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Edited Transcript of 601318.SS earnings conference call or presentation 16-Aug-19 2:00am GMT

Half Year 2019 Ping An Insurance Group Co of China Ltd Earnings Presentation (Chinese, English)

Shanghai Sep 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Ping An Insurance Group Co of China Ltd earnings conference call or presentation Friday, August 16, 2019 at 2:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Jason Yao

Ping An Insurance (Group) Company of China, Ltd. - Executive VP, CFO, Chief Actuary & Executive Director

* James E. Garner

Ping An Insurance (Group) Company of China, Ltd. - Chief Strategist & Head of IR

* Richard Sheng

Ping An Insurance (Group) Company of China, Ltd. - Secretary of the Board

* Jessica Tan

Ping An Insurance (Group) Company of China, Ltd. - Co-CEO, Executive VP, COO & Chief Information Officer

* Yonglin Xie

Ping An Insurance (Group) Company of China, Ltd. - Co-CEO & Senior VP

* Yuansiong Lee

Ping An Insurance (Group) Company of China, Ltd. - Co-CEO, Executive VP, Chief Insurance Business Officer & Executive Director

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Conference Call Participants

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* Charles Zhou

Crédit Suisse AG, Research Division - VP

* Hanbo Xu

CMB International Securities Limited, Research Division - Research Analyst

* Kunpeng Ma

SWS Research Co., Ltd. - Research Analyst

* Thomas Wang

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Xianghuai Zhao

Everbright Securities Co. LTD., Research Division - Research Analyst

* Xin Qi Liu

Guotai Junan Securities Co., Ltd., Research Division - Research Analyst

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Presentation

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Richard Sheng, Ping An Insurance (Group) Company of China, Ltd. - Secretary of the Board [1]

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[Interpreted] Good morning, ladies and gentlemen. Thank you for joining us today for the 2019 Interim Results Announcement Presentation of Ping An. I'm Richard Sheng, Company Secretary of Ping An. Mr. James Garner, Group Chief Strategist and Head of Investor Relations, is at the Hong Kong venue. We are honored to cohost the analyst presentation today. Now let us introduce our management team members who are attending today's presentation.

Mr. James Garner will now introduce the team from Hong Kong.

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James E. Garner, Ping An Insurance (Group) Company of China, Ltd. - Chief Strategist & Head of IR [2]

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Thank you. In Hong Kong, we have Mr. Peter Ma, Chairman and CEO of Ping An Group; Mr. Lee Yuansiong, Co-CEO; Ms. Jessica Tan, Co-CEO; and Mr. Jason Yao, CFO and Chief Actuary. Mr. Richard Sheng will now introduce the management team from Shanghai.

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Richard Sheng, Ping An Insurance (Group) Company of China, Ltd. - Secretary of the Board [3]

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[Interpreted] Thank you. In Shanghai, we have Mr. Sun Jianyi, Senior Vice Chairman; Mr. Xie Yonglin, Co-CEO; Mr. Alex Ren, President; Mr. Timothy Chan, Chief Investment Officer. Today's results presentation will begin with a presentation of the company's strategy and 2019 interim results by our CFO, Jason. After that, our 3 Co-CEOs will answer -- will give you more details on our business lines. And then we will open the floor for questions. Jason, please.

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Jason Yao, Ping An Insurance (Group) Company of China, Ltd. - Executive VP, CFO, Chief Actuary & Executive Director [4]

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[Interpreted] Ladies and gentlemen, good morning. Welcome to 2019 Interim Results Announcement Presentation of Ping An. Thank you for your continued interest in and support of Ping An. 2019 is a critical year in Ping An's strategic transformation. Following the strategic models of Finance + Technology and Finance + Ecosystem, we are focusing on the application of innovation technologies in Pan Financial Assets and Pan Health industries, in particular the traditional finance and 5 ecosystems.

Now I will take you through our financial results in the first half. In 2019, we again saw very strong results, and the operating profit grew by 24%. Interim dividend per share grew by 21%. Net profit grew significantly by 68%.

Now I will take you through our customer-centric profit drivers. As you can see that the main driver of operating profit growth was the retail operating profit, which grew by 32%, and the retail operating profit accounted for almost 91% of the group's total.

From this chart, you can see that the strong growth in retail operating profit can be attributed to growth in retail customer base, contracts for customer and operating profit for customer. In the first half, we acquired 20 new -- 21 -- sorry, 20 million new customers. And our operating profit per customer maintained 21% growth, and about 6.8 million new customers were sourced from the 5 ecosystems of the group. So far, Ping An boasts 196 million retail customers and 576 million Internet users. Among -- about 400 million users have not yet bought our financial products. So there is great potential for conversion in the future.

From this chart, you can see that since 2016, the percentage of customers holding contracts with multiple subsidiaries has gone up from 24% to 35%. This is a very important measure that we use to measure the effectiveness of cross-selling.

Now let's look at operating profit. First of all, let's look at the profits by business lines. Operating profit is a key profitability measure. It is also the basis for dividend payout. In the first half, the operating profit of the group grew by 24% year-on-year, largely thanks to double-digit growth across most of the business lines, in particular P&C, life and securities. The tech business line dropped -- I mean the technologies business profit dropped by 33%, mainly because of our increased investment incubation. Autohome and Lufax grew very well.

And first half operating ROE was stable at 12.3%, and life and health and P&C grew very significantly. This shows adjustments to net profit derived operating profit. Net profit of the group in the first half was CNY 105.7 billion, much higher than operating profit.

There are 2 main reasons. The first one is the CNY 10.4 billion decrease in income tax for 2018 factored into the income tax expense for 2019 as a result of a Circular on Pretax Deduction of Fee and Commission Expense for Insurers, and we have taken it out from operating profit because this is a one-off impact. And the second reason is the short-term investment variance of CNY 13 billion as a result of higher actual investment returns and the EV automating investment return assumption of 5%, and we have also taken this out of the net profit.

Now let's look at life and health residual margin changes and proceeds of operating profit. For life and health, it's up -- operating profit accounted for about 65% of the group's total and grew by 37% year-on-year. And this is mainly because of growth of 21% in release of residual margins and high -- and persistently high positive operating profit -- I mean operating variance and effective tax rate. We have also taken out the impacts of the new taxation policy. And as of the end of June 2019, the residual margin balance, that is the discounted price and value of unreleased profit on our balance sheet, reached RMB 867.4 billion. And residual margin release is a major source of profit. Although the -- although NBV growth slowed and the residual margin release as a percentage of operating residual margin decreased as a result of growing residual margin, the release in itself is increasing.

Now let's look at embedded value. At the end of June, the embedded value per share was RMB 60.9, up by 11% compared with the beginning of the year. The first half ROEV like operating profit has excluded impact of new taxation policy, and we maintained 11.2% growth.

Life and health ROEV was 14.2%, again, a relatively high level. It's because of contribution from new business value. Also, our 11% discount rate is quite conservative, and we have persistently showed positive operating variance. Here, we -- you can see NBV of life and health. In the first half, NBV grew by 4.7%, mainly because of higher or improved business quality. NBV margin improved by 4.7%, offsetting the decrease in first year premium.

Now let's look at EV and NBV. And there are sensitivities to some key assumptions. We focus on high-value protection products. And the sensitivities of EV and the NBV to investments were relatively low. But the NBV shows higher sensitivity to mortality, morbidity and accident rates.

Now let's look at the dividend and capital position. First of all, interim dividend payout, we based dividend on operating profits. And thanks to higher post-tax operating profit and strong solvency position, the interim dividend paid -- dividend grew by 21%. And also in June, we completed the first round of buyback of about RMB 3.4 billion -- sorry, I mean 3.4 billion shares.

Now let's look at free cash. In the first half, free cash reduced mainly because of dividend payout, share buyback. And also in the first quarter, we bought convertibles of Ping An Bank, which used up some of our free cash.

Now let's look at solvency position. The group life and P&C solvency positions improved much higher than the regulatory requirements. And also, they are -- the bank improved as well, and the bank had a 26 billion convertibles, which by the end of June, haven't been converted into stocks yet. You can see that not only our solvency margins are higher than regulatory requirements, we are also very resilient to market volatilities. We did 2 scenario-based testings, and you can see that solvency margin maintained at steady levels in both scenarios.

Now let's look at investment portfolio of insurance funds. At the end of June, the total investment of insurance funds reached about CNY 3 trillion, and we continue to optimize our asset allocation, and we increased rating of loan duration and loan risk bonds. Our nonstandard debt assets reduced from 15% -- 15.8% to 15.1%. We have also adopted the IFRS 9 new standard. 19% of financial assets are capitalized at --- are characterized as carried at fair value through profit or loss. And this has led to more volatilities in income statements. That's why we focus on operating profit, and that's also why we base dividend on operating profit.

Now let's look at the investment income and investment returns. In the first half of 2019, our net investment return was 5.5%, higher than the 5% investment return assumption in embedded value and operating profit of life and health.

Now let's look at our exposure to corporate debt. Our exposure reduced by 25% compared with the beginning of the year, accounting for about 4.5 -- 4.1% of the total. And also, we have improved our credit quality, and 94% of assets are rated at AA or above.

Here, you can see nonstandard assets and also investment return. You can see we have avoided high-risk industries and regions, and we have taken advantage of a strong supply of quality projects and successfully improved total investment return. And so far, there is 0 default in our nonstandard debt asset, and nominal yield reached 5.86%.

Here, you can see a new -- a piece of new information. Ping An has always emphasized environment, society and governance initiatives. That is ESG. Now we have included ESG into our daily operation and management. And we have launched a company-wide ESG policy covering information security, responsible investments, sustainable insurance and AI governance. We have included this new chapter in our interim reports, and there is this new section on our website. So you may refer to these reports and the website for more detailed information.

And we have also won more awards. Our brand value continue to increase. Now we rank #29 among Fortune 500 and #7 among top 2,000 of Forbes.

Now I will hand over to co-CEO, Lee Yuansiong, to take you through insurance.

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Yuansiong Lee, Ping An Insurance (Group) Company of China, Ltd. - Co-CEO, Executive VP, Chief Insurance Business Officer & Executive Director [5]

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[Interpreted] Thank you, Jason. Next, I will take you through the results of insurance business in the first half. In the first half, life new business value grew by 4.7%, mainly thanks to business structure adjustment, increased sales in protection products. And the EV margin increased by 5.7 percentage points to 44.7%.

Next, let's take a look at the agency channel, which contributed to 88% of new business value, the highest among all channels. NBV of agency channel increased by 2.5% year-on-year, mainly because the average NBV of agents increased by 8.5%. So productivity has increased and NBEV margin increased as well.

As to our agency force, by 2015 to 2017, the number of life agents securitized [future] growth with 25% to 36.9% year-on-year, doubling from 636,000 to 1.386 million (sic) [1.286 million]. While our head count increased rapidly, the team is not very stable. So we've proactively adjusted the team structure and improved team quality to build it into a more stable and healthier agency team. Although demographic dividend is a thing of the past and it is more difficult to recruit people than ever before, we've still deliberately removed low-performing agents.

Currently, the agent talent plan has been rolled out to the entire country, and the basis of awards for agents has been adjusted to recruit best talents and expand high-performing population. At the same time, we have launched a lot of new products to meet the needs of different customers. On the other hand, it will be able to match the self-capabilities of agents at different levels.

After the adjustments, the agent force is expected to stabilize. Monthly average income of agents is CNY 6,617, down slightly. But we've seen that the monthly average sales of agents is 1.3 policies, up slightly, and agent's income from selling life products remains stable.

And here, I'd like to explain, lower income for agents is mainly due to the CBIRC policy of consistency between reported and fee rate which led to a slide in premium per policy and commission rates of auto insurance as well as lower average income of life agents. And this slide shows some of scenarios of technology empowered life business. Our AI-based interviews have exceeded 3.4 million person times and over 290,000 hours since our interview robot went live in May 2018. And we provided 24/7 online training for agents. The monthly average online learning volume reached 35.7 million person times.

AskBob answers agents' inquiries about the businesses and products with an accuracy rate of 95%. In addition, agents are provided with task push and handling services, and the sales scenario-based drill covers 100% of agents. It's just like we provide every agent with one coach, and the Smart Customer Service system provided online services over 60 million times. The turnaround time was shortened from 3 days to 1 minute with 99% customer satisfaction towards online services. And the Jin Guan Jia app had 200 million registered users and nearly 30 million monthly active users.

P&C. In the first half, the premium income of P&C grew nearly 10% year-on-year with equal contribution from various channels. Combined ratio of P&C was 96.6%, better than the industry. In 2019, auto insurance has stepped up investments in customer-centered service systems to increase customer satisfaction and stickiness. Non-auto insurance has increased investment in highly profitable business lines and seized every opportunity available. The overall cost went up a little bit but still in good shape.

Next, let's look at application of technologies in P&C. We have used multiple technologies to empower P&C business including AI. Capitalizing on AI image-based loss assessment technology, our trust claim service settles a claim within 168 seconds on average with no back-end manual operations involved. We provide full online service support on claim settlement and inquiry services to more than 80% of claimants, and the Ping An Auto Owner ranks #1 among auto service apps in China with over 16 million monthly active users in June 2019. And we initiated a corporate, KYR, Know Your Risk project to offer disaster and loss prevention services.

And this concludes insurance presentation. Next, I'd like to invite Co-CEO, Xie Yonglin, to take you through the results of banking business.

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Yonglin Xie, Ping An Insurance (Group) Company of China, Ltd. - Co-CEO & Senior VP [6]

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[Interpreted] Thank you, Mr. Lee. Next, I will walk you through the results of banking business. In the first half, banking business delivered strong growth. Net profit grew by 15% year-on-year and operating revenue grew by 18.5% year-on-year. Annualized NIM improved by 36 bp, leading the industry. Annualized ROE went up by 27 bp.

Retail business. Ping An Bank accelerated retail transformation with continuing contribution from retail business. Operating revenue of our retail business increased by 32%, accounted for 57% of the total. Net profit grew by 19%, accounting for 70% of the total net profit. At the same time, Ping An Bank has adopted multiple strategies to increase retail deposits, including the introduction of diversification allocation strategy to attract customer assets. And also, we've increased the settlement deposits via payroll and acquiring business.

By the end of June, retail deposits increased by 17% from year beginning. And retail customer AUM secured high-speed growth in 2 years in a row, and AUM growth is 2.6x of the same period last year in the first half. And retail customers have passed 90 million.

At the same time, our retail department has proactively adjusted its pace to improve its risk buffer on this complicated external environment. From beginning of last year, Ping An Bank has increased the threshold for credit card and loan business, seeing that unsecured loans and car loans dropped slightly from year beginning. But NPL ratio of retail loan remains stable, better than the industry. According to the vintage analysis, delinquency ratios of top 3 retail products have improved.

While retail business maintaining strong growth momentum, corporate business has seen some success, too. By the end of June, corporate deposits have grown substantially and corporate loans have restored positive growth. Deposit structure have been improved, thanks to payment settlement and transaction banking by the end of June. Corporate demand deposits increased by 10% from year beginning.

Next up, we will continue to strengthen corporate business with focus on strategic customers and microsized customers and continue to consolidate transaction banking, industry banking, integrated finance framework. In the future, corporate business will become yet another growth driver for Ping An Bank. And when corporate business is strong, it can also provide large amounts of high-quality assets to retail to further support the realization of retail transformation goals.

And in terms of interbank business, Ping An Bank has introduced top-notch trading teams and system platforms from the world. In the first half, trading reached CNY 1.4 trillion, up 2x. Interest rate swap trading reached CNY 1.4 trillion, up 3.8x. Market making ranked #1, and Ping An Bank has separately promoted interbank sales transformation via technologies to improve its sales capabilities. In the first half, interbank sales reached CNY 232.4 billion, up 177%. In the future, interbank business will become an important player for bank to find interbank finance and also will help retail business to find assets, create products and empower wealth management business.

Asset quality. Last year, the deviation of nonperforming loans successfully dropped below 100% and reached 94% in the first half this year. There are no more historic assets or historical assets, packages, but we have still adhered to prudent risk management principles. And we've continued to reduce deviation of nonperforming loans, and various risk control indicators have improved further amidst high uncertainties in the macroeconomy. You can see that provision coverage ratio has increased the greatest among benchmarked banks, and 90-day plus provision coverage has reached 194%. So we have better risk buffer capabilities.

Next, the technology application. In the first half, Ping An Bank has sufficiently increased IT capital expenditure, applying AI to management of products and services to increase efficiency, control risks and improve service experience. For example, per capita productivity of retail is twice that of 3 years ago. And our income ratio has continued to optimize, and customer service robots accounted for 83%. At the same time, we have built smart approval platform and disbursed car loans within 5 minutes. And next step, we'll continue to use technology to optimize cost control and improve risk management, which will all be reflected in our banking results.

And that concludes the banking presentation. Next, allow me to invite Jessica Tan.

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Jessica Tan, Ping An Insurance (Group) Company of China, Ltd. - Co-CEO, Executive VP, COO & Chief Information Officer [7]

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[Interpreted] Thank you, Mr. Xie. Next, I will take you through the results of tech business. First is about innovation. We've continued to invest in our tech business. This slide shows investment in core technologies. We have 8 research institutes, 52 labs. Every lab has recruited top-notch scientists. In the first half, we've won over 20 world awards. For example, standard -- in a Stanford competition, we won a championship. Now we have 101,000 tech employees, 32,000 R&D employees and 2,200 scientists. And we have over 18,000 patent applications. 96% are tax patents apps.

And you can see that we are incubating tech companies at different stages of development. In the first half, tech companies' revenue grew by 34% to reach CNY 38.4 billion or USD 5.7 billion. And we will continue to increase investment in tech companies.

And next, I'd like to share with you some examples about the results of our investments. Both Mr. Lee and Mr. Xie have shown you the tech applications in insurance and bank, and I'd also like to offer you 3 examples. For example, sales-wise, 100% of agents have been interviewed by AI. AI interviewer have been implemented for 3 to 4 years. And 95% of our retail auto insurance policies are issued within 1 minute, thanks to policy issuance robots. And 78% of inquiries are answered by robots. In the first half, the speech robot has provided services over 200 million times.

And next, we've also used technology to empower health care, auto service and smart city ecosystems. So you can see the value of technologies. Health care, you have heard of AskBob, which has been applied in many industries. You can see that we have AskBob salespeople. We have AskBob risk manager. We have AskBob doctor. The AskBob is trained on over 30,000 knowledge maps, and AskBob has been deployed in over 1,200 medical institutions to support the diagnosis and treatment of 1,500 diseases. Over 300,000 doctors have used AskBob. After the use of AskBob, the compliance ratio has increased substantially.

And then Autohome. Autohome has been performing quite well in recent years. We have over 40 million daily active users. And Autohome provide OEMs and dealers with data services, and 96% of services are empowerment services including data services so as to improve their service quality and marketing efficiency.

And then Smart City. Now a city congestion has become a serious problem. We provide over 20 cities with smart traffic services. If accident happens, we can evacuate the site within 5 minutes instead of 40 minutes in the past. And also, 76% of investigations can be done via smart devices. And through smart traffic services, the congestion time can be shortened by 30%.

And next, I'd like to take you through various tech companies versus Lufax. Last year, Lufax completed a C round of financing with post-money valuation of USD 39.4 billion. And in the first half, the number of registered users and active investors and cumulative borrowers has improved steadily. And loan under management exceeded CNY 400 billion. And you can see that the asset quality remains stable. Since the end of last year, we have begun to disclose a 30-day above delinquency ratio. You can see that, which further dropped to 2.2%.

And next is OneConnect. OneConnect has been developing very rapidly and now provides services to over 3,700 financial institutions, including 615 banks and 81 insurance companies. And every day, 35% of auto insurance claims were done via our AI smart claim settlement platform. And in the overseas market, we actually provide services to 27 financial institutions in 10 countries and regions. And many of them are top financial players in their respective markets. For example, in Philippines, we have built a blockchain platform. And in Hong Kong, we have also built a blockchain trade platform.

Next is Ping An Good Doctor. Now we have 289 million users with daily average consultation close to 660,000 person times. It's equivalent to the 62 top-level hospitals' consultations every day. And now we have nearly 1.44 (sic) [1.44 million] paying members. And also, the operating revenue doubled.

Next is Autohome. Autohome is the largest auto service platform in China. It has 40 million daily active users, and average daily unique visitors on mobile devices reach 38 million. Although new car sales were weak, but the operating revenue of Autohome grew by 24% year-on-year. Every day, there are 560,000 articles, many of -- 44% are [ATC] articles and 54% are articles generated by our customers.

And I believe you have visited the Shanghai Auto Show and other auto shows. Usually, the auto shows are very crowded, and now we are hosting the largest auto show in the world on this Sunday. Offline, there are 2,000 car dealers who will join us in the auto show. And on August 18, we'll work together with a Hunan TV station to host a big campaign.

And since last year, we've begun to disclose information about Smart City. We believe that Smart City is natural trend for the future. Currently, our Smart City businesses cover over 100 cities in China with focus on government services, economic development and people's livelihood.

For example, government services, we've helped the government to calculate GDP and to analyze what kind of industries require or deserve investments. And also, we help enterprises, too. We provide a one-stop service via an app to enterprises so that they don't need to apply for 30 or 40 certificates. And also, environmental protection-wise, we use IoT technologies and other technologies to track and to monitor environmental pollution of various enterprises. These are truly breakthrough technologies. And to people's livelihoods, I've talked about the traffic.

And we have launched iShenzhen app in Shenzhen, which reengineer processes of Shenzhen government. If you want to apply for certificates or apply for retirement, you can just use the app. Now 1/3 of Shenzhen citizens are using our app to do government -- to receive government services.

Now, to meet your needs for more data, we've attached profit drivers of the various business lines for your reference.

This concludes the management's presentation. The floor is open.

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Questions and Answers

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Richard Sheng, Ping An Insurance (Group) Company of China, Ltd. - Secretary of the Board [1]

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[Interpreted] Now it's the Q&A session. We'll take questions in turns from Hong Kong and Shanghai, and we will allow one analyst each time. And please don't ask more than 2 questions. And before you ask your questions, please identify yourself and where you are from. Now let's start with Shanghai.

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Xin Qi Liu, Guotai Junan Securities Co., Ltd., Research Division - Research Analyst [2]

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[Interpreted] I'm from Guotai Junan and my name is Liu Xin Qi. I have 2 questions. The first question, well, Jason just mentioned that the dividend payout is based on the operating profit. So while the dividend payout sustained in the future so that we can relatively predict the dividend payment reliably in the future, you can see -- and earlier, you mentioned the technologies' net profit dropped by 33%. You mentioned that it's because of high investment. So do you include operating profit as a key performance measure? And also what about Lufax? And what is your future business plan for Lufax?

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Jason Yao, Ping An Insurance (Group) Company of China, Ltd. - Executive VP, CFO, Chief Actuary & Executive Director [3]

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[Interpreted] Okay. I will take the question on dividend payout. Well, since last year, we started to disclose operating profit, this new metric. And operating profit of our group has been only increased very stably. If you look at net profit, actually, it's very volatile while in the past 1 year, we've been actively communicating with investors and we have -- we have now defined our operating profit as the basis for dividend payout. And so we are confident in the steady increase of our operating profit in the future. So if dividend payout is based on operating profit, of course, the dividend payout will grow steadily as well.

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Jessica Tan, Ping An Insurance (Group) Company of China, Ltd. - Co-CEO, Executive VP, COO & Chief Information Officer [4]

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[Interpreted] Okay. I will take your question on technology business line. Well, I don't think it's time for us to measure the profitability. Well, technology business line cannot be managed in the traditional way. Why do we spend so much time and effort to divide it into 3 stages? Because these stages have different characteristics. In incubation stage, for example, we have to support the growth of the business. In the second stage, we have to start generate the value. And the third stage, we have to generate revenue. And the fourth stage, we have to generate profits. So you cannot start by measuring profitability in the first stage. Otherwise, these companies would have died very quickly.

To give you an example, one of our business is now in the second stage. And in 20 -- when it started, it had only 20 business or product lines and by 2017, 40 product lines. And in 2018, it had 50 product lines. And last year, it generated CNY 5 billion revenue, and a lot of its revenue came from new products. And also, we are expanding into new areas. In 1 year, we cover 10 countries, and we are serving 27 top-tier financial institutions. So in different stages of development, we have different metrics for these different technology lines. The technology business itself saw a drop of 33% in net profit, but its business size is growing very strongly.

And also, we are also investing in the fundamental technology and science. Earlier, you saw this very cool picture of our new technologies, and we have more than 50 labs dedicated to R&D. And we have set up very high entry barrier for our technology business lines. For example, we have this voice-based Q&A capabilities for one of our technologies. And they can read more than 15 million piece articles, and the machines can ask 150,000 questions based on all these articles. And the human beings can answer 80 out of 100 scores. But our machines can answer these questions with an accuracy of over 95 out of 100.

And of course, these technologies have to produce value. Otherwise, they wouldn't be marketable. And also, that means we need to invest more in all these core technologies because only with these core technologies we will be able to support the development of our core traditional finance business and other business lines.

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James E. Garner, Ping An Insurance (Group) Company of China, Ltd. - Chief Strategist & Head of IR [5]

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Please state your name, the company you represent, limited to 2 questions. Charles?

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Charles Zhou, Crédit Suisse AG, Research Division - VP [6]

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[Interpreted] My name is Charles Zhou from Credit Suisse. I -- the first question is interest rates to Jason, and the second is for long-term insurance business development. Okay. Let's look at profitability on Page 33. The last -- operating profit, OPAT was 37% up, and pretax is about 15%, and income tax is 25%. So have you -- so this should be a normalized tax rate. So does that mean that the tax rate will be as low as the 12% in the future? And also for AUM, well, in the first quarter, we saw positive growth. And -- but for other asset management, we saw a negative growth and some of the numbers have been restated. Could you explain this?

And my question to Lee Yuansiong, in March, you mentioned that NBV of Ping An will grow more strongly. Now last year was 7.3%, and this year was 4.7%. And that, in the second half, could be double-digit growth. So for our industry, it's usually about 15%. So could you give us more color on this? And also, I think the longer-term growth is very important. Insurance penetration rate in China is still low. And in the longer term, you expect 15% growth. And this year, it's still single-digit growth. So when will we achieve double-digit growth? The single-digit growth, is it a structure issue? Or is it a cyclical issue? So what is your outlook for midterm and longer term?

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Jason Yao, Ping An Insurance (Group) Company of China, Ltd. - Executive VP, CFO, Chief Actuary & Executive Director [7]

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[Interpreted] Okay. First of all, the profitability, I think you asked 2 questions. The first question is on the tax rate. Like the operating profit, in the first half, like operating profit, effective tax rate is relatively low compared with the previous years. Well, in 2018, if you do some calculation, you will see that the tax rates was about 25%. That was 2018. But last year, it was 25%, included the commission income on tax. Well, our assumption was 25% tax rates, and out of which, about 10% investment return can be used to offset. So the effective tax rate, in fact, was lower than 25%. And so 2018 was about 25%. It included the higher income tax. In 2019, we didn't have these impacts.

So why was it low, 12%? I think it has seasonal factors. In the first half, our treasury and our dividend payment, I mean we have relatively higher income. So that's why the deductibles are relatively higher. But throughout the year, we expect it to be lower. And so we have more impact. We see more impacts in the first half. And also, the new taxation policy, well, they have this limit of 18% of quota. So definitely, this increased the quota to 18%. If in 1 year it's above 18%, the excess can be offset in the following year. So in the first half, we saw some offset impact from 2018. So we have included into operating profit.

Well, in 2019, there is this possibility that the limit could be above 18 -- I mean we could have above -- we could exceed the 18% quota. And then it will produce future impacts. So that's why in the first half, the effective tax rate is relatively low at about 12%. But in the longer term, 12% is relatively low. If we take into consideration the assumptions and if we don't have the excess, then it will be -- the effective tax rate, we expect it to be about in the higher teens, like 15%, 17%. So this is the normalized tax rate that we expect.

And second question about other asset management business and profit growth. Well, the AUM, some business actually includes investment projects. Well, the high volatility, to some extent, due to our exits and also some seasonal factors. For example, last Q2, we exited some investments. But this year, we didn't have such exits. And also some investments in Q2 of this -- of last year saw some write-downs, could be equity write-down or could be debt write-down, and that was reflected in Q2.

Another reason is that in the second half of last year for some business, if we saw some cross-holding, then we restructured it. About -- that didn't happen in the first half of last year. So because of all these factors, you can see this decrease. But by the end of this year, well, the trend will improve. But other business -- I mean other AUM business, we have to consider the impact of investments.

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Unidentified Company Representative [8]

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[Interpreted] Thank you for your questions. Well, thank you for remembering everything that I have said, including what I have said in Shanghai, which happened a long time ago. You are definitely one of my loyal fans. Well, to answer your question, well, in a longer -- I will answer your questions from a longer term and from a shorter term. Well, in the longer term, we are very confident in the insurance markets of China. China -- well, I said something. Since you remember everything I've said, I think you should remember this as well. China is the best -- the world's best market for life insurance. There are many drivers. The first one is, right now, the insurance penetration rate is relatively low and China has a huge population base, and household income is growing strongly, and Chinese consumers are asset savers, and they are saving heavily for the future -- for their children. So because of all these drivers, we are very confident in China's insurance market.

In the past couple of years, the insurance industry in China has seen some headwinds in its growth. Well, as you said, the growth rate has not been very high, but it's exactly because of this that I have more confidence in China's insurance market in the future. Why? Because in the last couple of years, the CBIRC has been actively promoting the transformation of the whole industry, so that the industry can provide longer-term protection products and services for the general public, and this will sustain healthy growth of the whole industry. And also, thanks to the regulator's assets, we are seeing a transformation of the industry from disorderly competition to healthy and sustainable growth which focuses on high-value products and services. So that's why in the past couple of years, we have seen reduced growth rate in itself. But CBIRC has published a series of rules and regulations of market practices on products and also on the solvency position of insurers. We believe that these rules and regulations are very helpful to the sustainable growth of the industry.

So based on these reasons, I have a very strong confidence in the recovery of the industry's growth back to double-digit growth. And Ping An has been leading the industry, and so that's why I believe strongly that Ping An will come back to healthy and strong growth in the longer term.

And then about the shorter-term growth. Well, we did issue a guidance, that is NBV growth will be better -- would be better than last year, and we are very confident in achieving our target. In the first half, NBV growth was relatively low mainly because well, last year, we already briefed you on this, that is we've been restructuring our product portfolio. We no longer emphasize on high-saving products like the year beginning campaign. We are pushing for long -- higher value and long-term high protection products, and we are offering higher insured amount of products.

Also, we are launching a series of new products to create a -- to offer more varieties of protection products to our customers. We have, for example, Ping An pool which is 8,000 to 10,000 and also, we have 5,000 to 6,000 products, which is what we call (foreign language). And 3,000 to 4,000 is unseen by [100%] of products. And these target different customer segments. And these products actually are matched with the sales capabilities of different agents. After launching these new products, the market response is very positive. And the NBEV margin of these new products are quite high. Therefore, after this round of product adjustments and transformation, you can see that the overall NBEV improved by 5.7%. Agency NBEV increased by 9.9%, close to 10%. So I think that the product adjustment strategy actually have yielded benefits in line with our expectations. So I'm still confident in the guidance we've issued last year.

Okay, Hong Kong side -- Shanghai side.

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Hanbo Xu, CMB International Securities Limited, Research Division - Research Analyst [9]

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[Interpreted] I am Hanbo from CMB. I have only one question about channels. In the first half, agency force slipped, is it in line with your expectations or not? The -- what about the scale of our agent force now? And looking forward into the future, what will be the outlook about our agency force? So could you explain about the past, present and the future agency force?

The per capita average NPV increased yet the per capita income doesn't -- or didn't increase. So how did you balance the interest distribution between channels and company? And the long-term protection products sales dropped. Is it because of a lower base of agency force? So my question is mainly related to your manpower.

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Unidentified Company Representative [10]

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[Interpreted] Well, thank you very much for your question. Indeed, agency channel is one of the most important channels for Ping An Group including Ping An Life. Agency channel contributed to 88% of NBV of life. In addition, agency channel has contributed to a lot of our businesses, also other business lines, for example, it contributed to 21% of P&C business, and it contributed to 47% of the employee benefit schemes and 2/3 of our house insurance business. And also for corporate insurance and credit card and retail bank business all saw very big contribution from agency channel, all above 40%. So you can see that agency channel is very important for Ping An Group as well as Ping An Life, and we have invested heavily in agency channel including financial resources and talent resources to empower our agency force, so that our agents team could be the most productive and of the highest quality in this industry.

If you have been following Ping An for a long time you will realize that our agency force has been performing quite excellently in the industry. Since I've joined Ping An, agency force has been in fact increased. And in my presentation, I've briefed to you that indeed between 2015 to 2017, the number of agent head count doubled, and high-speed growth in our agency force actually require us to consolidate our teams further. So we will proactively remove nonperforming or low-performing agents. And we are promoting the product transformation now, and we want to sell high protection products. So the productivity of live agents actually increased by 8.5%, and the nonlife productivity of our life agents is on the increase too.

As I just mentioned about the importance of agency channel to direct business lines in the group, in the first half, agency income slided slightly. And the main reason is the CBIRC policy of consistency between reported and actually fee. For auto insurance, that's why the auto insurance fee income dropped and also the policy premium for auto insurance decreased, yet the activity rate of auto insurance remained high.

In the future, we will continue to pay high attention to the development of our agency force. We have launched agency talent scheme to recruit talents with high potential. 25% of newly recruited agents join the talent scheme. And the productivity of this scheme member is 1.7x of the nonscheme agents, so -- nonmember agent. So we are very confident in the future productivity of agents.

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Xianghuai Zhao, Everbright Securities Co. LTD., Research Division - Research Analyst [11]

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[Interpreted] I come from Everbright Securities. My name is Zhao Xianghuai. I have 2 questions. One is about bank. This year, the recent transformation strategy has yielded good results. Now the real economy is not very stable and the real estate industry is under strict scrutiny. So what about your future strategy? How can we -- or how are we going to strengthen the disposal and the recovery of nonperforming assets, and Ping An lease has grown by 30%. Is it because of the contraction in Ping An Bank business which brought opportunities for Ping An lease?

And the second question, you know the stock market has become very volatile. So how can we reduce our sensitivity to stock market volatility to gain some persistent investment income?

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Unidentified Company Representative [12]

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[Interpreted] Okay. I will take your questions about bank and lease business. In the first half, if you look at the business structure and de-risking, we have seen obvious progress. Having said that, we still stick to prudent risk management policy. In November 2017, we've discovered that there are some -- the leading indicators of retail loan portfolio deteriorated. So after careful study between December 2017 and January 2018, we've increased the threshold for retail loan customers and reduced the credit quota for customers. So as to curb the further deterioration of these leading indicators, we actually acted 1 year earlier than peers in this industry. So I'm very comfortable with the quality of our retail credit assets. I believe that they are one of the best in the industry.

Over the past 3 years, we've granted nearly CNY 1 trillion corporate loans and corporate loan quota has shrunk by CNY 50 million. Only -- there are 3 cases of corporate loans went into trouble, less than CNY 500 million. We understand that the external environment is very complicated, so we are still very prudent. And in the future, we will focus on 2 kinds of customers, strategic customers or big accounts. For strategic customers, we'll provide them with direct financing, indirect financing or investment of insurance fund. We believe that when the economy is weak, the strongest will survive. China is a huge market. There are good enterprises in this market, so we need to provide them with unique solutions. And also, we need to provide services to upstream and downstream property enterprises. We needed to leverage IoT blockchain technologies to build new supply chain financing models.

Our trade financing is our competitive edge, but the traditional way of trade financing is very costly and risky. So we needed to leverage modern technologies to rebuild the supply chain financing model. I believe that with technology, we can better control risks.

And as to our strategy, we still want to be the world-leading and China-leading smart retail bank. And we've now vigorously developed corporate business because we want to provide high-quality assets to retail customers. So our fundamental growth doesn't change. We just want to pursue balanced development within our banks.

So as to leasing business, while leasing business has been growing heavily all these years, and last year, we've deliberately disposed some leasing assets. That means we actually are running leasing business in a very conservative way. Provisional coverage has increased, and NPL ratio increased slightly. In Q2, NPL ratio already dropped compared with Q1. And compared with banking business, leasing business has this unique advantages. For example, it's very strong in managing real estate or properties. And it uses, IoT technologies, so it is very professional in some ways. And I believe that our leasing business will continue rapid growth. And at the same time, I will control risk very strictly. So please rest assured.

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Unidentified Company Representative [13]

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[Interpreted] About the stock investment. According to our announcement, equity investment is around 17.5%. Well, only 16.7% are impacted by some market volatilities because the 1.8% come from PEs. The others are linked to stock market performance. So what about our equity investment strategy? Well, we look at it from 2 aspects. First, from the past 2 years, you may have realized that we've adopted centralized investment strategy. We've selected individual stocks very carefully. As long as we've selected the stocks, for example, if we think that the stock has greater growth potential, and the company is well run and the financial position is valid and dividend is high, then we will keep investing in these stocks. This is one way.

And another way is we've used our FOF and MOM, the [assets] of equity investment so we will leverage external experts to manage our assets. So this is our ways to counter market volatilities.

And the second, we are -- we keep a close eye on different categories of stocks. Since last year, we have a category of HTM, which has CNY 372 billion, CNY 30 billion, and we've used the equity method, which is a concept of consolidated statement. It is the earnings of the invested will be included in our P&L or income statement based on the stakes we have. So the stocks that we have held long time, their PE is low, around 7x. So the earnings are much higher than our dividends. So we've used equity method. And we've selected these stocks and then used the equity method in accounting.

And another category of equity asset is OCI asset, and the stock price volatility will not affect the current year financial statement, but the dividend will be included in P&L. This type of asset, we have 2 assets in this category, HSBC and ICBC. And these assets' stock price volatilities will not have big impact on our current year P&L and when we calculate CRR, there will be some impact.

So insurance fund is different from other funds. We need to leverage R&D accounting categories to balance the impact of stock -- or equity positions on our group's profit. And long-term speaking, we think that our equity investment strategy is countercyclical instead of cyclical. The stock market is weak. The economic cycles will continue to be volatile. So we need to seize opportunities now and then to invest in high dividend stocks.

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Richard Sheng, Ping An Insurance (Group) Company of China, Ltd. - Secretary of the Board [14]

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[Interpreted] Gentlemen in this row.

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Kunpeng Ma, SWS Research Co., Ltd. - Research Analyst [15]

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[Interpreted] I'm Ma Kunpeng from Shenwan Securities. I have 2 questions. The first question is to Mr. Xie about Ping An Bank's performance. After the disclosure of the financial results in the first half, I think we are very confident in your growth, but what about longer term? Mr. Xie, could you give us more colors on your outlook for the Ping An Bank's growth in the next 3 years? If okay, could you give us more colors on your outlook of the fundamentals of Ping An Bank? And also could you give us your analysis of Ping An Bank's role in the core group? Well, I believe Ping An Bank is very different from your peers especially in 3 years' time. So could you give us again more colors on how Ping An Bank will differentiate itself from individual peers in 3 years' time?

And the second question is on technology business line. Well, Ping An is very strong in your tech sector, be it ordinary technologies or fintechs and in general technology, so fintech. And I believe that your strength into the technology sector were also reflected in your valuation. So Jessica, could you give us 3 examples that you are very proud of because you have invested a lot in technology business? So could give us 3 examples of your success pieces, examples of 3 drivers for your technology business growth and how you'll contribute to the group's growth?

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Yonglin Xie, Ping An Insurance (Group) Company of China, Ltd. - Co-CEO & Senior VP [16]

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[Interpreted] Well, this is a very big question, sorry. I don't know if you will believe in what I'm going to say or not. But I have to say something, right? Okay. So 3 -- in 3 years' time, how will Ping An Bank be like? Well, I think that in 3 years' time, Ping An Bank will be believed to be the most tech powered and with the smartest technologies will be a very interesting bank with different business mixture from our peers. That is retail business with account for a large -- will account for an even larger proportion in our business mix. And also, we are very strong in technologies. I have to emphasize this. As I said earlier, we tend to become a smart bank, and this is definitely something we aim to achieve in 3 years' time.

Well, I also have this dream. Well, today, when you look at the banking sector in China, CMB is usually the most widely quoted bank for best performance. But I believe -- hope that in 3 years' time, Ping An Bank and CMB will be named as best banks in the industry.

Well, retail business, in particular, well, right now, China's retail businesses is still largely off-line, but I hope in 3 years' time, the online business offering will be the dominant form and supported by off-line services because I think online business is easier in terms of a risk control and asset quality management. So -- and also I think off-line capabilities will offer the best customer experience and offer the best efficiency and effectiveness, and also, the best cost benefit. Well, some people believe that off-line will achieve better cost benefit, but I don't think so. I mean if you look at Ping An's -- I mean Ping An Bank's strategy in the past 2, 3 years, thanks to our online efforts, we have successfully doubled our efficiency.

And in terms of corporate business, we have investment banking, commercial banking and also investment business, and we are supporting our customers through all these different measures, and we are also leveraging technologies to recreate a value -- a supply chain finance for our customers, and we will reduce the cost and also better manage risks. And in 3 years' time compared with our peers, I think we will have a very strong cash flow position because we have a well-leading quant trading system. Well, in New York and in Chicago, we have a team of 30 people specializing in trading systems, and this is unique in the banking industry. In China, we still have this team scheme of 30 people. Also, we have the strongest team of traders. And they have been very active in China's trading markets. They are very active market makers. They are actively trading interest rate swaps. And these strategies have supported our wealth management business. And all these activities are driven by or are powered by technologies. So we have a very strong in retail business as well as corporate business and wholesale banking. So in 3 years' time, I hope that Ping An will become a role model and benchmark for the whole industry.

And about the role of Ping An Bank in the group, well, in the Executive Committee's meeting for the whole group, I said that we have to embrace technologies, and we have to embrace ecosystems. Well, we have Finance + Technology and finance + technologies growth models, and we embrace technologies and 5 ecosystems. We have 4 positioning for ourselves. Firstly, we position ourselves to become back office for the group because we have a lot of accounts and lease accounts have transactions, and this generates data, and with the data, then we can support the group's activities because without accounts, then you won't have transactions. And also, we will become agent for whole group's 1+ N strategy.

We will become a channel for the group's finance business. And also we position ourselves as the pioneer for smart operation because we have lot of applications, different scenarios, we have very big database. So we should become a pioneer in digital operation and smart operation of the group. And also, we've become -- we aim to become leader in a scenario or application-based services. Well, thanks to support of Mr. Lee, our retail business has grown strongly over the past few years. But in the past, we are -- we were just participants, kind of passive participants. But in the future, we will play a more active role because we have -- as I said, we have all these different applications and scenarios, and then we have a strong financial position, we have a strong cash flow, then we can help the group better implement its strategy for -- in the 5 ecosystems. How do we differentiate ourselves? Well, I've talked about this a lot during road shows. Well, what as I say, people don't trust. But once we show the audience, our app, then they are very impressed. So please do look at our app to see how we differentiate ourselves. Thank you.

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Jessica Tan, Ping An Insurance (Group) Company of China, Ltd. - Co-CEO, Executive VP, COO & Chief Information Officer [17]

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[Interpreted] Okay. I will take your question on technology. You asked me 3 questions. In fact, I will answer your questions 3 multiplied by 2. Okay. So first of all, technology empowering our core business and technology empowering our ecosystems. Okay. Technology empowering our tech -- our core business. I will give you 3 examples. First of all, agents. Well, Mr. Lee has said that agent force is our most important channel. We have this AI interview [work]. We interviewed 3.7 million people. So AI-based interviewing system is very successful in improving the agents' productivity by 20%, for example. And so we have this 3-dimensional system that helps improve the productivity of the agents, for example, telling the agents where they should improve.

And second example is our call center. We have [8.7] call center staff, and each year, we spend a lot of money in managing these call centers. But now we can reduce the people -- or the staff of call centers by about 30%, and this is something that is very useful in improving our cost. So we are improving the quality. At the same time, to give you a very simple example, well, our AI-based services, well, in the past, we have to offer free rider because some agents have already left our company, and when we speak with the customers, we have to offer them at least a free rider. But now, thanks to our AI system, they are very -- these robots are very good at answering questions and serving the customers' needs.

And another example is risk control for (inaudible), for example, offers loan products and services, and we are very active in restructuring our service offerings and better managing our risks. And we are also supporting the bank with our technologies. And for example, with AI-based risk management system, we are able to quickly identify high-risk applicants. For example, based on the micro-expression recognition technologies, and we have reduced NPL by 67% in the past few years. So these are all examples of how technology supports our core finance business.

And then how technology empowering ecosystems which, in turn empower our core business line. Well, this is quite complicated. Let me give an example to illustrate my point. That is Autohome. We've been investing Autohome for 3 years now and its market cap has increased by 3.7x. It's not just luck. It's because we have done a lot of things to support its business growth. For example, we are establishing closer contacts with OEMs and with sales channels and also we have 15 million credit card and more than -- and we have also doubled our policy distribution for our Autohome business. So we are empowering the auto services to empower our core business. And also, Good Doctor, every day, we have 650,000 inquiries, and also we have 1 -- we have also a lot of customers, they purchased our insurance services after being referred from the Good Doctor platform. And we now have [1.44 million] members on our Good Doctor platform. We have 576 million internet users. Internet -- 576 million internet users, and so out of the 576 million internet users, about 400 million users, they haven't bought our financial products or services yet. So there's great potential for conversion.

And then the last example, I would like to talk about smart city. This is a new project or initiative, but it has shown very strong results. We are helping with the customs single window framework in Shenzhen. And folks from Huawei and Samsung, they're headquartered in Seoul, they have all connected with our systems. And Ping An Bank and Ping An P&C import and export insurance, they all have benefited from such initiatives. I'm not in a position to disclose more details, but I will give you more information when the time is right. And we apply blockchain technology in the customs clearance. And when some traders, they clear the customs using our technology, they also buy our financial products. So we use technology to empower our core business lines through ecosystems.

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Yonglin Xie, Ping An Insurance (Group) Company of China, Ltd. - Co-CEO & Senior VP [18]

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[Interpreted] I would also like to add a couple of points because I'm in charge of life and P&C. Well, life and P&C are beneficiaries of technologies. Let me share with you what we have done in life. 93% of life's operations are paperless now and are online. By the end of the year, we expect this ratio to be 100%.

In P&C, there are 4 product lines which has about 90% of their operation paperless [or] fully online. And we expect 100% automation by the end of this year. And so after life and P&C move online, then we will be in a better position to accomplish digital transformation. And with the digital transformation, then we will improve productivity, improve efficiency, improve effectiveness and reduce cost. Without, technology, without AI, without internet technologies, without cloud technologies, this can't be done. Thank you.

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Richard Sheng, Ping An Insurance (Group) Company of China, Ltd. - Secretary of the Board [19]

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In the interest of time, we will give the last chance to Hong Kong. Thomas, be as simple as possible. We are already overrun.

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Thomas Wang, Goldman Sachs Group Inc., Research Division - Equity Analyst [20]

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[Interpreted] Okay. I will keep it simple. Two questions. One is about capital, about the free cash of the group, it was CNY 42 billion at the end of last year. If we remove short-term borrowing, it dropped by CNY 20 billion. Last year, there were some one-off capital injection. In addition to life this year, are we going to consider long-term borrowings? Or can we -- or anywhere else can we give money to the group for dividends?

And Mr. Lee mentioned that we have some new life products. And in the health industry -- health insurance industry, there will be a diversification or divergence into high end and low end, so people are worried that there will be like a price war which will put pressure on profitability. So what about the difference between the -- difference in profitability between high end, low-end market if you look at the premium difference about 3x?

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Unidentified Company Representative [21]

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[Interpreted] Well, I will answer your question about just capital. Well, in the first half, we've consumed the capital quite a lot. There are 2 reasons. First, this year, we've brought convertible bonds of Ping An Bank about CNY 13 billion. And also, in the first half, there was a CNY 3 billion buyback. Up until now, we bought -- there was CNY 5 billion buyback. Every year, we do capital planning for the next 2 to 3 years while considering the dividend payout policies. And you can see that life and P&C, Ping An Bank and asset management businesses and trust a major contributor to this profit. And in the future, some businesses will gradually mature. And by then, the group will require these subsidiaries to pay dividend to the group. Short-term speaking, sometimes, there are liquidity requirements. For example, this year, there are more short-term bank borrowings, but it's temporary. Overall speaking, we are still comfortable with our capital position which is stable, buybacks or capital injection into subsidiaries or special items, they are not recurring. So overall speaking, at the group level, the free cash is okay. In the future, as new financing tools are available, we may consider other financing schemes. Currently, there are no financing schemes.

As to products, this year, we have launched a series of new products to enrich the portfolio of our protection products. We provide different products to different customer groups, so they are full product series. And in the future, we will continue to upgrade and iterate products. After adjusting our product structure, we have seen that NBEV margin has been boosted strongly. Agency channels' NBEV margin increased by 9.9%. And in the future, we're going to iterate our products. I believe that our products will remain competitive in the market. At the same time, we believe that when customers buy insurance policies, there are not just buying insurance policies they have hoped in it. For example, if you buy critical units insurance because you're concerned about your health or if you buy kids' education insurance, that's because you want your kids to have bright future. For example, you want your kids to go to a famous university in the future, and if you buy pension products, it's because when -- you hope that when you retire, you will still enjoy a pretty high level of living. So in addition to upgrading life products, we will build product plus ecosystem framework or architecture. We will leverage 5 ecosystems and put our life products in it, so as to address the pain points of our customers. Thank you.

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Richard Sheng, Ping An Insurance (Group) Company of China, Ltd. - Secretary of the Board [22]

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[Interpreted] Thank you for all your questions, and thank you for the management for answering. If you have further questions, please contact our IR team. Thank you once again for attending our interim results announcement. Thank you very much.

[Portions of this transcript that are marked Interpreted were spoken by an interpreter present on the live call.]