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

Good afternoon, ladies and gentlemen. Welcome to CPIC 2025 Interim Results Announcement. I'm Su Saojun, Board Secretary of CPIC Group. My great pleasure to be here to share with our CPIC 2025 half-year results and also listen to your suggestion about the company's development. We adhere to the government requirements to conduct this results announcement both online and offline. And also investors can watch the playback of this event on our official website. Now, first of all, let me introduce the executives for this event. We have Mr. Zhao Yonggang, CPIC Group President, and Mr. Yu Bing, CPIC Vice President, and Mr. Ma Xin, Vice President of CPIC Group, and Mr. Su Gang Vice President, Chief Investment Officer, Chief Financial Officer of CPIC Group, and Mr. Zhang Yuanhan, Chief Actuary of CPIC Group. And our independent directors will attend this event online and offline, and some of our senior managers are also attending the event online and offline. First of all, I'll give the floor to Mr. Zhao. President of CPIC Group to be followed by Q&A session. Thank you. Well, good afternoon, ladies and gentlemen. It's my great pleasure to be here to share some information with you. You see, in 2025, we see a lot of uncertainty in China and the world. And despite all these kind of risks and uncertainties, China's economy held up well. With new quality productive forces gaining momentum, we see a lot of resilience and dynamism in China. So in the whole, the Chinese economy is still going well. And the insurance industry is also facing a lot of strategic opportunities. Insurance is serving as a cushion of economic shocks and social stabilizers. We have a lot of market potential from the regulators' perspective. Supervision is focused on quality and profitability. I believe this is going to help long-term healthy development for especially those kind of big players. The leading insurance group in China, CPIC, pursue high-quality development to uphold value and profitability. We see steady growth in our business results. and Consolidation of Market Standing. We have made an increased contribution to China's socio-economic development and people's well-being. If we look at our results, in the first half of this year, the group operating income amounted to $200.5 billion, up 3%. Our group OPAT Our EV was $19.9 billion, up 7.1%, and our net profit was 27.9%, up 11%. Our EV was $588 billion, up 4.7%. Our AUM reached $3.8 trillion, up 6.5%. Solvency margin was 264% and core solvency margin was 190%. And our subsidiaries' solvency margin were above regulatory levels and higher than levels last year. Going forward, we will maintain reasonable level of capital cushion to withstand systematic risks in view of regulatory requirements and the need for business development. Under the new accounting standards, net profit is more sensitive to capital market volatility, so OPAT is a more useful measure for underlying business performance. Excluding short-term investment volatility and adjustment of material one-off factors, Group OPAT was $19.9 billion, up 7.1%, and of this, CPIC Live recorded $15 billion, up 5%. To improve stability, sustainability, and predictability of shareholder dividend, our 2024 ASG meeting approved proposal on distribution policy and marked official announcement of our dividend policy. The policy links the dividend to OPAT while considering positive contribution from investment insolvency. We have completed the cash payment of DPS 1.08 yuan for fiscal year 2024, up 5.9% and higher than the growth of APAT of last year. Going forward, we will stay committed to stable, prudent business operation so that our shareholders can continue to share In the growth of the company, our EV maintained steady growth, up by 4.7% from the end of last year. In terms of composition, the in-force business value was $223.4 billion, up 4.9% year-on-year. And our adjusted net worth amounted to $365.5 billion, up 4.6% from the end of last year. In terms of driver of EV movement, positive contribution mainly come from expected return on EV and BV and operating experience variance. In the first half of this year, we strive to fulfill our responsibility in terms of the five financial priorities. In terms of the technology insurance, we served 75,000 enterprises through the Ketong Wu You and realized a premium of $5.2 billion. And we strengthened funding with support for strategic emerging sectors and the new quality protective forces. Our investment in technology sector reached $119.7 billion. In green insurance, we achieved a fast growth of green insurance and uncovered $5.3 million in new energy vehicles. And our green investment balance was $280 billion. In terms of inclusive insurance, we launched coverage for terminal illness, long-term care, and the Huiminbao programs across 240 cities in China. and we also provided 442 billion yuan in agricultural insurance protection and covered more than 2,700 transactions in domestic and foreign trade by small and micro enterprises. Our CPIC home has opened ten such communities in nine cities and we also have more than 220 brick-and-mortar experience centers for longevity retreat. In terms of digital finance, we have digital labor, accelerated development of a scenario for AR application, and also multiple AI-enabled solutions in CRM empowerment, operation efficiency, and risk management. Next, let's turn our attention to our core business. In terms of life insurance, we pressed ahead with Changkang Transplantation, speed up channel diversification, rolled out customer segmentation, and improved our product mix. We see fast growth of MBV. Of this, our return premium reached 193.5 billion, up 13.1%. And of this, return premium from new policies grew by 28.7%. Of this, regular premium rose 42.5%. And MBV grew by 32%. And MBV MBV MARGIN IMPROVED BY 0.4 PTs IN TERMS OF CUSTOMER MIX AND BUSINESS QUALITY WE ALSO SEE IMPROVEMENT THE SHARE OF MID-TIER CUSTOMERS AND ABOVE INCREASED BY 3.8% YEAR-ON-YEAR FOR THE AGENCY CHANNEL THE NUMBER OF HIGH NET WEALTH CUSTOMERS FROM BANK CHANNEL GREW BY 75% AND ULTRA HIGH NET WEALTH CUSTOMER BY 85% The 13-month persistency ratio reached 96.6%, and the 25-month ratio rose by 2.8 PT to 94.5%. For agency channel, we improved the distribution of agents, stepped up capacity building and digital empowerment, continued to diversify products and service offering to meet customer needs. We focused on key regions, and accelerated high-quality recruitment, enhanced basic management and agent training. In the first half of this year, the total premium was $137 billion, up 0.9%, and the share of variable products rose gradually, and the power business accounted for 51% of regular premium products. Total headcount stabilized and began to recover. Our total headcount of agents was 186,000 in the first half of this year, up by 1.6%. And the new recruits was 39,000, up by almost 20%. And the FYP per core agent reached 73,000 up by 12%. We persisted in value-oriented bank assurance to improve product offering and step-up channel development. Simeon partnership with joint stock banks, especially SOE banks, and focused on improving productivity, Building Professionalism of Sales Team and High Quality Team Building During the reporting period, Bank Channel realized $41.7 billion in premiums, up by 82% of this regular premium from new policy reached $8.8 billion, up by 58% MBV from Channel totaled $3.6 billion, up 156% a total of 13 bank outlets reported sales of regular premium business and on a monthly basis the number grew by 70% of this SOE bank outlets grew by 164% for PNC business we see high quality development We put volatility first and achieved continued optimization of business needs. Our premium income was $112.8 billion, up by 0.9%. Of this auto insurance was $53.6 billion, up by 2.8%. And the non-auto, $59.8 billion, down by 0.8%. Our combined ratio stood at 96.3%, down by 0.8 PT year-on-year. Of this, loss ratio stood at 69.5%, down by 0.1 PT. Expense ratio was 26.8%, down by 0.7 PTs. Underwriting profit amounted to For auto insurance, we maintained steady development. We strengthened the development of the channels and adopted precise management of business quality. In the first half, the combined ratio of auto insurance was 95.3%, down by 1.8 PTs. We continue to deepen presence in NEV business with premiums amounting to 10.6 billion accounting for 19.8% of total auto premiums, up by 5.7 PT year-on-year. For non-auto business, we step up efforts to optimize business mix, advance the risk reduction system, And we see continued improvement in profitability in the first half of this year. Combined ratio was 97.6%, excluding the impact of personal credit and guarantee insurance. The ratio was 94.8%, down by 2.3% year-on-year. For our main business lines, health insurance achieved turnaround in profitability and commercial property gained further improvement in underwriting profitability. Agricultural insurance, liability insurance, and commercial property insurance maintained steady growth. For asset management, we explored a new approach toward ALM. We developed a new method known as Net Investment Income Plus. We considered multiple factors. and established a unified platform and tools to optimize coordination of assets and liabilities. We enhanced ALM system across market cycles and saw steady increase in group AOM. By the end of the first half of this year, AOM totaled 3.8 trillion, rose by 6.5% from the end of last year. SAA remains stable. In terms of investment portfolio, the share of debt accounted for 75% down by 0.9 PT. The share of equity asset was 14.8% up by 0.3%. And of this, stocks and equity funds accounted for 11.8% up by 0.6 PT. Based on our outlook of macroeconomic trends, we followed the The dumbbell-shaped asset allocation strategy continued to allocate into long-term T-bonds and also explored opportunity for alternative assets. We conducted disciplined and flexible TAA under guidance of SAA, responding to the dual challenge of equity market volatility and the decline of interest rates. Our net investment yield was 1.7%, The total investment yield was 2.3% and the comprehensive yield 2.4% down by 0.4 and 0.6 PT respectively. That's mainly because of the reduced gains from fair value movement of fixed income assets through profit and loss. We used that great store by credit risk management and proactively extended duration of fixed income assets to lower reinvestment risk. The share of our bond security investments was 60.5% up by 2.4% of this treasury bond, local government bonds, and financial bonds issued by government-sponsored banks made up 40, And the duration of those was 12 years, which extended by 0.6 years. And the underlying profits and projects of our non-public financing instruments spread across sectors like infrastructure, communication, non-bank financial, real estate, etc., with a nominal yield 4.1% and an average duration of 8.4 years. Looking ahead, in the face of opportunities for Chinese insurance industry, we will pursue reform in an all-around way and continue to strengthen our value-creating capabilities and advance the three key strategies of health, elderly care, internationalization, and AI+. and continue to transform ourselves into a top-notch insurance and financial services group with market leadership and global competitiveness. Well, that ends my presentation. Thank you. Well, thank you, Mr. Zhao. Now let's start the Q&A session. First of all, online questions. First, offline questions for those Before you ask questions, please identify your employer and yourself. And please do not ask more than two questions. Anyone? Good afternoon. I'm from China Business News. Thank you for the opportunity for asking the question. I have two questions for Mr. Zhao. First of all, how do you comment on your Thank you very much. Thank you. Thank you for your question. Now you see the first half of this year, you see China's economy saw stable growth. We see improvement in terms of the income and China's domestic demand, et cetera. And for the insurance industry, we also see a lot of new regulation focusing on risk prevention, high-quality growth, et cetera, as you just mentioned. For example, as you mentioned, rules on dynamic pricing rate, risk filing, and also on the agency reform and also suitability of the products. Now all these new regulations aims to turn insurance industry to its fundamentals so as to better play up its main functions. Now given all these kind of changes, CPIC remained steadfast in our strategy. We speed up building our competitive edge, improve our business structure, business mix. As we have just mentioned, for the first half of this year, our total assets and our revenue continue to rise. Our OPAT, net profit, and EV also saw steady growth. Our overall business performance We have more better foundation for high quality growth. We see more resilience. To be more specific, you can see for the first half of this year, I would say we see three features. First of all, we continued with our transformation. We see steady growth of our main business. For example, for life business, we continue to focus on value creation and develop multiple channels. We enrich the product offering and segmentation of customers. Our MBV and the margin continue to improve. And the share of our variable products is also rising. Agency team headcount is stabilizing. and the productivity of core agents is growing and the contribution of bank channel is improving. On the P&C side, we focused on business quality and continued with risk structuring. We speed up risk reduction and fine-tuned our business management. We saw steady growth of premium and we improved our combined ratio with higher underwriting profits. And we saw also new high in operation cash flow. For the asset management side, we keep improving investment strategy for fixed income assets and also investment operation for open market equities. We also seized upon Overseas opportunity, for example, the stocks in Hong Kong market so as to offset some of the impact from dropping interest rate. Now the second feature is that we continued with our innovation and see the new growth of new engine. We pursued high quality growth by expanding Our new engine and focusing on the five financial priorities. Now, for example, we continue to improve the offering of our health insurance so as to cover those without basic social health care and those already ill. We also We keep improving our elderly care ecosystem so as to provide customers with full lifecycle products and services. We are also improving our pension management with fast growth of new annuity business. We also accelerated our development in technology and green insurance offering and promoted Our digitalization and big model rollout to use AI solutions to empower our business and cut costs with the use of AI assistant, AI solutions, etc. And the third feature is that we continued to consolidate our fundamentals We keep improving long-term mechanism for asset and liability matching. We are improving the synergy across CPIC group so as to improve customer operation. More and more customers who buy more than one policy from us will also pay a lot of attention to customer protection in terms of digital-empowered customer protection. And our subsidiaries lead peers in this regard. At the same time, we focus a lot on Building the system for compliance and risk management to monitor key risks, so as to improve compliance and risk management at all levels, especially frontline outlets. Of course, we also improved our KPIs, our assessment systems, so as to better balance development and compliance. Also, we continue to develop our people, develop our talent team, keep improving, optimizing our management. So I believe that's the key features of our growth for the first half of this year. Going forward, we will continue with our prudent and static growth to pursue high-quality development and also focus on innovation to generate new engine of growth, to balance volume and quality, and also to continue to generate value for shareholder, for customer, for society as a whole. Thank you. Well, let's continue with the on-site questions. Well, if you want to ask questions over the phone, please press star and 1 and please identify yourself and your employer before asking questions. Please ask no more than two questions. But of course, now we are having questions from our side. Thank you. I'm from Gotai Hightone Securities. I have two questions. Number one, on power life business. And our second one, AI plus strategy. In the first half, we can see power business had a lot of, well, took a big share, 45%. Now, our question is that, what was your strategy to promote the share of power business? And given the new regulatory requirements, In terms of dynamic pricing rate, what are your future moves or strategies to further promote power business? And the second question is about the AI plus strategy. Now, you mentioned that you had already built an AI infrastructure supporting more than 100 billion parameter model. In terms of your input in AI, can you share some of the examples and how they can be applied to the real business scenarios and their impact? Thank you. Thank you for your question. Let me answer your first question. In 2025, we focused on customer needs to promote Palai. Now in terms of size, Pa Business accounted for 10.7 billion, taking a big share. So for half of this year, we actually focused on four strategies. Number one, we made it absolutely sure about promoting Pa Business. At all levels, we remained on the same page about How power business is in the best interest of our customers and also future direction. Second, we differentiate by different channel, by different region. For example, agency was the first to promote power. For example, for agency, power life accounted for 50, over 50%, and bank channel is around 25%. For the second half of this year, we believe for the whole year, the share of PAC business will continue to rise. Thirdly, we differentiate by region. We sit upon the opportunity and also focused on the logic behind the selling PAC business. So we differentiate by different region, different preferences in different regions, and different teams in different areas. had more policy support, for example, giving support in terms of financial support, personnel support, and also coupled with KPI adjustment so that power business were taken as a priority. Going forward, new rules on dynamic pricing rates will be opportunities and challenges because for the short term, It will be harder to sell Pa Life, but at the same time, the gap between Pa business and the traditional business is narrowing. So the relative competitive edge of Pa business becomes even more obvious. It will be beneficial in the long run. Given this kind of macro changes, CPIC, We'll continue to look at various factors to respond to these changes. We'll use AI. We'll focus on synergy. To be specific, first of all, we'll continue to improve the offering of variable products to help with our product mix structuring. We'll focus on customer needs. and also consider the needs of our distribution channel. Secondly, we will continue to focus on health insurance to diversify the source of our profit. We'll seize upon this kind of mid- to high-level health insurance needs, for example, long-term care needs so as to improve This kind of integrated solution combining product plus services. Thirdly, we will continue to build our capacity. In the backdrop of dropping interest rate, we will continue to buy long-term T-bond, long-term debt assets so as to better match liability with investment, with assets. Thank you. Let me answer your second question. We launched the DITP program in 2023. It includes the use of a large model. I would say we had already some results. In terms of infrastructure, we have already We have a stable infrastructure. We already have built a computing power platform supporting training of 400 billion parameter models achieving 512 card GPU cluster management capacity and integrated and more than 30,000 of our employees and more than 90,000 agents are using our AI applications. The digital workforce is bringing productivity equal to 2,700 employees. In terms of health insurance, we reduced our claims turnaround time to merely two minutes On average. Also, we use AI to improve our productivity. For example, our AI coach can actually improve the agent, the new business premium by 21% in pilot areas. And AI also improved our risk management. Our extra loss reduction exceeded 100 million yuan thanks to AI. We continue to build our private domain large models and the insurance knowledge bases. We focused on our core scenarios to build our CPIC private large model. Secondly, we also try to build our knowledge base for 10 key areas And we use that case through iteration to improve the basic capabilities of our large models. In the 15th five-year plan, AI Plus is one of the three key strategies of CPIC Group. We'll focus on six key areas to reshape our business procedures so as to cover All the value chain of AI and all the user groups of AI. Thank you. Well, thank you for the answer. Now let's continue with the questions. Thank you from Huatai Securities. First of all, congratulations on the resilience of your performance. Two questions from me. Now, first one on the life business. You have N+. A 2 plus N channel strategy, you have a total headcount of over 180,000 agents and the bank channel is enjoying fast growth in terms of value and also volume. So what's your future strategy for these two channels? Second question about the health and elderly care strategy. Now it's a hot topic of the market. What are your current progress and what's your competitiveness or uniqueness for health and elderly care sector? Now let me first answer your first question about the channels. Now thank you for your attention to our strategy. We look at the market environment and also customer needs before launching this strategy. And also we look at our own resources, our own realities, and also we will look at the future growth of the industry before we launch the 2 plus N channel strategy. That is to say agency and the banker plus multiple channels. BBE, Internet, etc., so as to better improve our capability for creating value. For agency and banker, they are the main pillars of our value creation. To be specific, for the agency channel, we focused on building the team. So as to build a professional team, Empowered by Digitalization. We see a lot of good KPIs. For example, total headcount stabilized and recovered. Actually, it stabilized at around 180,000 agents. By the end of the first half of this year, total headcount 186,000, up by 1.6%. with improved 13-month and 25-month retention rates. We also see growth in core agent productivity. FYP on average improved by 12.7% for our core agents. And thirdly, the quality of our agents also improved. We had 39,000 new agents up by almost 20% year-on-year. And these new agents have better qualities, better educations. Now, new agent FYP also recorded a double-digit growth. Fourthly, we also saw better performance in terms of mid-tier and high-net-wealth customers. We are serving them with better results. For example, The share of mid-tier and above customers reached 27.3%, up by 3.8% PTs year-on-year. We should seize upon these opportunities to turn our team into a more professional team so that we can better consolidate agencies In terms of contributing to company value creation. To be specific, we should better improve the structure of our team. For example, by focusing on provincial capital cities and big cities, focusing on key posts, for example, high-performing agents, and also focusing on key segments, for example, agents with good education. Secondly, we need to improve team management, agents' team management with the updated basic law, basic compensation law. As we mentioned, our 13-month retention improved by 4.5 PTs, and over 50% of our agents have been with us for over five years. Thirdly, we also need to improve digital empowerment so that our agents can better leverage the digital tools to help with their sales, to identify customer requirements, to better convert customers, better touch the customers, to do a better job at the off-sale, For the bank channel, we continued with value-oriented bank strategy to explore new models. For example, first of all, we see the growth of premium and also value for the bank channel, very fast growth. Regular premium growth for bank channel was 8.8 billion, up by 58%. MBV grew by 156% to 3.6 billion yuan, making up almost 40% of new business value of a total life business. Secondly, we continue to improve the structure of our bank partners. Both the sales and the share of our key bank partners increased. We see a balanced growth of joint-stocks bank partners and SOE bank partners, state-owned bank partners. More than 13,000 outlets sold regular premium policies, up by 28.9%, and the average monthly number of performing outlets grew by 70%, of which state-owned bank outlets saw a growth of 164%. And thirdly, we continue to build a high-quality, high-performing, high-income, high-intention sales team for the bank channel. Going forward, we'll continue with the value-oriented bank strategy to further enhance the value creation of the bank channel I would say we need to improve the regional outlay or regional balance, focus on key cities. For example, in the Yangtze River Delta and the Pearl River Delta and the Beijing areas around Beijing. Secondly, we need to deepen partnership with our key partners. For example, balance the growth of the joint stock banks and the state-owned banks and select some good local banks, local commercial, rural commercial banks for collaboration. And thirdly, we need to deepen channel operation so as to share with our bank partners the business growth so as to build up momentum for further growth. And also we need to better match products and the resources to pay more attention to customer needs, to enrich product offering, to offer more variable products, to provide a bank-designated or exclusive service system so as to better serve a bank customers need for wealth management and retirement care. And also, we need to utilize digital tools to improve the customer journey, team building, training, quality management, operations, service, etc. Thank you. Well, thank you, Mr. Li, from Huat Hai Securities. The purpose for this is to help our main business of insurance. Let me give you two examples. In terms of the elderly care sector, we have more and more CPRC home up and running. We see actually our health care, health and elderly care is complementing our For example, our retirement community in Nanjing, which is full capacity only 18 months after its opening. So the more people living in our retirement communities, the more policies they are going to sell. For example, many people visit our Nanjing CPIC home, and many of them can be converted, for example, to be exempt. Actually more than 1,500 long-term policies were sold thanks to that. And not only in Nanjing, also in Shanghai, Putuo area. So we see this kind of mid-sized retirement communities in central urban areas are working and also empowering our main business of insurance. and we also have online health management platform Tai Yi Guan Jia. The platform offers health management services and also treatment plus claims service solutions. For example, we served a high tech company in Shanghai and the Tai Yi Guan Jia platform was used by 80% of the employee of that company. Now the HR of that company saw that the platform was widely used by its employees and they can also see the details of how the employee benefits are used. So given this kind of stickiness of the Taiyi Guanjia online health management platform renewal, policy renewal becomes very easy. Now as of now this integrated service solution covered over 100,000 people and it has become a very big help in improving customer stickiness and risk management. Now, these successful cases or experiences taught us a lot. In the 15th five-year period, CPIC is treating health and elderly care as a core group strategy so as to build an ecosystem for the health and elderly care sector. We would want it to have more synergy with our main business of insurance. CPIC actually focuses on the integration of health and elderly care And also, we focus on medical insurance, long-term care insurance, and also opportunities from the second and third pillar for retirement. We are trying to sit upon the opportunities brought by national policies to better serve, better help the growth of insurance business. Secondly, we would continue to improve our professionalism to better improve the quality of our service. For example, we are going to focus more on retirement, household care, retirement care, online and offline treatment, so as to boost our professionalism to enhance both quality and also efficiency. We are going to Be more focused on light asset retirement communities in central urban areas and focus more on the offering of high quality integrated solutions. So I would say that we are not only exploring the market, we are actually in a good swing, up and running. We are going to offer good quality service instead of Weidong Zhang, Mingchao Wang, Yonggang Zhao, Xin Ma Weidong Zhang, Mingchao Wang, Yonggang Zhao, Xin Ma Weidong Zhang, Mingchao Wang, Yonggang Zhao, Xin Ma In the business growth of our main business, we believe our health and elderly care strategy will boost our overall strategy and turn CPIC from a policy-oriented to customer-oriented company. Our EV per share exceeded 60 yuan for the first time in the first half of this year. And thanks to health and elderly care efforts, we, CPIC, are no longer a place for people to, for customers to claim, make claims, compensation, but also we are more like a full-time health system. Thank you. Well, actually the two questions, well, There are separate questions, but actually they are interrelated. Health and elderly care strategy or efforts is a very good complement to our main business of insurance. Let's welcome the next question. Well, thank you for the opportunity. First of all, congratulations for very good I have two questions. Number one, on investment, and secondly, about net asset. First of all, we see a lot of volatility for the investment market. So my question is on your take on the macro Thank you. Thank you for your question. Let me answer your questions. First of all, our take on the macroeconomy and also stock market. I would say we see a lot of uncertainties. in China and also the whole world. For the international side, we see a lot of tariff, game on tariff, and geopolitical conflict. There's a lot of uncertainties. For China itself, real estate market is still We're structuring, and the local government is also digesting its debt. And we see the slowing down of investment growth and deflation. So given all these kind of factors, we say we do face some challenges. In terms of the equity market, we do see some opportunities brought by policies And we also see transition, economic transition in China. So I will say the equity market presents opportunity for the mid to long term. But in the short term, we will see more volatility. So I will say for equity market, Insurance investment would have more opportunity but more difficulty. For interest rate, the interest rate is going down in the long term. So given this kind of backdrop, I would say this kind of opportunity for high quality assets would be rare. So reinvestment would be difficult for insurance funding. CPIC always pursue the main business of insurance. We have already built a SAA built on our sovereignty and also our risk preferences. We continue to pursue and fine-tune our dumbbell asset management strategy. We continue to extend our Allocation in long-term bond At the same time, we also explore opportunity for ABS and REITs At the same time, we also gradually enhance our allocation in equity assets including non-public equity In terms of equity asset investment, we focused on high dividend value strategy. We continue to improve the structure of our equity investment portfolio. We will continue to expand the variety of investment and variety of investment channels. We are expanding New areas, for example, investment in gold, private equity, swamps, etc. We believe this will improve the efficacy and quality of our investment. As you mentioned, our net asset dropped by 3.3%. Let me give you a response. On the new accounting standards, on asset and liability side, they use different No, discount rate. For the liability side, they use spot rate curve. But asset side, they use 50-day rate curve. If there is a big volatility on the interest rate side, there will be a time gap for the net assets. Well, this is quite prominent in first quarter of this year. and in the second quarter asset side valuation continue to improve and so the time gap is narrowing for the net asset so with the lower volatility for interest rate I believe the main gap would mainly concentrate in Q1 In the second half, this kind of gap will continue to narrow. Insurance is a long-term business. Our ALM is also for the long run. CPIC has been for many years extending the duration of our assets, and the duration gap is favorable. So in the long run, I believe the impact of interest rate On the asset and liability side can be offset. So the overall trend, long-term trend is stable. Thank you. Well, thank you for the opportunity. I'm from Zhonghai Securities. I have two questions, one for life and one for P&C. For life, we see MBV growth is good. MBV margin is also good. Now, what are the reasons? What's the picture for the whole year? Is it going to accelerate or decelerate? And for year-end, are you going to upgrade your economic assumption? Now, for non-auto, non-auto business, now combined ratio as a whole improved by 0.8 PTs, For non-auto business, you mentioned the adjustment of personal credit and guarantee business and some negativity there, negative impact on profitability. So what's the impact? Also for non-auto, what about catastrophe laws? What are your measures to cope with it? Well, thank you. Well, thank you for your questions. Let me answer your first question. Well, on a comparable basis, in terms of MBV margin, the growth is not big, mainly because of the drop in pricing rate. CPIC updated our products, for example, Life and Whole Life, Power Business. Now, profitability is still good. For agency, The whole life, traditional products, the share improved by 18 PT and the bank channel 7% PT. On the whole, the overall margin didn't improve a lot because of the pace of sales. The share of single pay on bank channel increased quite a lot. And the bank channel, the margin excluding single premium products, the margin of the banker is still lower than the agency. So it brought down the overall margin. And third reason is because we improved our product mix with offering of variable products. And the margin of variable products Of course, it's lower than traditional products. So the overall margin didn't grow a lot. For the whole year, if you look at the first half of this year, we can make some prediction. For H1, we focused on customer and also our distribution channel. We, well, continued with Changhang Transformation. We saw The main drivers for MBV are segmentation of customers. We move customers up to a higher level. The share of our mid-tier and above customers improved to 27%. And the share of high net wealth individuals and ultra high net wealth individuals improved by around 70%. Also, we have the 2 plus N channel strategy. We see stabilization, recovery of total health count, and also improvement in core agents. Looking at the whole year, in terms of the forecast, I would say there will be MBV Steady growth in NPV margin and NPV, NPV margin to be exact. And for each review, we will review our actuarial assumption and economic assumption. We would say in-force investment yield is aligned with our investment yield, but for the long run, It cannot be said for sure. We will keep observing, keep reviewing the market investment yield before making adjustments. Thank you. Thank you. Let me answer your second question. For the P&C company, we continue to pursue quality growth to improve business mix. As you know, peers have already removed their personal credit and guarantee business. We are doing it now. Now, the business impact our performance in two ways. First of all, reduction of premium because of relapse. And commander ratio also were impacted by this business. The non-auto business combined ratio were impacted negatively by 2.8 percentage points. In terms of risk exposure, by the end of July, the amount decreased by one-third. We believe the impact will be eliminated by the end of 2026. In terms of catastrophe loss, last year, first half of 2024, it's mainly because of the storm and the blizzard. Last year, the loss was 2% impact. And 2025, the impact from catastrophe loss was 0.5 percentage point. So we just thank the good weather for this year. We continue, of course, to improve prevention of catastrophe and natural disasters. To be specific, number one, in terms of underwriting, we continue to improve our underwriting rules to enhance the management of catastrophe. At the same time, by different products, dynamically adjusted the catastrophe exposure. Secondly, we improved our risk survey system and improved our tools. And on the claims side, we improved our AI empowerment to give pre-warning, pre-alert, Early Warning Fourthly, we improve the efficiency of claims and also review of those large claim cases. Well, thank you. Now let's take some questions from those online over the telephone. Now if you want to ask a question, please press star and zero. Please identify yourself and your employer before you ask questions. Thank you. Now we have a question from Zhou Chen from UBS Securities. Good afternoon. Zhou Chen from UBS Securities. First of all, congratulations on your solid performance. Your OPAT is better than expected by the market. I have two questions. Number one, you see OPAT improved by 11% in the first half, a considerable growth. For Q2, the growth would be about 30-something. So what's the reason for the Net profit growth. Net profit growth. Net profit growth. And OPAT grew by 7.1%. Also, what are the reasons behind that? And you mentioned the future development, a future dividend payment will be linked to OPAT. So how about 2025's cash dividend payout? And the second question, CII, Comprehensive Investment Yield, dropped by 0.6% to 2.4%. Now the volatility is quite big and your absolute number is lower than peers, so what are the reasons? And we look at the equity investment, especially stocks. By the end of June, the outstanding balance of your stocks improved by 11%. It's not a very big growth, also slower than your peers. So what are the reasons? Is it because of your newly added investment in stocks that were smaller or lower than your peers? Well, thank you. I'll answer your two questions. Well, for the first half, our net profit improved by 11%. Now, of course, compared to Q1, the growth was much faster. Now, it's mainly because of several reasons. Number one, interest rate environment is getting better. And the negative impact is, well, is narrowing down. And also, we sit upon a lot of equity market, especially the stocks in Hong Kong market. So our investment yield exceeded market benchmark so these all supported our net asset growth our investment business also supported this and PNC also see improved combined ratio our life business stabilized with steady growth So all these combined, we see good growth for the first half and for the whole year. We will continue to match investment with liability, continue to improve our quality of business growth to make steady growth. Well, despite a high starting point, high benchmark in the second half of last year, We will continue to pursue high quality growth for the second half of this year. We're going to continue to improve the quality of insurance business, continue to enhance investment yield, and build up the overall capability for asset and liability management. Well, in terms of OPAT, For the first half of this year, the total OPAT was $19.9 billion, up by 7.1%. That's mainly because of the improving underwriting profit for the P&C business and also the lowered cost of liability cost for life business. Of course, we know that, well, operation experience variance and also underwriting profit from P&C were the main contributors. So for the whole year, we believe OPAT will maintain steady growth. As we mentioned, we will continue with our prudent business growth to keep up the good contribution from operation variance. We believe for the whole year, Our OPAT will continue with steady growth. In terms of the dividend payout, we will consider OPAT, we will link it to the business growth, and also consider the positive contribution from investment. Last year was a case in point. For the year of 2025, we will look at the OPAT and also investment and also look at how to smooth out the yearly distribution. In terms of the comprehensive investment yield, it dropped a little bit, mainly because of the relative change of the fixed income assets. As you see, we had a considerably lower change in our fixed income asset recognized into P&L. And also because last year we had a quite high starting point, high benchmark. Now, of course, the annual performance of our investment yield is impacted by multiple factors. First of all, the ALM and systems of the company. We are actually exploring a new model for ALM. We have actually established a NII Plus model for ALM. We are trying to explore a new platform and tools to better match ALM. With this kind of new methodology, we continue to improve the ALM coordination. We'll continue to manage the liability and also share the long-term liability cost and risks with our customers. Using multiple measures to stabilize our investment yield to offset the dropping interest rate. For example, extend our asset duration, enhance the equity investment, and explore alternative assets to achieve high yield. And in the first half, our investment yield only dropped by 0.1 PT. on a non-annualized basis. CPIC have also established a SAA based on our long-term ALM preference, based on our judgment for the long-term market trend. We have a very good SAA for FIXED INCOME ASSETS AND DIVERSIFIED ASSETS FOR EXAMPLE STOCKS IN HONG KONG MARKET OVERSEAS OPPORTUNITIES OTHER OPPORTUNITIES ET CETERA AT THE SAME TIME SAA ALSO HAS IMPACT IN TERMS OF OPEN MARKET EQUITY INVESTMENT WE HAVE We have implemented a high dividend stock strategy. We look at not only high dividend payout, but also the fundamentals of those stocks so that the portfolio can withstand volatility, withstand long-term risk. We also use growth-type assets to share with the investment yield and the growth opportunities. Actually, we always focus on total investment yield across cycles. We always pursue value and prudent investment, responsible investment, so as to produce stable long-term sustainable return to shareholders. In the last 10 years, our overall investment yield is 4.7%, number one in listed insurers. Comprehensive investment yield is also leading peers. I believe among our listed peers, our investment yield is at the mid and upper range. We believe we will keep up the good work going forward. Thank you. Well, thank you. In the interest of time, I can only have one more last question. One last question. Well, we'll have a question from Liu Qi from Guangfa Securities. Thank you. Thank you for the opportunity. I have two questions. Number one, on the asset side, for the first half of this year, what's your investment, new investment for 2021? For example, investment in Hong Kong stocks and the pressure for reinvestment. because of your non-standard asset investment is 10%. So it's quite higher than your peers. Second question on the PNC business. Now NEV, the share of NEV premium is close to 20%. Now what about the trend going forward? And can it be profitable? What about the combined ratio? Are you going to put some limits to the growth of any business? Maybe a follow-up question. Liability, the lowering of liability cost. Is it about new business or about enforced business? Well, thank you. I'll answer your first question. In terms of investment, 2025 first half, now of course, because of the macroeconomic growth and the policy adjustment, the economy is actually showing a lot of resilience, is improving. But nominal rates is still low in China. So for insurance companies, The whole industry faces pressure for reinvestment and asset allocation. Now we focused on several areas. Number one, continue with the hold to maturity for fixed income assets so as to extend the duration of our assets. Secondly, select the targets. We invest in subordinated bonds debts of big banks so as to improve the yield of credit products. Thirdly, gradually improve the equity investment for open market. Fourthly, we explore PE and gold and other alternative assets. Now you mentioned our open market financing tools. Now 10% is going down. Now I have to say the investment environment is changing for insurance money. Previously, we focused on non-standard fixed income assets and the long-term bond. We use them to extend our asset duration. and equity investment is used to enhance the yield, but given the dropping interest rate, non-standard fixed income assets is having more credit risk. So this kind of financial tool, I mean, the whole market for this kind of financial tool is shrinking A lot of rich maturity. By the end of this year, our non-open market financial tool has also seen reduction. The share is dropping to 10%. Now, we of course will enhance our macroeconomic study so as to extend the asset duration. But at the same time, we will better manage the credit risks. So for this kind of a non-open market financial tools, we will select the good ones while managing the risks. So on the whole, so far, the risks are well under control. And in terms of building our capacity, investment capacity, we will focus on this kind of a cross-cycle investment research capabilities. Number one, we are going to stabilize our net investment yield by extending our duration of our assets and also using ABS and RITs. Secondly, continue to build diversify the portfolios so as to seize upon high technology and also industry rotation, et cetera, and also support this kind of emerging sectors through debt investment so as to achieve this kind of a cross-cycle benefit. And, fourthly, Embed ESG into our investment strategy. Fifthly, explore overseas and global investment opportunities. Thank you. Let me answer your second question. In the first half of this year, the premium from NEV is close to 10.6 billion. Now the business is quite good. I believe NEV sector is producing profit already. But of course, NEV including private car and commercial cars, commercial NEVs. Now for commercial cars, the risk is higher, combined ratio more than 100%. Private NEV combined ratio is lower than 100%. But in total, combined ratio is less than 100%. In the second half of this year, I believe, There will be some pressure in terms of combined ratio. For NEV, I believe it's a quite complex issue. Combined ratio is quite high with different reasons. For example, different brands will have different combined ratios. For example, for this kind of a law, we have more than 300, more than 300 Well, types of NEVs, which are numbered over 10,000, and 99 out of the 300 types of NEVs have combined ratio of above 100%. And also, you see, NEV is harder to repair. Battery is very pricey. around 50% of the total cost value. And NEV drivers tend to be young. I actually, for example, the car owner, the average age of a car owner of a Xiaomi NEV is 29 years old. And of course, driver behavior for NEV is different. So we need to consider all these factors. Now, our strategy, first of all, we developed a NEV business unit to have in-depth collaboration with NEV producers. Now, for this kind of new NEV manufacturers, their combined ratio is quite good and our The market share for this kind of new NEV manufacturer is 16%. We are the leader in this regard. And secondly, we need to improve our risk selection. NEV in big cities and medium-sized cities, the loss ratio is high because they use NEV as taxis. For example, in Shanghai, we established collaboration with EV data so that we can monitor the NEV driving force, driving behavior, their driving routes, so we can actually identify which NEVs are private cars and which NEVs are taxis. As I mentioned, first of all, we collaborate with the manufacturers of NEVs, and secondly, we use data. We use data to better select the risks. Now, we will not impose any limit on the growth of NEV, and we believe this is also part of our social responsibility. Actually, We have established a Houtoubao platform backed by the regulator. So the Houtoubao platform is a good platform to cover all NEV drivers. Well, it's a good platform with good growth. Now let me answer your liability cost question. With the drop in pricing rates, now 2021, the rate had dropped from 3.5% to 3% to 2%, et cetera. Given this kind of drop in rates, we kept improving our liability side costs. So we established a mechanism to adjust our pricing rates. Our overall pricing rates Weidong Zhang, Mingchao Wang, Yonggang Zhao Weidong Zhang, Mingchao Wang, Yonggang Zhao It's still reducing, still going down. Our sensitivity to interest rate is the best among peers. In terms of a new business, in January this year, the regulator actually released a rule on the dynamic adjustment of pricing rate And in July this year, there is a new rule tapping the pricing rate at 1.99%. So the pricing rate for traditional products would be 2% and the par life product will be 1.75%. So our liability cost will go down further going forward. Well, thank you. For the answers and questions, we also collected some questions from mid-sized and small investors. Now these questions are mainly about the strategy of our agency channel and also the measures to contain catastrophe risks and also outlook on our P&C business and also questions on SAA and TAA I believe we have covered most of them already. Now in the interest of time, we will answer your questions in text after this event. If you have unanswered questions, please contact our IR team. Thank you for your attention. Goodbye.