China Life Insurance Co Ltd (LFC) 2017 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to China Life's 2017 annual results briefing and the (inaudible) from the Board (inaudible). So as before we have two venues, two video conferences connected together. We do a simultaneous announcement, so if you are not on-site you are welcome to call in (technical difficulty) or watch the streaming online.

I would like to now present you the management team in both locations. In Hong Kong, the following are present: Mr. Lin Dairen, President; Vice President, Xiao Jianyou; Vice President, Ruan Qi; Operations Director, Madame Yang Hong.

In Beijing, management with us through videoconference are the following: Vice President, Xu Hengping; Vice President, Xu Haifeng; Vice President, Chief Actuary and Board Secretary, Li Mingguang; Vice President, Zhao Lijun; Marketing Director, Mr. Zhan Zhong.

Today's presentation will start with a 30-minute presentation of our 2017 results and then followed by 30 minutes of Q&A. So the questions will be raised alternatively between Beijing and Hong Kong. Mr. [Gao Pung], the Assistant Board Secretary and I will co-moderate the [session]. First I would like to invite the president, Lin Dairen.

Ladies and gentlemen, good morning. Welcome to 2017 annual results briefing of China Life. Today's presentation comprises five sections. First I would like to give you an overview of the Company's performance as well as business operations in 2017. Then other members of the management team will present our financials, investment performance and embedded value for 2017.

In 2017 -- I would like to start with an overview. In 2017, with the innovation driven development strategy as its guidance, the Company adhered to the operating guidelines while prioritizing our business around a strengthening sales force, optimizing business mix, achieving stable growth and guarding against risk, maintaining a strategic focus and technical flexibility and strengthening the foundation through its transformation upgrade.

As a result the Company sold (inaudible) and is showing (inaudible) new business value and profitability and [beat] a new level in its development. First the Company saw premiums reach a new high. Even though single premiums were further reduced by RMB9.3 billion, the gross written premiums exceeded RMB500 billion and reached RMB511.97 billion, up by 18.9% year on year.

For the first time the first year regular premiums exceeded RMB100 billion and reached RMB113.12 billion, up by 20.4% year on year. Renewal premiums amounted to RMB288.11 billion, up by 28.9% year on year.

Second, we continue to optimize our premium structure. First-year regular premiums accounted for 64% of long-term first-year premium up by 7.7% year on year. First-year regular premiums with 10 year or longer payment duration accounted to 58.4% of the first-year regular premiums, up by 3.7% year on year. Renewal premiums accounted for 56.3% of gross written premiums up by 4.4% year on year.

Third, we fully expanded our sales force and enhanced the quality of the total sales force across all channels to reach 2.025 million people, 11.6% higher than last year. The Agent Channel sales force amounted to 1.578 million people, up by 5.6%. The quality of our expanded sales force improved significantly. The quarterly average of productive agents were up by 29.8% compared with the end of last year.

The fourth is the value of our one-year sales grew rapidly to RMB60.12 billion, up by 21.9% year on year.

Fifth, the net profit attributable to equity holders of the Company amounted to RMB32.25 billion, registering a significant growth of 68.6% year on year.

The (inaudible) five years have been unusual for China Life. The China insurance industry was reformed and (inaudible) pricing rates and investment marketization. The launch of the stringent regulation measures, increasing differentiation in the industry and intense competition in the market in a complex and changing environment, the Company abided by the basic rules of life insurance, executed a clear and determined strategy as well as consistent operating guidelines and portfolio development in the (inaudible).

As a result it delivered rapid growth in business and value significantly increased the competitiveness. And as it built up strong growth momentum through reform and transformation, the Company upheld a value oriented strategy with the value of one-year sales up from RMB21.3 billion in 2013 to RMB50.1 billion in 2017 with a figure of 29.6%.

First-year regular premiums increased RMB40.3 billion in 2013 to RMB113.1 billion in 2017 with the account CAGR of 29.4%. The proportion of first-year regular premiums and long-term first-year premiums increased by 28.9% from 2013 to 2017. First-year regular premiums with a 10-year or longer premium duration increased from RMB21 billion in 2013 to RMB66 billion in 2017 with a (inaudible) CAGR of 33%.

The proportion of first-year regular premiums with a 10 or longer term payment duration totaled first-year regular premiums increased by 6% from 2013. The Company's 2017 gross written premiums amounted to RMB512 billion, increasing from RMB326 billion in 2013. [Now that] the renewal premiums have amounted to RMB288 billion, up from RMB190 billion in 2013 with a CAGR of 10.9%.

The sum of 2017 first-year regular premiums and renewal premiums accounted for 17% of the gross written premiums, the pattern of both our first-year regular premiums and renewal premiums driving the growth of gross written premiums have been transformed. From a macroeconomic perspective China's economy switch from the phase of rapid growth to high quality development and maintained steady growth.

In this new [era of] demand for insurance protection, wealth management has grown rapidly. The introduction of a series of national policies relating to commercial pension and health will provide a strong impetus and ample room for the development of commercial insurance.

From an industry perspective, regulators tightened regulation and guided the industry to return to its due role of protection. With accelerated transformation of market players in a more orderly market, the industry will focus more on protection-oriented and long-term savings business, customer services and technology innovation. The market competition is becoming increasingly fierce and differentiated.

In 2018 the Company will uphold keynote of achieving progress while ensuring stability, responding to demands for high-quality development. It will enhance its supply and demand system, investment management system, innovation system, talent system, risk control system and the endeavor to transform from leading in scale to leading and quality.

Next I would like to discuss business and operations. In 2017 we have achieved rapid growth in the insurance business. While further reducing the volume of single premiums, the Company continued to expand its first-year regular business and potential (inaudible) business. Both first-year regular premiums and renewal premiums drove an increase of gross written premiums. The gross written premiums reached RMB511 billion, up by 18.9%.

First-year regular premiums exceeded the RMB100 billion for the first time and reached RMB113 billion, up by 20.4%. Renewal premiums amounted to RMB288 billion, up by 28%. And short-term premiums amounted to RMB47 billion, up by 17.5%. In 2017, the Company continued its optimization of premium structure with a first-year regular premium and renewal premium for the main drivers of our gross written premiums. The Company's sustainable business growth was to further [enhance].

First-year regular premiums amounted to 63% of long-term first-year premiums, up by 7.71%. Renewal premiums amounted to 61% of the long-term gross written premium, up by 4.73%. First-year regular premiums with a 10-year or longer premium duration reached RMB66 billion, up by 28.5%, accounting for 58% of the total first-year regular premiums, up by 3.6%.

In 2017, guided by the value-oriented principle, the Agent Channel continued to record strong growth in regular premiums with business structure being further optimized. The gross written premiums amounted to RMB353, up by 25.4%. In particular premiums from new policy exceeded RMB100 billion and reached RMB108 billion, up by 21.6%. Renewal premium amounted to RMB253 billion, up by 26.9% year on year.

In terms of premiums from new policy, first-year regular premiums amounted to RMB[90] billion up by 21%. In particular first-year regular premiums with a 10-year or longer payment duration amounted to RMB58 billion, up by 26% year on year accounting for 65% of the Agent Channel first-year regular premium, up by 3%. A percentage of gross written premiums from the Agent Channel was 69.1%, up by 3.5%.

In 2017 the Company strengthened the day-to-day management of the Agent Channel and actively pushed forward the transformation of the sales management model. While the agent force expanded steadily, its quality was also enhanced significantly. Total individual agent force reached 1.578 million, up 5.6%. The quarterly average productive agent increased by 29.8% year on year.

The upsales agent team was aimed at integration of customer sources. Through maintaining good customer relationships upsales and team provided customers with (inaudible) sales services in 2017. The quarterly average productive upsales agents increased by 53% over the same period of last year.

The bancassurance channel continued its sound development, value contribution rose significantly. In 2017 the Company deepened the business transformation of the bancassurance channel and (inaudible) towards a single premium business which decreased by 12.2% over the last year. First-year regular premium reached RMB20 billion, up by 17.5% year on year.

The 10-year or longer FYRPs reached RMB6.14, up by 46% year on year. Renewal premiums amounted to RMB31.8 billion, up by 46.2%. This structure of the channel also further optimized our first-year regular premium, accounted for 26% of long-term FYP, up by 5.2%. First-year regular premiums with 10 years or more accounted for 29% of the first-year regular premiums up by 5.8%. Renewal premiums amounted to 21.1% of the gross written premiums up by 5 -- 8%.

The value of one-year sales of bancassurance channel increased by about 150% year on year and its contribution to the total value of one-year sales increased by 5.6%. The bancassurance channel sales totaled 339 sales people. The number of monthly average active insurance planners were up by 11.3%.

The group channel closely followed the national strategy to better people's livelihood, continued to diversify its business and witnessed steady growth in the short-term insurance business. The group channel gross written premiums amounted to RMB26 billion, up by 5.2%, of which short-term premiums reached RMB20.84 billion, up by 11%. The group channel sales force totaled 104,000 people, up by 21.4%, of which the high-performance sales force increased by 43% to 52,000 people.

The Company written premiums for the short-term insurance grew steadily. It not only contributed to the Company's development, but also served people's well-being, thus expanding the social recognition.

Gross written premiums of short-term insurance business reached RMB33.57 billion, up by 15.8%. The Company played an active role in policy-sponsored health insurance. It undertook more than 260 supplementary major medical (inaudible) insurance programs in 31 provincial branches, covering 420 million urban and rural residents. The gross written premiums reached RMB15 billion, up by 18%. In particular the surrender rate was 4.13%, represented an increase of 0.59%.

Our 14-month persistence rate was 90.9%, while the 26-month one was 85%, which comparable to the end of last year. The Company accelerated development of technology-driven China Life with the objective of building a client oriented Internet and AI-based responsive and reliable model; completed a new generation of integrated business process system, enabling the Company to transform and upgrade its operations and management.

We have established and developed a business structure and achieved end-to-end connections and is overall designed through business process engineering. The (inaudible) design allowed the establishment of a fully open cloud structure where resource applications have (inaudible) placed into the ground. The Company completed online deployment and transferred its sales services office work and management to online operations.

Thanks to the China Life e-store and China Life E-Bao the sales force is now a mobile 1 million sales center and 1 million service center. 95% of policy services can be processed online. We pushed forward the transformation of smart and centralized operations. They drove operations towards an innovative model of centralized management and the headquarters and the shared operations (inaudible).

The company created (inaudible) sales tools to support the transformation of the sales model. We launched smart devices establishing five major platforms such as artificial audio facial recognition and peak learning, but continued advancement of the Company's customer service capacity was also reflected in the following area.

The Company continues to improve its customer service capacity with the launch of digitized and smarter services. A mobile claim settlement were available at all service centers with the number of claims has increased by nearly 10 times year on year.

Return visits made by customers via WeChat or China Life E-Bao replaced 15% of the return visitors by telephone. The Company continued to improve its client relationship and management capacity. It's clear to the customers [family] unified and use of big data to customize insurance products for clients.

The Company continues to expand its scope of services, built a China Life sales platform and continuously expanded the scope of global emergency assistance services and the VIP services in order to satisfy customers demands, promote a tiered and personalized service. The efforts rendered our customer satisfaction rate historically high.

In 2018 the Company will continue to maintain its strategic focus and tactical flexibility mainly to fulfill fantastic high quality development and the push forward of client oriented service (inaudible) and digitized operational management system heading towards a new (inaudible) of high quality development.

First we transform and upgrade the sales management model. The Company will enhance day-to-day management and the training of sales force, further expand the scale of productive agents and improve the sales force quality, further optimize the business structure with the Company's achievement in terms of optimizing premium structure.

The company will (inaudible) innovation of potential type of products and services and emphasize the growth of [protection] oriented long-term (inaudible) insurance business to optimize the business structure.

Third, accelerate development in large- and medium-sized cities following the changing demand of our customers from (inaudible) cities. The Company will adopt a structured and comprehensive strategy to strengthen the confidence of our branches in these cities.

The fourth is to speed up the development of technology driven China Life. The Company will continuously optimize the business and management process and deploy the technology to facilitate the establishment of online China Life, [Smart] China Life and digitize China Life. It will integrate internal and external resources to meet the customers' whole life cycle demand and offer holistic family solutions.

Thirdly is to continue to emphasize the risk and prevention the Company will operate in stricter compliance with the loss and regulations and (inaudible) the risk control system and mechanism of service and the key risk of prevention and safeguard against risk.

Now I would like to hand over to Mr. Zhao Lijun, Vice President, to present our financials and investment performance.

Thank you, Mr. Lin. I'm going to give you a summary of our key financials and the investment performance of 2017.

Steady growth in revenues. In 2017 the company's net premiums earned -- amounted to RMB506.91 billion, up by 18.9% year on year. The Company's total revenue was RMB643.36 billion, up by 19%. Investment income was RMB122 billion representing an increase of 12.4%. Net realized spread income on financial assets was RMB2.8 billion. Impaired losses were RMB2.76 billion and the net fair value gains through profit and loss was RMB6.18 billion.

Continuing to optimization of cost structure, in terms of cost structure due to the optimization of regular premium structure and rapid growth of the [protection] (inaudible) the business structure was continuously optimized under commission expenses for the first-year regular premiums (inaudible) increase.

The underwriting term and policy acquisition cost ratio increased from 9.62% to 10.07%. At the same time the Company's (inaudible) cost of management with administrative expenses ratio falling from 5.89% to 5.59%. The proportion of administrative expense to total administrative expenses and underwriting and policy acquisition costs decreased from 37.98% to 35.69%. The cost structure was considerably optimized.

A significant increase in profit in 2017 as a result of the increase in gross investment income and upgrade are the discount rate assumptions for a reserve of traditional insurance contracts. The Company's net profit attributable to equity holders was RMB32 billion, 68.6%. The weighted average ROE was 10.49%, up by 4.33%.

Earnings per share was RMB1.13 up by RMB0.47 -- [billion]. The Company plans to pay a cash dividend of 0.4% (sic - see slide 24, RMB0.4) per share to all shareholders representing an increase of RMB0.16. This dividend payout [as well] is subject to approval by the 2017 annual general meeting.

Next I will present a summary of the Company's settlement, statement of financial position. At the end of last year the total assets of the company increased from RMB2.7 trillion to RMB2.9 trillion. The total liability increased from RMB2.3[9] trillion to R2.57 trillion.

Equity attributable to equity holders, increased from RMB303 billion to RMB320 billion. Reserves of insurance contracts was RMB2.03 [trillion] of which the residual margin was RMB607 billion. By the end of last year our equity attributable to equity holders totaled RMB320.93 billion, and up by 5.7%, of which net profit attributable to equity holders was RMB32.25 billion. Other comprehensive income was negative by RMB2.91 (sic - see slide 26 - RMB7.91 billion) and the dividend paid to shareholders totaled RMB7.16 billion.

The strong solvency position follows. By the end of last year the Company's core solvency ratio stood at 277% while the comprehensive solvency ratio was 277%. The Company was well capitalized. The decrease in comprehensive solvency ratio was due to the impact of various factors including (inaudible) insurance business and redemption of subordinate debt.

Next up balancing investment. Asset allocation in 2017, the Company's investment assets continue to grow amounting to over RMB2.59 trillion, up by 5.64%. In 2017 the Company seized opportunity of a high interest rate to increase the allocation to fixed income investments such as long-term bond and that type of financial products. The position in equity investment remained at a reasonable level.

The Company sees the structural opportunity in share market and they [vastly] undervalued the Hong Kong stocks resulting in a better return for the whole year. We actually explore the investment opportunities infrastructure supply side reform and better equity conversion to support the development of the real economy.

By the end of last year among the major asset categories that allocate them towards term deposits decreased from 21.94% to 17.3%. The proportion of bond increase from 46% -- 43.6% (sic - see slide 29 - 45.63%) to 45.86%. (Inaudible) funds increase from [10.05%] to 10.33%. At that time financial product investment increase from 5.38% to 11.65%.

There is a significant increase in investment yields. Last year the investment [folders] generated higher interest income, income from equity investment also increased compared with last year. Lastly gross investment yield went from 4.61% to 5.14%. The net increase of investment yield from 4.68% in 2016 to 4.91%, which could also be attributable to the increase of our stock and equity fund dividends.

As a result improved equity market performance compared to last year the comprehensive investment yield increased significantly from 2.43% to 4.55%. The held-for-sale and quality is nonstandard investment. The Company has always maintained a prudent investment strategy and our advanced set of assets are of high quality and well control the risks.

In 2017 the Company seized the asset allocation opportunities presented by high interest rates with the new allocation in terms of fixed income assets amounting to over RMB440 billion. We made an increased investment in fixed income nonstandard assets establishing investment positioned industry leaders benefiting from the supply chain reform as well as investment in infrastructure.

Newly added investments totaled over RMB200 billion for the whole year and weighted average maturity of approximately seven years. At the end of last year, over 95% of nonstandard assets had a AAA external rating, of which over 70% were invested in infrastructure, finance, energy, transportation, electricity and the municipal utility industry. There is also synergy from the investments in associated company.

Since China Life became the major shareholder of China Guangfa Bank the synergy between the insurance and the banking business has been expanding. The Company's investment in China Guangfa Bank has realized an investment income of RMB4.186 billion, an investment yield of 13% in 2017 on the equity accounting basis.

The insurance and the banking business formed a strong synergy as the customers were able access comprehensive and all-around financial products and services, which satisfied the diversified the demand and promoted insurance business development. At the end of last year China Guangfa Bank had a distribution channel to analyze an achieved increase of 42% in premiums of new policies, while first-year regular premiums recorded an increase of 100%.

We jointly issued a China Life CGB debit card and credit card, which made a (inaudible) by distributing over 1 million accounts. I now hand over to Mr. Li Mingguang, Chief Actuary and Board Secretary, to present the Company's embedded value for 2017.

Thank you, Mr. Zhao. Please allow me to elaborate on China Life embedded value for 2017. At the end of last year the Company adjusted net worth was RMB370 billion and the value of in-force business before cost of required capital was RMB398 billion. This cost of required capital was RMB35 billion, leaving embedded value after the cost of required capital was RMB734.17 billion.

Now let's look at the embedded value and the value of one year's sales. As at December 31, 2017 the Company's embedded value was up by 12.6% compared with the end of last year. There in, adjusted net worth increased by 6% and the value of in-force business increased by 20.2%. In 2017 the Company's value of one-year sales amounted to RMB60.12 billion, up by 21.9%, of which the value of Agent Channel's one-year sales amounted to RMB53 billion, representing 88.4% of the total value of one year's sales.

The value of bancassurance channel's one-year sales amounted to RMB6.54 billion representing 10.9% of the total value of the first one-year sales. The value of the group insurance channel's one-year sales reached RMB410 million representing 0.7% of the total. The graph shows the movement of embedded value from December 31 of 2016 to the same day 2017.

Major changes including the expected return was RMB52 billion, reflecting 2017 expected return of the [covered] business and expanded the investment in terms of net assets. The value of 2017 one-year sales amounted to RMB60 billion. Operating experienced variation was RMB529 million. Investment experience variance was minus RMB4.28 billion. The methodology model and assumption changes were minus RMB5.93 billion.

Market value and other adjustments were minus RMB11.55 billion. Exchange losses amounted to minus RMB459 million. The shareholder dividend actually paid out in 2017 was RMB7.16 billion. At the end of last year the embedded value of the Company amounted to RMB734.17 billion. That's all.

(Operator Instructions).

(Inaudible). My name is (inaudible), two questions. We noticed that bancassurance channel [for mostly] creation of embedded value and value rates enhanced tremendously. So what is the reason behind it? For the long-term strategy of the bancassurance, what is the intention of the Company?

So secondly, we have seen that in the evolution of embedded value, the market value adjustment was a major drag. The proportion is bigger than the peers in the industry. Is it because the methodology of allocation for embedded value is more conservative than the industry peers?

I would like to take the first question and Mr. Li may supplement. For the question about actuary, so Mr. Li requested to answer. Bancassurance registered a major growth last year because over these years we have always adhered to the transformation of the bancassurance channel.

With that maybe two paths are involved. One is to reduce the single payment scale. As you know that over the previous years, especially in 2008 and 2009, [many changes] ago, in order to scale up we have developed a very deep single premium product for RMB300 billion of the total. RMB160 billion was from the single premium product. [Imagine] making adjustments over the past decade. So past year it shrunk to only RMB60 billion. So we have adjusted for the sale of the single premium product.

We also developed a term premium business of the bancassurance channel. For the bancassurance channel we are not only selling single premium but more emphasis is placed on term premium products. By the end of last year that has exceeded RMB20 billion and reached RMB20.9 billion.

Thirdly, in terms of developing the term premium business, we have also enhanced the transformation of the payment structure. Previously for the term premium three-year was the majority because, at the beginning of that transformation, even the three-year is counted as the term. And Anyway is better than the single premium product. So a lot of the three-year products were sold. But it will dissipate very quickly.

In 2014 China Life experienced a negative growth of renewal premium because until (inaudible) products were sold in the previous years. So in the previous years we need to transform bancassurance with not only developing term but also the mid- and long-term term premium products. So those are in excess of 5 or 10 years increased much faster than the total business growth for the term product in the bancassurance channel.

So we have reduced the single and increased the term fast and for that mainly the long-term products. So that is why the value of our bancassurance increased by 150%, but objectively speaking, there is a high growth rate, but on top of a small basis. So that is basically what the case is.

Mr. Li, could you address a second question? Thank you for your kind attention to those details. Embedded value was first introduced by China Life. Since last century we have introduced the embedded value concept, so we use the all around market value as our indicator. And then the Chinese Actuaries Association published standards; within the allowable scope we still stick to the full caliber market value measurement.

You just also talked about the adjustment of embedded value. Let me briefly address it. Certain assets are made by the amortized cost basis. So we have voluntarily applied some substantive or material adjustment to a large amortized cost basis. So we also consider what the type of business is, if it is a traditional or [unilink]. So we would also develop different adjustments accordingly.

That was one part of your question. You also asked about our comparison with the rest of the industry. But that is not something I'm in a position to make a comment. You can also ask the industry peers whether they use the full caliber or all around indicator.

From (inaudible) Securities, my name is (inaudible). I have two questions. One is about the two line items. What are your estimated changes? So accounting estimated adjustments from minus RMB17.8 billion to minus RMB9 billion? So actually our revenue increased tremendously in Q4, but actually in Q4 the profit had a slight reduction but the corporate income tax increased significantly. What is the reason for the hike in tax?

Secondly, in your investment, the data tied to financial assets received a much higher allocation. What are the main types or products of this kind? What is the type of products and yield? And down the road in terms of asset allocations, what are the assets that will be prioritized? Thank you.

I would like to request Mr. Li and Mr. Xiao to address these two questions. One may take the lead and the other supplementing.

I would like to focus on the impact of the changed evaluation assumptions. As you mentioned, the impact was RMB13 billion and so smaller than the figure that you talked about. So I didn't hear your figure very quickly. And for this year it is correct; this adjustment is minus RMB9 billion. The basis of accounting for ordinary business year for the valuation date, so the cutoff date is to determine the account rate based on the valuation date.

Last year -- so we have seen the curve of 750 base. You also saw some market changes, especially in H2, there was a rate hike and expanding threat. So, in terms of the year-end evaluation assumptions, there was robust support. So that is why at the end of the year the change was RMB9 billion. So I would like to defer the question of CEI to Mr. Xiao.

So I would like to incorporate income tax. In 2017, as you know, our profit increased rapidly. So the tax expenses also increased proportionately. So increased from RMB4.2 billion to RMB8.9 billion, up by 46% due to mostly the increase of profit. So our profit was -- increased from RMB23 billion to RMB41 billion, and that increased our tax by 44%. So that's One figure that increased the profit by RMB17.8 billion.

You also talked about our bond investment in 2017. So indeed last year we seized opportunity of the -- opportunity created by the rate hike. And we also increased our allocation to long maturity bond and financial products. So for the full year the increase was [400 and -- RMB48] billion in terms of fixed income investment. We mostly increased our allocation to government bonds because it is tax free. And also we increased our allocation to the development bank bond.

So bond, if the lion's share of our increase fixed income allocation. We have also invested into [a debt] type of financial products. We invested more than RMB200 billion in this regard. So fixed income products have always been the core portfolio of our allocation. Of course in 2017 we seized opportunity of the rate hike to further increase our allocation in this regard.

In terms of our return of FY investment, it was 4.8%. The non-standard assets received RMB200 billion of investment and generated a yield of 5.58%. So it has a very good match with the assets. A maturity is also a standard. So by bigger allocation to fixed income our maturity also increased about seven years. So our yield of the existing assets has increased significantly. That is a highlight of 2017.

(Inaudible) from Goldman. My name is [Lon Quin]. Two questions; both to Mr. Lin actually. This year, and including the two previous years, saw good growth of renewal, but now there were some pressures on the new business. Our market share is also declining because others are catching up. You are pretty used to saying that we pay less attention to whether we are number one in the market. Do you have any pressure in terms of maintaining the number one position in the market?

Secondly, could you also explain and on the challenge of Guangfa Bank or (inaudible)? Do you have any further plan or intention for the collaboration? It raises question and basically I also saw from media coverage on me marketed share of China Life as opposed to other companies this year.

You have seen the status of the industry because of the change of regulatory policies and the external situation. In the insurance sector, especially the Life Insurance sector, the growth rate is very different from that of previous years. So the whole industry has experienced a negative growth. China Life likewise has faced the same problem. The period of negative growth is mostly caused by the incomplete business structure adjustments.

So we have downsized our single premium product (inaudible) insurance by more than 100 billion. But there's still 60 billion left. A single premium used to be very good for sales. So for example, in January it sold more than 50 billion and at that rate it was sold out. And because of the changed market environment now the single premiums basically don't sell.

So in a (technical difficulty) I further plan to downsize it and keep it at below 50 billion. But so far only 5 billion or 6 billion have been sold for a single premium. That is why this year there is a Of 50 billion bancassurance single premium. That is why there was a dip (inaudible) growth in January of 20%. But nowadays it has been a decrease of single-digits reduction, because of the term premium (inaudible).

So the renewal is also increasing. So last year the renewal premium amounted to RMB288, up from RMB230 billion. So there is an increase of about RMB40 billion to RMB50 billion. This year, according to the actuary department, it is estimated that the renewal rate will increase to RMB360 billion. So in 2018 it is going to -- it is expected to approach RMB360. So for the whole year the total premium will not decrease (inaudible).

So for the renewal premium increasing by RMB70 billion from RMB288 billion to RMB360 billion. So even if I don't sell any single premium product there's still going to be increases for the total premium. So there will be no negative growth of the total premium.

So related to your next question, compared with the other major insurance companies, indeed we have a lot of pressure because, at the end of last year, for other companies the bancassurance single premium product structure (inaudible) already basically result. That is true for (inaudible), Pacific and (inaudible).

So basically they completed the restructuring of single premium bancassurance by the end of last year. So little pressure remains for them, but still we have RMB50 billion, RMB60 billion bancassurance single premium product. But despite that we are going to maintain a modestly good growth for this year.

Second you asked about China Guangfa Bank. As I said previously, after we acquired this bank through the synergy between banking and assurance we have reinforced the business of both sides. From an investment perspective, as (inaudible) said, is contributing RMB4 billion of profit and we get an investment yield of more than 10%. There was also very good interaction between the two.

We have used our sales force to be able to develop for the bank a [bancassurance] issuance and the bank also uses its own resources to sell our bancassurance, especially term products for bancassurance. So we have achieved synergy between the two. So the overall development is quite good.

Good morning from [Chongjong Securities]. My name is (inaudible). Two questions. What is the balance of the individual channel or the Agent Channel? So I've seen a major improvement on the quality for the productive agents have increased significantly. So this year there is a change to the environment of sales.

I would like to ask you about the target of your sales force for this year. And product wise, in my second question, [protection] product, especially health insurance. What are the [plans] of the Company in this regard?

In terms of the Agent Channel, I would like to request Mr. Zhao to discuss it. In terms of project design I would like to defer to Mr. Li.

In terms of the Agent Channel, in 2017 the Company's strategy is to adhere to the expansion of scale and improvement of the quality (inaudible). In 2016 the focus was on scale, but in 2017 the scale really focuses on quality improvement. While the team's steadily expanding we will endeavor to improve the productivity of the sales force.

So you also observed that in 2017 there is expansion of productive sales force by 29.8%. That is a result of this policy that we will adhere to. In 2018 we are going to adhere to the same strategy of a bigger scale and better quality. We are going to make even more effort to increase the productivity while maintaining (inaudible) expansion of the size of the team.

So our focus will be increasing on the productivity. Our target is that -- of productivity will be double-digits at least. And in terms of increasing the productivity, our threshold on the productivity requirement will be even higher with the expectation that it will contribute to further to the increased productivity. That is the extent of my answer.

About protection products, you asked about the consideration of this year for protection types of product. For this year the Company has remained customer oriented in product development. Last year long-term saving and products were launched by 130 products. This year we are going to further diversify our offering in the protection category.

According to the evolution of sales organization now there is a tiered structure. So we are going to further support the evolution of sales and add to our product offering. In a (inaudible) special-needs of different kinds of people, we are going to step up our product research.

Since protection products receive attention I would like to make some additional remarks. So Mr. Li commented on the product level, but at a corporate level, as you said, we have a proposal target to lead not only in quality but -- quantity but also in quality. So in terms of assessing subsidiaries, for the first time we have introduced a practice where 20% of the performance basis remuneration will be (inaudible).

As to the achievement of the not only be expenses but also in the achievement of the target of new business value. So 80% of the performance remuneration still based upon the expenses. So we have that target, we have a new business value. So that will be part of the remuneration.

For the subsidiaries we have also imposed a target on the protection type products. We have taken a host of measures to increase the protection type of business and increase our value. For several years we had adhered to the principal in the 15 characters -- actually the first is the (inaudible) to [mainly target tighter] business value, strengthening sales force, optimizing business mix, achieving stable growth and guarding against risk.

So among these five (inaudible) the first is advertising business value. So we have taken new measures to continue as we increase our value to the protection and saving product. Now I would like to give the floor to those calling in.

The interpreter cannot hear the question because the sound quality is too poor.

The negative growth is less than two digits. Is it for new policy of individual insurance or total gross written premium? The gross premiums, including term premium, both decreased by only single-digit.

In January indeed gross premium, term premium, both declined by double-digit. So for both the gross written premiums and the term premiums declined, but only by one digit. The last question please. The gentleman here.

Thank you very much. The management from (inaudible), my name is Andy. Two questions. In terms of new business value, the H1 grew by 31% and H2 only by 9%. I would like to ask the management why there is a slowdown in the second half. So for the new business value of 2018, (inaudible) slowdown in (inaudible).

So second question is at the end of 2016 (inaudible) issued the new life expectancy table. So, so far China Life has not used it. So if China Life uses it for the reserve new business value and the embedded value what is going to be the impact of the mortality table?

So let me comment on the new mortality title. If that is adopted for the reserve value and other value there's no material impact. The embedded value reserve and the accounting of channel life has been based on the best assumption.

In terms of the new business value, H1 represents an increase of 31%; H2 by only 9%. For the whole year the growth was 29%. The main reason is that in the second half the structure of the Company changed. So, long-term savings has been focused from the deposit type to the -- another type, the dividend paying type. So we can give you one bonus question opportunity.

(Technical difficulty) from Haitong Securities (inaudible). In terms of developing the term product, so what is the difference between bancassurance and the Agent Channel?

We have learned recently through our survey we found two features in 2018. One is increased difficulty in recruiting. The other is that the conferences are less productive. So in terms of recruiting turnover and conferences what measures will be taken and what changes will happen?

In terms of the first question in terms of sales strategy for bancassurance, Haifeng, would you like to take it, for recruiting (inaudible)?

For management selling term product, two lines. One is banks and (inaudible) one channel. Usually the products are short-term, mostly three-year and mostly a savings type. The term product could not be sold by Agent Channel. So there's another channel I will call insurance planner team. So that team, opposed to agent team, are not essentially different. So actually the products are also basically the same.

If there's any difference the planners team through bancassurance have different sources of clients, namely [mostly] the service of the (inaudible) clients. And the Agent Channel mostly rely on the customers they acquire by themselves. So, Mr. (inaudible), could you deal with the next question?

You touched upon two things. One is the recruiting; the other is productivity conference. In terms of recruiting, since the H2 2015 the whole industry is recruiting very quickly, but after two years of rapid growth of recruiting the sales force has increased tremendously and also continuously in 2018 compared with 2016.

The expansion rate will be lower -- will not be that fast for the whole industry. But in mainland China the expansion is still intensive. So there is still space for further recruiting. But China Life will be more demanding for the quality of recruits and will also require more participant rate. And also in 2018 we will be more demanding from productivity. So maybe compared with 2016 we will recruit less.

In terms of the productivity conference, your judgment is correct. In January the term product regained growth because the regulatory policy required the changes on two products. And in January the return on the bank space wealth management products have picked up. So that has now caused the term product to be less attractive and more difficult to sell. And that will transmit to a lower success rate of sales.

So for this year our sales strategy is changing. Previously many companies rely on the corporate level, but now we will do promotion at all levels. So we emphasize on small briefings at workplaces and also the individual sales. That means we will make individual sales agents more productive at the individual level.

We have also noticed that [protection] type of product should not be reliant mostly on corporate level events. But if a policy is only worth several thousand RMB, we need to emphasize more on the ability of the individual sales agent. So now we step up the training intensity of the sales agents.

So I would like to make a few supplementary remarks. I think you pay great attention to the expansion of the team and improvement the quality of our team members. So what is the relationship between the two? Indeed our team expanded rapidly in previous years. And that is quite necessary because, since our IPO in 2003, our team was down to 600,000. 10 years has passed it's still about [100,000] to 600,000 people, but we have a much bigger business. So how can we sustain business growth equally with the same size of the team?

So in 2015 and 2016 we stepped up recruiting and that has resulted in a doubling of the size of our team. So individual (inaudible) sales are increasing to 1.6 million. So it doubled, but with a bigger size. Indeed the product (technical difficulty) has increased a lot. So individual on term increased from 30 billion to 70 billion. But a bigger team is also more complicated to manage.

So we used to rely on 330,000 managers for 600,000 sales. So now we have more than 1 million sales. So how can we better and more effectively manage the team? We are using transformation to achieve that target. With so many people our workplace needs to be also built and developed quicker. So to build and get our new offices it takes time.

So in terms of the entry point, we are moderately controlling the amount of new recruits. But even we hire a lot of people without improving, that is not dependable. So this last year we have been steadily growing the size of our team, but we will not expand our team as fast as previous years. Of course we are not going to downsize our team. We are going through a stable line of size stabilized size if not steadily growing the size of our team.

The focus is on the improvement of quality. So we are going to be compliant to the regulatory requirement and intensify the development of protection business. So that relies on the ability of individuals and not the traditional product workshop or briefing.

You talked about the (inaudible) of activity of events. Of course that is rational. We are not in favor of such briefings, so they were intended for big policies like the wealth management product. But now for protection products the value of insurance is not just smaller. So you need a much larger sales force to sell many smaller policies. So we are going to expand the size and improve the quality of our team continuously.

You also asked about the negative growth for term product. So that is also caused by the changed business portfolio and the ability of our sales force has not caught up with the (technical difficulty) with the changed business structure. So we have therefore intensified our training this year.

The KPI for training are linked to the sales performance of the sales force. So you can only judge whether training is effective by measuring whether the training has yielded more effective and productive sales. So this is what I would like to add.

So this is the end of the 2017 results briefing. If you have further questions please contact our IR department. So thank you very much for coming.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.