NCI earnings conference transcript! Executives respond to "net investment return rate under pressure"

As Xinhua Insurance's stock price hits a historical high, the third-quarter report also brings good news.

Xinhua Insurance disclosed that its operating revenue for the first three quarters reached 137.252 billion yuan, a year-on-year increase of 28.3%, and the net profit attributable to shareholders was 32.857 billion yuan, a year-on-year increase of 58.9%.

On the morning of October 31, Xinhua Insurance executives attended a performance briefing for the third-quarter report, engaging in an hour-long interactive exchange with investors on hot topics such as asset allocation of insurance funds, equity investments, and dividend plans.

Pressure on Net Investment Yield and Response Strategies

Management stated that the pressure on net investment yield is a common issue in the industry, mainly due to the decline in interest rates leading to a drop in the yields of standardized interest-bearing products such as government bonds, as well as credit risk factors prompting the industry to generally shrink non-standard allocations.

The company is firmly adjusting its strategy:

First, source high-quality assets and expand asset sources;

Second, extend from investment thinking to investment banking thinking, actively seek assets and build transaction structures;

Third, enhance the ability for complex transactions and front-back office collaboration.

In terms of implementation, the allocation focuses on interest-bearing bonds as the main asset allocation, combined with timing for interest rate adjustments; structural adjustments to financial products will reduce the incremental traditional risk assets represented by real estate, while actively following up on various types of REITs and making progress.

In the asset management plans and fixed income sector, the company is firmly laying out two main lines: one is dividend-type alternative assets represented by infrastructure, and the other is growth opportunities in the digital economy and healthcare sectors, aiming to stabilize net investment yield under an absolute return orientation.

Balancing High Dividends and Growth Stocks

In terms of equity investments, since 2024, Xinhua Insurance has continuously and steadily increased the proportion of equity asset allocation, maintaining this strategy in the first three quarters of 2025.

Based on a steadily increasing overall exposure, the company comprehensively considers market conditions, volatility, return on net assets, and long-term value, allocating both high-dividend and growth stocks, selecting quality targets through a combination of top-down and bottom-up approaches, not pursuing a fixed ratio but dynamically adjusting the structure.

The diversification of the investment portfolio has increased, with equity assets enhancing the role of improving the return center, and stability and resilience are also continuously improving.

Future Dividend Plans

Xinhua Insurance executives stated that the company has always placed a high value on shareholder returns. Historically, the company has actively rewarded shareholders based on profit realization, and semi-annual dividends have received positive market feedback.

With profits expected to reach a new high in 2025, mainly benefiting from good performance in the capital markets, in the future, the company will comprehensively consider annual profit realization, funding conditions, risk indicators, investment returns over the next 2 to 3 years, and trends in risk-free interest rates, while referencing the dividend levels of peers and soliciting shareholder opinions, seeking a balance between short-term and long-term development in researching dividend plans.

Slight Decrease in Solvency Ratio

Regarding solvency, the company pointed out that it is still improving overall compared to the end of 2024, although there was a decline in the third quarter of 2025 compared to the second quarter. The changes in the third quarter were mainly due to the downward movement of the 750-day moving average government bond yield curve, which increased reserves, while the rise in spot interest rates led to a decrease in the market value of available-for-sale bonds, combined with the rise in the equity market increasing minimum capital requirements, collectively affecting solvency indicators The company has improved its solvency through asset reclassification and optimizing asset-liability matching, and has enhanced its endogenous capital capacity relying on profit growth. In the third quarter of 2025, net assets increased by 18 billion yuan . The company is advancing the issuance of capital replenishment tools, and the board has approved a capital replenishment bond plan of 20 billion yuan, which will strengthen core capital and overall capital adequacy ratio, giving the company a strong ability to resist risks.

Transformation of Participating Insurance

Regarding new business and the transformation of participating insurance, the company stated that the first-year premium performance in the first three quarters of 2025 was outstanding, with the first-year premium for long-term insurance reaching 34.9 billion yuan, a historical high, with significant growth.

In the first quarter, the company achieved a leading position through differentiated strategies, and actively initiated the transformation of participating insurance starting in the second quarter. The company had not sold participating insurance for many years, so it conducted a systematic analysis before the introduction to ensure that products, training, and teams were fully prepared.

Starting in April, the company fully introduced participating insurance, focusing on enhancing the understanding and communication capabilities of the marketing channels, and implementing differentiated supply based on the needs of bank outlets in the bancassurance channel. From April to August, participating insurance accounted for over 70% of new business in personal business, further increasing in September; the proportion of participating insurance in the bancassurance channel increased month by month.

Growth of New Business Value

Management pointed out that the new business value in the first three quarters of 2025 increased by 50.8% year-on-year, driven by factors including enhanced product competitiveness, strengthened sales skills of the marketing team, upgraded service ecology, and simultaneous advancement of cadre team building and business quality control; the bancassurance channel improved product value rate through collaboration between insurance and banking, enhancing its contribution to overall value.

Regarding value backtracking, the company has not yet conducted specialized work, but if there is market demand, further research can be conducted at the end of the year. In the face of value rate pressure brought by participating insurance becoming mainstream, the company will aim to stabilize the value rate by optimizing business structure, adjusting payment periods and coverage durations, promoting cost reduction and efficiency enhancement, and strengthening business quality to offset the pressure.

Measures to Enhance Human Productivity

Management emphasized that human resources are the foundation and core competitiveness of the development of marketing channels.

The company systematically promotes the improvement of team foundation and quality, reshaping the team development model through institutionalized operations and ecological integration, proposing a new team development path of autonomous operation, posture leadership, and efficiency-driven, reversing the past state of high turnover and low efficiency in personnel changes, and incorporating the number of new and regularized, high-performing teams into the core assessment for 2025