China Pacific Insurance : CPIC Newsletter for Investors_No. 5

	Investor's Newsletter（1 June 2023）	vol. No.5 in 2023
	CPIC（SH601601, HK02601, LSE CPIC）

Stock Data (ending Feb. 28, 2023)

Total equity base (in million)	9,620
A-share	6,845
H-share	2,775
Total Cap (in RMB million)	270,693
A-share (in RMB million)	213,634
H-share (in HKD million)	64,803
6-month highest/lowest
A-share (in RMB)	31.37/18.01
H-share (in HKD)	24.20/12.28
GDR (in USD)	21.80/12.50

IR Calendar

Investor Relations Department

Tel: [phone]

Fax: [phone]

E-MAIL: [e-mail]

Add: 15F, 1 Zhongshan Rd. S.

Shanghai, P.R. China, 200010

Contact: Chloé LIU, QIAO Shengmei

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

Contents

• Regulatory Updates

Debut of SFRA: China's new financial supervisory system in place

• Industry Information

2023 Huiminbao saw participants in excess of 3mn, with premiums of 387mn yuan

Regulator promotes normalised business operation of specialised pension, with indicative yield capped at 5%

SFRA: Q1 solvency decline moderates considerably while maintaining reasonable levels

• Company News

CPIC unveils its Health Strategy Action Programme

• Special Report

Summary of Q & A of 2023 Q1 report

Premium Income (Unit: in RMB million)

	Jan.- April	Changes	April	Changes
P&C	71,543	16.0%	14,000	13.2%
Life	108,343	-2.9%	11,433	-5.7%

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Regulatory Updates

• Debut of SFRA: China's new financial supervisory system in place

On the morning of May 18, the State Financial Regulatory Administration (SFRA) was officially unveiled at No. 15, Jinrongjie of Beijing, marking the exit of CBIRC, which was established over 5 years ago. Thus, a financial supervisory system underpinned by PBoC, CSRC and SFRA replaced the former framework of PBoC, CSRC and CBIRC.

In March 2023, CPC Central Committee and the State Council jointly issued The Programme of Restructuring of the Party and State Institutions. According to the document, SFRA will be established on the basis of CBIRC. Responsibilities of PBoC, such as day-to-day supervision of financial groups and protection of financial consumers, and investor protection of CSRC will be handed over to SFRA.

Industry Info

• 2023 Huiminbao saw participants in excess of 3mn, with premiums of 387mn yuan

As of May 18, over 3 million people have participated in Huhuibao (a customised commercial medical insurance programme for Shanghai). Since its launch on May 9, participants exceeded 500,000 within 2 hours, and 1mn within 8 hours. In comparison, the Huhuibao for 2021 garnered 1mn within 12 hours of its debut. The programme for 2023 has realised a premium income of over 387mn yuan, based on premium of 129 yuan per person. So far around 15.8% of the 19mn people covered under Shanghai basic medical insurance have taken out Huhuibao policies.

• Regulator promotes normalised business operation of specialised pension, with indicative yield capped at 5%

On May 25, the regulator issued the Consultation Paper of Notice on Promoting the Development of Specialised Commercial Pension Insurance, seeking comments and suggestions of its branches and life/health insurers, with a deadline for feed-back on June 2, 2023. The Notice specifies thresholds for insurers to conduct the business; allows insurance firms to use their own money to "kick the ball rolling", provided that the fund can be withdrawn from the account in a timely manner; explicitly allows for distribution of specialised commercial pension insurance by banks and specialised insurance intermediaries; cuts back, after participating insurance, on levels of indicative yields, from high, medium and low to high and low,

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capped at 5%.

• SFRA: Q1 solvency decline moderates considerably while maintaining reasonable levels

On May 22, SFRA convened the work meeting on solvency supervision. As at the end of Q1, the average comprehensive and core solvency margin ratios of the 185 insurance companies under review stood at 190.3% and 125.7%, respectively; available capital amounted to 4.7 trillion yuan, with minimum required capital of 2.47 trillion yuan. Fifty-three insurance companies won the A IRR rating, 105 firms B, 16 C and 11 D. In Q1 2023, the industry posted primary premium income of 1.95 trillion yuan, a year-on-year growth of 9.2%. Annualised comprehensive investment yield for the quarter reached 5.24%, showing momentum of improvement. The decline of solvency margin ratios moderated considerably, while maintaining reasonable levels.

Company News

• CPIC unveils its Health Strategy Action Programme

On May 20, CPIC hosted a ceremony for the release of its Health Strategy Action Programme, unveiling for the first time the "352" Health Service Blueprint. Present at the event were over 50 participants, including domestic investors, analysts and representatives of the media. Through diverse channels of communication, such as presentation of strategic action programme, experience of health and elderly care service and dialogue between company management and guests, the meeting showcased the progress of CPIC in implementing the Health Strategy over the past 3 years, particularly innovation in areas of philosophies, mechanisms, product and services.

The blueprint seeks to build an all-around,all-encompassing insurance eco-system, with 3 pillars, i.e., insurance payment, service empowerment and eco-system building, 10 concrete measures, and development cycles of mutual reinforcement and mutual support. To be specific, there are 3 key elements, i.e., underwriting, claims management, and data, with continued development of insurance for standard risks and innovation for sub-standard risks, the elderly and children, supply of superb insurance service via smart claims management, improved matching of customer needs and risk reduction based on big data; 5 areas of specialty service to empower the core insurance business to enable integrated solutions of "insurance + health + elderly care", focusing on digital medicine, integrated care, rehab care, institution-based elderly care and health promotion of teenagers, so as to achieve shift of development drivers from products to services; the use of industrial equity investment fund and charitable foundations to help improve

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the ecosystem and promote public good, all of which is mnemonically referred to as "352".

Summary of Q & A for Q1 Report

Q1: What is the one thing that you are most happy about and one thing that needs improving in implementing Phase I of the Changhang Action Programme? What is your expectation for Phase II of the programme?

A:In Phase I, we focused on channel restructuring, and the progress is in line with our expectations. We put in place a new set of values and work mode, built broad-based consensus on the need for transformation and established a virtuous cycle. That being said, it takes time for new capabilities and habits to deliver benefits. We are now working on the design of Phase II, which aims to build a new organisational model, i.e., a model with headquarters focusing on empowerment and branch offices on independent business operation. Currently we have rolled out independent business operation of agents, and next we will promote this among staff, so as to establish a business model centering on customers and the agency force, underpinned by integrated mode of management, support and service throughout the organisation. In brief, Phase II seeks a paradigm shift for both agents and staff to boost productivity and long-term, healthy business development.

Q2: Based on your Q1 report, there seems to be a recovery of NBV margin. Why? Was this in line with management expectations? Targets for the year?

1. With improved selling skills, the agency channel has started to sell more annuity and whole life products with increased SA with long pay period to satisfy customers' needs for retirement savings. Going forward, we will continue to enhance their capabilities to sell protection products. In terms of product strategy, NBV margin of the same products remained largely stable. This year, we have upgraded certain products in response to customer demand and market trends which also played a part in NBV margin improvement.

Since the launch of Phase I of the Changhang Action Programme, we've been promoting new values for business, namely, the focus on normalised sales and recruitment, with an integrated approach to year-end sales and year-beginning sales campaign. The new philosophy has been endorsed by the entire company. Everyday is a game day. Business results in Q1 stemmed from this paradigm shift, and were recognised by both customers and the agency force. They are also in line with management expectations, with solid performance in agent productivity, activity ratio, retention ratio and productivity of new recruits .

Q3: What is the current agent headcount? Seems your core agents have

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stabilised. Will there be further growth? What is their share of NBV?

A; In Q1, total agent headcount was stable, with some growth. But we expect volatility for the whole year. In 2023, we will continue to consolidate the foundation of core agents, which calls for some restrictions on the number of new recruits, and minimum requirements for retention and competence of new recruits. For the year, our target is improvement in productivity and income of core agents; for 2024, we hope there will be both headcount growth and productivity gains for core agents. Currently, core agents contribute over 90% of NBV, which is exactly why they are management priority.

Q4: According to media reports, the regulator is soliciting industry opinions on lowering pricing interest rates of traditional products. What impact would this have on CPIC? What measures will you take to cushion the impact? What is the share of products with a pricing interest rate of 3.5% in terms of total sales?

1. We are in close communication with the regulator on this. Essentially, we support the direction of the change, as it helps to lower the cost of liabilities of insurance companies in the context of secular decline of interest rates. The move is conducive to healthy development of the industry. The impact on us would be limited. First, demand remains intact. We will continue to see strong needs for mid and long-term savings products, such as pension and annuity. Second, given the downswing of interest rates, compared with other wealth management products, insurance is a good option for asset allocation. Our own survey shows that there has been increasing awareness of insurance as an instrument of asset allocation, which will underpin robust demand for insurance in the medium to long term. To meet customer needs for long-term retirement provision, we are now looking at participating products, which we plan to launch in the second half of the year. They provide a minimum guaranteed interest rate and enable customers to share the profits of insurers' business operation. At the same time, on April 1, we launched a new CI product, which offered customised protection levers for different customer segments, as part of our effort to meet the Golden Triangle of customer demand and increase the share of health & protection products. The shift of product mix takes time, and we expect to achieve a balanced product mix in the medium and long term.

Q5: What is your view on the outlook for CI insurance in the long term?

1. Reports by consulting firms indicate a CI insurance gap of 200bn yuan ， which is expected to grow by 8-9% per annum between 2025 and 2030. That is also consistent with the results of our own survey. After years of development, CI insurance is a common type of product, but it needs more supply-side reform so that it can be more personalised, more compatible with customer's diverse needs, and delivered by professional sales advisors. On

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