I'm Chen Hao Chu from the CPIC world office. This is actually what we call in Chinese. The summer. We welcome all of you to this CPIC seminar on the new accounting standards. According to the Ministry of Finance, for data, the national need to implement new accounting standards January 23. These new standards will have a big impact on the financial statements. We have the pleasure to have with us a expert on this, Mr. Guo Hangxiang from Ernst & Young, some more insights on the new accounting standards. Of course, that represents only his own personal opinion and does not represent the opinion of the or any other institution. First of all, Mr. Guo. Lasting about 70 minutes, and then there will be a Q&A session. Let's give the floor to Mr. Guo. Good afternoon, everyone.
I will give you some information on the new accounting standards. Of course as Mr. Chen mentioned, I actually what I say here today is only my personal view, of course, new accounting standards and the fair new standards on financial instruments. I have prepared a PPT, we call it as the New Accounting Standards to Well, that's a rough name, including the new standards for insurance and the standards for new financial instruments. On the whole, we just call it the new accounting standards. It's a rather complicated issue. In terms of the implication for insurance companies, I would say, the impact will be quite big, but of course, impact will not only be financial impacts, but also on other areas. For example, impacting the IT systems and data, et cetera.
First of all, maybe I will spend the 70 minutes on the new accounting standards for insurance and then a little bit of time on the standard, new standards on the financial instruments. As I mentioned, you can see here what we have. What we talk about today is just domestic standards compared to international standards. As you know, the Ministry of Finance in China, we are, they are actually adopting international practices. There is a convergence, a trend of convergence. I would say, though they are Chinese standards, they are actually converging with international practices. What I would say for this presentation, we're first of all touching upon the new insurance accounting standards. It's very complicated in itself. Then we'll look at the interaction between the insurance accounting standards and standards for financial instruments.
Lastly, we will talk about some of the potentially important financial indicators. First of all, I will say something about the liabilities under the new standards. Under the new standard, as you can see, if they look at the, in terms of contract liabilities, in terms of the measurements, they are much more standardized. Also in terms of income recognition, they also, well, set up new definitions. I would say that you can say the BS, the right-hand side of the, well, the balance sheet is mainly the liabilities and also for PL, apart from the investment income and OCI, on the PL statement, you can see that they actually did a redo, a redefining of those liabilities.
For the standards for new financial instruments, on the left-hand side, that's on the asset side, and also on the investment yield side, they also had a lot of new rules and definitions. Both the asset side and liability side, they now have most of them covered. By that I mean new definitions, new calculations, formulas, calendar, et cetera. Of course, for insurance companies, they have other assets, for example, fixed assets, et cetera, but those are not large in amounts. I would say the important assets and liabilities are now being, well, redefined by the new standards. First of all, we will look at the Liabilities. Now they have to do the definition, the different approaches. I will here only touch upon the General Approach.
I would say in terms of the contract liabilities, you can see the four building blocks or four factors. That is, to put it simply, to calculate the liabilities, to calculate the reserves. They are now saying there are four building blocks. Using the four, they can calculate how much liabilities a company has. Of course, you can look at these professional definition of the four building blocks, and you can just read it for yourself. I will not just read it out. I will not repeat it. I would want to make my presentation more accessible, more easier to understand. To put it in layman's words, block one, building block one, that is the estimates of future cash flow.
That is to say, after you sign the insurance contract, how much premiums will go in, and will come in, and how much payment you will go out. Second block, building block two. For long-term life insurance contract, cash flow, and there will also be cash out. Of course, it's long-term. It will happen in many years in the future. We need to look at the discount rate, to look at the time value of the money. Especially for life business, now you can see the premiums come in. If we just look at the sum of the premiums, the premium of course will be smaller than the benefit payout, right? For example, a whole life insurance, if premium is RMB 10,000, but the benefit payout is only RMB 9,000. Well, it doesn't make sense.
No customer would buy such a product, right? Of course, the sum assured would be bigger, higher than the premiums. If so, are we going to lose money? No, because of the time value of the premiums. We need to look at the discount rate. We need to look at the present value of the premium, of the payout. P&C is a different story. Because the claims payout is not a certainty. Whole life business, of course, is definitely we need to pay out this amount of sum assured when the insured passes away. The third building block is the what we call the RA, risk adjustment for non-financial risks. Now to put it simply, the definition is quite complicated. To put it simply, I would say that the insurance companies need to undertake certain risks.
Of course, to take more risk, I need to be paid for that. If the possibility of a insurance event will be higher than my estimate, then I would have the money to, well, to pay for that. You can say that's a prudent way of making the calculation, right? That is what we call a RA, a risk adjustment. Of course, if we made a very, well, adequate reserves, then we can after that, on top of that, we can get the profit. That is the contractual service margin, CSM. That can be your profit. That's the building blocks four. That is to say, we have the profit, but why it is a liability? We would call it a liability.
That's mainly because of, you see, when I sign the contract. Under accounting standards, I cannot book it as a profit. I can only book it, record it as a profit while I provide the service. It's not, starting from day one. I need to provide the service many years into the future. This profit has to be amortized. That is why. After the four building blocks or liabilities, maybe I can give you a concrete example, give you some numbers, so that you can better understand. For example, if you collect RMB 100 for premiums, and then you pay out RMB 10,000 of SA is RMB 1,000 . For many years, it's a whole life product.
But if you make a discount, then the RMB 1,000 present value is only RMB 80 for present day money. RMB 80, then if you want to be more prudent, we can have a RMB 5 as a reserve. They pay out RMB 85 in terms of benefits, including the expenses. What's my profit? RMB 15, right? That's my profit. During this process, the RMB 15 is not there on day one. It's to be released or to be amortized over the stretch of many years in the future while I provide the service over the years, many years into the future. This is an important concept. You can see a CSM, that there will be a contractual service margin.
When you read the financial statements from a insurance company, then you must understand it. It is a future profit. It's to be amortized into the future, it will become the profit. I believe this is a very key financial indicator. That is to say, with the passing of time, the profit will be released for the insurance company. Of course, depending on the payout, on the well, expense estimates, etc., you need to prudent, you need to have enough reserves. For example, as I mentioned the case, RMB 80 + RMB 5 , that's RMB 85 . If you make one estimation, then if the total payout is RMB 120 , then You will lose RMB 20 rather than make a profit of RMB 15 .
Actually, the new accounting standards want the insurance companies to be prudent, to be conservative in estimating future cash flows. That is the general approach for calculating insurance liabilities. If you ask me what's the difference between the new and the old standards, well, I would say, they also have something similar to building block of one, two. They also have this kind of a risk margin. They also have actually financial risks. Non-financial risks. They have time value of money. Also in the old standard, they have the residual margin. In the future, there will not be residual margin. There will only be CSM. I would say the building blocks are pretty much the same or similar, but the calculation method or treatment will be different.
Building block two, the adjustment for the time value of money. Currently, they use the 750-day moving average to curve. In the future, they will use the spot rate. They don't allow you to use the three-year or the 720 moving average. You see, discount rate is very important to insurance companies. The rate, if there is only a very small difference, but stretched out over 50 years or 30 years, will make a very big difference. The impact of the risk will be huge for the insurance company in this calculation of the liabilities. If the discount rate is not 5%, but 3%, then the RMB 80 would become RMB 150, for example.
They will make a huge difference. building block four, CSM also, there's some change. For building block three, there will be the... They have it in the old standards, but for RA they are quite relaxed. For blocks, building block four, they are more strict. CSM is quite different from the residual margin. For example, the accounting estimates will be changed. Well, this is a point I will come back to. Well, this will... For the absorption of the accounting estimate changes. Well, let me give you an example here. For example, you're taking RMB 100 in premiums. In the future, you need to pay out RMB 1,000 in total. Discount, the present value of the RMB 1,000 would be RMB 80.
I give you the buffer of RMB 5, then that's RMB 85. Of course, actuaries are not gods. They cannot make, calculate everything accurately. Based on, given all that estimates and assumptions, maybe they would be more pessimistic or too optimistic, so they need to make adjustment and found out that they were wrong. That's very natural. Everyone can make mistakes. There might be some adjustment. We need to pay out more in expenses. The RMB 80 becomes RMB 90. Of course, building block three is still RMB 5. The future profit would be reduced from RMB 15 to RMB 5. Under the old standards, then the RMB 10 would be treated or be recorded into the P&L in the current period.
That is, there's RMB 10 more in for reserves. Your profit would go down by RMB 10, right? What would be the impact? That would mean that your profit will be reduced by RMB 10. Actually, the RMB 10 would be in the future. It doesn't happen in the current period. That is only because I made a adjustment to the morbidity rate, et cetera. We do a discount, then RMB 10 less in profit. That's the old standards. For the new standards, actually they have a absorption mechanism. That is to say, to absorb impact, that is to say, we amortize the profit. You made a wrong estimate. Best estimate is RMB 15, right? That's your original estimate. Later on, you found that you made the wrong estimation. It's only RMB 5.
There's a difference of RMB 10. They say that, first of all, you need to lower the profit to be released. That's the RMB 15. That is the reserve for future cash outflow should be higher, and the profit to be released will be lower. That is you move from liability A to liability B. Liability remains the same. P&L remains the same. Under the new standards, if you made changes in the morbidity estimate, the net profit will not be directly impacted because it will just impact the profit to be amortized, to be released. For example, previously it is RMB 50 to be amortized over 50 years. Now there is only RMB 5 to be amortized over 50 years. The current...
I mean, the impact for this year will be much less because it's divided by 50 years, divided by 50. It's amortized over many future years. Building block four can have an absorption effect, can offset the impact. It's different than the old standards. In the old standards, they don't have this kind of absorption effect. That's so much about the liability, calculation of liability. We move on to the incomes. We've heard a lot of rumors about the impact on insurance income. I would say, first of all, it will have very small impact on P&C, property and liability insurance. In P&C, property and casualty actually is short-term insurance. The impact will be very small. Secondly, income will go down, my profit will go down.
Not necessarily, because it does not only lower the income, but also reduce the payout. I wouldn't say it's, well, proportionally, but I'm gonna say the income will go down, the payout will also go down. Your ultimate profit will not necessarily be reduced. Why? Why the income will be lower? First of all, you see on the left-hand side, you could see the old standards. We will say we will have premium income. What does it mean? Well, that is to say, come back to the my case, the RMB 100 premium income. On day one, we signed the contract, we collect RMB 100 premium, single premium, RMB 100. This RMB 100 we collected, that is your income, right?
Under the old standards, the 100 RMB need to pay for insurance payments or service over the next 50 years. They will not consider it. It doesn't care about how many years of liabilities you have. They just record it, book it as income. They wouldn't worry about how much they need to pay out, whether it is a claims payment or whether it is a benefit payout, et cetera. They don't care about that under the old standards. If there is no insurance event you need to pay out, then this is not... this is what we, what they called a, it's like a saving component or what we call officially investment component. That, that is like, it's like a bank. I mean, you collect money. In the future, you need to pay out.
It's like a bank taking in deposits, right? There will no be no such triggers. There will be no threshold for payout to this amount of money. They will not pay it out whatever happens. Under the new standards, they would say it's like a saving, it's like a investment. For our whole life contract, traditional life product, whole life products, usually they would contain the terms saying that, of course, you can surrender your policy. If you surrender your policy, you will get a surrender payment, right? The surrender payment would be like a opportunity for policyholder to get money out and leave the game, right? To get the money out first. You can pay for retirement, et cetera.
Under the new standards, surrender is not a insurance incident, right? It's not a insurance incident, but they can surrender and get the money out. It is like a deposit. It's like a saving, right? They can take out the deposit, take out the living. They see this as kind of a saving component. This, if your premium can include this, then this part should be taken out. It should not be your income. That is the what I marked in yellow, the yellow part. Of course, there is the actual insurance part. You need to pay, well, you get paid before taking risks. Of course, they say that you need to provide the service over 50 years into the future, so you cannot book it on day one as income.
You need to stretch it by the 50 years. This is pretty much the same in other industries. For example, if you build a very big building, you get paid or you record it as income by milestones, right? The same here under the new standards. You need to release the income over many years into the future. You take out the savings component, and then you amortize the income over many years into the future. Of course, the actual calculation is very complicated. It's not like this. Not like what you see here on page six. It's not proportional. It's not a linear relationship. It's not very simple. It's quite complicated in actual calculation. Then there is the issue of interest. While you amortize your income, they can have the interest accreted.
What's the logic behind that? You see, I get RMB 100 in premium. It cannot be recorded as income. It should be amortized many years into the future. I would say the RMB 100 is a liability. Actually, with the passing of time, the liability will grow bigger. Why it will be grow bigger? That's because, you see, ultimately the premium should be comparable to your payout, to your claims payout. As I mentioned, RMB 100 in premium, 50 years into the future, I need to pay out RMB 1,000. The current RMB 100 should be the future RMB 1,000, maybe for 50 years into the future. Actually, in 50 years' time, I mean, I can only record RMB 100 for income, but the total expense would be RMB 1,000.
If that's what happen in reality, then I would be making losses, but that's not true. As I mentioned, I collect the money RMB 100, and then I will use the RMB 100 to make investment. The RMB 100 would grow bigger. Ultimately in 50 years' time, I will make money rather than lose money. That is to say I would actually create interest on this insurance revenue to be amortized. There's interest accrued and to be amortized. Ultimately in 50 years' time, then the RMB 100 would be bigger than the RMB 1,000 total payout over 50 years. We make some underwriting profits. That is the basic logic behind the new standards. Now, you would say, "Hold on a moment. There is a loophole." Because you accrete the interest, then you, I mean, how can you actually get the money? hire me. Well, you know, I would say it would not actually impact whether the old or the new standards will not impact the cash component.
The old component of the total amount under the old standards is RMB 100, but the new, under the new standards, the total revenue would be RMB 1,000 or even bigger than RMB 1,000. There comes the cost of funds. The cost of funds should be presented or listed separately. To say, well, your interest, your investment yield, it does not come from nothing, it comes from the cost of funds. That is to say, you get money in, you get a premium in, and then you get RMB 100. You make some investment, but the investment is at a cost, at a cost of funds.
Ultimately you need to pay out in claims or benefits. That is to say investment should make a profit. Underwriting should also make a profit. That is why now they actually want the interest to be accreted. You need to take out the saving component, you need to amortize, and then you need to input the interest. It's different for auto insurance, for example, right? If you not purchase an auto insurance, you need to surrender, you get some cash value back. For whole life insurance, if you surrender, you actually get more than your premium paid. If you are close to the maturity of that life policy, you get much more than the premium you paid out. For P&C insurance, that's a consumption insurance, but life is different.
Can you actually divide the life insurance into 50 parts, into 30 parts? Actually P&C you can do that, for life you cannot. For life, as I mentioned, the insurance revenue need to have the interest accreted. For P&C insurance, they sometimes they also accrete the interest, it's only for one year, the impact will be very small, not like the life business. This, I mean, the impact on the revenue mainly applies to long-term insurance. If there is no saving component, if the term is very short, impact will be very limited. On the next slide, you can see the expenses and the claims. We talked about the liability and the revenue. What about the expenses and claims?
For life business, long-term life, there will also be some impact. As we mentioned, when you make out claims, right? As you can also see on the slide, the claims, you need to take out the savings, saving component. Let's just say about the case, RMB 1,000 in premiums, RMB 100 in premium income and RMB 1,000 total payout. For the insured is 50 years when he bought the insurance and he died when he was 100 years old. When he dies, we need to pay out RMB 1,000 to his, to this beneficiary. Under the new standards, if actually they surrender, not surrender the policy, probably you need to pay him RMB 950 if he surrendered the policy before, right before he dies, maybe RMB 950, something like that.
They would say the RMB 1,000, only RMB 50 out of the RMB 1,000 would be expenses, and the RMB 950 would be paid back to the insured, to the policyholder. At the moment, if you surrender the policy, then the money should not be counted as revenue. As we mentioned, the RMB 100, maybe RMB 50 is a saving component. The saving component should also accrete the interest. The RMB 50 become RMB 950. You just pay back the RMB 950 to the policyholder. Using the same logic, they would take out the saving component, take that out from the revenue and also from the payout part. That's the claims.
In terms of the expense, under the old standards, when expense are, it will go into P&L, if needs to be amortized, you just do it. Under the new standards, the expenses should be transparent. You need to say what expense, what exactly is the expense. You should say, are they directly attributable expenses or indirect expenses? Is it direct or indirect or irrelevant expenses? When it occurs, it will go into the expenses. It actually go into the. It's not actually CSM, it's other expenses. For those directly attributable expenses, we would also distinguish between acquisition or maintenance or claims handling expenses. These will go to the insurance contract groups. With these contract groups, they will go into the amortization process. Eventually, I mean, these expenses would be amortized.
The acquisition expenses will need to amortized, so it would become smaller on your statement. Now, old standards, the expenses will not be amortized, acquisition cost, acquisition expenses. The new standards, acquisition expenses will be amortized. The difference will be huge, right? Is it the case? No. In the past, in the old standards, they actually, they would have a smaller provision for reserve. The new standard, they actually do not have the provision of reserve. I would say, it's a reclassification of these for the statements. I would say the biggest impact would come from the saving component. It was now taken out. It was taken out of the picture. Also the calculation of amortization would be different under the old and the new standards. Of course these are details.
With these details, we might have all sorts of differences. The biggest impact come from the taking out of the saving component. Revenue can goes down, payout goes down, so the profit will not necessarily go down. Of course, we cannot say for sure because the calculation of the three of them are quite complicated. The cost of funds, as I mentioned, under the new standards, you see the logic is right in that the revenue and the expenses should match each other. Because under the old standards, revenue is booked in the current period, and expense amortized over many years. It is not matching, right? Under the new standards, your revenue will also be amortized with interest accreted.
In 50 years' time, your revenue would be bigger than the total payout or total claims plus expense. The interest accreted would be treated as a investment income, booked at the cost of investment yield. You need to also calculate the investment yield. That is to say, you need to consider the cost of funds. They have under the insurance service results. As investment profits, then you get the pre-tax profits. This will give you better idea about the sources of those pre-tax profits. You can get a better idea, you can see here. Under the old standards, that is the earned premiums. Under the new standards, it's insurance service results. The different names, in reality, they just compare the earned premiums.
Under the simplified P&L statement, it does not give you too much details here. You can see here, on the left-hand side are the old standards. You can see some, well, red block boxes on the right-hand, the new standards. These are the insurance service results. The insurance service results in the old standards. If they have it, then you will be loss-making. Why? Because other than investment income or other income and expenses, All other items can be related to insurance. If you add them up, then you would be making losses. You can take listed life insurance company financial statements. You can do the calculation. You can do the pre-tax profits minus investment yields, minus other income. You would say the number would be a negative of one.
That is to say, your premium would be smaller than the claims payout because you do not accrete the interest, as I mentioned at the start of the presentation. Under the new standards, the Insurance Service Revenue or Results would include the interest. Now they have insurance financing costs. It's actually a cost of funds. Well, if you add the four up, you will see good companies, the total sum of the four items would be a positive number. That is a positive Insurance Service Results. If you look at the investment income minus the cost of funds, that's the I mean, cost of funds, as indicated in by the items in the blue boxes, you will get a income of the new standards.
Of course, we cannot truly look at the in-investment profit as the most important thing with PAR insurance. It's not necessarily a very good one. Okay, you can see some OCI items at the bottom of the page. That is other comprehensive income. It's a newly added indicator in the new standards. That is, for example, some changes in fair value of financial assets. Most companies would choose to do this OCI. What does it mean? Well, that would mean that when you read the financial statement, as I mentioned, when you calculate building block two for liability calculations, that is the discount rate, you use the spot rate. The old standards, that is the 750-day moving average. Now, the spot rate, what kind of impact would it be if we use this interest? That will mean more volatility.
For example, the BS balance sheet, for example, recently, if we have a reduction in interest rate, actually the old standards, they would use 750-day moving average. That's a average number. I mean, the changes in spot rates would only have no impact on the discount rate. If you use spot rate, then for example, you had a rate cut. The spot rate you use would, well, I mean, for the balance sheet would have a very clear impact. That is to say the total liability will change a lot if you change the discount rate. Example, I mean, if there's a rate cut, liability will go up by a huge degree. If under the old standards, it will go into P&L, a huge number.
If we use 750-day moving average, if you, if you look at the previous years' numbers, actually, impact will be quite big. Actually under new standards if you use spot rate. After that, the increased liability can go into PL and into OCI. You have the choice, you have the option, but it's a option of accounting policy. It will stay with you. You cannot change it arbitrarily. If after you make this option, then the sudden change of the discount rate will not have a direct or immediate impact on your net profit, only impact your OCI. Ultimately, the OCI will impact your profit. Ultimately, yes. This ultimately, your total profit over many years will be the same, whatever accounting treatment you use.
By using different treatment methods, you used to actually cut or re-cut the cake in different ways. If you put it into the OCI, that means your OCI would gradually turn into profit over many years to come. That means the impact will be, or that will be smoothened out, will be absorbed or even out. Given a very long cycle, for example, 50 years into the future, there will be rate cuts and rate hikes. Ups and downs in interest rate. The effect will even each other out over maybe 50 years, a very long horizon. If it is only a short-term volatility, it come into OCI. What I mean here is that under the new standards, actually, they would give you an option for the calculation of liabilities to offset the impact from interest rate changes.
We don't want the insurance companies to have immediate impact from interest rate cut. Because, I mean, interest rate cuts, short-term changes in interest rates, they cannot change it. They cannot control it. The regulators don't want this kind of rate cuts or rate hikes to produce immediate impact on your profits. I would say this logic is reasonable. They give you a option for OCI to absorb this kind of immediate impact. This is another key point here. I would say discount rate would have a huge volatility for liabilities. If you use VI, actually, you will not have immediate huge effect on your net profit, but still on the net assets. Also some other words on the accounting standard for financial instruments. Let's have what we call the FVOCI for debt instruments, for debts.
For example, bought some bonds. This bond, the same here, the interest goes down. In a fixed-term bond, you'll get unrealized gains with fair value increase, so your liability goes up. Well, because of interest rate cut, so liability goes up. If I put it this to FVOCI, then the balance would look more evened out. I would say many companies would actually treat financial instruments, a lot of the debt investment, many of them hold-to-maturity. I would say maybe they would like to move it to FVOCI, fair value OCI. That is to say, when the interest goes down, the liability calculated using spot rate, the net asset goes down, the net profit can offset the impact with OCI.
If you use FVOCI, when interest rate goes down, your asset goes down, and liability goes down, there will be some kind of offset effect. Of course, the duration of asset will be shorter than the liability's duration. You cannot invest a lot of long-term, long-maturity bond. Anyway, asset goes down can offset some of the impact from increased liability. I would say companies or insurers would actually put the debt investments into FVOCI so that the volatility of the net assets would also have some absorption effect. You may ask, why shouldn't I get into FVTPL? Well, I mean, on the asset side, it would be the same. It will make a difference for the net profit. If you choose the FVTPL for assets, there will be a mismatch.
I would just say the FVOCI approach would help to absorb the impact on the net assets. In terms of matching the debt investment in terms of classification, the FVOCI would be a better option. Of course, this only applies to long-term insurance. A P&C company, different story. They have short duration of liability, but longer duration for assets. For the P&C companies, you need to consider the duration of liabilities and assets and their relationship. It's a test of your accounting matching. On the whole, for most life companies, they have duration gap. That is, the duration of the liability will be higher or be bigger than the duration of assets. For P&C company, maybe you don't need the FVOCI approach. Also something about the reserves.
You can see for the reserves. There is also current period reserve minus the end of the current period reserve. Actually under the new accounting standards, there will not be such indicator. It's a perplexing issue. Sometimes you have higher premiums, your reserve does not go up. Because the reserves actually were impacted by many factors, not necessarily your premiums. There are many, many factors. Under the new standards, they say you need to provide more details, you need to have a more items, breakdown items. Many items will be impacted. That's some of the differences for the P&Ls. Now, about balance sheet differences. You can say a lot of the information here for the new standards, we now have four items.
All the items on the left-hand side will disappear, and you will only have four items. You can see BS, we'll have less information. I will say, where can I find the premiums collectible? You cannot find the information here under the new standards. Where do they come? Where I find the information? Actually you see under the new standards, you actually do it in portfolio approach. They actually, they would put similar insurance policies into a group, and they calculate their assets and liabilities, the debit item and the credit items, the reserves and the premiums collectible, claims payable, et cetera, and then they do a netting. After the netting, for example, reserve RMB 1,000, and then I have a reserve of RMB 80. That is a credit balance.
We would say that is insurance liability. For example, you have RMB 1,200 as premium collectible or payable, and then RMB 1,000 for claims payout. It becomes an asset item or asset balance. You need to have this kind of a netting. On the financial statement, if you want to see the number for premiums collectible, you actually cannot find directly this item on the BS. Will there be note, a disclosure? No. If you want this number, I would say you need to ask the company to give you such disclosure, because the accounting standards actually does not require company to release this premium collectible, the balance of the premium collectible, and under which item can you see the number. Well, they can voluntarily disclose the information, but it's not required by the new accounting standards.
Why? Why did they actually omit the premium payable or collectible? I believe these kinds of items or claims payable, et cetera, et cetera, they do the netting. Why? I would say they believe these are all factors. Building block what? Maybe they want it to be a perfect theory. That is the estimate of the future cash flow. What is the premium collectible? That is the possible premium income in the future, and that's the future cash inflow. The claims payable is cash outflow in the future. I would not distinguish these two from other cash outflow or inflow. I would just treat them as a Building block for calculating the liability. These premiums will actually be recorded into the liability calculation, so they don't want to repeat it in terms of presenting the numbers.
That is why we have the building block one, two, three, and four. In the old standards, in building block one, they don't have the premiums collectible. In the new standards, they already included in the building block one. What is the final effect for analysts? I would just say, my guess would be the total assets and total liability would both go down because premiums collectible would be smaller than the reserve. Premiums collectible should be smaller than the reserve, total reserve. You do the netting, so your liability would be smaller and your assets would also be smaller. That is to say, for example, RMB 100 in premiums collectible, RMB 100 in reserve, you do the netting, and then you only have RMB 100. Assets will be down by RMB 100.
Total assets and total liability will both go down, but it does not impact the net assets from this perspective. Don't be surprised if you see smaller total assets because of the netting. Sometimes you can't even find the item. This is not a mistake on the side of the company because actually the item disappeared under the new standards. That is why we are having this conversation today. When you read the future statements, you usually prepared for these changes. It's not that our business changed. It's not that we don't do policy long, don't have premiums, collectables, et cetera. It's only accounting treatment. They are not now listed as a standalone item. Actually I've touched upon some of these points earlier on.
The key impact, as I mentioned, there is no 750-day moving average. It's now spot rate, spot rates, current interest rate. Volatility would be higher, interest cut and reserve would go up. Current interest rate would give us short-term, bigger short-term impact. Net assets will be, of course, impacted. For net profit, luckily, we have the OCI, which can absorb some of the impact. Of course, there will be long-term impact unless the interest movement reverses. Ultimately, the net profit may not be impacted only one-sidedly. As I mentioned, when you actually change the morbidity rates or estimates, the impact will be minimal. Because if it's like, actually we have a cushion. That is the CSM. It has a so-called absorption mechanism. Accounting estimate changes two of them.
One is the financial estimate changes, for example, discount rate changes, et cetera. Non-financial estimates, morbidity rate changes and surrender rate changes. For financial estimate changes, you have an option. You have an option for FVOCI. If you have this option, then the impact on profit will not go into P&L. It will not go into your current P&L. The non-financial estimate changes, surrender rate, morbidity rate, now they will have an absorption mechanism that is utilizing the CSM. Of course, for those, there is a precondition. The first one is you need to choose, you should opt in for FVOCI. Yes, some company will not opt for FVOCI, for example, P&C companies. For FVOCI, you choose this option, it will mean a lot of work, a lot of workload.
It does not make sense for P&C companies because the impact will be limited. They can also manage their assets. They can also do some FVTPL for their assets. If they can manage their assets, then the impact will be even smaller. Some companies, they do not opt for FVOCI. FVOCI is for insurance policy groups. For example, some companies have both long-term and short-term insurance with different risk profiles. This is just an example. I can opt for FVOCI for long-term insurance, but not for short-term insurance. This is a unique feature for the new accounting standards. I mean, that actually applies to insurance portfolio or insurance groups. It's not for the company level, it's for the portfolio level. On CSM absorption is not an option.
Of course, you need to have a CSM. That is to say, for example, you have a RMB 15 in profit. Of course, if you have an extra RMB 10 in expenses, then your actually, your CSM or your profit to be amortized would be lower by RMB 10 than it evened out, I mean, RMB 15 minus RMB 10 . However, if your cash outflow increased not by RMB 10 , but by RMB 60 , then the RMB 15 original profit will not be enough because the profit amortized cannot become loss amortized. This is not allowed. The loss should be recorded, period. If the non-financial estimate changes leads to huge changes in cash outflow, then the CSM cannot absorb the negative impact, then you will go into the current period P&L.
The second, I mean, the absorption or the cushion can only do so much work for you. Of course, this CSM only applies to primary insurance and not reinsurance policies. Of course, I'm only talking about general principles, not extreme cases. We have a VFA, Variable Fee Approach. What does it mean? That is to say, they have this kind of, the changes in financial estimates and its impact on net assets. Actually, the VFA can also allow CSM to absorb this. We just said that CSM can absorb the impact from non-financial estimate changes. Using VFA, now CSM can absorb the impact from changes in financial estimates. For example, we sell a lot of the PAR insurance, participating insurance.
In terms of the interest gains, the spread gains, 70% of the investment gain will be paid out in terms of dividend. This PAR insurance might adopt the VFA approach, but it's not 100%. It's very likely this PAR insurance can use the VFA approach. If so, let me give you an example. You see, if the PAR account actually made investment income of RMB 100. That is RMB 100 more than I expected. It's RMB 100, it's an asset, and the RMB 100 is FVTPL. First of all, investment income increased by RMB 100. Well, it's possible because of the stock market boom, right? If we do not use the VFA, then when you have RMB 100 more, 70%...
Seventy yuan would be paid out to policyholder, and RMB 30 will be yourself. Will be given to the company. The RMB 70 will be paid out to policyholder. We do not consider discount rate. Liability will go up by RMB 70. Record it where? First of all, liability go up, then should we use CSM? No. It's a financial estimates. Usually, do we use VCOCI? FVOCI? If we choose FVOCI, then the RMB 70, profit will go up by RMB 70, and OCI also go up by RMB 70. Net assets go up by RMB 30, and the P&L, there will be a sudden... Right. There's a lot of volatility, a sudden change in net assets, if the number is not RMB 30. For example, it's RMB 10 billion. RMB 10 billion in investment income.
The net assets actually go up by RMB 3 billion. Necessarily under the general approach. Well, your net profit, net assets go up by RMB 3 billion. Now, if we use VFA, actually, the volatility will be evened out. Now, assets up by RMB 100. Liability, we need to pay out RMB 70 to policyholders, right? The RMB 70 would be divided into two parts. One part one, that's RMB 100 minus RMB 30. Now, the RMB 100 would be paid out to policyholder. Well, actually, it's RMB 70. You pay out RMB 100 to policyholder, and then you claw back RMB 30 as investment management fee. That is RMB 100 minus RMB 30. I pay out RMB 100 and pay back RMB 30. It makes a difference in terms of P&L.
We pay out RMB 100. The RMB 100 in assets go into P&L. The RMB 100 would also go into the cost of funds item. Investment income, RMB 100. Cost of funds is also RMB 100. Now you don't have a investment income. What about the RMB 30? Well, the RMB 30 is a asset management fee. The asset management fee cannot be booked as revenue. It should be amortized over many years. The CSM cannot absorb this RMB 30. Of course, the CSM would amortize maybe RMB 30, would just amortize to RMB 1 for the current period. That's RMB 1 for current period. Your investment profit would be zero . Net profit would be RMB 1 up.
Your RMB 10 billion investment income, using VFA, the net profit would only go up by RMB 100 million because the RMB 10 billion actually was offset by the RMB 10 billion in cost of funds. The CSM actually amortized the RMB 3 billion over 30 years. It becomes just RMB 100 million for the current year. The net profit, the volatility very small. I mean, from RMB 10 billion to down to RMB 100 million. What about the net profit under this scenario? Liability, net, future cash outflow reserve RMB 70. CSM will go up by RMB 29. Your total liability goes up by RMB 99. Your assets go up by RMB 100. Net assets only go up by RMB 1. If we do not use VFA, your net assets would go up by RMB 100.
Using VFA, the net assets only go up by RMB 1. If your PAR insurance can use VFA, then the volatility will be smoothened out. That's the attraction of VFA. It has this even out effect. You can better utilize the absorption effect of the CSM. This is what I believe a very important, a impact. A very important mechanism. Of course, please don't get me wrong, otherwise, you mean everything can be done in this way? No, not everything can be absorbed, can be evened out. Of course, P&C company, they do not pay out dividends. They do not sell UL product. They cannot use VFA as P&C company. Because P&C is different. Their, their asset side cannot actually impact their liability side. But a life company is a different story.
Life company, they have their own account. If their own account actually has a sudden windfall of the RMB 10 billion, then their liability is, must be changed completely. It's different from PAR life. Traditional life is different story. Because the whole of life products, you do not pay out more if you've got more in investment return. There's a difference. I mean, some of the assets can be offset by liabilities, and some cannot. We talk about none of the, I mean, new accounting standards. I mean, insurance accounting standards, but actually standards for financial instruments also have a big impact. Actually, I mean, in terms of the classification of the financial assets. If you have some of the assets not able to use VFA, then these assets cannot be absorbed.
The impact or the changes, interest rate movement can be absorbed by the liability side. It's different for equity movements, equity value movements. For equity investment, the absorption mechanism can apply to those that can use VFA. Some other assets cannot do so. On the fourth bullet point, you can also see the groups of insurance contracts will be the measurement unit. Of course, there are many, many differences. We don't have enough time for all of them, all the intricacies and the differences. The first three bullet points are very key. We talk about presentation. It does not necessarily impact the net assets and the net profit, but it actually impact your statements.
As we mentioned, the deposit or saving component are not included into the profit and loss. You would see smaller numbers. It's only for life, I mean, not for P&C company. For P&C, they don't have a deposit component. You only get claims if you crash your car, I mean. For life insurance, they have this kind of a saving or deposit component. If you surrender, you can actually get more than you paid. They actually should separate the insurance service results from the insurance financing, finance income and expenses. If it's like a cost of funds. By this kind of a distinction, you can see how much money you made or how much profit you make from insurance business and from investment. Actually, the PAA often used by P&C company.
That is before the amortization, your premium need to accrue, accrete their interest. There is interest accretion and amortization. Ultimately, it will be bigger than the total payout. If you look closer, P&C, their revenue, P&C companies might see increase in their revenue. For life company, they are most likely to have a decrease in revenue. There is also a ceded insurance. It's a deduction from revenue, but under the new standards, not anymore. It's now treated as a cost item. It's a amortization of the ceded insurance premiums. Now is the allocation of reinsurance premiums. It's a liability. If I ceded out a lot of insurance, previously impact my income. Now, of course, this is only a matter of a presentation. It's not from the actual business performance.
What I mean is that not necessarily. The revenue will not necessarily go down under new standards because some of these will even each other out. Yeah, I'm sorry. Actually, I'm lagging behind. I guess I've made myself clear, but maybe I mean, some of them are quite detailed. For the readers of the statement, not necessarily so much changes or the impact. Actually, it might have some impact on the companies. Of course, we need to look at the KPIs, look at the performance evaluation. Of course, certainly, basements will be different, some of the KPIs will change. Net profit, net assets, they will change. They will definitely change. I believe these indicators will have some influence on how they do their business.
Hence the KPI setting, evaluation, the way they do their business and processes, et cetera. It's only natural to do so. From another perspective, accounting standards will ultimately not change the fact of how much money you can make over the future years. It's just a different representation over different period, time period. I mean, when all policies matures, the total profits should be the same under either old or new accounting standards. The ultimate target or ultimate goal of the company will not change. I would say ultimately, companies would want better profitability, et cetera, or of course, sustainability, et cetera. This will not be directly impacted by the changes in accounting standards. Of course, there will be some differences, the fundamentals.
When you read the statements, you might see the profit changed a lot. Please do not be surprised. I don't believe the fundamentals will have changed. Of course, we need to enhance our capability to better manage the company. We need to match assets and liabilities. If a company wants to reduce, I mean, better present the net assets and the net profits. There must be good accounting matching and economic matching because there will be more transparency. Now, we are going to use current interest rate or discount rate. I mean, the impact will be more immediate. Your net assets will go down. I mean, the company would need to re-react in a quicker way. You would want a better matching between assets and liabilities. Previously we used 750-day moving average.
We use the current interest rate. Impact will be more direct and immediate. To cope with this, to be more proactive, we need to, well, improve our wisdom in many, many areas. The classification of financial assets, I'm sure you are quite familiar with this new standards starting from 2018, and the insurance companies are the last batch of companies using this standard. We get some kind of a waiver. Actually, the reason is for them to do so is that we are waiting for the new accounting standards for insurance companies. We have some absorption mechanism under the new accounting standards. I would say there will be more assets using FVTPL. VFA, as I mentioned, can also have some absorption effect for the FVTPL assets.
If you have the proper accounting matching, you won't see this kind of a big volatility. Of course, if you have a traditional account, if you have very good performance for that account, then the asset changes cannot be absorbed by the liability. For some of those accounts, the matching, I mean the accounting matching and the economic matching for the equity assets in the life company's own accounts will be hard to do. FVOCI, I mean, the disposable gain should not go into the P&L. If I choose FVOCI, then, I mean, the volatility of my P&L will be smaller. There's a kind of a trade-off between the volatility and the absolute amount.
In terms of the interaction between the two standards, I would say, to put it very simply, insurance companies under the new standards, when it take effect, they can have a reclassification of its financial assets. For example, some companies, they would say their hold-to-maturity assets and assets are better matching with their liability for at least a life company. If I want to reclassify it to FVOCI, you can do so. You cannot do it in the old standards. Now, in the transition period, you can do that. You can do this reclassification. You only have one opportunity to do so. You have this opportunity to do the reclassification. Of course, meeting certain standards, you cannot do it arbitrarily. You would say a lot of the financial assets can be reclassified. Some people will say...
well, actually, some insurance companies have already started. If they have a very big group company, they have a smaller subsidiary insurers, when they do consolidated accounting, they actually using the new standards for financial instruments starting from 2018. Even for those companies, they still have a chance to do reclassification of the financial assets. The logic behind it is that the new standards, the matching of assets and the liabilities will be different, and the logic is different. They would give companies a chance to do the reclassification. For readers of financial statements, you would see that for some, for some of those companies, when you implement the new standards, you would see changes for new profits, for net profits and net assets. For accounting standards, they say you need to restate your 2022 numbers.
For Q1 results for 2023. For year-over-year comparison, the Q1 numbers for 2022 under insurance accounting standards require you to do restatement of Q1 2022 numbers using the new standards. For example, premium revenue would become CSM, etc. Actually, the new accounting standards on financial instruments, this does not require the companies to do a restatement for 2022 numbers. I mean, it gives companies more leeway, more I mean, more room for choosing. I mean, for companies implementing the two new standards, they can choose to restate part of the financial numbers of 2022 under the new accounting standards on financial instruments. Of course, they need to make, well, make a proper statement and also with good reasons. Anyway, that gives them more leeway. So let me repeat myself.
For the insurance accounting standards, they definitely need to restate their 2022 numbers. For financial instruments, new standards, not necessarily a restatement of the 2022 numbers. The numbers will definitely be different in this year's Q1 results, between this year's Q1 announcements and last year's. For FVOCI, the debt instrument. The matching is easier. Unless the duration of the asset is bigger than the duration of your liability. You need to look at how much is your liability very sensitive to interest rate movement. I mean, by that, you can determine how much assets should become FVOCI. VFA can absorb the volatility of your net assets and the net profits. For companies, you should actually do economic matching, and also, ideally, also do a accounting matching.
For VFA, you should apply this in a proper way to reduce the volatility. For equity investments, there's some kind of equity type funds. No, actually most of the funds, mutual funds you see on the market under the new standards for financial instruments should be treated as a debt investment. It's not equity instrument investment. It's equity type, but actually it should be treated as the debt investment. Given this, it will become the FVTPL. It cannot be FVOCI. If you buy this kind of funds, mutual funds, then it will be classified as FVTPL. I mean, most likely it will be FVTPL. Debt instruments. This kind of, well, instruments will cause volatility to your P&L. Now for equity investment, then you have an option between FVOCI and FVTPL.
That is a trade-off between profit and volatility. The VFA can reduce the volatility of profits and the net assets. It will be hard to do imagine in the short term. Well, these standards are very complicated, but actually the impact from the new accounting standards on financial instruments will bring bigger impact. For example, if the stock market went up or down suddenly, that I mean, the equity investment will be impacted, hence it will impact the, well, total picture of the insurance company and even the, well, P&L statement. Also we care about the key financial indicators. Now, the different companies will have different options, different choices. I only give you some of the, you know, the, the possibilities. Those that you can see on the statements, I actually will not mention embedded value.
It's not a concept under accounting standards. It's not. I do not mean it's not important. I only listed the important indicators you can see on the statements. Some companies will have more or fewer of those indicators. Of course, people care about the revenue of insurance. Actually, CSM might be different from insurance revenue, especially for long-term insurance. You can say for new standards in terms of income recognition is actually more in line with accounting principles. For example, I mean, the saving component or the deposit component will be taken out of revenue. I also heard that some companies are thinking about the fact that some of the revenue for certain line of business will go down drastically, but short term insurance will go up. I mean, see increased revenue.
Should I change my product mix? I would say it's not a reason which is not a sensible choice. You cannot only look at the revenue, because profit might be more important than revenue. Short-term insurance will bring you low margin business with no interest spread, interest rate spread. They cannot accrete their interest. Long-term insurance will be a better option because actually we can get the spread gains, spread income. Revenue goes down, but our expenses also goes down. Lower revenue is not necessarily a bad thing. We should look at the profit margin of different insurance products. I would say we cannot change the fundamentals about insurance business. Life companies can also calculate their claims and expense ratios. Well, actually now they do not distinguish claims from expenses.
They now just actually claim a certain expense. Well, actually the new standards does not require companies to separately report or tell you amount of claim. That's the minimum requirement. Of course, some companies would still give you more information, give you standalone claims numbers, give you extra information. They will tell you very clearly how much of it is for claims and how much of it is for expenses. For the quarterly statements, you might not find these numbers. Underwriting profit. Underwriting profit, I mean, depends on the calculation of specific companies. Some consider including the cost of funds in the calculation of underwriting profit. You know, I mean, it's a moot point. I would not think the investment department would change their investment philosophy because you tell them the cost of the funds, cost of investments.
Whether it is a 3% or 5%. It's already a fixed cost. In terms of profit, the components for profit. For quarterly results, there is no such disclosure requirements. For annual report, there will be note disclosure requirements. For example, the current period experience adjustment. It would be like the morbidity spread, morbidity gains or loss, and the spread gain or loss. That is a estimate. That is the difference between the estimate and the actual number. Also you need to actually... Maybe there's also... You can see all these numbers, all these items contributing to the profit of the insurance company. CSM is to be amortized. It's a very important indicator. You will not see it in the statement itself, but in the notes.
Also, they will disclose the CSM from new business. Also, it's like NBV, new business value, but CSM is a accounting caliber. They also give you the closing balance of CSM and the amortization of CSM. For investment, apart from the old indicators, there might be something new. Previously, they don't have the FVOCI. When they disclose their investment yield, they might actually add a new indicator to include the disposal gains or losses. Especially those already realized disposal gains or losses. There's different kinds of investment yields. Also, a cost ratio of the insurance fund. Most, it's really hard to calculate the cost ratio of insurance funds. Some of the interest rates is locked. It's a historical fixed interest rate, maybe 20 years ago.
It doesn't make any sense to tell you this, to disclose this. Because some of these policies were issued 20 years ago, some 10 years, five years ago. Overall, of course, net assets and profits are important indicators. A lot depends on the economic and accounting matching, and also market conditions. You might see more volatility of net assets. I cannot say for sure whether the net assets will go up and down. The total profits under any accounting standards will be the same, there's only actually in a different way over a certain period of time. If you cut it this way, I mean, cut it how you cut it differently in different ways, but the cake remains the cake. It does not become bigger or smaller.
The accounting treatment is just a way to represent the numbers, the profits, the assets. Well, that's the end of my presentation. Any questions? I'm sorry. Actually, I am behind schedule.
Thank you, Mr. Guo, for your very detailed presentation. Well, I mean, that's also an indication of how complicated the new standards are and also the professionalism of Mr. Guo and Ernst & Young. Maybe for the Q&A session, we will try to make up for the lost time. We try to keep it simple, keep it short. Well, actually, I have two questions. Number one, some of the overseas companies, especially maybe some Canadian companies, insurance, they say net assets will go down by double digits and the long-term ROE will be the target.
What about its impact on ROE and net assets, the impact from the net accounting standards? That's the first question. Second, under the comparison between the old and new standards, insurance companies, room to cook the book, I mean, do cosmetic maneuvers. I mean, is it getting bigger or smaller?
Well, thank you. For the first question, some companies have this kind of a statement. Actually we are noticing more companies, not only-- not from a certain country. Some of them have increase in assets and some have decreases. For domestic insurers, I would say, as of now, no company actually disclosed the qualitative numbers as far as I can remember. As under this circumstances, I would say, maybe just wait for a few more days for the Q1 results.
You can see the actual numbers. It will be hard to answer the question because internationally there are increases and decreases. As I said, the new standards in a specific timeframe or time period, it is really hard to answer the question. It's really complicated for insurance companies. They sell a lot of long-term policies. I would say, we need to wait and see. The second question. Objectively speaking, Ministry of Finance actually mentioned when they released the new standards, the absorption effect will be there. The absorption effect means that it will be hard for some of the company to adjust, to make actually an adjustment to even out in the results. It will be hard because of the amortization of the CSM.
Under the new standards, it will be very hard to just adjust your actually estimates to smooth things out because of the amortization of CSM and FVOCI. Under the standards for financial instruments, as we mentioned, FVTPL will move up. These assets will be very hard to manage because it goes down if the market goes down. It will be really hard to manage the profit by the insurance companies to smooth out your profit. How would a CFO approach this matter? The CFO is maybe they need to think about some indicators to give us some ideas to the analyst, maybe tell them that they should not simply look at net profits because of the possible increase of volatility. They should look at the fundamentals. Maybe fundamentals remain unchanged, but net profits will fluctuate.
Some companies already have some best practices in this regard. Actually, some companies, they actually would give you some profit numbers which exclude the impact from short-term movement of investment values. I would say the CFOs of life insurers, maybe they might need to encourage investors to look at more at the fundamental indicators rather than simply one or two indicators. I believe that insurers should actually do more to help investors, help analysts to interpret the new statements, help them gain insight into the new statements.
Okay, any other questions from the Shanghai side?
Thank you for this opportunity. I'm from the CICC. First of all, thank you for giving this presentation and also thank Mr. Guo from E&Y. No, I would say presentation is very informative. Now, on the issue of information disclosure, previously, we would do...
actually do not pay a lot of attention to the statement itself, but rather on the management analysis. Now under the new standards, we would say the SPRP numbers, and some would say the old indicators are meaningful under the old standards. What do you think should be added to the management discussion and analysis under the new standards, and what indicators should be maintained or kept?
I do not represent the management. I actually talk from the perspective of a user of the statements. I would say there's a lot of financial indicators, and the new standards give you a lot of numbers for the source of pro. Of course, you cannot actually neglect or voluntarily neglect certain important indicators in the management discussion and analysis. There must be certain relevant contents and explanations.
As you said, you see, especially during the transitional period and moving from old to new standards, actually, some companies, insurance companies in China are yet to implement the new standards. Some of the indicators are in the old standards, under the old standards are still meaningful. For example, SP premiums. I mean, still is a very, well, it's a good indicator, people would pay attention to it. You know, for example, premiums collectible, some people will still disclose, some companies will still disclose, and investors will still care about. I mean, it's a really relevant point. I mean, people need to get used to the new standards, so they. Another thing they would like to do is they're going to compare the old and the new statements.
I believe insurance companies should also take this into consideration, how readers will read or interpret my new statements compared to the old ones. I believe on the whole, investors will receive more information, more useful information.
Thank you. The final question from the online. Nope, nothing from online. Any other questions from the Shanghai side?
I'm Wang Qing from CICC. A follow-up question on point you raised in saying that financial statements only record profits. I mean, insurance companies, they would like to present a very good statement. What do you think of the business behavior of insurance companies using the new standards? In order to present good information, good numbers, what kind of a behavior change would there be?
Good question. Number one, fundamentals will remain pretty much unchanged. Of course, it's like, a statement is like, taking a test. I mean, it's a test, so you care about the results, care about the scores. I believe insurance companies would want to present a good statement. Even with good fundamentals, they also would care about the, the score, the test scores. I would say, they can approach it from several perspectives. First of all, the new standards are transparent. Experience variance will be disclosed. That is to say, the difference between the estimate and the actual expense. It could be a noise, it could be because of pure luck. If the difference is very big and is becoming a trend, then investors would get worried. It might be a problem in terms of, controlling expense. You are always making...
Management enhance the expectation management or making assumptions. Maybe under the old standards, these issues will not be exposed. Now, with the new standards, these issues will be exposed quicker. With identification of these issues, they will take measures to address these issues. For another example, the matching of assets and liabilities. If there is not a good matching, there will be more volatility, so they need to better manage this kind of matching. Otherwise, the market would be, well, spooked. Of course, sometimes luck would play a part. You cannot always do proper accounting matching for equity investment, for example. I believe it has higher requirements for the management team. Some of the indicators actually can expose certain issue in a quicker way. It is like an encouragement for the management team.
Well, thank you, Mr. Guo. I believe we need to wrap up the Q&A session. I would suggest we give Mr. Guo a big round of applause. Really sorry that took up too much of your time. Actually, the two-hour presentation is very good. I believe the new accounting standards bring new changes and challenges to the industry as the whole. CPIC is making preparation for the Q1 results under the new standards, will be released on 27th of April. Actually, on the morning of 28th, we are going to have a result announcement teleconference to share with you our performance and indicators. Also, I'd like to give you a heads-up. We're going to conduct on 20th of May in Shanghai.
We are going to hold a CPIC House China launch ceremony for our big health business layout and initiatives. Within the year, CPIC Life and CPIC P&C high quality development. I mean, for these things, we are going to hold investor open day activities. Thank you very much for your attention and support. We are going to continue proactively to offer high-quality IR activities. Of course, the new accounting standards have a lot of details and are very complicated. If you have any further questions, please contact us after the meeting. Thank you.