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 the Fiscal Year 2023 Annual Earnings Results by Hanwha Life Insurance. This conference will start with the presentation followed by a divisional Q&A session. [Operator Instructions] Now we shall commence the presentation on the fiscal year 2023 annual earnings results by Hanwha Life Insurance.

[Interpreted] Good morning. I am Kim [ Sung-Jin Kim ] from the IR team at Hanwha Life. Consecutive interpretation in Korean and English is being provided throughout the earnings call for fiscal year 2023 of Hanwha Life. The presentation materials are available on our IR website. Today, CFO, [indiscernible], will first give a report followed by a Q&A session. Let me now hand over to our CFO.

[Interpreted] Good morning. This is CFO, [indiscernible]. I would first like to thank you for joining our earnings call. Please note that today's presentation was prepared based on KIFRS. Let me now begin the report on the earnings for fiscal year 2023. Page 4 is on the earnings highlights. 2023 was the first year when the new regimes were implemented. Despite increased volatility in the financial market and [ Tencent ] regulation, Hanwha Life achieved value up on all fronts. First, driven by the growth in general protection product sales, protection APE grew 114% year-over-year, resulting in the new business CSM of KRW 2.5 trillion, thus far exceeding the guidance. On a nonconsolidated basis, the net income improved significantly from last year's number under IFRS 4, thus posting KRW 616.3 billion. The K-ICS ratio remained stable at 183%, thanks to diversified capital management strategies. Meanwhile, the number of tied agents stands at 27,172, up 47% since the split off in 2021. Hanwha Life Financial Service, #1 GA in Korea, turned to profit in 2023, posting a net income of KRW 68.9 billion. I would like to give you more details on the following slide. First, new business APE grew 52% year-over-year, showing high volume growth, but we also achieved quality improvement as the portion of protection policies in the new business portfolio grew 22 percentage points year-over-year to 75%. More specifically, protection APE was up 114% year-over-year through the launch of highly profitable products such as Signature Cancer Insurance 3.0 and new Dementia Insurance. Page 6 is on sales efficiency. Last year, along with the acquisition of People Life, we were able to secure the strongest channel competitiveness by expanding the sales organization to approximately 27,000 by recruiting highly efficient financial planners. In 2024, we will continue to solidify our market leadership through stable expansion of the sales forces. The 13th month and the 25th month persistency ratios recorded 83.4% and 59.9%, respectively. Next is on CSM. In 2023, new business CSM posted KRW 2.5 trillion, thanks to the increase in high-margin general protection product sales, while Q4 new business CSM margin recorded 98%, showing a sustained trend of improvement. Started at KRW 9.7 trillion at the start of the year, our year-end in-force CSM came in at KRW 9.2 trillion by reflecting new business CSM of KRW 2.5 trillion, and the impact of assumption changes were KRW 2.5 trillion. On Page 8, our separate net income in 2023 was up significantly by 74% from last year's figure under IFRS 4 to post KRW 616.3 billion. The consolidated net income posted KRW 826 billion thanks to earnings improvements of major subsidiaries, including Hanwha General Insurance, Hanwha Financial Service and overseas subsidiaries. Page 9 shows details on insurance and investment gains. We recorded annual insurance income of KRW 650.9 billion based on a stable amortization profit of KRW 1 trillion, generated from strong in-force CSM. Despite unfavorable investment conditions, including greater volatility around market interest rates and increasing geopolitical risks, the investment income recorded KRW 90.4 billion, driven by a stable inflow of interest gains. Page 10 is on asset management. Our investment portfolio mainly consists of interest-bearing assets with a breakdown of 61% domestic bonds, 14% overseas securities and 16% loan assets. Through strategic asset allocation, as you can see on the slide, the portion of FVPL is reduced to 24%, so we expect yield volatility to reduce significantly. Q4 investment yield was up 3 basis points Q-on-Q to 3.36%. Next on Page 11, our bond portfolio is mainly comprised of long-term bonds with more than 10 years of tenor, 79% of which are domestic bonds and 15% are overseas bonds. The company is managing a high-quality fixed income portfolio, of which 96% of domestic bonds are rated AAA or higher, and 99% of overseas bonds are rated A or higher. Page 12 is on the loan portfolio. Our loan portfolio is well balanced with 51% alternative investments and 49% retail loans. The delinquency ratio and the NPL ratio are 0.47% and 0.16%, respectively. In response to increasing volatility in the financial market and growing risks involving commercial real estate properties around the world, we will continue to conduct strict risk management by constantly monitoring the performance of our invested assets. Next, as of the end of 2023, our best estimate liabilities posted KRW 78 trillion due to several factors, including the inflow of new business unwind and change in liability discount rates. The crediting rate was slightly up Q-on-Q to 3.64%. Next on K-ICS and duration gap. Despite the repayment of overseas hybrid debt and interest rate hikes, our K-ICS ratio remained stable at 183%, thanks to increase in available capital through continuous inflow of new business CSM. The duration on the asset side and the duration on the liability side are 10.3 years and 8.7 years, respectively, resulting in the duration gap of 1.3 years. Page 15 is on Hanwha Life Financial Service. Launched in April '21 as #1 GA in terms of the size of capital and sales force, Hanwha Life Financial Service went into the black in 2023, posting a net income of KRW 68.9 billion. We expect them to achieve the breakeven point on a cumulative basis in 2024. We will further strengthen our channel competitiveness by increasing the sales forces and improving the efficiency of the sales organization. Finally, on the outlook for 2024. This year, uncertainties are expected to continue around the world due to multiple risks, including the possibility of economic slowdown due to tight monetary policies, concerns over prolonged high inflation and increasing geopolitical risk. The insurance industry in Korea is expected to face fierce competition across lifers and non-lifers over the GA channel amid slower economic growth due to aging population and low fertility rate. In 2024, Hanwha Life will expand the sales forces to more than 30,000 by actively recruiting highly efficient FPs and secure new business CSM of more than KRW 2 trillion by introducing new products to meet customers' needs and building the sales portfolio focused on profitability. In addition, we will improve the persistency to drive the value of in-force business and enhance the capital management process so as to increase our K-ICS ratio to be higher than 190%. With that, I'd like to end the earnings report for fiscal year 2023. Thank you.

[Foreign Language] [Operator Instructions] [Foreign Language] The first question will be provided by Hong Jae Lee from Hyundai Motor Securities.

[Interpreted] Lee Hong Jae from Hyundai Motor Securities. First of all, I'd like to ask you to give us more color on your K-ICS ratio target of 190%. I wonder if this is the bottom line that you would like to achieve or maintain. And if the K-ICS ratio goes above 190%, can we expect more favorable shareholder return policy going forward? And when we consider the impact of strengthened regulations, it is expected to be around 10% -- 10 percentage points on the K-ICS ratio. And given the guidance of CSM of KRW 2 trillion, I'd like to understand how you are going to maintain this 100% -- 190% K-ICS ratio. I'd like to know if you have any plans for issuing additional hybrid debt or refinancing your notes. So if you can provide us with more specific strategies to improve your K-ICS ratio to be above 190%, we will appreciate that. The second question has to do with your plans on the treasury shares. I'd like to understand when you're going to cancel these treasury shares. Even if you sell your treasury shares at the market price right now, the impact on the K-ICS ratio is going to be around 3 percentage points, which is considered to be minimal. And given the current trend, we do not see any reason for you to continue to keep your treasury shares. So I'd like to understand your strategy and plan regarding treasury shares going forward.

[Interpreted] I am [indiscernible] from the risk management team. Let me address your first question on the outlook on our K-ICS ratio and how we are going to achieve our K-ICS ratio target for 2024. As you know, in 2024, there will be strengthening of liability discount rates, in particular, 25 basis points down on the long-term forward rate as well as the expected downward trend on the liquidity premium side. So as for the level of liquidity premium side, the level has not been determined, so I cannot give you any specific numbers at this point in time. But when we consider our sensitivity, the sensitivity to the long-term forward rate, downward step of 25 basis points is going to lead to an increase of liabilities by KRW 250 billion. And as for the liquidity premium rate, when it is 10 basis point movement, it will lead to the change of our liabilities by about KRW 800 billion. In response to these expected changes, we will continue to boost the inflow of new business CSM in order to increase available capital, which is going to have an impact of 15 percentage points on our K-ICS ratio. Furthermore, in response to the strengthening of the liability discount rate, we will continue to try to manage our duration gap. As a result of the strengthening of discount rate, liability duration is expected to be longer. However, our current asset duration is longer than the liability duration, so we believe we can manage the duration gap to a certain level. And at the same -- and by taking these actions, we will do our best to reduce volatility on the available capital side. And at the same time, to reduce the required capital, we're going to take action regarding beneficiary certificates. And overall, with these strategies, we are going to do our best to meet the target of 190% by the end of 2024. And you also asked a question regarding our plans for future hybrid debt issuance. We believe that with our current capital availability, we're able to respond to the current situation without having to issue additional notes. So we do not have any plans for additional issuances this year as of now. And moving on to your question regarding shareholder return policy. In consideration of our interest rate sensitivity under the current K-ICS ratio, we believe that we can maintain our K-ICS ratio to float above 150% even if there are very unfavorable interest rate environment. So our goal is to make sure that the ratio is above 150%, and further down the road, to keep it between 170% to 190%, so we can have enough buffer in managing our capital adequacy.

I'm CFO, [indiscernible]. Let me address your question regarding the cancellation of treasury shares. As of now, we do not have any specific plan regarding treasury share cancellation. But once the government announces the initiative on the value of program for low-PBR companies, we're going to look at the content of that initiative and consider, in a comprehensive manner, including the possibility of canceling treasury shares. And going forward, we're going to continue to enhance our shareholder return policy to meet the market's expectations.

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

[Interpreted] I'm Lee Byung Gun from DB Financial Investment and Securities. I would like to first ask a question regarding your CSM numbers. On Page 7, you had good inflow of new business CSM. However, due to the impact of assumption changes, there was a reduction in the CSM overall compared to the beginning of the year. We understand some of the details up until the third quarter, but I'd like to understand what led the reduction of KRW 1.1 trillion in Q4, the fourth quarter, due to assumption changes. I understand that there must be some impact from the policy loans with fixed interest rates, but considering that, there is a lot of reduction in the CSM by KRW 1.1 trillion. The annual amount of reduction is KRW 2.9 trillion, and for the fourth quarter, it's KRW 1.1 trillion. So if you could provide us with more color on the impact of assumption changes in more detail, we will appreciate that. The second question is when we've gone in your financial statements, we saw that there was this category called others, and they include policies where losses incur. In 2023, the amount was KRW 149.5 billion, and this year, it was KRW 221 billion. I understand that it had to do with the changes to interest rates for policy loans, which have an impact on personal pension accounts. And of course, because of the aging population and expected longevity, they may continue to incur losses. And if you can, please provide us with more details on how much losses you would have to bear in 2023 as well as going forward, because you have already sold many pension accounts and losses may incur continuously.

[Interpreted] I'm [indiscernible] from the actuarial support team. Let me address your first question. Other than KRW 267.9 billion of reduction in the CSM due to changes in additional premium -- changes in the spread rates for policy loans, the impact of assumption changes in the fourth quarter on the CSM number is KRW 668.1 billion. This is mainly due to the increase in lapse ratio due to higher interest rates as well as an increasing loading loss. So these have been reflected in the assumption changes leading to KRW 668.1 billion change in the CSM.

[Interpreted] I am [ Kim Jin Il ] from the actuarial team. Before I talk about the impact of policy that incur losses, I'd like to give you more details on the impact of actuarial assumption changes. With the currency rate changes on the VAF, there was this impact on the reduction in the best estimate liabilities on the variable guarantee policy side, which led to the reduction of the CSM as well, and the amount is about KRW 140 billion. And if interest rates kind of remain at the current level, this will not occur again, because this is a one-off temporary factor. Moving on to the losses that incur on the -- some of the policies that we have, especially the pension policies. In the fourth quarter, there was an increase in the withdrawal of policies for living benefits as well as pension benefits. So for non-participating pension policies, there was a loss of KRW 185 billion. So as I mentioned, there was KRW 185 billion of losses on nonparticipating determined contribution policies. However, there was some improvement in terms of the forward rates for variable guarantee, so this resulted in the reversal of KRW 80 billion. So in consideration of the low level of CSM for participating pension accounts as well as an increasing payout of living benefits, the losses will -- are expected to continue even though the size will not be as big as this year. Thank you.

[Foreign Language] The following question will be presented by [ Dan Wang ] from JPMorgan.

This is Dan Wang from JPMorgan. I have 2 questions. The first one is related to the dividend. And from your slide and also the [indiscernible], we didn't find any wording or comments related to dividends. So just to double check that we don't have any dividend proposal in this year in 2023. And the second question is about your -- the rates related to the investment book, specifically about the commercial real estate. We won't see that the company has made any reserve provision on the potential default related to the commercial real estate. And if you can share some details about their -- like the exposure, that'll be better.

[Interpreted] I'm [ Kim Dong Yi ] from the finance team. Thank you for your question. Let me comment on the dividend plan for 2023. For the past 2 years, we did not pay out dividends to shareholders in consideration of the preparations that we were making for the new bookings as well as responses to strengthen capital solvency regulations by the government. However, in 2023, our earnings have improved under the new regime and there was a revision the enforcement decree of the commercial act, which led to availability of the capital and can be allocated for dividend payout. So we are planning to pay out dividends in 2023. Since the listing of Hanwha Life, we have been maintaining the dividend payout ratio of around 20%. And this year, we're going to resume dividend payout to express our appreciation to shareholders who have who have maintained their belief in us. And for more details, these will be announced after the regular Board meeting scheduled to be held on the 23rd of this month, and the details will be announced regarding the dividend payout soon.

[Interpreted] I'm [ Shin Tan Go ] from the investment strategy team. Let me address your question regarding our exposure to commercial real estate as well as provisioning. When we look in our portfolio, our exposure to overseas, commercial real estate is about KRW 3.1 trillion. And to give you some breakdown, the hybrid type exposure is KRW 1.8 trillion and the office building's exposure is KRW 600 billion. As you may know, the new accounting regime, namely IFRS 9, was introduced starting from 2023, so these investments for these real estate in our portfolio are classified as FVPL. So their real actual value is reflected in the NAV, which means that we do not have any specific provisioning but rather, potential losses and values are reflected in the NAV. We understand that there have been concerns over real estate -- commercial real estate properties since last year, so we're closely monitoring the performance of these invested assets in our portfolio. And some of the potential losses may be reflected in the valuation amount, and we will continue to monitor the portfolio to reduce any exposure.

Any more question?

No. Thank you.

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

[Interpreted] From Morgan Stanley. I have a question regarding your whole life policies. When we look at the fact sheet, you can see the new business year from multiple, and from the second quarter to the fourth quarter, it's showing an upward trend, but still whole life CSM multiple seems to be relatively low. So I'd like to understand the percentage of single payment -- single premium payment of policies in your entire whole life portfolio in the fourth quarter as well as the entire year of 2023. And if you can give us some color on the future trend of CSM multiple movements, we would appreciate that.

[Interpreted] I'm [indiscernible] from the product development team. Let me address your question. When you look at the fact sheet, the whole life CSM multiple is about 1,000%, and this constantly changes depending on the best estimate assumptions as well as interest rate movements. And for 2023, the multiple is going to be around that level. And for 2024, it is very hard to make a prediction because there are many factors involving the potential downward trend of interest rates as well as the supervisor authorities planning for a separate guideline on this issue. And we believe that we will continue to develop whole life products in consideration of having lower surrender rates as well as strengthening covers. So overall, we will do our best to make sure that the multiple level will be around at this level.

[Interpreted] One follow-up question. In the fourth quarter of the whole life new business CSM, where will be roughly the percentage of single premium payment CSM?

[Interpreted] So regarding the point, we're going to check and get back to you soon.

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

[Interpreted] I am Kang Seung-Gun from KB Securities. First of all, as you discussed your dividend policy, you mentioned that in the past, you maintained a dividend payout ratio of about 20%. So when we say 20%, what will be the basis of calculating this payout ratio? Is it a consolidated basis or a separate basis? If you can give one answer to that, it will be very helpful for us to understand your dividend policy. And secondly, I have a question about your capital amount. In the fourth quarter, there was a reduction of KRW 1.1 trillion of capital. And when we think about the reasons why, mainly it is -- it has to do with the changes to other comprehensive profit and loss cumulative, which may be because of the lower interest rates, but there was a bigger decline in the liability side rather than the asset side. So the asset side, KRW 2.5 trillion reduction, but on the liability side, KRW 4.6 trillion of reduction. So there is this mismatch or gap between the 2. This is slightly different from the duration gap, but going forward in 2024, we expect interest rates to go down. So given this assumption, how much do you think you can reduce this mismatch between capital reduction in terms of asset side and the liability side. This type of information will help us understand how you will be able to make your K-ICS target and achieve that.

[Interpreted] I'm [ Kim Dong Yi ] from the finance team. When I mentioned that Hanwha Life has maintained a 20% dividend payout ratio, it is based on the net income on a nonconsolidated basis.

[Interpreted] I'm [ Shin Tan Go ] from the investment strategy team. Let me comment on your question regarding our capital management. We are now in the process of developing a more sophisticated ALM strategy given the current asset and liability situation. So we will not only manage the duration gap but also continue to calculate interest rate sensitivity on both the asset side and the liability side. For instance, as we know, liabilities are sensitive to the domestic interest rate movement, while the asset side, they are exposed to both the domestic interest rate movement as well as changes in the overseas markets and have some sensitivity to stock index movement. So we will consider all of these aspects in developing a better ALM strategy to manage and match the interest rate sensitivity on both the asset side and the liability side. And so we will continue to monitor interest rate sensitivity to domestic interest rates as well as conducting complexity analysis so that both the asset side and the liability side can move in a more synchronized manner. When it comes to volatility on the liability side, it's not just affected by market rates but also by other factors, including actuarial assumptions. So we will not be able to control everything, but when it comes to sensitivity to market interest rates, we will make sure to minimize the gap between the assets and the liability side. As of now, we cannot give you any specific number when it comes to the amount of capital size volatility right now, but our ALM strategy target is to minimize the differential between the assets and liabilities when it comes to their sensitivity to market rates.

[Interpreted] I am [ Kim Jin Il ] from the actuarial team. Let me provide more details on the liability side. So you asked how -- why liabilities were reduced more, much more than the assets in the other comprehensive income category, resulting in the reduction in the capital? To give you the conclusion, there were some one-off factors in the fourth quarter. Of course, because of the significant reduction in the discount rate, liabilities were impacted. But at the same time, there was this differential between the announced rate versus the market rates when it comes to floating rate policies. Because of the lower discount rates and increasing interest payments to policyholders, there was this temporary or one-off mismatch between the two leading to a further reduction in the liabilities.

[Interpreted] One further clarification. So going forward, when you talk about the payout ratio, is it continuing to be based on a nonconsolidated basis?

[Interpreted] I'm Jung, Yong-Ho from the business management team. In the past, we announced our payout ratio based on the separate financial statement. But going forward, we're going to include those from the wholly owned subsidiaries, which are the Hanwha Life Financial Service and the overseas subsidiaries.

[Foreign Language] The following question will be presented by [indiscernible] from JPMorgan.

I just have one follow-up question on the overseas commercial real estate. So in terms of asset quality, can you share more about any delinquency or any ethical concerns that you may have?

[Foreign Language]

[Interpreted] I'm [ Shin Tan Go ] from the investment strategy team. Regarding the invested overseas real estate properties in our portfolio, when it comes to any quality issues or delinquency, pretty much all of these changes are reflected real time in an NAV. So last year, for instance, there were some valuation losses recognized in our books because of potential losses that could incur from some of the assets, and in 2024, given the current market situation, such a situation may occur again. But we are constantly monitoring the performance of these assets in order to minimize any potential losses. Was it enough for your question?

Yes, sure. Maybe one more follow-up is in terms of your future plan, do you still want to continue to invest in overseas CRE?

[Foreign Language]

[Interpreted] I am Shin, Sang Wook from the investment strategy team. Upon your question, given concerns over global economic recession and some issues in the real estate property market last year, we did recognize some valuation losses, but we're constantly responding to them. So we're monitoring the performance of these assets. And going forward, given the market volatility, we are considering potential opportunities regarding opportunistic funds as well as high-quality PS or high-quality real estate fund in consideration of their impact on our K-ICS ratio.

[Foreign Language] The following question will be presented by Aditi Joshi from JPMorgan.

So I am Aditi Joshi from JPMorgan. I have 3 questions actually. So firstly is on the CSM target for 2024. Can you please share -- you have shared your new business CSM target for 2024. But can you also please share if you have a CSM balance target by the end of 2024? And also related to the new business CSM sensitivity to the interest rates, can you please provide what will be the -- if interest rates move by, let's say, minus 10 basis in 2024, how much is the new business CSM sensitivity to that interest rates? And my second question is on the K-ICS ratio. So you have shared a minimum target that you would like to maintain a K-ICS ratio of 150% level in 2024 even if interest rates go down. But can you also please provide the sensitivity of K-ICS ratio to the, let's say, fall in bond -- 10-year bond yield falls by 10 basis points and by how much the K-ICS ratio will be moving? And just last question is on the -- your crediting rate. For the fourth quarter, as disclosed in the presentation, the crediting rate has moved up. So can you please provide the explanation why it actually trended up in the fourth quarter? Is it mainly attributed to the new products that you have sold?

[Foreign Language]

[Interpreted] I am Jung, Yong-Ho from the business management team. Let me address your first question on the year-end CSM balance estimate. In 2023, the year-end CSM balance was KRW 9.3 trillion. And this year, our target for new business CSM is more than KRW 2 trillion. And given the trends in January and February this year, we believe that we can exceed this guidance of KRW 2 trillion to get more than KRW 2 trillion of new business CSM. So -- and also, we expect the amortization profit generated from in-force CSM, so all in all, by the end of this year, our CSM balance target is around mid-KRW 10 trillion.

[Interpreted] I am [ Pak Suwan ] from the risk management team. Let me comment on our K-ICS ratio movement. Last year, there were some issues related to mass lapse rate -- risk amount. And there was a falling of interest rates towards the end of 2023, which sets end -- there was differential of coefficient by product category last year. So thanks to these, there was some improvement. And the mass lapse risk amount will almost disappear this year because of changes in the market. So overall, to give you an answer to the interest rate sensitivity, when the interest rate goes down by 10 basis points, this will have an impact -- positive impact on the K-ICS ratio by 0.5 percentage points. In addition, you mentioned about 150% bottom line. This figure that I shared with you is the bottom line that we will be able to maintain even in a very stressful interest rate environment. However, in a normal situation that we anticipate for this year, the bottom K-ICS ratio that we will definitely maintain is 165%. That's our internal bottom line. But the target for this year, as was communicated before, is 190%.

[Interpreted] I'm [ Kim Jin Il ] from the actuarial team. Let me provide more details on the impact of interest rate movement. In the fourth quarter, the discount rate had an impact of going down by 70 basis points. And when it comes to the method of applying interest rate changes to floating rates, they are -- rather, they follow the interest rate movement in the market in a belated manner. That is why there was this kind of impact, which led to an increase in the liabilities. And moving on to interest rate sensitivity of our new business CSM, there is almost no impact on the new business CSM with respect to interest rate movement. However, when new business or new policies become part of the in-force CSM, they will be revalued at the end of 2024, which will be reflected in the changes to the other comprehensive costs. Was it enough for your answer?

Yes, sure. And just one follow-up on the crediting rate in the fourth quarter. It was a slight uptick. So can you please provide any reasons or your comments on that too?

[Foreign Language]

[Interpreted] I'm [ Kim Jin Il ] from the actuarial team. The reason for the increase in the crediting rate in the fourth quarter is mainly because of the lagging effect of interest rate increases in the market. Do you have any other questions?

This is it from me.

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

[Interpreted] I'm Jung, Jun-Sup from NH Investment & Securities. I have a follow-up question on your shareholder return policy. You mentioned that your historical dividend payout ratio was 20%. Should we consider this as a future guidance? Or is -- did you mention this just for reference? So if you clarify on this, we would appreciate that. And secondly, we believe that the government will announce the value of program sometime next week, and you mentioned that you will consider your capital policy in consideration of this program. So I'd like to understand around when you are planning to communicate with the market concerning your capital policy?

[Interpreted] I'm [ Kim Dong Lee ] from the finance team. When I mentioned 20%, it is just for past reference, and it does not constitute any future guidance. As for medium and long-term shareholder return policy, we are not really able to share with you any details. But in consideration of the government's value program as well as the policy towards shareholder return and more favorable shareholder return policy, we are going to move in that direction in the medium to long term.

[Interpreted] I am [indiscernible] from the IR team. As you mentioned, when the value of program is announced, we're going to have internal discussions on the medium and long-term shareholder return policies. And when the details are more crystallized, we will make sure to communicate them with the market.

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

[Interpreted] I'm Park Sinyoung from Goldman Sachs. I'd like to ask for some materials. In particular, when we look at the numbers for 2022, when it comes to the CSM movement and the profit and losses under IFRS, we do not have the quarterly breakdown. So we would appreciate it if you could provide that because, of course, this year is the first year when the new regimes are introduced, but such data will be helpful in making a quarterly analysis.

[Interpreted] I am [indiscernible] with the IR team. We will check with the relevant divisions and make sure to provide that to you.

[Foreign Language] The following question will be presented by Yong Jin Seol from SK Securities.

[Interpreted] I'm Seol, Yong Jin from SK Securities. I have 2 questions. The first question is when we look at the reserves for surrender refund, in the fourth quarter, there was a decline on a quarter-over-quarter basis. So I'd like to understand the reasons why. And secondly, given the changes in the interest rates in the market, there was some lower valuation gains than expected. So can you explain why?

[Interpreted] I am [indiscernible] from the actuarial team. There are 2 main drivers behind that. First of all, because of lower interest rates, there was an increase in the variable guarantee liabilities on a mark-to-market basis. So this led to a decline in the reserving by KRW 300 billion. And secondly, because of the changes to the actuarial assumptions with respect to treating the loss liabilities, there was a decline in the interest liability valuation of KRW 120 billion. And there was a trade-off effect between the increase in new business and decline in in-force on the net increase of KRW 330 billion occurred. Make a correction, the decline of KRW 330 billion, not increase.

[Interpreted] I'm [ Shin Sang Wook ] from the investment strategy team. Let me address your second question. So regarding the fourth quarter situation, as you mentioned, as of the end of December, interest rates were on the downward trend and so there were some valuation gains just from securities. However, as for alternative investments, given their characteristics, the interest rates that are applied for valuation are not as of the end of December but rather interest rates of 1 or 2 months prior to that point. So for some infrastructure exposures as well as PS exposures, the interest rates as of the end of November were applied. And at that time, the interest rates were on the upward movement, resulting in the recognition of valuation losses. In addition, for overseas commercial real estate, as I mentioned earlier, there were some losses recognized as well. So all in all, in the fourth quarter, valuation losses were recognized.

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

[Interpreted] With no further questions, I would now like to hand over to our CFO for his final remarks.

[Interpreted] So I am [indiscernible], CFO of Hanwha Life. I'd like to first express my thanks to all of you for joining us for this conference call. For the past couple of years, Hanwha Life has prepared in earnest for new regimes, including IFRS 17, IFRS 9 and K-ICS. So as a result, we were able to achieve a lot of progress in terms of profit and capital adequacy in 2023. In 2024, we expect much volatility in the market. But as for our earnings, we will do our best to make sure that our net income is exceeding that of 2023, and as for K-ICS ratio to be more than 190%. So we will continue to generate sustainable profit by increasing the in-force CSM as well as improving our capital adequacy so that we can normalize our stock price. Furthermore, we're going to implement shareholder-friendly policies, including shareholder dividend payout so that we can increase shareholder value for Hanwha. We would like to ask for your continued support and encouragement, and we will make sure to return your support and encouragement with good earnings performance. Thank you.

[Interpreted] With this, we would like to conclude the earnings call for Hanwha Life for 2023. Thank you all for joining us. And 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.]