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

[Foreign Language] Good morning and good evening. First of all, thank you all for joining this conference call. And now we will begin the conference of our fiscal year 2023 Second Quarter Earnings Results by Hanwha Life Insurance. [Operator Instructions] Now we shall commence the presentation on the fiscal year 2023 second quarter earnings results by Hanwha Life Insurance.

[Interpreted] Good afternoon. I am [ Kim Sang Jin ] from the IR team of Hanwha Life. We are providing consecutive interpretation in Korean and English for the earnings presentation for the first half of 2023. You can find the presentation materials on our IR website. Today, CFO in [indiscernible] will first give a report, which will be followed by the Q&A session. Let me now hand over to the CFO.

[Interpreted] Good afternoon. This is CFO [indiscernible]. I would first like to thank you all for joining on our earnings conference call. Please note that today's presentation was prepared based on the separate financial statements under K-IFRS. The results for the first half of 2022 are based on IASB 38, IFRS 4 and IFRS 17, while those for the first half of 2023 are based on IFRS 9 and IFRS 17. Let me now begin the report on the earnings for the first half of 2023. Page 1 is on the earnings highlights. In the first half of 2023, our new business APE grew 113% year-on-year, thanks to strong product and channel competitiveness, with a big growth of 63% year-on-year in new business CSM, our in-force CSM expanded to KRW 10.1 trillion, thereby providing a strong basis for sustainable earnings. While our investment yield reported 3.84%, up [ 0.41 ] percentage points year-on-year. Net income in the first half of this year posted KRW 513.3 billion. Next is on new business APE. On the back of stable sales of general construction policy and expanded sales of Whole Life products that meet market demand, new business APE recorded KRW 1,845.6 billion. The notable increase in our sales in the first half of the year can be attributable to our strong channel competitiveness centered on Hanwha Life Financial Service, which accounts for 64% of the APE and the remaining 33% comes from GA. Next is on sales efficiency. As of the first half of 2023, we had about 26,000 sales agents, including those at Hanwha Life Financial Service, Hanwha Life Lab and People Life. The 13th month FP retention rate was 51.9%, up 3.3 percentage points year-over-year, thanks to our efforts to recruit highly efficient SPs. The 13th month and the 25-month persistency ratios improved 0.4 percentage points and 0.2 percentage points, respectively, driven by comprehensive measures to increase persistency including a stronger enforcement of persistency as our KPI and a structured management of persistency based on the duration of the in-force policies. [indiscernible] is our new business CSM and in-force CSM. Driven by protection sales growth new business CSM recorded KRW 1.4 trillion, up 63% year-over-year. Given the strong stable growth trend of protection sales, we expect our annual new business CSM to far exceed our guidance of KRW 1.8 trillion. In addition, due to the shift of portfolio to focus more on high-margin protection policy, new business CSM margin in the second quarter improved 51 percentage points Q-on-Q to 103% and with General Protection margin of 145%, Whole Life margin of 92% and annual margin of 21%. On Page 5, net income in the first half of the year recorded KRW 513.3 billion, thanks to investment income improvement and stable interest profit of KRW 310 billion generated from a solid CSM level of around KRW 10 trillion. With successful implementation of the new regime, the negative spread margin issue that used to be a burden on our P&L has been successfully addressed. So we expect that our earnings fundamentals focused on insurance profit will continue to strengthen. Page 6 shows details in insurance gains and asset management. The insurance income recorded KRW 309.7 billion based on KRW 463.5 billion of CSM amortization and KRW 64 billion of risk adjustment. The investment income posted KRW 308.4 billion with KRW 1.2 trillion of gains from interest-bearing assets and disposal gains in the process of bond replacement. The company will do expense to maximize the insurance income through stronger management of differences between estimated and actual and expansion of new business CSM. Next is on asset management. Our assets by account consists 28% FVPL, 30% FVOCI, 11% AC and 16% loan assets. In the general accounts, 92% of investment assets are interest-bearing assets. The investment yield on the general accounts reported 3.83%, thanks to stable interest gains from fixed income assets and improved new money yields. Next on Page 8, or ALM service, our bond portfolio is mainly comprise of long-term bonds with more than 10 years of tenor, 76% of which are domestic bonds and 18% are overseas bonds. The company is managing a high-quality fixed income portfolio, of which 97% of domestic bonds are rated AAA or higher and 99% of overseas bonds are rated single A or higher. Page 9 is on the loan portfolio. Our loan portfolio is well balanced with 50% alternative investments and 50% retail loans. This current sluggish real estate market and concerns over economic depression, our loan quality has been well managed with the NPL rate of 0.14% and the delinquency rate of 0.33%. We will continue to manage our loan assets from a conservative standpoint through constant monitoring of the financial market. Page 10 is on insurance liabilities. The insurance liabilities stands at KRW 85 trillion, slightly up from the end of 2022, and the portion of CSM grew 1 percentage point from the end of last year to 12%. In the first half of the year, [ CEO ] posted KRW 73 trillion, including new business of KRW 1.4 trillion and unwind of KRW 1.5 trillion. The crediting rate declined 7 basis points Q-on-Q to 3.4%. Page 11 is on K-ICS and duration gap. Even after the repayment of $1 billion of overseas hybrid debt, K-ICS ratio in the first half of the year is expected to be 180%. We plan to target 2023 annual K-ICS ratio to be around 180% by increasing the size of available capital through new business growth. Also, the duration gap under K-ICS regime is 1.26 years, thanks to active ALM. Finally, on the strategy for the second half of 2023, under the new slogan of New Starts No. 1 adopted on the first year of the new regime implementation, we are producing tangible results by strengthening our sales, organization and profitability. In the second half of the year, in order to emerge as #1 in the insurance industry, we will maximize corporate value by actively recruiting competent sales agents, expanding strategic partnerships with high-quality GA, launching various new products and reinforcing global business capabilities. This is the end of the earnings report for the first half of 2023. Thank you for your attention.

[Foreign Language] [Operator Instructions] The first question will be presented by Mingi Jeong from Samsung Securities.

[Interpreted] I am Jeong Mingi from Samsung Securities. I have two questions. The first question is related to your K-ICS ratio. As you mentioned, even though you repaid $1 billion of hybrid debt, you were able to maintain the K-ICS ratio to be stable around 180%, which is good. I'd like to learn more about the movement of K-ICS ratio in the second quarter in terms of the contribution of new business CSM and any changes to the valuations of your financial assets. You can provide them in more detail in terms of amount or in terms of the movement of K-ICS ratio. The second question is rather simple. I can see that your corporate tax payment for the second quarter was reduced significantly compared to the first quarter to be around KRW 3 billion. So what was the reason behind this?

[Interpreted] I am Yong-Ho Jung, Head of the Risk Management team. Let me address your first question regarding the K-ICS movement. As of the end of March, the K-ICS ratio was 181%. And as of the end of June, the ratio was 180%. So there was a decline of 1 percentage point. To give you more details, in April, there was a repayment of $1 billion of hybrid debt, which had a negative impact of 10 percentage points on the K-ICS ratio. And secondly, there was interest rate increase by about 30 basis points compared to the end of March to the end of June. So that had a negative impact on the increase in the required capital. So the impact was negative 17 percentage points. While there was a positive impact coming from the increase in new business CSM in the second quarter, so that has a positive impact of 5 percentage points. And moving on, there was a reinsurance of the surrender related policies, about KRW 800 billion. So that has a positive impact of 11 percentage points.

[Interpreted] I am [ Kim Dong Ye ], Head of the Finance team. Let me address your second question. As you mentioned, the corporate tax expenses declined by about KRW 3 billion, and there are two main reasons. The first reason is that there was a revision to the corporate tax-related law. As a result, it was about 1% impact on the corporate tax expenses, which can be translated into about KRW 10 billion of reduction in corporate tax expenses. And also, we got the reimbursement of about KRW 10 billion in the second quarter after we filed for petition for reimbursement. So there was the impact of reduction by about KRW 20 billion in our corporate tax expenses.

[Foreign Language] The next question will be presented by Heewon Choi from Morgan Stanley.

[Interpreted] I'm Choi Heewon from Morgan Stanley. I have a question related to your outlook on imports in -- on new business. In the first half of the year, thanks to the increase in single premium payment policy sales as well as sales of annuity products in the second quarter, the new business CSM has reached KRW 1.4 trillion in the first half of this year, which is already near your annual guidance of KRW 1.8 trillion. So can you provide us with any revised guidance with the annual new business CSM considering your outlook in the second half of the year? I wonder if you are going to maintain a conservative outlook on the second half of the year because when we take a look at the sales of general protection policies on a year-over-year basis, there was a slight decline in the sales of that category. So I wonder if you assume that such trends will continue in the second half of the year. And general protection policies margin or profitability has declined as well. So I wonder if you have a similar view for the second half of the year on this particular category.

I am Yoon Jong Guk, the Head of the Corporate Planning and Administration team. Let me address your questions. As you mentioned, in the first half of this year, our new business CSM reported KRW 1.36 trillion, that is thanks to KRW 650 billion coming from the Whole Life sales and KRW 560 billion from General Protection policies. And also, we had big sales of annuities product in the first quarter, which led to the increase of new business CSM by KRW 140 billion. So in total, the first half of this year, we recorded new business CSM of KRW 1.36 trillion. And going forward, for the second half of the year, our target is KRW 1.2 trillion. So the revised annual target or guidance where new business CSM is going to be upward adjusted from the initial business plan to be around KRW 2.5 trillion. In the second half of the year, we will continue to push forward with sales of General Protection policies in order to increase margin and profitability and improve the size of the new business CSM.

[Foreign Language]

[Interpreted] I have one follow-up question. In the second quarter, of the new business, CSM, coming from Whole Life policy, can you give me a breakdown of such policies between short-term premium paying policies versus long-term premium paying policies?

[Interpreted] Once again, I'm Yoon Jong Guk from the Corporate Planning and Administration team. In the second quarter of the Whole Life CSM, the percentage of single payment or short-term premium payment policies account for about 67%.

[Foreign Language] The next question will be presented by Do Ha Kim from Hanwha Investment & Securities.

[Interpreted] I'm Kim Do Ha from Hanwha Investment & Securities. I would like to ask a question. First of all, about your Whole Life business. We can see a significant growth in the size of your CSM, which is very good news, and it does have an impact on not only the corporate value and your P&L, but also on your K-ICS ratio. So I believe it is critical to understand how this Whole Life sales is going to play out going forward. You mentioned that there is a higher portion of single or shorter-term premium paying policies more than the longer-term premium paying policies. So I wonder if you have enough historical data to come up with reliable assumptions including surrender rate when it comes to calculating your contractual service margins? And how much of an assumption do you have with the surrender value of such pollicies compared to longer premium paying policies? The second question is to do with investment yield. I can see that thanks to higher valuation gains in the general account, the investment yield seems to be pretty good. So when it comes to the special account, especially our variable guarantee accounts, it seems that there's some negative impact. So can you provide us with some more details?

[Interpreted] I'm [indiscernible] from the [indiscernible] support team. Let me address your first question. When it comes to the surrender rate consumption, we have different assumptions applied depending on the level of premium payment. We understand that there is a lower surrender rate or probability right before the complete payment of the premiums. And there's a slight tendency of increase in surrender rate after they fully pay their premiums. So such different assumptions are applied for surrender rates. And as for historical data, we are using the immediate 5-year historical data, which has been presently [ attested ] with liabilities from external companies, including accounting firms.

I'm Kim Howard from the Investment Strategy team. Let me address your second question by providing more details on our special accounts. When it comes to the retirement accounts, we have some reclassification of accounts in the earlier -- in the beginning of the year to classify them as FVPL and we are now in the process of replacing them to be classified as FVOCI. The process is not completed yet. In the second quarter, due to interest rate increases, there was some exposure to this risk. And therefore, there were some losses in terms of valuation of assets that we have. However, when it comes to the asset liability margin, it does not cause much problem because it is just on an accounting basis, considering our investment period and the matching ratio. So ALM matching is well under management.

I am [ Kim Jiangsu ] from the Marketing division. Let me provide some additional comments on your question related to the shorter-term premium paying policies. As was announced in the media as of September 1, the financial supervisory service will introduce regulations on this type of policies. So in the second half of this year in order to meet our internal guidance of KRW 1.2 trillion of new business CSM that was already mentioned, we have 2 specific strategies. The first strategy is to continue to recruit excellent sales agents so that we can hire about 1,000 new sales agents per month in the second half of the year. The second strategy is to do our best to make sure that we will have #1 market share in the General Protection policies. Already in August compared to the previous month, we have seen an increase in the sales of General Protection policies and we will continue to maintain this trend so that we can increase the profitability of our insurance businesses while increasing the volume coming from General Protection policies so that we can continue to meet our target.

[Foreign Language]

[Interpreted] Okay. So I have just one quick follow-up question. You may have had the numbers to share with us right now when it comes to the classification of retirements down to FVPL, if you can provide us with some investment return-related numbers from the comprehensive income perspective, I would appreciate that.

[Interpreted] So I am Howard Kim from the investment strategy team. We will provide more information through the IR team regarding our numbers on FVPL versus FVOCI. Thank you.

[Interpreted] The next question will be presented by [indiscernible] from JPMorgan Asset Management.

I have two questions. So the first one is, if I look at Slide 1, that talks about the key financials. I saw that equity number declined from KRW 16.44 trillion in the first half of '22 to KRW 12.06 trillion as of the first half of this year. Can you talk about the driver of this decline? And the second question I have is on the investment portfolio. Within the overseas segment, you have 15%. Do you have exposures to overseas commercial real estate assets? And if so, how much? And also one more question is, in general, what's your view on asset quality for your entire investment portfolio.

[Interpreted] I am [ Kim Dong Yee ] from the finance team. Let me answer your first question. When it comes to the reason behind the decline of equity from KRW 16 trillion to KRW 12 trillion, there are several reasons. First of all, in the process of transitioning to IFRS 9, there was a reclassification of FVPL and FVOCI, and as a result, there was a KRW 3.4 trillion of equity decline, and as you know, in April of this year, we repaid $1 billion of hybrid debt, which led to the reduction of equity by KRW 1.2 trillion. But thanks to adjustment to retained earnings, there was an increase of KRW 0.6 trillion. So as a result, there was a difference of KRW 4 trillion in equity.

[Interpreted] I'm Howard Kim from the investment strategy team. Let me address your second question on our exposure to overseas real estate properties. In total, our exposure to overseas real estate properties is KRW 3.4 trillion. Of course, due to the global concerns over economic depression and sluggish real estate markets around the world, we incurred some valuation losses on some assets. However, we have been gaining some stable interest income from these assets, and we have been taking preemptive measures to manage any potential risks. In order to change any potential negative headwinds in the investment team, we are checking on the market, and we are flexibly responding to various potential risks and issues in the investment. And also, we have been revisiting and reviewing our alternative investments process to check if there's any risk issues that we need to address. Of course, we may not be fully freeing ourselves from any of the major global issues. However, we are taking a very proactive and preemptive measures in terms of risk management so that we can respond to any potential risks to minimize them.

Do you have any other questions?

Maybe just one follow-up. Thank you for the feedback. In terms of the KRW 3.4 trillion overseas real estate assets, can you provide more details in terms of what type of assets in terms of the geographic locations?

[Interpreted] Again, I'm Howard Kim from the investment strategy team. So to give you an overall big picture, most of these real estate assets are located in advanced markets, but we are going to provide you with more details through the IR team in terms of the breakdown by real estate asset classes by commercial office, hotels and so on.

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

[Interpreted] I'm Lee Byung Gun from DB Financial Investment. I have two questions. The first question is related to your performance on the variable guarantee account. On a year-over-year basis, of course, last year, there was not enough hedging. There was greater volatility. But when we look at the numbers in the first quarter and the second quarter, based on the fact book that you provided us, it seems that you incurred some losses on your variable guarantee accounts. Is that because you were not yet fully hedged against these risks? Or is it because of the accounting issue? Or is it because of the greater volatility in the market? Because previously, you communicated with investors that when the IFRS 9 and 17 are applied, there, volatility on your variable guarantee would be reduced significantly. But I can see that still, you have some volatility and the changes in that respect. So I'd like to get some explanation about that. And the second question has to do with the increase in surrender value-related provisioning, of course, I can see the impact of increase in the new business CSM in the second quarter, but even in consideration of the increase in new business CSM, it seems that you have been provisioning a lot more than that. So I would like to understand the reason why.

[Interpreted] I am [indiscernible] from the actuarial team. Let me answer your question related to our P&L on the variable guarantee reserves. We have been adopting the P&L approach, meaning that we recognize all the changes to the insurance liabilities as P&L. And as for hedging, we are 100% hedged. So it does not have much an impact on the numbers. But because of the variability or changes to the insurance liability, we have some losses, as you mentioned on our variable guarantee reserves. However, there were some changes to the guidelines provided by the regulatory authority with respect to the accounting treatment of -- so that there will be a shift from the P&L approach to VF approach, which is based on the fees of valuable. And this will be applied from the end of from September. So we can provide you with more details after this new guideline is applied in September. And going forward, such variability on the -- variable guarantee reserves is going to be reduced significantly, thanks to the change in accounting treatment. Okay. Moving on to your second question with respect to the increase in provisioning for surrender. It has to do with the timing of the transition to a new regime, and there was a gap or difference occurred between the previous method of cost-based method to the new method. And it has to do with the lower rate that we applied before the new regime and under the cost method. So we had to add additional provisioning for the surrender because of this different issue. And in addition, as you mentioned, we have a good increase in new business CSM. And in the beginning of contract signing, there is additional provisioning that has to be provided for potential surrender. But as the policy continues to be in force, such numbers will continue to decline. And there's a ceiling or a limit as to how much such provisioning can continue to increase. And we assume that after it sort of reaches the highest level, it's not going to increase that much. And with the changes to the accounting treatment on variable guarantee reserves, we expect this amount to continue to decline.

[Foreign Language] The next question will be presented by [indiscernible] from Hanwha Securities.

[Interpreted] I'm [indiscernible] from Hanwha Securities. I have a question regarding the difference between estimated and actual. In the second quarter, because of the increase in new business, we expect it that there will be a reduced difference between estimated and actual in terms of claims paid out, but there was also an anticipation that there will be a negative difference in terms of floating expenses. And going forward in the second half of the year, as you continue to push forward with increasing new business CSM, we may continue to maintain similar assumptions regarding these differences, so I wonder if you are planning to reduce such differences between estimated and actual when it comes to floating expenses. What is your overall strategy? Because previously, you communicated that your target is to make that difference zero.

[Interpreted] I'm Yoon Jong Guk from the Corporate Planning and Administration team. I just answer your questions. Yes, because we had successful sales in the second quarter, there was a growth in volume. And as a result, there was an increase in incentives and fees paid out for such sales. And that has led to losses and the differences between the estimated and actuals for floating side. However, I'd like to mention that when we consider the positive contribution coming from the increase in new business CSM, this can cover -- this can be covered quickly because with more than KRW 600 billion of increase in new business CSM on an annual basis, this is going to provide a very solid basis for future earnings. Therefore, this is rather the sales-related expenses that we had to bear. And going forward, in the first half of the year, we had -- we recruited more than 1,000 SPs per month. And in the second half, we're going to continue to recruit highly competent sales agents. So we're going to increase our top line based on a strong sales organization. In other words, rather than using incentives or fees for sales, we're going to utilize our -- their highly performing sales organization to continue to increase the pipeline. And in this way, we will be able to reduce the difference between actual and estimated in terms of floating expenses. So in short, in the second half of the year, our target is to incur profit from the difference between estimated and actual for claim payouts and make whether even or 0 difference between the actual and estimated in terms of floating expenses.

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

[Interpreted] I'm am Kang Seung-Gun from KB Securities. My first question has to do with the CSM movement. Thanks to your efforts, you saw a big increase in the new business CSM of about KRW 1.36 trillion. However, due to the adjustments, the amount or the number went down to KRW 600 billion in the first half of the year, which means that there was a reduction of about 46% of new business CSM. Of course, this may entail some adjustments in the first half of the year related to the surrender rate assumptions and other assumption adjustments. So if you could provide us with some more details about these adjustments, we would appreciate that. And also, I have to understand your outlook for the second half of the year in this regard. The second question has to do with increase in surrender related reserves, and there was an increase from the first quarter to the second quarter. So if you could break this down between the general account and variable guarantee account with the numbers, we would appreciate that.

[Interpreted] I am [indiscernible] from actuary team. Let me comment on the CSM movement. As the CFO mentioned, there was an inflow of KRW 1.3 trillion of new business. And when you look at the movement, there was an increase of KRW 170 billion due to the cost based interest rate difference and also the KRW 460 billion of CSM amortization amount. And there were some adjustments due to changes to the assumptions, which is about KRW 600 billion. To give you more detail, there are 2 categories. The first category is adjustment based on the actual or experiential data and the second category is reversal with respect to loss recognition. So there was some changes to in-force policies and changes to the model. So these effects led to a reversal of some of the amounts that we recognized at the end of last year, which amounts to KRW 360 billion. This is a one-off recognition and there was changes to the surrender rate assumption. So as a result, KRW 200 billion was recognized. So in total, KRW 560 billion of one-off recognition occurred. And so due to the accounting treatment of variables guarantee, if there was any performance related to surrender, this will be recognized as a CSM profit. So in the first quarter, it was about KRW 100 billion. So if we exclude these one-off recognitions and treatments according to assumption changes, in the first half of this year, our recurring recognition is estimated to be KRW 100 billion. So in short, when it comes to the impact of CSM reduction, of the -- so the CSM amortization of KRW 450 billion to KRW 500 billion with the adjustment of KRW 100 billion, there is an impact of KRW 500 billion. So out of KRW 600 billion, KRW 500 billion of adjustment is one-off. And other than that, about KRW 100 billion is recurring impact. So when you consider the CSM movement going forward, I believe that the increase of new business CSM impact is going to be KRW 1 trillion. Thank you.

[Foreign Language]

[Foreign Language]

[Interpreted] This is [indiscernible] from the actuary team. We expect that there will be a limited increase in provisioning for surrender. And as I mentioned, there is going to be a change in the guideline in terms of the accounting treatment of surrender-related reserves, so that VF approach will be applied. And so we can provide you with more detail after September when the new guideline is applied. But as per the numbers as is, we are going to provide them to you through the IR team.

[Foreign Language] The next question will be presented by Sinyoung Park from Goldman Sachs.

[Interpreted] I'm Park Sinyoung from Goldman Sachs. I have two questions. First of all, in your presentation, you mentioned that year-end, the K-ICS ratio target is 180%. Does this number based on the assumption that there will be changes to assumptions in August. So did you consider these changes in calculating your target K-ICS ratio? And I understand that you're using reinsurance as an instrument to manage your capital adequacy ratio. So I wonder if you have any plans to issue any additional hybrid debt or any plans for capital expansion. Looking on to my question, it's related to dividend payout. I wonder when you will be able to restart the dividend payout policy. Does that require revision to the commercial law? And what is the amount of distributable earnings that you have already in your possession? And what is your target K-ICS ratio that you would like to reach before you decide to pay dividends to the shareholders?

[Interpreted] I am [indiscernible] from the risk management team. Regarding your first question, we communicated that our K-ICS target for 2023 is 180%. We considered, yes, the changes to the actuarial assumptions, which will be included in the guidelines announced by the government -- to be announced by the government in the second half of the year. And moving on to your question related to potential debt issuance, we do not have any specific plans for additional issuance for capital. And when it comes to reinsurance, again, some risk of massive surrender, we will consider the interest rate level at the end of the quarter to make a decision, but we have not yet made such a decision yet. And your last question was about target K-ICS ratio so that we could implement the shareholder return policy, including dividend payout. In consideration of sensitivity to interest rate movement, our K-ICS target for that purpose is about 170%.

[Interpreted] I am [indiscernible] from the finance team. With respect to the distributable earnings, because of the mark-to-market valuation of different liabilities according to the IFRS 17, there was a big increase in unrealized gains. And as a result, there was a huge reduction in the amount of distributable earnings that we could share with the shareholders. Therefore, in consideration of the interest rate movement and the authorities -- regulatory authority's dividend guideline, in order to ensure a sustainable dividend payout for our shareholders, the commercial law has to be revised, and we assume and expect that such a revision will be completed by December of this year. Of course, we do not have final earnings numbers for the entire year of 2023. So I cannot give you a specific number. But given the continuous successful operation of our insurance business and stable management of the K-ICS ratio, we expect the amount of funds that can be utilized for dividend payout will continue to increase. So by the end of this year, we expect that we'll be able to pay out dividends.

[Foreign Language] The next question will be presented by Tan Wang from JPMorgan.

It seems like last quarter, you talked about the year end dividend guidance. So I'd like to ask another two questions, if I may. So the first one is in your fact sheet, you have shared. So there was a tab, namely 19th statement of the financial position. in that shape, we find that there are 2 items attract attention. The first one is the return earnings before this position, which it seems like compared to last year end, it has dropped by nearly KRW 1 trillion. And the other item is the cancellation we found reserves also increased by nearly KRW 0.6 trillion. So I want to ask the management if they could share some details about why these 2 accounts fluctuate so much. So that's the first question. The second one is about product margin. As we see very impressive new business CSM margin, so -- but if we look at the denominator, the new business APE, if we convert the APE into like other items like the present value of new business premium, so can we still for, I mean -- per the management's perspective, can we still see a higher trend of the product margin? So that is my question.

[Interpreted] I'm [indiscernible] from the product development team. Let me address your second question first. As you can see in the presentation material, the new business CSM has been very well managed. And the profitability in the first half was mainly driven by Whole Life policies, but in the second half, we are going to shift our attention and focus of our portfolio to General Protection policies. So if we can continue to maintain a sizable top line, we believe that our product margin will continue to improve in the second half. And excuse me, but can you actually ask the first question again because the connection was not very clear. We were not really able to get the gist of your question.

Sure, sure. So in the fact sheet, you have distributed the Excel. So in that Excel in tab 19. Tab 19 statement of the financial position, so in a row 200 and 201, there were 2 items, namely returned earnings before disposition and the cancellation refound reserves these 2 items. So at the end of June, so compared to last year-end, we found these 2 items has a very large change amounted to around KRW 1 trillion. So I was wondering if the management could share some details why these 2 items have changed a lot.

[Interpreted] Okay. With respect to the transitioning to a new regime, there was a reclassification of the securities held to maturity, which were classified now as FVPL, therefore, there was a reduction of retained earnings by KRW 0.9 trillion.

[Interpreted] I'm [indiscernible] from actuary team. With respect to increase in the calculation related reserve at the end of last year, it was KRW 1.92 trillion and as of the end of June, it's KRW 2.5 trillion, so there was an increase. And we're going to provide you with more details through the IR team, but I'd like to once again mention that there was a big increase in sales in the second quarter, which led to a higher provisioning. But I believe it is now more appropriate and relevant to discuss these types of changes after the new guidelines are applied in September. Thank you.

[Interpreted] With no further questions, we would like to conclude the Earnings Conference Call for the first half of 2023 of Hanwha Life. Thank you all for joining us. And if you have any further inquiries, please contact the IR team. Thank you.