China Reinsurance (Group) Corporation (1508) Earnings Call Transcript & Summary

Respectable investors, analysts, ladies and gentlemen, good afternoon. Welcome to China Re Group's Open Day for the Year 2021. I’m the moderator for today's session, Liu Shukai, Director of the BOD Office, China Re. Currently, fintech is becoming one of the major driver for the insurance industry and innovation and the insurance industry is becoming the new driver for our group. And facing this unprecedented circumstances, China Re Group has issued and launched the China Re Digital Corporation in the year 2018. And since we have launched this Digital China Re strategy, we are using the platform, trends and technology. And with a global vision, we are [ point out ] to use the technology to empower these techniques, and we have built a system of IT technologies to promote China Re Group's high-quality development. In today's open day to the capital markets, we are really honored to invite Mr. Feng Jian, the Chief of the IT Center, China Re P&C of the China Re CRM, to give you a brief introduction toward the details of the digital platform in China Re Group. After that, we are going to open up the floor for the questions. And please be noted that this open day has only be available through the telephone. [Operator Instructions] So now the floor is given to Mr. Feng Jian to start with the updates.

Respectable investors, analysts, ladies and gentlemen, on this -- today's platform, I'd like to share with you the digital transformation of the China Re Group. And first, I'd like to give you a brief introduction over this 3 different major lines of the China Re Group, including the Digital China Re 1.0 Strategy; and second, we'd like to talk about the practice of the China Re -- Digital China Re; and finally, we'd to talk about the Digital China Re 2.0 Strategy. So let's look at the digital transformation of the China Re Group through overarching picture. So starting from these strategies, we have 3 lines that indicate 3 different periods. The first line is the traditional track. It is about the internal construction. So for the second line, it is about the elevation strategies and time line, it is a series of time lines about the technological innovation that is very convenient for the China Re to provide better service to the industry. And the third line is about the organization structures. So for the China Re -- Digital China Re 1.0 to the Digital China Re 2.0 is what happened between 2018 and 2020. And for the 2.0 period, it is going to be between 2023 to 2025. So we are going to guarantee internal smooth operation from the China Re Group. And starting from developing these of the year 2018 until the finish of the first period in the year 2020, we have worked really hard in terms of the China Re cloud, and we have also built up a digital platform, and we have also built a [ mentor bench ] which combine the business and data together. And internally speaking, we have also connect several lines, we achieved a very fruitful result. And in terms of the innovation line, and we have built up the catastrophe risk platforms and also the IDI platform. And these have integrated a series of cases. And I'm going to give you a brief introduction nature. In terms of the organization mechanism, we have embarked the transformation through 2 different tracks. The first one is the transformation through the internal structures and the second part that we have added the department of digital analyzing and we have also integrated all kinds of different functions. And this is what we have done during the Digital China Re 1.0 period. The construction of the Digital China Re 1.0 strategy has laid a firm foundation for the future corporations and of the future advancement, and it has also provided us a lot of logic when we are entered into the Digital China Re 2.0 period. And it is also going to better provide us a foundation for the deep integrations between the IT and auto business. So I'd like to give you a brief introduction toward the Digital China Re 1.0 strategy. And since the year of 2016, we have paid a lot of attention to the technical innovation and its impact to the business model, and we have put forward the digital transformation of the reinsurance at an early stage. We believe the digitalization of the insurance company has changed the 3 models of the reinsurance, and we believe the quantum trading model has been regularly transformed into the real-time trading models. And it is also going to reshape the risk management models, and we are going to build an integrated model for the [ fourth ] line, a big data integration and build a big data platform. And thirdly, we are going to have local government to build the digitization to the local government, and we are going to better serve the government functions and the government's administration. The risk big data is going to help the government to operate professionally and build a digital society with a co-governance system. For China Re Group, we have 3 different features. The first line is that we are going to serve the national strategy. The second line is that we are going to serve the industry's development. Reinsurance is a platform connecting the insured and insurer and also the reinsurers. And internally, all the insurers in our company is being connected, and we are connecting around 200 different insurance companies with 4,000 different international players. And thirdly, we have emphasized the platform identifications of the China Re Group, we are going to combine the academic performance together with the technology. Reinsurance is a very good cutting point for you to better understand the risk management as well as the business models for the insurance industry. So that's the reason why we are going to serve the national strategies. At the same time, we are also going to be integrated into the social government systems. And this is what we have put forward. We are going to integrate in the resources and build up our platform at the Digital China Re 1.0 period. And we are also going to gather all kinds of experts and talents to enjoy all of their resources to open up the platform. And this is also going to create a business strategy. So I'm actually going to use nice -- 3 different key words to summarize that. We are going to gather up the resources to build the platform and create our ecological systems to better serve the government, industry associations and also the insurance companies, consumers and China Re Group. And if I have introduced to you, there are 5 different key points. The first one is about the infrastructure. And in the year 2018, we have put forward the China Re cloud platform. And on top of that, we have built our own digital platform and formalized it. This is also going to help us from the bottom up. And in terms of the platform, which is gathered and integrated all kinds of the businesses, we believe that this has provided us 90% of the drivers for further growth. And in terms of the intelligent, management and control platforms, we also believe that this is going to be better for the positions of the China Re Group and also better control for the risk management in our industry. And we are one of the first movers in this sector to combine the cloud and big data after 3 years of hard work. In terms of the technological strength, I'd like to report to you what we have achieved. In the past 3 years, the China Re Group has demonstrated an ever-growing technological progress. We doubled ourselves number in the IT sectors. And while we have increased the total investment in the IT sector by 5x, we have ranked 42 different big awards with 15 different internal awards, and we have ranked around 27 external awards. I also think that there are some things that we should pay attention to. That is to say we have applied for over 22 patents, and we have applied for 11 different software copyrights. By the year 2020, the third -- the fourth quarter, we have achieved a very remarkable result that has range -- that has been worked by the industry. So we summarize what we have achieved during Digital China Re 1.0 period, and the concern we get is that we have a very accurate grip of the Digital China Re 1.0 direction, and we have generated very fruitful results, and they have laid a very good foundation for the China Re Group's future digitalization transformation period and also the hard powers of the China Re digitalization, including its infrastructure, technologies and the platforms has been reaching above the industry average. And in the year 2020, we have got the DingGe award. This is an award being organized and being awarded by the Tsinghua University, Harvard Business Review and SAP. And this is what we have done internally speaking. So let's talk about traditionally what we have done. We are one of the fast movers in the industry to build up this platform. At the same time, we look into the industry through the securities of the data, through the utilizations of data. And in terms of a platform, we have built a holistic future forward management platforms, and we have also built the platform, integrating the data and IT technologies. And this has rewarded very good external foundations. And we have also built a very good internal [ mentor bench ]. And this has actually underwent the construction of the second stage. And in terms of the business models in the China Re Continental Group, we are building the core business presence for the China Re Continental Group. To summarize it in one word, I believe 90% of our business can be done or achieved online and 80% of the data are being interpreted. And we all know at the core of the reinsurance, it is about the data. So we have managed 8.57 billion policy data, and we have integrated around 1,143 different insurance products to guarantee the reinsurance policy and premiums. And in terms of the innovation track, I believe the strategies for innovation platform has gradually been emerged, and we are trying to explore the first step of the innovative business model. For the interest of time, I'm going to focus in on the catastrophe risk platform to give you a very detailed introduction towards that. And for the IDI part, I believe the platform has [ key work ], a very rapid group in terms of premiums. And currently, the total premium in our company has been reached around RMB 700 million. And then in terms of innovations, we are actually focusing on the 2 different parts. The first one is, we have jointly launched the index for the reinsurance and also we have built up the standard the government systems. And we are actually joining hands with multiple stakeholders. We built the first alliance to train based on the blockchain technologies. And every year, the operating premium on that alliance train is actually around RMB 800 million. We are actually -- it's quite all kinds of policies and the data on the blockchain technologies. The result is very clear. And at its [ heart ], after years of the construction and striving for 1 part. We covered all the business models, and we also covered all the insurance companies. And we actually covered the frontal business discussion to the final branches, policy claims. And we have covered the global business by working together with 26 different foreign institutions and foreign receptors to use our digital platforms at the same time. The business that used to be done by several weeks can be shortened within 1 week. Another part I want to talk about is digital integrations. By integrating different data, we are going to enrich the data, and we are going to take the qualities of the data. And here, we have prioritized the product, the integration between the banks and also the insurance companies. Traditionally speaking, we are using the bank as a channel while the insurance company is actually becoming one of the actual [ movers ]. But through this integration and strategic models, we’re curious about the integration between the banks. And we are trying to figure out how do we better operate business and how we better do the marketing. And secondly, we also want to focus how to optimize the data piece, research into the data and the new innovations in that [ second ] part. This is also the first company in China to connect the insurance company with the banks, with a very leading presence of the industry. We are working together with a very leading listed company, and we have bought them [ for perfect ] for around RMB 500 billion. This year, I believe that this is not only using to quickly improve their data quality and, by our corporation, we have built a very good sales model for the insurance company. And we are building the label for the insurance company to be better cooperated. That is to being integrated the data and through the algorithms of artificial intelligence, we have promoted the new [ algorithm ] ecosystems or what we call the algorithm economy, and this is actually an innovation for the insurance models and reinsurance models. That is to say -- and this year, we are working together with one private bank to make sure that all the reinsurance premiums, income in the year 2021 is going to be around RMB 1 billion. This is only a thought. I believe this has opened up a new era for the cross-sector integrations between the banks and the insurance companies. And moving forward, we are going to launch into a series of explorations in this field. And recently, we have also been working together with some of the companies focusing on the quantum algorithms, how do we use massive data to do the algorithms in a superfast period to address the future headaches of the insurance companies. In terms of the organizational structures, we have discussed about the traditional IT structures. In the 1.0, we have worked into 2 steps. The first line that we are using, one, infrastructure. We have added the innovation department, and we have also set up the digital laboratories and also the digital administration department. And at the same time, after a series of these development, we discovered that these departments cannot be served our further development in a better way. That's the reason why we have canceled these departments. And we have built a dynamic department to better serve our frontline business. And typically, in one word, organization is the key while the [ talents ] are seen as the core of the future development. And for another part, starting from the innovations in the 1.0 area, we have formed the insurance science and technological companies. I am the legal person of this company, and we are the only company in China focusing on the catastrophe-free risk management. And we are focusing on one single item that is to say the competitions are the catastrophe-free risk. And we are also working together with the metallurgical bureau of the China because we are launching and tapping and drilling into the new [ flavor ]. And starting from the year 2018, we have done several different cases. And we have also a lot of practices. I'd like to give you a brief introduction toward the catastrophe risk. I think this is actually at the heart of all of your concern. Generally speaking, I'd like to summarize the 2 different risk problems are the catastrophe-fee risk management. The first part is that people can -- are not [ be more aware ] of the catastrophe risk. The second part is that they don't understand the management structures. The third part is that since there is no assurance for the catastrophe risk, they cannot team up with a solution for the catastrophe risk. They don't have a business or algorithm model. And the fourth part is that they cannot better manage it. No matter in the company or in the society from the social management, they need to address these 4 cutting -- 4 problems in a very quick manner. The first one is that we have integrated all kinds of data. That is what we see the risk [ reason ]. So for the first part, I believe all the data is rather complicated and it is not integrable. The second model is that we have built the risk quant, which is to say that we have made these quantifiable models. And this year, we have launched a quantifiable model from the earthquakes and typhoons. And in the second half of this year, we are going to build a risk model for the [ product ]. And the third problem is the risk for you. So how do I balance the different risks is also going to be the focus of our company. And in terms of the bond insurance for the catastrophe risk, it is also going to be one of the key focus. And the fourth part is that how we have the insights in terms of the risk, how do we make the risk foreseeable? We have also focusing on the RMB of the basic product lines. And for one part, it is a way for the earthquake prediction models, and we are 3 -- we’re reaching into the 3.0s. And we are also going to focusing on the 2.0 typhoon models and laying in terms of the international market. And we have also finished the China Re earthquake models, and we believe this is actually the first coming Chinese own intellectual property in terms of the catastrophe models in the earthquake. And we have built up these platforms and integrated all the data of the insurance companies. And for this platform, we have talked about the integrate risk research platforms. It is about the data integrations. I'm not going to dig deeper in these area, but I believe that we are going to [ enlarge ] the users and the user is actually for around 161 different companies. And at the same time, we are actually combining and a very recent product, and we have came up with the [ ABI ] service platforms with a tailor-made services, and this is what we call the service provided according to users' demand. And I have talked about the research and development. And this is also going to be a [ street ] line process. I want to talk about 4 different programs -- 4 different items. And we believe that we are going to come down, and we are going to work around. And for the earthquake models, we have undertake a lot of projects include from the industry of science and technologies. We have reiterated ourselves to the 3.0 stage. And currently, we are doing some of the applications in the market. And I believe the result is very good. And for the China metallurgical and earthquake society, they have granted us a lot of certification. Our algorithm is based on the man-made algorithms and moving forward, and we are going to [ half ] the calculation period, calculation time from 8 hour to 8 minutes. And this is also going to better us in terms of our future predictions and estimations. And that is how we get the best awards. During the 35-year period by the Ministry of Science and Technologies, there are 17 different institutions helping us with these areas. And I believe that this project has been widely applicable in terms of the pricing for the business models. This has become the landmark of our industry. The typhoon is a very complicated metallurgical condition. And recently, in [ Shandong ], we have heard the flood events, creating a lot of damage in the city. So how do we calculate and how do we team up with the typhoon calculation models based on the reality in China. I believe that we are working together with the supercomputer in our country to gather up all the data in the supercomputer. And we are in 2 years to finish this model, and we have done a lot of work. And we are actually working together with the top notch institutions in China and in abroad. So I'd like to give you one data in this field. At the bottom of the [ group ], it's worth being written by ourselves. And we have got a lot of certifications at the same time. We are also working together with the 3 different top estimations in China. They have given us the [indiscernible] performance, and they encouraged us to fill in the blanks of our industry. To combine what we have done with [ the industry ], the results before the typhoon last year, and we have also shared the data together with the state grid group together with the southern grid group. If we are combining these details together, it is also going to provide them real-time risk management prevention control. So I've been talking with these risk management models, and this risk management model has came up with a series of solutions, and we accumulated all kinds of risks to check out the current [ line of strategies ]. So this is the content that we are managing right now, and it is at its core. The code is being written by ourselves, and we did not recruited any external part-timers and it has also been launched into the external usage, advising the catastrophe internationally speaking. And moving forward, it is also going to help our [ slippage ] -- I mean risk -- catastrophe free risk management. And for every time, we -- our nation has been through a catastrophe, we are going to accumulate the data and use it in terms of -- in this risk model. And these patent is a very good demonstration of the China Re's commitment to address these problems. From the development of these catastrophes, I believe the business -- this model is open now [indiscernible] to address the problems. We have opened up every single layer of the [indiscernible] and we have emphasized the data is actually at the core. And we are actually willing to collaborate with the cooperators to address the tailor-made models. And from the business perspective starting from last year, internally, we have senior groups, and externally, we also see a very rapid group. We are also projecting a very rapid group this year, not only from the items and the projects, we are also going to be benefiting from the [indiscernible], and we are trying our best to better [ update ] our team in the south areas. And we are trying -- we are discussing with the stakeholders. And this year, we are going to team up with 3 to 4 different new applications. According to the SaaS model, it is going to be the payment according to the demand and payment according to the usage. This is also going to help us with the future groups. From the construction industries, IDI is actually very well discussed items in China. And in Shanghai and in Beijing, IDI is actually addressing the root of the problems. And we have put the model from the construction-focused, construction-prioritized model into the down balance sheet where the insurance company is going to be connected and also the reinsurance companies are also going to be connected. And we are really honored to undertaking Shanghai [indiscernible] task to build our IDI platform to connect the insurers and [indiscernible] insurers. And we are also working together with the Beijing [ support ] government in terms of building up our IDI construction quota insurance systems to control the quality. So all the different items and data is also going to be in script on the blockchain technologies. And through the data -- through our platforms, we are analyzing all kinds of details. And I think that all the premiums has also been quite on the blockchains. And this is actually the only IDI platform that has include into the realities, and it is actually a government platform, serving all types of industries. The group is really substantial and focusing on that. Let's look at the problems in our whole circle platforms. It is not only about the IDI, it is also about the security with [ most of the ] insurance. And starting from the 1st of September, we are going to possibly start the security insurance for the construction and for the building industry and for building and construction industries. And I think if you check the insurance items, our insurance policies, this number has also been printed. So what sort of problem are we trying to address during the process? And I think it's about the data, and we are working together with the different cooperators to gather, constructed these systems. And we are trying to address these systematic programs and optimize all the different procedures. And the data is going to be identified. R&D platform has been overarchingly launched in the [ Jilin ] province, and the data is being used through our platforms. And currently, we are actually working together with one single building construction, and we have constructed the iron and steel infrastructure and also these [ several new ] infrastructures are one build -- several new sectors are building to make sure that all the data can be analyzed professionally, to be served professionally, to better for -- to be served for the quality controls of the insurance company because it is a market where it's just being started. So we estimated that moving into the future, this is going to be a market for around RMB 50 billion. These are some of the conservative estimations, but this is actually a policy closely related to the government policies. We have been discussing the catastrophe risk platforms, and we have been discussing a number of practice in terms of the IDI platforms. These 2 practices, the 2 comprehensive cases, and it is not only about the concept, it's also about the construction of our platforms, its operations and benefits. And starting from the year 2020, after that, we have been thinking about some of the problems of the future digitalization of China Re Group. The other reason why we have came up with the 2.0 stage. The logic behind 2.0 stage is just inherited what we have seen in the logic in terms of the 1.0. Internally speaking, we are going to work into the smarter strategies, and we are trying our best to utilize the core part, and it is actually the key part. And in terms of innovations, we are going to focus on the key trains for the food and for the transportation, for the basic demand of the people. And that is how we are going to better promote the ecological development of our platforms and including the IDI and also including the catastrophe risk. And in terms of the organizational structure, I believe it is also going to be optimized. And we are also going to integrate the business structure together with our business purpose. And this is also going to help us to create the dynamics, transform the dynamics more into the real driver and the Digital China Re 2.0 strategy. So let me use another strategy in another chart to describe to you what are we going to experience in the Digital China Re 2.0 stage. We are going to make our business smarter, and we are going to make our digital, our data and our assets of our companies. That is how we are going to build a data cube for -- digital cube for our industry. And it's actually right at the core of our company. We have emphasized once again the customer-centered service model, and we have also emphasized the scenario-based smart driving platform. And in terms of the infrastructure, we are also going to build a better platform. And finally, let me summarize it in my words. The digital transformation of the China Re Group has just been re-ramped. The Digital China Re Strategy 1.0, it has already been finished, and we entered into the 2.0 stage. Finally, China Re Group is going to stick to the digital transformation as [indiscernible] and we are going to better advance the [ module rate ] for China Re Group. And we are going to let the China Re Group to work into the development strategies with high quality. Thank you very much.

Thank you very much, Mr. Feng Jian for your mindful speech. And now the floor is open to questions. I believe there are some of the distinguished guests who are going to attend today's Q&A session. We have with us Mr. Li Ming, the Business Director of China Re; and also Mr. Feng Jian, Chief of IT Center, China Re P&C of the China Re CRM; [ Mr. Cho Jung Hua ], the Chief of Business Innovation Department in China Re P&C, Vice President of the China Re CRM. [Operator Instructions] Thank you. Now please the floor is open up for the first question. Now the floor is open for the first question. [Operator Instructions] The first question is Mr. -- is Mao Qingqing from CICC.

I am Mao Qingqing from CIC. You have give us a detailed introduction toward the professionalism of the China Re Group. The 2 question. The first one is about the Digital China Re 2.0 strategies. Can you give us a brief introduction towards the health care platforms under the China Re 2.0 commodities? So what China Re is going to do in the health care problems? The second question is about the natural disasters and the catastrophe. Other times when a natural disaster happens, the insurance companies going to shoulder the major responsibility. So have you calculated the total underwriting numbers for this year's flooding disasters?

So we are going to direct the first question into Mr. Feng and second question into Mr. Li Ming.

Thank you very much for your question. So these are very good questions. In the 2.0 stage, we have tiers about the health care outlining and strategies. So I'd like to introduce to you that in the 2.0 era or in the 45-year period, we -- I believe the first question is still under internal discussions. And for a more detailed content, I am afraid that we are not very [ committing to reveal ] that to the public. The health care is always the priority of China Re Group. And during the 45-year period, we are going to led the technology better play the rules. And we also hope that we could use the digitalization to empower the insurance clients to develop better and healthier. Mr. Shukai, do you have anything to add up?

And for the second question, the losses that we have experienced according to the flood disaster in Henan province. So, so far, we [indiscernible] the insurance for the Henan flooding disaster is about the vehicle insurance, the insurance for the properties and also [ current rates ]. Since the disaster is still wreaking havoc across the Henan province, it is -- we believe the total insurance that is going to be underwritten is around RMB 5 billion. For China Re Group, we have 2 stakeholders in world. The first one is China Re -- China Continental, and China Continental has received 3,862 items, and the estimated compensation is around RMB 100 million to RMB 120 million for the China Re P&C because it is still under estimations. And we have not came up with a very concrete number of years. And for the possible losses of this flood, I know that it is very difficult to estimate so far, but we have 2 different risk management items. And we have procured some of the items or we have invested in some of the huge catastrophe risk management. And I think it is -- also in terms of our underwriting business, we believe the vehicle insurance has a very floating mechanism, which can offset a lot [ losses ]. But for the digital data, later on, we are going to unveil it to the public. I hope that all of you could pay attention when we unveil that number. Thank you very much for your question.

Thank you very much for your answer, Mr. Feng and Mr. Li. Now the floor is open up for the second question. The next question is Li Jian coming from Huatai Insurance.

Two questions. The first question is that from the data. The [indiscernible] for the catastrophe risk in China because for the flooding disaster in Henan province, it has created lots of recovery losses. The majority of them is coming from the vehicle insurance. So any of this distribution similar to the patent with the years before? The second question is not only about this time catastrophe. So the second question is that when we were signing up the contract with the reinsurers, so how do we get the claim? I believe the vehicle insurance is actually a redistribution mechanism. So what kind of ratio are the insurance company undertake in that contract?

Thank you very much, Mr. Li. So we are going to direct this question to Mr. Feng and Mr. Li to answer your question and explain through the different perspectives.

I'd like to say that for the losses created by the catastrophe and the insurance company, we believe that we only covered a few small portion. From the point of a catastrophe development, it can be divided into 2 parts: the first one is the insurance industry; the second part is the loss is created for the society. And I believe [ Mr. Cho Jung Hua ] is an expert. So let me direct this question to [ Mr. Cho Jung Hua ] to give you every detail answer to this question.

So thank you. Speaking of the natural disaster created catastrophe and the losses it created, starting from the crunch point, the -- actually, we don't have a very comprehensive and holistic picture because the disaster happened in a random trend, but there are 2 trends, which is clear. The first one is with the adding up of the wealth of our society, with the growth of our economy, especially when the wealth has been compensated in some of the coastal areas and thinking about the climate change and the comp is created. We could see that moving into the future, the disaster is going to create us a lot of [ homes ] moving into the future. The second question is what Mr. Feng has just mentioned. Last thing, we will get [indiscernible] for the social economy. Every time when a catastrophe happened, the -- we have experienced a really damage into the economy. According to the data issued by the Ministry of Emergency Management, for the past 10 years, every year, we have -- the natural disaster or the natural catastrophe has actually created around RMB 300 million to RMB 500 million of claims and -- but with people writing [indiscernible] to insure themselves, and with the progressions of a policy-based insurance, the catastrophe -- and the risk -- catastrophe risk insurance is going to play a bigger role in this front. This -- on that China Re is actually working in this front of the risk management, catastrophe, science-based risk management and risk evaluation to better serve the market. That is how we are going to lower down the risk and combine with the returns.

So can you give us brief introduction towards the reinsurance management of the catastrophe risk?

And I think that we have a consensus here that is to see the effect or the rule the reinsurance contract plays. In China, that is to say, we have 2 different contracts, that is proportion-based through contracts. It is actually addressing the underwriting capacity and also the compensation claim capacity for each one of the insurance company based on their own underwriting capacities and risk preference. So when they are actually arranging this contract, they have different preference. The second part is about the nonproportion contract. For the simple cases, it is about the super claim contract. So it is being designed to transfer the risk. So I think what is the reasonable range, it is based on the risk preference and underwriting capacities of the insurance companies for the very conserved company who achieved very high stabilities of their financial performance. So when any catastrophe risk released, they are going to sign up a very conservative type of the contract. So for that part, we are going to underwriting a very small -- very high proportion of the claims. For some of the claims -- for some of the insurers, the very tolerant of the fluctuations of the financial performance. But they need to guarantee the underwriting abilities of the companies, especially the company is not going to bankrupt during extreme conditions. So when -- for the different types of companies, you have different preference and different requirements. The underwriting capacities and also the stabilities of their financial statements and whether we can guarantee a continuous operation of the company, this has determined whether the company has signed up a high proportion or a low proportion based contract with reinsurers. So different companies have different preferences. So that is what I tried to answer you. Thank you.

Thank you very much, Mr. Li. So we’d like to give the floor to the next investor. [Operator Instructions] The next question is Jenny coming from Morgan Stanley.

I have 2 questions. The first question might overlap with other different investors. So it is more about the medium and long term. So are we actually care about the extreme weather and also the insurance pricing under the extreme weather. So the new opportunities writing in the industry, we have done a lot of preparation. Do we have any detail of sharing, can we please say that it is going to have a better clearance -- or awareness toward the catastrophe risk. Do we have any good business opportunities when we are thinking about the catastrophe risk. How do you better understand the micro impact towards the catastrophe risk? The second question is about the social responsibilities and also estimations into the CTO of the market. I think this has been promoted by the government. So are they going to experience a market-based pricing and the market. So how -- what is the perfect ratio in the reinsurance market? So this is going to help us to better predict the [ position ] of the China Re Group.

Thank you very much for your question. We will direst this question to [ Mr. Cho ] and Mr. Feng to answer your 2 questions.

Thank you very much for your question. The first question is about the extreme weather, micro impact and its future opportunity. Actually, what I want to say here is that, for the catastrophe risk or extreme weather, we need to figure out one thing -- the 3 things. The first one, the mechanism happening behind the extreme weather. It is a question of more scientific discovery, but it's also very closely related to the insurance company. If we are not aware behind the scientific principles of that, we cannot have a very clear picture towards the insurance company. The medium- and long-term predictions and after the short-term predictions, the progress that we have made is also being related with our corporation with the China metallurgical bureau. So that's the reason why I'm talking about the extreme weather and how do we predict and prevent and control the extreme weather. These are something that we should think about. And I believe there are so many opportunities being threat out of that. We are going to provide a better insurance services, and this is also going to led us to have redesign the insurance structures. The premise-based service is going to be transferred into the service based. And second, let me give you one example, the [indiscernible] and extreme [indiscernible]. So once it's occurred and once we can predict that it is going to help us to reduce a lot of losses and by combining better with the science and technologies. The second part is actually the accumulations of the wealth, the risk exposure is getting bigger and larger. So we have the opportunity, and we also have the risk, how do we better manage this risk, in need of very good management [ mechanisms ] if we are using the market pricing. So what I want to say is that we need some of the digital models to better qualify the risk it existed. And after the qualifications of that part, we are going to team up with a reasonable range for the premium. And it is not only a question, handing over the insurance industry, it is also a direction the government, all the different stakeholders should work towards to. So we have talked about the catastrophe risk management, it is going to be a long-term risk management for the human kind and the [ purchase ]. Insurance company is going to play a bigger role, and it needs our professionalism, it needs our professional pricing and servicing capacities. We are also going to serve the sustainable development of the society. This is also going to be new commitment for the insurance company to the society. This is my answer to the first question. The second question is about the various development. So it is about the people's willingness. So I think it's going to be a government-directed project. And in terms of the definition, we also need some of the relevant technologies to help us for the reinsurance company. We emphasize our professionalism. So in terms of the 3 composition features, we have talked about the 3 different composition features. We need the external support. That is how we are going to better serve the clients, serve the insurers. And since the insurer is going to cooperate with the government, we are going to have a better definition in terms of pricing mechanisms. And I welcome my colleagues to follow up -- to give me some of the add-ups in terms of this answer.

I have no add-ups.

Now the floor is open up for the further questions.

The next question is Mr. [indiscernible] coming from the [indiscernible] Securities.

I have 2 questions for the distinguished guests. The first question has perfectly demonstrated the China Re's long-term overarching plans. We also want to better understand that -- from the China Re Group's perspective, how do you evaluate the transformation of the China Re's digitalization transformation? And do you have any target? So what are we -- are going to be the targets? So from the macro level, since we have launched this strategy and the China Re Group is going to reallocate some of the personnels and also some of the investments. And if we have any single group target, that is to say, for example, in the coming 3 to 5 years, so what kind of -- how many -- what is the view of the premiums that the digitalization transformation is going to [ go ] to the China Re Group? This is the first question. And for the second question, for the digitalization of the China Re Group, what is going to be the composition or environment of the China Re Group because in the China Re Group, we are going to build a platform and build a few [indiscernible] of the platforms, including the health care platform. So what kind of users are these platforms are we going to see? So what kind of users are these institutions? Because for the insurance company, it is actually a very homogeneous market. So there is a large insurance company, [indiscernible] patent. So if we have adopted these platforms, how the reinsurance company is going to compete with the insurance company in the future?

Thank you very much. We are going to direct this question to Mr. Feng.

Thank you very much. The first question is about the digitalization of the China Re Group. Some of the macro analysts and evaluations, I should put it that during the digitalization 1.0 stage, the digital transformation from the China Re Group has not been quantified or put into a lot of details. That is to say at the very first stage, we want to support the group into the future directions. And after 3 years of hard effort, we are quite clear about the picture that is -- to see during the 2.0 stage, we have reinvested some of the evaluation systems. So that’s what you can see in this [ call ], I've been talking about the 4 different keywords: lower down the risk, lower down the cost, improving the efficiency, technological -- the technology is going to drive the increase of premiums. And at our core, we need to promote our major businesses development. So the core or the indications for that sector is going to be one of the major pillars. We are going to divide it the different targets into the 3-year based targets. So I'm going to -- not going to elaborate for the each year's target, but these are some of the bigger pictures for the first question. Some of the problems invested behind this grand picture. The second part is about some of the results, the platform. We have done a lot of effort. We actually want to design some of the platforms and some of the platforms are focusing on the innovations. And some of the platforms are not mature. Today, we talk about the catastrophe risks. And for these 2 different platforms, in the recent few years, we are really working hard for the further development of these 2 platforms and how do we combine with our major business and who are our clients. Our clients are the insurance company, the government, the industry. And this is actually the first big question. I think if you have any further questions, I am going to connect you with my team to give you a more detailed answer. For the second question is about the future development policies platform and the users they are facing and what kind of advantages do we have. I think that we should return back to the identification and [indiscernible] of the China Re Group, every single [indiscernible] should not be separated with the advantages of the China Re Group. The advantages of the China Re Group should be the platform advantages. We are being connected with all the different clients, including the insurance clients, the industry clients. And also, our proposition with the government is becoming ever more important. And finally, I'd like to talk about that our advantage also comes from our deep proceeds to technological advancement. We have a very good resources, and we integrated all kinds of the resources, relying on the scenarios, applications, the problems that we address. And this is not something that one major company can focusing on. We are focusing on the social problems, the fundamental problem of the social development. That is actually the pursuit of our society. That is why we talk about the catastrophe risk for 3 models of catastrophe-free risk. Why are we focusing on these 3 different perspectives after so many years? It is being closely related to the public of the China Re Group. So what are the features of the China Re Group? We are trying to integrate the resources. We are not building one platform. And after that, we are going to own that platform. No, we are going to build the platforms and that platform is going to be shared by the industry. And we are going to integrate the future development models, and this platform is going to be mutually discussed, mutually shared and mutually endorsed by the industry. We are collaborators, not their competitor. This is the position of our group. So who are our uses? Our users, first and foremost, is going to be the insurers, but the insurer company -- insurance companies are far from enough. And we should focusing on the industry. So the industry front is one of the major pillars. That's the reason why we have teamed up with the concept of collaborating with the insurance company. And we are going to lower down the risk of the industry, and which, in turn, is going to better serve our clients. I think I'd like reparaphrase these words. And by looking back into the health care platforms, you are going to better understand the key rules. We are going to be collaborating with the collaborators, open up to the -- open up the platform to fit the different clients, to fit different demand from the client and for the successful researching platforms, and we have a weather forecasting platform. We integrated resources, the best integrated resources. We have the best algorithm. We have the best team, which is being owned by the China Re Group. We are working together with them to achieve a win-win result. And finally, what I want to say is that for the problems, all the development is open, it's about collaborative, it's about mutual sharing, it's about promoting the development of the industry. And in the process, we are going to drive the insurance company and its high-quality development -- insurance industry and its high-quality development.

Thank you very much, Mr. Feng for your questions. For the interest of time, China Re Open Day and the Year 2021 is going to open -- wrap up here. Thank you very much for your yearly support for China Re Group. I'm looking forward for the future dialogue with all of you. If you have any other questions or if you need to understand information, please contact our analysts and investors. Thank you very much. See you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]