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Li Yinghui: Good evening, ladies and gentlemen, investors, analysts. Welcome to China Life's 2024 Third Quarter Results briefing. My name is Li Yinghui, Securities Representative of the Company. Today's briefing is held online. Mr. Li Mingguang, President; Ms. Liu Hui, Vice President; Mr. Bai Kai, Vice President; Ms. Hou Jin, Chief Actuary; Ms. Yuan Ying, Person in Charge of Finance, as well as the Head of the Development Departments participate in the briefing. In addition, Mr. Zhai Haitao, Independent Director of the company, is also attending online. Today, this briefing is held in a bilingual form. Please select Chinese or English channel as you need. Today's briefing will start with a presentation on the company's third quarter results, followed by a Q&A session, during which our management will take questions from the participants in the call. Now let's first have Ms. Grace Hou, Head of the IR team introduce the company's 2024 third quarter results.
Grace Hou: Thank you, Ms. Li. I'm Hou [indiscernible]. I know our analysts, investors are very busy tonight. We've just switched to our meeting from another meeting. To give you some background, let me share with you our performance. In the first three quarters of 2024, the company continuously deepened reforms and innovation, steadily advanced risk prevention and control, took active actions and strengthened asset liability management. As a result, the company achieved continuous breakthroughs in business development. Its operational quality and efficiency were significantly enhanced. Market leading position was continuously solidified, and a comprehensive strength was further bolstered. Firstly, the insurance business maintained rapid growth on the high base for the corresponding period of last year. In the first three quarters, the company's gross return premiums amounted to RMB600 billion, a record high, RMB60.82 billion, a yearly increase of 5.1%. In particular, renewal premiums were RMB410.7 billion, an increase of 7.5% year-on-year, premiums from new policies were RMB197.5 billion, an increase of 0.4% year-on-year. First year regular premiums amounted to RMB113.2 billion, an increase of 6.8% year-on-year, of which first year regular premiums with a payment duration of 10 years or longer reached RMB52.6 billion, an increase of 17.7% year-on-year. Short-term insurance premiums were RMB73.7 billion, an increase of 6.3% year-on-year. The surrender rate was 0.74%, a decrease of 0.14 percentage points year-on-year. So this is about the insurance business. Secondly, operational quality and efficiency continued to improve with the value of new business maintaining rapid growth. The company consistently strengthened asset liability management, actively promoted the diversification of product and business model and continuously optimized the quality of insurance liabilities, which further solidified the foundation of the company's long-term development. First year regular premiums with a payment duration of 10 years or longer maintained rapid growth, accounting for 46% of the first year regular premiums, an increase of 4 percentage points from the corresponding period of 2023. The value of new business for the first three quarters maintained rapid growth, reaching an increase of 25.1% compared to 2023 corresponding restated results. Thirdly, the size of the sales force was further stabilized with continuously enhanced quality. The company steadily advanced its sales system reforms and deepened the transformation towards a specialized professional and integrated sales team with a focus on optimizing agent recruitment and development and increasing productivity. As at the end of the third quarter, the number of its total sales force was 694,000, of which the number of agents of the individual agent channel was 641,000, showing improved momentum. The quality of the sales force improved effectively and its structure was further optimized with a continuous increase in both the scale and proportion of high performance agents. The productivity of the sales force was steadily improved on a high base with the monthly average first year regular premium per agent rose by 17.7% year-on-year. The pilot program of the new sales model was advanced rapidly with the Seed Program being initiated in 24 cities, including Nanjing and Shenzhen having achieved initial results. Fourthly, investment income was significantly increased. In the first three quarters, the company adhered to the principle of asset-liability matching and the philosophy of long-term investment, value investment and prudent investment seized market opportunities for cross-cycle allocation and continuously optimize the structure of equity investments, resulting in a substantial year-on-year increase in investment income. In the first three quarters, the company achieved gross investment income of RMB261.4 billion, representing a year-on-year increase of 152% on a comparable basis. And the gross investment yield was 5.38%. The net investment income was RMB144.7 billion, a year-on-year increase of 3.9% on a comparable basis, and the net investment yield was 3.26%. As at the end of third quarter, the company's total assets reached RMB6.48 trillion and investment assets reached RMB6.36 trillion, an increase of 11.7% and 12.3% from the beginning of 2024. The company's solvency remained at a relatively high-level with the core solvency ratio reaching 154.58% and the comprehensive solvency ratio reaching 211.64%. The company adhered to the concept of asset liability management, controlled liability costs in a scientific manner and actively enhanced investment income In the third quarter, the stock market rebounded rapidly after experiencing low level fluctuations, leading to a substantial year-on-year increase in the company's gross investment income. In the first three quarters, the net profit attributable to equity holders of the company was RMB104.5 billion, marking a year-on-year increase of 174%. So there are two record highs. The gross premiums, more than RMB600 billion and net profit more than RMB100 billion. So thank you very much for your congratulations. The company will continue to pursue the customer-centric approach and adhere to the guideline of seeking progress while maintaining stability, promoting stability through progress and establish new growth drivers before abolishing the old ones. The company will steadily advance its business development for the year, actively plan new round of deepen reform, accelerate the transformation and upgrading of its sales force, vigorously promote diversification of products and business, further enhance refined management, continuously strengthen asset liability interaction and firmly hold on to the bottom line of the risk with a view to driving high-quality development of the company to a new level.
A - Li Yinghui: Thank you, Ms. Hou. [Operator Instructions] From Haitong Securities, Sun Ting, please.
Ting Sun: I want to thank Ms. HOU for the presentation. I'm Ting Sun from Haitong Securities. Two questions, please. So in terms of product mix, what is the situation? I think since September, the various companies have also increased their sales of the risk based products? And what is your share in terms of the sales in October? And in terms of the leading products for [indiscernible], so are you also providing whole life? Or are you also selling more participating products? And can you continue your growth? What is your target then? And second, the product value rate of the various companies have been increasing, and there's also a rate cut. So what is the prospect of the value rate for your products given such rate cuts? And what is your forecast for the value in 2025?
Li Mingguang: For your first question, I would like to invite Mr. Bai to address it and Mr. Hou to address your second question.
Bai Kai: Thank you for your question. In Q3, we see repricing for interest rates. The company also followed the various policies and made the switch of products, especially for the participating products, we step up the training. So we have enabled the individual agent channel to achieve a stable progress in Q3 for whole life and annuity as well as the pension, the sales has been going on well. Since September, the sales of participating products have been gaining momentum and the new order premium is also rising given the short time since the switch and the large sales force, training and transformation take time and the base figure was low. So there is a little significance of year-on-year growth. You also asked about our product mix as of Q1 next year, in terms of whether we can jump start next year. I think we need to defend the bottom line of the size and also grow our value. On such a basis, we need to further diversify our products in the light of the market evolution and also lead the sales of participating insurance and also specialize and specify the customer operation and increase the sophistication and the granularity. So we need to also match the resource allocation to the various branches and provide all around sales support. In terms of the diverse product mix, we will also further increase our training for the participating products. You asked about our product mix by 2024, given our features, our whole life has been low in share, but our strategy for 2025, so the whole life and participating products will all be larger in share and the traditional products will be smaller in share. But so far, we have not started our game, and we are just making some customer calls and training the sales of our agents. We look forward to transition to this direction and takes time for our sales force to actually deliver the sales practice, and we will keep watching. Thank you for your question.
Hou Jin: On your second question about the rate cuts and the impact on our value rate. Of course, the premise of this question is the widening spread of the interest rate, and that will, of course, have a clear positive impact on our profitability. At the end of the year, the company will, as every year, review our relevant assumptions for the return on investment. Given your question, we will need to also revisit the spread of our interest rate and how -- where it will stand by the end of the year.
Li Yinghui: The next question please. From UBS, Cheng Zhou.
Hong Cheng Zhou: Okay. Thank you for this opportunity to ask question. I would like to start by congratulating the management on the very good performance. Indeed, over history, we haven't seen profit in excess of RMB100 billion. As you said, this is a record high. But with the new accounting standards, the profitability of life will be higher than the old standards, but volatility will also widen. Given such a background, I would like to ask President, Li, whether we will launch a concept of the operating profit so that analysts and investors will be able to do their job for forecasting and understanding the actual profitability of the company and manage the increased volatility and improve the accuracy of our profit forecast. So could you also share with us more records and data? Second, our profit is pretty high and the dividend payout has been linked to the net profit. I remember the payout ratio has been 35% given the large profit and larger volatility under the new accounting standards, what is your new policy for dividend payout and the impact on your solvency? Thank you.
Li Mingguang: Thank you Mr. Zhou, for raising such an excellent question. You already answered this question for me. The dividend policy for sure, will be as ever, based on many factors like the business development needs, the needs for solvency, profitability level, the applicable laws and regulations. Of course, we need to be compliant. On policy of dividend payout, you refer to another indicator, namely operating profit and whether we will launch this indicator. That is a very good question. For the long-term development and the value, we see them to be our long-term commitment. And gradually, people have better feeling about the old versus new standards. In the current market environment and the business environment, we have gradually realized the areas where we will see more or less volatility and varying performance. Over time, such realization has been achieved. And that is also a very good takeaway. In terms of learning, the whole industry will be able to seriously consider how better dividend payout can be administered with the more volatile profit and how the forecast or expectation for profitability can be set up for the payment of dividend. I think we will -- I would like to stop here. We will keep you updated. More questions, please.
Li Yinghui: From China Merchants, [indiscernible], please.
Unidentified Analyst: I would like to thank and congratulate the management on such a good performance. Two questions. First, liability and second, investment. For liability, I would like to ask the following. We have always been curious as a market leader, the comprehensive liability cost must be the lowest in the market. How much has been the marginal level? How much have you brought that down in terms of the comprehensive liability cost to the existing policyholders? And how about the new liability cost incurred in the first three quarters? With the restructuring of product mix next year, do you have any plan about the extent of further reduction of the comprehensive liability cost with the historical loss from the spread of bringing down the liability cost has been proven to be the most sustainable approach given international experience. Second, on investment, the company is still investing a lot in equity. So what is your strategy then in terms of equity investment? There has been a lot of rising market share price and better liquidity, does the company choose to sell or buy? And is that still attractive market given such a high dividend payout?
Unidentified Company Representative: Yes. I would like to first address the first question and request the Chief Actuary to address the second question and Mr. Li to discuss investment. In the coming period, the strategy of the company remains the diversification of products and business. Internally, we call it scientific management of cost. We need to pay more attention to the rigid cost management, so that we can better manage the floating interest rate. In general, we need to have a concept. The liability cost is not optimal when it is the lowest. For floating interest rate products, we need to defend the rigid cost and also do a good job in investment management so that we can increase our reward to the customers. This is our main direction in the future. I would like to conclude here and leave the rest to Ms. Hou.
Hou Jin: Thank you. You asked about the liability cost for this year. In terms of the guaranteed interest rate cost in 2024, that must be lower than 2023 level by 50 bps on average. With further reduction of the guaranteed return as a cost for new business in 2025, the guarantee cost will be lower by another 50 bps versus this year. This is about the guaranteed liability cost for new business. And we also refine our expense management, so the input-output efficiency of the expenses will be further improved. This is my answer about the liability cost.
Li Mingguang: Okay. Let me address your second question, which is about equity investment strategy. Thank you so much for raising that question. First, our market judgment. The Asia market previously rebounded rapidly and the bottom has been further solidified. We believe there are still the allocation value for the mid and the long run, especially given the new regulatory policies deepening the market -- capital market reform, that is helpful to improve the market ecosystem and the long-term return with high-quality development gaining progress and new productive forces also accelerating in the development. In such a big context, the scientific innovation, advanced manufacturing, green development do produce abundant long-term investment opportunities. You asked about our strategy for equity investment. We will stay focused and also uphold a long-term orientation. We will have a balanced and prudent position of equity investment, take comprehensive consideration of market situation, risk appetite and solvency so as to optimize our allocation of equity assets. Second, we will also be to diversification as our investment strategy and also emphasize absolute return so that we can balance our layout and improve our structure for equity assets. Third, we are still committed to the long-term in allocating our investment so that we can leverage the advantage of insurance as a long-term patient had capital and also match our KPI and we'll also do countercyclical allocation and focus on the direction of the high-quality development for economic transition and serve the development of the new productive forces. Third, you asked about the investment in high dividend shares. For such shares, our investment will consider both the return of the dividend and the long-term preservation and increase of value as a potential. In the near-term, the pro-dividend investment is in the upper share -- upper hand. So we will consider the contribution from both the capital gain and the dividend. And we will also appropriately increase our investment into the high-quality, high dividend shares and properly paid our investment and keep the security margin so that we will invest more into the companies with robust operating performance, governance and a reasonable dividend payout and especially the industry leaders. We will also go through the diversified strategies and improve our proactive management so as to achieve a long-term return for equity investment.
Li Yinghui: Next question, please.
Operator: [Indiscernible] from Citibank, please.
Unidentified Analyst: I want to thank the management for this opportunity. This is [indiscernible] investment analyst for insurance from Citibank. Two questions. First is the doing [indiscernible] for individual agent channel. During the semiannual review, Mr. Bai said, the company has been dynamically monitoring the composition of the expenses and identify the space for improved expense management. Some time has passed since such remarks. So given the reform of doing filing and what levers are you pulling to better improve the expense management? And will such expense control have certain changes on your business? What are they, if any? What is the timetable for pursuing the reform of doing filing? So impact timetable is my first question. Second, about your volatility of net assets. In Q3, the growth of net asset was as high as 15%. That is evidence of the high volatility. The company has also proactively managed the net profit and you invested in more of the high dividend shares, also set up funds to manage your net profit. So in terms of net assets though, what measures will the company take, where your business is going? How you will try your best to reduce the short-term volatility of your net assets. These are the two questions. Thank you.
Unidentified Company Representative: Okay. First question, Mr. Bai, please. Second question, I will start to be followed by Mr. Ruan [ph] and Ms. Hou. Okay. Let me take the first question. What do like filing regime in the individual agent sales can regulate market order and reduce long-term risk, help us cut costs and increase our efficiency. This is aligned with our development philosophy. We actively support and implement the regime. Regarding the timetable, it started with the filing of our new products. Recently, we have filed a batch of new product according to the new rules of the regime. So in practice, it has already started in the individual agent channel. As for its impact, in our interim results briefing, I mentioned the implementation of the regime in individual agent channel has posed new requirements for our commission as well as the fee management model. But as we have a very good foundation in individual agent sales business, and the gap with the new regime is not very big. So it's easier for us to adapt. For the sales force, filing regime itself has only a very minimal impact on sales force. So the sales force mainly has to adapt to the change of preset interest rate, which affects our products. And our sales force need to retrain and refamiliarize themselves with the new situation. So the dual filing regime only has very limited impact on the sales force. We hope our sales force will quickly adapt to the new products released after the implementation of the regime, and we are stepping up training as well as customer accumulation. So that they can adapt to the new reality as quickly as possible and do a good job in the sales of new products. And on the other hand, the regime also raises new requirements for the refined management of our sales force-related business channels and departments have already started to study more refined management methods. In the next few months, we are likely to introduce a series of measures. So that's my answer. Thank you.
Unidentified Company Representative: Let me take the second question. Recently, after the implementation of the new accounting standard, the parties are paying more attention to the performance of the NPL with new perspectives. Apart from the volatility in terms of profits, people are starting to notice the volatility in net assets, which speaks to the great efforts of all of you. I think the volatility of net assets should be a common area of focus, as the volatility of net assets reflects broader scope than the volatility of profits. It reflects the matching all the assets and all the liability in the new context. Moving forward, on the business side, there is bound to be the issue of asset liability matching from the business end to the accounting end. What do you have to prioritize? Do you only look at the net assets, profits or value? It all goes down to one question. In the future, we have to look at the essence of life insurance. Essence is long-term operation. So moving forward, we will pay more attention to value growth, and we will make sensible analysis of the volatility of profits and net assets. Around value creation, we want to do a better job. But the premise of value creation is to defend the bottom line, which is development and security. And security is reflected in the following areas: Solvency. Solvency can -- to some extent, be reflected in net assets, although it doesn't paint the whole picture. And second, we need to pay particular attention to liquidity management. So in order of priority, I don't think the company will purposely see net asset volatility as our primary management goal. Our primary management goal is to stick to long-termism and to create long-term value based on solvency and liquidity. At the same time, we will match liability and assets on the business end as well as the accounting end. I hope this is helpful for you. So no addition.
Li Yinghui: Next question. From CICC.
Unidentified Analyst: Thank you. Thank you for the question opportunity. I'm [indiscernible] from CICC. First, congratulations on your very good performance. My question concerns net investment return. I see that for the first 3 months, it dropped by 0.6% to 3.3%, larger than the drop of the same period of last year. And last year, you adjusted the evaluation hypothesis, which means that the current hypothesis is 4.5%. So if net investment return continues to decline, would you make further adjustments? So these are my two questions.
Li Mingguang: First question to Ms. Liu Hui and second question to Ms. Hou Jin.
Liu Hui: Thank you. Thank you for your question. In the first three quarters, net investment return rate is 3.26%, down 0.27 percentage points from the same period of 2023. So there is a change. According to our analysis, the net investment return rate has fallen due to the following reasons. First, market interest rates are falling quickly. So the newly addition is lower than the stock on assets. And we stick to very prudential credit risk appetite. We haven't sunken the credit to get higher yield. As a result, the net investment return has dropped to some extent. But moving forward, with interest rates stabilizing, the decline will slow overall of the year, we stick to the allocation of cross-cyclical categories and also long-term bonds as well as high-quality assets, they have formed very good bottom position. Moving forward, we believe the net investment return rate will show very sound momentum. Regarding 4.5% of long-term investment return hypothesis, be it China Life or the industry. We will follow our common practice which is to review the hypothesis at the end of the year for the major asset classes as well as our expectations for the return of the asset classes and reset the hypothesis for investment return rate. So I can't give you an accurate answer as to whether we will adjust at the end of the year, but we will update our expectations and make decisions accordingly. Thank you.
Li Yinghui: Next question, please. From Thomas Wang, Goldman Sachs, please.
Thomas Wang: Thank you to the management for the opportunity. I've one question only. We see from the industry peers that in Q3, the profits are good, but there is no growth in net assets. The highlight is 15% increase in your net assets. So my question is your OCI actually in Q3 had a positive impact. But actually, the tangent treasury yield continued to fall. So why is the impact positive, which is different from our understanding? Does it have anything to do with your calculating methods of the bonds? Do you have any special accounting method? Thank you.
Li Yinghui: Zhijun Hu [ph] will take the question.
Unidentified Company Representative: Thank you for your question. Let me take your question. You've noted that in Q3, the profits attributable to shareholders increased as compared to our peers. We started to implement new standards this year. So last year's comparable basis was I-39, but this year, the basis is I-9. So the differences on growth lead to differences in the starting figures. And also within the reporting period, the increase in our profits also boosted equity return.
Thomas Wang: A follow-up question. In Q3, your OCI, in Q3 was actually positive. Why? Because interest rates kept falling.
Unidentified Company Representative: We are saying that the Q3 of this year, yes, Q3 of 2024, BOCI. First, net profit, we had RMB104.5 billion, which increased the shareholders' returns. That's the main cause. Thank you.
Li Yinghui: Next question, please. Li Jian from Huatai. Jian, please?
Jian Li: I want to congratulate the management on such a brilliant performance. The first question is I want to thank Mr. Li for making this investor education about how to fairly and evaluating the performance of insurance company. So my first question is, have you considered in your management that given the very smooth logic presented by Mr. Li, how there can be some coupling between the valuation system and return to shareholders? So in your dividend payout, what logic can be there to couple the KPIs and the shareholder return? Second, Mr. Bai, you mentioned that next year, you would like to increase the share of whole life and participating insurance. What is the reason behind this? Is it business driven or designed to meet the customer demands? Or do you want to stabilize your operation and also address the spread loss?
Li Mingguang: I didn't quite understand your first question. Could you please repeat it?
Jian Li: I would like to first thank Mr. Li for such a wonderful investor education, you said we should not focus on just profit when we evaluate the performance of an insurance company, I do associate myself with that. But how solvency value management and other indicators you mentioned can be coupled with the return to shareholders? Has the company considered a more reasonable or intuitive coupling logic with dividend payout? Second, I also would like to know more about your product strategy. Mr. Bai said, you will increase the share of whole life and participating insurance. Is it for the sake of business or stabilizing your operations?
Li Mingguang: Okay. Let me take both of your questions. You made a very good comment. In the future, we will intensify our research. Recently, many investors and analysts also mentioned shareholder return, including its stability. That is a very realistic and practical question. If you can come to Beijing and interview me, I can give you in-depth information about how future shareholder return can be linked with the value creation of our company, including the various indicators and how they can be coupled with the shareholder return. This is indeed an excellent question. When I address the question on future dividend payout, I already discussed it. Future dividend payout, for example, needs to consider a lot of the factors we mentioned for an insurance company committed to long-term result, the dividend policy should not be unpacked to adjust the profit or net asset of a certain year. More importantly, the long-term research or forecast shall be made. For example, for a long period of time, how much has been paid out, how much has been accumulated, what new business will be developed? How much value can be created? How much liquidity will it come with? Where is the inherent capital to be yielded by such a business? We need to make a long-term forecast on that very basis. It is possible that the stability of the shareholder return can be considered and factored in. That is my preliminary thinking. And over time, we have been thinking and piloting in this regard. We have heard the strong calls made by the community and the new accounting standards have been also applied. So such research is now even more relevant. This is my answer to your first question. Second, on product mix. We have always focused on customer centricity and the product diversification. Finally, we can diversify our business. This is about our choices for product mix. The primary driver is customer demand. In the new environment of interest rates and new environment of operation, customer expectation is always changing. And the risk appetite of consumers can be quite different among different segments. As the largest life insurer, China Life needs to have a comprehensive and diversified product strategy. That answers your question about why we would like to launch more products for floating interest rate. It is both offensive and defensive in the low-rate environment. It may work for even more segments and consumers, given such an evolving environment for whole life insurance, whether it is participating or not, it will address the needs of different customers. So this is the main factor shaping our product strategy. This is what I would like to say. Thank you, Mr. Li. Okay. Let's go on with the questions.
Li Yinghui: From Guosen Securities, Mr. [Indiscernible].
Unidentified Analyst: Thank you. This is insurance analyst [indiscernible] from Guosen Securities. So I've got two questions on top of the congratulations on such a good performance. I think you mentioned you would like to proactively manage the maturity or the duration of our products. So how is it in Q3? And how much is the delta or the gap? And second, when you announced results, your insurance service performance is increased a lot. And in Q3, the service fees did not increase. Given the first half versus Q3, what differences happened? Is it because of the cost of participating insurance? Ms. Hou, could you like to give us more information?
Li Mingguang: Can I leave it to Ms. Hou to answer this question?
Hou Jin: Yes, thank you. For your first question, I would like to quote a concept of effective duration for maturity. So that is a concept in which we need to consider the impairment function of the floating rate products and the management of spread loss. So the delta of the effective duration is only 2 years for asset and liability management in the industry, that is already something that puts us in a very good shape. Second question regarding the insurance service performance, including uptake, the revenue and expenses for insurance business both increased. Between the two, there's also a slight positive growth in terms of net value. That is due to the impact of the declining interest rate. So there is some impact on the cost of floating rate products under the new accounting standards, they need to be booked into the insurance service expenses. Thank you.
Li Yinghui: Next question, please. Let's take the next one.
Unidentified Analyst: Thank you for this opportunity. This is investor [indiscernible] from Dongwu Securities. First question goes to Mr. Bai. Could you elaborate on the Seed Program? Since the open day last year, the company has been talking about it, but it seems that the progress is even faster than our expectation. In the 24 pilot cities, is the size of new recruits. This year, the sales force has been stable in size. Given the HR-related disclosures, we have seen some of your peers have been quietly increasing their recruitment. So what is your detail and consideration for the Seed program? Second, also about the new accounting standards. Since China Life is a pure-play life insurer and the premium revenue has been declining under the new standards, but still, you have appeared more resilient than your industry peers. Is it because of the release of the CSM, which is more stable or some other reasons that make your growth rate of the premium looking nicer than your peers? Thank you.
Bai Kai: Okay. Let me address your first question about the Seed Program. Indeed, in Shenzhen, Nanjing and in 22 other cities, piloting has been started. For a new team growing from scratch, with a new -- brand-new model. So we need to work on the fundamentals, namely the basic systems, model of recruiting, model of empowerment, model management, model of sales and many other dimensions. We need to make attempts along all of them. We originally planned to pilot in 6 to 8 cities, but we actually expanded the piloting not for the speed or the size for rolling out. We just wanted to collect samples for more cities to corroborate or revise the various models and systems and test whether they work. For our sales force, we hold on to high caliber. We don't do any lateral hires. We just hire brand-new recruits, all of them need to have a bachelor degree or above and certain working experiences. So the expansion will not be very fast for the sales force. The stricter our standards are, the more it will be true that we will not prioritize speed of recruiting as a first priority. The bottleneck for recruiting has been basically resolved. The recruiting model under the Seed Program differs from the previous recruiting model where the individual agents were the mainstay. Now we use an integrated recruiting model. The mainstay is the company hires with a small number of the individual base hires. This model has been proven to be valid, and we can also develop a high caliber entrance of new recruits. It takes more time to test and refine the post-recruiting management. So when the new hires with a new company history coming on board and adopting new sales model, can they address the premium segments and sell our products effectively? The sales model is the consulting-based marketing. We have technological reserve. There's no problem with that. It takes just a few months for the new hires to adapt themselves, train themselves and also do their hands-on practices so that they will improve their skills and embrace the market. So it takes time to further test these new hires. But progress to date proves that our work has been quite effective. Every quarter, every month, we are correcting our course and adjusting the plans we made previously. The mission of piloting institutions is to consolidate the takeaways. So it doesn't really matter whether the number of the pilot cities is 24 or 14. That's my answer. Thank you. Could you repeat the second question? Well, let me take the second question. In the first three quarters of 2024, insurance service fees increased because the amortization increased from last year from cash flow of the sale of insurance. So it's 7.53. Last question. Okay. Let's continue.
Li Yinghui: [Indiscernible] from Morgan Stanley.
Unidentified Analyst: Thank you to management for this opportunity. Two questions. First, a follow-up question on Seed Program. Actually, can I say that in recruitment, we are moving on to the routine track. But in some traditional cities for the program and in terms of the income or productivity since this is a new model, so we haven't seen a significantly higher income or productivity as compared to traditional teams. The second question is that under the new standard, the profits are more than RMB100 billion, whereas under the older standard, the profits will be smaller. So for the shareholders, regulators and Ministry of Finance, do you refer to old standard or new standard? Or do you look at both? How do you balance the differences between the two? Thank you.
Li Mingguang: First question, Mr. Bai, and second question, Ms. Ruan, please.
Bai Kai: Let me repeat. First question is about the productivity and income from the Seed Program team. It's not significantly higher than the traditional team. For the Seed Program, we have freshmen with clean state -- clean slates. Now according to their time with us, the average productivity and the growth speed are higher than the old team. And there are very high-quality on sales people in the team have earned high income. So on average, they are performing better than traditional teams. But in our traditional teams, they also contain some elite with very good customers and high income. Such comparisons do not have absolute meaning, but in absolute terms, the new teams definitely will have higher per capita income, service capability, expertise, professionalism because we require 100% attendance. And in terms of professionalism and specialism, they represent the future direction of our sales force reform.
Ruan Qi: Now let me take your question on the old standard. Like you said, there is much attention paid to the new standard. This is also an issue that we've been following closely for some time now. Regarding the review, it will affect our operations. Regarding the old standard in terms of tax processing and solvency, we still need figures under old standard. The conversion of old standard is a very hot topic and regulators and operators are both paying attention at the group level, we are working with the Minister of Finance under the assessment system, we've been studying very carefully to guide the company and guide regulatory attention to our long cycle operation. This is an ongoing process. If there are sure results, we will communicate with the investors. Thank you.
Li Yinghui: Last question. Li Jian from Huatai Securities, please.
Jian Li: Thank you. One question. Now we see that profits and equity market performance are closely linked. So how do you make of it? Do you want to reduce the linkage? Or do you want to keep it up? Thank you.
Li Mingguang: [Indiscernible] could you share with us your take? Where do you think this linkage is reflected? What is your logic? Profits and the performance of stock market? Especially in terms of trading accounts. Well, you're asking about our investment in the equity market.
Unidentified Company Representative: Yes. No problem. Well, stocks and equity are key minority allocation of our insurance funds. The allocation into this asset has its own meaning and it is aligned with our long-term allocation principle. It is risk assets. So definitely, there will be related return and volatility as for its impact on profits through various means, we will control its impact on our balance sheet and volatility. We stick to long-term and balanced strategy. After balancing and distribution, we will have effective control over volatility. And we are also building up on high dividend stocks. And in our OCI, we have allocation in high dividend stocks with increase this year. In this way, the volatility of the stocks will be kept under our level of tolerance. You mentioned that OCI stocks and TPL stocks. Actually, this year, with the dividend style in the upper hand in the market, we will have more TPL allocation to earn dividend and capital gain. This is a very optimal strategy. Now with market style, on shifting, we will deploy in the OCI space. Thank you.
Li Yinghui: This brings us to the end of our 2024 third quarter results briefing. If you have any further questions, please feel free to get in touch with our Investor Relations team at any time. Thank you for your participation. Goodbye.