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

Respectful investors and analysts, ladies and gentlemen, good afternoon. Welcome to, again, the announced -- result announcement of the China Re Group 2021. I am Liu Shukai, I'm the Director of the BoD Office of China Re Group. I'd like to introduce you the agenda of today's meeting. The General Actuary of China Re Group, Mr. Tian Meipan; and Mr. Li Ming, the Business Director of China Re Group; Mr. Zuo Huiqiang, the Business Director of the International Business Sector for China Re Group; and Mr. Lu Xiaowei, the Business Director of China Continental International Group; and Mr. Luo Ruohong, the General Manager of the China Re P&C Core Operations. This meeting is going to be divided into 2 parts. The first one is that we are going to invite Mr. Li Ming to give us a brief introduction towards the performance of the China Re Group and the interim result announcement for the first half of the year 2021. And the second part is for a Q&A session. [Operator Instructions] So now the floor is going to give to Mr. Li.

Distinguished guests, welcome to attend the interim results announcement 2021 of the China Re Group, and I'd like to briefly introduce the performance of the China Re Group. And turning to overview first, in the first half of this year, facing a really competitive deterioration, domestic and abroad, China Re Group sticked to high-quality development. As we have stable [indiscernible] growth and a controlled risk, in the first half of this year, we have a very rapid growth of the profit risk, prudent risk management and optimized structures of our Re market. Returns has rendered in the market. Our strategy has achieved a really important implementation. So with the first part, that I'd like to give you a brief introduction towards the record growth of the profit. In the first half of the year 2021, the net profit attributable to our shareholders is RMB 4,011 million, that is 62.6% growth, while the annual weighted average return is grow by 8.5% that is 2.87 percentage points growth. And this is benefiting from the good performance of the international business sectors while we are optimizing the investment structure. We are working in our sites in the market and trying to realize the returns in a timely manner. Secondly, I can see a very optimization of the business structure in the year 2021. China Re Group has entered into the Fortune 500 in 2021, making a forte among the global insurance companies and maintaining its reinsurance leadership in China. And in the first half of year 2021, the gross written premium of the group in the first half of 2021 is RMB 83 million. Then we have our optimized business structure via the -- and the P&C facultative reinsurance sectors, we are seeing a 2.1 percentage point improve. While for the overseas P&C reinsurance sector, we could see a 5.4 percentage points growth. And for the domestic L&H protection type reinsurance, we are seeing a 10.8 percentage points growth. For domestic L&H financial reinsurance, the market share -- the total share has been dropped by 4.9 percentage points. The third part is about the investment firm outperforming this year in the market. Taking this lower interest rate environment and complicated current situations, the company has worked the rising annualized total investment yield and our overall performance in the first half of this year has achieved a growth ratio of 6.55%, that is 1.07 percentage points compared with what happened last year. And the second half of this year, the equity investment has outperformed the peers in the market, and that we are seeing 600 bps growth. Fourthly, we are seeing the prudent risk management in the China Re Group in the first half of the year 2021. We have accelerated and comprehensively managed our risk without major risk events. And in the first half of the year 2021, there is no major risk to our company. By the 30 of June 2021, the China Re P&C has registered an adequate aggregated solvency at 228%. China Re Life has of 224%, while the China Continent Insurance is registered at 351%. The group's consolidated number is 197%. And we are ranging the financial strength rating of A and stable outlook by the S&P Global Ratings and we are best financial strength of our A, excellent and stable outlook. The fifth part I'd like to introduce you is that our accelerated strategy implementation. We have grabbed the opportunity from the national initiatives, and we have also tried to constantly cultivate new business growth. We are focusing on the pilot product in the 16 different provinces and cities and regions across the country, and we have acted as the chief or sole reinsurer in more than 80% of the projects. We have completed the development of the typhoon catastrophe model 2.0 with expert certification. And in the first half this year, our IDI is registered at [indiscernible] premium for 5,434 million and BR 2022 promote the construction of our IDI platform in Hainan, Guangdong and other areas. The platform has registered a total revenue of RMB 10.1 billion. So based on the Belt and Road initiation, and we are promoting the establishment of China Belt and Road Reinsurance Pool and serve as the Chairman of the managing agency, which company has accumulatively underwrote 12 products and protected the overseas assets of RMB 10.1 billion in total. And under the China Re Group, the Chaucer Insurance has launched a Belt and Road Consortium at Lloyd's which initially underwrites political violence risks. The consortium was led and managed by the Chaucer. We have -- a total of 32 Belt and Road cooperation memorandums have been signed. The cooperation network has covered 136 countries and regions, providing risk protection of RMB 350 billion for more than 600 projects. The third part is to introduce the health China initiative. The domestic health reinsurance market shares maintain #1. A new model of integration of commercial insurance and social security was created with products, products with specific drugs and specific drugs plus social security. We have also provided reinsurance support for local inclusive health insurance plans, covering 41 million people in 85 cities playing a leading role in the market. We have also participated in the first domestic long-term care insurance pilots, developed insurance pilots including long-term care and clinical illness. We have also launched the first Greater Bay Area of cross-border medical insurance and exclusive critical illness insurance. Fourthly, we are providing the reinsurance support for the [ Montreal ] region, especially for the environmental pollution liability insurance scheme in many cities. They have also provided nuclear insurance for all domestic nuclear power units of nearly CNY 1 trillion nuclear related assets and over 10,000 frontline workers in nuclear-related enterprises. Now also independently developed agrometeorological index insurance product for research and development platforms, providing the industry with 26 innovative product solutions for the meteorological index. And let's go -- let's dig deeper into what our performance is in the different sectors. The growth at the P&C reinsurance, we could see a decrease of the premiums with the improvement of the profitability. And in the first half of the year 2021, the gross written premiums is registered at RMB 25,403 million, that is a 6.2% drop from last year. The profitability is -- domestically, the number is RMB 15,672 million, that is 13% drop compared to last year. While the overseas performance is RMB 9,667 million, that is 9.1% growth. The net profit of this year is RMB 2,056 million, that is 194% year-on-year growth. While the annualized weighted average return on equity is 15.38%, that is 9.6% year-on-year growth. For the domestic P&C reinsurance is also dropped because of the reform, the insurance reform and the auto infrastructure. We can see a decline in the total premiums and the second reason is because of the decline in the upper portal sectors. And exactly because of the short-term impact on the premiums received by the establishment of the trial recovery firm. At the same time, China Re Group has keen to grow our returns. And we have not received the premium that we have find together with all the different non auto incremental factor line. So that's the reason why we need to work into 2 different channels. And at the same time, we need to actively participate in the further innovation in the business assets. The first half of the year, you can see that the combined ratio has demonstrated very good result. The non-agriculture, non auto sector has registered a very rapid growth by 19%. It offsets the negative impact but by the agro and the auto sectors. To put general spacing, we can see the total loss ratio has grown by 0.22 percentage points. And in terms of the domestic structures, we are trying to optimize the domestic structures based on the different types of the insurance. In the first half of the year 2021, the non-auto proportion is 71.2%. That is 2.5 percentage points growth. And the rate that emerging lines is occupying for 9.3%, that is 1.5 percentage points growth. The type of reinsurance arrangement is seeing a facultative in reinsurance accounting for 9.3% and the year-on-year growth is 2.1%. We are seeing a rapid growth in the Chinese interest abroad projects insurance, construction surety bond insurance and short-term health insurance and also the inherent defects insurance. Let's look at the overseas business of the P&C Reinsurance. Generally speaking, we have rising opportunity [indiscernible] and we have adopted ourselves to the local situations. In the first half year 2021, the gross written premiums is reaching RMB 9,667 million that is the year-on-year growth of 9.1%. The Chaucer registered 15.1%, while the other overseas P&C Reinsurance is dropped by 6.6%. We have worked with alternative with the wording of the same, and we have developed the overseas sectors. And we have also brought the real opportunities from the market, and we have expanded our results by applying for the multiple different lines. We have registered a rapid growth. For the platform in Beijing, we have added business, some of the Beijing [indiscernible] products and driving this rare opportunity of the rising reinsurance, we are exploring into the European market. And in the Singapore market, in our Singapore subsidiary, we are trying to not to cause these lower-performing underwriting business. And that is how we generate a differentiated growth in our performance to locate in a comprehensive manner, the efficacies of the underwriting, work has been improved dramatically. Generally speaking, overall cost interest has been dropped by 19.25 percentage points and [ moderately ] the Chaucer is actually seeing a 22.16 percentage points, while the other business overseas P&C sector is seeing a 10.39 percentage points drop. This is a brief introduction towards the P&C reinsurance. Now to talk about the life and health reinsurance. Generally speaking, we see a rapid growth of the profit with a reasonable business mix of the life and health reinsurance. In the first half of this year, the net profit of this sector is 15.6%. While the year, the ROE is 11.6%, that is 79.1% growth. In the first half of this year, the domestic market is actually accounting for 33 percentage points while the overseas business is accounting for 27.2%, that is a 7 percentage points rise compared with last year. We have actively addressed the production type business mix with the premiums and underwriting results remain stable. In the first half of the year 2020, we have worked on some of the incremental business, and we have terminated a part of the bank performing product. And at the same time, we are trying to focus on the product with higher efficiency. This has enabled the general guaranteeing skills and the total premium income is registered at CNY 11,559 million, that is 3.8% growth for [indiscernible] actual development of profitable part of the business. The reinsurance premiums for the middle-class medical insurance increased by 49.1% year-on-year and the proportion increased by 10.7%. We have years to be innovation [indiscernible] while we are using a metal drug and embracing inclusive insurance plans, insurance liability and [indiscernible] who are customized for the clients and the special drugs provided from our home city, Hainan, was first introduced. And we are also going to apply the drug usage data to risk pricing and to further control the risk of cost. And we are trying to use some of the incidence control to replace the medical expenditure control based on the drug data insights. New areas such as chronic disease data and cancer-carrying policyholders have been explored and the market for the elderly has been expanded, which has formed a product solution. And this is also going to guarantee that, for example, we have also done the special drug model towards extended to the medical devices. And for example, for breast prosthesis for the breast cancer product and a fully implantable analgesic pump product was firstly launched, and we have also launched into the new areas. And by the factors about data cut, we have deepened our industrial fundamental research. We took the responsibility of industrial fundamental research and led the compilation of the industry accident insurance rate table. We have also the data asset. The transfer of data resources to data assets of the company was promoted to expand data analysis dimensions, understand risk trends and improve pricing capabilities. We have also made our development with the medical insurance data. So the above mentioned is about the life and health in reinsurance. So our license introduced you to the primary P&C insurance areas where decrease in the premiums with an increase in the business cost. In the first half of the year 2021, the primary premium has [ been ] RMB 23,332 million that is a 8.4 percentage drop. The combined ratio is 101.93 percentage growth to 110.28 percentage growth. The reason for this value ratio is because of the deepening of the auto insurance or entire quarter readjustment of the cost. Coverage, we are seeing a weakening of the business structure. That's the reason why with the [ talking ] of such ratio, we need to see a [ broaching ] of the primary premium. And for the non-auto line, it has remained a very good growth momentum. In the first half of the year 2021, the non-auto line is registered a total product of -- for the accident and health, it is accounting for CNY 4,433 million, that is 11.5 percentage growth. And for the liability it is accounting for CNY 1,503 million, that is 24 percentage growth. And for the agriculture sector, it is RMB 569 million, that is 25.9 percentage growth. And we have comfortably readjusted the surety products. The surety line was actually addressed with a risk exposure further reduced so that the bad debt ratios were further dropping. And the surety product is actually registered income of the RMB 2,348 million, dropping by 27.8%. So now I'd like to give you a brief introduction towards our performance in the asset management sector. We have been working under the support of a valuation market in the long-term investment, and we are driving this company in financial situations and working on these opportunities. In the first half of this year, we have registered very good investment income. And the total investment income in the first half of this year is RMB 10,302 million, that is 36.2% growth. The annualized total investment yield is 6.55%, that is a 1.07 percentage points growth. The total investment still means that we have an increase in the total investment asset with a stable asset allocation structure by the end of the June 30, 2021. The total investment assets in our group is RMB 321,479 million. And we have actively readjusted our quarters, among which the fixed income investments data coming forth is at 75%. The equity and investment fund is 18.2 percentage points. The cash and short-term deposit is 5.7 percentage growth. We are driving these opportunities to reallocate the results and we are exploring to see the fixed income investment allocation opportunities and optimize in terms of the investment follows. And in terms of the equity investment, we have optimized the investment structure from optimizing opportunity in the first half of this year, and this is a brief introduction towards our business performance in the first half of this year. Let's enter into the third quarter of today's introduction, that is going to be the outlook for the future. From the promotion premium lag in the 13th 5-year plan to value improvement in the 14th 5-year plan, China Re will insist on profitable development, market benchmarks, risk compliance and digital transformation. And the business principle of stabilizing growth, optimizing structure, controlling risk and improving profitability to build a world-class comprehensive reinsurance group with sustainable development capability and core competitiveness. The above mentioned is the announced -- without announcement of the performance of the China Re Group in the first quarter of the year 2021.

So Mr. Li has [indiscernible] introduction to the performance of the China Re Group. Now we are going to open up the floor for questions. [Operator Instructions] Now the floor is going to be given to the investors.

[Operator Instructions]

The first question is from Martin Singh from the CIC Group.

I'm Martin Singh from CIC. I have 2 questions to the management group. The first question is that in your report, you have mentioned the China Agriculture Reinsurance Group. Can you give us growth introduction to the opportunity and our planning to the agriculture sector of the reinsurance? And the second part is that there are 2 separate quantities breaking the life and health reinsurance market. So can you tell us what kind of measures are we going to adopt to tackle these 2 challenges in the life and health sectors? Thank you very much for your question.

I'm going to direct your question to Mr. Li. And the second question, I'm going to direct to Mr. Tian.

For the profit-based agriculture reinsurance, we are seeing a dramatic change in the sector. In the past, the agriculture reinsurance is being presented by a [indiscernible] of the agriculture sector and the China Re Group is managing that sector for the asset administration. And we have a market share of 17%. After we have founded the China Agriculture Reinsurance Group, the responsibility has been transferred from the China Re Group to China Agriculture Reinsurance Group. There is so far the policy be it operation entities has been also been transferred to China Agriculture Reinsurance entities. Moving forward, we are going to see 2 different channels. The first line that we are going to focus, on the medical reinsurers, and we are lucky the commercial business that is reinsurance. The second part is that we are going to draw [ a line there ] with the China Agriculture Reinsurance Group because they have a certain share of transfer from the business from our side, and we are going to sign a strategic development core plans with China Agriculture Reinsurance Corporation.

For the second question, you mentioned about the life and health insurance market. In the first half of this year, I think there are so many reasons behind the 2 challenges. So if you see insurance companies, if you are seeing their results announcement, we have mentioned the reason no matter from the supply side, the selling channels, customer demand, there are so many changes in such a complex situation. The difficulties we are facing in the first half of this year from the performance includes some of the major delays, calling a huge drop of the value and the long-term annuity business does not go a very smooth journey -- have not gone a smooth journey in the first half of this year. And for the reinsurance product, being put in fences actually affected our business performance. But for the reinsurance is also dropping down because we have been postponed performance. And we are also seeing a drop in the medium based medical reinsurance sector. But actually, the L&H insurance market and the difficulty [indiscernible] the attitude that we are adopting is we are trying to look into the super [indiscernible]. If we are on a very small smooth journey, the reinsurance is -- the insurers are doing a good job and we are on the very good momentum. The rule of the reinsurance company might not be fully placed. But when we are -- as a difficult to it is going to be the time when the reinsurance company to get aim and play our rules, ensure our insurers' responsibility. So definitely, this is going to be one of the major ones. For example, in these different sectors, the need for the China Re -- for insurer -- for the reinsurance is not only demonstrated to the openings, it is also about innovation, going to be grow only by innovation, only by digging into the demand of the clients that we are going to have a very good performance in the L&H reinsurance market and also the auto insurance market. We looked through optimization of our products and also a good service into the market, we are going to elevate into the market. No matter from the data perspective or no matter from the innovation perspective, we have a very good -- and we have very good -- we have very optimistic [ eye ] towards market no matter from the [indiscernible] insurance or the medical insurance. In terms of the products, we have also done a lot of work, for example the special drug insurance, the connections towards the internet announced or the clinics and also the rating inclusive insurers, we have actually supported the performance of these sectors. And just as Mr. Li Ming has mentioned, combined with the long-term [indiscernible] the major disease insurers and also the innovations in the medical insurance means that we need to merge -- we need to integrate ourself further with the hospitals, with the insurance sectors of the medical works. We believe that we are going to play a very important role in the medical insurance. We are having a relatively leaning more in the sector right now. And moving forward, it is also going to be a very important part. From the [indiscernible] I think it's a very huge opportunity. And we are also going to turn this rare opportunities into a very good growth momentum.

Thank you very much, Mr. Li and Mr. Tian, for your answer. So now the floor is going to be given to the next investor. We are going to welcome Jenny from Morgan Stanley.

I have one question. In this year's performance, I can see that there are some of the impacts due to investments. This year, we can see a high number. So what matters are we going to adopt? And this offer to achieve a very good momentum, it's very rare that we have a double-digit ROE. So how do we keep this momentum and improve our ROE performance ratio?

Thank you very much, Jenny, for the questions. I'm going to direct this question to Mr. Li Ming.

Thank you very much. I think that all the year can see that we have delivered a lot of satisfied investment returns in the first half of this year. There are many factors affecting this. From a net perspective, in the P&C insurance sector, the underwriting of the [indiscernible] company is improving, all different sectors. The underwriting and reinsurance and the management of our assets, I can see that for these different sectors, there is not a very good possibility that agri sector is growing, agri sector is now booming. So for every year, we have some of the highlights and we have some of the drawbacks. Last year, in the year 2020, we were obviously affected by the COVID-19 pandemic. So this year, we are seeing the highlights in the asset management. So these different sectors is forming the relatively stable performance. And moving to next year, investment is going to be quite good. And we're also going to give a very good review for the development of the different business sectors. I am quite confident. The key problem is that the general management design -- the total design is going to be focusing on the value-based long-term investment. On the lower -- lowering or widening of ROE in a special year. For example, if there is 1 year there's no so much major international disasters. It is going to -- we are going to see a rigorous performance. And these are very real situations. And generously to see, we are seeing a very steady growth in the market, and we can see a very stable rising performance of the market. It is going to be a long-term operational strategy and it's also going to guarantee our uprising in other business sectors. I think this is only a random case for the huge -- for the short-term rise in the ROE ratios in the asset management or also a vendor cost for the COVID-19 pandemic.

Thank you very much, Mr. Li. Now the question is going to open up to the floor. Thank you. The next investor is [ Adam Cumming ] from [ Invest Securities ].

Hello, can you hear me?

Yes, please.

I'm from [ Citigroup ]. I have 2 questions. The first question is about the reinsurance, the P&C reinsurance. So the question is about the [indiscernible] of the P&C reinsurers and the competitor integration. And the second question is about the reform. So we have so far noticed that the final reform is going to be released by the end of September, and the reform detail has not been renewed yet. So are there going to be any impact towards it? So thank you very much for giving me this rare opportunity.

Thank you very much. So I'd like to direct your first question to Mr. Zuo, the Director of our International business, to see that.

For the international business, the performance in the first half of this year is quite satisfying. From a different perspective, I can draw this conclusion. Compared with the performance last year, the total cost is also improved due to multiple factors from the maintenance ratio compared with last year due to the COVID-19 pandemic. The claim ratio in the market is not very good. But this year, the impact has been shrank. That's the reason why in the first half of this year, due to the net impact of the COVID-19,we could see a rapid growth of the base number for the second half. After many years of struggle, especially in the year 2019 and 2020, the general pace in the market, the general premiums in the market is also very strong. That is a very quick improvement. We have drastic opportunities from the market, and we are seeing a very rapid growth. Thirdly, we are trying to optimize our business structures. You all knew that at the end of the year 2018, our international business had improved greatly. We have covered more regions, provided more reinsurance products. And at the same time, we are also trying to -- we adapt those sectors who have not seen a very good performance, and it has improved our international business sector greatly. Another important factor is because of the market is still at a relatively fatigued stage. We have also strategically improved our cost structure. In the first half of this year, the performance is satisfying and we are looking forward that in the second half of this year, we could expect a better performance. Thank you.

For the [indiscernible] reform, there have been 3 months of tasks in our industry. And we have now very accurately seeing when this revenue is going to be fully implemented. And for China Re, the major impact is going to be the adequate compensation ratio. The risk is going to be based on the 3 parts. The first point is going to be the calculation method of the market and the ratio is also going to be around the major disaster risk. And from the investment side, the equity investment is also going to see a readjustment. At the same time, for the China Re Group, the equity investment means that the recognition towards the P&C insurance is relatively lower. This is going to affect all the different sectors. Under this background with lowering adequate compensation ratio, we also need to reallocate the capital into the areas where the property is going to be generated most. We used to have a lot in capital. We used to have adequate capital of them. That's the reason why we have allocated it into somewhere where the capital ratio is going to be higher after the reform. There is going to be some of the reinsurance opportunities. With lowering of the compensation ratios, we are going to see a better performance.

Thank you. Mr. Li for your answer. Now the floor is also going to be opened for the next investor. Thank you. So the next question is going to be Michelle from HSBC -- Citibank.

I am Michelle from Citibank, and thank you very much for your announced -- result announcement for the first half of this year. And the first question is that the higher ratio of the reinsurance sector of the first half of this year. If I'm right, you mentioned it's because of the ongoing framework reform. So what direction are we going to move towards to? Are we currently focusing on the premiums or the policy underwriting phase? And after, we have normalizing that sector, so what is going to be the normal performance? And then the second question, is that for the P&C reinsurance sector in China, so there is going to be a major disaster risk. And in the first half of this year, we have suffered a lot disaster in the Funan province. Can you tell us compared with last year compared -- so what is the increase and the allocation of the capital to that major disaster?

So I'm going to direct the first question to Mr. Lu and the second session to Mr. Li.

Thank you very much for your questions. You have mentioned the framework impact toward the continental insurance. As you see, the impact is very huge. The cost is rising compared to last year. The first affecting factor is the framework reform. After the framework reform, the core part is going to be lower the premiums, increase the quality and improve the quality. And with the increase of the framework reform, the fee is seeing a very rapid growth. And it is also driving up our overarching compensation ratio. The second factor that selling on the point of the framework reform, we are also doing some of the business sectors for the long-term development of the company. For example, the [ performance ] business and after the IDI insurance. And these are the long-term products. Because of the calculation method, they have not included in our balance of the sheets. But for the long term, this is going to be very beneficial for the long-term profit of our company. And the third reason is that due to the effect of the interest rate this year, the national government has came up with some of the restriction policies. I think that this is also going to brought a lot of difficulties. By so far, the reform and the auto insurance is going to be continued for a long time. And moving forward, we are also going to see a drop in this sector. But if we are seeing the compensation ratio, it is going to be continued for the long term. For the China Reinsurance, we still need [indiscernible] to ensure our performance ratio. The first part is constructing the mixed structures for the auto insurance. The auto insurance is accounting for 50% of the insurance model and we hope to utilize this part of the structure as a major reference of the risk. This is also going to help us to increase the premium for the auto insurance. The second part that we are also going to increase the overall cost ratios. We are going to tap the auto insurance as a channel for us to be connected with more and more customers by providing them added services. This is going to help us. And this is also going to give us very good performance results. The third part is that we are also going to develop in non-auto sectors. We will be focusing on the non-L&H sector, the major disaster insurance and this performance is going to be increased. And then lastly, moving to the future, I think these sectors is going to setup performance of the non-auto sector. And the second factor is that through the using of the models, we are going to offset the claim ratios and claim costs and the start that we are also going to control the human resulted costs and improve the per capita performance and through several different matters, we are going to virtually improve the performance. Thank you.

And for the newer [ disasters ], I think it is going to contribute into international performance and our investment performance. For the international performance, we consider the first half of the year registered a very good performance. But actually, in the first half of this year, the -- I think the compensation -- the claim ratio is actually around 20% or 30% higher than the previous year because of the COVID and also the heatwave. And in the international business, we see a very good performance. But against the backdrop of the international environment, and I think the compensation and also the claim ratio is occupying for a relatively high percentage points. From a marketing perspective, there is a huge market demand emerged from the troughs after typhoons and earthquakes and after this year. [indiscernible] of our estimation and there is no huge impact compared to last year because the disaster has happened that is relatively concentrated in China here. People see the [indiscernible] disaster coming in the summer due to the typhoon occurring in the summer. People might expect that we have a very higher compensation ratio. But for the -- for disaster happening in the [indiscernible]. From our side that, our PRC insurance policy has witnessed a certain loss. And for the reinsurance sectors, because data is actually lagging behind. I think that the insurance companies are going to report their number to us after they have a full picture to work their losses. The data readout is relatively lagging behind. Generally speaking, one large [indiscernible] is not going to create an actual damage or impact to our cost.

Thank you very much, Mr. Lu and Mr. Li for your kind answers. Now floor is going to be given to the next investor. Thank you. So it is going to be [ Fin Chu ] from [ Yangtze River Securities ].

I'm [ Fin Chu ] from [ Yangtze River Securities ]. I have 2 questions. The first one is, what is the strategy for the China Re Group in terms of the health and also nursing houses? The second question is about the marketing policy for the Charter and also Continental Group, China Re Continent Insurance?

We are going so let Mr. Tian, the Chief Actuary of China Re Group to answer your questions.

For the China Re's risk strategy and the long term health sector, for the first part, is going to be the integration of the different industries. We have done several things. We have integrated the group with the medical sector. We have expanded the algorithmic display in the medical sectors. We have extended the drug performance. For example, we have extended the performance to the world in the Hainan program. Secondly, we are promoting our insurance from the medical -- from the pharmacies to the medical devices. For example, we are working to work with the top medical devices company. We have also integrated China Re to our millions of medical devices programs. And we have also promoted the program from the [indiscernible] common drugs to this. They are the ordinary drugs that people take. The second maneuver for us in the medical field is that. And the inclusive insurance project, we have included the performance of the special drugs, the medical devices. And with our integration of the growth, we have also done some of the integration in terms of the channeling. We used to use the internet to generating more channels. At the same time, from the reinsurance sector, in the past, it used to be an insurance product. But currently, we are using the inclusive insurance product. We work toward the different facets. We have also done several different parts of the business. For example, we are working towards the cerebral client department, the ophthalmology department and also the other different factors. And thirdly, we are also integrating with the clinical insurance and the process of medical insurance. We have opened up a seminar about the new insurance, and it has paved the way for the future direction. And through the product of the inclusive insurance products, we are trying to exploring into the further possibilities of the medical insurance in terms of the data construction. And we actually included all the different data from the reinsurance, and we are actually working into the future to trying to explore opportunities lying ahead. We are going to make our international business with a very innovative structure. So I think the growth is going to be around 500% or 600%. And moving forward, in terms of the integration of the business, we are going to growth further. On that part, on the current project. And fourth more important, we are also going to build the capital of the product. We are also going to integrate our business. And we should also focus on the [indiscernible] inclusive insurance, we are going to integrate these sectors. So we are actually looking into the inclusive sectors of the business. And this is also going to bring the real comfort and health to the general public. From the [indiscernible] sector, these levels are quite different. But the integration of the medical sector means that the current cooperation means that we are going to work together with a special drug department of the public hospitals and the integration of the medical insurance is going to see a deepening performance of the inclusive insurance product. So how are we going to integrate these different sectors? It is possible for us to draw the hands, to right the catalog for the medical products together. Coming in into some of the new high property medical devices of the drugs, so are we going to invest in terms of the health-related industries? This is also going to promote the industrial growth. It is also going to promote the industry and the reinsurance sector in terms of the nurturing homes. It is about the risk allocation. It is not being recognized by all the companies. And this kind of the longevity of influence is not pose a lot of risk internationally speaking. So from the current situation, the major risk is going to be accompanying our performance such -- with the national growing requirement of the -- the nation have us rising requirement converting aging industry and the nursing homes. We are going to see the allocations of the risk, and we are going to provide for a very good long-term management. And we are also trying to focus on the long-term business model. These products are very difficult to be sold in the market. And we are actually focusing now on innovation combined long-term services. And these long-term nursing product is also very popular in the market. You can see the performance of these products, especially the performance of the annuity in this market. Our overall speaking, we have done lots of efforts in the life and health product, and it is going to be our priority. No matter how the institutional reforms or the optimization are structured, we [indiscernible]. Moving forward, we are also going to set up an integration of the results. And we are also going to focusing on the different products. So from a real marketing perspective, we are going to do a revenue integration between the market and also the health sectors.

Thank you very much, Mr. Tian, for your answer. Now the floor is going to be given to the next investor. The next question is [ Stephen ] from Bloomberg.

I'm [ Stephen ] from Bloomberg. I have several questions. The first question is that for the reinsurance sectors, although there is a very significant improvement for the compensated ratio, but we are under a little bit of a threat. I think it's because of the domestic sectors performance. So my question is for the domestic P&C reinsurance. I can see the claim ratio is around 5%. So my question is that apart from the auto insurance, which kind of reinsurance have a higher claim ratio? So the second question is about the insurance sector. I think it is not included in the results announcement. What is the trajectory for the non auto sectors reinsurance? So which are the major driver for the project? So my special question is going to be given to the authority and also the insurance, which one is most important?

Thank you very much for your question. For the first question, it is also going to be directed to Mr. Li. And the second question is going to be answered by Mr. Lu from China Continental Group.

The claim ratio of our rising auto insurance sector, so the rising of the claim ratio is -- does not bring a rising compensation ratio because domestically speaking, we have adopted a slowing interest ratio. We have some of the partial procedures. And this is also going to impact the China Re results. From the claim ratio, this is not going to have to draw [indiscernible] toward the performance of the reinsurance sector. If we combine this ratio, there is no significant meaning of that. Thank you very much for your question.

So I'm going to update the second part of your question. We have no single drive of the performance affected by the framework reform. This is going to drop the margins of the product and the project. Because of the over-rising competition, the overall ROI is seeing a huge difference between the different sectors. The traditional insurance is seeing some of the rising. And for example, the insurance products, they're perfect and also their returns balance each other. For some of the -- for including the accident insurance, the health insurance and also the short imprudent has a very good performance. You have also mentioned the short insurance, I think you want to have [indiscernible] of our product in these sectors. I like introduce you the 2 different products in the China Continental Insurance. The first one is about the personal and individual targeted reinsurance products. And the second part is some of the mortgage-based reinsurance because it is only a new starter in the sector, the total volume is relatively very small. The nonperforming ratio is also very small. And we have adopted a series of factors. The nonperformance ratio of the first half of this year is around 7.2%. It is going to be back to the normal level around 1 year ago and it's also contributing to a fair share of underwriting profit. Thank you.

Thank you very much, Mr. Li and Mr. Lu for your questions. So now the floor is going to be given to the final question. Thank you. It's going to be [indiscernible].

[indiscernible] I only have one question. You mentioned about the loan -- DCF reform impact to work the underwriting profits. Can you tell us how long DCF reform will last, especially the CROs impact towards our domestic profit margin?

Thank you very much for your questions. We have a very relatively clear picture towards DCF reform. It is going to impact the industry to a very large extent. The impact is going to be divided into 2 parts for the China Re Group. The first impact is going to be the China P&C Reinsurance and the second part is to the China Continental Reinsurance. And for the P&C reinsurance, the premium is going to be shorter in range. The growth ratio is also going to be effected. The total number is going to drop by 20%. That is a larger drop compared with the insurer. And if you see the DCF reform is affecting the commercial vehicles, and while the transportation insurance that we're focusing on the transportation sectors, while we are actually focusing on the commercial vehicles, it really do impact our profits. And in terms of the contract design, it is going to be the procedure. The impact toward us is not that huge. And for the insurance, it's going to do real damage. Although these usually is not as high as we expected, we are going to see a 10% drop across the industry. Another impact is going to be toward the results. The auto insurance is undertaking huge pressure. We are seeing a rising claim ratio. It is going to be a product for continued readjustment. It's going to be the improvement of the business. It is also going to be the adaptation for technologies, the improving of the pricing is going to be our purpose. So for the short term, it is going to have a very huge impact towards the China Continental Reinsurance, especially for the China Continental Insurance under these difficult backdrop, we need to stop from the operation sector, we should keep the anticipation of the data. It looks as if the overall performance ratio is going to be lower, but the data is actually -- the data is authentic. So this is going to be the general introduction.

For the interest of time, we again please wrap it up here for the result announcement for the first half of the year of China Re Group. Thank you for your support towards China Re Group. Thanks to [indiscernible] the future group of the China Re Group. If you have any questions, please contact our investment team, and we are going to conclude today's meeting here. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]