Welcome everyone to Shin Kong Financial Holding Company's 2021 first quarter earnings conference call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question- and- answer session. Please follow the instructions given at the time if you would like to ask a question. For your information, this conference call is now being broadcasted live over the internet. Webcast replay will be available within an hour after the conference has finished. Please visit www.skfh.com.tw under the investor relations section. Now I would like to introduce Mr. Stan Lee, the Senior Vice President of Shin Kong Financial Holding Company. Mr. Lee, please begin. Thank you, moderator. Good afternoon ladies and gentlemen? Welcome again for joining the Shin Kong Financial Holding 2021 first quarter earnings call. Before we start, I would like to introduce my colleagues who are with me today. Here in the meeting room are Han-Wei Lin, Chief Actuary of Shin Kong Life, En-Fon Liao, Head of the investment team in Shin Kong Life, Isabella and Christine, members of the IR team. We are also joined by Ophelia Au Young, Partner of Deloitte Actuarial & Insurance Solutions. Ophelia has been working closely with us over the past few months in reviewing our EV work, and she's here to help us answer any questions you may have. The presentation we are about to go through was sent out two hours ago. You may also download it from our website or participate through webcast. If you do not have the presentation, please let us know now. Your lines will be muted when we are presenting. If you are cut off, please dial back in or call Christine at eight eight six-nine six eight-nine two nine-two three zero for assistance. Please turn to page four. SKFH recorded a consolidated after-tax profit of TWD 9.44 billion for the first quarter 2021, up 23.7% year-on-year. Earnings per share was TWD 0.72. Consolidated shareholders' equity was TWD 231.38 billion. Book value per share at the end of the first quarter was TWD 17.34. Life insurance EV per share of SKFH was TWD 23.2. EV of Shin Kong Life increased 6% year-on-year to TWD 309.4 billion in 2020. VNB was TWD 20.1 billion. VNB margin increased to 27.8%, 6.5% higher than the year before. The subsidiaries also posted strong results for the first quarter, which will be covered in later presentation. Page 10. Not simply aiming for sales volume or market share, Shin Kong Life choose to promote foreign currency policies and value-focused products for stable interest spread, better asset liability matching, and CSM. As a result, FYP of foreign currency policies for the first quarter amounted to TWD 8.5 billion, accounting for 77.3% of the total. FYPE reached TWD 4.2 billion, and FYPE over FYP increased from 35.8% in first quarter 2020 to 38.2% in first quarter 2021. Cost of liabilities decreased three basis points year to date to 3.8%, in line with our guidance. Page 13 presents the overall view of Shin Kong Life's investment portfolio. Annualized investment return for the first quarter was 4.31%. Breakdown of investment returns for different asset classes were real estate 4.7%, mortgage and corporate loans 1.7%, policy loans 5.6%, overseas investments 4.2%, domestic securities 5.9%, and cash 0.2%. Page 14 shows the portfolio of overseas fixed accounts. At the end of first quarter, overseas fixed accounts topped NTD 1.9 trillion. Corporate bonds accounted for the largest share, representing 47.7% of the total, followed by international bonds at 27.2%. Emerging market government bonds accounted for 24.6%. About 90% of the overseas fixed accounts position was deployed in U.S. dollar denominated bonds. You may also find a chart of the overseas fixed accounts portfolio by region in the upper right corner. North America and Europe accounted for the majority of overseas fixed accounts, showing a combined share of 62.3%. Page 16. The pie chart on the left-hand side shows the mix of hedging instruments. At the end of first quarter, hedging ratio was 74.0%, including CS, NDF, and the naturally hedged foreign currency policies. CS and NDFs accounted for 58% and 42%, respectively, of traditional hedges. Annualized hedging cost was 1.65% for the first quarter 2021, and foreign currency volatility reserves was NTD 4 billion. In order to better contain hedging costs, Shin Kong Life will flexibly adjust hedging ratio through its proxy basket and continue to build up the foreign currency volatility reserves. I will now hand over to Isabella, who will take you through the results of Shin Kong Bank and MasterLink Securities. With that, please turn to page 20. Shin Kong Bank delivered a strong quarter on many fronts. Net interest income grew 3% year-on-year, with improved deposit structure and steady loan growth. Net fee income and investment income increased 9.2% and 19% year-on-year respectively. Pre-provision operating profit reached TWD 2.07 billion, which was 8.3% higher from the year earlier. Consolidated net income increased 13.7% year-on-year to TWD 1.52 billion. Page 21. The bank's loan balance rose 1.9% year-to-date to around TWD 666 billion. Consumer lending grew 3.3% year-to-date and represented the largest segment of the loan portfolio as mortgage and other consumer loans increased 3.6% and 3.1% year-to-date respectively. The full year target for loan growth remains 8%. Page 22. As the deposit rates steadily reprice downwards and the ratio of demand deposits increased, net interest margin and net interest spread went up one basis point quarter-on-quarter to 1.25% and 1.65% respectively. The trend is in line with our guidance given at the full year 2020 analyst call. Page 24. Wealth management income for the first quarter increased 10.3% year-on-year to TWD 675 million, thanks to strong sales momentum in mutual funds. Fee income from mutual funds accounted for 41% of the total. In the second half of the year, Shin Kong Bank will actively attract new funds and expand its client base through online marketing campaigns. Page 25. Asset quality was stable with NPL ratio at 0.19% and coverage ratio at 712.77%. Both ratios were better than the level of 2020. Page 27. MasterLink Securities generated a brokerage fee income of TWD 1.19 billion for the first quarter, which was 62.1% higher year-on-year. Proprietary trading income amounted to TWD 2.77 billion, driven by disposal gains from equities and related securities, which was NTD 2.47 billion higher year-on-year. Operating revenue grew 206.7% year-on-year to TWD 2.28 billion, and consolidated net income reached TWD 0.9 billion. In April, MasterLink Securities was approved for the high net worth business and the U.S. QI license. The company will look to expand the business opportunities. I will now turn the conference over to Han-Wei Lin to talk about the results of EV and AV. Thank you, Isabella. Please turn to page 29. For 2020 embedded value, the earning rate of VIF goes from 3.00% to 4.47% in 30 years for NT dollar products, and 4.10% to 4.93% for U.S. dollar products. The equivalent investment yield is 3.91%. For VNB, it goes from 2.57% to 4.32%, and 3.79% to 4.82% in 30 years for NT dollar and US dollar products respectively. The adjusted NAV increased 6%, VIF increased 3%, and COC increased 1%. As a result, at the end of 2020, EV of Shin Kong Life increased 6% year-on-year to TWD 309.4 billion. VNB decreased 19% to TWD 20.1 billion. AVs for five years of new business and 20 years of new business were TWD 392.0 billion and TWD 508.8 billion respectively. Page 30. Under the base case scenario, risk discount rate was reduced from 10.5% to 9.5%. We also provide the sensitivity test of investment return and the risk discount rates for your reference. Page 31 shows the breakdown of adjusted NAV. Shin Kong Life adjusted NAV at the end of 2019 amounted to TWD 196.9 billion. Profits in 2020 contributed an increase of TWD 7.2 billion, while unrealized gains on financial assets caused a decrease of TWD 8.1 billion. As for other adjustments, which represented an increase of TWD 12 billion, mainly included a capital injection from the financial holding company and an increase in FX reserve. Therefore, Shin Kong Life adjusted NAV at the end of 2020 was TWD 208.1 billion. Page 32. VIF grew from TWD 186.4 billion to TWD 192.5 billion in 2020. The main impact came from the change in economic assumptions, which caused a decrease of TWD 68.3 billion. The change in risk discount rate caused an increase of TWD 22.2 billion, and the new business issue added TWD 25.8 billion to VIF. Page 33. The 38% decline in FYP deducted TWD 9.5 billion from VNB. However, Shin Kong Life adopted a value-driven strategy and focused on products with high margin, such as regular premium products and protection products. The improved product mix was the biggest positive impact that added TWD 5.6 billion to VNB. VNB only decreased 19% year-on-year from TWD 24.5 billion to TWD 20.1 billion in 2020, and VNB margin increased from 21.3% to 27.8%. That wraps up our results presentation. Moderator, please start the Q&A session. Yes, thank you. Ladies and gentlemen, we will now begin our question- and- answer session. If you wish to ask a question press zero one on your telephone keypad, and you will enter queue and wait to be announced to ask your question. The first question is coming from Jennifer of National Life. Go ahead, please. I have two question on Shin Kong Life. First, equity only accounted for 9% at the end of March. Do you expect a decline in cash dividend? Second, what is the new money yield right now? Thank you. Hi, Jennifer. To answer your questions, I think the first question is that there's a likelihood that this year's cash dividend we received from domestic equity investments could be lower than what we had last year. It is possible. Now everything's been postponed because of COVID-19. We are still waiting for the invested company's AGMs to be held, also during the time, the positions may be changed, both up and down. We'll see. The general guidance that, yes, there is a likelihood that the cash dividend we receive this year could be lower than what we had last year. Now the new money yield is around 3.5%-3.8%, mainly for the foreign section accounts. That is much, much better than what we had last year. Even at the end of last year, we can only strive to get around 3%, which is very painful for us because we definitely need a very stable spread for U.S. dollar-denominated policies. For NT dollar policies, we don't really mind that much because now NT dollar policies are mainly focused on the protection type of products. That's why U.S. dollar policy we have virtually everything, including savings. We definitely need the positive spread. Did I answer your question, Jennifer? Well, if there's no follow-up questions, moderator, please check whether there are any other questions. Sure. Yes. As a reminder, please press zero one on your keypad if you would like to ask a question. Thank you. The next question is coming from Bruce Lee, Bank of America Securities. Go ahead, please. Hi. Thank you for taking my questions. My question is mainly on life insurance. I think in the Mandarin session that we mentioned that in order to support the CSM accumulation at life, we will do a suitable fundraising every year. I would like to ask in detail that does it mean that we plan to have fundraising plan every year? The difference is only about the size, or actually we still have some discretion over whether we will do the fundraising of the year. Thank you, Bruce Lee. It's just what I said in the Chinese session. I recommend not to overly interpret what's been said, and particularly not by the subject of the newspapers' reports. What I've said is that we can expect reasonable capital raisings from the holding companies and reasonable downstreams, particularly to the life insurance. Some of the funds will also be downstreamed to the bank for their business support as well, because particularly for 2021, we're aiming for 8% growth of loans. Sooner or later, they're going to need some capital. I think the point is not about every year and how long is every year, right? That's typically a misleading wording, I would say. As I talked before, some analysts or investors tend to ask me whether we are going to do a one-off larger size of kitchen sinking fundraisings for IFRS 17. My answer has been, and will be, we don't plan to have one-off capital raising for that issue. What we will do is to accumulate CSMs by every year's sales of the new policies and maintain the quality of the new sales at a certain level. To support that, we need capitals. That capital raising or downstreams will not be very big because the number is likely to be under TWD 10 billion. How long? I don't know. As I said in the Chinese session. There was one question raised whether it will be two or three years. I don't know, because almost all of those capital raising plan has to be approved by the Board. Before the Board have any resolution, I cannot disclose, and I don't even know the details of the fundraising. The general guidance is that we need a certain level of capitals to support the business growth. If that's the philosophy, I will be very comfortable to saying that every year it should be a relatively small size, under TWD 10 billion. How long? How exactly that will be? I cannot say anything about it. For 2021, there's a likelihood that we're waiting for the resolutions of the Board that will raise common equities from the holding company level and downstream to life insurance. Again, that amount will be highly likely to be under TWD 10 billion. Okay. I have a follow-up question on that. I just want to have a better understanding of the RBC ratio that we are currently standing at, because I think our goal is to accumulate TWD 30 billion CSM every year as a target. I would like to know that if we are going to achieve this, how much of this will consume our RBC capital and whether or not that will affect our RBC buffer against the regulatory ceiling. The reason why I asked for this question is that although that our RBC is lower than our major peers, I just want to know that whether the 220- something RBC for us is good enough for us to achieve the TWD 30 billion CSM goal every year. Thank you, Bruce Lee. I think that's a very complex question. Some of the solutions that we're also trying to figure it out. Before answering the details, I would say yes, we're now looking at RBCs. The factors that really increase the denominator and which also the risk-weighted assets. It's not only linked to the growth of assets. It's also about the mix of the assets. Right? It is true that now when we grow the new business, as you mentioned, for all those NT dollar denominated products, we're only aiming for protection type of products. That will somehow make the growth of NT dollar assets lower. What you can see in FYP's trend is that in this year, 2021, similarly trend that we observed last year is still in downward trend, which will somehow decrease the growth of the overall asset. If you look at the past five years, the CAGR of the assets growth is over 8%. 2021, I strongly believe it will be lower, definitely lower than the 7%. Would that be the equivalent of the asset growth? Answer is probably not, because the weighting is also be changing. I would say, somehow we have to still support the growth of, say, 6%, 7% of the asset growth, which way the asset is depends on the portfolios. We still need some capitals if we have a particularly good year. That is also why I cannot give you a guidance saying that two, three, four years, every year we're going to do something. There may be some years that we can generate enough ROEs. We can generate enough incremental shares equities as well through the other comprehensive incomes. There may be some certain years that there'll be other noises that even when we have enough after-tax profit, the comprehensive income is not good enough. The elements that making the comprehensive income is not right for us to accumulate enough qualified capital. It's very complex metrics. Again, I'm still quite confident in saying that the growth of the asset is slowing down, and that is the most important element here. That is also supporting my theory, and also the plan, that the need for the capitals will not be a one-off. It will be a huge number, and will not be a kitchen sinking capital raising. Again, I think it's still very realistic thinking that some certain level of capital raising and downstreams is still necessary. Okay, got it. Thank you, Stan Lee. Thank you. Next we'll have Jaime Huang of JP Morgan for questions. Go ahead, please. Yeah, hi. Thanks. Just two questions from me. The first one is for the unrealized capital gain losses of around TWD 17 billion as of first quarter at Shin Kong Life. Could you give us a rough breakdown in terms of the split between equity and also bonds? The second question is, if I look at your hedging mix in the first quarter, I think the hedged position, the U.S. dollar and other currencies actually has been increasing over the period of time. Just try to figure out whether you think that you are taking a little bit more currency volatility risk here, even though you have been trying to top up the FX reserve. Thanks. Jaime, I think I would like to answer the first question first. The TWD 17 billion remaining balance of the unrealized loss. Those were all from fixed income positions. For the equities, I think we still have some gains, the losses were all from fixed income. The bulk of that is from the foreign fixed income position, including the ETFs and also the outright ownership of the foreign bonds. As for the second question, hedgings, yes, you're right that U.S. dollar plus proxy basket. The position slightly larger than what we had one quarter before. It was 21.8%, but now it's 23.2%. You're seeing a little bit rise in that category. Again, we have raised the proportions of the proxies, and that means the naked U.S. dollar positions has not been increased. We are still taking care of the overall risk very carefully. Again, you also know the changes of the dollar/yen fluctuations this year was huge. Right? It could be bi-weekly, space-based, you're seeing significant differences. We have to remain very flexible. We have to change the mix of the basket. I have to be very nimble changing the NDFs and also versus making decisions to remain the 2% target of hedging policy as possible. Got it. Thanks. Thank you. Well, by the way, apparently there's no further questions. If so, let's call the meeting now. Sure, yes. Thank you, Mr. Lee. Ladies and gentlemen, we thank you for your participating in Shin Kong Financial Holding Company's conference call. There will be a webcast replay within an hour. Please visit www.skfh.com.tw under the investor relations section. Should you have further questions, please don't hesitate to contact the IR team of SKFH by phone or by email, y ou may now disconnect. Goodbye