AIA Group Limited (AAGIY) Q2 2023 Earnings Call Transcript

AIA Group Limited (OTCPK:AAGIY) Q2 2023 Results Conference Call August 23, 2023 8:15 PM ET

Company Participants

Yuan Siong Lee - President and Chief Executive Officer

Garth Jones - Chief Financial Officer

Lance Burbidge - Chief Investor Relations Officer

Jacky Chan - Chief Executive Officer, AIA China

HakLeh Tan - Chief Life Operations

Conference Call Participants

Charles Zhou - Credit Suisse

Thomas Wang - Goldman Sachs

M.W. Kim - JPMorgan

Kailesh Mistry - HSBC

Edwin Liu - CLSA

Tianjiao Yu - Bernstein

Michael Chang - CGS-CIMB Securities

Leon Qi - Daiwa Securities

Yuan Siong Lee

Good morning from Hong Kong, and welcome to AIA's Interim Results Presentation for 2023. I'm delighted to announce very strong results in the first half with excellent new business momentum and growth in all of our key financial metrics. Let me provide some highlights from the results. AIA's unrivaled distribution platform has powered a very strong acceleration of sales momentum in the first half. VONB grew by 37% for the group.

AIA Hong Kong delivered an outstanding performance, more than doubling its VONB, and we delivered double-digit growth in Mainland China, ASEAN and TATA AIA Life in India. Our excellent new business performance contributed to growth in EV equity to $70.6 billion, and operating ROEV of 13.3%, up nearly 4 percentage points from the full year 2022. Our large and diversified in-force portfolio drove growth in operating profit after tax and underlying free surplus generation. And our operating return on equity increased by 120 basis points to 14.2%. The group's capital position remained very strong with free surplus of $16.3 billion, and the Board has declared an increase of 5% in the interim dividend.

In addition, we have now returned $5.5 billion to shareholders through our ongoing share buyback program. These results again demonstrate the power of AIA's business model that enables us to capture the growth opportunities across Asia and deliver cash returns to shareholders. Let me explain how we have delivered the excellent VONB results. Our proprietary Premier Agency is the core of our unrivaled distribution platform and generated 75% of the group's VONB in the first half. Critically, AIA's consistent focus on quality and dedicated support over many years enabled us to grow and enhance our agency during the pandemic.

As each market reopened, our initial emphasis has been on uplifting the activity and productivity of our existing high-quality agents. Our success in the first half of 2023 is clear with 27% VONB growth and higher agent incomes. We have also grown both agency leaders and new recruits as we focus on increasing the scale and reach of our agency force. Our differentiated Premier Agency is the clear leader in Asia. AIA Group has been the number one MDRT company globally for the last nine years, and we are also number one in Mainland China, Hong Kong, ASEAN and India.

The excellent first half performance has driven a 49% increase in the number of MDRT qualifiers and our significant investments in TDA help to ensure that AIA is the Company of choice for professional agents, positioning us to fully capture AIA's growth opportunities in life and health insurance. Our strategic partnerships with banks, brokers and digital platforms bring us complementary access to large customer pools across our markets. We have seen excellent performance in the first half, and our partnerships, in total, generated VONB growth of 62%. Within this, bancassurance delivered an increase of 38%, and the return of Mainland Chinese visitors to Hong Kong helped to more than double our IFA VONB. These results reflect the breadth and quality of our partnerships.

In bancassurance, our approach is to build long-term strategic partnerships with high-quality banks. We are partnered with leading banks in Hong Kong, across ASEAN, Australia and New Zealand, and most have more than a decade to run. In Mainland China, we adopt a differentiated model, leveraging postal savings banks' vast network, targeting affluent customers with tailored products from AIA China and assessing the mass market segment through our investment in China post life. And in India, TATA AIA Life's digital capabilities allow us to successfully partner with multiple banks in open architecture models. AIA's extensive capabilities in product, distribution, digital and analytics help our bank partners better engage with their customers, delivering profitable growth to our partners and AIA.

Let me now take you through the performance from each of our key growth engines, starting with Mainland China. In Mainland China, as the surge in COVID cases subsided, AIA China saw a rapid return of strong momentum with 29% VONB growth from February. In our Premier Agency, we focus on uplifting agent productivity to leverage the reopening, driving strong growth and recruitment momentum. Protection is a core component of our customer proposition, and AIA China has grown VONB from critical illness products post reopening. We have also seen strong customer demand for our long-term savings products, where we focus on long-duration products that address our customer needs.

AIA China has a unique opportunity from geographical expansion, and we continue to make excellent progress. In May, we successfully launched our newest branch in Central Henan, and we have nearly doubled new recruits across new operations compared with the first half of last year. While still small, our partnerships provide incremental VONB growth for AIA China. Here, we saw VONB more than triple driven by excellent results from Postal Savings Bank and BEA. AIA China's ability to deliver long-term sustainable growth is centered on our high-quality and differentiated Premier Agency that targets the rapidly growing and attractive middle class and affluent customer segment with our broad range of compelling propositions to meet their evolving needs.

In our Premier Agency, our commitment to quality recruitment, a full-time model and extensive digitalization differentiates our agents, and they are significantly more productive than the industry. Our Premier Agents are experienced professionals with the skills, tools and products to successfully meet the increasing demands of Mainland China's expanding middle class and affluent customers. This segment contributes 85% of AIA China's A&P with an average customer holding over six AIA policies. Our digitally powered Needs-Based Advice Process identifies individual protection gaps and see our customers increase their critical illness sum assured by a factor of almost 3x.

And the third component is our propositions. The majority of our new policies are protection, and more than 90% of our agents sold protection in the first half. And our long-term savings products help our customers meet their broader financial goals with 75% sold to existing customers, almost all of whom already have an AIA protection policy. For example, our popular new private pension products launched in April take advantage of tax benefits, and many of our products include additional retirement planning and medical services tailored to our customers' needs. It is AIA's unique combination of our differentiated Premier Agency, underinsured wealthy customers and our compelling propositions that enables AIA China to build on its track record of sustained value creation across both our established and new operations.

Also, in the Mainland, our strategic investment in China Post Life targets the mass market opportunity and complements AIA China. CPL has continued to deliver excellent results with VONB up 55% in the first half to more than $1.1 billion. Supported by dedicated experts from AIA group office, CPL has continued to advance its strategic priorities. We have seen a further shift towards higher quality new business and an excellent increase in critical unit sales. Our investment in China Post Life enables AIA to capture significant additional upside in Mainland China.

Moving to Hong Kong. VONB more than doubled, and AIA Hong Kong became the largest contributor to the group's VONB in the first half. We achieved excellent growth across all channels and customer segments. While increased demand from Mainland Chinese visitors was the main driver of growth, we also delivered double-digit VONB growth from domestic customers. AIA's Premier Agency remains the leader across Hong Kong and Macau, and the combination of higher agent activity and productivity drove VONB growth of 82%.

We are focused on increasing the scale of our agency with new leader numbers up 29% and new recruits up 60%. Through our partnerships channel, we saw VONB more than triple with excellent growth from our bank partners and a return to market leadership in IFA. As visitor numbers increased, we have delivered very strong quarter-on-quarter of VONB growth in our MCV business. Sales have been to visitors from across Mainland China with around 60% coming from outside the Greater Bay Area. In the second quarter, we have seen an increase in demand for protection with close to 40% of new policies from critical illness products.

And while average case size has remained stable, we have seen a strong increase in sales to customers who are new to AIA. We are confident that demand is strong and sustainable as we scale our recruitment and build new capabilities to attract and retain our target customers. AIA is well positioned to capture the opportunities in Hong Kong and the GBA by meeting customer needs across our extensive distribution channels. Turning to our ASEAN markets. The region is a key growth engine for the group, and accounted for over 1/3 of total VONB in the first half.

Excluding Vietnam where industry-wide issues have impacted new business sales, we have delivered aggregate VONB growth of 16%, and we continue to rank number one in ASEAN by new business sales.

Awareness and demand for insurance continues to rise across the region, driving a 20% increase in traditional protection VONB. Our powerful multichannel distribution platform is exceptionally placed to meet growing customer needs with both our agency and partnerships delivering strong growth. We have the most professional agency in the region and achieved increases in overall productivity and active new agents. Our long-term strategic partnerships are a key asset, and we delivered excellent growth with Bangkok Bank in Thailand, Citibank in Singapore and BPI in the Philippines. ASEAN offers enormous potential for AIA with a huge protection gap and growing middle class and affluent population that will exceed 500 million by 2030.

Our largest ASEAN business is in Thailand, where we achieved 28% VONB growth in the first half, supported by excellent performance across distribution channels, and we continue to lead the market in new business sales. Our agency is the largest and most professional in the market by far. And we continue to uplift quality and standards year-on-year. Our financial adviser program continues to grow and further differentiates our market-leading agency with VONB more than doubled the first half 2019 levels, driven by greater headcount, productivity and enhanced product mix. Only AIA's agents can deliver the superior mix of integrated, unit-linked and protection products that makes us the market leader in these segments.

We have a differentiated strategy focused on growth through quality protection and long-term savings products, and there is still substantial headroom for growth for AIA in Thailand. Finally, turning to India where our joint venture, TATA AIA Life, continued its excellent track record with VONB up by 48%. We are the number three private life insurer, the market leader in retail protection, and we have a balanced multichannel distribution platform. Our Premier Agency strategy has made us the number one MDRT life insurer, and our focus on scaling and enhancing our agency delivered A&P growth of 80%. We delivered more than 30% A&P growth through our six high-quality bank partners with the potential to reach more than 165 million customers.

And we have the number one share of wallet through our key brokers, driving A&P growth of 45% in our digitally enabled partnerships. India's economic growth and increasing population is driving compounding demand for life and health insurance. Our protection-focused strategy, quality distribution and proven execution ensure that TATA AIA Life is well on its way to capturing India's massive potential. In summary, our unrivaled distribution platform and multiple engines of growth have achieved a return to excellent momentum and VONB growth of 37%. In Mainland China, we saw a rapid recovery post reopening, and our differentiated strategy can capture the full potential of this market.

AIA Hong Kong more than doubled VONB with double-digit growth in the domestic customer segment and very strong and sustained sales to Mainland Chinese visitors. We are the leader in ASEAN where we delivered strong VONB growth and excellent results in Thailand, our largest business in this region. Our fast-growing industry-leading business in India has achieved another excellent result with VONB up by 48%. Asia continues to offer the best prospects in the world for life and health insurance, and I'm confident that they will only get stronger over time.

High levels of private savings, growing yet aging populations, low levels of insurance penetration and limited welfare coverage create an urgent need for AIA's personalized products and high-quality advice. Our strategy is aligned to these structural growth trends, and we have the superior financial strength to capture the full economics of growth in the region. AIA is the right business to deliver sustainable long-term value for all our stakeholders.

Thank you.

Garth Jones

Good morning. In the first half of 2023, AIA has delivered excellent VONB growth and a very strong financial performance overall. I will now take you through the financial results in more detail across growth, earnings and cash, starting with growth. VONB grew by 37% in the first half of 2023 with growth from all of our reportable segments and distribution channels. AIA Hong Kong more than doubled VONB, driven by very strong demand from Mainland Chinese visitors, while we also delivered double-digit growth in our Hong Kong domestic business.

AIA China was up 14% for the whole of the first half. As the effects of the pandemic subsided, strong momentum returned, and VONB growth was 29% from February to June. AIA Thailand delivered growth of 28%, reflecting a very strong performance from both agency and partnership channels and a stable VONB margin compared with the second half of 2022. AIA Singapore was up by 5%, supported by a strong performance from our bancassurance channel.

And for AIA Malaysia, growth in all distribution channels delivered an increase of 10% in total. Other markets increased 8% in aggregate, with very strong growth, offset by substantially lower sales in Vietnam. We delivered very strong double-digit growth in the rest of the markets, including the Philippines, Australia and New Zealand, and an outstanding performance from TATA AIA Life in India. Overall, the group delivered excellent VONB growth powered by AIA's unrivaled distribution platform and our consistent financial discipline. Our continued focus on writing high-quality, profitable new business generates attractive returns over time.

We grew VONB to more than $2 billion, supported by 49% growth in A&P and the VONB margin of 50.8%. We saw growth in the sales of traditional protection products in Hong Kong and also experienced very strong demand for our long-term savings products. This is reflected in the higher contribution from participating business in our product mix. The group's PVNBP margin remained stable at close to 10%. Our ability to meet the full range of customer needs across protection, long-term savings and retirement products is a key differentiator for AIA and a major factor in our confidence in the group's future growth.

EV operating profit was $4.4 billion, up 20% per share, driven by the excellent VONB result and an increase in the expected return, reflecting higher government bond yields and risk discount rates. Operating experience variances were positive and added $0.2 billion. We've experienced increased medical claims compared with the lower levels seen during the pandemic, and have included a temporary claims provision within operating assumption changes for prudence as we continue to reprice our health insurance portfolios. Our consistently favorable operating variances have added $3.9 billion to EV equity since IPO. Operating return on EV of 13.3% was up by nearly 4 percentage points from the full year 2022 level.

And EV equity was $70.6 billion after returns to shareholders of $3.6 billion. Our EV methodology uses spot market yields and trends over time to our long-term assumptions, which aims to smooth out short-term market volatility. While AIA is not immune to capital market movements, you can see from the sensitivities that our EV remains highly resilient to short-term market volatility from both interest rate and equity market movements. We have a substantial allowance for risk in our discount rates with a risk premium of close to 5% for the group, consistent with the levels used since IPO. Now moving to IFRS earnings, which we are reporting under IFRS 9 and 17 for the first time.

Under IFRS 17, the contractual service margin, or CSM, is the key driver of OPAT. The CSM represents the stock of expected future profits that are yet to be earned on our in-force business, and these will release over time into OPAT and net profit. We've built up a very large CSM over time through the addition of successive cohorts of profitable new business, with a discounted value of more than $50 billion at the start of the year. In the first half, the CSM grew by 19.3% on an annualized basis before variances, exchange rates and the CSM release into OPAT. The growth was driven by a new business of $3.4 billion and an expected return of $1.2 billion.

Variances and others of $1.4 billion, mainly related to market movements. The annualized CSM release rate remained stable at 9.7% as $2.6 billion was released into OPAT from the CSM at the end of the first half. On an underlying basis, CSM grew strongly by $2 billion over the first half of the year.

As you saw on the previous slide, the addition of large-scale profitable new business is the main driver of future growth in the CSM, while the release of CSM forms the vast majority of the insurance service results, and this, in turn, is the largest component of our OPAT. The insurance service result was stable at $2.8 billion as growth in the CSM release was offset by higher medical claims within operating variances similar to EV. Net investment result after expenses increased by 9% to $1.7 billion due to higher equity asset balances and increased long-term investment return assumptions. After reflecting higher finance costs on a more normalized level of tax, OPAT remained stable compared with the same period in the prior year, and operating margin was strong at 17%. After the positive effects of the ongoing share buyback program, OPAT per share increased by 4%.

AIA sources of earnings are high quality with 73% from insurance services. Regular premiums make up 99% of our total related premium income, providing additional future premiums, a very strong cash flow and ample liquidity on our large in-force book. Taken together with our geographically diverse portfolio of businesses, this underpins the resilience of the group's earnings and balance sheet. Our disciplined strategy of focusing on value and quality has helped deliver consistent growth in OPAT per share to over 3x the IPO level, uninterrupted by the adoption of IFRS 17. Shareholders' allocated equity provides a clearer reflection of the underlying drivers of the change in equity by excluding the fair value reserve and insurance finance reserve contained within other comprehensive income.

As a reminder, under IFRS 17, virtually all mark-to-market movements from participating business flow to insurance contract liabilities, reducing the volatility of net profit compared to the prior accounting basis.

Before returns to shareholders, allocated equity increased to $48.7 billion as net profit increased by 50% to $2.3 billion. The combination of $3.3 billion of OPAT and the share buyback helped drive operating ROE up by 1.2 percentage points compared with the full year 2022 level to reach 14.2%. A new measure under IFRS 17, comprehensive equity, is the sum of shareholders' equity and the CSM, net of tax, reinsurance and noncontrolling interests. Comprehensive equity represents the aggregate value of historical and expected future profits from the in-force business, net of cumulative cash returns to shareholders. As of the 30th of June 2023, comprehensive equity of $83 billion was evenly split between shareholders' equity and net CSM.

Our financial leverage ratio, including the net CSM, was 11.9% at 30th of June 2023, further supporting AIA's financial flexibility and our strong credit ratings. With comprehensive equity significantly higher than our EV equity, the prudence of AIA's embedded value reporting is clear.

Finally, capital and dividends. The LCSM coverage ratio is the group's principal regulatory solvency measure, taking a fully consolidated view of local business requirements and is calculated on a prescribed capital requirement basis. While the LCSM is consistent with the capital requirements used to assess regulatory solvency, free surplus continues to be more representative of the capital position for shareholders.

Before the effects of the share buyback and other nonoperating items, the LCSM ratio was stable over the first half of the year. Other nonoperating items include temporary effects from internal capital movements that will reverse and changes to the regulatory regimes in South Korea and New Zealand. The sensitivity of our LCSM coverage ratio to mark-to-market movements on equities and interest rates is low, reflecting the strength of our balance sheet and our robust risk management. AIA's capital position remains very strong, with the group LCSM coverage ratio of 260% at the 30th of June 2023.

Our high-quality investment portfolio is constructed to match our insurance liabilities as closely as possible. Our participating business asset allocation aims to achieve attractive returns over the long term for policyholders above a base level, while nonparticipating investments are positioned more defensively. As a result, 81% of non-par and surplus assets are fixed income, with the vast majority either government and government agency bonds or investment-grade corporate bonds. Within this, the $29 billion corporate bond portfolio is well diversified across sectors and geographies and is comprised of bonds from more than 1,900 issuers with an average holding of $15 million. The average credit rating of our corporate bond portfolio at A- is unchanged from the full year, and there was no material increase in expected credit loss provision in the first half of 2023.

The group's exposure to real estate and local government financing vehicles in Mainland China is small, and almost all of AIA China's fixed income assets are government and government agency bonds.

In summary, we have strong asset liability management and a high-quality, diversified investment portfolio. In the first half, free surplus increased by $2 billion to $19.9 billion before returns to shareholders. The increase was driven by underlying free surplus generation of $3.3 billion, up 10% per share and reinvestment of $0.7 billion in new business at attractive long-term returns. The $3.6 billion return to shareholders included $2 billion through the share buyback. As a result, free surplus closed the first half at a very strong $16.3 billion.

The Board has declared a 5% increase in the interim dividend to HKD 0.4229 per share. The Board continues to follow AIA's established prudent, sustainable and progressive dividend policy allowing for future growth opportunities and the financial flexibility of the group. In addition to regular dividends, our ongoing $10 billion share buyback program has, to date, returned $5.5 billion to shareholders. A total of $22.5 billion has now been returned to shareholders since IPO. In conclusion, in the first half of 2023, the group delivered excellent VONB growth and very strong financial results overall across growth, earnings and cash.

VONB was up 37% with VONB in Hong Kong more than doubling and double-digit growth in each of Mainland China, our ASEAN businesses and TATA AIA Life in India. EV operating profit increased 20% per share, and operating ROEV jumped to 13.3%. OPAT per share was up 4%, and operating ROE increased to 14.2%. Underlying free surplus generation grew by 10% per share, and our capital position remains very strong with free surplus of $16.3 billion. The Board has declared an increase of 5% in the interim dividend, and we are around halfway through our $10 billion share buyback program.

AIA's robust balance sheet is a key competitive advantage, ensuring we retain our unmatched financial flexibility to invest in the enormous potential for profitable new business growth in the region, fully harnessing the exceptional qualities of AIA that are clearly demonstrated by today's results. Thank you.

Lance Burbidge

Good morning from AIA Central in Hong Kong, and welcome to our 2023 Interim Results Question-and-Answer Session. I'm Lance Burbidge, Chief Investor Relations Officer. Together with me we have Lee Yuan Siong, our Group CEO and President; and Garth Jones, our group CFO. We also have our Regional Chief Executives and other members of our group executive committee with us in the room. I know this is a busy morning, but I hope you've had the chance to watch the two video presentations, which we posted to the website earlier today or read the transcript.

Before we start the Q&A, Yuan Siong will make some opening remarks to tell you some key messages from the results.

Yuan Siong Lee

Good morning, everyone. AIA has delivered very strong results for the first half of 2023 with excellent new business momentum and growth in all of our key financial metrics. VONB grew by 37% for the group, as our unrivaled distribution platform has powered a very strong acceleration of sales momentum. AIA Hong Kong delivered an outstanding performance, more than doubling its VONB and we delivered double-digit growth in Mainland China, ASEAN and Tata AIA Life in India. Our excellent new business performance contributed to growth in EV equity to $70.6 billion, an operating ROEV of 13.3%, up nearly 4 percentage points from the full year 2022.

Our large and diversified in-force portfolio drove growth in operating profit after tax and underlying free surplus generation. And our operating return on equity increased by 120 basis points to 14.2%. The group's capital position remained very strong, with free surplus of $16.3 billion, and the Board has declared an increase of 5% in the interim dividend. In addition, we have now returned $5.5 billion to shareholders through our ongoing share buyback program. These results again demonstrate the power of AIA's business model that enables us to capture the growth opportunities across Asia and deliver cash returns to shareholders.

Now over to you for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Let's proceed, and our first question comes from Charles Zhou from Credit Suisse.

Charles Zhou

I think this is a very strong set of results and congratulations. And also, I think it's a strong beat to the consensus. So I have two questions. The first one is related to China. I think that 14% value of new business growth is a very decent growth, but still compared with some of your -- the China domestic peers, they probably have 20% to 30% growth.

I would like to know the reason. Is it because you don't sell this controversial increasing sum assured for life products? Or what's the reason why you are lagging behind some of the domestic peers? Also, let's talk about the China outlook both in terms of the existing region and also the new regions. I think you applied the Henan province last year, right?

And do we expect any new license to be given or you're going to apply new license? Still one to two license per year, is that still your target?

And second, for margin. I know that AIA always say we focus on total business, not on margins, but I still got a question from the investor and the debate between savings and protection. We see the margin has declined in the first half due to the product and also channel, can you maybe elaborate about the margin and your focus on protection?

Yuan Siong Lee

Okay. I will just start off and then I'll hand over to Jacky to talk about China and Garth to talk about margin. I think I'm very pleased with the results that we delivered in China. As you know, in January, the market is still impacted by the spread of COVID. So from February to June, we were able to deliver very, very strong results, I think, in China.

February to June year-on-year was 29% growth. Yes, we do not sell the increasing [ISWL] product through our agency channel. I think the results from our China business is excellent, and I'm very pleased with it.

I think in terms of the China outlook, I'll hand over to Jacky now.

Jacky Chan

Yes. Thank you, Yuan Siong. In fact, I also want to reiterate that our fundamental driver in our AIA China business are very, very strong. As you said, AIA China, we don't sell, they are nonparticipating, increasing sum assured life for our agency, and we don't have identified sales in the first half. Yet from February to June after the subsiding of the COVID impact in China grew VONB by 29%, and our agency grew a strong double digit, both in terms of productivity in ANP per active agent and VONB per active agent.

And in fact, the underlying fundamental of China in terms of the recruitment activity, sales -- selling a differentiated proposition remain very strong. Our new recruit in the second quarter actually grew by [38%] compared to the first quarter. And as you know, during the pandemic time, majority -- the whole industry number of agents actually declined by 50%. But AIA China agency force remained intact. And as the COVID situation subside, we come up very strong.

And I want to reiterate that, in fact, our differentiated Premier Agency in [AIA] China, they sell a lot of protection products while the market may fund or it may be a bit difficult, but it is not the case for us. And in fact, more than half of the new policies produced in the first half, they are protection policies and our critical illness product, the VONB grew by 7% from February to June. This shows the strength of our Premier Agency. I also want to add a little bit color about the product mix shift saving plan versus protection. In fact, [AIA] China is the first insurance company to come up with the tax deductible pension benefit plan and it became our top seller among the agency force in second quarter.

And I want to let you know that, in fact, among the saving policy, the long-term saving policy we saw in Mainland China throughout the first half, actually, 75% of them were sold to existing customers. So we are deepening the share of wallet. On the other hand, for the new pension benefit plan that we launched, 35% of them are new customers, and our agent will have a lot of opportunity to do upselling. I think this demonstrates the strength of our differentiated Premier Agency force. At the same time, in the first half of this year, we also have triple-digit growth in our bancassurance, of course, coming from a smaller base, but it shows that we are able to penetrate through our partnership with the China Post Life group and also our exclusive bancassurance partner, Bank of East Asia.

So let me...

Yuan Siong Lee

Before -- so on the margin question and before I hand over to Garth, yes, we are focused on protection. As Jacky said, the majority of protection products in China, even Hong Kong, is a protection focus. The margin remains very healthy. And as you rightly pointed out, we don't focus on margin alone, we are more focused on the group in VONB. But that said, I think, the VONB margin levels that we are seeing is a very healthy levels of VONB margin.

Just an example. In China, where we use close to 10% risk discount rate, the kind of VONB margin that we are delivering it demonstrates that we are very -- these are very, very profitable products for AIA China and for AIA Group and the IRR of our new business is in excess of 20%, yes.

Garth Jones

Yes. Thanks, Jacky. And certainly, most things have been said already, Charles. I mean, clearly, excellent VONB growth and we've said, as you quite rightly noted, that consistently, we focus on overall VONB growth sometimes through cycles that will be more protection-based, sometimes in margin growth, sometimes, it will be more savings and volume based. The key thing is that we have the strong agency force, professional agency force, that sells to the needs of customers and can adapt with the market.

I mean, as an Yuan Siong said, our margin remains healthy, over 50%. And if you look at the PVNBP margin, that's been very stable close to 10%. So very happy with the profitability of the products.

Yuan Siong Lee

Yes. There was also a question about our expansion. We continue to be engaged with the regulators, both at national level and also at the regional level. And we are happy with the progress to date, yes.

Operator

The next question comes from Thomas Wang of Goldman Sachs.

Thomas Wang

Can I just follow up on the China margin, firstly? Can you help me to understand the margin decline on a year-on-year basis. How much of that was probably driven maybe by the bancassurance margin dilution? Maybe how much was from agency or the product mix change? Or was there any other factor that we need to consider when we think about that change?

The second part. On China is, we see the strong growth in the other -- the new provinces we've got since 2019. Am I right to understand that the agent -- active agents and new recruits, a lot of them still haven't been really in production for March? Maybe only one or two months and we should see a stronger growth in the second half on those new provinces?

Yuan Siong Lee

Garth, you take the margin.

Garth Jones

Yes. Yes. Thanks, Thomas. I think the thing to note with the margin was that the vast majority of the business is still through the agency channel. And as Yuan Siong and Jacky said, we don't sell interest sensitive whole life through the agency channel.

The agency VONB margin actually remained close to 60%, so still very strong. And we continue to be focused in the agency on the protection and long-term savings. And again, the agency force have been able to sell the pensions product that Jacky mentioned. I think, again, that shows the quality of the agency force. So that should give you some idea.

Yuan Siong Lee

Yes. I think I also like to reiterate what Jacky said about the fact that the, through our Premier Agency force in China, we seek to service and provide for the needs of our insurance -- of our customers who are middle class and affluent customers. Through their different life stages, we sell to them protection. And then we should -- as they go through different life stages, we sell to them different products according to their needs. As they grow older, as they have -- set up their families, have children and then become empty nesters and start planning for retirement.

So just as an example, the middle-class customers that our agent service have on average six policies with AIA China. So I think this actually demonstrates that how we are working with our customers. And as Jacky said as well, we continue to focus on selling critical illness. Critical illness VONB grew in the period after the reopening from COVID. And we -- it can also be seen that as we further professionalize our agency force, as they use our needs-based selling tools, as they get in deeper conversations with their customers, we see that our customers are increasing the sum assured of the critical illness as well.

So all these are very good signs that keeps -- makes us very optimistic about our China business.

Jacky Chan

Yes. Thank you, Yuan Siong. So let me give a little bit more color on the new provinces. As we have been said in the past, we aim to open one to two new province license per year. And in the past, as you also noted, we keep giving you a very positive message that our new programs have very, very strong growth.

And for this one, in the first half of '23, our agency VONB across our new province grew by 36% and number of active agents grew by 44% and the total manpower actually grew by 78%. And we will continue to drive quality recruitment in our new province. As we opened a new Henan, Zhengzhou branch in May this year, we have roughly 500 new agents, and most of them are college graduates. Let me give you a little bit color on our new agent in this -- first half in this year. As I just mentioned, recruitment momentum became stronger after the COVID situation subside from February onwards.

Our second quarter number of new recruit increased by 38% compared to our first quarter. And in fact, across AIA China new recruits in the first half of this year, the income of our new recruit increased by 22%. So because we continue to focus on quality recruitment and the building up of our Premier Agency force and we believe going forward, not just our new province, but throughout our presence in Mainland China, we will continue to have sustainable business and growth going forward.

Operator

The next question comes from MW Kim of JPMorgan.

M.W. Kim

I have two questions. One is about the shareholder return outlook. So you have the free -- underlying free surplus generation remains very strong with a large free surplus balance. So after the first -- the completion of the share buyback, would it be reasonable to see the more regular buyback potential to enhance that total shareholder return?

The second question is about the CSM movement. Would you discuss a bit of details on the variance items on the CSM movement especially the difference between the actual versus estimates in the claim and expenses?

Yuan Siong Lee

I will hand to Garth for these questions.

Garth Jones

Thanks, MW. I think as we've said consistently, we've set out our capital management framework last year. We aim to keep a robust balance sheet. Our solvency is 260% on the LCSM basis, as you see. We look to continue to grow the business, and you've seen 37% growth in VONB in the first half and continue to fund the growth and invest in growth.

That's the greatest return for our shareholders. And we get very good returns, good IRRs and short payback periods on the new business. We have a prudent, sustainable and progressive dividend policy. You see another 5% increase in the dividend, and we continue to increase the dividend through COVID. And then we look at what we have available for shareholders beyond that and whether we need all of that capital.

That's why we announced a $10 billion buyback program. We're about halfway through that. We've already given back about $5.5 billion of buyback. And so that will continue again tomorrow. And then we will review the situation as it develops.

And we said, I think when we announced the buyback, we said periodically, we'd review the situation. That's what we'll do. Yes.

In terms of the CSM. The variances and others in there, the operating variance in there is persistency. There's a little bit of negative persistency variance. As you saw in the embedded value, there's a slight negative persistency variance. There's also some equity variance, which is primarily in China and Thailand in the equity markets.

But the biggest component is actually due to the illiquidity premium reducing on the U.S. dollar book in Hong Kong. So you see the illiquidity premium reducing, that increases the best estimate liability. And therefore, the CSM reduces. So that's where you see the balance of the variance in others.

That's the biggest component.

Operator

The next question comes from Edwin Liu of CLSA.

Edwin Liu

Firstly, congratulations on a very good set of results. I have two questions here. First, I just want to follow up on the new regions in China. Could you give us some color in terms of the current contribution to your VONB from these new regions in China? And in terms of product mix, and Asian productivity, have you seen any difference in the new regions versus the existing regions in Mainland China?

And my second question is relating to the CSM and VONB. So in the first half, VONB was up 37%. New business CSM was up 14%. Could you explain on the disconnect here maybe because of interest rate, product mix or just different regions monetization?

Jacky Chan

Yes. Let me continue to take the question on the new regions of Mainland China. In fact, in our presentation, we already put it there. The new region contribute about 4% of our AIA China VONB. And as I said, the growth actually is very strong year-on-year.

And in terms of the productivity, et cetera, actually, that will vary according to the economic situation of the new province and new city.

As you know, across Mainland China, they are Tier 1 and then Tier 2, Tier 3, Tier 4. So as we expand into the newer provinces, so depending on the economic situation, yes, the productivity will be commensurate to that. And I want to let you know that, in fact, you always -- we always emphasize our agents, the productivity compared to the peers like-to-like in the different cities across Mainland China. Our agents' productivity in terms of VONB is 4x of our peer. And then our agents' income is 2x of our peer on a like-to-like kind of comparison.

So this shows you the strength of our agency force across the new provinces.

Yuan Siong Lee

I'm pleased with the progress of the new regions. As you know, Whenever we move into a new province, we actually start with the provincial capital and, for example, Chengdu, Wuhan, Zhengzhou and typically, these cities, the economic powerhouse of the province. I think second point I'd like to talk -- mention about the new regions is that whilst we are pleased with the progress made, I think we have to recognize in the last three years, it has been quite disruptive. Already, it's quite difficult to launch a new branch. But to launch a new branch in a pandemic where there's a lot of stop, starts and there's a lot of interruption to your normal operations is challenging.

But as Jacky has elaborated, we have been able to continue to demonstrate very strong performance from our new regions, which is something that I'm pretty happy about. Going forward, the hope is -- and everybody's hope is that we will have less disruptions post pandemic.

Garth Jones

Yes. On the new business CSM, Edwin, clearly, VONB and new business CSM grew strongly in the first half. That ratio of 1.7, still a very high ratio between new business CSM and VONB. It's a function of the underlying geographical mix, product mix and economic conditions. Typically, I think as we noted earlier, we'd expect them to move in parallel, but they are on a different basis at the end of the day with the accounting basis for the CSM and the other being a shareholder value perspective.

What we have seen is that, that ratio has changed the new business CSM to VONB has changed, largely because of the product mix shift that you saw in Hong Kong and Mainland China towards long-term savings products.

But I think the key thing to note is that the new business CSM still remains much larger than the VONB, and that reinforces the prudence in the EV methodology. Then we -- as we said previously, we view value of new business, EV and free surplus as key measures for shareholder value and look at those more closely.

Lance Burbidge

Thanks, Garth. We actually have Kailesh's questions. He's sent them through, so I can read them out and then we can go through those. First is on the China and Hong Kong VONB margin. Can you provide a waterfall for the margin evolution as we do for the VONB margin for the group on Slide 20?

The second question is on China agents. What was our agent head count at the end of the first half? What percentage are active, and how do they compare with pre-COVID? And the third one is about details of the solvency ratio, the LCSM solvency ratio move. There's a 15 percentage point impact from nonoperating items.

Can you provide some color on what the temporary move is? And what were the regulatory changes in Korea and New Zealand that negatively impacted the ratio?

Yuan Siong Lee

I think Garth, you have to take the first and the third and, Jacky, the second.

Garth Jones

Yes. I mean, to provide a bit more color. I think the Hong Kong change would -- there hasn't been that big a change in the channel split. So that would be primarily from product mix, Kailesh. I think on China, clearly, there's also a product mix in the agency force, but the bancassurance channel is clearly lower margin than the agency channel.

So that will also have an impact. But the product mix is significant also. In terms of the non-operating, the temporary movement is where we are moving cash between companies, and there are certain instruments we use that are nonqualifying for solvency purposes that will reverse as those transactions move through the system, and we move cash from one place to another within the group. In terms of the regulatory changes, the biggest one there, the New Zealand one is relatively small, but the biggest one is the introduction of the Korean ICS regime. What that's done is moved from a -- to a more risk-based system.

That's released about $900 million into free surplus. And what we've seen though is that the required capital has also increased and the ratio is less than 260% of those for Korea. So that's why it comes down slightly. But if you take all that noise out, you can see that the LCSM was broadly flat. And again, the sensitivities are very small, yes.

Jacky Chan

Yes. As to the [AIA] China agency forces. As I said, during the pandemic time, the industry see themselves, a drop of 50% and [AIA] China's agency force remained intact. And as the COVID situation subsided after January and our new record, actually momentum with banks and very strongly, especially second quarter new record is a 48% growth over first quarter. As of the end of first half, agency force is roughly flat, and activity is also roughly back to the pandemic level, is roughly flat compared to pandemic but our productivity actually has a double-digit growth.

This drives growth -- a strong result in the first half '23. I want to say that, in fact, after this first half, as I said, the COVID situation already subsided. Our momentum and fundamental strength actually saw a very strong rebound in the second quarter. And therefore, we continue to see that the AIA Premier Agency force is really a differentiated agency force in China, and we are able to capitalize the opportunities ahead of us. And also, AIA China has the most number of MDRT qualifiers globally, right?

Operator

The next question comes from Tianjiao Yu of Bernstein.

Tianjiao Yu

I just wanted to ask two questions. Firstly, on Hong Kong. Can you help talk about the Hong Kong recovery? The moment seems building up in the second quarter compared to the first quarter. I want to understand what's the underlying demand.

Is there any underlying demand shifts, particularly in between the savings versus protections?

Second question is around China. You mentioned about the recruiting in the new branches, which is showing very good momentum. Can you also talk about the established launches in your Beijing, Shanghai, et cetera? And also just to clarify, you mentioned about the protection mix in China that is more than half. Is that by number of policies or it's by the A&P mix?

Just wanted to understand the protection mix in terms of A&P. And then lastly, if I may. The rising interest rate headwinds doesn't seem to impact your investment book this time. We saw the fair value gains from the debt securities and also the derivatives. Can you elaborate more on that, please?

Yuan Siong Lee

Yes. I think Hong Kong delivered an excellent performance of growing by 111%, mostly driven by our recovery in the MCD business. I think we are also very happy that the domestic segment, which is focused on selling to Hong Kong residents, we also saw double-digit growth. And we are adding our capacity in terms of servicing MCD business by increasing our recruitment of MCV focused agents.

Now so I hand over to Jacky.

Jacky Chan

Thank you, Yuan Siong. And I'm very happy to report that Hong Kong has a very strong growth in the first half of this year across all channels and across all customer segments. And the agency force grew strongly, strong double-digit growth. And in fact, our partnership distribution actually has a triple-digit growth. And across our customer segment.

Domestic segment has a growth of double digit, and the MCV actually has an excellent impressive growth. I want to give you a little bit more color because you can see that our MCV momentum remained strong. The second quarter MCV VONB grew by 64% compared to the first quarter. And our MCV business, as we have been talking in the past, it is -- has a strong combination with the Mainland Chinese visitors to Hong Kong. And AIA Hong Kong is able to capitalize all this opportunity driven by a strong fundamental of our agency force, double digit growth in the active agent and our number of new recruits in the first half increased by 60%.

And in fact, the Hong Kong -- as the Hong Kong continued to move from first quarter to second quarter. First of all, we already mentioned a majority of our new policies sold in Hong Kong Protection products. And as the MCV customer segment is concerned, in fact, for the very popular critical illness product in the second quarter, by a number of policies, the MCV purchased 5 percentage more compared to the first quarter in terms of the CI policies, by number of policy. So this really shows a very strong momentum and also a Premier Agency force, and we are able to meet both the protection needs and the long-term saving needs of Hong Kong.

Yuan Siong Lee

I'll just add that as -- I don't know whether you'll recall, when I -- last year at interim results presentation, I also mentioned -- shared with you all my observations when I visited Mainland China that the -- I thought that the demand for Hong Kong products by Mainland Chinese customers is very, very strong. And I think after the reopening of the border, the momentum that we saw in Hong Kong clearly demonstrates that the demand for Hong Kong products by Mainland Chinese customers is very strong. I think there's a question about the established branch.

Jacky Chan

Yes. The second question about the China, the new branches and also how about the other established branches and new recruit. In fact, when I say that the second quarter new recruit actually increased by 48% compared to the first quarter. That applied to the whole Mainland China. We also cover those additional branches as well.

So as I said, recruitment momentum actually is coming back strongly, showing the fundamental driver of our Premier Agency. And on the protection front, what I mean is also similar to what I meant, I mean in Hong Kong. We are talking about the activity of the agents shown by a number of policies. So among all the new policies that we saw in Mainland China in first half, more than half of them or the majority of them, they are protection products.

Garth Jones

And yes, on the interest rate movements. I think one thing, obviously, to remember for this half is the first time we're reporting on IFRS 17 and 9 formally. Previously, we reported under IFRS 4 and under IFRS 4, which is noneconomic, movements in the assets came through into the net profit and movements in the liabilities didn't come through in the same way. As a result, the IFRS 17 profit for last year was tandem, reflecting the matching between our assets and liabilities by around $2.5 billion. You'll see that in the statement of consolidated shareholders' allocated equity.

Operator

The next question comes from Michael Chang of CGS-CIMB Securities.

Michael Chang

This is Michael Chang from CGS-CIMB. Just some questions. Firstly, on the VONB margin on Page 20. I noticed there's other -- if you look at the VONB margin movement, there are others, including assumption changes impact of plus 2.2 percentage points. Can I just clarify what that is?

And then secondly, moving on to the MCV business. I note that the IFA growth rate was extremely impressive at 165% year-on-year. Can I get some clarification or some light shed on what percentage of the MCV VONB in the first half comes from the broker channel versus the agency channel? And how does that compare to maybe prepandemic levels?

And then also in relation to the geographical source of the MCV. I think I understand that about 60% of the VOMB comes from outside GBA in the first half of this year. How does that compare to the prepandemic levels? And how is that shifting? If I take a look at first quarter and second quarter?

And maybe just lastly on ASEAN, especially Singapore and Malaysia. So while other regions are growing very strongly, if I take a look at Singapore, Malaysia, it's up 5% and 10% year-on-year, I'm aware that some part of that might be due to a higher base effect as these regions exited [Omicron]. But could you shed some light on the underlying business momentum because I think there's some concern that given that Singapore's GDP is slow materially, maybe this could impact insurance demand. So I would appreciate if you could share your thoughts on that.

Garth Jones

Yes. On the margin movement, the others, including assumption changes. The biggest item there, which accounts for pretty much all of it is the acquisition expense overrun change. As we've seen volumes come back, particularly in Hong Kong, then we have seen those acquisition expense overruns disappear. And as you remember, we take our acquisition expense overrun straight through to value of new business, which is a very prudent way to publish the numbers.

And know that the volumes have increased and those expense overruns have disappeared, we've got a corresponding increase in margin.

Jacky Chan

Okay. So I'm also very excited to talk about the MCV business more. And as a whole, in the first half, MCV contributed a little bit over half of our total VONB in Hong Kong and Macau. And in terms of the channel speed, as I think you already understand, in fact, the IFA broker channel has a higher proportion coming from MCV far higher. So you see that once the border reopen, our partnership distribution actually is triple of before and a very high triple-digit growth for the IFA broker.

Just want to supplement that. In fact, exclusive bancassurance partnership with Citibank and BA also come up with very strong double-digit growth in the first half. So among the IFA channel, yes, there is, of course, higher -- much higher proportion coming from MCV. So you can imagine that it means that in our agent channel, it is a little bit more balanced. I would say this is good because we want to continue to have growth in both the domestic and the MCV customer segment.

Now in terms of the MCV, I also wanted a little bit color as it transits from first quarter to second quarter. As I said, we have a good growth in the second quarter, VONB 64% compared to the first quarter. When we look into the customer mix between new and existing. Actually, in second quarter, 79% of the MCV VONB comes from new customers in the second quarter. And in the first quarter, it is about 59% they are new customers, meaning that our agency force, our distribution channel are able to tap into the new MCV customer coming across the border.

And it also demonstrates there is very strong interest for those who are more affluent and above MCV customers to come to Hong Kong and Macau for their financial planning needs. So this shows the sustainable momentum for the MCV business. And maybe I may say a little bit about the so-called of the geographical spread of the MCV. As you know, we already mentioned that. So roughly 40% of the MCV come from GBA and the rest actually is very diverse coming from all parts of Mainland China.

We say this kind of speed, about 40-60 is roughly similar to the prepandemic level.

Yuan Siong Lee

Start off with ASEAN and then I hand over to Hak-Leh, who's RC in charge of most of the markets in the ASEAN region. I think we're very happy with the performance in ASEAN. I think it's been -- ASEAN -- in many of the ASEAN markets, we have a very strong presence, market-leading position. Our brand is very, very powerful in these markets, and we very well recognized. ASEAN is an important market for us.

It contributes to 1/3 of our VONB. And as a whole, the ASEAN region has grown consistently actually over the last couple of years. And this -- first half of this year delivered a very respectable 12% value of the VONB growth. Our agency force, we have the best and most productive agency force in the ASEAN region in terms of MDR team members, number one. We have partnerships with many leading regional banks, Public Bank, Bangkok Bank, BPI, BCA, et cetera.

So in fact, in several of the ASEAN markets, our -- the value of new business has actually exceeded the first half of 2019 VONB levels.

So over to Hak-Leh.

Hak-Leh Tan

Thank you, Yuan Siong. Thanks for the question, Michael. Let me start with Malaysia. Malaysia achieved a 10% growth first half of this year, and that's on top of a very strong growth of more than 20% in 2022. And the growth in Malaysia came from both agency and partner distribution channel.

In fact, the size of our agency force in Malaysia is close to 50%, bigger than prepandemic. The number of active agents first half this year was about 49% more than the number of active agents in the first half 2019. And our agency force continue to serve both the conventional as well as the affluent markets, focusing primarily on protection business. Likewise, we've seen very significant increase in productivity from our partnership with Public Bank as a result of the significant enhancement and collaboration between both parties to strengthen the entire process of leads identification, leads management as well as our ability to provide bespoke solutions to Public Bank's customers.

So we remain very optimistic about Malaysia. We clearly are a market leader in many aspects of the business. And of course, in the first half of this year, our Malaysia business continued to outperform the market quite substantially.

Moving on to Singapore. For first half, Singapore achieved 5% growth. The bulk of the growth came from a strong recovery in the partnership distribution in China. Our Corporate Solutions business in Singapore, which we are clearly number one, continued to deliver double-digit growth in first half. Agency recruitment grew very strongly, particularly in the second half of this year.

In fact, the number of recruits grew by more than 20% in the second half of this year the onshore and offshore customers.

And within our product portfolio, we have both unit-linked businesses as well as traditional products. In terms of all the focus, traditionally, we've been very strong in protection business -- both protection -- life protection, critical illness and medical insurance protection. We see protection business to be -- continue to be highly relevant under most economic cycles. We are -- so overall, in Singapore, we believe the external distribution channel, the comprehensive range of products that we have as well as the market leading digital tools that will enable us to continue to serve the market well and grow the business together with the whole industry.

Operator

The last question comes from Leon Qi of Daiwa Securities.

Leon Qi

I have three questions today. Firstly, actually on Thailand, which is the fastest growing ASEAN market. I do note a very successful progression of your FA program in Thailand, which presumably is helping both your volume and margin in Thailand. But FA is only 35% of your agency VONB in the first half. It looks like there is still plenty of room to -- for FA channel to be much more significant to your Thailand growth.

So I'm just wondering, do we have a target of our FA contribution in Thailand? And a bit more specifically on the product mix in Thailand. What specifically products actually help in driving our margin uplift in Thailand?

And secondly, on China Post Life. I note that on the one hand, the growth has been significant for China Post Life. But on the other hand, the core solvency margin has also been declining. It has dipped to 71% as of the end of first half this year. So wondering, in the case that China Post Life need some capital injection, are we going to keep our current stakes here and what's our plan in terms of our capital management in China Post Life?

And lastly, on CSM. I appreciate that the CSM release rate accelerated to 9.7% on an annualized basis in the first half. Just want to understand the reason behind that. Was it just because of the seasonality? Or there has been some average tenure changes in your product mix.

Yuan Siong Lee

Thank you, Leon, for your question on Thailand. I was going to jump because Thailand clearly was a star performer in our ASEAN markets with 28% VONB improvement. And I think very consistent strong performance over the years, in the pandemic. And I mean it is one of the markets that I mentioned that has actually exceeded the 2019 first half levels of VONB production. We are number one in agency, and we have a very strong partner in Bangkok Bank.

Hak-Leh, do you want to elaborate?

Hak-Leh Tan

So maybe just a bit more color on our FA that you referred to. As you're probably aware that we've been in Thailand for about 85 years. We have had very large and we've had very large and well-established agency force. FA was a program that we launched about seven to eight years ago with the objective of recruiting full-time professional agents. As you can see from the presentation that the FA program has been extremely successful.

In fact, the VONB from FA in the first half of this year was more than double the VONB from FA in the first half of 2019. The -- in fact, many of the successful FA have since moved on to become the highly successful agency managers that are building a long-term career with us. Of course, other than FA, we do have a large pool of agents that has been with us for many years. And many of them continue to be highly productive. In fact, as you've seen in our presentation that we are number one in MDRT in Thailand.

We have the highest number of unit-linked qualified producers. Our agency force is probably the most successful agency force in delivering unit-linked products with high protection elements. So moving on to the margin on the products. The VONB margin first half this year increased compared to first half last year. But it actually remained at the same level, same VONB margin level as the second half of last year.

And that's as a result of our ability to continue to sell a lot more long-term protection business, particularly critical units and medical plans. And that's been a key strength. And of course -- and we are selling the whole range of products, both long-term savings and protection via the Bangkok Bank channel as well. So that's -- with that through both our agency channels as well as partnership distribution with a comprehensive range of products that we have, we are in a good position to meet the needs of the customers in Thailand.

Yuan Siong Lee

Yes. On China Post Life, very happy with the performance, strong business growth. Our technical assistance team led by our previous Group Chief Actuary, is working very well with the China Post Life management and helping them to enhance the quality of the business. As you can see, there's a clear shift towards longer premium-term and regular premium business. Regular premium as a percent of total new premium is now 83%.

And there's also an increasing focus on selling more differentiated products, including critical illness products, which as we saw quite a strong increase in China Post Life as well.

Jacky Chan

Yes. Thank you, Yuan Siong. In fact, we are very pleased with our 24.9% investment into our CPL. In the past 18 months, the technical assistance team actually did a very great job collaborating with the CPL management in shifting the product mix away from single premium to a more regular pay product. And also the margin actually continued to increase, and also a good increase in the critical illness production.

In fact, let me give you a little bit color. In fact, based the current new business mix for China Post Life already contribute positively to the capital. It generate positive surplus to the capital. The solvency for CPL is more impacted by the mark-to-market kind of valuation of the underling asset. So we believe that with this continuous improvement in the liability side, in the product, in fact, the solvency ratio should remain strong.

Of course, we continue to monitor closely, depending on the market situation on those kind of mark-to-market situation.

Garth Jones

And then I'll just finish on the CSM release rate. First thing to say is that it's only gone from 9.5% to 9.7%. So it's quite a small increase. There's two small reasons for it. One is on the new business that we sold in Hong Kong in the first half actually has a slightly higher release -- CSM release rate this year.

The second was -- actually goes back to the protection and our protection business in Mainland China that we actually had a campaign on a particular part of our portfolio in force to upgrade the coverage which also increased the CSM release rate very slightly. So that's the answer to that. With that, I know many of you have to get to another company's results presentation. Thank you all for your questions. Obviously, if you have any more, the Investor Relations department will be available to take them.

Thank you very much for listening.

Operator

Ladies and gentlemen, this concludes AIA's 2023 interim results Q&A session. Thank you for your participation.