China Pacific Insurance (Group) Co., Ltd. Class H

Ladies and gentlemen, good afternoon. Welcome to the 2022 interim results announcement of the CPIC Group. I'm Su Shaojun, board secretary of the CPIC Group. Now, given some of the resurgence of this COVID-19 in China to protect the interest of our investors, we are conducting this announcement Thank you very much. Actually, before this announcement, we have already issued notices and have also collected some questions from medium and small investors. Now, let's introduce the panel. You can see on site in Shanghai, Mr. Fu Fan, Group President, and Mr. Zhang Yuanhan, CFO and also Chief Actuary of CPIC Group, and Mr. Zheng Yi, General Manager of CPIC PNC Mr. Cai Qiang, General Manager of CPIC Life Mr. Yu Longquan, General Manager of CPIC AMC Mr. Zheng Yi, Cai Qiang and Yu Longquan were with us for the first time for this release and our independent Directors Ms. Liu Xiaodan, Lin Tingyi, Chen Jizhong also joined online. First of all, let's have a presentation on the performance to be followed by Q&A. Good afternoon everyone. Welcome to this results announcement. It's my great pleasure to share with you our performance in the first half of this year. Given this kind of uncertainties, environment, and difficulties in China and around the world, especially COVID-19, we faced a lot of challenges. But with the backing of our shareholders and the board, we took the initiative to overcome the difficulties. and took the measures to control the pandemic and boost our business. We adhere to high-quality development and deepen our business transformation to pursue channel diversification, accelerated our healthcare and elderly care business deployment, and delivered further progress amid stable business performance. For some numbers, Our GWP reached 242.5 billion, up 8.0 year-on-year. And our OPAT were 20.1 billion, up 9.9% year-on-year. Group net profits fell by 23.1%. And our EV reached 501 billion, a growth of 2.2%. and our total number of our customers reached 170 million and our group AUM reached 2.74 trillion, up 5.4% from the end of last year. And we maintained a solid capital position with our comprehensive and the core solvency margin ratio on the CROS II at 290% and 201%, respectively. Despite the impact of CROS II, the sovereignty margin ratios of the group CPIC-LIFE, CPIC-PNC maintained sufficient levels and complied with regulatory requirements. Our group, OPAT, attributable to parent stripped-out short-term investment movements, changes to evaluation assumptions, and impact of material one-off factors on the basis of net profits. During the reporting period, we posted $20.1 billion in OPAT, up 9.9% of this, and that from life was $15.2 billion, up 6%. EV-wise, it grew 2.2% from the end of last year. In terms of composition, our adjusted net worth reached $296 billion, up 3%, and our group value of enforced business was $213 billion, up 1%. In terms of contribution, it mainly comes from expected return on EV and MBV. We see an increase of EV and a slowdown of MBV growth. MBV's contribution to EV movement has diminished. At the same time, EV movement was also impacted by investment in return variance and profit distribution. While maintaining stable business performance, we accelerated deployment in health and elderly care to improve the supply of our products and services. Our family doctor system covered 2.8 million registered users. We also launched Jia Anxin tailor-made innovative medical insurance product for high-end healthcare with established Guangci Memorial Hospital and collaborated with renowned providers such as New Frontier Vitality Limited, United Family Hospitals to facilitate the online plus offline health ecosystem. We also support China's elderly care strategy and achieved national footprint. For example, our CPIC Home in Chengdu and Dali were now in operation and have received a total of 110,000 visitors. and more than 700 of CPIC service officers reached out to customers to offer them services during the COVID-19 period. For example, CPIC P&C stood by 24 plus seven and CPIC Life offered the four preferential measures in policy loans and benefited 450,000 customers. and we also provided a package of tailor-made financial products to minimize disruption to the supply chain. Actually, the individual customer reached each having 2.32 insurance policies on average, up 1.8%. And the CPIC Life and the CPIC PNC won the top ranking. in the first consumer rights protection ranking by CBIRC, maintaining our number one position. And technology-wise, we continued with our technology infrastructure in Chengdu and Shanghai. And we also upgraded a new generation of CPIC cloud. to ensure that our service will be maintained with consistency during COVID period. We also stepped up big data systems, setting up data governance framework, and completed the integration of the data of 170 million customers. CPIC TECHNOLOGY OFFICIALLY LAUNCHED TO EXPLORE MARKET-ORIENTED MECHANISM. WE ALSO DEEPENED AI APPLICATIONS. FOR EXAMPLE, OUR CPIC P&C RECEIVED SMART INTERACTION WITH A MONTHLY AVERAGE OF 150,000 SERVICE REQUESTS. And we also have a daily average of over 100,000 attempts in customer profile delineations or often policies by CPIC Live. Well, now we turn to the business lines. First of all, live, even the COVID-19 impact, CPIC Live stayed firm, adhered to high-quality deployment, development, and pursued progress while maintaining stable business performance and demonstrated resilience. In terms of GWP, it reached $149 billion, up 5.4%. Of this, FYP amounted to $43.1 billion, up by 25.8%, and recurring premiums reached $106 billion, down by 1.1%. We focused on business quality management with 13-month policy persistence ratio at 87.8%, up by 6.1 PTs, and surrender ratio fell by 0.1 PTs. NPV was under pressure. Actually, it decreased by 45.3% year-on-year. And if we look at the quarter in Q1 and Q2, it fell by 48.6% and 39.3% year-on-year, respectively. But over this, the MBV growth in June turned positive, actually. If we look at the productivity in the first half, our monthly average agent headcount was 312,000 and of this core agent headcount was 69,000. And in terms of productivity, our The core agent FYP average was 32.3 thousand, up by 23.5%, and the monthly average FYC per core agent was 4,630, up by 10.8%. And actually, During the reporting period, we actually delivered $17.8 billion in GWPs for the bank channel, up by 876%. And the new business premium amounted to $16.8 billion, a growth of more than 1,000%. We collaborated mainly with Pudong Development Bank, Rural Credit Cooperatives, and China Merchants Bank, and our MBV went up by more than 100%, with monthly average regular pay FYP grew by 49% year-on-year. For P&C, we deepened transformation, intensified business quality control, and improved our combined ratio. In the first half, GWP reached 91.6 billion, up by 12.3%. Auto business, GWP reached 48.2 billion, up by 7.9%. Non-auto business grew by 17.6% to 43.4 billion. Our command ratio was 97.2% down by 2.1 percentage points, and our loss ratio was 69.7% down by 0.4 PTs, and expense ratio went down by 1.7 percentage points. We improved capability for P&C business and achieved strong growth momentum. Actually, auto insurance reported a combined ratio of 96.6% down by 2.4 PTs. and the loss ratio was 70.3% down by 2.4% and the expense ratio stayed the same. The share of MEV premium increased by 3.1% to 6.6% year-on-year. And our overall improvement for non-auto business with a combined ratio of 98.4% down by 1.5 percentage points. We also developed a business in medical insurance for major diseases, Medical Poverty Reduction So health insurance reported 10.5 billion in GWPs, up 28.2%. For agricultural insurance, we seized opportunity of rural invigoration strategy. with GWP for H1 at $9.3 billion, up 38.1%. Liability insurance, we actually collaborated with local governments and offered specialized, differentiated, and customized insurance products with GWP at $8.3 billion, up 23.2%. For asset management business, our group AOM grows steadily By the end of June this year, our AOM totaled at $2.74 trillion, up 5.4%, and the group in-house AOM was $1.94 trillion, up by 7.1%, third-party AOM nearly $800 billion, up by 1.3%. Even the market challenges, we persisted in the dumbbell-shaped asset allocation strategy to increase allocation into long-term T-bonds and also enhance management of reinvestment risk, and also moderately increase investment in alternative assets, including private equity, investment property, to improve investment return. Looking at the structure, our share of fixed income investment stood at 76.4%, up by 0.7 percentage points. Equity investment was 20.4%, down 0.8 percentage points. Of this, stocks and equity funds accounted for 10.5%, decreasing 0.6 percentage points. We continue to enhance ALM. For the first half of this year, our net investment income totaled $39 billion, up by 10.2%, mainly because of the increased dividend income on equity assets. Our annualized net investment yield reached 3.9%, down by 0.2 percentage points. And our total investment income amounted to $38.6 billion, down by 21.9%, mainly because of the gains in securities trading. Our annualized gross rate of investments as net asset value fell by 1.5% to 3.3%. The 10-year average net asset yield, total investment yield, and comprehensive investment yield were 5.0%, 5.4%, 6.1%, respectively, all exceeding long-term investment return assumption for EV. We remain prudent in our risk exposure and strive to enhance credit risk control We actually 98.2% of our enterprise bonds and financial bonds issued by non-government-sponsored banks had issued a rating of AA or A-1 or above. Of this, the share of AAA reached 93.3%. of non-public financing instruments of external credit rating, the share of AA+, and above, was 99.6%. And of this, the share of AAA was 95.8%. And the NPFIs were either exempt from debt issuer external credit rating or secured with credit enhancing measures. Now, in terms of sector, we are mainly invested in infrastructure, real estate, communication, transportation for non-public financing instruments. We are committed to long-term value growth. In the second half, we will persist in high-quality development, deepen transformation of core business segments, promote upgrading of development mode, focus on key areas of healthcare, big data, and integrated regional development. and Enhanced CPIC Service fully integrate ESG into our business operation and foster major risks to ensure healthy and stable development. We are confident that despite the challenges, a new window of opportunity is emerging which calls for adherence to the right direction and the pursuit of high-quality development with unwavering determination. That actually concludes my presentation. Thank you. Enter the Q&A. You can raise your question over the phone or online. And for the online questions, we will select a few of them to answer them on site. And of course, we will also respond in text on the online channel. And if you want to raise a question, please press star 1 to raise a question. And please identify yourself and your employer before you ask the questions. And please ask no more than two questions. Thank you for your collaboration. And also, could you please make sure you are in a quiet environment? And could you not, please do not use the speaker mode. Well, let's welcome the first question. Well, from Song Ting from Haitong Securities. Thank you for the presentation, Sun Ting from Haixong Securities. First of all, congratulations on your quite good performances in H1. I actually have two questions for live business. First of all, for Mr. Cai, you see the Changhang Action Plan or Changhang Transformation. Now it's actually started and you have a new compensation scheme Now, how do you view the Changhang transformation in terms of the results and the effects? And what are the difficulties? What are the good results or lessons learned? And so what are the specific measures in the future? Secondly, we also look at the new business value margin actually dropped quite a lot. So why? Why is the drop? What's the reasons? And what's your expectation for the future? Are they going to remain low or are you going to improve them, improve the MBV margin? And what about the positioning of your bank channel? Because you see a lot of growth in the new premium for the bank channel. Now that is actually beyond your expectation. So what's your positioning for the bank channel? Thank you. Thank you for your questions. Now the question about the Changhang Action Plan. Now actually it was launched in January 1st last year. It's a five-year plan. So, actually we had an 18-month map plan after one year's design. Now, in this 18-month transformation roadmap, was launched because of the challenges for the whole life industry in China, not only for CPIC, but also for the whole industry. It's kind of like a supply-side reform for China's life sector. So given these conditions, and especially given the The COVID-19 and also other challenges, we stick with our transformation. It's like an anti-cyclical transformation, which will certainly become more challenging, but will be more fruitful because it can address the root causes. Now, it was officially launched in January 1st of this year. Especially given the new compensation scheme or the basic law, now we believe 70% of the projects under the transformation, Changhong transformation, are being implemented and with, well, phasal results. For example, the professionalization, digitalization, and Thank you very much. Secondly, channel diversification, that is the value-based bank channel, value-based outlet, bank outlet, and bank team development. At the same time, our business quality indicators, for example, surrender ratio, persistency ratio, Now these indicators also show improvement. So this is our current review of the Changhang transformation. It's within our expectation. Now of course there will be difficulties. First of all, because of the external uncertainties or difficulties, especially for Q1 and Q2. If we look at the MBV numbers, Now in April and May, the COVID-19 situation in Shanghai and China actually gave us some disruption. But fortunately, we see the team did not give up. They did business development online. They provide service online, etc. So starting from June, we see a positive trend for MBV. So the second difficulty is because of the new model brings new behavior and this kind of a new behavior takes time. So previously we use product seminars to promote business, but now we need to shift it to one-on-one presentation. Previously we use mass recruitment, but now we focus on quality recruitment. Now all these takes time. So in the transitional period, we need to remain steadfast, stick to our principle, stick to our strategy, stick to doing the right things. So we need support on this. Now, in terms of the future measures, I believe we should stick to the 18-month roadmap of the Changkang transformation. We continue to improve our business model, continue to develop and strengthen the strengths of our team, and continue to empower via digitalization, especially in the second half. We will accelerate the pace. So this is to answer your first question. Secondly, MBV margin. If you look at the single product, our MBV margin has not changed, especially for our core or flagship products, be it CI products or annuity products or health products. Now, our flagship products didn't change their margin. But what changed? Now, because of the change in Channel mix, especially given the rise of the bank channel. Now, for bank channel, first of all, there is a strategic positioning. We promoted the value-based outlets. Secondly, is the change in product mix, especially in Q2, after the COVID-19 pandemic. We found that consumers prefer the shorter-term products after the COVID-19. But we believe it is a transitional thing. It will not last. So we need to build our capabilities to analyze customers' requirements. I want to stress one point. We do not actively manage the NPV margin, but focus more on customer needs. We need more or new source of business margin or business value. Now the third question on the bank channel actually for the bank channel after 10 years development especially the regulator CBIRC the new regulator actually now they focus more I mean there's a total change in the big picture for bank channel If we look at the mature markets overseas, the bank channel actually they take up around 50% of the total market share, especially in terms of the value creation of insurance because banks now pay more attention to customer needs. They pay more to intermediary business. It's not like a winner gets all. So banks focus more on the long term brand or long term service for the customers. So given all these big conditions or big trends, we believe the bank channel will be a very important second pillar for the distribution. So it's not a short term thing. So, I believe for bank channel, we still focus on three core strategies. First of all, high value customer, especially private bank customers. Secondly, Thank you very much. Strategically aligned partners for long-term collaboration. And thirdly, this kind of high-quality team to support bank in their sales. So that's the strategy for bank. Thank you. Thank you, Mr. Tsai. Let's welcome the next question. Thank you for giving me this opportunity. I'm Zhou Chen from Credit Suisse. Now, first of all, congratulations on the growth of OPAT. I have three questions. First of all, you see, we noticed that the monthly average number of agents dropped quite a lot. So agency channel is a very big channel for live company. But of course, we noticed the improvement in quality. But what about the numbers? It dropped quite a lot. So is it because you transformed too quickly? Second question about the OPAT, group OPAT. We look at the residual margin actually dropped by 0.8%, but the OPAT was up by 6%. So what are the driving forces for OPAT or operation variance or etc.? I mean, what are the driving forces for the OPAT? What is the picture like in long-term or medium-term future? And lastly, about the market. I mean, the dropping interest rate. What about the capital market? How to adjust the reinvestment risks? And what's your investment strategy? Are you going to enhance your equity investment to enhance long-term or higher return? Thank you. Well, maybe I answer your first question, Charles, about the drop in the total number of agents. Now, we understand that for agents, agency force, In the supply side reform, I mean, if we look at the second curve, now we need to become more professional and more career-based sales force. So starting from last year, we actually responded actively to the requirement from CBRC. to tighten the validation requirements to remove these kind of fake agents. So if it is fake, I mean, they will leave one way or another. So this is kind of a growing pains for agency transformation. So it should be done sooner rather than later. So this is the same for every industry in China. I mean, the removal of surplus productivity. So if there is no cheese, then we should move on to the new cheese. So anyway, I believe we have... Three key things for the agency transformation. Number one is the change of our values. The core values for CPIC is integrity and prudence. So we'd like to send this message out. We don't want fake agents. We would like to actually also convey this message to the investors. We'd like to give out authentic numbers to our investors. So if you do not show up for the morning meetings as an agent, if you cannot make a full commitment to the job, then maybe it's your time to move, to leave. Secondly, it's the change of model. From mass recruitment to quality recruitment, from short-term incentives to long-term recruitment and sales. So that we can have a long-term business model. Maybe in the first half you see some big drop in numbers, but that's because Because that's different. I mean, there is a grand opening or the 开门红 in China for life insurance companies. But now we don't want to do the 开门红, the grand opening. We want to, well, smooth out. We don't want this kind of seasonality. So this is another of our core strategies. Because if you have a stable business as an agent, then your service, your capability, your reputation will pick up. Secondly, the change in capabilities. But of course, it takes time. Actually, you see, for us, we don't want the agent leaders to keep the fake agents so that they can maintain their leader status. We'd like to give the agent leaders a transitional period of maybe two years, three years, so that they can use the period to build up a new team. So we do have this kind of a transitional period for Asian leaders. We want the change in our business model. So as a result, actually, we are glad to receive a lot of support from our agents, agent leaders, and also our staff. So we already see some very good points, good results. Now let me answer your second question about OPAT. Now OPAT, for first half was 20.1 billion, up by 9.9%. For OPAT, for PNC, well, it grew quite fast, 20... 1.3%, that's mainly because of the drop in loss claims. For life, it grew by 6%, also because of the drop in loss claims because of COVID-19, and also some improvement in surrender rates, and also because of the improvement of taxation. That is the reason for the improvement of life's improvement or improvement in OPAT for CPIC life. Now, let me answer your third question. Now, of course, on the investment side, given the dropping interest rate, we do see quite a lot of pressure for reinvestment. Now we believe for the macro side, for first half, we see a contraction of demands. So there's a lot of challenges. But for the second half, we believe given or thanks to stimulating measures from the central government, we might see a modest recovery. For example, improvement in infrastructure, Now, for the bond market, our view is this. For the overall interest rate, the interest rate might fluctuate. Now, in terms of the yield, it will not go up sharply, but the yield curve is already quite low historically. So, some of the good factors were already factored in. So we believe the total monetary policy will not be too loose. So overall judgment is that it will fluctuate in terms of the allocation of fixed assets, fixed income assets. First of all, we should pay attention to the duration of our allocation. For example, especially focusing on long-term bond, T-bond, or the interest rate bond. Secondly, pay more attention to quality. Select high-quality assets to actually cross the investment cycle. And also to cope with, to enhance investment return. And we have actually did a lot of research on the market. Now, for example, for the equity market, we said we will maintain the dumbbell strategy. Now for the equity investment, we will diversify the type of equity investment. Apart from the equity investment, alternative investment, in the secondary market, we will diversify. You can see quite a lot of growth in dividend payout. or dividend income. You can see our performance of equity investment. We dropped much smaller than the market because we focused more on the value side of equity. In terms of dividend income, actually increased by more than 50% compared to last year. And secondly, about new energy or ESG sectors or new energy sectors, we enhance our allocation. For example, new energy vehicle, etc. In the second half of this year, we also pay attention to consumption, medical sectors, transportation sectors. We are conducting market study so as to prepare for a recovery in consumption and economy. On the whole, we are quite active or positive on equity investment. So we are making the preparation for high quality assets, equity assets. Well, thank you. Next. Thank you for this opportunity. I'm Xie Yusheng from Guotai Dreamland Securities. It's great that you issued more information without announcement. We actually look at the We actually noticed that the size of the core agents increased. So what's your standards or criteria? And will this trend continue? And the second question for P&C, we see improvement in profit for P&C business. Now, of course, the COVID condition is a factor. And so what's your expectation or what's your forecast? What about auto and non-auto business? Is the improvement sustainable? Thank you. Thank you for your first question about the core agents or the definition of core agents. Now, first of all, let me tell you about the change in the basic law or the compensation scheme for agents. Now you see, previously we focused all our resources on the 开门红, on the grand opening. But now we turn them into quarterly bonus or year-end bonus, performance-based. And for the year-end bonus, so it's based on the times where you can meet your monthly targets. So, we hope to make this change to change the behavior of our agents. So, for core agents, they must qualify for quarterly bonus. Now, since CPIC, China is very big, and CPIC is a big company. So, for different branch, they have slightly different standards or criteria for core agents. But anyway, to become a co-agent, you need to qualify for quarterly bonus. So if you can qualify as a co-agent, then it means that you can get a full-time job, full-time salary. On the local market, you can make a living for your family. Now for first half of this year, we focused on this kind of a transition for our existing agents. That's a continuous business development. on a weekly and monthly basis. So you can see this kind of a 20% increase in the number of co-agents. For the second half, our focus will be on not only turning our existing agents into co-agents, but also use them to attract new recruits. Because by becoming core agents, they increase their income, they become successful, so that they can attract other potential recruits. And also, it will help agent leaders to recruit more recruitments or recruit more new agents. So it's like a change from our previous ways of doing things. So we should not only recruit agents, but also develop them, cultivate them, help them succeed. Spend more time on them, on the new agents, to return, to improve the retention rate. Thank you for your question about P&C. Now as the only listed company with headquarters in Shanghai, we are impacted quite a lot by the COVID-19 situation in Shanghai. We took a lot of measures to cope with the incident. Actually, we actually grow faster than the industry by 2.9 percentage points. And our auto, non-auto, and agriculture insurance, actually the three main areas of P&C business all grew by double digits. And our main indicators actually were the best within 10 years. But of course, for the future, on the macro side, there will be both certainties and the changes. Because for the economy, we'll recover. There will be a strong recovery of economy. Thank you for watching. So given these macro conditions, CPIC, PNC will maintain the business growth while maintaining good quality. That is to say, we will have targeted business operation and management so that we can enhance our business operations. We will maintain the growth momentum, remain compliant. In H2, especially in Q3, we will focus on the anti-flood business and also focus on business quality control and further strengthen high-quality development. and also build up the foundation for sustainable development for the next three years. Now, given China's carbon neutrality and peaking strategy and some stimulus policies for new energy vehicles, we believe for the auto business there will still be room for improvement. So for the auto business, we believe the key words is to seize up the opportunity and follow closely in the new areas, especially the new energy vehicles. We should study this new area. But folks, for traditional gasoline vehicles, we should maintain our position. We should focus both on business growth and also business quality while maintaining our services so that our auto business can maintain its position as a key component of P&C business. And as already mentioned, the drop in loss ratio is partly because of the drop in travel because of COVID-19, but also because of our business management measures. But of course, given the end of COVID, we will see more claims returning to the normal level. You can see for July and August, loss ratio actually went up by 1 percentage point. So we need to optimize our expense management, enhance claims management, and also enhance operation and productivity. and reduce claims costs. And also we should enhance our team headcount for cases involving personal injuries. And also study the new model for new energy vehicles Currently, combined ratio for new energy vehicle is more than 100%. We need to drop that. We need to cut that. For non-auto business, we believe we can maintain the sustainability of profitability for non-auto business. For our traditional business, the share is two-thirds. With quite good profitability. But for new business, the share is smaller, one-third. But it's growing very fast, but the combined ratio is not good enough. So we need to balance new and existing sectors. And more importantly, we should enhance the profitability of new areas of business. So this is a key task for us. For example, government sponsored health insurance, we need to enhance our profitability capability, profitability by employee big data platform to manage or manage the medical expenses. and also enhance or optimize the structure of government-sponsored health insurance. For example, by having a right balance between the long-term care business and the medical insurance. And we should also enhance our own capabilities, enhance our project management to improve efficiency. Well, I hope that I have answered your question. Thank you. Thank you. And so comes the next question. Thank you. Good afternoon. I'm Jenny from Morgan Stanley. Thank you for the opportunity. I have the question number one about the group. We also read the news, a lot of news about the CPIC's development in elderly care industry. So could you tell us more on the elderly sector, elderly care sector, or the third pillar, that is the pension business, and also especially elderly care or elderly services, elderly care service? And also, compared to other banks or insurance companies, what's your strengths or what differentiates you? And the second question for the life company. Now we notice that there is an improvement for productivity and MBV production, etc. So what about the trend? Are they going to continue in June, in August? Or is it a one-time thing? Thank you. About the, first of all, the elderly care sector, Now on the whole, you can see for the elderly care sector, now on the whole, business is, well, the operation is very smooth. If we look at the, apart from the Chengdu and the Dali CPIC home, the CPIC home in Hangzhou also opened for business in July this year. So now we have multiple sites across China. Now if we look at the sales, this CPIC home in Dali also leveraged tourism in terms of visitors. And in terms of the satisfaction of the customers, the ratio is more than 80%. And in terms of SOPs, procedures, it's all improving. And in first half of this year, CPIC Home received a total visitor of over 40,000 people. And also we... We also created more than 2,700 invitations to CPIC home. We will maintain the services, improve our operation so that the visitors, our customers can enjoy their stay in CPIC home. And at the same time, we will establish a professional team to manage those facilities. So this is our main ideas of our CPIC home and the elderly care services. For the health related sectors, CPIC home is only one part of our strategy. We have an overall health-related strategy. Because health-related strategy of areas is a core area of CPSC group. It helps with driving new business and also enhances our core capabilities. In terms of our unique strengths, first of all, we are professionalized. We stick with insurance business. Compared to peers, we are more dedicated to insurance business. So this is something proven over the past 30 years. We will continue to do so in the future. We are going to extend this insurance ecosystem. Second strength is that we are more innovative to leverage the ecosystem. We collaborate with internet giants, big hospitals, etc., and startups. We now leverage, deploy big data and other new technologies to become more professional in this regard. Secondly, we are improving our governance. We have more professional people to run these teams and projects. Our directors are very professional in their unique areas, so they will be able to give us good guidance. Now, second question about life, the trend. Now, of course, I cannot give you a forecast, but I can do answer you. If we look at the first half of this year, apart from April and May with big impact from COVID-19, I believe February and March numbers were within our expectations. We actually travel MBV on a daily basis. It's quite stable. It's not like in the past where it fluctuated a lot. We hope this kind of stability went on, go on into the second half. And if the trend in June can continue, it will be very good. You see, because now we focus not on sheer number of agents, it's actually what matters is production or productivity. Because if we can do the same thing, give you the same number with only half of the number, half of the people, then it will be better. Because it will cut down the cost. So the drop in cost this year is partly because of the reduction in rents of our office buildings. let along other indirect costs. So this is also why we should have a develop a lead agency team. Oh, thank you. Now you see the elderly care industry, I mean CPIC group has a lot of unique strengths because first of all in terms of our products, we actually have a longer term with stable return and we are closely involved in terms of the pillar 3. The third pillar and we had a lot of experience in pension and so we can build up a pension ecosystem. Now let's welcome the next question. Thank you. I'm Li Xin from City Securities. I have a question on the demand. Now we notice that the industry is transforming, so there's a lot of uncertainty about the household income. So some say the demand for insurance will drop. So what's your view on the long-term trend for demand of insurance? And also a question for live from Mr. Cai. So if the demand is going down, now, even if you succeed with your transformation, what about the sales of the critical illness insurance? The second question, PNC, we noticed a 17.6% rise in the reserves for unsettled claims. Now, the ratio of reserves versus earned premium is 85.7%. It increased compared to last year. So why? Now, thank you for the question. In terms of the market forecast or the future demand, I would say... The whole industry is transforming. Premium and value actually now see quite slow growth, not double-digit growth, but slow growth. So everyone in the industry is exploring the ways of transformation. Now, I believe the challenges are threefold. First of all, it's because of, I mean, eruption of previous or accumulated problems. Previously, well, it was this kind of massive recruitment, a lot of fake agents, fake policies. So, high surrender ratio, etc. These kind of problems. Secondly, we should have a new growth momentum for the industry. Because it will take time to become a professional and high quality agency sales force. And for P&C side, we have a reform of commercial auto insurance so that customers can enjoy more benefit. And for the non-auto insurance need more innovation. So all these might give us uncertainty. because of a lack of data. And also we have a global warming, so there is maybe enhanced possibility of a catastrophe. And certainly external impact. You see the interest is dropping and the capital market is fluctuating. We face pressure for reinvestment. So all these presents problem or pressure for liability side. And in terms of the regulations, we have CRAS II, which have higher requirement for risk management of insurance companies. But we also noticed China's economy fundamentals were not changed. I mean, with more uncertainty, we need more insurance. The function of insurance is more prominent, become clearer. For example, people are made more aware of the need for insurance given COVID-19. So for the long term, we believe the changing democratic profile and also China's strategy for new energy, etc. will inject new vitality for China's insurance market. We also actually read a lot of the studies. We see actually there's still huge potential demand In terms of medical insurance, wealth management, pension, annuity, etc. To sum up, demand is still there, but it is changing. So that means we need to have a better provision of our services and products. So CPIC will transform, will focus on customer needs, will keep doing the right thing. For example, the Changhang transformation to build up the new agency sales force. We will strive to meet customers' demand for insurance and wealth management and continue to expand our insurance ecosystem. For example, the health elderly care sector. And for P&C, we will continue to improve our systematic capabilities to keep not only our existing business, but also develop new areas of growth. For asset management, we will continue to focus on this cross-cycle asset management. So that's our key views on the market. Well, that is a very comprehensive answer. I have no addition to make. Now, let me answer your question about the P&C Reserve. Now, on the whole, it's because of the business growth. Now, for the reserve for unsettled claims, given the COVID impact, apart from the growth of business, For first half, because of the COVID, the loss claims went down a little bit. So the loss ratio were lower than usual. But given this, the end of COVID-19, loss rate claims, loss ratio will move back to normal. And we actually are more cautious in our reserves provision. So we made a proper revision or provision for our reserves to reflect the objective picture of the market and make the reserves more adequate. So if we look at the adequacy of our reserves, we would say our numbers are quite reasonable. And for this kind of undue reserves, it's mainly related to the structure of our business mix, product mix. Well, in the interest of time, we'll only have time for the last questions. Thank you for giving me this opportunity. I'm Li Jian from Huatai Securities. Two questions from me. Number one is for investment. Now we see a lot of risk event for real estate companies. So what about your exposure? If you look at all your investments, what's your risk exposure for the real estate market? How big is it? What is the ratio? And how do you manage the credit risk? Second question about the live company. We see agents, the productivity improved, improved about 7% according to our calculation. Now, our question is, What's your forecast or projection of your agent's productivity? What is your target for the productivity? Thank you. Thank you. First question about the real estate market exposure. On the whole, our risk exposure accounted for 5% of our total assets. 5% is quite a low number, especially for the equity stocks and REITs. For fixed income is debts, debt plan, bonds. and also real estate fund and the investment real estate now it's bonds and debt plans make up the biggest share. We took a look of those real estate assets. They are mainly this kind of high-quality central government-managed companies. And other companies, others also gave us quite high credit risks, credit ratings. So we believe the overall risk is quite reasonable, well under control. And we will of course manage those risks according to our internal rules and procedures. On the whole, we will actually reduce the limit for real estate exposure. On the macro side, we will have a strict control on the counterparties. We will look at the company's fundamentals, and actually we downloaded some of the credit lines for some real estate companies. So on the whole, the risk is well under control. Thank you. Thank you for the second question. Now for the 18-month roadmap. Now we talk about the second curve transformation. This is a little bit like your stock investment, several phases. Phase 1 is the price go down and the volume maintain flat. And then the price went down and the volume went down. And then the price stabilized and the volume diminishes. And the last phase is we see a rise in both the prices and also the volumes. For our agency transformation, we are experiencing both a drop in the volume and the price. But for the first half of this year, the picture changes. I believe we have removed most of the or a lot of the fake agents. And now we are seeing an increase in productivity. This is a very good result. Now going forward, next step. We are going to improve, further improve the capabilities of our core agents. and also the capability to recruit new agents. So you might see in the next six months, apart from the productivity increase, You will see a small increase in the number of core agents. And I believe the last phase, phase four, will start next year. So that is 18 months to 36 months. So our ultimate goal is the five-year plan. For the end of that, we hope that the average income of our core agents will be three times of society average income. I mean, three times the average income on the society. So, as long as we can do that, then We can have high-quality people serving as core agents for CPIC. Well, thank you. We also actually solicited questions from small and medium-sized investors. They care a lot about the total market conditions and also CPIC's performance and the future strategy. We have covered most of them. And we also actually had a lot of questions from the online channels. No, actually, I have a question from the small investors, which goes that we see a lot of stock buy-in from the chairman and also president and other senior executives. So, Are there going to be future stock buy-in plans? Or are you going to have this kind of employee shareholding plan? Now, let me answer this question. You see, our senior executives bought in a lot of CPIC stocks, some CPIC stocks on the secondary market, which was disclosed properly. Now, these actually This kind of confidence indicates our confidence for the long-term growth of the company. Now, this kind of confidence comes from our resolve for long-term success. Now, you see, COVID condition is quite severe in China. Actually, 50,000 of our employees across more than 800 offices were impacted by COVID-19. Now our executives actually faced up to the challenges. Many of our offices were actually locked down. But our people, our executives, they actually stayed or lived in those offices to keep up the business running. And we are also making a lot of progress in terms of elderly care sector. So I believe all these hard work boosted our confidence in the long-term healthy growth of a company. In terms of the stock buyback and employee shareholding plan, we don't have any disclosable information as of now, but we will pay close attention to it. And as required by law, we will make a close study On this topic, and we'll disclose all the proper information in due time. Now, since we don't have enough time for any more questions, and well, of course, you can reach out to us after the meeting by contacting our IR team. Thank you very much for your time and attention. Goodbye.