Hello, everyone, and welcome to the Prudential plc 2022 Half Year Results Call. My name is Seb and I will be the operator for your call today. There will be an opportunity for Q&A. I will now hand the floor over to Mark Fitzpatrick to begin. Please go ahead.

Thank you and welcome everyone to our 2022 half year presentation from our offices here in Hong Kong. I’m Mark FitzPatrick and I'm joined here in person by several members of our leadership team and by a number of our Hong Kong based analysts. From the Prudential team, we have James Turner, our group CFO and Avnish Kalra, Group Chief Risk Officer and Compliance Officer. We also have the Managing Directors of our three Strategic Business Groups. Here with us in the room is Lilian Ng responsible for Chinese Mainland, Hong Kong, and Taiwan, as well as overall distribution capabilities. And then joining us remotely from Singapore is Dennis Tan, who heads up Singapore, Thailand and Vietnam; Solmaz Altin, who's responsible for the remaining country markets, including Indonesia, Malaysia and the Philippines and he also has responsibility for our digital and technology functions. And then also Seck Wai-Kwong, Chief Executive of Eastspring. So I appreciate this is a very busy day for many of you, and we'll close the session just before top of the hour. But very briefly, before we go into Q&A, just a couple of key points I'd like to highlight from the half year. So firstly, it was a resilient set of results. APE sales were up 9% to $2.2 billion, reflecting diverse source of growth due to our geographic footprint, product mix and distribution channels. APE sales in Southeast Asia and in Greater China are now both at about $1 billion. New business profit was flat year-on-year when you exclude economic effects. And it was down 5% to $1.1 billion following differences in country and channel mix, and the impact of higher interest rates, and the could be attributed approximately a third to each of those factors. IFRS group operating profit was up 8% to…

Thank you. Maybe we can start with Michael.

Thanks for letting me. My name is Michael Chang from CGS-CIMB. I've got two questions. So firstly, it's on the China business. It's definitely better than expected. First half NBP was only down 4%. And that's off a extremely difficult base for last year. Could you shed some light on your view of the operating environment on that front? Maybe you can show some - give some figures on trends? How did 1Q and 2Q doing as China exits the outbreaks, how is July doing on that front? And what are you doing to continue to outgrow the industry? And secondly, on the Hong Kong business in terms of the fifth wave, obviously a very tough 1Q but since then things have improved in terms of COVID cases. How's the business momentum of the domestic segments since then? Thanks.

Okay. Michael, thank you for that question, let me start off and then Lilian, I’ll hand over to you for a little bit of extra color, please. So in terms of the - our business in China, we're very pleased with how it performed this half. A key component - a key differentiator in our performance was undoubtedly the multi-channel distribution that we have. So we had strength in agency, we see strength in bancassurance, but also the very broad footprint we have in Chinese Mainland in terms of 99 cities in terms of 6000 outlets. So that means most of the business was able to continue performing, even if some cities were at various stages of lockdown or restricted movements. So that undoubtedly was a very important component. And I think we've also been very focused on the quality of our agents in terms of additional training and we've seen improvement - significant improvements in terms of the number of cases that each agent is working through and a significant increase in terms of health and protection policies that we've seen coming through. So we think these are important drivers, important competitive advantages because it takes time to build up bancassurance relationships. And we think we have, we have those, and we have those in abundance throughout China. And Lilian, why don’t you kind of, any further comments on the Chinese Mainland, and then maybe a little bit on Hong Kong business.

Hong Kong? Okay. Thanks Mark. And thanks for the question. So obviously, on the Chinese Mainland, I think the reason why we can continue to outperform it's a combination of our wide geographic footprint as well as the multi distribution. So basically, we are where the customers are, and we can serve them the way that they want to be served, whether it's through our agency or our bancassurance channel. So just touch a little bit on our agency capacity and capabilities. I think as people were, I think the regulator is focusing more about sales practices. And I think there's now a draft in place in terms of looking at how to - how does an insurance company and the sales imageries drive consumer conduct. I think you'd be very happy to hear for a CPL agency force, we are already embarking on that, the role that they play. So we're very selective in who we recruit, as far as how we equip them to actually do the right thing for our customers. So as a result, we've been able to see an increase in what we call the productive and the elite agents month on month. Since the beginning of this year, as you appreciate, I think the COVID has - so have some impacting on our recruitment momentum but we're seeing that quality coming up. On the bancassurance side, the beauty we have actually with our bancassurance platform other than our capabilities is, I believe, in terms of our digital technology platform that we can actually hook up with a bank partner quickly. And also address the double recording, which is coming through, in terms of financial advice, so you have to do a video and sound recording. So these are capabilities that we can and as…

Move to Thomas, next. Okay.

Thank you. Sorry, Thomas Wang with Goldman Sachs. So a couple of questions if I can, full-on that China question. In terms of distribution, we've seen struggles within the - among lot of Chinese insurance agency side, how and then uprooted a lot of bankers for new bancassurance relationship, as longs as comes, how you think about medium to long term, how that dynamic or balance between the two channels, how do you see that developing? And then the second question, if I can ask, on the capital side. Just quickly have some update on the IFRS 17 implementation and how potentially that impacts our financials for the next year?

And Thomas, thank you. So in terms of distribution on Chinese Mainland, I think what we're seeing is a real shift towards quality. So you've seen the number of agents in the market come down, a real focus in terms of quality and your seen the regulatory direction from CBIRC focusing on quality of agents as well. So that plays to our strengths and we think that that supports who we've been and the type - the space of the market that we play in. And we do think that bank is going to continue to be a very important part of distribution as well in Chinese Mainland, and we have developed it in such a way that the margin is very respectable about 40%, 41%. And therefore, it's a meaningful contributor. And as Lilian says, we have the wherewithal to be able to link up with new banking relationships very significantly. So in Chinese Mainland, we have 55 banca partners, and we have access to over 6100 bank outlets. So it is capability and strength of scale and of size as well, which is important. So both banca and agency will be important. I think a little bit the whole industry will shift towards a more professional agency force. And that's very much in line with where we're at. And then on IFRS 17?

Thomas, thank you. So and thank you for my first question as CFO. In terms of IFRS 17, we've given you a slide in the deck, which sets out the timetable and some of the key points. But in terms of impacts, really the key issue is that the methodology is still being defined in a number of areas. What we will do is we'll do a market update in Q2 2023, where we will go through the impacts of IFRS 17, and bridge between IFRS 4 and the new accounting basis. But really, the important thing to remember is, this is an accounting basis, it doesn't change the economics of our business. It doesn't change our strategy, our dividend, our cash generative basis, or indeed our capital strength. So it is clearly important, and it's front of my mind in terms of ensuring we get an optimal outcome. The key underlying economics of this business are not impacted by IFRS 17.

And perhaps we could pass to Edwin, and then we'll come down.

Thank you. I'm Edwin from CLSA. If I can switch gear to on China market. So my first question is on Singapore. I noticed that last year and actually for the first half of this year, Singapore business performed quite well. And the momentum seems to be much better than your peers. So just wonder, could you share some color behind the strong momentum for your Singapore business? And should we expect such momentum to continue in the second half? And the other question is going back a little bit to the Hong Kong business, so I understand the economic assumption may have some impact on the new business profit for Hong Kong in the first half. Is there - is it possible to share with us, without such economic assumption change, what would be the new business profit change for Hong Kong market in the first half? Thank you.

Edwin, thank you. I'll start off in the Singapore and then Dennis, I'll hand over to you for a little bit of extra color seen as you're on the ground in Singapore, and then maybe James you could cover the Hong Kong NBP margin and economics. Thank you.

Yeah.

Yeah.

So in terms of Singapore, I think the team will continue to do fantastically well. The agency has performed well, we've got nearly 20% of agency bases MDRT. So that's continuing to do well. And I think with the banca channel and the customer appetite over the course of the last six months, banca has come through very strongly. And we've seen a real appetite from high net worth clients for long term policies that really look at savings and legacy protection. But maybe, Dennis, I could hand over to you for a little bit of extra color, please.

Thank you, Mark. I think in the Singapore context, given the reopening, and things being more endemic in nature now, there's been a lot more activities on the ground. So we see that a lot more in second quarter of this year as compared to the first quarter. In that regard, a lot more customer engagement, a lot more face-to-face activities are being rolled out, both in the bank channel as well as through our large agency force that continues to support a lot more of a business generation here. And the other item is actually, with the pandemic, there's been a huge adoption in terms of our digital tools. So despite the reopening now, the agency force continues to really use the digital tools in terms of the video engagements and video tools to sell, I think that continues to help us increase productivity. So definitely we’ll continue to see this coming through in terms of momentum into the second half of this year. Back to you, Mark.

Thank you very much, Dennis. James?

Edwin, listen, thank you. In terms of economic impacts in Hong Kong, in terms of margin, it had about a 25.1% hit, in terms of the MBP margin, and that equates to about $57 million dollars in terms of NBP.

Let’s go to Jenny.

Hi, management, this is Jenny from Morgan Stanley. First of all, thank you for organizing this on site event. I think it's very - so good to see management in-person and also our peers. So maybe two questions from me, one is still on China, I want to ask about management's view on China's retirement market. On the asset management side, I think there's a lot of changes in regulation, we move our ownership cap. So is there any further thinking or strategy planning there in China? And also on the insurance side, we've seen some new business models in China. They're doing financial products plus retirement services, like the senior care homes. It's getting quite popular, a lot of local peers, your key competitors, they're all trying to explore that business model. So just want to hear your view on that. And maybe second question is on Indonesia, used to be a very, very important market for us. It has been struggling a little bit. We just want to hear management's, maybe some comments, how the market is doing, do we think, it has turned around? And we have done some changes there, we have a new Sharia license. How is that going to sort of develop? And also in the venturing side in Indonesia, is there anything further we can do to strengthen the distribution there? Thank you.

Okay, Jenny. So there's a lot in there. Let's start with channel mix. I'll make some opening comments and then Lilian, maybe over to yourself and then Solmaz, I’ll start on Indo and then hand over to yourself, if that's okay, please. Thank you. So in terms of China, the retirement market, it is a huge opportunity. We think pillar three is a huge opportunity for the market. And it's great that consumers and regulators on Chinese Mainland are spending more time focusing on the need to save for retirement. It's a need, I think that we're seeing throughout the world, so it's great to see it really being an area of focus in Chinese Mainland, I think the opportunities we have within the CPL are very real. And CPL, our China Business, has 100% owned asset management company that effectively provides at all the support and some of the new regs effectively would link into that entity. But Lilian why not give a little bit more color please?

Okay, thank you, Mark. I think as you said, I think this pension opportunities in China's is huge, right? So our joint venture ICICI Prudential Life there, so as Mark mentioned, we actually have a wholly owned subsidiary for the insurance asset management company. I think they are probably around about 30 plus insurance asset management companies in China, and about a third of that, what we call JV or foreign owned. So we're proud to say that actually we’re one of the top three or four, JV IAMC in the market. So we have capabilities in that AMC business. Now, going back to the pension opportunities, I think where we definitely can play is actually in the periphery, which is the private and personal pensions. Actually CPL is one of the first to actually engage in the pilot, where CBIC allow certain insurers to actually pilot the retirement products in the southern provinces. Obviously, as a learning regulator, CBIC continued to work with those pilot insurance to improve the product offering. The second thing where we are actually quite excited is actually is formalized in the revised regulation just came out this week, is that we can also now with our IAMC participate in the asset management of pension assets from other - for other providers. So that's an area that we are very excited, and I think can tap into that. So hopefully, that addressed our capabilities already on the ground to capture those opportunities. I think the second one you mentioned is about the insurance products. I think the way we actually look at insurance product is, we look at it from a customer proposition. So we offer the - what we call the retirement savings insurance product, but at the same time, we have what we call value-added services. Back to your point, we actually, for example offer, for example, engage with one of the property developers so that we can engage with them say to purchase a retirement home in advance in Hainan of all places. We've also engaged with one of our health management company called . And that's offering health care management services. So this is how we provide those value added services for our customers who are planning for retirement. So all that you see is something that we've actively engaging in.

Okay, then on Indonesia. So Indonesia and Indonesia is a very exciting market for us, very, very exciting. And we've been very busy, the team has been very busy this year. And we launched the new Sharia business, the first in the world to launch a standalone Sharia business in April. And that's come along really, really well. And we're also very pleased in terms of the broadening out and the continued upskilling that we're doing in terms of our agency, but also the element of our product range. We spent a lot of time developing and expanding the product range. And therefore that's actually resonating with a lot of customers, and especially at the moment when COVID is still very real in some parts of Indonesia, making sure that there are policies that are available for those customers. As well as getting into the SME market, is one that we got into fairly recently and we're seeing some very encouraging signs from that. So Solmaz, why don’t I hand over to you and just allow you to provide a little bit of extra color, please.

Thank you very much, Mark. And thank you very much for the question. We will see Indonesia insurance market which has been hit hard indeed by the pandemic, as the country opening up, the situation will become better. Let me also point out a few things on the questions that you mentioned on Sharia, and bancassurance. On the Sharia side, indeed, we have successfully separated our Sharia business. We are currently the market leader in the Sharia segment with 30% market share. And we have 160,000 agents enabled to be operating and selling Sharia compliant products with that new entity. So we have an amazingly strong position in the Sharia segment. Our distribution power in Indonesia conventional business is extremely strong. We have almost 50% of all agency population, is with us. And as the country opens up, this will give us the opportunity to increase also sales again with banca being flat and APE sales in agency was a bit down. With bancassurance overall, we do see some progress with our existing bancassurance partnerships albeit from a slow base. We will certainly look into other opportunities that might present themselves to us over the next year or so. And we will certainly be also be cautionary in terms of the transaction values and the price we will be willing to pay for that. Back to you, Mark.

Solmaz, thank you. Thanks for the questions, Jenny.

I think we'd like to go to the operator and we'll have a question from the some of the International sell side, if that’s okay?

Okay.

Thank you. Our first question comes from Andrew Baker of Citi. Please go ahead.

Thanks for taking my question. So just two for me, please. Are you able just to provide an update on where you are on the Macau license registration process? And then when that does come into effect, what impact you're expecting on both APE and new business profit from Macau? And then just secondly, on the group wide supervision ratio, obviously, there's a lot of moving pieces and it now includes the RBC and C-ROSS changes. Just wondering when you think you might be in a position to provide us with more information on what you might consider an appropriate target range for that ratio? Thank you.

Andrew, thank you for those questions. I'm pleased to hear that, James you’ll have to deal with the target range question rather than me having to deal with that in the past. In terms of Macau license, we continue to engage with the regulators. So as soon as that is open, we'll expect to be able to begin business very shortly there thereafter. A key component clearly of Macau is not only the element of Macau itself, but also the visitors coming down from Chinese Mainland and the opportunity of that. And while the border with Hong Kong and Chinese Mainland remains shut, that provides a useful conduit to be able to tap into some of that demand that undoubtedly is there for multicurrency, for critical illness protection and the like, that can be effectively provided to what would be a branch of our Hong Kong business. So that's what we would expect to happen once the license gets approved. James, terms of GWS?

Andrew, thank you. So in terms of the GWS ratio, as we stated in our disclosures, we haven't set a maximum limit on the coverage ratio because the GWS solvency position, which is a key metric for assessing our regulatory capital but it does include elements of capital that cannot be converted into cash immediately. So a classic example would be contributions from the - with profits fund. And so where we've guided to is free surplus, I think that's a much better metric in terms of understanding the shareholder capital available for distribution. It's also the primary metric we're using to assess the group sources and uses of capital. What we have done is we've given you a risk appetite level of 150%. And so that was the new piece that we've added in terms of those moving parts that you referenced.

Thank you.

Thank you.

Operator, shall we have another call from the international callers, please?

Next question comes from Farooq Hanif from JP Morgan. Please go ahead.

Hi, everybody. Thanks very much. Just going back on Andrews question on GWS ratios, so what does that risk appetite mean? So if we take free surplus ahead of that, does that basically mean, this is capital that you feel like - I mean, how much of that do you think you'll need to retain for growth? And how much do you think could be part of some sort of future distribution either through dividends or buybacks? If you could talk about that, or at least tell us when you might consider talking about that? And the second question is, you've got this 13% growth momentum that you talked about in July, in your slides? Can you give us a bit more of an idea of where this is coming from and where growth is accelerating? And quickly, third question is, what are your kind of latest thoughts on dividend growth generally, given the momentum that you've seen in free surplus? Thank you.

You want to?

Okay, so, Farooq, thank you. In terms of GWS and risk appetite and really the question is, why do we pick 150? Clearly, we carry out a lot of internal stress testing to derive this buffer. We considered all the considerable risks to the GWS capital position, and the also potential mitigating actions. Holding this level of buffer over the GPCR minimizes the probability of regulatory intervention, even after a very large movement. And I’d kind of draw your attention to the fact that if you look at our - we're given you the pro forma GPCR level at the beginning of the year 320%, and even after the significant disruption that we faced in the first six months and market volatility, we are reporting a 317 percentage at the half year. I think your second question really is about how to think about kind of firepower. And it's probably best, I'm not going to give a number but tell you how I think about it, first, I'll refer you to our free surplus of $8.6 billion. And there's a slide in the CFO appendix that covers that. That's the best guide to distributable surplus because this is the stock in excess of 100% of GPCR. And clearly, we are not net capital generative. So all else being equal, that capital stock will increase over time. But that stock does include $2.1 billion of hold co cash. And clearly, we need to maintain prudent levels of liquidity. Also conscious of the scale of our organic opportunities, the attractive IRR that we're able to achieve and we’re able to invest in. And so we'd also need to look at all the necessary stock at one time, wouldn't necessarily want to pull it up from the businesses. Classic example is when we invested in TTB, in Thailand, you saw that that was a $700 billion, $750 billion investment, about $500 billion came from the central resources, but we use the stock in the business units to pay the balance. So that's how we think about free surplus. Clearly, there's also the fact that we're capital generative, and that we are - we'd look at things like our debt equity ratio, where we're at the bottom end. Hopefully that gives you a sense of the strength of our capital position, and our financial flexibility, Farooq.

And then Farooq, hi, good morning to you. In terms of the growth in July, I think it was about 10 markets registered year-on-year growth. So it's something stronger than others across the path. So please, just quite a broad brush in terms of terms of performance. And James, I wonder if you could pick up the div question.

Sorry, can you just repeat it, so I didn’t hear the second part of your question.

The trajectory for dividends, given the FSG.

Just in terms of - my question was, in light of your strong free surplus, in light of your growth in kind of generation a free surplus, what's the trajectory here in dividend growth? Full year dividend growth?

No, listen, thanks Farooq. So we announced a new dividend policy last year. And we're linking that through to the as you say to that growth in free surplus, obviously, relevant of normal life, central costs, etc. And so you would expect to see it grow at the same level as our growth in free surplus, aligned with that dividend policy. Thank you.

Thank you, so much. Thank you.

Operator, we'll go to another question from the phone.

Our next question is from Greig Paterson at KBW. Please go ahead.

Good morning, can you hear me?

Hi, Greig. We can hear you.

Two questions. I wonder if you could give us an update on your ambition to increase your stake in the Chinese JV? And the second thing, there seems to be a sort of retail property crisis going on in China and it seems to be escalating. Hiccup maybe from supply chain issues from the one big insolvency we had last year. I was wondering if that's having any detrimental or will have any detrimental impact on your volumes? Thank you.

Greig, hi, thank you. And so the stake in CPL, I think we've made it clear to yourselves, investors, and to - empathetic of our appetite to be able to buy more if that opportunity arose. That being said, our time and effort and Lilian as chair elect, all our time, and efforts are being absolutely committed to try and help that business grow as quickly as possible. Grow into the footprint further, you've seen the great job that the team have done over the course of this half and we look forward to seeing them continue. Just to contextualize vis-à-vis the industry, CPL outperformed the industry four times in the first six months of the year, so very, very strong performance. And that's really what we're going to keep driving and keep focusing on, so nothing new on that side, Greig. And in terms of the retail property piece, actually, I suppose there's going to be a broader economic and macroeconomic piece for the Chinese economy. That being said, the inflation print that was done for China this morning at 2.7% CPI isn't I think causing any concerns in the market. The core inflation is running at 0.8%, so Chinese consumer is not driving up demand significantly. So we do believe that there is an opportunity to continue really focusing on the health and protection space, which is what we've been doing for a number of years. And I think COVID and the unpredictability of COVID outbreaks around the world just continues to remind customers of the need to get some protection, should they suffer from COVID or should unfortunately, somebody died from COVID. So at this stage, not seeing that there's going to be a major direct impact and the impact from ourselves in terms of our balance sheet is fairly minimal. Thanks Greig.

Thank you. To that end, I’ve got a question on the web, which I'll just read out. So part of it's already been answered. But Nasib at UBS is asking, what opportunities do you see in the banca space and which markets? And then a question for Lilian, which is, how would you expect to run sales from the branch in Macau once that license is approved?

Okay, so thank you for that question. In terms of the banca space one of the areas that we have set for a little while now that we continue to explore and consider opportunities to close the gap is in Indonesia, where the market is a bit more balanced than our business. Our businesses are predominantly agency and the market is a little bit more balanced between the agency and banca. So we're very focused on various opportunities to try and pick up a bancassurance deal in Indonesia if possible, as Solmaz said, a short while ago. So that's been probably the main component. Our big kind of regional bancassurance deals are pretty much kind of locked up for many years. And we're very pleased at how well the processes are progressing. And we continue to keep an eye on individual opportunities that may arise, ensuring at all times that we're very disciplined. We don't want to overpay and we want to make sure the terms and conditions are appropriate for what we do in the banca space. And the Lilian then on Macau?

I think as Mark mentioned, we are applying for a branch license of Prudential Hong Kong. So Macau operate as a branch. So a lot of the infrastructure and operations will be done through in Hong Kong. So in terms of the sales model, obviously, we will continue to put in a multi-distribution. We actually already have capability in Macau already in our rep office, setting up, for example, recruiting corporate sales service people to service the agency channel. So that's one area and actually interesting enough on the banca side, we are already starting to talk to some of our bank partners that is in the region, that who are - who have or have a branch in Macau. So it will be in the same way that we actually run service in most of our markets.

Thank you. Operator, let's go back to one of the international calls, please.

Thank you. Next question is from Andrew Crean from Autonomous. Please go ahead.

Good morning, everyone. Can I ask three questions, please? Firstly, could you give a sense of how you see the opportunity when the border opens in terms of sales and your business profits relative to the levels that you were doing in 2018? Secondly, coming back on the first questions, could you give us the growth rate in China and Hong Kong, your business profits, or APE, first quarter and second quarter so we get a sense of momentum? And thirdly, coming back on this capital position, could you tell us in terms of the war chest for acquisitions, say, like the China JV how much you've got either in terms - is it defined in terms of the amount of free surplus available for that, or in terms of the whole cash? It is important, I think, that investors understand what your firepower is.

Okay. So Andrew, let me start off with the border opening piece. And then I'll hand over to James for the other components. In terms of the border opening vis-a-vis the previous periods when we had significant volume coming through, and I think pretty close to about $100 million per month was effectively coming through of new business profit. Effectively what that and from the research that we've done, and from the surveys that we've done and interesting it's not just surveys that we've done a number of other houses do these surveys of people in Chinese Mainland asking about their appetite and propensity to travel down to Hong Kong, and then when they hear what they might do. So we've seen an uptick, actually an appetite for people to travel down to Hong Kong and we've seen an uplift in terms of people's propensity to purchase, especially those who are in the 45 plus age group, and those who have maybe about US$ 100,000 or more to be able to invest, it's a significant uptick. So we think that that demand has not gone away, it's pent up in that maybe the very high net worth individuals in Chinese Mainland have ways to be able to move some of their wealth around the globe. But our population, our audience rather, is very much the affluent, the mass affluent. And therefore, they really need the border to be open to be able to benefit from the multicurrency opportunities to be able to benefit from the critical illness cover, and to be able to access the Hong Kong healthcare system that that is so well known and so well respected. And again, that's something that we explored in the survey, where people said for minor illnesses, very happy to deal with local hospitals. If anything significant, they'd like to come down to Hong Kong, given the brand that that Hong Kong has. So I think the border opening, so much will depend, Andrew, on how the border opens. And I think it's unlikely the broader is just going to be flung open. Our expectation is, it is more likely to be a gradual opening and likely to be GBA in the first instance that may be that make it a broader opening. And just to remind everybody, the GBA population size and scale, it's kind of you know, sized of about 70 million people and the scale a bit like South Korea in terms of an economy. So it is a very sizeable opportunity and for us for the market and also for Hong Kong because at its height, we had a million visitors a week coming down for Mainland China. And well I'm in Hong Kong at the moment, you see its got a lot more energy about it, people are very enthusiastic given quarantine rules have been restricted. It'd be great even better when the visitors come down. James?

Andrew, thank you. So I'll do the APE one first in terms of Hong Kong, and China. So in Hong Kong, it was split pretty much 50/50 in terms of in terms of Q1, Q2. In China in terms of APE, it was weighted much more to the first quarter, and kind of three fifths, yeah, three fifths in the first quarter. In terms of your second question, in terms of where we are, on.

I’m sorry the growth rates. Sorry, the growth rates, rather than the split quarter-to-quarter, I was after?

Okay, so in terms of Hong Kong, the growth rate in Q1 was down about 18% and in Q2, it was up 19%. And in China, clearly, in the first quarter, you'll recall that we had the fire sale of the CI product. So that's reflected in Q1 where it's down 62%. And Q2, it was up 41%.

I mean -

Okay. In terms of the second question, you asked about firepower. I mean, I refer you back to what I said before, it's not appropriate to give a number, but it's best to look at examples. So in answering that Thailand example, the investment into TTB, where we had $700 million, just over $750 million that we invested, $530 million was from central resources, $240 million was from local resources. So that's about and demonstrating the capital, the free surplus that we hold in the LBU’s is important for those investments, and that we are able to call on it when we need to. And you're right that we have $2.1 billion of cash in the center. And we were very successful in growing our business and then being able to convert that growth into cash, which ultimately comes up in terms of remittances. But we're not looking to remit more than we need. And we've got the financial flexibility aligned with how I described the free surplus earlier to the earlier question.

Okay, thank you.

And is there another question from the room?

There is. Jian?

Thanks. I'm Jian Li from Huatai Securities. My first question is about Mainland China. There is a discussion in the market that the overall demand of insurance in Mainland China is weakening because people see a huge number of agents are leaving the industry. So what's your observation? And what's your future competitive advantage in this market? Second is about Malaysia. What's the opportunity in Takaful business? And what are you going to do to maintain your leadership?

Perfect. Okay, thank you for those questions. So Solmaz, I'll come to you for the Malaysia Takaful opportunity. And then in terms of Chinese Mainland in terms of demand, so undoubtedly, the number of agents across the industry has fallen dramatically over the course of the last few years. I think a large part of that is, when you look at what the type of business many of those agents were selling, it tended to be very short-term endowment type products. And that's not really what the CBIRC is looking for the industry to sell. The industry is looking to make sure there's greater protection, and there's more long term cover rather than short term investment component. So we do think there is undoubtedly a big shift towards quality. And we're seeing that play through. And therefore I think one of our big advantages in the in the market is that (a) we've never played in that space where some of the other agents and some other people played with a lot of short-term endowment. It wasn't something that we felt was attractive business or business we wanted to do. So we have within our organization within the management team, a culture and a mindset and within our agents, a culture and a mindset of actually selling more health and protection products. So we do think that that opportunity will continue. And we think again, with our bancassurance footprint, given how wide it is, that gives us a tremendous opportunity. When we move into a new - a new city, a tier two, tier three city, it gives us an opportunity to establish a presence almost immediately and be selling through those bank branches while we then recruit up agents locally and while we then actually mature our business locally. So we are, I think, very positive about the prospects and opportunities within Chinese Mainland for insurance. CBIRC has made it very clear. They're looking for a greater level of penetration than they have at the moment. They spoke about a penetration level of close to 5%. We're well under that as an industry in Chinese Mainland. So there's a long way to go I think before we reach anywhere near saturation. So Solmaz, could we go to Malaysia please and Takaful?

Yes, of course. Thank you, Mark. Thank you to Huatai for the what I for the Takaful question, Malaysia. Well Takaful is a fast growing segment in Malaysia and is an important component of Malaysia APE and NBP overall. The size of the opportunity is actually very huge with Islam being the most widely practiced religion in Malaysia with around 60% of the entire population. And we with our BSN, PruBSN company we are the Takaful market dealer with 29% market share, that's as of the financial year ‘21. We’re also launching new health and protection Takaful products, for example, the product called BSN Sakinah. We launched that in this half year, in the past half year and this helps us support the very high APE mix of 67% in our Takaful business. We have a strong Takaful agency for us, as I mentioned, the 160,000 and we have grown them just in the past half year by another 15% or 90,000. Back to you Mark.

Solmaz, thank you. I think just on that, the Takaful, it is a huge opportunity. One that we're very, very excited of. And just for clarity, I think the agents numbers, Takaful is about 16,000. I think the number Solmaz gave was for the Indonesia. So the Takaful piece is about 16,000. Yeah, thank you.

Sorry, Andrew, it's James. I picked up the wrong numbers, comparatives, the actuals that I gave you were correct. In terms of quarter-on-quarter but the year-on-year, I was picking up a different number. In Q1 in Hong Kong, it was a 17% drop, in Q2, it was flat and in Q1 in China, it was a 7% drop and in Q2, it was a 68% increase. Apologies for that, but just to correct that immediately.

So we go back to Michael.

And then I think we've got two more from the phone lines.

Yes. It’s Michael Chang, CGS-CIMB, again. Sorry, James, just on your comment about the second quarter for Mainland China that at 68% year on year, could you may be shed some light on what the agency was for two 2Q versus bancassurance? And I think that ties to what Lilian said earlier on that, since the beginning of this year productive agents have increased month-for-month, for every single month, so maybe shed some light on that? And secondly, on the Macau business, obviously as you said, a great opportunity to reclaim some of the MCV related business. Could you shed some light on what portion of MCV historically, maybe came from the Greater Bay Area, the Guangdong region? And maybe that could be some easy wins that can be tapped in the near term? Thanks.

Why don't we start with the second question.

Okay.

In terms of terms of Macau and the Chinese Mainland visitors?

So obviously, I think, yeah, Macau, obviously there's the opportunity. What we - in the past what we see pre-2019, the contribution from the Guangdong areas about a quarter of MCV business will come from the GBA area. Actually, if you then added to that what we call the eastern coastal provinces, right? So as you know, right in China, anything south of that it's - they are prone to come to Hong Kong, if you add that part where you go in terms of Fujian, Shanghai, Jiangsu, that will be like 50% of our business. So we expect that's how the flow may come when the border opens up.

Okay.

And in terms of in terms of split, in terms of H1, what we saw in China is agency was down 11%, and bancassurance was up 28%. That's completely in line with what Lilian was saying earlier.

We go back to the international phones, please.

Our next question from the phones is from Dom O'Mahony at BNP Paribas Exane. Please go ahead.

Hello, folks. Thanks for taking questions. Three for me, if that's all right. And first, you highlighted 22 new bancassurance arrangements. Is that, I wondered if you could just highlight which geographies or which big arrangements you would highlight within that? Whether there are particularly meaningful large new arrangement that you could highlight? The second question is on the free surplus generation in the life business. This is very, very strong. I think it was 18% increase in the expected free surplus generation and it's also well, well ahead of the outlook for ‘22 as presented at fully year ‘21. I'm wondering whether there are mark-to-market effects within the operating piece of this generation and if so, how big that is? And then third question. And if I look at the insurance margin, very strong, and I just was curious as to whether the sort of the lockdowns and border, so the COVID-related measures, may have reduced claims activity. I think that that was something you highlighted in previous periods, different period’s discretionary health claims may have reduced. I'm wondering whether that was relevant in this period and if so, if you have any idea of how much? Thank you.

Thank you. Okay, all right. So Lilian, do you want to give an overview of the new banca arrangements, please, in terms of just the pool of geographies that we have?

I think for 2022, actually, majority of that is actually in China - in the Chinese Mainland. As you know, in the Chinese Mainland, it's a open architecture arrangement. So we've been able to onboard 11 new bank partners in the first half of 2022. So majority of that is new, and the rest is actually operating on the existing arrangements that we have with our regional bank partnership. And I think we spoke about the Thailand one as well, that's what's adding the value.

And James, in terms of the just conscious of time in terms of the two questions in terms of FS generation and insurance margin?

To be honest, both links and so the insurance margin, a 17% increase in the insurance margin is benefits from the impact of the adoption of Hong Kong, RBC it’s about $200 million above the line and that goes through the insurance margin. So that's why that's up at 17%. If you strip that out, it'd be the underlying of approximately 6%, 7%.

Okay, thank you.

Yeah, thank you.

Okay. I think we've got one more call from the International lines, then we'll close.

Our next question then is from Fulin Liang from Morgan Stanley. Please go ahead.

Thank you very much. The two quick questions on IFRS, the first one is a follow up as Indonesia. So if I look at the operating profit, actually all of your regions still show like high single digit or low double digit, operating profit growth. Apart from Indonesia, and just wanted to see when are we going to do expect to see the turnaround in Indonesia on from the IFRS side? And the second thing is on Hong Kong, if I back out your numbers, seems like a majority of the short-term fluctuation came from Hong Kong business, which was a bit surprise to me, because in the past, we've been advertising that majority of Hong Kong businesses with profit, which means that it is actually relatively stable under IFRS net matrix. So I wonder, actually what, is it because of your general account, despite a small proportion in Hong Kong is still very large absolute amounts? And just what's the reason of that? And also, whether do you think that IFRS 17 implementation will change that? Thank you.

Okay, thank you. Just in the interest of time, let me just deal the first one quickly and then James, maybe you could comment on the second two. In terms of the IFRS from Indonesia, their profit, that is down, I suppose, not particularly surprising given that there's a bit of a lag effect in terms of - with over the course of the last few years. Sales have unfortunately been down in Indonesia, Indonesia, as we've retooled that business. And therefore, effectively, what I think you'll see is a continuation of the softness in the Indonesian IFRS numbers until such time, as we see the agency performing again, at the levels that we are familiar with. And until such time, as we see I suppose, effectively a sustained period of the market being open and agents can interact with customers on a more normalized level. James, in terms of the Hong Kong,

You're right, a significant amount of the short term fluxes from Hong Kong, and that's really reflecting the fact that, as you know, we focus on high quality health and protection business, is not particularly sensitive to market movements. But all of those profits, you're discounting at a higher level. So that's what you're seeing in driving that number. In terms of IFRS 17, you'll see a spreading of profits, that's the nature of it. That has both advantages on a with profits business, where they've typically under IFRS, for back-ended, but clearly on the products where they recognize some more upfront, they're spread out more along the whole of the lifecycle of that project - the lifecycle of that product.

Okay.

Thank you, operator. And I'll pass back to Mark who's got some closing comments.

Thank you very much, everyone. So as you can see, we've demonstrated hopefully, that our business is delivering quality and discipline growth, that we have diverse sources for this growth because of the regional footprint, but also our digitally enhanced multi-channel distribution model, and a predominant very strong focus on health and protection and a very keen focus on execution and delivery. So there's plenty more to go for. And we look forward to further progress as the effects hopefully of COVID diminish, everywhere and with Asian growth, generally higher than then in the West, where we are looking forward to a very exciting future here in Asia and Africa. So thank you very much, everybody for your time this afternoon or this morning, and we look forward to chatting to you in due course.

Thank you, operator, you can close the call now.