China Life Insurance Co. Ltd. (LFC) announced record-breaking figures during its 2023 Annual Results Briefing, showcasing significant growth in key financial metrics. The company reported an unprecedented increase in embedded value, gross written premiums, and total assets, which exceeded CNY 1.26 trillion, CNY 640 billion, and CNY 5.8 trillion respectively. Notably, the insurer experienced double-digit growth in new policy premiums, first year premiums, and first year regular premiums, indicating strong growth potential and resilience.
Key Takeaways
- China Life achieved record highs in embedded value, gross written premiums, and total assets.
- The company reported double-digit growth in new policy premiums, first year premiums, and first year regular premiums.
- First year regular premiums reached RMB 91.8 billion, a 12.6% increase year-on-year.
- The bancassurance channel saw a 24.2% year-on-year increase in total premiums.
- China Life emphasized customer-centricity and the development of an integrated financial ecosystem.
- The company proposed a cash dividend of RMB 0.43 per share.
Company Outlook
- China Life is confident in achieving high-quality growth in 2024.
- The company has a stable start in gross written premiums for the first two months of the year.
- They have established a PV fund for long-term financial investment in quality listed companies.
Bearish Highlights
- The company is navigating a continuous reduction in interest rates.
- Regulatory changes are impacting the sales force and require adjustments.
Bullish Highlights
- China Life's focus on reform, innovation, and risk prevention is expected to contribute to strong growth in 2024.
- The establishment of a PV fund is aimed at optimizing long-term financial investment.
- The company is emphasizing asset liability management to maintain high-quality development in a low-interest-rate environment.
Misses
- There were no specific financial misses mentioned in the earnings call summary.
Q&A Highlights
- Management discussed capitalization management and actuarial calculation assumptions.
- The importance of high-quality development and stable dividend payouts was emphasized.
- Measures to manage asset liability in a low-interest-rate environment were addressed.
In the face of a challenging low-interest-rate environment, China Life has strengthened its commitment to high-quality development by prioritizing asset liability management across departments. The company is diversifying its product offerings to meet customer demands and manage business growth and risk. Forward-looking views and pricing strategies based on liquidity and interest rates are being employed to support this objective.
The company's investment in digital transformation, marketing system reform, and customer experience improvements is expected to drive growth in the coming year. China Life has outlined three priorities for 2024: value creation, reform and innovation, and risk prevention and mitigation. The establishment of a PV fund is a strategic move to optimize long-term financial investment and leverage the advantages of insurance capital.
To diversify its products and meet changing customer demands, China Life plans to offer long-term protection and retirement products with diversified channels and durations in 2024. The company is also eyeing the health insurance market and enhancing customer experience. Reforms to improve the quality of its sales force are underway, including an innovation project and a pilot program in six cities, with plans to expand to 13 cities and recruit more qualified candidates.
Investors and stakeholders were encouraged by China Life's performance and strategic direction, and the company's Investor Relations team remains available for further inquiries and information.
InvestingPro Insights
China Life Insurance Co. Ltd. (LFC) has shown robust financial performance as indicated in its 2023 Annual Results Briefing. To provide further context on the company's financial health and market position, here are some insights based on real-time data from InvestingPro and InvestingPro Tips:
InvestingPro Data:
- The company's Market Cap stands at a substantial $91.13 billion, reflecting its significant presence in the insurance industry.
- With a Price/Earnings (P/E) Ratio of 11.61, LFC trades at a valuation that suggests investor confidence in its earnings capacity.
- The Revenue for the last twelve months as of Q4 2023 was reported at $103.53 billion, despite a decline of 4.05% from the previous period.
InvestingPro Tips:
- LFC is currently trading at a high earnings multiple, which may indicate that the market has high expectations for its future performance.
- Analysts predict that the company will be profitable this year, aligning with the company's own confidence in achieving high-quality growth in 2024.
These insights, along with the company's commitment to innovation and risk prevention, suggest that LFC is positioning itself to navigate the current financial landscape effectively. For investors looking for a deeper dive into China Life Insurance's performance and market outlook, InvestingPro offers additional tips. There are 7 more InvestingPro Tips available, providing a comprehensive analysis of the company's financials and market position. To access these valuable insights, visit https://www.investing.com/pro/CILJF and don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - China Life Insurance OTC (CILJF) Q4 2023:
Unidentified Company Representative: Good morning, ladies and gentlemen. Welcome to China Life's 2023 Annual Results Briefing. My name is [Indiscernible] Department, General Manager of the company. The Beijing and Hong Kong venues for this briefing are connected by a live video conference. We invite those who are not able to attend the briefing in person to use the dial-in facility to join or access through the live webcast. Now, let me introduce the management attending today's briefing at Beijing and Hong Kong venues, respectively, they are, Mr. [Indiscernible], Chairman; Mr. [Indiscernible], Vice President; Mr. [Indiscernible], Vice President; Mr. [Indiscernible] Vice President and Board Secretary; Mr. [Indiscernible], Vice President; Ms. [Indiscernible], Chief Actuary, are with us in Beijing. Mr. [Indiscernible], President; Ms. [Indiscernible], person in charge of Finance appointed are with us in Hong Kong via live video conference. Today's briefing will start with the presentation by our management team on the company's 2023 annual results, followed by a Q&A session during which our management will take questions from both Beijing and the Hong Kong venues. Ms. Li, [Indiscernible] representative of the company will co-host the Q&A session in Hong Kong. Your questions are welcome. Let me now hand over to our Chairman, Mr. [Indiscernible], to introduce the company's 2023 annual results.
Unidentified Company Representative: Good morning, ladies and gentlemen. Welcome to China Life 2023 annual results. Today's briefing has five parts. First, I will give a brief overview of the company's overall situation in 2023, followed by presentations by other members of the management team on the performance of the business and operations, investment, finance, and embedded value. It is important to note that the company has adopted the IFRS financial instruments and IFRS 17 insurance contracts under H share reporting and the original standards under A share reporting. Please pay attention to the referred notes in the forward-looking statements. The year 2023 marks the beginning of the comprehensive implementation of the guiding principles of the 20th CPC National Congress, Chinese economy continued to rebound and improve, and the life insurance industry showed a clear recovery trend. China Life focused on serving the overall national development, actively leveraged insurance as an economic shock absorber and social stabilizer, keeping to the path of financial development with Chinese characteristics, and taking solid steps towards becoming a world-class enterprise. First, we dedicated efforts to addressing the top priorities of the country. We adhered to the people-centered approach and significantly improved the coverage and accessibility of inclusive insurance services, with nearly 350 million people covered by major disease insurance, more than 30 million people covered by long-term care insurance, and a record number of customized insurance projects undertaken for cities. We helped improve the multilevel pension insurance system, commercial pension insurance flourished. We vigorously promoted the pilot of personal pension business and the pension service system and ecosystem building continuously improved. We actively played the role of the main force in serving the real economy and the balance in maintaining financial stability. With our stock investment in the real economy exceeding CNY4 trillion. This dark [ph] green investment over CNY460 billion. We effectively supported rural revitalization. The rural revitalization insurance was the only insurance industry project selected as one of the fourth global best cases of poverty reduction. We continuously deepen the construction of ESG system and won the 2023 Forbes China ESG Innovative Enterprise Award. Second, we promoted high-quality development with focus on both quantity and quality. We sit on integrating the effective improvement of quality and reasonable growth of quantity with the company's gross written premiums hitting a record high. The value of new business for -- achieving double-digit growth and the solidified leading position in the industry in the value of new business, embedded value, and the gross written premiums. We continue to study the trend of interest rates and strengthen asset liability management and continue to optimize the structure of our insurance business, while maintaining scale growth in in-force business. We insisted on making good allocation of broad asset classes from a long-term perspective that transcends the cycle and our sustainable development capability continued to improve. But our key reforms witnessed breakthroughs, the company continued to promote a series of reforms, including the Eight Reform Programs, made breakthroughs in the reform of the marketing system and accelerated the upgrading of the sales force in terms of specialization, professionalization, and integration. The company made health care and senior care ecosystem building a long-term development strategy and insurance plus service achieved significant results. We deepen the integration of digital and business improved the convenience and competitiveness of insurance services, improved channel life service, and ranked the top in the industry in terms of regulatory evaluation of consumer rights and interest protection. Fourth, we controlled and mitigated risks effectively. We insisted on taking risk control and mitigation as the eternal theme of our work and continue to improve the construction of the compliance management system in the second phase of CROS [ph] 2 summer assessment, our score was among the highest in life insurance companies and we kept our A rating in integrated risk rating. We successfully passed the certification of domestic and international compliance management system and our risk control and mitigation capability was further improved. Looking ahead, China remains one of the most dynamic and promising insurance markets in the world and China's life insurance industry is still in a period of important strategic opportunities. Now, at the same time, we also recognize that the current market environment has undergone profound changes and the industry has entered a critical period of high-quality development. On the basis of the strong foundation accumulated over the years, China Life will insist on high-quality development has the hard truth in the new era and continuously enhance its new core competitiveness. First, we will make high-quality development, our top priority. On the one hand, we will accelerate development, continuously promote the value of new business, embedded value, premium scale comprehensive strength, and brand influence to a new level and firmly consolidate our leading position in the domestic market. On the other hand, we will focus on excellence and strength benchmark against the world's best and continuously improve our investment management capability, product innovation capability, cost control capability, and customer reach capability so as to accelerate the construction of a world-class enterprise. Second, we will top reform and innovation as the primary driving force. We will conduct in-depth research on economic and social transition with reference to China Life's own advantages and characteristics. We will take bigger steps in reform and innovation, seize new opportunities in silver-edge economy and new organization, strengthen product and service innovation to expand the service clientele, accelerate the reform of the marketing system, strengthen the core competitiveness of the team, actively promote the health care and senior care ecosystem building, and digital transformation; build a new development mode with new quality productive forces; and accelerate the formulation of a quality-efficient and diversified insurance service supply. Third, we see the talent team as our vital resource. We will continue to optimize the H structure and professional structure of the team, attract and cultivate a number of specialized and market-oriented tenants to provide key support for the company's high-quality development. Fourth, we will take risk prevention and mitigation as the fundamental guarantee. We will strictly implement regulatory requirements, cultivate a compliance culture, enhances the ability of compliance to create value, strictly control key risks, and firmly got the baseline of risk prevention and mitigation. So, much for my brief introduction. Next, I'd like to ask Mr. Li [Indiscernible] to introduce the business and operation of the company.
Unidentified Company Representative: Thank you, Chairman. I will now specifically introduce our business and operations in 2023. In 2023, faced with the profound changes in the internal and external situations, the company coordinated the present and the long-term liabilities and assets and development and security and seeks the opportunity of restorative development to rapidly develop an upward trend. And based on the long-term, we took the action of consolidating the fundamentals to lay a good foundation for the company's long-term growth. Overall, the company's strength took a new big step forward with embedded value, gross written premiums, and total assets exceeding CNY1.26 trillion, CNY640 billion, and CNY5.8 trillion, respectively, which were all record highs and continue to lead the industry. Specifically, there were the following four features. First, faster growth. The growth rates of new policy premiums, first year premiums and first year regular premiums of 10 years above or exceeded double-digits, hitting a record high in the past three years. New business value continued to lead the industry, achieving faster growth on a high base, reaching RMB3.86 billion under new economic assumptions, with an adjusted growth rate of 11.9% using the same accounting method. It was RMB41.04 billion under old economic assumptions with an adjusted growth rate of 14% under the same accounting method. Second, more resilient. In the face of the complex and volatile external environment, the company assisted on asset liability linkage, cost reduction and efficiency improvement with the net profit attributable to shareholders of the company of CNY46.8 billion, a considerable overall scale showing a strong development resilience. Third, stronger growth potential. The company was aggressive interest for me, mode adjusting structure and improving quality. With the 14-month policy persistency rate up by 7.4 percentage points. The premiums of 10 years and above accounted for 44% of the first year premiums, which will bring considerable renewable premiums in the future. The ability of reform and innovation-driven development was significantly enhanced. With the contribution of premiums driven by health care and senior care ecosystem increasing continuously and the percentage of high-performing individual agents, increasing continuously with the capital productivity up by nearly 30%. For more stable operations, we coordinated development and security with more diversified products and optimized investment allocation. Under the CROS 2 regulations, the core solvency adequacy ratio and the comprehensive solvency adequacy ratio reached 258.2% and 28.5%, respectively, up 14.6 and 11.8 percentage points compared with the beginning of the year. Next, I'll give you some specifics by business segment. So, first, let's look at the individual agent business. In 2023, the individual agent business made progress while maintaining stability focused on value creation and push forward channel transformation in debt, achieving rapid growth in all new business indicators and significantly optimizing business structure. First year regular premiums amounted to RMB91.8 billion, an increase of 12.6% year-on-year. First year regular premiums with a payment duration of 10 years or longer amounted to RMB49.5 billion, an increase of 18.4% year-on-year and accounted for 53.9% of first year regular premiums, an increase of 2.6 percentage points year-on-year. In 2023, the individual agent segment consolidated and deepened the strategy of business development, driven by effective teams and steadily promoted the reform of individual agent business marketing system. The existing team accelerated its upgrading around six major initiatives, including structural adjustment, foundation, consolidation, urban reinforcement, and deep cultivation in countries. It also actively promoted the layout of new marketing models and piloted the promotion of the seed plan. The size of the sales force was the first in the industry to stabilize and its quality continued to improve. As of the end of 2023, individual agent sales force stood at 634,000, the largest in the industry. Among them, the general sales team numbered 410,000, and the upsells team included 224,000 people. The quality of the team continued to improve with mostly per captive first year regular premiums rising by 28.6% year-on-year in 2023. Among new recruits, the number of high-quality new agents went up by 13.6% year-on-year. The percentage of high-performance agents rose by 2.1 percentage points compared with 2022. The diversified business sector focused on professional channel management, emphasizing both scale and value and enhancing high-quality development. In 2023, the sector made significant progress in refining channel operations, transforming and upgrading and improving its value contribution. The group insurance channel achieved integration of scale and efficiency, leading to steady business growth. Short-term insurance premiums showed a year-on-year increase of 3.8%, while per captive productivity maintained a steady growth. The bancassurance channel strengthened its collaboration with banks and accelerated business expansion resulting in a rapid growth of premium scale and value. In 2023, the channel achieved a total premium of RMB78.75 billion, making -- marking a 24.2% year increase. Among these, first year regular premiums amounted to RMB20.74 billion, showing a 39.4% year-on-year increase. First year regular premiums for policies with the duration of five years and above accounted for 47.6% of the total, indicating a 4.3% points year-on-year increase. This optimized business structure effectively drove the rapid growth of new business value. By the end of 2023, the bancassurance channel had a team of 23,000 account managers with a quarterly average annual actual manpower increase of 8.5% year-on-year. Additionally, per capita productivity for regular premium business saw a significant year-on-year improvement. The company remains committed to a customer-centric approach and actively develops an integrated financial ecosystem of life insurance plus to drive high-quality growth. In 2023, the company achieved RMB23.6 billion in premiums from co-selling, property and casualty insurance and RMB8.66 billion from co-selling, pension insurance, while [Indiscernible] Bank acted as the company's agent for bancassurance first year regular premiums, which reached RMB1.8 billion, representing a 16.6% year-on-year increase. The company proactively explored synergies between insurance and investment businesses, deepening collaborations with the asset management company and China Life Investment Company. This partnership focused on investment opportunity promotion and joint client development, fostering innovative approaches for insurance investment interaction. Simultaneously, the company driven by the goal of meeting diverse customer needs, actively engaged in various customer management activities with a property and casualty insurance company and [Indiscernible] Bank. This collaborative effort aimed to deliver comprehensive, high-quality financial and insurance service solutions to customers. In 2023, the company will implement a people-centric development concept focusing on creating value and diversifying services. We will centralize, digitize and diversify our operations and services, aiming to accelerate the integration of a national operation and service system. Our goal is to enhance consumer protection and establish core competitiveness based on convenience, quality, and caring. First, we have strengthened our professional capabilities to improve the quality of our operations. We are continuously enhancing our operational standards and actively participating in the formulation of national and industry standards. Standardization and specialization are the solid foundation of our operations and services. The industry's first centralized and shared operational model has been fully implemented, resulting in an efficiency increase of over 27% in underwriting, policy administration, and claims settlement. Second, our claims settlement service prioritizes consumer protection. We have built a convenient and caring claims settlement service, significantly accelerating the average time for claims settlement to 0.38 days. We have expanded the coverage of convenient claims payment with a 31.9% year-on-year increase in critical illness claims settled within one day. Third, we have enhanced client experience through diversified services, inclusive value-added services continue to expand with a 12.1% year-over-year increase in the number of people covered. Upgrading our VIP service system has led to an 11.9% increase in VIP customers and a 26% increase in VIP services year-on-year. Fourth, we are committed to individual leading -- industry-leading consumer protection. We have established a comprehensive consumer protection paradigm that involves all employees ensures full coverage and manages the entire service chain. Our customer protection efforts have been recognized with top rankings in regulatory assessments within the industry. In the upcoming period, the company will prioritize high-quality development, maintaining the right balance between tradition and innovation. We will focus on strengthening party building, promoting reforms, and preventing risks; achieving stable growth, increasing business value, and emphasizing the sales force; optimizing services, facilitating integration, and cutting costs. In 2024, alongside our core responsibilities, we will focus on five major tasks; first, strengthening asset liability interaction to ensure steady growth in new business value and maintain long-term growth momentum. We will cater to the significant demand in the pension and the health insurance market, providing diversified insurance protection and actively diversifying our business duration and costs. We will refine our investment strategy, optimize asset allocation, and adopt flexible investment management to stabilize and enhance investment returns. Two, accelerating transformation to optimize and strengthen channels. We will emphasize the role of personal insurance as the primary channel for creating value, fast-tracking the reform of our personal insurance marketing system. This includes steadily increasing the scale and share of high-performance employees and enhancing their per capita value contribution. Furthermore, we will leverage the strategic support of diversified channels such as group insurance, bancassurance, and health insurance to achieve parallel progress in scale and value, exploring new channels like the Internet will also be a priority to generate new business growth. Three, optimizing customer service to gain differentiated competitiveness, service will be a crucial pillar supporting the company's core competitiveness. By focusing on customer centricity, we will comprehensively develop a big service system that covers front, middle, and back office operations. This will amplify the impact of insurance plus service and enhance the contribution of service to the company's value growth. Four, integrating resources to unlock synergy and potential, we will fully leverage the company's internal and external resources, integrating customer channel, service ecosystem and technological resources. This will transform our vast resources into the driving force behind the company's development. Five, strengthening cost control and improving operating efficiency. We will leverage technology, refine management, and maintain reasonable control over costs related to sales, operations and other areas by reducing costs and increasing efficiency, we'll enhance the company's productivity. Now, I will invite Ms. [Indiscernible] to talk about the company's investment performance.
Unidentified Company Representative: Thank you, Mr. Li. Now, let me present to you the investment performance of China Life in 2023. In 2023, the domestic economy showed signs of recovery, but the internal driving force was not yet strong. Interest rates remain low and quality assets were still limited. The stock market experienced downward volatility with notable structural divergence. To navigate the challenges of this complex market environment, the company proactively responded by maintaining strategic clarity, adhering to asset liability match and flexibly conducting investment operations. First, we maintained a solid position in bottom pricing. We allocated over CNY800 billion to ultra long-term interest rate funds and highly rated credit funds, increasing the share of fund allocation. Second, we strategically positioned our equity investments for the long-term. Seizing market opportunities, we achieved balanced allocation and optimized our portfolio structure, prioritizing a balance between long-term value and short-term returns. Third, we steadily allocated investments in alternative assets. By focusing on high-quality opportunities and advantageous sectors, we innovated our investment approach. Throughout the year, we added over CNY100 billion of new alternative investments, effectively enhancing our portfolio returns. Under ASBE, the company achieved a net investment yield of 3.77% and a gross investment yield of 2.68% and in 2023, consistently beating the industry average. Under IFRS, the net investment yield stood at 3.7%, while the gross investment yield reached 2.43%. In credit risk management, the company consistently follows a conservative investment philosophy and maintains a prudent credit risk appetite. As of December 2023, more than 98% of the company's credit bonds received an external AAA rating and over 99% of non-standard fixed income assets also received an external AAA rating. Now, I will invite Mr. [Indiscernible] to introduce the company's financial performance and embedded value.
Unidentified Company Representative: Thank you, Ms. [Indiscernible]. I will now present to you the financial performance and embedded value of China Life in 2023. In 2023, the company embraced the principle of asset liability management across all aspects of its operations by balancing long-term value and short-term returns, strengthening cost control, and enhancing underwriting management. The company aimed to stabilize its overall return level. As a result, it achieved a net profit attributable to shareholders of RMB461.8 [ph] billion under the new standard. Furthermore, in line with an investor-oriented approach, the company increased its distributed payout ratio in 2023. It proposed a cash dividend of RMB0.43 per share, including tax for all shareholders, pending approval at the Annual General Meeting in 2023. At the end of 2023, the company's total assets amounted to RMB5.8 trillion, an increase of 15.8% and total liabilities amounted to RMB5.32 trillion, an increase of 14.7%. Insurance contract liabilities were RMB4.86 billion, of which the contractual service margin was RMB769.14 billion. Shareholders' equity attributable to the company's shareholders was CNY477.1 billion at the end of 2023, an increase of 30.3% from the end of 2022. This slide shows the difference in shareholders' equity attributable to the company's shareholders under ASBE and IFRS. I will continue with the embedded value. In 2023, the company remained committed to its value-first development philosophy and maintain its industry leadership in one year new business value. Under the new economic assumptions, the company achieved CNY36.86 billion in first year new business value with a year-on-year growth rate of 11.9%. This includes a one-year new business value of RMB34.65 billion in the personal insurance segment, representing a 10.4% increase and a one year new business value of CNY2.21 billion in the diversified segment, reflecting a 42% year-on-year growth. Additionally, we disclosed the one-year new business value under the old economic assumptions, which experienced a year-on-year growth rate of 14%. The one-year new business value ratio for first year premium of the individual insurance segment was 29.9%, an improvement of 2.5 percentage points of the 2022 results. By December 31st, 2023, the company's embedded value reached RMB1,260.57 billion, marking a 5.6% increase compared to the previous year end. Adjusted net assets amounted to RMB675.76 billion, reflecting a 4% increase from the previous year end. The value of in-force business reached CNY584.81 billion, showing a 7.4% increase from the previous year end. This slide shows the embedded value movements and due to time constraints, I will not go through the details. This concludes the presentation. Thank you.
A - Unidentified Company Representative: Thank you very much, members of the management. Now, let's proceed to the Q&A session. [Operator Instructions] Let's first take a question from Beijing. Analyst on the left, please.
Unidentified Analyst: Thank you management for the opportunity. I'm from [Indiscernible] Securities. I have two questions. First, regards capitalization management and the second is the actuarial calculation assumptions. The authorities have been emphasizing the importance of capitalization management. The state console authorities have also set forth the inclusion of such indicators into the KPI for the management. So, what measures will you take to improve the capitalization of the company, which is grossly underestimated? And what are the short and mid and long-term capitalization management goals to better reflect your investment value? And second, regarding the life insurance actuarial assumptions. So, our assumptions have been lowered this year, including the return on investment. So, for the markdown of these two indicators, what are your considerations? 4.5% return rate in the future capital market under the current judgment, how can you better realize the level? And risk realization ratio is the same, you have adjusted to 8%. What is the underlying logic? The discount rate is lower than your listed peers by 1 percentage point. So, could you shed some light on that? Thank you.
Unidentified Company Representative: Regarding -- utilization, I will take the question. As for the second question, actuarial assumptions, I will ask on Ms. [Indiscernible]. You asked -- too frequently asked questions. When I attended the two sessions, some members of the media also paid high attention to this question. Capitalization management or strengthened capitalization management is the most basic requirement for listed companies to be responsible for shareholders. In this regard, China Life has paid high attention to capitalization management. Let me share with you three points. First, one business needs to consolidate the foundation for high-quality development. So, regardless of the circumstances, you need strong performance as guarantee for capitalization. Capitalization reflects the integrated value of the company and stock price is closely related to improved performance in the lower month. So, as a business, regardless of the situation, we need to bear in mind the high-quality development requirement for the new era. And importantly, over the years, we have dealt with lots of risk incidents. We need to keep to the law of insurance development in our operation. We need to adapt to or lead the transition of the industry. Regardless of the circumstances, we need to be customer-centered to deploy and change the business in terms of upgrading business model and product service system innovation and the reform of management system. We need to work around the customers and enhance the cost effectiveness and develop your cost leadership. Only by doing so can we lay out a solid foundation for steadily improving capitalization. So, first, you need the support of solid performance. Second, equally important, you need a very stable dividend payout arrangement. To give the investors long-term and stable expectations for return in the past 20 years since our listing, we have cumulatively paid RMB190 billion in dividends to investors. 6 times of our [Indiscernible] in the Asia's market. In the past 10 years, our dividend payment ratio is about 35% of net profits. But this year due to market fluctuations, after careful consideration and analysis, we have raised it to 69% of the net profit. To try to smooth out the impact on investors by short-term volatility, to stabilize investor expectations, we will continue to improve dividend payout on mechanism to build a stable expectations for investors. Third, we need to strengthen communications with investors. Especially in the market, we need to strengthen information exchange and communication with the investors. The big fluctuations in the stock prices of listed companies are largely due to miss communication. So, we pay high attention to information exchange and communication. For example, last year in 2023 alone on home -- at home and abroad, we held 247 on-site meetings with investors. We took thousands of questions from investors around major strategy, we had our Special Open House Day, which was warmly recognized by the media, the public and investors. And capitalization management is a long-term exercise and the authorities have set out related requirements. So, we will continue to boost the transparency of corporate operations, make timely disclosures to address the concerns of the investors. Over to Madame [Indiscernible] for the second question.
Unidentified Company Representative: Thank you very much, Mr. [Indiscernible]. Thank you for your interest in the company. Now, let me brief you on downgraded the actuarial assumptions in the calculation of embedded value, there are two points. First, investment return from 5% to 4.5%, and risk discount assumption was marked down from 10% to 8% by 200 basis points. And for the formulation of investment return assumption, the broad logic is based on two prerequisites and one work. At the end of 2023, we made adjustments to the overall investment return assumption. Of the two prerequisites, one is very important. The life insurance features long-term business. The average debt duration is more than 10 years and the coverage period is from five years to dozens of years or even 100 years. So, this is a long cycle and cross-cycle business. When formulating future economic assumptions, this is a very important premise. And the other premise is that we believe that China's economic development has a strong resilience, be it the strong advantages of domestic market or the completeness of production chains, improvement of dividends, and rising sales and technology innovation capabilities, we believe the long-term upward trend of the Chinese economy hasn't changed. So, this is another premise in this adjustment. And based on these two premises at the end of 2023, we worked incentively to forecast the future market interest rate trends and according to the liability of accounts, we make decisions on the allocation of broad asset classes as well as return rates. And finally, on settle on a 4.5% assumption. And second, risk discount rate. The formulation of this rate is to take into account three factors. First, sales risk discount rate is the risk-free interest rate plus risk premium. So, on the one hand, we need to look at the pivot of risk-free interest rate, which currently dropped to some extent. So, we also revised down this risk-free risk interest rate on pivot. And the second factor is development stage of the insurance industry and the overall situation. In the past, the risk discount rate contained over 7% of risk premium. After listing of China Life in our first financial report on the risk premium level was set out, and it has been adopted by the industry in the past 20 years and in Southeast Asian countries, this is the highest level. After 20 years of development, we see that mature insurance in cost of operation and management, especially risk management have accumulated lots of experiments, and we have been shifting towards high-quality development. So, overall, there is support for revising down the risk discount. And in an industry project, we made some calculations. We used on open market data and calculated the average risk premium of listed companies of about 5.5% to 6%. So, this is the second factor, the stage and the situation of industrial development and the average risk premium of the industry. Third, the individual case of the company. China Life in China's life insurance industry is the oldest company. We have a strong foundation. And in terms of solvency adequacy ratio as well as risk management and mitigation, we have been doing well. So, based on 5.5% to 6% average industrial risk premium, we have set the level for China Life at 5.5%. So, eventually, we can revise down the economic assumption. So, these two assumptions actually have strong inherent logic links because they contain the same risk-free pivot and this risk premiums are also related. Life insurance companies have leveraged operation. So, risk discount ratio is normally adjusted by a large margin than the investment return rate. Thank you.
Unidentified Company Representative: The next question will be from Hong Kong. The lady in the second row, Michelle, please.
Unidentified Analyst: Thank you. Thank you for the question. Michelle from CITIC. I have two questions. I look at the 10-year government treasury yields, the latest figure is 2.3%. So probably, we have entered a low interest rate age. China Life has been emphasizing the linkage between asset and liability. I think this is very forward-looking and a strategic decision. So, a specific question, we have lots of members of the management here also from investment department and actuarial and product departments. In terms of specific asset liability linkage, what measures have you taken to make sure that in the low interest rate environment, we can still have high-quality development? This is my first question. My second question is about personal insurance. So, we are now implementing eight tasks, but we also see changes in regulatory environment, especially with regard to agent qualifications. So, can I ask you how your reform will proceed? And what would be the impact on the sales force? Thank you.
Unidentified Company Representative: So, let me answer the first question. So, your first question is very broad, and it's a good question. Life insurance companies are different from other financial institutions is because they have a long-term business across multiple cycles. So, asset liability management is one of our key priorities, whether it's a high interest rate environment or low interest rate environment, we need to manage interest rate carefully. And since our IPO 20 years ago, we experienced several cycles of interest rate movement. And in the process, China Life also accumulated rich experience in handling interest rate movements. In response to the new interest rate environment, we have taken various measures to promote high-quality development. Let me just give you a brief overview. The first measure is to better manage asset liability management. So, asset liability management has become a key priority for the top management. Let me give you a few examples. First, product development and pricing, sales, customer service, investment management, operational management, fee management, capital management, risk management and compliance are all working towards better manage assets and liabilities. So, in the past, we didn't care that much about asset liability management when interest rate remains stable. But when interest rates are highly volatile, then this will become a top priority. So, that's why we are working with various departments to contribute to better asset liability management, especially in asset liability management and business development and sales. So, every insurance company is focused on this topic. And I said that through every link of our operations, we emphasize asset liability management. For example so our product design is focused on customers' interests and risk management. So, we want to have more diversified cost structures, durations, and products and to meet the demands of our customers and also to expand the measures to manage assets and liabilities. The reason for this is that customers have different risk appetites. Some customers don't like risk, some do, and some are in between. So, for our product design, we need to match their demand. And only through that effort, can we better balance business growth and risk management. So, diversification is very important. Second, we need to have a forward-looking view. So, based on liquidity and the interest rate, we will price our products differently. Some analysts are looking into how we price our long-term products and universal products. I believe you have noticed the differences. So, that's what we did to better manage assets and liabilities. So, that's about our products. Due to the time constraint, I'm not going to go through the details. And the second measure is investment and asset management. So, we need to work both on assets and liabilities, especially on top of the traditional model, we need to broaden our measures. And to quantify under new circumstances, how we can better manage assets and liabilities. So, this requires us to understand the features of liabilities and the movements of interest and in our investment management business based on the characteristics of liabilities, we need to assess whether our investment and reinvestment can achieve our goal. So, what's the feature of our asset management -- asset liability management? Our big -- the biggest feature is that we have strong cash flow and we have huge amount of assets. So, how can we take advantage of our long-term view and make the best investments? How can we make the best long-term investments and value investment? How can we navigate the cycles? So, that's on the investment side. And another bridge between products and customers is our sales force. So, maybe you have read in our presentation that we are very focused on nurturing our sales agents. And the key purpose is to follow the demand of customers and to better match supply and demand to diversify our business and to diversify the duration of our products as well as the cost. So, in terms of product, we need to build our channels to diversify our business. And this requires a good sales team. So, we need to hire qualified agents so that they can sell suitable products to suitable customers. So, this is one area we've been focusing on. And second, on the sales side, we need to improve our underwriting practices. So, we have a long track record of underwriting, and we need to further tap into our future and potential with our strong capital support if we can improve our underwriting performance, then we can achieve a virtuous cycle. So, that's how we deal with a low interest environment. We need to unleash our potential and to focus on our core business, to diversify our sources of profit. So, that's a brief overview of how we better manage assets and liabilities through product design and investment. And in 2024, we want to achieve a few breakthroughs, service, resource, and cost cutting and efficiency enhancement. And this will help us better manage our risks and to meet the customer demand. I will say a few more words about our resource advantage. So, we have a lot of advantages in our ecosystem and in our sales force and our product design, if we can achieve synergy, then we can help the company substantially improve its performance. That's how we consolidate our resources. And in terms of managing our fees, the regulators require insurance companies to refine our management and to use technology to reengineer our business processes and to control cost and improve the use of technology. So, in a low interest environment, we also have other measures to boost our efficiency. So, this is a brief overview of our measures. Thank you.
Unidentified Company Representative: Let me answer your second question about our sales force and the qualifications of our sales agents. The policy was announced in the second half of last year with the announcement of the new regulations, and it will go into effect -- it has gone into effect on March 1st. And we have participated in the drafting of the new regulations. So, the qualification of our sales agents will match the kind of products they can sell. And also, there are four categories of qualifications that require different exams for sales agents. So, we require high-quality sales agents so that they become more professional and more specialized in the products they sell. And we are now looking into the consultation paper and develop our own qualifications for hiring new agents. In the short-term, we will see some turnover of our sales force. But in the long-term, we think the impact is neutral. But it will help us achieve high-quality growth. And in the intermediary business, the new regulations can help prevent long-term operational risk and to improve the market order and to help companies enhance efficiency. So, we need to study the new regulations and to better design our products and control our cost. And in the bancassurance channel, we have completed the fee agreement signing as well as online launch of the products. With the implementation of the new rules, the immediate impact is the agent fees between us and the banks have been on the cut. And we also do our best to balance the interest between customers and shareholders and business margin of the new business will also be improved. The sales force classification is for the high-quality requirement for team management and the new rule for the products with the bancassurance represents the high-quality requirements for the business and products. In recent years, we have been adhering to the requirements and requests of high-quality development in individual business sales. We have promoted the professionalization, specialization, and integration of the sales team. And through the implementation of the new rules, we have also strengthened the implementation and management of the product. If the new rules are then extended to the individual agent business sector, we will be able to better promote the marketing system reform for individual agent business to strengthen service and improve the sales team management. From the data in 2023 financial reports, our marketing system reform has yielded some results. From Q1 of 2024, the effects of the reform are showing and we are sure that we will implement the regulatory rules and continue to promote company's high-quality development. Thank you.
Unidentified Company Representative: Question from Beijing.
Unidentified Analyst: Thank you. Thank you for the opportunities. I'm from [Indiscernible] Securities. I have two questions. First, we can see that this year, you have disclosed the gross written premiums for the first two months, up by 3% year-on-year, very stable and also due to the average of your peers. So, what is your overall outlook and the plan for gross written premiums? So Mr. [Indiscernible], would you like to answer this question? And second question is about our investment. Slide 16 shows that our investment balance in stocks about RMB430 billion. There is a slight volatility from the end of 2022. And you also announced the establishment of a PV with [Indiscernible], how is the PV fund doing? What it will be the directions of allocation in its stocks and which categories have brought assets class will they be entered into? What are the constraints and plans for investment in the stock market?
Unidentified Company Representative: The second question is for Madame [Indiscernible]. Thank you very much for your interest in China Life. In the first two months, we had a good start, measured 3%. When I left office, I took a look at the data of this year as of today. Building on February results, we have kept going strong and well, so we had a good head start. In retrospect, I think this is due to the following factors. In the long-term, we have committed ourselves to high-quality development and this goal hasn't changed. Last year, here answering investors' questions, I summarize 2022 as the difficult -- the most difficult here in my career. Now, in 2024, when I look back on 2023, 2023 wasn't easy, but we have put through. And in the first months of 2024, we had a good start. So, due to our commitment to high-quality development and also due to our coordinated approach to scale and efficiency, short-term and long-term and also our main business and innovation as well as development and security, we are paying more attention to the relations between these areas with greater emphasis on high-quality development. As of 2024, I'm full of confidence in 2024, and I'm very confident in terms of macroeconomic development. This year, China's economic rebound has been very fast. I feel very strongly, economic rebound is accelerating and in terms of investment, consumption and major import and export indicators, they beat expectations. Capital market is warming up and also, since last year, the government has introduced packages for macroeconomic regulation, whose effects are shown. So, this is the macroeconomic foundation. Second, at the regulatory level, first, the new rules regarding the reporting and practice. This is under strict implementation. Second, we continue to reduce interest rates. So, there is continuous coordination between assets and liabilities. Mr. [Indiscernible] talked about the balance of assets and liabilities. And also personal insurance companies are subject to classified regulations. I think these policy moves are very favorable to us big companies. I hope this trend can continue. And in terms of our own business in recent years, we have been stepping up digital transformation, continuously increasing investment in digital. And in marketing system reform, product and service innovation, and improvement of customer experience, we have done lots of work. From this year, we can see the results of the reform are showing. So, I think the momentum of growth for 2024 is even stronger. As for work arrangements for 2024, we published the arrangements on January 15th. So, let me walk you through the three priorities of the work this year. First, we will focus more on value creation. Analysts asked about the management of asset liability matching. This is difficult for any insurer. In recent years, our understanding has been deepened. I worked in bank and also insurance for many years. In the banking sector, asset liability management is handled by one department. But in insurance companies, it is handled by different departments. So, it's more difficult to collaborate. So, we need to unify our thinking and pull in the same direction. I have a very deep experience about this. In the low interest rate environment, we need to work even harder on this field. Last year, we improved communication and institution building. And the two sites also reached more consensus and working together. Second, we need to focus on reform and innovation. We have run into lots of challenges and problems. The traditional model can hardly sustain. So, what should we do? We need to strengthen reform and innovation. With science and technology growing fast, digital transformation is a good entry point. So, we will strengthen digital transformation. And another important feature of China Life is coordinated development. This is our great specialty. We tap into the advantages of different business lines and also enrich the ecosystem of health care plus senior care. We are the biggest insurance provider in this ecosystem. So, we will focus on new momentum, new customers, as well as new business. Finally, we will focus on risk prevention and mitigation. Early identification, early warning, early exposure, and early disposal, so that we can have a strong foundation for risk prevention and mitigation to make our development more secure. Thank you.
Unidentified Company Representative: Thank you for your interest. Let me answer your second question. China Life and [Indiscernible] assets allocated RMB500 million in setting up a PV fund, which can help us leverage advantages and strength in asset liability management and optimize long-term financial investment. This can also help us leverage the advantages of long-term capital. To promote the healthy interplay of insurance funds and the capital market, the fund has been registered and is qualified and ready to make investments. The target areas are quality listed companies with good operations and the fundamentals, especially high-quality stocks with the high dividend payout. Our corporation fund has the greatest advantage in that both can use equity calculation for the fund and for the underlying on starts, the FVOCI method is used for accounting. So, the fluctuation in stock prices will be included in other returns, whereas the dividend payout are included in income increase. So, this will be able to smooth out the impact on the balance sheet. Given the low interest rate environment, the company will pay more attention to equity investment. Like you said, we want to give it a role of the key minority to boost return on investment. We will continue to advance the structural balance and diversified strategy of equity investment. At the same time, we were also tap into the advantage of insurance capital as long-term capital. for our fund with [Indiscernible] assets as well as high dividend payout positions, we have allocated a considerable positions. Moving forward, we will pay more attention to timing and control the safety margin of investment. We will continue to improve investment capability and seize investment opportunities generated by new quality productive forces to boost return on investment in the long run to create more value for investors. Thank you.
Unidentified Company Representative: In the interest of time, we will now take the last question from Hong Kong.
Unidentified Analyst: Thank you, management. I'm analyst from [Indiscernible] Securities. I have two questions. First, this year for life insurance products, what is your deployment? It was said that you will reduce on liability costs, and there has been lots of discussion in this area. So, what is your deployment plan? And second, on agent channels reform was announced late last year. What is the progress? What is your plan and goal for the reform this year?
Unidentified Company Representative: So, Mr. Li, first question, and Mr. [Indiscernible] second question.
Unidentified Company Representative: Regarding products, I will say a few things. First, Mr. Chairman talked about on coordination of investment side and liability side. You asked about new products, the positioning of new products. As I mentioned earlier, in terms of investment, our company needs to work out via changing customer demands. And on top of that, we need to emphasize diversity of our products, especially in the following areas. First, the type, the maturity, and also the cost of the products need to be more diversified. As for the design development of products and deployment of the products, I will ask the Chief Economist to provide more information. In 2024, our placement strategy continued to follow the diversity requirement to meet customer needs for diversified protection. But--
Unidentified Company Representative: So, in the current interest rate environment, our new products for 2024 are specially designed to provide long-term protection and retirement products for consumers, especially for the retirement products. We have very diversified channels and durations. So, I want to point out a few interest rate risks. First, in our product design, we adhere to the philosophy of managing assets and liabilities together, and we embedded the duration into our product design, especially for the retirement products. So, we try to control the duration to about five years, while providing long-term protection, we manage the duration more carefully. And second, product diversity. In 2024, we provided traditional products as well as participating products that are more flexible. And for participating products, we also managed on both sides of assets and liabilities and how do we design the minimum interest rate and how do we design the demonstrated interest rates and the new products we launched this year actually reflected this philosophy of better managing assets and liabilities. And also, we announced some auxiliary policies to support the retirement market -- the pension market. And in 2024, we also want to tap into the demand of health insurance and to offer more health management services to enhance customer experience and to mitigate risk and to improve profitability. So, let me also say a few words about this question. Last year, on our Investor Day, we talked about three reforms about enhancing the quality of our sales force. So, we want to emphasize innovation using the seed project to test the products with our new newly recruited sales agents. And so far, our R&D has been completed and the improvement of our sales force, what we call the 6 plus 1 project have been rolled out nationwide, and we have seen very good results. And the seed project is now in the pilot stage. And we chose six cities to conduct the seed project and it proved very effective. So, we want to expand the pilot program to 13 cities. So, we will control quality and to control the process. For example, in January this year, we tested the pilot in Shenzhen, and we have recruited 100% college graduates and productivity increased significantly in just one month. And we believe that these newly recruited agents are more productive and we are very confident in rolling out this program nationwide. And also, the size of our sales force remains stable, but the share of high-performance agents increased. And we will try to recruit more qualified candidates and to enhance our processes to boost the income of the new hires. And so far, we think the sales force has met our expectations. Thank you.
Unidentified Company Representative: So, due to the time constraint, we may not be able to answer all the questions you have. So, please do not hesitate to get in touch with our Investor Relations' team. This brings us to the end of our 2023 annual results briefing. Thank you for your time. Good bye.
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