New China Life Insurance Company Ltd. (601336) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning. Welcome to New China Life 2023 Interim Results Announcement. I am the Vice President, Chief Actuary, and Board Secretary Gong Xingfeng, the host of the conference. First, I'd like to introduce the management team present today. They are President, Mr. Zhang Hong; CFO and Vice President, Mr. Yang Zheng; and Vice President [indiscernible]. And also, we have [indiscernible] the independent directors of the company, the Ma Yiu Tim and Mr. [ Liu Yigong ]. Welcome the directors. Today's meeting has 2 sessions. First is the presentation and the second is Q&A session, we will provide simultaneous interpretation. [Operator Instructions] Next is the presentation. Mr. Zhang Hong will introduce the overview and life insurance of the company for the 2023 in the first half. And Mr. [indiscernible] will introduce the financials and investment and will introduce the embedded value. First, let's welcome Mr. Zhang Hong.

Ladies and gentlemen, good morning. We're happy to gather here today and today for your support and interest in New China Life and welcome to present the conference today. First of all, I would like to introduce the business overview of the company. For the indicators, in the first half of this year, the company focused on life insurance, stay committed to returning to the assets of insurance, strengthened supply side reform with customers as the core, prevent risks and strive to have balanced development and we have AA rating issued by the previous [ CPRC ] and the main indicators as follows such as [indiscernible] was 108 billion, up by 5.1% year-on-year. And the FYRP from long-term insurance totaled 17.5 billion, up by 42.9%. Total asset was 1.3 trillion, up by 7.8% and net profit attributable to shareholders up by 8.6% to about CNY billion. The VNB is about 2.5 billion, up by 17.1%. The embedded value was 266 billion, increased by 4.3% compared with the end of last year. For the development strategy of the company, the company is committed to the high-quality growth and strengthened the strategy in part by technology and we focus on our main business and strive for high-quality growth. The asset and liability of the company has been strengthened and supply sided reform deepened. We optimized market channels and support market demand and innovation. And we build a professional and high-quality sales team with a solid and broad customer team. The second is supportive industrial collaboration. After years of efforts, the company has established a system of old age care and health community, community nursing and medical care community, leisure and tourism community and health management center to provide whole [indiscernible] service and the whole product and service has been provided by the company, [indiscernible] community in Hainan province operate effectively. Your custom health service system was rolled out and covering the treatment and of the customers, and we have covered 3 popular cities in terms of the long-term care insurance and the new China Life rehabilitation hospital will provide a special medical treatment. The company sees [indiscernible] while expanding our investment assets, we have realized a better result compared with the benchmark and the asset has -- from the sound synergy with the liabilities. The third is technology empowerment. The company strengthened technology innovation and integrated digital intelligence into the whole business circle and processed and [indiscernible] provide the customers with various services, including the information update in claim settlement and renewal premium payment. And we have built ecosystem, insurance plus health care and old-age care and the customers can enjoy online service at home. A new era platform has provided intelligent online tools for sales team and the smart service to those in [indiscernible] intelligence outbound calls, the smart teller machines, et cetera, has developed intelligent service ecosystem and has built online offline sales and remote manual and intelligent traditional and innovation services for customers. And the smart service cluster has 370,000 intelligent interactive scenarios, which can solve customers' needs through multimedia methods. And for the wealth management side, the company has the asset management company [indiscernible] the main management platform and adapt multidimensional and diversified strategies and manage assets for the entrusted and assets of the company. Company subsidiary, New China Life is about 624 billion, up by 45% and the portfolio asset management portfolio up by 52.5% to 580 billion. And we have increased by over 100 billion for 3 consecutive years. In terms of serving national strategy, the company actively serve the national development strategy manifesting the responsibility of a large state-owned listed company to serve the national economy and people's life. First is to serve the real economy, the currently invested and support the development strategically emerging industries totaled 22.6 billion. And the investment goes to the -- original development totaled 155 billion and investment to support the industry totaled 18 billion and the company actually respond to aging population and support the commercial pension insurance and the exclusive commercial pension has reached 400 million. And then also we have expanded the service to the individual pension funds and covered 8 banks of customers convenient experience service, we served a healthy China strategic, the company actively promoting the policy-oriented medical insurance projects and undertook 17 projects. And the [indiscernible] projects totaled 35 products covering altogether 19 million insured people and relevant investment amount to RMB 3.5 billion. In terms of the environment of social responsibility, the company actually support the [indiscernible] revitalization, consolidated achievements of poverty elevation through funds and consumption assistant. The company has allocated the funds to various regions of 10.4 million and consumption assistance totaled 3.7 million, and we provide support to rural [indiscernible] and treatment environment to promote the rural revitalization. Second is we fulfill our responsibilities. And in the first half of the year, the foundation continued to carry out the public welfare activity for sanitation workers nationwide. As of 30 June 2023, the project covered about 170 cities around China and donated about 428 billion sum assured and the total payment totaled 32 million and the volunteer union of the company organized various volunteer activities. And also, we have issued 20 articles to practice economy and take multi-measures to save energy and reduce emission to fulfill our social responsibilities. And in terms of the customer service, we adopted the customer-centered operation, philosophy, and digital intelligence throughout into our business development through our national distribution networks and diversified marketing channels, the company offered whole life circle risk protection and wealth management products and services. And we work for the smart plus customer service cluster and to provide a new customer health service system, the intelligent operations service system has been improved. And in the first half of the year, this amount of service cluster served a total of 11.7 million customers. The company is committed to the principle of quick settlement and service and supported by technology. In the first half of the year, the company handled 2 million claims and with the total payment of 8 billion, and the average TAM from application to settlement for each claim was 1.64 days and 96.69% of the claims were submitted online. In terms of our brand, the company strive to forge and committed to our vision of build China's best financial service group with comprehensive live insurance business as core, while serving national economy, we serve the real economy, people's livelihood and leverage our functions of insurance and fulfill automation. In this year, the company has been a member of Fortune 500 for 3 consecutive years and rank the world's top 500 public companies for 10 consecutive years, and rank 84 in China most 500 valuable brands and rank 8 in by the Fitch ratings. And looking into the future, the China's economy is recovering, but the foundation for such recovery is not solid. And the regulators have guided the industry to accelerate [indiscernible] reform around the quality of sales, team products and service to meet the needs of economic and social development. In the second half of the year, the company will stick to high-quality development goals and deepen transformation. We continue to improve our product and service capabilities to structurally prevent risks. First is strictly about compliance operation. We will continue to optimize the comprehensive risk management system, employment of one plus and risk management system. Risk [indiscernible] transformation requirement will strengthen internal control and compliance management mechanism and improve the internal control in core business and [indiscernible]. NCI will implement an active list mechanism and strengthen risk moderating and early warning. Our actions will be taken to consolidated responsibility of preventing risks. Second is build high-performing sales team, focusing on attracting, cultivating high-performance sales team, promote the build of the team, strengthen the training and the volume products [indiscernible] strength investing management and to improve the quality and quantity of the team. Third is optimize customer management. The company will take efforts in customer development, service and management to enhance customer management capabilities. Efforts will be made to strengthen the technological support, enhance information-based operation and intense management, improve support and service efficiency, enrich value-added service and optimize customer experience. First is promote integration development. NCI will strengthen the asset liability, synergy and optimize the development of aged care and health care, strengthen the service and upgrade our products so as to build ecosystem of protection, wealth management of the aged care and health care service that covers whole life circle of customers. Next, I would like to introduce the insurance service of the company in the first half of the year. As the macroeconomic policies introduced and took efforts to stabilize the economy, product and marketing demand steadily recovered and resident demand for protection and wealth planning continue to be released. The industry actually improved the private service supply, deepened value creation, pushed forward ecological construction and integrated development. And the insurance mix grow fast. As such background, the company adhered to the general principle of seeking progress while ensuring stability, switching from [indiscernible] to proactive, accelerate transformation and development, enhanced construction of professional distribution channel. The premium increase steadily among which FYP from long-term insurance totaled 33 billion, increased by 14.8% year-on-year and renewal premiums amounted to 72 billion, grew by about 2% year-on-year, accounting for 66% renewal premium remain solid. Premium from short-term insurance was 2.4 billion. And for distribution channels, the individual insurance realized a premium of 69 billion, about flat compared with the last year accounting for 46% of the [indiscernible] bank insurance channel, a realized premium of 36.8 billion, up by 18.1% year-on-year, accounting for 34.1% of the [indiscernible]. Corporate insurance realized premium of 1.8 billion. And next, for individual insurance premiums, in the first half of the year, the individual insurance channel focuses on values and accelerate business transformation improvement, improve the basic management, new business rebounded the first year regular premium from long-term insurance business totaled 8 billion, up by 6.6%, accounting for about 95% of the [indiscernible] a high-proportion. The company outstretched the renewal business with renewal premiums totaled 60 billion, representing 87% of the channel and serving as the anchor of the channel premium. And for the sales team of individual insurance channel, in 2023, the company focused on improving the quality of the team. The company adheres to increasing protection of demand structure and stabilizing growth to improve the team. By end of the half -- the first half of the year, agent headcounts totaled 171,000 and proportion of qualified agents grew by [ 1.1 PT ]. Monthly average comprehensive productivity totaled 8,103, up by 111% year-on-year. And for the bank insurance channel, in the first half of the year, banks insurance channel strengthened market opportunity and focus on regular business, key indicators improved the FYP from long-term insurance totaled 25 billion, up by 17.7% year-on-year. First-year regular premiums up by about 100% to 9.5 billion and renewal premiums totaled 11 billion, up about 90% year-on-year. By the end of the June 30 bank insurance channel realized premium of 36.8 billion, up by 18.1% year-on-year. Proportion of regular premium grew by 15.4% value, contribution grew by 17.3 PT. And the customer [indiscernible] by customer demand, the bank insurance channel promoted the long-term regular business. First, diversifying the product system, the channel continue to adopt the strategy of promoting regular business with single premium business driving the diversified product sales such as the whole life insurance and annuity to meet various demand. Second, we have realized to double the growth of FYP while we reduce the single premium, the second we improved the channel operation, expand and deepen the cooperation with banks to promote growth of regular business. And the third is we increased the productivity, the team and outlet productivity of the company has improved. The first is we optimized the efficiency of the company, strengthened budget management and financial analysis and attract the indicators of efficiencies and refined the management and efficiency. And for the premium of major product, in terms of the [indiscernible] the traditional insurance totaled 161.3 billion. House insurance was 30 billion. Participating insurance were 16 billion for FYP, influenced by the product -- single-premium product [indiscernible] bank insurance channel, the premium firm participating insurance decreased. And in 2022, the company has a single premium product of [indiscernible] and in this year, we have shifted a single premium to [indiscernible] is not a participating insurance product. So the premium from participating insurance has decreased. And the premium of critical illness insurance decreased down the year is mainly because, first -- reasons, first is the government lead product [indiscernible] and other medical insurance continue to be popular in the market and squeeze the commercial insurance market. Second is the sales agent team has decreased in its numbers and has influenced the sales of the critical illness product. Third is there is greater competition in the products in the market, and there is a differentiated gap between the supply and the customer demand. So the attractiveness to customers has declined. In the next stage, the company will continue to promote the construction of diversified product system and product transformation. On the one hand, we will further explore customer needs, enrich our product pipeline and to enhance our product attractiveness and expand coverage. The second, we will increase the product innovation, develop the product, covering new fields and new group of customers and increase the [indiscernible] of protection life products and long-term health, care insurance and high-end medical insurance to explore new growth points. And as for business quality of the company, intensified business, quality management and the 30 months present situation of the company was 18.9%, up by 4.9%, 25 [indiscernible] was 79% decrease to about 3.7 PT, decrease of the 25 months present situation was mainly due to the decline of the 30 months present situation during the same period of the last year, benefiting from quality management measures of the company. The 20 months present situation of the company has narrowed by 1.8 PT compared with the 30 months present situation last year. Surrender rate was 1.1%, flat compared with last year. This is the insurance business. Next welcome Mr. Yang Zheng to introduce the financials and investment.

Thank you, Mr. Zhang. Next, I would like to introduce the financials and the investment of the company. And before we go to the numbers, I want to elaborate that since this year and to next year or the year after, we will have a lot of discussions focusing on the financial indicators and numbers. And the major difference is the new accounting standard. In this year, the company has, as required by the regulators, adopted a new accounting standard and we have the IFRS 9 governing the investment business and IFRS 17 governing the insurance business and also other related accounting standard and the new application -- applicated accounting standard is historical changes in the industry because the foundations, the principles, the presentation has material difference and adjustment compared with the previous accounting standard. With 2 or 3 years study of this new principles, we may have a certain understanding of the new indicators of the financial support of the company. This is our first half year report and some indicators might differ from the previous ones. So you might know that it's a new standard indicator. But for some indicators, the name is the same, but the essence and the meaning of the indicators has changed under new accounting standard. So for the investment part, now the indicators of the investment has different foundations of the accounting standard and the base are different, which is also in line with the regulations and for the indicators in 2022, we have the number and the previous investment accounting principles and the numbers in 2023 is under a new investment accounting standard. So under this background, I would like to share and discuss the number of the new members of our company. And under the new accounting standard, the total insurance revenue of the company is about 26 billion. And the previous indicator is the insurance income and now is the insurance revenue. So this number has decreased by 6.5% year-on-year. The main reason has been elaborated by Mr. Zhang Hong. The health insurance has declined in the first half of the year and also because of the shift of accounting standard. And the insurance business expenses and other expenses, about 37 billion, which is different from our previous indicator. And for the investment income, even though the foundations of accounting standard are different, but we can compare with that. And we can see that we have elaborated the financial expenses from issuing insurance contract and as required by the Ministry of Finance of the company and the new P&L report, the structure of the income statement has different with the international one because the Chinese standard and international standard has the same logic, and we have a new presentation and of the indicators, and we can present the accounting policies as required by the Ministry of Finance. So there is a slight difference between that. And this is the key financial indicators and for the investment performance. Since 2019, the company has established the development philosophy of dual engine of asset liability to have the life insurance and by the end of the reporting period, the total investment of the company is about 1.3 billion, up by 8.8% compared with the end of last year. As for the investment set, the shifting of accounting standard have a limited impact of the number. The total asset is about 1.3 trillion and the total asset is about 1.6 trillion. And for the investment income is about 21.9 billion, and this is under the new accounting standard. In the first half, annualized investment yield present here, the total investment yield is about 3.7% and net investment yield is about 3.4%, even though the standard is different for the principles for this year and the last year, but we can see the trend because of the volatile decrease in the capital market, we can see that the number has declined because of the interest rate has decreased, the fluctuation, volatility in the stock market as well as the dividend paid to the shareholders. Therefore, the investment yield of the company has decreased in the first half of this year. Next, let's go to the investment portfolios. We have over 1 trillion investment assets. And in a short period, we have balanced and a stable investment allocation and the company has balanced the accounts based on the market environment in the first half of the year, the company has -- based on our allocable assets and products and market conditions, we have invested more in long-term treasury bonds, local government bond, and short-term deposits. And the rest, as for the net standard asset and other asset with higher risk because we have decreased the allocation to those products. So the total investment mix is stable. And for the net standard asset, you may have the impression that the net standard asset of the company has a higher proportion compared with our peers. But as we have discussed to the market, the net standard asset of the company has decreased as expected by the end of the reporting period, the net standard asset accounting for less than 15% of the company. And you may know that 17 years ago, the proportion is about 30%. So there's a huge decrease of the proportion. There are reasons for the decrease of the net -- for example, the capital market is increasingly material, there is less supply of net standard asset in the market. And at the same time, the company have more choice of standard asset and available for us. And on the other hand, the quality and the risk of prevention environment has changed down because net standard asset has a higher risk. So it's not suitable for the life insurance allocation. So under internal and external circumstances, we have discussed with the market and the net standard asset is decreasing in its proportion and now the proportion is less than 15%. And let's see the mix of the net standard asset, the proportion within different products of net standard asset is stable. So the number -- the amount is decreased, but the proportion is stable last. And also, at the same time, the company focused on the quality of net standard assets and the net standard assets allocated by the company has a high quality with high ranking and quality. And in the past several years, we can see that there may be some market risk event happen, but our risk is low and there is a large [ SIF ] margin for NSA, and we believe the net standard assets of the company is safe and has also provided sound yield to the total investment yield of the company. And last, I would like to introduce the solvency of the company. By the end of the reporting period, the core solvency margin ratio is about 146.9%, up by 6.38 PT and the comprehensive solvency margin ratio is about 239%, flat compared with the last year. And those 2 ratios is much higher than the regulatory bottom line requirement and also laid a solid foundation for long-term investment growth of the company and we have more capital strength and can have a long-term solid and stable development. And that's the end of my introduction. Next is Mr. Gong Xingfeng to introduce the embedded value.

Thank you, Mr. Yang. Next, I would like to introduce the embedded value of the company. By the June 30, 2023, the embedded value of the company totaled 266.5 billion, up by 4.3% compared with the end of last year, among which the value of [indiscernible] business increased by 1% from 89.9 billion to 90.8 billion. Adjusted net worth increased by 6.1% from 166 billion to about 176 billion. And next, I would like to introduce the change, analysis of change for the embedded value. And from this chart, we can see that the major driver for EV is coming from operating related changes. And it has totaled 20.7 billion, up -- and contributing 5% of the EV growth and the major consumption of EV is the dividend paid to shareholders, which is about 3.6 billion, resulting in 1.3 decrease of the EV and the EV has changed from 255 billion to 266 billion. And next I'd like to introduce the embedded value of the -- introduce the value of new business. In the first half of the year, the company has focused on business and the first year used to calculate value of the first year has increased and the VNB has increased 2.5 billion, up by 17.1% is because the company has sensed the market opportunities and has resulted in the increase of the value of new business. This is my introduction about the values. And this is the end of the presentation period. And thank you for Mr. Yang Zheng and Mr. Zhang Hong for their introduction. Next is the QA session. And due to time limits, please propose no more than 2 questions and tell us your name and institutions represent.

And next we'll first welcome the onsite questions.

Thank you all for the opportunity and congratulations on the performance of the company. We can see there's a double-digit growth of the NBV. I am Tang Shengbo from Nomura. And I have 2 questions. First is about the business. We can see that in the bank insurance channel, we can see there's a huge growth and life insurance has a similar trend. But I want to ask that the continuity of the growth in ventures channel. Now there is a new regulation about the commission fees in the channel, and I want to know the company's growth outlook in the channel or even the outlook in the next 2 or 3 years? The second question is about the individual insurance channel. And the channel is -- have a smaller proportion of EV for the new business value. And when can we expect the value of the channel stabilized and see growth?

Thank you for your question. First, I've to introduce -- to ask Mr. [indiscernible] to answer your question.

In the first half of the year, the bank insurance channel has realized a sound growth and this is because the market recovery, the demand of the banks. And also we have a sound distribution channel and network. So in the first half, the completion rate and growth of the company is sound. And in the second half of the year, we will follow the regulation, and we will continue to grow the bank insurance channel. We believe the growth of the channel can be continued because in the channel, we have sound experience and good cooperation, relations with the banks. We believe now in a short term, maybe some new policies can have impact on the business. But in the long run, we believe it is beneficial to the market. And for the individual insurance channel, just now, Mr. [ Zheng ] has introduced -- has said that the FYP has an active growth, and I want to correct that the NBV of the individual insurance channel has a positive growth, but we want to say that the headcount of the channel has decreased and the productivity of the company has doubled compared with the end of last year. So we strive to improve their productivity, adjusting the structure and strength of the growth, and we have sound results. And in the future, we will strengthen investment in the individual channel and invest in more resources in recruiting more elite and suitable agents. And in the first half of the year, we can see that the structure of agent team is stabilizing. And we're focusing on the recruiting some agents and nurturing the high-performing agents. We believe the individual insurance channel will have a higher proportion contribution to the team. And the individual insurance is the core trend of the company.

Next, let's welcome the online questions. [Operator Instructions].

I'm a reporter from Shanghai Securities News report and just now you've mentioned that what's your product and channel strategy in the second half of the year. And in the bank insurance channel, the company has seen a sound growth, but there's maybe new regulations in the channel. And I want to know your growth expectation.

Let me ask Mr. Gong to answer your question.

In the first half of the year, the home market has better environment and sales conditions compared with the earlier of the year. That's because we have a release of -- we have seen the release of customer demand in the first half. The economy is recovering from the pandemic and the life insurance customers has a deeper understanding of the insurance product and which has provided opportunities for the growth of the channel. And the core is that we should focus on our own financial planning, especially focused on the protection and the long-term financial investment. In the first half, we can see that the major contributor for the business is whole life insurance and both individual insurance channel and bank insurance channel has sound investment growth and for the life insurance. Just now Mr. [indiscernible] has discussed, we have seen positive growth for the bank insurance channel. We also have grown this challenge, and it has greater importance and contribution to the company. And whether this trend can sustain and are there any product changes in it, second half, we have several -- we have several comments. First is we believe there is a huge market demand and the market potential in the market. We can see that the demand of the citizens and the changes in the markets, for example, the real estate market has brought great long-term changes to the market. They assume the interest rate and the regulation requirement is trying to regulate the industry development and will not influence the customers' demand. The second is we believe there's a huge market potential in the life insurance industry. In the previous several years, the critical units insurance has seen fast and -- growth that the premiums per policy is still low. And this year, the whole life insurance has seen a sound growth. But if we're looking into these policies, we should have a look of whether the protection part is enough. Now the [indiscernible] and other affordable benefiting products has introduced and provide customers with protection. But now we can also see that there is a great demand for high-end medical treatment and care demand. So this is where the life insurance business can focus and grow in the future. And we believe this can promote our business in the future. And the third is we want to talk about the continuity and the sustainability of the growth. The company focus on sustainable growth of the team, of the company. And for the team building, we strengthened and grow the individual insurance channel and grow the bank insurance channel in a whole and for the products in the first half of the year, we provide multiple products and also provide the health insurance, the whole life insurance, the medical insurance, that were to rollout in the market. And we believe and also hope that those product pipeline can meet the demand of the customers and meet and make up for the gap of long-term insurance of the life insurance industry. And this may answer for the first question for the bank insurance. And the second question, we believe the existing business and new business is important and fitting our position of different channels, and we are quite stand and clear about our authorization of channels. Both individual and bank insurance channel are trying to meet demand of different customers and different demands. And the customers have different demand and preference. Some customers may like to go to banks and some might love to communicate with agents and others might want to buy products through online channels. So the demand is -- demand for customers are different. And in the first half, we can see the bank insurance channel has seen good growth and is a hot amount in the market, and we have a good result and growth in the first half year-end. Can we maintain the growth in the second half of the year or in the next 2 or 3 years? As mentioned earlier, before, we think for life insurance industry, we have a positive understanding of the company, and we will maintain our position, individual insurance channel, which is supporting the volume growth of the company and improve our capability in serving customers and markets with the cost-efficient and within control, we hope to provide a more secure and appropriate products to the market. And the demand for the bank insurance channel with -- we have seen that there are a lot of changes. And the demand is shifting from a single deposit to whole life protection. And there's also a shift from a single premium business to regular premium business. So there is an active demand in the bank insurance channel. Banks has a much more managed assets and more market-based than life insurance industry. So this product is just a proportion of bank's business and we believe it can provide a large potential for business growth. And second, we would like to deepen our cooperation with banks. For the bank insurance channel, it's of concern and attract attention in the market. We would like to improve our competitiveness in a channel, strengthen the cooperation field, and deepen the cooperation, strengthen innovation. Last, we would like to grasp the basic management in the bank insurance channel. The customers are there, but it's not naturally the customer of New China Life or life insurance industry. We hope to explore and grasp opportunities and strengthen our team building and internal management to -- and the [indiscernible] to provide a foundation for the long-term growth of the channel. And we hope to drive the growth of the bank insurance channel. And this is my answer for this question.

Next, let's welcome onsite questions.

Thank you, management team for this opportunity. I'm [ Julie Fang ] from [ Golden Securities ]. First, I would like to congratulations on the sound business of the company in the first half. And I have 2 questions. First, I want to ask about the strategy of the company. We have noticed that Mr. Yang Zheng will become the Private Secretary of the company. And as a customer, we can see that he will be the Chairman of the Board of the company and investors are focused on and are much more interested in the growth opportunity and the strategy of the company. I want to know the plan for the strategy in the future. Second is we want to know the business planning of the company. We can see that in the first half, the NBV is higher than the whole year result in 2022, and we can see there as a positive growth of the year. And I want to know your planning and the pace of the business in the second half and your planning for jump start period in the next year.

Thank you for your question. And Mr. Zheng Yang will answer the first question, and we'll invite Mr. [indiscernible] to answer the second question.

And as known that Mr. [ Li Chen ] has resigned from the Chairman of the Board of the company due to the age. And we have released related matters and Mr. Li Shen, resigned and this resignation will not impact the business of the company. Mr. Yang has assumed the private secretary of the company, and we also have a proposal that nominating he's Executive Director of the Company's Board and the related governance procedure is undergoing and the investors is interested in the strategy of the company after the -- assume of the new Chairman. And you may have noticed that last week, we have a business launching meeting for the business in the September and October. Mr. Yang has proposed a series of requirements for the company. And generally speaking, the company after the change of management team will stick to our previous [ 14th ] 5 year plan we have proposed and a follow-on plus 2 plus 1 strategy and we will stick to our strategy mechanism culture and technology empowerment, and we will invest in more resources in those regards and deepen our reform and development. And in this regard, we will optimize our planning. And with details as follows: First, we will strengthen the high-quality growth of the distribution channels, Mr. Gong Xingfeng and Mr. [indiscernible] has elaborated that the company has always focused on and attach importance to the growth and build up the distribution channels. The individual insurance channel will focus on the values and follow the steps of improve the comprehensive productivity, structure and growth and to promote the high quality growth and the bank insurance channel is an important trend of the company, as mentioned by Mr. Gong, we'll stabilize the premium volume and on the basis of our corporative relations with banks, we will strengthen exploration of high-end customers and strengthen the development of insurance trust and other cooperation products. And we also have group insurance channel and we will play our role in serving national strategy and improve the efficiency of the channel. And this is for the channel building. And the second is the build of high performing team. Just now in the presentation, I have elaborated that and we will continue to promote the team building, especially for high-performing agent team, and we plan to recruit the elite agents and guide the team building and recommend of our channel. And also, we will enrich our product pipeline, strengthen team training and optimize basic internal management to improve both quality and quantity growth of the channel. And at the same time, we will also improve our business support capability. And first of all, we would like to say that we will invest more resources to product innovation, focusing on value creation, we will diversify our product pipeline, optimize product structure. Just now Mr. Gong has discussed that while answering the previous question, and our goal is that we hope to explore the features of a specialized product and have -- and try to explore the products, targeting specific fields and group of customers. And also, we would like to improve our technology empowerment. In this regard, we have seen positive development and progress and that's focusing on the demand for both customers and our agents, we will further improve our marketing tools and expand our service margins and fees and now we have tens of thousands of scenarios for online intelligent service and the customer experience has gradually been improved. And in the future, we also will improve the collaboration between our life insurance and health care and aged care industries. And in the past several years, with our efforts, we have seen a positive and a sound growth of our aged and health care business. First, I would like to share that we have made a lot of efforts in experience, marketing, and sales. And this mode has sound result, which has promoted the shift of customers, which is the customers of health care customers and insurance customers. So we can shift these customers for different products and fees, and we will further strengthen our layout and investment in aged care and health care. And we have heavy assets, which are [indiscernible]. And those are 3 heavy assets project. And in the future, we will step up our efforts in investing in that asset investment. And we have made some plannings and have initial communication and interaction with some good companies. And in the future, we will further follow this step and depend our investment -- our yield. And we also strive to promote on the old age care at home and nursing at home business. As for the whole business and the strategy of the company, we will strengthen compliance operation in terms -- in a process of internal management, which took great importance to a compliance operation and risk control in all the process of business. And we have affluent experience and a sound system and policies. And we have and will follow the procedure as set by our company. The continued and high-quality growth of the company will rely on that, and we will make further efforts in this regard. And we will strengthen the internal control in all the business, especially in the key links and improve the mechanism of negative lists to promote the high-quality growth of the company. And this is my answer for the first question. Next, [indiscernible] want to answer the second question.

Thank you for your recognition of our company and the performance of the company is better than expected, such as the first year regular premiums, the new business value and the profit of the company. We can see there's a net positive growth in various regard, key regards in -- of the company and especially for the new business value, a lot of investor, customer wealth these indicators. So we can see that the NBV of the company in the first half is much higher than last year. So we can see positive growth for the whole year. And thank you for your recognition, and I want to talk about the business planning for the second half of the year. Now I want to talk about 4 points. First is, even though the NBV of the company in the first half is higher than that of the whole year of 2022, by the way, haven't realized our challenging targets of the company for 2023 as our basic responsibility in realizing our basic goal, that is our capability in realizing the challenging tactics. So in the first half, even though we have sound performance, but in the second half, we will not lose and we will strive to fulfill our challenging goals in the second half and try to surpass the target. And the second half, we will focus on the continuous growth of the value and focus on the team building. And if we just wait for the start period for the next year, which this is not what we want, and we believe it's not what the investor want to see. And if there is an active growth of the team, there will be a reverse of the expectation for the team. So we will not have a solid foundation for the growth. So as for us, we will continue to promote NBV growth and team building. And thirdly, I want to say that in the second half of the year, we will follow our high-quality growth philosophy both in bank insurance channel and in the insurance channel as well as the renewal channel, and we hope that all of our 4 channels can have positive growth and contribute to the value growth of the company. And firstly only we have sound growth in both half -- the first half of the year and also in the second half of the year, we can have growth of the next year. So in the second half of the year, we will focus on the requirement of high-quality growth and on 25 August we have hold the business launching meeting for August -- for September and October. And we believe it's golden September and silver October, we believe this -- our hardworking efforts is the essence for those 2 months. And for this year, in the second half, we believe is critical for the growth, and we should contribute to the growth in those 2 months. And also those 2 months, so these 2 months are the [indiscernible] of the business growth in the first quarter of 2024, and we should be prepared both tactically and methodologically for the growth in the jump-start period in 2024. So this is my elaboration of the pace and the business in the second half of the year. And for the jump start period, in 2024, just now I've mentioned, we will combine the business growth -- business promotion in this year and the preparation for last year and for next year, and we will seek steady progress and shifting from defensive to proactive and as for the jump start period, in terms of product, we will continue to adopt multi-product strategy and we'll have health insurance, annuity insurance, and [indiscernible] insurance to drive the continuous growth of the whole business. And then secondly, in terms of the team, even though in 2023, the first half have seen a decrease in terms of agent head count, about the productivity of the team has greatly increased and the confidence of the team has improved and the team building has been the consensus of the whole system, and we will continue to strengthen the recruitment of the new elite agents and training part of it, the agents, and we hope that the existing team will consolidate and the examples for the team building and growth. And thirdly, for the customer growth, I want to talk about 2 aspects. First is for the branches and the several branches, even though the first tier outlets and the service branches as well as the individual sales agents, we have the whole customer service system and throughout the customer service in all layers and in terms of the customer acquirer and cultivate, we have our experience system, and we have connect the customers of individual insurance channel with other channels, and we will explore the customer resources individual insurance channel and Mr. Yang, our new secretary of the communist party of the company said that they improve our customer experience, will promote the growth of our business, and we will follow the requirement of high growth led by high credit building activities, and we hope to follow the requirement of growth volume and value and we want to emphasize that we will optimize our channels and regional development, strengthen the team building and structure. And thirdly is promote the customer management and operation forces to improve the professionalism and the capability to serve. The fifth is to improve the product innovation and asset liability management. And all of those measures will be rolled out in the second half of the year as well as the first quarter in last year. And those are my questions.

Next let's welcome the online question.

Thank you for the opportunity. I'm [indiscernible]. First, I want to congratulations on your good performance in the first half. I want to ask about the new accounting standard. First is, we can see that under the new accounting standard IFRS 17, we can see that the insurance revenue is motivated by health insurance business, which is 17% -- 70% of the total premium. But we can see -- this is a major driver, and I want to ask about your comment on the recovery of critical illness as well as your comment on the proportion for different products in terms of insurance service revenue. And also, you have released the customer service margin, and I want to know your -- you have elaborated the details of this CMS and I want to know your advice in understanding those indicators and when can we expect a positive growth of COMMISSION?

First, I invite Mr. Gong Xingfeng to answer your first question. And second, let's invite Mr. Yang Zheng to answer your second question.

And first, I'd like to talk about the life insurance and just now you have mentioned that -- and I have also have some feels about this regard. And whether we have the customers' demand, whether this is required by the customer and whether the agents can sell and promote these products to the customers and what has caused decrease of the health insurance, especially the critical units products and what caused the large fluctuation in past several years. And I want -- and I think that different people and companies, different agents may have different answers. And I think a major background is that the customers' demand has shifted, especially the demand for short term and from 2014 to 2018, we can see there's a huge growth of the health insurance product and a lot of our customers buy policies. And also, the [indiscernible] has been launched and rolled out in the market, which has been popular in the market and puts pressure for the sales of critical units. But if we look into this, we can see that there is a solid foundation for the growth of health insurance, why saying consolidated, we believe there is a huge protection gap for the customers. And in the past, if we see the treatment and the medicines for the customers, we kind of see there's huge changes. And since 2014 and 2016, we started the business of critical units with some customers has buy the premium of 15,000. And at that time, they believe that's enough now with the exploration of the product, we can improve the premium per policy to 150,000. There's a huge growth, but whether this new sum assured enough, different people have different standings. But obviously, for different people, and they have their gap of production, demand and real protection. And for the medical protection in China, the social security system grew, mature and it sound we have the medical insurance covering both urban citizens and the country rural citizens and also as well as the workers and -- but we can still see that there's still a wide gap for the demand for citizens. So we believe there's huge growth potential, and we are confident in that -- in this regard, we should get the customers and promote the business properly. And in the past 2 years, the premium from health insurance has decreased a lot. And we think it's because some customer has been guided to whole life insurance and aged care and health care as in the future we will strengthen the sales of critical illness product and as well as the trainings of agents. And we will innovate our product, upgrade our service and we will have more deepened and a thorough understanding of this regard and have better service to the customers. Thank you for your interest and notice of the new financial report and under the new accounting standard, we should first realize that -- and what's the meaning of the new account standard to the life insurance business. And we believe the new accounting standard in terms of the formulation terms, it focus more on the essence of life insurance and more clearly elaborate the insurance service income and expenses, the balance as well as the contributor of profits. The new standard also come better and have a more clear elaboration and present of the business quality changes for the insurance companies. And for the current insurance revenue and expenses as well as the related expenses, we can see that in the past several years, we have discussed that it is a sophisticated problem. And the liability is difficult to -- and complicated to understand and under the new accounting standard, we might need, well, 2 years to realize the release of the CSM and we can see this efficiency and the quality of the CSM and whether it's a short-term or a long-term effect. And just now we talk about the health insurance. But it's not necessary that the health insurance can contribute to high quality and a long-term contribution to CSM. And we believe we should take more time to look at those indicators. And in the future, we will release more indicators and the numbers in the annual report. And because this is just the first interim results and maybe in the future, we can have a more clear outlook and the understanding of the essence of financial activities for life insurance companies and to analyze the development, quality of the team, just in these interim results, we just have the number for 1 period. And we let insurance business has a long term, gradually, we will have more release the numbers. And after a while, 2 years, we will have a little clear and a thorough understanding of the indicator. And I think this has been impacted by a lot of parameters and generally speaking, the trend as well as the essence of the new accounting standard will present the quality of the company, and it will gradually show in the future. And therefore, the number in this period is just a number for this period and cannot tell the long-term growth of the company. So after 1, 2 years, we have a better understanding.

And next let's welcome the onsite questions.

Thank you, Mr. Gong. I'm [indiscernible]. I have 2 questions. First, I want to ask about the liabilities. In the first half of the year, we can see that the participating insurance has decreased. And about $1 million, and we believe that there is a decreased assumed rate and the people's interest rate income has decreased, people attach more importance to participating insurance. And I want to know your positioning of participating insurance business in the future? And what's your focus and priority in the future? And then second, I have a question relative to the asset. And in the first time, tracked by the dividend and the interest, the net investment yield has decreased. I want to know more detail, the reason about that. And in the long run, under more volatile capital market, what's your asset allocation strategy?

Thank you for your question. These 2 questions, I would like to introduce Mr. Gong and Mr. Yang to answer, respectively.

For the participating insurance, traditional insurance as well as unit-linked insurance product. There are different types of products present, but the service and protection to the customers are similar, that is we provide service and protection for customers in terms of the old age care and health care. And you've talked about the proportion of participating insurance is low. We have historic reasons and current reasons, and we have a shift from the sum assured participating of interest to the cash dividend. And we need time to adjust that. And in this process, we have seen changes in terms of understanding and the focus of participating insurance and the sales capability of these products has also been retained. And in 2014 and 2015, there's also some adjusted regulations. And in this process, we have ceased opportunities in the market, and we tried to understand the -- the understanding of risks for customers and we prefer to sell traditional insurance, which has a clear protection to customers. The premium paid, the sum assured, the annual payments and dividends is clearly presented in a contract, which can make the customers better understand and have more confidence in the company. And for NCI, the business structure in both individual insurance and the bank insurance channel are different. The bank insurance channel also prefer traditional products, whether both participating insurance and traditional insurance has provided a sound and a similar return to customers. So we promote the sales of the traditional insurance and promote less of the participating insurance compared with traditional insurance. So this -- there is some differentiation. And in the future, we will adjust based on the current market changes and the teams communicate with customers and to further understanding our team and understand of the products. And as for the customers, the -- for the guaranteed yield and fluctuating yield, the customers need to have a more clear understanding and a more thorough understanding of those 2 products, and we will also improve the sales of different products to different customers with different demands. Thank you for your concern and interest in the net investment yield. And actually, you have elaborated the reasons for that. And we have the interest and the dividends in this indicator. And in the first half of this have limited impact on this indicator. In the first half, the net investment has a slight decrease. And you've mentioned 2 reasons. And that are the cases. First is the decrease of interest rate and allocable assets, fixed income assets has a lower interest income to the company and contribute less to the yield. And the last year, you may notice that the dividend paid by the funds has been paid in advance. And those have increased their base and reduced the income for this year. And we believe this is a short term. So this is a short-term case. And in the long term, it will be back to the normal. And the interest and the dividend decreased, we think we should monitor that in the short run. And as you've mentioned for the asset allocation, asset mix portfolio, for life insurance companies, we believe fixed income assets is the anchor for the total assets as well as the yield in terms of duration, cash flow as well as the yield, the flow, and the security is important to life insurance companies and for large companies, 80% of the asset goes to the fixed income assets. And this is the general law and it will be at least be higher than 17%. So in terms of fixed income assets, we will follow our asset allocation requirements, taking into consider the current macroeconomic environment. And now there is a scarcity of allocable assets. Now there may be some risk incidents, but we have our large investment base and a single asset cannot materially impact the yield of the company, but the general trend and the decrease of the rate will have impact on the yield and income of the company. You may see that the allocable corporate bond, the financial bonds and treasury bonds as well as deposits. The yield is decreasing, obviously, and the yield for deposits is slight over 3%. So the liquidity and the security is guaranteed. And for the treasury bonds, the duration is long, but the yield is lower. And in middle and short-term run, it will be it -- it will be inevitable for life insurance assets and how to deal with that. First, we think we should grasp opportunities. And even for the deposits, there are opportunities that we can allocate higher yield and lower risks and even for the corporate bond and the financial debt, we believe there are also opportunities. We have accumulated experience and sound capabilities in allocating assets. For example, in the past year, we have allocated a lot of agreement deposits with bank deposits as well as the next and in the previous years, we believe this can prove a foundation for us, allocation, we will focus on to strike a balance between security, liquidity, and growth and to -- and in the first half of the year, we have a large cash inflow from the bank insurance channel, and we have allocated the assets to the fixed income assets and also prevent risks and maybe fixed rate income have mediocre yield. Equity asset may have -- may -- can contribute to a better yield of the company. And in the current circumstances, some market entities has encountered difficulties. So the allocation in the equity market is more challenging and rely on better real capability in terms of the TAM choosing the risk prevention and they subject to choosing. So we should have a sound and a more clear understanding of the national strategy, the macro trend, the development strategy and the risks of the individual market entities and so as to contribute to the long-term investment yield of the company. And so in terms of as a liability matching, we will continue to uphold the feature we have accumulated in the past few years, and we will allocate more of the fixed assets, and we will not be feared by the single risky event. And we have taken into the quality of the assets -- invested assets of the company. The quality is high and secure and will support the long-term investment yield of the company, and we will continue to conduct asset liability management and to adjust in regard with the macro economy. And this is the end of the Q&A session. And next, I would like to respond to the questions mostly presented and is through our IR e-mails and IR hotlines. First is what's the reason for the company issuing the capital supplementary debt. And by the end of the second quarter, the core solvency margin ratio of the company is 146% and comprehensive solvency margin ratio is about 239, higher than the regulatory requirement and the solvency margin ratio of the company is high and adequate to issue the capital supplement down that we hope to increase the capital strength and increase our base and the capability in our solvency and risk prevention capability. And the second question is after the issue and application of the new accounting standard, the -- whether you will change the dividend payout ratio of the company, and the company has sound, in operations and has adequate capital and the company will continue to improve the profitability and reward the shareholders with our strength -- with our strengthened yield and business income and do not have the plan to change the dividend ratio. And thank you for your interest and the support of New China Life. If you have further questions, you can contact the IR team of the company. Due to time limits, this is the end of the interim results announcement of the company. Thank you all. [Statements in English on this transcript were spoken by an interpreter present on the live call.]