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Edited Transcript of 1508.HK earnings conference call or presentation 30-Aug-18 1:30am GMT

Half Year 2018 China Reinsurance Group Corp Earnings Call (Chinese, English)

BEIJING Sep 13, 2018 (Thomson StreetEvents) -- Edited Transcript of China Reinsurance Group Corp earnings conference call or presentation Thursday, August 30, 2018 at 1:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Riming Kou

China Reinsurance (Group) Corporation - VP & CFO

* Xiaoyun Zhu

China Reinsurance (Group) Corporation - Board Secretary

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Conference Call Participants

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* Jenny Jiang

Morgan Stanley, Research Division - Equity Analyst

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Presentation

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Xiaoyun Zhu, China Reinsurance (Group) Corporation - Board Secretary [1]

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Ladies and gentlemen, good morning. I'm the secretary to the board, Zhu Xiaoyun, of the China Reinsurance. Welcome to China Reinsurance (Group) Corporation Limited 2018 interim results announcement.

It is the reporting period and it is a great pleasure for us to meet you again online on the business performance in the first half year. And we would also like to share with you our future plans, and this format is a conference call. We will use Mandarin to conduct the meeting, while we also provide English-Chinese simultaneous translation service. Also at the meeting, we will continue with our communication with you on the latest information. Please follow our website at Investor's calendar for more details.

Now shall I introduce the management team before we start. They are: Mr. Yao Hezhen, the Actuarial General; CFO, Mr. Riming; Vice President, [Mr. Jiang]; and Assistant to General Manager, Zhao Wei of (inaudible); and Mr. (inaudible) from China Re; and Mr. (inaudible) General Manager for Technical Center; and Mr. Lu Xiuli, Vice Director of the Office to the Group; and the rest of the department leaders.

Let me invite Mr. Riming to share with you the detailed business performance in the first half of 2018. After that, we will open the line for Q&A.

Now Mr. Riming, please.

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Riming Kou, China Reinsurance (Group) Corporation - VP & CFO [2]

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Good morning. Welcome to our interim results announcement for 2018. I would like to walk you through our business performance in the first half of 2018. In the first half, we stick to the principle of the strategy assets by the [strategic] 5-year plan which is pursuing for the steady and progress of our growth. Our achievements are as follows: Number one, our leadership in the market has been further enhanced and the reinsurance business increased by 14.1%. The market share in China has been #1. Our protection-type life and health insurance business increased by 75.1%, also #1 in the local market. The primary P&C insurance business, among the top 8 players in the market, has been the first as well, reaching 17.4% of market share, also increased. And secondly, if you look at our business structure, it has been further optimized. The overseas P&C reinsurance business, that is the international business, increased by 38.4%. As for the domestic [speculative] P&C insurance increased by 51%. For the protection-type life and health reinsurance business increased by 75.1%, as well as the nonauto primary P&C insurance increased by 51.2%.

As for the reinvestment business, there has also been progress. The total investment income reached CNY 5,069 million, up by 1.2%. And annualized net investment yield was 5.29%, up by 0.70 percentage points. The performance of domestic-listed equity was marked superior to the market index and the annualized total investment yield was 5.21%, which is higher than the industry average.

As for our solvency capability, we have consolidated aggregated solvency adequacy ratio at 207% and including the China Re P&C, China Re Life and then China Continent Insurance, the aggregate solvency adequacy ratios are 209%, 208% and 486%. We maintained the credit rating such as A by A.M. as well as A by S&P.

Now let's look at our premium income. In the first half, our total premium income was CNY 67.829 billion, slightly dropped by 2.2%, in which the life reinsurance as well as the other business sectors, the total premium income also reached high levels, specifically CNY 15.2 billion, CNY 30.16 billion and CNY 21.9 billion. The total premium income was CNY 23.826 billion in within the same reporting period. And considering all the factors -- or putting aside the financial reinsurance business, the total premium income increased by 9.1%.

In the first half, the P&C insurance, also as well as the P&C direct insurance also increased by 22.6% as well as 32.6%. And the life reinsurance premium income rose to 44.8%, ranking the first among all the 3 business sectors.

In the first half, our total assets was CNY 299.545 billion, up by 23.4%. Net asset was CNY 85.633 billion, up by 13.3 -- 13.6%. Net profit attributable to the parent company was CNY 2.331 billion, dropped by 21.1% mainly because that in the first half of this year, there was a onetime investment in the property sector, that is the Shanghai World Square (sic) [Plaza]. The total yield after the resolution is CNY 727 million, so therefore, the performance base was greater. Secondly, there was a fierce competition in the insurance market and the cost was up. That's why our undertaking yield also dropped because of this. So that is our financial performance.

Now let's look at our strategy. I would like to share with you more about our strategy. First of all, we continue to lead the business growth through innovation. In terms of the mechanism innovation, we established a project management mechanism for key innovative initiative and incentivized projects. In terms of the technical (sic) [technological] innovation, we launched the Digital China Re strategy and set up our new platform. And meanwhile, we also set up our private cloud platform to sustain release -- support our business growth. Meanwhile, we also published the Reinsurance Blockchain White Paper. In terms of the business innovation, we promoted piloting of the inherent defects insurance of our buildings, and there is a 480% total growth in the premium income. Thereby, we also introduced a satellite remote sensing technology and finished our product design.

We worked with our customer and jointly developed the insurance + futures + reinsurance products. In terms of for the environment protection, we also worked together with a partner to launch the compulsory environmental pollution liability insurance. Meanwhile, we also launched the Million Medical Care and fostered hot-selling mid-end online medical insurance products.

The second part of our strategy is on the catastrophe risk management platform. We issued the first independent intellectual property earthquake catastrophe model and we provide key technical support for earthquake catastrophe insurance pricing. We set up China Re Catastrophe Risk Management Company devoting to enhancing the industry capability of a catastrophe risk management. We are also -- our market share also go beyond 35% because of our leading role. We have provided services to our customers, who are in the catastrophe prevention sector.

We actively participated in the Belt and Road Initiative. We signed a cooperative EOM with 27 major overseas insurance companies. Meanwhile, we also provide services to over 121 -- customers to -- in 121 countries. That is China's overseas insurance. So this is the contribution we make to the Belt and Road Initiative. Meanwhile, we also signed the cooperation agreement with [we signed with] our current partner and we signed the International Insurance Cooperation Forum in London to further enhance our influence in the overseas market.

Now let me share with you more details about our business performance. First of all, the P&C reinsurance business. In the first half of 2018, our total P&C reinsurance rebounded back, and the total premium, a high record in the past [3] years. So the net (inaudible) from insurance was greatly reduced. In the first half of 2018, the total premium income was 14.1% reaching CNY 15.2 billion. And for the combined ratio increased also significantly to 99.5%. The solvency ratio reduced by 8.5%. And the combined ratio -- the combined ratio has increased.

If you look at the domestic business first, there has been a faster growth, the nonmotor business has been the leader in the total growth. The total premium from the first half of 2018 there has been -- it rose from CNY 11.487 billion to CNY 12.903 billion, representing 12.3%. As for the nonmotor insurance business, it also rose to 8.1 billion, representing 24.8%. The combined ratio in domestic market maintained at the same level last year, which is 99.6%. As for the loss ratio, this is a 1 percentage point down to 52.9%. And the expenses ratio increased by 1 percentage point reaching 46.7%.

In terms of other domestic market, we also captured opportunities in the market, particularly for the nonmotor and facultative reinsurance business, which helped to improve our overall insurance business structure. And if you look at the -- we realized double digits growth in all these sectors in which, for the enterprise property insurance, liability insurance, engineering insurance and other nonmotor insurance business you can see the premium increased by 17.4%, 31.1 -- 33.1%, 62% and 60.4%.

As for the nonmotor business, it has been growing fast. It's because of the faster growth in the relevant multisector. Meanwhile, we also [adjust our] business sector and expand with more energy resources in expanding these businesses. As for the facultative reinsurance business, there has also been a growth rising from 44.1 billion (sic) [CNY 441 million] to 66.60% (sic) [CNY 666 million] representing 51% of growth. The facultative reinsurance business was driven to growth because of the IDI, which was set up for the -- during the building defect product. And we have also -- go to the technical support. The new business has been supporting to promote the growth of our facultative reinsurance business.

While we're consolidating our leading positioning in the local market, we also see growth out of Singapore, the subsidiary in Singapore, to expand our Southeast Asian countries. And the overseas market also continued to grow rapidly.

In the first half of 2016, our overseas market was CNY 1.62 billion. After 2 years of growth, in the first half this year, the overseas market delivered a performance of CNY 2.5 billion, reaching a 24.5% of increase. And the premium revenue grow -- rose from 12.5% to over 16% this year.

If you look at our distribution of our business, there have been better growth in not only China, Asia, but also Europe and America representing 53.1% of our growth, 21% of growth -- sorry, it's 38.1% of growth. The Asian business growth -- faster growth because of our fast expansion in Asian market. Meanwhile, we also increased -- we also optimized our business model.

Now let's look at the life and health reinsurance business. In the first half this year, our life and health reinsurance business delivered performance of CNY 30.117 billion decreased from CNY 36.552 billion last year. The reason for the decrease is, first of all, the financial reinsurance business achieved abnormally strong result and the domestic financial reinsurance premium income amounted to RMB 23.826 billion, of which CNY 23.725 billion was recorded in the first half this year.

The savings-type reinsurance business is under pressure, affected by regulatory supervision and the acceleration of industry transformation, costs of savings-type business remain high. And the third reason, while in the insurance industry we see the return back to the [SF] so for the pressure, half of our reinsurance business, we realized a faster growth through the Data+, Technology+ strategy. We also enhanced the growth of the high-efficiency business as well as for the major business -- insurance finance support, which also grew faster in the first half.

In the domestic market, our total life and health reinsurance business realized a 75.1% of growth. And for the YRT protection-type reinsurance as well as the other protection-type reinsurance business, you can see that there was also a positive change as well as for the mid-end medical services, they also realized 172.5% of growth. In terms of the saving-type of our business, there was a 42% deduction. The reasons, as I mentioned before, the business costs went up. So that's why we have to strictly control our cost and select more carefully how the business grow. So while we have the right assets to match -- that's why you can see our scale of our business have decreased.

In terms of the financing reinsurance business, the facultative business was reduced by 23.2%. We keep a close eye on the regulatory changes, particularly cost, while we manage risks well. We hope that through the technical innovation and product innovation we could realize effective growth.

Now let's look at our actuarial information. So this is the value evaluation result, that is based on this report. So based on the overall operating environment as well as the market expectation, we also consider all the assumptions and the evaluation was basically the same as last year. The total embedded value of our China Re was CNY 21.438 billion, up by 6.6%. And for the value of one year's new business rose by 1.7%, reaching 1.5 -- CNY 1.495 billion.

Now let's look at the primary P&C insurance, our business sector. The total -- our total premium income of China Continent was higher than the industry average. And the total premium income was CNY 21.948 billion, up by 17.4%. So based on the original premium income, you can see that this year, the premium income was CNY 21.948 billion and up by 17.4%. And in terms of the market share, there's also a 0.09 percentage points of growth with 3.62%. The original premium income grew by 14.2%.

And in the first half of 2018, there are also a -- for the nonmotor business, combined growth in the year reaching 42.7% CAGR. As for the key nonmotor insurance growth, they maintained high growth as well, particular [the portfolio of mid-end] medical care as well as the individual medical care insurance. And in the first half, we realized 29.6% of growth in the accident and short-term health, et cetera, reaching 2.386 (sic) [CNY 2.368] billion, and we keep innovating in our products. In the first half, we also realized growth in the [surety,] reaching 149.4% of growth, reaching 2.192% (sic) [CNY 2.192 billion].

As for -- we also captured the opportunity because of the transformation efforts of medical insurance to promote safe construction, particularly when we launched the liability insurance. And our -- we firstly opened the -- such a new product, and in the liabilities sector center, there is a 25.7% of growth reaching CNY 90 billion (sic) [CNY 900 million] of premium income. In terms of our cargo transportation, we also realized faster growth, particularly the transportation sector has been growing faster in China. In the first half this year, our cargo transportation premium income last year was 11.4 billion (sic) [CNY 114 million], and this year, we realized 231.6% of growth reaching 3 -- 37.8 billion (sic) [CNY 378 million].

And in terms of the primary P&C insurance, the combined ratio was 99.97%, and the expense ratio was 47.61% (sic) [43.61%]. Loss ratio, 56.36%. So the reason for such changes is because for the reform in China, particularly the solvency ratio with adequate solvency ratio, we carefully selected products to improve the solvency ratio. So we are pleased about our 3 business sector.

Now look at our asset management sector. In the first half, we continue to carry out our prudent management as well as the long-term investment strategy and adjusted our fixed assets investment and enhancing our allocation of the right assets in the portfolio. The total investment yield was CNY 5.069 billion, up by 1.2%. In 2017 and at the beginning of 2018, we dramatically increased the investment in fixed income products, so therefore the yield went up. We captured the opportunity of the market. In the first half, our total net investment yield, up by 0.7 percentage point, reaching 5.29%. So this is annualized investment yield which is also above the industry average.

By the end of the term this year, our total investment asset was CNY 201.074 billion, comparing with that of our 2017, there has been a 6.7% growth. So the total asset size went up steadily.

In the first half, we also captured the opportunities in the market, improving our allocation of resources. In terms for the fixed income investment, we further expanded this sector and realized 73.7%. As for the equity and investment funds, they're 16.6%. Cash and the short-term time deposit is at 12.4%., and the other investment, only 8.8%.

We also prudently allocated fixed income as well as equity on the investment funds. The fixed-income investment is the middle part in the portfolio. And in the first half, for the equity bond, the corporate bonds, it went up to 6.4% because the bond market was going through a transformation -- transition and we captured today's time window. For the medium to long-term corporate bond, we allocated more resources, about 16 billion and the structure was optimized. And so this leads to getting us a long-term stable yield.

As for the equity and the investment funds, compared with the end of 2017, there was a reduction because we adjusted the structure, particularly in the open market. And at the end of the year, when the level was high, we also liquefied some of the equity and the investment fund.

So with that, I would like to conclude my report on our results. Thank you.

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Xiaoyun Zhu, China Reinsurance (Group) Corporation - Board Secretary [3]

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Thank you very much, Mr. Riming. Now I will open the line for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) (foreign language)

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Unidentified Analyst, [2]

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(foreign language)

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Unidentified Company Representative, [3]

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(foreign language)

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Unidentified Company Representative, [4]

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First question is from [Madame Yang] from HSBC. The question is about that, we noted the first half of this year, there has been the 51% of growth in the domestic facultative business. Just want to know that -- what is the reason for such a big growth, and what about the second half this year as well as tomorrow, do you think that it will continue to grow? And what about the project contribution for this business sector?

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Unidentified Company Representative, [5]

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First of all, the answer is that it's true that the 51% of growth in the facultative business and -- it is because that we spent more time and resources to expand acquiring new customers in this sector and the products in this sector, many of those are new products, which have to grow for our business.

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Unidentified Company Representative, [6]

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(foreign language) The products and the new products regarding the facultative reinsurance business, so it includes liability, reinsurance products as well as the life and health reinsurance business. So the profit for facultative reinsurance product is pretty good, but we are expanding the size of this business sector but also are planning to maintain a high profit contribution to our growth.

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Unidentified Company Representative, [7]

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(foreign language)

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Operator [8]

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(foreign language) Morgan Stanley, Jenny Jiang.

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Jenny Jiang, Morgan Stanley, Research Division - Equity Analyst [9]

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(foreign language)

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Unidentified Company Representative, [10]

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This question is from (inaudible) JPMorgan. The first question is about regarding P&C reinsurance as well as the direct reinsurance business. The -- there is an adjustment regarding the reserves, so just want to know what will be the impact to your profit? And I also wonder what kind of adjustment you have made with the assumptions and why there is such an adjustment and why this time. The second question is about the overseas expansion. It is said that you are participating in bidding in the overseas projects. I just want to know what kind of significance it has to your company strategy. (foreign language)

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Unidentified Company Representative, [11]

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(foreign language) To answer your first question regarding the [reverse], it is true that there has been the adjustment. It is because of [equity in] the interest rates. And as for the life and the health reinsurance, there is [such a change] but it is not a big figure and the impact to the profit contribution is really limited.

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Unidentified Company Representative, [12]

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(foreign language) As for the P&C reinsurance business, the increase is coming from the international business because it has been growing very fast, and its contribution is getting bigger and bigger in the overall portfolio (foreign language) So for the second, for our keeping prudent, we [wrote off] our fee reserves for the international business. And this also have to cater to any uncertainties arising from the catastrophe in the international business. (foreign language) As for the primary P&C reinsurance sector, because of the fee reform in the motor reinsurance sector, we also increased the reserves in order to guarantee that the [employees] that there isn't insufficiency in the [solvency ratio]. We have to keep our claim reserves for this. (foreign language) Regarding our international expansion, the international sector has always been a very important part in our 15th 5-year plan considering data analytics in this sector as well as the economic growth. Regarding P&C business, we are actively looking for more opportunities and areas for further deployment. (foreign language) And as well, we will be actively promoting our international expansion steadily to continue our deployments in order to further promote the growth in the international business sector. Regarding the [billing] you mentioned in your question just now, it is not comfortable for me to make any comment at this moment. Once there is progress, we will make a disclosure immediately.

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Unidentified Company Representative, [13]

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(foreign language)

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Unidentified Analyst, [14]

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(foreign language)

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Unidentified Company Representative, [15]

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(foreign language)

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Unidentified Company Representative, [16]

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Two questions from (inaudible) from (inaudible) Research.

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Unidentified Analyst, [17]

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The first question is about the P&C reinsurance sector. We noticed that your nonmotor insurance business went up fairly quickly in the first half. And this is also in compliance with the data we have in hand and [mainly] it covers liability reinsurance as well as the agriculture insurance, so on and so forth. So as China Reinsurance group is taking the bar at a high level in the market and I believe that you've got more data in hand, can you please share with us that -- along with the fast growth of our nonmotor insurance sector, what kind of a risk there will be? What kind of an advantage there will be in the market as well? And how do you think about the trend of growth in the future? And we also noticed that in terms of P&C as well as the nonmotor insurance business, the profit performance has been actually declining, which is not an ideal situation to auto insurers. So what is your comment on this? And particularly, from the risk management point of view. The second question is about the P&C as well as the primary P&C reinsurance business. Just now, the management said that you prepared to assess to cater to the situation in case that you don't have a sufficient solvency regarding the auto reinsurance business. And also, there is also a change regarding the discount comparator. And I just want to know your understanding for the auto -- sorry, if the motor reinsurance business, if the reform continues, so what do you think about the influence to your business? And what are you going to do to respond to that?

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Unidentified Company Representative, [18]

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The first part of the answer is regarding your first question from P&C reinsurance, et cetera. According to our observation, there are 2 reasons accounting for such a change. (foreign language) The first reason is that the traditional nonmotor insurance business has also been very [vastly] in the [domestic] market. Because of the macro economy, the overall market size has been bigger and bigger. (foreign language) So in -- the process improvements regarding risk management is different from one company to another. Some company has a very mature operations and the risk management mechanism in place that they have in adopting their talent pool. So that's why they can manage the risks better. While some other companies may not perform that well in managing such risks. (foreign language) As for China Reinsurance, we are looking through all the risks and are trying to identify the differences in them. In terms of our customers, we also try to focus on those quality ones. Internally, we adjusted our business structure and tried to encourage growth in those high-quality business sector. In this way, we can capture the opportunities in the market and realize the growth. (foreign language) The second reason for such a good performance is that we have been focusing more on the innovative business, particularly the life and the health reinsurance business. Just for an example, so we have allocated thereby to professional talents to enable such a growth. Meanwhile, we are also expanding our overall innovation in this business sector in order to realize the scale of growth and a very healthy quality of growth. (foreign language) (inaudible) focusing on the detail we had regarding the first half of this year, the P&C and the nonmotor insurance business maintained a stable growth and its profit contribution has also pretty good.

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Unidentified Company Representative, [19]

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(foreign language)

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Unidentified Company Representative, [20]

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(foreign language) Regarding the countermeasures we are going to take to (inaudible) changes regarding the reform. I want to answer your question through 3 perspectives. (foreign language) First of all, we will enhance our assets in risk selection to guarantee the quality of our business. As you know, that in China continent, the quality has always been competitive advantage. (foreign language) This year, based on our existing strategy, we did something new, that is the [F card] index. So for each customer, we will calculate a risk factor. When the customer choose our products, we will allocate the risk selection factor to the customer. (foreign language) Secondly, from -- at the industry level, you know that from the beginning of August, there has been a new program which is called the combination of profiling and driving and this may lead to the change in our trend settlement ratio. And we believe that with the implementation of this program, our [sudden] cost will go down and the risk in this sector can be managed well. (foreign language) And then thirdly, internally, we also enhanced our efforts in terms of our claim resettlement. And through this, we hope that, yes, we can also contribute to improve our profit contribution.

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Unidentified Company Representative, [21]

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(foreign language)

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Unidentified Company Representative, [22]

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(foreign language) (Operator Instructions) (foreign language)

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Unidentified Analyst, [23]

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(foreign language) (inaudible) question from (inaudible) of (inaudible). The question is about the [saving] type of reinsurance product. You noted that there is a big reduction in terms of premium income in the first half. I just want to know why. And what is your view on the trend of reduction -- a deduction?

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Unidentified Company Representative, [24]

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(foreign language)

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Unidentified Company Representative, [25]

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(foreign language) So regarding the question from decrease of premium income in saving type of reinsurance products, basically there are 2 reasons. Number one, comparing with that of 2017, you may notice that the calculation base in 2018 is much smaller. The second reason is that the supervisory regulation has been more strict than before and that, therefore, the sales of saving type of reinsurance products also dropped significantly. (foreign language) So to other reasons, the number three is that in 2015 to 2016, there were a lot of short-term to midterm saving type of products that became mature, so that's why, in many companies, they had very tight cash flow and the demand for reinsurance [all] became weaker. And the last reason for the drop of this business sector is that we noticed that there is a transformation of many companies because they do not want to sell so many saving type of reinsurance products that much. So therefore, the overall sales also became less, particularly, when I said before, the regulatory regulations are becoming stricter and stricter. And as for trend, first of all, what we are trying to manage is the asset-liability allocation better, particularly for those sold and the effective reinsurance products. (foreign language) In addition to this, in the overseas market, we will also expand our business growth. For example, we are working hard to build up the platform in Hong Kong to help with the expansion in the overseas business. We also work hard to innovate our new products, for example, we launched the innovative new type of saving type of reinsurance products and financing reinsurance is just one of many examples.

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Unidentified Company Representative, [26]

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(foreign language)

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Unidentified Company Representative, [27]

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(foreign language) Two questions from Mr. (inaudible). The first question, about net profit. We noticed that there was a big drop in the net profit this year, just want to know why. The second -- and also regarding the (inaudible), what is the target for this year? The question is about the capital expansion, so do we have any plan to introduce more shareholders to the company? And what will be your plan for the capital expansion, if any?

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Unidentified Company Representative, [28]

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The answer to the first question is that it's true that there's a 21.2% of drop in net profit this year. The first reason for the drop is that in 2017, we sold out a property in Shanghai which resulted in CNY 727 million. That deal is [once] overall, but it did push up the calculation base of our net profits last year.

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Unidentified Company Representative, [29]

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(foreign language) The second reason is that in the first half this year, competition in the market became as fierce. And the profit performance also declined because of the competition. Besides for this, we saw fluctuations and a decline in the capital market as well, which resulted in the less yield also for equity investment. (foreign language) Next, we still have the confidence to hit our annual target in our operations as well as the ROE and we can maintain the very stable delivery of our ROE performance. (foreign language) Your second question in China Reinsurance is now actively preparing a bond issuance to support our life reinsurance business growth. And we will make an announcement in this regard once there is any progress.

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Unidentified Company Representative, [30]

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(foreign language)

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Unidentified Analyst, [31]

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(foreign language)

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Unidentified Company Representative, [32]

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(foreign language) So just a follow-up question from (inaudible) of (inaudible). In terms of the corporate bonds that you're holding or you have invested, just want to know whether there is any default? And also, what is the rating of all those corporate bonds that you're holding? And how do you think about the credit risks involved?

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Unidentified Company Representative, [33]

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To answer the questions. First of all, there is no default in all the corporate bonds that we are holding. And if you look at the ratings for the bonds, 80% of them are AAA and around 20%, I think they are AAA+. That is the data by the end of June this year. So regarding the risk management, what we can do is that, first of all, we will enhance the credit evaluation before investment. And number two, we will be more careful in terms of our credit granting in order to avoid too much concentration which may lead to more risks.

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Unidentified Company Representative, [34]

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(foreign language) And thirdly, we will also enhance our tracking and management after the investment, particularly regarding those that we're holding yet at a lower rating. So we will conduct and follow-up and monitor more frequently. (foreign language) We will also conduct due diligence as well as some research, both through international -- both through internal assets as well as external resources in order to identify any potential risks. And if we find anything and we will take precautious measures and adjust such risks accordingly in our portfolio.

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Unidentified Analyst, [35]

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(foreign language)

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Unidentified Company Representative, [36]

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(foreign language) So this is a follow-up question from [Madam Yang] of HSBC, which is about M&A. I just want to know if you have other plan of any possible M&A in the future. What will be the size of investment if there is any M&A? And with capital from your own reserves or are you going to issue more share or bonds to raise such funds? (foreign language)

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Unidentified Company Representative, [37]

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(foreign language) Thank you for your question. At the group level, in our [15th] 5-year plan, the M&A has been a very important part of our strategy to deploy for the future. And if there is any M&A, it will be from our international business or health and life business because particularly, the life and health business were -- have been not as strong in this sector. (foreign language) For this purpose, we have already set up different project groups to look into the possibilities. So regarding the capital for possible M&A, I think it is still too early to make any comment on it because if you look at our cash position, we have abundant capital in hand. And if the acquisition target is too big, we can handle it by using our own capital. Of course, we don't exclude that possibility of issuing shares or bonds in the future.

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Unidentified Company Representative, [38]

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(foreign language) This is the end of the Q&A session, and thank you very much. If you have any further questions, please feel free to contact our IR department. Thank you once again for you coming. (foreign language)