China Life Insurance Company (OTC:LFCHY) Limited (NYSE: LFC), one of China's leading insurance companies, has reported a solid financial performance for the first half of 2024, despite facing an uncertain and volatile market environment.
The company announced that its gross written premium reached RMB 489.57 billion and net profit attributable to shareholders climbed to RMB 38.28 billion, marking a 5.9% year-on-year increase.
Total assets have surpassed RMB 6.2 trillion, reflecting a 7.2% growth. The insurer also reported a significant rise in new business and embedded value, with the latter increasing by 11.4% to RMB 1.4 trillion.
Key Takeaways
- Gross written premium reached RMB 489.57 billion.
- Net profit attributable to shareholders was RMB 38.28 billion, a 5.9% increase year-on-year.
- Total assets exceeded RMB 6.2 trillion, a 7.2% increase from the previous year.
- Embedded value rose by 11.4% to RMB 1.4 trillion.
- The company introduced interim dividends, focusing on shareholder interests.
- Gross investment yield increased by 26 basis points to 3.59%.
Company Outlook
- China Life plans to continue its steady development and improve the quality and efficiency of operations.
- The company is dedicated to deepening reform and innovation in the second half of the year.
- China Life aims to optimize its services, promote integration, and lower costs.
- The company will adjust its product mix and allocate more to high-quality alternative assets to achieve a stable long-term return on investment.
Bearish Highlights
- The company is anticipating a gradual reduction in the overall target and guaranteed interest rates in the coming years.
- China Life has lowered the dividend payout and settlement ratio of universal insurance in an orderly manner.
Bullish Highlights
- China Life has maintained a stable sales force and implemented a sales force reform plan for individual insurance.
- The bancassurance channel has seen an increase in the value ratio.
- The company expects steady and healthy growth in the bancassurance business.
Misses
- The overall liability costs have dropped below 3% on average by the end of July, indicating a potential decrease in revenue from interest.
Q&A Highlights
- Chief Actuary Hou Jin discussed the increase in the bancassurance value ratio due to cost reduction, efficiency improvement, and business structural improvement.
- Executive Ruan Qi elaborated on the positive impact of deregulation of network cooperation on bancassurance.
- The company addressed questions about participating insurance, stating it helps balance risk and earnings.
- China Life considers operating performance and solvency ratio for interim distribution, recommending a ratio of around 50% of last year's distribution.
China Life remains committed to leveraging its insurance protection function, expanding in pension and health insurance sectors, and offering diverse products to different groups. The company has highlighted its proactive risk management and precise services to the real economy.
With a focus on improving operational quality and efficiency, China Life continues to execute strategic investment operations and maintain high solvency ratios. The company's core solvency adequacy ratio stood at 151.9%, and the comprehensive solvency adequacy ratio was 205.23%.
China Life's executives emphasized their commitment to shareholder interests by announcing the introduction of interim dividends and plans to distribute them.
The company's investment approach, focusing on fixed income, equity, and alternative investments, has yielded a net investment yield of 3.03%. They also expect positive investment return deviation due to the double-digit growth in embedded value over the past three years.
China Life has invited interested parties to contact their Investor Relations department for more information or further questions.
InvestingPro Insights
China Life Insurance Company Limited (NYSE: LFC), also known by its ticker CILJF, has demonstrated resilience in its recent financial performance. To provide a deeper understanding of the company's current financial health and future prospects, we can look at some key metrics and InvestingPro Tips.
InvestingPro Data indicates a robust market capitalization of $106.05 billion, which solidifies China Life's position as a significant player in the insurance industry. The company's P/E ratio stands at an attractive 7.95, suggesting that the stock could be undervalued relative to near-term earnings growth. Additionally, the PEG ratio over the last twelve months as of Q2 2024 is 0.52, which may appeal to investors looking for growth at a reasonable price.
InvestingPro Tips further reveal that China Life has a perfect Piotroski Score of 9, indicating strong financial health. Moreover, the company is expected to see net income growth this year, which aligns with its reported increase in net profit attributable to shareholders. However, analysts anticipate a sales decline in the current year, which may warrant attention from investors considering the company's long-term revenue trajectory.
For those interested in exploring more about China Life's financial outlook and performance, InvestingPro offers additional tips on their platform, including insights on the company's dividend history, with 19 consecutive years of maintained dividend payments, and its liquidity position, with liquid assets exceeding short-term obligations.
To gain further insights and access more InvestingPro Tips for China Life Insurance Company Limited, visit https://www.investing.com/pro/CILJF.
Full transcript - China Life Insurance Co Ltd (CILJF) Q2 2024:
Tang Xin: Good morning, ladies and gentlemen. Welcome to China Life's 2024 Interim Results Briefing. My name is Tang Xin, Culture and Brand Development, a Department General Manager of the company. The Beijing and Hong Kong venues for this briefing are connected by a live video conference. We invite those who are not able to attend this briefing in person to use the Dalian facility to join and access through the live webcast. Now let me introduce the management attending today's briefing in Beijing and Hong Kong venues respectively. With us in Beijing are President Li Mingguang; Vice President Liu Hui; Mr. Ruan Qi; Vice President, Ms. Hou Jin, Chief Actuary. With us in Hong Kong via live video conference are Mr. Bai Kai, Vice President, Ms. Yuan Ying, person in charge of Finance. Today's briefing will start with a presentation by our management team on the company's 2024 interim results, followed by a Q&A session during which our management will take questions from both Beijing and Hong Kong venues. Ms. Liu Hui, Securities Representative of the company, will co-host the Q&A session in Hong Kong. Your questions are welcome. Let me now hand over to our President, Mr. Li Mingguang, to introduce the company's 2024 interim results.
Li Mingguang: Ladies and gentlemen, good morning. Welcome to China Life's 2024 interim results announcement. This briefing comprises four parts. First, I will give you an overview about the company's performance as well as the business and operations in H1 2024. Then, Ms. Liu Hui will update you about our financials and investments as well as embedded value. In H1 2024, the external environment was increasingly uncertain and the market environment complex and volatile. China Life actively coped with challenges of all sorts, achieved new heights on a high base in many core indicators. The company's gross written premium reached RMB489.57 billion and its total assets exceeded RMB6.2 trillion. In the first half of the year, new business value and embedded value grew rapidly while remaining the champion of the industry. Net profit attributable to shareholders of the company hit RMB38.28 billion, showing clearly improved profitability. Both core and comprehensive solvency ratio remained high, and the company ranked the first among life insurers in 2023 Insurance Service Quality Index. In general, the company balanced scale, value, quality, structure, efficiency, and security, and consolidated its leading position in overall strength. Moreover, the company continued to function as a shock absorber for the economy and a stabilizer for the society, integrated itself into the country's overall development, improved the people's livelihood, and enhanced the effectiveness of social governance. First, the protection function of insurance was fully leveraged. In H1, we continuously expanded pension and health insurance in the areas of most concern for the public, accumulated nearly RMB4 trillion in pension-related insurance reserves, and health insurance premium increased by 6% year-on-year. The increasingly diverse, inclusive products served groups such as migrants, farmers, and seniors. Second, precise and efficient services were provided to the real economy, tapping the advantage of patient capital. We accumulatively invested over RMB4.2 trillion to serve the real economy, invested over RMB720 billion in technology innovation, advanced manufacturing, and green development for new quality productive forces. We underwrote 99.2% more customers in emerging strategic industries and 64.3% more customers in green insurance. Third, risks were proactively and solidly managed. The company was rated A-class for 24 consecutive quarters in the Integrated Risk Rating and maintained industry-leading regulatory ratings for consumer protection. While maintaining steady development, the company has ever, paid attention to the interests of all shareholders and created long-term and stable value returns for investors. Since its listing, the company has distributed over RMB200 billion in dividends, with an average dividend-to-payout ratio of around 39%, to share more value with investors arising from the company's growth. The company decided to introduce interim dividends and pay RMB0.2 per share. Let me move on to introduce business and operations. In H1 2024, the company deepened its reforms to cope with profound industrial changes, became even more people-centric, matched asset and liability closer and achieved high-quality development in three aspects. First, better quality. On the liability side, we diversified our products and business and improved the balance among endowment, annuity, health, and whole life. We achieved effective management of new business costs and duration, with the percentage of FYRP with a 10-year-plus payment duration up by 3.8%, and growth sustainability further enhanced. On the asset side, we allocated among asset classes across cycles and increased gross investment yield by 26 base points. Second, greater momentum. The company made the sales force even more professional, specialized, and comprehensive. While keeping its size stable, the agent force saw its per capita productivity rising by double digits and its performing members growing in both absolute and relative terms. The development of a new type marketing force made a solid start. Upholding the new product-as-a-service model, we further diversified our health management services. Our elderly care communities have been rolled out to 14 cities, covering the Beijing, Tianjin, Hebei area, Yangtze River Delta, and the city cluster of Chengdu and Chongqing, as well as other city clusters. Our digitalization gained momentum and yielded results. AI and big data mining were widely used in product pricing, sales support, operational services, and other scenarios. Over 130 pb of data was stored, and data was yielding more and more value. Third, higher efficiency. We continuously advanced cost reduction and efficiency enhancement and precisely managed expenses. While sustaining steady growth of gross premium, we significantly reduced fees and commissions and improved the return on imports by various channels in H1. The individual agent channel adhered to high-quality development, vigorously created value, deepened channel transformation, and steadily improved the indicators and value of new business on top of high base. FYRP reached RMB84.61 billion, up 5.6%. FYRP for 10-plus years stood at RMB42.6 billion, up 9.4%. It took up 50.3% of the total FYRP, up 1.7% year-on-year. In H1, the individual agent channel contributed a new business value of RMB29.29 billion, up 14.6%. Moreover, the individual agent force deepened its market system reform, accelerated the transformation of its existing team and advanced its new sales model. The existing team continued to implement its team-building philosophy, accelerated the construction of a customer-centric individual insurance management system, and expedited the transformation of the individual insurance team into a professional, specialized, and comprehensive one. By the end of June, the individual agent channel sales force had maintained its team size stable at 629,000 people, comfortably the largest in the industry. Among them, 401,000 worked in general sales and 228,000 in up-sale. The per capita productivity of agent force grew by 12.4%, going up for four years in a row. The number of high-quality new agents went up by 20.1%. Percentage of high-performance agents increased by 1.9% year-on-year. We also expanded the seed program to 24 cities as planned to pilot a new agent model. The bancassurance channel strictly complied with the reform of unified application and execution, better controlled commissions, and reduced the cost while increasing efficiency. This channel also diversified its products, built diverse product systems, upgraded its basic law, professionalized team management, expanded its coverage, and covered more partner banks. In H1, bancassurance earned a GWP of RMB49.73 billion and renewal premium of RMB32.74 billion, up 27.7%, representing 65.8% of GWP. By the end of June, this channel involved 21,000 customer managers. Thanks to expense reduction and business structure optimization, the MBV margin improved by 13.4%. The company actively practiced the consumer-centric business philosophy, accelerated the upgrading and integration of service resources, strengthened the protection of consumer rights and interests, and endeavored to create a better customer experience with high-quality operation services. First, operation efficiency was improved by digital intelligence. The average time to settle claims was 0.34 days, a significant 13% increase year-on-year, ranking among the top in the industry. Claims can be settled in seconds at the earliest through the Claims Direct Payment Program. The intelligent review rate of underwriting and policy administration reached 96.2% and 99%, respectively. The intelligent and intensive sharing model has led to a continuous improvement in the approval efficiency of underwriting, policy administration, and other operational areas. Second, the service quality at points of reach is better. The company continues to build a service system of one-click for direct online access and close proximity offline. The number of registered users of channelized life insurance app exceeded 150 million. The customer contact service experience continued to improve, and more than 500 traditional counters were transformed into four-in-one customer experience centers of service experience, sales assistance, and consumer protection. Third, service supply was expanded and upgraded. We built a diversified, multilevel, and comprehensive service matrix, providing services to a total of 1.56 billion people in the first half of the year. The heartwarming senior-friendly services were selected as an excellent case of inclusive insurance services by the Insurance Association of China. Fourth, the consumer protection system remained sound. We further deepened the comprehensive consumer protection program of full participation, comprehensive coverage, and full chain management. We deepened the construction of the digital intelligence consumer protection platform and maintained the industry's top rankings in regulator assessment on consumer protection and insurance service quality index. In the second half of the year, the company will continue to practice the business ideas of three commits to strengthen party building, promote reform, and prevent risks, three enhances of development, value, and the team, and three breakthroughs in optimizing services, promoting integration, and lowering costs, and continue to consolidate the stable and positive development trend. We will promote development, change model, adjust structure, and increase efficiency by reform and strive to achieve a high level of multi-objective dynamic balance. We will focus on the following tasks. First, we will assess the overall situation and promote the steady development of the company. We will firmly grasp the opportunities in the era of healthy China and aging economy and promote the steady growth of health and pension insurance, comply with the development trend of regional coordination, continue to maintain the upward trend of key cities, and further consolidate the traditional advantages of the current [ph] market. Second, we will insist on high quality development and continue to improve the quality and efficiency of our operations. We will proactively respond to changes in the interest rate environment and customer demand, adhere to the asset liability alignment, and continue to promote the diversification of business maturities, forms, and costs. We will further optimize the investment strategy that matches the characteristics of liabilities and stabilize investment returns. Third, we will deepen reform and innovation, and make further breakthroughs in optimizing services, promoting integration, and lowering costs. We will firmly implement the guiding principles of the Third Plenary Session of the 20th CPC Central Committee and continue to deepen reform and innovation. We will insist on optimizing basic services, strengthening value-added services, refining the layout of recreational and ecosystem services, and continuously improving customer service. We will deepen the integration of resources and effectively utilize the company's customer channel and ecosystem advantages. We will strengthen refined management and digital empowerment, accelerate the deep integration of new quality productive forces with the life insurance value chain, and comprehensively enhance input and output efficiency. Next, I would like to ask Ms. Liu Hui to introduce the company's financials and investments and embedded value.
Liu Hui: Thank you, Mr. Li. Next, let me brief you on China Life's financials and investments in the first half of the year. First of all, let's look at the main financial indicators for the first half of the year. As of the end of June, the company's total assets amounted to CNY6.22 trillion, up 7.2%. Total liabilities amounted to CNY5.72 trillion, up 7.6%. In the first half of the year, the company continued to strengthen the linkage of assets and liabilities, continuously strengthen underwriting management and enhanced investment income, realizing a net profit attributable to shareholders of the company of CNY38.28 billion, an increase of 5.9% year-on-year. As of the end of June, the company's core solvency adequacy ratio was 151.9%, and the comprehensive solvency adequacy ratio was 205.23%, which stayed at a high level. Next, let me present to you the company's investment performance in the first half of the year. In the first half of 2024, the domestic interest rate level went down faster and quality assets were scarce. The stock market oscillated broadly at a low level with obvious structural differentiation. The company proactively responded to the challenges of the complex market environment, maintained strategic certainty, adhered to asset liability matching, and the flexibility carried out investment operations. First, fixed income bottom position continued to consolidate. In the first half of the year, the allocation of after-long-term interest rate bonds and high-grade credit bonds exceeded RMB400 billion, and the proportion of bond allocation continued to increase. Second, equity investment was more balanced. We ceased the market low in the first quarter to increase the position moderately and continued to promote structural optimization, equity assets, investment returns improved year-on-year. Third, alternative investment allocation is steady. Focusing on high-quality themes and core assets, the company innovated its investment model and stabilized its allocation scale and return level. The company's net investment yield for the first half of 2024 was 3.03%, and its gross investment yield was 3.59%, up 26 basis points from the same period in 2023. In terms of credit risk management, the company always adheres to a prudent investment philosophy and maintains a prudent credit risk appetite. As of the end of June 2024, over 98% of the company's credit bonds were externally rated AAA, and over 99% of its non-standard fixed income was externally rated AAA. The company's asset allocation remains sound and asset quality is excellent overall. Now, I will continue with the embedded value part. In the first half of 2024, the company sought progress while maintaining stability, continued to focus on value creation, enhanced the contribution of new business value by strengthening its diversified business strategy, strengthened expense management, promoted cost reduction and efficiency, proactively enhanced the effectiveness of risk reduction management, actively consolidated the effectiveness of asset liability linkage, and endeavored to stabilize investment returns. As of June 30, 2024, the company's embedded value amounted to RMB1.4 trillion, an increase of 11.4% from RMB1.26 trillion at the beginning of the year. Among them, in the first half of 2024, the value of new business achieved rapid growth of 18.6%, totaling RMB32.26 billion continuing to lead the industry. The individual agent channel grew 14.6% year-on-year, while bank assurance and other channels grew 80.6% year-on-year. Of the value of new business in the first half of the year, 90.8% came from the individual agent channel, under the guidance of unified reporting and practice. The bank assurance and other channels achieved more significant results in cost reduction and efficiency enhancement, and their contribution increased compared to the same period last year. The company's active management of interest rate risk and proactive control of liability duration were highly effective, but the sensitivity value of new business to investment yield declined significantly in the first half of 2024. Meanwhile, the sensitivity value of new business to expenses in the first half of the year was also reduced, reflecting the results of the company's active pursuit of cost reduction and efficiency. This concludes management's presentation of the interim results. Thank you.
Li Mingguang: Thank you members of the management. Now I would like to invite questions from analysts and investors at Beijing, Hong Kong venues and those who are joining us through teleconference facility, please ask no more than two questions at each time, and let me know your name and institution. Let's first take a question from Beijing. First of all, the lady. Thank you.
Q - Ting Sun: Thank you management for the presentation. I'm Sun Ting from Haitong Securities. I would like to first congratulate the company on excellent performance. According to our calculation, under the new standards for Q2 profitability, you have already doubled your year-on-year performance. That is for pub, especially for NBV investment yield of 3.59%, which is much better than the industry average of 2.8%. I've got two questions for you, first, about investment. In recent years, there have been a general concern about the interest margin loss. And in H1, the interest rate has been falling significantly. So I would like to know your observation about the interest rate trend and equity market trends. What is your adjustment and planning as well as the intended application among asset classes? Second, also about investment, your allocation to OCI equity investment has been low, but you have moved up this ratio in H1. Will you place more shares in OCI account? Second, about life insurance. September 1, the target interest rates will be lowered, and with that, in terms of product policy, what changes will you introduce? And in terms of product mix, what differences do you anticipate? Also, I would like to know a number from the company in terms of ability cost. How is that? And how it will be in the future trend.
Li Mingguang: I would like to invite Ms. Liu Hui to address the first question and Hou Jin, the second one.
Liu Hui: Thank you very much for your question. In H2, we expect the economy to continue its steady growth for the better. And the equity market valuation in general, is in historical low and there are structural opportunities and also long-term value for allocation. In the fixed income market, the downside of interest rate is limited, and there's also a scarcity of high-quality assets. So in H2, we will stick to the matching between asset and liability and focus on the return on equity and also the advantage of long-term fund of the insurance, focus on long-duration products and also allocate more to the high-quality alternative assets with a stable return and capture business opportunities from transactions. We'll also be the critical majority and also allocate more to the high dividend shares and also make our equity allocation more balanced and structurally more optimized. We'll stick to the long-term and also the prudent investment style so as to achieve a stable long-term return on investment in relative terms. Also, you mentioned about the high dividend shares. Indeed, those shares have outperformed the market by a big deal and also attracted broad attention. We believe that a high dividend strategy has long-term investment value, and we pay close attention to investments in those shares. And so far in this field, the company has already made some allocation. And in terms of OCI is only a small part. And so far, our dividend ratio has exceeded 6%. At this moment, we believe that the overall valuation of such shares remain reasonable. And down the road, we will appropriately allocate more of our investment to the high dividend shares. We'll pace our investments and manage the security margin. So we have attention to the companies with a sound operation and governance as well as a low market value and also high dividend. So for those industry leaders, we will diversify our strategy and intensify our active management so as to improve the return on our equity investment.
Hou Jin: Okay. I would like to address about the falling target rate and the liability risk. On September 1 and October 1, the industry will lower the target interest rate and guaranteed risk for the ordinary insurance, September 1 and also the universal -- and participating insurance on October 1. So we have made ourselves fully ready, and we have also the strategy of diversification in terms of term cost and form. So for these three diversities, as guiding principles for products, we enable our products to meet the changes of asset liability matches and evolving customer demand. So this is the overall guiding principle. Facing the new market interest rates guided by the principle of three diversities, we will dynamically adjust our product mix. For example, in terms of cost diversification, it is possible that, over the past period, mostly, it is the ordinary policies that are the mainstream or the main part. So in the future, we will better balance the guaranteed risk versus the floating interest rate. The products covering the latter will be increased, especially the dividend paying products in H1. We have launched more of the products with floating rate. And also the participating insurance is also rapidly growing in the future across the company. We will make further improvements on our product strategy for the future market launches of new products. We will also further emphasize our concept on the management of term and duration. For the duration management, for years, China Life has been committed. In H1 through our results announcements, you will be able to see that due to the management of our new product duration, the NBV sensitivity to investment yield has been significantly lowered. That is one part. As another part, we will stay customer centric and launch house and also mortality-based insurance so as to diversify also the company's source of profitability from the product side. This is about the future of product strategy. On the liability cost, the average guaranteed interest return rate is about 2.9% for China Life since the beginning of this year. According to the actual investment and the market performance, we have lowered the dividend payout of our participating insurance and settlement ratio of universal insurance in an orderly manner. By the end of July, the overall liability costs of the company has dropped below 3% on average. For the whole six months of the first half of the year, it is slightly above 3%, but the cost structure is coming down gradually. Because of the target and guaranteed interest rates were reduced on August 1 and September 1, so the guaranteed return of new products will be effectively reduced. So in the next two to three years, you can expect to see that overall target and guaranteed interest rate of the company as a general will come down. For the floating return, in the light of the actual investment performance, we will make sure that our products meet the principle of stability and affordability in terms of the management of the floating return. I would like to invite the next question from Hong Kong, Michelle from Citi, please.
Unidentified Analyst: Thank you for the opportunity to ask question. Michelle, analyst from Citibank. I would like to congratulate the company on its performance. But also in terms of our team and profitability, we have seen a clear reversal in H2 -- in Q2. In terms of the team or sales force, you discussed seed the program for your new sales force that has been rolled out to 24 cities and also -- or in certain results. I would like to ask why since Q2, we have been able to see the expansion of team and sales force. Are we going to see a moderate continued expansion of your sales force? What have you done in terms of rolling out the seed program? What results do you anticipate? Do you have a timetable for that? That is about individual insurance. About net profitability. Q2 also exhibited a clear reversal. In terms of pretax profit, the growth has been as much as almost 30%. How about the tax rate? And this year, we have seen that the management actively raising return to the shareholders and planning the payment of the interim dividend. What is the logic of such distribution? And what is your anticipated whole year distribution?
Li Mingguang: Okay. There are three questions, right? The HR question goes to Mr. Ruan Qi, net profit goes to Ms. Liu and the final distribution, I will take it. I will invite Ruan Qi first.
Ruan Qi: Thank you for your question. You paid attention to our sales force and the reversal in Q2. I didn't feel it. My overall feeling is just a stable size of the team. Since Q4 2022, when China Life was conceiving and planning the sales force reform of individual insurance and took some actions, in the Open Day in Tianjin Q4 last year, we systematically introduced our sales force reform plan for individual insurance. There are mainly three parts. One is the upgrade of the existing team, and the second is the newer terms of the new type of sales model, and the third is the product plus service capability enhancement. Since Q2 last year, we have been following our existing plan and executed in a step-by-step manner. So we actually stick to our core concept of moderate team expansion and conducted a 6 plus 1 program as our priorities. I think I already covered those priorities last year at our briefing. So in H1 this year, we have been moving forward, the sales force reform in general, but we highlighted the four directions. One is the assessment for high-performance individuals, and that is what we call the high performance with star talents. The second is the team development. Last year, we were guiding it. And this year, we have been intensifying our assessment for the high-performance recruits. The third is the further enhanced assessment of team retention. And the fourth, is the work on the management team in terms of assessing their effectiveness of execution. That is to say that the plan of a reform must be executed and reviewed and assessed so that, at low levels, province, city and county as well as our outlets and workplace, all the five levels need to speak one language, and all the reform initiatives can be implemented at the grass root. By all these efforts, the sales force has already made a clear improvement. There are several parts of the manifestation. First, in terms of the high-performance talents, last year, in the first half, because of the fall of the interest rate from 3.5% to 3%, the market responded to the strong anticipation, we prohibited a high pain but still the market demand drove the fast growth of our premium and impressive numbers. This year in the first half, we went through a stable development. In terms of high performers, salespeople grew year-on-year in both absolute and relative terms. So that is remarkable and not easy to achieve. Second, about the high-performance new recruits, namely the recruits with college degree and aged between 25 and 45 years old, the share of such high-performance recruits and their absolute performance and both improved significantly. These numbers showcase the markedly improved quality of recruiting. The third is about the ever improving team retention. In April and July last year, we launched the new review system in two batches and 236 units nationwide. The result is clear and retention has been markedly improved. The fourth is the quality and the performance of the new recruits within one year of service. You have seen the numbers in our interim announcements. In H1, the per capita FYRP improved by 12.4%. Because of the high performance of the new recruits, within one year of service, the per capita FYRP for 10-plus years have outperformed the average level of the entire sales force. That show us the high potential of these people. Because of this move, it is my feeling that year-to-date, there was a dip in January. And in all the other months, there have been stable performance. In Q2, there was a slight uptick. And as long as we [indiscernible] and unswervingly stick to our team transformation strategy and professionalize, specialize our team for more comprehensive improvement, I'm confident in the future performance of our team. For the seed program, which was kicked off last December, in Q1, we announced a deployment to 13 cities. So we announced a rollout to 24 cities in interim results. So from the end of 2022 to early 2023, our seed program is expected to be positive to 546 cities. So you can review the reporting at that time. We expected to take two years to make the model work. Then in 2026, it was expected to be rolled out, but we moved this up in terms of accelerating the rollout to part of the cities because after our reiterative consultation and assessment, the direction, basic system, recruiting and our review and also training sales models under the seed program were highly recognized. A lot of the priority cities applied to be included into the rollout. Then, it was the management decision that the rollout could be expanded. We are still breaking our way forward at this stage but with the large scope of piloting. So we are embracing our team, all with college degree, and a flat organization. Upholding a new sales model. The team is already underway. It has also a master certain size with as of all, and we hope that at appropriate time there'll be interim results, and then we will update the announcements to the media and analysts. Thank you.
Liu Hui: Now let me take your question on tax. Thank you for your interest in our profits. Like you said in this year's results, the pretax profits grew higher on than tax revenues. This is largely due to the confirmation of income tax. This year, the income tax was CNY8.8 billion, an increase year-on-year. The confirmation of income tax is affected by deferred tax as well as other tax factors. Like we introduced earlier this year's results, a better dispel increased revenues and will also affect income tax. Besides in a stock market and a stock market, we implemented the new accounting standards, especially in Asia market, we implemented the IFRS 9 and 17. The shift will also affect the income tax. And also deferred income tax confirmation is another factor. I think you all know that in life insurance, the tax exempted on income is high. So for the whole year, it's likely to be negative, which will be a tax loss. The company, according to income tax as well as the accounting standards, will estimate the future income tax to determine the amount that can be included in the deductible amount this year. Tax-free income will continue to be high for the company moving forward. So we have adopted a cautious approach to identify the tax losses, which will affect the confirmation of the deferred income tax of the year due to the triple factor, our deferred income tax amount has increased this year. Thank you.
Li Mingguang: Now let me take the last question about the dividend payout. Since our listing, China Life pays high attention to shareholder interests. So this time, we have gone out of way to summarize our dividend payout since our listing. As was shown in the presentation since our listing, China Life has cumulatively paid more than RMB200 billion in dividends since listing. In terms of share, the highest is 65. In 2023 last year, taking into account the profit difference under two accounting standards, we increased the share to 58%. This year to allow investors to share more development outcomes, we've also specially paid out dividends. This trajectory speaks to our philosophy of returning to shareholders. So this year and moving forward, our dividend payout will continue on this path. More specifically while meeting regulatory requirements, we will give full consideration to our performance, shareholder returns as well as business development requirements and work out the dividend payout for the whole year. So that's for my answer. Thank you. Now let's get back to Beijing. Gentlemen, in the second row, please.
Unidentified Analyst: Thank you for the opportunity. I'm from Dongwu Securities. Question on bancassurance on the Slide 12 of the PPT, we can see that the new sales of bancassurance dropped, but value ratio increased. The management mentioned some details in the presentation. Could you shed more light on the reasoning behind the increase in the value ratio? And after limiting the restriction of 1 plus 3 of network deployment, as the industry champion, how can we further leverage our advantages? And also, we've noted the increase in embedded value. There is a very important on figure. The EV returned to double-digit growth in the past three years. Our valuation system faced a big test during COVID. So that is one point. The return investment return deviation has returned to positive territory. So investment return has exceeded 4.5%, which is the supposed level. So could you elaborate on that?
Li Mingguang: You actually asked 3 questions. The first question regarding value ratio, an increase in the bancassurance value. This question will be taken by Madam Hou Jin. Regarding the network cooperation question will go to Mr. Ruan Qi. So madam Hou Jin, please. Thank you.
Hou Jin: Thank you for your interest in the increase in value ratio and embedded value. Bancassurance new business ratio increase actually comes from multiple sources. In our slides, we introduced the course of cost reduction, efficiency improvement as well as business structural improvement, which contributed to 13.4 percentage points. This is the result of reduced cost at bancassurance due to the principle of unified reporting and practice. Moving forward, in the bancassurance channel, we will continue to refine cost management, including the sales cost management and on back-office cost management. In terms of cost allocation, we will introduce more diversified products, including the matching of different durations, the matching of different cost structures from product and post-launch management. We will enhance our fee spread as well as asset liability management results. We hope the bancassurance channel value ratio with our efforts will continue to improve. And second, the increase of embedded value. You've also noticed that this year's investment return deviation is positive, like you said, although the overall return rate disclosed is 3.59%. The comprehensive figure including embedded value investment return deviation is slightly above 5%. So as you can tell, the investment return deviation is positive.
Ruan Qi: Let me take the question on 1 plus 3 channel network cooperation deregulation. Well, actually, this is not an isolated move. It should be considered under the perspective of the implementation of unified reporting and practice after the full implementation of unified reporting and practice at bancassurance, the ratio of fees payment by the banks are converging, all with very slight differences. Banks before the deregulation and after the deregulation, when they pick insurers, they pay more attention to branding, the operations as well as the expertise, customer service capability and also more importantly, risk management capability. As the fees are not that different, they will pick insurers with the better capabilities, strengths and services. And China Life ticks all the boxes in the industry. So the deregulation of 1 plus 3 favors insurers that can provide richer services and products to customers. Due to these advantages, in the first half of the year, China Life's implementation of unified reporting and practice as well as with the deregulation of network cooperation, aside from our state-owned banks, where we have maintained existing strengths and operations, we have also strengthened cooperation with the local commercial banks and joint stock commercial banks. So in the first half of the year, the number of our corporation points increased steadily. And in the first half of the year, our bancassurance business scale and market share as well as market ranking stayed stable. And moving forward, we have full confidence in bancassurance business where we can strengthen network building an increased incentive of network operation. We will stay committed to our scale and value creation. Externally, we will strengthen communication and liaison with bancassurance channels. Internally, we will strengthen capacity building. We believe our bancassurance channel will continue to grow steadily and healthily. Thank you.
Tang Xin: Let's invite the next question from Hong Kong. This gentleman, please.
Unidentified Analyst: Thank you to management. I'm from Morgan Stanley (NYSE:MS). I have two questions. First, regarding our products, especially in -- on the dividend insurance in the first half of the year, the insurance grew very well. What is the percentage of the insurance? And what is the market demand for such product? For example, from first-tier sales force or the promotion from bancassurance, are there challenges? And moving forward, it might increase above 50%. So what is your outlook on the percentage in the midterm and long term? And second question is related to bancassurance. We can see that on this year on one-off payments contracted dramatically. Is this because of the principle of unified reporting and practice? Is this because of maneuver in terms of accounting? In terms of bancassurance, BMP percentage remains low. Do you have any considerations for its long-term value consideration?
Li Mingguang: I would invite Ms. Hou Jin to address the first question and Ruan Qi, the second.
Hou Jin: Thank you. For the participating insurance, for this round of the rate cut and also the clear requirements and the encouragement of the development for participating insurance and the supporting requirements, the market had a great interest and expectation for the development of participating insurance. Before the issuance of the company had already reconsider and plan the deployment and planning of participating insurance. The growth rate of participating insurance has been fast. But due to the history, over the years, there were very few new policies. And after rapid growth, by the end of June, the share of participating insurance in new business premium remains low. That is just the objective reality. And in China Life, the share of participating insurance and other floating insurance accounted for 40% of our reserve. So almost half of the business of the company can be managed in a floating way in quarters with the market performance. Facing the market demand for participating insurance, we see the necessity of developing participating insurance. For a life insurer such development is a systematic work. It is not the case that after the product is launched, healthy development will be automatically achieved. So in terms of developing participating insurance, the company has introduced a set of plans, including during the rest of the industry to educate the customers so that the customers will more rationally realize the relationship between the floating and guaranteed benefits. And also, the demonstrated and realized interest rate so that the consumer awareness will be improved for the development of participating insurance, we will also manage better our sales force and better categorize and hierarchical level so that our salespeople can be better trained in terms of selling the floating products so that they can develop our participating insurance in a more scientific manner. As we expect, as of September, the share of participating insurance in new business will markedly enlarge. And in terms of the specific share or proportion, I can say that we will try to enlarge it and also do a good job in managing assets and liabilities so as to cope with the challenges of the new interest rate environment jointly.
Ruan Qi: Okay. I would like to take your question about the single payment of bancassurance and also the share of bancassurance value. In terms of single premium payment, in bancassurance, we didn't do much last year. By strategy, we have not conceived a shift. Since the beginning of the year, we have designed quite a diverse spectrum of single premium payment bancassurance products because of the reform of unified reporting and practice. The reduction of the commission and the fees have been steeper than the regular premium payment products. In terms of the reward to banks, banks have their own consideration in terms of how to balance their source of benefit. We did not initiate the restructuring. And second, the big downturn of the single premium payment did not affect our growth of GWP. For years, the regular premium payment products, especially the 10-year-plus products in China Life have been leading the industry by a big margin. So we have a lot of potential future growth. Despite the downturn of the single premium payment bancassurance products in the first half of the year, our momentum remains strong. So we made the adjustment in a reactive way, and that is not bad. We will not intentionally downsize any business. What we want to achieve is balanced and stable growth. So that is our overall consideration of bancassurance. Specifically, you also asked about the share of bancassurance in the overall business. It was about 6% last year in our new business. And this year, in the first half, that has been enlarged to 9%. The main reason is the reform of unified reporting and practice. We will step up bancassurance in the future, and we wish to see steady increase of the value from bancassurance. But in terms of the share, that is a consideration involving multiple dimensions. We hope to see also steadily growing value of individual agent channel. But if the overall value goes down, but the bancassurance value goes up, of course, bancassurance will take a bigger share. But that is not what we hope to see. So we hope both the value of bancassurance and the overall business growing at the same time steadily.
Tang Xin: Any questions from the teleconference? So is there any analyst using teleconference facility, would like to ask a question. [Operator Instructions] Well, anyway, let's come back to Beijing. The lady in the front row, please.
Unidentified Analyst: Thank you for the opportunity. This is Lo Chi [ph], analyst of insurance sector from Guangfa [ph] Securities. A follow-up to Mr. Hou Jin. You said your liability cost is below 3%. Did you consider the premium variance and mortality variance for that? So because of the rate cuts, have you calculated your trajectory of the liability costs in the next three or five years is going up or down? Second, the NBV growth rate has been high over the past two years. What is your projection for next year in terms of premium and value of new business? These two questions.
Li Mingguang: Ms. Liu -- so you already mentioned Ms. Liu, so I would like to divert your question to Ms. Hou, our Chief Actuary, since you mentioned her.
Hou Jin: Operating cost up to last month was no more than 3%. We didn't consider the variances you mentioned. For life insurance, as you know, typically, we work on three variances with multiple variants as management. The mortality mobility have been considered in premium, so there are certain sources. And for the premium or expense variance, it is not covered by investment yield as a whole. But if we consider the other variances, the breakeven rate will be low and for new business, the breakeven level will be even lower than the existing or overall business. Second, over the past two years with two rate cuts, for the guaranteed minimum and target rates, so considering the development of new business in the future, our overall guaranteed return cost in the next two to three years will trend down. This is what we hope to see as healthy direction of development. This is about your first question. About the second one, about our new business and its value next year, next year, it's going to be the whole -- first whole year with lowered rate. Then we will actively restructure our products and business in H2. In various respects, the company will get itself ready for the restructuring. And next year, we will arrange a pretty proactive budget for new business. In terms of value, the company will vigorously reduce cost. That is what the trend calls for and what the company's new quality -- high-quality development requires. We'll also do a good job in striking a balance the volume and risk of new business development. For participating insurance, typically, people believe the value rate to be lower than the ordinary or general insurance products. But actually, participating insurance bring down the overall operating risk of the company. So the value rate is not only about earning. It is also implying the cost at risk. So in terms of balancing risk and earnings, the value rate of participating issuance will not be much lower than the ordinary ones.
Tang Xin: Due to time limit, let's come to the final question from Hong Kong. Thomas, please, from Goldman.
Thomas Wang: Thank you management. This is Wang from Goldman. Can I have a follow-up question about the participating insurance for the dividend payout? So what is the basis of your interim distribution? Some colleagues mentioned this is because of the interim profit. Someone said it is benchmarked to last year, whole year distribution. So what is your consideration or rationale for that? As shown by the PPT slide, can we anticipate a whole year distribution rate similar with the historical average? Second, about the expense variance. You mentioned repeatedly the cost reduction and the efficiency improvement. What is your anticipation about the expense variance and how that will help to lower the liability cost?
Li Mingguang: I will address the question but before I invite Ms. Hou Jin to address your second one. You asked about the interim distribution rationale. Our main consideration is to reward investors. This is the first and foremost consideration. In terms of how much, you are analyzing the higher or lower distribution ratio of different companies in turn alive. In China Life, we mostly base our decision on the operating performance. And now there has been a good profit in the first half of the year. Second, the -- we consider the solvency ratio. The core and the comprehensive solvency ratio both are very important. Even after the distribution, our distribution ratio remains quite stable. If we look ahead to the whole year profitability, the interim distribution ratio, of course, must be based on the whole year performance. With a total analysis of all these factors, the recommended interim distribution ratio is around 50% of the distribution last year. So we have taken active steps. You asked about the whole year distribution this year, what we anticipate to be the whole year distribution ratio. As I said, the history shows us the basic concept of distribution. When we decide the whole year distribution, as I said, we will first comply with the regulatory requirement. That is the basic requirement. Then we will consider the operating performance, return to shareholders and the interim distribution and the year-end solvency and to make a comprehensive consideration.
Hou Jin: Let me answer this question regarding the fee difference. Fee difference management is a cumbersome management system for life insurers. We can see in the first half of the year, bancassurance channel value ratio increased significantly. To put it simply, it came from bancassurance on business cost reduction. But actually, fee difference management is much more than the reduction of sales cost. It also comes from technology empowerment, improvement of operational efficiency and back-office cost savings. And it also came from the reasonable distribution of cost resources, which can go to the most effective department. All kinds of management on AIM means are contributors to increased efficiency. So our fee management and also moves to boost the fee difference, our ongoing process. And the results of the process are gradually unleashed. This year -- in this year's notice, we can see that the unified reporting and practice is not only applicable to bancassurance. Actually, this is aligned with our approach to cost. This helps us on better refine our cost management by providing a conducive context. In this environment, we will gradually improve our fee spread. Thank you.
Tang Xin: Now due to the time limit, we will not be able to take all your questions. If you have further questions, please do not hesitate to get in touch with our Investor Relations team at any time. This brings us to the end of our 2024 interim results briefing. Thank you for your time. Goodbye.
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