Hanwha Life Insurance Co., Ltd. (A088350) Earnings Call Transcript & Summary

. [Interpreted] Good morning, and good evening. First of all, thank you all for joining this conference call. And now we will begin the conference of the fiscal year 2021 first quarter earnings results by Hanwha Life Insurance. This conference will start with a presentation followed by a divisional Q&A session. [Operator Instructions] Now we shall commence the presentation on the fiscal year 2021 first quarter earnings results by Hanwha Life Insurance.

[Interpreted] Good morning. I am Choi Sang-Wook, Head of IR, under the sustainability management team at Hanwha Life Insurance. We provide consecutive interpretation in Korean and English during the earnings conference call for the first quarter of 2021, and you can find the presentation materials on our IR website. Today, CFO, Kyung-Geun Lee, will first give a presentation, which will be followed by a Q&A session. Now I will hand over to the CFO.

[Interpreted] Good morning, this is CFO, Kyung-Geun Lee. Before I begin, I would like to mention that today's presentation materials were prepared for the convenience of investors based on the separate financial statements under K-IFRS, and some numbers are subject to change after a full audit. Let me now begin the report. Page 1 is key financials. In the first quarter of 2021, premium income and new business APE declined year-on-year due to limited face-to-face sales activities during the pandemic. However, we saw a 30.5% growth in APE of high-margin general protection products that satisfy customer needs. Net income posted KRW 194.2 billion, a 306.1% growth year-on-year, mainly due to a solid core insurance margin and improved spread margin on the back of equity index and interest rate increases. Page 2 is on premium income. We have been implementing product and sales strategies that focus on profitability in order to prepare for new regulatory regimes. As a result, premium income in Q1 was down 6.4% year-on-year as premium income from savings insurance has declined and legacy policies have matured. Meanwhile, protection premiums were up 1.6% year-on-year and high margin general protection revenue recorded a 26.7% growth year-on-year, indicating quality improvement of our insurance sales. On Page 3, total APE in Q1 declined year-on-year on the back of the strategic reduction in the sale of lower-margin savings products. General protection APE grew 30.5% year-on-year, thanks to the success of products such as new special cancer insurance and one specific Lifeplus insurance that cater to market needs. As a result, total new business margin posted 51.5%. In February, we obtained an exclusive right to use on Lifeplus healthy insurance for exercise, which is a new product designed to promote healthy lifestyle. On May 3, we launched Hanwha Life always by our side long-term care insurance, the first of its kind in the industry that provides covers for the entire long-term care process including diagnosis, hospitalization, nursing, disability and rehabilitation. The review on granting an exclusive right to use on this product is currently underway. Starting from the second quarter, we will benefit from the channel stabilization of Hanwha Life Financial Service, which is industry's #1 ultra large insurance sales company. In addition, we will maintain the new business growth momentum by expanding the sales of competitive protection products that are designed to satisfy customer needs. On Page 4, the APE breakdown by channel shows that the FP channel accounts for 54%; GAs 15%; and bancassurance, 28%. The portion of protection new business APE in the FP and the GA channels was 90% and 85%, respectively. We will continue to increase the protection sales to maximize the value of new business. Page 5 is on sales efficiency. The 13th month and the 25th month persistency ratio improved substantially to 85.9% and 63.1%, respectively. The company's mis-selling rate is the lowest in the industry. So while there are concerns in the industry over the implementation of the financial consumer protection loan, our persistency ratios are expected to remain stable. The number of DSPs increased 3.8% year-on-year to 19,464 . Going forward, the newly established Hanwha Life Financial Service will actively recruit experienced sales agents, improve the sales support system and provide quality welfare benefits for employees, strengthened loyalty of the sales personnel. On Page 6, net income in Q1 posted KRW 194.2 billion, up 306.1% year-on-year. Specifically, expense income of KRW 67.2 billion, and mortality income of KRW 115.9 billion resulted in the sizable core insurance profit of KRW 183.1 billion. In addition, interest gains improved dramatically to post KRW 74.1 billion, driven by KRW 33.2 billion of recovery from the variable guarantee reserves on the back of stock market value and KRW 41.4 billion of disposal gains of overseas stocks. Page 7 is on core insurance margin. The loss ratio improved 6.4 percentage points year-on-year to record 80.6%. Mortality gains were KRW 115.9 billion, mainly driven by a 3.3% growth of risk premiums and stabilization of accident claims. The expense ratio was 17%, up 0.6 percentage points year-on-year. Expense income posted KRW 67.2 billion due to temporary sales decline. Starting from the second quarter, we expect the expense ratio to improve as full-fledged sales activities of Hanwha Life Financial Service will lead to stable inflow of premium income. Next is asset management. The investment portfolio may mean this of interest-bearing assets with 50% domestic funds, 20% overseas securities and 23% loans. Based on the barbell strategy, we posted disposal gains of overseas bonds in the prospects of replacing short-term bonds with long-maturity bonds, and disposal gains of overseas stock to use investment yield. As a result, the investment yield in the first quarter was 3.83%. The running yield on interest-earning assets has not changed quarter-on-quarter and because of the recent interest rate hike and the company's active substitution trading strategy. Page 9 is on the bond portfolio. The portion of domestic and overseas funds appear or longer maturities, accounts for 92% of the portfolio. The bond duration increased to 12.42 years due to the process of rebalancing from short to long maturity bonds to prepare for new regulatory regimes. More than 96% of domestic bonds are rated over AAA and overseas bonds rated over A to maintain portfolio quality. Next, the loan portfolio is well balanced with 39% alternative investments, 30% quality loans and 31% retail loans. Despite concerns over economic slowdown due to the pandemic, the loan portfolio quality has been managed stably with a delinquency ratio of 0.19% and the NPL ratio of 0.07%. Page 11 is on the crediting rate and policy reserves. With the maturing of legacy high rate policy, the fixed rate portion with rates higher than 6% fell to 25%, and the average crediting rate was down 10 basis points year-on-year to 4.4%, showing a continuous structural improvement of the liabilities. Next is on the RBC ratio and duration. The RBC ratio recorded 205%, mainly due to the decline in valuation gains of funds available for sales on the back of higher interest rates. Under the current regime, interest rate increased negatively affects RBC, but under the new regime, higher interest rates are positive as they reduce the burden on the required capital. Therefore, we will strengthen capital adequacy management in consideration of the new regime, which will be introduced in 2023. The duration gap improved 0.7 years year-on-year to achieve 0.13 years, thanks to the expansion of asset duration through active ALM. Page 13 is on ESG management. In March, the company decided to pursue ESG-based management at the level of the Board of Directors. Also, Sustainability Management Committee was established directly under the Board where medium- and long-term ESG policies will be formulated to strengthen the company-wide ESG practices. In April, Hanwha Life joined TCFD, task force on climate-related financial disclosures, and we will publish a sustainability report based on international standards to gain external recognition on our ESG-related efforts. Page 14 is on Healow App and Hanwha Life app. In February, we upgraded the Healow App, which is a health management application to help customers manage their health using creative and scientific methods. Now our customers can obtain health data, such as the number of stress and heart rates and use new services such as microbiome tests. Healow App offers Lifeplus health insurance for exercise, which is an insurance product that offers premium discounts based on the daily exercise data such as mountain tracking and biking connected on the application. We also launched Hanwha Life app, financial platform that combines the existing Hanwha Life website, insurance wallet and direct insurance. Users can now get information on various insurance products to all the insurance companies, including Hanwha Life. And we have enhanced the user convenience so that users can use this app for the entire scope of insurance experience ranging from policy purchase, to claims filing and claims receipt. We believe that this renewed Hanwha Life app can strengthen much points with potential customers and attract new customers. Hanwha Life will continue to make efforts as the first mover in digital transformation. This is the end of the earnings report for the first quarter of 2021. Thank you.

[Operator Instructions]. [Interpreted] The first question will be provided by Kim Jin-Sang from Hyundai Motor Securities.

[Interpreted] I am Kim Jin-Sang from Hyundai Motor Securities. Thank you for the good earnings report. I have 2 questions. The first question is related to the loss ratio. I can see that the loss ratio in the first quarter has improved. Do you think that this trend is sustainable going forward? What is your overall guidance for the annual loss ratio for 2021 as well as your guidance on mortality gains? The second question is related to the variable guarantee reserves. I can see that there was some recovery from the variable guarantee reserves in this quarter. And what was the size of this recovery? And were there any other one-off factors that we need to take into account? And given this current financial industry environment, what is your projection for the variable guarantee reserves going forward?

[Interpreted] I am [indiscernible] from the Claims Management. Let me respond to your first question. You can see that there was a big improvement in the loss ratio in the first quarter, and this was mainly due to the increased sales of general protection products that have led to the increase in the risk premiums. And you can see that the improvement margin is pretty big. It is because of the base effect in the first quarter of 2020 when there was temporary increase in accident claims. And moving on to our annual guidance on the loss ratio for 2021, we expect it to be around 81%. Of course, we need to take into account the potential impact of increase in accident claims during COVID-19 pandemic, but we already witnessed the peak in the recovery of the accident claims starting from the second quarter of last year. And in the fourth quarter of last year, there was a big increase in death and other claims even during the pandemic. And -- but at the same time, we expect the continued sales increase of general protection products that will bring about increase in the risk premiums. Therefore, even after the COVID-19 pandemic is over, we do not see any sizable impact from the accident claims on the loss ratio. So our medium- to long-term loss ratio target is around 80%. And you also asked about the size of the mortality gain. This is quite dependent on the quality of the in-force policies, and we expect it to be around KRW 450 billion to KRW 500 billion.

[Interpreted] I'm Kim Byung Ho from the Risk Management. Let me answer your second question related to the variable guarantee reserves. The amount of recovery from this particular reserves in the first quarter was KRW 33 billion. This was mainly due to the increase in investment profit on the back of increased stock prices. And by the end of this year, if we see the current interest rate to be maintained, there will be no additional reason for additional reserving. But when investment yield goes up, I would say that there will be an increase in the gains from variable guarantee reserves by KRW 45 billion when the investment yield increases by 1 percentage point. And the sensitivity to the interest rates by 10 basis points is KRW 35 billion, and that is our estimate for the variable guarantee reserves.

[Interpreted] The following question will be presented by Tae Joon Jeong from Yuanta Securities.

[Foreign Language]

[Foreign Language]

[Interpreted] I am Tae Joon Jeong from Yuanta Securities. I would like to ask 3 questions. The first question is related to the products that you have exclusive right to use. What is the percentage of such products in your overall product portfolio in the medium to long term? And how much of new premium income are you expecting from this type of product? The second question is related to your specific ESG plan. As per advice by the financial authorities, are you planning to issue ESG-related bonds? Or how much of an improvement do you expect from our ESG activities on your RBC? If you have any specific plans, please share them with us. The third question is related to your investment strategy. You've been working to expand the asset duration and there has been substantial improvement. And I can see that there was a reduced duration gap between the assets and liabilities. So I'd like to know whether you will continue to maintain this stands in your asset management or if you continue to gain more investment income, when or how will this link to dividend payout?

[Interpreted] I am Sung-Kyun from Product Development. Let me address your first question. As for the insurance product, we have the exclusive right in the first quarter, this is the health insurance to promote exercise. And this is an advanced format from the existing method of collecting exercise and physical activity data. I believe that this is meaningful that it is -- it has the linkage to the digital tools. And so in this manner, rather than focusing on increasing the volume, we are focusing on expanding the customer base. And -- but there is a different story for the long-term care insurance that we have applied for exclusive right. This is, I would say, the first of its kind in the life insurance industry where we have entered into the long-term care insurance segment. The existing long-term care insurance had some risks related to providing benefits in proportion to the actual costs. But this new product offers fixed amount benefit for long-term care covered. So I believe that there will be new opportunities in generating profit in this general protection category. Of course, this was newly launched just 2 weeks ago, but we have a certain volume target that we want to achieve. And going forward, if we make meaningful progress, I expect that a portion of such type of product in the protection category to be around 5% or maximum 10%. And going forward, in the second half of the year, we have several products that we are now in the process of developing or are ready to be launched in connection with digital tools. And so we are thinking of ways to connect these new types of insurance products with our major or mass products so that we can better serve our customers.

[Interpreted] I am [indiscernible] from Sustainability Management. Let me answer your question related to the ESG. In 2020, the global volume or size of ESG-related bond issuance was KRW 520 billion, which was a 60% growth year-on-year. And there is actually a Korean Life Insurance company that has issued KRW 300 billion of ESG-related bonds that was quite successful. Hanwha Life has great governance system, and we received the highest results from ESG evaluation last year among the life insurance companies. Given our good governance and interest rate-related issues, I believe that it is quite viable for us to consider the option of issuing an ESG plan.

[Interpreted] I am [indiscernible] from the Investment Strategy. Let me cover your third question related to our substitution trading. The primary reason for us to be in the process of replacing short-term bonds with long-term bonds, of course, is to increase the asset duration so that we can reduce the interest rate sensitivity of the liabilities. Under the current RBC regime, as you can see in the presentation materials, we are able to cover for the interest rate sensitivity of the liabilities. However, in consideration of the K-ICS to be introduced in 2023, we still need to expand the asset duration because our liability duration is expected to be lengthened to 15 years. The second reason for our substitution trading is to replace overseas bonds with domestic bonds. It is mainly because our liabilities are denominated in the Korean won. And when there are different movements of interest rates between those in Korea and those overseas markets, the holding of overseas funds may not have much of an impact of hedging, but rather will increase volatility. So from this perspective, in order to reduce the interest rate risk of liabilities, we will continue to carry out this substitution trading of replacing overseas bonds with domestic bonds given the current domestic interest rates.

[Interpreted] I'm Yoon Jong Guk from the Corporate Planning and Administration. Let me cover your question related to the linkage between gains from disposal of bonds and dividend payout. Until 2019, on a nonconsolidated basis, our dividend payout ratio was 20%. However, in 2020, due to the ultra-low interest rate environment and the anticipation of the new regime, we had to lower the payout ratio to be early 10%. We have not made our final decision on the dividend for this year and going forward. But given the disposal gains from this process of execution and our efforts to increase the overall earnings, and given the interest rate increases in recent months, I can say that the overall environment this year is better than last year. So we will do our best to ensure that the level of dividend payout will be similar to that of 2019 and before.

[Foreign Language] The following question will be presented by Kang Seung-Gun from KB Securities.

[Interpreted] I am Kang Seung-Gun from KB Securities. I have 2 questions. The first question is that recently interest rates have been going up, and I can see that there was an increase in the disposal gains from bonds. But when you look at the capital side, there was a decline from KRW 12 trillion at the end of last year to KRW 10.5 trillion. I understand that this is mainly because of the decline in the valuation gains of securities available for sale and the remaining amount is KRW 940 billion only. I believe that the key here is whether you can sustain the current level of disposal gains going forward. So what is your overall plan for this year in terms of disposal gains? And what is your overall target? The second question is related to the RBC. Your RBC ratio has gone down by 40.6 percentage points. This is, I'm sure, mainly due to the decline in your capital size. And you're not able to do account reclassification this year, while there will be an increase in RBC sensitivity to interest rate. So if we assume that there will be continuous increase in interest rates, what is your strategy in managing the RBC ratio? And what is your overall target for RBC?

[Interpreted] I'm [ Gi-Jee Seung ] from investment strategy, let me answer your question related to the bond disposal gain. First of all, about the size of disposal gains in the first quarter, this was KRW 120 billion. And when you look at this on a year-over-year basis, this is only 1/3 of what we had last year. So I would like to say that these disposal gains were not produced on purpose for the sake of disposal gains, but rather in an effort to increase the asset duration, we have been replacing short-term bonds with long-term bonds and replacing overseas bonds with domestic bonds. And as a result of this process, such disposal gains are paid. And as for the contribution of such disposal gains to the overall earnings, it is quite difficult to answer this question because this is depending on the size of the disposal and also interest rate level at the time of disposal.

[Interpreted] I'm Kim Byung Ho from Risk Management, let me answer your question related to the RBC management. As you can see in the presentation material, the RBC ratio in the first quarter was 205%. There was a decline in the domestic rate by 35 basis points and overseas 10-year yields was down by 80 basis points. As a result of the decline in the valuation gains, there was a decline of RBC by 33 percentage points. Going forward, if there is continued trend for interest rate increase, this will have burden on the RBC for the entire industry. Currently, our RBC ratio is slightly above 200%, and we will have to [ maintain ] this level. But we also have to make -- we also have to be mindful that the current RBC regime will be maintained only until last year. And starting from 2023, we'll have the new regime of K-ICS. So we're going to maintain and manage our financial service based on the new K-ICS. And to do so in order to integrate this, we've been continuing to increase the asset duration. And also, as was mentioned by the investment strategy head, we are continuing to replace overseas bonds with domestic bonds in order to reduce capital volatility. And if interest rates go up very significantly, this will have an impact on the entire industry in terms of RBC management. So we will continue to utilize various options, including hedging for variable guarantee reserves as well as adjusting the timing for high-risk asset investment, and these will be utilized to maintain our RBC ratio. The interest rate level will continue to have an impact on the RBC ratio. So I don't think it is very meaningful for us to give you any RBC target at this point in time. Of course, we do have an internal RBC target. We'll continue to maintain our capital adequacy. I'd like to make 1 correction. Compared to the end of last year, there was a treasury yields increase by 35 basis points domestically and yields increased by 82 basis points overseas.

[Foreign Language] The following question will be presented by Hyun Jung Lee from Hana Financial Investment.

[Interpreted] Lee Hyun Jung from Hana Financial Investment. Thank you for the good earnings. I would like to ask 3 quick questions. The first question is that, of course, because interest rates have been going up, there is not major an LAT issue. But compared to 2019 and 2020, do you expect any LAT losses by the end of this year? The second question is that liability duration will start to be licensed starting from June this year. What is the overall impact? And the third question is about Life MD. There has been advertising in YouTube and you mentioned about Life MD previously. So what's the current status?

[Interpreted] I'm [ Kim Joon Il ] from IFRS task force team. Let me answer a question related to the LAT. As you mentioned, there is the impact of increased interest rates and also the impact of net inflow of new business into the portfolio. So we do not see any major problem related to LAT for this year. As for the retrospective application of the LAT, based on the government road map, if the changed discount rate is beneficial to strengthen the financial statement, financial institution is able to apply this retrospectively. So we are considering this option for several reasons. First of all, this will have the impact of recognizing an increase in liabilities due to the new [ RFRMC ] in advance. And second, even if there is any LAT losses for 2022, we can all have some buffer by having this retrospective application. The target here would probably be 2019, and we're considering the specific amounts.

[Interpreted] I'm Kim Byung Ho from the risk management. Let me answer your question related to the liability duration side. Currently, specifics are being discussed and nothing is finalized yet. So I cannot give you a very specific answer. But the current plan under discussion is to increase the maximum liability duration to 50 years. In -- on our case, our liability duration is expected to increase by 1.6 years. So currently, the duration is 10.6 years, and it is likely to be increased to 11.8 years, and this will lead to a change in the interest rate risk amount. Currently, I can say that the mismatch risk between maturities does not exceed the minimum level in terms of calculating the interest rate risk amount. And as for the application of liability duration expansion, there are discussions on quarterly application and other options. And overall, we do not see any substantial impact on our RBC ratio.

[Interpreted] I am [ Chae Yong Bok ] from the new business unit. Let me answer your question related to Life MD. This is a completely new digital channel where salespeople can register themselves and receive training and get certified and registered and sell insurance products on this digital platform so that people can have multiple jobs. The infrastructure was completed in October last year. And currently, we're focusing on increasing the number of registered sales people on digital MD and stabilizing the overall process. And currently, there is a new net adds of 300 people per month for Life MD, and we have a total of 1,700 people. We will continue to expand the size of Life MD and stabilize the channel. And in the future, we are going to offer more multi-job opportunities through B2B partnerships so that we can actively respond to the new distribution landscape, including the GA and other solutions.

[Foreign Language] The following question will be presented by Lee Byung Gun from DB Financial Investment.

[Interpreted] I'm Lee Byung Gun from DB Financial Investment. Due to time constraints, I'm going to ask 2 quick questions. The first question is that I can see that the new business profitability has improved, but the volume has declined. So the new business value has declined as a result. In pushing forward with new business, what is your priority as the company? It could be profitability, but when the size of new business declines, it will have some issue under the new regime. Your priority may be to stabilize the channel of your subsidiary company? Or you could be responding to any one-off issues such as that we had in the life insurance channel. So what is your overall priority in promoting new business? The second question is that you have been providing earnings report on a nonconsolidated basis. But starting from April or second quarter, I can see that there will be some impact from your subsidiaries going forward. We will, of course, have to do our estimates based on similar or comparable grounds. And I'd like to know if you have any plan for change in the format starting from the second quarter?

[Interpreted] I'm [ Lee Gyung Seop ] from insurance business. Let me answer your first question related to the decline in the APE in the first quarter and our overall product and volume strategy. To help your understanding, I'd like to first give you an overview of the industry as a whole. In the first quarter, in the life insurance industry, the month initial volume declined by 8% and protection volume declined by 25% -- 24% year-on-year. We see that there is an impact of the commission rule change of 1,200%, this had impact on the market. And also various life companies are pushing for with the portfolio restructuring to increase the portion of general protection. This has led to the decline in the whole life bonds. And going forward in April and the second quarter, we believe that the market volume will be similar to that of last quarter. And as for our own APE, there was a larger decline by 35.9%. One reason for this decline was that there was a 40% decline in the short-term savings products that were sold through the bancassurance channel on a year-over-year basis, as there was a shift to annuity products of longer than 5 years. And starting from last year, we have been lowering the assumed rates for whole life and trying to increase the portion of general protection in our portfolio. So as a result, our whole life portion has declined further than the competitors. And another reason will be the lack of relative focus due to the preparation for the split off of the sales organization. So going forward, we are planning to put priority on both the profitability and the volume side. As for general protection products, because it offers higher margin, we will drive up new business margin by focusing on the general protection products, while at the same time, trying to maintain the sales volume. As for the short-term savings products that used to be sold through the bancassurance channel, we're now in the process of shifting to single premium payment products and annuities products because they offer higher margin. And as for whole life, rather than competing in terms of interest rates, we're going to focus on the inherent nature of whole life products and the benefits for our customers. Thank you.

[Interpreted] I am Choi Sang-Wook from the IR part. Let me answer your question related to our earnings report format. With the new subsidiary under our umbrella, we are considering various ways to better communicate with the market. And we are making preparations for better reporting for the first half of this year in the next quarter. Our principle in communicating with the market is to provide as much information as possible to the market so that we can continue to gain trust from the market. And we will do our best to prepare for the most optimal format of the reporting in the second quarter.

[Interpreted] So I will wait for your annual reporting going forward. But when it comes to this new subsidiary, there hasn't been much clear communication, and we get information from the GA channel but there are mixed messages. And I hope that there will be more numbers provided regarding this in the second quarter.

[Foreign Language] The following question will be presented by Jung Jun-Sup from NH Investment Securities.

[Interpreted] I'm Jung Jun-Sup from NH Investment & Securities. I have 1 quick question. IFRS 17 will be introduced in 2023. I would like to know if you have done any simulation based on the current financial statement, if there's anything you can share with us, for instance, how much change would be made to the paying capital or CSM or any major assumptions that you will make?

[Interpreted] I'm [ Kim Joon Il ] from the IFRS task force team. Since July last year, we have been doing a settlement both under the current accounting regime and the new IFRS regime, and our system is almost completely ready. But as you may know, the default criteria for the IFRS 17 have not been determined or finalized by the supervisory bodies. This was expected to be coming out within the first half of the year, but there are some differences that need to be ironed out so we expect some delay. We have been making comparisons, but there are so many differences depending on how the government will decide on the final criteria. So we will be able to communicate with you more clearly when -- maybe within this year or early next year.

[Foreign Language] The following question will be presented by Won Jaewoong from HSBC Securities.

[Interpreted] I'm Won Jaewoong from HSBC Securities. I press the numbers quite early, but my connection is really late. And my question is related to the new subsidiary for sales. What is your overall performance target for the subsidiary for the year? And there were many talks about the RBC. And your favorite bond issues will have 5-year call option next year. And do you think it will be rolled over actually for the entirety? Or will there be some recovery?

[Interpreted] I'm [ Lee Gyung Seop ] from the insurance business. Thank you for your questions. I will answer your question related to the subsidiaries. Given the growth of the GA channel in the market and given the limits in the PA channel for life interest companies and given the popularity of cross-selling between life and nonlife products, we've decided to split off the sales organization in a preemptive manner. This new subsidiary sells life insurance only from Hanwha Life, but we will sell nonlife products from 9 different P&C companies. So mixed sales opportunities will increase. Our FP has been selling about KRW 500 million to KRW 700 million of cross-selling between Life and Non-Life, but their understanding on nonlife product is not yet complete. So our #1 priority for this year for the subsidiary is to stabilize the system and make sure that our salespeople understand how to sell both non-life and life products at the same time. So for the volume target for this year is KRW 6.2 billion for life products. And as for top selling, it used to be KRW 500 million to KRW 700 million, but we'd like to increase that to KRW 900 million to KRW 1 billion this year.

[Interpreted] I'm [indiscernible] from the sustainability management. Let me answer a question related to the hybrid bonds. Starting from next year, as you mentioned, call option training will come, and we have not made any final decision yet with respect to various options of replacement or rollover. We are going to continue to take into account our capital adequacy and the market environment. And when decisions are made, we will communicate them with you in the market.

[Foreign Language] The following question will be presented by Kim Go En from Meritz Securities.

[Interpreted] I'm Kim Go En from Meritz Securities. I would like to ask some questions. The first question is related to the RBC. Based on the comments you provided during this conference call, is it okay to understand that there will be no additional issuance of funds for the capital side? And the second question is that you made a split off of the subsidiary GA company with a very large capital size of more than KRW 100 billion. So -- and then you also mentioned about the potential IPO. So what was the reason behind this decision?

[Interpreted] I'm Kim Byung Ho from the Risk Management Team. As for the potential additional issuance, we do not have any plans for additional debt issuance. And for the existing hybrid bonds that we've issued, we are now considering various options whether to replace them or rolling them over.

[Interpreted] I'm Yoon Jong Guk from the Corporate Planning and Administration Team. Let me address your question related to the Hanwha Life Financial Service and its capital. So the total capital of this new subsidiary is KRW 650 billion, which is much, much larger than other GAs in the market. And one reason was that the size -- the sheer size of the company is very big with 1,300 employees and more than 18,000 SPs. Another reason for this decision was to take into account the initial year's cash flow considering that fixed expenses will have to be paid out throughout the year. While commission income will be distributed over a period of 3 years, we expect a negative cash flow in the beginning. And in order to support this, we have decided to have a large capital allocated for the subsidiary.

[Foreign Language] The following question will be presented by Im Jiyong from Shinhan Financial Investment.

[Interpreted] I'm Im Jiyong from Shinhan Financial Investment. It may be a little too early for you to comment on this. But after the introduction of the IFRS 17, how actively are you going to pursue your shareholder return policy? If there is any plan, how much can we expect?

[Interpreted] I am CFO, Kyung-Geun Lee, let me comment on your question on the shareholder return policy. As I mentioned, related to the question on the dividend policy, we have been paying out dividends to our shareholders as part of our shareholder return policy. We will continue to pay dividends to return profit to our shareholders. But at this point in time, I'm not really able to provide you with any details. But when details are prepared, we are going to really present with the market.

[Foreign Language] Currently, there are no participants with questions. [Operator Instructions]

[Interpreted] With no further questions, we would like to conclude the first quarter 2021 earnings conference call for Hanwha Life Insurance. Thank you very much for your participation. If you have any further inquiries, please contact the IR team. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]