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

Ladies and gentlemen, welcome to attend the 2023 interim results announcement of China Re Group. I'm also going to [Audio Gap] Mr. Tian Meipan, who is the Chief Actuary of China Re Group; and Mr. [Xiaopeng] who is the Chief President of China Continental Insurance. Today's results announcement is going to be divided into 2 parts. So Mr. [indiscernible] who is the China P&C Reinsurance, China L&H Reinsurance as well as Mr. Lu Xiaowei and Mr. Li Wei who is going to introduce the distinguish different portfolios in the different sectors. The second part of this meeting is going to be the Q&A session. Based on the Q&A session result, we are going to have one-on-one session. So please be noted that this time result announcement is only available by press release from online. [Operator Instructions] Now we are going to have the results announcement.

Distinguished investors, distinguished analysts, good afternoon, welcome to attend the 2023 interim results announcement with China Re Group. In the first half of the year 2023, between the complicated situations, China Re Group has fully implemented the general tone of seeking progress while maintaining stability and enhancing values around the strategic goals of building a world-class comprehensive reinsurance group and has taken new steps for high-quality development. Now my introduction is going to be divided into 4 parts. The first one is the comprehensive improvement in operating performance. Second, in the first half of this year, the consolidated gross written premiums of the group is RMB 102,617 million, up by 16.6%. The consolidated insurance revenue of the group is RMB is 48,444 million, up by 16.4%. The net profit attributing to the equity holders of the parent company is RMB 2,012 million, up by 331.5%. Annualized ROE is growing by 4.46%, that is a growth of 3.44 PPT growth. The reasons behind of this growth is because starting from the year 2023, we have implemented the new international financial reporting standards. And the base standard means that we should follow the consolidated written premiums according to the standards effective on the changes in the situation. The general consolidated gross written premiums of the group has increased by 15.1%. And based on this rapid growth year-on-year, the half year gross written premiums exceeded RMB 100,000 million. We are also working on the key segments, optimizing our business structure. Domestic P&C reinsurance non-motor sector is registered RMB 18,239 million, up by 15.1%. The overseas P&C reinsurance has a revenue of RMB 30,923 million, up by 22.4%. The domestic L&H reinsurance protection type business is up by RMB 15,555 million, up by 15.2%. The P&C primary insurance non-motor business is RMB 15,265 million, up by 23.9%. Our underwriting results has seen a good improvement. Despite the heavy losses from the major natural disasters, such as the earthquake in Turkey, the underwriting profit of the group increased significantly and reached a record high. Last year, we are still seeing a quite registered revenues, among which, the domestic P&C reinsurance is seeing 99.65% growth, up by 0.09 PPT. The overseas P&C reinsurance is 88.48%, down by 8.05 percentage points. The L&H reinsurance term protection type business is 97.35%, down by 0.89 percentage points. The primary P&C reinsurance is 100.86%, down by 2.14 percentage points. We are also optimizing the risk management area. The solvency and international ratings is also demonstrating our resilient performance. The China Re P&C is 209%. China Re Life is 214%. China Continental Insurance is 247%, while the group consolidate is 186%. We have remained the financial strength rating at A and stable Standard & Poor Global Ratings. Second, we are also trying our best to serve the national interest while trying to pursue the high growth in this industry. In the first half of this year, the total underwriting revenues of our insurance is around RMB 20,369 million, and we are also selling over 500 different small and medium enterprises, that is 1.5% times of growth. In the China Re L&H insurance, we are also underwriting a series of this policies, selling these kind of specialized enterprises and providing the financial support for these companies. We have also underwrited the first reinsurance contract with the fishery industry in China. There was a initiation, means that we have underwrited RMB 12 trillion. China Re L&H is also using the [indiscernible] as one of the major innovative ways to manage the platforms, including the [indiscernible] and other different domestic protection types. We are also working for the new brands. China Continental Insurance is also trying to figure out the profit-generating areas, including the health care industries as well as a [indiscernible] of the net profit audit selling over 50,000 more medium size enterprises. And based on the REITs own self-managed products, we are also trying to widen our asset management portfolio. This is how we try our best to guarantee the major project. Thirdly, we are also trying to promote the digital transformation processes. We have finished the digital transformation permit, and we are also launching a 5-year plan in the future. We are also trying to initiate sell 12 different earmarked projects serving the different models and also the earmarked products. We are trying to promote the reinsurance, health insurance for asset [indiscernible] management with the investment management portfolio. In our company, we are also achieving a phased new result. Fourthly, we are also trying [indiscernible] to have a whole risk management system. We are also trying to perforate our risk management portfolios in year 2023. By doing the 5 dimensional, we are also trying to promote the low [indiscernible] of these areas. We are also working together with the risk control risk management and initiated the international pre-disaster management platforms, third phase development strategies. By working into the current geopolitical risk across the international society, we are trying to evaluate the risk that China Re is going to -- under the extreme situations. And based on that, we are going to further target our systems, improving our capacities to deal with the risks. Now I'm going to give the floor to the different session and also the representative from different session to give us a brief introduction towards the performance in the different sectors. Now we are going to give the floor to Mr. [indiscernible] who is the representative of China Re to introduce the performance in the P&C Reinsurance.

Distinguished guys, ladies and gentlemen, I'm going to give you a brief introduction towards the domestic P&C reinsurance. The previous -- the data was calculated based on the year-on-year performance of last year. Let's look at the domestic business. In the year 2023, the reinsurance premium has reached RMB 20,369 million that is by 19%. For the different factors, we have also grabbed the opportunities for the motor insurance. We are also seeing a 34.5% of the motor incrementals. We are also exploring into the commercial agriculture insurances and focusing more on these sectors, promoting the agriculture innovations in these sectors. And we are also seeing 33.7% in the agricultural incremental insurance. In the non-motor, non-agriculture sector, the business such as the engineering insurance and health care insurance, grew rapidly, and we are seeing 11% growth. In the year 2023, in the first half of this year, the combined ratio is 99.6%. That is the same level compared with the previous year, mainly that we are showing a very stable operations of the company benefited by the rapid growing of the [PNH] session. The domestic premium growth rate is continuing to exceed that of the primary insurance industries. In the first half of this year, the reinsurance premiums of the non-motor lines is surpassing 10%. We are also trying to optimizing our non-motor lines with optimizing basic structures. The growth rate of reinsurance premium has registered RMB 18,239 million that is to see the combined growth ratios of the previous 3 years has been registered at 16.3%, among which the commercial agriculture industry insurance, short-term health insurance, first in the insurance and cybersecurity insurance has achieved a very rapid growth. For the overseas P&C reinsurance sector. In the first half of the year 2023, the gross written premium is RMB 30,923 million, up by 23.4%, among which Chaucer has registered RMB 11,172 million, up by 25.4%. The overseas business at [indiscernible] is RMB 2,751 million, up by 11.5%. We are adhering to the general principles of optimizing portfolio, prioritizing efficiencies, seizing opportunities and strictly controlling risk, giving the opportunities of rising premium rates by expanding the skills of the advantages business on the basis of efficiency, resulting in record growing premiums, continuously improving the contract conditions actually reducing business with poor operational efficiencies and continually optimizing business structure. Although we are affected by the Turkish earthquake, the overall underwriting result has been improving continuously. In the first half of the year 2023, the overseas business in Chaucer has grown by 88.4%. That is minus 8.05 percentage point downward, among which Chaucer is being decreased by 13.68 percentage points. The business sector accepts Chaucer has growth to 104.53%, up by 7.57 percentage points. I concluded the introductions of the China Re P&C Reinsurance. Now I'm going to give the floor to the Chief Actuary of the China Re Group and also the managers of L&H Reinsurance, Mr. [indiscernible] to give us introduction towards the China Re L&H Reinsurance.

So I am going to give you a brief introduction towards China Re L&H Reinsurance. In the first half of the year 2023, the reinsurance premiums of the L&H session is reaching RMB 38,252 million, up by 50.3%, among which the domestic business accounts for RMB 34,872 million, up by 33.7% and overseas business is seeing upward trend by RMB 3,390 million, up by 27.9%. The reinsurance premium from the domestic protection type of business has grown to RMB 15,559 million, up by 13.8%. We are also trying to innovate our business structures by focusing on the traditional track and innovative work. We are also working on the medical insurance business and also other different protection type of business. We are grabbing the opportunity in the health care-related insurance. At the same time, we are also trying to innovate our business models by relying on the leading positions in the industries. We have actively developed the efficient type of business such as medical insurance, continue to deepen loss protections and reductions of existing businesses. In the first half of the year 2023, the surety for that is underwriting ratio is 97.3%, down by 0.89 percentage points. The underwriting profit is around RMB 320 million, up by 15.2%. At the same time, we are trying to create more values by the core competitiveness. We are entrusting to weigh the industry's [indiscernible] competition product and the industry's critical incident revenue project. At the same time, we are focusing on the core competitiveness insurance. In terms of the digital sector, we are also trying to make some of the innovations to upgrade the smart risk control systems, realized the model suggestions, upgrades and data upgrades and carried out systematic matches with leading insurers. Data is going to empower our business development, providing support for product pricing, product development and risk avoiding. In the product sectors, we are trying to keep of the guidance of the tax professional authorities, providing support for the development of the tax-free health care insurance products and assisted the relevant product to large prepay in the market. We are also providing a variety of the industrial integrator options for the house insurance product for local branches of the insurers. We are also trying to summarize the practical experience of the [indiscernible] and published a series of the report, including the current situations and sustainable development of the regional customer -- consumer medical insurance. And in industrial individual sectors, we are taking the hypertension, hyperlipidemia and also hyperglycemia management at the entry point, exploring the business models of the chronical disease management and realizing the innovative and digital transformations of the insurance plus medical transformation. We have also implemented a new innovative payment models for CAR-T and innovative product models for health insurance, integrated advanced medical insurance such as the artificial heart and artificial liver. So now I'm going to give the floor for China Re Continental to give us a brief introduction towards the P&C session.

Distinguished investors, distinguished guests, let me give you a brief introduction about P&C reinsurance. The data was based on the comparisons with the year-on-year performance. In the first half of the year 2023, the premium -- primary premiums of the P&C reinsurance is registered at RMB 27,764 million up by 13.3%, among which the motor line has seen a revenue of RMB 12,499 million, up by 2.6%. The non-motor line has seen RMB 15,265 million, up by 22.9%. In first half of this year, we are also trying to optimize the other structures, trying to improve the combined ratios. And starting from the combined ratio has been dropped by 9.42 percentage points from the 110.28% to 100.86%, and we are trying to continuously optimize the cost management, actually adjusted the business structure. The share of the motor line has seen a downward trend of minus 4.7 percentage points to 45% and the share of non-motor line is up by 55%, up by 4.7%. In order to optimizing the structure, trying to -- we are also trying to make sure the [indiscernible] in this area. Now I have concluded the introductions of the P&C session. I'm going to give the floor to you China Re Asset Management to give you a brief introduction towards the asset management session.

Distinguished investors, I'm going to give you a brief introduction towards the asset management of China Re Group. In the year -- first half of the year 2023, the global macro economy as well as the asset management situations have shifted greatly. The inflations overseas have continued, while the net investment income of our group has maintained a very stable performance. Facing this complicated and every-changing situations, we have sticked to our previous principles and also prioritized the asset management with a conservative attitude while the structural opportunities and the net investment income, we have registered RMB 6,999 million growth, down by 1.9%, keeping a very stable momentum. The annualized net investment yield is 300.96%, down [Audio Gap] while the annualized total investment yield is 3.27%, up by 0.5 percentage points. By the end of the year of 2000 -- by the end of the first half of the 2023, the assets under our management is RMB 604,279 million up by 41.4%. The total investment assets of the group is increasing by RMB 352,584 million, up by 8.1%. The asset of the third-party under management is RMB 251,695 million, up by 146.1%. We have also optimizing the asset allocation structure, focusing on the major assets into the areas of the -- where the market is demanded. We are also optimized the third-party asset environment by managing around RMB 251,695 million. We have also tried to keep a very stable momentum of the asset structure, optimizing the investment portfolios and keeping overall resilience. The fixed income investment is accounting for 80.3%. The equity and investments fund is accounting for 20.4%. We are also grabbing the opportunities in the market, increasing allocation in the cash and short-term times. We are also trying to grab the opportunities for the hype areas of the interest rates, trying to invest in the associates. In terms of the investments in the stocks and the assets, we are trying to get a very fixed investment. At the same time, we are also trying to figure out the opportunities in the other different areas, trying to mix our assets with the best optimizing of the new cash flows. At the same time, we are also working for the long-term portfolios. For the overseas fixed income investment, we leverage allocation values at the peak of the recycle for the high-grade corporate bonds and extended the duration to improve the medium and long-term returns. So now I'm actually concluded my introductions in the assets. Now I'm going back to the floor to our President to give you an outlook into the future.

Moving to the future, let's look at what a market is demonstrating toward us. I believe the market environment is stable and improving. Medium- and long-term structural opportunities are provided by improving macro economy recovery in progress. And as of the new momentum is gaining the support after the COVID-19 pandemic, the restructures of the industries need some of the analyzing. Currently, the insurance industry is stabilizing and recovery with a clearer trend. By building a common market across the country, we are going to have the opportunities with a large and unified market, but there are other more changes in the demand structure. We are trying to build a new situation in the modern society. The digital economy proposes us with new opportunities with the transformations and operating of the domestic economies, we are seeing the reimprovement of the industries. The domestic industry is very resilient in terms of the development. We are also actively [indiscernible] the developmental opportunities with the domestic economy. China Re has actually opened itself wider with evermore efforts in terms of the overseas businesses. In the first half of this year, the market investment is -- the international investment is up by 24.2%, among which we have invested more in the Belt and Road initiative. Second, for the -- we have also recalculated the bad sectors. The reinsurance business will increase the business 20, continue to improve the leverage of the profitability. We [indiscernible] for the opportunity of L&H reinsurance is going to come. In the recent few years, in the P&C session, we have launched a few opportunities to facilitate the development in the L&H sector. We are also promoting the utilization of the rural areas as well as the C-ROSS Phase II insurance. We are also trying to optimizing the commercial insurance as well as the domestic insurance. The top-level design of the insurance is a nation to new momentum and potentials. We are also going to facilitate the development of [Audio Gap] and we are also going to continue to pursue the reform and innovations to unleash growth. Thirdly, we are actually facing very hard foundations in the climate change. So the reinsurance industry is facing new opportunities and challenges. Across the previous years, there are really some of the climate extremities. The occurrence ratios of climate extremities means that we should improve the performance in these sectors because of the coverage in these areas and also the wide spreading of these areas, it is posing more threats to the insurance sector, and it might create some of the risk spillovers of the insurance sectors. This also means new opportunities for the efforts of the reinsurance companies to wake. In the longer term, we should have a clever understanding of the extreme barriers in climate, trying to explore the big opportunities posted by the company towards it, working on the green insurance session and fully supporting the national energy risk reduction process is going to become the future development of the reinsurance sectors, pushing these new opportunities and new challenges. China Re Group is going to stick to the skill-based economic group, underwriting more protections in these industries with a very stable growth. We are also going to start our effort in the following 4 fronts, trying our best to conclude the annual results, facilitating our comprehensive reinsurance sectors, creating more profits to the shareholders. First, we are going to strengthen the assessment of [indiscernible] and also increasing our business resilience. We are going to actually create development of opportunities of the domestic markets and international markets and follow the business space. We are going to strengthen the global foreign exchanges in the financial market research and pre-actively negotiate through the risk cycle. We are also going to closely monitor climate change risks and geopolitical risks and continuously optimizing the business portfolio. Second, we are going to adhere to fine management, adhere to the efficiency effect, calculated the underwriting accounts, investment accounts and capital accounts and steadily increase the returns on the capital market. The reinsurance business will increase business screening, continue to improve the levels of profitability. The primary insurance business will promote the quality and efficiency adhered to underwriting perfect. Asset management business will optimize asset allocation to cushion the fluctuations of the market. Thirdly, we are going to promote the transformations in operating and build our own core competitiveness. We are going to keep the full play to the advantages of the main business, making progressive breakthroughs, accelerate the expansion of the strategic emerging business areas and continue to create a new [indiscernible] of the business. Strengthening the guidelines of the research, the implementation of new business models such as insurance cloud technologies to reduce the risk and insurance for our special medicines, our clinical disease management. Fourthly, we are going to pursue the reformed innovations to unleash the new growth momentum. We are going to enter to the strategic goals of building a world-class reinsurance growth. We are going to team up with a defined strategic planning and action planning, accelerate the strategic layout of the catastrophe company and digital technology companies as per the policy opportunities of the constructions of the International Board of the Shanghai Reinsurance Centers. Accelerate, explore and reform to improve the global -- group's global development control systems, strengthen the group's systematic strategy and coordination to form a competitively advantaged to occupy the market opportunities. Here, I wrap up the result announcement of the year 2023 interim areas. I would like to thank all the investors and analysts for your long-term support. Now I'm going to give the floor to the Q&A session. Thank you.

Thank you so much. I think that we have just gave you a debrief introduction towards the interim results announcement of the year 2023 from our executives. Now the floor is open up for questions. [Operator Instructions]

Dear executives, I'm from [indiscernible] Securities. I'd like to congratulate for China Re Group to achieve such a good results. I have 2 questions from my side. The first question is about the profitability. In terms of the profit, we are seeing a new background in our industry. There are some of the fluctuations in the profit in our group. From the company side, hopefully, I understand these fluctuations of the profit and how do we deal with it? And a following up question. Are there any adjustments of our policies in dealing with the fluctuations of the policies -- profits? Second question. It is because of this arbitrage with the downward trend of our pricing mechanisms, is it going to affect the performance of the company? What is the company's outlook to the yearly deposit type of the product? These are the 2 questions from my side.

Thank you so much for your question. I think you have a lot of questions. For the changes of the accountant standard, I'll give the floor to Mr. [indiscernible] to answer your question. And for the changes in the other front, we're going to give the floor to Mr. Li Wei from China Re Assets to answer your question.

Thank you so much for the question. In the first half of this year, we have adopted the new accounting standard. And achieving for over RMB 2 billion profit, I would say, the new accounting standards is really a complicated situation. So that is to see under the new profit system, how do we understand the profit? The -- under the new accounting system, I'll say this is more comparable. Generally speaking, it is more transparent. If we understand this a few weeks, we will see that -- generally speaking, the new accounting standards implementation makes all of our revenues and profits more transparent to the market. From the China Re Group's perspective, fluctuations in the profit means that it is a more -- is actually standing on because of the new accounting standard. We are also seeing a very huge increase year-on-year, but the general profit is coming from the asset investment. In the first half of the year, we are seeing a downward -- the decrease in terms of the asset investment. The major reason is because moving into the future for China Re Group, the changes in the profit is due to asset side. The fluctuations from the asset side is more stable because we have adopted fluctuations in the market. We used to say I-14 standards is a very important reason for the fluctuations in the profit. But under the accounting standards of the I-17, we have eliminated one of the major influencers toward the fluctuations of the market. Underwriting premiums or underwriting profitability is becoming one of the major contributors to this area. In the asset side, we are adopting the I-9 accounting standards. So fluctuations in the asset is going to change the fluctuations across the company. So that is to see. Downward trend in this area is going to create further downward trend in this area. Actually, from the first half of the year 2023, the major reason is also because of the fluctuations in the equity side. Moving to the future, we are also hoping that we could keep relatively stable performance of the profits. We hope to do it by better management of the profit and losses, balancing the asset management portfolios, improving the underwriting premiums from our companies. Improving the underwriting premiums is the major way we deal with the losses. Thirdly, we are also going to better manage the assets in the asset side making sure that there is going to be a downward or decrease in terms of the profitabilities in the equity side. For the decrease of the interest rate effects our company, I would say, that in the past few years, with the changing of this -- with new industries replacing the old ones and also the population shift in China, the new interest era is undergoing in China, holding more threats to the insurance industry. So the difficulties for our -- we are also seeing increasing in terms of the asset allocation because of these mismatchings of the financial cycles of these interest rates. International financial market is also seeing an improvement in these areas facing this complicated situation. Firstly, we should better manage the assets and the liabilities. We are going to team up our asset investment strategies with a more conservative attitude, avoid this long-term fluctuations of this asset. For this kind of long-term management, we are going to focusing on the 3 sectors. The first one is that we are going to make the asset management cycle the longest. In terms of the domestic investments, we are going to increase the allocation in terms of the interest rate liabilities. Actually, obviously, the duration in the asset side is going to always be longer than the liability side. Second, we should also see the effect of this risk as well as the equity investment before the listing. In the future, we are going to increase our assets allocated in the companies which -- in the equities before listing. The third one is that we should also focusing on the business structures of the China Re Group [Audio Gap] The macroeconomic cycles is posing more opportunities. The international China Re Group means that we have a lot of [indiscernible] of the international business sectors. We are trying to combine the domestic and the international market, better manage the international situation. So we've seen the mismanagement of the economic cycle. For a lower interest rate in none of these while we are seeing a higher interest rate in the U.S. dollars, we are going to allocate more assets, trying to select the best window period for the international asset allocation. For example, we are going to increase the investment for the long-term U.S. funds in order to increase the long-term turnovers of our asset investment with a conservative long-term and stable attitude. We are going to better manage the cash flow, better manage the sensitivities in the market. In order to deal with any potential extreme situation, build all-weather allocation strategies matching the risk and the competition of [indiscernible] where we are real facing long-term changes in the arbitrage. For the deposit product and also the arbitrage product, Mr. Meipan?

So for the deposits type of the product, we are seeing a very huge increase in the first half of this year. This is because of the asset liability management. This is due to a very good important investment strategies. For example, domestically speaking, some parts of our business is still seeing a better arrangement in the asset and arbitrage allocation looking into the second half of this year. From our understanding, we are going to adopt a very conservative attribute in this area. In terms of this deposit type of the product, we mentioned some of the development reasons. One is that using the balance sheet as the arbitrage hub and using the 2 different asset portfolios and other platforms to do a good job. And our dollar business as well as the RMB business or the arbitrage. As far for the China Re Group as well as the China Re L&H, the duration of our liability is quite long term. I think generally speaking, it is less than 5. There is a very short gap between the 2 products. So that is to say for the arbitrage losses. For the China Re L&H, this effect is quite small. But for the [indiscernible] do poses a lot more challenges for us to improve the ROE in the future.

The analyst from this [indiscernible] Securities also cares about our dividend.

Actually, we have very stable dividend policies. Every year, we have one dividend in cash that is no less than 30% of the profit attributing to the parent company. I think with the implementations of new accounting standards, the visual is going to change. For China Re Group, we are going to continue to follow the previous strategies. And based on the yearly performance as well our strategies, we are going to team up with a reasonable yearly performance. At the same time, what kind of content standards should we follow is also one of the much [indiscernible] from the investors. We are still discussing with the regulators and also the peer company in order to give you a better answer in this sector. The investors also asked one of the important questions about the implementation of the accounting standards. We should take our overall perspective in this area. One part is I-17 while the other part is that the changes in the profit also means some of the challenges in the operations. We should look at the macro economy as a whole and readjust the model. My understanding is that the I-17 implementation is something that we've been working on for many years. Generally speaking, the changes of accounting standards is never going to translate everything of our insurance business and the reinsurance business as well as our asset management business. A better content standard is going to be very helpful for the high-quality progresses in our company's performance and it's also going to help us with the yearly management of our company. The operations of insurance and the operations of the assets might see some of the adjustments, but this is not the equivalent answer to the changes or the fluctuations in the market, we are still a group working towards high-quality, high-stability growth.

The next question is [indiscernible] Securities.

I'm [indiscernible] with Securities. I have 2 questions to ask you. The first question is, in the first half of this year, Turkish earthquake among the different natural disasters, what is use of outlook towards the [indiscernible] reinsurance across the year? The second question is how do you deal with the climate change as well as the catastrophic disasters? The second question is about, what is the impact of the slots of the Northern China during this summer? Is it going to affect the financial performance of your company across this year?

This is a year of catastrophic disasters throughout the year. In the first half of this year, the catastrophic insurance losses is around USD 12 billion. This is the biggest loss that we have experienced since the year 2010. You mentioned about the Turkish earthquake. From the Turkish earthquake, it is the largest earthquake since 1999 waving around 40,000 lives across the world. This is the second caused [indiscernible] earthquake since the 1950. The general losses made towards the insurance industry is around USD 5 billion. For our company, the major losses is around USD 550 billion. And these kind of losses was reflected in the performance and balance sheet in the first half of this year. Generally speaking, I think it is within our expectations in the first half of this year.

You also mentioned some of the ways or method we could use to deal with this catastrophe. So how do we deal with the climate change?

The way to deal with this catastrophe can be included in the following sectors. The first one is that we are seeing accumulated results in this year. The general accumulations for the consolidated risk means that it should be down within the identified range of the group and investors. Second, we should have a very [Audio Gap] of the models of the risk assessment model. In the recent few years, the frequent occurrence of these areas means that while doing a good job in this area, we should also increase the protection from the pricing mechanism. Thirdly, we are going to arrange the allocation in these areas, [indiscernible] the high risk in this area. And fourthly, for the reinsurance sector, we have carried out a comprehensive optimization of these sectors, especially for the condition in this area. We have done some of the consolidations of the risk, which is going to help us to stabilize the performance. Generally speaking, the catastrophe losses of this year is within a controllable range. And for another part, we are also going to adopt a series of [indiscernible] in order to deal with it, trying to make sure that the future operation is going to be operated in a stable range. The second question is about the heavy flood in the north part of China and the Northeast part of China. I'm going to answer your question directly. To be frankly, a heavy flood and the heavy rain in North China and Northeastern China is creating a lot of losses for our company. According to the information, on the 19th of August, the North part of China report 217,000 cases accounting for the total loss of RMB 10 billion. According to calculations from our group, the total claim for our company is within RMB 600 million to RMB 800 million. In the contractual payment by combining the 2 issues together, I would say that the heavy flood in the North China and Northeast of China is only starting a very small proportion of our yearly performance. China Continental Insurance is one of the subsidiaries about entire China Re group.

For the heavy floods in North China and Northeast China, we are going to give the floor to Mr. [indiscernible] from China Continental Insurance to answer your questions.

Thank you so much for your questions. Basically, for the primary insurance, we have 2 aspects to report. At the end of the June, we started our emergency mechanisms. At the first time, the subsidiaries is working together with the group. In order to better report the potential risk by the 29th of August, that is to see from yesterday, the losses it has created for our company is RMB 129 million, and we have a prepaid RMB 107 million. That is to say, we have prepaid 17.4%. The claim ratio is 43.4%. In the motor sector, the total losses is RMB 552 million. The claim ratio is 59.2%. All the compliance work is in progress. And another part we want to talk about is that the heavy floods from the north part of China and Northeastern part of China is not proposing level of changes in the financial performance of our company. We are going to continue our work in this area, have the citizens and also the companies to resume their operations. The heavy flood in north part of China and Northeast part of China is reflecting the structural changes in our company. This is also reflecting that under the extreme climate event, the payment is becoming ever more important. We are also one of the first companies worked on the catastrophe-related areas, coming off with our pricing models for the catastrophe currently have achieved some of the initial results. At the same time, we can also feel that the global climate change is the insurance industry -- the reinsurance industry to work on the calculations of that and accelerating the collaborations in the climate change area. Thank you so much for your question.

Thank you so much, Mr. [indiscernible]. Because of the prime interest, we are only available for the final question. So the next question is coming from [indiscernible].

I have 2 questions from my side. The first question is that the underwriting premiums of the China Re Continental Insurance decreases, what countermeasures did the group take to balance the liability? [Audio Gap] the second phase of the [indiscernible]. We have adopted the liability of the company decreases. So how can company improve their performance in these areas?

The first question is going to be directed to Mr. [indiscernible] with China Continental Insurance.

Thank you very much for your question. Your question is about the underwriting premiums of the China Continental Insurance, it has improved greatly. What kind of measures did we take? Actually, in the first half of this year in order to achieving this result, we have stick to the perfect driven model, improving the profit as well as working on the risk management areas, achieving a difference of the unwinding premiums year-on-year. We are working on the 4 different fronts. First, we identified the perfect regions of this first half of this year, and we are working on the expert lower [indiscernible]. And while we are strengthening the targets, we are also trying to support the growth in these areas. Second, we are also working on the optimizations of this area in order to working and optimizing the high-risk products. We are also trying to optimize the risk areas. And another part is that we are also optimizing the structures in the high risk and high profit areas [indiscernible], we are lowering on the cost on one side while improving the profit on other side, and we have conducted a special management in the claim ratios. We are also working on the risk management, improving the results of using efficiency. Fourthly, we are trying to work on the compliment risk management, improving the risk management portfolio and trying to deal with the inventory risk, and we have undertaken the bottom line of the risk. Second question is about how do we balance the skills and efficiency? By optimizing the structures, we are balancing the structures in these areas. In the first half of the year 2023, we have worked on the comprehensive climate-related issues working on the health care products as well as the accidental products. That is how we improved the underwriting premiums in the first half of this year. And the second half of this year, we are going to optimize our performance and improving the cost while optimizing the structures, promoting the specialized or earmarks operations of the product and of the channels, improving the underwriting premiums of our company.

Thank you. The C-ROSS Phase II reform means? Tthat is going to be directed to Mr. [Indiscernible]

After the implementation of the C-ROSS Phase II reform, the major reason is because that we are seeing our progress in terms of policy. The underwriting policy is also downward is -- seeing a downward trend to fit in this situation for our company. We have made some of the [Audio Gap] plans. The first one is that from its roots, we should address the asset-related investment. We should improve the profitability as well as the ability to gain the profit, and we should also better manage the assets in terms of the liability side. We are also going to increase the underwriting premium. No matter for the short-term business or the long-term business or the international business or the domestic business sector, the improvement of the underwriting yields is definitely going to improve the underwriting premiums. Second, we should also better manage the assets as well as the losses. We have -- are also going to lower down the asset allocations in these areas. Thirdly, we should also deal with the asset management situation. For example, for the secondary credit and after the multiple platform operations, we are also trying to reallocate these numbers. No matter domestically or internationally speaking, this is going to make the asset management more efficient. Generally speaking, we could sum it up as [indiscernible] dealing with the [indiscernible] of the liabilities is at worst well prepared by the group. This is also a very good structure from a company's operations side. So what we manage? The first one is that we manage with the cost. The second one is that we should manage the assets and the capital risk. That is how we stabilize our operation. For the company, we are dealing with the [indiscernible] efficiencies. So that is to say, in China Re Group, we are working on the 3 syntheses; fuel means growth, cost means efficiency, investment means returns. These are the 3 syntheses guiding our operations.

Thank you so much, Mr. [indiscernible]. Since the [indiscernible] of the year 2015, China Re Group has had a long-term support and attention from the investors and analysts. On behalf of the executives, I'd like to thank all of you for your long-term support. China Re Group has achieved its great importance through the interactions between the capital markets. We are going to work together with the domestic investors and international investors raising the voices from the market, promoting the high-quality development of our group, creating more returns for the shareholders. For the interest of the time, here we are concluding the 2023 interim results announcement of China Re Group. I want to thank you -- all of you for reaching out to us today. If you want to get more information, please contact our IRR team. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]