China Pacific Insurance : CPIC Newsletter for Investors_No. 12

	Investor's Newsletter（Nov. 18, 2022）	vol. No.12 in 2022
	CPIC（SH601601, HK02601, LSE CPIC）

Stock Data (ending Oct. 31, 2022)

Total equity base (in million)	9,620
A-share	6,845
H-share	2,775
Total Cap (in RMB million)	162,960
A-share (in RMB million)	130,261
H-share (in HKD million)	35,135
6-month highest/lowest
A-share (in RMB)	22.72/18.01
H-share (in HKD)	19.34/12.20
GDR (in USD)	16.40/12.50

IR Calendar

Nov. 24, 2022

2022 Investor Day

Hangzhou

Contents

• Regulatory Updates

Five government agencies jointly issued rules on personal pension fund

Regulator contemplates improvement of life insurance agent system

CBIRC mulls over pilot programme of conversion from life insurance to long-term care

Scope of products eligible for tax-deferred commercial health insurance expanded

• Industry Information

Insurance industry aims to establish differentiated sales management system in 3 years

Investor Relations Department

Tel: [phone]

Fax: [phone]

E-MAIL: [e-mail]

Add: 15F, 1 Zhongshan Rd. S.

Shanghai, P.R. China, 200010

Contact: GONG Zheng

Tel:[phone]

E-MAIL:[e-mail]

Disclaimer:

China Pacific Insurance Company (the "Company") abides by the disclosure obligations by securities regulators and stock exchanges in accordance with the law. The newsletter is for information purpose only and do not constitute investment suggestion in any circumstances. The Company nor has any liability for any loss howsoever arising from any information contained in the newsletter.

All copyrights are reserved by the Company. The newsletter belongs to non-public information. Without written authorization by the Company, none part of the newsletter could be copied or substituted to others in any circumstance

• Company News

CPIC launches brand for rehab care

• Special Report

Summary of Q & A Session of Q3 Results Announcement

Premium Income (Unit: in RMB million)

	Jan.- Oct.	Changes	Oct.	Changes
P&C	144,104	12.11%	11,371	7.41%
Life	202,826	5.73%	13,088	29.44%

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Regulatory Updates

• Five government agencies jointly issued rules on personal pension fund

On November 4, the Ministry of Human Resources and Social Security, the Ministry of Finance, the State General Administration of Taxation, CBIRC and CSRC jointly issued Implementation Regulations on Personal Pension Fund. Participants of the scheme need to open a dedicated account on an information platform via a national unified on-line system or through commercial banks, followed by the opening or designation of their one and only pension fund account with a qualified commercial bank.

On the same day, the Ministry of Finance and the State General Administration of Taxation published The Announcement on Policies concerning Personal Income Tax of Personal Pension Fund, which provides for tax incentives for the scheme starting from Jan. 1, 2022. Fund contribution can be tax deductible up to 12,000 yuan per year; investment income accrued into the account is tax-free, and fund withdrawals are taxable at a separate rate of 3% instead of being calculated as "comprehensive income".

• Regulator contemplates improvement of life insurance agent system

On November 3, CBIRC released the Consultation Draft of Opinions on Further Improving the Agent System for Life/Health Insurance. The document seeks to: (1) optimise system design, skewing incentives towards front-line sales personnel, establish an organisational structure and career advancement path facilitating long-term service of agents; (2) optimise bonus allocation and explore long-term oriented mechanisms for commissions so as to encourage retention; (3) encourage innovation of agent management systems by insurance companies, such as sales of in-house insurance products by staff on the pay-roll provided relevant qualifications are obtained, or entry into labour contractual relations with eligible agents; (4) encourage independent agents, and the development of tailor-made insurance products;

(5) improve the social security system for life insurance agents.

• CBIRC mulls over pilot programme of conversion from life insurance to long-term care

According to media reports, CBIRC circulated on Oct. 25 the Consultation Draft of Notice on Launch of Pilot Programme of Conversion from Life Insurance to Long-term Care. The document specifies 2 methods of liabilities conversion, i.e., insurance policy discount for the insured already in a state of

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care, and actuarial parity for those yet to enter the state of care. Second, it defines certain designated illnesses and injuries or disabilities from accidents as the precondition for "the state of care". Third, personal traditional life insurance will be selected for the pilot programme. Fourth, the regulator encourages insurance companies to add terms on conversion of liabilities based on insurance policy discount when developing traditional life insurance products. Fifth, the pilot programme will last for 2 years, and life insurance companies conducting traditional life insurance business can participate.

• Scope of products eligible for tax-deferred commercial health insurance expanded

On November 11, CBIRC issued the Consultation Draft of Notice on Expansion of Scope of Products Eligible for Tax-deferred Commercial Health Insurance, which seeks to expand the scope of eligible insurance products, ease restrictions on the insured and on the scope of eligible insurance companies, relax underwriting conditions for sub-standard risks, abolish standard terms and clauses, and requirements for return of premiums in the event of insufficient claims payment, and specify qualifications for the business in terms of net assets and solvency of insurance companies. According to the document, the scope of eligible insurance products now covers all major business lines of health insurance, including medical insurance, long-term care and disease insurance, and insurance companies are allowed to tailor-make plans for sub-standard risk.

Industry Information

• Insurance industry aims to establish differentiated sales management system in 3 years

According to news reports in early November, the Insurance Association of China recently issued the Programme for Establishment of Ratings System of Qualifications for Insurance Sales Personnel. The programme strives to establish an industry-wise, unified set of standards for sales qualifications ratings, occupational training, performance evaluation, with protocols for sales authorisation 3 years from now. The industry will put in place, through self-discipline, a differentiated sales management system underpinned by sales authorisation and compatible with capabilities of sales personnel. The programme does not involve additional requirements for recruitment. It only applies to sales personnel who are already in the system. Specifically, sales qualifications will be classified into 4 levels depending on complexity of the products. Level I, Level II and Level III are only for insurance products, while Level IV for both insurance and other financial products.

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Company News

• CPIC launches brand for rehab care

After the debut of CPIC Home, a brand of retirement communities, on November 6, the company unveiled CPIC Recover, its brand for rehab care, marking another important step in the model of "insurance + services". CPIC will continue to deploy in rehab care in a systematic manner, and plans to build a premium service net-work consisting of rehab hospitals, rehab clinics and rehab centres through independent development and M & A . It aims to build a capacity of 10 rehab hospitals, 20 rehab clinic with a total of 3,000 beds 5 years from now.

On the same day, CPIC and the Medical School of Shanghai Jiaotong University jointly hosted a ceremony for the donation of CPIC Fund of Education Development Foundation of the Medical School of Shanghai Jiaotong University, and the unveiling of a joint Rehabilitation Care Institute. The Rehab Industrial Fund under CPIC Group also signed an investment agreement with Shanghai Dayuetang Hospital Management Co., Ltd., the health care arm of Jiadao Capital. According to the agreement, the two sides will work together to build and operate a premium rehab hospital in Putuo District of Shanghai in 2024.

Special Report

• Summary of Q & A Session of Q3 Results Announcement

On October 28, CPIC held the Third Quarter Results Announcement, and below is the summary of the Q & A session.

1．Q: Phase I of the Changhang Action Programme has been half-way through. What results have you achieved? Your Q3 NBV turned positive. Was it because of the transformation? Do you think the improvement can be sustained?

1. We started to implement the 18-monthroad-map of Phase I Transformation on January 1 this year, marked by amendments to the Basic Law. The road-map encapsulates 8 projects, aiming for a comprehensive, structural reform of the life insurance business.

In terms of business results, new business sales maintained strong growth in the past 9 months, with increasing momentum quarter by quarter, mainly as a result of steady agent productivity gains, high growth of regular-pay premium of bancassurance, and strong sales driven by long-term savings; our NBV in Q3 was the first among listed insurance companies to turn positive,

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largely because of changes of agent behaviours driven by the new Basic Law, productivity improvement as a result of NBS (needs-based selling) processes, and the cultivation of normalised selling based on activity management.

As for sales force quality, we accelerated agency force restructuring towards career-based development, professionalism and digitalisation, with stabilisation of agent headcount, enhancement of productivity and improvement of income. Specifically, core manpower started to stabilise, and its proportion of total agents increased considerably. We enhanced basic management, with steady improvement in sales force quality, evidenced by quarter-by-quarter improvement of performance ratio for long-term insurance, increasing growth of monthly average FYC per agent quarter by quarter, and increasing growth of agent income quarter by quarter. We adopted a holistic approach towards recruitment and retention, with initial success in high-quality recruitment and coaching: quarterly new recruits recovered a lot; productivity of new recruits within one year improved quarter by quarter, and in Q3 the growth was nearly 100%; sampling shows that 92.7% of new recruits have work experience, and the top 3 occupations were self-employed households/private business owners, employees of private/foreign-funded firms and civil servants/not-for-profit organisations; 7-month retention ratio improved quarter by quarter.

When its comes to business quality and mix, policy persistency, claims ratio and expense ratio all improved, with 13-month policy persistency improving by 7.5pt. We continued to diversify product and service offerings centering on the "Golden Triangle" of health/protection, wealth inheritance and wealth management so as to better satisfy customer needs, with improvement in business mix: the share of long-term insurance with a pay period of 10 years and above improved month by month in Q3; regular-pay FYPs from bancassurance grew rapidly, with the share of regular-pay business increasing steadily quarter by quarter, pointing to improvement in channel mix.

In brief, the key to improved business results in Q3 was the continuation of transformation. After implementation of 9 months, the behaviours of agents have gradually shifted away from sales push in Jump-start towards more normalised sales and recruitment work mode underpinned by "monthly planning, weekly operation and daily visits", winning the support of the entire organisation.

In Q4, as the agency channel continues to drive business development, coupled with further business mix improvement in bancassurance, we expect continued momentum in FYP and NBV. At the same time, in spite of its initial success, the transformation is a long-term endeavour, which means a U-shaped recovery, instead of a V-shaped rebound, and thus requires more patience and time.

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