China Pacific Insurance Group Co Ltd

SSE:601601

Earnings Call Analysis

CPIC Group Reports Strong Profit Growth Amid Strategic Developments

In Q3 2024, CPIC Group achieved a notable net profit of CNY 38.3 billion, marking a significant 65.5% increase year-over-year. The insurance revenue rose to CNY 209.4 billion, up 2.3%, with CPIC Life's premium income down 2.5% and CPIC P&C up 4.1%. The company targets a new business value of CNY 14.2 billion, up 37.9%, reflecting successful channel diversification. A focus on digital transformation and consumer rights earned high ratings for compliance. Looking ahead, CPIC aims for sustainable growth while adapting to regulatory changes and enhancing product offerings to meet evolving consumer needs.

Navigating Change: CPIC's Strategic Focus

In the third quarter of 2024, CPIC Group reported a notable increase in net profit, achieving CNY 38.3 billion, which represents a 65.5% year-on-year rise. This strong performance is a testament to the company's strategic focus on high-quality development and its acquisition of a stable position in the insurance market, guided by new policies aimed at bolstering the insurance industry. The company's approach reflects its vision of becoming a first-class insurance group with international influence, emphasizing sustainable growth across all sectors.

Premium Growth: A Deep Dive

CPIC's insurance revenue for the first three quarters totaled CNY 209.4 billion, marking a modest year-on-year growth of 2.3%. Delving deeper, CPIC Life generated CNY 62.3 billion, down 2.5% from the previous year, while CPIC Property & Casualty (P&C) saw an increase to CNY 145.2 billion, up 4.1%. This performance underscores a strategic pivot towards enhancing premium income, with CPIC Life’s annualized premium equivalent (GWP) reaching CNY 230.5 billion, up 3.3%, and a striking increase of 37.9% in new business value to reach CNY 14.2 billion.

Challenges and Opportunities in P&C Insurance

The P&C segment presented contrasting challenges, notably a stable combined ratio at 98.7% which did not change compared to the same period last year. However, this stability was accompanied by difficulties; Q3 2024 saw increased disaster-related claims due to severe weather events across China, which notably raised claims costs. The year-to-date catastrophe losses were significantly above historical averages, particularly impacting the non-auto segment. These external shocks prompted the company to take a balanced approach to growth, ensuring focus on sustainable performance amid challenges.

Investment Strategy: A Shift Toward Securities

CPIC continues to refine its investment portfolio strategy, maintaining a cautious yet adaptive approach. The company's total assets under management (AUM) reached CNY 2.58 trillion, up 14.9% year-on-year. However, it reported a slight decline in net investment yield at 2.9%, down 0.1 percentage points from last year. Some measures will be introduced to enhance returns; these include focusing on high dividend-paying stocks to leverage market dynamics effectively. The company aims to maintain its balance sheet health by allocating significant resources into long-term bonds amidst expectations of falling interest rates.

Product Innovation and Customer-Centric Strategies

CPIC's push for innovation is visible through its multi-faceted approach toward enhancing customer offerings, captured under the umbrella of the 'BIG HEALTH', 'BIG REGION', and 'BIG DATA' strategies. The involvement in health and retirement solutions emphasizes a holistic view on customers' welfare. Notably, new products tailored to health protection and the senior living segment have seen promising uptake, reflecting a consumer-oriented approach amidst evolving demographic trends.

Looking Forward: Confident Growth Prospects

Looking ahead, CPIC remains optimistic about the continuing growth of its new business value (NBV), particularly in the life segment, targeting sustainable growth fueled by diversified channels and improved product mix. The ongoing implementation of the Changhang Transformation plan will enhance customer value while adapting to new regulatory environments. CPIC sets ambitious but achievable goals for the coming year, indicating the potential for high double-digit growth in their life insurance lines.

Emphasizing Quality and Compliance

The company's commitment to protecting consumer rights is evident, boasting an 'A' rating for its insurance disclosure practices sustained for over a decade. Furthermore, CPIC is focusing on enhancing its quality of service through the adoption of digital technologies such as AI to streamline operations and improve consumer engagement. CPIC's dedication to compliance combined with a customer-first ethos positions it favorably in the competitive insurance landscape.

Earnings Call Transcript 2024-Q3

[Shaojun Su, executive]

[Interpreted] Good evening, ladies and gentlemen. Welcome to the 2024 Q3 results announcement of CPIC Group. I'm Su Shaojun, Group Board Secretary. We have with us Mr. Zhao Yonggang, Group President; and Mr. Su Gang, Group Vice President and CIO; and also Mr. Zhang Yuanhan, Group Chief Actuary.

First of all, Mr. Zhao will give you a presentation on our results in the first three quarters, and then we will have a Q&A.

I'll give the floor to Mr. Zhao.

[Yonggang Zhao, executive]

[Interpreted] Good evening, ladies and gentlemen. I'm Zhao Yonggang, President of CPIC Group. Next, I'm going to give you a brief introduction of our first three quarters' results.

Since Q3 2024 guided by the new 10 articles for insurance industry issued by the State Council and to build a first-class insurance group with international influence, we adhered to high-quality development and healthy progress. We played up our role as a shock observer and stabilizer to contribute to 5 key areas of finance, improved the quality and the efficiency of insurance services and also strengthened our core competitiveness while delivering steady progress on business performance.

We mainly focused on insurance business and saw rising premium income and profits. In the first 3 quarters, our insurance revenue amounted to CNY 209.4 billion, up 2.3% year-on-year. Among them, CPIC Life achieved CNY 62.3 billion, down 2.5% year-on-year, while CPIC P&C delivered CNY 145.2 billion, up 4.1% year-on-year. The group realized a net profit of CNY 38.3 billion, up 65.5% year-on-year.

Our key strategies include the "BIG HEALTH", "BIG REGION" and "BIG DATA" strategies. Through them, we strive to strengthen our strategic control and synergy and enhance customer management. To meet health and retirement needs, we accelerated the construction of the pension management plus pension insurance plus elderly care system. We opened a CPIC care home in Wuhan and speeded up innovation and synergy in key areas and maintained a healthy premium growth and quality of business.

In terms of digital workforce, on top of AI audit, we added AI coaching for our life agents, AI review of health insurance claims and online claims assistant for P&C business. We take very seriously the protection of investors and the consumer rights and interests and has been awarded A rating for insurance disclosure of listed companies on the SSE for 11 consecutive years. Both CPIC Life and CPIC P&C have been rated #1 in the industry for their consumer rights protection assessment results in 2023.

In terms of the key performances of our business line, committed to Changhang action plan and Transformation, CPIC Life continued to focus on customer value creation. Our CPIC Life GWP was CNY 230.5 billion, up 3.3%; new business value was CNY 14.2 billion, up 37.9%; and the new business margin was 20.0%, up 6.2 percentage points.

Our agency continued to improve its professionalism and KPIs. For example, our first 3 quarters GWP grew 4.1% in the -- and our new business GWP grew 16.3%.

Secondly, our number of core agents stabilized with improving quality. The monthly number of the core agents was up 2.4% year-on-year.

And thirdly, the number of our new agents was 15.5% up year-on-year, and the FYP was 35% increase. The 13-month persistency ratio of our individual customers increased by 2 percentage points year-on-year to 97.5%, while 25-months persistency grew 8.2 percentage points to 92.3%.

The banca channel adhered to value approach to focus on key regions and strategic channels. Its GWP in the first 3 quarters increased by 6.2% of which individual long-term insurance regular-pay new premiums increased by 23% year-on-year.

Group Channel upgraded its worksite BD and improved the mix of its short-term business. The GWP decreased by 12.8% year-on-year, but the work-site business grew by 18.3% year-on-year.

Our product mix continued to improve. Starting from September, our product mix has improved significantly. The share of health protection and participating products doubled and the CPIC Care home keeps to empower our business. Its average number of monthly residents rose steadily and the number of entry qualification and first-year new premium and total premium payable grew by 20% year-on-year.

CPIC P&C maintained a focus on sustainable, high-quality growth. In the first 3 quarters, its GWP was CNY 159.8 billion, up 7.7% year-on-year, of which auto premiums was up 3.3% year-on-year, while non-auto grew by 12.2% year-on-year. The combined ratio was 98.7%, unchanged from the same period last year.

For auto insurance, we complied with regulatory requirements by effectively controlling expenses and further optimized costs with innovative new energy vehicle business model.

For non-auto insurance, we serve the real economy and people's well-being, developed emerging new areas, strengthened innovation, enriched supply of products and services and better served our customers with integrated risk solutions.

For the asset management side, we maintained a prudent SAA while flexibly adjusting TAA; that is to say, we allocate long-term flexible income assets to extend duration and strengthen active management of equity. We buy equity with low duration, high dividend and long-term profitability.

We actively respond to low interest rate market environment with above-market performance results. As of the end of Q3, our total group's total AUM was CNY 2.58 trillion, 14.9% higher than the end of last year. And our net investment yield was 2.9%, down 0.1 percentage points year-on-year. Our gross investment return was 4.7%, up 2.3 percentage year-on-year. The above net and gross investment yields are not annualized.

Looking ahead, CPIC will strictly implement the new regulatory rules and the messages from the Third Plenary Session of the 20th CPC Central Committee meetings and the Central Financial Working Conference (sic) [ Central Financial Work Conference ] and integrate itself into the construction of Chinese modernization and achieve high-quality growth while safeguarding people's well-being and serving the real economy.

To be specific, we will continue to enrich the supply of products and services, improve the pricing mechanism to better meet people's need for insurance protection and wealth management.

Secondly, we will continue to focus on service, optimize service process, improve the quality and the protection of consumer rights and interest.

And thirdly, we will give long-term -- given the long-term nature of our insurance funds, we will focus on China's major strategies and key areas to better serve the real economy and technology, innovation and modeling industries.

Fourthly, we will accelerate digital transformation, strengthen data governance and promote emerging technologies to better empower the company's operation and management.

And number five, we will strengthen risk management and internal control, enhance asset liability management, promote long-term healthy development.

With that, I end my presentation and welcome your comments and questions. Thank you.

[Shaojun Su, executive]

[Interpreted] Well, thank you, Mr. Zhao for your presentation. Now we'll start the Q&A session. [Operator Instructions]

First, Sun Ting from Haitong Securities.

[Ting Sun, analyst]

[Interpreted] Thank you, Mr. Zhao. I'm Sun Ting from [ Haitong ] Securities. I have two questions on Life business. First one, you mentioned that in September -- can you share more numbers on the share of your products?

And secondly, the grand opening for the next year, how are you going to plan it? What's the pace of the sales? And what kind of product mix are you going to have for 2025? Because you'll see for 2024, your starting point is quite high. So how can you achieve growth for the next year?

And next question on Agency. For 2024, the Banca Channel have new regulations on commissions reporting, so your margin improved a great deal. Now what about the rules -- similar rules for the Agency Channel? Are they going to have more -- or have what kind of impact on your business? How is it going to impact your margin?

[Yuanhan Zhang, executive]

[Interpreted] Well, let's answer your first question. In terms of the PA business, for 2024, the first 3 quarters, our health products and incremental life products, well, the offerings, we offer more of these kind of products. Our product mix improved a lot in September. That's mainly because of the pricing rate has not been changed in September. So in Q3, participants in life sells much better than in the previous quarters. As Mr. Zhao mentioned, it more than doubled in September in terms of the sales of participating life insurance.

And starting from October, new business from participating business insurance also doubled in share in terms of the share. Of course, in October, the absolute number was smaller and that's because of a seasonality issue. But our capability to sell participating insurance is improving and we did more training to train our skills on selling participating insurance products. We trained more than 1,000 trainers, sales trainers, so we believe this laid a good foundation for next year.

And for next year, you see on the whole, in terms of the preparation for the grand opening of 2025, we will continue to pursue diversified channels to focus on customer needs and also take in consideration of the changes in macro environment. So we will be diversified. We focus on value while improving our product mix. We have a lot of mature experience in selling participating products to boost the business. So for the next year, we believe the NBV growth, we are quite confident about NBV growth.

To answer your second question about the rules on commissions reporting to regulators for the Agency Channel. Now for the Agency Channel, we believe the overall trend is a good one. We will have better team with better quality. We will closely follow the new regulatory development regarding commissions reporting to the regulator for the Agency Channel. We believe we will go back to the fundamentals of insurance business.

So these kind of measures will actually benefit CPIC so that we can cross the cycles and boost high-quality growth of the Agency Channel. CPIC Life has been doing the Changhang Transformation. We are trying to build our agency into a professional one, helping our agents to become more professional, so that they can be more successful in a new era as a leading insurer in China.

We do enjoy some benefits from the advantages, if I may. So we can better offer integrated solutions to our customers so that we can comply better with regulations. We can better boost the income of our agents. As far as we can see, the long-term savings products, I mean, the margin is quite stable. I mean be it participating or traditional saving products. I mean, after the shift to lower rates of pricing rates, I believe our margin actually improved. Thank you.

[Shaojun Su, executive]

[Interpreted] Thank you, Mr. Zhang for your answer. Let's welcome the next caller. Well, next, we'll have Li Jian from Huatai Securities.

[Jian Li, analyst]

[Interpreted] I'm Li Jian from Huatai Securities. One -- two questions, one for investment, one for life. Now for this quarter, in Q3, new business premium increased a lot for life. Now what's the reason for the increase? Is it because of the sales boost because of a product termination? Is it sustainable, I mean, especially for new business growth. Now you mentioned that you will have a better new business value. Now what about the new business premium for next year?

Second question about investment. You mentioned that you are going to allocate more in terms of high-yielding stocks. But most of these allocations are booked as tradable. But what's the reason for that?

[Unknown Executive]

[Interpreted] Well, thank you for the questions. Now your first question, actually, starting from this year, we pursued our Changhang Transformation plan to focus on customer value and we actually wanted to increase economic value by focusing on improving customer value. As we mentioned, for Q3 our business further grew in Q3. In the first 3 quarters, NBV was CNY 14.2 billion, up 37.9%. Now, of course, if we look at the reasons our -- well, several reasons, pricing rates were cut down, NBV margin improved a little bit. But secondly, it's also a result of our diversified channel development. For example, Agency improved its performance, our Banca Channel also focused on value business. So we believe for the whole year, NBV will have a good trend of growth.

But of course, lowering of pricing rates will present challenges in the short term. But in the long term, it is actually favorable for us because it would help us to better manage the interest rate breadth risk. So we believe we need to seize on these opportunities to turn it into, well, business improvement.

So far, we have finished the development of the participating life products for -- to be used in the 2025 grand opening. We believe we need to have value, not only volume, but also business value. We have a mature model for that. For 2025, we are quite confident about continued growth of NBV in 2025.

Now let me answer your second question. As you mentioned, CPIC always pays a lot of attention to the equities with high dividend return. Now we have been doing this for the last 2 to 3 years, with very good results. And not only us, other companies are also doing this. We believe it's a good strategy, especially under the new accounting rules.

Actually, we have been improving the OTI class equity assets. And of course, with ongoing process, now the share is above 20%. But of course, you can look at the issue from different angles. We can take it off-line after the meeting if you have different approaches to this issue. Thank you.

[Shaojun Su, executive]

[Interpreted] Thank you for the answers. Now let's welcome the next call. Next from Liu Xin Qi from Guotai Junan Securities.

[Xin Qi Liu, analyst]

[Interpreted] Well, first of all, congratulations on your good performance. I'm Liu Xin Qi from Guotai Junan Securities. Two questions from me. Number one, new life strategy for you. As you mentioned, the Changhang Transformation plan, phase 1, phase 2. Now after all that, Agency improved a lot with better core agents, better quality. So my question is, what's your focus for further or future reform?

And the next question about the gap between net investment yield and the gross investment yield, 1.8 percentage points. So what's the reason for that? Now going forward, how are you going to maintain kind of a stability of investment yield? How are you going to use asset allocation to maintain the stability of investment yields?

[Unknown Executive]

[Interpreted] Now the #1 question about the life strategy, right?

[Xin Qi Liu, analyst]

[Interpreted] Yes. Correct. I mean, after Changhang Transformation, the quality of the Life business improved. So was your Agency Channel, but what about your future priorities for Life's transformation?

[Unknown Executive]

[Interpreted] Now in the long term, I mean, we remain unchanged for Life agency where we need to be the best in terms of the service experience of our customers. But of course, there are macro environment changes and also demographical changes in China and also industry trends. So these changes, plus regulatory changes may affect our reform. So going forward for the CPIC Life, I mean, they need to recalibrate based on those changes. So -- but we still will focus on customer value, our social and economic value. And based on all that, we will design our big strategies. So our customer, our channel strategy, our product strategy all need to be based on all those factors. It's still ongoing. It's early stages. After we have matured plans, we will share them with you.

And as you mentioned, the new 10 articles for life insurance sector has just been released. So we need to better study the document, better, well, do then more study and research before finalizing our plans.

[苏罡, executive]

[Interpreted] Well, I'm the Chief Investment Officer, Su Gang. Thank you for your question. Now, of course, you see we need to look at our net and gross and the comprehensive investment yield. We need to look at all these indicators. But objectively speaking, the net investment yield has been under pressure for the entire industry because we know the interest rate is going down in China.

So previously, some of our high-yielding fixed-income assets matured, and we need to reinvest, but the reinvestment yield was lower than before, but we have took some measures to offset that effect. Compared to peers, our net investment yields declined, was actually smaller than a lot of our peers. But of course, admittedly, capital market changes also influenced us. Especially after the end of September, the stock market spike in China also had a huge effect. Especially the fair value change fluctuated a lot. So this kind of a spike will invariably change our -- or impact our gross investment yield and comprehensive investment yield. So the gap between the net and the gross investment yield become wider.

But of course, if we look at the reasons for those kind of yields, I mean, attributing factors in terms of debt and the fixed assets, debt and equity, I believe the share is 50-50. But in Q3, equity, of course, made a bigger contribution in Q3. Our fair value change impact was very favorable in Q3, much better than the TPL assets.

[Shaojun Su, executive]

[Interpreted] Thank you. Let's welcome the next caller from Citigroup.

[Yuping Ma, analyst]

[Interpreted] I'm Ma Yuping from Citi Bank. Two questions from me. Number one, P&C in the first half of this year, actually, you improved in terms -- well, in terms of profitability. But if we look at the first 9 months, we believe combined ratio remained the same as last year. For Q3, there's a lot of disasters happening in China. So if we -- in Q3, I mean, what about the Q3's profitability? Maybe also share a little bit on the auto and non-auto side.

Second question. PA life sales is growing, is improving month by month so far. How many of your agents have received the qualification to sell, participate PA life products or have already sold PA life products?

[Unknown Executive]

[Interpreted] Well, let me answer your first question about combined ratio of P&C business. Of course, you see the numbers. This year, our combined ratio, I mean, maintained a stable growth, overall growth, lead our listed peers. Our target remains unchanged. We need to focus on sustainability of growth, focus on value. We need to have a good control of our quality.

But of course, we had more disasters in China this year. In Q3, we have a lot of typhoons. So well, we are impacted. So far, if we look at the numbers, this kind of catastrophe loss was much higher than last year, than previous years even. So this negatively impacted combined ratio in Q3.

In terms of the line of business, our non-auto suffered most of damages. Now, agriculture insurance, our property insurance, so these catastrophe losses impact would be above 3 percentage points for Q3, which can be evened out across the whole year. So given this kind of impact, our combined ratio for the first 3 quarters remained stable. We believe with the extension of time for the whole year, our profitability will be quite good.

To answer your second question, compared to last year, our PA life, regulatory (sic) pay was very low. In the first 9 months of this year, we sold CNY 100 million, that's for last year. But for this year, in first 6 months, the volume was CNY 400 million. And for September, it doubled again. And in October, PA life regular pay sales also grew fast. So if we look at the September, PA regular life, we believe in terms of share of the PA life regular pay, we were ranked in the middle of the industry. Thank you.

[Shaojun Su, executive]

[Interpreted] Next caller [indiscernible] Securities.

[Unknown Analyst]

[Interpreted] I'm [indiscernible] from Guangdong Development Securities. First question. For the whole year, profit growth was quite fast. What about dividend payment and the payment ratio? Are you going to actually maintain a ratio of more than 30%?

Second question, in the first 3 quarters in terms of claims payout, how much was from [ WIFS ]?

[Unknown Executive]

[Interpreted] To answer your questions, of course, we always take very seriously return to dividend to shareholders. Now, temporarily because of the new accounting standards, given the capital market volatilities, we have not paid out a midterm dividend payout. We were going to do that later on and we look at the OPAT and also look at our business performance and the shareholder return on these factors to decide on a dividend standard. So that's the first question.

Sorry, I didn't -- the second question, in terms of underwriting loss, our DVA is relatively stable. And our liability cost ratio was down a little bit. Now most of it comes from VFA growth. Thank you.

[Shaojun Su, executive]

[Interpreted] Our next caller from CICC.

[Qingqing Mao, analyst]

[Interpreted] I'm Mao Qingqing from CICC. Now I have one question. From other comprehensive income in Q3, it's negative CNY 4.8 billion. Now the [indiscernible] side, the impact was offset, the impact on traditional insurance. In Q3, it's a negative number. What is the reason? And OCI trend for the future, how do you look at it? Is it going to remain a gap?

[Unknown Executive]

[Interpreted] Let me answer your question. In Q3, it's a unique case because on the liability side, OCI changes were based on the 50-day assessment rate curve, which was going down. But at the asset side, the interest rate curve is real-time interest rate curve. So by the end of the quarter, it picked up again. So that's the change. We believe this kind of change can be tolerated. And it is a natural gap between the 2 rates. And when this happened in Q1 last year, so we believe it's normal.

Well, of course, for the long run, we believe our asset liability matching is relatively good. Going forward, we might, based on our ALM and do some research based on interest rate movements.

[Shaojun Su, executive]

[Interpreted] Thank you. Let's welcome the next caller. Next, a caller from Goldman Sachs.

[Unknown Analyst]

[Interpreted] I have questions. Number one, OPAT, you mentioned OPAT. What about the growth for OPAT this year, in Q3 or the first half of this year?

Now second question, maybe share a little bit more on -- I mean, profit is good in Q3. Net profit in Q2, Q3 were pretty much the same. In Q3, A-share in China performed very good. So why was there -- wasn't there a big increase in net profit in Q3?

[Unknown Executive]

[Interpreted] Now first of all, for the first 3 quarters, OPAT year-on-year growth was very small, mainly because of the Q3 catastrophe losses for our P&C business. So our underwriting profit went down month-on-month, so the growth narrowed compared to last year.

So from the net profit perspective, in Q3, our net profit was benefited from the capital market movements. In Q3 last year, our performance was quite stable. So that is why this year Q3, we didn't see a huge increase in net profit. So we believe we had quite a stable growth, stable business mode. Thank you.

[Shaojun Su, executive]

[Interpreted] Thank you. Let's welcome the next caller. Next, [ Zhao Yao ] from Morgan Stanley.

[Unknown Analyst]

[Interpreted] I have two questions. Number one, on the number of agents for the P&C agency -- of Life Agency. Now first of all, how do you define your core agents? And actually a slight decline in core agent numbers. And the contribution from these kind of core agents in terms of NBV, so -- and in terms of number, are they going to remain unchanged at 60,000?

Second question about your investment in high dividend-paying stocks. What's your consideration? If such a stock is already in TPL, how -- and we want to move it to OCI, how are we going to do it?

[Unknown Executive]

[Interpreted] Thank you. Let me answer them. In the first 3 quarters, the agency, I believe, is improving. We believe the number and the quality of our core teams improved. For example, the number of core agents improved by 2.4%. And for 3 consecutive quarters, we saw this kind of growth. For example, first year premium for core agents also improved by more than 10%. And in Q3, single quarter, our recruitment and also total number of our agents looked very good.

If you look at more details, I believe the agency -- I mean the strategy for agency is also customer-centered. With Changhang Transformation, we will continue to push our agents to be more professional and to focus on quality recruitment and training and agent development. For example, in key cities in China, we are trying to build this kind of a retirement- and pension-related advisers, and we recruit high-quality new agents and train them.

Secondly, we have a system to develop these new agents, to protect them in the first of 6 to 12 months, to train them, to turn them into high performance for the first year, so that these core agent teams can be stabilized.

On the whole, I would say we focus on both the quality and volume. For example, we boost our productivity, boost recruitment and stabilize the volume or the size of our agents, especially core agents. So with stabilizing number of core agents and agent leaders, we can improve our agency business.

[苏罡, executive]

[Interpreted] Well, I'm Su Gang. Maybe I will add more on the high-dividend stocks. In terms of selecting those stocks, it's also a systematic approach. For example, we look at the industries. When we look at, first of all, the big industries, is it a promising industry? So that's the base of consideration. And based on that, then we look at the specific subject matter. For example, the company, is it competitive in the industry? And we will also look at the valuation of that particular company and the company's dividend payout ratio, et cetera, et cetera.

So does it meet our definition of high yield, high-dividend stock? And we look at also market factors. So there is not a single, simple criteria to say which stock is a high-dividend stock. It's an ongoing fluid process.

In terms of the strategy, this is a long-term strategy for CPIC investment. Starting from 2014, we have been utilizing this strategy and treating it as a fundamental strategy for our stock selection. On the whole, we will stick to SAA and then with expanding AUM. Under SAA limits, our total volume of equity investment is improving. So that is why we say investment funds is a long-term fund, is a long-term money, patient money. We have this kind of space to play up our advantages in allocation. So it's not saying that we must move out those high-dividend stocks from TPL.

So currently, the share is 2%. We were actually looking to increase it further. We hope to better reflect the long-term nature of our insurance money.

Now in terms of -- you mentioned about the facilities, monitoring facilities. Now the new policies on these swap facilities, this is a further indication of the Chinese government's commitment to the capital market. So market liquidity will be improved. Market dynamism will be improved. The market confidence will be further improved.

So for insurance companies, especially a state-owned insurance company, we will stick to the directions of the central government. And based on our investment strategies, we must follow the policy to serve the real economy and to serve the national strategy. We will study the new policy and try to development scenarios where we can utilize these policies. So we combine the long-term nature of our insurance money with short-term swamp monetary facilities. Thank you.

[Shaojun Su, executive]

[Interpreted] Thank you. And also thank the questions. In the interest of time, we only have the time for the last question. Our next caller from the [ CM ] Securities.

[Unknown Analyst]

[Interpreted] [ CM Securities, Junxi Sha ]. Two questions from me. In terms of liability, could you share more information on that? For example, we know the regulators are trying to lower the pricing rate to lower the liability cost, so do you have some numbers? I mean, comprehensive liability cost, including the channel expenses, operating expenses. I mean, comprehensive liability margin, how much is it lowered? What's the level of comprehensive liability cost? Could you maybe give us a cumulative number or a marginal number? So that is on the side of the lowering of liability cost. And what about next year? How will the liability cost change in next year? And how low can they reach in next year?

And the second question on investment, on the fixed asset side. Now, your strategy on fixed asset investment, could you elaborate a little bit your share of the bonds and the share of your alternative investment? What's your specific strategy? Are you going to overinvest in the fixed asset investment assets?

[Unknown Executive]

[Interpreted] Now the -- well, first question about liability cost. With the lowering of the pricing rate for traditional products and also for PA life, universal life, of course, liability cost of a company for the new business went down a great deal. And of course, we now offer lower guarantee rates.

To put it simply, our liability cost, that is to say the comprehensive liability cost, that cost would be slightly lower than the pricing rate by 20 to 30 basis points. So overall, new business liability cost dropped quite fast. For example, at 2.0%, you can calculate the liability cost for us yourself.

Now for the in-force business, with the lowering of interest rates in China, overall, PA life and the universal life settlement rate will go down for the whole industry and significantly lower the risk of interest rate spread risk.

Now apart from guaranteed business, I'm talking about the variable parts, floating parts we offer to our customers, now as I mentioned before, our overall liability cost, including PA was lower than 2.5%. On the extreme cases, CPIC, of course, we don't want the extreme cases. CPIC's -- if we do not pay out dividend yield, dividend payout, we believe the 2.5% liability cost can be further lowered.

Now second, on our strategy on fixed asset investment. Of course, fixed asset takes a lion's share in our SAA, maybe 80%, something. Now for a very long term, we have this kind of dumbbell strategy for SAA. Now the biggest one factor is we continue to enhance allocation in T-bond, government bond. We are doing this all the time. We believe this is favorable to our long-term asset liability matching.

Given the current situation, we need to allocate very actively in long-term and ultra long-term T-bond because going forward, we believe T-bond yield are very likely to go down. So at this time point, we believe it's wise to invest in long-term bond. We believe China is going to issue more T-bonds and the equity market improvement will impact the bond market either from primary or secondary markets. So we believe it's a good time to invest in long-term and super long-term T-bond bond market, bond assets.

Now for -- in terms of credit bonds, CPIC will focus on prudent strategy, that is to say, we believe credit bond spread is very small as of now, so credit bond is also a good option. And maybe on a temporary basis, we might look at this kind of a phase of opportunities to look at the maybe bank deposits to improve the yield.

For alternative nonstandard investment, we are prudent on the whole. Of course, we have an asset securitization license. We have our own mutual fund. So we will do some innovation, for example, for risk investments. So we are trying to explore innovative fixed asset investments, so as to achieve some risk premiums.

For the next year, on the whole, we believe we are going to maintain interest rate bond and maintain stable maneuver or stable allocation in bonds so that in either bonds [indiscernible], we will have this kind of a balance. Thank you.

[Shaojun Su, executive]

[Interpreted] Thank you all for the answers and questions. Thank you for your attention to CPIC. If you have more questions, please reach out to our IR team. Thank you. That ends the meeting. Thank you all.

[Unknown Executive]

[Interpreted] Thank you. That's the end of the meeting. Thank you. Goodbye.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]