Earnings Call: Q2 2021

Aug 27, 2021

Ladies and gentlemen, good morning. Welcome to Lure China Life's 2021 Interim Results Announcement. I'm Gong Xingfeng, Vice President, Board Secretary and Chief Actor of the Company, also today's moderator. First, please allow me to introduce the management team here with me today. They are CEO and President, Mr. Li Quan Vice President, Mr. Zhang Hong Vice President and CFO, Mr. Yang Zheng Vice President, Mr. Li Yuan and the Vice President, Mr. Yu Zhe Gang. Today's results announcement has two parts. The first is the presentation on the first half performance and the second is Q and A session. Simultaneous interpreting will be provided. Now let's come to the presentation part. Mr. Li Quan will brief you on the H1 performance and future outlook Mr. Yang Zhen, on financials and investment, I will introduce the embedded value part. Now the floor is yours, Mr. Li Quan. Thank you, Mr. Gong. Ladies and gentlemen, good morning. Welcome to NCI's 2021 Interim Resort Announcement. First of all, I'd like to brief you on the overall performance. In the first half, although we encountered a lot of headwinds, but NCI still achieved some highlights. First, the GWP was RMB 100,600,000,000 up by 3.9%. It rose steadily and the 25 months persistence ratio remained flat at 85.8 percent, up by 1.2 percentage points. Embedded value, JPY 250,700,000,000, up by 4.2% compared to the end of last year. Total assets, RMB 1,020,000,000,000, up by 1.8% compared to the end of 2020. Net profit attributable to shareholders, RMB 10,500,000,000 up by 28.3% year on year. Annualized total investment yield remains trailing. It was 6.5%, up by 1.4 percentage points. When developing Life Insurance Business, we also actively shouldered our social responsibility. For environmental protection, we adopted a low carbon approach to address climate change and promote ecological civilization. In office decoration, we follow the principle of modest decoration and energy saving in all aspects to improve efficiency and reduce consumption. In our daily operation, multiple steps were taken to cut emission and save food. In the business conducting, we use mobile platforms for marketing, operating and customer service to cut the paper use. Also, we are actively fulfilling our social responsibility. In July this year, a torrential rain and a flood hit Henan. To help them with flood relief and post disaster reconstruction, we decided to donate RMB 1,000,000. In H1, to rejuvenate countryside, we spent RMB 8,300,000 in Guizhou Shubing. Also in the first half, we provided nearly 840,000 sanitation workers with insurance. From 2017, the total claim payment reached RMB 22,000,000. In the second half of this year, under the guidance of high quality party building, we will remain true to the essence of insurance, continue to optimize products and services, strengthen technological empowerment and strictly control risks to steadily advance annual targets. 1st, accelerate the transformation of our teams to improve the quality, ensuring the quality of new recruitment and continue to recruit more qualified agents. We will also provide more tools, training, policies and take other measures to cultivate high quality teams. 2nd, optimize product offering and improve coordination. Adopting a customer centered approach, we continue to optimize product mix and align the resources of old aged care and health care industry to expand our service scope and also to improve the product attractiveness. 3rd, foster innovation and strengthen technological support. We stepped up research on business innovation and application to gain more support for our technological tools and to improve the operation and management capability. 4, to strengthen the risk control and practice compliance operation. Prevention comes first in risk control. We strengthened the compliance culture education and supervision also to make everyone play its part and play its role to improve our capability to monitor, identify and to firmly control the risks. Next is the insurance business part. In the first half, we tried to seek progress while ensuring stability, made efforts to build professional distribution network and enhance the risk prevention. All types business remain on track. FYP for long term insurance business, RMB 30,000,000,000, up by 0.5 percent. Renewed premiums, RMB 66,900,000,000, up by 6.9 percent, accounting for 6.6 percent of GWP. This is the solid foundation for rapid premiums growth. Premiums from short term insurance business, RMB 3,600,000,000, down by 16.3%. By different channels, individual insurance channel contributed RMB 6,690,000,000 premiums, up by 5.5 percent. Bagsurance channel, RMB 28,900,000,000, down by 0.7 percent, accounting for 28.8 percent of GWP. Group insurance channel, RMB 1,800,000,000, up by 21.5%. For individual insurance channel, it stepped up efforts in customer management, explored ways to support marketing. FYP for long term insurance business, RMB 10,200,000,000, down by 1% renewal premiums, 57,600,000,000 up by 8.6 percent premiums from short term insurance, 2,000,000,000, down by 28.8%. For the agent team building, the traditional marketing model get tumbled in the insurance industry. We actively explore the transformation of such models and dismissed the unqualified agents. The agent headcounts, 441,000, down by 16.2 percent monthly average number of qualified agents, 105,000, reduced by 22% monthly average qualified rate, 19.1%, down by 7.3 percentage points. For Bagsurance channel, we deepened cooperation with important partners and boosted the growth of regular business. FYP from long term insurance business, RMB 4,700,000,000, up by 28.5 percent. Renewal premiums totaled RMB 9,300,000,000, down by 2.6%. From different products, the participating insurance contributed RMB 36,300,000,000, down by 9.3%, accounting for 36% of GWP. Health Insurance, RMB 33,300,000,000, up by 4%, accounting for 33% of GWP. And then Traditional Insurance, RMB 29,900,000,000, up by 26.9 percent accounting for 29.7 percent of GWP. For the business quality, the quality remained stable in the first half. The 30th month persistent ratio, 88.8 percent 25 month persistency ratio, 85.8%, down by up by 1.2 percentage points. The surrender rate, 1%, up by 0.3 percentage points. That's all for the insurance business. Now I'll give the floor to Mr. Yang Zhen to introduce the financials and investment part. Thank you, Mr. Li Quan. Next, I will introduce the financials and investment of the company. First is the revenues and the revenue of the company is RMB 130,000,000,000 up by 12.3 percent. Net written premiums and policy fees increased by 4.1% to RMB 99,000,000,000, influenced by the increase of investment yield, which is up by 47.2%. The investment income increased by 12%. The expenses is in line with the company's business and net profit totaled RMB 10,500,000,000 up by 28.3%. Earnings per share was RMB 3.38. Next, let's see the investment performance. In the first half, the company in phase with the complex and severe market conditions, the investment focus on our core business indicators and realized certain results. Firstly, the investment asset reached JPY 979,000,000,000, up by 1.4% compared with the end of last year. And the annualized total investment yield was 6.5%, up by 1.4 pt. Annualized net investment yield was 4.5%, down by 0.1%. Next, let's see the investment portfolios. The asset allocation of the company compared with last year, remained stable. We can see for the changes of various items is within a 1% change. The term deposit accounting for 13.3%, up by 0.6pt. The debt financial asset totaled $559,000,000,000 accounting for 57.2%, a slight decrease. This is the major asset allocation of our company. The bonds, trust products, debt plans and asset funding funds are all stable. At the same time, the companies strengthen the research of the debt products. The overall credit is within control, and the equity financial asset reached $280,000,000,000 accounting for 21.3 percent of total investment asset maintained flat. The company focused on value investing and absolute return, grasped the structural opportunities to realize the sound yield. And for the net standard asset investment, the company has shared our investment philosophy with the investors. We have continued to stabilize our net debt asset, but the volume and proportion has decreased. The total net debt asset totaled $227,000,000,000 a slight decrease proportion in the investment asset. The debt investment accounting for 71% and the equity investment accounting for about 30%. The company has good quality of the net debt asset with the credit within control. Next, I'd like to share the solvency margin ratio of the company. By end of June, the core consumption margin ratio of the company is 2 60%, down by 7.75pt. The comprehensive solvency margin ratio hit 2 69%, down by 8.17pt. That's all for the financials. Next, let's welcome Mr. Gong Xingfeng to introduce the embedded value. Thank you. Thank you, Mr. Yan Zheng. Next, I would like to introduce the embedded value of NCI. By end of June this year, the EV of the company continued to rose, increased by 4.2% from raised from 2 40,000,000,000 to JPY 250,000,000,000 among those value of in force business increased about 2.1%, up from JPY 93,000,000,000 to JPY 95,000,000,000. Adjusted net worth grew from $147,000,000,000 to $155,000,000,000 up by 5.6%. For the analysis of the EV, we can see in the first half this year, the major contributors to EV growth were NBV and expected return, which contributed 2% and 4% to EV growth, respectively. Next, let's go to the VNB. In the first half, the VNB of the company totaled JPY 4,000,000,000, down by 21.7 percent. FYB based VNB margin was 12.2%. APE based NBV margin was 12.1%. That's all for the embedded value. Thank you. That's the end of the presentation part. Let's come to the Q and A session. Due to time limit, please raise only two questions and tell us your name and the institution you represent. Now we are ready to take your questions. Ladies and gentlemen, this is the Q and A session. Thank you, management. I'm Zengguanglong from Zhoushan Securities. First, congratulations on the management results. I have two questions. The first is on the liability side. As you mentioned in the presentation part, the insurance industry against encountered some headwinds. I want to ask about the agent development since you achieved a lot of headcounts growth last year. But this year, we see a huge drop in the headcounts. What's your outlook in the recruitment in the future? And what measures will you take to prevent the further drop of the headcounts? The second question is about the asset management. The F1 performance is quite sound and good, but we can see there are some diverging trend in asset markets and the sectors. So what's your how do you judge the equity market investment? Thank you. Mr. Li Yuan, please answer the first question. Thank you for your question. In the H1, indeed, the whole life insurance industry had a good start but a disappointing trend, especially in the April, May June. We think there are several reasons. The first is the recovery from the pandemic is lower slower than expectation. It hit hard on the life insurance industry. And the second factor is the stringent regulation. China's regulatory authorities put higher bars and standards on the agents' building. And the third is the marketing mechanism in China Actually made a lot of contribution in the past 3 decades. But right now, it has to change according to the circumstances and also customers' needs. Now we are entering a period of pains. I think there are 4 mismatches. The first is the age of agents is mismatched with that of our customers. Most of our agents are born in 1960s 70s, but our customers are much younger. Most of them are born in 1980s 90s. They have different mindsets. And there is a mismatch. It's very hard for them to communicate. And the second mismatch is the product. The product supply is not aligned with the customers' needs. In the past, we may focus on one single product. Most agents sell these products to customers. But right now, we can see there are some individualized and personalized demand from customers, which is very hard to satisfy. And the 3rd mismatch is the marketing scenarios. We know young people, they prefer shopping online. They like visual interactions. But now we still focus on off line marketing, though we have advanced our technology advance. Top peers and also other large media companies also find it very hard. We still focus more on face to face marketing and conduct some salons and offline activities. So the sales model is changing. And the 4th is the income of agents, and their retention is not matched. In 1990s, when we started this marketing model, the income of them were RMB 2,000 to RMB 3,000, which was very high at that time. But after nearly 3 decades, the average income still remained flat at 3,000 to 4,000, which is relatively low in today's society. It's not good to the retention of the agent team. So we can see from the above mentioned three aspects and the 4 mismatches. The individual life insurance channel was hit hard. That's why some indicators you mentioned see a drop in the first half. Faced with these challenges, we took active measures. We have 3 steps. First, we have 3 attitudes actually, but we choose to respond actively. 1st, we dismissed the unqualified agents following the guidelines of regulators and make sure the headcounts, premiums and the structures are all free of fraud. And second, for the new recruitment, we strengthened higher standard and criteria to seek agents that is younger, more professional and living and working in urban areas. 3rd, we grasped the opportunity to make short term health insurance customers to buy new policies and to engage more customers and agents use this activity. We encourage them not to renew their short term policy but to buy new loan policies. We also provided some specific financial input to this activity so that we can inject more confidence in this green market to encourage them to visit more customers. At the same time, we stepped up our efforts to conduct customer activities, for example, the campaign Jogging with China Jogging with the New China Life. If you are familiar with our activities, we invited Mr. Su Bin Tian, also the athlete, to be the guest of our Jogging with NCI activity. Besides, we also built some platforms to keep interaction and engagement with our customers so that we can make our customers know the company and our products better and to create opportunities for the interaction between agents and customers. So in this first half, the excellent agents and the manager level agents as well as our structure remained stable against all the headwinds. You mentioned marketing channel and team building. We still focus on the full approach in marketing through our policies, atmosphere, responsibility and also activities. I mentioned that we pray for agents, which is younger, professional and living in the urban areas. And also, we provide products with full coverage targeting at whole family and to cover the protection from the birth to the death. We want to build a new ecosystem of our marketing. In the past, the marketing ecosystem focused on the headcounts and product. We think these 2 can ensure a rosy sales. But right now, we shifted to technology, services and product. Technology is comes at first. We made some efforts to acquire customers from Internet and to engage customers who know NCI well and recognize our products. Also, we launched plans and incentives targeting at specific customer groups. And last, I want to say we will strengthen training and to cultivate more excellent agents. We know some agents, they know nothing about insurance. They don't know how to sell. So training is very important. We have 2 training program. 1 is for new recruit and the other is for managers. Also, we're targeting at 3,000 and 5,000 agents. So we believe in the second half of this year, we still see opportunities among challenges. We will abide by laws and make sure the headcounts, premiums and the structures are true. Also, we will take some innovative steps, enhance training, provide financial input. We believe with all these moves, we may make some progress. Thank you. For the equity market divergence, Mr. Yang Zhen, please answer this question. This is a very good question. Equity investing is very important to the asset management of NCI. It has a huge influence, though it has a limited size, especially during the fluctuation of equity market. It may attracted a lot of eyesight from you. From our fundamental strategy, to simplify it, it equity marketing equity investment has 3 impacts: 1st is duration and the second is return and the third is fluctuation. For duration part, equity investing is a little bit shorter than required, and it's shorter than the I have to correct myself. Equity investing is has a long duration, and its return characteristics have to follow the guidance of the government, and also we have to seek high quality targets and alpha returns. This is what we want. That is the long duration and excess return. 3rd is the fluctuation. This may seems negative to you at the very first glance, but the fluctuation of equity market is not a bad thing. It is a neutral phenomenon. How to leverage the fluctuation of the market and to meet our strategic asset allocation target is a key area, and equity investing is very important tools. Duration, return and fluctuation, these are the 2 three key roles Equity Marketing played. And we can see in the first half, we achieved the ROCE results. So in the second half, we will still follow these three objectives: to prolong the duration, to generate higher return and to use fluctuations of our objectives. We can see right now China's economy and the performance of different sectors, industries and corporations, they diverge in different ways. Some changes are within our expectation, but most of them actually took us by surprise. The NCI has accumulated experience to cope with the short term fluctuation and to grasp the media to long term trend. So we will leverage these advantages and to grasp our opportunities in asset allocation, sector selection and the security selection, also to serve the return objective through short term fluctuation. Equity assets, especially in short term period, as you all know, is very important to company's performance. We will follow our established strategy and to grasp market opportunity. Thank you. Let's welcome the next question. Ladies and gentlemen, this is the Q and A session. Next question comes from Liu Xie from Guangfa Securities. Thank you for this opportunity. I have two questions. First is we can see the NBV and the BIM margin has increased for the bank insurance channel, and we can see the peer company has strengthened the focus on bank insurance channel. And I want to know your strategy in bank insurance channel and your advantage. The second question is that the persistent ratio of 13 months has decreased by 2.2 PT, but the 25 months persistent ratio increased. I want to know the reasons for that. We can see the 25 mass percentage ratio decreased for the peer companies, but yours are increased. I want to know the reason. Thank you. These two questions, let's welcome Mr. Li Yuan to answer. For the first question about the bank shows channel in the second half of this year. In the first half of this year, the banknotes channel performance is sound in the market and in our peer companies, the distribution channels has realized a good performance in the second half. We will continue to follow our three operations, namely distribution team and customer operations and follow our strategy of promoting regular premiums with single premiums. The single premium of our company has a similar and decreased target compared with the last year. But with their strategy, the FY RPS decreased. So in the second half, we'll follow our prescribed strategy. In terms of wealth management business, we will consolidate our team building, strengthen trainings and provide more support to the sales of high value products, and that's the first point. And the second is about the persistence ratio of 20 13 months 25 months. We can see the increase of 25 months persistence ratio shows that the stabilized team, the sales of products and high quality business contributed to this result. So we can see the 25 months persisted ratio increased. The company attached importance to the quality management. We excluded the surrender policies and premiums in the business supporting schemes. And for those institutions who haven't realized the target of persistent ratio, we have some punishment measures. So with those efforts, we consider 25 months persistent ratio increase. And for the 30 months persistent ratio in the first half, it has decreased in the first half of this year. But we think there's that trend is in line with the market. And the reasons are that, first, is because of the pandemic, the economy hasn't recovered. Last year, we prioritized stabilizing the team. So there are some issues about the quality, and the business of quality has decreased. And for second reason is we can see the renewal premiums and the willing for paying renewal premiums of customers has decreased. So these two reasons contribute to the decrease of the 30 months percent ratio, but NCS also have taken measures to cope with that problems. And we have conducted specific meetings to cope with that problems. And for the products with weak persistence ratio, we will strengthen our supervision and promotion, and we will punish those who have weak and bad performance. So we have to conclude that we have conducted multiple measures to cope with those problems. And Mr. Li Chen want to add to the Banxiao's channel. Mr. Chen said, I agree with Mr. Li Yuan. Banuqs Channel has realized positive growth and conduct effective measures after the new management took office in 2019. Last year, I've shared with you about my philosophy about bank insurance channel. We will develop the bank insurance channel in a bigger picture. We strive to improve our management level, reduce the cost and improve the value of bank insurance channel. We have been continually follow our set strategy and sound results have been received. And in the future, we will strive to grow the bank insurance channel continually. Thank you. Next question, please. Ladies and gentlemen, this is the Q and A session. Thank you, management, for the opportunity to ask the question. Just now, you have answered and clear a lot of my doubts. We know that the change of customers has posed challenges and the many companies are seeking new growth points. You mentioned the asset the wealth management strategy. Could you please update in this regard? Thank you. Thank you, Ms. Mao from CICC. Since we took office, we proposed the strategy called 1 plus 2 plus 1. First, to build NCI into the best financial service groups that provide all around services and customer centered. And the first is the life insurance. The 2 is old age care, health care and another one is for technological empowerment. From execution result, we can see this strategy has translated into actions. First, in the Life Insurance business, our foundation and the basis is solid. We have professional channels and products and services. To cope with this year's uncertainties and difficulties, we are exploring transformations of marketing mechanism and strengthen the coordination among different industries. We just presented you with the H1 performance. The GWOP is RMB 100,600,000,000 up by 3.9%. The growth rate is not high compared with last year. But against the backdrop of this year, we it's a hard won result. Renewal premiums accounted for 6%, 7%, a major contributor to the GWP growth. And for Wealth Management, we have put in place a mature model that align our asset side with liability side to leverage the advantage of asset management and to support the steady growth of liability side. The investment yield is quite rosy and cheery. The annualized total investment returned 6.5%, up by 1.4 percentage points. And for health care and elderly care industry, Now we have set up multiple elderly care communities in different cities. And we have 3 communities named Leishan, Yishan and Tunxiang. These communities helped contributed rmb 1,000,000,000 premiums. And in health industry, we have served 110,000 clients for health checkup. And for technological empowerment, we have strengthened our technological support. And to expand the technology application, we have launched the core system and to cater the needs of our agents and agent team for the marketing. And we also launched the Cloud Win program to optimize customer experience. These are some results we yielded. Thank you. Ladies and gentlemen, this is the Q and A session. Next question comes from Mr. Li Da from CRSA. Thank you for this opportunity, analyst Liu Da from CLSA. Just now, the management team have answered a lot of questions, and I have two questions. First, as you've mentioned, this strict regulation in the market and what regulation policies could we expect next year? And can you expect some regulation policies that may impact the business in the short run? And the second is about the aged care. We can see in the market, there's a new state annuity insurance that will be established, and I want to know your comment on that. And what do you think the traditional life insurance companies participating in this business? Let's welcome Mr. Li Yuan to answer these two questions. First is about the severe regulation policies. The regulators in the past 2 years has introduced the policies in line with the country and the whole national economy. A lot of policies has been introduced for us. We believe in the future, in terms of product supply, the distribution model and the agent team, new policies might be introduced. And for the regulations, we think it will be a new normal for the regulation. Now the economy of our country is heading to high quality growth. The regulators should, based on the current development model and level, to regulate the industry and promote the industry's return to the essence of life insurance and maintain high quality growth. The second, you've mentioned about state annuity company. This is a new topic and hotspot recently. I think the state annuity insurance company is new. A lot of its future business and its supporting policies hasn't been released. For me, 1st of all, I think it shows that our country prioritized the aged care, and the country has, in a macro level, strengthened the role of aged care companies and hope the banker banks should play a more important role in this regard. And in the future, I think it's a priority in terms of the national strategy. And the second, for the life insurance industry, we think we should focus on our own business and seek the comparative advantages. For life insurance business, we have our advantage. I believe we have 3 advantages. First is in product design, we have a guaranteed rate for the product, which is a comparative advantage for us. The second is life insurance industry has accumulated a sound pricing model and risk control mechanism in the long run. And the life insurance business has also accumulated wealth management capabilities of long term asset, which are pivotal to aged care industry. So for NCI, we believe we will attach importance to the in this field and also the possible regulations that might be introduced by the government such as the tax support policies or how can the insurers participated in this regard. We will focus on 3 aspects. First is we are one of the 6 pilot institutions of exclusive aged care annuity insurance, and we will actively participate in this regard. And the second is we will try to accumulate experiences in our pilot programs. The second is we will enrich our aged care products and service supplies, and we will provide long term annuity insurance, care insurance, etcetera. And we are planning to introduce the monthly paid annuity insurance to meet the demand of customers. The second is we will improve our layout in the aged care industries and form sound synergy and coordination with life insurance business and to form our Sound Ecology. That's our financial. Next question. Thank you, management. I'm Zhao Yao from Guoxian Securities. I have two questions. The first is about the basic policies of the agent team. Since we know you launched the new policy last July and now the industry environment has changed. How do you reflect on the new policies? And what is the pros and cons? How do you improve it? The second question is about the old age care and health care. We noticed that you have 3 elderly care communities. So what is the operation and the profitability of these three pipelines? And what's your future outlook? Mr. Li Yuan, would you please answer the first question? Thank you for the question. The new agent team policy was launched the last July, and we see 3 features. First, the new policy strengthened the culture of promotion to consolidate the foundation of the pyramid. The foundation is our marketing group. Then, the upper level is the marketing division. We try to consolidate the whole structure layers by layers through promotion. Now we have about 600 supervisors, 6,000 divisions and 30,000 groups. The second feature, it strengthened the cultivation of excellent agents. From the very beginning, when we recruit the agents, we set high bars and, criterias. We divide it into 2 directions. The first is excellent recruitment and the other is some common recruitment. So for excellent recruitment, we prioritized their education background and their ages. Also, we provided some measures, for example, the training of excellence 5000 elite clubs and elite summits for this team. These measures help to stabilize excellent teams. And but we have to say, last year, the total headcount reached 6 100,000. So this is a result yielded by the new policy. Both promotion and consolidation. For the future, how do we update the new policy? I have to reiterate that new policy. It's the cornerstone management tool for the whole company. Right now, according to our schedule, we don't have amendments to the new policy. But we have noticed there's some difference. First, the market environment is different. 2nd is our emphasize on the excellent agents' training. We have to step up our efforts in this regard. And also, the layers of the pyramid will be streamlined. The hierarchical level will be simplified. And also, thirdly, we put more emphasis on the agents who are younger, more professional and working in the urban areas. This is a new trend of our team building. That's all for the question. Thank you. Mr. Zhang Hong, would you please answer the second question? Thank you for your question and your support and attention in this regard. Mr. Yu Zhigang just mentioned health care and elderly care industry actually show its initial effects. We have formed multiple elderly care communities in different cities. In the first half, the operational indicator remains stable and the business are stable. Our constructions are proceeding smoothly. And to for some details, you mentioned we have 3 communities. In Beijing, we have Zunxiang Community in Lianhua Chi and in Hainan, we have Leushang community. These 2 communities are put into operation. And the Yixiang community, which is still under construction in Beijing Yanching District. This construction project will undergoing smoothly, and the Phase 1 construction is expected to complete by the end of this year. On 28 May, we had a debut ceremony. Over 100 potential clients have visited our Yanqing community. This is a brief introduction of our elderly care communities. On the other side, to better serve our strategy, we have Xinhua Excellence with Hospital and also we have Xinhua Excellence Health Investment Management Company. It has set up 19 health care centers around the world. So to speak, the elderly and health care program has stable operation indicators and business. For the future, we will make more efforts and provide more inputs. We try to set up more programs in Beijing, Tianjin and Hebei Province as well as Changjiang River Delta and Zhejiang River Delta to build NCI's own ecosystem. Also, we want to boost the effective synergy between elderly care industry and life insurance to strengthen our profitability. Thank you. Ladies and gentlemen, this is the Q and A session. Next is Mr. Zhang Jingwei from Huachong Securities. Thank you for the opportunity. I have one question. For the setbacks of the sales of health insurance business, the long term insurance is pivotal to the CRISPR product. Now there is increment whole life insurance, which is popular in dividend insurance channel. I want to know your product strategy in the next stage and the outlook for NBV margin. Next question is invite Mr. Gong to answer. This is the 2nd year after the outbreak of the pandemic. The pandemic has a huge influence on the industry and people's lives. This year, there are many challenges for the industry. And the core for that is there's a mismatch between the life insurance plan, the people's demand. In the previous years, there's obvious evidence and characters that the people's demand are changing. And in the past, in a stage, people have favorable interest in the annuity insurance product, and other times, some people prefer health insurance product. And after the pandemic, people have diversified demand for insurance product. And for SEI, the sales has shown those trend. The annuity insurance has a sound yield and performance and but the health insurance has encountered challenges, but how to explore customers' demand and found a new growth point in these circumstances is a priority of our company. And people's demand for critical illness products should be explored and attached importance. And we have strengthened our research on the expanded product coverage and product research. Also, in terms of the sales, we try to guide the guidance guide the customers. And apart from our regular product innovation, we have introduced a new whole life insurance product, including Also, we have promote research and development to new products, which are entitlement insurance and whole life insurance, which might be introduced next year. And focusing on those changes, the product combinations and portfolios will be enriched to identify the customers' demand and improve the business. Whole Life Insurance is alone, so we have expected more values from those products. We hope that it will be recognized by the market and the firm and contribute to the value growth. That's all. Let's welcome the next question. Ladies and gentlemen, this Thank you, management. Thanks for the opportunity. Zhou Zijin from Changjiang Securities. Mr. Gong just talked about some product strategies. In the future, we know the contract system to account system. So from the actuarial perspective, if we did see this switch, what products will NCI prepare since the UNI link and Unifil right now, traditional whole life annuity products, they are different. So what adjustment question is about the agent? Actually, we are concerned about the turning point of the headcount development. What is the bottom of this drop? We see some peer insurers also see some challenges. So the agent headcount has decreased about 40% for the whole industry. What is the end of this declining trend? What's your expectation? To answer the first question, you talked about the annuity and the pension products. This is a very big and complex question. Also, this is an important aspect, how to cope with the aging population challenge and how to construct the 3rd pillar, I'd like to share the social hot topics reflect a And now the quick and convenient media coverage make information more transparent. This is also the same to the pension and annuity products. In the past, we mixed the accumulation of money and also the withdrawal of money into 1 product. Our customer at his forties to pay them his money to the company insurer company. And by the end of 60, he may withdraw the money. But he does note now how his account our past to hand distinguish clearly about between the account and the other pen annuity products types of products in NCI. Now while the company is pushing up the of NCI and encourages us to be more innovative and to improve our existing system. Also, as you just mentioned, we have to leverage our advantage and capabilities in managing longevity risk and to deepen the reform of contract type products. And second, for the account type products, under the guidance of the 3rd pillar, we have to set up a more flexible management model for the accumulation period and to generate more abilities to create values, to provide a much clearer and transparent display presentation to the customers. And at the point, we will encourage customers to switch back to the contract type products. I think this is the macro trend of pension and annuity products. NCI is a life insurance company. We have a complete and a sound product system. And this year, we also launched some new products. Some of them are short term to medium term like Hui Jinsheng Annuity. Also, we introduced the Eyang, Jing Shen and other products that was linked to elderly care communities. For 3rd party accounts products, we will also follow the experience we accumulated under the 3rd pillar structure and try to make some innovation. I'll answer the second question. You mentioned agent headcounts. When can we expect to see the lowest headcount? From 9,000,000 headcounts to over 4,000,000 headcounts. What a dramatic drop for insurance industry. Actually, this trend will continue. A lot of unqualified agents leave this industry. Some of them are not suitable for the insurance selling. Many companies, including NCI, are taking active measures to recruit new agents. I can't say the specific time of this valley, but we think it's more important for us to retain those agents that are good at and excel at insurance selling. Right now, the headcount of agents is not enough for such a big population in China. I have several thoughts to share with you. As I mentioned before, the first is to follow the rules and the laws. There used to be some misconduct in the agent team to acquire illegal interests and profits from the company. So we have to strengthen the team management to abide by the laws and the rules and to make sure all the data are transparent and are true. 2nd, we have launched a product targeting at new recruits and existing agents. For new agents, we want to provide them with some simple some products that is easy to sell and help them to engage with the customers. As Mr. Gong mentioned, we have some health care and elderly care communities that will help the new recruits to sell. And the third is to build an agent team that is younger, more professional and good at working at urban areas. We wanted to simplify the hierarchical levels and the structure to meet the diversified needs of our customers. The last point is technological empowerment. We want to gain more customers from the Internet. We have to expand the online channels and to cater to the needs of the younger customers. In the past, we used to think the recruitment of agents will bring naturally customers. It is not true. We have to expand the channels to help our team market and to increase their income so as to help them retain in the company. By doing so, we have to make efforts in 2 aspects. 1 is quality. The other is quantity. Due to your time limits, let's welcome the last question. Next question comes from Shihuan Hong Thank you for the opportunity, analyst from Shuanghong Yang, Kei Yu Shao. I have two questions. First, I want to ask about the industry. We can see the industry going down in the Q2. What do you think are the reasons behind this? And when can we expect a turning point? Or what indicators or signs that may reflect the turning point? The second is, in the final statement, we can see the payout of health insurance increased by over 40%, which is higher than the premium growth and whether there are changes of assumptions behind this and will adjust your assumption in the future? Thank you. First, let's welcome Mr. Gong to answer the second question. For the increase of the payout, we can see that the payment for medical insurance, because of the pandemic in 2020, a lot of the areas are restricted, and the payment for medical insurance are low. But in this year, the payout are returning to a normal level. So that's the answer for your first question. And about the payout for the critical illness product, in the past several years, the Critical Unit business increased fast and accounted for a high proportion in FYP in some time. And so we have growing existing business. With the increase of our existing business, we can expect the growth of the payment to claims, which is in line with the business growth in the past several years. And we can expect a payout payment to the claims increase in the future. And for the current assumptions and increase of payments, claim payments, whether there are some problems in terms of the pricing and the customers, I think it's a complex question. For the pricing point, the base for the pricing of our company has followed the critical estimates table and a curve table of the industry and the mobility rate. And these tables are transparent. So I think we have relatively certain and sound grasp of those risks. And the second point, customers' awareness of protection and insurance has increased, which promoted the customers to buy health insurance product. But no doubt, we can see there are some fraud in these products sales and which has increased the payment ratio of our company. The loss ratio as well. Recently, we can see many news which can show this phenomenon. And other is the increase of the medical technology such as the thyroid cancer, which has a lower it was not that critical, but it has a higher claim payment. Generally speaking, I believe the claim payment is in the normal track and its increases within our expectation, and we will closely follow those assumptions and the trends. Thank you. Let's welcome Mr. Li Yuan to answer your first question. About the first question, you've mentioned the growth of the industry in the second quarter. I have answered in my previous answers, we can I talked about this, the decrease of industry as mainly in the individual insurance channel, but the bank insurance channel and the corporate insurance has relatively good performance? And for the life insurance business, I think there are 4 mismatches. Those this mechanism, the changes of the market and the mechanism all contribute and influence the industry development. And I think the distribution team building models needs to be changed. And for example, there is a mismatch between the age of customers and our agent. The second is the mismatch between the product supply and customers' demand. And people customers have diversified and personalized demand. The third is there's a mismatch between the sales model and market customers' purchase models. So the young people likes to buy insurance products online, so we are working on that. And the last is mismatch between the people's income and the affordability of insurance product. So there are mismatches. And about the turning point, for me, I hope the turning point to show as quickly as possible. And for me, with the regulation requirement and the severe regulation policies, we can see there are some time that needs to adjust and adapt to the new regulatory requirements. And secondly, I think there needs time to transform the agent team. Companies need to invest resources in this regard, and we have made selection and adjustment in the team building and business promotion, and we have the similar feeling that we hope the turning point show quickly. And through the transformation and coordination of various resources, we believe we can expect some indicators to show the turning point. And in this process, we should, 1st of all, adapt to the regulatory requirement. The second is we need to strengthen the innovation. There are 4 mismatches just enough mentioned, and we should work on that to solve those mismatches. And this will require us to strengthen our efforts in product innovation, and we hope to empower the business with technology. The second is we hope to build a new team, which is young professional urban team, and we hope to provide precise service and products to customers and to meet their demand. We hope these products we sold can better meet people's demand, including the demand for aged care and health care. At the same time, we hope to provide a better health care service for the customers as well as aged care and health care service. And also, we hope to provide more products and service in terms of wealth management business and aged care. Those businesses are our priorities, and we will closely follow the trend of those indicators. First is about the performance rate. The second is productivity per capita. In the first half, we can see the productivity per capita of our company has increased by double digit. The 3rd indicator is people's income. Now the income of the agents is about RMB 3,000, which is not high and inadequate for agents' livelihood. So to improve and increase the income of agents will be our priority in the future. And the 4th indicator is the recruitment. We have to decrease the follow-up of existing agents and recruit high quality agents and recruit the high performing agents. We hope to reduce the fall off of the new agents and retain the team. And we hope those who are inappropriate for the industry and leave and hope those who can adjust the industry can retain. And that's all for my answer. Thank you. Thank you for participating in our interim results announcement and for your questions. If you have further questions, please contact the IR team of our company and we are happy and ready to answer your questions. That's the end of the interim results announcement of NCI. Thank you.