Samsung Life Insurance Stock

Good morning and good evening. Thank you all for joining the conference call for the Samsung Life earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we'll begin the presentation on Samsung Life's First Half of Fiscal Year 2026 Earnings Results.

Good afternoon, everyone. This is Sun-jung Kim, Investor Relations Part Leader. Thank you for joining us today for Samsung Life's 2026 First Half Earnings Presentation. Today's call is scheduled for 1 hour, starting with the earnings presentation delivered by our CFO, Mr. Wan-Sam Lee, and followed by your questions, which will be addressed by the members of our management team present here today. Please note that the figures in this presentation may be revised during the auditing process and any forward-looking statements, including the earnings outlook contained in today's conference call, are subject to change depending on both the domestic and overseas market conditions and operating environment. Let me now hand over the presentation to our CFO, Mr. Wan-Sam Lee.

Good afternoon, everyone. This is the CFO, Wan-Sam Lee. I would like to sincerely thank our investors and analysts for taking the time out of your busy schedules to attend our first half 2026 earnings presentation call. Let me start with our key financial results and major business topics for the first half of 2026. Our consolidated net profit for the first half grew by 35.8% year-on-year to reach KRW 1.9 trillion, demonstrating our solid earnings capacity. Insurance service results declined by 35.9% year-on-year due to higher operating variance despite stable CSM profits. On the operating expense side, we recognized a one-off expense of KRW 83 billion in the first half, mainly due to higher wages, including a temporary increase in retirement benefit provisions following the outcome of Samsung Electronics [ TIA ] lawsuit.

On the claims payment side, the negative operating variance widened from a year ago due to increase in medical service usage. Given these one-off factors, it seems inevitable to achieve growth for the annual insurance profit on a year-on-year basis. Nonetheless, we will make every effort to secure at least KRW 3 trillion in new business CSM each year, driven by our strong portfolio and sales capabilities across our exclusive and nonexclusive channels.

In addition, we'll improve our efficiency metrics such as our loss ratio and expense ratio with the aim of turning around our insurance profit to show growth going forward. We have seen our first year loss ratio improve compared to the beginning of this year, thanks to our newly established framework to rigorously manage our first year loss ratio by improving our product structure and stricter underwriting standards. We will further strengthen our efforts so that these initiatives translate into an improvement in the overall loss ratio. Investment profit surged from a year ago, supported by higher dividend income and stronger consolidated and equity method earnings from subsidiaries such as Samsung Securities and Samsung Asset Management. Notably, while still modest in absolute terms, earnings contribution from the Thailand and China business have grown at an accelerating pace of growth. That said, amid heightened volatility in financial markets, including interest rates and equity prices, hedging losses on variable insurance within investment income experienced a slight increase.

We run a hedging program to effectively manage our capital and earnings volatility associated with the minimum guarantee options embedded in our variable insurance products. Going forward, we are operating an internal task force, testing out different strategies for different market conditions to achieve the optimal strategy in periods of extreme market volatility, such as this year. New business CSM recorded KRW 1.7 trillion in the first half, growing by 20% year-on-year. We are well on track to achieve our annual target of KRW 3.2 trillion. Taking profitability and market conditions into account, we plan to continuously secure stable new business CSM by implementing a flexible portfolio strategy between the highly profitable health insurance and the whole life insurance solely available to life insurers.

For our CSM balance, we reflected key assumption changes in the second quarter in accordance with the Financial Supervisory Authorities guidelines. These changes include applying conservative loss ratio assumptions to new riders, a more defined segmentation of riders and adjusting expense ratios assumptions to reflect inflation and changes in cost drivers. As a result, there was a one-off CSM adjustment. We expect additional guidelines changes in the fourth quarter as well, but expect the impact to be limited as most of the guidelines have been reflected as of June end. Based on this, we will pursue sustainable growth of improving our CSM balance going forward. Amid a tightening regulatory environment, such as the full implementation of the GA 1,200% commission rule and the cap on total sales commissions, the environment for the insurance industry has shifted to prioritize profitability and sustainability over top line growth.

We anticipate these regulatory changes will foster healthy change in the midterm by promoting qualitative growth across sales channels and through a more rationalized expense structure. Accordingly, we plan to reinforce our efficiency-focused sales strategy by further strengthening the competitiveness of our exclusive channel and through qualitative growth of our GA channel. Our exclusive channel has continued to grow steadily with a net increase of approximately 2,100 agents year-to-date. Our exclusive agents are educated through systematic training programs and generating new business performance based on the highest retention rates in the industry.

We will further differentiate the competitiveness of our agents by providing comprehensive support across the overall sales process, including AI-based sales tools and product education. For the GA channel, we continue to strengthen our portfolio around high-margin whole life and general health products while enhancing AI-enabled sales support systems and expanding partnerships with large GA firms. In particular, under a healthier market environment following the introduction of the GA 1,200% commission rule, we will continue to expand our market presence by strengthening sales infrastructure, including broader support through AI tools.

Next, turning to the capital adequacy. Our K-ICS ratio as of June recorded 208%, while Tier 1 capital K-ICS ratio remained stable at 177%. Going forward, we will continue to maintain industry-leading capital adequacy by securing high-quality new business CSM, improving operating efficiency and rigorous ALM management centered on Tier 1 capital K-ICS ratio. In the second quarter of 2026, the surrender value reserve amounted to KRW 3.1 trillion, up by KRW 1.4 trillion from KRW 1.7 trillion at the end of first quarter. Approximately KRW 0.5 trillion of surrender value reserve is generated on a recurring quarterly basis due to new business sales. In addition, increased market volatility resulted in an additional impact of approximately KRW 0.9 trillion due to the valuation difference between the reserves and liabilities of our variable products. However, this increase largely reflects temporary effects from heightened market volatility.

If market conditions, including equity prices and interest rates stabilize going forward, we expect the pace of increase in the surrender value reserve to gradually moderate. We also have sufficient distributable earnings, and therefore, the increase in the surrender value reserve is expected to have a limited impact on our shareholder return policy. Regarding the shareholder return, we want to maintain a foreseeable dividend policy under the principle of increasing shareholder dividends at a rate above the growth rate of recurring profits. We will maintain a consistent shareholder return principle, unwavering from short-term earnings volatility while strengthening market confidence as a dividend growth stock by improving the quality of earnings and enhancing capital efficiency.

In addition, we will continue to explore ways to effectively utilize surplus capital, including expansion into new business. Additionally, we understand that our investors are very interested in the timing of our Value-up program announcement. Taking into account measures such as treasury share cancellation plans, we are required to make the announcement before next year's Annual General Meeting of Shareholders. We will do our best to make the announcement as early as possible. Despite domestic and overseas economic uncertainties, Samsung Life will continue to pursue sustainable growth based on industry-leading sales competitiveness, asset management capabilities and solid capital foundation. Going into the second half, we will focus on delivering tangible results toward our goals of securing more than KRW 3.2 trillion in new business CSM, achieving double-digit growth in annual earnings and enhancing shareholder returns based on these results. We will now move on to the Q&A session, and we will do our best to address your questions. Thank you.

[Operator Instructions] The first question will be provided by MW Kim from JPMorgan Securities.

I would like to ask 2 questions. First is about the high net worth individuals, the baby boomers who are approaching retirement age. Obviously, over the last decade or so, real estate property prices have continued to rise. And over the past year, the KOSPI has delivered very strong performance, which, and it is fair to say that the high net worth asset base is probably much bigger. So in terms of your addressable market, how much further upside do you see in terms of the addressable market over the next 10 years? What is your outlook in terms of further upside? And also, I wonder if the company has already established a future strategy on securing future earnings. If so, if you could provide more of a quantitative outlook, I would appreciate it as well.

Second question is on risk management. The 10-year KTB is actually yielding at above 4%. With rising interest rates, of course, this is associated with higher risk of lapses, also added pressure in terms of liquidity management as well. So can you share the latest trends in terms of the lapse rates that you have been seeing? And what are your stress scenario assumptions? And also please share your plans in terms of liquidity management. Also, we have seen a significant impact on your financials from the volatility from the equity market, also from the variable account reserves as well. So if you could also share some measures by the company to mitigate against that kind of financial impact or volatility, I would also appreciate it.

[ Huh Jung-moo ] Head of the Channel Marketing team at Samsung Life. So yes, as you have said, there is a very high concentration of wealth, particularly among those aged 60 and above. And for all of Korea, based on our market intelligence, we believe there is about 470,000 individuals, high net worth customers with assets above a certain level. Of that pool, above KRW 1 billion in financial assets. Of that pool, 50,000 actually are existing Samsung Life policyholders or our customers. So again, this is based on financial assets only, by the way. And you will know that Samsung Life among the insurance companies in Korea has a very unique position that we have a family office within our organization. So our family offices caters to the ultra-high net worth individuals providing not only whole life or other insurance type products, but a diverse lineup of other services as well, including beneficiary certificate or funds, also trust consultation as well across our FP centers that are located in 8 key geographies.

So obviously, for the security firms, their focus in terms of their business is financial asset appreciation to grow wealth. For the banks, it is to maintain that wealth. And as an insurer for us, actually the transfer of that financial wealth or assets is very key. So through our whole life product mechanism, the transfer of wealth is our area of focus. So we obviously have a very extensive customer base of customers who hold either our whole life or other term insurance policies. And the total amount of death claims paid out actually is quite extensive at around KRW 60 trillion, the payable amount. So we are targeting those individuals to expand into the trust business, and we have been promoting a service which is entrusting their death cover claims to trust. So this actually provides for assurance in terms of the smooth transfer of the death benefits to the designated beneficiaries.

And this is a key part of our new business strategy to expand into the trust business. And so already the AUM is now at around KRW 800 billion to date, we expect to exceed the KRW 1 trillion mark within this year. The nearest competition, the second ranked insurance company in Korea is very far behind with AUM of just KRW 100 billion as we widened the gap. For WM, we are also doing quite well. If required, we'll try to create another opportunity where we can share more materials and present to our analysts.

This is the CFO. Let me add just a little bit. Yes. So we have a very clear recognition that the high net worth market is, in fact, growing. And in terms of the underlying infrastructure to cater to this segment and to manage it well, I would say that we are by far the most, the top performing in the industry. We can leverage our very strong exclusive channel, and we are focusing on continuing to grow the asset consulting capacity of our channel. And we are also expanding beyond just whole life, particularly to single payment type products and policies that have underlying needs within the high net worth market.

Yes. This is [ Yi Ji-sun ], Head of the RM team. Let me take your second question on liquidity management. So as you said, with rising interest rates and also an abrupt increase in share prices, it is true that we also have seen a slight increase in our lapse ratio as well. However, although it did go up in the first half, in particular, into the second half of the year, amid widening volatility in the equity market, we have seen recovery more towards stable trends. But just as a baseline, we continue to track on a day-to-day basis, our asset liability in terms of the size, we continue to forecast the gap in terms of the balance. And we have identified different crisis scenarios and identified the minimum level of liquidity that must be defended in every crisis scenario.

So based on our management criteria, we are under normal conditions at the moment. But early -- well, starting 2 years ago, we actually have been enforcing tighter liquidity control aligned to Stage 1 in the scenario analysis. And we are continuing to carry out scenario analysis assuming very high risk contingency situation where there may be an abrupt increase in lapse similar to what we saw previously during the Asian financial crisis. And we are testing on a quarterly basis if we have the means within Samsung Life to cover against that kind of liquidity risk and exposure. So our conclusion to date is that we do not see any source of major concern. However, with the market volatility as wide as it is now, we intend to continue very tight management based on a conservative stance.

This is [indiscernible], Head of Asset Management. Let me take your third question. So in the first half, certainly, with very significant widening of market volatility, we have seen elevated hedging-related loss. So obviously, the hedging was for the purpose of hedging against the risk associated with minimum guarantees that were provided as an option on our variable account policies. If we had not hedged against that risk, potentially, there could have been an impact of around KRW 1 trillion to our P&L. So obviously, we believe we need to continue to hedge against this potential risk. But because this should not be an added burden to our financial stability, we are running our own task force on variable product hedging specifically to analyze the root cause of the recent developments and to develop numerous hedging tools or means so that we can minimize the error rate. And we intend to refine our analysis and mitigating measures further so that we can be more defensive against market volatility such as we saw in the first half.

Yes, this is the CFO. I would just like to add that we actually have been moving quite proactively in terms of managing our liquidity, particularly given the wide market or widening market volatility. We actually have been trying to tap a lot of the widely available cash assets that are circulating in the market by developing certain products that can cater to not only retail or individual customers, but to corporate customers as well. And we have started the sales of these new products in July, and we will continue with this type of product-driven strategy as well.

The following question will be presented by Do Ha Kim from Hanwha Investment & Securities.

Yes. I would like to ask a question on investment and then dividends. So I'm looking at the separate basis number, so it may not match exactly with the numbers that you are looking at. But in terms of the variable hedging loss that you mentioned, what is the exact size? Just in terms of the special account, I think it's somewhere around KRW 4 billion. So is that consistent with the total amount? Or is there another portion that also impacts your general accounts -- sorry, KRW 84 billion.

Second question regarding the dividends. I think on numerous occasions, the CFO has said that while you're not able to immediately share, still you'll try to address the request, the numerous requests to try to share, to give more color as quickly as possible. That being said, a lot of time has passed and still we don't have -- we have not received that kind of information. So will you at least be sharing that kind of update at least within this year, if you can share? I don't think any of the investors are expecting any increase in the DPS per se, but we are interested whether you have plans to share some of your special earnings. So could you explain further?

This is [indiscernible] from the management team. So in terms of our variable hedging loss, actually, the hedging is done using fees that are received through our general accounts. So in fact, that means all our hedging-related losses are specific to our general accounts only. And the hedging-related loss actually totals about KRW 85 billion.

Yes, this is the CFO. Let me elaborate on our dividend policy, also the Samsung Electronics-related special dividend that you asked about. So I'd like to seek your understanding in advance that I am not able to share the detailed numbers or the exact timing today. So we obviously are targeting a long-term shareholder return target of 50% driven by robust earnings growth and consistent increase to our dividend per share. And we continue to work hard to drive for that kind of consistent incremental improvement. So as you are well aware, we have been growing our dividend per share at an annual growth rate of above 16%, and we have committed to continuing to expand our dividend per share at above the rate of growth for our recurring earnings. So we are committed again to doing our best to anchor ourselves as a very stable dividend growth share.

And then regarding Samsung Electronics disposal gains, also possibility of special dividends. So when we were determining our dividend policy earlier in 2025, we committed to expanding dividend per share above ordinary growth. And also at the time of disposing, regarding disposal gains from SEC shares, we also determined that they would be included in the pool of funds for dividends and that policy remains unchanged today. And regarding special dividends regarding SEC shares, I do know that this is a matter of great interest, but it's very difficult for me to share any specifics in terms of what exact time line we expect, also the size given the different factors that may lead to changes -- change in condition. And so once there is more clarity in terms of the special dividend, in terms of the size and likely timing, then -- and on the assumption that we are maintaining our K-ICS ratio above a certain adequate level, we remain committed to continuing to improve our DPS year-on-year.

The following question will be presented by Byung Gun Lee from DB Securities.

So my first question has to do with the surrender value reserves. So you did elaborate on the variable accounts breakdown. So I'm interested in the surrender value reserves as well. So earlier this morning, there was a non-life company that reported their earnings. So I think in terms of the absolute size of the accumulation, perhaps it is quite similar, 80%, but perhaps the breakdown or the composition might be different, which is why I asked. So you talked about an ordinary level of about KRW 500 billion in surrender value reserves. So what are the factors? So maybe operating expense overruns relative to the budget, but then beyond that, what other factors may have an impact?

And second question is regarding the 1,200% rule that will be implemented starting next year, I believe, where an aggregate cap will be enforced starting 2027, with the government also talking about possible sanctions being written into the law as well. So assuming the current level, if the rule is adopted, to what extent will your new business acquisition expense be reduced? If you have some internal numbers, I'd like to hear.

Yes. This is [ Byeon In-cheol, ] Head of the Actuarial team. Let me take your first question. So in terms of the surrender value reserves, this actually represents the difference between our liability measured at cost versus liability measured at fair value. And any time we issue a new product, then the fair value liability becomes a negative, which results in that difference. So based on our analysis of this difference, actually, it is not a meaningful level for us. However, if you need more further details, please contact the IR team. Okay. So on an ordinary quarterly basis, yes, you are correct. The surrender value reserves typically are about KRW 500 billion per quarter. As of the second quarter, the total reserve amount is about KRW 3.1 trillion. With the exception of the variable products, the surrender value reserves are negative for all other type of policies.

Yes, this is the CFO. Let me discuss the second question a bit more. So in terms of expected reduction to new business or business acquisition costs, we expect it will be about 10% reduced cost for us, 20% for the broad industry. So we want to ensure that the reduced new business on acquisition expense does not lead to any contraction in sales activities. So we've been focusing on non-pricing-related competitiveness and trying to activate more -- or excuse me, to promote more activities on the part of our sales organization. So in order to continue to boost sales, we are actively deploying AI-enabled tools and also developing AI-based sales practices as well to drive further sales growth so that we can deliver on our annual new business target of KRW 3 trillion or above.

The following question will be presented by Yong Jin Seol from iM Securities.

So I had a question mostly on the impact from the changes to the actuarial consumptions. It does seem that you had some CSM adjustment this quarter, which could be the mixed effect of positive and also detracting factors. So if you could provide a breakdown, I appreciate it. And also what type of impact do you think this may have on the simplified issue type of coverage that you're planning to release in the fourth quarter? Also, what is the possible impact in terms of new business? What kind of an assumption changes do you expect in the fourth quarter? What kind of impact from the changed assumptions in the fourth quarter?

So let me elaborate more on the impact of the changes to the actuarial assumptions in the second quarter. On the assumptions applied for the simplified coverage planned for the fourth quarter. So in terms of the changes to the actuarial assumptions, it can be divided into 2 parts, 1 on the loss ratio, the other on the expense assumptions. For the loss ratio assumptions, conservative loss ratio assumptions are to be applied for newly introduced coverage, also certain type of renewable products as well. So there have been more refined standards. This could potentially pressure our CSM. But on the expense assumption side, which stipulates that inflation-related assumptions shall be reflected, we had already been doing that already. So that will not be an impacting factor.

And regarding the simplified coverage in the fourth quarter where a loss ratio of 90% shall be applied. In that case, it could act in part as a negative factor. But given how our efficiency metrics actually have been improving, the impact will be to a lesser extent in the fourth quarter versus the second quarter. So the tightening of the loss ratio-related assumptions actually are more on the conservative side relative to our underlying fundamentals. But with time, as the time of mortality approaches, for example, and the statistics are updated, we think in the mid- to longer term, it shall actually serve as a plus factor for us.

This is [ Huh Jung-moo ] from the Channel Marketing Team. Let me answer about the impact to our new business results. So for the first half, our new business CSM multiple is around 13x. If the changed actuarial assumptions have been applied in January, it would have been lower by about 1.7x. So it would actually be about 11.3x. However, in the second half, as our CFO explained, we will focus very much on expanding sales of our high-margining health-related policies as well as the traditional whole life products as we secure a stable inflow of new business CSM. So as of July, after factoring in the enhanced assumptions, we still manage -- we are still expecting to maintain new business CSM multiple of 13x. We recorded KRW 1.7 trillion in the first half in terms of new business CSM, and we will work hard to deliver above that in the second half.

The following question will be presented by Jun-Sup Jung from NH Investment & Securities.

First, I'd like to ask about your M&A or capital allocation strategy. I believe that initially, you considered a potential acquisition of KDB Life, but then decided to not take part in the main bidding. So what was at the background to your initial interest? And why did you ultimately decide to drop out? Also, can you provide the overall strategy or directionality in terms of future M&A? What kind of sectors you may be looking at, what side? And what would be the expected financial impact? The M&A funding may actually lead to a decline in your K-ICS ratio. So what would be the maximum amount of spend that you will be willing to consider?

Second question is, I think, of course, thanks in part to your own effort, but also thanks to the rise in SEC share prices, we have seen your net asset value actually go up quite considerably. But if -- of course, overall, we believe that share prices should continue to rise. But if the movement actually goes in an unexpected direction for either yourself or Samsung Electronics, what would be the possibility that Samsung Life could be classified as a low PBR stock? So what are your thoughts? And then what kind of response measures do you have in place?

Yes, this is the CFO. Let me explain the background to why we were looking at KDB, the acquisition and also more on our M&A strategy. So I must seek your kind understanding that due to disclosure requirements, I am not able to share too much detail in terms of the -- why we decided to first join and then ultimately decided not to go ahead with the bidding. So initially, we felt that potentially there could be some strategic synergy with KDB in terms of overall channel operations, products and also asset management as well. But based on our assessment, we reached the conclusion that, that may not be practical or achievable, which is why we decided to drop out from the bidding.

So -- and regarding M&A, given the limitations to growth in the domestic life insurance market, we explained previously that we wanted to expand quite proactively into the overseas markets. So for our current overseas operations in Thailand and China, actually, we have seen very rapid growth in just the size of the earnings from those 2 markets. So we are planning expansion in those 2 markets. And then building on that successful experience, we will seek out actively other promising M&A opportunities. So we are looking beyond the emerging market and the Asian market into advanced markets like the U.S. as well as we explore good M&A opportunities.

And to move more proactively, we actually engaged in an outside consultancy in the first half, and we established our overseas business strategy, and we will gradually be implementing that strategy in phases. And as an insurance company, obviously, ALM remains our #1 priority. But that being said, we also want to maximize our investment returns as well. We are actively seeking out promising investment opportunity as well. For alternative investments, in particular, we are examining very closely potential investments that are both safe and with good return profile as well. We will be implementing these investments in phases.

This is the Head of IR. So regarding the likelihood that we may be classified as a low PBR stock, I believe the likelihood of that occurring is very weak or thin at best. But apart from the scheme itself, as our CFO has explained, we continue to work to improve our PBR by gradually increasing our shareholder return ratio, also using our excess capital to drive M&A or other new business opportunities.

The following question will be presented by Sinyoung Park from Goldman Sachs.

I just have 1 question. I think the CFO has consistently said that the company will be improving the dividend per share at a growth rate above the growth for ordinary earnings or recurring earnings to broaden the shareholder returns. So could you explain the exact definition of what you mean by recurring or ordinary profit or ordinary earnings? That would be very helpful.

Yes, this is the CFO. Thank you for the very good question. So in terms of what do we mean by ordinary profits, I think everybody will pretty much have the same idea. But as an insurance company, it's fair to say it's a normalized operating profit. So normalized means that any one-offs are removed. So basically, we're talking about operating profit. So I know maybe there's a hidden question there. So I think everybody is interested in knowing whether any disposal gains on SEC shares will be included in the pool of funds available for distribution in relation to SEC special dividends or share cancellation -- share buyback and cancellation. I will reiterate that all of those types of gains or proceeds will be included in the funds available for dividend distribution.

Thank you very much. As there are no further questions, we will now conclude our earnings call. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

[Interpreted] Good morning and good evening. Thank you all for joining the conference call for the Samsung Life earnings results. This conference will start with a presentation followed by a Q&A session.

[Operator Instructions]

Now we will begin the presentation on Samsung Life's First Quarter of Fiscal Year 2026 Earnings results.

[Interpreted]Yes, after this is Kim Sun-jung, Head of Samsung Life IR team. Thank you for taking the time out of your busy schedules to join us for the first quarter 2026 Earnings conference call for Samsung Life. Before we proceed with the Q&A, we will brief view on the key performance highlights for the first quarter using the materials that we have prepared and made available in advance.

First, new business CSM increased 11% Q-on-Q to KRW 848.6 billion, driven by balanced growth across both exclusive FC and nonexclusive channels, supported by sales of products with sound underlying profitability. Our new business GSM multiple remained healthy at 11.4x. The company continues to develop new health insurance products while implementing underwriting strategies that balance market expansion with disciplined risk management. In addition, we are enhancing the competitiveness of our health insurance portfolio by offering value-added services such as health care management and family bundled discounts. At the same time, we are revitalizing traditional whole life sales by diversifying product features and strengthening trust and inheritance planning solutions. Our exclusive sales channel continues to expand with a number of [ FCs ] increasing by approximately 1,500 YTD, contributing meaningfully to new business growth.

Our CSM balance reached KRW 13.6 trillion, up KRW 0.4 trillion year-to-date, supported by solid new business DSM and stable insurance efficiency management. Our loss ratio was maintained at 85%, in line with our business plan, and we will continue to strengthen profitability management through various initiatives. In Asset Management, we remain focused on interest-generating assets to support ALM while continuing to diversify our portfolio to enhance investment returns amid rapidly changing macroeconomic conditions driven by recent geopolitical risks. We're also concentrating on strategic asset allocation and more disciplined investment management. Net income for the first quarter rose 89.5% Y-o-Y to KRW 1,203.6 billion, supported by stable insurance earnings, higher dividend income and increased equity method and consolidated earnings from subsidiaries and associates.

As of the end of the first quarter, our K-ICS ratio stood at 210%, up 12 percentage points from year-end, driven by growth and net increase in CSM, earnings expansion and favorable movements in the equity market as well as interest rates. Going forward, we will maintain our industry-leading capital position through continued growth in high-quality new business, CSM, improved insurance efficiency and disciplined airline management. Based on this solid capital strength and improving fundamentals, including CSM growth and higher net profit, we remain committed to our core shareholder return policy of delivering stable and sustainable dividend growth per share. Please refer to the distributed materials for further details on our financial results. Please also note that any forward-looking statements discussed during today's conference call are subject to change depending on domestic and global economic conditions and the operating environment. With that, we will now proceed to Q&A.

[Interpreted] [Operator Instructions]

The first question will be provided by Seung-Gun Kang from KB Securities.

[Interpreted] Thank you for the opportunity to ask quite a detailed question on shareholder return policies. Recently, you have seen a rise in Samsung Life share prices. It is underlined by steady growth in your business and also your very well-managed performance in part. But I think a big part of the upside in share prices are the broad market expectations of special dividends from Samsung Electronics perhaps to be paid within 2026 which then will be reported in your first quarter 2027 financials. I think part of the upside in share prices actually reflect those expectations.

In the fourth quarter, you said that you want to stably or steadily increase your DPS with a mid- to long-term payout target of 50%. If we foresee this kind of large-scale special dividend came in from Samsung Electronics, and it does play out as the market largely expects, then certainly, it will contribute significantly to your 2027 earnings. But then it will serve as a high base for your performance comparison thereafter. So my question is, if, in fact, you incur this large-scale nonrecurring profit Will you still determine your dividend policy even for the given year based on your criteria or target for payout? Or will the absolute value of DPS serve as the more prevailing criteria, which means that you will not be distributing the full amount just in the current period, but were steadily over multiple years, which between payout versus absolute DPS amount is the higher priority?

[Interpreted] I'm the CFO. First, I would like to thank all of you for the large turnout today. So I do realize given the strength of Samsung Electronic performance, there are heightened expectations of greater shareholder returns from Samsung Life as well. However, we kindly seek your understanding that given how Samsung Electronics does not provide any firm commitment about its intentions for dividend payouts or shareholder returns. We are also in a position where we cannot provide details on our future plan based on the pending assumptions.

So if, in fact, as the market expects, Samsung Electronics does provide large-scale cash dividends, no matter what exactly means they use to deliver those shareholder returns, I think you will all know that those gains will be recorded under our retained earnings. And like we have explained before, the increase in retained earnings from dividend payments from SEC will be included in the available pool of resources to fund dividends. And we will determine the exact payout amount after studying the payout. So I have previously communicated that in case, we maintain our K-ICS ratio above a certain threshold. We will continue to steadily increase our DPS year-on-year and delivered EPS growth above and beyond our ordinary earnings growth.

So while we do not know the exact scale of net profit for next year or the exact size of the special dividends, if any, we will study those conditions to try to deliver DPS growth above the ordinary earnings growth. And regarding the last part of your question, in the event that there is a very sizable dividend payment, we will be distributing those -- making those distributions over multiple years in line with our stated goal of growing our DPS year-over-year. So in the event that it is a very large-scale amount, we are open to that kind of spread out distribution.

So we are committed to doing our best so that we can anchor ourselves as a very stable dividend, growth stock, expanding DPS again at a higher rate above ordinary growth, of course, mobilizing all distributable profit.

[Interpreted] The following question will be presented by MW Kim from JPMorgan Securities.

[Interpreted] This is Myung Wook Kim from JPMorgan Securities. First, I would like to congratulate you with market cap above KRW 60 trillion I think Samsung Life shares have been re-rated on the market. And so congratulations.

I just have 2 questions for Samsung Life. Now one of the representative financial companies in Korea. If you look at the dialogue with Asian or other global leading insurance companies, prior to IFRS 17, a lot of the talk was about capital adequacy. But over the last 2 years, I think there has been a large shift toward capital efficiency. And so if you look at your capital position, whether you're looking at core capital or K-ICS ratio, it does seem that you certainly have abundance and capital strength. And our past -- and compared to the capital ratio that you communicated as being a target in the past, you're already above that amount. So when you contemplate deployment or allocation of excess capital going forward, what kind of high-level road map do you have in mind? And which direction would you like to direct more of that capital in order to enhance the corporate value of Samsung Life going forward.

Second question has to do with your product portfolio. In the past, when somebody was thinking of Samsung Life, it was associated with a company very good in whole life. Over the last 5 to 10 years, it's not only whole life, but you're now very accomplished in health or other survival benefit type products and have really transformed. But the surviving benefit type health products, while they do have good benefits, they do have more significant underwriting risk. So when you look out the next 3, 5 years, how do you foresee growth in the whole life market versus the health market? What is your general outlook? And what is your envision positioning on those markets going forward? Given the aging demographics, where do you see potential more potential opportunity in terms of your portfolio?

[Interpreted] Yes. This is the CFO, Lee Wan-sam again. The fact that we have reached, in fact, exceeded KRW 60 trillion in market cap, I think, is largely thanks to the interest and encouragement of many of you here. Thanks for the congratulations.

And relative to the minimum K-ICS target of 180% based on our prior communication. But we have already exceeded that amount with K-ICS ratio of 210% in the first quarter. And the excess capital, of course, will be proactively directed to enhancing shareholder value and to fund the future growth of the company. So in terms of delivering higher shareholder value and higher shareholder returns, we are committed to making investments. We will continue to follow our strategy of gradually increasing our payout up to 50%. And over the last 5 years, our DPS actually has grown by more than 16% annual average. And going forward, we will continue to grow our GPS again above the minimum or, excuse me, at minimum above ordinary or recurring earnings growth as we contribute more proactively towards shareholder returns.

And then after doing that for any excess capital, we will use to fund potential M&A opportunities in either the insurance or asset management space. Also, we are examining different prospective opportunities to diversify our investment portfolio and also looking at new business areas, including senior living. May I elaborate a little bit on our global business. Right now, we have operations in Thailand and China. While the size is still small, still we have experienced very rapid pace of growth an improvement in the P&L. And to leverage this momentum, we are exploring possible new M&A opportunities.

And as a life insurance company, of course, we are highly committed to ALM as the #1 priority. But against that -- with that as a base, we are diversifying into different investment assets to maximize our investment returns. We are exploring different investment opportunities. For alternative investments, we are enforcing rigorous monitoring, looking at both stability and returns to increase our -- or excuse me, to manage our exposure. And in keeping with changing demographic trends, also changes in the competitive landscape. We want to expand the role or our role as an insurer beyond insurance into daily services as well. looking at adjacent markets like health care or senior living, which can deliver very strong synergy with our core insurance business.

[Interpreted] Yes. This is [ Ho-Chung Mo. ] I'm in charge of the channel marketing team. Let me take your second question. So at present, as of the first quarter 2020 in terms of the life insurance business, total new business is KRW 100 billion, and it is split roughly KRW 50 billion in health type products, the other KRW 50 billion in death whole life. In terms of future market prospects, given heightened interest toward health and also aging, we think a lot of the growth will be driven by health.

And to reflect these trends, we have also increased the health-related products as a percentage of our total revenue mix. So what used to be KRW 6.7 billion in sales as of 2023 has now increased to KRW 14 billion as of the first quarter this year, reaching roughly 60% of our product portfolio. We will continue to grow this space, this health care or health-related product space, while managing risks with strict underwriting and loss rate control. For the whole life or the death cover, the market size currently is KRW 50 billion, and we think that the broad market will see flat growth going forward as well. Our current market share is 25% to 30%, but we will continue to address this part of the market as well.

So at Samsung Life, we currently have a trust AUM of KRW 560 billion. regarding the death claim. And so we will continue to expand these types of products, life coverage connected with inheritance planning needs.

[Interpreted] So this is the CFO, if I can just add the key highlights. So we will retain our current dominant position in the traditional whole life space, leveraging our key strengths, which lies in consulting capabilities. But because we foresee significant growth going forward in health-type products going forward, particularly the refund-type or hybrid type health policies. As the industry leader, we will also play a pioneering role to broaden this part of the market as well and to continue to build out that business.

[Interpreted] The following question will be presented by [ Bian ] Gun Lee from DB Securities.

[Interpreted] Yes. I just have 2 questions. First, regarding the increase in the surrender value reserves. I think several companies actually have seen the reserves increase at quite a high pace to the extent that nonpolicy reserves actually had -- may have had been replaced in some cases. So even for Samsung Life, while you do not have to accumulate these reserves, starting second half of last year, you did begin and I think the reserve -- the provisioning has actually increased quite quickly, as well in the first quarter of this year as well. And I imagine that possibly there is a big impact from your variable type of products.

So if you look at third, fourth quarter last year, first quarter this year, how much under value reserving have yet to do on account of variable products and what is the reserving logic, if you don't mind explaining. And in the event that, for example, there are losses in terms of your investment assets, can those reserves potentially decrease. The second question is the rise in expenses. Of course, this is not unique to Samsung Life only. But given your prior answers regarding the surrender value reserves, it does seem that -- the aggregate amount payable will not decrease necessarily. It's just that there will be a deferral of the payment period or the timing, which will -- I think you said will lead to a moderation in the pace of accumulation. But given how the 1,200% rule is likely to be expanded in the second half of this year, how is this impacting your expensing, your execution of new acquisition expense currently?

[Interpreted] Yes. This is [indiscernible] from the actuarial team. Let me take the first question. So you are right, many life insurance companies are now in a similar position of having to do surrender value reserving. We also started at the end of last year. And as of the end of the first quarter, our reserve stands at KRW 1.6 trillion, which is actually the lowest in the industry. So for us, the reserve actually increased, impacted by rising health policy sales throughout 2024, '25. And with the above rise in both share prices and interest rates in the second half of last year, it is true that for those 2 quarters, we have had some impact from the variable products. So in terms of a breakdown of the increase in reserves in the first quarter, I think it's 50% due to new business and 50% due to the above rise in variable reserves.

[Interpreted] This is [indiscernible] from the channel marketing team. Let me take your second question. So the broad life insurance market actually has grown from KRW 50 billion as of 2022 to now KRW 100 billion as of the first quarter of 2026. So as the size of the total market grew, there was aggressive scouting or head hunting with companies competing for the planners also extensive promotions and marketing fees that did drive up new acquisition expenses.

However, the regulatory authorities are now going to crack down on those types of excessive practices and it enforced the 1,200% rule for GA's NFCs starting in July of this year and aggregate ceiling will be enforced starting next year on sales commissions and the commissions will be payable in 4 year -- or excuse me, in installments across 4 years. Next year, but then across 7 years starting in 2029. So as these regulations go into effect, we think that excessive competition driven by higher commissions will abate. And we will also reduce our sales-related costs through greater efficiency in our promotional activities and also by enforcing preemptive cost control.

[Interpreted] The following question will be presented by Jun-Sup Jong from NH Investment & Securities.

[Interpreted] Ask 2 questions. My name is Jun-Sup Jung. So a lot of good things have already been set. So let me just ask regarding shareholder returns. You did mention that you will continue the gradual increase in DPS. And in the event that there is a sizable distribution from SCS or SEC, you are open to considering possible payout in installments. While we do not know the exact size, if we foresee that considerably, it can be a distribution in the trillions next year from Samsung Electronics potentially, you might not be able to meet the criteria to qualify for a separate taxation on dividend income. So will you be mindful to satisfy those -- the criteria? Or will you have to wait and see the developments before determining that? And when should we have more visibility into possible changes to your shareholder return policy?

And second, you did mention the road map for deployment of excess capital with a recent growth in the capital market. I think a lot of the financial holding companies have been making capital injections into their asset management or securities arms. How about Samsung? You are the largest shareholder for both Samsung Securities and some asset management. So do you have any capital injection plan?

[Interpreted] Yes. This is the CFO. Regarding the -- meeting the eligibility criteria to qualify for separate taxation on dividend income versus our commitment to continuing to deliver DPS growth. To talk about the direction for next year. I think to do that now would be too premature. But certainly, we will consider both sides to decide, and we will be ready to communicate with the market at an appropriate period.

And in terms of the timing, when you can expect more visibility on our shareholder policy. I do apologize that I cannot provide a clear answer right away. Actually, in March of this year at our Annual General Meeting of Shareholders, we did provide a simplified of our value program, and we have until the AGM in March next year to provide our official value program. So within this legally bound time line, we will do our best to set our policies and communicate them with the market. And regarding excess capital. Well, first, for Samsung Asset Management, as you know, we already own 100% of equity interest. And I do know that there is a lot of talk about potential additional acquisition of shares in Samsung Securities. F&M and Samsung Card.

So any decision to increase our equity interest in any one of our subsidiaries will require a comprehensive study, and we'll strictly have to be in the interest of enhancing shareholder value and furthering corporate company growth. At this time, we do not have plans to make additional acquisition of shares in these subsidiaries.

[Interpreted] The following question will be presented by Jaewoong Won from HSBC Securities.

[Interpreted] Thank you for delivering a strong performance despite the challenging environment. I also have 2 questions. One on the money move phenomenon. So on Page 11, you do show trends for your protection-type products. How about for your savings-type policies? If in fact the cancellations or the [indiscernible] is on the rise, do you have any concerns for sizable CSM adjustment at the end of this year and the fourth quarter due to major changes to your assumptions that will reflect into CSM adjustments?

And on Page 14, regarding the K-ICS sensitivity, it seems that as Samsung Electronics share prices increase, actually, your sensitivity to those share prices actually is going down. Potentially because your required capital has grown to by a more significant degree versus available capital. So if Samsung share prices or Samsung electronic share prices goes up to KRW 300,000, even KRW 400,000, given the concentration of market risk, potentially could that play as a negative?

[Interpreted] Yes, this is Janisha, Head of the Actuarial team. Let me take the first question. So from 2 years ago, we have already been undertaking a company-wide efficiency management initiative, particularly to manage against labs. But given the risk activity of the stock market starting last year. It is true that we have seen the lapse rates or cancellation go up by about 1% to 2%. So it's just slightly for some products that are linked to interest rates.

So the labs did increase in January for the savings type products linked to the interest rate, but then stabilized some in February and March. So when we assume that the current conditions continue until the end of this year. We don't think -- we don't anticipate any major CSM adjustments on account of adjustments to the cancellation. And just to give you more comfort, actually, in the first quarter, we have already seen evidently that compared to smaller companies, our CSM adjustments on account of labs or changes to the lapse assumptions actually smaller versus the other players.

[Interpreted] Yes. This is [indiscernible] Song, Head of the RM team. Let me take your second question. So in terms of share price, rising share prices, of course, are associated with a rise in available capital, but then at the same time, required capital also goes up. So relative to the impact of rising interest rates, the overall the rise is less. So in the first quarter, Samsung Electronics share price was KRW 160,000 baseband and [indiscernible]

In terms of sensitivity, if Samsung Electronics share price goes up by KRW 10,000, the sensitivity is 0.1 percentage points. And similar sensitivity profile, assuming current pricing of [indiscernible] But if SEC shares go up further beyond KRW 300,000, KRW 400,000, it's not that our K-ICS ratio will continue upside. At some point, it will you will start to see incremental decrease. But actually, the sensitivity is very low, going down by about 1 percentage point for KRW 100,000 increase in share prices.

[Interpreted] The following question will be presented by Do Ha Kim from Hanwha Investment & Securities.

[Interpreted] So this is not so much a question, but I would like to ask a favor. If you look at other listed insurance companies where the CFO level attends and the rest, the earnings conference call. They do all provide a SAP-based financial statements during the earnings call. But because Samsung Life does not do so, we are not able to have -- to look at the more detailed numbers to ask questions during the earnings call. I don't think you should have any trouble preparing the financials in terms of your underlying infrastructure as it was readily done during IFRS 4. So could you -- that is just my suggestion.

[Interpreted] Yes, this is the Head of IR. Thank you for your suggestion. We will look into -- we will practically look into different ways where we can provide further information, particularly numbers. in order to help you better understand our company financials.

[Interpreted] Currently, there are no participants with questions.

[Interpreted] Yes. Thank you all for joining us. With that, we will conclude our first quarter 2026 conference call for Samsung Life. Thank you very much.

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

Hello. Thank you for joining us today for Samsung Life's Earnings Conference Call. The earnings presentation will be delivered by Samsung Life, followed by your questions. [Operator Instructions] Now we will begin with Samsung Life's Fiscal Year 2025 earnings presentation.

Good afternoon, everyone. This is [ Han Sung Kim ], Investor Relations part leader. Thank you for joining us today for Samsung Life's 2025 Year End Earnings Presentation. Today's call is scheduled for 1 hour, starting with the earnings presentation delivered by our CFO, Mr. Wan-Sam Lee and followed by your questions, which will be addressed by the members of our management team present here today.

Please note that the figures in this presentation may be revised during the auditing process and any forward-looking statements, including the earnings outlook contained in today's conference call are subject to change depending on both the domestic and overseas market conditions and operating environment.

Let me now hand over the presentation to our CFO, Wan-Sam Lee.

Good afternoon, everyone. This is the CFO, Wan-Sam Lee. I would like to thank our investors and analysts for taking the time out of your busy schedules to attend today's earnings call. Let me start with our financial highlights for the fiscal year 2025.

Our consolidated net profit for the fiscal year 2025 grew by 9.3% year-on-year to record KRW 2.3 trillion, a record high, backed by continuous profit-driven performance and improved fundamentals. Insurance service results recorded KRW 975 billion, while investment profits recorded KRW 2 trillion. Let me now go over the specifics in the next slides. Insurance service results for the fiscal year 2025 recorded KRW 975 billion, driven by increased CSM profit from high-margin health products and better management of operating variances.

Going forward, we will do our best to achieve robust insurance profits of over KRW 1 trillion by securing high-quality new business CSM and by strengthening the efficiency indicators such as a loss and lapse ratio, along with cost-cutting efforts by reducing fixed costs and countering fraudulent claims.

Following is a breakdown of our investment profit. Investment profit for the full year was maintained at a stable level under the ALM principle despite losses from the variable account due to market volatility in 2025, resulting in a total of KRW 2 trillion. We will try to improve our investment profit year-on-year. Under the strengthened ALM principle, we will enhance our investment yield and reinforce risk management measures on nonperforming alternative assets to defend our profit against potential losses.

Next is the current status of our consolidated balance sheet. Our total assets came in at KRW 351 trillion as of December and is comprised of KRW 247 trillion in invested assets, KRW 29 trillion in variable account, KRW 29 trillion in corporate pension account and KRW 46 trillion in Samsung Card and other consolidated subsidiaries. Total liabilities came in at KRW 286 trillion, with insurance liabilities recording KRW 201 trillion, including KRW 184 trillion for BEL, KRW 3 trillion for RA and KRW 13.2 trillion for CSM. Shareholders' equity recorded KRW 65 trillion with KRW 44 trillion in accumulated other comprehensive income and KRW 21 trillion in retained earnings.

Next is the CSM movement. Our CSM bonds at the end of December was KRW 13.2 trillion, increasing by KRW 0.3 trillion year-to-date. This was driven by new business CSM of KRW 3.1 trillion. CSM adjustment of KRW 1.8 trillion due to updates on actuarial assumptions and regulation guideline changes, such as the hike in education tax, and CSM amortization of KRW 1.5 trillion. In 2026, we will focus our efforts on growing the CSM balance, which is the foundation of our insurance profit. We will do so by expanding not only the new business CSM, but also by strengthening the efficiency management measures.

Now I will explain the changes in the shareholders' equity in more detail. Our shareholders' equity at the end of December 2025 came in at KRW 64.8 trillion, increasing by KRW 26.7 trillion year-to-date. The increase was attributable to an increase of KRW 2.3 trillion from the annual net profit, a KRW 3.8 trillion increase from change in our reserve discount rate and an increase of KRW 21.4 trillion in accumulated other comprehensive income, mainly due to the hike in Samsung Electronic share price.

Now let me walk you through our business highlights. In 2026, our new business CSM recorded KRW 3.1 trillion, thanks to expansion of the high-margin health product sales. Over the past 2 years, we have strengthened our market position within the overall insurance sector by introducing new health product lineup, while increasing competitiveness for the coverage we provide. As a result, we were able to increase our health proportion within the new business CSM to 75% in 2025 compared to the 58% in 2024. Our CSM margin rose to 11.3x in 2025, an increase from the previous 10.5x in 2024, thanks to the increased proportion of high-margin health products.

Let me go over the details regarding the performance of the health CSM. The annual new business Health CSM recorded KRW 2.3 trillion in 2025. In particular, we were able to enhance both the quality and quantity of our CSM by increasing the proportion of general health products compared to a year ago. Also, we were able to enhance the competitiveness of our health products by diversifying the product lineup based on differentiated customer needs and launched the surrender value strengthened health product, a product type specialized for life insurers. In addition, we also improved our nonpricing competitiveness by improving the overall underwriting process and providing additional health care services.

Next is on our distribution channel. As of December, we saw a net increase of over 5,000 agents year-to-date for exclusive channel, resulting in over 43,000 agents as of 2025. Our exclusive channel generates approximately 70% of our new business APE, which accounts for 85% of our new business CSM, thanks to its high productivity and profitability compared to other distribution channels. We are implementing measures to manage the productivity of the newly added agents and to better manage our expenses.

Continuing on as a major efficiency trends. Protection persistency ratio for the 13th month came in at 89% or 76% in the 25th month, both similar from a quarter ago. Loss ratio has been on a rising trend due to pent-up demand from claims following the normalization of the medical strike in 2025. However, in the fourth quarter, the loss ratio inched down on a quarter-on-quarter basis, recording 84% due to improvement from the living benefit. We will do our best to maintain our loss ratio at a stable level by reviewing the product structures, such as the risk rate for the coverage with a high loss ratio, strengthened the underwriting process and reinforced the review process of fraudulent claims.

Now let me explain our investment portfolio. As previously mentioned, we are pursuing investment profit expansion through asset diversification strategies under the ALM principle. General account invested assets recorded KRW 247 trillion as of December 2025, of which interest-bearing assets, such as bonds and loans account for 60%. Our investment yield for the general account amounting KRW 247 trillion, recorded 3.1%, while the interest expense rate on the insurance liability stood at 3.2% for the KRW 201 trillion in insurance liabilities.

In addition to the general account investment profit, we recorded KRW 1.3 trillion from the consolidation and equity method profits from subsidiaries, totaling our investment profit to record KRW 2 trillion for 2025.

Next is on the K-ICS ratio, which represents our capital soundness. Despite regulatory tightening of the discount rates in 2025, we expect our tax ratio to reach around 198% as of December 2025, thanks to improved fundamentals supported by a net increase in CSM balance earnings expansion of favorable market conditions, such as rising Samsung Electronics share price and interest rates. Our Tier 1 capital tax ratio is expected to stand at around 157%, which significantly exceeds the financial authorities recommended level. Going forward, we will remain committed to maintaining an industry-leading capital adequacy able.

Now let me guide you through our future strategies for 2026. We will pursue sustainable growth from our core insurance business and enhance profitability through our asset management business going forward. For our core insurance business, we will continue to grow our exclusive channels, strengthen our [ J ] channel competitiveness and increase the sales of our high-margin insurance products.

In addition, we plan to continuously grow our CSM balance through efficiency management, such as improving the persistency ratio and managing the loss ratio. For our Asset Management business, we plan to strategically allocate our assets and enhance our investment returns under our ALM principle and find additional growth opportunities in overseas insurance as well as investment management companies.

As a future growth strategy, we established a life care ecosystem that integrates the usage of digital health care and senior living. From the digital side, we will increase work productivity using AI and big data and also expand the infrastructure environment for distribution channels. From the health care side, we'll build the business model to monetize on the health care services provided. As for application health, we will increase this usage to prevent the disease beforehand and manage risk.

Lastly, for Senior Living business, we will strengthen the foundation for mid- to long-term growth by utilizing our subsidiary Noble Life, which was established in 2025. We will expand our business through market differentiation and internalizing our operational know-how.

Lastly, let me go over the direction of our corporate value enhancement plan. As previously communicated, we are committed to achieving a midterm target shareholder return of 50%. For the fiscal year 2025, our dividend per share came in at KRW 5,301, an 18% year-on-year increase, thanks to earnings improvement and enhanced dividend payout ratio. Going forward, we will continue to expand our total dividend amount by increasing the dividend per share by more than our recurring profit growth each year based on improving fundamentals.

This concludes our presentation on our 2025 annual earnings results. Thank you for attending today's earnings call, and we appreciate your continued interest and support for Samsung Life.

[Operator Instructions]

The first question will be provided by MW Kim from JPMorgan.

I will ask 2. First, about the PEA adjustments. If you look at the end of year materials, it does seem that there was some reclassification of PEA from liabilities to the capital accounts or the equity accounts -- excuse me. So even if you do not consider the valuation gains from your SEC shares, just on the strength of your core underwriting insurance profits alone, on a CSM basis, we can anticipate gradual improvement in your underlying profit.

And then if we assume 50% or so target payout, as the size of your shareholder equity continues to grow, that may mean that there is limited room for further upside in terms of improving on your ROE. So could you address this question and also give us some more backdrop to the changed reclassification or accounting treatment for your PEA account? And any midterm plans for added capital efficiency?

And second, my question has to do with future dividend policy also distributable pools to fund future dividends. Obviously, Samsung Electronics share price has increased significantly, and this has translated into improved capital adequacy ratio for Samsung Life as well. Compared to a couple of years ago, I think the rise in SEC share prices is actually quite significant. And looking forward at a potential future point when you are ready to dispose of those shares, there may be significant disposal gains.

So could you -- I think you mentioned possibility of a special dividend in the past. So could you clarify that further possible use of proceeds from disposal of SEC shares, how you intend to return those excess gains to the shareholders? I would appreciate it.

Yes. This is the CFO. My name is Lee Wan-Sam. Yes, let me first take your question on the policy holder, the PEA adjustment. So previously, in December of last year, there was a return notice provided from the FSS to the association of life insurance companies in Korea, regarding the accounting treatment for PEA accounts under life insurance companies. So pursuant to the inquiry and also the subsequent response from the FSS, we have determined that in accordance to the accounting standard number 1117, starting at the end of the current period, we will begin assessment of those liability, we will do the liability assessment. And then briefly on our mid- to long-term ROE.

So we intend to continue to deliver solid growth in terms of CSM, particularly net CSM growth driven by new business to continue to improve our Insurance Service profits underlined by ALM practice, increase in our net interest spread, diversification of our investment portfolio and also increased contribution from our consolidated equity method gains to -- which will also help improve our investment profit. So the goal is to gradually improve our ROE in the mid- to long term and consistently improve our dividend per share as part of our ongoing capital policy.

And then further on our dividends. So we have consistently emphasized our midterm target of 50% in terms of shareholder return. And we intend to continue to deliver solid earnings and profit growth to enhance the visibility of our shareholder return policy. And our #1 principle in terms of shareholder return would be the consistent enhancement of our DPS.

Over the last 5 years, we have increased our dividends at an annual average growth rate of 16% or more. And going forward, we will continue to increase our dividend per share at above or at minimum above the growth of our ordinary income. So that we can anchor ourselves as a stable dividend growth stock.

When we determined our dividends for 2025, we factored in not only our recurring ordinary income, but also the disposition gains from SEC share sales that were generated in February last year. So those will also be included in our pool of distributable profits to fund dividends. And this plan remains unchanged.

That being said, as you mentioned as a source of concern, it is hard to really anticipate the exact timing of when those disposal gains will likely occur from SEC shares. And the size of those proceeds also are subject to great variability as well. So in terms of achieving our steady increase in dividends, which is our goal, this could act as a potential variable. And so it is hard for us at this point to specify exactly what part of those disposal proceeds in terms of the exact dividend ratio will be provided to our shareholders.

However, our #1 goal will be to continuously increase our dividend per share consistently year-on-year, when we feel that our K-ICS ratio is above a level that we find to be adequate. And we will consider both our net profit and also SEC sale gains to consistently improve our DPS.

The following question will be presented by HeeYeon Lim from Shinhan Investment & Securities.

So for 2026, if the company can provide your guidance in terms of how we should be thinking of new business and other performance metrics as well. And nowadays, there is a lot of talk about surrender value reserves. And so I'd like to hear more on Samsung Life's position, how -- in terms of your overall approach?

This is [indiscernible] from the Channel Marketing team. Let me take the first question. So we do expect challenging conditions to continue in 2026 with the introduction of regulations for different fees, also guidelines for loss rates and expense ratios as well. However, regardless of the external volatility or change, nonetheless, we are strongly committed to achieving our full year 2026 target of KRW 3.2 trillion or more in terms of new business CSM. So that will bring us above the KRW 3.1 trillion in new business CSM we reached in 2025. And then a measure of the profitability of our new business, which is the new business multiple, which is new business CSM over volume. We achieved 11x multiples in 2025, but we'll strive to achieve 12x higher multiple in 2026.

Yes. This is [ Yongin Choi ], Head of the Actuarial team. Let me take the second part of your question. So the authorities did mention that practices may have to improve regarding surrender value reserves in the interest of expanding shareholder returns and also enhancing corporate value. So this was mentioned sometime in the fourth quarter last year.

So although the authorities made that initial announcement, nothing actually has developed further beyond that point. So it is hard for us to say where exactly this policy is likely to be headed. That being said, in terms of our approach, we do expect broad improvements in what may be a more rational or reasonable theme in the interest of better consumer protection, also mitigating excessive competition.

The following question will be presented by Heewon Choi from Morgan Stanley.

I'd like to ask 3 questions. It seems that in the current quarter, there was quite substantial CSM adjustments. I believe potentially there might have been one-off factors, including the increase in the education tax, the rise in the corporate income tax rate as well. So could you elaborate further on how these one-offs impacted your CSM also your profit?

And second question is, you did mention that in the first half of this year, the loss ratio and expense ratio related guidelines are expected to go into effect. So could you also give us a rough idea of how you believe the guidelines should affect your CSM also profit as well?

And third question is starting in 2027, the Tier 1 capital adequacy ratio will start to be adopted. So in the mid- to longer term, what kind of adequate level of Tier 1 capital and also your K-ICS ratio, are you looking at?

Yes. This is Yongin Choi, Head of the Actuarial team. Let me take the first the second part of your question. In terms of the cause of the CSM adjustment in the fourth quarter, broadly there were 2 drivers First was the increase in the education tax, which accounted for an adjustment of KRW 300 billion.

And then the second large component came from our indemnity products, an adjustment of KRW 600 billion to KRW 700 billion. So this also reflects the lowering of premiums on indemnity products, mainly the first generation and second generation of indemnity loss products at the end of 2024. And also with normalization after the medical strikes in 2025, this did lead to an increase in indemnity claims. So that was the second driver.

So typically, for a given quarter, we usually have a CSM adjustments around KRW 200 billion or so from changes to policies, also other nonrecurring one-off factors. So when we take out those 2 main components that I mentioned, the CSM adjustment is actually in line and consistent with past trends.

Now regarding your second question. The authorities did issue a press release regarding potential guidelines for actuarial assumptions, including expense ratio and loss ratio. So in terms of the direction of the proposed guidelines, as far as the loss rate are concerned, we actually had been quite conservative in our assumptions, particularly for nonrenewal type policies. So the guidelines, if anything, will be an added plus for us. In terms of new coverage, the TITAN guidelines may represent a partial detraction.

And regarding the expense ratio assumptions, we have already been pricing in inflationary assumptions as well. So regarding shared cost, the cost allocation, we believe that the guidelines will be quite reasonable or rational. At this point, I think we do not have exact details in terms of the direction of the policies, particularly regarding the criteria for calculation of the loss ratio, also a review of the underlying statistics for calculating expense loading, also the scope of the assumption.

The assumption calculations is also quite expensive at this point. But once these outstanding points are determined, we will be sure to communicate back with you.

This is Lee Jungsun, Head of the RM team. Let me take your third question. So in terms of the Tier 1 capital ratio that you mentioned, according to the regulations, 80% was proposed as the recommended level while the regulatory threshold was set at 50%. As of 2025, our Tier 1 ratio is actually 157%, which is substantially above both thresholds. Because Tier 1 capital regime is going to go into effect only in 2027, in the interim, ahead of 2027, exactly what level we will manage our Tier 1 against, we will have to do some more further review.

But given that the Tier 1 ratio has slightly wider volatility versus the K-ICS ratio, roughly speaking, we think that Tier 1 broadly within 120% to 130% would be largely consistent with our mid- to long-term K-ICS range of 180%. In terms of the exact level that we will be managing against, we will get back to you before the regulations actually enter into effect.

The following question will be presented by Seung-Gun Kang from KB Securities.

We did talk a bit about dividends. And you did clarify the proceeds from SEC shares sales will be used as part of the funding for future dividend payments. So in terms of the overall picture, by 2028, the company has stated that you intend to gradually increase your payout ratio up to 50%. Now our hope was that in the interim up to 2028, we would have liked to see the SEC the disposal gains be used to fund special dividends as an added layer instead of having to wait until 2028. So we had -- there were some expectations that we might see a rather faster increase in your payout at the front end.

However, based on what you have announced this time, it does seem that we will have to wait until 2028. While the disposal gains will be included in the overall distributable pool, it seems like you're painting a more or less linear trajectory as you move towards that 50% target. So because there might be those types of concerns, if you could clarify and provide us with more clear guidance, I'd appreciate it.

This is the CFO, Lee Wan-Sam. So again, it is very hard for us to also estimate the exact timing of when we will see disposal gains on our SEC shareholdings. And also the size of the disposal and the gains also is subject to a lot of variance as well. That's why we cannot specify exactly how much of those proceeds will be used to fund the dividends.

So in terms of determining our strategy, we intend to be quite strategic. For example, the core behind our capital management policy will be the gradual improvement to our dividend per share. And any time that there is a disposal of any of our affiliate shareholdings at a scale that could potentially impact that. Also, any time we have a nonrecurring source of earnings, we intend to evenly allocate those proceeds over a specific time period and include in the pool of funds available for distribution.

And so overall, we will be quite strategic. And again, any time these types of events may occur, we will review internally and update the market as quickly as possible.

The following question will be presented by Jiwon Kim from DAOL Investment & Securities.

Just a quick question before you're ready to wrap up. You mentioned that potentially nonrecurring earnings may be used as part of special dividends. You did mention that you will be strategic, you'll be allocating those proceeds over a certain time period. In terms of time period, would it be within the timetable of your value-up plan, so within the balance of, say, 2028 or '29?

Yes, this is the CFO. In the event that we do a major sell-off of SEC shares and indeed, see a sizable gain from the disposition, in that kind of scenario, still the size -- or it would depend on the size of the disposition gains, also the DPS growth rate at that time, which we'll inform how exactly we will allocate evenly over what exact time period. So we will try to follow up with more specifics at that time period or at that time.

And so again, because we cannot accurately predict exactly when the timing will come for the sell-off of the SEC shares and what size of that will be. I apologize that we are not able to be more specific in terms of the expected timing.

The following question will be presented by Sinyoung Park from Goldman Sachs.

This is Sinyoung Park, from Goldman Sachs Securities. I think I'd like to ask 2 questions on the timing of your announcement on your value-up plan and also cancellation of treasury shares. I think we've been waiting for some time now for the company to announce your plans on the value-up program. Other affiliates within the Samsung Group apparently have already begun cancellation of their treasury shares.

So when should we gain more visibility in terms of Samsung Life? Will you potentially be ready to make that announcement once the proposed revision to the commercial code is finalized? Or even then, would there be any additional consideration that you would have to take into consideration, it would be very helpful to know.

First of all, I'd like to express my sincere apologies to our investors who I know have been waiting for quite a long time. I apologize with the delay in our disclosure of our value-up plan. So we are currently observing developments as they unfold, including evolving market conditions in and outside of Korea. Also, the government moved regarding the proposed change to the laws regarding treasury share cancellation. And once the revision is finalized, then we will undertake a review of what we will do with our treasury shareholders, including possible cancellation and update the market.

And again, it is hard to predict exactly when the commercial code revision will be finalized and complete. But once the bill is passed into law, we will, again, undertake in a comprehensive consideration, our overall value-up program, including measures to enhance our capital efficiency. So again, it will be a comprehensive review of what we do with our treasury shares, including possible cancellation, also our mid- to long-term profit outlook. Also, our shareholder policies will be included in our value-up disclosure at that time.

As there are no further questions, we will now conclude our conference call. For further inquiries, please contact the IR team.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good morning, and good evening. Thank you all for joining the conference call for the Samsung Life earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions]

Now we will begin the presentation on Samsung Life's Third Quarter of Fiscal Year 2025 Earnings Results.

[Interpreted] Yes. Good afternoon. This is Minyoung Kim, Head of the IR team. I would like to extend my sincere thanks to everyone for joining us today at our earnings call despite your busy schedule. Before proceeding to Q&A, I will briefly take you through our third quarter business highlights.

As of the third quarter YTD, we recorded new business CSM of KRW 2.3 trillion. Amid intensifying competition between life and non-life insurers, health CSM was the main driver of new business CSM growth recording KRW 1,751.7 billion, up 23.9% Y-o-Y.

Overall, new business CSM margins remained solid at 11.5x against first month premiums and 16.8x for health policies in particular. We have been expanding our health lineup in a systematic manner, introducing pure health and refund type policies, which reflect customer needs. We have been leveraging AI-based risk rating models, also offering premium discounts based on the health status of policyholders and expanding value-added ancillary services, all as we continuously work to enhance our competitiveness. We are also refining the structure of our whole life products with a greater focus on death benefit coverage to maintain appropriate level of profitability.

Our exclusive FCs have now increased to 42,000, and we are seeing both productivity and retention improve as we strengthen sales education for FCs and provide differentiated infrastructure support. As we look to expand our coverage in the nonexclusive markets as well, we are boosting the number of active branches and active planners to drive stronger CSM growth.

As of the end of the third quarter, our CSM balance recorded KRW 14 trillion, up KRW 1.1 trillion YTD from robust new business CSM performance. Net profit attributable to controlling shareholders rose by 3.7% Y-o-Y, recording KRW 2,117.1 billion, thanks to solid insurance service profits driven by net CSM growth as well as increased investment profit from investment deals.

Our K-ICS ratio was 193%, up 6 percentage points from the end of the second quarter as we maintain top industry levels. We intend to maintain a solid capital adequacy position into the future, boosted by high-quality new business CSM and rigorous ALM.

We are seeing continuous improvements in our underlying fundamentals, thanks to strong new business CSM driven by health product growth, a net increase in our CSM balance from strict efficiency management and management gains and also from broadened earnings base from our consolidated subsidiaries. This year, as before, we will continue to implement shareholder return policies in line with our midterm shareholder return targets to enhance corporate value and support greater market recognition of our corporate value.

Please refer to the materials that we have provided for you in advance for further details on our performance. Please be advised that forward-looking statements mentioned in today's call may be subject to change going forward from changing economic and overall business conditions in and outside of Korea.

With that, we'll now start our Q&A.

[Operator Instructions]

The first question will be provided by M.W. Kim from JPMorgan.

[Interpreted] Yes, this is Myung Wook Kim. I will be asking 2 questions. It seems that on the market, there are growing quite good expectations towards Samsung Life in terms of your value-up programs. But when I look at the materials compared to what was made available at the end of the first half, I don't note any major difference.

Is there any particular reason why your announcement of the value-up program is being delayed apparently. It is towards the end of the year, so for us, we do have to make certain projections about expected dividends, which is why I would like to ask for more details.

In the first quarter, you did dispose of SEC shares, and you did comment that those proceeds would be used as part of the pool of distributable dividends. But going forward, supposing that you have more disposal of SEC shares, and I think conceivably, there can be a lot of room for those types of events, given how Samsung Electronics themselves has done a lot of buybacks. It's just that they have not canceled out the whole amount just yet.

But if we suppose that there are further disposals of such, what should we be projecting in terms of our expected dividends for Samsung Life? So regarding SEC dividends, for example, separate from the progressive dividend guidance, could we expect special dividends, for example, and embed that into our projections, would that be fair?

Or if we can take the disposal proceeds multiplied by the current payout, would that give us some reasonable estimate of how much we can stand to be distributed from SEC disposal? Or if not, could the company provide more guidance? The second question has to do with private credit. It seems that starting from the advanced markets now into Asia, more insurance companies are actually investing more into private credits or private debt assets.

And in an IMF report that was out in October, I think that was mentioned as well. So as a representative of insurance company of Korea, what are your thoughts in terms of insurance companies investing more into private debt as an asset class? Do you, in fact, have plans to increase those types of asset holdings for Samsung Life? In terms of the risk reward, do you think that it is in the interest of insurance companies to do more private credit in view of solvency capital and asset liability matching also liquidity profile, your thoughts?

[Interpreted] Yes, this is the CFO. My name is Wan-Sam Lee. So I do apologize for the delay in our announcements of our value-up program, but it's not for any particular internal reason that there is this delay. So currently, we are actually observing developments as they play out in terms of the direction of law or amendment of laws with regard to the cancellation of treasury shares led by the government. Also, we are observing market conditions in and outside of Korea as well. And so we are doing our best, and we will continue to do our best so that we can make our value-up program public and available to you at an appropriate time.

And in terms of our disposal gains on Samsung Electronics shares earlier in the year, as we have explained before, for those disposal gains, we will distribute in the form of dividend separate from our ordinary or recurring profit base. In terms of the actual payback, I cannot specify at this time, but we will be defining a rational or a reasonable level. And once that is set, we will communicate back with you.

So Samsung Electronics has announced their plans to do further follow-on second round and third round share buybacks and also cancellations, but they have not specified in terms of the exact timing. And so overall, in terms of the overall dividend payout plan with regard to disposal of SEC shares, we will again do a very comprehensive and rational review and update you further. And again, we are very strongly committed to implementing the shareholder return expansion policy that we have so far been communicating with you on.

Yes. This is [ Kim ], our Head of the Asset Management or Investment management team. So in terms of private credit exposure, yes, we do have some private credit assets, but it is to a very minimal extent because first and foremost, the most important thing is our ALM-based stance and remaining investments are allocated into alternative assets and a very small, less than 0.1% portion of those alternative assets are invested in private credit, mostly now in the form of fund of funds type instruments.

But as we are looking to expand into the global asset management market, we have recently acquired Hayfin. I think this may have prompted concerns on the market that maybe Samsung will now substantially increase our private credit exposure. So I do understand where those concerns can be coming from.

However, again, our current exposure is very limited. And even if we do expand some, it will still be to a very limited extent. And it happens that Hayfin, our new partner, actually has a lot of experience in management of those types of assets as well. The key management have a very good legal background as well and are very experienced in exiting on those types of assets for recovery.

So it could go both ways. I suppose the private credit market can continue to grow or as per your concern, it could actually deteriorate. But irregardless of the developments, we were very confident that Hayfin would be very competent and able to deliver very stable returns, which is why we decided to go ahead with our recent investment. We will continue to build on our partnership with Hayfin as well and manage everything very tightly so that we do not -- there is no cause for concern.

The following question will be presented by Jun-Sup Jung from NH Investment & Securities.

[Interpreted] Yes. I will also ask a question regarding your investments. So in terms of looking out to the fourth quarter and 2026, could you just inform us to set our expectations for what kind of quarterly investment income you expect on an ordinary or recurring basis? There are many macro indicators, including interest rates that have been moving outside of expectations many times with widening volatility as a result.

So what is your company outlook regarding those macro indicators? And again, what is your expectations in terms of investment gains on a quarter -- quarterly basis. Also in the third quarter, there was a onetime disposal gain this time. Do you have more disposals planned going forward?

[Interpreted] Yes. This is Kim from Asset or Investment Management. Yes. So let me take you through our outlook for the fourth quarter in terms of various indicators. For example, interest rates. So in terms of the fourth quarter and 2026 outlook, assuming that current levels of interest rates and also FX rates are maintained, we are assuming similar levels of investment gains relative to now. In the third quarter, we did have disposal gains on disposal of real estate property, but this is not a very frequent type of event, and we do not expect more in the near future.

The following question will be presented by Byung Gun Lee from DB Securities.

[Interpreted] Yes. This is Byung Gun Lee from DB Securities. I appreciate that you were able to manage your performance well despite the challenging circumstances. I have 2 questions, mostly on your operating variance, particularly from claim payments. If you look at the trends, it seems that claim payment operation or operating variance actually is widening in terms of the negative -- towards the negative territory. And so what type of policy blocks perhaps by underwriting year, what block is it that is contributing the most to that kind of variance? And what do you think is the fundamental cause for this type of negative variance?

And your guidance, please, when reflecting these trends, what kind of effect do you think this will have on CSM adjustments at the end of this year? Second question, I'd like to ask for your guidance on full year net increase in CSM as well. In terms of the retroactive period, you started -- or things started out on the shorter end. For the nonlife insurance companies, their net CSM increase actually has been quite good.

But if you look at post application and the time that has lapsed, I think they are now reverting circling back toward their starting point levels. Given the K-ICS levels of the nonlife insurance companies, it's not something that we can be purely optimistic about. So if you could provide more guidance on your side in terms of net increase CSM on a full year basis.

[Interpreted] Yes. This is [ Aninta ] from the actuarial team. I will address your questions. So in terms of the reason for widening variance for claim payments post transition, so we have applied fair value valuation for the most part with 1-year retroactive application. So in fact, most of the negative or the widening variance is coming from fair value -- the fair valuation block from past sold legacy policies.

So again, these are legacy products, health policies sold early in the 2000s or annuity type insurance policies sold in the '90s. Relative to our expectations against natural attrition, the actual decrease was less. And so we are seeing a widening of variance from a certain block of these policies from this specific time period.

And it is true that our variance in the third quarter has increased slightly, but mostly due to one-off factors. So when we are looking at the impact of changes to assumptions, including loss rates and how that will impact end of the year CSM adjustments, well, we think that overall CSM adjustments will be similar to last year or end of last year levels.

Then moving on to your second question. So 3 years ago upon transition to IFRS 17, most of the non-life insurance companies, I understand, applied 5-year retroactive period. And so there was an increase in the number of sectors that they had to manage. And then they actually started to be more aggressive in terms of their assumption application. And as a result, compared to life insurance companies, in relative terms, their CSM actually has been stronger as far as I recall.

So post transition, obviously, you have a starting point for your in-force CSM. But from that period on, there will invariably be decreases to the CSM from amortization and adjustments. So what is very key is how to add on high-quality CSM going forward. And so whether a company can do this or not, I think will largely determine whether we can maintain a net CSM increase stance or not.

So as you have seen, as you will know from seeing what we did over the last 2 years, we have been working very hard to secure new business CSM, and we have been working on various initiatives that will continue to further improve our margins while we rebalance our product portfolio as well. So while we cannot say definitively what the exact net increase number will be, it will be still safe for you to bet that we will continue to be able to see net increases to our CSM balance.

So at the company level, we consider net increase to CSM as our #1 priority, and it is a key KPI that we are measured against. And this is, of course, reflected in our mid- to long-term strategy as well. And in order to boost net increase in our CSM balance, we are continuing to work to secure new business CSM, particularly from the higher margining in health type products where there's a higher CSM multiple.

Also, we are defending against cancellation and enforcing tighter control against claim payments as well. So overall, as we have heard from Jung it on now, we will be enhancing overall efficiency and which is why we are very confident that we will be able to continue to sustain upside trends and growth in our CSM balance.

So I apologize, but if I can just clarify one thing real quick. So in your explanation of the reason for the operating variance, I think -- well, let me just first say last year, I think we saw how a fair value block due to some expense efficiency measures actually contributed to CSM growth. So in your comments just now, were you mindful of this, that this may also be reflected this year as well?

[Interpreted] So last year, there were some adjustments to our operating expense assumptions. And so there were -- there was CSM adjustments from one-off factors. But for this year, in contrast, we are expecting not one-off factors, but just recurring or ordinary factors resulting in CSM adjustments.

The following question will be presented by Do Ha Kim from Hanwha Investment & Securities.

[Interpreted] I would like to ask about your loss-making or owners contracts, if you could break it down into new policies versus in-force, I would appreciate it. It seems that in last year, the previous year, some of your participating type products experienced some loss and increase in loss-related expense as well. I think there were comments that this year, there could be some loss-making contract expense between KRW 200 billion to KRW 300 billion, depending on interest rates.

So if you could elaborate more about your view today. And I think between then and now, the interest rates actually have moved quite abruptly as we have -- as we have seen in September and then even more sharply in October as well. So based on the changed interest rate as of the end of September and at present, could you take us back in terms of your assessment of the loss-making block so that we can inform our projections.

And also in terms of other operating expense, while it is not very substantial relative to the size of your business, it seems that compared to the time that has lapsed, it does seem to have grown some by more. So could you explain about that as well?

[Interpreted] Yes. This is from the actuarial team. Let me take this question. So in terms of our loss-making policies in the third quarter, first, from the new policies, it was about KRW 20 billion, mostly from indemnity type products as we expanded sales of health-related products and also certain savings type insurance products as well. And then from our in-force or existing block, the loss-making contracts amounted to about KRW 50 billion.

And then you asked about the impact of change in interest rates to our participating type policies, our par-type block. Well, pursuant to the guidance of IFRS 17 and IFRS 17 standards, for those types of changes, we recognize the valuation gain or loss changes as OCI on the balance sheet. So it is adjusted for at the AOCI account level. And therefore, there is no impact or a change to CSM or to our underwriting profit.

So in terms of future expensing for the part type policies, I think starting from the level that we mentioned previously, you can assume that it will go down slightly gradually from those levels. So you asked about why there was an increase under insurance profit for the other expense category, it mostly is on account of accrued claims that have not been paid. So for more details, I think -- I would appreciate if you would contact us at the IR team.

The following question will be presented by Jiwon Kim from DAOL Investment & Securities.

[Interpreted] I will be just asking one question. It seems that recently, as a share of the total mix, your health-related CSM actually has been increasing substantially. But despite the increase to the new business CSM multiple, I think there has been less of a boost to your health protection CSM. So it remains to be seen how the interest rates, the movement will play out. But when we assume that expansionary fiscal policies may be in the pipeline, there is a possibility that the yield on long-term paper may increase from current levels.

So considering this type of interest rate environment, I think maybe the burden from the discount rates actually may be eased some perhaps regarding your health-related policies. So what is the company's plan? But do you intend to maintain the current mix of health CSM? Or will you be increasing perhaps the other categories like savings annuities or whole life?

[Interpreted] Yes. This is from the Channel Marketing team. Thank you for your question. So I think you were asking the question because in the third quarter, there was a slight decrease in our health CSM just as a percentage of the total. But as a category of products compared to whole life, health products actually have lower interest rate sensitivity. And so despite the fall in interest rates or other externalities, it is possible to continue to drive stable new business CSM growth.

So after the second quarter, most of our new product releases were centered around health type policies. But in the third quarter, for the purpose of diversifying our product portfolio, we did introduce more death coverage type products. So it was actually very well received by the market, and there was a boost in terms of the volume overall. It has a stronger margin profile versus the short-term payment type products. Also, it leverages our strength in death policies as well.

So although it's hard to specify the exact mix between health versus death products overall, into the fourth quarter, we will continue to place focus on selling the higher-margining high profitability products.

The following question will be presented by Hye-jin Park from Daishin Securities.

[Interpreted] I have a question regarding your immediate annuities. The Supreme Court ruling actually decided against the plaintiff. And so I understand that currently, you are setting aside some contingent liability against that kind of exposure. But pursuant to the court ruling, is there any changes required to your accounting treatment?

Second question regarding the living benefit profit on Page 12. So I do know that you have made various efforts, which you mentioned for diversifying also improving the margins. But when do you think that it is likely for there to be more of an improvement or rally?

[Interpreted] Yes. This is the CFO. Let me take your first question. So regarding our ongoing litigation for immediate annuities, as of October, we did receive some partial judgment in favor. But currently, we have 4 legal proceedings pending regarding immediate annuities. So this partial win actually applies to just 1 of those 4 cases. So 3 of 3 cases -- or excuse me, 2 are pending at the Appellate High Court and at the District Court level.

And I understand that you are interested in knowing about the accounting treatment with regard to those cases. So we will be observing the development of the remaining 3 pending cases, but we are referring to the corporate accounting standards, and we'll be determining any reversal or write-back of provisioning depending on court decisions and the timing of any reversal. And once it is determined, we will communicate back with you.

[Interpreted] Yes. This is Head of the RM team. Let me take your second question. So as you mentioned in your question, it is true that in the third quarter, our loss rates actually did increase by a significant margin. It is due to multiple factors. There were more business days versus other quarters. There was an increase in big ticket death claims as well, and there was an impact from the medical strike.

But we think that the loss rates will come back down to 82% or 83% levels in the fourth quarter. But as you suggested, it is true that if we have a bigger portion of health products in our portfolio, inevitably, this will mean a slight increase in our loss rates.

But that being said, we will continue to make efforts to minimize any increase to loss rates. We will be cracking down against fraudulent claims, for example, and working from the beginning upon sales of any new product to enforce tight management of loss rates within a predefined range.

The following question will be presented by Do Ha Kim from Hanwha Investment & Securities.

[Interpreted] Yes. As another follow-on question, again, regarding the par type owners block. So obviously, at the end of this year, you will be doing another evaluation or assessment of that block, and this will either lead to an increase or decrease on your bill. So when -- what is your underlying assumption in terms of your interest rate for calculating that BEL adjustment? So what is the time period that you use for your interest rate assumptions? If it is as of the end of September, then that is already pretty much confirmed and set. I'd like to know what time period interest rate is reflected. And then like last year, there can be further loss or perhaps write-back from these types of loss-making blocks. So what is your expectation, both on the loss or reversal side?

[Interpreted] Yes. This is In-cheol Byeon from the actuarial team again. Let me take your question. So you asked about what type specific interest rates are we applying in our assumptions. Well, as you know, the par-type annuities that we are talking about now are legacy high fixed rate products that were sold prior to 2000. So at the time of doing a market fair value valuation, we assumed a set interest rate as of the end of 2021, which was fixed at 3.2%. Because it is fixed, irregardless of any changes to actual market interest rates, the interest rate assumption that we use for calculation of BEL remains unchanged.

And upon end of the year revaluation, why is it that we may see a loss. It's mostly due to increased life expectancy of individuals, which is sequentially reflected and kicks in. So although it will be to a lesser extent versus last year, we think that there will be a certain level of impairment booked also in the fourth quarter this year.

So to clarify, and I apologize for this basic question, but the reason for the loss converting -- the block that converted to a loss last year, are you saying that this, in fact, was not due to the interest rates, but due to changed life expectancy or life experience assumptions?

[Interpreted] Yes.

Thank you very much. We will now conclude our earnings call as there are no further questions lined up. With any further questions, please contact us at the IR team. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]