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

Respectful investors, distinguished analysts, friends from the media, good afternoon. Welcome to China Re Group's 2024 interim result announcement. I am the moderator for today's session. I am the Vice President and Board Secretary of China Re. First and foremost, let me introduce you the distinguished guests who's joining us today. They are Mr. Dr. the President of China Re, Mr. Tian Meipan, Assistant to President, Chief Actuary of China Re, President of China Re Life, [ Mr. Wang Xiaoya ], President of China Re P&C, Mr. Lu Xiaowei, President of China Continent Insurance; and also Mr. Luo, Vice President of China Re Assets. For this time, results announcement, it is going to be divided into 2 parts. The first part, we are going to invite the management to introduce you the interim results. And Mr. Zhuang is going to introduce you a general overview of the performance. And also [ Mr. Wang Xiaoya ], Mr. Tian Meipan and also Mr. Lu Xiaowei and also Mr. Luo is going to give you their different sectors and their performances. So the second part is going to be the Q&A session. The management is going to answer your questions and open floor. So this times result announcement is only open up for the participants online. [Operator Instructions]. So we are going to give the floor to Mr. Zhuang Qianzhi.

Distinguished guests, friends from the media, good morning and also good afternoon. Welcome to attend the 2024 interim results announcement. In the first half of the year 2024, facing the unprecedented economic situations and also the daunting development task, China Re is working to work on to -- working to develop a world-class reinsurance groups and also trying to pursue the state-of-art growth and value comes first. We are trying to working on the undertaking performances while pursuing the high-quality development. So now I'm going to give you a results overview from the strategic development as well as a comprehensive performance. First, the comprehensive performance has seen an overall involvement from the major indicators in the first half of the year 2024. We have a consolidated insurance revenue of the group of RMB 51.78 billion, growing by 6.8%. And the consolidated gross written premiums of the group is RMB 1.412 billion. The net profit attributable to equity shares of the parent company is RMB 5.727 billion. Annualized ROE is 11.85%, that is 7.39 percentage points growth. Total assets is RMB 474 billion that is 3.2% growth. Total equity RMB 107 billion that is 5.2% growth compared with last year. And we are also continuing to pursuing the overall profitability structure. The underwriting profit has seen a record high, along with a significant increase in the investment income. In the first half of the year 2022, the group's consolidated underwriting profits continue to improve from a record high of last year. The underwriting profit is seeing as 30% growth year-on-year. For the different business segment, it achieves underwriting profit. Among its domestic P&C and overseas P&C is seeing 99.49% and 89.09%. The L&H reinsurance protection-type business is registered at 96.6%. That is 0.75 percentage points downward, while the premium P&C insurance is 99.86%. That is 1 percentage point downward. And we are also working on a steady fast investment strategies. We have seen a rapid growth in terms of investment income. In the first half of the year 2024, state total investment income is registered at RMB 9.647 billion, that is 17.2% -- 72.6%. The annualized total investment yield is growing by 1.1 percentage points benefited by the markets we have registered the profitability, while the net profit attributable to the equity shareholders of the parent company is growing by 184.6%. The annualized ROE is grown by 7.36 percentage points to 11.85%. We have always continued to improve our risk management policies and risk appetite systems. In the first half of the year 2024, the solvency is adequate, while the China Re's P&C is 249%. China Re Life is 212%. The China Re Continental insurance 280%. The group consolidated number is 184%. We have remained S&P Global Rating Financial Strength of A and stable outlook of A and AM Best Financial Strengths Rating of A and stable outlook. There is no additional significant risk event during the first half of the year, and the overall risk of the group was controllable. We are continuing to improve our risk management process. Second, we are always serving through our national policy rules. China Re has always been focusing on the leading roles in the field within the 5-year priorities for the high-quality development of the financial industry. We are also serving the national key insurance as well as providing the high-quality development of our nation in the first half of the year 2024. China Re is also solving the key areas of the national strategies and providing RMB 140 trillion, facilitating the health care insurance systems and also small and medium-sized enterprises. First, we play a leading role in the field within the 5 priorities for high-quality development of the financial industry. In the field of science and technological finance, we raised the first demonstration of cloud for the third-party liability insurance for the [indiscernible] vehicles in China. In the green financial sectors, we're participating in the establishment of the China greenship insurance pool, the number of nuclear power units, China nuclear insurance pool has underwriting hit the second in the world. And for the inclusive finance, we provided series of the inclusive insurance products, such as comprehensive protection for the possible employment scenarios, exclusive liability insurance for small and micro enterprises. In terms of the outer caring finances, we innovated in new products such as disability income, loss insurance and elderly accident insurance to promote the upgrade of the health risk protection. For the digital finance sectors, we developed re-journey new energy vehicle insurance pricing and risking control models, operating in retail comprehensive agricultural insurance technological platforms. Second, we have supported national strategies for addressing climate change. With that, established a working mechanism for addressing the climate change and we started and formulated an action plan and route map to address the climate change. We innovated new models of the meteorology plus insurance [indiscernible] with the Chinese meteorological administration to address climate change and explore new functions of insurance and also finance transferring meteorological disaster risk. We undertake pressure testing for the psychological risk in aggressive climate change encountered by the central banks and explore the path to control the climate change. Thirdly, we supported the creation of the catastrophe insurance protection system and reinsurance market development. We have independently developed catastrophical models for earthquakes, typhoons and draught in China. Most of these indicators are better than a similar project worldwide. We are deeply involved in 19 quality projects for catastrophe insurance across the country, acting as the chief reinsurer in more than 80% of the project. We also supported the first comprehensive catastrophic insurance that covers all disaster types and have wide coverage and longer durations and served as the chief reinsurer. The Shanghai reinsurance operation center, our China Continental Insurance, officially commenced operations and insured its -- our first insurance policy. We fully support the Shanghai reinsurance operation centers. Thirdly, the core competitiveness continued to consolidate. We are working on the business mechanism for innovation, optimizing the rules of positioning of the strategic customer department to enhance the collaborative integration capacities in serving customers. We also formulated an important innovation business upgrades review method through important management capacities in dealing with the insurance risk. We developed an app for the catastrophic portfolio risk management platforms. And extending the management, our pricing capacities have a catastrophic risk from the reinsurance business to the primary insurance business. We plan to cover both development business and overseas business overall. We also developed a 3-year plan for the digitalization of the reinsurance sectors in China. We accelerated the constructions of the key product in the data made and business platforms to improve the decision-making capacity supported by the data. Fourthly, we are also advancing our global strategies. We have fully leveraged the rules of the overseas development and management committee to strengthen comprehensive subsidization and the management of significant matters in worthy institution. We improved the management systems of the overseas institution, enhanced the overseas risk monitoring and continuously optimizing the control systems of the overseas institutions. We convened a strategic seminars for overseas institution including training and expansion of the personnels between domestic and overseas institutions and strengthened the synergies between the domestic and overseas business. In the first half of this year, 2024, we have constructed improvement in overseas business qualities. The proportion of the gross written premium for our overseas business of the group is registered at 80.4% while the performance of the two subs has been doubled. Now I'm going to give it to the different sector management to give you the introduction in terms of the business. Now I'm going to give the floor to [ Mr. Wang Xiaoya ], who's going to give you a brief introduction towards China Re P&C.

Dear investors, dear friends from the media, good afternoon. I'm going to introduce you the performance of the P&C sectors. The domestic P&C reinsurance has registered a rapid growth in revenue and remaining stable in underwriting results. The insurance revenue is also seeing a rapid growth. In the first half of this year, the insurance revenue is registered at RMB 12.477 billion, that is increase of 24.9%. The reinsurance premiums is registered at RMB 29.192 billion and are affected by the accounting method. The 2D reinsurance business is registered at RMB 20.09 billion, while the facultative reinsurance business is registered at 1.099%. And it is a very stable performance. The compound ratio is at around 99.47%. The major sector has developed quite rapidly. The total revenues about the premiums of the major lines in the motor sector is registered at RMB 6.075 billion. That is a 0.1% increase. The commercial property is seeing a total revenue of RMB 4.39 billion. That is an increase of 50.7%. The liabilities is seeing a registered growth of RMB 3.8 billion, that is 19% growth. We are also working on the strategic growth industries in China, and we are also promoting the emerging business mind from a comprehensive perspective. We are working on technologies, digitalization and also the platforms. The reinsurance premiums for the emerging lines is seeing a growth of RMB 1.709 billion, among which the catastrophic insurance and the construction sectors is seeing a very rapid growth. Now let me introduce you the P&C reinsurance. In the first half of the year 2024, we are going to see the opportunities for the business cycles to drive rapid growth in revenue. We are presenting new opportunities for the insurance revenues. The overseas business sector is registered at RMB 10.942 billion that is an increase of 10.2%. And the reinsurance premiums is registered at RMB 16.331 billion, that is an increase of 17.3%. The total businesses registered a RMB 30.52 billion that is increase of 21.1%. The other business sectors are also seeing RMB 2.8 billion. And in the first half of this year, the total overseas business is seeing a growth of 0.64 percentage points to 89.09%. The total sector business is seeing a growth of 4.56 percentage points. That is an increase of 87.22%. And the other overseas business is seeing an 8.21 percentage point growth into 96 percentage points. Now we are going to give the floor to Mr. Tian Meipan, Chief Actuary of the China Re Group to give you the introduction.

Dear investors, dear analysts, I'm going to introduce you the L&H sectors. The first half of the year 2024 has seen actuary proactively promoting the business transformation and maintaining a reasonable underwriting schedules. The reinsurance revenue is seeing RMB 5.86 billion, while the reinsurance premium is seeing a RMB 58.86 billion. The reinsurance premiums by the lines of the business is seeing a very typical growth, facing the unprecedented situations in domestic and abroad. We are promoting the transitions of our business sectors, and we are also working on the China Re L&H. The domestic protection type of the business is also growing quite rapidly. There is good strategic development in the domestic protection type of the business, means that we are going to innovate into the different business sectors. In order to work together with the premium type of this business, and we are also providing the real opportunity for the domestic sector. And we also better manage the asset liability focusing on the cost controls, the domestic saving type business is registered at RMB 10.39 billion. And we are also working on the business opportunities where we are seeing the domestic financial reinsurance business registered at RMB 9.1 billion. The overseas business revenue is -- premium is registered at RMB 2.1 billion. At the same time, we are optimizing the protection-type business structures with a continuous improvement in the underwriting results. In the first half of the year 2024, we are seeing our reinsurance premiums met with a protection-type business, protection whereas the type of the medical insurance in our other key businesses is seeing a 85.3% growth. We have different key areas, seized opportunities from key customers and the main promoted product iterations and innovations via innovation. We are also continuing to promote the industrial integration and innovations and [indiscernible] payment operations around Internet on patient insurance, special medicines, chronic disease management and other fields, realized normalized underwriting of the profitable business. The underwriting results of the protection type of business is declined from 98.2% from the year 2022 to 96.6% in the year 2024 while the underwriting profit is growing from RMB 22.1 billion to RMB 3.6 billion. This is a brief introduction towards the L&H sectors. Now we are going to give the floor to Mr. Lu Xiaowei to give us a brief introduction towards the performance of the China Continental Insurance.

Dear investors, dear analysts, I'm going to take over from here to introduce you the steady growth of the revenues in turn from the losses to profit in underwriting results. In the first half of the year 2024, the total insurance revenue, we registered is RMB 23.1 billion, that is an increase of 2.6%. The primary premiums is at RMB 28.09 billion. That is an increase of 1.2%. The motor lines registered at RMB 12.86 billion, an increase of 3% and non-motor lines is 13.22% (sic) [ RMB 13.22 billion], that is minus 0.3%. And we are also seeing a combined ratios has been declined from the 103% to 99.86%. We are also transforming the economic performance. And in terms of the motor line rate of the insurance, the quality improvement of the motor line is registered at 96.6%. We have always seeked through the target, and we are always trying to optimizing the results. We are also actively renew the results. In the household vehicles, the total renewed rate of the household vehicle is 96.5%. And the proportion of the premiums of household vehicles is 62.6%. We are also seeing the numbers of the household vehicles underwritten by 2.3%. The stable development of the non-motor lines where we are seeing the premiums -- primary premiums of the actuary corporate registered at RMB 1.3 billion -- RMB 1,333 million, that is an increase of 30.1%. And the primary premiums of the surety insurance is at RMB 1,334 million, that is a decrease of 41%. This is above-mentioned AC business performance of this P&C insurance. Now we are going to give the floor to Mr. Luo to give us brief introduction towards the asset management side.

Dear investors, dear analysts, I'm going to introduce you the asset management side of the China Re assets. In the recent few years, these asset environment is very turbulent. The global economy is seeing a higher risk for inflation while the geopolitical conflict is pulling more threats to our overseas environment. We are also working on the high-quality development, while we are lacking the investment. In the first half of the year, Asia market is demonstrating a structural resilience. There is constant growth of the investment assets and the prudent asset allocation facing this unchanging and facing this complicated situation, we have decided that the investment should be based on the stabilities and we should also grab the opportunity from the market, optimizing our investment portfolios as well as grab the real investment opportunities. By the end of the 30th of June, the total investment asset of the group is registered at RMB 351.10 billion, that is a 4.5% growth. While we keep a very steady investment, we are also better allocated assets. Working on the fixed asset income is registered at 86.5%. Equity and investment fund is accounting for 60.4%. In terms of the fixed income investment, the domestic investment is occupying for the dominated and long-term investment, and we are also keeping on a reasonable leverage ratios and trying to optimizing the positions structure. We are also working on the investment in the fund investment mix. For the overseas investment, we are also going to grab the real opportunities and working on the medium and the long-term investment in terms of this domestic investment in the investment funds, we are trying to master the opportunity of high yield since the beginning of the year and increased investment in the long-term funds. We're experiencing liquidity management and maintained a good leverage to maintain stable returns. We continue to optimize the credit structures of the position. And we are also using the method to combine the funds together with the direct investment in order to fulfill the potential, and our annualized total investment yield is 4.6%, that's an increase of 1.1 percentage points. And the annualized net investment yield is 2.9%. The long-term investment is very stable. The equity investment has outperformed the market, domestic stock comprehensive investment yield extended the CSR300 benchmark by 1,600 bps. The overseas style comprehensive investment yield extended the Hang Seng index benchmark by 800 bps. The above mentioned is the result of the asset management side. Now I'm going to give the floor to Mr. Zhuang Qianzhi to give you the outlook about the future investment.

Now I'm going to introduce you the future outlook. Firstly general performance. We have the above-mentioned judgment. First, we are going to deepen the reform. As the main theme of the macroeconomic policy, we are going to deepen the reform and working on the comprehensive development. Second, the domestic insurance market is at a critical stage of the transformation in our country. The insurance industry has a promising future, but in the transitional stage. Due to a result, we cannot be serviced in the industry, it's also going to be a double edged sword. Third, the landscape of the international insurance market continues to be evolving. Geopolitical conflicts means our advice to keep an eye about these results. Facing these new situations, new changes, China Re continue -- going to be continue to work on the general tone of seeking progress while ensuring stability, enhancing values and the business philosophy of expanding business yields, increasing the underwriting profit and making prudent investments China Re will make an effort to realize the annual business objectives and promote the group's high-quality development. First, we are going to achieve the annual business objectives comprehensively. We are trying to figure out the potential possibilities for the national investment. And we are also going to optimizing our business structures, promoting the effective growth of the business. And we are also going to achieve the year results. Second, we are going to enhance new qualities and efficiencies in serving the international strategy comprehensively. We're going to promote the construction of the reinsurance market and working on Shanghai and Yangtze river deltas to achieve the actual results. We are also going to support the construction of the Shanghai as the International Corporation centers for the reinsurance sectors. And we are also going to facilitating the market development of old models, focusing on the 5 development pillars building the product with the Chinese own characteristics. Thirdly, we are going to focus in on strategic cadence and we form an innovation comprehensively. We are going to build a world-class reinsurance group, optimizing this product innovation as well as the global layout, promoting the economic transition topologies, and we are also going to play a very important role in the investment and returns of the reinsurance sector. Working on the high project development of the group and the strategic development of the industries with a buffer and position. And fourthly, we are going to improve the risk control and compliance level comprehensively, optimizing a fully covered, all trained operations, and we are also working on the management situation of these sectors, promoting the risk control and management control systems and build a firm foundation for the future risk. The above mentioned is the 2024 interim results announcement. Thank you for the investors long-term support and friends from the media long-term are concerned for the growth and progress of the China Re Group. Now we are going to give the floor back to our moderator, madam [indiscernible].

We have discussed the introduction of the first half of this year. Now we are going to open up the floor for the questions.

[Operator Instructions] The first question is coming from [indiscernible] the Banco China insurance.

I have 2 questions. The first one is overall improvement of the performance in the first half of this year. What is the reason behind it? What is your outlook about the one year's performance under the new accounting rules? The second question is, how will the company divested -- deal with a disaster catastrophe made by the global climate change?

Thank you so much for your questions. The first question is going to be answered by me. The second question is going to be answered by Mr. Wang [indiscernible] from China Re P&C.

Actually, in the first half of the year 2024, China Re's performance is quite good. The reason -- I think we have the following part. The first one that in the past 2 to 3 years, China Re has changed our operational business philosophy. We think that the development and investment should have its own skills, and we should also increase the underwriting premiums, the investment should be very vast. These are the principles for all of us. The development should have its skills. Underwriting should see profitability while the investment should be very stable. Actually this principle is -- have a huge difference with the previous concept where we have emphasizing on the investment and do not take a very heavy look on the underwriting profit. I think that there is a huge difference between these sectors, this philosophy. Second, according to this principle, China Re, in the first half of this year, we are working on the growth end of the underwriting together with the investment based on the new accounting principles. The business sectors relevant profitability is increased by RMB 2.2 billion in the insurance sector, while the investment sectors is increased by RMB 4.9 billion after the basis of revenue gain performance and third parties from the management perspective. From China Re Group, no matters our groups all the history -- no matter domestic or international speaking. In the past few years, we are working on the tailor-made management and generating very good results. And from the result announcement, you could also see that from the first half of this year, the underwriting profitability registered a rapid growth. At the same time, for the different platforms, the underwriting profitability, no matter domestic and abroad, overseas and through all customer platforms, we have all achieved the cost increase in terms of revenues. This is a very difficult performance. This is very closely related to the philosophies that we adhere to. Reinsurance as the insurance of the insurers, we would work on the field industry. This is the performance of the first half of this year. And for the second half of this year, the outlook of the future profitabilities I'd like to emphasize in 2 points. The first one is that actually for all of us. Profitabilities, we have achieved very high levels in terms of the profit, but I believe that in the second half of this year, we might see more difficulties. Extreme weather, climate disasters might be putting the challenges to our revenues. Second, from the investment perspective, it is also going to affect our performance. And in terms of investments, it is also going to be strained by the domestic and overseas investment market. We are also using our customer [indiscernible] to promote the profitability success. First, we are working on to changing the structure mix. And after the product mix, working on the strategic development of the product and improving the profitability in these sectors. Second, we are also optimizing the assets. We are trying to strengthen the strategic asset allocation while working on the domestic and overseas investments, trying to avoid from the fluctuations of the overseas investment and improving our abilities to deal with these fluctuations of the market. Gravity investment and return opportunities. And there's the other party that we are working on the asset and liability management, coordinated the clients using the double platform as an advantage, going to fine-tune the assets and liabilities. Looking to the next year, we are going to devote ourselves to fulfill the targets of the national strategy, and we are also going to working on the investment and innovation, improving the risk controls and compliance work, creating a very good investment on returns. I'm going to direct the second question to my colleague.

Thank you so much for your kind question. Actually, in the year 2024, according to some of the authoritative institutions, the global natural disasters is creating for over USD 60 billion, that is a combination of the natural disasters in the past 10 years. The natural disaster is causing a lot of challenges to these sectors. This is also related to the industries, for example, in the Maryland in the United States in March this year, there is some of the [ call pressures. ] There were some of the [ call pressures, ] which is causing the changes in the market. But with such a huge catastrophes being benefited by the terms of the market. We believe the underwriting company is playing a very important role, and the Primary insurance is absorbing more and more claims from the market, but insurance companies, we have increased the pricing mechanism. This is also going to be very helpful to deal with the risk. We have also done a very good job in terms of the risk controls. Speaking about the market performance in the first half of this year, definitely, there are some of the catastrophic risk. But in China, with the performance of the first half of this year, it could be demonstrated. And from the globally announced, I would say that the risk that report is in a controllable level. To deal with the global climate change, also reinsurance companies working with the primary insurance companies. We are working on the climate and changing the risk it brought and trying to echo with the green financing sectors and satisfying our clients' demand in the green and lower carbon sectors. At the same time, we are also trying to make a segmented market in terms of catastrophe risk management. We're also going to consider the plans of the claiming change and doing a risk management system. And we are also going to arrange the underwriting capacities through the technical management, we are also strengthening the risk management and also our risk control patterns.

Thank you so much, Mr. [indiscernible] Thank you so much, Mr. Li. We are going to welcome the next question. It is Mr. Tong from [ Senior ] Securities.

Thank you so much for giving me these opportunities. I am analyst at [indiscernible] from [ Senior ] Securities. congratulations for achieving such high results. I have 2 questions. The first question is the increase of the fluctuations in terms of the influence toward the dividend policy? The second part is about what is your antelope in the premiums -- the first question is under the new accounting system, the profit in the company is seeing fluctuation -- and as the president has mentioned that we have registered over 2 billion increase in the revenues. Is this kind of increase continuable -- continuous or not? And the second part is that in terms of the international reinsurance market, what is your outlook towards the premiums? And for the overseas investment, since we have procured Chaucer, Chaucer has registered a very good performance. What is going to be the future outlook about the management. These are the 2 questions from our side.

Thank you so much for your question. For the dividend policy, the fluctuation policies, I'm going to ask Mr. Meipan to answer the question. And for the overseas investment, with the acquisitions of the Chaucer, I'm going to ask [indiscernible] to answer your question. So Meipan please.

Thank you so much for your questions. With the new accounting system, the major reason is because with the new I4 we placed the I9 accounting system. They have allocated some of the previous assets into the current profitability. And so under I4 accounting systems, some of these assets acquired recently, is going to be reflected in the final balance sheet. But for the life insurance companies, -- they have less and less -- they have relatively less operations in the I17 accounting standard. If you put it into the I4 accounting system, -- there is going to be a huge account -- to expiration. Generally speaking, for the whole industry, no matter for the reinsurance company, -- the profitability is demonstrating a huge fluctuations. We have mentioned about the revenues that we get from the investment at RMB 4.9 billion. Actually one proportional rate is coming from the equity market and equity fluctuations. This is going to be -- this is actually a reflection towards the performance in the capital market. If there's a huge changes in the capital market in the future, definitely this could be reflected in our performance and in our accounting system. Mr. [indiscernible] has mentioned, the business remained very stable, better for the dividend parties. Actually overall speaking, our target is to be the stabilities of the dividend system, there's going to be 2 sectors: first one is that we should stabilize the profitability. The stable profitability is reviewed for the stable dividend -- we are going to work on the 2 sectors. First, we are going to improve the underwriting profitability. The underwriting profitability is going to be affected by the interest in the market. If there is going to be more and more profitability, it is going to be more stable. Second, we are also going to work on the underwriting profitabilities in the capital market. For example, we are going to increase the stable asset as well as the higher equity higher dividend assets -- this is also going to lower down the risk. This is -- what could we do from the market side and from the liability part. The other part is about the stabilities in the dividend policies since it goes to the market. Our dividend policy that we are going to return the dividend -- keep the dividend every 1 time a year, while the dividend is going to be no less than 30% compared with a net profit asset year. Moving to the future. With more and more accounting systems, we are going to better design the dividend policies. On one part, we are going to guarantee the stable operation from our business. And we are going to demonstrate a steady increase of the dividend to our investors. Thank you so much for your questions.

For the international market premiums, are we in -- which cycle do we in, I'd like to introduce you from the supply and the demand of the investment.

In the year 2024, the insurance market is generally very stable. -- among which alternative assets is very active, but the major restoration is within the current market through this year's operations, we are seeing an increase of the investment. I would say that the general market does not see a lot of new entities and new capitals. This is different compared with the previous historical cycles. And from the demand side, global climate change is holding more and more threats, especially in the first half of this year, there global natural disaster is surpassing the average numbers in past 10 years. This is also being created by the geopolitical events. In June, this year, there are so many cyber attacks and also the natural disasters, which is creating more homes to the industry. So we should remain at a very stable growth, a steady fast growth, both from the supply side and the demand side. Within this year, we are going to calculate the major factors affecting the market. And for the -- I would say that we are still at the downward side of the cycles. And for the preference that have bought Chaucer, I'd see that in the first half of this year, Chaucer is maintaining a very good momentum. In April this year, Chaucer, we have appointed new CEO in Chaucer and also with the new CFO and CRO. This steady transition of the Chaucer's management. We are seeing and demonstrating more professionalism in their undertaking business and this is also supporting the bad performance -- the good performance of Chaucer. As the parent company of Chaucer, China Re is going to support the long-term development of Chaucer. And it is also going to be one part of our international systems, and we are going to plotting the next 5 years for Chaucer. And with the new management team in Chaucer, we are thinking about the future 5-year plans. And with the historic record of Chaucer, the deep and narrow focus of Chaucer and also the innovative policies from Chaucer. And after the expansions of their client has achieved a very good results. I believe the new leadership of the high executive team, we are going to deal with the new market demand. This is the advantage -- advantageous strategies that we have registered. Thank you.

Thank you so much, Mr. Meipan and also Mr. Zhuang Yan. Now we are going to open the floor for the next question. So the next question is Mr. [ Liu jin Yang from Securities Time. ]

Thank you so much. I'm with the [ Securities Time, Liu Jin Yang. ] The first one is about solvency. This year, is a transitional period for the C-ROSS reform. Second phase. So what is going to be the change after the second phase of the reform. The second question is to the investors -- investment sectors. Could you please elaborate what is the key factors for the good investment return policies and a lower interest rate ever, what is going to be the allocated -- asset allocation strategy.

I'm going to answer the first question, and Mr. [indiscernible] is going to answer the second question. After the implementation of the C-ROSS second phase, the majority of the insurance company has a decline in the solvency ratios, actually China Re Groups and China Re Subsidiary, is seeing and also is in downward trend. But according to our calculation, this downward trend is with an -- controllable stage. Actually, after this reform, it has a very limited impact to our business. Actually, the solvency ratio is 1 of the core business of any insurance company. We attach great importance to the solvency performance. And moving to the futures in the capital asset management, we have several different unloads. First, we are going to be more into prospective insurance companies and we are hoping to create more investment in this field in order to improve the capital consumption at the same time, we are also going to use the marketing performance together with the underperformance of the market and after the [ modified ] situations, we are also going to issue some of these equity product in order to ensure the adequate end market at the same time, in the digital operations, we are also going to optimizing our business structure. We are going to integrate our business together with the capital market. In organic manner, generally speaking, we are going to attach the importance of the capital market and the dynamic look in the capital market, testing the performance and for any emergency situation, we are going to come up with our own policies. If there are any deviations from the previous outlook, we are going to adopt some of these methods to deal with it. The second question is going to be given to Mr. Li Wei.

The first half of the year 2024 means that the net investment return is 3.39% while the total investment return is around 4.6%. So we would see that this is a 1.1% growth against the macroeconomic environment. We would say that there are several different elements, 3 sectors, the first one that we have been working on the risk management. Second, we are going to work on the asset allocation. And the third way, we are also working on the core policy development. For the long term, we have adopted a very steady fast investment policies. Pleasing this long-term investment results, we have stake to the principles where the asset and liabilities should be met probably with each other, and we should offer study for allocating assets and for over charge the risk prevention at our core and also trying to overcome the difficulties in the asset allocation sectors. And we have always working. We have also coordinated development domestic and abroad. And working on the medium and long-term investments. And in the asset allocation sectors, we are optimizing the positions trying to deal with the fluctuations of the market, absorbing the experience from the history at the same site -- part of the cycle. And we are seeing a double-digit growth in the total investment. Equity investment and investment from the capital market is also seeing a rapid growth. The domestic and the international market is also demonstrating a downward trend. And for some of the fixed asset environment, it is seeing an increase in terms of the market -- for all the assets with more and more returns, this is also laying a very important foundations for the investment for the continuous returns in these sectors distributed related to the investments [ gradually ] risk control profits and also the market environment. After several rounds of the market, the investment portfolio is demonstrating a very good integrative policies in resilience -- the long-term investment and the steady fastly ratios means that against these huge fluctuating markets, first and foremost, we should avoid the major risk. We should also control the risk with a diversified market. In order to stabilize the portfolios -- investment portfolios in a very stable range, at the same time, we all know that in the lower interest rate period, deposit and also the bonds is seeing some of this downward trend, the steady for stable investment, their returns is increasing. So since this kind of fluctuation products, we are very sensitive to the -- so we should -- so there is a difficulty in terms of the matching between the different products in the same portfolio. From the China Re asset part, we should coordinate the development in this sector. There should also be a differentiated management in this sector. And the [ channel ] asset has always been keep a close eyes in what is in the market and put it at a very important pricing mechanisms in order to optimizing the market portfolios, and this is also a very important measure to deal with the low interest [indiscernible] to develop the new product from the asset side and also the liability side, we are going to attach this great importance. Facing this lower interest rate period, we should also stick to the long-term investment and risk environment. which is also working on the stability side as well as grabbing the opportunities which are also promoting the overseas and domestic asset allocation system, and using the asset allocation systems to optimizing the structures and trying to going through the cycles in the fluctuation times in order to better support the development of these reinsurance sectors. And in terms of the fix investment, the total investment ratio is 87%. In terms of the equity investment, equity allocation is around 16%. The assets and liabilities mean that we have our own preferences. This is also going to be working on our asset management. This is also going to be related to the market changes. For the fixed asset income, we should grab the opportunities, and we are also going to use the open equity market to stabilizing our position structures to prevent the potential risk domestic and abroad. And in terms of fixed asset income investments, which we're also working on the highly efficient assets. And grab the allocation window period and trying to allocate more assets in the high asset areas and trying to grab these trading opportunities and focusing on the macroeconomic high-quality development transitions of the industry. We should also working on some of the alternative fixed income assets. The strategic market means that we should optimizing the situation and ease the downward trends of the economy impact towards our investment. In terms of these equity investment. We should always stick to the principles of our patients as well as long-term development, which will allocate more and more long-term standing assets and trying to optimizing more structures and is using the high dividend and steady equities as the major way to allocate the assets using the multiple pillars investment process to diversify the investment portfolios. In terms of the alternative investment, we should grab the pace of the market and easing the equity of the capital markets trying to fit on the opportunities in the market and select a path on to the best. On the other side, in the rest of few years, overseas market is also one of the major areas where we should launch a global development. The global development is a very important area, we could diversify the risk, and we should also working on the domestic and the international asset allocation, multiple currencies, multiple asset investment. And in the domestic and overseas asset allocations, we should grab these opportunities and also -- especially the window period where the securities and the bonds in the overseas market has registered a high return, improve the performance and optimizing the returns in this portfolio investment.

I think Mr. Li has a very comprehensive offering to the question. I'd like to say something about the investment logic -- in against the global economic backlog, the domestic capital market is demonstrating a huge risk from the alternative investment market. This is the first. Second, -- what is in the co-part for the investment? It is about the concept, this gratuity. In channel risk concept, there are 3 key words. The first one that the investment should be stable. And then for the reinsurance, especially, it is working on a short-term capital [ pools. ] And in the investment in logistics, we have always emphasizing that long-term investment. We have always emphasizing the definite investment returns, we should also focus on the global market. At the same time, Mr. Wei has also emphasizing that. And while we are allocating the 2 categories of these returns and the fixed asset investment is registered at a 7% growth. This is a result of our stable investment returns. It is the same -- and -- here, we are emphasizing the steady fast investment, supporting markets. At the same time, since we have an international team, actually in the underwriting premiums is registered at [ 80.4% ] growth. This is also going to be very important to balance our investments and risk.

Thank you so much, Mr. [indiscernible] and Mr. Li Wei for your kind answers. For the interest of the time, we are open up the floor for the final question. Now the question is from [indiscernible].

thank you so much for giving me this opportunity. I am from Citic [indiscernible]. I have 2 questions. The first 1 is about, the outlook about the insurity products and what is your outlook about the insurity products? Second part question is to turn China continent in first. And in the first half of this year, China continent insurance is demonstrating the underwriting profits. Could you share with us, the outlook throughout the year.

Two questions. The first 1 is about the midterm investment. We are going to give the floor to Mr. [ Chunlei He ]. The second question is going to be answered by the President of China Re China Continental Insurance.

For the occurrence of these -- disease -- the heavy disease. I see that these heavy and rare diseases are worsened between the year '20 to '24. And for the occurrence ratios of these heavy disease, there are 2 sectors, wide thyroid cancer. The second one is mild lung cancer. This is also a very severe situation. And for these scrutiny of these sectors, it comes from the research of better screening method. Over mild cancer, high occurrence ratio is the cause of this better screening method. And the using of the better spiral 3D screening methods can detect the minimal lung cancer and the lung cancers at the early stage. The screens and also the physical examinations can help us to detect it. There are the mild oncological diseases also on the right. Generally speaking, initial period times as we are moving into the future. The momentum is not going to be reversed unless there are some changes in terms of these medical behaviors and medical guidelines. And for the insurity product development, I think there are several different aspects. First, we should fully using the datas from the life-related products as our core competitiveness. We are also going to use our data advantages. And to put it specifically, in the innovative -- in the insurity product, first, we are going to use our data to do a better pricing mechanism, making the product more counter productive. And second, we are going to be making the risk prediction more precisely. For example, for the severe disease is a current mix and also for the segmented market, we are going to work together with the medical institutions, and we are also going to making a better underwriting policies. And for the product development, to put this specifically, the life insurance comes from -- the development policies of the investment companies, actually, the product that we provide is about the innovation of our products. New products means the new risk. New risks cannot be recognized by the customers since they have not encountered it yet. For example, the special medicine insurance and the outpatient department related insurance. These are the new risks, which might be difficult to recognize. And also for the high and medium end of the medical insurances. We need the technologies, we need the data. We need the risk control. We could create the demand through the product designs. Second, from the market perspective, we are hoping to introduce -- the new affordable systems working together with the disease sectors and the insurance sectors to lower down the risk and improve the competitiveness -- generally speaking, as we are moving into the future, the innovation is going to be our core competitiveness by developing a better product we could drive up the business. We are also hoping that security data has a new market. We could build new competitive advantages. The above mentioned is about the risk patterns in our business. Mr. Lee, thank you so much for your questions. China continent has enhanced if underwriting capacity is reflecting our company's core competitiveness and the information management, and it is related to 3 parts. The first one is about the guidelines about the investments. And we have specified the product line. Second, it's about the changes of the business structure. We have released a lease-based management market. And we have always working on the insurance sector. Thirdly, we have offered different innovations. We engage in the scientific method to figure out all the field sectors, optimizing the operational ratios and lowering down the pace up until the end of last year, the overall underwriting profitability is seeing a downward trend. And we are confident and we have the capacity to reach the yearly target for the underwriting premiums.

Thank you so much, Mr. Meipan and Mr. Xiaowei for your kind introduction. For the interest of time, we are going to wrap up the Q&A session. [indiscernible] since we went to the market in the year 2015, we get the support and concerns from the investors, analysts and friends from the media on behalf of the management I would like extend my warm gratifications and to all the investors. We have always attach this great importance to these changes in communications into the market -- understanding in China and Hong Kong, China, we are going to have a very clear exchanges between the market. We are going to listen to the voices from the capital market. And return the investors and stakeholders with the high-quality growth. That is the end of the 2024 interim results announcement. I'd like to thank you all for coming here. And, thank you again for the investors, analysts and friends from the media. If you have any questions, please contact our IR team. Thank you.