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

Good afternoon. Welcome to our company's annual results conference for 2023. I'm the company's VP, Chief Actuary and the Board Sectary, Xingfeng Gong and I'm the host of this meeting. First of all, I'd like to introduce to you the management members of our company who are attending today's meeting. They are Chairman, Mr. Yang Yucheng, President Mr. Zhang Hong, VP, Mr. [indiscernible], Mr. [indiscernible]. In addition, we have the honor to invite the company's Independent Director to attend the meeting online. The conference will be divided into 2 parts: Introduction and the Q&A session. We will provide a translation. Mr. Yang will introduce our company's annual results. Later, we will start the Q&A session. [Operator Instructions] Now let's move on to the introduction session, please welcome Mr. Yang Yucheng to introduce the company's annual performance.

Respective investors, friends from the press and analysts. First off, welcome to attend our company's annual results conference. Thank you for your support to our company in the long term. Next, I will introduce the company's reform and development in 2023. The company formally implemented requirements of the Central Economic Work Conference and Central Financial Work Conference, intensified top-level design, initiated professional and market-oriented reform. First development position, clarify positioning as a financial service group with life insurance at its core. On the main responsibility and the main business development, initiated wealth management, system building strength as an asset management capacity, explore innovative development model, accelerated old-age care business and realized one-stop financial product supply, improve system mechanisms, explore market-oriented personnel selection mechanism, strengthened staffing at all levels, enhanced cost effective management, elevated refined management level. We will attach green products on systematic operation, strengthened risk control and compliance system, operate management system and improve marketing system, introduced a new basic now for agents and clarify high-performance orientation, improve product system centered on customer interest, built a full circle product mechanism covering demand research development, upgrade service system, offer more financial tax and legal services, integrated healthcare care and older care resources, optimize process to enhance coordination and operational support, optimal development layout, priority developed markets consolidated comp regions, build strong local offices, initiate an original development layout, improve supported policies in respect of sales and products, adopt differentiated operation and an improved the closed-loop mechanism of supervision implementation. As a state-controlled financial institution, we saw national development strategies with focus on technology, finance, growing inclusive pension and data finance. By the end of last year, the company support real economy invested RMB 920 billion, up 7.5% year-on-year. So national strategy invested RMB 240 billion, up by 19.7%. So strategic emerging industries invested RMB 25.8 billion, up 43%. So our grand development invested RMB 17.4 billion, up by 19%. So for our construction of pillar pension system invested RMB 4 billion. Support financing SME invested RMB 10.6 billion, up by 253%. So national strategy regional development invested is RMB 163.3 billion, up by 11%. We fulfill social responsibilities as a responsible state-owned company. Support rural revitalization, we provided from RMB 20.66 million to support 20 assistant projects engaging in charitable donations. We donated RMB 18 million worth of cash and supplies. And we donated to 940,000 sanitation workers worth of insurance amount. We stay committed to people-oriented finance and fulfill insurance responsibilities. We serve for 31,986 main individual customers and 3,000 institutional customers and the SaaS technology empowers customer service. The smart cluster served a total of 22.53 million visitors, continue to improve product supply, stick to diversify the product strategy in current product innovation and improve competitiveness. By the end of last year, there are 169 products on sale. Also for insurance responsibilities, we set of 4.4 million cases and compensated RMB 15.9 billion and build a brand of fast settlement excellence service. Upgrade service capabilities, we set 1,500 service counters. And the 630 other service stations, which benefited more than 100,000 customers. We stay committed to high-quality development and build brand power and manifest brand value. In last year, we was rated A2 by Moody's. And was rated A by Fitch and listed among Fortune 500 for 3 years and world's top 500 public companies by Forbes in 10 years. Next, I will introduce companies' value growth. In last year, the company adhered to high-quality development. The new business value grew rapidly. On a comparable basis, the NBV was RMB 4 billion, up 65.1%. AP based on the first year premium-based NBV, margin increased by 3.7 percentage points and a 3.4 percentage point. See the development opportunities of the industry. The gross written premium reached RMB 165.9 billion, including FYP reached RMB 40.9 billion, up by 5.4 percentage points. Renewal premiums reached RMB 121.3 billion, up by 1.3 percentage points, accounting for 73.1 percentage of the GMP. In 2023, the company focused on regular business and continue to improve our structure. The first year regular premium from long-term insurance business reached RMB 23.5 billion, up by 31.8%. Its ratio to first year premium increased by 11.6 percentage points. Regular premiums with a payment period of 10 years or more totaled RMB 2.9 billion. Individual insurance channel firmly pursued the philosophy of focusing on value and maintain regular premium growth. The FYRP from long-term insurance business reached RMB 11.1 billion, up by 9.8% year-on-year. The regular business were enhanced. The individual insurance channel plays high-performing agents at the core, striving to further specialize the professional and elite sales team. We have the effect on the high-performing agents team building. The monthly average comprehensive productivity per capita was 6,294. The Bancassurance channel focused on regular business. The key business indicators have grown rapidly. The FYRP from long-term insurance business reached RMB 12.4 billion, up by 16.5 percentage points. The Bancassurance channel was committed to transformation and customer-oriented concept to enhance the professional capabilities and firmly built new business ecosystem, optimized channel layout, stabilized cooperation, strengthen key breakthroughs and achieved rapid growth in important partners, focus on regular premium business. FYRP's business share was up 15.2 percentage points, enhanced team building, strengthened capability improvement. Business development high net worth customers in progress, insurance trust in service was executed. The business quality has been improved rapidly. The 13-month persistency ratio of individual insurance business was 89.8%, up by 7.2 percentage points. We will do a better job in 2024. The persistency ratio is a key indicator. The company's investment assets had increased stably. Our investment assets reached RMB 1.3 trillion, up 15.4 percentage points. The capital markets fluctuated greatly. The main broad-based index weakened and the profit of the company was under pressure accordingly. Under the new accounting rule, the total investment yield was 1.8% and the net profit yield was 3.4%. The company's investment assets are mainly fixed income investment by the end of last year. Financial investment bonds accounted for 50.24%. We adhere to value-oriented investment, adaptive flexible tactics, control positions, gross structural opportunities. We combined medium and short duration products with long duration interest rate bonds and extend asset durations, we are actively seeking high-quality products and taking measures to prevent credit risk. The company continued to reduce net standard investment. By the end of last year, the net standard investment totaled RMB 156.9 billion, a decrease of RMB 64.2 billion compared with the decrease in 6.7 percentage points compared with the end of the last previous year. Most of the net standard investment and underlying items are loans, we have implemented subject credit and have good credit enhancement measures. The existing net standard assets with AAA rating accounted for 98.6%. The overall credit risk was limited. But end of last year, the company's core solvency margin ratio grew 57%, up 16 percentage points. The comprehensive work solvency margin ratio was 278%, up 40 percentage points, laying a solid foundation for the sound development of the company. Next, I will introduce the company's outlook for the future. In 2024, the company -- we will try to build a international, world-class, modern insurance company. We will thoroughly grasp the principles of Central Work conference. And strengthen strategic leadership and try to build a professional market-oriented modern international insurance company, strengthen strategic leadership and advanced reform transformation, help with our internal strength transformed towards a learning organization and service power organization. We will build a training system that cover our internal staff and external agents and build a customer service process with efficient collaboration and effective empowerment, enhance our development capabilities and consolidate the foundation, focusing on structural optimization and value growth, improve asset and liability management, combine the requirements of the liability side with the requirements from the asset side. We will strengthen sustainable development, upgrade service system and create a service ecosystem. So the construction of multilevel and build models such as insurance, homes of the elderly care, homes -- insurance plus high-quality health and implement high net-worth brand, Xinhua Rui and provide the people with a wide range of products, shape the brand culture and enrich the spiritual heritage. We try to combine the financial culture with change characteristics, combine our 27-year history and refresh the cultural value, advocate completion openness and institutionalized culture and highlight cultures with actions and build NCI a trustworthy brand. That's the end of the presentation. Thank you.

Thank you for introduced the annual results of the company and show that in 2023, the company emphasized the reform and opening up and the highlights of the business as well as the outlook for the next year's business, and the introduction is in line with the company's operational management and strive to promote high-quality growth of the company. Next, let's go to the QA session.

Due to time limits, please first no more than 2 questions. Please tell us your name and the company. Now let's welcome the questions.

Thank you for the introduction. I am analyst from Huatai Securities, [indiscernible]. First I would like to congratulations on the result of the company and NBV has realized high growth. And I have 2 questions. First is, in the past 1 year, the management team has great changes. And I want to ask the management team that how do you comment on the market status and what the market can expect to NCI? And what are your reforms and -- reforms measures. And the second question is about the NBV value. And we can see that the investment yield assumption -- and we can see that for the sensitivity announced we can see if we lower the investment yield of 50 bp, we can see the NBV will decrease by 83%, which is higher than the peers as well as the past history. And we can see higher sensitivity. I want to ask how can we understand of this data? And what will be the changes of this data? And how will the company reduce the liability costs and the dependence on the insurance policies?

Mr. Gong Xingfeng will answer the second question.

Your question is very accurate. I cannot debate that because the data are there. If we see the data of NCI in the past several years, we can see the sensitivity of the NBV to the rate is that we are highly sensitivity to the interest rate and higher than peers. And for the reasons and histories of this evolvement of this data, we can see the major reason is the business structure. We can see this year the FYRP and bancassurance channel has accounted for 67%. And in the past, the proportion is higher, there is a highly competitive market. If we want to have a growth in the bancassurance channel, we have 2 advantages, and these are necessary. And the first is we should have joint efforts to provide customers with service together with the banks. The second is inside the company, we should have a better pricing capabilities, and we can see that the rate -- the profit rate for the bancassurance business is lower, but we cannot get rid of the bancassurance channel. In the past history, NCI has attached importance to bancassurance channel, which is that we position bancassurance channel as a major channel to gain customers and win market status, which can also answer your question about market status. And this is also a foundation for constant and sustainable growth of our company. So in the past, we constantly talk about the position and the importance of the bancassurance channel. We haven't changed that. So this is the first reason in the past for the history reasons that the bancassurance channel has higher percentage of FYP in a competitive market environment. The second is the product structure has changed. In the past several years, we can see that. NCI has shifted from a company that is focusing on health insurance to a company that has a higher proportion in whole life insurance, which is also in line with the changes of market and customers' demand. Maybe this -- our growth speed of whole life insurance is higher than our peer companies. This is because, first, the whole life insurance will have higher sensitivity to the interest rate. But how can we comment on this matter? First, we know there is history issues, and we have to attach importance to these issues and the management team has also noticed this problem. We have strengthened the construction of our product-mix and to improve the sales capabilities of individual channel and the group channel to improve the quality of the business. On the other hand, the diversified product strategy show that we cannot have one major product. We have to explore the potential for health insurance aged care insurance business and to find opportunities to ensure that we have a more balanced business product structure to better respond to the interest and the yield fluctuations. This is my answer. And Mr. Yang will answer the first question.

The management team are confident about the development of NCI. We believe in our peer companies. We have our own unique advantages. First, we have a strong shareholder. The CIC and the Central Huijin is a major shareholder of our company. And the second shareholder is Baowu Steel, which are major central state-owned enterprises with strong strength. And to build a strong finance in China is also in build spirit of NCI's culture. And the second since the built, NCI has the engine of market development. We are first private company and then transferred into state-owned company, we have to -- and we will play the role of our 2 advantages, and we believe it can release huge potential and power. And to build a professional, modern and international business, just as mentioned, and this is our goal. And also, we have other advantages. We have over 28 years history, and we have accumulated over million customers and over 1,700 sales office, we have over 1.4 trillion assets which are high quality, as well as our talent team. We have a strong and professional talent team, which is also important and lay the foundation for growth. After I came to NCI, it has been 7 months, and the party committee of the company has introduced a series of reform and reform measures, which you might have heard. First is we emphasized the leadership of the strategy. We emphasized the reform our institutions and mechanism to build a strong talent team and we hope to become more professional and market-oriented. We will emphasize both asset side and liability side. For the liabilities, we will -- in the past, the life insurance industry has a lot in common. It is more like sales-driven business. Now we want to shift to the real customer-centered business model, and we will leave -- we will strive to work on that. For example, as customer-oriented strategy, we hope to improve our service to customers and the fairness tax and law service will be further improved. And also, we have introduced a high-end customer service system, Xinhua Zun, which is a brand we hope to introduce. And in late 2023, we have introduced the basic law individual insurance channel to emphasize the incentives to the agents, individuals channel and the competitiveness of the agent team and the product has improved. And the service -- customer service ecosystem has also been improved. And this year, we hope to build a company which focus more on the service and empower -- the self-service empowered organization to improve the quality of development. In 2024, we emphasized the value and long-term payment business, and we take the business quality as the first. So we believe the major indicator for life insurance business is the value growth. So in the decrease of the interest rate environment, we have to lower the cost of liabilities. So we have introduced a serious products to increase the values. For example, we hope to -- in all levels of our company to consolidate the business and to strengthen the reform measures. And for the asset side, we will strengthen our allocation and enrich the asset allocation products, introduce talents and increase the asset management abilities. In the past, we have done a good job in the past, but we hope to further improve the asset management and the team as well as the investment subjects. All the measures is under progress. We believe NCI will take off in the future, and we are confident about the growth and the development of the company. We believe with our internal efforts, with our customer service further implemented with, will grow a more professional and market-oriented, we will have a higher market present status and the reputation. We'll focus on our own business and consolidate our measures, we believe we can have a better business performance in the future. Let's welcome the next question.

Thank you for the opportunity. I have several questions. First is in the 2023, there is a shift in life insurance industry. And now we can see there's layered management of the agents, there is the regulation changes as well as the lower of guaranteed rate. And I want to know your comment. And second, I want to know your investment strategy in 2024.

Thank you for your question. Mr. Zhang Hong will answer the questions.

First, for the industry, we have our understanding and the comments. For now, we think that the insurance industry is encountering huge challenges and changes. But also at the same time, we believe there are opportunities and there is a huge potential for future growth of the industry. We believe challenges and opportunities, both exist. There's changes of customers' demand and product supply. The customers' demand is becoming more diversified and professional, they hope to have a better customer experience. In the past, we have made market research, and we can understand and realize that people have a higher demand for aged care and health care, and have made efforts on that. And also for the supply side, we can see there's a signal for the product we have well lack in our service, quality and capability. So we have to further improve that. And we believe it is a challenge for the management of the company. And we believe the economy is under pressure. Interest rate is going in a lower level. So under these circumstances, the recruitment of the agents and retention of the agents has encountered difficulties. And in the investment that the Chairman has mentioned that we strive to find good and high-quality assets, but the opportunities are rare. And for the asset and liability management, they will pose higher difficulties, so it will pose a higher requirement and a challenge to asset liability mismatch management. By the way, I believe we should be optimistic about the potential and growth, which is opportunity. And we believe in the long run, the economic fundamentals are sound, and we are confident about the growth. We believe China has a large population and the economy has great potential. We believe the huge economic growth potential will bring huge opportunities for life insurance industry, and we believe with the recovery and growth of the economy, the consumption of the citizens will increase. And we believe there is huge opportunities for the industry. Now we have implemented the requirement of the central government to make efforts in developing inclusive finance and the patient finance and to build the third pillar pension system to make steady progress, and we believe there are huge potential and opportunity for future growth. And personally, I think for NCI, just like Mr. Yang has mentioned, we are confident. And just now, you also asked the measures of our company. Just now the Chairman has elaborated and I will further add that. As we all know, Mr. Chairman has assumed office in August last year. And I have a feeling that the leader in the security industry has brought the new management philosophy and measures for NCI and how to build a professional, market-oriented and international life insurance industry. In this regard, we do not -- we're not -- this is not only a slogan, and this is a goal and mission we have embodied to ourselves. And we hope to make early movements and steady practice measures in both asset and liabilities to grow the business. And I would like to have some more detailed introduction. And for our business, the whole system has made actions. We have improved our strategic deployment in all levels. We can see that in the future, the strategic deployment is very important and critical. After analyzing the current development status and histories of the company, we have introduced the regional development layout plan, and we will invest more resources to key regions and cities and to grow development pattern that emphasize our own competitive areas. The second is to build a more talented team. Just now we mentioned last year, we have introduced a new basic law centering, building a high performance rate. And after one quarter, we can feel that we -- this is effective. The productivity per capita of the agents has increased greatly. And we believe to build a team with competitiveness, we can have greater potential and vitality for future growth. And second is we will be customer-centered, and we are working on that. We are conducting layered management of customers and focusing on high-end customers. We are building a high-end customer service system. And also for the mass customers, we will do a good job in service and product supply. For example, [indiscernible] has been provided service to the customers. And hopefully, we can improve our brand reputation. Also, we will strengthen the building of professional distribution channels, and we will try to grow the high-performance agents and to grow our dual engine ventures channel and in group channel, we hope to strengthen our service to national strategy and serve our customers. And also in terms of the internet sales, we have launched our deploy and speed up efforts. For the product innovation, we also have made efforts. We have done research to the customers and the agents and based on the different demand of the customers we hope to have more differentiated products to serve their different demands. Our goal is to enhance innovation to introduce competitive products. And for the asset side, just our Chairman has elaborated and I will comment. And also I want to talk about the system and mechanism reform. We hope to have a more meticulous management and build a high-performance-oriented evaluation mechanism and to build mechanism that is market oriented to allow free flow of talents. And also, we hope to optimize the financial resources and the management and invest our resources more effectively to the key areas. And in this regard, we actively respond to the central government's costs and have a strict control on the fee cost, and we have meticulous management measures in our liability side. And just now you've also mentioned the layered management of the agents, and I want to talk that on March 18th, the regulator has introduced the policies and to strengthen the management of agents and the risk management of life insurance company in 6 aspects. And the management team emphasize on this policy, and we have a studied the policy, and we have deployed relative departments as the leading group and several departments to supplement and support the project and because the regulator is required, we have to report the data to them. So we attach importance to that. We believe this will strengthen the company's risk position and control, which is very important. Under current circumstances, the interest rate brand losses has posed risk to the liability management. We have to control risks, which is important to our long-term sustainable growth. We believe this is not only our risk control measures. It is also -- we also promote the life insurers to return to the essence of insurance. The policies have some concrete regulations and requirements. We believe this will stabilize the development of the industry. And also, there are some extra bonus like the ESG aspect. So if you then contributions to inclusive finance and we'll have some extra credit, which is a sound guidance for the life insurance industry and the companies. And we believe it will promote the insurers to serve the economy. And this is my introduction. Thank you.

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

Thank you for the opportunity. I'm [indiscernible] Securities. I have 2 questions. First is about asset and liability matching management. Now the interest rate spread and losses is a key topic in the industry. How to understand on this topic, I want to know your comment and how can we compare and understand the indicators and the status of the company? And in the future, what are the measures in terms of ARM and what are your plans? The second I want to ask about the individual insurance channel. We believe at the end of last year, the total agent head count has decreased and the productivity has increased, like doubled, but the qualified agent ratio has a slight increase. And I want to ask that if -- whether the productivity increase is mainly driven by the high performance agent, and I want to know your future plan and measures for the promote of agent team building and for the math and the normal agents, and I want to know your measures in recruitment? And will you set some lines or limits to the recruitment? Or will you recruit the normal people and after a recruiting agency that then the company select the high qualified agents?

For the asset level matching the company has done some efforts. Now there's a heat topic, namely the interest rate losses, whether there is an interest rate loss or how can we comment on that? I think we should have introduced one premise that is if the interest rate continues to decrease, the assumption will be inevitable. But if we do not add this premise, I think the answer to that is neutral. I believe we can have an expectation about a lower interest rate. And under these circumstances, there is the potential risk for interest rate losses will be a real one. In 2023, the equity market is highly volatile, which is a vivid lesson for the industry about the interest rate losses. And we can see that the leverage of the interest rate can have huge losses if we cannot cover the liability cost. So in this regard, we should first talk about the asset liability management, and we should look at this question at a higher level. First, I think we should have -- we should view this question in the long term. And now we can see some -- there are some temporary fluctuations that we should comment and review of long-term investment yield and in 2023, the fluctuation of the interest rate and equity market has gave some our lessons, and we have done some efforts on that. First is, we will strengthen the philosophy of long-term investment. We all know that the liability management of life insurance is long term. But how can we live through the long-term circle? I think there's a question mark for the life insurance asset. And the insurance fund should have passed through the different economic circles. And this doesn't mean the company of life insurance can pass through the long-term circle. And just now, Mr. Chairman has said, we should have built a service-oriented and training-oriented organization and to empower the business so that we can have a higher capability to manage the asset and the liability. The second is to improve the differentiated competitive strength. Now we believe the market is highly competitive. There's homogenous of the market and also the service and how can we leave a unique development path? We should have a unique features in asset liability management. Just now the analyst has talked about the business structure. This is our uniqueness. We should also see the business in the long term, but also make up for the short-term weakness, and we have to have a clear awareness of our management strength and we can live through the history and become the real gold. And we will still in the stage after the tiding. So in this respect, just Mr. Zhang has introduced that we have done efforts in reduce liability cost, improve productivity and to strengthen the service ecosystem and strengthen the customer service capabilities. And thirdly, I believe we wish to improve the synergy of asset and liability. We have to -- in our organizational structure, have a more coordinated synergy of asset and liability management. Recently, we have established special teams in managing special insurance accounts. And the group introduced the distribution channels, the management of the investment asset as well as actuary department. All the related department will altogether to talk about the sales in the liability and asset allocation to form the coordination of asset and liability, so that the liability can effectively reduce costs. And we will decrease -- we decreased the guaranteed rate of 3.5%, and we reduced liability costs, especially the unnecessary costs and to improve the efficiency, give more interest to the customers as well as pose higher requirement to assets and to take a more market-oriented approach in asset management. The fourth is innovation. For the asset liability management, we talk about the scarcity of high-quality asset as well as a high liability cost. Now yes, there are pressures in the economy, we have to be innovative to solve those problems. For the company just now, we have talked -- we are aware that there are some products that are highly sensitivity to the interest rate. And in the future, we will strengthen the sales and innovation of products such as the participant insurance product and universal life insurance product. And in the long run, we hope to have done a better job in asset liability match management to reduce the risk of interest rate losses. And there is a saying that great companies grow from headwinds, and we believe NCI will become a great company in the shift of economy circle. And Mr. Zhang will add.

Just now the analysts from [indiscernible] Security is very good, and it has a meaning for the industry development. After I come to NCI, I growing and understanding and understanding of life insurance industry, we believe the economies of China is in lower -- in a downward circle and it's like the 1990s Japan in the past ever China economy has experienced decades of high growth. And life insurance is also in line with the growth of the asset liability has grown and the liability is our commitment to the customers, which is rigid and we should pay and assume our commitments. And for the asset side, the high-yield assets like the local investment vehicle financing and real estate investment as well as net standard asset. And in the past, maybe the liability cost can reach to 4 or even 6. And as well as for the asset side, the investment yield can reach to 8% or 9%. So those high yield has empowered and guaranteed high-quality growth and long-term growth of life insurance industry in the past several years, but now it has entered into a new stage. Just now Mr. Gong has talked good about the China's economy. I think China's economy is having great potential, and there is opportunities in the reform and economic recovery. And we believe for the macro economy, we are confident. And we are firmly responded to the call of the central government and to forge ahead and to transform to the economy with the new quality. And in the government report of Mr. [ Li Zhang ], there's a word called high -- the new quality growth productivity. We believe it will bring new bonus and productivity to the growth, and we will follow the direction of the central government and for the asset side management, different companies have their features, and I believe NCI will take walk in the forefront of the industry and in 2024, just not to talk about that in 2024, we will improve the investment and bring greater profits to the company. And to conclude, we will do efforts in 3. First is to grow longer, grow wider and grow deeper. For grow longer, we will invest committed to long investing and value investing, we believe liability features brought long-term feature of our investment fund, and we believe the long-term investment and value investing is a feature for insurance fund, and we are a major force in the market, and we will allocate the asset with long term, such as the long-term interest rate bonds. And also, we will allocate to the asset that has long-term holding features, and we will enrich our investment subjects, especially the subjects that is in line with the feature of serving national economy such as have the future of new quality productivity such as the new infrastructure building and new energy, we will seize the bonus grow in this respect and opportunities and to grow the investment yield. The third is to go deeper. After I went to NCI, I previously worked in [ Shenwan ] Securities. And Shenwan has been known as the Huangpu school of the industry, and we believe it has -- we believe the research and the study of the company is important to the company, and we believe we will -- it will bring the momentum to the company's development. Only deeper research and study can bring the momentum for the productivity. And we can seize and grasp the market opportunities. And this is the strategy and tactics in the asset set, we hope to -- we will grow longer, wider and deeper. And -- and for the trading, we have our own strength. Aside from the asset allocation, we will attach importance to the value investing and long-term investing goal -- longer, deeper and wider. Also, we will strengthen the emphasis and allocation to non directional and low volatility assets and we have understanding and strength as well as strategy in terms of our asset management and allocation. Interest rate losses is not a problem for one company, it's an industry-wide issue, and we hope that we can do a better job in this regard. And for the life insurance in the -- life insurance business, let's welcome Mr. [ Wang ] to answer.

Thank you for your question. Just now you've mentioned the decrease of agent headcounts. In 2023, the agent head count has decreased by 20%. There are 3 reasons. First is the life insurance industry is still undergoing transform and adjustment. The whole industry has encountered the trend of decreasing head count and not one company is experiencing growth, agent head count and growth business. The major reason for that is there are some changes in the workforce market, the macro economy and in the industry. And the second reason is that the whole industry, and we have its own features. In America, Japan and other countries can see that the retention rate for the 1-year agent is only about 20-30%. And it's kind of inevitable. And the third is the old recruitment models cannot work and the old ways cannot work, and we should -- and we are exploring the new ways for recruitment. So we can see the agent head count is going down, but it's more stable. But in 2023, the business performances have highlights such as the NBV has grown by 65%, and the productivity increased by 94.4%. And this is because that we are following a path of improving productivity and stabilizing structure. We hope to improve our business structure to improve the productivity. We shifted from the products with lower premium per policy to policies with higher premiums. And this will greatly improve the productivity. The second is we hope to grow the high-performance agents which is about the top 5,000 or 520,000 agents. Those are the major team of our business growth. And also, we hope to have a more collaborative in our product improving system, including the online sales and supporting department to improve the productivity. We should also optimize the business structure, including the term structure. We have reduced the product with payment period of 3 to 5 years and increased product with payment period of 10 years or more. And the improvement of term structure contributed to the NBV growth. And also with the daily recruitment of high-quality agents, it has bring opportunity and confidence to our future growth. And we have optimistically business costs. And this has also contributed to the persistency ratio of our company. And the bonus to the agents also shift in terms of managing the persistency ratio -- last year, we have introduced a new management basic law, and there are difference between the different basic laws. The previous basic law focusing on the agent head count growth. And at that time, the agent -- the greater agent headcounts will have more business and more higher growth. And in 2023, there are changes in the industry. The agent headcounts driven the business has -- cannot work and more we should follow a path featuring high-quality and high-performance agents. And only with high-quality growth of one company, can we pursue a high-quality growth of the industry and led by the new Chairman of the company, we clarified that we will follow the high-quality growth, which is internal high-quality growth. Not the agent head count driven growth, we should grow the business with the team -- the building of high performance team. So we introduced a new basic law which featuring the high-performance agents. And we emphasize the capability improvement of individual agents. We hope that our whole team and organization will be stable and live among the headwinds. And we believe the new basic law will promote the team building. We have made efforts in 3 aspects. First is we have strengthened the recruitment criteria and increased the criteria. We believe not every people can do a good business in insurance sales. We have seen that the insurance is not done by normal people. They are done by the talented people. So we should nurture the team building and for the recruitment, we emphasize, we should recruit the high-quality agents. And we are clear that what kind of agents can adopt to insurance sales and NCI. The second is we will consolidate the basic management to consolidate the foundation for team growth so that we can have a basic foundation for the growth. The third is to strengthen the honorary system. We all know that the biggest incentive is self-incentive and the worst incentive is external pressure incentives. We believe the internal incentives can bring internal incentive growth, and we believe the honorary system can have huge promotion to our business, and we have made great efforts in building the honorary system. For example, we have strengthened the IDA, International Dragon Award and also our agent Team Summit system. And also, we have strengthened our criteria and the layered management of teams such as the excellent agents, the agents with 10,000 FYC. And for those agents, they can meet the criteria of IDA and for the excellent agents, the criteria is the FYP of over 6,000. We can believe they can be a cornerstone of our company and for the performing agents, the criteria is FYC of over 3,000 FYC and we believe they are the core of our team. And guided by the new basic law, we are confident about our team building because under new basic law of the agents can have a better understanding and growth map of their growth and all the branches and the frontline office, they have created atmosphere that every agent and the staff study the agent law and to guide the business growth. And in 2024, we believe -- and we can see that it has created a sound atmosphere for business growth. And in the future, we believe will further emphasize the recruitment criteria and team maturing and so that the quality of the team will grow, and we have entered a path of internal motivated growth. Next, let's welcome the offline questions.

Thank you for the management team. I'm [indiscernible] Securities. I have 2 questions. First, I want to ask about the business performance in the past year. We can see that the company has adopted the IFRS 9, IFRS 17. And the company restated the business of 2023, and the skill is large and the company disclosed that the profit decreased by 43% on like-for-like basis. And I want to know that the restated base in 2024 is high and the reason for that? And what are the adjustment to that? The second question is about the economic assumptions, we can see that the net unit linked investment yield assumption has decreased by 50 bp, and the risk discount rate has decreased by 200 bps, and I want to know the mechanism under that adjustment? And now the 4.5% investment assumption and do you think there is some pressure in fulfilling that assumption?

Mr. Gong Xingfeng will answer those 2 questions.

First, about the IFRS 17. And just now you mentioned that we have increased the base of the profit in 2022. And I cannot agree with you on that. We cannot -- we did not intentionally increase the base. This is normal adjustment based on the IFRS 17 and the management team did not made some adjustments to the data of the restated data. And just as we've mentioned in our annual report, the number is not comparable because in 2023, we have mid -- we have given the financial data based on the IFRS 9 and IFRS 17. And the number of 2022 is under IFRS 17 and 38. And they are 2 sets of accounting standards. So they are not comparable. They follow different principles and standards. So for NCI, we followed the new accounting standard, including IFRS 17 and IFRS 9 and included in our daily management for IFRS 39 -- and we have followed the requirement of Ministry of Finance, we did not restated the number of our financial number based on IFRS 9. I can see some research paper that there is a huge decrease of our profit decreased from RMB 21 billion to RMB 8.9 billion. I think this comparable is not appropriate. So in order to lower your anxiety, I think we have disclosed an extra number that is modeled number. And this is not a legal requirement of number disclosure. And this is our own disclosure, and we hope to give you extra number to understand our financial data, and you can have a comparison at a comparable basis. And the comparable number is following the new accounting standard, and this model number for your reference. And this is my explanation about the financial data. And I want to also say that in 2023, IFRS 17 and IFRS 9 has been fully adopted and we are smooth in adapting to the new accounting standard. And also we -- we have got award in the industry. This has laid a sound foundation for our financial management of our company. And hopefully, in 2024, we will work together with the analysts to have a more comparable analysis of financial data. The second is about the adjustment mechanism of financial data in the past 3 years. I'm waiting for this question is not because I'm fully prepared it's because in the past 2 years, people ask me questions about whether we adjust the number or -- when and whether we will we adjust those numbers. And at that time, I can only have some preliminary discussions. And this year, we can see that we adjust the investment return assumptions and risk discount ratio assumptions and the investment return assumptions adjusted to 4.5% and RDR adjusted to 9%. And you can see that we made adjustment based on our long-term investment expectations. In the past, we have investment return of 5%. This is because the life insurance business is long term. We are prudent in adjusting those assumptions and also adjustment based on our understanding and expectation of a long-term trend. And also it is related to the management level and investment return of life insurance industry. It doesn't mean that lower of investment return assumptions equals to a lower investment capabilities, we should combine those 2 aspects. Just now Mr. Yang has mentioned that China is resilient in its economic growth, and we are adjusting and growing the high-quality productivity and under the new circumstances, we believe the China's economy will have a better performance in the future, and we are confident about future growth of China's economy. This is a premise of the adjustment. And in this process, I think the risk-free investment yield is decreasing. And after considering all those measures and the reasons, we have lowered the 50 bp of the investment return assumptions. And for the investment asset, just now Mr. Yang has introduced and elaborated in terms of going longer, deeper and wider and for the company, we will -- we have made -- we have followed an investment return assumption of 4.4% based on our understanding of the industry's growth and our economic growth. And we have established a coordinated synergy mechanism in adjusting both the IRR and the investment return assumptions. And for the return -- the adjustment of the IRR, we should also take in through a look of the constitutes of the IRR. There are 2 aspects. First is risk offer rate and risk premiums and also some spread and the risk offer rate and risk premiums are the 2 parts. And after the company's research and the study of our pricing models, we can see that the risk premium of the company is 5% to 5.5% and under evaluation of 5.4% and as well as the risk premium, we think the IRR of 9% is appropriate, in line with our market status and our understanding of the market. And we believe those 2 assumptions will not be stable -- will not be -- remain stable for forever, which will have a more mobile understanding and research on that and make adjustment accordingly. Thank you. Next, let's welcome the online chat questions.

[interpreted ] I'm [indiscernible]. In the past year, we can see that the investment yield of the company is 3.4%. And I have compared your peers and the allocation to stocks has decreased, but NCI has increased the allocation to stocks. And I want to know that what areas or industries you've allocated in terms of equity investment and how do you comment on the secondary market? And the second is we know that the China Life and New China Life has established a security company. I want to know your progress and will NCI asset management company will continue their business and how do you solve their mix or similar business?

Thank you for your question. Mr. Qin will answer those 2 questions.

First is for the equity investment, the company has several considerations. First is we follow the long-term investment strategy. The second is we will consider the physic opportunities and to adjust the positions. The third is we will select quality -- high-quality subjects in the industry in the past year, the equity investment of the company is maintained stable and make steady progress, and we are prudent in the allocation in equity investment. Maybe there -- the number you've seen is a spot number. And for NCI, we are prudent in terms of equity investment. And there is no large fluctuation or changes of the asset allocation mix. And the second is strategy into 2024. Just now Mr. Chairman has mentioned that we are confident about the China's economy and also take into consider the current market status and the environment as well as the fluctuation of internal and overseas market and also we should take into consider the changes of the market and the long-term asset allocation requirement. So with those considerations, we will emphasize several aspects. First, in terms of grow wider, we will consider the opportunities in the primary market as well as the high dividend assets as well as preferred stocks. And on the other hand, we will consider the industry's transformation because China's economy is undergoing fund changes, the previous asset allocation will have some shift and rotation in different industries. Now we are talking about high-quality productivity. Now we believe the high-quality productivity is focusing on the -- we believe we will make an adjustment in the high-quality asset and high dividend assets. And we believe there are a lot of importance. And in terms of the high dividend asset, and we believe we will select assets, and our professional team will strike a balance between that. And to conclude, we believe we will follow our strategic asset allocation and to invest with our professional talents in asset management. And the second -- your question, may reflect too complicated understanding of that. The security companies established by China Life will altogether to work and explore opportunities in the asset allocation, the operation and asset investment of the security company will not be conflicting with the company's own asset allocation. So we are confident in the security company. Mr. Yang will further add.

The percentage of equity investment has a slight increase, but the proportion of equity investment for NCI is not high in the whole industry, we are in a lower range. And the number are accurate you can look on that. In 2023, the equity investment market has encountered fluctuations, and we are optimistic about the stock market as well as the Hong Kong market, we believe the market of is high investment values, and we're actively participated in the stock market and share market. And we have the requirement, especially long-term investment requirement. And we believe there are investment values. And you have asked detailed industries that we have allocated. You know that we have over RMB 1 trillion investment assets. We will diversify our concentration, we will diversify the risks. We'll have a better management of the concentration risks, and I have long-history working security companies. We are aware of the importance of the concentration risk and we have a consensus that with our colleagues that life insurance pay should follow the lower industry and the non directional assets. So those direction will not change. And we are looking on many industries, such as the assets with high dividend yield and high payout ratio, high technology industry or industry with higher cash flow, the consumption industries, mineral golden areas or industries. So those industries, we will take a look on those industries, and we emphasize our research and study on different industries, and we have sound cooperation mechanism with different research teams, and we also have a strong research team, and we will explore the investment resources. And just now I mentioned, we will grow longer, wider and deeper. And the standardized bond and stocks will have some fluctuations. To reduce the fluctuations, we will increase the allocation to the new infrastructure, the electricity, the city rebuilding, et cetera, especially the areas has a higher security as well as alternative investment and private equity investment, and we have demand also deployment in those regard. The company, we will improve our investment capability, and constantly improve our capability, and we will also take a good use of third-party investment assets, and we will have cooperation with [indiscernible] fund as well as bilateral fund of CIC such as China, France and the China U.K. bilateral investment fund. And we only select the high-quality third-party research parties and we believe for the primary market, the PE as well as the alternative investment assets will follow the strategy of nondirectional and lower fluctuation asset, and we will diversify our investment subjects as well as to reduce the concentration of risks to expand our investment channels and the subjects, and we will seize opportunities evolve from the high-quality productivity so that we can seize the opportunities and about bonus grow from the high-quality productivity areas, and we will explore sources and opportunities of research and opportunity, and we hope that the research department of the security companies can have a better support to our company. And just now Mr. Qin has answered and talk about our home fund security that we are cooperating with China Life and those funds will focus on the investment in the long-term investment in the secondary market and the investment asset of the company has surpassed RMB 1.25 trillion is only a small proportion of our invested assets, we will invest in a standardized investment. And also, we will have deployed in terms of the new quality productivity and new infrastructure, et cetera. And due to time limit, let's welcome the onset question.

This is a question from [ Shanghai ] Security. The new management team has established the industry is looking forward to the development of the company. And I want to know your business measures and strategies .

This question is for me. And -- at the beginning, I have a simple answer of that in -- the new party committee of the company emphasized high-end design and strategy to grow a financial company. The strategy is critical. And the incentive and the [indiscernible] mechanism are important. The teams and talents are important. The culture is important. Culture is the major competitiveness. The technology is also a key indicator. And I think those are the major issues for the financial industries, I have been working for financial industry for over 20 years and have my personal understanding and their practice in financial industry. And I believe the financial industry should follow the professional and market-oriented path. And for a financial company, we are doing with the money and the financing and investment can easily surpass billions RMB, so we should be professional and market-oriented. The financial industries generate data, and we have data released monthly, quarterly or yearly, and we will seek to professional and market-oriented development. NCI has 28 years history, and we have profound accumulation, and we will be ambitious in our future growth. And the history has given us millions of customers and the distribution channels and some cooperation with banks. So the accumulation is rich, and we have talented team. We have 25,000 staffs. We have hundreds, thousands of agents. So with those foundations, we should have a better performance and the market status and we should renew our culture values and all levels of our company should have internal incentives to grow the business, and we will grow our brand culture and spiritual heritage to forge ahead and we have ambitious and long-term growth vision, and we will grow NCI in a higher level and the vision. And we believe the management team are ambitious. And we are ambitious in our growth, and we will release our full potential and then our efforts. And I emphasize the unity of the board members and the management team, we believe the joint efforts of the management team will empower the management and all the staff of the company know that the party committee, the management team, all levels of talent and leaders are confident and motivated. And we have introduced a series of reform measures. For the one hand, we emphasize the innovation of products, we emphasize the customer-oriented culture to put customers at the center, we will have supplemented measures to improve the service system, for example, the tax loss, servicing culture and the sales of products is not only the sales of agents, it is the competition between our collaborative efforts, including the supporting departments. We know that a staff of a company do not sell policies and policies are sold by agents. So we will increase the incentives to the agents and optimize the mechanism to improve their sales entries, and we have established a mechanism that they are from the deadline support the frontline, the staff serve the agents so that the custom-oriented strategy is fully implemented. This is upgrading of our strategy. And the second is we'll follow a high-quality and internal motivated growth path. And after I come to NCI, we have put a higher emphasis and importance to values, and we not only emphasize the business quality but also the business structure. The business quality indicators has been improved this year, and we cannot release the data of this year, but I can say that the trend are improving. So with the guidance of incentive, we can embark on the internal motivated and high-quality growth. And we also emphasize the culture and the spiritual heritage, we emphasize serving national economy and rural revitalization, we will serve the country's development with a strong financial performance, and we hope the publicity of the models inside our company will bring positive atmosphere and momentum to the growth. We believe the sunshine will lag the shadows and the positive energy will grow the business, which is in line with Mr. [ Wang ] has mentioned. We believe the light of strategy and culture, the improvement of our working philosophy will solve real problems, and we have made several assets. We have opened the secretary mills and the management team can closely understand and know the basic daily operation management issues. And for the asset allocation, we have our strategic asset allocation strategy and our unique understanding. We will make up for our weakness and grow our competitiveness. NCI has a lot of advantages. Just now talked a lot about that, how can we release our potentials and advantages. After I came to NCI, I know that NCI is volatile. Most of our staffs are ambitious, and I will further light the vigor of the agent team, and we will strengthen the basic management. And I think this is not only an issue facing NCI, issue facing the whole industry in the past. The fast and extensive growth of the industry has brought some prominent such as the fake policies, fake agents, et cetera, and we will strengthen our management and have a more scientific and meticulous management and have a better financial control of our fees and reduce costs. And also, we will optimize the resources allocation. And we will leave to the professional market-oriented philosophy to fully motivate the staff and agents so that the company will have a new vigor. And I think the financial industry should be traditional as well as modern and we should be professional and market-oriented, we should have allocation to the AI and the big data, and we will introduce a serious projects that face the company's development. And I think we will be both stable and innovative and the management teams will unite our efforts and to present sound business performance to our customers, our shareholders as well as our staff.

Thank you for the Chairman. And this will be the end of the QA session. And lastly, I would like to respond to the questions frequently asked. And first is, will we increase the payout ratio of a company? The company's distribution channel ratio is in line with the requirement of the stock exchange and the articles of the company. We will take into consider the operational investment circumstances as well as the shareholders' expectation about the payout ratio to consider the payout ratio, and we will set the -- the second is the insurance technology has developed rapidly and what is the IT expense share for the company in 2023? Will investment be increased in the next 3 to 5 years? The company has the importance to the important role of financial technology and the progress of business development. In next 3 to 5 years, the company will follow the leader of digital channel strategy, combine the high-quality development with digital intelligent applications, strive to make greater breakthroughs in this field. And last, thank you for your attention. This is the end of the announcement. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]