Earnings Call: H1 2019

Aug 23, 2019

Ladies and gentlemen, good morning. Welcome to China Life 2019 interim results analyst and investor briefing. I am Grace Hou, Head of the Investor Relations team of the company. The Hong Kong and Beijing venues for this briefing are connected by a live video conference. We invite those who are not able to attend the briefing in person to use the dial-in facility to join in. Alternatively, a live webcast of the briefing is available at the mobile phone and/or computer. At your request, for this briefing, we moved this briefing 15 minutes earlier in order to make it possible for you to take the Q&A, have more interactions with the management. We also welcome more of your advice from you so that we can do a better job for you. Now, please let me introduce members of the management who are attending today's briefing in Hong Kong and Beijing respectively. Mr. Su Hengxuan, President. Mr. Li Mingguang, Vice President, Chief Actuary, and Board Secretary. Ms. Yang Hong, Vice President, are with us in Hong Kong. With us in Beijing via live video conference, Mr. Zhao Peng, Vice President. Mr. Ruan Qi, Vice President. Mr. Zhan Zhong, Vice President. Today's briefing will start with a 30-minute presentation on the company's 2019 interim results. After that, there will be a 45-minute Q&A session, during which our management will take questions from both Hong Kong and the Beijing venues. Ms. Li Yinghui, Securities Representative of the company, will co-host the Q&A session in Beijing with me. Let me invite first Mr. Su Hengxuan, our President. Respectful analysts. At the beginning of this year, we proposed the strategic goal of revitalization of China Life. In the first half of the year, we took the high-quality development as the fundamental requirement and focused our customer-centric way and focused on the value and the individual products. We also focused on the value and also achieved the stable growth, upgrading technology, optimizing customer services, upgrading against the risk. In the end, we have also adopted a customer-centric approach or focused on the field office, strengthening NBV growth, individual insurance business development, and of course, forward the transformation from being sales-oriented to attaching equal importance to sales and services. From being human resource-driven to being human resource and technology-driven as well as being sales-oriented to the coordination of scale and value. While vigorously promoting those various reforms, the company has also seen robust development. In the first half of the year, the company could achieve good results under the strategy. First, the key operating metrics improved significantly. The value of the company amounted to CNY 34 billion, up by 22.7%. The gross investment yield grew significantly to 5.78%, up by 200 basis points. The net profit attributable to equity holders was CNY 37 billion, up by 128% year-on-year. Second, the long-term regular premiums under the designated protection-oriented business grew rapidly. In the first half of the year, the first-year regular premiums with a payment duration of 10 years or longer totaled CNY 38 billion, up by 68% year-on-year, accounting for 45.8% of all first-year regular premiums, up by 18% year-on-year. Designated protection of business grew strongly with its proportion in the first year, regular premiums increased by 5%. Third, both the size and quality of the sales force were enhanced as the company's total sales force across all channels reached 1.898 million people, up by 7.1% from the end of last year. Of which the agent channel sales force amounted to 1.5 million people, increased by 9.3%. Along with the size expansion, the quality also saw marked improvements. The monthly average productive agents in the agency channel increased by 38%. In particular, the number of agents selling designated protection-oriented insurance products increased by 52.1% year-on-year. Through continuous reform and innovation, we will capitalize on the new driving engines and professional management to create greater value for our shareholders, customers, and the society. Next, I will present the details about the company's business and operations in the first half of 2019. In the first half of the year, under the China Life revitalization strategy, the company saw a successful jumpstart in the first quarter, followed by a decisive transformation in the second quarter, ushering a new prospect for the company's development. The company's gross written premium reached CNY 377.98 billion, up by 4.9% year-on-year. The single premiums were greatly reduced from CNY 10.1 billion to CNY 1.02 billion, representing an 89.9% decrease. The first year regular premiums increased 1.7% year-on-year to CNY 83.13 billion, of which those with a payment duration of 10 years or longer totaled CNY 38 billion, up by 68% year-on-year. Renewal premiums reached CNY 250 billion, up by 6.4% year-on-year. Short-term premiums reached CNY 43 billion, up by 30.4% year-on-year. The company's business structure continues to be optimized. The percentage of single premiums in long-term first-year premiums decreased from 64.9% in 2013 down to 1.2%. First-year regular premiums accounted for 98.8% of the long-term first-year premiums. Within first-year regular premiums, those with a payment duration of 10 years or longer accounted for 45.8% of the total, up 18.1% year-on-year. Protection type business grew rapidly. The percentage of premiums from designated protection-oriented products in the first year, regular premiums increased by 5% year-on-year. Product diversification continued with six out of the top 10 first-year regular premiums products being protection-oriented. By different channels, some are seeing a new business value growth in the first half of the year. The agent channel further promoted the transformation upgrade of the sales management model and coordinated the improvement of business sales force and day-to-day sales team management to achieve steady and continued growth. The agent channel recorded a gross premium of CNY 219 billion, up by 6.7%, accounting for 76.9% of the company total, up by 1.4%. Renewal premium increased by 6.5% year-on-year, which helped to drive the growth of gross written premiums from this channel. The first-year regular premiums in the agent channel were CNY 64 billion, which accounted for 99.8% of its long-term first-year premiums. In particular, the percentage of RP within 10 years or more payment duration was 51.7%, up by 19.1%. Bancassurance and the brokers channel. The bancassurance channel optimizes business mix innovatively, firmly committed to development of a long-term regular payment business with its new business margin improved significantly consistently. Single premiums sharply decreased from CNY 8.64 billion down to CNY 12 million, down by 99.9%. The gross written premiums of the channel amounted to CNY 47 billion, down 15.4%. First-year regular premiums amounted to CNY 17 billion, accounting for 99.9% of the long-term first-year premium of the channel, up 31% year-on-year. Renewal premium grew by 4.4%, amounting to CNY 29.2 billion, accounted for 61.7% of the gross written premiums of the channel, up by 11.7%. The group channel continues to develop diversely, optimizing the business structure and expanding various businesses. Gross written premiums for the channel amounted to CNY 13.98 billion, up by 12.1% year-on-year, of which the short-term premium reached CNY 13.98 billion, up by 19% year-on-year. In terms of sales force in the first half of the year, the company continues to pursue its sales force's development strategy of expanding the size and improving the quality to strengthen recruiting and cultivating new talents. Agents promote weekly operations, standardize the field office infrastructure, enhance education and training, tighten day-to-day management, and achieve improvement in both quality and quantity. By the end of the reporting period, the company's total sales force reached 1.898 million people, of which the sales force of the agent channel totaled 1.573 million, an increase of 134,000 people from the end of last year. Among which, the agents of upsales team amounted to 497,000, an increase of 91,000 people from the end of last year. The monthly average productive agents in the agent channel increased 38.2% year-on-year, and the monthly number of agents selling designated protection-oriented products increased by 52%. The bancassurance channel remained at 241,000, among which the insurance planner team saw a small increase. The monthly average active insurance planner grew by 43.4% year-on-year. In terms of our services, being customer-centric, the company upgraded the 7T services to offer smoother, faster, smarter, more caring services. The operational efficiency and effectiveness were significantly boosted while customer service and experience continued to improve. Concentrating on achieving one customer, one China Life, the multimedia contact center, China Life insurance app offered a unified entry point to our various services, such as property insurance, pension, Huangma Bank security funds, and more. In addition to life insurance, the number of registered China Life insurance app users exceeded 67 million, and the average number of the active users per month increased by 52%. The company launched the claims settlement for critical diseases within one day program, created a five-way direct claims payment, and partnered with more than 10,000 medical institutions and the rate of automatic claim settlement increased by 30%, reducing the time required for making claims payment by 37%. The company continued its optimization of its differentiated underwriting policy and strengthened the application of artificial intelligence. The rate of intelligent underwriting increased by 8.7%. The total number of intelligent customer service performed amounting to over 23 million. The company VIP service continues to be enhanced and launched a number of VIP services such as domestic medical care advice, critical illness fast track, and international emergency rescue. We understand that the company's progress in implementing the China Life revitalization strategy and the market-oriented reforms are of great interest to all of you. Allow me to share some information about it. In the first half of the year, the company launched a comprehensive organization transformation program called the Dingxin Project, which aimed to drive high-quality development and reshape the organization system and better tap into the potential and vitality of the market-oriented mechanisms. The main components of this project can be summarized as follows. One goal, by following the value market efficiency and problem orientations under the principle of a strong headquarters, streamlined provincial branches, optimized city branches, and dynamic field offices. We aim to build a set of agile, streamlined, efficient, and vibrant organization structure to enhance value creation investment yield in technology empowerment and services, and strive to revitalize China Life. Two focuses. Adhering to the company's core strategy of centering on customers and the basic operational units, focusing on MDT and individual insurance and business, we try to create a strengthened individual agent channel in coordination with other channels and a market-oriented investment management system. Two engines, market-oriented incentive and talent development mechanism, and new technologies. Two supports, integrated intelligent operational system and a precise financial resource allocation system. The Dingxin Project involves all aspects of the company's operation and management, and we plan to roll it out over the next 2-3 years. In the second half of 2019, we will focus on the organizational restructuring from the top down. In the second half of the year, the company will carry out the following key tasks to lay a solid foundation for the start of the China Life revitalization. First, the company will put new business value growth at a more prominent position, concentrating on the development of protection-oriented business while expanding long-term savings business. Second, the company will deepen reform and implement the first batch of initiatives of the Dingxin Project and release reform dividend as soon as possible. Third, the company will create a strengthened individual agent channel in coordination with other channels and deepen the transformation upgrading of the sales team, put more emphasis on team quality, and strive for a successful fourth quarter and a good start next year. Fourth, the company will focus on the revitalization of key cities while continuously strengthening our key advantages in rural areas. Use various supports such as manpower, financials, asset, and others to stimulate the growth in urban areas. We will also give full play to the company's traditional advantages and the national rural revitalization strategy. Fifth, the company will strengthen technology empowerment and innovation by building an internal innovation platform, establishing a market-oriented incentive mechanism for IT personnel, increasing investment in artificial intelligence, strengthening technology-empowered operations, and upgrading China Life's technological and operational capabilities to a new level. Six, we will continue to do a good job in risk prevention and control. Now, I would like to hand over to Vice President Zhao Peng to present the company's financials and investment performance. Thank you. Thank you, Mr. Su. Next, I will present the financials and investment performance of China Life in the first half of 2019. In the first half of 2019, the company's total revenues amounted to CNY 448.22 billion, up by 11.6% year-on-year. The company's gross written premiums amounted to CNY 377.98 billion, up by 4.9% year-on-year. In the first half of the year, the company achieved solid investment income. Gross investment income amounted to CNY 88.92 billion, up by 68% year-on-year. Net investment income amounted to CNY 72.03 billion, up by 11.1% year-on-year. Net realized spread gains on financial assets were CNY 7.15 billion, impairment losses, CNY 3.37 billion, and the net fair value gains through profit and loss were CNY 13.11 billion. In terms of cost structure, regarding the cost underwriting and policy acquisition cost ratio increased from 8.89% to 10.17%. Administrative expenses ratio changed from 3.72% to 3.78%. The percentage of administrative expenses to the total administrative expenses underwriting and the policy acquisition cost decreased from 29.48% to 27.1%. The change mainly was driven by the continued optimization of business structure, significant growth of 10-year or more regular premiums under the auxiliary protection-oriented businesses. As a result, underwriting policy acquisition costs rose while the proportion of administrative expenses decreased. Due to the increase in gross investment income, coupled with the upward adjustments of a tax-deductible cap for commission and fees in the first half of the year, the net profit attributable to shareholders was CNY 37.599 billion, up by 128.9%. The weighted average ROE was 11.14%, up by 6.03%. The EPS was 1.32%, up by 0.75%. This is about the P&L. Let me move on to balance sheet. As of June 30, 2019, the company's total assets increased from 6.9% to CNY 3.48 trillion, from CNY 3.25 trillion at the end of 2018. The total liabilities increased by 6.0%, from CNY 2.93 trillion to CNY 3.11 trillion. The reserve funds for insurance contracts were CNY 2.46 trillion, of which the residual margin was CNY 742.18 billion. The company's equity attributable to shareholders totaled CNY 368 billion, an increase of 15.7% compared with the end of 2018. The equity attributable to equity holders increased by CNY 50.06 billion. Net profit attributable to shareholders amounted to CNY 37.599 billion. Other comprehensive income was CNY 20.18 billion, and dividends paid to shareholders was CNY 4.72 billion. The company remained well capitalized as a core solvency ratio stood at 258%, while comprehensive solvency ratio stood at 269%, up by 8.07% and 18.53% from the end of last year. In March, the company successfully issued a CNY 35 billion of capital supplementary bonds, which calculated into supplementary tier 1 capital, raising the comprehensive solvency ratio by roughly 10%. Next, I will present the company's investment performance. In terms of asset allocation first. With the asset liability management system at the core, the company builds strategic asset allocation framework based on return risk and diversification properties that are taken into account. Few months requirements and asset liability matching constraints with a clear risk appetite. We analyze the mid to long-term interest rate trends to navigate through the cycles. As for tactical asset allocation, the company tactically deviated from SAA and rebalances within the risk tolerance to capitalize on market opportunities. For fixed income investment, the company sees the allocation opportunities on investment on interest rate trends and the market supply of long duration bonds to improve asset liability matching conditions and allocated those select time deposit as a non-standard fixed income investment with stringent credit risk controls. For equity investment, we see both long-term core assets, attractive valuation, and short-term trading opportunities closely monitor equity risk exposure with a disciplined rebalancing strategy, so as to actively invest with the controlled exposure. In terms of underlying managers, allocations were managed by China Life, a dedicated investment team and external managers with distinct styles and complementary strengths. The external managers' strategies were clearly defined to give play to their expertise. For the first half of the year, the investment asset continued to grow, amounting to CNY 3.3 trillion, 6.4% higher than the end of last year. The allocation towards term deposit decreased from 18.02% to 16.84%, and proportion of bonds decreased from 42.2% to 40.95%. Stocks and other funds, excluding money market funds, increased from 9.03% to 10.79%, and the debt-type financial product increased from 11.32% to 11.43%. The company accurately sees market opportunities in making appropriate allocations. In terms of net investment income, the allocation to fixed income products and high yield stocks in advance help to mitigate the impact of lower interest rate trends and net investment yield remains stable at 4.66%. In addition to continuously optimizing long-term fundamental allocations, the company made timely adjustments and proactive steps to effectively capitalize on the rise of the domestic A-share market. The gross investment yield and comprehensive yield increased by 200 and 464 BPS respectively compared with the first half of 2018. The company have always maintained a prudent investment strategy of our asset-type assets with high quality with well-controlled risk. By the end of first half, over 95% of the company's credit funds had a AAA rating for a total amount of non-standard fixed income assets exceeded CNY 430 billion, with over 98% of them having AAA excellent rating. The company's newly added non-standard fixed income investment exceeded CNY 40 billion with over 99% of them having AAA rating. I'd like to hand over to Vice President, Chief Actuary, and the Board Secretary, Li Mingguang, to present the company's embedded value. Thank you, Mr. Zhao. Please allow me to elaborate on China Life's embedded values during the first half of 2019. As of June 30th, the company's embedded value reached CNY 886.8 billion, an increase of 11.5% compared with the end of the last year. Of which, the adjusted net worth increased by 15.6% amounting to CNY 446.3 billion, while the value of the in-force business after the cost of required capital increased 7.7% to CNY 440.51 billion. After considering the diversification effect, the company's value of in-force business after the cost of required capital was CNY 472.8 billion, and embedded value was CNY 919.09 billion. About the movement of embedded value, the graph shows the change in embedded value from December 31st, 2018 to June 30th this year. The major changes included the expected return reached CNY 32 billion, reflecting the total of the expected return of the covered business, unexpected investment return of the net asset in the first half of the year. The value of the half year's sales amounted to CNY 34.57 billion. Operational experience variation, CNY 1.2 billion. Investment experience variance was CNY 26.26 billion. Methodology and model changes, CNY 14 million. Market value and other adjustments, minus CNY 1.39 billion. Exchange gains, CNY 38 million. These are the main changes. Let's move on to the value. In the first half of the year, the company's value of the half year sales amounted to CNY 34.57 billion, up by 22.7%. The value of the agent channel amounted to 30.38%, representing 87.9% of the total value. The value of the bancassurance channel amounting to CNY 4.04 billion, representing 11.7% of the total value. The value of the group channel amounted to CNY 152 million, representing 0.4% of the total. in the first half of 2019, the company proactively optimized its business structure and lifted the percentage of the first-year regular premium, 10-year or longer first-year regular premium, and designated the protection-oriented premiums. As a result, the new business margin was significantly enhanced, of which the agent channel's new business margin increased to 36.6%, up by 4.2%. Bancassurance channel's new business margin increased by 21.5%, up 7.9%. Thank you. Okay. Thank you. We will now take questions. Due to time constraints, please limit your questions to no more than two. We will be very grateful if you can tell us your name and institution. Let's begin with Hong Kong. Please. Good morning. From CSCC, Ken Dan. Two questions. First to Mr. Su. From the beginning of the year, you have announced that you are streamlining the human resources and organization. Could you give us more details about this? Second to Mr. Li. In the first half of the year, all the metrics on human resources and quality of the people have exceeded the market expectation in terms of productive sales force per capita and NBV productivity. Within such a short space of time, I believe you have achieved what other companies took more than two or three years to achieve. What did you do exactly to achieve such a significant improvement of your productivity? First, about your first question. As I said, China Life carries out reforms through the Dingxin Project. We actually change every aspect of the company. We plan to take two to three years to execute this project and achieve all the intended results. Over the past month since the initiation of the project. In the second half of the year, we would like to change the structure of the headquarters and the branches and optimize the workforce and have the people properly structured. In terms of position, we would like to strengthen the headquarters and streamline the provincial offices, optimize the municipal level, and make the field offices more dynamic. That is our overall approach. In terms of the current status, this project is steadily in progress. In the headquarters, we aim to strengthen the decision-making, commanding, professional support, technology empowerment, and the risk control as the four key functions and capabilities of headquarters. We'd like to strengthen the front line, optimize the mid-office, and streamline the back end. At the front line, the number of functions increased from six to eleven, and the proportion of front-line employees versus the total workforce is going to be changed from currently 24% to over two years, up by 10% and reaching 34%. The composition of the front line will be characterized by three centers. One is the integrated individual insurance and a much diversified financial service and investment management center. For the center of individual insurance, previously, there was a department of individual insurance. It is expanded to six departments. More specifically, marketing, upsell, planning, operation, education and training, and comprehensive finance are the new six departments for individual insurance. For diversified service center, it is clear that it is necessary to develop the synergy among the diverse segments, namely group, bancassurance, and fund distribution will be more synergized. In terms of the investment management center, there are six teams. According to a market-oriented approach, we structure the teams and staff them and make them more market-based, including the performance review system, appointment, and utilization of talents, and fundamentally, the performance review systems as the bottom line. So far, the progress is smooth. In the middle office, in terms of the IT operation and products are the three key segments to talk about. For technology, we will increase the supply ability of technology and develop the sub-center for R&D. We have one R&D center, and in the future, in appropriate regions, we are going to develop R&D sub-centers. We will also set up the product system and explore the technological innovations. At the same time, we will also increase our ability of incubation. For the operational segment, we will optimize the current functions and develop proactively customer-centric integrated service systems, and develop the reformed operational model and increase the consolidation of shared services. Of course, for the product segment, we will optimize the departmental functions to more for market survey and segmentation and product operation and make our product development more agile. For the offices at or below the provincial level, according to the orchestration of the head office, the plan is under review and approval. I know I cover many aspects, so I just want to give you some highlights like this. For your further interest on operation and technology and other sectors, if you are interested, you have Ms. Yang Hong for operation and Mr. Ruan Qi for technology. Further questions are welcome. Thank you. Just now, you asked essentially about how we make the team both bigger and better. What are the tips? I am not in charge of sales directly, but I do have a feeling for the pulse of sales and the products. So let me venture to address it at first to be added by Mr. Zhan Zhong if my answer is not complete. You ask a very pertinent question. Over the years, the growth and the quality improvement of the sales force has always been a focus of the industry. There are two parts of this. First, for the older sales reps, how can we keep them vigorous? And also for the newly added colleagues, how can we grow those new sales force? So these are the two key challenges for the major insurers. China Life has planned ahead. We have always been advocating a principle in terms of enhanced quality and quantity. That is not going to be merely a slogan. How can we make it happen? In terms of development of sales force, we need to have both the hardware and the software. In terms of hardware or the tangible initiatives, we have been setting up the investment in the provincial, city, and county level sales force, especially the hardware and software for marketing. At the grassroots level, the infrastructure and software have been very well developed. If you are interested, you are welcome to visit us in China Life. You will be able to see our hardware and the software at workplace. You have minister right here, so he can also address your questions. We have done a very good job in this regard. Second, with the hardware and the software, education and training must catch up. We have intensified the development of the trainer team and adapt them to the differentiated systems for different levels of sales force. Because of the improvement of both hardware and software, the young sales personnel, after joining us, can feel proud and be productive. This is a key enabling condition. With the team and the training in place, there must be also products for them to sell. We have always been advocating that all the supporting functions must take a step ahead to make sure insurance products and services can be well integrated within the shortest possible time. The services can be delivered to customers in an integrated way through comprehensive support. They will be delivered to our salespeople in a suite. From the beginning of the year, we would like to highlight value and achieve diversified development. Under this principle, we diversify our development so that our business is not only long-term saving, but also protection type products. Another dimension of the diversification of our business is that for all levels of colleagues, there must be their performance matrix. We do not rely on just one product. If in one quarter or one half of the year, a large number of people cannot earn revenue, they will not stay with us. What we have done very well recently is that the overwhelming majority of the people have their own revenue, then they will settle down and stay with us. From products to services, to hardware, software, and infrastructure. We have been working on those fundamentals, then we have nice results in the middle of the year, naturally. This is what I would like to say. Mr. Zhang, do you have anything to add? Okay, let me make a few additions since people are so interested. Do you have something to add? Yes, I do have. Let me report more information to you. Just now, Mr. Li gave you a presentation about the first half of the year. Indeed, the sales force effectively made achievements. Compared with the market, we are somewhat again behind, and this is what we are working towards. There are three messages. First, we have been long focusing on developing our team by enhancing both the quality and the quantity of the sales force. While growing the quantity, we still maintain the improvement of quality. Of course, the priority may differ across different stages. The improvement of our quality has to be based on the expansion of the quantity or the size of the sales force. This is our long-term policy for the sales force development. Secondly, if you have come here often, you will remember that we have been working on the transformation and upgrading of individual insurance. After doing that for two or three years, as you ask, we have made breakthroughs recently. Team development is a long-term task. In recent years, after three or four years, we can only say that we have achieved initial results. The transformation and upgrading involve many aspects. In terms of the sales force development, as I noted here last time, there was just several parts of it. Recruiting, development, retention, and management. In terms of recruiting, we need to carefully select the high-caliber talents. In terms of the age and aptitude, we need to be careful. In terms of cultivation of new colleagues, we have indeed done a lot. In terms of promotion through our quality management and assistant management, we have made a lot of efforts. Our retention rate in the first half of the year is higher. Secondly, we have long been committed to the transformation and upgrading, which have yielded early results. This is not our target, of course. In terms of our new strategy, in terms of integration, I believe we need to focus on value and individual insurance. In terms of the new centers, we would like to focus on the grassroot level as a center. In our performance review and investment, we try to revitalize the grassroot level, especially in terms of workplace development. We invest a lot of resources, including strategic resources, to better the workplace, as Mr. Li said. In this way, we hope that the managers will be able to operate more autonomously. Thanks to such strategic core. While focusing on value this year, we also increased our retention rate. As you are well aware, the commission for the designated protection-oriented products is higher. That helps to stabilize the team. In terms of products, we differentiate by different categories and levels. More of the sales people will earn revenue, and they will stay with us. If they perform, they will earn revenue. This is the experience we have achieved in the first half of the year. Thank you for your interest. You know sales force development is an ongoing job for the long term. We are going to work even harder to do a better job so that we can reward our shareholders with even better results. That's all of my additions. Thank you. Back to Beijing, please. The lady in the front row. Okay. Thank you for your presentation. From Haitong Securities, my name is Asim Tin. Two questions from me. First, could President Su briefly address the following question. This year, in term profitability, investment, and embedded value, China Life has been growing much faster than the industry. Is this for temporary, or it's going to be sustainable in the next 3-5 years? Can we expect China Life to grow better or quicker than the industry? Do you have a forecast or target for the improvement of embedded value in the next 3-5 years? Second, about investment. It seems that the global economy is entering into recession and a downturn of the interest rate, and the yield is down to 3%. How are you going to keep cope with the downturn of the long-end yield? Is it possible that you will fail to hit the target of 5% of NBV? What are you going to do for the allocation of investment? Thank you very much for your question, which is highly important, and it's also a core topic for us. Let me address your question in the following way. The performance we have achieved this year is a result of efforts of all, and it also is attributable to our respect to the dynamics of marketing and of value. We stick to high-value development, focus on value, and constantly create value to reward our shareholders. This is a long-term target that we commit ourselves to. Second, in terms of future development strategy, it is for sure that such a performance is not going to be for a temporary manifestation. Indeed, we get good results in the first half. It is possible that because of the dynamics of the economy and the regulatory policy, there can be some deviations. But beating the market, holding on to high-quality development, and sticking to high-value development will not change. You asked about many technical issues. Our chief actuary, Mr. Li, will be invited to answer this. He is more authoritative than I am. Just now, Mr. Xu talked about the dream. Let me address your technical question. The core of the revitalization is growth. We strive for high-value development. We will improve our asset liability management. So we have duly prepared ourselves for that. Second, we manage insurance risks. This is always our strength. We develop the human and other resources. We also stick to the value-first principle. Mr. Su, we will strive to beat the market. This is, of course, what we want to achieve. But profit is exposed to short-term factors, and can fluctuate. So we cannot guarantee you that we will go beyond the market. As a large insurer, we ask ourselves to develop internal value. This is what we are up to. This year, the investment return is actually subject to the volatility of the interest rate volatility. We got a yield of 4.66%. That shows that we did a decent job, and it is also a result of the operation we made in previous years. This is my first addition. Second, about the declining 10-year yield, will it affect our assumption of 5%? Over the recent days, or even the recent six months, I've been always asked about it. What I can tell you is my initial conclusion. So it has not come to the time to adjust the 5% assumption. Secondly, don't be too worried. So we have a maturity of 12 years, and for other companies, the maturity is not long either. You seem to ask about something of a remote future. Interest rates fluctuate. There is a long-term corridor for interest rates, so we need to work together and keep watching. This is what I can share. I would like to discuss investment. In the first half of the year, the company achieved a very good investment return. Recently, we have been also assessing the trajectory for the second half of the year and beyond, and design our investment strategy. As you said, we do have felt the mounting pressure on the downward trend of the interest rate, and we have also felt the pressure on our investment. We have actively prepared ourselves for this. There were two commitments and five responsive policies. The first is the dedication to the matching between asset liability. Recently, CBIRC has issued the administrative rules on this, and this is a topic that we have been committed to. And the second, we commit ourselves to long-term investment, value-based investment, and prudent investment. For the five initiatives, I'd like to briefly outline them as follows. First, in terms of fixed income products, we do two things. First, one is to work on the opportunities of allocating to the underlying asset. At appropriate window of time, we will increase the long-term and the super long-term allocation to the government bond of the central government and local governments. Recently, the 10-year yield is declining, and we will choose the appropriate time to acquire super long-term bond to improve our asset liability match. In terms of fixed income, when the interest rate is generally declining while allocating to long-term bonds, we will also selectively choose preference equity and standard fixed income. Secondly, in terms of equity, in open market, we also keep to two principles. First, in appropriate or low range of valuation, we will actively buy the high dividend core stocks. Meanwhile, for open market equity investment, we have strict restrictions on the means by rebalancing. We will also actively control the risk exposure in open market equity investment so as to reduce the volatility of the portfolio and the impact on the current period return. In alternative investment as a third initiative, we will proactively innovate our investment strategy while keeping the risk manageable. We will carefully select the good quality alternative investments. On one hand, we can achieve steady cash flow and dividend, and we can also access the premium of liquidity by investing in alternatives. When the interest rate is declining, we can pull up the return of the portfolio through alternative investment. We also want to do a better job in managing investment managers through performance review and day-to-day communication. We will intensify the performance management of investment managers so that they can do it better to implement our investment strategy. We need to also give play to the strengths of internal and external investment managers. Last but not least, we also carefully guard against risk. There have been recently a lot of default cases in the market, so we pay close attention to risk management, including credit risk, market risk, interest risk. For all of them, we will take more strengthened risk management measures. By long-term measures, we will effectively manage risk. By these means, we are confident that through asset liability management and the enhanced and optimized portfolio and risk management, we can constantly improve our investment return. Next question, back to Hong Kong, please. From Goldman. My name is Kim. Two questions from me. First about the agent team, second about product. For agents, in the first half of the year, the number of expansion is robust. Where did you get the new agents? Which cities, which regions? Tier 1, tier 2, or tier 3 or 4 cities, or even counties and below? On slide 13, you categorize your agents into a subcategory of upsell, and that team grew much faster than the overall. It hits a growth rate of 20%. Why did you grow the upsell team so quickly? What is your motivation? Second, for products. In the second half of the year, what specific product plan do you have? Other insurers also announced their product plans for the high, mid, and low-end market. Comprehensive plans have been drawn up by other insurance companies. It's also that you would like to make sure the agents will have product to sell. So what is your product strategy for the second half? Mr. Zheng Zhong, could you address the first question, and Mr. Li Mingguang, could you address the second one? In my additional remarks just now, I gave you some information about the team development. You asked about it. Building on the answer I gave, I would like to give you more elaboration. The first question is about the source of new agents. Over the years, we have been working on both quantity and the quality of the sales force through the transformation, as I said, in the course of growth. Recruiting, cultivation, and management and retention are the four steps. Recruiting is crucial. In terms of growing the quantity and the quality of the sales force, we have been raising the bar for recruiting in terms of education, age, track record. These are the criteria of our selection. In every company, there's a hope to keep the bar high for recruiting, and we are moving this to the bank. Where are the sources? This is what you ask about. For the company, in large and the middle sizes of cities, we prioritize our efforts of recruiting. These larger cities are the main battlefields of insurance companies. Of course, they are also main sources of our new agents. China Life has its own strengths in other markets, so we will solidify our advantages in the county level. We take a balanced approach between large cities and the small cities. You also asked about the upsell team. In the previous briefing and the open day, we mentioned this team. We built this team mostly for the urban areas. Our purpose of developing this team is to attract high-caliber talents, especially those well-educated and appropriately aged. We hope that in the larger cities, we can reach out to the high-value customers or the high-net-worth ones. The team is still growing. As I said, the sales team cannot be developed over time or instantaneously. There is a delay in between efforts and achievements. In recent years, this team expands quicker than the overall sales force. In the second half of the year, we will further intensify our emphasis on this team. We hope that by developing this team, we will not only be able to contribute more value to the company, but also developing more high-net-worth customers. Let me address your second question. In the second half of the year, we would like to increase more focus on value, integration of the team, and differentiation. This is overall guiding principles for our products. More specifically, do more protection-oriented type and also support it with long-term saving. Okay. Beijing, please. After the questions from Beijing, moving back to Hong Kong. On the phone, there are 100 analysts and investors. If there are questions from online, please raise them. We haven't got any. I found that during this briefing, many people told us you have wonderful performance, I have no question. The share price is also pleasing. We look forward to your questions, and they can help us grow better. You, please. Thank you. From RBC, my name is Andrew. The company keeps on emphasizing on value. The single premium growth is also significant, even larger than the term or regular premium, mostly from group channel and others. I would like to ask, the value from this channel is lower. Is it possible to make some short-term changes? Mr. Li Mingguang, please. I would like to clarify your question. In terms of one-off premium or a single premium, which slide are you talking about? The group under other channels. Will there be any changes? You are asking about the short term. For short-term business, you made a very good observation. There are several types of short-term products, group, individual, and diversified. For different kinds of business, we adopt different managerial measures. For the highly competitive sectors, the company would focus on increasing efficiency. For diversified products, the company will intensify sales efforts so as to further increase the gains from the group insurance. Group channel is not only measured by profit. More importantly, the other gains need to be measured. In terms of the first half results, there has been a clear improvement versus before. Based on the requirement of the revitalization strategy, the improvement measures for group channel will be launched, so we can then see the results at the end of the year. We got one question from conference call. Founder Securities, please. Thank you. Two questions. First, about the products. Previously, you mentioned that the protection type of products grow rapidly, and so has the human resources data for that. What is the percentage of protection products? You said six out of our 10 top products are of protection, but actually first five are long-term savings. Are there any variance of definition? What is your position and the growth target for protection type products? You are talking about the diversification effect of embedded values. The product is not put into it. For the other companies which do a factor in diversification effect, the value can be huge. Although that is not put into an embedded value, you can still see a very big diversification effect. With such a diversification effect, what is the reason for that? What is the situation last year? Could you make a comparison? I did not hear you clearly. Could I recap your question? I guess I will start with your question. Although I did not hear you clearly, let me try to guesstimate what you asked about. You asked about the diversification effect of embedded value, why it was not reported. In my slides, I purposely mentioned the diversification. It was CNY 889 billion, and the diversification factor was CNY 32 billion. Considering the embedded value, considering the diversification effect will be CNY 91 billion. Although the diversification effect is huge for us, we do not separately calculate it. The reason is the following. Diversification effect happens at very different levels and changes year-on-year. For analysts, the best is to track one company continuously rather than jumping from A point to B point when they assess a company. Otherwise, there will be deviation or variance in their assessment. That is why we did not consider diversification effect. This time we disclosed it to you because we want to show you that China Life has the biggest spectrum of products and region coverage. We also have the longest history, so diversification effect is huge for us. If you would like to use it as a base scenario, I can do more fact-finding and consider whether we can take it as one base scenario. This is about your second question. Coming back to your first question, what is the target ratio of protection products for designated protection-oriented business? We call it the same because we consider the timing and the risk profile, controllability, capital consumption, and the profitability of the products. We do it through a comprehensive analysis. Our target is the more the better. Thank you. Due to time constraints, let us move on to the last question. Anyone from Beijing? Third row. The lady, please. Thank you. From Huaxi Securities. My name is Hong Jing Ping. My first question is about a minor change of actuarial assumption. This time, your interest rate for the reserve of non-participating portfolio, there is a dip. But actually, the government bond yield will not go down until the end of the year. So that caused your reserve to be provisioned CNY 2 billion more. Why are you moving earlier than the benchmark rate? Why did you reduce your interest rate for reserve earlier than the market? Second, you also made an active bid in the market. So you invest into other financial institutions and the non-financial industries in long-term investments. In middle term, expanding equity investment is the necessary choice to cope with the declining interest rate. For long-term investment, have you considered synergistic investment in the industry or long-term plans, or are you simply doing it for short-term and trying to get high dividend out of your investment? Vice President Li, first question, and Vice President Zhao, second question, please. Let me address your first question. Based on the current accounting treatment, the assessment interest rate of traditional products is based on the government bond yield curve plus premium. You made a correct observation. For the basic 750-day moving average, there is an upward trend, but the premium is showing some signal of downward change. We have several considerations for this. First, we would like to reflect interest rates that is close to our liability. Second, we would like to reflect the evolving premium in the capital market. In total analysis, the overall assumption of China Life is CNY 2 billion in terms of impact on the reserve. Let me take your second question. Recently, you must have noted that in the secondary market, we have made some operations or transactions. In the open market, our overall ratio is capped internally, so we remain prudent. In the low range of valuation, we actively adjust our investment portfolio. In the secondary market, we will choose some products with stable profitability and dividend payout. Some stocks meet the regulatory requirements. Based on such requirements, we performed the relevant disclosure procedures. Thank you. Thank you all for attending the China Life 2019 interim results briefing. If you have any questions, please contact our IR team at any time. Thank you.