China Pacific Insurance (Group) Co., Ltd. (601601) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon. I'm [ Jinghui Chen ] from CPIC [ broad ] office. This is actually what we called in Chinese [Foreign Language], the summer. So we welcome all of you to this CPIC seminar on the new accounting standards. According to the Ministry of Finance [Technical Difficulty] we need to implement new accounting standards [ January '23 ], this new standards will have a big impact on the financial statements. [Technical Difficulty] And we have with us experts on this. Mr. Guan Xiang from Ersnt & Young, for more insights on the new accounting standards. And of course, and represents only his own personal opinion and therefore does not represent the opinion [Audio Gap] or any other institution. First of all, Mr. Guan [Audio Gap], lasting about 70 minutes, and then there will be a Q&A session. Now let's give the floor to Ms. Gu.

Good afternoon, everyone. Now I will give you some information around the new accounting standards. But of course, as [ Mr. Chen ] mentioned, I actually -- what I say here today is only my personal view, and well, of course, new accounting standards and the new standards on financial instruments. I have prepared a PPT, we call it as the new accounting standards -- well, that's a rough name. So including the new standards for insurance and the standards for new financial instruments. But on the whole, we just call it the new accounting standards. It's a rather complicated issue. And in terms of the implication for insurance companies, I will say the impact will be quite big. But of course, impact will not only be financial impact, but also on other areas, for example, impacting the IT systems and data, et cetera. So first of all, maybe I will spend 70 minutes on the new accounting standards for insurance, and then a little bit of time on the new standards on the financial instruments. Now as I mentioned, well, you can see here what we have -- what we talk about today is just domestic standards compared to international standards. As you know, the Ministry of Finance in China, we are -- they are actually adopting international practices. So there is a convergence, a trend of convergence. But I would say though they are Chinese standards, they are actually converging with international practices. So well, I would say, for this presentation, we are first of all touching upon the new insurance accounting standards. It's very complicated in itself. And then we'll look at the interaction between the insurance accounting standards and the standards for financial instruments. And lastly, we will talk about the -- some of the potentially important financial indicators. So first of all, I will say something about the liabilities under the new standards. So under new standard, as you can see, is they look at the -- in terms of the contract liabilities, they -- in terms of the measurements, they are now more standardized. And also in terms of income recognition, they also, well, set up new definitions. I would say that you can say the BS, the right-hand side of the -- well, the balance sheet is mainly the liabilities. And also for PL, apart from the investment income and OCI on the PL statement, you can see that they actually did a redo, a redefining of those liabilities. And for the standard for new financial instruments on the left-hand side, and that's on the asset side and also on the investment yield side, they also had a lot of new rules, the definitions. So both the asset side and the liability side, they now have most of them covered. By that I mean, new definitions, new calculations, formulas, caliber, et cetera. But of course, for insurance companies, they have other assets, for example, fixed assets, et cetera, but those are not large in amounts. So I would say the important assets and the liabilities are now being redefined by the new standards. So first of all, we will look at the issuance abilities. Now they have [Technical Difficulty] to do the definition, the different approaches. I will, here, only touch upon the general approach. So I would say, in terms of the contract liabilities, you can see the 4 building blocks or 4 factors that is, to put it simply, just to calculate the liabilities, to calculate the reserves. And they are now saying they are 4 building blocks. And so using the 4, they can calculate how much liabilities a company has. So of course, you can look at the professional definition of the 4 building blocks. And you can just read it for yourself. I would not just read it out. I will not repeat it. I would want to make my presentation more accessible, more easier to understand. So to put it in layman's words, block 1, building block 1, that is the estimates of future cash flow. That is to say, after you signed the insurance contract, that how much premiums will go in and how -- will come in and how much payment will go out. Second block, building block, for long-term life insurance contract, so cash flow and they will also be cash out. So -- but of course, it's long term, it will happen in many years in the future. So we need to look at the discount rate, to look at the time value of the money. Especially for life business, now you can see the premiums coming. If we just look at the sum of the premiums, the premium, of course, will be smaller than the benefit payout, right? So for example, whole life insurance, if premium is CNY 10,000, but the benefit payout is only CNY 9,000. Well, it doesn't make sense. No customer would buy a such a product, right? So of course, the sum assured that would be bigger, higher than the premiums. But if so, then are we going to lose money? No, because of the time value of the premiums. We need to look at the discount rate. We need to look at the present value of the premium of the payout. But P&C is a different story, because the claims payout is not a, well, certainty. But whole Life business, of course, is definitely we need to pay out this amount of sum assured when the insured passes away. And the third building block is the -- what we call the RA, risk adjustment for nonfinancial risks. Now to put it simply, the definition is quite complicated. But to put it simply, I would say that the insurance companies need to undertake certain risks. Of course, to take more risk, I need to be paid for that. So if the possibility of insurance events will be higher than my estimate, then I would have the money to -- well, to pay for that. So you can say that's a prudent way of making the calculation, right? So that is what we call a RA, a risk adjustment. But of course, if we made a very, well, adequate reserves, then we can -- after that, on top of that, we can get the profit. That is the contractual service margin, CSM, that can be your profit and that's the building block 4. That is to say, we have the profit. But why it is a liability? So we would say [Audio Gap] call it a liability. But that's really because of -- you see when I sign the contract, so under accounting standards, I cannot book it as a profit and I can only book it, record it as a profit while I provided the service. So it's not -- starting from day 1, I need to provide the service many years into the future. So this profit [ price ] would be amortized, so that is why [Audio Gap]. So after the 4 building blocks for liabilities. Maybe I can give you a concrete example, give you some numbers, so that you can better understand. For example, if you collect CNY 100 for premiums and -- but you pay out CNY 10,000 or SA is 10 -- is CNY 1,000, for many years it is a whole of life product. So -- but if you make a discount, then the CNY 1,000 present value is only CNY 80 for present-day money. So CNY 80, then if you want to be more prudent, we can have a CNY 5 as a reserve, CNY 5 that is I collect my CNY 100 I need to payout CNY 85 in terms of benefits, including the expenses. So what's my profit? CNY 15, right, that's my profit. And during this process, the CNY 15 is not there on day 1, it's to be released or to be amortized over the stretch of many years in the future, while I provide the service over the years, many years into the future. This is an important concept. So you can see a CSM, that there will be a contractual service margin. So when you read the financial statements from an insurance company, then you must understand that it, it is a future profit, it's to be amortized into the future, and then it will become the profit. I believe this is a very key financial indicator. That is to say, with the passing of time, the profit will be released for the insurance company. And of course, depending on the payout, on the, well, expense estimates, et cetera, you need to be prudent, you need to have enough reserves. For example, as I mentioned the case, CNY 80 plus CNY 5, less CNY 85. But if you made the wrong estimation, then if the total payout is CNY 120, then you actually made -- you will lose CNY 20 rather than make a profit of CNY 15. And actually, the new accounting standards want the insurance companies to be prudent, to be conservative in estimating future cash flows. So that is the general approach for calculating insurance liabilities. But if you ask me, what's the difference between the new and the old standards? Well, I would say they also have something similar to building block 1, 2. They also have this kind of a risk margin. They also have actually financial risks, and nonfinancial risks. They have money of -- well, time value of money. And also in the old standard, they have the residual margin. But in the future, there will not be residual margin, there will only be CSM. So I will say the building blocks are pretty much the same or similar, but the calculation method or treatment will be different. For example, building block 2, the adjustment of the time value of money, currently, they used to 720-day moving average, the curve. But in the future, they would use the spot interest rate. They don't want you -- they don't allow you to use the 3-year or the 720 moving average. You see discount rate is very important to insurance companies. From the rate there is only a very small difference, but stretched out over 50 years or 30 years will make a very big difference. So the impact of the rates will be huge for the insurance company in this calculation of the liabilities. As I mentioned if the discount rate is not 5%, but 3%, then the CNY 80 would become CNY 150, for example. So they will make a huge difference. Building block 4 CSM also, there is some change. For building block 3, there will be -- maybe they have it in the old standards. But for RA, they are quite relaxed. But for blocks -- building block 4, they are more strict. CSM is quite different from the residual margin. For example, the accounting estimates will be changed. Well, at this point, I will come back to -- so well, this will or the absorption of the accounting estimate changes. Well, let me give you an example here. For example, you're taking CNY 100 in premiums, in the future you need to pay out CNY 1,000 in total. But discount, but the present value of the CNY 1,000 would be CNY 80. I'd give you the buffer of CNY 5, then that's CNY 85. But of course, actuaries are not Gods, they cannot make -- calculate everything accurately. So based on -- given all the estimates and assumptions, maybe they would be more pessimistic or too optimistic, so they need to make adjustment and found that they were wrong. That's very natural. Everyone can make mistakes. So there might be some adjustment. So we need to pay out more in expenses. So then the CNY 80 becomes CNY 90. So -- but of course, building block 3 is still CNY 5. So then the future profit would be reduced from CNY 15 to CNY 5. So under the old standards, then the CNY 10 would be treated or be recorded into the P&L in the current period, that is there's CNY 10 in full reserves and your profit would go down by CNY 10, right? So what would be the impact? That would be -- that would mean that your profit will be reduced by CNY 10. But actually, the CNY 10 would be in the future, it doesn't happen in the current period. That is only because well I made an adjustment to the morbidity rate, et cetera. So then we do a discount then CNY 10 less the profit. So that's the old standards. But for the new standards, actually, they have an absorption mechanism. That is to say to absorb say impact. That is to say, the amortized profit, you made a wrong estimate. Best estimate is CNY 15, right, that's the original estimate. Later on, you found that you made the wrong estimation, it's only CNY 5, there's a difference of CNY 10. Then they say that, first of all, you need to lower the profit to be released and that's the CNY 15. So that is the reserve for future cash outflow should be higher, and then the profit to be released will be lower. So that is you move from liability A to liability B. So liability remains the same. PL remains the same. So under the new standards, if you made the changes in the morbidity estimate, the net profit will not be directly impacted because it will just impact the profit to be amortized, to be released. So for example, previously, it is CNY 50 to be amortized over 50 years, now there's only CNY 5 to be amortized over 50 years. So the -- I mean the impact for this year will be much less because it's divided by 50 years, divided by 50, it's amortized over many future years. So building Block 4 can have an absorption effect, so can offset the impact. So it's different than the old standards. In the old standards, they don't have this kind of absorption effect. That was so much about the liability -- calculation of liability. Now we move on to the income. So we've heard a lot of rumors about the impact on insurance income. Now I would say, first of all, it will have very small impact on PL and property and liability insurance. In the P&L, property and casualty actually is short-term insurance, so the impact will be very small. Secondly, income will go down, then my profit will go down? Not necessarily, because it does not only lower the income, but also reduce the payout. I wouldn't say it's proportionately. But I would say, the income will go down, the payout will also go down. So your ultimate profit will not necessarily be reduced. So why the income will be lower? First of all, you can see -- on the left-hand side, you can see the old standards. When we say we will have premium income, what does it mean? Well, that is to say, come back to my case of CNY 100 premium income. On day 1, we find the contract, we collect CNY 100 premium, single premium, CNY 100. So this CNY 100 we collected, so that is your income, right? So under the old standards, the CNY 100, need to pay for insurance payments or service over the next 50 years. But they will not consider it, it doesn't care about how many years of liability you have, they just record it, book it as income. They wouldn't worry about how much they need to pay out, whether it is a claim payment or whether it is a benefit payout, et cetera, they don't care about that under the old standards. If there is no insurance event you need to pay out, then this is not -- this is what they call a -- it's like a sale component or what we call officially investment component. Well, then it's like a bank. You collect money in the future, you need to pay out. So it's like a bank taking in deposits, right? There will be no such triggers. There will be no threshold for payout to this amount of money. They must pay it out, whatever happens. So under the new standards, they would say it's like a saving, it's like an investment. For our Whole Life contract, traditional life product, whole of life products, usually, they would canton the terms saying that, of course, you can surrender your policy. So if you surrender your policy, you will get a surrender payment, right? So the surrender payment would be like an opportunity for policyholders to get the money out and leave the game, right, to get the money out first, you can pay for retirement, et cetera. So under the new standards, so the lender is not an insurance incident, right? So it's not an insurance incident, but they can surrender and get the money out. So it is like a deposit, it's like a saving, right? They can take out the deposit, take out the living. So they save this as kind of a saving component. So this -- if your premium include this, then this part should be taken out. It should not be your income. So that is the what I marked in yellow, the yellow part. And of course, there is the actual insurance part you need to pay or get paid before taking risks. But of course, let's say that you need to provide service over 50 years into the future, so you cannot book it on day 1 as income. You need to stretch it out, stretch it out amortize it over 50 years. This is pretty much the same in other industries. For example, if you build a very big building, you will -- you get paid or you record it as income by milestones, right? So the same here under the new standards, you need to release the income over many years into the future. So you take out the savings component and when you analyze the income over many years into the future. But of course, the actual calculation is very complicated. It's not like this, not like what you see here on Page 6. It's not proportional. It's not a linear relationship. So it's not very simple. It's quite complicated in actual calculation. And then there is a issue of interest. While you'll amortize your income, they can have the interest accreted. What's the logic behind that? Well, you see, I get CNY 100 for premium -- in premium, it can not be recorded as income. It should be amortized many years into the future. So I would say the CNY 100 is a liability. And actually, with the passing of time, the liability will grow bigger. Why it will be grow bigger? That's because you see ultimately the premium should be comparable to your payout, to a claims payout. As I mentioned CNY 100 in premium 50 years into the future, I need to pay out CNY 1,000. So CNY 100 should -- the current CNY 100 should be the future CNY 1,000. Maybe for 50 years into the future? Well, actually, in 5 years' time, I mean, I can only record for income, but the total expense would be CNY 1,000. If that's what happened in reality, then I would be making losses. But that's not true. As I mentioned, I collect the money, CNY 100, and then I will use CNY 100 to make investment. So the CNY 100 would grow bigger. So ultimately, in 50 years' time, I will make money rather than lose money. So that is to say I would actually create interest on this insurance revenue to be amortized. So there's interest accrued and to be amortized. So ultimately, in 50 years' time, in the CNY 100 would be bigger than the CNY 1,000 total payout over 50 years. So then we make some underwriting profits. So that is the basic logic behind the new standards. Now you will say hold on a moment, there is a loophole, because you create an interest, then you -- I mean, how can you actually get the money higher, I mean. Well, I would say, it would not actually impact -- whether the old or the new standards will not impact the cash component. But the old component, the total amount under the old standard is CNY 100. But the new -- under the new standards, the total revenue would be CNY 1,000 or even bigger than CNY 1,000. But then there comes the cost of the funds. The cost of funds should be presented or listed separately. That is to say, well, your interest -- your investment yield does not come from nothing, it comes from the cost of funds. That is to say you get the money in, you get a premium in, and then you get CNY 100, you made some investment, but the investment is at cost, at the cost of funds. Because ultimately, you need to pay out in claims or benefits. So that is to say investments should make a profit, underwriting should also make a profit, that is why now they actually want the interest to be accreted. So you need to take out the saving component, you need to amortize and then you need to accrete the interest. It's different for auto insurance, for example, right? If you've purchased an auto insurance, you need to surrender, you get some cash value back. But for whole of life insurance, if you surrender, you actually get more than your premium paid. If you are close to the maturity of that life policy, you get much more than the premium you paid out. So for P&C insurance, that's a consumption insurance, but the life is different. But can you actually divide the life -- divide the life insurance into path into 50 parts, into 30 parts? Well, actually, P&C, you can do that. But for life, you cannot. For Life, as I mentioned, the insurance revenue need to have the interest accreted. So for P&C insurance, they -- sometimes they also accrete the interest, but it's only for 1 year. So the impact will be very small. Not like the life business. So this -- I mean, the impact on the revenue mainly applies to long-term insurance. If there is no saving component, it's very -- the term is very short, then impact will be very limited. On the next slide, you can see the expenses and the claims. Now we talked about the liability and the revenue, now what about the expenses and claims? For Life business, long-term life, there will also be some impact. As we mentioned, when you make out claims, right, as you can also see on the slide, the claims, you need to take out of the savings, saving component. Now as we use the same of the case. CNY 1,000 in premiums -- CNY 100 in premium income and CNY 1,000 total payout. Before income insured is 50 years when he bought the insurance and he died when he was 100 years old. So when he dies, we need to pay out CNY 1,000 to his -- to this beneficiary. Under the new standards, if actually they surrender -- not surrender the policy, then probably you need to pay him CNY 950 if he surrender the policy before, right before he dives, maybe CNY 950 something like that. So they will say the CNY 1,000 -- only CNY 50 out of the CNY 1,000 would be expenses, and the CNY 950 would be paid back to the insured, to the policyholder. As we mentioned if you surrender the policy, then the money should not be counted as revenue. As we mentioned, the CNY 100, maybe CNY 50 is a saving component, then the saving component should also accrete the interest, then over 50 years the CNY 50 become CNY 950 then you just paid back the CNY 950 to the policyholder. So using the same logic, we would take out the savings component, take that out from the revenue and also from the payout part. So that's the claims. Now in terms of the expense, the old -- under the old standards, when expense occur you will go into PL, and then if it needs to be amortized, you just do it. But under the new standards, the expenses should be transparent. You need to say what exactly is the expense, you should say are they directly attributable expenses or indirect expenses, is it direct or indirect or irrelevant expenses. So when it occurs, it will go into the expenses. It actually go into the -- on the -- it's not actually CSM, it's other expenses. So for those directly attributable expenses, we would also distinguish between acquisition or maintenance or claims handling expenses. And this will go to the insurance contract groups. So with these contract groups then they will go into the amortization process. So eventually I mean, these expenses would be amortized. So the acquisition expenses, we need to amortize so you would become smaller on your statement. But now old standard, the expenses will not be amortized acquisition costs -- acquisition expenses. But the new standard acquisition expenses will be amortized. So the difference will be huge, right? So is it the case? No. In the past, in the old standards, they actually -- they would have a smaller provision for reserve. But in the new standard, they actually do not have the provision of reserve. So I would say it's a reclassification of the -- for the statements. I would say the biggest impact would come from the saving component, it was now taken out. It was taken out of the picture. And also the calculation of amortization would be different under the old and the new standards. So -- but of course, these are details. So with these details we might have all sorts of differences. The biggest impact comes from the taking out of the saving component. So revenue goes down, payout goes down, so the profit will not necessarily go down. But of course, we cannot say for sure because the calculation of the 3 of them are quite complicated. And the cost of funds, as I mentioned. Under the new standards, you see the logic is right, in that revenue and expenses should match each other. Because under the old standards, revenue is booked in the current period and expense amortized over many years, so it's not matching, right? So under the new standards, your revenue will also be amortized with interest accreted. So then in 50 years' time, your revenue would be bigger than the total payout or total claims plus expense. But of course, the interest accreted would be treated as investment income booked at the cost of investment yield, and you need to also calculate the investment yield . That is to say we need to consider the cost of funds. So now they have another insurance service results, plus investment profits, then you get the pretax profits. So this will get you a better idea about the sources of those pretax profits. You can get a better idea. You can see here. So under those standards, that is the earned premiums. Under the new standards, it's insurance service results. So it's different names. But in reality, they just compare the earned premiums. And with the simplified PL statement does not give you too much details here. Now you can see here on the left-hand side of the old standards, you can see some, well, red boxes. On the right hand, the new standards. Now these are the insurance service results. They don't have the insurance service results in the old standards. If they have it, then it will be loss-making. Why? Because other than investment income, or other income and expenses, other than -- all our items can be related to insurance. If you add them up, then you would be making losses. Now you can take the listed life insurance company's financial statements, you can do the calculation. You can do the pretax profits minus investment yields, minus other income, you would say the number would be a negative one. That is to say your premium would be smaller than the claims payout, because you do not accrete the interest, as I mentioned at the start of the presentation. But under the new standards, the insurance service revenue or results would include the interest. So now they have insurance financing costs, so it is actually a cost of funds . So if you sum -- well, if you added the 4 up, then you will see for good companies, the total sum of the 4 items would be a positive number, that is say positive insurance service results. If we look at the investment income minus the cost of funds, that's the -- I mean, cost of funds as indicated in the -- by the items in the blue boxes, then you will get an income of investment profit under the new standards. But of course, we cannot purely look at the investment profit as the most important KPI, it's not necessarily a very good one. And okay, you can see some OCI items. At the bottom of the page, that is other comprehensive income, it is newly added indicator in the new standards. That is, for example, some changes in fair value of financial assets. And most companies would choose to do this OCI. What does it mean? Well, that would mean that we will read the financial statement. As I mentioned, when you calculate a building block 2 for liability calculations. That is the discount rate should use the spot rate. And the old standards, that is the 720 moving average. Now the spot rate, what kind of impact would it be if we use the spot interest? Does it mean more volatility, for example, the BS, balance sheet, for example, recently -- well, if we have a reduction in interest rate under the -- actually the old standards, they would use 750-day moving average. That's an average number. So I mean the changes in spot rates would only have minimal impact on the discount rate. But if you use spot rate, then for example, you had a rate cut, then the rate -- the spot you use would -- I mean for the balance sheet, would have a very clear impact. That is to say your liability -- the total liability will change a lot if you change the discount rate. For example, if you -- I mean if there's a rate cut liability will go up by a huge degree, now if, under the old standards, you would go into PL, P&L, a huge number. If we use 750 moving day average, if you look at the previous year's numbers actually the impact will be quite big. But actually, on the new standards, if you use spot rate, but after that, the increased liability can go into PL and go into OCI. But you have the choice, you have the option. But it's an option of accounting policy, it will stay with you. You cannot change it arbitrarily. If after you make this option, then the sudden change of the discount rate will not have a direct or immediate impact on your net profit, only impact your OCI. Now ultimately, the OCI will impact your profit ultimately, yes. Because ultimately, your total profit over many years will be the same, whatever accounting treatment you use. By using different treatment methods, you actually cut or recut the cake in different ways. So if you put it into the OCI, that means your OCI would gradually turn into profit over many years to come. So that means the impact will be offset, will be smoothened out, will be well absorbed or evened out. So given a very long cycle, for example, 50 years into the future, there will be rate cuts and rate hikes, so the ups and downs in interest rate. So then these effect will even each other out over maybe 50 years very long horizon. So if it is only a short-term volatility you can go into OCI. So what I mean here is that under the new standards, actually, they would give you an option for the calculation of liabilities to offset the impact from interest rate changes. We don't want the insurance companies to have an immediate impact from interest rate cuts. Because the interest rate cuts, short-term changes in interest rates, they cannot change it, they cannot control, and then the regulators don't want this kind of rate cuts or rate hikes to produce immediate impact on your profits. So I would say this logic is reasonable, they give you an option for OCI, they -- to absorb this kind of immediate impact. So this is another key point here. So I would say discount rate would have a huge volatility for liabilities. But if you use OCI and then actually you will not have immediate huge impact on your net profit, but still on the net assets. And also some other words on the accounting standard for financial instruments. They have what we call the FVOCI for debt instruments, for debt, for example, you bought some bonds. And this bond, the same here, if the interest goes down. If you got a fixed-term bond, you get unrealized gains with fair value increase. So your liability goes up. So I would say the -- well, because of interest rate cut, so liability goes up. If I put it -- this to FVOCI, then the balance sheet would look more evened out. So I would say many companies would actually treat financial instruments, a lot of the debt investment, many of them hold to maturity, I would say, maybe they would like to move it to FVOCI, fair value OCI. That is to say, when the interest goes down, the liability calculate the yielding spot rate, the net asset goes down, net profit can be offset -- can offset the impact with OCI. So if you use FVOCI, when interest rate goes down, your asset goes down and liability goes down. So there will be some kind of offset effect. But of course, the duration of assets it will be shorter than the liability duration. You cannot impose a lot of the long-term nonmaturity bond. So -- but anyway, assets goes down can offset some of the impact from increased liability. So I would just say the company -- or insurers would actually put the debt investments into FVOCI, so that the volatility of net assets would also have some absorption effect. But you may ask, why should I -- why shouldn't I put it into FVTPL? Well, I mean on the asset side, it would be the same. It will have -- it will make a difference for the net profit. If you choose the FVTPL for assets, then there won't be a mismatch. So I would say the FVOCI approach would help to absorb the impact on the net assets. So in terms of matching the debt investment, debt investment in terms of classification, the FVOCI would be a better option. But of course, this only applies to long-term insurance. A P&C company, different story. They have short duration of liability, but a longer duration for assets. So for P&C companies, you need to consider the duration of liabilities and assets and their relationship. So it's a test of your accounting matching. But on the whole, most -- for most life companies, they have a duration gap. That is the duration of liability will be higher or be bigger than the duration of assets. But for P&C company, maybe you don't need the FVOCI approach. And also something about the reserves, you can see the reserves, there is also current period reserves minus the end of the current period reserves. But actually, under the new accounting standards, there will not be such indicator. It's a perplexing issue. Sometimes you have higher premiums, but your reserve does not go up. Because the reserves actually were impacted by many factors, not necessarily your premiums. So there are many factors. So under the new standards, they say you need to provide more details, you need to have more items, breakdown items, many items will be impacted. So that's some of the differences for the PL. Now about balance sheet differences, you can say a lot of the information here for the new standards, we now have 4 items. So -- and one of the items on the left-hand side will disappear and you will only have 4 items. You can see BS, will have less information. I will say, where can I find the premiums collectible? But you cannot find the information here under the new standards, where do they, where can I find the information? Well, actually, you see under the new standards, you should have a -- you actually do it in a portfolio approach. So they actually -- they would put similar insurance policies into our group and then they calculate their assets and the liabilities, the debit item and the credit items, the reserves and the premiums, collectible, claims payable, et cetera, and then they do a netting. After the netting, for example, reserve of CNY 1,000 and then I have a reserve of CNY 800, that is a credit balance. We would say that is the insurance liability. Now, for example, you have CNY 1,200 as premium collectible or payable, and then when CNY 1,000 or claims payout, then it becomes an asset item or asset balance. So we too have this kind of a netting. So on the financial statement, if you want to see the number for premiums collectable, you actually cannot find directly this item on the BS. Will there be note, a disclosure? No. If you want this number, I would say you need to ask the company to give you such disclosure, because the accounting standards actually does not require a company to release this premium collectible, the balance of the premium collectible, and under which item can you see the number. Well, we can voluntarily disclose this information, but it's not required by the new accounting standards. Why? Why did they actually omit the premium payable or collectible? Well, I believe these kind of items or claims payables, et cetera, et cetera, they do the netting. Why? I would say they believe these are all factors. Building block 1, they wanted to be a perfect theory, that is the estimate of future cash flow. What is the premium collectible? That is the possible premium income in the future, so that's the future cash inflow, and the claims payable is cash outflow in the future. So I would not distinguish these 2 from other cash outflow or inflow, I would just treat them as a building block for calculating the liability. So these premiums were actually -- or will be recorded into the liability calculation. So they don't want to repeat in terms of presenting the numbers. So that is why we have the building block 1, 2, 3 and 4. Because in the old standards in building block 1, they don't have the premiums collectible. But in the new standards, they already included in the building block 1. So what is the effect for assets? I would say, my guess would be the total assets and total liability would all -- would both go down, because premiums collected would be smaller than the reserve, so premiums collectible should be smaller than the reserve, total reserve. Then you do the netting, so your liability would be smaller and your assets would also be smaller. That is to say, for example, CNY 100 in premiums collectible, CNY 200 in reserve, you do the netting, and then you only have CNY 100. Your assets will be down by CNY 100. So total assets and total liability will both go down, but it does not impact the net assets from this perspective. So don't be surprised if you see smaller total assets it's because of the netting. And sometimes you can't even find the item. So this is no mistake on the side of the company because actually the item disappeared under the new standards. So that is why we are having this conversation today. When you read the future statements, you're usually prepared for these changes So it's about business change, it's is only -- it's not that we don't do policy loans, don't have premiums collectibles, et cetera, it's only accounting treatment, they are not now listed as a standalone item. So actually, I've touched upon some of these points earlier on. Now the key impact, as I mentioned, there is no 750 moving day average, it is now spot right -- a spot rates, current interest rate. So volatility would be higher, interest cut and reserve would go up. Now current interest rate will give us short-term -- bigger short-term impact. But net assets will be -- of course, will be impacted. But for net profit, luckily, we have the OCI, which can absorb some of the impact. But of course, there will be long-term impact, unless the interest movement reverses. So ultimately, the net profit may not be impacted only one-sidedly. Now as I mentioned, when you actually change the morbidity rates or estimates, the impact will be minimal because it's like actually, we have a cushion. That is the CSM. It has a so-called absorption mechanism. So accounting estimate changes. Now 2 of them. One is the financial estimate changes, for example, discount rate changes, et cetera, nonfinancial estimates, morbidity rate changes and surrender rate changes. For financial estimate changes, you have an option, you have an option for FVOCI. So if you have this option, then the impact on profit will not go into PL, P&L. So it will not go into your current P&L. And the nonfinancial estimate changes, surrender rate, morbidity rate, now they will have a desorption mechanism that is utilizing the CSM. Now of course, for those, then this a precondition. The first one is you need to choose, you should opt in for FVOCI. Yes, some companies will not opt for FVOCI for example, P&C companies. Because for FVOCI, you choose this option, it will mean a lot of work, a lot of workload. So it does not make sense for P&C companies because the impact will be limited. And they can also manage their assets, they can also do some FVTPL for their assets. So if they can manage their assets, then the impact will be even smaller. So some companies, they do not opt for FVOCI. So FVOCI is for insurance policy groups. For example, some companies have both long-term and short-term insurance with different risk profiles. So this is just an example, so I can opt for FVOCI for long-term insurance, not for short-term insurance. So this is a unique feature for the new accounting standards. So I mean, that actually applies to insurance portfolio or insurance groups. So it's not for the company level, it's for the portfolio level. On CSM absorption is not an option. But of course, you need to have a CSM. That is to say, for example, you have a CNY 15 in profit, and of course, if you have an extra CNY 10 in expenses, then you're actually -- your CSM or your profit to be amortized would be lower by CNY 10. Then it evens it out, I mean, CNY 15 minus CNY 10. However, if your cash outflow increased not by CNY 10, but by CNY 50, then the CNY 15 original profit will not be enough because the profit amortized cannot become lost amortized. So this is not allowed. The loss should be recorded for the current period. So if the nonfinancial estimate changes leads to huge changes in cash outflow, then the CSM cannot absorb the negative impact, then you will go into the current period P&L. So the second -- I mean, the absorption or the cushion can only do so much work for you. Now, of course, this CSM does not only -- that only applies to primary insurance and not reinsurance policies. Of course, I'm only talking about general principles, not extreme cases. And also, we have a VFA, variable fee approach. What does it mean? That is to say they have this kind of the changes in financial estimates and this impact on net assets . Now actually, the VFA can also allow CSM to absorb this. I mean we just said that CSM can absorb the impact from nonfinancial estimate changes. But using VFA, now CSM can absorb the impact from changes in financial estimates. For example, we sell a lot of the PA insurance, participation -- participating insurance. So in terms of the interest gains, rough gains, 70% of the investment gain will be paid out in terms of dividend. So this PA insurance might adopt the VFA approach. But it's not 100%. It's very likely this car insurance can use the VFA approach. If so, let me give you an example. You see, if the [ part count ] actually made investment income of CNY 100, that is CNY 100 more than I expected. So it's CNY 100 is an asset and the CNY 100 is FVTPL. So first of all, investment income increased by CNY 100 -- well, it's possible because of the stock market boom, right? So if we do not use VFA, then when you have CNY 100 more. 70% -- CNY 70 would be paid out to policyholder and CNY 30 will be yourself, would be given to the company. Now the CNY 70 will be paid out to policyholder. We do not consider discount rate. So liability will go up by CNY 70 and recorded where? First of all, liability go up, then should we use CSM? No. It's financial estimates. So usually, do we use VCOCI, -- FVOCI? Now if we choose FVOCI, then the CNY 70, profit will go up by CNY 70 and OCI also go up by CNY 70. Net assets go up by CNY 30. And the P&L, there will be a sudden -- there a lot of volatility, a sudden change in net assets. If the number is not CNY 30, you -- for example, is CNY 10 billion, CNY 10 billion investment income. So when the net assets actually go up by CNY 3 billion. That's under the general approach. So well, your net profit -- net assets go up by CNY 3 billion. Now if we use VAF -- VFA, now actually, the volatility will be evened out. Now assets up by CNY 100. Liability, we need to pay out CNY 70 to policyholders, right? But the CNY 70 would be divided into 2 parts. One part, part 1, that's CNY 100 minus CNY 30, now the CNY 100 would be paid out to policyholder. Well, actually, it's CNY 70. You pay out CNY 100 to policyholder and then you claw back CNY 30 as investment management fee, so that is CNY 100 minus CNY 30. I pay out CNY 100 and paid back CNY 30, so we make a difference in terms of P&L. We pay out CNY 100, now the CNY 100 in assets going to P&L. So the CNY 100 would also go into the cost of funds item. It's -- so investment income, CNY 100. Cost of funds is also CNY 100. So now you don't have income, investment income. And what about the CNY 30? Well, the CNY 30 is an asset management fee. Now the asset management fee cannot be booked as revenue, it should be amortized over many years. So the CSM can absorb this CNY 30. And of course, the CSM would amortize, maybe CNY 30 would just amortize to CNY 1 for the current period. So that's CNY 1 for current period, your investment profit would be 0, net profit would be CNY 1 up. So your CNY 10 billion investment income using VFA, the net profit would only go up by CNY 100 million, because the CNY 10 billion actually was offset by the CNY 10 billion in cost of funds. And in the CSM actually amortized CNY 3 billion over 30 years. So it becomes just CNY 100 million for the current year. So the net profit -- the volatility is very small. I mean from CNY 10 billion to -- down to CNY 100 million. Now what about the net profit of this scenario? Liability, net future cash outflow reserve, CNY 70. And then CSM will go up by CNY 29. So your total liability goes up by CNY 99, your assets go up by CNY 100. So net assets only go off by CNY 1. So if we do not use VFA, your net assets would go up by CNY 100. Using VFA, the net assets only go up by CNY 1. So if your car insurance can use VFA, then the volatility will be smoothened out. That's the attraction of VFA, it has this even out effect. You can better utilize the absorption effect of the CSM. This is what I believe a very important impact, a very important mechanism. Because, please don't get me wrong, otherwise, you mean everything can be going to be done in this way? No, not everything can be absorbed, can be evened out. Now of course, P&C company, they do not pay out the dividends. They do not sell UL product, they do not have -- they cannot use VFA. That's P&C company. Because P&C is different, I mean their asset side cannot actually impact their liability side. But the life company is a different story. For Life company, they have their own account. If their own account actually had a sudden windfall of CNY 10 billion then their liability side cannot changed [indiscernible]. It's difference from PA life, traditional life is a different story. Because with whole life products, you do not pay out more if you've got more in investment return. So there is difference, I mean some of the assets can be offset by liabilities and some cannot. Now -- we talked about none of the new accounting standards, I mean, insurance accounting standards, but actually standards for financial instruments also have a big impact. Actually, I mean in terms of the classification of the financial assets, so if you have some of the assets, not able to use VFA then these assets cannot be absorbed. And the impact of the changes in interest rate movement can be absorbed by the liability side. But it's different for equity movements -- equity value movements. So for equity investment, the absorption mechanism can apply to those that can use VFA, but some other assets cannot do so. And on the fourth bullet point, you can also see the group of insurance contracts will now be the measurement unit. Of course, there are many, many differences. We don't have enough time for all of them, all the intricacies and the differences, but the first 3 bullet points are very key. And then we talk about presentation. It does not necessarily impact the net assets and the net profit and that is actually impacting your statements. As we mentioned, with the deposit or saving components are not included into the profit and loss so you would see smaller numbers, it's only for life. I mean not for P&C company. For P&C, they don't have deposit component. You only get claims, if you crash your car, I mean. But for life insurance, they have this kind of saving or deposit component. If you surrender, you can actually get more than you paid? And then actually you need to separate the insurance service results from the insurance finance income and expenses, if it's like a cost of fund. So by this kind of distinction, you can see how much money you made or how much profit you make from insurance business and some investment. And actually, the TAA often used by P&C company that is before the amortization, your premium need to accrete their interest. So there is interest accretion and amortization. So ultimately, it will be bigger than the total payout. So I feel the closer P&C, their value -- P&C companies might see an increase in their revenue. Now for Life Company, they might -- and they are most likely to have a decrease in revenue. And there is also a ceded insurance is a deduction from revenue, but under the new standards, not anymore, it's now treated as a cost item. It's amortization of the ceded insurance premiums. So now is the allocation of reinsurance premiums. So insurance and liability. So if I ceded out a lot of insurance previously impacted by income. Now of course, this is only a matter of a presentation, if not from the actual business performance. So what I mean is that not necessarily -- the revenue will not necessarily go down on the new standards because some of these will even each other out. Well, yes, I'm sorry, actually, I'm lagging behind. No. I guess I've made myself clear at the maybe -- I mean some of it and some of them are quite detailed. Now for the readers of the statements not necessarily so much changes or the impact. Actually, we might have some impact on the company's, of course, we need to look at the KPIs, look at the performance evaluation. Of course, certainly, basements will be different. So some of the KPIs will change. Net profit and net assets, they will change. They will definitely change. So I believe these indicators will have some influence on how they do their business. So hence, the KPI setting, evaluation, the way they do their business and processes, et cetera. So it is only natural to do so. And from another perspective, accounting standards. Well, ultimately, not changes the fact of how much money you can make over the future years. It's just a different representation over a different period -- time period. So at the end of the -- I mean when -- when all policies mature, the total profit should be the same under either old or new accounting standards. So the ultimate target or ultimate goal of the company will not change. So I would say, ultimately, companies would want better profitability, et cetera -- of course, sustainability, et cetera. So this will not be directly impacted by the changes in accounting standards. But of course, there would be some differences, the fundamentals. So when you read the statements, you might see the process changed a lot. Please do not be surprised. I don't believe the fundamentals will have changed. But of course we need to enhance our capability to better manage the company. We need to match assets and liabilities. If a company wants to reduce, I mean, better present the net assets and the net profits. So there must be a good accounting matching and economic matching because there will be more transparency. Now we're going to use current interest rate or discount rate. I mean, the impact will be more immediate. Your net assets will go down. So I mean, the company would need to react in a quicker way. You would want a better matching between assets and liabilities. So previously, we used 750-day moving average, now we use the current interest rate. So impact will be more direct and immediate. So to cope with this, we'll be more proactive. We need to improve all this down in many, many areas. Now the classification of financial assets. I'm sure you are quite familiar with the standards starting from 2018 and the insurance companies are the last batch of companies using these standards. We get some kind of a waiver. Actually, the reason is -- for them to do so is that we are waiting for the new accounting standards for insurance companies. So now we have some absorption mechanism under the new accounting standards. So for -- the standard for, I would say, there will be more assets using FVTPL. And VFA, as I mentioned, can also can have some absorption effect for the FVTPL assets. So if you have the proper accounting matching, you won't see this kind of a big volatility. Well -- but of course, if you have a traditional account, if you have very good performance for that account, then the asset changes cannot be absorbed by the liability. So for some of those accounts, the matching, I mean the accounting matching and the economic matching for the equity assets in the life companies own accounts will be hard to do. And we all see -- I mean, the disposable gain should not go into the P&L. So if I choose FVOCI, then, I mean, the volatility of my P&L will be smaller. So there's kind of a trade-off between the volatility and the absolute amount. Now in terms of the interaction between the 2 standards, I would say, to put it very simply, insurance companies under the new standards, when you take effect, make have a reclassification of its financial assets. For example, some companies, they would say their hold-to-maturity assets and assets and bad matching with their liability for -- that is our life company. So if I want to reclassify it to FVOCI, you can do so. You cannot do it in the old standard and now in the transition period, you can do that. You can do this reclassification, you only have one opportunity to do. So you have this opportunity to do the reclassification. But of course, meeting certain standards, you cannot do it arbitrarily. So you would say a lot of the financial assets can be reclassified and some people will say and actually some insurance companies have already started. If they have a very big group company, they have a smaller subsidiary insurers, when they do consolidated accounting and they're actually using the new standards for financial instruments starting from 2018. But even for those companies, they still have a chance to do reclassification of the financial assets. And the logic behind it is that the new standards, the matching of assets and the liabilities will be different and the logic is different. So they will give companies a chance to do the reclassification. So for readers of financial statements, you will see that for some of those companies, you implement the new standards now they would -- you would see changes for new profits -- from net profits and net assets. Now for accounting standards, they say you need to restate your 2022 numbers. Now for Q1 results for 2023, year-on-year comparison, the Q1 numbers for 2022 under insurance accounting standards require you to do restatement of Q1 2022 numbers using the new standards. For example, premium revenue would become CSM, et cetera? But actually, the new accounting standards on financial instruments, this does not require the companies to do a restatement for 2022 numbers. So I mean it gives companies more new way -- more -- more room for choosing. So companies implementing the 2 new standards, we can choose to restate part of the financial numbers of 2022 under the new accounting standards on financial instruments. But of course, we need to make -- well, make a proper statement and also with good reasons. But anyway, that gives them more new way. So let me repeat myself, for the insurance accounting standards, they definitely need to restate their 2022 numbers. But for financial instruments, new standards, nothing for certainly of restatement of the 2022 numbers. So the numbers will definitely be different in this year's Q1 results -- between this year's Q1 announcements and last year. So for FVOCI, the debt instrument is matching easier unless the duration of the assets is bigger than the duration of your liability. So you need to look at how much of your -- is your liability very sensitive to interest rate movement? So by that, you can determine how much assets should become FVOCI. VFA can absorb the volatility of your net assets and net profit. The company's should actually do economic matching and also -- clearly also do a accounting matching. And for VFA, you should do -- apply this in a proper way to reduce the volatility. For equity investments, there's some kind of equity type funds, actually most of the funds -- mutual funds you see on the market under the new standards for financial instruments, should it be treated as a debt investment is not equity instrument -- investment. It's equity type, but actually it should be treated as the debt investment. So given this, it will become the FVTPL, it cannot be FVOCI. So if you buy this kind of funds, mutual funds, then it will be classified as FVTPL. So I mean, most likely, you will be FVTPL, debt instruments. So this kind of instruments will cause volatility to your P&L. Now for equity investment, you have an option between FVOCI and FVTPL and that is a trade-off between profit and volatility. And the VFA can reduce the volatility of profits and the net assets but it will be hard to do manage in the short term. So these standards are very complicated. But actually, the impact from the new accounting standard on financial instruments will bring bigger impact. For example, if the stock market went up or down suddenly I mean, the equity investment will be impacted, hence it will impact total picture of the insurance company and even the P&L statement. And also we care about the key financial indicators. Now different companies will have different options, different choices. I only give you some of the possibilities. And those that you can see on the statements, I actually will not mention embedded value. It's not a concept under accounting standards. It's not -- I do not mean it's not important. I listed the important indicators you can see on the statements. And some companies will have more or fewer of those indicators. Of course you could care about the revenue of insurance and actually CSM might be different from insurance revenue, especially for long-term insurance. You can see for new standards in terms of income recognition is actually more in line with accounting principles. For example, the saving component or the deposit component will be taken out of revenue. And I also heard that some companies are thinking about the fact that some of the revenue for certain lines of business will go down drastically a short-term, insurance will go up and you see increased revenue. So should I change my product mix but I would say, it is not a reason that -- it's not a sensible choice. You cannot only look at the revenue because profits might be more important than revenue, short-term insurance will bring you low-margin business, there is no interest rate spread. They cannot accrete their interest. So long-term insurance will be a better option because actually, we can gather the bad things, so bad income. So revenue goes down, but our expenses also goes down. So lower revenue is not necessarily a bad thing. If you look at the profit margin of different insurance products, I would say we cannot change the fundamentals about insurance business. Life companies can also calculate their claims and expense ratios. Well, actually, now they do not distinguish claims from expenses. Actually, the new standards does not require companies to separately report or tell you amount of the claim. So that's the minimum requirement. But of course, some companies would still give you more information, give you stand-alone claims, numbers, give you extra information, they'll tell you very clearly how much your of it is for claims and how much of it is for expenses? And for the quarterly statements, you might not find these numbers. And then underwriting profit, I mean depends on the calculation of specific companies. Some consider -- including the cost of funds in the calculation of underwriting profit. So it is a moot point, and I will not think the investment department would change their investment philosophy because you tell them the cost of the funds, cost of investments, whether it's 3% or 5% because of certainly the fixed cost. And in terms of profit, the component for profit, for quarterly results, there is no such disclosure requirements. And for financial for annual report, it will be non-disclosure requirements. For example, the current period experience adjustment. Well, it will be like the morbidity spread, morbidity being the loss and the spread being the loss. So that is an estimate -- that is the difference between the estimates and the actual number. Also, you need to actually -- maybe you can see all these numbers, all these items contributing to the profit of the insurance company. CSM is to be amortized. So it's very important indicator. You will not see it in the statement itself, but in the notes. And also, we will disclose the CSM from new business. And also, it's like [indiscernible] business value, the CSM is accounting in Canada. And we also give you the closing balance of CSM and the amortization of CSM. Investment, apart from the old indicators, there might be something new because previously, we don't have the FVOCI, they disclosed their investment yield, they might actually add a new indicator to include the disposal gains or losses, especially those already realized disposal gains or losses. So there's a different kind of investment yields and also a cost ratio of the insurance fund. But it's really hard to calculate the cost ratio of insurance funds. Some of the interest rate is locked. These are historical fixed interest rate, maybe 20 years ago. So it doesn't make any sense to tell you this, to disclose this. Because some of these policies were issued 20 years ago, some 10 years, 5 years ago. And all, of course, net assets and profits are important indicators. A lot depends on the economic and the accounting matching and also market conditions. So you might see more volatility of net assets so I cannot say for sure whether the net assets will go up and down. The total profit on the annual accounting standards will be the same. The standard is only actually [Technical Difficulty] in a different way over a certain period of time. So if you cut it this way, I mean cut it -- how you cut it differently in different ways, but the cake remains to cake. It does not become bigger or smaller, the accounting treatment is just a way to represent the numbers to process the assets. Well, that ends my presentation. So any questions? I'm sorry, actually, a busy schedule.

Thank you Mr. [ Gu ] for your very detailed presentation. Well, I mean, that's also an indication of how complicated the new standards are and also the professionalism of Mr. [ Gu ] and Ernst & Young. Now maybe for the Q&A session, we will try to make up for the lost time. We try to keep it simple, keep it short.

I actually have 2 questions. Number one, some of the overseas companies, especially maybe some Canadian companies, insurance, they say net assets will go down by double-digits. And the long-term ROE will be the target. Now what about its impact on ROE and net assets -- the impact from the net accounting standards. That's the first question. Second, under the comparison between the old and new standards insurance companies ruled to cook the book, I mean to do cosmetic maneuvers I mean, is it getting bigger or smaller?

For the first question, some companies have this kind of a statement. And actually, we are noticing more companies, not only -- not from a certain country. Some of them have an increase in assets and some have decreases. For domestic insurers, I would say as of now, no company actually disclosed qualitative numbers as far as I can remember. So under this circumstances, I would say you just wait for a few more days for the Q1 results, you can see the actual numbers. It will be hard to answer the question because actually, there are increases and decreases. But as I said, the new standards give us a specific time frame and time period. It is really hard to answer the question. It's really complicated for insurance companies they have -- they sell a lot of long-term policies. So I would say, we need to wait and see. And the second question, so objectively speaking, the finance actually mentioned when we released the new standards, the absorption effect will be there. The absorption effect will be that it'll be hard for some of the companies to adjust -- to make actually adjustment to even out in the results. So it will be hard because of the amortization of CSM. So on the new standards, it will be very hard to adjust to you actually estimates and to smooth things out. Because of the amortization of CSM and FVOCI under the standards for financial instruments, as we mentioned, FVTPL will move up. Now these assets will be very hard to manage because it goes down if the market goes down, but it will be really hard to manage the profit by the insurance companies to smooth out your profit. So how does a CFO approach this matter, [Technical Difficulty] think about some indicators can give us some ideas and to the analysts maybe how the amortization not simply look at net profits because of the possible increase in volatility. We should look at the fundamentals. Likely, fundamentals remain unchanged, but net profit will fluctuate. So some companies already have some best practices in this regard. Actually, some companies, they actually would give you some profit numbers, which exclude the impact from short-term movement of investment values. So I would say the CFOs of life insurance, they might need to encourage investors to look at more as the fundamental indicators rather than simply 1 or 2 indicators. So believe insurers should actually do more to help investors, help analysts to interpret the new statements, help them gain insight into the new statements. Okay. Any other questions from the Shanghai side.

I'm from CICC. First of all, thank you for giving this presentation. And also thank Mr. Gu from E&Y. No, I would say, probably it's very informative. On the issue of information disclosure, previously, we actually do not pay a lot of attention to the statement itself, but rather on the management analysis. But now under the new standards, SPRT numbers, someone say the old indicators are meaningful under the old standards. So what do you think should be added to the management's discussion of analysis under the new standards? And what indicators should be maintained or kept?

I do not represent the management. I actually talk from the perspective of a user of the statements. I would say there's a lot of financial indicators and with new standards give you a lot of numbers for the source of -- of course, you cannot actually recollect or voluntarily recollect certain important indicators in the management discussion and analysis. So there must be certain relevant contents and explanations. But as you said, you see especially during the transitional period and moving from old to new standards. Actually some companies -- insurance companies in China are yet to implement the new standards. So some of the indicators are in the old standards and the old standards are still meaningful. For example, SP premiums, I mean still it's a very good indicator people will pay attention to it, for example, premiums collectable, some people will still disclose, some companies will still disclose and investors will still care about. So I mean it's a really relevant point, people need to get used to the new standards. So another thing we would like to do is going to compare the old and the new statements. So I believe the insurance companies should also take this into consideration how readers will read or interpret my new statements compared to the other ones. I believe on the whole, investors will receive more information -- useful information. Thank you. The final question from the online. No, nothing from online. Any other questions from Shanghai side?

I'm [indiscernible] from CICC. Now a follow-up question on point you raised in saying that financial statements only record profits. But in reality, I mean insurance companies, they would like to present a very good statement. So what do you think of the business behavior of insurance companies using the new standards so in order to present good information, good numbers, what kind of behavior change will that be?

Good question. Number one, fundamentals will remain pretty much unchanged. And of course, it's like -- the statement is like taking the test. I mean, it's a test, so you care about the results, care about the scores. So I believe insurance companies would want to present a good statement even with good fundamentals, they also would care about the score, the test score. So I would say they can approach it from several perspectives. First of all, the new standards are apparent, so experience variance will be disclosed. So that is to say the difference between the estimates and the actual expense, it could be a noise. It could be because of [ dual lock ]. But if the difference is very big and is becoming a trend then investors would get worried. It might be a problem in terms of controlling expense. You're always making -- management will enhance the expectation management of making assumptions. So maybe under the old standards, these issues will not be exposed. But now the new standards, these issues will be exposed quicker. So with identification of these issues, they will take measures to address these issues. Another example, the matching of assets and liabilities. If there is not a good matching, there will be more volatility, so they need to better manage this kind of matching. Otherwise, the market would be spooked. But of course, sometimes luck would play a part. You cannot always do proper accounting matching for equity investment for example. So I believe it has a higher requirement for the management team. And some of the indicators actually can expose certain issue in a quicker way. This is like an encouragement for the management team.

Well, thank you, Mr. [ Gu]. I believe we came to the end of Q&A session. We suggest we give Mr. [ Gu ] big round of applause.

Very, very sorry. That took up too much of your time. No. Actually, the 2-hour presentation is very good. I believe the new accounting standards bring new changes and challenges to the industry as a whole, management making preparation for the Q1 results under the new standards will be released on 27th of April. And actually, on the morning of 28th, we're going to have a result announcement teleconference. We're going to share with you the -- our performance and indicators. And also, I'd like to give you a heads up. We are going to have -- we are going to conduct on 20th of May in Shanghai -- we're going to hold a CPIC House-China launch ceremony for our big house business layout and the initiatives. Within the year, CPIC Life and the CPIC high-quality development, I mean, for these themes, we are going to hold investor open day activities. And thank you very much for your attention and support. We are going to continue proactively to offer high-quality IR activities. Now, of course, the new accounting standards have a lot of details and they're very complicated. So if you have any further questions, please contact us after the meeting. Thank you.