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Edited Transcript of 601336.SS earnings conference call or presentation 21-Mar-19 1:30am GMT

Full Year 2018 New China Life Insurance Co Ltd Earnings Call (Chinese, English)

HK Mar 26, 2019 (Thomson StreetEvents) -- Edited Transcript of New China Life Insurance Co Ltd earnings conference call or presentation Thursday, March 21, 2019 at 1:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Xingfeng Gong

New China Life Insurance Company Ltd. - VP, Chief Actuary, Board Secretary & Joint Company Secretary

* Yuan Li

New China Life Insurance Company Ltd. - VP

* Zheng Yang

New China Life Insurance Company Ltd. - Acting CEO, VP & CFO

* Zongjian Li

New China Life Insurance Company Ltd. - Acting Chairman, VP & Chief Risk Officer

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Presentation

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Xingfeng Gong, New China Life Insurance Company Ltd. - VP, Chief Actuary, Board Secretary & Joint Company Secretary [1]

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Ladies and gentlemen, good morning. Please welcome to the 2018 annual results announcement of New China Life Insurance Company. I am Gong Xingfeng, Vice President, Chief Actuary and Board Secretary of the company. I'll be the moderator for today's briefing. First of all, please allow me to introduce the management team of New China Life. They are Mr. Li Zongjian, acting Chairman of the Board; Mr. Yang Zheng, acting CEO; Mr. Liu Yigong, Vice President; Mr. Li Yuan, Vice President; Mr. Yu Zhigang, Vice President.

Today's briefing [constitutes the] presentation on the company's 2018 annual results and [second half] financial year (inaudible) [5-year], respectively.

(Operator Instructions) Now let's start the presentation. Mr. Yang Zheng will talk about the business operations, financial and investments of 2018. So now we'll go through the investments and financials before Mr. Li Zongjian presents you with the company's outlook and social responsibility.

I'll now hand it over to Mr. Yang Zheng.

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Zheng Yang, New China Life Insurance Company Ltd. - Acting CEO, VP & CFO [2]

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Thank you. Dear guests, I'm very pleased to be here and talk about New China Life's annual results. In 2018, the company was faced with complicated changes in macroeconomy. The company stayed unwaveringly on results transformation, promoted the protection business and continued to leverage a renewal premium driven growth model. Therefore, GWP grew optimally, business structure was optimized and business quality improved. This is part of our key financial indicators, and we're happy to disclose it to you. We'll elaborate later.

Now let's come to the insurance business. First is GWP. You will remember that in Q1, [we also began to] jump-start the whole insurance industry, including New China Life. So we will see annuity business. The company promptly adjusted its market strategy and intensified efforts in our protection business. GWP reached RMB 122 billion, up 11.9%. This growth rate is faster than the industry average.

Renewal premiums, RMB 95.9 billion, up 24.9%. Its proportion was 78.4%, [greatly] drove the GWP to grow. Annuity insurance business, as you all know, fell below the anticipation.

In the past, we will disclose the single payment premiums. But after years of transformation, we have had single payment premiums [on our gross margins], and it's less than RMB 100 million. So to better describe the change in business structure and also our operational achievements, the red bars on the slide disclose the premiums for short-term insurance business. So we can say single payment premium is kind of a [hindrance]. The short-term insurance business premium was RMB 5.6 billion, up 42%. Among them, the health insurance contributed RMB 3.5 billion, up by 46%; accident insurance, RMB 1.95 billion, up by 37%, and drove the premium for short-term insurance business to grow rapidly.

Now let's go to term structure and product structure. The company's FYRP with 10-plus years payment period is down by 31%. And the health insurance accounting for 58.7%, up by 26 percentage points. And also because of the decline of annuity business, the FYP with 10-plus years payment period is down by 31%.

Now it's the channel. Individual insurance channel continues to be the core channel. In 2018, premiums was RMB 99.2 billion, up 13.6%, accounting for 81% in the GWP, up by 1.2 percentage points. Insurance channel accelerated its transformation to focus on growing this business. Premiums, RMB 20.8 billion, up 4.3%, so the insurance channel had steady growth.

Now I will talk about the individual channel. In 2018, the individual channel focused on protection business and adopted the strategy of promoting primary insurance through riders, which means we use the riders to advance the sale of combos with primary insurance. We continue to increase the riders product pipeline. At the end of 2018, the company launched the first CVD rider.

This product has filled the marketing plan, and it has raised people's health awareness and also their need for such segment. It has been popular among our customers [in construction]. This strategy has shown great results. Thus, the short-term insurance business increased by 71.4%. The FYP for long-term insurance business fell by 27.2%. [That's because of] the decline of annuity business. Renewal premiums, RMB 79.8 billion, up 26.1%, this is the basis for our renewal-business-driven growth model.

Now comes to the sales force. This is the priority of the company. The company was the first to put forward into practice the concept of risk managers. And we offer whole life, comprehensive and family-wide risk management service. This has renewed the professional image and knowledge of our sales team. And before the sales team are [presented], we have played a video. This is a promotion video for the risk managers. It's not a long video, but I think it's worth watching. This video was produced with the support of Swiss Re, a big shareholder of our company.

And also the CVD rider has been developed with the help of Swiss Re. In fact, the emphasis on protection business and riders has shifted our sales team's ability and habit and helped [distribute] both in quantity and quality for steady improvement. Agents' number increased by 6.3% to 370,000.

Bancassurance company continued to deepen its transformation. As I mentioned, we have cut single payment premiums, and Bancassurance channel continues to focus [on regular] business. That's why the renewal premiums grew impressively and have -- drove the premiums of this channel to grow.

Now comes to the business quality. We have made great progress in this regard. Surrender rate decreased by 0.4 percentage points. This is also an effect of our transformation and development. It's a natural result. That's the brief introduction of the insurance business.

Next, I'll talk about financial and investments business. Total revenue increased 6.2%, and the expense remained stable. Administrative expense has fallen about 13%. In the past 3 years, the company has been committed to increase [asset] management and control. In 2018, as the transformation quickened, the company has shown the results in this regard. That's why the decline of FYP and also our management of projects has led to the decrease in administrative expense. But this is not a sustainable trend. It will not go down and down and down. The [net before that as follows], net profit rose by 47.2%, and the reason is the same as with our disclosure in the website.

Next, the investment assets increased 1.7%, and we continue to remain committed to be prudent as the investment principle, pursuing both investment return and risk control and we want to seek certainties during this uncertain situation.

Total investment yield, 4.6%, down by 0.6 percentage points. Net investment yield, 5%, remaining stable.

In terms of asset allocation, actually, during the whole 2018, in terms of the macroeconomy and the regulation, we are very (inaudible). So the asset allocation of our company in the first half of 2018, from this chart, we can see that the term deposit has increased. As we know, in H1 2018, we have a window opportunity. The agreement deposit, the interest rates of 3 commercial banks have reached our requirements. So we increased the allocation of term deposits. It is (inaudible).

As for the other changes, these are just normal changes. These are the adjustments for maturity of assets on the balance sheet. As for equity investments, because the sales value of equity has decreased in the latter part of 2018 and we didn't get much change -- window change opportunity in the latter part of 2018, so term deposits are our purpose.

As for non-asset allocation -- nonstandard asset allocation, we know that the NCI has a large proportion of nonstandard assets. And 1/3 of our assets were allocated in this regard, and the last few years we explained repeatedly that the risk and credit risk of the nonstandard asset of our company is very minor. It is very important as (inaudible) of the allocation of the asset of our company. Although that in the past, some risks have been exposed for some companies, NCI has remained stable in the allocation and also in the investments of NSAs. That said, the quality of NSAs of our company is stable.

As for the solvency ratio, we have an adequate and comprehensive solvency ratio, and both recording comprehensive solvency ratio are at around 270%. So you don't have to worry about the solvency ratio of the company. So in the level of 270%, we believe that we can support the company's operation and payment of insurance. And at the same time, we can also support the investment risks as well as the regulation changes. And of course, we are not concerned about the regulation because the authority is still discussing about the regulation concerning the solvency ratio, but we believe that this level of solvency ratio with our company can support any changes.

That's all for the financials and investment part. Now let's give the floor to Mr. Gong Xingfeng to introduce the actuary part.

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Xingfeng Gong, New China Life Insurance Company Ltd. - VP, Chief Actuary, Board Secretary & Joint Company Secretary [3]

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Good morning. I'd like to share the embedded value analysis of NCI. The even growth from RMB 153.5 billion to RMB 173.2 billion, by 12.8%, of which value of insurance business rose from RMB 60.3 billion to RMB 74.3 billion, up 23.2%, and adjusted net worth from RMB 93.2 billion to RMB 98.9 billion, up 6.1%. From the actuary perspective, we believe that we are very satisfied with this result, and this also shows that the existing business of our company has contributed a lot to the quality as for the quantity of the company's business and the actuary expectation.

Next, let's come to the movement analysis, which shows growth of the EV. During the whole year of 2018, the growth of EV mainly came from VNB and expected returns. The former was RMB 12.2 billion and the latter, RMB 14.1 billion, [increase of] 8% and 9.2%, respectively. And in 2018, VNB reached RMB 12.2 billion, up 1.2%. VNB margin based on FYP rose from 39.7% to 47.9%, up 8.2 percentage points.

Of course, during the whole year, we've encountered much uncertainties but we've overcome all of it. We believe that in the year 2019, we'll also have enough capacity to counter all difficulties. And next, we will optimize the business structure to promote the increase of our value. That's all for the embedded value.

Next, I'll give the floor to Mr. Li Zongjian to talk about the company's outlook and social responsibility.

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Zongjian Li, New China Life Insurance Company Ltd. - Acting Chairman, VP & Chief Risk Officer [4]

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Good morning, ladies and gentlemen. Next, on behalf of the company, I will introduce the outlook, strategies or business plans so to speak for NCI. In the new year, the company will resolutely implement the Central government's general requirements of steady growth, structural adjustment and risk prevention, geared to the general principle of maintaining steady growth. We will intensify the supply side reform, give full play to the advantages of life insurance business, strengthen the synergy between health and pension insurance, continue to optimize product pipeline, sales team and service and explore the path of high-quality development with NCI characteristics to ease the concern of health care, pension and wealth preservation and appreciation for customers.

The company will take 5 new measures in 2019. First, we will speed up the development of the core business. We will respond to the customers' demand in time, enrich the supply of protection products with whole life, comprehensive and family-wide principle. We will focus on sales of health insurance and riders to lay a solid foundation for deepening product transformation.

Second measure that we are about to take is to strengthen and enlarge the sales team, targeting and securing a team of (inaudible). We will kick the sales team transformation towards risk managers. On the basis of improving the existing sales team, we will actively recruit new salesmen and strengthen training and enhance management system. In both quantity and quality of the sales team, we will try to make every effort.

Third, improve customer experience. We will apply more new technologies to enhance operations for the efficiency and even expanding service models to win the customers' sense of recognition and sense of happiness.

Fourthly, we will enhance investment management. We will stick to prudent investment strategy and proactively prevent and control risks. We will beef up study of macroeconomy, regulatory policies and market trends, grasp investment opportunities and deepen the synergy between assets and liabilities of both strategic and tactical levels.

Fifth, actively and prudently prevent and control risks. The company will improve risk prevention and control, continuing to implement the building of risk control system, innovate the tools and clarify the management and risk responsibilities. This was the outlook of NCI and the business pipeline as well as the (inaudible) in 2019.

Next, let's come to social responsibility both for the year of 2018 and the outlook for 2019. Since the establishment of the company, for almost more than 20 years, we have been committed to public welfare, including exploring insurance public welfare model, and we have also set up our own welfare foundation. And the platform of this foundation, we have a lot of projects and activities in poverty alleviation. These projects concern education donations, health care and environmental protection. We have improved (inaudible).

In 2018, we continued our donation to sanitation workers. And we have launched a campaign for comprehensive (inaudible) public welfare action that has covered 56 cities. We covered 4 municipalities and more than 20 capitals of different provinces. We have provided accident insurance for sanitation workers with sum assured of over 515,000. And in 2018, we have settled 45 claim payments of over 4 million. That's been highly valued by local government and regulatory authorities.

Last year, through the New China Life Foundation, we have set out the comprehensive (inaudible) public welfare action in more than 10 provinces, (inaudible), et cetera. And at the same time, NCI Foundation has donated funds for projects in Gansu and diverse areas. Up to now, we have sent all kinds of insurance to more than 30,000 impoverished households with sum assured of more than 3 billion.

In 2019, we will carry out very targeted poverty alleviation projects, expand the projects' scope and beneficiary, focusing on small, [water] in poor areas. By leveraging the resources of insurance industry, we hope to contribute to China's targeted poverty alleviation. At the same, we will continue to push forward the (inaudible) for sanitation workers. In 2019, on the basis of covering already 56 cities, we will cover over 100 cities in 2019, and we will cover more than 1 million sanitation workers in 2019.

The public welfare [containment] activities have been well acknowledged by citizens of (inaudible) and also by local authorities. In the new year, we will perform our public welfare responsibility even better and combine our economics and social influence so as to contribute to social cause. Thank you.

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Questions and Answers

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Xingfeng Gong, New China Life Insurance Company Ltd. - VP, Chief Actuary, Board Secretary & Joint Company Secretary [1]

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(foreign language)

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Unidentified Company Representative, [2]

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(foreign language)

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Unidentified Analyst, [3]

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(foreign language) I have a question about the investment yield. I noticed that the investment yield is 4.6%, which is higher than the assumption of 4.5%. But the EV growth rate fell below the expectation, and also the economics experienced change contributed a negative, about RMB 5.9 billion. I want to ask about the reason behind it. And also, we noticed that the stock market has warmed up in 2019. So will the economics experienced change contributed positive in 2019?

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Unidentified Company Representative, [4]

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Thank you for your question, and thank you for your support for NCI. Actually, the investment yield, there are 2 reasons behind this. The first is the model calculation. We not only use the 1-year adoption of 4.5%. We also use the other investment yield assumptions by 5% for the lump sum investment when we calculate the assumption. And the second is because of the structure of different accounts like traditional insurance account, you may see a higher investment yield than expected. As for participating insurance, they may have different impact. That's the 2 reasons behind the 4.6% investment yield. Sorry, and also for 2019, we have seen in the Q1 2019, the capital market has warmed up, and we hope to yield a greater result in investment by the end of 2019. Thank you.

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Unidentified Analyst, [5]

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(foreign language) I have 2 questions. The first one is for the value and the second one is for health insurance. For the first one, it is about the embedded value. We've seen in your announcement that the operation -- or experienced variance had a positive contribution of CNY 3.1 billion while the assumption has a negative contribution of CNY 1.3 billion -- CNY 1.4 billion. So I want to ask about the relationship between the assumption and the variance. And the second question is about health insurance. You've said in the past years in your annual results announcement and also in the opening day of your company that the expense ratio, the price of health insurance will have a decrease in the next few years. And last year, we've seen that some of your counterparts have decreased the price of health insurance by a very large margin. But of course, most of the industry has not followed the trend. And I want to ask, what's your attitude? What's NCI's attitude towards the decrease of the expense ratio and price for the health insurance?

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Unidentified Company Representative, [6]

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(foreign language) Thank you for your question. As for your first question about the embedded value, about the -- our experience and the assumption. I think you are understanding it quite right. We think that currently, the mobility rate of the whole industry and the whole society have increased. So we can see that the assumptions of our company can cover the experience. And also, in the operational variance -- operational assumption of our company, we've considered not only the experience but also the persistency ratio and the surrender rate of our company. So from Mr. Yang Zheng's introduction just now, we've seen that the 13-month persistency ratio and 25-month persistency ratio have all had very good performance. And also, the surrender rates have decreased. So we can see that the actual experience of the EV has been better than the assumptions. That's why the management has contributed positively to the EV. As for the assumption changes, we've actually considered the increase of the mobility rate of the whole society. So we add some of the variances and factors to our assumption calculation models. In recent days, we also have seen some discussion on the media that cancer such as thyroid cancer has increased its mobility, both in the payment and the expense of this disease. And also, in the regulation authorities, we've seen that including CBRC, they have had some changes about the definition and the standard for our critical illness. That shows the trend for the increased mobility, not only in these cancers but also in thyroid cancer but also in CVDs and other kind of cancers. This always lacks the trend of increased mobility, and NCI has a concern -- has been concerned about this part. And in our risk control management as well as the change of our assumptions, we've increased this concern for this part. Thank you.

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Unidentified Company Representative, [7]

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(foreign language) Thank you. As for your second question about the margin, it's a very difficult question to answer because things on different perspective, you can see that the results can actually counter each other because for our company, for different business, different channels and different management structure, we can see different payments and different results of our operation that will contribute positively or negatively to the margin. Last year, we can see from the data that we just introduced, our margin has increased by nearly 8 percentage points. It is a very [heartwarming] result. As for the strategy for next year, it requires a very large stability of our business and our strategy. And also, it relies on the support of the whole team for the transformation and the adjustment of our structure and our business. So all of this has, let's say, limits to the management in this regard. As for different channels, they have different abilities, features as well as their expansion abilities. So when it is increased, it becomes more difficult. Thank you.

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Unidentified Company Representative, [8]

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(foreign language) As for your second question, and of course, for the price of health insurance.

Our wish is a beauty but the reality is the monster. So we can see from the development of the health insurance price, the Internet and also the competition of the industry has put a lot of pressure to the traditional health insurance as well as our price. In 2019, of course, as a management team, we hope that we can remain stable in the margin of health insurance. But the competition of our whole industry has put a lot of pressure, especially in the sales teams. Mr. Li Yuan has actually -- and we all argued in our office what kind of product should we put forth to sell and what kind of price and expense ratio should we use? Should we lower our price to increase the market share and thus increase the overall margin? But personally, I am not very positive about the overall price margin of the health insurance of the whole industry. And nowadays, we know that the whole industry is focusing on health insurance and provide protection for our customers. And also providing cost-effective products for our customers is the responsibility of the whole industry. And there are -- the second kind of pressure that comes from new technology is in diagnosis and therapy of the different critical illness. For example, in the past, thyroid cancer can only be diagnosed in the latter phase. But nowadays, it can be diagnosed in the very early phase.

(foreign language) So I will not dwell on the question. I'll just give a summary of the question. The problem of price of health insurance is indeed a very big problem and challenge for NCI. And in the future, we hope that we can remain stable and provide the balance between the quantity and the quality. Thank you.

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Unidentified Analyst, [9]

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(foreign language) I have 2 questions. The first is the 2018 VNB actually increased by 1.2%. What is the expectation for 2019? Will the growth rate accelerate? The second is about the change of the NCI's management team. Will Mr. Li and Mr. Yang continue to be the Chairman and CEO of the company? Could you please update the election procedure?

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Unidentified Company Representative, [10]

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(foreign language) Thank you for your question. Actually your question reminds me of my kids who got 85 points after the examination. But as parents, we always say, why 85 points? We want full marks. And as for NCI which achieved the 12% growth rates, I maybe so thrilled on our results that I will stand on the table to tell you this great news. But now with the growth rate of only 1.2%, I have to stand on the ground, but still with my head up, because we are satisfied and positive with these results. We actually made our contribution and efforts. And in the past year, our sales team and business has witnessed a great transformation of the structure, especially this is very valuable during the transition period, and we are quite satisfied. As for the next year, we will continue the transformation and maintain the increase of both quantity and quality and to remain stable in the VNB margins. Thank you.

(foreign language) Thank you for your support for NCI and thank you for your care and attention personally. Actually, the position of Chairman, CEO and other management are elected and decided by the Board of Directors and also our senior -- superior shareholders. So if you are a shareholder of our company, maybe we can have the answer today.

(foreign language) I'm now the acting Chairman. Mr. Yang Zheng is the acting CEO of the board. And the 6 Board of Directors is going to expire in this month. And the 7 Board of Directors is undergoing the procedure of reelection. And the whole procedure will follow the company rules and articles of association. I can assure you today that during the transition period, the management team will continue to make efforts and make great efforts to ensure that the Board of Directors and the company operation remain at the normal level.

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Unidentified Analyst, [11]

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Unidentified Company Representative, [12]

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Unidentified Participant, [13]

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I have 2 questions. The first one is that we know that during the past 2 years, in 2017 and 2018, the company's product strategy is mainly focused on protection-type business, that is to say health insurance. My question is that in 2019 or the next 5 years, will the product strategy of the company be adjusted to diversify your products supply? Will there be more kinds of savings products? And the second question is that, through the last 2 years of transformation, so we came from transformation, we've seen a steady growth of your agents in the latter part of 2018 without any decrease of performance rates. So I want to ask your expectation of your agents in 2019.

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Unidentified Company Representative, [14]

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The first question will be answered by Mr. Gong Xingfeng because he's in charge of the product department of the company, and the second question will be answered by Mr. Li Yuan because he's in charge of the individual channel. Thank you.

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Xingfeng Gong, New China Life Insurance Company Ltd. - VP, Chief Actuary, Board Secretary & Joint Company Secretary [15]

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(foreign language) For your first question, it is actually related to the overall strategy of the company, so I will answer it first. And if I'm not comprehensive about this question, Mr. Yang and Mr. Li will answer the next part. It is related to the logic of our transformation. While the logic of our transformation changed, currently, we see that, in the whole society, in the whole market, the customers still have a very large demand for health insurance. As for the economic trend, we can see there is actually a downward pressure and difficulty on that in the economic development, especially how to avoid a long-term potential interest loss is the main challenges facing the whole insurance industry. For our team, we've stated repeatedly that we will build a team of risk managers instead of wealth managers. So we will diversify and differentiate the strategy of our sales teams. I believe that the logic of our transformation will not change. And as for the headquarter of our company, we still remain in strategy of returning to the [Athens] of insurance and focus on protection-type business with the core of health insurance. That will push forward our business transformation and structural change. Over the past 2 years, we've seen that the NBV growth of our company is mainly due to the value growth of our health insurance. That is also due to the efforts of our company in the -- especially in the individual insurance channel. As for our company, we believe that we'll remain best status and remain stable in the strategy of a value-oriented and protection type-oriented strategy. In the past, we've focused more on savings products. But in the future, we'll focus more on protection-type business as well as riders that provides more assurance and insurance for our customers, both in medical care and other aspects. We -- and nowadays, the biggest problem for our company is how to remain stable in our quality and, at the same time, increase the speed of our development and the quantity of our insurance. That is the biggest challenge of our company. And this year, we've adjusted some of our policies and also distributed some of the resources to give that back. To enlarge our sales team and also to diversify our product pipeline, we developed some of the energy products so as to satisfy the demand of the customers. Different ventures can also offer different product pipelines according to the needs of our customers and the needs of the sales team. In 2019, the overall strategy of the company will not change, will still be health insurance and protection type-oriented. And at the same time, we'll increase the peer function of health industry and the elderly care industry to satisfy the demand of our customers and to build a strong team.

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Yuan Li, New China Life Insurance Company Ltd. - VP [16]

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(foreign language) Thank you for the acknowledgment of NCI's sales team. Actually, in the past 2 years, we have transformed a lot. And the NCI sales team has blazed a new trail with NCI characteristics. And also we have formed a stable triangle, a new triangle in which the health insurance occupied about half of the insurance premium. And then comes the annuity business and then the riders. So as for the teams building in 2019, we think we have to make efforts in the following 5 aspects. The first is the budget and expense. We will launch budget at the beginning of the year and also actuary expense during some special periods, like the jump-start, we have used actual commissions for -- to inspire the teams to sell. The second is training. Since the year of 2019 we'll see a large increase of the sales team number, we believe that the new recruits requires larger amount of training so as to be professional and to cultivate their sales ability and management ability as well as their understanding of our products. The third is products pipeline. Just as Mr. Gong Xingfeng mentioned that the individualized insurance focused on the health insurance and the riders, and we adopted the strategy of promoting primary insurance through riders. The NCI sales team actually has gotten used to sell combos or packages of our products. We often joke that no riders, no sales. Only the combo with main primary insurance plus riders is the true sale. So as for the combo sales, we actually stand at the top of the industry. The fourth is the promotion. We will make efforts in 4 aspects so as to increase use our basic laws and to increase the number of our agents, the number of qualified agents, the policy number per capita and also the policy premium -- the premiums per policy. The fifth is the promotion events. We have held the different events, including (inaudible) and the special conference regarding to a target product in the past years. We believe the above-mentioned 5 aspects will help to play a great role in the team building for the next year. Thank you.

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Unidentified Company Representative, [17]

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(foreign language) Now let's welcome the online friends.

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Operator [18]

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Unidentified Analyst, [19]

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Unidentified Company Representative, [20]

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Unidentified Company Representative, [24]

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Unidentified Participant, [25]

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Unidentified Analyst, [26]

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Thank you. I have 2 questions. The first one is about the sales channels. In 2018, there's been a decrease of annuity. And also because of annuity decrease, the income of our salesmen has also decreased. I want to ask in the company focusing on protection-type business, what is the productivity of the sales team of health insurance channel? And what will the company do in the future to increase the productivity of the sales force? Will it be the policy project that or will it be the premiums per policy? And the second question is about actuary part. As we know that the company is now focusing on more critical illness insurance. And we can see from the movement analysis that the NBV has had a greater sensitivity towards mobility rates. It has increased from minus 4% to minus 7%. In the future, as the mobility rates increase, we will adjust the -- change the assumptions of the actuary part. And the sensitivity of NBV will become greater towards the mobility rates and thus the EV will be influenced negatively because of it. I want to ask what the company will do to address this problem.

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Unidentified Company Representative, [27]

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(foreign language) Thank you for your question. The first question will be answered by Mr. Li Yuan and the second question Mr. Gong Xingfeng. As for the sales team, the productivity of the sales team in 2018 is actually that the energy product has witnessed a downward in 2018. It is in the same trend of the whole industry. But our health insurance has witnessed an increase that make up for the decrease of the energy product that the NBV of our company in 2018 has increased. As for the strategy that we are about to take to increase the productivity of our sales force in 2019, I think there are 4 aspects. The first one is our plans. We will increase the appraisal of health insurance sales and rider sales in the year 2019. And the second is our product pipelines. We will enhance the packaging and the mix of our product portfolios. We launched the product of CVD plus 3 product mix in the jump-start of 2019. We know that it is a product mix of CVD, the rider, plus 3 different critical illness insurance and annuity insurance. And the third aspect is our training. We will increase the support of our sales team of our training. I just mentioned that we should increase the efforts in responsibility sales. That means the risk managers of our company, the sales teams should be in charge and take responsibility for the customers' needs, not just promote different product portfolios, such as primary insurance and rider, but also be proactive in settling different claims of our customers so as to satisfy the needs and upgrade their experience. And the fourth aspect is our team building. We've been the first in the whole industry to put forward the concept of risk managers, and we just mentioned that through a comprehensive family wide and whole life process, we will provide a very integrated service and solutions to our customers. That the premiums per policy can be increased. I believe the above 4 mentioned aspects will help to increase the productivity of the sales force.

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Unidentified Company Representative, [28]

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(foreign language) As for the second question, I agree with you on you just said the sensitivity of NBV towards mobility and mortality rate. As for the in-force business, we believe it is still under control because we have a relatively large liability of over 600 billion. So because of a large foundation, the change will have a minor impact of it. As for the other aspects that you mentioned, the sensitivity of it towards the savings product and wealth management product is not so much as the health insurance business. Thank you.

(foreign language) I agree with you on the 1 year NBV margin, the sensitivity towards the mortality and mobility rate has increased. This also reflects the structural change of our business. But I believe personally that the current situation, your concern will not happen because actually we've talked about the decrease or deterioration of mobility and mortality rates. There are also some negative influence -- some positive influence towards it. Nowadays because the technology, the medical care has been updated, so some of the diseases may be diagnosed in the early phase. So it will not develop into critical illness that will require the payment of insurance. These are all the positive factors that contribute to the health insurance industry. So we believe that overall, the mobility rate and mortality rate risk is controllable. Thank you.

(foreign language) Thank you. Because of time limit, this will be the end of the annual results announcement. And we are very sorry about the online questions. We are not able to answer your questions. If you have further questions, please contact the management staff and our IR team. This will be the end of the annual results announcement. Thank you.