Good afternoon. I am Kim Sung -jin from the IR team at Hanwha Life. Today's earnings call for the third quarter of 2024 will proceed through consecutive interpretation, and the presentation materials are available on our IR website. Today, CFO Lim Seok -hyun 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 Lim Seok -hyun. Thank you for joining our current earnings call. Please note that today's presentation was prepared based on K-IFRS. Let me now begin the report on the earnings for the third quarter of 2024.
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Page one is on earnings highlights. In the third quarter, Hanwha Life achieved stable growth in new business on the back of a large sales organization and product competitiveness. Our net income also grew significantly QoQ and YoY, thanks to investment income growth. Our new business APE was up 35.7% year-over-year, thanks to a more diversified protection product portfolio, resulting in the new business CSM of KRW 542 billion in Q3.
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The 13th month persistency ratio recorded 90.8%, up 8.3 percentage points year-over-year. The size of the sales force increased to 30,127, achieving the guidance of 30,000 at the beginning of the year ahead of schedule. Separate net income in Q3 posted KRW 236.8 billion, driven by higher investment income, and the cumulative net income came in at KRW 584.6 billion. Let me give you more details on the following slide.
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Page two is on new business APE. In the third quarter, new business APE saw a significant growth of 35.7% year-over-year to post KRW 977 billion, and the portion of protection APE expanded to 80%.
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Our protection APE grew 15.3% year-over-year, thanks to the introduction of new general protection products, such as signature cancer treatment insurance that provides enhanced coverage for major cancer treatment expenses, and H10 health insurance to appeal to individuals with mild preexisting conditions.
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Page three is on the sales force and persistency. In Q3, the number of FPs grew by 3,538 compared to the prior year to 30,127, thereby already exceeding the full-year target of 30,000.
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The 13th month and the 25th month persistency ratios improved year-over-year to 90.8% and 61.6% respectively. We will continue to promote new business growth and improve the quality of in-force policy by expanding the sales force and improving sales efficiency.
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Page four is on CSM. The average quarterly new business CSM has been over KRW 500 billion since early this year, and it recorded KRW 542 billion in Q3. New business CSM margin recorded 56%, and the profitability of general protection policies improved to 137%, thanks to a series of new high-margin general protection products.
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The CSM balance at the closing of Q3 was KRW 9.13 trillion after reflecting new business CSM of approximately KRW 540 billion, unwind CSM amortization and VFA adjustment of KRW 264 billion.
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On page five, our separate net income in Q3 posted KRW 236.8 billion, thanks to the growth in investment income, and the cumulative net income was KRW 584.6 billion, driven by the stable quarterly earnings flow.
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Cumulative consolidated net income recorded KRW 727 billion based on the solid separate net income trends and good earnings results by major subsidiaries, including KRW 345.8 billion from Hanwha General Insurance, KRW 83.6 billion from Hanwha Life Financial Service, and KRW 40.4 billion from the Vietnam subsidiary.
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Page six shows details on insurance and investment income. Based on the solid CSM amortization gains of KRW 211.5 billion, Q3 insurance income posted KRW 106.5 billion with experience variance and the recognition of onerous contracts.
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Moving on to investment. Even though we recognized losses related to overseas commercial real estate worth about KRW 140 billion, investment income recorded KRW 173.8 billion, thanks to strong interest income from interest-bearing assets and REITs disposal gains.
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Page seven is on asset management. 92% of our investment portfolio are interest-bearing assets with a mix of FVPL and FVOCI being 26% and 37% respectively.
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The investment yield in Q3 improved year -over -year and quarter -over -quarter to 3.79%, which continues to be higher than the liability crediting rate in 2024.
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As for our bond and loan portfolio, please refer to the relevant slide. Next on page 10 is K-ICS and duration gap. K-ICS in Q3 is projected to be around 164.5%, with the positive factors including new business CSM and issuance of capital securities that lead to an increase in the available capital, and negative factors such as declining interest rates and increase in required capital.
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Asset duration and liability duration are 10.66 years and 10.09 years respectively, resulting in the duration gap of 0.37 years, which is the same as the previous quarter.
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Page 11 is on Hanwha Life Financial Service. Having successfully turned a profit in two years since the split-off, the company recorded net income of KRW 29.3 billion in Q3. The cumulative net income comes in at KRW 83.6 billion, which is higher than the 2023 full year net income of KRW 67.9 billion. Thank you.
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We will now like to have the Q&A session.
[Non-English content] Now, Q&A session will begin. Please press star one. Star and one if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two. That is star two on your phone. [Non-English content] The first question will be provided by Myung -Woo Kim from JP Morgan. Please go ahead with your question.
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I am Kim Myung -Woo from JP Morgan. Thank you for the opportunity to ask you questions. I have two main questions. First of all, in your second quarter earnings conference call, you provided us with the year-end guidance for K-ICS ratio to be around 175%. I'd like to know if the company still maintains this guidance for the full year of K-ICS ratio. There have been many changes to the regulations recently, and so I'd like to get some more color on your dividend projection for 2024. And if it's going to be challenging for you to pay out cash dividends this year, I wonder if we can expect some cash dividend for 2025. So basically, this is a question on the guidance on your solvency and dividend payout plan.
As for the second question on page seven, it shows that your crediting rate has been lower while your investment yield has been going up. I believe this type of trend is the first time since the IPO of Hanwha Life. I'd like to understand the reasons behind this reverse trend between the crediting rate and the investment yield. Is it because your disposal gains have led to higher investment yield? Or is it because you have floating rate reserves that have lower crediting rates? Or is it because of the maturity of high yields or high interest rate reserves that have been shrinking because of the results of maturity? I'd like to understand the reasons behind this trend and also the outlook. Thank you.
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I am Park Soo-won from the risk management team. For your question on our K-ICS guidance for the full year of 2024, first of all, because of the strengthening of regulations on zero and low surrender value products, we expect a slight decline on the K-ICS ratio towards the end of 2024. However, in the fourth quarter, we will continue to boost the increase in new business CSM, as well as reducing interest risks through reinsurance schemes and lowering investment-related risks. Our target guidance for K-ICS ratio by the end of the year is 175% or more.
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I'm Kim Jun-il from the finance team. There was a guidance from the financial authorities at the end of October that when insurance company solvency ratio is more than 200%, then their surrender reserve requirement will be 80%. Regarding this guidance from the financial authorities, there is a process going on to collect input from the insurance companies. Therefore, Hanwha Life has been preparing for our responses and providing them to the authorities so that there will be relaxing of the regulation of surrender reserves. At the same time, we will continue to work hard to increase the offsetting of unrealized gains and secure enough income available for dividends. We will do our best so that we can achieve an environment where we can pay dividend in 2024, and we will continue to do our best.
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I'm Shin Sang-wook from the investment strategy team. Let me answer your second question regarding the crediting rate trend and the investment yield trend.
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As you mentioned already, in 2024, for every quarter, we have seen a higher investment yield that has been higher than the crediting rate. The reasons that you mentioned in asking the question have all played a part.
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As you know, by the end of third quarter, interest rates have been moving downward. As a result, we have seen an increase in the valuation gains from bonds as well as infrastructure assets. There was also an increase in valuation gains from overseas stocks because of the increase in the stock markets overseas. We've been increasing alternative investments since 2021, and there has been solid dividend income coming from these alternative investment assets. All of these have contributed to higher investment yields.
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In the third quarter, there was a one-off event, which was the disposal gains from the real estate property. Therefore, for each quarter this year, we were able to increase our investment yield.
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However, when it comes to the projection on investment yields, we acknowledge that in 2024, there was more benefit in terms of capital gains, including valuation gains and disposal gains, much more so than the income gains. We're now in the process of restructuring our investment portfolio so that we can gain more income gains from our investment operations. Based on the income gains, we will continue to utilize and invest in return-seeking assets as well, so that we can make sure that our investment yield is higher than the crediting rate. Thank you.
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[Non-English content] The following question will be presented by Do-ha Kim from Hanwha Investment & Securities. Please go ahead with your question.
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I'm Do-ha from Hanwha Investment & Securities. Thank you for the opportunity. I have two questions. The first question is concerning projections on the impact of regulatory changes. Last week for two rounds, there were guidance implemented by the financial authorities. One on the risk assessment of zero to low surrender value products, and the second was on changes to actuarial assumptions. I'd like to understand the impact of these regulatory changes on your BEL, CSM, and K-ICS. I would also like to understand the impact of potential changes and strengthening of regulations on LTFR and LOT next year on your K-ICS ratio. The second question is related to your investment. You had KRW 340 billion of disposal gains from real estate property. But other than that, it seems that there is a negative or a loss of KRW 200 billion in terms of valuation and disposal gains. I'd like to understand why this has happened.
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I am Jun-ik Son from actuary support team. Let me answer your first question on the guidelines on surrender rates. We understand that this guideline has been developed in order to address some of the concerns regarding uncertainty and concerns over profitability for zero to low surrender value products because of the lack of experience data. I believe that this guideline has been developed to make it more reasonable. For Hanwha Life, we're going to apply the standard log-linear model to calculate the surrender rate. As far as we understand, there's no major substantial difference in terms of finance between using the standard model or the optional model. For additional surrender impact, it's going to be calculated at around 30%. For experience, because until we have enough experience of statistics, we're going to utilize the industry statistics for the 11th year for savings products that have been accumulated for 10 years.
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For the optimal assumptions for 2024, we acknowledged that the surrender rate for shorter term or single term payment products after the completion of the premium payment is higher than a longer-term premium paying surrender rate. Given the fact that there will be improvement to the guidelines for low, zero and low surrender value products as well as a decrease in the surrender for high value supported, high surrender value supported products, we see that there's very minimal impact on our CSM, BEL, and K-ICS when it comes to these types of regulatory changes.
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I'm Shin Sang-wook from the investment strategy team. Let me answer your second question on our investment.
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I'd like to make one correction regarding the amount of disposal gains from real estate property. It's not KRW 340 billion, but it is KRW 280 billion. As for the remainder, there were recognition of losses from two overseas commercial real estate properties that were already on our watch list. The recognition of losses amounts to about KRW 140 billion. Other than that, these are mainly movements in the valuation gains and asset appraisal gains with respect to interest rate movements.
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Also, for your information, we have been managing and tracking the watch list on overseas commercial real estate properties since last year. For all of these two cases, losses have been recognized already in the third quarter. There is no additional watch list that we are following.
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I am Park Soo-won from the risk management team. With respect to the strengthening of guidelines on surrender rate modeling for zero and low surrender value products, this will not have any major impact on our K-ICS ratio on a separate basis. However, it has some impact on Hanwha General Insurance, so there is a downward impact on our K-ICS ratio on a consolidated basis. We're currently in the process of analyzing the impact of this guideline on our K-ICS ratio. Thank you.
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Moving on to the impact of strengthened guidelines on the surrender risk. This may lead to an increase in the lapse ratio for zero and low surrender value products, but there is also a very large increase in the offset for surrender calculation. Because of this offset impact, the impact of this new guideline on our K-ICS is going to be very minimal.
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Regarding the gradual change to LOT in the first quarter of 2025, it is going to lead to a drop on long-term forward rate by 25 basis points. As of now, we expect the impact of such change on our K-ICS ratio under the current interest rate trend is going to be around eight percentage points. This will be reflected in the first quarter one time, and we will continue to drive the increase in new business CSM to offset.
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[Non-English content] The following question will be presented by Byung gun Lee from DB Financial Investment. Please go ahead with your question.
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I'm Lee Byunggun from DB Financial Investment. Thank you for your effort in running your business. I have two questions. The first question is related to the cost of onerous contract. When I look at the financial statements, of course, the amount itself is not very big, but it was recognized at a larger amount in the third quarter compared to the first and the second quarters. So I'd like to understand why. And as for participating pension products that were initially studied with the fair value method, I wonder if these will lead to higher onerous contract expenses, maybe at the end of this year or early next year. Because indeed, in late 2022 and 2023, there were sizable increase in the expenses for onerous contracts for some of the non-listed insurance companies.
So there are some concerns about this possibility. So I'd like to understand how Hanwha Life is going to address this. And as for the second question, I hope that you will be able to maintain and manage your fixed ratio well by the end of the year. But there are still concerns that under the current regulatory regime and the interest rate environment, there seem to be some issues related to the pricing of reinsurance, and this may lead to some impact at the end of this year or early next year. And if that becomes the case, I would like to know if Hanwha Life has a plan to issue additional capital securities going forward.
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I am Kim Jun-il from the finance team regarding onerous contracts. I'd like to provide you with some numbers on a quarter-over-quarter basis in terms of new business and in force policies.
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In the first quarter, there was a recognition of KRW 26.8 billion for new policies while there was a reversal or return from the in-force policies worth about KRW 15 billion. In the second quarter, KRW 16.6 billion for new business and KRW 2 billion for in-force. In the third quarter, KRW 20.3 billion from new policies and KRW 22.8 billion from in-force. That is why we have an increase in the third quarter, and it is mainly coming from the in-force portfolio.
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There is KRW 22.8 billion of costs recognized from the in-force policies. As you mentioned, this is actually related to the participating annuity policies in that block, because that block has a smaller CSM compared to other blocks within the portfolio. Because of the changes to the cash flow, this has led to an increased recognition of the cost expenses for onerous contracts.
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The size of the CSM is not very large, but depending on the sales and the actual performance of these policies, there will continue to be reversals and cost recognition going forward. It is not easy to make an accurate projection yet, but what I can say is that there will be cost treatment going forward.
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Regarding costs related to onerous contracts from the new policies in the first quarter, there was a massive sales of health insurance policies. Because of that, for some product categories, we had to recognize losses. Through the revision and improvement of the risk loss management as well as product design changes, this is not happening any longer.
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For the loss recognition in the second and third quarter, this is mainly related to the whole life policies with declining interest rates, which resulted in the small decline in the total CSM. losses were recognized for some policies.
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For some of the losses we recognize from [H Health] policies, when the loss ratio increases or risk ratio changes, this will lead to a reversal of these loss recognition, which will lead to turning these policies into profitable policies and resulting in an increase in the CSM.
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I am from the risk management team regarding the potential issuance of capital securities. If there are circumstances that are necessary for us to do so, we may consider that option. Thank you.
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One follow-up request for that participating annuity policy block. If you can provide us with the amount of BEL and CSM later, I would appreciate that. Thank you.
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I can answer that question now. Regarding that participating annuity block, because of the recognition of losses, there's no CSM balance, so it means it's zero. That is a reflection of the cash flow changes. Thank you.
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Participating annuity policies that were signed before 2018, and CSM is currently zero. There's a slight movement up and down across this zero level.
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[Non-English content] The following question will be presented by Young-jun Ahn from Kiwoom Securities. Please go ahead with your question.
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I'm Young-jun from Kiwoom Securities. Thank you for this opportunity. I would like to learn more about the acquisition of Hanwha Savings Bank and valuation in the market doesn't seem to be very favorable, and it may have an impact on your capital status. So I'd like to understand how the company is going to address these aspects and how you're going to manage this business in a way to create synergy.
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I'm Song Hyun-hong from the corporate planning team. Let me address your question. As you mentioned, we are going to acquire 100% of the stake in Hanwha Savings Bank, and Hanwha Group and Hanwha Life has been working to transform itself into a comprehensive financial holding structure. So under this basic approach, we have decided to acquire Hanwha Savings Bank so that we can become a more integrated financial group.
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We understand that there are market concerns about the financial situations of Hanwha Savings Bank because of the project financing issues last year and the year before. Basically, savings bank business is based on the spread margin, and it has better profitability than other financial businesses.
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However, I'd like to mention that in 2023, more than half of the savings banks in Korea recorded deficits, but Hanwha Savings Bank was able to continue to generate profits regardless of these challenges. We believe that we will be able to continue to support Hanwha Savings Bank so that we can make that transition and expansion from corporate financing to digital-based retail financing. If we continue to nurture this business in the medium to long term, I believe that savings bank business can contribute to our financial earnings as well as shareholder value enhancement.
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[Non-English content] The following question will be presented by Yong -jin Seol from SK Securities. Please go ahead with your question.
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I'm Yong -jin Seol from SK Securities. I have a question regarding your K-ICS. If you can provide us with some breakdowns on the reasons for upward movement and downward movement of K-ICS ratio in Q3 versus Q2. You mentioned that you will maintain the guidance of 175% for the whole year. I'd like to understand in more detail what you are planning to do to achieve this guidance.
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I'm Park Soo -won from the risk management team. I'd like to give you more details on the drivers behind the increase of K-ICS ratio from 162.8% at the end of Q2 to 164.5% as of the end of September. As for the positive factors with the new business CSM inflow in the third quarter, that has led to an increase in the available capital and adjustment to the insurance risk. There is a positive contribution by 3.5% points. Also with the issuance of capital securities, there was an upward movement by 6% points.
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For the negative factors compared to the end of June at the end of September, the 10-year yield or 10-year treasury bond yield has gone down by 17 basis points, which led to the decline of the liability spread by 0.7 basis points, which led to the negative impact of 2.3% points on our K-ICS ratio. We also preemptively recognize losses from overseas commercial real estate, and there was additional reserving for IBNR, which has the negative impact of 2% points on the K-ICS ratio, but this is one factor. When it comes to investment risk, an increase in operational risk, this has a negative impact of 1.6% points. There was some increase in the required capital from the subsidiary and on a consolidated basis, the negative impact is 1% point.
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Starting our K-ICS guidance for full year 2024, there are several positive factors. First of all, with the increase in new business CSM in the fourth quarter, this will lead to an increase in the available capital and the impact is 4 percentage points. We expect some valuation gains from overseas infrastructure and other beneficiary certificates in the fourth quarter that will have a positive impact of 1 percentage point. We will also make other additional efforts, including the re-insurance of disability and illness-related coverages. We are currently discussing this with the financial authorities. We will also work to increase our net asset. This will all contribute to the plus of 5 - 6 percentage points on our fixed ratio. Thank you.
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Currently, there are no participants with questions. Please press star one. Star and one to give your question.
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The following question will be presented by Hee -Yeon Lim from Shinhan Securities. Please go ahead with your question.
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I'm Hee -Yeon Lim from Shinhan Securities. I'm not sure if this topic was already addressed because I just joined in this conference call. You mentioned that there is minimal impact on your K-ICS and the financials with respect to the recent changes to the guidelines on zero and low surrender value products. And I've heard that this type of impact is very much dependent on your disclosed rates. So I'd like to understand in more detail how this has happened, because the impact from these new guidelines seems to be much smaller than what was anticipated. Thank you.
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I'm Son Jun -ik from actuary support team. I explained this already, but let me repeat this again. When it comes to calculating the surrender rate for zero and low surrender value products, we are going to apply the standard model, the log-linear model, and we do not see any major financial impact or difference between using the standard model versus the optional model. Moving on to the additional surrender impact, the rate will be 30%. This is the level that we're going to apply until we have enough experience data. As for optimal assumptions for 2024, we will take into consideration that surrender rate after the full premium payment for short-term premium paying policies is higher than other long-term premium paying policies.
We are going to take that into account. Given the trade-off between the changes in the guidelines on the zero to low surrender value and the additional surrender rate impacts, we do not see any major impact on our CSM, BEL and RA. Thank you.
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On your question on the disclosure rate, we are going to communicate with you later through IR.
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[Non-English content] The following question will be presented by Hee-won Choi from Morgan Stanley. Please go ahead with your question.
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I'm Choi Hee-won from Morgan Stanley. I'd like to get some update on your new business CSM projection and the CSM multiple. Given the new guidelines as well as ongoing discussions on guidelines on sales force, as well as other potential changes to your product design and the pricing adjustment. In consideration of all of these factors, I'd like to understand your guidance for new business CSM for 2025, and also a CSM multiple outlook for your whole life product as well as general health insurance policy.
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I am Baek Jae -min from the business management team. On a cumulative basis by the end of third quarter, our new business CSM amount is KRW 1.5 trillion, and on a cumulative basis by the third quarter, our protection new business CSM multiple is 8x.
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As mentioned, even though our whole life sales are similar to the level of previous year, because of the decline in the liability discount rate, the profitability of the whole life policies has been declining across the industry, and that's the case also for Hanwha Life.
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However, given the declining profitability of whole life policies since early this year, we have been pushing for the sale of general protection policies that have higher margins so that we can defend our bottom line.
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As you can see in the fact sheet, the monthly average in 2023 for general protection policies was KRW 4.5 billion, but it has more than doubled to KRW 8 billion per month this year. The portion of general protection policies within the protection new business portfolio has increased from 50% to 70%.
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Currently, general protection policies and their multiples is about 5x - 6x higher than that of the whole life. While we continue to sell our whole life policies, we will continue to introduce new general protection policies and utilize our sales organization to expand the portion of general protection policies in our portfolio to respond to the market and continue to increase our new business CSM multiple.
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In closing, our whole year new business CSM guidance for this year as well as next year is going to be more than KRW 2 trillion. Thank you.
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[Non-English content] The following question will be presented by Jung Dan from Credit Suisse. Please go ahead with your question.
My question is really about the capital management. Can you give us a sense of the tolerance for the capital adequacy ratio? How low is too low for the K-ICS ratio? Is it 150%, 140%, or is it already very too low for the management? We just want to have a sense of how the management think about this K-ICS ratio. Thanks.
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I am Park Soo-won from the risk management team. Thank you for your question. We at Hanwha Life, we have the risk management committee that is in charge of setting the lower limit for the capital adequacy. For 2024, the lower limit was 165%. However, going forward, we recognize strengthening of regulations in the insurance industry in 2025. Our lower limit is going to be around 150%.
Is that your answer for your question?
Thanks for this information. With regard to the current board, I think for the 150%, does it breach any trigger from the regulator perspective? If, let's say, they have the recommended minimum level of 150%, and now your lower target is 150%, is it a bit too close to what the regulator is thinking for the minimum recommended level? I may be wrong here, but please correct me if I'm wrong.
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I am once again Park Soo-won from the Risk Management Team. Let me add some more clarification. The number that I gave you is different from our guidance or the target K-ICS ratio. For this year's target K-ICS ratio, it is between 170% - 175%. Going forward, we expect some more strengthening of the regulations and a potential decline, further decline of market rates. In consideration of all of these possibilities, 150% is the lowest that we can ever get in a very stressful situation. Consider this as a stress situation number rather than our actual target.
Is that your answer?
Thanks a lot. Just one last follow-up question. With regard to the plan to acquire Hanwha Savings Bank, what is your expectation on the impact of the K-ICS ratio?
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I am Park Soo-won from the risk management team. To answer your question, when we acquire Hanwha Savings Bank, there will be a set of required capital that is taken into account in consideration of the type of business. So savings bank business, and there is a level of required capital that is counting towards the K-ICS ratio calculation. Our expectation is maybe a decline by 1 percentage point, but this is something we can tolerate. Thank you.
Do you have any further questions?
No. Thanks a lot for your answering.
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[Non-English content] The following question will be presented by Jun-seop Jung from NH Investment & Securities. Please go ahead with your question.
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I'm Jun-seop Jung from NH Investment & Securities. Thank you for taking my question. I just have one question. Back in 2022, there was a rights offering by your subsidiaries, Hanwha General Insurance, and I understand that Hanwha Life has some convertible shares. And this year, Hanwha General Insurance may not be able to pay cash dividends. I wonder, I'm not sure if the conditions for dividend payout for this type of shares is the same as common stock. But if that's not the case, I'd like to understand if there's any update on conversion terms and conditions and the pricing of conversion, any meaningful or significant impact on your financials? Thank you.
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I'm Jong-guk Yoon from the planning administration division. Let me answer your question. As you mentioned, we have preferred stock of KRW 190 billion of Hanwha General Insurance. Of course, the terms and conditions for dividend for this type of share is different from common stock. As far as I know, there is a fixed dividend payout ratio of around 5.9%. But if Hanwha General Insurance does not have any available income for dividend, we will not be able to take dividends from Hanwha General Insurance. Thank you.
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[Non-English content] The following question will be presented by Shin -young Park from Goldman Sachs Securities. Please go ahead with your question.
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I'm Park Shin -young from Goldman Sachs. I have one question. I can see that there have been several transactions with your subsidiaries, including Hanwha General Insurance, Hanwha Asset Management, and also Hanwha Savings Bank deal. I'd like to understand the background behind these transactions, because I want to know the overall strategy and criteria for your capital allocation in respect to whether there will be further transactions going forward with the subsidiaries, or you are pretty much done with this type of activity. Thank you.
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I'm Jong-guk Yoon from the planning and administration division. I'd like to answer your question. The recent decision to acquire Hanwha Savings Bank is going to be the finish to our effort to reorganize the financial companies within Hanwha so that we can become a comprehensive financial group, which means that there will be no further major change to the corporate governance structure in the future. Thank you.
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[Non-English content] Currently, there are no participants with questions. Please press star one. Star and one to give your question.
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With no further questions, I would like to turn to our CFO for his closing remarks. With that, we will conclude the earnings call for the third quarter of 2024.
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After the adoption of IFRS 17, Hanwha Life was able to restore year-end dividend payout in 2023 based on improved profitability and solvency, which demonstrated to the market the company's commitment to shareholder value enhancement. These days, there are growing uncertainties around dividends due to regulatory strengthening and issues related to surrender reserves, but we are striving to secure sufficient income available for dividends by optimizing the offsetting of unrealized gains and losses, and contributing to the improvement of surrender reserve-related regulations.
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Furthermore, we aim to minimize negative impacts on our in-force CSM and K-ICS by actively analyzing and responding to future guidelines from the financial authorities on surrender rate assumptions and zero to low surrender value products and maps risk modeling. I hope this conference call helps deepen your understanding of Hanwha Life, and thank you for your unwavering support and confidence.