Now we will begin the presentation on Hanwha Life second quarter fiscal year 2026 earnings results.
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Good afternoon. This is Choi Sang-wook from the IR team at Hanwha Life Insurance. Today's earnings call for the first half of 2026 will proceed through consecutive interpretation, and the presentation materials are available on our IR website. Today, CFO Yoon Jong -guk will first give a presentation, which will be followed by a Q&A session. Let me now hand over to our CFO.
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Good afternoon. This is CFO Yoon Jong-guk. Thank you for joining our earnings presentation. Let me begin the report on Hanwha Life's earnings for the first half of 2026.
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Page one, first half highlights. In the first half of 2026, we delivered solid financial performance across all areas of our business, both insurance and non-insurance, driven by strengthened competitiveness in our core business and continued diversification of our business portfolio. First, new business CSM for the first half reached approximately KRW 1.3 trillion, marking the highest first half level since the adoption of IFRS 17, supported by our profitability-focused sales strategy. New business profitability also improved to 11 x. Consolidated net income increased to KRW 904.5 billion, driven by a more than 100% year-on-year increase in standard loan net income, as well as strong earnings growth at our major domestic and overseas subsidiaries. I will walk you through the details starting from the next page.
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Page two, new business CSM. New business CSM was KRW 610.9 billion in the first quarter and KRW 689.2 billion in the second quarter, bringing the first half total to KRW 1.3 trillion, up 40.5% year-on-year. In terms of profitability, whole life insurance profitability increased to 10.5x in the second quarter, supported by increased sales of whole life products with medium to long-term premium payment periods. As a result, overall new business profitability for the first half reached 11 x, an improvement of 3.8 x compared to the previous year. In the second half, we will continue to strengthen product competitiveness and profitability by further expanding sales of medium to long-term whole life products and launching new products designed to lead the dementia and long-term care market.
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Page three, sales force. The number of financial consultants continued to grow in the first half, led primarily by Hanwha Life Financial Service, reaching 38,092. The 13-month persistency reached 90%, the highest level since the introduction of the new system, while the 25th month persistency also improved to 77.4%, continuing its steady upward trend. Going forward, we will further strengthen our distribution channel competitiveness by leveraging our industry-leading brand strength and enhancing our sales support infrastructure through the AI STS system and other initiatives.
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Page four, in-force CSM. In the first half, in-force CSM reached approximately KRW 8.9 trillion, an increase of KRW 214.3 billion from the beginning of the year. This was driven by a solid KRW 1.3 trillion inflow of new business CSM and reduced experience variance adjustments despite the application of new guidance for loss ratio and expense assumption. Going forward, we will continue to grow our in-force CSM over the medium to long term by improving persistency rates and further refining our assumption management.
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Page five, consolidated net income. First, standalone net income increased by 183.9% year-on-year to KRW 510.2 billion, driven by improvements in both insurance service results and investment results. Consolidated net income also rose by 96% year-on-year to KRW 904.5 billion, supported by broad-based earnings growth across our major subsidiaries, including KRW 215 billion from Hanwha General Insurance, KRW 56 billion from Hanwha Investment & Securities and KRW 103 billion from overseas subsidiaries. Meanwhile, net income attributable to controlling shareholders, reflecting our ownership stake in the subsidiaries, increased by 119.8% year-on-year to KRW 771.9 billion.
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Page six, insurance and investment profit. Insurance profit for the first half amounted to KRW 285.3 billion. Looking at the quarterly breakdown, claim experience variance, expense experience variance and losses on onerous contracts all improved compared to the previous quarter. Investment profit increased significantly year-on-year to KRW 354.8 billion, driven by steady growth in interest and dividend income as well as solid performance for alternative investments.
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Page seven, financial performance of major subsidiaries. Supported by broad-based earnings growth across domestic and overseas subsidiaries, their combined net income reached KRW 501 billion in the first half, continuing the steady upward trend since 2023. The earnings contributed by overseas subsidiaries also increased to 11%, driven by continued business expansion across regions and markets. Going forward, we will continue to strengthen our earnings generation capacity by improving subsidiary profitability and expanding synergy with Hanwha Life Insurance's core operations.
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Page eight, asset management. We maintain a well-balanced investment portfolio comprising domestic bonds 50%, overseas securities 20%, and loans 13%. Despite heightened market volatility, including rising interest rates and exchange rates, as well as increased uncertainty in the equity markets, our investment yields stood at 3.34%, up 14 basis points from the end of last year.
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Please refer to the slides on page nine and 10 for details on our bond and loan portfolio. Next is page 11. K-ICS ratio and duration gap. Despite the introduction of new actuarial assumption guidelines, our K-ICS ratio is expected to reach 167%, up 9.5 percentage points from the end of last year, supported by an increase in available capital resulting from higher earnings and rising interest rates. Assets and liability duration sit at 11.36 years and 10.1 years respectively, both shorter than in the previous quarter, resulting in a duration gap of 0.93 years. Going forward, we will continue to manage our capital adequacy on a stable basis over the medium to long term by increasing available capital through profitability focused improvements to our business fundamentals, while also working to reduce required capital. This concludes our first half 2026 earnings presentation.
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We will now start the Q&A session.
[Non-English content] Now Q&A session will begin. Please press star one. That is star and one. If you have any questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two. That is star and two on your phone. [Non-English content] The first question will be provided by Lim Hee-yeon from Shinhan Investment & Securities. Please go ahead with your question.
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Good afternoon. First of all, I appreciate the company's strong earnings performance. I have two questions. The first question is related to a news report that was out last weekend related to the possible change in the surrender value reserve framework. Assuming that this proposal is actually put into practice, if you want to think that it will be applied from the end of the annual book closing period, then it poses a question related to what the distributable income will be and how it will be returned to the shareholders as a result of that change.
Assuming that the proposed plan that was reported in the newspaper is actually executed, I'd like to hear from Hanwha Life what its plans are specifically for this end, and how it intends to operate its shareholder return policy. Moving to my second question, this is related to your Q2 CSM adjustment, which has actually been affected in a significant portion, and this is also related to the application of the actuarial assumption guidelines. Could the company give us a breakdown with respect to the specific impact that such guidelines have on the company's CSM performance?
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This is Kim Dong-hee from the Finance Team, and I will answer your first question. Recently, there was a report related to the reserving ratio of protection changing to 25% for the savings insurance, 35%. This is designed to rationalize this part of reserving rates. However, regarding this report, the financial regulator has come out to say that there is nothing confirmed or finalized in relation to the update to the relevant framework. In this respect, assuming that we are now able to apply 25% for protection products and 35% for the savings products, then if this change does take place, then Hanwha Life will be able to secure sufficient distributable earnings income as a result of this change.
However, I do want to stress that this matter is not confirmed, and as such, I believe that it is too early for us to comment related to our dividend or prior policy. When we get better clarity related to how the framework will be changed, then I believe that it will be the right time for us to come back and talk about our dividend plan.
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This is Kim Jun-il. I am from the actuarial team, and I would like to answer your second question related to the impact the actuarial assumption guidelines are having on our CSM adjustment. Related to the actuarial assumption guidelines for Q2, we could talk about two major impacts. One is related to the change in the actuarial assumption, which had an impact of KRW 200 billion for the CSM adjustment, and the other was the indemnity RA change. That amounted to KRW 40 billion for the CSM adjustment. In total, the CSM adjustment amount came to KRW -240 billion.
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To give you a detailed breakdown related to first, the KRW -200 billion portion, this is related to the change in the notes and also specifically for the actuarial assumption change. That amount came to KRW -120 billion, and for the other portion, which is the balance of KRW -80 billion, this is the reversal of losses. The other category is recorded KRW -40 billion. The detailed breakdown is that there was an RA increase of KRW -70 billion. However, due to the volume change, there was KRW +30 billion effect also put into the calculation.
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In respect to the impact regarding the KRW -120 billion, if you take into consideration the company's insurance claims experience variant, and also for the KRW -80 billion, the company's large absorption capability for the variable insurance, we believe that this change is actually quite positive for the company in the mid- to long-term horizon.
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I hope that sufficiently answered your question.
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Thank you.
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Thank you. We will now take the next question.
[Non-English content] The following question will be presented by Heew on Choi from Morgan Stanley. Please go ahead with your question.
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Good afternoon. I have two questions. Related to the first question, in respect to the quarter-on-quarter increase related to your K-ICS ratio in the second quarter, would it be possible for the company to provide the breakdown regarding the K-ICS movement? Vis-a-vis the 10-year government bond, what is your K-ICS ratio sensitivity? Related to the end of Q2, what was your Tier 1 capital ratio? I would also like to hear from the company what you expect to report in terms of the year-end K-ICS ratio as well as core capital K-ICS ratio.
Moving to my second question. In this earnings presentation, the company was able to give us a detailed breakdown related to your consolidated earnings. I would like to get a little bit more information related to the earnings from your overseas subsidiaries in the mid- to long-term. If it is possible, could the company share possibly your overseas subsidiaries' expected performance in the mid- to long-term horizon? Could you please provide that guidance?
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This is Park Su-won from the Risk Management. Let me answer your first question. Compared to March, our June K-ICS ratio was up by 4.9 percentage points. To look at the breakup, there is a positive factor which was the higher interest rate as well as the higher exchange rate, which attributed to +4 percentage points increase. The new CSM also contributed to the 4 percentage points increase as well. The earnings gain and capital gain both contributed to the 3 percentage points increase as well. We also had a negative factor, meaning that due to the actuarial assumption guidance, there was a -2 percentage points decline, and also related to other types of risks in the insurance and the credit market, that is -4 percentage points.
Moving on to your next question related to the interest rate sensitivity, we can do the sensitivity analysis by assuming there is a movement of 10 basis points, but you have to look at the interest rate for the domestic market versus the overseas market. Assuming that we're looking at the domestic market and the interest rate goes up by 10 basis points, then our K-ICS ratio will go up by 1 percentage point. If you are assuming that for the overseas interest rate, if it goes up by 10 basis points, then it has an offset of driving down our K-ICS ratio by -0.6 percentage points. Basically, if you do the combine for the domestic as well as overseas interest rate movement by 10 basis points, then that sensitivity will equate to +0.4 percentage points for the K-ICS ratio.
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Just to follow up on some other points that you asked in your first question. For Q2, the expected Tier 1 capital ratio, and we believe that it could actually slightly decrease in June compared to March. Despite the fact that we had higher rates and we had actually greater earnings, we also had greater, we call it, capital requirement as well. As such, we are currently in the process of closing the June numbers, and so once this process is completed and we have a confirmed number to present and the breakdown, we will make sure that we have the IR team communicate this to you.
The last part of your question related to our target K-ICS ratio at the year-end, we hope to be above 165%, and for core capital K-ICS ratio, our target is more than 60%. In order to achieve this, the company has a detailed plan in place. For example, we will be making sure that there is a tight management of the claim experience areas of ratio as well as applying the actuarial assumption and also on the area for the new business as well as taking out the co-insurance. The company will make every effort to minimize volatility as well as the risk charges.
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This is Nam Koong-hoon from the overseas business. You asked about the performance related to our overseas subsidiaries and our expectation for their performance in the second half. I would like to mention that in respect to the performance of our overseas subsidiaries, they were able to make a contribution of cumulative net income increase of KRW 130 billion, representing 11% of the consolidated net income for the company. This is a result of the effort that we have put in respect to continuously diversifying our portfolio as well as the business lines and also the regions. We believe that such outcome is a result of the subsidiaries now making tangible progress in their performance.
This is not only for the life insurance business subsidiaries that we have. The newly acquired non-life businesses also have been performing very strongly. More specifically, I would like to also mention that for Vietnam, they were able to post insurance and investment income of KRW 170 billion, and that takes them to pre-tax earnings of KRW 41 billion operating profit. The net income is KRW 32 billion. We also have made sure that in Indonesia, for Nobu Bank, they are doing their business mainly based on the mortgage product as well as interest income, and Nobu Bank was able to generate the operating income of KRW 37 billion and net income of KRW 29 billion.
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Continuing on the components that we have seen in the first half, our overseas affiliates will continue to make sure that they are able to drive qualitative growth and profitability, and at the same time minimize their global volatility that we will see.
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We believe that it's very much important that the companies are able to achieve top-line growth, but at the same time, they are contributing to the ecosystem that we are actually trying to build out. In 2026, we set a goal for their pre-tax operating profit to be KRW 200 billion. We are well above the target, and we believe that this target that we set out for this year will be more than achieved. For the 2030 target, we believe that we are also going to be able to achieve the KRW 304.1 billion target. When this happens, then their contribution to the consolidated earnings will far exceed the current level of 11%.
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In the second half, we'll make sure that we continue to drive this growth from across for the overseas business to be able to continue to show very strong earning performance. At the same time, continue to identify promising opportunities overseas.
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I hope this answers your question. Thank you.
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We'll move on to the next.
[Non-English content] The following question will be presented by Seol Yong-jin from iM Securities. Please go ahead with your question.
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Thank you for this opportunity to ask a question. I myself also have two questions. The first question is related to going back to what we discussed, the actuarial assumption having an impact of KRW 240 billion. I f we think about the potential for quarterly BFA impact of KRW 700 billion, we get to then that will be around KRW 470 billion won. I would like to understand if there were other factors. I can assume that there were some when you were recording losses, but I would also like the company, if possible, to comment on other factors contributing to this amount. There is also a discussion related to the change that would happen to the simple trend actuarial assumption as well. Has the company done any internal analysis on what the impact will be if such an assumption change were to take place?
I'd also like to follow up on the reversal of losses on onerous contracts. Was this as a change of the framework, or was there another factor that has contributed to the reversal of the losses on onerous contracts? Moving to the second question, this is related to the increase that we have seen related to the current revalue reserve, which actually grew slower than the previous quarter. I would assume that this is also somewhat tied to the full usage of the retained earnings portion. Is it possible for the company to comment on what the actual increase has been? And when you are talking about the expected capital Tier 1 ratio at year-end, did you also factor this point as well when you were giving us your guidance?
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This is Kim Jun-il from the Actuarial Team. R elated to the current quarter, I would like to walk you through the detailed breakdown. First, in respect to the outcome that we have mentioned, this is inclusive of the updated framework and more specifically related to the actual amount per item for the experience adjustment that amounted to KRW 592 billion. In respect to the performance impact of the CSM, that which is inclusive of the volume as well as the actual performance, that amounted to KRW 246 billion.
While we were talking about the KRW -240 billion, we have to look at these plus factors as well. We already mentioned that for the actuarial assumption change, that portion was KRW -120 billion. For the [inaudible], RA, and also the reversal of losses on onerous contracts, that amounted to KRW -225 billion. If we were to just carve out the impact from the change in the framework, that amounts to KRW -150 billion.
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Following what the CFO has stated during his presentation in the first half related to the experience adjustment, that amount was KRW 890 billion. The earnings effect was in the quarter KRW 240 billion, taking us to KRW 560 billion. Once again, related to the actuarial assumption change, that impact is KRW -120 billion. There are other adjustments that we actually roll up and can say is around KRW -250 billion.
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Lastly, related to the impact related to the reversal on losses on our contract, specific to the variable insurance, we actually saw a change in assumption which led to the CSM increase. Previously, we have recorded a lot of CSM loss, but this has now changed to a positive. As a result, we are able to recognize KRW 80 billion from the previously what we recorded as a loss for the onerous contract.
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This is Park Su-won from Risk Management. Going to your question whether or not we actually hit the limit with respect to earnings, yes, in Q2, there was some we expect to be related on limit. Once again, as we communicated to you, our year-end target for the core capital Tier 1 ratio to be above 60%, it is inclusive of it. We took into consideration of it and then were able to communicate to you that the company is targeting the core capital Tier 1 ratio to be 60% or higher. Thus we are working very hard to have very tight management related to claims experience, as well as to tighten our internal approval so that we are able to keep this target.
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I hope this answers your question.
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I have a follow-up question. Assuming that we can say that the limit region was not something that you needed to consider, what would be the actual amount related to the surrendered value reserve?
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This is Team Leader Park Su-won, and regarding your follow-up question, I would like to ask the IR team to communicate this to you separately. Next question, please.
The following question will be presented by Jung Jun-sup from NH Investment & Securities. Please go ahead with your question.
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Thank you for this opportunity to ask questions. I will ask two questions. One is specific to the current company's process of acquiring Acuon Capital. I know that this is a working process, but if possible, could the company share any progress updates and future schedule related to the potential acquisition? Moving to my second question, I would like to get a better understanding of the financial synergies that post-acquisition would create for Hanwha Life.
In talking about the K-ICS ratio, when you are communicating the K-ICS ratio, I'm just wondering whether or not the acquisition impact had already been factored in when you were talking about the year-end K-ICS ratio target. I would also like to get a better understanding of the company's plans post the potential acquisition of Acuon Capital and Nobu Bank. Is it possible that you're also looking into potential M&A opportunities onshore and offshore?
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This is Lee Seung-woo from the management planning team. In respect to your question, Hanwha Life had entered the tender to acquire Acuon Capital. This is in line with our plans to continue to diversify our business portfolio. After entering the tender, we were chosen as a preferred bidder. As such, we are currently in the process of discussing the terms related to the potential acquisition. The expected benefit that we tend to see for the potential acquisition is that, as you know, our portfolio has been mainly focused on the insurance and financial investment area. Through the acquisition, we'll be able to further diversify our portfolio, but also into capital finance. This will fundamentally help to improve the competitiveness of Hanwha Life.
As such, we believe that it is also going to be conducive to generating higher profitability and stabilizing our earnings performance as a whole. However, please understand that we are currently in the discussion related to the detailed terms and conditions, what the total acquisition amount will be, and what type of structure will be employed for this acquisition. Since all these matters are not finalized, it's not actually possible for us to comment in respect to specific numbers related to not only K-ICS, but also other financial profile-related matters. Lastly, I would like to confirm that the company, at this point in time, does not have any specific plans for M&A possibilities other than what we have just discussed, Acuon Capital.
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Hope that answers your question.
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Yes, thank you.
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Next question, please.
[Non-English content] The following question will be presented by Kim Do-ha from Hanwha Investment & Securities. Please go ahead with your question.
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Thank you for this opportunity to ask a question. My question is related to the CSM margin. In Q2, we actually saw an effect in new business margin multiple. You have communicated it and the improvement is related to the increase in interest rate and also increase in product mix. A s we look forward to estimating the company's performance for the second quarter, and as we also know that we also have that impact already in take for the actuarial assumption side, we want to understand better exactly how the company will be able to generate additional performance. I know that the company can work to continue to improve the product mix, but at the same time, there will be other factors that will not be so conducive. Could the company provide us with additional color or some direction as to how you plan to actually manage this area?
Moving to my second question, it is not really a question, but it is a suggestion. In respect to how we are going to see the increase in the net profit earnings, and at the same time, we want to also know that, of course, in the press media, we heard about the 30% reserve rate. I f we actually try to get a better clarity on what the distributable earnings will be for the company, and if we consider what the impact that the company will be carrying on its core capital, it's still very unclear for us to do a very detailed assessment of how the distributable earnings would look like and whether or not such earnings could be sustained in the long term.
The proposal that I have for the company is that if it's possible, can you actually give us some quantitative numbers, and possibly starting from the next quarter in your release, if you could communicate with the market related to detailed numbers and data, that would be very much helpful.
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This is Baek Jae-min from Business Management. To answer your question related to the CSM margin. As our CFO mentioned during his presentation, our core CSM improved to KRW 1.3 trillion, and we actually been able to see sequential increase happening. We've seen an increase in Q1 and also in Q2 sequentially as well. This increase was driven by the fact that we were able to significantly increase the sale of longer pay whole life products, and at the same time we made some adjustments to the rate as well. As such, we were able to drive the increase in the CSM multiple.
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In order for us to continue to perform positively in the first half, on the whole life side, we were able to focus on improving the quality of our product portfolio by focusing on sale of whole life that have the medium to long-term premium payment period. At the same time, on the health insurance side, we are able to continue to improve the quality of our portfolio by focusing on the distribution of high margin riders.
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Thus, in the second half for the new business portfolio, we will make sure that we work towards increasing the CSM that we have seen positively increasing in the first half by fully mobilising our sales organization to focus on selling high margin products. Even if we assume the impact coming from the actuarial assumption guideline change, we will make sure that we will be able to continue to show positive gains in the CSM margins and multiple performance.
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This is Shin Chung-Ho from Product Development, and I would just like to follow up by saying that, of course, the application of the actuarial assumption guidelines, we know that it's going to have - 0.8 x impact on the multiple. However, in order to offset this, starting from July, we've been able to launch renewable new products and at the same time continue the trend that we have to continue to sell longer pay whole life products. This trend will continue to accelerate in the second half.
Catering to the demand from the customer, we will also be distributing new whole life products that will have the medium to longer premium payment periods. We will be backed by higher multiples that have higher profitability and which will make sure that we see our business portfolio improving with products that will generate high margins for the company. At the same time, we'll be backed by rate adjustments. Thus, we anticipate that the incremental multiple gains from these efforts would amount to 2x -3x , and thus we see that we'll be able to outperform what we did in the first half in the second quarter and meet the CSM target for the company.
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I hope this answered your question. We'll move on to the next question.
The following question will be presented by Won Jae-woong from Hanwha Life Insurance. Please go ahead with your question.
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The company name was incorrect. It's HSBC, and I have two questions. The first question is related to the widened duration gap that we see for the second quarter, which went up to 0.9. We could consider the increase as a result of higher interest rates, but even we factor higher rates, I believe that the company should actually manage the duration gap down to 0.5. For this end, could the company please share your duration gap management plan, how you plan to narrow this gap?
Moving to the second question, I also want to ask about the service surrender value reserve as well. The reserve amount is actually increasing faster than your earning amount. As we heard, you mentioned that you will continue to also increase the growth of new business this year. With the further increase that we can expect in the second half, I'm just wondering how you're going to be able to do this. Would you be looking into increasing the number of agents to support for the sale, or would the company change its shift and focus on margins and ultimately, be able to meet the target of the K-ICS ratio target of 160%?
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This is Park Su-won from the Risk Management Team. I would like to answer your question related to how the company plans to manage its duration gap. Compared to March, the June number that we posted, 0.5 higher than the March number, and the 0.5 can be broken down to a higher rate that attributed to 0.3 for the duration gap. The balance of 0.2 is related to the shift in our asset liability portfolio. We inspect here how much room that we have in terms of how our net assets are increasing. We can accommodate the current rates rise, and our net assets are still increasing.
However, if we were to assume that there's going to be even further hike in rates, then this will create a situation where our net asset side can decrease. Thus, we need to maintain a very flexible stance in how we actually invest and invest in fixed income in bonds. That's one thing that we're mindful of. At the same time, we also have to be prepared for the time when the rate is actually moving downward. Ultimately, we believe that for the time being, what we can say is that we are going to have a positive number for the duration gap. We can actually offset a certain portion, but at the same time, in the current environment, we have to say that we will have a positive number attached to the duration gap.
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Moving to the second question related to the management of the core capital ratio. As the company continues to have performance in the new business, as they come into the company, we see a required capital side, which is the denominator, increasing and being applied immediately. However, in order for us to increase the available capital, which is the numerator, we also have to understand that there's going to be a time lag. Basically, we have to go through an annual process of CSM release or CSM amortization, which will be reflected in retained earnings, then be able to actually apply it to our available capital and the capital. So, it takes time for us to work through this process.
For the company, as we see the regime taking effect starting from 2027, it is very important that the company exerts great effort to continue to improve its bottom-line performance so that we're able to minimize the burden we have on the required capital side. We have detailed plans that we have been executing towards that end. In more detail, we continue to have better management of the claims experience variance. We also continue to manage tightly the actual assumption. We also have activities related to ceding of the whole reinsurance portion to hedge against higher risk as well. At the same time, there is also a process where we are obtaining the approval for the internal models as well. Through these efforts, we hope to continue to minimize the capital burden for the company throughout this year.
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I hope this answered your question. We'll take the next question.
Currently, there are no participants with questions. Please press star one, star and one to give your question. If there are no further questions, this concludes Hanwha Life's earnings conference call for the first half of 2026. Thank you for your time.