CPIC's mid-year report card: Steady revenue growth, good investment, continuous enhancement of value contribution

Source: Times Finance Author: Liu Ziyu

Recently, China Taibao (601601. .SH; 2601.HK； CPIC. LSE) delivered a solid mid-year report card, with positive year-on-year growth in operating income and operating profit attributable to the parent company, while investment income performed well, providing important support for the Group's overall operating results.

On August 27, CPIC released its 2023 interim results report and held a results conference in Shanghai the next day. In the first half of the year, CPIC's operating income under the new accounting standard reached 175.539 billion yuan, a year-on-year increase of 6.5%, and the operating profit attributable to the parent reached 21.537 billion yuan, a year-on-year increase of 2.5%; As at the end of June, the Group's embedded value was RMB537,114 million, an increase of 3.4% over the end of the previous year.

The report mentioned that CPIC has withstood market fluctuations in different periods and maintained steady growth in assets under management. As of the end of June, the Group's assets under management reached 2.84 trillion yuan, an increase of 6.9% over the end of the previous year, credit risk control maintained a good level, and large-scale asset allocation capabilities and professional investment capabilities were leading the industry, achieving good investment income performance.

At the interim results press conference, the management, represented by Fu Fan, President of CPIC, collectively responded to topics of concern in the industry, including life insurance market changes, current stock price valuation, new energy vehicle insurance market, insurance capital investment and other topics of concern to the industry.

The management said that in the second half of the year, it will continue to adhere to the concepts of value investment, long-term investment, steady investment and responsible investment, strengthen investment and research capacity building, do a good job in credit risk management and control, and continue to improve the value contribution of the asset side.

Adhere to the long-distance running mentality, the total investment income increased by 4.1%

In the first half of the year, in the complex and changeable market environment, CPIC adhered to the long-term principle, carried out asset allocation with a long-distance running mentality, achieved steady growth in the scale of assets under management, and maintained a leading position in the domestic industry in terms of investment income.

According to the report, as of the end of June 2023, CPIC's assets under management reached RMB2,836.924 billion, an increase of 6.9% over the end of the previous year, of which the Group's investment assets were RMB2,118.655 billion, an increase of 8.3% over the end of the previous year. assets under management of third parties amounted to RMB718.269 billion, an increase of 2.9% over the end of the previous year; In the first half of the year, third-party management fee revenue was 1.132 billion yuan, an increase of 2.4% year-on-year.

On the investment side, CPIC adheres to a refined "dumbbell" asset allocation strategy based on the long-term trend of the macro environment, on the one hand, it continues to strengthen the allocation of long-term interest rate bonds to extend the duration of fixed income assets. On the other hand, appropriately increase the allocation of alternative investments such as equity assets and unlisted equity to improve long-term investment returns; At the same time, continue to reduce the allocation ratio of credit assets and manage credit risks.

For example, CPIC Asset Management, a subsidiary of the Group, issued portfolio insurance asset management products using the dividend value investment strategy. In the first half of the year, this type of product withstood the test of market fluctuations and was recognized by stable customers, and the scale of the company's equity-biased investment products achieved steady growth. In terms of fixed income investment, CPIC Asset increased its allocation efforts and preferred allocation varieties during the period when the rate of return was relatively high, actively grasped the allocation opportunities of long-term fixed income assets, effectively optimized the allocation effect, and achieved stable returns. As of the end of June, the scale of CPIC Asset's third-party portfolio asset management products and external entrusted assets totaled RMB226.331 billion, an increase of 2.3% over the end of the previous year.

Industry experts said that CPIC's strategic asset allocation is positioned in long-term asset allocation across economic cycles, and this strategic asset allocation based on a long-term perspective is not only more in line with the logic of large-scale asset allocation, which is conducive to practicing CPIC's investment philosophy, but also conducive to giving play to the traction role of strategic asset allocation in investment management and liability management.

In fact, since 2019, CPIC has focused on building a group investment research platform, and after four and a half years, it has built a comprehensive and all-weather research system including annual review of strategic asset allocation, annual, semi-annual and quarterly recommendations for tactical asset allocation, weekly macro allocation meeting system, daily global asset and economic tracking, and extensive thematic research.

Based on the group's investment research platform, Changjiang Pension strengthened the research of asset allocation strategy in the first half of the year and dynamically adjusted it in a timely manner, strengthened the trustee management ability of annuity, and effectively guaranteed the stability of entrusted performance. As of June 30, 2023, the scale of assets under third-party entrusted management of Changjiang Pension was 381.489 billion yuan, an increase of 9.1% over the end of the previous year; The assets under management of third-party investment amounted to RMB363.890 billion, an increase of 2.7% over the end of the previous year.

As an important member of CPIC's investment business, Guolian Fund has also delivered a solid and upward report card. According to the statistics of Galaxy Securities, as of the end of the second quarter of this year, the assets under management of Guolianan's public funds reached 102.853 billion yuan, exceeding the 100 billion mark for the first time; The non-monetary asset management scale was 98.629 billion yuan, ranking in the top 1/3 of the public fund industry, an increase of 20.43% compared with last year, showing strong strength against the market.

With a long-distance mentality for strategic asset allocation, while strengthening investment research and construction to build diversified investment capabilities, CPIC's professional investment capabilities have always ranked at the forefront of the industry, providing strong support for the group's overall investment income.

The data shows that thanks to the increase in fair value change profit and loss, the group's total investment income reached 38.249 billion yuan, a year-on-year increase of 4.1%; Net investment income was RMB38,432 million, up 2.7% year-on-year, mainly due to the increase in dividends and dividend income; Consolidated return on investments was 2.1%, up 0.6 percentage points year-over-year, primarily due to the impact of changes in equity-like assets that are recognized at fair value and changes in other comprehensive income in the current period.

On the whole, in the first half of the year, CPIC performed well in the investment side, and all indicators were at the leading level in the industry, showing a stable and positive development trend.

Regarding the asset allocation in the second half of the year, Yu Rongquan, general manager of CPIC Assets, said that the stock market has a long-term allocation attraction in the second half of the year, and now is the time to invest in the stocks of high-quality listed companies, and will gradually increase the allocation of high-quality stocks at a lower position. ”

Improve investment quality and enable value growth through ESG investment

Driven by the dual carbon goals, ESG has become an important part of China's corporate strategy. In 2022, CPIC was successfully selected into Forbes China's first China ESG 50 list. In 2023, CPIC will continue to deeply understand and actively practice ESG concepts, and continue to promote ESG management systems and capacity building.

Adhering to the investment philosophy of "long-term investment, value investment, steady investment and responsible investment", CPIC and its subsidiaries integrate ESG governance with operation and management, fully integrate ESG factors in investment management, risk management, performance appraisal and other links, build a long-term sustainable ESG investment management system, continuously improve the quality of foreign investment, and at the same time improve its social responsibility performance to help the Group's value growth.

For example, in terms of investment practices, CPIC Asset Management takes ESG as an important factor in investment considerations, actively supports the development of green industries such as energy conservation and environmental protection, clean energy, green infrastructure upgrading and green services, and strengthens the evaluation and management of high-carbon assets.

During the reporting period, CPIC Asset Management focused on green investment, innovated green financial products, and actively deployed ESG-themed product lines. At present, CPIC Asset Management has established 3 ESG themed products, covering pure debt, secondary bond-based and partial equity hybrid products, and issued 2 green-labelled alternative investment plan products. As of June 30, CPIC Asset Management had invested nearly 80 billion yuan in green assets.

Similarly, Changjiang Eldercare, a subsidiary of the Group, also introduces ESG concepts into the whole process of investment management, completes the transformation of ESG strategies of existing products, and takes ESG evaluation factors as an important basis for screening ESG theme investment targets. On the one hand, increase the research strength and investment opportunities of clean energy, energy conservation and emission reduction and other related industries encouraged by policies; On the other hand, the exclusion of ESG-themed alternative investment targets that do not meet the company's internal rating requirements reduces investment losses caused by risks such as deterioration of governance structure or negative externalities.

At the same time, CPIC and its subsidiaries have also incorporated ESG management requirements into the comprehensive risk management system and performance appraisal system, done a good job in qualitative and quantitative assessment of ESG risks, and adhered to ESG value orientation and business orientation while paying attention to investment performance, giving full play to the power of finance for good, and empowering the Group to enhance its long-term value.

For example, through systematic design, forward-looking research and innovative practice, Pacific Property & Casualty Insurance has initially built a "1+4+2+1" green insurance innovation practice system, that is, "1 set of corporate standards and system implementation + 4 key areas of product innovation + 2 first-in-class low-carbon insurance models + 1 low-carbon operation system", becoming the first insurance company in the domestic property insurance industry to clearly put forward sustainable insurance strategic planning and carry out innovative practices, and actively leading the development of "green property insurance".

During the reporting period, Pacific Property & Casualty provided nearly RMB45 trillion in green insurance, accounting for more than 1/4 of its overall business.

At present, the internal and external environment of the insurance industry has undergone great changes. Regarding the group's planning for the second half of the year, Fu Fan, president of CPIC, said that insurance companies should respect the development law of the industry and return to the origin of insurance operation.

In the life insurance sector, CPIC will continue to build diversified value channels based on agent channels; In terms of property insurance, the auto insurance business focuses on improving market-oriented pricing capabilities and refined management capabilities, while non-auto insurance business needs to seize the development opportunities of national strategies such as green and low-carbon, rural revitalization. For the investment sector, we will continue to adhere to the concepts of value investment, long-term investment, steady investment and responsible investment, strengthen investment and research capacity building, do a good job in credit risk management and control, and continue to improve the value contribution of the asset side.