Ladies and gentlemen, welcome to MetLife's 2018 Asia Investor Day. Our program will begin shortly. Please take your seats and kindly make sure electronic devices are turned off. Ladies and gentlemen, please welcome Senior Vice President and Head of Investor Relations, John Hele.
Good afternoon, everyone. Thank you for joining us and welcome to the 2018 MetLife Asia Investor Day. Some of you have traveled a great distance to be here with us today, and we appreciate your interest in MetLife. If you're joining us remotely, presentation materials are available on metlife.com via a link on the investor relations webpage. For those in the room, you should find materials at your seat. Let's see. The next several pages contain some forward-looking statements and non-GAAP financial information. I'm not going to read it all, but I will point out that we may be making some forward-looking statements today, and we will be discussing non-GAAP financial information. Forward-looking statements include our near and long-term outlooks and any other statements providing information about future periods. As the statement notes, actual results might differ materially from projected results.
For a discussion of the factors that could cause actual results to differ, please see the risk factors in our 10-K, 10-Q, and other reports filed with the SEC. The explanatory note on non-GAAP financial information includes how we calculate non-GAAP measures and the reasons we believe this information is important. Reconciliations to the most directly comparable GAAP measures are also included here. What I'd like to do now is provide a quick overview of what to expect today. As you can see from the agenda, we have a packed program with presentations from many MetLife Asia business leaders. Kishore Ponnavolu and Rebecca Tadikonda will review MetLife's Asia business. John McCallion will provide color on Asia financials. Sachin Shah and his Japan leadership team will offer a deep dive on MetLife Japan. Finally, Siyi Sun will shine a spotlight on MetLife China.
Following a break, Kishore will make some brief closing remarks, and we will open the program to Q&A. Since today's program is intended to highlight our Asia segment, I would ask that when we do get to Q&A, you focus your questions on Asia. While it probably goes without being said, one question, one follow-up, please. We want to be fair to everyone and allow everyone to get a chance to get their questions asked and answered. Once we finish with Q&A, we are hosting a cocktail reception just outside the meeting room, and we look forward to the opportunity to engage with all of you on a more informal basis. That's all my housekeeping items. Let's get today's program started, and I'd like to bring Kishore Ponnavolu to the stage. Thank you.
Thank you very much, John. Hello, everyone. On behalf of 15,000-plus MetLife associates that work in the Asia region, a warm welcome to you. I'm Kishore. I joined MetLife in 2011 as head of enterprise strategy before moving on to run the property and casualty business in the U.S. I'm delighted to be here as President, MetLife Asia. There are three reasons why I'm absolutely excited and thrilled, and why I took this job in the first place. Number one, Asia is the economic growth engine for the foreseeable future. I will keep coming back to that theme over and over and over again. Number two, in today's presentations, and there's quite a lot of them in depth, you'll see that we've accomplished a lot, and we're absolutely well-positioned for the future.
Number three, we have a great team in Asia and around the globe. You will hear from some of them today. With that, let's get started. A few highlights. Asia will continue to be a significant opportunity for us. Healthy economic growth, rising disposable income, and low insurance penetration rates will be tailwinds. If you take the average GDP of the countries which we operate in in 2017, that will be 4.8%. With a 4.8% economic growth as a tailwind, I don't know what else compares. MetLife is well-positioned to capture this opportunity with the right footprint, products, and distribution mix. I will come back to that in more detail. Just think about this for a second. If you take the countries we operate in, take their populations, divide that by the total Asia population, that is 73%. We have the potential to reach 73% of Asia's population.
We're also aligned to enterprise strategy to create shareholder value. You'll hear more about that from Rebecca. Sachin and Siyi will show clearly through their presentations as to how they've been able to accelerate value through meaningful and proactive changes to product and channel mixes. Finally, Asia represents 25% of MetLife's earnings with attractive IRRs. John McCallion will spend a lot more time in detail about that. Let's talk about growth prospects in Asia. Do you see the left-hand chart? I'm not going to spend any time on it because it's self-evident. Asia is a large market, 4 billion people. Collectively, GDP of $28 trillion in 2017. Did I say that markets we operate in had a 4.8% GDP growth? I did.
When I was going through the slide, someone actually said, "You should stop at this point and move on, because you made your point." I don't think I'm done yet. Let's talk about the expanding middle class. Stay with that for a second. You got 2 billion people that would have hit middle class section or category by 2020 on a purchasing parity basis across Asia. That is a little less than two-thirds of the world's middle class in terms of size. That is huge. Aging population is another opportunity. By the year 2050, 62% of Korea and 42% of Japan population will be over 60 years old. China is behind those, but not too far behind. These two factors, combined with the growth in economy, will create significant tailwinds for protection on long-term savings products for us. Let me come to the cherry on top.
You have a tech-savvy population with high mobile penetration, and that actually creates a lot more opportunities for new business models to emerge, and that makes it very exciting. Okay. Let's take a look now at how MetLife is positioned for growth in this region. We're in 10 markets, mature markets of Japan and Korea, large, high-growth markets, China and India, and faster-growing markets of South and Southeast Asia, with 15,000+ employees and 20 million customers across the region. Let me pause there for a second. Maybe I should repeat this, right? Because if that's not scale, I don't know what is. We're ranked number 4 as a multinational insurer in Asia. I come back to the point that we represent more than 25% of MetLife's earnings. We're also pushing forward on innovation through LumenLab, based out of Singapore.
The mandate for LumenLab is to drive culture change, drive partnerships, and push forward on disruptive solutions. So in this backdrop, how have we performed so far? What's our track record? The answer is very well. In China, we grew at 15% over the last three years. In any market, there's responsible growth, and there's the other category. And China is no exception, by the way. And in China, we're clearly on the responsible growth category. We focused on regular premium protection and agency expansion, and you will hear a lot more about that from Siyi. Japan, we outperformed the market, far outstripped it, 6%, while the rest of the market is shrinking. Much of that success is attributed to the shift from yen life to FX products. Korea is a similar story to Japan. We've successfully defended our position while shifting away from heavy guarantees to fee-based products.
Now let's take a look at our product and distribution mix. Balanced product and channel mix ensures that we reach customers broadly with higher conversion opportunities. When you have more channels, you have better ability to reach a broader section of customers. And when you have multiple channels, your conversion opportunities go up. On products, our mix is aligned with customer expectations, catering to protection, savings, and retirement needs. Our distribution, our mix is wide. We have 46,000 career agents across the Asia region, 173,000 independent agents, and 120 bank relationships. To me, that's scale. In short, we have a strong product and distribution mix that positions us well for the future. Now, I'm going to hand over to Rebecca, who's going to give us a deeper dive on our strategy in addition to the strategic growth market, and then I will come back at the end to close.
Thank you.
Thanks, Kishore. Hello, everyone. Thanks for being here with us today. I'm Rebecca Tadikonda. I've spent the last four years as the Chief Strategy Officer of MetLife, and have now just recently taken a role here in Asia to lead our strategic growth market. Look forward to telling you a little bit more about what those are after talking about our strategy. This is MetLife's strategy we put in place a couple of years ago, and the Asia team has been executing and leading the transformation of MetLife around these strategy components for several years now, with great progress and results. On the left-hand side of the page here, this is the foundation of success for any insurance company, and MetLife is clearly a leader here.
Around optimizing value and risk, we focus on making sure that everything that we write, the business that we put out there, earns a strong return for our shareholders while delivering value for our customers, and that we are confident that the cash that we put out will come back in. Part of our strategy to optimize value and risk is to be very thoughtful about the role that different businesses play in our portfolio. Here in Asia, we have an interesting mix of businesses. We have businesses in more mature markets such as Japan and Korea, where we look to balance both the cash coming out of that business as well as continuing to invest in future growth. Then we have markets that we expect to have a lot of growth over the coming decades, many of which are already delivering strong returns for us today.
China is a business that we talk about scaling. We are scaling that business and continue to pursue the market opportunities there. Then we have some of our longer-term play businesses, like Vietnam and Malaysia, where we have a good foothold, and we really see the coming opportunities there over the coming decades. We balance the role these play in the portfolio, some of them generating cash that's actually used to grow our business elsewhere. The second part of the strategy here is around operational excellence. We've actually had great progress in Asia over the last couple of years in terms of investing in technology that makes us more efficient, simplifying our business, taking out the costs, automating processes. We've decreased our expense ratio in Asia by 110 basis points for 2017 versus 2015, and we'll continue down that path as we go forward.
On the right-hand side, these are the things that we have been investing in and will continue to invest in that we feel really differentiates MetLife from competitors. Oops, sorry. Right solutions for the right customers. You'll hear a lot about this from Sachin and Siyi in terms of how we're actually bringing products to market in a different way. MetLife is not about copying competitors' products. We are about understanding through rigorous analytical techniques, quantitative and qualitative, understanding different customers, different customer segments. We heard about aging populations. We also have young populations in different markets, understanding their needs, what is particularly well-served versus not well-served by the insurance industry today, and then coming up with solutions to meet those needs. We really think about solutions in terms of health, family, and future.
We think not just about a product construct, but we think about value-added services, for example, to help people manage their health and stay healthy and get healthy. We think about the experience that a customer has in learning about MetLife's products, in signing up for our products, and then in using our products and services over time. Finally, on distribution, Kishore talked about the strength of our distribution footprint. It's absolutely essential to a life insurance business, is to be able to get out and reach these customers. We are absolutely committed to and investing in face-to-face channels. We think that that's the prevailing way that a lot of people like to make important financial decisions, is to have that kind of advice. We're also investing in our bancassurance relationships.
Again, a place where actually people come in and talk to somebody about their financial needs and how products meet. We are starting to think about and experiment with and invest in distribution of the future. I'd say it's interesting to think about, everybody talks about direct to consumer, and those products probably look a little bit different than the products that we're using in the face-to-face agencies. They have to be more simple, and in many cases, what we'll see is it's the beginning of a relationship that may start digital and may transition over to face-to-face agencies, to where you can really more fully meet the needs of the customer. Distribution is absolutely a big focus in Asia as it is globally. At the center of our strategy is digital.
Every single thing we're doing on this page is enhanced by our investments in technology, by the way that we use data to understand our customers and make smarter business decisions, and the way that we bring innovation to bear so that we can be fast to market with new offerings and new capabilities. This is MetLife strategy in Asia, absolutely at the forefront of execution. Turning to the strategic growth markets, you'll see a lot of these themes come through as well. This is the map here of Asia, just highlighting the strategic growth markets. You can see it's a large portion of the region. I probably imagine every person in this room recognizes the attractive market fundamentals that Kishore talked about here.
Large growing populations, growing middle class, that is creating a need and an opportunity for financial services companies to help people as they move up the economic ladder or prepare for retirement, or prepare for what could be extensive periods where they may not be healthy. What are we doing to go after this capability? Well, first, we have already established a very strong capability locally in each of these markets. We think being locally relevant is absolutely essential, but we think that where MetLife can, one, learn from each other in one market to another, share those learnings, share capabilities, bring them over, and bring the power of MetLife globally, that's how we'll outcompete. We do this all while taking a very long-term view and remaining very disciplined in terms of deployment of shareholder capital and very disciplined around pricing.
At times, you might find that we will therefore grow our top line more selectively than the market. We're doing that very thoughtfully and with the right view towards the health of our business long term and our ability to meet our customer commitments over the long term. The other thing I'd say, if we think about the local capabilities, in addition to that, there's a few things that we are able to learn and leverage across different markets. This customer focus, we do see a commonality of needs, and we do see that there are often solutions we develop for one market that we can bring to other markets. Partnerships and distribution.
For us to gain scale in these markets, partners who have, for example, banks with a large net access to the market, can be a much faster way for us to get there than agency. We balance the building out of agencies where those make sense. A lot of these markets are very attractive for agency, it takes time and discipline to build an agency well. Bank partnerships can help us get there faster. Additionally, employee benefits. We are a global leader in employee benefits, and the relationships that we have with both brokers as well as employers can actually help us accelerate growth in some of our markets as well. Then finally, digital data innovation. Asia is the leader here.
We're looking as countries here are maybe leapfrogging some of the more mature markets, we're looking at how can we learn from things, for example, that we're doing in China with WeSure and some of the digital giants there. What can we do? How can we experiment here in these markets? We may find ourselves actually bringing those to our more mature markets over time. Kishore spoke about our innovation center of LumenLab. This is, think of it as an agile solution shop, where at fast, low cost, we can actually look at a customer need or an opportunity and bring something to market, and do it very quickly. We'll continue to invest in that capability and leverage it across these markets.
I would like to bring this all together with an example of a business that if I talked about it a couple of years ago, would've told a very different story. We have a business, PNB MetLife, in India. A couple of years ago, our business, like many of the market overall, was very much focused on growing top line and sales. That was not a fit with MetLife strategy, we took a hard look at how can we transform that business. It has become a leader in protection, both on a standalone basis as well as bundled in with savings needs. Kishore showed some data from 2017, if you look at the most recent half of the year, we're actually growing now at two times the industry. We refocused, we got alignment with PNB that we need to focus on value.
We slowed down while we repositioned our products, and now we are both a value and growth leader in that market. That partnership of their capabilities was really essential. We've now actually begun to diversify our distribution far beyond PNB in terms of other banks, in terms of agency, in terms of digital. That's the model for us in these markets, is to build up that system across distribution, across products, and then to take what's working in one market and learn from that and see how do we adapt both the capabilities and the experience into our other strategic growth markets. With that, I will turn it over to John McCallion to talk to you about the financials.
Good afternoon, everyone, thank you, Rebecca. Great to be here. Great to see all you here in Tokyo. Let me just start by saying I'm really excited to see Kishore and Rebecca join this talented Asia team. There's been a lot of great progress that has occurred over the last few years, and I think their skill sets will be a great complement to this excellent team here in the Asia region, and really excited to see what this group can do. I'm going to give a brief financial overview of Asia. Before I do that, let me just kind of start with four key themes. One is, as Rebecca and Kishore kind of alluded to, there's been a journey here, journey for the firm and journey for Asia, right? It's been a focus on accelerating and maximizing value creation.
That has started with finding the right customer segments, understanding their needs, delivering the right products to grow value overall. Also, there's been a focus on operational excellence, as you saw in the strategy. How do we continue to improve our operational efficiency, really for this region, look to redeploy those savings in investments to fund growth? That's been happening over time, and we see that continuing, and certainly in order to deliver in this market, it's necessary. During the last few years, as part of our accelerating value initiative that we talked about as a firm, there's been a steady focus on cash generation and improving that, and you'll see that in a few slides how that's occurred.
Lastly, I just would point out, I think there's been a lot of work that's occurred over that time period when we first started this initiative back in, I think it was 2014 or so. I think we're really at this inflection point, and you're starting to see that come through our results. First half of 2018 performance has been very strong on a number of key metrics, and I'll walk through that. I'm going to start with a financial scorecard, these next two pages. Some of these metrics you've seen and we disclose publicly, others are maybe new to you. I'll start with value and growth. Again, we've been on this accelerating value journey, focusing on those right customers, their needs, and the overall growth of value.
That has resulted in a rebalancing of our product mix over the years to ultimately get that higher value creation. You can see that come through in the statutory IRR. Our statutory IRR has grown 180 basis points since 2015. It has continued to improve. If you see the first half of 2018, at 14%. At the same time, over that three-year period, or 2015 to 2017, let us say, sales were muted or relatively flat because of this mix shift. This careful rebalancing occurred over time, and that has, as a result, a shift to higher returning products for the customer and for the shareholder. Also, I think, as I said, we are at this inflection point where now you are starting to see growth come back into the number of growth metrics, and we will go through a few of those.
The shift in mix shows good growth when you look at gross written premium. Statutory revenue metric or AUM or assets under management, you will see that come through at a 7%, 10% CAGR, respectively. However, with the shift to foreign currency-denominated products away from the JPY-denominated life products, there is pressure on the adjusted PFOs. That is a common metric you will see in our quarterly financial supplement, particularly here in Asia. Again, as you focus on these other metrics, you see that there is growth. It is just because of the accounting, these deposit-oriented, spread-based products, they do not have the same level of impact as, let us say, the formerly known as FAS 60 products, premium paying products would have had. It has been a little misleading on our growth as a result of the shift in mix, but you can see the other metrics it is coming through.
Also earnings, again, I would look at the last three years, a decline of 5%. I will talk more about this on a separate slide. One, you probably have to adjust for some tax changes that occurred in 2017 versus 2015, nonetheless, it is relatively flat. Again, I would probably attribute that to this journey we were on for those prior years. You are starting to see the results of these actions come through in earnings, and look at the growth rate first half of 2018 through the first half of 2017. Moving to efficiency, as Rebecca said, the statutory expense ratio has declined 110 basis points. We think this is a better metric, again, just thinking about the accounting for the PFOs, the adjusted PFOs for some of the products we sell now.
This is probably a better metric or reflecting the improvement in operational efficiency as opposed to the direct expense ratio, which is a firm metric, and I am going to get back to how this is counter to the direction of the global or the firm-wide direct expense ratio and the trajectory that we intend to see there. That is probably not really indicative of what we see here in terms of improving the operational efficiency, and I will talk more about that. Lastly, there is cash. We are committed and have been committed to kind of sustainable growth in cash. This accelerating value effort has focused on the cash profile of the products that we sell, and that has translated into good growth over the last three years. I would caution, we put a kind of a caution sign on the first half of 2017 versus 2018.
That's just timing right now. 2018 is really in line with the guidance that we provided back in December. Here's some new business metrics. Let's start with capital deployed. Through this journey, we have really looked at the customer need and the return profile of our products. There's been a 20% reduction in the capital deployed for the same level of sales, resulting in a higher IRR. You see that, as I mentioned before, it's 180 basis points growth in IRR over that same period and a reduction in the payback period from 11 to eight years. How does this happen? Take an example in Japan, as I said, we've shifted from the yen-denominated products in Japan to foreign currency-denominated products, continued our focus on growing A&H, and now actually in Japan, 95% of our sales are foreign-denominated life and annuity and A&H products.
We're also, kind of to Rebecca's point, leveraging those learnings, and we're starting to find ways to deliver products similar to that in Korea. Siyi Sun will go through China, how they've done a great job, responsible growth, a disciplined approach to growth, she'll describe how they've grown or doubled the agency force while in a profitable way. You've seen this version of the chart, Mekko chart. We've shown this at the 2016 Investor Day for the whole firm. We also showed it at the 2017 outlook call or 2018 outlook call. X-axis, as a reminder, the x-axis is the capital deployed. Approximately $800 million in 2017, as you saw just previously, $900 million of capital deployed in 2016. You see some clear improvement in the efficiency of our sales.
Capital deployed above the hurdle rate is 98% in 2017 versus 88% in 2018. That reflects this journey we've been on here in Asia. Look, I think as we move forward, again, as I said earlier, I believe we're at this inflection point for growth. We have a good platform now for growth that we've made, and we look to shift the product mix that we have. I think as a percentage of capital deployed above the hurdle rate, that could vary over time because we also want to find products, new products, innovative products. Oftentimes, when you have a new product, though, it starts out red because we don't give any benefit to future expense efficiencies. That might start out in the red, but you need a path to get to yellow or green. Right?
Our ultimate goal is to show sustainable growth and our value of new business over time. Again, just focusing a bit more on the mix shift and how that's impacted premiums on a statutory basis versus adjusted PFOs. 7% CAGR over the last three years for a gross written premium, high growth rate in the first half of 2018 versus 2017. Although I would caution you to believe that's a trend. That's partly due to heavier weighting towards single premium products in the first half of 2018. We move to adjusted PFOs, though, you don't see the same growth rate as I mentioned before. This is a function of the accounting for these products, deposit-oriented, spread-based products, much less impact on the premiums than the previously sold yen life products. In addition, adjusted PFOs don't show our JVs. Right?
You'd have to consider that where gross written premium, we show that here. I think there's good momentum in the premium metrics, although maybe a little high for the first half of 2018 in terms of a trend for gross written premium versus 2017. I don't think 2% is reflective of the real underlying growth of this region. Another way to maybe look at this is assets under management. It's another metric of growth. We've grown above $100 billion through 2017, 10% CAGR over 2015 to 2017, and then continuing with the 7% growth first half of 2018 through first half of 2017. A diversified asset portfolio and liability profile, about a third JPY, third U.S.
dollar, a third other in terms of currency, leveraging a number of our global capabilities to match these assets, also leveraging some of our private placement and commercial mortgage opportunities to do so in an effective and risk-reducing way. Adjusted earnings. I talked to you about a number of growth metrics, right? Okay, adjusted PFOs aren't maybe a perfect indicator of the growth given the shift in mix. I shared with you gross written premium, assets under management. Obviously, those are leading indicators. I think what's good to see is that we're starting to see that translate into earnings in the first half of 2018. 16% growth first half of 2018 through 2017. Obviously, we didn't see that over the last three years. I would attribute that to the transition of the transformation that we are under in terms of accelerating value.
First, maybe one adjustment I would make is I did mention to you in 2017, we made a change to how we recorded taxes in the segment. It was neutral to the firm overall, but did have a negative impact to move back to the marginal rate for Japan in 2017. If you remove that, we're relatively flat, 2015 to 2017. Again, I point back to, I think we're at this inflection point where now a lot of the actions that we took over those years are starting to come through. Ultimately, those other growth indicators, they're just indicators, ultimately are translating to growth in earnings. As I mentioned on the second quarter earnings call, we had about $20 million of non-recurring positives in the second quarter.
Even adjusting for that, you're seeing about a 12% growth, underlying growth, if you were to normalize for the $20 million. Again, good growth, starting to see it come through in earnings, and ultimately, that's our goal. Again, going to operational efficiency. You see how even Rebecca focused on the statutory mix. We think that's a better reflection of the operational efficiency for the Asia region in light of the shift in mix that we've seen. Actually, the direct expense ratio is going up, I will remind you as a firm, we have a target to reduce our direct expense ratio from 14.3% using that anchor in 2015, down approximately 200 basis points by 2020. That hasn't changed. We're absorbing this shift in mix impact has on the direct expense ratio. It's more of an accounting issue, right?
As I said, because the direct expense ratio is those fixed costs divided by the adjusted PFOs. Those adjusted PFOs, given the products we're selling, are not fully reflecting the growth that we're seeing, primarily as a result of these products being deposit-oriented and spread-based products. Again, good underlying improvement in operational efficiency and ultimately leveraging a number of those efficiencies to fund growth. That's important for this region. You saw a slide earlier from Kishore and Rebecca about digital. Digital is important. In order to maintain competitiveness, we need to invest, and that's the point of continuing to focus on operational excellence. Lastly, just turning to cash. Strong growth over the last three years. We have focused a lot on the cash profile of our products with a goal of improving the cash profile of this region, and we have.
29% CAGR since 2015 through 2017, driven by more efficient deployment of capital on the new sales, and our focus on a number of efforts to reduce the volatility in our statutory results through hedging and other reinsurance-related activities. Again, getting more predictable earnings, statutory earnings to fund, and to improve the dividend profile of the Asia region. You see that come through over the last three years. The dividend to earnings ratio was 61% in 2017, in line with the guidance we gave previously. First half of 2018, again, I caution the growth rate, it's not probably very relevant given it's just timing. For 2018 full year, the dividend profile or dividend expectations are in line with the guidance that we gave back in December of 2017.
In summary, this has been a region that has been focused on maximizing value creation through a careful rebalancing of products focused on those customer segments that we believe we can serve in the right way and deliver on their needs. With a continuous focus on operational excellence, improving the operating efficiencies of the segment so that we can reinvest some of those savings to fund growth. Cash generation has been a key focus for this area, and we've seen steady improvement over the last three years. I'd say overall, as I said before, I do believe that for Asia and for MetLife overall, we've kind of gotten to this inflection point where we've made a number of product mix changes, but we have a great platform for growth, and we're starting to see that come through in the first half of 2018.
With that, I have the pleasure of introducing Sachin Shah, Executive Vice President and General Manager of MetLife Japan, to give you an overview of the Japan business. Thank you.
Thank you, John, and hello, everyone. It is good to see so many of you again back here in Tokyo, and it is a pleasure to host you all here in Tokyo as MetLife celebrates its 150th anniversary globally, and importantly, our 45th anniversary here in Japan. Today, as John mentioned, I will talk about the transformation of MetLife Japan and how this has absolutely accelerated value creation and growth. After me, Koichiro Yamaguchi will talk about our diverse distribution and broad product platform, which remains a competitive advantage for us. Finally, Nick Walters will speak in more detail about our financial performance. Let me get started. Since our last 2018 Asia Investor Day, we have steadily made changes to our business using a value and competitive lens.
We did this to make sure that this business could thrive in any environment, slow economic growth, low or negative interest rates, whatever that environment might be. If you look at our fiscal year 2017 statutory results, our efforts are bearing fruit. MetLife Japan continues to outperform the life insurance industry in Japan. Premiums grew more than 12%, driven by growth in foreign currency products and strong A&H persistency. At the same time, industry growth was -3%. Foreign currency life and A&H sales grew by 22% year-on-year, driven by strong customer demand and the tailwind of ultra-low or negative JPY interest rates. Our dividend also increased by about JPY 9 billion, a 15% year-on-year increase. We also achieved several very important milestones for our business here in Japan. First, our number of in-force policies is now above 9 million.
2 million of these were added since MetLife acquired Alico in 2010. Second, our total statutory assets now exceed JPY 10 trillion for the first time in our history. We absolutely have scale in this market, and it is a point of leverage and strength for us. These strong results are evidence of our competitive positioning and, more importantly, our disciplined execution of MetLife's enterprise strategy. Let me talk a little bit about the journey. In 2014, our accelerating value analysis highlighted four key areas of both improvement and opportunity. First, our proprietary analysis highlighted the need to exit JPY life and annuity. Second, consistent with what we have shared at an enterprise level, we clearly had opportunities to better manage our overall costs, and perhaps even more importantly, lower our unit costs.
Late in 2014, we set an ambitious target of becoming top quartile in statutory operating expenses within five years. Third, with free cash flow as a critical metric, we identified significant opportunities to reduce statutory volatility, better leverage reinsurance, and more effectively deploy capital. Nick Walters will discuss this in more detail later. Finally, fourth, we segmented the overall retail life insurance market in Japan into 9 consumer segments. We attributed value to each and identified profitable growth opportunities for us to pursue. We have made solid progress against these four priority areas, and our accelerating value transformation is largely complete. I am going to walk through each of these areas in a bit more detail for you. As I mentioned, it became very clear to us that JPY savings products were value diluted and also had an unattractive risk profile.
That's why ahead of the market and ahead of the Bank of Japan's decision to adopt negative interest rates, we began exiting the sales of yen-denominated savings products and pivoted to foreign currency-denominated products and accident and health. At that time, this was a bold decision. Thanks to our strong distribution capabilities and our competitive advantage and history in foreign currency products, we have successfully pivoted our business. Today, as John mentioned, A&H and foreign currency products account for more than 95% of our total sales. This is the mix we expect to go forward with. This decision also involved trading off A&H volume. Not all A&H sales are created equal. As we made this pivot to foreign currency products, we lost A&H package sales with yen life products, and also as we exited value-deteriorating segments or suspended products that did not meet our value hurdles.
Now, with this pivot complete, we expect to grow A&H going forward. We also focused on our cost structure and becoming more efficient. First, we focused on real estate opportunities. We consolidated our Tokyo offices from seven locations to two and increased our use of lower-cost locations in Kobe and Nagasaki. We have strong presence in these locations. They provide critical business continuity capabilities, and they strengthen our brand in important parts of Japan. Second, we have and we continue to invest heavily in process automation. This involves a combination of process optimization and redesign and leveraging robotics and machine learning. Our initial focus has been on critical customer touch points and higher volume processes. For example, new business intake, underwriting, or claims. We are making good progress on increasing straight-through processing and have a path forward to more automation and more straight-through processing.
Perhaps more importantly, we have made solid progress in digitalizing our business. For example, all of our agents now utilize tablets or iPads to seamlessly intake new business. Overall, approximately 70% of our new business applications now are paperless. This will increase to almost 90% over the next two to three years. Another example is our wholesalers utilize salesforce.com to identify which agents or bank branches require follow-up. Our career agents also utilize salesforce.com to better manage their customer pipeline and, in essence, improve their own productivity. As I stated earlier, we set an ambitious target of becoming top quartile in statutory operating expenses within five years. As this chart shows, while we have achieved our goal, we are not done. Going forward, we expect further improvements in efficiency as we increase automation and digitalization with a bigger focus on our middle and back office areas.
Thanks to the early pivot, our statutory gross written premiums, as John has shown, have grown at a time when the overall market is shrinking. The shrinking market is also putting pressure on the industry's unit costs. Now following the Bank of Japan's introduction of negative interest rate policy in the beginning of 2016, well after we began our pivot, the industry standard reserve rate for yen products was also lowered in April 2017. It actually increased the relative attractiveness of foreign currency products. We were able to absorb the large premium income drop in yen products by leveraging our expertise and our early pivot in foreign currency products, enabling us to continue meeting the significant savings, income, and inheritance needs of Japanese consumers.
In addition, our focus on customer centricity has enabled us to improve A&H persistency, an all-time high for our business right now, providing an additional tailwind to our premium growth. The combination of these actions is enabling us to improve shareholder value. Our product and distribution mix requires less new business capital, and therefore, has a higher IRR. Our new business payback period is lower, now less than 10 years, driven by the exiting of sales of yen-denominated savings products and offset by stronger sales of foreign currency and A&H products. This, combined with our improved operating expense profile, has led to an increase in free cash flow generation, and therefore, dividends back to the holding company. With the right product mix and a more efficient platform in place, we're now focused on sustaining profitable growth going forward.
As Rebecca mentioned, we're doing this in a very disciplined way. We're investing significantly in listening to Japanese consumers. For example, a MetLife commissioned report by the Economist Intelligence Unit released in October of last year shows there is a serious knowledge gap in Japan around retirement issues such as how long people will live or how long people will stay healthy. We provided you with a one-page overview of the Japan findings of the report. This knowledge gap can lead to significant miscalculations around the assets needed for a happy retirement, which explains why many Japanese have a negative view of what should be their golden years. In fact, in Japanese, there's even a specific word for the negative view and stress, and it's real, that Japanese people feel about life in retirement, and that word is called rogo.
That's why Change Rogo, our brand positioning released one year ago, aims to change this negative view. Through Change Rogo, we aim to help all of our customers manage their health and wealth needs and enjoy a better quality of life for as long as possible. This is differentiating our brand in the market, and it's focusing all of our efforts to ensure that we deliver a compelling value proposition to our customers. To deliver on this aspiration and to make Change Rogo a reality, we are integrating our products, our value-added services, and digitally enabled customer experiences to redefine the customer value proposition and change the way how our agents and distribution partners sell MetLife.
For example, in 2017, with our first move in delivering a new integrated value proposition, we launched a new simplified issue medical product with no waiting period, which remains an industry first in Japan, combined with coverage options for dementia and nursing care. Again, very important issues in an aging society with people living longer. At the same time, we launched a mobile claims app that customers can use to file claims without any paper within minutes, many of which are paid within 24 hours. This mobile claims app is also a first in the Japanese life insurance industry. This new integrated value proposition has enabled us to continue to grow our A&H business on the back of the pivot to foreign currency products.
For example, in a very attractive simplified issue medical segment, we achieved 41% growth in the first half of this year versus the first half of last year. This is a great example of how we're bringing together our historical strength in distribution and product, combined with our investments in technology and marketing to sustain profitable growth. In summary, through the bold actions we've taken, we are improving value creation and free cash flow. We are outperforming the market in profit and growth, and we continue to improve our operational efficiency. At the same time, we are investing to sustain our growth and performance. Thank you for your attention. I look forward to the Q&A. Please allow me to introduce Yamaguchi-san, who will talk about our diverse distribution and broad product platform, which is a competitive advantage for us. Thank you very much.
Thank you, Sachin, and good afternoon, everyone. I am very honored to present here again. Today, I want to explain MetLife Japan's distribution advantage. The advantage is based on our diversified distribution platform with extensive product portfolio to reach customer broadly. This platform allows us to meet rapidly changing customer needs in various market segments. With these capabilities, we believe we have a unique, competitively advantaged distribution mix with strong positions in growing channels that will sustain profitable growth. Let me start with our distribution and product mix. As you can see in the left-hand pie chart, we have a well-balanced mix of distribution channel between career agencies, independent agency, large agency, and bancassurance. Independent agency is small to medium-sized agencies with less than 100 producers focused on door-to-door sales. Large agency has over 100 producers, having both door-to-door and over-the-counter shop type and provide national reach.
Segmenting an independent channel into 2, IA and large agency, is unique to MetLife Japan. We also have a diverse product portfolio, as you can see in the right-hand chart. In the first half of 2018, FX products were a large part of our sales ANP, and A&H is also a significant part of the mix. The 77% of foreign currency product break down to 34% single premium and level premium life, and 43% annuity. Please also note that we had strong bancassurance sales at the end of 2017 and in the first half of 2018. We achieved strong sales volume and margin by VNB optimization project in our bank annuity product, resulting in an approximately 40% share of our sales distribution mix. In 2017, at the full year basis, bancassurance sales mix was around 30%, more equivalent with the other 2 big channels.
Given that last year in the first half of 2017, foreign currency products were 61% of our product sales, this 16% increase to 77% shows that we successfully executed our strategic pivot from yen to foreign currency. In Japan, which is a mature market, there are many distinct customer segments, each with its own rapidly changing needs. To deliver the right solutions to the right customers, as Sachin said, it is necessary to offer a wide range of products via multiple diverse channels. We provide a range of options from which customers can choose according to their needs. This is exactly what MetLife Japan does, and this gives us competitive advantage in mature markets.
As an example, our latest foreign currency A&H product is selling well across our career agency and independent agency channel to corporate owners, and we'll continue to launch products to meet the changing needs of our customers. Because of the challenging external environment, there are many advantages to having balanced sales channels. First, our diverse channels give us strong positioning, making us nimble and able to respond quickly to capture growth in a changing market, as well as customers' changing needs. Second, multiple sales channels help us mitigate the impact of market volatility and give us solid risk diversification. Finally, we have strong positions in key channels. I'll explain this last point in greater detail. Since first half of 2016, we have achieved strong growth in our bancassurance and large agency channels.
Both channels have grown at a CAGR close to 40%, indicating we were well-positioned to participate in the growth of those channels' key market segments. As for bancassurance in Japan, affluent and wealthy seniors view banks as a trusted channel to deposit their wealth, which is mainly in yen. These customers have banks to manage their assets and protect their wealth for retirement. As negative interest rate continues, the need for foreign currency products to provide higher return increases. Our shift from yen to foreign currency has well-positioned us to capture the strong growth in bancassurance by meeting this change of the need. As for large agencies, the protection of personal information in Japan has tightened significantly. What this means is that it is more difficult for sales agents to meet their customers in their offices where a lot of business used to be done.
As a result, customers are looking for over-the-counter shops as an alternative. Customers are also seeking for opportunities to compare similar type of products provided by different insurers. Nationwide large agencies with conveniently located over-the-counter shops attract these customers by providing product comparison of different companies. MetLife Japan's strong partnership with these large agencies reflects in our growth on the bar chart improvement. Our channel growth is helped by our network of hundreds of strong banker and large agency partnerships across Japan, by our history of strong account and relationship management, and by our focus on rolling out competitive products and sales support. Our nimbleness and quick response to change is a result of our strong positioning in multi key channels. We will continue to invest in these channels to further strengthen our distribution advantage.
In summary, our diverse sales channels and range of targeted products give us broad reach across market segments. We can provide customers with a choice how they want to reach to our product and services. This multi-channel approach makes us nimble and able to respond quickly to capture growth and diversify our risk. We will continue to invest to maintain our competitive distribution advantage. This will help us sustain profitable growth. Thank you very much. Now let me introduce Nick Walters, our CFO.
Yeah. Good afternoon, everybody. I'd like to close out the presentation about Japan this afternoon by going back over some of the statutory figures that Sachin mentioned earlier and tying them back to some of the GAAP and U.S. GAAP metrics that we're more used to seeing and talking about during our earnings calls. Before that, I'd like to do a bit of a deeper dive into the sales shift that Sachin and John were discussing earlier on. Since 2015, we've essentially exited the sales of the low-value yen-denominated life and savings products. If you think back to the Mekko chart that John shared earlier, that's really represented by removing some of those red bars from the left-hand side of the screen.
While we've made that conscious step out of the yen life and savings market, we've also been intentionally growing sales in the higher value foreign currency denominated and A&H products. The left-hand chart on the slide here clearly shows the impact of our sales strategy. The conscious reduction in the yen life and savings products, represented by the teal color at the top of the chart here, has resulted in an overall CAGR of negative 5%. However, if you track that same chart from the top of the green bars, you can see a CAGR of positive 12%. That positive CAGR represents the growth in sales of those targeted higher value A&H and foreign currency products. The right-hand graph shows the sales for the first half of 2018 compared to the same period of 2017. It underlines this story with an overall growth of 25%.
Now I'd like to spend a few minutes looking at how this sales shift has impacted both our top line and also our expense ratios. Statutory premium has increased at a CAGR of positive 6%, as Sachin and John mentioned earlier, far outperforming the market. Here, we report our gross written premiums on a cash basis for all of our products. However, as John referred to earlier on, for U.S. GAAP, as you're all aware, while we report premiums on a cash basis for those FAS 60 products, for those FAS 97, those investment type products, only the fees get included in the PFO line.
As such, as we've changed that product mix towards the FX life and annuity products, which are all classified as FAS 97. This has led to an overall CAGR of negative 2% in our adjusted PFOs from 2015 to 2017 on a constant currency basis. This is because the reduction in the premiums from those yen life products has more than offset the higher fees we're receiving from the increasing FX block. If we take a deeper dive into the U.S. GAAP PFOs, we can more clearly see these impacts. As I mentioned, total targeted PFO, total reported PFO from 2015 to 2017 on a constant currency basis dropped by a 2% CAGR from 2015 to 2017.
If we split that view into the yen life and the other deprioritized products on the one hand, then there's higher value A&H and foreign currency products on the other hand. The underlying story can be much more clearly seen. In the top graph here, the PFOs for those yen life and other products has reduced at a CAGR of -8% from 2015 to 2017. That's as we have consciously chosen to exit this market. In the lower graph, you can see the PFOs for our A&H and foreign currency denominated products have been growing at a CAGR of +2%, primarily driven by the ongoing growth of our FAS 60 A&H block, with also the contribution from recurring fees from our growing FX block as well.
While our reported U.S. GAAP adjusted PFO has stagnated over recent years, the underlying story is still one of solid growth. Now, this premium recognition clearly has an impact on our expense ratios. Our statutory expense ratio, as Sachin mentioned earlier, has reduced by 130 basis points from 2015 to 2017. And that's the equivalent of removing $180 million from our expense base. During the same period, our U.S. GAAP direct expense ratio has increased by 60 basis points. The GAAP difference from premium recognition is responsible for the vast majority of this variance at 160 basis points. The residual is due to a number of smaller items, including some small differences in the GAAP difference of reported expenses such as amortization and depreciation.
Sachin mentioned earlier, our operating expense performance continues to improve, even if this is not immediately obvious from our U.S. GAAP expense ratios. Also, it's important to keep in mind that for product pricing purposes, our unit costs are all derived using statutory expenses. As such, our statutory expense ratio and seeing improvement in our statutory expense ratio is a very important metric for us. With premium recognition differences creating a lack of clarity, another way to look at our growth here in Japan, as John mentioned, is to look at our AUM. With strong sales driving new business growth, as well as higher persistency on our in-force block, our business in Japan is growing, reflected in an 11% CAGR in our AUM between the end of 2015 and the first half of 2018.
Assets under management have increased more than $20 billion since the end of 2015, with good diversity among our three main functional currencies of the U.S. dollar, Australian dollar, and also, of course, the yen. Our net investment income has grown proportionally with the AUM, reflecting our strong global investment capabilities in capital markets in the U.S., in Europe, and as well as here in Asia. This global capability enables us to take advantage of MetLife's deep experience in sourcing and originating assets that enable us to both enhance our overall yield, as well as optimizing our asset and liability duration matching. And this skill set, which enables us to continue growing our net investment income, is very hard for many of our peers here in Japan to replicate.
Finally, I'd like to share an image of the cash and capital being utilized by the Japan business to demonstrate how we're optimizing value and risk. There's a few simple messages from the slide here. Firstly, because we're targeting more capital efficient products, we require less capital to be allocated to new sales. Secondly, while we're continuing to invest back in the company at a rate of approximately 5%. These investments are enabling us to become more efficient in our operating expenses, which have reduced here from 38%-35%. All of this translates to more of our capital being freed up to enable MetLife Japan to increase our free cash flow. Which on the page here is increasing from 21%-32%.
In summary, our sales are growing in those high value targeted products, which is also enabling us to reduce the amount of capital we're allocating to new business. As we mentioned, while the reduction in the yen life and savings products continues to cause a drag on our adjusted PFOs, we believe our AUM is a better measure of the growth of our business here in Japan. Put together, this is enabling us to increase free cash flow while also consistently investing back in our business in order to create further efficiencies. In summary, for Japan, you can see that accelerating value has clearly transformed our business here. As a result, we are outperforming the market, both in profitable growth and in unit costs. Our distribution platform, as Yamaguchi-san explained, is a clear competitive advantage for us.
Combined with the investments we are making to differentiate our customer value proposition, we are very well placed for sustainable profitable growth. With that, I'd like to thank you for your attention. I look forward to the Q&A later on. In the meantime, I'd like to hand over to my colleague, Siyi Sun, Senior Vice President and General Manager of MetLife China.
Good afternoon, everyone. I'm glad to have the opportunity here today to talk to all of you about MetLife China's business. In 2017, China is already the world's second-largest and Asia's largest life insurance market, measured by total premium. Only back in 2015, China was the world's fourth-largest life insurance market. From 2015 to 2017, the total premium has grown at 30% CAGR. MetLife China is well-positioned in this market to capture the huge growth potential. I will talk more in details later. This is a picture of where the China's insurance market compare to the rest of Asia. As the world's second-largest insurance market, China is still under-insured, as you can see from the two frequently used measurements, life insurance density and life insurance penetration. Life insurance density means premium per capita, and life insurance penetration is premium as a percentage of GDP.
First, let's look at the blue bar here. China's life insurance density in 2017 is only $225. Compare that to all the developed markets in Asia, Hong Kong, Singapore, Japan, South Korea, we're well below that. Even in large cities such as Beijing and Shanghai, where the life insurance density was the highest in China, the number is still well below $1,000. $225 is even below some developing markets such as Malaysia and Thailand. Let's look at penetration. China's number is at 2.7%. Look at the developed markets such as Japan, South Korea, and Singapore. They are well above 6%. Hong Kong is exceptionally high at close to 15%. Even for some developing markets such as Malaysia and Thailand, and even India is higher than China's number. What does this tell us? It tells us there's a huge potential for future growth.
As China's economy grows and the middle class expands, people's income levels rise and the demand for protection will continue to rise. This will present significant opportunity for future growth in the life insurance sector. The question is: how is MetLife positioned in this market to capture this huge growth potential? Let's look at that. Let me give you a brief introduction of MetLife China's business. We have a 50/50 joint venture business in China. We first formed our joint venture in 2004. Our JV partner is Shanghai Alliance Investment Ltd., which is a state-owned investment company under Shanghai East government. Let's look at the map. The blue area is where we operate. We currently operate in 26 cities across 11 municipalities and provinces.
We are strategically located in the most populated and affluent areas of the country, which covers 566 million of population and 55% of GDP. After 13 years of operating in China, we crossed a milestone of achieving 10 billion RMB in gross written premium in 2017. That's equivalent of roughly $1.4 billion. We're also very well capitalized at about 320% under C-ROSS, which is China's equivalent of Solvency II capital regime, which probably most of you are very familiar with the Solvency II regime. Let me talk about the last bullet point. Both Kishore and John mentioned disciplined and responsible growth. In Kishore's presentation earlier, you probably saw the gross written premium growth rate for China from 2015 to 2017 has been trailing the market growth rate of 30%. We were at 15.
That is actually because we never pursued the growth for the sake of growth. Our philosophy has been consistently on disciplined and responsible growth. While a few years back, many market participants have been focusing on selling short-term, savings-oriented products. MetLife China has focused on protection and long-term products. Let me give you some stats. For example, over 90% of our regular pay product new sales has a premium payment period longer than 10 years, while the industry average is only 50%. That gives a view of long term versus short term, us versus industry. Our discipline has paid off. As a local regulator, CIRC tightens local regulations to stop these aggressive market behaviors. Our discipline and our strategy has paid off. First half of 2018, for the whole industry, the individual life and annuities cash new premium has decreased by 43% year-over-year.
While during the same period, MetLife China's new business premium has increased 24% year-over-year. Responsible growth has been the core of our strategic focus. Since 2015, our strategic focus has been consistently on accelerating value. Given the time we have today, I can only share a few key strategic initiatives with all of you. Scaling our distinctive professional agency force, given the large value pool in our agency channel in entire market, and integrate telemarketing channel with the digital capabilities to unleash the combined strength of both. Also through extensive market research to activate customer value propositions. With relentless execution, we're able to generate value with capital efficiency. Let me walk you through with some more details. Let's look at scaling distinctive professional agency force.
Through the extensive market research we have identified in the value pool of the entire life insurance market, agency channel delivers the highest value. With that in mind, we have more than doubled our agency force from 2015 to 2017. As we scale our agency force, we were able to maintain high quality and high productivity. For example, over 99% of our agents have at least three plus years of college education. 60% of our agents sell at least one life policy each month. In fact, our agency force is among the most productive in the China market. Our active agents' productivity is at $3,000 per month. That is twice as high as the industry average. 6.3% of our agents are members of the Million Dollar Round Table, known as MDRT.
Many of you probably heard MDRT before, which is recognized as a very elite group of agents that are mostly productive and successful around the world. Our percentage of agents who are MDRT members are among the top of the industry. The other key strategic initiative is about combining our strengths in digital and telemarketing. This is very unique to us, the MetLife China business. We have both strengths in digital and telemarketing. However, what really differentiates us is how we bring them together, how we integrate the two and create an innovative and unique business model. Let me walk you through that. Let's look at the left-hand side, the digital business. MetLife China is one of the first among all the foreign JVs to go online to sell our products. Currently, we partner with 38 digital partners.
99% of our products we sold online are accident and health products. Today, we are ranked number three among all the Companies in terms of online sales in the A&H sector. Let's move to the right, telemarketing channel. Telemarketing is a niche channel. However, we are among the largest telemarketing channel in all the JV companies. MetLife China has 10% of the telemarketing market share. We partner with eight large banks, and we also have eight of our own call centers to sell our products. Our telemarketing sales representatives are highly productive, and each of them, on average, sells $5,800 per month. This is way above twice of the industry average. I want your attention to move to the middle, the circle in the middle. This is what really differentiates us.
When we bring our online customer acquisition with the offline telemarketing follow-up sales. Our unique capability to allow us to partner with internet giants to acquire customers online. There are huge traffic brought in from online. We were able to acquire them online, then follow up or cross-sell, up-sell them through the offline channel, which is telemarketing. Currently, as Rebecca mentioned earlier, we have strategic exclusive partnership with WeSure, which is a Tencent-owned digital insurance platform by WeChat. We also have partnership with Amazon, China's Amazon equivalent, JD.com, and China's Google equivalent, Baidu. We expect through these partnerships, and with our strong, combined, unique capability in digital and telemarketing, we're able to capture the huge growth potential in the digital space in the coming years. The distribution advantages can only be powerful where you have great products to sell.
Let me talk a bit more about that. Through extensive customer research, we have narrowed down our focus to affluent customer segments who are internationally minded and health proactive. We found out through our research, what today's customers want is not simply a good product. In fact, they all want a holistic end-to-end solution. Because of that, we moved away from a simple product approach to a holistic end-to-end solution approach. We generated what we call signature moves with a common theme of health over the past year or so. Let me give you a few extra colors on that. On the left-hand side, you can see the three signature moves we launched since last year. The first move we launched, called Safeguarding Your Health. This is a whole life critical illness product with a range of value-added services.
At the time of launch, it was very pioneer in the market because it offered holistic solutions from prevention to treatment to rehabilitation. It was so well-received by our customers and our distribution, and it also received 2018 Bronze Stevie award for the best new product of the year. Our product team was named the best product development team of the year. Second move, Effortless Premium Healthcare, which is in our video commercial, is on the looping. Some of you probably already saw it. If not, please take a moment to watch it on your way out. Third move, Flexible With You for Critical Illness. We offer the customers with the flexibility to tailor-make their own needs for their critical illness coverage. We just launched it early September this year.
In less than 20 days, we have sold 12,000 policies, which is certainly a huge success. With the very clear and differentiated strategy and the relentless execution, we were able to generate value while we're driving the scale. Let's turn to the numbers on this page. Our sales has been growing at 26% CAGR from 2015 to 2017. While the capital deployed for new business in the same period has been decreasing at 12% CAGR. Our statutory internal rate of return is well above 15%. Let me recap. China is the world's second-largest insurance company as of 2017, and it continue to grow. The market is still under-insured and the economy is developing. The middle class expanding. Protection needs are rising. MetLife China is well-positioned in this market to capture the future growth potential.
We have very clear and differentiated strategies in distribution, in products, and in digital. Everything you have seen also on our commercial, our digital capabilities, we didn't have enough time to cover in details today. With all of that and a good track record of execution, we believe we can continue to generate value while driving scale in the China market. Thank you for your time and attention. Now let me welcome our Asia President, Kishore, back to the stage for some closing remarks.
John, were you supposed to be here? Okay. This is such an easy close for me. Such an easy close. I loved what John McCallion said. I think I'm going to steal that word, and I'm going to use it for the next five years, inflection point. That's what characterizes our business in Asia. If I try to sum it up, accelerated sales, accelerated assets, steady improvement in statutory expense ratio, and a steady improvement in IRRs. How did that come about? You saw brilliance in execution. Sachin and team talked about remixing the business and almost remixing 50% of sales while improving operational efficiency. Just think about that for a second. That did not destroy even a dollar of distribution franchise value. I was actually sitting there looking at Yamaguchi-san, and he says he looks young and dashing. How did he manage that?
That is near impossible to do. Yet the team did it. You saw Siyi talk about the wonderful opportunity in China, how the team stayed so disciplined, not chasing growth for growth's sake, yet focusing on the most important things. Growing that agency channel, looking out for the future on both digital and telemarketing. That's not easy to do. By the way, I don't know if you missed it or not, I did not miss it. With both Sachin's and Siyi's discussion, the underlying theme was customer focus. If we're focused on the customers and their needs, and we're disciplined in terms of our opportunities and challenges with respect to our financials, we'll be all right. That is our story. With that, and I don't need to come back and say Asia is a fantastic growth market. Huge opportunity for us.
That's given, and we have a wonderful team. I am so proud of our team here, and you only saw the tip of the iceberg. There are plenty more. There are many, many more. I come across people in these businesses and in the regional office with 15, 20, 25 years of experience who are tremendous hands, and I personally will rely on them going forward. With that, thank you very much. I'll hand it over to John. I guess it's time for a break and then Q&A after that.
Well, thank you very much, everyone. Thank you, Kishore. You're exactly right. We're going to take a short break now, about 10 minutes or so. We're going to return back to this room at quarter of.
That's for the benefit of the webcast. We're going to take Q&A for as long as you guys can last. Thank you very much.
Ladies and gentlemen, please take your seats. Our meeting is about to resume.
Fantastic. Great, everyone. Thanks for coming back promptly. We're going to launch into Q&A, I want to remind you that this Q&A session is what stands between you and cocktails, manage your questions accordingly. A couple of ground rules. Number one, this is being webcast, if you wouldn't mind just one, wait for the microphone, and two, announce your name and firm when you ask your question. Number two, I guess that's it. Let's get rolling. Okay. We have two mic runners out here. Over here, we've got Josh asking a question.
Thank you. Josh Shanker, Deutsche Bank. On slide 45, we have the sales growth, obviously very strong, annuities up 100%, it looks like, year-over-year. There was really, it seems, very little growth between 2017 and 2016. I wonder if there's incentives there that's driving that product design. What's sort of changed in the last six months or a year that's accelerated that? As the level premium product the sales declines near zero, likewise, why sell the product at all if you're de-emphasizing it or whatnot? Are you trying to move away from the market?
Great. I think you're referring to the Japan section in those slides. Let me start that out, and then the team can add on to that. Thanks for your question. A couple things that are going on. I think the first thing I'd say, and it's really important to underscore some comments that both John McCallion made and then Nick made. If you think about where we're now headed with our sales volumes, we're now back to pre-crisis levels or pre-2014 levels in our volumes. We've taken down the JPY business and, in essence, replaced it with FX business, and we're also now beginning to grow A&H. As I said in my comments, we lost A&H volume as a result of the value actions that we took.
A lot of this is just the natural progression of shifting our distribution out of JPY into foreign currency products, and that's what's driving the underlying growth that you're seeing here. We're getting to a base where we feel we can get back to growing faster than the market, but more closer to our long-term guidance that we've been providing on this business fairly consistently here. That's just one quick comment. Regarding, we do not have any special sales incentives or commissions in place on our products. In fact, in the bank channel, because of both commission disclosure and other things that have come through from a regulatory framework perspective, we don't have any incentives in place on any of our products in the bank channel. I would say that's fairly consistent for all of our product sales across all of our channels.
Our commission scheme is our commission scheme, our commission scheme is the only way we pay our agents today. I don't know if I'm answering your question directly or not there. Secondly, on the level premium side, if your question's referring to the JPY piece, the bulk of what's left is actually good JPY because it's term life.
We have very little, if close to zero sales of JPY whole life at this point. The majority of that, I guess it's the teal at the top of that chart. If you use 2017 and you have the $1.38 billion, the majority of that is term life product, JPY term life product. It's good stuff. Very well term matched, has good profit margin, it's pure protection business.
I was mistaken. The colors were similar. It's the yen life. In the annuities, it's about 100% growth year-over-year. There's nothing in particular driving that?
Yeah, the biggest thing that we've done there, as we made the shift away from yen to FX, one of the things we started to do was to apply the VNB optimization discipline down to a distribution channel and product level here, and look at all of our optimization levers. What we were able to find was opportunity where we could make the product more attractive from a customer perspective and maximize the shelf space we had with banks. In most cases, we had shelf space with our bank partners that was essentially not giving us maximum VNB or value here. Making some changes in the product design as well as the value proposition to the customer, we were able to get our bank partners to, in essence, turn those shelves on because the product became more attractive to customers there. That's the simple story.
It's a VNB maximization exercise that we went through there. Our goal was find where we need to be on the curve, if you will, to maximize value and volume with each bank shelf we have, and how do we do that.
Okay. We'll move to right next door, Ryan Krueger.
Thanks. Ryan Krueger at KBW. Can you talk about what percentage of your Asia earnings currently come from outside of Japan, and where you see that headed to over the next 3-5 years?
I'll take that, John. Yeah, I think it's roughly 25% or so, give or take. Look, I'm not going to give a projection as to where I think that goes over time, because I think there's good growth opportunities across the region. Obviously, Japan being our biggest business, if you see strong growth, there's going to be a pretty high weighting to that over time. There's also high growth markets. You saw Siyi talk about China, which has been doing very well. I think what I like about this, and I think this is for MetLife overall, is we value the diversity because it gives us a chance not to have to chase, right? Chase market share just because we're in a certain market.
We have the ability, if things get irrational, to step back because we have other products and other geographies that will give us value over time. We have the ability to shift when the market's not there. Rather than giving a forecast, I think it's important just to leverage the diversity of our book.
On the FX annuity product, typically, because I think of fixed annuities as being fairly capital intensive, as you went through the value optimization process, what got you comfortable that that would produce cash faster? Did you change certain aspects of the product structure or commissions?
maybe I can start off the response on that as we think about that value optimization work that we applied to our annuity book. It really goes back to some of the comments I was making during the presentation about leveraging our global capabilities. It was really looking at how do we optimize our investment portfolio for these specific durations of these different products. We have, obviously, fixed term FAs in that block, as well as whole life products in that block. It's really optimizing our investment yields for the risk categories of the assets we're putting into each of those portfolios. It's doing it on a very granular level, getting down to each of the different product portfolios and applying both the investment, the yield, and the risk lens to really enhance those capabilities.
What I'd add to that is I think, one, fixed annuities generally in our portfolio, if you compare it to a whole life product whether it's a foreign currency whole life product or even our medical products, which tend to be whole life, fixed annuities tend to be much more capital efficient on a relative basis when you think about new business strain or new business capital required. That's one. The couple points I'd add around the products themselves are, one, it's a single premium product. We're very tightly duration matched, as Nick said here. There's very little, if any, ALM risk in that product there, because they're term type products, and we're selling them for relatively short durations 10 years or less, typically. They're foreign currency, predominantly U.S. dollar, so we have very deep expertise in matching that duration and liability profile.
The second is the product is designed with what we call market value adjustment features, the customer is bearing the market risk. As FX rates or equity markets move up or down, or in fixed income, in this case, moves up or down, the customer is, in essence, either benefiting or not benefiting prior to the maturing of the product there. We feel really good about the risk profile. We feel good about the risk sharing that's in place that we have there. As Nick said, our investment expertise gives us a lot of confidence that we're not only going to meet the customer obligation that we have, but also earn more than our fair share of spread on it.
Thank you.
Great. Let's move to the middle aisle here. Erik, keep your hand up in the air.
Hi. Erik Bass with Autonomous Research. First question, could you talk about the sources of earnings for your products in Japan and the breakdown between mortality and morbidity margin and investment spread?
Sure thing. Let me pick up on that a little bit again there. One thing that we're seeing as we're going through this transition is a strong contribution and strong improvement from all of the sources of earnings. Excuse me, all of the consistent sources of earnings. Apologies that I talked more to our statutory earnings at this point. This is where we do a deeper dive on our source of earnings. If we look across our statutory earnings, we're seeing improvements in our mortality earnings. Not huge leaps forward, but clear improvements in our mortality earnings. Very strong improvements in our investment earnings, given the, again, those global capabilities and the strong NII. Our expense earnings is also improving significantly with the increase of the sales that we're making, as well as the strong consistency that we're seeing on the in-force block.
We're seeing very good persistent sources of earnings. Where we've seen a drop over the last few years, we look at our statutory earnings, is in those one-off earnings. The surrender. With the yen staying where it is right now, we see the surrenders coming more from weakening yens. Where the yen's been weakening, our surrender earnings is off, but try not to rely too much on that one. If we think about those consistent sources of earnings, it's a good strong contribution across all places.
Thanks. One on China. With the opening of the market and the potential to take a greater ownership stake, is this something that you would have an appetite to do? If you have any sense from your JV partner whether they may be open to you taking a larger stake?
Thank you for the question. We have very strong and positive relationships with our JV partner in China, and this is hard earned, and it's not the case for some of our other JV companies. We have been able to grow our business together. With our partnership, MetLife bring in the insurance expertise. As I mentioned earlier in my presentation, our JV partner is a state-owned investment entity. We view this partnership very positively, which has brought us to where we are today, and we look forward to continue to grow the business together with them.
Suneet, keep your hand up. Take the mic.
Thanks, John. Suneet Kamath from Citi. You talked about improving your statutory expense ratio in Japan, even though you're better than peers, and I think the last number you gave us was a 7.1%. Where do you think that could go over the next couple of years? How much more improvement do you have?
Sure thing. If we look out over our midterm figures that we have projections for, we see that figure staying consistent. Still marginal improvements. If we look at those improvements that we are seeing there, that is really coming from an ongoing reduction in the expenses, contributing to that expense ratio improvement. We see that level of marginal improvements from that level going over to the midterm future.
In terms of your Japan earnings, maybe for John, have you hedged those earnings over the next few years? Can you give us a sense of where you've hedged them?
We've hedged through 2019 at this point. I think the average strike may be around 109. Does that sound about right? It could vary. I forget. Maybe don't hold me to that. We've hedged through 2019. What I would say is, I think we're still looking at whether we continue that practice. We have diversified that book. Even though our Japan earnings in Asia and relative to the firm are fairly large, obviously our yen-denominated earnings in Japan has become less % of the total pie. I think we're going to look at it. We have it out through 2019 at this point. We're going to probably consider where our mix is overall. We have a pretty well diversified book globally. I think we have to just weigh the cost benefits of hedging those in the future. Okay.
Let's move over to this side. Tom, keep your hand up.
Thanks. Tom Gallagher, Evercore. First question is just on the improvement in cash flow. What's the source of that? Is that improved statutory earnings? Are you using some optimization to reinsurance? Like when we see the 60% of GAAP earnings that you're actually taking out as dividends, how much of that is actually driven by statutory FSA earnings and the like versus other mechanisms?
Do you want to start, and I can jump in afterward, just give a sense of the stat earning profile over the couple year period.
Sure thing. Tom, you're absolutely right. The increase in cash flow is coming from increases in our statutory earnings. That is coming from some of the capital management efforts that Sachin and John referred to earlier. Those capital management efforts include reinsurance, they include other hedging strategies as well, really focused on taking the volatility out of our stat earnings. There's three areas that we're really looking at taking down the volatility on the stat earnings there. One is on the core earnings, which is the equivalent of an adjusted earnings for local stat purposes, which is a really important figure to our distribution partners. When they're talking to our customers, they want to see strong core earnings. We're looking to take the volatility out there.
The second place of taking volatility out is the net income line, which is obviously feeding straight into your question there, Tom. The third place is also taking volatility out of our solvency margin ratio. That when we're performing our stress test looking forward, we've got less impact from the various stress scenarios, giving us more confidence to distribute more cash flow. Over to John.
Is it fair to say, are FSA earnings more than 60% of GAAP earnings, if we were to compare Japan right now?
Yes. It's in that ballpark. It's around 60%, but yeah.
Okay. The next question, just curious what's going on with your life planner channel. As you've done this big pivot, I think it's 20% of total sales right now. Have sales fallen a lot? Have you lost people? Can you comment on what's happening with that distribution channel?
Thank you very much for asking it . That important channel as well. I think you are referring like career agency channel. We call it consultant rather than life planner, by the way. The total number of our consultant is last few years, a little bit decreased from 4,000 to around 3,800-ish number. Now, this year, it turned around and currently we have around 3,850 consultants. We are also improving productivity of those consultants, our agents. This channel is very important to provide stability in our product mix. That's important core part of our distribution mix.
Tom, what I'd add is similar to what we talked about with the question earlier around the bank channel where we said, "Where do we have shelf? How do we do a V and V optimization on each shelf?" We did the same thing in the career agency channel. We went down to the agency level and did a V and V optimization of the agencies. We identified agencies that we felt like were below where we needed them to be on a relative basis. If we didn't see a path to getting them to a certain threshold, we made the decision to consolidate agencies or shut down agencies here. Again, all part of this optimization work that we were doing. There's a lot of moving parts under the numbers we've been sharing with you.
While Yamaguchi-san only focused on two channels, every one of our channels over the last four or five years we've been doing this very disciplined value maximization or optimization exercise here. That's caused us to bottom out in the last 18 months or so. In the last 12 months, as Yamaguchi-san said, that we've now focused on recruiting again. We had, in essence, held back on recruiting while we did the optimization and consolidation exercise. We started recruiting in the last 12 months and expect to grow it off that base. Not crazy because the market itself is not very big around life planners. It's mostly third-party distribution now. We do see an opportunity to continue growing here because we have good productivity in that system, which now has improved with the work we've done, as Yamaguchi-san said.
We see opportunity to continue to steadily grow that business from where we've got it.
Just final question. A&H, are you still selling packaged products, or now that the yen has gone down so much, are you no longer doing the packaged products?
While our producers are doing consultative sales, we have those packaged sales even with U.S. dollar. Because of the currency difference, the package rate was not as high as those package with JPY-denominated whole life. In order to provide a tailor-made consulting service, we sell both whole life with A&H product as well.
Again, here, maybe the broader backdrop, and I'm sure you've heard some of this from the meetings that many of you've had this week here. In the industry here, there's been an effort made really in partnership between the regulator and the industry association around this concept of fiduciary duty. Really, to me, it's customer first at its heart. In our case, and I think this is consistent with many players in the industry, but in our case, we took a hard look at our commission schemes in particular and said, "Are our commission schemes incenting customer-centric behavior?
Do we have situations where it works for us because we have incentives to package sale, but it may incent the wrong behavior on an agent's part in terms of are they doing the right thing for the customer from a need perspective?" We reevaluated all of our commission schemes across all of our channels here and backed away from what historically had been additional incentives to package medical with life insurance products. We have much lower incentives, if none, now in place. That happened in parallel with the transition to foreign currency products away from JPY, which as Yamaguchi-san said, really puts a lot more emphasis then on the consultative selling, which is where we're focusing our energy.
We'll take our next question from Jimmy.
Hi, Jimmy Bhullar, JPMorgan. It seems like there's a little bit of a disconnect in the story you tell on the business and the metrics over the last few years, and then the numbers that we've seen are coming out of the company. As you're looking forward, to what extent do you expect the GAAP numbers to follow the metrics in the business, or is there sort of ongoing drag from product mix shift or something else? Then relatedly, how do you think about the growth potential of your international or the Asia business? I guess China is easy, but if you could talk about how fast you could grow and such in further Japanese business.
Yeah. Maybe I'll start. I think, in terms of metrics, I think we showed you a series of metrics because sometimes it's hard for no one metric is perfect, right? Mix can change that metric, and we gave a number of examples how with the shift in mix we've seen in Asia to pretty heavy focus on foreign-denominated products, that things like adjusted PFOs have a hard time kind of reflecting the underlying growth. We showed you a number of other metrics to try to explain that in a different way. I think going back to our outlook call, probably the one I would focus on is adjusted earnings. I think we said we're probably outperforming what we said for 2018.
I think we said mid-single digits, and I showed a slide today, we're at 16% for the first six months, and if you adjust for or normalize for the $20 million I referenced on the second quarter, maybe we're at 12%. Call it low double digits. I think in that outlook call, we then said that after 2018, we saw something more like high single, low double as our trend. I think that's probably still a fair trend. I think as we move towards the next outlook call, we have to look at the other areas of guidance that we may give around different metrics. I think for the earnings, that's probably the one that at least is neutralized for the different products. I think it's showing that there's good volume growth. These are still good margin products we're selling.
That shift occurred over the last three years, and you're starting to see that come through. I think that near-term outlook is still probably appropriate and one to focus on.
Then just on competitor behavior in both the Japanese and the Chinese markets, is it rational or are you seeing pockets of aggressiveness on the part of your competitors?
Thank you for the question. I'll take for China first. I think we have experienced quite aggressive market behaviors in the past few years. The regulator, especially after the combining the bank regulator and the insurance regulator together early March this year, we have seen a really very tightening regulatory environment, especially later last year and the first half of this year. As a result, if you look at the overall life insurance industry's premium growth, you have actually seen negative year-over-year growth. I think this is going through a very healthy movement from a quite aggressive market environment to a more healthy level playing field environment. The regulator's mandate is try to shifting, really let the insurance focus on insurance rather than focusing on selling wealth management type of products.
At MetLife China, we have always focused on protection type of products to start with, our strategy never shifted even during those past few very aggressive years. We welcome this regulatory tightening environment very much.
I'd say we pay attention a fair amount, obviously, to competitors and what they're doing, largely from, are they offering a better customer value proposition and is there something we are missing from a customer value perspective? With our focus around both adjusted earnings and really value maximization and our diverse product and distribution portfolio, we don't get too caught up on a channel, a product. We have the ability, as Yamaguchi-san in his presentation, to shift our focus to a different product set here. It's down to a distributor level that we can do that because in many cases, we have multiple shelves with our third-party distribution partners.
If a competitor's doing something we feel it's just not going to get us the value we want, we can back off on that shelf with that distributor and focus on another shelf with either that distributor or go to another distributor that we have multiple shelves to. I think the one big thing I'd say that's under the hood here with this accelerating value is we've gotten a lot more sophisticated at the level at which we're managing our distribution and product decisions here. There might be some irrationality in the market here and there. We see it. There's no question about that. It's a lot, I think, easier for us to shift our focus somewhere else because of the diversity of our platform that we have in place.
Finally, the backdrop that I'd reinforce is the regulator here is quite engaged with the industry around ensuring customer-centric practice. I think that has really, in essence, helped the industry to move away from practices in the past that might have been more commission-driven in terms of the decisions that distributors were making or more price-driven simply because people were trying to grab market share. I'd say overall, there's maybe a bit more rationality in the market today than there might've been a few years ago even.
Just lastly.
Since no one else has asked you, on the changes in accounting that are coming down the road in a few years, do you have a view on, or where do you stand on how MetLife's going to be affected?
Yeah. We're working through it. Obviously, early days in terms of the effective date being announced back in mid-August. I would hesitate to give you a directional view, because I think while we're happy it's principle-based, there's a lot more work to do around the principle and how we're going to address the principle, as MetLife and as an industry, I think. Probably early days. Again, I would just remember, ultimately, we have a big focus here on cash. Right? The cash profile of our products, the economic value of those products over time. While U.S. GAAP earnings or metrics could vary over time for accounting changes, cash is not changing, from our perspective. Again, early days, but ultimately, we revert back to cash, and we've been giving that story for some time now.
Thank you.
Move to Humphrey in the middle here.
Humphrey Lee from Dowling & Partners. I was just wondering if you can remind us in terms of among the 10 markets that you are in, which markets are at scale as opposed to markets that are still making heavy investments into those businesses?
If we start with China, it's a business that we think is at a strong foundation of scale, but certainly we are still scaling that business significantly. From an operation efficiency perspective, we feel it's at scale. Japan and Korea are scale businesses, as is our Australia business in its focus on the superannuation market. That is the core business there, and that is at scale. Amongst the remainder of the strategic growth markets, we're looking to scale those businesses and build more operating efficiency over time.
I was just wondering if there's any way to size the investments that you're making and to steal the term from John, when do you expect to hit the inflection point?
I think it really depends what John talked about the opportunities that we see in the market, and those can be lumpy. Some of them scale more gradually over time. We look at agencies, and those are scaling. As we see bancassurance relationships and opportunities to go after those, that could put us to scale more quickly or more slowly. Additionally, employee benefits can be something that we can build much more quickly. I think it's hard to forecast that at this point. The collection of those overall, I would expect will be ones where we will be moving capital in rather than moving capital out for the next three to five years. Again, it'll be very much driven by the scale of the opportunities that we see presented that are more lumpy versus the organic growth.
Can I just add?
So-
Oh, you go ahead. Go ahead.
Sorry, John.
You can think about scale from a couple of angles, right? One is how big are you in the market relative to competitors? Are you one, two, three, four, five, six, seven, eight, nine, 10? There is certainly a cut-off point which you can think about. The other thing is internally, from our own metrics, what's your earnings size today, right? That gives you a rough order of magnitude. Earnings is not the only metric, right? Obviously, there's a whole bunch of other metrics. Obviously, Japan, Korea are obvious examples. Bangladesh, given where it is, given the market size, given the market share, you could call that business to scale. Then there are some other larger markets where we're smaller. In China, for example, we're a very tiny, small market share.
However, from a growth perspective, from a premiums perspective, it is approaching that size where we say, "Hmm, it's meaningful for us." Right? That's the way I would think about it. Either way, our push is going to be towards driving scale up. It just does not make any sense to be in a broad number of markets for the sake of being in those markets.
Over here with Alex, please.
It's Alex Scott from Goldman Sachs. I guess the first question is just on the FX annuities. I'm just interested in if there's any sort of regulatory sensitivity around the mismatch that a retiree could have on a fixed income with the FX. I guess similar to the FX death products, but it does seem if somebody's on a fixed income, is there any sensitivity specific for that type of product versus a death product, or do they view the two in the same lens?
Sure. It's an important question. I think maybe I'll have Yamaguchi-san start to talk about our sales process around these products, and the customer disclosure, and then come back with a couple comments.
Yeah. Since we are the leader of foreign currency denominated product, we aim to be a leader for the quality of sales. In other words, like in sales practice for those foreign currency denominated product. This is also our key initiative, along with our customer centricity initiative. We have been improving those sales products for the foreign currency denominated product in 3 sales stage. Before sales, during the sales process, and after the sale, post-sale. Before sales, we of course provide lots of FX-related training to our producers and as well as for the certain channel. We have an internal license in order to make sure those producers have enough knowledge to explain customer the risk they are taking because of the FX nature. That's pre-sale.
During the sales process, we have a tool to check, checklist, in order to make sure producers have to explain those points to the customer. Also we have a video developed, like for certain channel. It's a mandatory. We have to show that video which explains the risk nature of the foreign currency denominated product for that unit, including a unit. Then finally, we have underwriting process to make a confirmation call for the certain segment of the customer in order to make sure they clearly understand what kind of risk they are taking. Then post-sale, we constantly monitor lapse rates or persistency and number of complaints, as well as we do sample calling in order to make sure there's no issue relating to those FX-related product.
Just if I could add, I think, again here, look, with our business now so reliant in this segment and to your point, the clear fact that there is potentially more risk or understanding that the customer has to have with this product, this is an area where we can't be good enough. We're all over it here, and we're looking for ways to continually improve it. In fact, we have work underway right now to simplify and improve the customer friendliness of our disclosures for our foreign currency products here. We're working very closely with the regulator as well to make sure we're bringing in industry best practices into what we're doing here.
Okay, that's helpful. The follow-up I had is just on that investment income. In the first half of the year, it looked pretty strong. I'm interested, I guess, just in is spread compression still a headwind? Are there any choices you're making with allocation maybe to floaters or USD hedge back into JPY or anything like that we should be thinking about that might be kind of influencing it one way or the other?
Do you want to take it?
Sure. I think overall, if you look at the first half of the year and expectations how that's going to go forward, we're not expecting any particular concerns around compression at this point. At the same time, we've been continually not just addressing our view from a yield perspective. We've also been looking at our ongoing hedge programs and ensuring that we're taking both risk and cost out of those hedge programs. I think the work we've done over the last 6-12 months on that means we're feeling very comfortable with those programs right now. I don't see any real concerns with leaning at this point. That answers your question.
Yeah. Thank you.
Thank you.
All right, I think we've come to the end of our Q&A session, and I appreciate everybody's endurance. We have a cocktail session right outside, so please. Thank you, everyone. Thank you, everyone up front.