on the LSE, making us the first insurer simultaneously listed in Shanghai, Hong Kong and London. Our history over the past 30 years is compelling evidence of the importance of corporate governance as the bedrock of the development of a business enterprise. It is because of the effectiveness of our governance mechanisms that CPIC has been able to persist in high quality development, forestall systemic risks, and contribute to national initiatives, China's real economy as well as the welfare of the Chinese people. And we will not stop there. The recent GDR issuance is another important step to enhance our corporate governance. It raised capital and, more importantly, it pooled talent. In particular, with the participation of high quality investors such as Swiss Re, we further optimised our ownership structure, which laid a sound foundation for continuous enhancement of corporate governance. Recently, with the election of new directors, the new board of directors has become more diversified, international and professional, which, in turn, will add impetus to the implementation of Transformation 2.0 and long-term development of the Company.

We delivered steady growth of business results. The board closely tracked the status of KPIs and led a broad-based effort to promote business development. In the first half of the year, we achieved further growth of comprehensive strength, while maintaining an overall healthy momentum in the core business segments.

• The property and casualty insurance business reported rapid top-line growth, with continued enhancement of underwriting profitability.
• Our life insurance operation met challenges head-on, stepped up on-line management of the agency force, and continued to push for its restructuring and upgrading focusing on the 3 core segments. During the reporting period, we achieved steady growth of the life insurance residual margin, with improvement in new business value (NBV) margin of the individual customer business.
• As for asset management, we persisted in the optimisation of Strategic Asset Allocation (SAA) based on profiles of liabilities, while enhancing infrastructural management, improving mechanisms of outsourcing management and performance evaluation, and pushing forward the building of mid-end systems, with steady investment performance in the first half of 2020.

We pressed ahead with transformation.

Breakthroughs in innovations of systems and mechanisms. We vigorously promoted the establishment of a market-based, long-term incentive system, with recent on-the-ground progress in the core business segments of our life and property and casualty operations. The new structure combines a performance-based pay system, which focuses on value contribution, and a dynamic mechanism to "enlarge the pie" of compensation package. At the same time, given the long-term nature of the insurance business, there are also mechanisms of "lock-ups", "deferred payment" and "claw-backs". The new scheme covers the key positions of the headquarters of the life and property and casualty subsidiaries, and is more skewed towards the front-line of their branch offices, so as to strike a balance between providing incentives for growth and quality. We believe that the implementation of the new mechanisms will stimulate organisational vitality and improve talent retention, paving the way for sustainable development.

Further progress of digital empowerment. The data centre in Luojing of Shanghai was proceeding according to plan, with the completion of "CPIC Cloud" and "3 Data Centres in 2 Locations". We continued to optimise the distributional framework of the core business systems, fostering seconds-level response capabilities. We also started comprehensive strategic co-operation with leading technology firms and renowned academies, put in place a mode of co-operation for the technology ecosystem, with steady progress in the capacity-building of data processing and AI mid-end output. We formulated a draft plan for the establishment of CPIC Fintech, in a bid to enhance our technology capabilities in an all-around way through marketisation of technology.

Reaping more benefits from increased intra-Group synergy. We launched a new management system for cross-sell business and intra-Group collaboration, integrated customer data, improved tools support and continued to promote the integrated customer-oriented operational model with our own characteristics. In the first half of 2020, business from intra-Group collaboration grew rapidly, underpinned by unified customer resources at Group level. Of this, cross-sell premiums, such as health and automobile insurance cross-sold by life insurance agents amounted to RMB9.95 billion, a growth of 20.9%; the number of customers with 2 insurance policies or above reached 27.29 million, up 6.3%; affiliates under the Group jointly developed more than 400 strategic accounts, which covered 84% of governments at provincial or municipal level.

Deepening of integrated risk management. We improved the standards, performance evaluation and personnel management systems of risk management, while launching pilot programmes of integrated risk management at grass-root levels. We pushed forward the integration of risk management and internal auditing which went downstream to sub-key branches, so as to enhance the risk management effectiveness at grass-root levels. We initiated the re-engineering of key processes at Group headquarters in a bid to streamline procedures, improve efficiency and strengthen service capabilities. We promoted the sharing of financial resources, deepened centralised management of fund payments and receipts, unified fund management so as to maximise benefits from centralisation.

We promoted the branding of "CPIC Service" in an all-around way. Since the outbreak of the pandemic, we stood side by side with our compatriots and fully participated in the combat against the pandemic. As an insurance company, we provided insurance cover to mitigate disruption to the economy and people's welfare, while facilitating resumption of businesses and work. We provided comprehensive solutions in the form of funding and risk protection, which targeted the key supply chain and most vulnerable communities and enterprises, supporting firms in key sectors and SMEs in their effort to resume normal business. CPIC employees have been seen at the forefront of the fight against the pandemic, around the pavilions of the China International Import Expo, and at the scene of disaster relief in flood-stricken areas of Southern China, reinforcing a brand image of "Responsible, Smart and Caring" of "CPIC Service".

We continued to deepen targeted poverty reduction mechanisms. As of the end of the first half of 2020, our poverty alleviation programmes covered 6.414 million registered impoverished people nationwide, and provided a total of RMB2.73 trillion in sum assured to poverty-stricken areas. The "Fang Pin Bao" programme was up and running in over 500 districts and counties of 25 provinces, providing cover against poverty with sum assured of RMB5.96 trillion, benefiting 90 million vulnerable people. We paired up with 2 rural townships and 3 rural villages and succeeded in lifting them out of poverty 9 months earlier than planned. The Rainbow On-line Charity Platform, stepped up product promotion via live streaming, and delivered nearly 60% increase in turnover dedicated to poverty alleviation. The mode of "shopping and donating to those in need" helps to pool resources and get more people on board in the poverty relief effort.

Thirty years is the prime time of one's life. As a business enterprise, we will soon celebrate our 30th anniversary, and that means more foresight and even better plan to prepare us for long-term growth opportunities. Recently, we completed a new 3-Year Development Programme of the Group and the Development Programme of Health-related Business. The former outlines the vision and objectives of the Group between 2020 and 2022, and sets out the 3 development paths, namely, the improvement of product and service supply, the focus on long-term capacity-building and long-term incentive systems and the establishment of an integrated risk control system. The latter revisits and revamps the strategic plan for deployment along the health value chain, with a vision of becoming a leading domestic provider of comprehensive health-related services via capacity-building in products, services, operation and risk management. In the retirement business, we are half way through the implementation of original plans. The "CPIC Home" retirement communities are up and running in various locations across China. Given China's economic development and demographic shift, the health and retirement sector is becoming increasingly important. The COVID-19 pandemic further raised people's awareness of public health. Going forward, we will seize opportunities and vigorously deploy along the health and retirement value chain, in a bid to promote the model of "insurance products + health management" and "insurance products + elderly care".

In the second half of the year, we will persist in high quality development, while striking a balance between stability of business performance and the acceleration of transformation.

On the liability side, we will accelerate the shift of growth drivers of property and casualty insurance, pro-actively adapt to the comprehensive reform of automobile insurance, and translate the achievements of previous transformation into our competitive edge. We will also step up the restructuring of the life insurance agency force, upgrade the customer-oriented operational model, and foster new growth engines via service and digital empowerment.

On the asset management side, in a complex economic environment, it is essential to adhere to the principle of long-term, prudent and value investing, further enhance investment research capabilities, step up post-investment management, strengthen co-ordination of assets and liabilities and continue to improve capabilities in risk prevention and mitigation.

It is equally important to foster long-term development capabilities in key areas. One is the deepening of long-term incentive systems so as to inject vitality into the organisation; another priority is marketisation of technological innovation. We will emulate leading insurance companies and renowned Internet firms, and accelerate market-based reform of systems and institutions so that technology can be a more powerful enabler of business development; there is also the building of a platform for health management services by pooling premium resources, both in-house and third-party, and promoting the sharing of core capabilities.

Looking ahead, under the leadership of the board of directors, we will stiffen the sinews, meet challenges head-on, and work relentlessly toward the vision of "being the best in customer experience, business quality and risk control capabilities, with industry leadership in healthy and steady development".

-End-

Appendix 1: Key performance indicators of the core businesses

Life business NBV growth under pressure, with steady growth of residual margin.

• CPIC Life realised RMB11.228 billion in NBV, down by 24.8%, with an NBV margin of 37.0%, down by 2.0pt. Given the focus on business quality, the NBV margin of the individual customer business stood at 56.5%, up 6.8pt from the same period of 2019.
• The residual margin of life insurance amounted to RMB347.056 billion, a growth of 5.3% from the end of 2019.
• CPIC Life realised a 5.9% growth of renewal business, driving a GWP growth of 0.1%, reaching RMB138.586 billion.

Improved combined ratio of property and casualty business ^{[note 1]}, with rapid top-line growth.

• The control of expenses was intensified in property and casualty insurance business, and recorded a combined ratio of 98.4%, down by 0.2pt. Of this, loss ratio stood at 59.9%, up 0.6pt, and expense ratio fell to 38.5%, down by 0.8pt.
• GWPs amounted to RMB77.748 billion, an increase of 12.4%. Of this, non-auto business grew by 29.1% and accounted for 38.2% of total property and casualty insurance GWPs, up 4.9pt.
• Automobile insurance enhanced renewal business management and pushed for a shift of growth drivers. Emerging business lines including agricultural and liability insurance experienced rapid development. Of this, agricultural business realised RMB6.274 billion in direct business premiums ^{[note 2]}, with a fast increase in market share.

Persisted in asset allocation stretching across economic cycles and based on profiles of liabilities, with largely stable investment results.

• The share of fixed income investments stood at 79.5%, down by 0.9pt from the end of 2019; that of equity investments 15.5%, down by 0.2pt, and of this, core equity investments ^{[note 3]} accounted for 8.3% of total investment assets, the same as that at the end of 2019.
• With continued effort to extend asset duration, enhance investment research capabilities and the Tactical Asset Allocation (TAA) process, Group annualised growth rate of investments' net asset value reached 5.3%, down by 0.6pt from the same period of 2019. Annualised total investment yield was 4.8%, the same as that for the first half of 2019, with annualised net investment yield of 4.4%, down by 0.2pt.
• Group assets under management (AuM) amounted to RMB2,306.305 billion, an increase of 12.9% from the end of 2019. Of this, third-party AuM amounted to RMB753.439 billion, an increase of 20.8%.