NCI Performance Meeting Transcript: 26% Revenue Growth, What "Secrets" Are Behind It?

On April 30th, NCI held a first-quarter performance briefing. After announcing a strong first-quarter report with a revenue increase of over 26% year-on-year and a net profit attributable to shareholders of the parent company growing by 19% year-on-year, the NCI team faced investors and provided a detailed interpretation of the operational situation in the past quarter.

Below is the Q&A transcript, organized by ZhiShiTang for readers.

Question: In terms of investment, how did the company's overall performance in stocks and bonds fare in the first quarter? After April, with capital market fluctuations, how is the investment performance expected in the second quarter?

Answer: In the first quarter, the company's equity investments seized structural opportunities. Specifically, in A-share investments, the company strengthened its wave operations, capitalizing on structural investment opportunities and increasing positions in high-dividend varieties. In Hong Kong stock investments, in addition to continuously focusing on high-dividend strategies, attention was also given to the allocation in growth industries.

In fixed income investments, the company increased the allocation of long-duration bonds and bought more when bond prices were low, enhancing wave returns while slightly reducing the scale of repurchase leverage.

After April this year, the company will continue to adhere to value investment and absolute return principles, with stable performance in equity investment returns.

Question: The company's first-year premium for long-term insurance has seen significant growth, but premiums for policies with a term of over 10 years have declined. What is the reason for this? As the entire industry transitions towards risk, what changes will the company's product strategy have after the second quarter? The disclosed non-consolidated financial value growth rate is 68%. What is the trend of the financial value growth rate and value ratio under comparable standards?

Answer: The growth in first-year premiums for long-term insurance is mainly due to the company's adherence to a value-centric development philosophy, focusing on first-year premium business and maintaining a good development trend while managing the pace of business development and emphasizing team and capacity enhancement. The decline in premiums for policies over 10 years is primarily because the business volume for 2024 is not large, and although there is a significant decline in 2025, it has a limited impact on the total.

In the second quarter, the company will continue to promote 10-year premium business, drive the transformation of participating insurance, and regularly promote long-term protection products.

The transformation of participating insurance has achieved certain results, with participating insurance becoming a major source of premium income in marketing channels in April. Regarding the growth rate of financial value and the trend of value ratio changes, the company's business value continues to grow rapidly. Although the growth rate of business value is lower than that of premium payments or new policies, it remains within a reasonable range overall.

Question: The net assets in the first quarter saw a quarterly negative growth of about 17%. Since the second quarter, the yield on 10-year government bonds has declined, while the 60-day average has risen. What is the trend of the company's net assets since the second quarter, and what measures will be taken to smooth out net asset fluctuations in the future? In terms of asset-liability matching, what are the durations of the company's assets and liabilities? What is the current cost of liabilities? How much has the cost of liabilities decreased in the past two years against the backdrop of declining pricing rates?

Answer: The decline in net assets is mainly due to the downward shift in the yield curve, which has led to a significant increase in the book value of insurance contract liabilities, along with factors such as asset classification misalignment.

Although net assets have decreased, this does not indicate that the company's operations are facing issues; rather, it is based on the logic of the new accounting standards. The company is adjusting its asset allocation and may supplement net assets in the future through financing tools such as bond issuance to alleviate volatility issues In terms of asset-liability matching, the duration of the company's assets and liabilities will be dynamically adjusted based on market conditions. Currently, the cost of liabilities mainly concentrates around 2.5% for traditional insurance and participating insurance, with some at 3.5% for protection-type products.

Question: The core solvency adequacy ratio has significantly improved in the first quarter. Is there a one-time bond conversion effect behind this? The underwriting financial losses have seen a substantial increase in the first quarter. Is this due to the rise in policy interest costs or better performance in investment returns?

Answer: The improvement in the core solvency adequacy ratio is mainly due to the company's reclassification of held-to-maturity assets, all of which have been reclassified as available-for-sale assets to better match the relationship between assets and liabilities.

This adjustment has led to a significant increase in net assets compared to the end of 2024, resulting in a substantial increase in actual capital and core capital. Regarding the increase in underwriting financial losses, it is mainly due to the increase in investment returns from participating insurance, which has slightly raised the underwriting costs on the liability side, as well as the growth in the scale of traditional insurance policy liabilities leading to a slight increase in insurance system costs.

Question: The pace of investment in the bancassurance channel in the first quarter of this year differs from last year and peers. What is the reason? In a low-interest-rate environment, how has the strategic business investment pace and expectations in the bancassurance channel changed? Can the newly grown regular premium income be further broken down? The cash outflow for fees and commissions in the cash flow statement has grown rapidly. Is this due to the income growth of the individual insurance channel team or higher fees in the bancassurance channel?

Answer: The rapid growth of single premium income in the bancassurance channel is mainly due to the low base in 2024. In 2025, the company will adopt a strategy of both regular premium and single premium in the bancassurance channel. The newly grown regular premium income mainly comes from business expansion and product structure adjustments in the bancassurance channel.

The growth in cash outflow for fees and commissions in the cash flow statement is mainly due to the increase in business scale, rather than an increase in fee rates. The company's fee expenditures in the bancassurance channel are strictly executed according to regulatory requirements, and overall cost control is good.

Question: What is the proportion of participating insurance in new premium income? What is the company's target for the proportion of participating insurance by the end of this year?

Answer: The proportion of participating insurance in new premium income is gradually increasing, with participating insurance accounting for nearly 60% of new premium income in marketing channels in April. The company's target is to achieve a proportion of participating insurance in total new premium income of over 30% by the end of the year.

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