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

Welcome to our Company's 2024 Interim Results Announcement. I'm VP of the company, Gong Xingfeng. I'm the host of the meeting. First, I'd like to introduce the management of the team. They are Chairman, Mr. Yang Yucheng; President, Mr. Zhang Hong; Vice President, Mr. Qin Hongbo; Vice President, Wang Lianwen. In addition, we are honored to have invited the company's Independent Directors: Ma Yiu Tim, Lai Guanrong, XU Xu, and Guo Yongqing to participate in meeting online. The conference is divided into 2 parts, presentation and Q&A session. We will provide translation. [Operator Instructions] Now let's start the presentation. Please welcome Mr. Yang Yucheng to introduce the company's 2024 interim results.

Dear investors, analysts, friends from the media. Welcome to attend our company's 2024 interim results announcement. Thank you for your long support of our company. First, I would like to introduce the reform and development performance of the company in the first half. In the first half, the company adhered to high quality project building to lead high-quality development, building learning and service-oriented organization and carry out professional and market-oriented reform and achieved initial results in high-quality development, focus on main business and achieved steady progress, NBV, revenues and net profit. Our group NBV is up by 57.7%. Revenue is up by 13.6%. Net profit is up by 11.1%. Strengthen asset management and enhance investment capabilities. Investment assets exceeded CNY 1.4 trillion. Annualized total investment yield was 4.8%. Annual comprehensive investment yield was 6.5%. The company managed interest assets over CNY 550 billion from third-party business. New generational team building -- launched new generation team building project, building a multilevel customer service circle and a Heartfelt Service, customer service. Deeply technology empowerment and practiced the concept of digital finance, integrated business development strategies, drove business model innovation through digital transformation. It's very important to risk control, improve system, consolidated the bottom line on preventing risk and enhance the [indiscernible], especially in the service empowerment sector. As a state control the financial institution, we actively serve our national development strategy with focus on 5 major areas: To fulfill our state-owned enterprise responsibilities, by the end of the period, the company supported the inclusive finance, participated in 46 policy oriented medical insurance covering over 46 million people. Supported real economy investing CNY 170 billion to promote coordinated regional development up by 9.8%. Supported rural revitalization. Assistance funds reached CNY 10.4 million and put in place 21 targeted assistant projects. Supported green finance. Put CNY 19.9 billion to support green industries. Support public welfare activity for sanitation workers benefited over 5 million people with total payment of CNY 38.23 million. The company entered a new era of sales team building on the XIN plan, was officially launched, which was committed to building a high qualified financial talent team, a professional and high-quality career development platform and a long-term and efficient sales management team. First, promote implementation of XIN generation. Provide comprehensive support for development of high-performance team. Upgraded training system. Promote consultant-style recruitment training. 5+N certification training, accelerating new employees and high-performance training. Strengthening institution guidance, refine policy mechanism, achieve operating income distribution system, career development path and take institutional management to a new level. Build customer-centered heartfelt service system. The company had this customer-centering concept, upgrades the brand feature or fast claim settlement, excellent service. Claim settlement is fast and of good quality. A total of 2.36 million claims were handled. [Audio Gap] Second, our featured service is excellent. We continue to build Xinhua Zun high-net-worth system. We maintained home-based service for customers and their families. We promoted Xinhua, a home-based care service system to help with inconvenience to family with daily care. The company is also promoting Xinhua Rui, mid-to-high-end customer service system. And Xinhua Yue health and elderly care system accelerating the construction of the service ecosystem. Thirdly, service is quite smart. Data and technology empowered with customer service. Zhangshang NCI and our official WeChat account served 13.21 million users and witnessed 76.16 million visits. Now is the first part. Let's move to the second part. The operation of our company. First, NBV maintained fast growth. The company firmly took the road of high quality development and the business has been steadily advancing. We achieved new business value of CNY 3.9 billion, up by 57.7%. NBV margin based on first year premium was 18.8%, up by 12 percentage points. In addition, investment performance significantly improved. The company proactively and accurately grasped the opportunities in the stock and interest rate markets, focused on value investment and long-term investment and achieved good investment returns. The company's investment assets exceeded CNY 1.4 trillion, up by 7%. The total investment income was CNY 31.6 billion, up by 43.3%. Comprehensive investment income was CNY 42.6 billion, up by 51.8%. Profitability greatly increased. Net profit was CNY 11.1 billion, up by 11.1%. ROE was 11.2%, up by 2.53%. The company intends to pay interim cash dividend of CNY 0.54 per share, totaling CNY 1.685 billion. The company implemented thoroughly the major decisions [Audio Gap] development of the regular premium accounted for 83.3% FYP of long-term insurance. Regular premium with payment period of 10 years accounted for 11%, up by 5.8 percentage points. The renewal premium accounted for 78.6%, up by 12.3 percentage points. The premium income remained stable. Our premium income remained stable. Regular premiums with payment period of 10 years or more grew steadily. Renewal premiums remained a solid contributor. The company realized GWP of CNY 98.8 billion. Regular premiums with payment periods of 10-years or more reached CNY 2.04 billion. Renewal premium reached CNY 77.7 billion, up by 8.6%. For the individual channel, the core business grow. Individual channel focused on the enhancement and business structure optimization and accelerated long-term and diversified transformational products. FYP from long-term insurance was CNY 8.5 billion, up by 1.8%. As FYRP of long-term insurance was CNY 8.3 billion, up by 4.1%. Accounted for 97.3% of FYRP up by 2.1 percentage points. The individual channel allocated resources to promote individual insurance. First, focus on value. Maintain growth in regular premium business. Focus to promote long-term business transformation, practiced high-quality development. Accelerated the high-performing team building. Introduced new basic law, focused on recruitment, integrate the superior resources, launch XIN Generation plan, strengthened basic management, promote steady growth of core business. In terms of team-building from the high-performing oriented transformation, focused on effective recruitment and emphasized quality and training. The company has a total of 139,000 agents with an average high-performing rate 12.5%, up by 2.3 percentage points. Average monthly productivity is CNY 10,400, up by 28.3%. The Bancassurance channel layout is optimized. FYRP from long-term insurance business is CNY 7.1 billion accounting for 71.7%, up by 34.3 percentage points. Renewal premium was CNY 18 billion, up by 58%, accounting for 46.4% of the China premium, up by 3.5 percentage points. Bancassurance channel improved professionalism on the team, optimized the customer management tool. Optimized channel layout, rationally distributed core channel, key channel and potential channels and continuously improved institutional layout. Strengthened customer management, focus on customer demand, explore customer management model and maintain diversity of customer needs. Improve product layout, continue to enrich product supply, deepen the long-term transformation of the business. Business quality has been enhanced. The company strengthened the business quality management, the quality improved significantly. For individual channels, 13 months persistency ratio reached 95%, up by 5.8 percentage points. 25-month persistency ratio was 85.6%, up by 6.6 percentage points. Surrender rate was 0.9%, down by 0.2 percentage points. The balanced investment portfolio. The company's investment asset takes fixed income assets as ballast stone. Our financial investment bonds accounted for 49.2%. The company followed the philosophy of prudent long term under value-oriented investment. Regarding strategic assets, it centers on fixed income assets with long duration and stable cash flow to meet the requirements of the asset-liability matching supplemented by balanced equity asset allocation. In tactical asset allocation, it has dynamic adjusted structure and achieved certain results. The nonstandard investment portfolio with controlling risk. We continue to reduce the size of nonstandard investment. Nonstandard investment has reached CNY 128.5 billion, a decrease of CNY 28.4 billion, accounting for 8.9% of the total investment assets, down by 2.8 percentage points under strict credit and combined requirements. Most of the nonstandard investment underlying assets are loans and have good credit enhanced measures. The overall risk is controllable. We have adequate solvency margin. The company's core solvency margin ratio was 122%, and comprehensive solvency margin ratio was 225%. Affected by discount rates, the growth of reinsurance and investment business, the solvency margin ratio has decreased to a certain extent, but still much higher than the regulatory requirements, laying solid foundation focused on development of the company. The company embedded value was growing. Our EV was approximately CNY 268.4 billion, up by 7.1%. Value of in-force business improved 3.6% to CNY 90 billion. Adjusted net worth rose 9% to CNY 177 billion. Our stable insurance business operations contributed CNY 16.6 billion, which helped the EV grow by 6.6%. That's the embedded value change analysis. That's the second part. Grow value with coordinated development. Next, I will introduce our future outlook and the key measures for the second half. In the second half, the company will embrace tradition and innovation and continue to release development momentum. First focus on key rules, deepen breakthroughs: Deepen customer-centered, professional and market-oriented transformation. Stick to institutional management, strengthen systematic and refined management, accelerated execution for results, strengthen team building and service ecosystem diversification. Comprehensively enhance the company's core competitiveness. Strengthen house product competitiveness. Design and develop products with customer interest at center. Strengthen product innovation, launch multiple new products, improve product support capabilities of premium products and play the leading role for flagship products. Continue to build a learning-oriented and service empowered organization. Optimize training system, enrich training resources, continue to improve the professionalism of the team. Build professional and comprehensive upgraded marketing product. Build an efficient, collaborative and effective empowered customer service support, headquarters serve branches. Middle and back office serve front-office, staff serve agents and agent serve the customers. The company will be guided by the spirit of the sort of plenary of the Central Committee of CPC, particularly the role of financial development, strive to build a first-class comprehensive modern insurance company. Thank you. That's the end of the presentation.

Thank you, Mr. Chairman. The presentation is simple, but has some key message. Let's move to the Q&A session.

[Operator Instructions]

Marketing team reform in this is true. We have heard some good results for the marketing reform. We have heard the regulator has a need to adjust the present rate [indiscernible] for the product?

Thank you for your attention to our marketing system reform. The marketing system is part of the company's strategy. We have 3 levels: First, it's based on team plan. We try to build a professional elite team with rich feature-served upgrades, upgrade mechanism and team building up with the service system. Upgrade the training system, upgrade the resource system, upgrade the management platform, which all help the team grow. The second level is the company stick to institutional management, which is based on basic law. On first hand, we introduced the new basic law, which is a high-performance oriented. After this introduction, the team and on productivity per capita, obviously, very good results at certain level based on the XIN plan with strengthening on the philosophy for team development. We focus on recruitment and training with personal attention on long-term development rather than the short-term development. You just mentioned in the new pricing rate environment, what's our product strategy. We all know that the whole market is experiencing product shift. We have built a professional team, which is selected by our Chairman to promote this product shift. It is moving forward a prospect of this work steadily. Before the analyst knows we will first shift the traditional products. Before the end of next months, we will shift other products such as participation, insurance and universal insurance. In this process, we will adapt the whole team and adapt the customers. You just mentioned the pricing rate adjustment regarding the impact of the regulators and both regulators and the whole industry while increase high-quality development, which is also for the sake of the supply side reform. Other preparatory measures will help reduce the cost of our liability side and we will narrow our interest risk. In the future, we have good confidence about the industry's high-quality development. The company has diversified strategy for product. Universal participation insurance and saving products all will help serve the customers demand. We have upgraded our system, the features product plus service. After our Chairman came to our company, we promote high end -- middle to high end and other categories. With all those measures in place, we believe and see will be a choice for customers first. Under this background, the marketing channel will be a role model for the steady progress and development. We try to be the leader compared with other peers. We hope to satisfy those investors. Thank you.

I'm [indiscernible] from Securities. Congratulations on the performance for the first interim. All indicators have grown rapidly. We see the share price grow today, the biggest rise for this year, which all show the confidence for our results. We see that the performance of the company further we can see the profit growth in the first quarter and second quarter vary. And there is a great difference between quarters. And I want to ask that after employing the new standards, the market is starting the new standards and we see that in the first quarter, the profit decreased rather in the second quarter, the profit doubled, and I want to know how can we view and understand the results and the company's performance? And the second, we can see that the asset -- net asset of the company has decreased and decreased compared with the end of first quarter, which is different from the peer companies. I want the management team to elaborate on that, how can the company to better balance the asset and liability side so the net profit can -- net asset can have a more smooth performance?

Thank you for your question. Mr. Gong will answer this question.

For the net profit. In the first half and the second quarter, we have increased a lot. There is a difference between the first quarter and the first half of the year. And for this question, I think, we should have a comprehensive perspective. First is the performance enhanced the investment under insurance business, these 2 sides. In the first half, the insurance business of the company has grown fast and we can see into -- in the first half in this year, there is a huge change compared with the previous years because the product and the margin ratio of the company has increased. And the residual margin release for this year has increased, which has contributed to the growth of the net profit. And also, the pressure of the first day losses has decreased. And in the second quarter, we have grown very fast. And from the liability side, we can see the CSM has a stable release and the new business has contributed also. And relatively, the investment set that has a larger volatile performance and we can see the total investment yield of the company has greatly improved. And in the first half, we have grasped market opportunities and allocated assets. And just now, the Chairman has talked about that. They total investment yield of the company has relatively high performance. And there is a great improvement compared with the first quarter and for the volatility of the net profit that shows that the company, in terms of the asset allocation and classification, has more times to work and to study because the net free interest rate had decreased. Therefore, the net asset can show we cannot fully cancel the influence of the decreasing rate. A lot of the asset was calculated as amortized assets and a smaller proportion was put in the FTOCI debt asset. So the net investment assets, the asset of FTOCI will have higher proportion. If the FTOCI debt asset has a higher proportion, so the net asset of the company will have a more flat performance, so we will strengthen the asset liability matching management. And the second difference is that there is a decrease of the curve. And in the first half, the decrease range has doubled compared with the last year. So because of the decreasing of the curve, there's an increase of liability, and this won't result in the profit statement. So it has a huge impact on the equity of the company. And the reasons and the aspects we talked we have the company attach importance to that, and we will increase the proportion of FVOCI assets so that we have a better asset liability matching management. And this is an important feature of the new standard and we will get use of the asset and to better balance the volatility of the asset and the profit. Thank you.

Thank you, Mr. Gong. I want to ask that with the decreasing of the rate, the profit or the income of the fixed income will decrease and we can see there is a greater volatility in the equity market, and I want to know what's your total asset allocation strategy and how do you view on the equity market? And what's your responding strategy?

Thank you for the question. Yes, the rate has a great fluctuation and the market is also seeking opportunities and company is facing challenges and pressures in our asset allocation in the first half. The performance and the investment results is sound. We believe there are 3 features for the performance of the company in the first half. And the first is the total asset allocation strategy. We will follow the law of the insurance funds allocation. And just like the Chairman has said, the fixed income will be the major proportion and we will also seek opportunities in the equity market, especially in the Hong Kong stock market and Asia market. And we believe there are different opportunities. And if we can have a balanced management of both fixed income asset and equity market, we can have a sound performance in the market. And we believe in the first half of the year, the asset allocation of the company has a good timing, and this is the first feature. Secondly, for the fixed income assets, just like Mr. Gong has elaborated, as it has over 28 years history. In our history, we have a lot of assets put in held-to-maturity class and a lot of that asset has contributed our investment yield and can give us a relatively stable performance to responding the decrease in rate. And the held-to-maturity asset has a higher assets proportion. And in the short term, it have impact on our equity. But even this [indiscernible] the reducing rate we have our strategy and for the fixed income assets, we have to focus, first is, we will control the position, including the Asianic share. In this year, the company has in the second performance improved our performance and grasped the market opportunity for the investment subjects. We follow 3 directions: First is, we will follow the national development strategy, the new productivity driving forces and the industry is supported by the country. The second is, we will follow the market leaders. And with the expert research of the industry, we seek to have excess return in equity investment, especially in each share investment, we have sound tracking record. And thirdly is, we attach importance to the high dividend investment, and we are optimizing our equity investment. In the future, we will as the long-term insurance fund, we will have more efforts on that. And with the low interest rate, we will follow the essence of life insurance fund and follow the rules of the equity market. We will have professional research on the development of the industry so that we can have a sound investment assets and performance.

Next, let's welcome the online questions. Next, let's welcome the phone number with 8821. [Operator Instructions]

I'm [ Tai Fung ] from UBS. I have 2 questions. First is about the NBV. The second is about the debt investment. We can see the NBV of the company up by 58%. And we believe there is a great improved risk comparative standard, and I want to know your prospect of NBV in the second half. The second is about the debt investment asset as Mr. Gong has said that the debt investment of the company has a greater proportion as the amortized cost asset and we believe is about 40%, and the peer company has about less than 20% proportion, and I want to know your strategy, will you reallocate the AC assets to the other assets to reduce the proportion of amortized cost assets? And those are the questions.

Mr. Gong, I will answer these 2 questions. First, about the NBV growth. The NBV growth has several drivers. First is business structure optimized and improved after management and the business growth. First, the core business of our company has grown greatly. The FYP and FYRP was a pending period of 2 years or more has great growth rapidly, and the core business also includes the business in the Bancassurance channel. We can see that the single premium of Bancassurance has decreased and the FYRP in the Bancassurance have decreased to that with limited range. It has contributed a lot to the NBV growth, especially after the policy that align the fees with the assumptions. We can see that the fee assumptions and the fee experience has improved a lot contributed to NBV growth. The second is, we've improved our distribution channels. Just now the media friends have asked this question and Mr. Gong already has elaborated on that. And for the company, we will build high-performing team and through the launching of our new generation project, we will improve the productivity of our team and to improve the quality of the team and long-term growth and selling abilities of the team. In the first half, we can see that the premium per capita of the team has grown by 20%, which has contributed a lot to the NPV growth. And thirdly, we will optimize our term structure. In the first half, a lot of work in growing the longer-term payment business and regular premiums and premiums with payment period of 10 years or more has grown rapidly. And we have optimized term structure. Thirdly is, we have improved our business quality. We can see that in the first half of the year, the presentation has shown that the 13 months and 25 months persisted. The ratio has grown rapidly, which has shown in our NBV performance. So these are the reasons for the NBV growth of the first half of the year. And we hope for productivity, the management, the structure has optimized. And in the second half, we will further follow our investment advantages and respond to the challenges we have faced in the second half of the year. Just now we have talked about the reform of the marketing system, the upgrade of the management, we will further optimize our reforms and to grow off our first year premiums, optimize the resources efficient and to grow the internal momentum and drivers for the NBV growth. And for your second question, I think it's a technical discussion. First, different companies have different considerations in asset allocation and asset classification. For now the interest rate is decreasing. If there is fluctuation and reversal of the rate, it will have held impact on the BS and income statement. And now is going to the downward trend and the short-term fluctuation of the rate won't impact the income of our company, especially long-term asset of a company. And for the asset classification, it's not a quick work. It has a strict standard and regulation requirement. And in these circumstances how can we better grasp the asset and liability, our balance sheet and income statement will optimize our classification and the asset allocation. So that we may expect that we'll have a higher proportion of FVOCI at debt and FVOCI equity investment. And the second level will improve the asset allocation to high dividend asset so that we can have sound investment base and higher investment dividend so that we can have stable and better performance in our balance sheet and income segment. And also, we will increase the asset allocation to long-term equity investment. There are multiple measures to solve this problem. That is one aspect we will take multiple measures. Thank you.

I'm [indiscernible] Securities. I have 2 questions. First is about the product strategy. Just now Mr. Wang Lianwen has said, the regulators has introduced the documents of reducing the assumed rate. And I want to know your product strategy in September or even in the jump-start period in last year, and the market has seen that the crediting rate of the universal life insurance and the payment of the participating insurance has decreased and how can we balance the profit and the benefit of the customers' need? And the second, I want to ask that this solvency margin ratio of the company has decreased and the company has issued the capital supplementary bond, and I want to know whether you have plan to issue this capital supplementary bond in the future?

Mr. Gong will answer those 2 questions.

First, under the current rate environment, under the current economic environment, the market and the customers will be affected. The product is the chain of the -- major chain in responding to the demands of customers. And generally speaking, just now Mr. Wang Lianwen has elaborated, we recognize the current adjustment of the assumed rate, and we believe it's firstly a healthy development of the company, also the industry. And the NBV growth, the sound performance in the first half is a result of such adjustment. And in the future, we will focus on the customers' demand and will be more customer-centered and conduct multiple product strategy. And first, we will focus on the flagship products. The customer needs is changing constantly for saving products and traditional products, we have different demands. For younger customers and other customers, they have different demands on the definitions. The current products, CI, incremental whole life, we have growing -- they are the mainstream of the products, and they can make sure our team can move this transition period. Second, we can enhance the product innovation. We can promote the innovation, which is to implement the CPC central party's meeting spirit. We hope to use the diversified product innovation, and we can enhance the sales capability and promote this product innovation and drive our company's sustainable development. Thirdly, optimize business structure for this product shift. Different products, they have different features. First, we need to still promote traditional products. Also, we need to promote other types of products and made the customer demand in different aspects and that is the development between different products such as traditional products and participation products and may bring new drivers for our company's development. Fourthly, we will further enhance product plus service ecosystem building. We have put forward. We should make sales easier. We should make recruitment easier in the hope to give the importance of the ecosystem, such as Xinhua Zun, the high-net-worth service brand, Xinhua An, home-based eldercare service brand and which all help to improve the sales performance of the existing customers and we can make a coordinated development between products and services, so to build the full ecosystem. Lastly, make our team know more about the product. Our team can improve the capabilities to sell those products. With the product strategies upgrade, we can upgrade our service to our customers. That's the answer to your question regarding the product shift in the future. Second, about solvency margin ratio's decreased. It's a complicated matter, which involves a lot of factors such as minimum capital and capital. To put it simple, the 750 million average 12-year bond curve and portfolio change all impacted our solvency margin ratio. Other factors include the fluctuation of capital market interest rate movement, which all impacted our minimum capital and we increased our capital requirement, which decreased our capital margin ratio. This decrease, it's still within our control. And if it's within our risk budget and it's still much higher than regulatory bottom line. You can see that our performance is so adequate, and we have adequate capital to resist the market risk. You just mentioned bond insurance and some other measures. In the first half, we issued a CNY 10 billion in bond, which will offset the reduction in the margin ratio decrease. In the future, we will take more measures to respond to the market changes. Thank you.

I'm [indiscernible] Securities. Congratulations on the nice performance in the first half. I have 2 questions. The first about dividend, we see -- it's first time for us to release the interim dividend. I want to ask how to calculate this interim dividend, is it sustainable? Is there any change for the whole year dividend? The second question is about the channels. We see the new regulatory measures implemented for the Bancassurance channel and we know the individual channel and the broker channel will also implement this new regulatory requirements, both our company's members. If we implement this matter and related to affected agents will miss to sell our products?

I will answer your first question about dividend. It's the first time in our history to pay interim dividend. This is our responses to the shareholders and the regulator's requirement and also our response to the national strategy of the country. In the shareholder assembly, we have submitted the application. The General Assembly decided and authorized the Board of Directors to draft the detailed plan. For the first year, as you mentioned, we have achieved nice performance for first half. And the first half performance, the net profit grew by 11.1%. The growth in net profit gave us the ability to pay interim dividend. We will adopt the long-term stable dividend strategy and also consider our cash flow and the shareholders' wishes and other factors as well. So we decided this yearly and half year dividend launch. By considering various factors, we decided the dividend ratio is 15%. If we use this number to see our last year's dividend is 19%, which is not low. The interim dividend reflects our company's response to the home capital market and the requirements for the investors. For next steps, we will consider various factors to including the capital market requirements and shareholder wishes to decide our annual dividend launch. I'll ask Mr. Lianwen to answer the second question.

Thank you for your question. After Bancassurance and broker channel implemented the regulatory requirements, the market has a question mark for when the New China will record this policy. We believe New China will definitely adopt this strategy. We think if the New China adopt this policy, which is quite positive for the whole industry growth and lower the cost of the liability side and high quality -- is also very positive for the high-quality development. If we can reach consensus, the company has had full considerations in meeting the regulatory requirements first. We are a public company and a big company. We stick to the high-quality development road and new development road. And this coincides with the regulatory requirement. We think the policy will be implemented in all the channels. We have had several meetings and take measures to counter this problem. So the company has started to lower its cost. And with assumptions improve quality and efficiency and stabilize customer benefits for products declined. If we can provide competitive products to customers, we can make sales and recruitment more easier thoroughly. We will diversify our product strategy and automate product structure and improve development -- product development. We will further enhance product plus service model and improve the size and sell more products with long term, which will all help boost the key indicators for us. We will have product service innovation based on customer-centric philosophy and try to build an ecosystem that will provide good service and products to customers. We just mentioned if we implemented this policy in the individual channel, [indiscernible] the agents witness to sell the products. If the whole market lowered the commission and if we can sell more products and increase the productivity per capital, and so in total, we need to enhance the product -- competitiveness of products and enhanced and improved sales. So which will be winning results for the company and the agents. So our companies can benefit from the policy. You can see our financial statements after Bancassurance channel implemented the policy, our [indiscernible] value improved a lot from long-term point of view. This policy is quite positive for the company and the industry. As expected, the value and some key indicators are improved after implementation of the policy. If the policy is implemented in individual channel, which will be quite good for the company, high-quality development. Thank you.

We can see that for the investment of the case, there is a great increase of the long-term equity investment. And I want to know what's your principal in the long-term asset equity investment and what having industries. And for the primary market, apart from the standard in the industry, do you have your own access logic?

Thank you for your question. The long-term equity investment is a key topic in the decrease in rate. And we have 3 features. First is the long-term equity investment is a major direction in our asset allocation. We hope to allocate good project. With controllable risks, we can improve the proportion of long-term equity investment. And this is 1 strategy. And in this process, we will not be bland. We will focus on sound and good project and strengthen our industry research. The second is for the industries, and we think the emerging industries and the traditional industries both have opportunities. We do not prefer what industry. We will look into the sustainability after growth of the industry and the industry's policy and the cash flows of the industry as well as the management team of the companies. And especially for the companies has a sound tracking record in the capital market. And we believe those are the assets we are considering. And the emerging and traditional industries are included in our pools. And now the key issue is that it require a favorable environment to have sound performance and investment in a long-term equity investment, the management team and the Chairman and the investment team of our company has done a lot of effort, and we hope to have breakthroughs in this allocation. And on the other hand, in the future, well, implementing projects, we believe we should have 3 folks in grasping the favorable environment. First is we should have a professional team, the Chairman attach good importance to that. The asset management company of our company has talents, and we will introduce more high-end professional analysis in the industry, and we believe it's the base, a starting point. Secondly, we will process the cooperation with some large state-owned enterprises, especially the central SOEs. We believe in China's development, and we think the industries has leaders, and it's hard for those companies who maintain its leading position, and we believe we will focus on the leaders in the industry, and this will be key issue in the investment to seek investment opportunities and timing. And some companies may have some strategic reorganization and private placement or even on the financing activities and the exit of some existing shareholders, and we believe there are opportunities and the directions are clear, and we believe we need a favorable environmental conditions to have a good investment in this aspect.

Next, let's welcome the online questions. Next, let's welcome the investor with phone number 1763.

I'm [indiscernible] Securities. I have 2 questions. First is, we can see that the NBV margin of the company has increased a lot. I want to further ask that what is the liability cost of the company? And if you consider the fee spread losses were what are the liability costs? Second, I want to know a question about the liability matching. And what other duration of your assets and liabilities and what have mismatch for the duration of both asset and liability?

And Mr. Gong will try to answer this question.

Just now you talk about the NBV margin of the company. And for the individual insurance channel of the company, just know we have talked a lot about the rate changes and the assumption rate changes as well as the online fees with assumptions regulations, we believe the regulation has a huge impact on the Bancassurance channel. It has a huge impact on the marketing and sales management of the company and also pose a higher requirement for the cost. This is a key concern for our company. If we -- how can lower our cost under the new regulation? How can we turn our cost structure, which is quite a good question? Our company is discussing the base growth of the Bancassurance channel and the organization change for the Bancassurance channel. Hopefully, this will achieve enhanced performance of the Bancassurance channel and offset the regulations negative impact and stabilize the NBV margin. For your second question. As liability match, you will watch closely on the match between the terms and yields as a decrease of the cost of liability side. The pickup is narrowing that include traditional products and participation insurance, all those products can see a decrease in cost. We have enhanced our requirements for long-term asset allocation. we have made a quite clear guidance for this equity asset allocation direction. The gap between liability side and term between liability gap and asset side is narrowing to avoid the liquidity risk.

I'm [indiscernible] Securities. My question regarding strategies. The company has showed a quite good performance. What are the matters behind this good performance? Second, for the future outlook, what are our key tasks in the future? Our Chairman mentioned service-oriented and service empowered organization. Of course, second question is regarding asset liability. What's our strategy and asset allocation strategy. After chairman came to our company, we have tried several measures to stabilize our investment returns, such as [indiscernible] with other firms?

Thank you for your question. I would like to share with the friends present today my thoughts. I worked for broker dealers for 15 years. Your question is quite good. Can you share on our company's strategy? We had meeting of Board of Directors yesterday, and we have delivered some quite good performance for the first half. Behind all those, this can be credited to the efforts of each and every colleague from NCI [indiscernible] and each and every colleague is behind each and every good data. A year ago, I came to NCI and this -- today after almost 1 year anniversary for my working in NCI. Now after 6:00 p.m., the whole building is still quite -- have a lot of people working late. We all work very hard. I think the culture and the other aspects and the environment, the mood is improving a lot. And [indiscernible] professional reform has achieved initial results. I mentioned this a lot. On the service side, the agents are selling products to customers. However, under service, this is the comprehensive capabilities of each company. Just to give a few words on strategy, service, reform, vitality, newer capabilities, strong investment, we think our strategy clear. In the past we sent our own selling products, now we transform towards customer-centric philosophy. Just a simple sentence. It's a systematic work. Make our product innovative and attractive, make our service attractive. Technology empowerment and claim settlement. We need to have some claim settlement service. It's not useful to have words for insurer. The comprehensive liability will speak for itself. For big companies like NCI, we have strong capabilities and faster claim settlement. As a financial institution, it's quite important to be strong in the power. We compete our sustainability. Our customer-centric strategy is quite down to earth from product to customer service to customer ecosystem and a couple of brands such [indiscernible], the series of brands, we have served different branches. We also need to build different brands for our health and auto care service. We have made measures to improve all those aspects, hope to outperform our peers. Second, we make our service better and we need to implement reform -- and reform our organization structure. It will transform from traditional model to a customer-centric model, the branch office organization structure change has been implemented which will have boost the development of the team. We will have 700 branches as we can make those branches stronger. We can double the high performing agents, which will be quite impressive. If the reform is from top level -- top to bottom, the structural reorganization need to be implemented by professional team. The new management team has pulled forward to strengthen leadership at average levels. So after new management came office, we have strengthened leadership in the high quarters for various departments. The head in those number of departments have all changed. We have 35 branch offices. We match talent with those branch offices, and we make the right people in the right position for those entrepreneurs, we make them in developed regions. For those stable ones, maybe not so younger on the stabilized in nature, put them in some existing regions. Human resource, capital resource and financial resource, we will try to allocate them rationally. It's a heavy task in this regard. It's both in the headquarter level and branch office level and some branch level. We hope to, with those measures, we can release vitality. Our company has a history of 28 years with strong powers and great ambitions. We have strong powers with heritage, but we still need to innovate which is quite important and employees work quite hard and we put some incentive measures. You need to match your position with your performance. [indiscernible] force. Regarding the regulatory tactical importance and control of the risk for insurers -- for the risks of insurers, we did a lot of work towards institutional management. In the past, our company had some problems such as not quite fine management. The branch office has big powers for recruitment and cost control. After the new management team came to office, we require to implement institutional management. We launched new base cloud for individual channel. We just mentioned the new cloud for the Bancassurance news channel. And we will institutionalize management for the channels through the new base cloud. We are in this process of discussing the incentives for marketing activities. Also regarding the group business reform through a combination of [indiscernible] we are striving towards the high-quality development, try to lower our cost and send more resources to the right place. We'll improve [indiscernible]. We will see money when it is necessary. This is one of the key tasks in the past half year. Our strategy is more and more clear when we enhanced our input for product focused on the recruitment of the team. We need to build a very strong, high-performing agents team. We need to feel that a stronger staff team can promote the agent's team. We will improve the management of the whole staff team. We deepen our reform that is market-oriented and professional-oriented. We should make our products more competitive and enhance in recruitment and grow the number of high-performing agents. We should also be made in technology empowerment. We want to make our sales easier and recruitment easier. All those measures will help to improve our competitiveness of the company in the market, which is realized by making the selling of products easier and recruitment easier, make the best products in our company. We are on that role to realize that goal. We have a couple of measures to achieve product innovation and the goal is to have the best products in NCI. Our strategy has become clear. The investment side is quite important. I came from broker and dealers [indiscernible] investment. In current environment, the economy is transforming, we all feel a downward pressure of the economy, but we still have good confidence for the economic recovery. In a low interest rate environment, the bond yield is quite low. We have much higher requirements for investment side. For asset allocation, we have CNY 117 billion gross written premium. Our target is CNY 117 billion gross written premium for this year. We need to -- on the gross written premium, I need to make the responsibility for investing those premiums. We have requirements for our investment government and asset management companies. We have some unique matters. For the gross written premium collected, we put them in the investment account in a timely manner. Our investment is generally prudent and stable. We need to go to play to the nature of insurance capital. We have very high quality for the investment team. One first advantage for insurance capital is this long term in nature and to give full play to the advantage of long-term and the patient's capital. For specific steps, we need to integrate security and yield and pursue long-term stable yield, make the investment long term, value-oriented investment [indiscernible] of the insurance capital and increase our yield by increasing the term. We have a great number of long-term debt investment. Fixed income investment is common to increase the term on the investment. For active investment, we should make investment to some best players in each industry. On long-term investment under OCI inadequacy, we have made measures to improve their proportion and give to the advantage of the insurance capital. Now is a good time to do long-term investment, both in primary market and secondary market and as found. You will see the effect gradually. To deepen our research capabilities, I came from the broker dealers. I will touch on the importance to the investment and research capabilities. Our investment and research team has made quite deep research. If we haven't done a lot of homework, we cannot buy the single asset. We will make more research both in macroeconomic movement and specific industries. Top players in new productive and industries, consumption, resource-related will have input in those areas, broaden our strategies. In the past, we held relatively speaking, single strategies. Now we need to diversify our strategies. We need to have a strategy suited with those insurance capital. And build some risk resilience system. Build a professional team and compliance system powered by technology. We have many more room to improve in this regard. We increased our investment in equity this year, especially buy more stocks during the market downturn, which is a good opportunity. We have confidence in China's economy and see opportunities in share and share market. In China, quality companies most gone public. And the blue chip companies acquired suitable for insurance company to invest. We also made investment in convertible bond and some other products and diversified our investment strategy. Most insurance have a heavy weight on fixed income assets. We make the right amount of adjustment in investment strategy, which make us invest in top players in industries and other such as convertible bond and REITs, to stabilize our investment yield. In total, we take importance on the general allocation of assets. Our investment assets reached CNY 1.4 trillion, which is quite huge. Optimize the asset allocation strategy is quite important. In terms of fixed income, we increased the term of the debt. Lower the risk and grasp the opportunities. We have some trading opportunities for some bonds. In terms of active investment, we'll be a patient -- player in patient capital and make investment in strategic industries and make investment in top players in some industries. We touched importance on the cash flow and stability of the companies. In alternative investment, we make investment in underlying assets such as new energy and infrastructure. We stress risk control for the investment, optimize our negative list mechanism. And the classification assets in total as a life insurance company as a Chairman, I combine learning through action. We should take matters in both asset side and liability side. We are fully aware of our advantages. In this transitional period and low interest rate environment, the implementation of regulations will give us advantage. Our advantage will be more transparent compared with smaller companies. We have a unique brand advantage. We are part of the state-owned enterprises, financial institution. We have 1,700 branches and a whole talent team, which has been accumulated in the past 28 years. I noticed quite a lot of talent are very outstanding. We need to better manage their capabilities. Thirdly, the quality of the assets, the investment assets CNY 1.4 trillion with good quarter. So by asset ratio is quite low with better -- with good investment yield. We need to excel in every single aspect. We have so many advantages in terms of branch branding, the number of customers, the advantages in the quality of the assets. Those advantages cannot be enjoyed by smaller companies. We still have much room for reform and the development. I put out several reform and development directions after I came to this company. We have reformed and development dividend for high net worth customer service. We have ability to serve high-end customers, whether high-end, middle-end customers we will also [indiscernible]. Second, regional development capabilities. We are quite strong in a couple of regions and have high market penetration reach. For some developed regions, our market penetration rate needs to grow. It's good, but not enough. We will boost development in those developed regions. For the development for the organization, how to boost for the organization and deepen the reform that is market oriented and customer-oriented, enhance the product innovation. And we all enjoy dividends for some other aspects such as internationalization. We need to build a second profit growth curve. If we do better service for our customers, we can have another policy. If we can serve the company well, we can be real player in the market, and we need to enhance the revenue of service. All those companies with higher service-related revenue that can [indiscernible]. Service need to be combined with products. Headquarter need to be coordinated with the branch. Different departments in headquarter need to be coordinated, so the whole organization is advancing in a coordinated way. In the investment side, we need to increase our investment yield. And with better risk control, we have confidence for the future. And the new management team has made it clear for the strategy. The whole company is quite clear to move forward. Thank you for your support for our company. Thank you.

Thank you for the Chairman and for your thorough and comprehensive elaboration of the strategy of our company and due to time limits, this is the end of the results announcement. Thank you very much for your participation and presence in today's meeting and thank you again for your support and attention to answer. If you have further questions, you can contact us. And now this is the end of the announcement. Thank you all.