Commission File Number 001-31914

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

September 10, 2020

 

 

China Life Insurance Company Limited

(Translation of registrant’s name into English)

 

 

16 Financial Street

Xicheng District

Beijing 100033, China

Tel: (86-10) 6363-3333

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F:

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes  ☐            No  ☒

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-             

 

 

 


Commission File Number 001-31914

 

On September 10, 2020, China Life Insurance Company Limited published its interim report as required by the Stock Exchange of Hong Kong Limited for the six months ended June 30, 2020, a copy of which is attached as Exhibit 99.1 hereto.

Certain statements contained in this report may be viewed as “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of the Company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2019 filed with the U.S. Securities and Exchange Commission, or SEC, on April 29, 2020 and in the Company’s other filings with the SEC. You should not place undue reliance on these forward-looking statements. All information provided in this report is as of the date of this report, unless otherwise stated, and we undertake no duty to update such information, except as required under applicable law. Unless otherwise indicated, the Chinese insurance market information set forth in this report is based on public information released by the China Banking and Insurance Regulatory Commission.

EXHIBIT LIST

 

Exhibit    Description
99.1    Hong Kong interim report for the six months ended June 30, 2020


Commission File Number 001-31914

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

     

China Life Insurance Company Limited

      (Registrant)
   By:   

/s/ Su Hengxuan

      (Signature)
September 10, 2020    Name:    Su Hengxuan
   Title:    President and Executive Director
EX-99.1

Exhibit 99.1

 

LOGO

China Life Insurance Company Limited Stock Code: 2628 INTERIM REPORT 2020


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2


FINANCIAL SUMMARY

MAJOR FINANCIAL DATA AND INDICATORS

 

                   RMB million  
     As at 30 June
20201
     As at 31 December
2019
     Increase/ Decrease from
the end of 2019
 

Total assets

     3,966,033        3,726,734        6.4

Including: Investment assets2

     3,781,024        3,573,154        5.8

Equity holders’ equity

     415,906        403,764        3.0

Ordinary share holders’ equity per share3 (RMB per share)

     14.44        14.01        3.1

Ratio of assets and liabilities4 (%)

     89.36        89.02       
An increase of 0.34
percentage point
 
 
     January to June
20201
     January to June
2019
     Increase/
Decrease from
the corresponding
period in 2019
 

Total revenues

     504,431        448,221        12.5

Including: Net premiums earned

     407,936        361,297        12.9

Profit before income tax

     35,564        38,893        -8.6

Net profit attributable to equity holders of the Company

     30,535        37,599        -18.8

Net profit attributable to ordinary share holders of the Company

     30,334        37,403        -18.9

Earnings per share (basic and diluted)3 (RMB per share)

     1.07        1.32        -18.9

Weighted average ROE (%)

     7.36        11.14       
A decrease of 3.78
percentage points
 
 

Net cash inflow/(outflow) from operating activities

     182,792        150,290        21.6

Net cash inflow/(outflow) from operating activities per share3 (RMB per share)

     6.47        5.32        21.6

 

Notes:   

 

1.    The interim financial results of the Company are unaudited.
2.    Investment assets = Cash and cash equivalents + Securities at fair value through profit or loss + Available-for-sale securities + Held-to-maturity securities + Term deposits + Derivative financial assets + Securities purchased under agreements to resell + Loans + Statutory deposits– restricted + Investment properties + Investments in associates and joint ventures
3.    In calculating the percentage changes of “Ordinary share holders’ equity per share”, “earnings per share (basic and diluted)”, and “Net cash inflow/(outflow) from operating activities per share”, the tail differences of the basic figures have been taken into account.
4.    Ratio of assets and liabilities = Total liabilities/Total assets

 

3


MAJOR ITEMS OF THE CONSOLIDATED FINANCIAL STATEMENTS AND THE REASONS FOR CHANGE

 

                         RMB million

Major Items of the

Consolidated Statement of

Financial Position

   As at
30 June
2020
     As at
31 December
2019
     Change    

Main Reasons for Change

Term deposits

     536,256        535,260        0.2  

Held-to-maturity securities

     1,001,314        928,751        7.8   An increase in the allocation of government agency bonds

Available-for-sale securities

     1,052,029        1,058,957        -0.7  

Securities at fair value through profit or loss

     150,399        141,608        6.2   An increase in the scale and fair value of stocks in securities at fair value through profit or loss

Securities purchased under agreements to resell

     61,202        4,467        1,270.1   The needs for liquidity management

Cash and cash equivalents

     80,889        53,306        51.7   The needs for liquidity management

Loans

     651,388        608,920        7.0   An increase in certificate of deposit and policy loans

Investment properties

     13,450        12,141        10.8   New investments in investment properties

Investments in associates and joint ventures

     227,764        222,983        2.1   New investments in associates and joint ventures and an increase in the equity of associates and joint ventures

Insurance contracts

     2,858,092        2,552,736        12.0   The accumulation of insurance liabilities from new policies and renewal business

Investment contracts

     284,882        267,804        6.4   An increase in the scale of universal insurance accounts

Securities sold under agreements to repurchase

     48,127        118,088        -59.2   The needs for liquidity management

Annuity and other insurance balances payable

     54,774        51,019        7.4   An increase in maturities payable

Interest-bearing loans and other borrowingsNote

     20,361        20,045        1.6  

Equity holders’ equity

     415,906        403,764        3.0   Due to the combined impact of total comprehensive income and profit distribution during the Reporting Period

 

  Note:

Interest-bearing loans and other borrowings include a five-year bank loan of GBP275 million with a maturity date on 25 June 2024, a five-year bank loan of USD860 million with a maturity date on 16 September 2024, a six-month bank loan of EUR127 million with a maturity date on 13 July 2020, which is automatically renewed upon maturity pursuant to the terms of the agreement, and a six-month bank loan of EUR78 million with a maturity date on 2 July 2020, which is automatically renewed upon maturity pursuant to the terms of the agreement. All the above are fixed rate loans. A five-year bank loan of USD970 million with a maturity date on 27 September 2024, a three-year loan of EUR400 million with a maturity date on 6 December 2020, and a one-year bank loan of USD28 million with a maturity date on 6 November 2020, which are floating rate loans.

 

4


                         RMB million

Major Items of the

Consolidated Statement of

Comprehensive Income

   January
to June
2020
     January
to June
2019
     Change    

Main Reasons for Change

Net premiums earned

     407,936        361,297        12.9  

Life insurance business

     345,591        307,009        12.6   Due to the steady growth of life insurance business

Health insurance business

     54,693        46,989        16.4   The expansion of health insurance business by the Company

Accident insurance business

     7,652        7,299        4.8  

Investment income

     72,706        66,345        9.6   An increase in interest income from investment with fixed maturity dates

Net realised gains on financial assets

     10,807        3,786        185.4   An increase in spread income of funds in available-for-sale securities

Net fair value gains through profit or loss

     8,606        13,107        -34.3   A decrease in profit or loss in fair value of stocks in securities at fair value through profit or loss

Net gains on investments of associates and joint ventures

     4,020        5,665        -29.0   A decrease in the profits of certain associates and the impact of impairment

Other income

     4,376        3,686        18.7   An increase in commission fees from agency services for CLP&C

Insurance benefits and claims expenses

     371,950        330,049        12.7   An increase in insurance contract liabilities

Investment contract benefits

     5,030        4,617        8.9   An increase in the scale of universal insurance accounts

Policyholder dividends resulting from participation in profits

     14,507        10,836        33.9   An increase in investment yield from the participating accounts

Underwriting and policy acquisition costs

     56,518        45,595        24.0   An increase in commissions of regular business due to the growth of the Company’s business and the optimization of its business structure

Finance costs

     1,772        1,930        -8.2   A decrease in interest paid for securities sold under agreements to repurchase

Administrative expenses

     17,047        16,958        0.5   Due to the growth of business

Income tax

     4,502        964        367.0   Due to the impact of the adjustment of the pre-tax deduction policy of underwriting and policy acquisition costs adopted in the corresponding period of 2019

Net profit attributable to equity holders of the Company

     30,535        37,599        -18.8   Due to the combined impact of the update of discount rate assumptions for reserves of traditional insurance contracts, the adjustment of the pre-tax deduction policy of underwriting and policy acquisition costs adopted in the corresponding period of 2019 and the change in gross investment income

 

5


CHAIRMAN’S STATEMENT

 

LOGO

 

We strided forward to advance China Life Revitalization strategy, staying true to our original aspiration and shouldering our social responsibility.

In the first half of 2020, the Company’s comprehensive strength was further enhanced and its leading position in the market was consolidated. During the Reporting Period, the Company’s gross written premiums amounted to RMB427,367 million, an increase of 13.1% year on year. The embedded value of the Company exceeded RMB1 trillion for the first time, reaching RMB1,015,856 million, an increase of 7.8% from the end of 2019. Total assets were RMB3,966,033 million, increasing by 6.4% from the end of 2019. Net profit attributable to equity holders of the Company was RMB30,535 million. As at the end of the Reporting Period, the core solvency ratio and the comprehensive solvency ratio were 258.24% and 267.31%, respectively.

Looking back to the first half of 2020, during our journey of revitalizing China Life, we firmly maintained our strategic focus, proceeded well with both the pandemic control and business development, and achieved a satisfactory operating performance, which reflected the time-tested experiences and strong development resilience of China Life. The high-quality development of the Company also demonstrated our commitment to shouldering social responsibilities in serving the overall national development plan and our efforts to guarding people’s wellbeing.

 

 

6


We took an active role in serving the overall national development and gave full support to the socio-economic development. In the face of the unexpected COVID-19 pandemic, we took an immediate action to offer complimentary insurance protection for medical workers fighting on the front line, and considered safeguarding the safety and health of customers and employees as our top priority. We proactively expanded the scope of insurance liability, upgraded claims settlement services, and provided support to the pandemic prevention and control as well as the resumption of work and production. To ensure stability on the six fronts and security in the six areas, we strived to support employment stability with the aid of insurance mechanism. We fully capitalized on our comprehensive financial strength to deeply integrate into the national and regional development, focused on new infrastructure and new urbanization constructions, and offered financial and insurance services, so as to give support to the development of real economy. We vigorously promoted the “Poverty Alleviation Insurance” project to target to the specific insurance needs of poverty-stricken people, and consistently built the network for protecting people’s wellbeing, thus leveraging China Life’s strengths for maintaining the socio-economic stability and development.

We adhered to the concept of “value-oriented” development and consistently advanced high-quality development. With emphasis on business value, profitability and development quality, we endeavoured to develop business with high value, so that the protection-oriented business grew significantly, with the percentage of premiums from designated protection-oriented products in the first-year regular premiums rising by 3.4 percentage points year on year, and the value of half year’s sales was RMB36,889 million, an increase of 6.7% year on year. Meanwhile, the size of our sales force remained stable with its quality being enhanced, and its foundation for value creation was further consolidated. A satisfactory performance was seen in our investment. As the interest rate rebounded after a sharp decline and the equity market fluctuated significantly, the gross investment income of the Company reached RMB96,134 million, an increase of 8.1% year on year, and the gross investment yield was 5.34%.

We firmly grasped the trend of technological advancement and accelerated digital transformation. As the COVID-19 pandemic around the world unleashed technology productivity at an accelerated speed, the Company sped up the application of achievements from “Technology- driven China Life” initiatives, which helped us to respond to the challenges brought by the pandemic from all aspects, such as remote office operations, online sales and online services, etc, and ensured the order and efficiency of the Company’s operation and management. By accelerating the application of technological strengths into operation and management, our technology empowerment reached to a new level. Adhering to the “customer-centric” principle, we committed ourselves to the construction of a corporate with excellent services, and upgraded our operations and services to be more integrated, intelligent and ecological. In the first half of the year, the Company’s capability in offering digital services was further strengthened. Nearly all of our individual insurance business could be applied online, and the speed and efficiency of our claims settlement led the industry.

We were committed to the transformation and upgrade through reform and constantly enhanced our development vitality. Under the “Dingxin Project”, the development layout of “Yi Ti Duo Yuan” was implemented, which gradually released the benefits from business restructuring. The general agent team and upsales team developed in a coordinated manner, with significant business value created by the individual agent business sector. The positioning of the diversified business sector was clearly defined, and the business transformation of the bancassurance channel kicked off smoothly, with its first-year regular premiums growing rapidly. The group insurance channel continued to enhance its specialization and capacity building, so that its profitability and business quality were further improved. Besides, we strengthened the market- oriented incentive and restraint reform and promoted market-oriented talents recruitment in key fields to fully activate our development vitality.

 

 

7


We firmly held on to the bottom line and carried out risk prevention and control in a practical manner. We proactively prevented and mitigated major financial risks, continued to keep track of the changes of domestic and international development and the impact on the financial and insurance industry, paid great attention to interest risk, market risk, credit risk and compliance risk, strengthened our efforts on risk monitoring and pre-warning, and well prepared stress tests and emergency response plans, so as to strictly prevent any external risk incidents from penetrating into the Company. We implemented regulatory requirements in a stringent and consistent manner, organized special governance on risks, and made preliminary achievements in the informationization of risk management, thus enhancing our overall capability in risk management and control.

We were determined to achieve high-quality development by responding to the changing environment, bringing about new progresses and turning crises into opportunities.

We are witnessing major changes unfolding in the world, something unseen in a century. The challenges brought by the “Black Swan”, namely the COVID-19 pandemic, further increased the uncertainty amid such major changes. Despite this, we saw an accelerated growth of emerging industries under the pandemic. Huge market size and domestic demand were still the favourable factors to support the economic development in China. Regulatory authorities rolled out a series of policies to correct irregular market practices and to optimize business environment, thus offering the new space for the high-quality development of the industry. With heightened awareness of the society on risks, the public demands for insurance protection rose significantly. New technological revolution evoluted more quickly and financial technology flourished, which greatly increased the service efficiency of the industry. To take a long-term perspective, we firmly believe that the Chinese economy will maintain its stable and sound development and its long-term positive growth fundamentals remain unchanged, and that the domestic insurance industry is still at an important stage full of strategic opportunities. I have full confidence in the prospect of the Chinese economy, the development of the domestic insurance industry, as well as the future of China Life.

The year of 2020 is a crucial year for us to make breakthroughs for “China Life Revitalization”. Despite instabilities and uncertainties in the external environment, we will remain steadfast to our strategic deployment of “China Life Revitalization”, seize the new development opportunities of the industry, properly carry out the regular pandemic control, enhance business value, and improve the quality of our business and sales force. We will deepen reform and innovation and carry out the “Dingxin Project” with great efforts, speed up digital transformation to reinforce technological and service empowerment, strengthen asset-liability management, attach great importance to the prevention and mitigation of major financial risk, and enhance our comprehensive governance capability.

We are setting sail to lead the trend and working hard to open the door of the opportunity. On the journey of building a world-class life insurance company, we will stick to our original aspiration and forge ahead, with a view to rewarding the shareholders and people from all walks of life with satisfactory operating performance.

 

  By Order of the Board
  Wang Bin
  Chairman
  Beijing, China
  26 August 2020
 

 

8


LOGO

 

REVIEW OF BUSINESS OPERATIONS IN THE FIRST HALF OF 2020

2020 is the crucial year when the strategic deployment of China Life Revitalization advanced to a critical stage of breakthrough. In the first half of the year, facing various challenges from the COVID-19 pandemic and economic downturn, the Company pursued the fundamental requirements of high-quality development, adhered to the strategic core of “centering on customers and basic operational units, focusing on business value and individual agent business sector” (“Dual Centers and Dual Focuses”), and concentrated on the operational guideline of “prioritizing business value, strengthening sales force, achieving stable growth, upgrading technology, optimizing customer services and guarding against risks”. The Company proceeded well with both the pandemic control and business development, and realized a stable growth of its core business, a continuous optimization of its business structure and a steady increase in its new business value. The Company accelerated optimization and adjustments in asset-liability management, technological innovation, operations and services, risk management and control, and withstood the tests by the pandemic. With steady and healthy development of the Company’s businesses in various aspects, its leading industry position was consolidated.

During the Reporting Period, the Company’s gross written premiums amounted to RMB427,367 million, an increase of 13.1% year on year. As at the end of the Reporting Period, the embedded value of the Company reached RMB1,015,856 million, an increase of 7.8% from the end of 2019. The value of half year’s sales was RMB36,889 million, an increase of 6.7% year on year. During the Reporting Period, the Company continued to enhance the asset-liability management, and its gross investment income reached RMB96,134 million, an increase of 8.1% from the corresponding period of 2019. Due to the combined impact of the update of discount rate assumptions for reserves of traditional insurance contracts, the adjustment of the pre-tax deduction policy of underwriting and policy acquisition costs adopted in the corresponding period of 2019 and the change in gross investment income, net profit attributable to equity holders of the Company was RMB30,535 million, a decrease of 18.8% year on year. As at the end of the Reporting Period, the core solvency ratio and the comprehensive solvency ratio were 258.24% and 267.31%, respectively.

 

 

9


LOGO

From left to right: Mr. Zhao Guodong, Mr. Zhan Zhong, Ms. Huang Xiumei, Mr. Su Hengxuan, Mr. Li Mingguang, Mr. Ruan Qi, Ms. Yang Hong

Key Performance Indicators for the First Half of 2020

 

            RMB million  
     January to June
2020
     January to June
2019
 

Gross written premiums

     427,367        377,976  

Premiums from new policies

     146,214        127,845  

Including: First-year regular premiums

     94,170        83,133  

First-year regular premiums with a payment duration of ten years or longer

     39,502        38,082  

Renewal premiums

     281,153        250,131  

Gross investment income

     96,134        88,923  

Net profit attributable to equity holders of the Company

     30,535        37,599  

Value of half year’s sales

     36,889        34,569  

Including: Individual agent business sector1

     36,559        33,333  

Policy Persistency Rate (14 months)2 (%)

     89.60        86.10  

Policy Persistency Rate (26 months)2 (%)

     83.30        87.00  

Surrender Rate3 (%)

     0.61        1.43  
     As at 30 June
2020
     As at 31 December
2019
 

Embedded value

     1,015,856        942,087  

Number of long-term in-force policies (hundred million)

     3.12        3.03  

 

 

  Notes:   
 

1.  The corresponding results of individual agent business sector for the first half of 2019 have been restated to allow for new sector definitions on a pro forma basis.

2.  The Persistency Rate for long-term individual life insurance policy is an important operating performance indicator for life insurance companies. It measures the ratio of in-force policies in a pool of policies after a certain period of time. It refers to the proportion of policies that are still effective during the designated month in the pool of policies whose issue date was 14 or 26 months ago.

3.  Surrender Rate = Surrender payment/(Liability of long-term insurance contracts at the beginning of the period + Premiums of long-term insurance contracts)

 

10


During the Reporting Period, the Company maintained its strategic focus, concentrated on developing long-term regular business and achieved a continuous increase in its new business value. First-year regular premiums amounted to RMB94,170 million (a year-on-year increase of 13.3%), which accounted for 99.03% in long-term first-year premiums, increasing by 0.24 percentage point year on year. In particular, first-year regular premiums with a payment duration of ten years or longer were R MB 39, 502 million, an increase of 3.7% year on year. The Company adhered to the diversified product strategy and vigorously developed protection-oriented businesses. Out of the top ten insurance products by the first-year regular premiums, six were protection- oriented products. The percentage of premiums from designated protection-oriented products in the first- year regular premiums rose by 3.4 percentage points year on year, with an increase in both the number of protection-oriented insurance policies and average premiums per policy. The value of half year’s sales was RMB36,889 million, an increase of 6.7% year on year. As at the end of the Reporting Period, the embedded value of the Company reached RMB1,015,856 million, increasing by 7.8% from the end of 2019. The number of long-term in-force policies was 312 million, an increase of 3.0% from the end of 2019. During the Reporting Period, the surrender rate was 0.61%, a decrease of 0.82 percentage point year on year.

During the Reporting Period, the Company continued to enhance the asset-liability management and flexibly adjusted its investment allocation strategy, so as to actively address the pressure from both assets and liabilities. By closely following the market changes while flexibly adjusting the pace of asset allocation and investment tactics, the Company achieved a gross investment income of RMB96,134 million, an increase of 8.1% year on year. Due to the combined impact of the update of discount rate assumptions for reserves of traditional insurance contracts, the adjustment of the pre-tax deduction policy of underwriting and policy acquisition costs adopted in the corresponding period of 2019 and the change in gross investment income, net profit attributable to equity holders of the Company was RMB30,535 million, decreasing by 18.8% year on year.

LOGO

 

 

11


In the first half of 2020, guided by the strategic deployment of “China Life Revitalization”, the Company further implemented the “Dingxin Project” to effectively strengthen capacity in various fields and boost high-quality development. In terms of sales management, the Company greatly pushed forward the development system of “Yi Ti Duo Yuan”, accelerated integration of two sales teams of the individual agent business sector, promoted standardized management of basic operational units, and further consolidated the foundation of sales management. The Company also advanced the transformation and upgrade in the diversified business sector. The bancassurance channel refocused on business transformation, and the group and health insurance channel emphasized specialization and capability building. In terms of investment management, the Company improved the investment management system with a market-oriented approach, coordinated asset allocation and entrusted investment management at account level, and

bolstered its investment capability through research of asset classes and optimization of investment strategies. In terms of operations and services, the Company continued to improve refined management, enhanced the entire Internet-based and intelligent operational process, increased operational efficiency through integration, and built a mechanism for continuous tracking and optimization of its customer experiences. In terms of technology support, the Company rebuilt the technical product development team according to the principle of flattening, greatly increasing the vitality and responsiveness of the team. In terms of risk control, the Company strengthened the informationization and intellectualization of risk management, and delved into a centralized risk management model to enhance the efficiency in risk management and control, and firmly held onto the bottom line of risks.

 

 

BUSINESS ANALYSIS

Insurance Business

Gross written premiums categorized by business

 

                   RMB million  
     January to June
2020
     January to June
2019
     Change  

Life Insurance Business

     346,137        307,461        12.6

First-year business

     89,668        78,573        14.1

First-year regular

     88,758        77,563        14.4

Single

     910        1,010        -9.9

Renewal business

     256,469        228,888        12.0

Health Insurance Business

     72,264        62,416        15.8

First-year business

     47,875        41,444        15.5

First-year regular

     5,403        5,523        -2.2

Single

     42,472        35,921        18.2

Renewal business

     24,389        20,972        16.3

Accident Insurance Business

     8,966        8,099        10.7

First-year business

     8,671        7,828        10.8

First-year regular

     9        47        -80.9

Single

     8,662        7,781        11.3

Renewal business

     295        271        8.9
  

 

 

    

 

 

    

 

 

 

Total

     427,367        377,976        13.1
  

 

 

    

 

 

    

 

 

 

 

  Note:

  Single premiums in the above table include premiums from short-term insurance business.

 

During the Reporting Period, gross written premiums from the life insurance business of the Company amounted to RMB346,137 million, a year-on-year increase of 12.6%. Gross written premiums from the health insurance business amounted to RMB72,264 million, a year-on-year

increase of 15.8%. Gross written premiums from the accident insurance business amounted to RMB8,966 million, a year-on- year increase of 10.7%.

 

 

12


Gross written premiums categorized by channel

 

            RMB million  
     January to June
2020
     January to June
20191
 

Individual Agent Business Sector2

     356,075        323,393  

First-year business of long-term insurance

     82,379        74,382  

First-year regular

     82,239        74,261  

Single

     140        121  

Renewal business

     263,363        240,445  

Short-term insurance business

     10,333        8,566  

Bancassurance Channel

     28,542        16,746  

First-year business of long-term insurance

     11,872        8,262  

First-year regular

     11,867        8,248  

Single

     5        14  

Renewal business

     16,464        8,262  

Short-term insurance business

     206        222  

Group Insurance Channel

     16,500        16,798  

First-year business of long-term insurance

     835        1,507  

First-year regular

     62        622  

Single

     773        885  

Renewal business

     1,275        1,314  

Short-term insurance business

     14,390        13,977  

Other Channels3

     26,250        21,039  

First-year business of long-term insurance

     2        2  

First-year regular

     2        2  

Single

     –          –    

Renewal business

     51        110  

Short-term insurance business

     26,197        20,927  
  

 

 

    

 

 

 

Total

     427,367        377,976  
  

 

 

    

 

 

 

 

Notes:

 

  1.

According to the development system of “Yi Ti Duo Yuan”, data for the corresponding period of 2019 were adjusted on a pro forma basis.

  2.

Premiums of the individual agent business sector included premiums of the general agent team and upsales team.

  3.

Premiums of other channels mainly included premiums of government-sponsored health insurance business and online sales, etc.

 

In the first half of 2020, the Company focused on business value growth, and sped up transformation and upgrade. After the organizational restructuring of “Yi Ti Duo Yuan”, the individual agent business sector achieved a significant result in business value creation and the core business indicators saw a steady growth despite the unfavourable market conditions. The diversified business sector focused on business

transformation and its positioning was clearly defined. As at the end of the Reporting Period, the Company’s total sales force reached approximately 1.8 million, which remained stable with its quality being improved. The sales management was further transformed and upgraded.

 

 

13


Individual agent business sector

In the first half of the year, the individual agent business sector adhered to the priority of business value and the return to protection type of business, deepened transformation and upgrade of its sales management, and realized the continuous growth of both business value and scale despite the unfavourable market conditions. During the Reporting Period, gross written premiums from the sector amounted to RMB356,075 million, an increase of 10.1% year on year. First-year regular premiums were RMB82,239 million, an increase of 10.7% year on year. In particular, first-year regular premiums with a payment duration of ten years or longer were RMB39,389 million (a year-on- year increase of 6.4%), which accounted for 47.90% in the first-year regular premiums. The designated protection-oriented business grew rapidly, with an increase in both the number of protection-oriented insurance policies and average premiums per policy. Renewal premiums amounted to RMB263,363 million, an increase of 9.5% year on year. In the first half of the year, the capability of the individual agent business sector in value creation was prominent. The value of half year’s sales of the sector was RMB36,559 million, accounting for 99.11% of the value of half year’s sales as a whole. New business margin of half year’s sales of the sector reached 39.3%, which remained stable compared to the corresponding period of 2019.

In the first half of the year, the general agent team and upsales team of the individual agent business sector developed in a coordinated manner. The Company implemented the new Agent Management and Compensation System, through which the benefits from system upgrading were released, major day-to-day sales force management indicators were steadily improved, and the quality of the sales force enhanced with a stable size. As at the end of the Reporting Period, the number of agents of the individual agent business sector was 1.69 million, including 1,007,000 agents from the general agent team and 683,000 agents from the upsales team, and the monthly average productive agents increased by 40.4% year on year.

 

LOGO

Diversified business sector

The transformation and upgrade under “Dingxin Project” was carried out in the diversified business sector in great depth. By concentrating on the development philosophy of “professional operation, enhancement of quality and efficiency, transformation and innovation, and legal compliance”, the diversified business sector coordinated well with the individual agent business sector, and focused on the development of bancassurance, group insurance and health insurance. During the Reporting Period, gross written premiums from the diversified business sector amounted to RMB71,292 million, an increase of 30.6% year on year.

 

 

14


Bancassurance Channel. The bancassurance channel repositioned to focus on bank agency business, with equal emphasis on business scale and value, and kicked off the business transformation smoothly. During the Reporting Period, gross written premiums from the channel amounted to RMB28,542 million, an increase of 70.4% year on year. First-year regular premiums were RMB11,867 million, an increase of 43.9% year on year. Renewal premiums amounted to RMB16,464 million (a year-on-year increase of 99.3%), accounting for 57.68% of the gross written premiums from the channel (a year-on-year increase of 8.34 percentage points). The bancassurance channel constantly strengthened sales team management, and the quality of the sales force was improved steadily. As at the end of the Reporting Period, the number of bancassurance channel account managers was 31,000 and the quarterly average active managers increased substantially.

 

LOGO

Group Insurance Channel. The group insurance channel continued to deepen diversified development and improve business profitability, strengthened the expansion of key businesses, and achieved steady development. During the Reporting Period, gross written premiums from the channel were RMB16,500 million, a decrease of 1.8% year on year. Short-term insurance premiums from the channel were RMB14,390 million, an increase of 3.0% year on year. As at the end of the Reporting Period, the number of direct sales representatives was 53,000. In particular, the number of high-performance personnels increased by 15.9% from the end of 2019.

 

LOGO

 

 

15


Other Channels. In the first half of 2020, gross written premiums from other channels reached RMB26,250 million, an increase of 24.8% year on year. The Company actively developed government-sponsored health insurance businesses, including supplementary major medical expenses insurance, supplementary medical insurance and long-term care insurance, and led the market consistently. As at the end of the Reporting Period, the Company carried out over 220 supplementary major medical expenses insurance programs, providing services to nearly 400 million people in 31 branches at the provincial level. It also provided supplementary medical insurance in 17 branches at the provincial level, serving more than 33 million people, undertook over 600 health protection entrusted programs, covering more than 100 million people, and offered long-term care insurance protection to more than 15 million people.

In the first half of the year, there were greater development opportunities for the online insurance business due to the impact of the COVID-19 pandemic, and a rapid growth was seen in the online sales business. The Company continued to diversify its online insurance product mix, offered various types of online insurance products during the pandemic, and consistently improved internet application functions such as China Life Insurance APP and China Life e-Store. A sales framework for the

Company’s online insurance business was established, with the integration of online and offline sales as the core, and direct sales on official website and sales by external platforms as supplement. The Company constantly reinforced its online insurance operations to provide more convenient, efficient and diversified online services to its customers.

The Company actively consolidated internal and external ecological resources, steadily pushed forward its coordinated business development with other subsidiaries of CLIC, and expanded the market and customer base under the strategy of “One Customer, One-stop Service”. In the first half of 2020, premiums from property insurance cross-sold by the Company increased by 24.6% year on year, whereas new bids of enterprise annuity funds and pension security products of Pension Company cross-sold by the Company grew by 22.1% year on year. Meanwhile, the Company entrusted CGB to sell bancassurance products, with first-year regular premiums for the first half of 2020 increasing by 18.7% year on year. The number of new debit cards and credit cards jointly issued by the Company and CGB during the first half of the year exceeded 500,000, thus fostering a sound environment for achieving coordinated development, positive interaction and mutual benefits.

 

 

16


Insurance contracts

 

                   RMB million  
     As at 30
June 2020
     As at 31
December 2019
     Change  

Life insurance

     2,653,725        2,385,407        11.2

Health insurance

     194,368        158,800        22.4

Accident insurance

     9,999        8,529        17.2
  

 

 

    

 

 

    

 

 

 

Total of insurance contracts

     2,858,092        2,552,736        12.0 % 
  

 

 

    

 

 

    

 

 

 

Including: residual marginNote

     821,199        768,280        6.9

 

Note:

The residual margin is a component of insurance contract reserve, which results in no Day 1 gain at the initial recognition of an insurance contract. The residual margin is set to zero if it is negative. The growth of residual margin arises mainly from new business.

 

As at the end of the Reporting Period, the reserves of insurance contracts of the Company increased by 12.0% from the end of 2019, which was primarily due to the accumulation of insurance liabilities from new

policies and renewal business. As at the date of the statement of financial position, the reserves of various insurance contracts of the Company passed the adequacy test.

 

 

Analysis of claims and policyholder benefits

 

                   RMB million  
     January to
June 2020
     January to
June 2019
     Change  

Insurance benefits and claims expenses

     371,950        330,049        12.7

Life insurance business

     328,888        291,580        12.8

Health insurance business

     39,350        35,474        10.9

Accident insurance business

     3,712        2,995        23.9

Investment contract benefits

     5,030        4,617        8.9

Policyholder dividends resulting from participation in profits

     14,507        10,836        33.9

 

During the Reporting Period, insurance benefits and claims expenses rose by 12.7% year on year due to an increase in insurance contract liabilities. In particular, life insurance business rose by 12.8% year on year and health insurance business rose by 10.9% year on year. Due to an increase in insurance contract liabilities and the fluctuation of claims payment of certain insurance business, accident insurance business rose

by 23.9% year on year. Investment contract benefits rose by 8.9% year on year due to an increase in the scale of the universal insurance accounts. Policyholder dividends resulting from participation in profits rose by 33.9% year on year due to an increase in investment yield from participating accounts.

 

 

17


Analysis of underwriting and policy acquisition costs and other expenses

 

                   RMB million  
     January to
June 2020
     January to
June 2019
     Change  

Underwriting and policy acquisition costs

     56,518        45,595        24.0

Finance costs

     1,772        1,930        -8.2

Administrative expenses

     17,047        16,958        0.5

Statutory insurance fund contribution

     803        737        9.0

Other expenses

     5,260        4,271        23.2

 

During the Reporting Period, underwriting and policy acquisition costs rose by 24.0% year on year due to an increase in commissions of regular business as a result of the growth of the Company’s business and the optimization of its business structure. Finance costs decreased by 8.2% year on year due to a decrease in interest paid for securities sold under agreements to repurchase. Administrative expenses rose by 0.5% year on year as a result of business growth.

Investment Business

In the first half of 2020, due to the impact of the pandemic, the global economy experienced a notable downturn, with the trend of deglobalisation being intensified. Despite a significant decline in China’s economic growth, recovery was seen in the second quarter of the year. The interest rate of the domestic bond market rebounded after a rapid decline, and the volatility of the stock market escalated. The Company

continued to enhance the asset-liability management, closely followed market movement, and flexibly adjusted its investment tactics. In respect of fixed income investment, the Company seized the opportunity of market fluctuation during the significant downturn of interest rate, timely adjusted allocation to government bonds with long duration, and controlled interest rate risk while maintaining the asset duration. In respect of open market equity investment, the Company adhered to its established allocation strategy and arrangement under the complicated market environment and continued to adjust internal asset structure, thus stabilizing its investment yield. As at the end of the Reporting Period, the Company’s investment assets reached RMB3,781,024 million, an increase of 5.8% from the end of 2019.

 

 

18


Investment Portfolios

As at the end of the Reporting Period, the Company’s investment assets categorized by investment object are set out as below:

 

     As at 30 June 2020    

RMB million
As at 31 December 2019

 

Investment category

   Amount      Percentage     Amount      Percentage  

Fixed-maturity financial assets

     2,772,336        73.32     2,674,261        74.85

Term deposits

     536,256        14.18     535,260        14.98

Bonds

     1,456,870        38.53     1,410,564        39.48

Debt-type financial products1

     428,613        11.34     415,024        11.62

Other fixed-maturity investments2

     350,597        9.27     313,413        8.77

Equity financial assets

     625,383        16.54     605,996        16.95

Common stocks

     304,966        8.06     276,604        7.74

Funds3

     99,026        2.62     118,450        3.31

Bank wealth management products

     38,396        1.02     32,640        0.91

Other equity investments4

     182,995        4.84     178,302        4.99

Investment properties

     13,450        0.36     12,141        0.34

Cash and others5

     142,091        3.76     57,773        1.62

Investments in associates and joint ventures

     227,764        6.02     222,983        6.24
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     3,781,024        100.00     3,573,154        100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

 

Notes:

 

1.

Debt-type financial products include debt investment schemes, equity investment plans, trust schemes, project asset-backed plans, credit asset-backed securities, specialized asset management plans, and asset management products, etc.

2.

Other fixed-maturity investments include policy loans, statutory deposits–restricted, and interbank certificates of deposits, etc.

3.

Funds include equity funds, bond funds and money market funds, etc. In particular, the balances of money market funds as at 30 June 2020 and 31 December 2019 were RMB793 million and RMB1,829 million, respectively.

4.

Other equity investments include private equity funds, unlisted equities, preference shares, and equity investment plans, etc.

5.

Cash and others include cash, cash at banks, short-term bank deposits and securities purchased under agreements to resell, etc.

 

As at the end of the Reporting Period, among the major types of investments, the percentage of investment in bonds changed to 38.53% from 39.48% as at the end of 2019, the percentage of term deposits changed to 14.18% from 14.98% as at the end of 2019, the percentage of investment in debt-type financial products changed to 11.34% from 11.62% as at the end of 2019, and the percentage of investment in stocks and funds (excluding money market funds) changed to 10.66% from 11.00% as at the end of 2019.

The Company’s debt-type financial products mainly concentrated on the sectors such as transportation, public utilities and energy, and the financing entities were primarily large central-owned enterprises and state-owned enterprises. As at the end of the Reporting Period, over 99% of the debt-type financial products were rated AAA or above by the external rating institutions. In general, the quality of the Company’s debt-type investment assets was in good condition and the debt risks were well controlled.

 

 

19


Investment Income

 

           RMB million  
     January
to June
2020
    January
to June
2019
 

Gross investment income

     96,134       88,923  

Net investment income

     77,391       72,030  

Net income from fixed-maturity investments

     61,730       56,274  

Net income from equity investments

     10,053       9,563  

Net income from investment properties

     (5     20  

Investment income from cash and others

     923       508  

Share of profit of associates and joint ventures

     4,690       5,665  

Net realised gains on financial assets

     10,807       3,786  

Net fair value gains through profit or loss

     8,606       13,107  

Disposal gains and impairment loss of associates and joint ventures

     (670     –    

Net investment yield1

     4.29     4.66

Gross investment yield2

     5.34     5.78

 

Notes:

 

1.

Net investment yield = [(Net investment income – Interest paid for securities sold under agreements to repurchase)/((Investment assets at the end of the previous year – Securities sold under agreements to repurchase at the end of the previous year + Investment assets at the end of the period – Securities sold under agreements to repurchase at the end of the period)/2)]/182×366

2.

Gross investment yield = [(Gross investment income – Interest paid for securities sold under agreements to repurchase)/((Investment assets at the end of the previous year – Securities sold under agreements to repurchase at the end of the previous year – Derivative financial liabilities at the end of the previous year + Investment assets at the end of the period – Securities sold under agreements to repurchase at the end of the period – Derivative financial liabilities at the end of the period)/2)]/182×366

 

In the first half of 2020, the Company’s net investment income was RMB77,391 million, an increase of RMB5,361 million from the corresponding period of 2019, rising by 7.4% year on year. Due to the effect of a significant decline in interest rate and the delay in dividend payment from some listed stocks in the portfolio, the net investment yield was 4.29%, down by 37 basic points from the corresponding period of 2019. By grasping market opportunities, the Company optimized the structure of investment mix and portfolio strategy in its equity investment, rebalanced tactical allocations as appropriate, and controlled risk exposure in a prudent manner to maintain the stability of investment income. The gross investment income of the Company reached

RMB96,134 million, an increase of RMB7,211 million from the corresponding period of 2019. The gross investment yield was 5.34%, down by 44 basic points from the corresponding period of 2019. The comprehensive investment yield1 taking into account the current net fair value changes of available- for-sale securities recognized in other comprehensive income was 5.40%, down by 285 basic points from the corresponding period of 2019.

Major Investments

During the Reporting Period, there was no material equity investment or non-equity investment of the Company that was subject to disclosure requirements.

 

 

1

Comprehensive investment yield = {[(Gross investment income – Interest paid for securities sold under agreements to repurchase + Current net fair value changes of available-for-sale securities recognized in other comprehensive income)/((Investment assets at the end of the previous year – Securities sold under agreements to repurchase at the end of the previous year – Derivative financial liabilities at the end of the previous year + Investment assets at the end of the period – Securities sold under agreements to repurchase at the end of the period – Derivative financial liabilities at the end of the period) /2)]/182}x366

 

20


ANALYSIS OF SPECIFIC ITEMS

Profit before Income Tax

 

                   RMB million  
     January
to June
2020
     January
to June
2019
     Change  

Profit before income tax

     35,564        38,893        -8.6

Life insurance business

     21,850        27,340        -20.1

Health insurance business

     7,388        4,506        64.0

Accident insurance business

     112        459        -75.6

Other businesses

     6,214        6,588        -5.7

 

During the Reporting Period, profit before income tax from the life insurance business decreased by 20.1% year on year primarily due to the combined impact of the update of discount rate assumptions for reserves of traditional insurance contracts and the change in gross investment income. Profit before income tax from the health insurance business rose by 64.0% year on year primarily due to the growth of short-term health insurance business and its business quality improvement. Profit before income tax from the accident insurance business decreased by 75.6% year on year primarily due to the fluctuation of claims expenses for certain insurance business. Profit before income tax from other businesses decreased by 5.7% year on year primarily due to a decrease in the profits of certain associates and the impact of impairment.

Analysis of Cash Flows

Liquidity sources

The Company’s cash inflows mainly come from insurance premiums, income from non-insurance contracts, interest income, dividend and bonus, and proceeds from sale and maturity of investment assets. The primary liquidity risks with respect to these cash inflows are the risk of surrender by contract holders and policyholders, as well as the risks of default by debtors, interest rate fluctuations and other market volatilities. The Company closely monitors and manages these risks.

The Company’s cash and bank deposits can provide it with a source of liquidity to meet normal cash outflows. As at the end of the Reporting Period, the balance of cash and cash equivalents was RMB80,889 million. In addition, the vast majority of the Company’s term deposits in banks allow it to withdraw funds on deposits, subject to a penalty interest charge. As at the end of the Reporting Period, the amount of term deposits was RMB536,256 million.

The Company’s investment portfolio also provides it with a source of liquidity to meet unexpected cash outflows. The Company is also subject to market liquidity risk due to the large size of its investments in some of the markets in which the Company invests. In some circumstances, some of its holdings of investment securities may be large enough to have an influence on the market value. These factors may adversely affect its ability to sell these investments or sell them at a fair price.

Liquidity Uses

The Company’s principal cash outflows primarily relate to the payables for the liabilities associated with its various life insurance, annuity, accident insurance and health insurance products, operating expenses, income taxes and dividends that may be declared and paid to its equity holders. Cash outflows arising from the Company’s insurance activities primarily relate to benefit payments under these insurance products, as well as payments for policy surrenders, withdrawals and policy loans.

The Company believes that its sources of liquidity are sufficient to meet its current cash requirements.

 

 

21


Consolidated Cash Flows

 

The Company has established a cash flow testing system, and conducts regular tests to monitor the cash inflows and outflows under various scenarios and adjusts the asset portfolio accordingly to ensure sufficient sources of liquidity.

    

 

 

                         RMB million
     January
to June
2020
     January
to June
2019
     Change    

Main Reasons for Change

Net cash inflow/(outflow) from operating activities

     182,792         150,290         21.6   An increase in premiums due to the steady growth of the Company’s business

Net cash inflow/(outflow) from investing activities

     (88,639      (75,908      16.8   The needs for investment management

Net cash inflow/(outflow) from financing activities

     (66,682      (67,937      -1.8   The needs for liquidity management

Foreign exchange gains/(losses) on cash and cash equivalents

     112                2,140.0  

Net increase/(decrease) in cash and cash equivalents

     27,583         6,450         327.6  

 

Solvency Ratio

An insurance company shall have the capital commensurate with its risks and business scale. According to the nature and capacity of loss absorption by capital, the capital of an insurance company is classified into the core capital and the supplementary capital. The core solvency ratio is the ratio of core capital to minimum capital, which reflects the

adequacy of the core capital of an insurance company. The comprehensive solvency ratio is the ratio of the sum of core capital and supplementary capital to minimum capital, which reflects the overall capital adequacy of an insurance company. The following table shows the Company’s solvency ratios as at the end of the Reporting Period:

 

 

           RMB million  
     As at 30
June 2020
(unaudited)
    As at 31
December
2019
 

Core capital

     997,274       952,030  

Actual capital

     1,032,310       987,067  

Minimum capital

     386,181       356,953  

Core solvency ratio

     258.24     266.71

Comprehensive solvency ratio

     267.31     276.53

 

Note:

The China Risk Oriented Solvency System was formally implemented on 1 January 2016. This table is compiled according to the rules of the system.

 

As at the end of the Reporting Period, the Company’s comprehensive solvency ratio decreased by 9.22 percentage points from the end of 2019, which was mainly due to the continuous growth of the scale of insurance

business and investment assets, dividend distribution, and the changes in the market environment such as the decline of interest rate.

 

 

22


Sale of Material Assets and Equity

During the Reporting Period, there was no sale of material assets and equity of the Company.

Major Subsidiaries and Associates of the Company

 

                                    RMB million

Company Name

  

Major Business Scope

   Registered
Capital
    

Shareholding

   Total Assets      Net Assets     

Net Profit

China Life Asset Management Company Limited

   Management and utilization of proprietary funds; acting as agent or trustee for asset management business; consulting business relevant to the above businesses; other asset management business permitted by applicable PRC laws and regulations      4,000      60%      12,373        10,924      913

China Life Pension Company Limited

   Group pension insurance and annuity; individual pension insurance and annuity; short-term health insurance; accident insurance; reinsurance of the above insurance businesses; business for the use of insurance funds that are permitted by applicable PRC laws and regulations; pension insurance asset management product business; management of funds in RMB or foreign currency as entrusted by entrusting parties for the retirement benefit purpose; other businesses permitted by the CBIRC      3,400      70.74% is held by the Company, and 3.53% is held by AMC      6,283        4,591      500

China Life Property and Casualty Insurance Company Limited

   Property loss insurance; liability insurance; credit insurance and bond insurance; short-term health insurance and accident insurance; reinsurance of the above insurance businesses; business for the use of insurance funds that are permitted by applicable PRC laws and regulations; other businesses permitted by the CBIRC      18,800      40%      103,113        25,713      1,895

China Guangfa Bank Co., Ltd.

   The businesses approved by the CBIRC include commercial banking businesses such as public and private deposits, loans, payment and settlement, and capital business      19,687      43.686%      2,808,459        214,916      6,486

 

Note: For details, please refer to Note 18 in the Notes to the Interim Condensed Consolidated Financial Statements in this report.

Structured Entities Controlled by the Company

The details of structured entities controlled by the Company are set out in Note 18 in the Notes to the Interim Condensed Consolidated Financial Statements in this report.

Changes in Accounting Estimates

The changes in accounting estimates of the Company during the Reporting Period are set out in Note 3 in the Notes to the Interim Condensed Consolidated Financial Statements in this report.

Analysis of Core Competitiveness

During the Reporting Period, there was no material change in the Company’s core competitiveness.

 

23


TECHNOLOGY EMPOWERMENT, OPERATIONS AND SERVICES, RISK CONTROL AND MANAGEMENT

Technology Empowerment

In the first half of 2020, China Life pushed forward digital transformation in all aspects, accelerated technological innovation, proactively applied digital technologies to respond to the impact of the COVID-19 pandemic in a swift manner, and exerted the powerful function of technology empowerment to maintain business development, thus accelerating the application of technological strengths into operation and management.

Great leap in capability and further advancement of technological innovation

Technological development demonstrating the strength of China Life. By concentrating on the “ Technology-driven China Life ” strategy, the Company applied technology, as an important production element, throughout the whole process of operation and management, and made use of technology to integrate ecological resources and empower the operational units, so as to provide convenient and efficient digital services to customers. In the first half of 2020, the Company improved technological governance, reformed management mechanisms, established a management system based on technology products, and pushed forward the establishment of innovation incubation center and R&D sub-centers, thus enhancing its technology- empowered ability of value creation, diversification of supply and innovative development.

Technology research activating innovation vitality. The Company established four technological innovation-themed laboratories, namely insurance technology, cloud computing and infrastructures, cyber security and block chain, and carried out more than 30 research projects. It developed six AI models, and applied them to the business fields, such as sales, operation and risk control, and commenced the intelligent risk detection and control for the individual agents, promoted online intelligent risk control of illegal fund raising, and achieved the full process automation for the management and control of anti-money laundering, and the efficiency of processing a single suspicious transaction increased by 30% on average. The technological innovation facilitated the Company’s operation and management to become more digital and intelligent.

 

Digital ecosystem bringing about the synergy effect. With the continued expansion of the FinTech ecosystem based on the digital platform, the Company released 295 additional standardized services and created more than 570 micro-applications in the first half of the year. It also provided insurance coverage review for the family-based customers, online premiums collection and payment, and supported the branches at all levels to make local innovations. The Company seamlessly cooperated with 19,000 medical institutions, and carried out over 90,000 activities with different types of collaborated institutions, which consistently enriched the Company’s insurance- centered ecosystem services.

Empowerment upgrade and acceleration of digital transformation in all aspects

Digital sales creating new driving forces for development. The Company adopted technologies such as mobile internet, big data and AI to facilitate its online sales force recruitment, online agent training, online business development and online day-to-day management, thus effectively ensuring the business development during the pandemic. In the first half of the year, the Company launched the full process online sales force recruitment and applied AI human-machine dialogue in its training sessions for agents, with over 10 million person-times participation, and more than 20.13 million hours were spent on online training sessions for the new agents. The Company created the model of live video streaming of morning assembly, micro-innovation meeting and cloud innovation meeting, etc., which recorded a daily average number of 2,200 meetings at the peak period of live streaming during the pandemic.

Digital field offices creating new intelligent bases. The application of the “Internet of Things” and AI technology diversified the digital scenarios for field offices and ultimately strengthened online and offline interaction. The Company added new electronic equipment on the selected branches, such as the self-service terminals for business processing, intelligent sensing equipment and intelligent visualization screen, and realized digital training, multi-dimensional and visualized performance tracking, and brand promotion, etc. The Company also launched the AI real-time performance reporting and extended digital services to front-line operational units and sales teams, which became the digital bases for its further service extension.

 

 

24


Digital services enhancing the new experience at fingertip. The Company promptly responded to the demands for health services from customers during the pandemic and accelerated the innovation of online services. The intelligent application made the Company’s services within close reach. As the Company pushed forward the establishment of China Life Hybrid Cloud in great depth and leveraged the advantages of flexible, convenient, reliable and un interrupted proprietary Cloud, its capability of service offering increased by 6 to 8 times during the pandemic, which enabled it to flexibly address the explosive demands for online applications.

Operations and Services

In the first half of 2020, by adhering to the “customer-centric” principle and the operation objective of “strengthening efficiency, promoting technology-driven development, achieving value improvements and offering first-class customer experience”, the Company continued to improve its product development and management, pushed forward the high-quality development of operations and services, implemented the three-year action plan for excellent services in a conscientious manner, and further promoted the upgrade of operations and services to be more Internet-based, intelligent and ecological.

Products were more diversified. In the first half of 2020, the Company took active actions in product development and upgrading to satisfy the demands of its customers. There were a total of 194 products (including new products and upgraded products), including 10 life insurance products, 177 health insurance products, 4 accident insurance products and 3 annuity insurance products. Out of these products, 184 were protection-oriented products and 10 were long-term savings products.

Services were more convenient and efficient. The Company’s online policy services saw a notable improvement. The paperless insurance application rate of individual long-term insurance business and group insurance business reached 99.8% and 96%, respectively, and the online process rate of individual insurance policy administration and claims settlement for medical insurance rose by 20 percentage points year on year and 44.5 percentage points year on year, respectively. The efficiency of the Company’s claims settlement was further enhanced. The direct claims payment services were available in nearly 20,000 medical institutions, which increased by 46.2% year

on year. The pass rate of the whole process automatic claims settlement service rose by 12 percentage points year on year, and the time required for making claims payment was shortened by 13.2% year on year.

Services became more intelligent. As the application of AI technology accelerated, the Company’s operation management and control became more refined. The whole process intelligent underwriting system was optimized and the underwriting model was upgraded. As a result, the automated approval rate of intelligent underwriting increased by 3.2 percentage points year on year. With the application of an automatic detection and risk control system, the pass rate of automatic policy review reached to 98.2%. The intelligent application in the Company’s contacting services developed at a high speed. In the first half of 2020, services provided by the intelligent online customer service robot and the intelligent outbound-call robot increased by 78.9% year on year.

Services were more diversified. The Company consistently improved high-quality service provision system to satisfy the diversified needs of customers. The inter-linked services were available in China Life Insurance APP and CGB’s credit card services. The accumulative number of registered users of China Life Insurance APP rose by 21.6% year on year and the monthly average number of active users rose by 55.6% year on year. The Company organized Internet-based scenario customer festival with the number of participants reaching 120 million person-times. The Company also created an “online + offline” model to provide value-added customer services and organized a variety of activities, such as the Famous Doctors Lecture and the Joyful Life for Women.

Services became more considerate. The Company applied the “Zero Contact Services” in great depth, providing customers with insurance protection for pandemic prevention and control. To satisfy the needs of its customers, the Company launched the service of “Online Customer Service Agent”, promoted electronic insurance policy for the long-term individual business, carried out remote and non-touch investigation, and launched a series of services, including the information services on pandemic prevention and control, fitness and healthcare, etc. To address customers’ urgent needs, the Company streamlined its claims settlement process and realized quick processing and payment for the claims relating to COVID-19.

 

 

25


Constantly implementing the strategy of “Inclusive Healthcare” and “Integrated Aged-care”. By consolidating the resources of healthcare and medical services, the Company established a healthcare ecosystem covering full life cycles and promoted the construction of the online and offline platforms. During the COVID-19 pandemic, the Company established the “Healthcare Service Zone” especially for the prevention and control of COVID-19. The Company also created an innovative model for the cooperation between medical and insurance entities and promoted application of the claims settlement model that integrated government and businesses in the form of “basic medical insurance + supplementary major medical expenses insurance + commercial insurance”. The Company pushed forward investment in the China Life Integrated Aged Care Fund and Jiangsu China Life Jiequan Equity Investment Center (Limited Partnership) (Inclusive Healthcare Fund II), focusing on companies or funds engaging in inclusive healthcare- related sectors such as healthcare, elderly care, health information management, pharmaceutical production and services, and medical apparatus and instruments production, with a view to further promoting the strategic layout in the aged-care and healthcare industry.

Risk Control and Management

During the Reporting Period, the Company consistently strengthened its internal control and risk management in strict compliance with the laws and regulations of its listed jurisdictions, as well as the regulatory requirements of the industry. With enhanced ability to manage risks, the Company maintained its integrated risk rating at Class A. The Company paid constant attention to the risks related to the COVID-19 pandemic, actively conducted various tasks on risk investigation and governance, and identified hidden risks in a timely manner, so as to enhance its ability to address risks in all aspects. It constantly optimized the Enterprise-wide Risk Management System of “China Risk Oriented Solvency System” (C-ROSS), and improved the relevant work mechanisms. The Company also continuously improved the system for the management and control of investment risks for the purpose of gradually creating a framework for the analysis of investment risks in the whole chain. It strengthened the system for the management and control of sales risks by taking an active role to conduct sales risk pre-warning and investigation, cultivate integrity culture among sales agents, and

introduce the credit rating for them, etc. The Company fully implemented the regulatory requirements on anti-money laundering, and actively performed its anti-money laundering obligations such as customer identification, which further improved the effectiveness of its anti-money laundering management and control. It constantly developed the internal control assessment system to enhance the effectiveness of the internal control mechanism. With the purpose to strengthen the source governance of customer complaints as well as risk management and control, the Company created an atmosphere of sales with integrity and in compliance with laws and offering high quality services. The Company further strengthened disciplined operation, management and assessment and stepped up efforts in the management of administrative punishment, with a view to enhancing its ability in legal compliance as well as risk prevention and control.

During the Reporting Period, the Company carried out various audit projects and put more efforts on the application of audit results. It also carried out the economic responsibility audit on managers and the audit on senior management in order to regulate its operation and management in a practical manner. The Company conducted risk-based special audits in great depth to improve its operation and management. The Company actively conducted regular audits, seriously implemented regulatory requirements, and put more efforts in rectifying any problems identified in audits, which fully performed the supervisory role of audit.

PERFORMANCE OF THE CORPORATE SOCIAL RESPONSIBILITY

The Company adhered to its culture philosophy of “Success for You, Success by You”, upheld the original aspiration of and fulfilled the mission as a state-owned financial enterprise, and attached great importance to fulfilling its social responsibility. It actively probed into a business mode that balanced the development of itself and the society, and made contributions to the overall economic and social development in aspects of aged care, medical services, social assistance and education, thereby demonstrating its strong commitment in protecting environment, serving the national economy and people’s livelihood, and shouldering its due responsibilities.

 

 

26


Leveraging its advantages as a professional insurance company to fight against the COVID-19 pandemic

After the outbreak of the COVID-19 pandemic, the Company took positive actions in donating insurance policies as well as pandemic prevention supplies and funds, upgrading claims settlement services, participating in volunteering actions and offering complimentary healthcare services, thus providing the professional support of the insurance industry to fight against the COVID-19 pandemic. As at the end of the Reporting Period, the Company offered complimentary insurance protection for over 2.5 million medical workers fighting on the front line of the pandemic in 35 provinces and cities nationwide, and extended the coverage of 31 long-term critical illness insurance products to include any insurance liabilities in connection with COVID-19. It completed a total of 550 cases of claims settlement related to the COVID-19 pandemic, making claims payment totaling RMB37 million. In order to address the pandemic, the Company proactively upgraded eight services and measures, including 7x24 online claims settlement services, active search for clients, launch of fast-track claims settlement, cancellation of paper application materials for claims settlement, cancellation of restrictions on designated hospitals, cancellation of restrictions on cooling off period, cancellation of restrictions on drugs, diagnosis and treatment, and cancellation of deductible. In the meanwhile, the Company established the “Healthcare Service Zone” for the provision of eight services such as online consultation, early screening of COVID-19 and traditional Chinese medicine (TCM) video. As at 30 June 2020, there were over 410,000 page views.

Protecting the health of people for enhancement of social welfare and people’s wellbeing

By giving full play to the functions of insurance as an economic “shock absorber” and social “stabilizer”, the Company made its contributions to charitable and public welfare programs and safeguarded people with a better life through its concrete actions. In the first half of 2020, the Company handled 6.7 million cases of claims and made the claims payment of over RMB21 billion, with a daily average amount of nearly RMB120 million in claims payment to customers. The Company underwrote an additional insured sum of RMB307 trillion, taking an

active role to provide insurance protection for people from all walks of life. As at the end of the Reporting Period, the Company provided the old-age accident insurance protection for 41.52 million aged people, with a risk coverage of approximately RMB1.88 trillion. The Company also provided the supplementary major medical insurance protection for nearly 400 million urban and rural residents, making the claims payment of RMB10,229 million for 5,996,200 person-times in the first half of 2020. A donation of RMB9.99 million was made on a cumulative basis to “China Life Caring for Life Poverty Alleviation Project” through China Life Foundation.

Implementing the ecological civilization and adhering to green business operations and development

The Company, as a non-manufacturing insurance company with low energy consumption and light pollution, carries out its major business activities in a manner that does not pose any material adverse effect on eco-environment and natural resources, and has always made its best endeavor to mitigate any negative impact of its operations on environment to the greatest extent. The Company kept on improving its electronic service system and reducing its consumption on energy and paper, with a view to integrating low-carbon and environmental-friendly concept into its daily office operations, as well as the whole process of operations and services, including policy underwriting, policy administration and claims settlement. In the first half of 2020, the Company advanced the “Zero Contact Services” in all aspects, achieving 99.80% of the rate of online paperless application in the long-term individual insurance business and 95.99% of the rate of paperless application in the group insurance business. Paperless insurance application resulted in saving approximately 214.53 tons of paper. The Company continued to increase the application of internet and launched a new model of live streaming for its morning assembly, which significantly reduced the frequency of sales agents commuting to and from the Company and put low-carbon operation into practice. In the first half of 2020, the Company convened 98,000 meetings through its own internet-based video platform, with an accumulated time duration of over 12 million minutes.

 

 

27


Targeted poverty alleviation

Targeted poverty alleviation plan

During the Reporting Period, the Company upheld a strong sense of social responsibility, surmounted the impacts of the COVID-19 pandemic, actively fulfilled its social responsibilities, and leveraged advantages of insurance protection function to fully support poverty alleviation, so as to make contributions to the battle against poverty.

Summary of targeted poverty alleviation activities during the Reporting Period

During the Reporting Period, the Company shouldered its social responsibilities by stepping up its efforts in poverty alleviation and actively playing the due role of insurance protection. It pushed forward the poverty alleviation projects for deeply impoverished areas such as the “Three Regions and Three Prefectures” for the purposes of resolving the difficulties in selling agricultural products of poverty-stricken areas and carrying out poverty alleviation in full swing. As at the end of the Reporting Period, the branches of the Company at all levels actively offered assistance to 1,364 poverty alleviation points and three impoverished villages supervised by the PRC government, with a view to contributing China Life’s strength to the battle against poverty.

The Company actively performed its obligation to offer assistance in poverty alleviation and pushed forward donation projects for poverty alleviation in deeply impoverished areas such as the “Three Regions and Three Prefectures”. It planned to make a charitable donation of RMB20 million, with an aim to ensure the implementation of 114 key poverty alleviation projects in 80 poverty alleviation points. In the first half of 2020, the Company motivated the employees of China Life to purchase agricultural products with a total amount of RMB27,045,200 from poverty alleviation points and the deeply impoverished areas such as the “Three Regions and Three Prefectures”, which assisted the peasant households in poverty-stricken areas to resolve the difficulties in selling agricultural products. During the period of pandemic prevention and control, the Company showed care and concern about the health of impoverished people and cadres for poverty alleviation and donated 100,000 insurance policies and pandemic prevention equipment and supplies worth RMB382,000 to them.

 

 

28


Achievements of targeted poverty alleviation activities during the Reporting Period

 

Indicators

  

Data and Details

I.

    Overall situation      
    Including: 1.      Funds (the insurance claims payment    RMB1,949 million
     related to the poverty alleviation)Note      
    2.      Funds (contribution to the targeted poverty    RMB55.27 million
     alleviation areas (including the contribution      
     from e-commerce consumption)      
     + contribution to poverty-stricken students)      
    3.      Materials (contribution to the targeted    RMB3.80 million
     poverty alleviation areas + contribution      
     to education resources in poverty-stricken areas)      
    4.      Number of beneficiaries in recorded    22,144
     poverty-stricken families (person)      
          

II.

    Contributions breakdown      
   

1. Poverty alleviation by industrial development

     
    Including:     

1.1 Type of industrial poverty alleviation

   Ö    Poverty alleviation through agricultural and forestry
    

projects

      industry
        Ö    Poverty alleviation through tourism
        Ö    Poverty alleviation through e-commerce
           Poverty alleviation through asset incomes
        Ö    Poverty alleviation through technology
           Others
    

1.2 Number of industrial poverty

   212
    

alleviation projects (unit)

     
    

1.3 Contribution to industrial poverty

   RMB6.63 million
    

alleviation projects

  
    

1.4. Number of beneficiaries in recorded

   11,531
    

poverty-stricken families (person)

     
   

2. Poverty alleviation by transfer of employment

     
    Including:     

2.1 Contribution to training courses on

   RMB0.17 million
    

occupational skills

     
    

2.2 Number of persons receiving training

   1,621
    

courses on occupational skills (person/time)

     
    

2.3 Number of beneficiaries getting jobs

   932
    

in recorded poverty-stricken families

  
    

(person)

     
   

3. Poverty transfer by relocation

     
    Including:     

3.1 Number of relocated beneficiaries

     
    

getting jobs (person)

   198
   

4. Poverty alleviation by education

     
    Including:   

4.1 Contribution to subsidize poverty-

   RMB1.33 million
    

stricken students

     
    

4.2 Number of poverty-stricken students

   1,167
    

who received subsidies (person)

     
    

4.3 Contribution to improve education

   RMB1.58 million
    

resources in poverty-stricken areas

     
   

5. Poverty alleviation by healthcare

     
    Including:     

5.1 Contribution to medical and health

   RMB0.13 million
    

resources in poverty-stricken areas

     

 

29


Indicators

  

Data and Details

6.

  Poverty alleviation by ecological protection      
  Including:   

6.1  Project name

      Conduct ecological protection and construction
        Ö    Establish compensation method for ecological protection
           Set up non-profit positions for ecology
                 Others
    

6.2  Amount of contribution

   RMB0.03 million

7.

  Basic guarantee      
  Including:   

7.1  Contribution to help left behind children, women and the elderly

   RMB0.28 million
    

7.2  Number of left behind children, women and the elderly helped (person)

   95
    

7.3  Contribution to help physically disabled people in poverty

   RMB0.13 million
    

7.4  Number of physically disabled people in poverty helped (person)

   259

8.

  Social poverty alleviation      
  Including:   

8.1  Contribution to poverty alleviation cooperation between the east and west

   RMB0.60 million
    

8.2  Contribution to targeted poverty alleviation work

   RMB7.03 million
    

8.3  Poverty alleviation charity fund

   RMB1.32 million

9.

  Other projects      
 

Including:

  

9.1.  Number of projects (unit)

   134
    

9.2.  Amount of contribution

   RMB39.84 million
    

9.3.  Number of beneficiaries in recorded poverty-stricken families (person)

   8,114
    

9.4.  Description of other projects

  

 

Note:    Including the claims payment of RMB564 million for poverty alleviation from the group insurance channel, claims payment of RMB1,235 million for poverty alleviation from the supplementary major medical expenses insurance business, and claims payment of RMB150 million from the targeted poverty alleviation product, namely the “Well-being Insurance” series.

 

Progressive achievements in performing the social responsibilities of targeted poverty alleviation

In the first half of 2020, the Company further stepped up its efforts in promoting poverty alleviation insurance to expand its scope of beneficiaries covered. In the first half of 2020, the claims payment for poverty alleviation insurance business amounted to approximately RMB1,949 million. With the commitment to constantly developing insurance products for poverty alleviation, the Company developed three exclusive poverty alleviation insurance products including the “China Life Group Comprehensive Accidental Injury Insurance for Impoverished People in the Three Regions and Three Prefectures”, the “China Life Group Term Life Insurance for Cadres for Poverty Alleviation” and the “China Life Group Comprehensive Accidental Injury Insurance for Cadres for Poverty Alleviation” with people in the deeply impoverished areas such as the “Three Regions and Three Prefectures” and cadres for poverty alleviation as the targets, thus offering China Life’s proposals for and injecting China Life’s wisdom into poverty alleviation.

Subsequent targeted poverty alleviation plans

The Company will concentrate on the principal business of insurance, actively promote the “Poverty Alleviation Insurance” series, focus on the deeply impoverished areas such as the “Three Regions and Three Prefectures”, and expand the protection coverage of poverty alleviation insurance. The Company will consistently and vigorously carry out supplementary major medical expenses insurance and medical insurance administration to promote poverty alleviation by healthcare, with a view to enhancing the risk-resistant ability of impoverished people in a practical manner. The Company will accomplish its mission to make due contributions to the poverty alleviation and the establishment of a well-off society.

 

 

30


FUTURE PROSPECT

Industry Landscape and Development Trends

With the current economic downturn around the world and the global market contraction, instabilities and uncertainties are growing and China’s economic operation is under greater pressure. Despite the above circumstances, China’s long-term positive economic fundamentals remain unchanged and the economic operation shows trends of restorative growth and steady recovery, which will continue to provide a healthy and favourable external environment for the development of the insurance industry. The rollout of a series of measures by insurance regulatory authorities has offered support to the pandemic prevention and control as well as economic and social development, prevented and mitigated financial risks, and deepened the reform and opening-up of the financial sector, thus helping promote the steady development of the insurance industry and achieve the goal of high- quality development. The COVID-19 pandemic strengthened the public’s awareness of social risks and insurance and deepened their recognition of insurance functions, which promoted the public’s demands for insurance protection. The pandemic also facilitated the transformation to new business models, enhanced the application of technologies in insurance sales, management and services, and accelerated the online operation of insurance companies and online customer migration. As a result, new insurance concepts and insurance purchase models will gradually emerge, and the insurance industry will further accelerate digital transformation.

Development Strategies and Business Plans of the Company

For the second half of 2020, the Company will take high-quality development as its fundamental requirement, fulfill the strategic core of “Dual Centers and Dual Focuses”, and uphold the operational guideline of “prioritizing business value, strengthening sales force, achieving stable growth, upgrading technology, optimizing services, and guarding against risks”. The Company will make progress while maintaining stability, improve quality and efficiency, push forward transformation and upgrade, and strengthen business value creation. It will also facilitate the development of sales force in a healthy and efficient manner, push forward reform and innovation in great depth, strengthen technological and service empowerment, firmly maintain the bottom line of risk

management and control, accelerate the modernization of corporate governance, and promote “China Life Revitalization” to a new stage, so as to lay a solid foundation for building a world-class life insurance company.

Potential Risks

We are currently witnessing rising protectionism, sagging world economy and global market contraction, and China is going through a critical stage in transforming the development model of its economy, optimizing economic structure and switching the driving force for growth. With a positive outlook of its economic development, China is also facing difficulties and challenges arising from the intert wining of structural, institutional and cyclical problems. Coupled with the impact of the COVID-19 pandemic, China’s economic operation is under greater pressure. The long-term and profound impacts of the pandemic on domestic economy and society remain to be seen. On one hand, people tend to be more prudent in spending and it is probable that the precautionary demand of potential customers for cash will increase. As a result, the development of savings-oriented insurance business will come under pressure in short term. On the other hand, with the long-term downward trend of market interest rates and greater volatility in the capital market, the credit risk will be increasingly severe.

The Company has taken a variety of measures, such as diversifying its product mix and optimizing insurance services, to satisfy the demands of customers. Moreover, the Company has paid close attention to the macro-economic development, enhanced asset-liability management and flexibly adjusted asset allocation for the purpose of stabilizing investment returns. The Company will continue to stay alert and actively respond to any impacts associated with the regular pandemic control, enhance its analysis on complex risk factors, ensure its steady and healthy operation and strive to push forward its high-quality development.

The Company expects that it will have sufficient capital to meet its insurance business expenditures and new general investment needs in the second half of 2020. At the same time, the Company will make corresponding financing arrangements based on capital market conditions to further implement its future business development strategies.

 

 

31


LOGO

 

BACKGROUND

China Life Insurance Company Limited prepares financial statements to public investors in accordance with the relevant accounting standards. An alternative measure of the value and profitability of a life insurance company can be provided by the embedded value method. Embedded value is an actuarially determined estimate of the economic value of the life insurance business of an insurance company based on a particular set of assumptions about future experience, excluding the economic value of future new business. In addition, the value of half year’s sales represents an actuarially determined estimate of the economic value arising from new life insurance business issued in half year based on a particular set of assumptions about future experience.

China Life Insurance Company Limited believes that reporting the Company’s embedded value and value of half year’s sales provides useful information to investors in two respects. First, the value of the Company’s in-force business represents the total amount of shareholders’ interest in distributable earnings, in present value terms, which can be expected to emerge over time, in accordance with the assumptions used. Second, the value of half year’s sales provides an indication of the value created for investors by new business activity based on the assumptions used and hence the potential of the business.

However, the information on embedded value and value of half year’s sales should not be viewed as a substitute of financial measures under the relevant accounting basis. Investors should not make investment decisions based solely on embedded value information and the value of half year’s sales.

It is important to note that actuarial standards with respect to the calculation of embedded value are still evolving. There is still no universal standard which defines the form, calculation methodology or presentation format of the embedded value of an insurance company. Hence, differences in definition, methodology, assumptions, accounting basis and disclosures may cause inconsistency when comparing the results of different companies.

Also, the calculation of embedded value and value of half year’s sales involves substantial technical complexity and estimates can vary materially as key assumptions are changed. Therefore, special care is advised when interpreting embedded value results.

The values shown below do not consider the future financial impact of transactions between the Company and CLIC, CLI, AMC, Pension Company, CLP&C, and etc.

 

 

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DEFINITIONS OF EMBEDDED VALUE AND VALUE OF HALF YEAR’S SALES

The embedded value of a life insurer is defined as the sum of the adjusted net worth and the value of in-force business allowing for the cost of required capital. “Adjusted net worth” is equal to the sum of:

 

  Net assets, defined as assets less corresponding policy liabilities and other liabilities valued; and

 

  Net-of-tax adjustments for relevant differences between the market value and the book value of assets, together with relevant net-of-tax adjustments to certain liabilities.

The market value of assets can fluctuate significantly over time due to the impact of the prevailing market environment. Hence the adjusted net worth can fluctuate significantly between valuation dates.

The “value of in-force business” and the “value of half year’s sales” are defined here as the discounted value of the projected stream of future shareholders’ interest in distributable earnings for existing in-force business at the valuation date and for half year’s sales in the 6 months immediately preceding the valuation date.

The value of in-force business and the value of half year’s sales have been determined using a traditional deterministic discounted cash flow methodology. This methodology makes implicit allowance for the cost of investment guarantees and policyholder options, asset/ liability mismatch risk, credit risk, the risk of operating experience’s fluctuation and the economic cost of capital through the use of a risk-adjusted discount rate.

PREPARATION AND REVIEW

The embedded value and the value of half year’s sales were prepared by China Life Insurance Company Limited in accordance with the “CAA Standards of Actuarial Practice: Appraisal of Embedded Value” issued by the China Association of Actuaries (“CAA”) in November 2016. Willis Towers Watson, an international firm of consultants, performed a review of China Life’s embedded value. The review statement from Willis Towers Watson is contained in the “Willis Towers Watson’s review opinion report on embedded value” section.

ASSUMPTIONS

The valuation assumptions used as at 30 June 2020 are consistent with those used as at 31 December 2019.

 

 

SUMMARY OF RESULTS

The embedded value as at 30 June 2020 and the corresponding results as at 31 December 2019 are shown below:

 

Components of Embedded Value           RMB million  

ITEM

        30 June
2020
     31 December
2019
 

A

  

Adjusted Net Worth

     520,153        482,793  

B

  

Value of In-Force Business before Cost of Required Capital

     552,486        509,515  

C

  

Cost of Required Capital

     (56,782      (50,220

D

  

Value of In-Force Business after Cost of Required Capital (B + C)

     495,704        459,295  

E

  

Embedded Value (A + D)

     1,015,856        942,087  

 

Note:   Numbers may not be additive due to rounding.

 

33


SUMMARY OF RESULTS (continued)

The value of half year’s sales for the 6 months ended 30 June 2020 and for the corresponding period of last year are shown below:

 

Components of Value of Half Year’s Sales           RMB million  

ITEM

        30 June
2020
     30 June
2019
 

A

  

Value of Half Year’s Sales before Cost of Required Capital

     41,481        39,361  

B

  

Cost of Required Capital

     (4,592      (4,792

C

  

Value of Half Year’s Sales after Cost of Required Capital (A + B)

     36,889        34,569  
  

Including: Value of Half Year’s Sales of Individual Agent Business Sector

     36,559        33,333  

 

Note:    The corresponding results of individual agent business sector for the first half of 2019 have been restated to allow for new sector definitions on a pro forma basis.

The new business margin of half year’s sales of individual agent business sector for the 6 months ended 30 June 2020 are shown below:

 

New Business Margin of Half Year’s Sales of Individual Agent Business Sector             
     30 June
2020
    30 June
2019
 

By First Year Premium

     39.3     39.7

By Annual Premium Equivalent

     39.3     39.7

 

Note 1:

Note 2:

  

First Year Premium is the written premium used for calculation of the value of half year’s sales and Annual Premium Equivalent is calculated as the sum of 100 percent of first year regular premiums and 10 percent of single premiums.

The corresponding results of individual agent business sector for the first half of 2019 have been restated to allow for new sector definitions on a pro forma basis.

 

34


MOVEMENT ANALYSIS

 

The following analysis tracks the movement of the embedded value from the start to the end of the Reporting Period:

 

Analysis of Embedded Value Movement in the First Half of 2020    RMB million  

ITEM

      

A Embedded Value at the Start of Year

     942,087  

B Expected Return on Embedded Value

     39,724  

C Value of New Business in the Period

     36,889  

D Operating Experience Variance

     3,626  

E Investment Experience Variance

     3,463  

F Methodology and Model Changes

     (240

G Market Value and Other Adjustments

     8,666  

H Exchange Gains or Losses

     110  

I Shareholder Dividend Distribution and Capital Injection

     (20,834

J Other

     2,366  

K Embedded Value as at 30 June 2020 (sum A through J)

     1,015,856  

 

Notes: 1)  Numbers may not be additive due to rounding.

           2)  Items B through J are explained below:

 

  B

Reflects expected impact of covered business, and the expected return on investments supporting the 2020 opening net worth.

  C

Value of half year’s sales for the 6 months ended 30 June 2020.

  D

Reflects the difference between actual operating experience in the first half of 2020 (including mortality, morbidity, lapse, and expenses etc.) and the assumptions.

  E

Compares actual with expected investment returns during the first half of 2020.

  F

Reflects the effects of appraisal methodology and model enhancement.

  G

Change in the market value adjustment from the beginning of year 2020 to 30 June 2020 and other adjustments.

  H

Reflects the gains or losses due to changes in exchange rate.

  I

Reflects dividends distributed to shareholders during the first half of 2020.

  J

Other miscellaneous items.

 

35


SENSITIVITY RESULTS

 

Sensitivity tests were performed using a range of alternative assumptions. In each of the sensitivity tests, only the assumption referred to was changed, with all other assumptions remaining unchanged. The results are summarized below:

 

Sensitivity Results      RMB million  
     Value of In-Force
Business after Cost of
Required Capital
     Value of Half year’s
Sales after Cost of
Required Capital
 

Base case scenario

     495,704        36,889  

1. Risk discount rate +50bps

     473,640        35,119  

2. Risk discount rate -50bps

     519,404        38,798  

3. Investment return +50bps

     585,753        43,575  

4. Investment return -50bps

     406,018        30,206  

5. 10% increase in expenses

     489,289        34,701  

6. 10% decrease in expenses

     502,119        39,076  

7. 10% increase in mortality rate for non-annuity products and 10% decrease in mortality rate for annuity products

     492,274        36,372  

8. 10% decrease in mortality rate for non-annuity products and 10% increase in mortality rate for annuity products

     499,134        37,407  

9. 10% increase in lapse rates

     494,732        35,920  

10. 10% decrease in lapse rates

     496,629        37,897  

11. 10% increase in morbidity rates

     488,793        35,685  

12. 10% decrease in morbidity rates

     502,772        38,095  

13. Allowing for diversification in calculation of VIF

     532,917        –    

 

36


WILLIS TOWERS WATSON’S REVIEW OPINION REPORT ON EMBEDDED VALUE

To The Directors of China Life Insurance Company Limited

China Life Insurance Company Limited (“China Life”) has prepared embedded value results as at 30 June 2020 (“EV Results”). The disclosure of these EV Results, together with a description of the methodology and assumptions that have been used, are shown in the Embedded Value section.

China Life has engaged Towers Watson Management Consulting (Shenzhen) Co. Ltd. Beijing Branch (“Willis Towers Watson”) to review its EV Results. This report is addressed solely to China Life in accordance with the terms of our engagement letter, and sets out the scope of our work and our conclusions. To the fullest extent permitted by applicable law, we do not accept or assume any responsibility, duty of care or liability to anyone other than China Life for or in connection with our review work, the opinions we have formed, or for any statement set forth in this report.

Scope of Work

Our scope of work covered:

 

 

a review of the methodology used to develop the embedded value and value of half year’s sales as at 30 June 2020, in accordance with the “CAA Standards of Actuarial Practice: Appraisal of Embedded Value” issued by the China Association of Actuaries (“CAA”);

 

 

a review of the economic and operating assumptions used to develop the embedded value and value of half year’s sales as at 30 June 2020; and

 

 

a review of the results of China Life’s calculation of the EV Results.

In carrying out our review, we have relied on the accuracy of audited and unaudited data and information provided by China Life.

Opinion

Based on the scope of work above, we have concluded that:

 

 

the embedded value methodology used by China Life is in accordance with the “CAA Standards of Actuarial Practice: Appraisal of Embedded Value” issued by the CAA;

 

 

the economic assumptions used by China Life are internally consistent, have been set with regard to current economic conditions, and have made allowance for the company’s current and expected future asset mix and investment strategy;

 

 

the operating assumptions used by China Life have been set with appropriate regard to past, current and expected future experience; and

 

 

the EV Results have been prepared, in all material respects, in accordance with the methodology and assumptions set out in the Embedded Value section.

For and on behalf of Willis Towers Watson Lingde Hong

26 August 2020

 

37


LOGO

 

MATERIAL LITIGATIONS OR ARBITRATIONS

During the Reporting Period, the Company was not involved in any material litigation or arbitration.

MAJOR CONNECTED TRANSACTIONS

Continuing Connected Transactions

During the Reporting Period, the following continuing connected transactions were carried out by the Company pursuant to Rule 14A.76(2) of the Rules Governing the Listing of Securities on the HKSE (the “Listing Rules”), including the policy management agreement between the Company and CLIC, the asset management agreement between the Company and AMC, the insurance sales framework agreement between the Company and CLP&C, the framework agreements entered into by CLWM with CLIC, CLP&C, CLI, Pension Company and China Life E-commerce Company Limited (“CLEC”), respectively, the framework agreement between the Company and Chongqing International Trust Inc. (“Chongqing Trust”), and the framework agreement between the

Company and China Life Capital. These continuing connected transactions were subject to the reporting, announcement and annual review requirements but were exempt from the independent shareholders’ approval requirement under the Listing Rules. CLIC, the controlling shareholder of the Company, holds 60% of the equity interest in CLP&C and 100% of the equity interest in each of CLI, CLEC and China Life Capital. Therefore, each of CLIC, CLP&C, CLI, CLEC and China Life Capital constitutes a connected person of the Company. AMC is held as to 60% and 40% by the Company and CLIC, respectively, and is therefore a connected subsidiary of the Company. CLWM is a subsidiary of AMC, and is therefore also a connected subsidiary of the Company. Chongqing Trust is an associate of CLIC and CLP&C by virtue of its acting as the trustee of a trust scheme of which CLP&C is a beneficiary, and is therefore also a connected person of the Company pursuant to Rule 14A.13(2) of the Listing Rules.

 

 

38


During the Reporting Period, the continuing connected transactions carried out by the Company that were subject to the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules included the framework agreements entered into by AMP with the Company, CLIC, CLP&C and CLI, respectively, and the asset management agreement for alternative investments between the Company and CLI. Such agreements and the transactions thereunder have been approved by the independent shareholders of the Company. AMP is a subsidiary of AMC, and is therefore a connected subsidiary of the Company.

During the Reporting Period, the Company also carried out certain continuing connected transactions, including the asset management agreement between CLIC and AMC, and the framework agreement between the Comp any and CLWM, which were exempt from the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The Company has complied with the disclosure requirements under Chapter 14A of the Listing Rules in respect of the above continuing connected transactions. When conducting the above continuing connected transactions during the Reporting Period, the Company has followed the pricing policies and guidelines formulated at the time when such transactions were entered into.

Policy Management Agreement

The Company and CLIC entered into the 2018 policy management agreement on 26 December 2017, with a term from 1 January 2018 to 31 December 2020. Pursuant to the agreement, the Company will continue to accept CLIC’s entrustment to provide policy administration services relating to the non-transferred policies. For details as to the method of calculation of the service fee, please refer to Note 18 in the Notes to the Interim Condensed Consolidated Financial Statements. The annual cap for the three years ending 31 December 2020 is RMB708 million.

For the first half of 2020, the service fee paid by CLIC to the Company amounted to RMB281.48 million.

Asset Management Agreements

Asset Management Agreement between the Company and AMC

The Company and AMC entered into the 2019-2021 asset management agreement on 28 December 2018, with a term from 1 January 2019 to 31 December 2021. In order to optimize the structure of service fees and further enhance the performance incentives for AMC, the Company and AMC entered into the 2020-2022 asset management agreement on 1 July 2020 to replace the 2019-2021 asset management agreement, and to revise the annual caps in light of the needs for business development and the revised structure of service fees. Pursuant to the 2020-2022 asset management agreement, AMC agreed to invest and manage assets entrusted to it by the Company, on a discretionary basis, within the scope granted by the Company and in accordance with the requirements of applicable laws and regulations, regulatory requirements and the investment guidelines given by the Company. In consideration of AMC’s services in respect of investing and managing various categories of assets entrusted to it by the Company under the agreement, the Company agreed to pay AMC a service fee. For details as to the method of calculation of the service fee for the first half of 2020, please refer to Note 18 in the Notes to the Interim Condensed Consolidated Financial Statements. The annual caps for the three years ending 31 December 2022 are RMB3,000 million, RMB4,000 million and RMB5,000 million, respectively.

For the first half of 2020, the Company paid AMC a service fee of RMB872.65 million.

Asset Management Agreement between CLIC and AMC

CLIC and AMC entered into the 2019-2021 asset management agreement on 29 December 2018, with an entrustment term from 1 January 2019 to 31 December 2021. In order to optimize the structure of service fees and further enhance the performance incentives for AMC, CLIC and AMC entered into the 2020-2022 asset management agreement on 1 July 2020 to replace the 2019-2021 asset management agreement, and to revise the annual caps in light of the needs for business development and the revised

 

 

39


structure of service fees. Pursuant to the 2020–2022 asset management agreement, AMC agreed to invest and manage assets entrusted to it by CLIC, on a discretionary basis, subject to the investment guidelines and instructions given by CLIC. In consideration of AMC’s services in respect of investing and managing assets entrusted to it by CLIC under the agreement, CLIC agreed to pay AMC a service fee. For details as to the method of calculation of the service fee for the first half of 2020, please refer to Note 18 in the Notes to the Interim Condensed Consolidated Financial Statements. The annual cap for the three years ending 31 December 2022 is RMB500 million.

For the first half of 2020, CLIC paid AMC a service fee of RMB44.51 million.

Asset Management Agreement for Alternative Investments between the Company and CLI

As approved by the 2017 Annual General Meeting of the Company, the Company and CLI entered into the 2019 asset management agreement for alternative investments on 31 December 2018. Such agreement took effect from 1 January 2019, with a term of two years until 31 December 2020. Unless a party serves the other party a written notice for non-renewal prior to 90 working days before the expiry date of the agreement, the agreement will be automatically renewed for one year from the expiry date thereof. Pursuant to the agreement, CLI agreed to invest and manage assets entrusted to it by the Company (including equity, real estate, related financial products and quasi-securitization

financial products), on a discretionary basis, within the scope of utilization of insurance funds as specified by regulatory authorities and in accordance with the requirements of applicable laws and regulations and the investment guidelines given by the Company, and the Company agreed to pay CLI the investment management service fee, floating management fee, performance-based bonus and real estate operation management fee in respect of the investment and management services provided by CLI to the Company. For details as to the method of calculation of the investment management service fee, floating management fee, performance-based bonus and real estate operation management fee, please refer to Note 18 in the Notes to the Interim Condensed Consolidated Financial Statements. In addition, the assets entrusted by the Company to CLI will also be partially used for the subscription of the related financial products established and issued by CLI or of which CLI has participated in the establishment and issuance, and such related financial products will be limited to infrastructure investment schemes and project asset-backed schemes.

For the three years ending 31 December 2021, the annual caps on the contractual amount of assets newly entrusted by the Company to CLI for investment and management, as well as the annual caps on the amount of the investment management service fee, floating management fee, performance-based bonus and real estate operation management service fee payable by the Company to CLI are as follows:

 

 

    

Amount of Assets Newly
Entrusted for Investment and
Management during the Period
(including the Amount for
Subscription of the Related
Financial Products)
(RMB million or its
equivalent in foreign currency)

   Amount of the Investment
Management Service Fee,
Floating Management Fee,
Performance-based Bonus
and Real Estate Operation
Management Service Fee
(RMB million or its
equivalent in foreign currency)
 

For the year ended
31 December 2019

   200,000
(including the amount for the subscription of the related financial products: 100,000)
     1,391  

For the year ending
31 December 2020

   200,000
(including the amount for the subscription of the related financial products: 100,000)
     1,982  

For the year ending
31 December 2021

   200,000
(including the amount for the subscription of the related financial products: 100,000)
     2,266  

 

40


For the first half of 2020, the investment management service fee, floating management fee, performance-based bonus and real estate operation management service fee paid by the Company to CLI amounted to RMB290.59 million, and the contractual amount of assets newly entrusted by the Company to CLI for investment and management was RMB3,562.07 million. For the first half of 2020, the amount for the subscription of the related financial products established and issued by CLI or of which CLI had participated in the establishment and issuance was RMB2,970.00 million.

Cooperation Framework Agreement for Investment Management with Insurance Funds between the Company and China Life Capital

The Company and China Life Capital entered into the 2020–2022 framework agreement on 31 December 2019, with a term from 1 January 2020 to 31 December 2022. Pursuant to the agreement, the Company will continue to subscribe in the capacity of the limited partner for the fund products of which China Life Capital or any of its subsidiaries serves (individually and jointly with third parties) as the general partner, and/or the fund products of which China Life Capital serves as the manager (including the fund manager and co-manager). For the three years ending 31 December 2022, the annual cap for the subscription by the Company in the capacity of the limited partner of the fund products of which China Life Capital or any of its subsidiaries serves as the general partner is RMB5,000 million, and the annual cap for the management fee charged by China Life Capital as the general partner or the manager of the fund products is RMB200 million.

For the first half of 2020, the amount of subscription by the Company in the capacity of the limited partner of the fund products of which China Life Capital or any of its subsidiaries serves as the general partner was RMB0 million, and the management fee charged by China Life Capital as the general partner or the manager of the fund products was RMB32.86 million.

Insurance Sales Framework Agreement

The Company and CLP&C entered into the 2018 insurance sales framework agreement on 31 January 2018, with a term of three years from 8 March 2018 to 7 March 2021. Pursuant to the agreement, CLP&C will continue to entrust the Company to act as an agent to sell selected insurance products within the authorized regions, and pay an agency service fee to the Company in consideration of the services provided. For details as to the method of calculation of the agency service fee, please refer to Note 18 in the Notes to the Interim Condensed Consolidated Financial Statements. The annual caps for the three years ending 31 December 2020 are RMB4,260 million, RMB5,540 million and RMB7,050 million, respectively.

For the first half of 2020, CLP&C paid the Company an agency service fee of RMB1,202.64 million.

Framework Agreements with AMP

Framework Agreement between the Company and AMP

As approved by the First Extraordinary General Meeting 2019 of the Company, the Company and AMP entered into the 2020-2022 framework agreement on 31 December 2019, with a term of three years from 1 January 2020 to 31 December 2022. Pursuant to the agreement, the Company and AMP will continue to conduct certain daily transactions, including the subscription and redemption of fund products, sales agency services, asset management for specific clients and other daily transactions permitted by laws and regulations. Pricing of the transactions under the agreement shall be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending 31 December 2022, the annual cap of the subscription price and corresponding subscription fee for the subscription of fund products is RMB72,600 million; the annual cap of the redemption price and corresponding redemption fee for the redemption of fund products is RMB72,600 million; the annual caps of the sales commission fee and client maintenance fee payable by AMP are RMB700 million, RMB800 million and RMB900 million, respectively; the annual caps of the management fee (including the performance-based fee) payable by the Company for the asset management for specific clients are RMB300 million, RMB400 million and RMB500 million, respectively; and the annual cap of the fees for other daily transactions is RMB100 million.

 

 

41


For the first half of 2020, the subscription price and corresponding subscription fee for the subscription of fund products were RMB599.50 million, the redemption price and corresponding redemption fee for the redemption of fund products were RMB1,370.35 million, the sales commission fee and client maintenance fee paid by AMP were RMB1.73 million, the management fee (including the performance-based fee) paid by the Company for the asset management for specific clients was RMB17.15 million, and the fees for other daily transactions were RMB1.37 million.

Framework Agreement between CLIC and AMP

As approved by the First Extra ordinary General Meeting 2019 of the Company, CLIC and AMP entered into the 2020-2022 framework agreement on 6 September 2019, with a term of three years from 1 January 2020 to 31 December 2022. Pursuant to the agreement, CLIC and AMP will continue to conduct certain daily transactions, including the subscription and redemption of fund products and private asset management. Pricing of the transactions under the agreement shall be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending 31 December 2022, the annual cap of the subscription price and corresponding subscription fee for the subscription of fund products is RMB10,000 million; the annual cap of the redemption price and corresponding redemption fee for the redemption of fund products is RMB10,000 million; and the annual cap of the management fee (including the performance-based fee) payable by CLIC for the private asset management is RMB100 million.

For the first half of 2020, the subscription price and corresponding subscription fee for the subscription of fund products were RMB700.00 million, the redemption price and corresponding redemption fee for the redemption of fund products were RMB1,300.57 million, and the management fee (including the performance-based fee) paid by CLIC for the private asset management was RMB12.32 million.

Framework Agreement between CLP&C and AMP

As approved by the First Extra ordinary General Meeting 2019 of the Company, CLP&C and AMP entered into the 2020-2022 framework agreement on 3 December 2019, with a term of three years from 1 January 2020 to 31 December 2022. Pursuant to the agreement, CLP&C and AMP will continue to conduct certain daily transactions, including the subscription and redemption of fund products, asset management for specific clients and other daily transactions permitted by laws and regulations. Pricing of the

transactions under the agreement shall be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending 31 December 2022, the annual cap of the subscription price for the fund products is RMB10,000 million; the annual cap of the redemption price for the fund products is RMB10,000 million; the annual cap of the subscription fee for the fund products is RMB100 million; the annual cap of the redemption fee for the fund products is RMB100 million; the annual cap of the management fee (including the performance-based fee) payable by CLP&C for the asset management for specific clients is RMB100 million; and the annual cap of the fees for other daily transactions is RMB100 million.

For the first half of 2020, the subscription price for the fund products was RMB0 million, the redemption price for the fund products was RMB0 million, the subscription fee for the fund products was RMB0 million, the redemption fee for the fund products was RMB0 million, the management fee (including the performance-based fee) paid by CLP&C for the asset management for specific clients was RMB2.55 million, and the fees for other daily transactions were RMB0.09 million.

Framework Agreement between CLI and AMP

As approved by the First Extraordinary General Meeting 2019 of the Company, CLI and AMP entered into the 2020-2022 framework agreement on 17 February 2020, with a term of three years from 1 January 2020 to 31 December 2022. Pursuant to the agreement, CLI and AMP will continue to conduct certain daily transactions, including the subscription and redemption of fund products, asset management for specific clients, advisory services and other daily transactions permit ted by laws and regulations. Pricing of the transactions under the agreement shall be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending 31 December 2022, the annual cap of the subscription price and corresponding subscription fee for the subscription of fund products is RMB10,000 million; the annual cap of the redemption price and corresponding redemption fee for the redemption of fund products is RMB10,000 million; the annual cap of the management fee (including the performance-based fee) payable by CLI and its subsidiaries for the asset management for specific clients is RMB150 million; the annual cap of the management fee (including the performance-based fee) payable by the subsidiaries of AMP for the asset management for specific clients is RMB150 million; the annual cap of the advisory fee payable by CLI and its subsidiaries for the advisory services is RMB150 million; the annual cap of the advisory fee payable by AMP and its subsidiaries for the advisory services is RMB150 million; and the annual cap of the fees for other daily transactions is RMB150 million.

 

 

 

42


For the first half of 2020, the subscription price and corresponding subscription fee for the subscription of fund products were RMB16.43 million, the redemption price and corresponding redemption fee for the redemption of fund products were RMB32.27 million, the management fee (including the performance-based fee) paid by CLI and its subsidiaries for the asset management for specific clients was RMB0 million, the management fee (including the performance-based fee) paid by the subsidiaries of AMP for the asset management for specific clients was RMB0 million; the advisory fee paid by CLI and its subsidiaries for the advisory services was RMB0 million; the advisory fee paid by AMP and its subsidiaries for the advisory services was RMB0 million, and the fees for other daily transactions were RMB0.24 million.

Framework Agreements with CLWM

Framework Agreement between the Company and CLWM

The Company and CLWM entered into the 2018-2020 framework agreement on 28 December 2017, pursuant to which the Company will continue to conduct certain transactions with CLWM during the period from 1 January 2018 to 31 December 2020, including the asset management services, the sales agency services for asset management products and other daily transactions permitted by laws and regulations. Pricing of the transactions under the agreement shall be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending 31 December 2020, the annual cap of the management fee payable by the Company for the asset management services is RMB240 million; the annual cap of fees in connection with the sales agency services payable by CLWM, including the sales commission fee, client maintenance fee, handling fee and intermediary fee, is RMB100 million; and the annual cap of the fees for other daily transactions is RMB100 million.

For the first half of 2020, the management fee paid by the Company for the asset management services was RMB3.60 million; the fees in connection with the sales agency services paid by CLWM, including the sales commission fee, client maintenance fee, handling fee and intermediary fee, were RMB0 million; and the fees for other daily transactions were RMB5.65 million.

Framework Agreement between CLIC and CLWM

CLIC and CLWM entered into the 2018-2020 framework agreement on 27 December 2017, pursuant to which CLIC will continue to conduct certain transactions with CLWM during the period from 1 January 2018 to 31 December 2020, including the asset management services and advisory services. Pricing of the transactions under the agreement shall be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending 31 December 2020, the annual caps of the management fee payable by CLIC for the asset management services are RMB50 million, RMB120 million and RMB180 million, respectively; and the annual caps of the advisory fee payable by CLIC for the advisory services are RMB50 million, RMB80 million and RMB120 million, respectively.

For the first half of 2020, the management fee paid by CLIC for the asset management services was RMB1.07 million, and the advisory fee paid by CLIC for the advisory services was RMB0.86 million.

Framework Agreement between CLP&C and CLWM

CLP&C and CLWM entered into the 2018–2020 frame work agreement on 29 December 2017, pursuant to which CLP&C will continue to conduct certain transactions with CLWM during the period from 1 January 2018 to 31 December 2020, including the asset management services, advisory services and other daily transactions permitted by laws and regulations. Pricing of the transactions under the agreement shall be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending 31 December 2020, the annual caps of the management fee payable by CLP&C for the asset management services are RMB50 million, RMB150 million and RMB240 million, respectively; the annual caps of the advisory fee payable by CLP&C for the advisory services are RMB40 million, RMB80 million and RMB120 million, respectively; and the annual caps of the fees for other daily transactions are RMB150 million, RMB400 million and RMB700 million, respectively.

For the first half of 2020, the management fee paid by CLP&C for the asset management services was RMB2.36 million, the advisory fee paid by CLP&C for the advisory services was RMB1.84 million, and the fees for other daily transactions were RMB0.01 million.

 

 

 

43


Framework Agreement between CLI and CLWM

CLI and CLWM entered into the 2018-2020 framework agreement on 20 December 2017, pursuant to which CLI will continue to conduct certain transactions with CLWM during the period from 1 January 2018 to 31 December 2020, including the asset management services, advisory services and other daily transactions permitted by laws and regulations. Pricing of the transactions under the agreement shall be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending 31 December 2020, the annual caps of the management fee for the asset management services are RMB40 million, RMB80 million and RMB120 million, respectively; the annual caps of the advisory fee for the advisory services are RMB40 million, RMB80 million and RMB120 million, respectively; and the annual caps of the fees for other daily transactions are RMB20 million, RMB80 million and RMB160 million, respectively.

For the first half of 2020, there was no relevant transaction between CLI and CLWM.

Framework Agreement between Pension Company and CLWM

Pension Company and CLWM entered into the 2018-2020 framework agreement on 26 March 2018, pursuant to which Pension Company will conduct certain transactions with CLWM during the period from 1 January 2018 to 31 December 2020, including the asset management services, advisory services and other daily transactions permitted by laws and regulations. Pricing of the transactions under the agreement shall be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending 31 December 2020, the annual caps of the management fee payable by Pension Company for the asset management services are RMB100 million, RMB150 million and RMB200 million, respectively; the annual caps of the advisory fee payable by Pension Company for the advisory services are RMB40 million, RMB80 million and RMB90 million, respectively; and the annual caps of the fees for other daily transactions are RMB90 million, RMB180 million and RMB270 million, respectively.

For the first half of 2020, there was no relevant transaction between Pension Company and CLWM.

Framework Agreement between CLEC and CLWM

CLEC and CLWM entered into the 2018–2020 framework agreement on 29 December 2017, pursuant to which CLEC will conduct certain transactions with CLWM during the period from 1 January 2018 to 31 December 2020, including the asset management services, advisory services and other daily transactions permitted by laws and regulations. Pricing of the transactions under the agreement shall be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending 31 December 2020, the annual caps of the management fee payable by CLEC for the asset management services are RMB5 million, RMB10 million and RMB15 million, respectively; the annual caps of the advisory fee payable by CLEC for the advisory services are RMB5 million, RMB10 million and RMB15 million, respectively; and the annual caps of the fees for other daily transactions are RMB200 million; RMB300 million and RMB400 million, respectively.

For the first half of 2020, there was no relevant transaction between CLEC and CLWM.

Framework Agreement between the Company and Chongqing Trust

The Company and Chongqing Trust entered into the 2020-2022 framework agreement on 27 December 2019, with a term of three years from 1 January 2020 to 31 December 2022. Pursuant to the agreement, the Company and Chongqing Trust will continue to conduct the subscription and redemption of trust products and other daily transactions permitted by laws and regulations. Pricing of the transactions under the agreement shall be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending 31 December 2022, the annual cap of the total amount of subscription and redemption of the trust products is RMB30,000 million; the annual cap of the trustee’s remuneration is RMB500 million; and the annual cap of the fees for other daily transactions is RMB100 million.

For the first half of 2020, the total amount of subscription and redemption of the trust products was RMB2,000.00 million, the trustee’s remuneration was RMB0.53 million, and the fees for other daily transactions were RMB0 million.

 

 

 

44


Other Major Connected Transaction

Formation of Partnership (Hebei Xiongan Baiyangdian Ecological and Environmental Protection Fund)

As approved at the sixteenth meeting of the sixth session of the Board of Directors, the Company and other investors (each as a limited partner) originally intended to enter into a partnership agreement with China Xiongan Group Fund Management Co., Ltd. and China Life Industrial Investment Management Co., Ltd. (“CLIIM”) (each as a general partner) by 31 December 2019 for the formation of Hebei Xiongan Baiyangdian Ecological and Environmental Protection Fund (Limited Partnership). The Company planned to contribute RMB3 billion to the partnership. China Life Capital would serve as the manager of the partnership. The partnership shall have a term of fifteen years. It shall invest in ecological and environmental protection projects in Baiyangdian watershed, covering water, solid waste treatment and other industries.

As there might be changes in the investors of the partnership and the size of the partnership might decrease, the parties were not able to enter into the partnership agreement by 31 December 2019 as originally planned. The Company will promptly make a further announcement in respect of the connected transaction when the terms of the partnership agreement are finalized by the parties.

Each of CLIIM and China Life Capital is a subsidiary of CLIC, and therefore a connected person of the Company. The transaction concerning the formation of partnership as described above constituted a connected transaction of the Company that was subject to the reporting and announcement requirements but was exempt from the independent shareholders’ approval requirement under Rule 14A.76(2) of the Listing Rules.

The Company has complied with the disclosure requirement under Chapter 14A of the Listing Rules in respect of the connected transaction concerning the formation of partnership as described above.

Statement on Claims, Debt Transactions and Guarantees of a Non-operating Nature with Related Parties

During the Reporting Period, the Company was not involved in claims, debt transactions or guarantees of a non-operating nature with related parties.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S SECURITIES

During the Reporting Period, the Company and its subsidiaries did not purchase, sell or redeem any of the Company’s listed securities.

MATERIAL CONTRACTS AND THEIR PERFORMANCE

During the Reporting Period, the Company neither acted as trustee, contractor or lessee of other companies’ assets, nor entrusted, contracted or leased its assets to other companies, the profit or loss from which accounted for 10% or more of the Company’s profits for the Reporting Period, nor were there any such matters that occurred in previous periods but subsisted during the Reporting Period.

The Company neither gave external guarantees nor provided guarantees to its non-wholly owned subsidiaries during the Reporting Period.

 

 

45


Entrusted wealth management during the Reporting Period or any wealth management occurred in previous periods but subsisted during the Reporting Period: Investment is one of the principal businesses of the Company. The Company has adopted the mode of entrusted investment for management of its investment assets, and established a diversified framework of entrusted investment management with China Life’s internal managers playing the key role and the external managers offering effective supports. The internal managers include AMC and its subsidiaries, CLI and its subsidiaries, and Pension Company. The external managers comprise both domestic and overseas managers, including fund companies, securities companies and other professional investment management institutions. The Company selected different investment managers based on the purpose of allocation of various types of investments, their risk features and the expertise of different managers, so as to establish a great variety of investment portfolios and improve the efficiency of capital utilization. The Company entered into entrusted investment management agreements with all managers and supervised the managers’ daily investment performance through the measures such as investment guidelines, asset entrustment and performance appraisals. The Company also adopted risk control measures in respect of specific investments based on the characteristics of different managers and investment products.

Except as otherwise disclosed in this report, the Company had no other material contracts during the Reporting Period.

H SHARE STOCK APPRECIATION RIGHTS

No H Share Stock Appreciation Rights of the Company were granted or exercised in the first half of 2020. The Company will deal with such rights and related matters in accordance with relevant PRC governmental policies.

UNDERTAKINGS OF THE COMPANY, SHAREHOLDERS, EFFECTIVE CONTROLLERS, ACQUIRERS, DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT OR OTHER RELATED PARTIES WHICH ARE EITHER GIVEN OR EFFECTIVE DURING THE REPORTING PERIOD

Prior to the listing of the Company’s A Shares (30 November 2006), land use rights were injected by CLIC into the Company during its reorganization. Out of these, four pieces of land (with a total area of 10,421.12 square meters) had not had its formalities in relation to the change of ownership completed. Further, out of the properties injected into the Company, there were six properties (with a gross floor area of 8,639.76 square meters) in respect of which the formalities in relation to the change of ownership had not been completed. CLIC undertook to complete the above-mentioned formalities within one year of the date of listing of the Company’s A Shares, and in the event that such formalities could not be completed within such period, CLIC would bear any potential losses to the Company due to the defective ownership.

CLIC strictly followed these commitments. As at the end of the Reporting Period, save for the two properties and related land of the Company’s Shenzhen Branch, the ownership registration formalities of which had not been completed due to historical reasons, all other formalities in relation to the change of land and property ownership had been completed. The Shenzhen Branch of the Company continues to use such properties and land, and no other parties have questioned or hindered the use of such properties and land by the Company.

 

 

46


The Company’s Shenzhen Branch and the other co-owners of the properties have issued a letter to the governing department of the original owner of the properties in respect of the confirmation of ownership of the properties, requesting it to report the ownership issue to the State-owned Assets Supervision and Administration Commission of the State Council (the “SASAC”), and requesting the SASAC to confirm the respective shares of each co-owner in the properties and to issue written documents in this regard to the department of land and resources of Shenzhen, so as to assist the Company and the other co-owners to complete the formalities in relation to the division of ownership of the properties.

Given that the change of ownership of the above two properties and related land use rights were directed by the co-owners, and all formalities in relation to the change of ownership were proceeded slowly due to reasons such as issues rooted in history and government approvals, CLIC, the controlling shareholder of the Company, made further commitment as follows: CLIC will assist the Company in completing, and urge the co-owners to complete, the formalities in relation to the change of ownership in respect of the above two properties and related land use rights as soon as possible. If the formalities cannot be completed due to the reasons of the co-owners, CLIC will take any other legally practicable measures to resolve the issue and will bear any potential losses suffered by the Company as a result of the defective ownership.

AUDITORS

A resolution was passed at the 2019 Annual General Meeting held on 29 June 2020 to engage Ernst & Young Hua Ming LLP as the PRC auditor and the auditor for US Form 20-F of the Company for the year 2020, and Ernst & Young as the Hong Kong auditor of the Company for the year 2020. The Company’s 2020 half-year financial statements prepared in accordance with the China Accounting Standards for Business Enterprises have been reviewed (not audited) by Ernst & Young Hua Ming LLP and the Company’s 2020 Interim Condensed Consolidated Financial Statements prepared in accordance with the International Financial Reporting Standards have been reviewed (not audited) by Ernst & Young.

RESTRICTION ON MAJOR ASSETS

The major assets of the Company are financial assets. During the Reporting Period, there was no major asset of the Company being seized, detained or frozen that is subject to the disclosure requirements.

OTHERS

In order to consistently implement the relevant arrangements under the “Notice of the State Council on Issuing the Implementation Plan for Transferring Part of State-owned Capital to Supplement Social Security Fund” (Guo Fa [2017] No. 49), the CBIRC has approved the one-off transfer by the Ministry of Finance of 10% of its equity interest in CLIC to the National Council for Social Security Fund (the “SSF”) (the “Gratuitous Transfer”) in accordance with the “Reply for the Approval of Change of Shareholder of China Life Insurance (Group) Company” (CBIRC’s Reply [2020] No. 63). Following completion of the Gratuitous Transfer, the Ministry of Finance and the SSF hold 90% and 10% equity interest in CLIC, respectively. CLIC is the controlling shareholder of the Company, and the Ministry of Finance is the effective controller of the Company. The Gratuitous Transfer would not result in any change of the controlling shareholder or effective controller of the Company. For further details, please refer to the announcements published by the Company on the website of the SSE (http://www.sse.com.cn) and the HKEx news website of Hong Kong Exchanges and Clearing Limited (http://www.hkexnews.hk).

 

 

47


LOGO

CORPORATE GOVERNANCE

In the first half of 2020, the Company adhered strictly to the regulatory requirements and listing rules of the jurisdictions where it is listed, and adopted effective measures to improve the efficiency of the Board of Directors, strengthen the communication with investors, standardize and upgrade the system and workflow of information disclosure, and increase the transparency of its business operations, so as to ensure that investors, especially small and medium investors, have an equal access to the Company’s information.

The shareholders’ general meetings, Board of Directors meetings and Board of Supervisors meetings of the Company have been functioning pursuant to their relevant procedural rules. As at 30 June 2020, the Board of Directors held five meetings, and the Board of Supervisors held two meetings.

As at the latest practicable date (26 August 2020), the Board of Directors held seven meetings, and the Board of Supervisors held three meetings. The announcements concerning the resolutions adopted at the above meetings were published on the China Securities Journal, Shanghai Securities News and Securities Times, as well as the website of the SSE, the HKExnews website of Hong Kong Exchanges and Clearing Limited and the website of the Company.

Shareholders’ general meetings convened during the Reporting Period are as follows:

The “Proposal in relation to the Investment by the Company in China Life Aged-care Industry Investment Fund” was considered and approved by a combination of on-site and online voting at the First Extraordinary General Meeting 2020 held in Beijing on 20 February 2020.

 

48


Eight proposals, including the “Proposal in relation to the Report of the Board of Directors of the Company for the Year 2019”, the “Proposal in relation to the Report of the Board of Supervisors of the Company for the Year 2019”, the “Proposal in relation to the Financial Report of the Company for the Year 2019”, the “Proposal in relation to the Profit Distribution Plan of the Company for the Year 2019”, the “Proposal in relation to the Remuneration of Directors and Supervisors of the Company”, the “Proposal in relation to the Election of Mr. Lam Chi Kuen as an Independent Director of the Sixth Session of the Board of Directors of the Company”, the “Proposal in relation to the

Remuneration of Auditors of the Company for the Year 2019 and the Appointment of Auditors of the Company for the Year 2020” and the “Proposal in relation to the General Mandate for the Issuance of H Shares by the Company”, were considered and approved by a combination of on-site and online voting, and the “Duty Report of the Independent Directors of the Board of Directors of the Company for the Year 2019” and the “Report on the Overall Status of Connected Transactions of the Company for the Year 2019” were received and reviewed at the 2019 Annual General Meeting held in Beijing on 29 June 2020.

 

 

Session of the meeting

  

Date of the meeting

  

Index for websites on which
resolutions were published

  

Date of publication of resolutions

First Extraordinary General Meeting 2020    20 February 2020    http://www.sse.com.cn http://www.hkexnews.hk    20 February 2020
      http://www.e-chinalife.com   
      http://www.sse.com.cn   

2019 Annual General Meeting

   29 June 2020    http://www.hkexnews.hk    29 June 2020
      http://www.e-chinalife.com   

 

The Company has applied the principles of the Corporate Governance Code and Corporate Governance Report (the “CG Code”) as set out in Appendix 14 to the Listing Rules, and has complied with all code provisions of the CG Code during the Reporting Period.

The Audit Committee of the Board of the Company has reviewed the 2020 Interim Report of the Company.

IMPLEMENTATION OF PROFIT DISTRIBUTION PLAN DURING THE REPORTING PERIOD

The Company will not declare any interim dividend of ordinary shares for the Reporting Period.

According to the Profit Distribution Plan of the Company for the Year 2019 approved at the 2019 Annual General Meeting held on 29 June 2020, with the appropriation to its discretionary surplus reserve fund of RMB5,857 million (10% of the net profit for the year 2019 under the China Accounting Standards for Business Enterprises), based on a total of 28,264,705,000 shares in issue, the Company has distributed a cash dividend of RMB0.73 per share (inclusive of tax) to all holders of ordinary shares of the Company, totaling approximately RMB20,633 million.

 

 

49


CHANGES IN ORDINARY SHARES AND SHAREHOLDERS INFORMATION

Changes in Share Capital

During the Reporting Period, there was no change in the total number of shares and the share capital of the Company.

Information on Shareholders

Total number of shareholders and their shareholdings

 

Total number of holders of ordinary shares as at the end of the Reporting Period    No. of holders of A Shares: 121,613
   No. of holders of H Shares : 26,997
Particulars of top ten shareholders of the Company   

 

Name of shareholder

   Nature of
shareholder
   Percentage of
shareholding
    Total number of
shares held as at
the end of the
Reporting Period
     Increase/decrease
during the
Reporting Period
     Number of shares
subject to selling
restrictions
     Unit: Shares
    
Number of shares
pledged or frozen
 

China Life Insurance (Group) Company

   State-owned legal person      68.37     19,323,530,000        0        –          –    

HKSCC Nominees Limited

   Overseas legal person      25.92     7,324,925,201        +1,234,498        –          –    

China Securities Finance Corporation Limited

   State-owned legal person      2.56     723,937,634        0        –          –    

Central Huijin Asset Management Limited

   State-owned legal person      0.42     119,719,900        0        –          –    

Hong Kong Securities Clearing Company Limited

   Overseas legal person      0.23     66,295,344        +11,645,180        –          –    

China Universal Asset Management Co., Ltd – Industrial and Commercial Bank of China Limited – China Universal – Tianfu Bull No. 53 Asset Management Plan

   Other      0.05     15,015,845        0        –          –    

China National Nuclear Corporation

   State-owned legal person      0.04     12,400,000        0        –          –    

Industrial and Commercial Bank of China Limited – SSE 50 Exchange Traded Index Securities Investment Fund

   Other      0.04     11,293,409        -1,512,714        –          –    

China International Television Corporation

   State-owned legal person      0.04     10,000,000        0        –          –    

Abu Dhabi Investment Authority

   Overseas legal person      0.03     9,174,546        -1,063,762        –          –    

 

   1.    HKSCC Nominees Limited is a company that holds shares on behalf of the clients of the Hong Kong stock brokers and other participants of the CCASS system. The relevant regulations of the HKSE do not require such persons to declare whether their shareholdings are pledged or frozen. Hence, HKSCC Nominees Limited is unable to calculate or provide the number of shares that are pledged or frozen.
Details of shareholders      
   2.    China Universal Asset Management Co., Ltd – Industrial and Commercial Bank of China Limited – China Universal – Tianfu Bull No. 53 Asset Management Plan has Industrial and Commercial Bank of China Limited as its asset trustee. Industrial and Commercial Bank of China Limited – SSE 50 Exchange Traded Index Securities Investment Fund has Industrial and Commercial Bank of China Limited as its fund depositary. Save as above, the Company was not aware of any connected relationship and concerted parties as defined by the “Measures for the Administration of the Takeover of Listed Companies” among the top ten shareholders of the Company.

 

50


Change in the Controlling Shareholder and the Effective Controller

During the Reporting Period, there was no change in the controlling shareholder and the effective controller of the Company.

Interests and Short Positions in the Shares and Underlying Shares of the Company Held by Substantial Shareholders and Other Persons Under Hong Kong Laws and Regulations

So far as is known to the Directors, Supervisors and the chief executive of the Company, as at 30 June 2020, the following persons (other than the Directors, Supervisors and the chief executive of the Company) had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO, or as otherwise notified to the Company and HKSE:

 

Name of substantial shareholder

  

Capacity

   Class of shares      Number of
shares held
    Percentage of
the respective
class of shares
    Percentage of
the total number
of shares in issue
 

China Life Insurance (Group) Company

  

Beneficial owner

     A Shares        19,323,530,000 (L)      92.80     68.37

BlackRock, Inc.(Note)

  

Interest in controlled corporation

     H Shares        665,162,100 (L)      8.94     2.35
           1,258,000 (S)      0.02     0.00

The letter “L” denotes a long position. The letter “S” denotes a short position.

 

(Note):

BlackRock, Inc. was interested in a total of 665,162,100 H shares in accordance with the provisions of Part XV of the SFO. Of these shares, BlackRock Investment Management, LLC, BlackRock Financial Management, Inc., BlackRock Institutional Trust Company, National Association, BlackRock Fund Advisors, BlackRock Advisors, LLC, BlackRock Japan Co., Ltd., BlackRock Asset Management Canada Limited, BlackRock Investment Management (Australia) Limited, BlackRock Asset Management North Asia Limited, BlackRock (Netherlands) B.V., BlackRock Advisors (UK) Limited, BlackRock International Limited, BlackRock Asset Management Ireland Limited, BLACKROCK (Luxembourg) S.A., BlackRock Investment Management (UK) Limited, BlackRock Asset Management Deutschland AG, BlackRock Fund Managers Limited, BlackRock Life Limited, BlackRock (Singapore) Limited, BlackRock Asset Management (Schweiz) AG and BlackRock Mexico Operadora were interested in 4,009,000 H shares, 11,683,000 H shares, 128,753,588 H shares, 170,077,000 H shares, 11,084,000 H shares, 59,183,499 H shares, 1,035,000 H shares, 4,309,000 H shares, 31,571,236 H shares, 1,163,000 H shares, 2,232,000 H shares, 1,254,000 H shares, 52,737,436 H shares, 85,914,000 H shares, 34,747,893 H shares, 494,000 H shares, 41,641,742 H shares, 20,453,741 H shares, 2,388,000 H shares, 54,000 H shares and 376,965 H shares, respectively. All of these entities are either controlled or indirectly controlled subsidiaries of BlackRock, Inc. Of these 665,162,100 H shares, 8,578,000 H shares were cash settled unlisted derivatives.

 

 

BlackRock, Inc. held by way of attribution a short position as defined under Part XV of the SFO in 1,258,000 H shares. Of these 1,258,000 H shares, 902,000 H shares were cash settled unlisted derivatives.

Save as disclosed above, the Directors, Supervisors and the chief executive of the Company are not aware of any other party who, as at 30 June 2020, had an interest or short position in the shares and underlying shares of the Company which was recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.

 

51


DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES

Change in Shares of the Company Held by Directors, Supervisors and Senior Management

During the Reporting Period, there was no change in shares of the Company held by Directors, Supervisors and senior management.

Change of Directors, Supervisors and Senior Management

After the election at the First Extraordinary General Meeting 2019 of the Company and upon the approval by the CBIRC Beijing Bureau, Mr. Zhao Peng served as an Executive Director of the sixth session of the Board of Directors and a member of the Strategy and Assets and Liabilities Management Committee of the Company from 20 February 2020. Due to the adjustment of work arrangements, Mr. Zhao Peng ceased to be an Executive Director of the sixth session of the Board of Directors and a member of the Strategy and Assets and Liabilities Management Committee of the Company from 23 April 2020. Mr. Lam Chi Kuen was elected as an Independent Director of the sixth session of the Board of Directors of the Company at the 2019 Annual General Meeting of the Company. The qualification of Mr. Lam Chi Kuen as a Director is still subject to the approval of the CBIRC Beijing Bureau.

After the election at the fourth extraordinary meeting of the second session of the employee representative meeting of the Company and upon the approval by the CBIRC Beijing Bureau, Ms. Wang Xiaoqing served as an Employee Representative Supervisor of the sixth session of the Board of Supervisors of the Company from 27 December 2019. Due to the adjustment of work arrangements, Mr. Song Ping ceased to be an Employee Representative Supervisor of the sixth session of the Board of Supervisors of the Company from 3 January 2020. Due to the adjustment of work arrangements, Mr. Luo Zhaohui ceased to be a Non-employee Representative Supervisor of the sixth session of the Board of Supervisors of the Company from 22 July 2020.

Due to the adjustment of work arrangements, Mr. Zhao Peng ceased to be the person in charge of finance of the Company from 23 April 2020. As considered by the twenty-fifth meeting of the sixth session of the Board of Directors of the Company and upon the approval by the CBIRC Beijing Bureau, Ms. Huang Xiumei served as the person in charge of finance of the Company from 20 May 2020.

Employees of the Company

As at 30 June 2020, the Company had 101,541 employees in total. There was no material change in the employee remuneration policy and training program when compared with the information disclosed in the annual report of the Company for 2019.

Disclosure of Interests of Directors, Supervisors and the Chief Executive in the Shares of the Company

As at 30 June 2020, none of the Directors, Supervisors and the chief executive of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) that were required to be recorded in the register of the Company required to be kept pursuant to Section 352 of the SFO or which had to be notified to the Company and the HKSE pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Listing Rules.

Compliance with the Code for Securities Transactions by Directors and Supervisors of the Company

The Board has established written guidelines on no less exacting terms than the Model Code for Directors and Supervisors of the Company in respect of their dealings in the securities of the Company. After making specific inquiries to all the Directors and Supervisors of the Company, they confirmed that they had complied with the Model Code and the Company’s own guidelines during the Reporting Period.

 

 

52


LOGO


Auditor’s Independent Review Report

 

LOGO

To the board of directors of China Life Insurance Company Limited

(Incorporated in the People’s Republic of China with limited liability)

INTRODUCTION

We have reviewed the interim condensed consolidated financial statements, set out on pages 55 to 103, which comprise the interim condensed consolidated statement of financial position of China Life Insurance Company Limited (the “Company”) and its subsidiaries (together, the “Group”) as at 30 June 2020 and the related interim condensed consolidated statements of comprehensive income, changes in equity and cash flows for the six-month period then ended, a summary of significant accounting policies and explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and International Accounting Standard 34 Interim Financial Reporting (“IAS 34”) issued by the International Accounting Standards Board. The directors of the Company are responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with IAS 34. Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review. Our report is made solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards, or accept liability to, any other person for the contents of this report.

SCOPE OF REVIEW

We conducted our review in accordance with International Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.

Ernst & Young

Certified Public Accountants

Hong Kong

26 August 2020

 

54


Interim Condensed Consolidated Statement of Financial Position

As at 30 June 2020

 

     Notes      Unaudited
As at
30 June

2020
RMB million
     Audited
As at 31
December
2019
RMB million
 
ASSETS         

Property, plant and equipment

        51,303        51,758  

Right-of-use assets

        3,291        3,520  

Investment properties

        13,450        12,141  

Investments in associates and joint ventures

     6        227,764        222,983  

Held-to-maturity securities

     7.1        1,001,314        928,751  

Loans

     7.2        651,388        608,920  

Term deposits

     7.3        536,256        535,260  

Statutory deposits – restricted

        6,333        6,333  

Available-for-sale securities

     7.4        1,052,029        1,058,957  

Securities at fair value through profit or loss

     7.5        150,399        141,608  

Derivative financial assets

     7.6        —          428  

Securities purchased under agreements to resell

        61,202        4,467  

Accrued investment income

        43,241        41,703  

Premiums receivable

        48,395        17,281  

Reinsurance assets

        5,273        5,161  

Other assets

        33,378        34,029  

Deferred tax assets

     14        128        128  

Cash and cash equivalents

        80,889        53,306  
     

 

 

    

 

 

 

Total assets

        3,966,033        3,726,734  
     

 

 

    

 

 

 

The notes on pages 61 to 103 form an integral part of the interim condensed consolidated financial statements.

 

55


Interim Condensed Consolidated Statement of Financial Position (continued)

As at 30 June 2020

 

     Notes      Unaudited
As at
30 June 2020
RMB million
     Audited As
at 31
December
2019
RMB million
 
LIABILITIES AND EQUITY         

Liabilities

        

Insurance contracts

     8        2,858,092        2,552,736  

Investment contracts

     9        284,882        267,804  

Policyholder dividends payable

        114,038        112,593  

Interest-bearing loans and borrowings

        20,361        20,045  

Lease liabilities

        2,960        3,091  

Bonds payable

        34,991        34,990  

Financial liabilities at fair value through profit or loss

        4,259        3,859  

Securities sold under agreements to repurchase

        48,127        118,088  

Annuity and other insurance balances payable

        54,774        51,019  

Premiums received in advance

        2,888        60,898  

Other liabilities

        107,377        81,114  

Deferred tax liabilities

     14        10,151        10,330  

Current income tax liabilities

        181        223  

Statutory insurance fund

        775        602  
     

 

 

    

 

 

 

Total liabilities

        3,543,856        3,317,392  
     

 

 

    

 

 

 

Equity

        

Share capital

     19        28,265        28,265  

Other equity instruments

     20        7,791        7,791  

Reserves

        205,598        197,221  

Retained earnings

        174,252        170,487  
     

 

 

    

 

 

 

Attributable to equity holders of the Company

        415,906        403,764  
     

 

 

    

 

 

 

Non-controlling interests

        6,271        5,578  
     

 

 

    

 

 

 

Total equity

        422,177        409,342  
     

 

 

    

 

 

 

Total liabilities and equity

        3,966,033        3,726,734  
     

 

 

    

 

 

 

Approved and authorised for issue by the board of directors on 26 August 2020.

 

Wang Bin

 

Su Hengxuan

Director

  Director

The notes on pages 61 to 103 form an integral part of the interim condensed consolidated financial statements.

 

56


Interim Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2020

 

           

Unaudited

For the six months

ended 30 June

 
            2020     2019  
     Notes      RMB million     RMB million  

REVENUES

       

Gross written premiums

        427,367       377,976  

Less: premiums ceded to reinsurers

        (3,113     (2,641
     

 

 

   

 

 

 

Net written premiums

        424,254       375,335  

Net change in unearned premium reserves

        (16,318     (14,038
     

 

 

   

 

 

 

Net premiums earned

        407,936       361,297  
     

 

 

   

 

 

 

Investment income

     10        72,706       66,345  

Net realised gains on financial assets

     11        10,807       3,786  

Net fair value gains through profit or loss

     12        8,606       13,107  

Other income

        4,376       3,686  
     

 

 

   

 

 

 

Total revenues

        504,431       448,221  
     

 

 

   

 

 

 

BENEFITS, CLAIMS AND EXPENSES

       

Insurance benefits and claims expenses

       

Life insurance death and other benefits

        (62,640     (83,821

Accident and health claims and claim adjustment expenses

        (24,311     (21,819

Increase in insurance contract liabilities

        (284,999     (224,409

Investment contract benefits

        (5,030     (4,617

Policyholder dividends resulting from participation in profits

        (14,507     (10,836

Underwriting and policy acquisition costs

        (56,518     (45,595

Finance costs

        (1,772     (1,930

Administrative expenses

        (17,047     (16,958

Statutory insurance fund contribution

        (803     (737

Other expenses

        (5,260     (4,271
     

 

 

   

 

 

 

Total benefits, claims and expenses

        (472,887     (414,993
     

 

 

   

 

 

 

Net gains on investments of associates and joint ventures

        4,020       5,665  

Including: share of profit of associates and joint ventures

        4,690       5,665  
     

 

 

   

 

 

 

Profit before income tax

     13        35,564       38,893  

Income tax

     14        (4,502     (964
     

 

 

   

 

 

 

Net profit

        31,062       37,929  
     

 

 

   

 

 

 

Attributable to:

       

– Equity holders of the Company

        30,535       37,599  

Non-controlling interests

        527       330  

Basic and diluted earnings per share

     15        RMB1.07       RMB1.32  

The notes on pages 61 to 103 form an integral part of the interim condensed consolidated financial statements.

 

57


Interim Condensed Consolidated Statement of Comprehensive Income (continued)

For the six months ended 30 June 2020

 

    

Unaudited

For the six months

ended 30 June

 
     2020     2019  
     RMB million     RMB million  

Other comprehensive income

    

Other comprehensive income that may be reclassified to profit or loss in subsequent periods:

    

Fair value gains/(losses) on available-for-sale securities

     11,865       42,263  

Amount transferred to net profit from other comprehensive income

     (10,835     (4,759

Portion of fair value changes on available-for-sale securities attributable to participating policyholders

     1,829       (11,144

Share of other comprehensive income of associates and joint ventures under the equity method

     18       378  

Exchange differences on translating foreign operations

     83       65  

Income tax relating to components of other comprehensive income

     (568     (6,586
  

 

 

   

 

 

 

Other comprehensive income that may be reclassified to profit or loss in subsequent periods

     2,392       20,217  
  

 

 

   

 

 

 

Other comprehensive income that will not be reclassified to profit or loss in subsequent periods:

    

Share of other comprehensive income of associates and joint ventures under the equity method

     (108     —    
  

 

 

   

 

 

 

Other comprehensive income for the period, net of tax

     2,284       20,217  
  

 

 

   

 

 

 

Total comprehensive income for the period, net of tax

     33,346       58,146  
  

 

 

   

 

 

 

Attributable to:

    

– Equity holders of the Company

     32,800       57,777  

Non-controlling interests

     546       369  

The notes on pages 61 to 103 form an integral part of the interim condensed consolidated financial statements.

 

58


Interim Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2020

 

     Unaudited  
     Attributable to equity holders of the Company     Non-
controlling
interests
RMB million
    Total
    
RMB million
 
     Share capital
RMB million
     Other equity
instruments

RMB million
     Reserves
RMB million
    Retained
earnings

RMB million
 

As at 1 January 2019

     28,265        7,791        149,309       130,117       4,919       320,401  

Net profit

     —          —          —         37,599       330       37,929  

Other comprehensive income

     —          —          20,178       —         39       20,217  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     —          —          20,178       37,599       369       58,146  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners

              

Appropriation to reserves

     —          —          1,354       (1,354     —         —    

Dividends paid

     —          —          —         (4,718     —         (4,718

Dividends to non-controlling interests

     —          —          —         —         (133     (133

Others

     —          —          (107     —         —         (107
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with owners

     —          —          1,247       (6,072     (133     (4,958
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

As at 30 June 2019

     28,265        7,791        170,734       161,644       5,155       373,589  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

As at 1 January 2020

     28,265        7,791        197,221       170,487       5,578       409,342  

Net profit

     —          —          —         30,535       527       31,062  

Other comprehensive income

     —          —          2,265       —         19       2,284  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     —          —          2,265       30,535       546       33,346  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners

              

Appropriation to reserves

     —          —          5,936       (5,936     —         —    

Dividends paid (Note 16)

     —          —          —         (20,834     —         (20,834

Dividends to non-controlling interests

     —          —          —         —         (161     (161

Others

     —          —          176       —         308       484  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with owners

     —          —          6,112       (26,770     147       (20,511
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

As at 30 June 2020

     28,265        7,791        205,598       174,252       6,271       422,177  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

The notes on pages 61 to 103 form an integral part of the interim condensed consolidated financial statements.

 

59


Interim Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2020

 

     Unaudited  
     For the six months  
     ended 30 June  
     2020     2019  
     RMB million     RMB million  

Net cash inflow from operating activities

     182,792       150,290  
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

    

Disposals and maturities

     305,627       360,314  

Purchases

     (394,808     (485,617

Investments in associates and joint ventures

     (2,319     (16,122

Decrease/(increase) in term deposits, net

     (972     2,815  

Decrease/(increase) in securities purchased under agreements to resell, net

     (57,015     6,688  

Interest received

     61,162       61,167  

Dividends received

     9,536       8,552  

Increase in policy loans, net

     (9,850     (13,705
  

 

 

   

 

 

 

Net cash outflow from investing activities

     (88,639     (75,908
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

    

Decrease in securities sold under agreements to repurchase, net

     (69,331     (101,645

Interest paid

     (2,568     (1,685

Repayment of borrowings

     (523     —    

Dividends paid to equity holders of the Company

     (201     (3,527

Dividends paid to non-controlling interests

     (161     (133

Proceeds from issue of bonds

     —         34,988  

Cash received from borrowings

     681       26  

Payment of principal portion of lease liabilities

     (670     (511

Capital injected into subsidiaries by non-controlling interests

     6,795       4,896  

Cash paid related to other financing activities

     (704     (346
  

 

 

   

 

 

 

Net cash outflow from financing activities

     (66,682     (67,937
  

 

 

   

 

 

 

Foreign exchange gains on cash and cash equivalents

     112       5  
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     27,583       6,450  
  

 

 

   

 

 

 

Cash and cash equivalents

    

Beginning of period

     53,306       50,809  
  

 

 

   

 

 

 

End of period

     80,889       57,259  
  

 

 

   

 

 

 

Analysis of balances of cash and cash equivalents

    

Cash at banks and in hand

     78,512       56,056  

Short-term bank deposits

     2,377       1,203  

The notes on pages 61 to 103 form an integral part of the interim condensed consolidated financial statements.

 

60


Notes to the Interim Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

 

1

ORGANISATION AND PRINCIPAL ACTIVITIES

China Life Insurance Company Limited (the “Company”) was established in the People’s Republic of China (“China” or the “PRC”) on 30 June 2003 as a joint stock company with limited liability as part of a group restructuring of China Life Insurance (Group) Company (“CLIC”, formerly China Life Insurance Company) and its subsidiaries. The Company and its subsidiaries are hereinafter collectively referred to as the “Group”. The Group’s principal activities are the writing of life, health, accident and other types of personal insurance business; reinsurance business for personal insurance business; fund management business permitted by national laws and regulations or approved by the State Council of the People’s Republic of China, etc. The address of its registered office is 16 Financial Street, Xicheng District, Beijing, the PRC. The Company is listed on the New York Stock Exchange, the Stock Exchange of Hong Kong Limited, and the Shanghai Stock Exchange.

These unaudited interim condensed consolidated financial statements are presented in millions of Renminbi (“RMB million”) unless otherwise stated. The interim condensed consolidated financial statements have been approved and authorised for issue by the board of directors of the Company on 26 August 2020.

 

2

BASIS OF PREPARATION

These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting issued by the International Accounting Standards Board (“IASB”). The interim condensed consolidated financial statements should be read in conjunction with the consolidated annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with International Financial Reporting Standards (“IFRSs”).

Except for the standards and amendments described below, the accounting policies applied are consistent with those of the consolidated annual financial statements for the year ended 31 December 2019, as described in those annual financial statements.

 

  2.1

New accounting standards and amendments adopted by the Group for the first time for the financial year beginning on 1 January 2020

 

Standards/Amendments

  

Content

  

Effective for annual periods

beginning on or after

IFRS 3 Amendments

   Definition of a Business    1 January 2020

IAS 1 and IAS 8 Amendments

   Definition of Material    1 January 2020

IFRS 9, IAS 39 and IFRS 7 Amendments

   Interest Rate Benchmark Reform    1 January 2020

IFRS 16 Amendment

   Covid-19-Related Rent Concessions (early adopted)    1 June 2020

 

61


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

2

BASIS OF PREPARATION (continued)

 

  2.1

New accounting standards and amendments adopted by the Group for the first time for the financial year beginning on 1 January 2020 (continued)

IFRS 3 Amendments – Definition of a Business

In October 2018, the IASB issued amendments to the definition of a business in IFRS 3 Business Combinations. The amendments clarify and provide additional guidance on the definition of a business. The amendments clarify that for an integrated set of activities and assets to be considered a business, it must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. A business can exist without including all of the inputs and processes needed to create outputs. The amendments remove the assessment of whether market participants are capable of acquiring the business and continue to produce outputs. Instead, the focus is on whether acquired inputs and acquired substantive processes together significantly contribute to the ability to create outputs. The amendments have also narrowed the definition of outputs to focus on goods or services provided to customers, investment income or other income from ordinary activities. Furthermore, the amendments provide guidance to assess whether an acquired process is substantive and introduce an optional fair value concentration test to permit a simplified assessment of whether an acquired set of activities and assets is not a business. The Group has applied the amendments prospectively to transactions or other events that occurred on or after 1 January 2020. The amendments did not have any significant impact on the Group’s consolidated financial statements.

IAS 1 and IAS 8 Amendments – Definition of Material

In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to provide a new definition of material. The new definition states that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments clarify that materiality will depend on the nature or magnitude of information. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. The amendments did not have any significant impact on the Group’s consolidated financial statements.

IFRS 9, IAS 39 and IFRS 7 Amendments – Interest Rate Benchmark Reform

In September 2019, the IASB issued the amendments to IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures to respond to the hedge accounting induced in the Interbank Offered Rates (IBOR) reform. The amendments provide temporary reliefs which enable hedge accounting to continue during the period of uncertainty before the replacement of an existing interest rate benchmark. The amendments did not have any significant impact on the Group’s consolidated financial statements.

IFRS 16 Amendment Covid-19-Related Rent Concessions (early adopted)

In May 2020, the IASB issued the amendment to IFRS 16 Leases to provide an optional relief to lessees from applying IFRS 16’s guidance on lease modification accounting for rent concessions arising as a direct consequence of COVID-19. The amendment does not apply to lessors.

The practical expedient applies only to rent concessions occurring as a direct consequence of COVID-19 and only if all of the following conditions are met: (i) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; (ii) any reduction in lease payments affects only payments originally due on or before 30 June 2021; (iii) there is no substantive change to other terms and conditions of the lease. The amendment is effective retrospectively for annual periods beginning on or after 1 June 2020 with earlier application permitted.

The Group has early adopted the amendment on 1 January 2020. Because the Group was not provided with a significant amount of rent concessions arising as a direct consequence of COVID-19, the amendment did not have any significant impact on the Group’s consolidated financial statements.

 

62


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

2

BASIS OF PREPARATION (continued)

 

  2.2

New accounting standards and amendments that are effective but temporary exemption is applied by the Group for the financial year beginning on 1 January 2020

 

Standards/Amendments

  

Content

  

Effective for annual periods

beginning on or after

IFRS 9

   Financial Instruments    1 January 2018

IFRS 9 – Financial Instruments

In July 2014, the IASB issued the final version of IFRS 9, bringing together all phases of the financial instruments project to replace IAS 39 and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. Based on the current assessment, the Group expects that the adoption of IFRS 9 will have a significant impact on the Group’s consolidated financial statements. The Group has adopted the temporary exemption permitted in Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (“IFRS 4 Amendments”) to apply IAS 39 rather than IFRS 9, until the effective date of IFRS 17. Refer to Note 17 for more details.

Classification and measurement

IFRS 9 requires that the Group classifies debt instruments based on the combined effect of application of business models (hold to collect contractual cash flows, hold to collect contractual cash flows and sell financial assets or other business models) and contractual cash flow characteristics (solely payments of principal and interest on the principal amount outstanding or not). Debt instruments not giving rise to cash flows that are solely payments of principal and interest on the principal amount outstanding would be measured at fair value through profit or loss. Other debt instruments giving rise to cash flows that are solely payments of principal and interest on the principal amount outstanding would be measured at amortised cost, fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”), based on their respective business models. The Group analysed the contractual cash flow characteristics of financial assets as at 30 June 2020 and made relevant disclosures in Note 17.

Equity instruments would generally be measured at fair value through profit or loss unless the Group elects to measure at FVOCI for certain equity investments not held for trading. This will result in unrealised gains and losses on equity instruments currently classified as available-for-sale securities being recorded in income going forward. Currently, these unrealised gains and losses are recognised in other comprehensive income (“OCI”). If the Group elects to record equity investments at FVOCI, gains and losses would be recognised in retained earnings when the instruments be disposed, except for the received dividends which do not represent a recovery of part of the investment cost.

Impairment

IFRS 9 replaces the “incurred loss” model with the “expected credit loss” model which is designed to include forward-looking information. The Group is in the process of developing and testing the key models required under IFRS 9 and analysing the impact on the expected loss provision; the Group believed that the provision for debt instruments of the Group under the “expected credit loss” model would be larger than that under the previous “incurred loss” model.

Hedge accounting

The Group does not apply hedge accounting currently, so the Group expects that the new hedge accounting model under IFRS 9 will have no impact on the Group’s consolidated financial statements.

 

63


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

2

BASIS OF PREPARATION (continued)

 

  2.3

New accounting standards and amendments that are not yet effective and have not been early adopted by the Group for the financial year beginning on 1 January 2020

 

Standards/Amendments

  

Content

  

Effective for annual periods

beginning on or after

IFRS 17

   Insurance Contracts    1 January 2023

IFRS 10 and IAS 28 Amendments

   Sale or Contribution of Assets between an Investor and its Associate or Joint Venture    No mandatory effective date yet determined but available for adoption

The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

IFRS 17 – Insurance Contracts

In May 2017, the IASB issued IFRS 17 Insurance Contracts, a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure, which replaces IFRS 4 Insurance Contracts.

In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies for measurement purposes, IFRS 17 provides a comprehensive model (the general model) for insurance contracts, supplemented by the variable fee approach for contracts with direct participation features and the premium allocation approach mainly for short-duration which typically applies to certain non-life insurance contracts.

The main features of the new accounting model for insurance contracts are as follows:

 

   

The fulfilment cash flows including the expected present value of future cash flows and explicit risk adjustment, remeasured every reporting period;

 

   

A contractual service margin represents the unearned profitability of the insurance contracts and is recognised in profit or loss over the coverage period;

 

   

Certain changes in the expected present value of future cash flows are adjusted against the contractual service margin and thereby recognised in profit or loss over the remaining coverage period;

 

   

The effect of changes in discount rates will be reported in either profit or loss or OCI, determined by an accounting policy choice;

 

   

The recognition of insurance revenue and insurance service expenses in the statement of comprehensive income based on the concept of services provided during the period;

 

   

Amounts that the policyholder will always receive, regardless of whether an insured event happens (non- distinct investment components) are not presented in the statement of comprehensive income, but are recognised directly in the statement of financial position;

 

   

Insurance services results are presented separately from the insurance finance income or expense;

 

   

Extensive disclosures to provide information on the recognised amounts from insurance contracts and the nature and extent of risks arising from these contracts.

 

64


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

2

BASIS OF PREPARATION (continued)

 

2.3

New accounting standards and amendments that are not yet effective and have not been early adopted by the Group for the financial year beginning on 1 January 2020 (continued)

IFRS 17 – Insurance Contracts (continued)

In June 2020, the IASB issued the amendments to IFRS 17 which include a deferral of the effective date of IFRS 17 to annual reporting periods beginning on or after 1 January 2023. Insurers qualifying for the deferral of IFRS 9 can apply both IFRS 17 and IFRS 9 for the first time to annual reporting periods beginning on or after 1 January 2023. The Group is currently assessing the impact of the implementation of the standard.

Except for IFRS 17, there are no IFRSs or IFRIC interpretations that are not yet effective but would be expected to have a significant impact on the financial position and performance of the Group.

 

3

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

The preparation of the interim condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing the interim condensed consolidated financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 December 2019.

 

4

FINANCIAL RISK MANAGEMENT

The Group’s activities are exposed to a variety of financial risks. The key financial risk is that proceeds from the sale of financial assets will not be sufficient to fund the obligations arising from the Group’s insurance and investment contracts. The most important components of financial risk are market risk, credit risk and liquidity risk.

The interim condensed consolidated financial statements do not include all financial risk management information and disclosures required in the consolidated annual financial statements, and should be read in conjunction with the Group’s consolidated annual financial statements for the year ended 31 December 2019.

There have been no significant changes in the Group’s risk management processes since 31 December 2019 or in any risk management policies.

Fair value hierarchy

Level 1 fair value is based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can obtain at the measurement date.

Other than Level 1 quoted prices, Level 2 fair value is based on valuation techniques using significant inputs, that are observable for the asset being measured, either directly or indirectly, for substantially the full term of the asset through corroboration with observable market data. Observable inputs generally used to measure the fair value of securities classified as Level 2 include quoted market prices for similar assets in active markets; quoted market prices in markets that are not active for identical or similar assets and other market observable inputs. This level includes the debt securities for which quotations are available from pricing services providers. Fair values provided by pricing services providers are subject to a number of validation procedures by management. These procedures include a review of the valuation models utilised and the results of these models, as well as the recalculation of prices obtained from pricing services at the end of each reporting period.

 

65


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

4

FINANCIAL RISK MANAGEMENT (continued)

 

Fair value hierarchy (continued)

Under certain conditions, the Group may not receive a price quote from independent third-party pricing services. In this instance, the Group’s valuation team may choose to apply an internally developed valuation method to the assets or liabilities being measured, determine the main inputs for valuation, and analyse the change of the valuation and report it to management. Key inputs involved in internal valuation services are not based on observable market data. They reflect assumptions made by management based on judgements and experiences. The assets or liabilities valued by this method are generally classified as Level 3.

As at 30 June 2020, assets classified as Level 1 accounted for approximately 35.33% of the assets measured at fair value on a recurring basis. Fair value measurements classified as Level 1 include certain debt securities, equity securities that are traded in an active exchange market or interbank market and open-ended funds with public market price quotation. The Group considers a combination of certain factors to determine whether a market for a financial instrument is active, including the occurrence of trades within the specific period, the respective trading volume, and the degree which the implied yields for a debt security for observed transactions differs from the Group’s understanding of the current relevant market rates and information. Trading prices from the Chinese interbank market are determined by both trading counterparties and can be observed publicly. The Company adopted this price of the debt securities traded on the Chinese interbank market at the reporting date as their fair market value and classified the investments as Level 1. Open-ended funds also have active markets. Fund management companies publish the net asset value of these funds on their websites on each trade date. Investors subscribe for and redeem units of these funds in accordance with the funds’ net asset value published by the fund management companies on each trade date. The Company adopted the unadjusted net asset value of the funds at the reporting date as their fair market value and classified the investments as Level 1.

As at 30 June 2020, assets classified as Level 2 accounted for approximately 43.56% of the assets measured at fair value on a recurring basis. They primarily include certain debt securities and equity securities. Valuations are generally obtained from third party pricing services for identical or comparable assets, or through the use of valuation methodologies using observable market inputs, or recent quoted market prices. Valuation service providers typically gather, analyse and interpret information related to market transactions and other key valuation model inputs from multiple sources, and through the use of widely accepted internal valuation models, provide a theoretical quote on various securities. Debt securities are classified as Level 2 when they are valued at recent quoted prices from the Chinese interbank market or from valuation service providers.

As at 30 June 2020, assets classified as Level 3 accounted for approximately 21.11% of the assets measured at fair value on a recurring basis. They primarily include unlisted equity securities and unlisted debt securities. Fair values are determined using valuation techniques, including discounted cash flow valuations, the comparable companies approach, etc. The determination of Level 3 is primarily based on the significance of certain unobservable inputs.

 

66


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

4

FINANCIAL RISK MANAGEMENT (continued)

Fair value hierarchy (continued)

The following table presents the Group’s quantitative disclosures of the fair value measurement hierarchy for assets and liabilities measured at fair value as at 30 June 2020:

 

     Fair value measurement using         
     Quoted prices
in active

markets
Level 1
RMB million
     Significant
observable
inputs
Level 2
RMB million
     Significant
unobservable
inputs
Level 3
RMB million
     Total
RMB million
 

Assets measured at fair value

           

Available-for-sale securities

           

– Equity securities

           

Funds

     82,333        —          —          82,333  

Common stocks

     237,608        17,572        —          255,180  

Preferred stocks

     —          —          59,550        59,550  

Wealth management products

     —          38,396        —          38,396  

Others

     11,976        17,720        72,913        102,609  

– Debt securities

           

Government bonds

     680        22,524        —          23,204  

Government agency bonds

     11,908        149,630        —          161,538  

Corporate bonds

     1,962        131,240        —          133,202  

Subordinated bonds/debts

     —          54,501        —          54,501  

Others

     —          3,889        116,991        120,880  
Securities at fair value through profit or loss            

– Equity securities

           

Funds

     16,612        81        —          16,693  

Common stocks

     49,342        444        —          49,786  

Others

     —          200        —          200  

– Debt securities

           

Government bonds

     69        673        —          742  

Government agency bonds

     305        5,651        —          5,956  

Corporate bonds

     4,732        71,290        16        76,038  

Others

     —          984        —          984  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     417,527        514,795        249,470        1,181,792  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities measured at fair value

           

Financial liabilities at fair value through profit or loss

     (4,259      —          —          (4,259

Investment contracts at fair value through profit or loss

     (10      —          —          (10
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     (4,269      —          —          (4,269
  

 

 

    

 

 

    

 

 

    

 

 

 

 

67


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

4

FINANCIAL RISK MANAGEMENT (continued)

 

Fair value hierarchy (continued)

 

The following table presents the changes in Level 3 assets and liabilities for the six months ended 30 June 2020:

 

     Available-for-sale securities     Securities at
fair value
through
profit or loss
     Derivative
financial
assets
    Total assets  
     Debt securities
RMB million
    Equity securities
RMB million
    Debt securities
RMB million
     RMB million     RMB million  

Opening balance

     105,650       128,899       16        428       234,993  

Purchases

     11,152       650       —          —         11,802  

Transferred into Level 3

     —         —         —          —         —    

Transferred out of Level 3

     —         —         —          —         —    

Total gains/(losses) recorded in profit or loss

     —         —         —          (121     (121

Total gains/(losses) recorded in other comprehensive income

     546       3,964       —          —         4,510  

Disposals or exercises

     —         (1,050     —          (307     (1,357

Maturity

     (357     —         —          —         (357
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Closing balance

     116,991       132,463       16        —         249,470  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

68


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

4

FINANCIAL RISK MANAGEMENT (continued)

Fair value hierarchy (continued)

The following table presents the Group’s quantitative disclosures of the fair value measurement hierarchy for assets and liabilities measured at fair value as at 31 December 2019:

 

     Fair value measurement using      Total
RMB million
 
     Quoted
prices in active
markets
Level 1
RMB million
    Significant
observable
inputs
Level 2
RMB million
     Significant
unobservable
inputs
Level 3
RMB million
 

Assets measured at fair value

          

Available-for-sale securities

          

– Equity securities

          

Funds

     102,349       —          —          102,349  

Common stocks

     214,206       22,117        —          236,323  

Preferred stocks

     —         —          58,314        58,314  

Wealth management products

     —         32,640        —          32,640  

Others

     —         28,319        70,585        98,904  

– Debt securities

          

Government bonds

     2,620       21,138        —          23,758  

Government agency bonds

     24,305       146,884        —          171,189  

Corporate bonds

     5,360       143,095        —          148,455  

Subordinated bonds/debts

     1,069       52,853        —          53,922  

Others

     —         6,817        105,650        112,467  

Securities at fair value through profit or loss

          

– Equity securities

          

Funds

     16,023       78        —          16,101  

Common stocks

     40,070       211        —          40,281  

Others

     —         20        —          20  

– Debt securities

          

Government bonds

     33       8        —          41  

Government agency bonds

     362       6,497        —          6,859  

Corporate bonds

     7,999       69,200        16        77,215  

Others

     —         1,091        —          1,091  

Derivative financial assets

     —         —          428        428  
  

 

 

   

 

 

    

 

 

    

 

 

 

Total

     414,396       530,968        234,993        1,180,357  
  

 

 

   

 

 

    

 

 

    

 

 

 

Liabilities measured at fair value

          

Financial liabilities at fair value through profit or loss

     (3,859     —          —          (3,859

Investment contracts at fair value through profit or loss

     (10     —          —          (10
  

 

 

   

 

 

    

 

 

    

 

 

 

Total

     (3,869     —          —          (3,869
  

 

 

   

 

 

    

 

 

    

 

 

 

 

69


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

4

FINANCIAL RISK MANAGEMENT (continued)

 

Fair value hierarchy (continued)

 

The following table presents the changes in Level 3 assets and liabilities for the six months ended 30 June 2019:

 

     Available-for-sale securities     Total
assets
    Derivative
financial
liabilities
    Total
liabilities
 
     Debt securities
RMB million
    Equity securities
RMB million
    RMB million     RMB million     RMB million  

Opening balance

     79,248       100,000       179,248       (1,877     (1,877

Purchases

     1,953       4,213       6,166       —         —    

Transferred into Level 3

     —         —         —         —         —    

Transferred out of Level 3

     —         (1,780     (1,780     —         —    

Total gains/(losses) recorded in profit or loss

     —         —         —         404       404  

Total gains/(losses) recorded in other comprehensive income

     (86     2,371       2,285       —         —    

Disposals or exercises

     —         (4,000     (4,000     1,473       1,473  

Maturity

     (368     —         (368     —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Closing balance

     80,747       100,804       181,551       —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The assets and liabilities whose fair value measurements are classified under Level 3 above do not have material impact on the profit or loss of the Group.

For the assets and liabilities measured at fair value on a recurring basis, during the six months ended 30 June 2020, debt securities of RMB12,964 million (for the six months ended 30 June 2019: RMB24,200 million) were transferred from Level 1 to Level 2 within the fair value hierarchy, whereas RMB3,150 million (for the six months ended 30 June 2019: RMB15,599 million) debt securities were transferred from Level 2 to Level 1. No material equity securities were transferred from Level 1 to Level 2 (for the six months ended 30 June 2019: same), whereas RMB1,870 million (for the six months ended 30 June 2019: RMB5,739 million) equity securities were transferred from Level 2 to Level 1.

For the six months ended 30 June 2020 and the six months ended 30 June 2019, there were no significant changes in the business or economic circumstances that affected the fair value of the Group’s financial assets and liabilities. There were also no reclassifications of financial assets.

As at 30 June 2020 and 31 December 2019, significant unobservable inputs such as the discount rate and discounts for lack of marketability were used in the valuation of mainly assets and liabilities at fair value classified as Level 3. The fair value was not significantly sensitive to reasonable changes in these significant unobservable inputs.

 

70


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

4

FINANCIAL RISK MANAGEMENT (continued)

 

Fair value hierarchy (continued)

 

The table below presents information about the significant unobservable inputs used for primary assets and liabilities at fair value classified as Level 3 as at 30 June 2020 and 31 December 2019:

 

    

Fair value

  

Valuation
techniques

  

Significant
unobservable inputs

  

Range

  

Relationships between fair
value and unobservable inputs

Equity securities

   30 June 2020: 25,643
31 December 2019: 26,265
  

Comparable companies approach

  

Discounts for lack of marketability

   30 June 2020:
13%–35%
31 December 2019:
11%–35%
  

The fair value is inversely related to the discounts for lack of marketability

   30 June 2020: 31,547
31 December 2019: 28,346
  

Net asset value method

  

N/A

   N/A   

N/A

   30 June 2020: 73,465 31 December 2019: 72,477   

Discounted cash flow method

  

Discount rate

   30 June 2020:
3.80%–6.38%
31 December 2019:
3.80%–6.38%
  

The fair value is inversely related to discount rate

Debt securities

   30 June 2020: 116,991 31 December 2019: 105,666   

Discounted cash flow method

  

Discount rate

   30 June 2020:
3.88%–9.53%
31 December 2019:
3.02%–6.22%
  

The fair value is inversely related to discount rate

Derivative financial assets

   30 June 2020:          — 31 December 2019:        428   

Comparable companies approach

  

Discounts for lack of marketability

   30 June 2020:
Not applicable
31 December 2019:
15%
  

The fair value is inversely related to the discounts for lack of marketability

 

71


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

5

SEGMENT INFORMATION

 

  5.1

Operating segments

 

The Group operates in four operating segments:

 

  (i)

Life insurance business (Life)

Life insurance business relates primarily to the sale of life insurance policies, including those life insurance policies without significant insurance risk transferred.

 

  (ii)

Health insurance business (Health)

Health insurance business relates primarily to the sale of health insurance policies, including those health insurance policies without significant insurance risk transferred.

 

  (iii)

Accident insurance business (Accident)

Accident insurance business relates primarily to the sale of accident insurance policies.

 

  (iv)

Other businesses (Others)

Other businesses relate primarily to income and cost of the agency business in respect of transactions with CLIC, etc., as described in Note 18, net share of profit of associates and joint ventures, income and expenses of subsidiaries, and unallocated income and expenditure of the Group.

 

  5.2

Allocation basis of income and expenses

Investment income, net realised gains on financial assets, net fair value gains through profit or loss and foreign exchange gains/(losses) within other expenses are allocated among segments in proportion to the respective segments’ average liabilities of insurance contracts and investment contracts at the beginning and end of the period. Administrative expenses are allocated among segments in proportion to the unit cost of the respective products in different segments. Unallocated other income and other expenses are presented in the “Others” segment directly. Income tax is not allocated.

 

72


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

5

SEGMENT INFORMATION (continued)

 

           For the six months ended 30 June 2020  
     Life     Health     Accident     Others     Elimination     Total  
     RMB million  

Revenues

            

Gross written premiums

     346,137       72,264       8,966       —         —         427,367  

– Term life

     1,240       —         —         —         —            

– Whole life

     39,020       —         —         —         —        

– Endowment

     59,252       —         —         —         —        

– Annuity

     246,625       —         —         —         —            

Net premiums earned

     345,591       54,693       7,652       —         —         407,936  

Investment income

     66,539       4,242       222       1,703       —         72,706  

Net realised gains on financial assets

     10,017       637       33       120       —         10,807  

Net fair value gains through profit or loss

     7,249       460       24       873       —         8,606  

Other income

     503       29       —         4,861       (1,017     4,376  

Including: inter-segment revenue

     —         —         —         1,017       (1,017     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment revenues

     429,899       60,061       7,931       7,557       (1,017     504,431  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Benefits, claims and expenses

            

Insurance benefits and claims expenses

            

Life insurance death and other benefits

     (60,684     (1,941     (15     —         —         (62,640

Accident and health claims and claim adjustment expenses

     —         (20,724     (3,587     —         —         (24,311

Increase in insurance contract liabilities

     (268,204     (16,685     (110     —         —         (284,999

Investment contract benefits

     (5,024     (6     —         —         —         (5,030

Policyholder dividends resulting from participation in profits

     (14,433     (74     —         —         —         (14,507

Underwriting and policy acquisition costs

     (43,763     (8,799     (2,733     (1,223     —         (56,518

Finance costs

     (1,286     (81     (4     (401     —         (1,772

Administrative expenses

     (10,684     (3,829     (1,226     (1,308     —         (17,047

Statutory insurance fund contribution

     (550     (189     (64     —         —         (803

Other expenses

     (3,421     (345     (80     (2,431     1,017       (5,260

Including: inter-segment expenses

     (953     (61     (3     —         1,017       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment benefits, claims and expenses

     (408,049     (52,673     (7,819     (5,363     1,017       (472,887
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net gains on investments of associates and joint ventures

     —         —         —         4,020       —         4,020  

Including: share of profit of associates and joint ventures

     —         —         —         4,690       —         4,690  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment results

     21,850       7,388       112       6,214       —         35,564  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax

               (4,502
            

 

 

 

Net profit

               31,062  
            

 

 

 

Attributable to

            

– Equity holders of the Company

               30,535  

Non-controlling interests

               527  

Other comprehensive income attributable to equity holders of the Company

     1,889       120       6       250       —         2,265  

Depreciation and amortisation

     1,539       528       180       292       —         2,539  

 

73


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

5

SEGMENT INFORMATION (continued)

 

           For the six months ended 30 June 2019  
     Life     Health     Accident     Others     Elimination     Total  
     RMB million  

Revenues

            

Gross written premiums

     307,461       62,416       8,099       —         —         377,976  

– Term life

     1,238       —         —         —         —            

– Whole life

     28,931       —         —         —         —        

– Endowment

     62,020       —         —         —         —        

– Annuity

     215,272       —         —         —         —            

Net premiums earned

     307,009       46,989       7,299       —         —         361,297  

Investment income

     61,445       3,653       220       1,027       —         66,345  

Net realised gains on financial assets

     3,551       211       13       11       —         3,786  

Net fair value gains through profit or loss

     11,727       696       42       642       —         13,107  

Other income

     485       30       —         3,910       (739     3,686  

Including: inter-segment revenue

     —         —         —         739       (739     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment revenues

     384,217       51,579       7,574       5,590       (739     448,221  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Benefits, claims and expenses

            

Insurance benefits and claims expenses

            

Life insurance death and other benefits

     (82,129     (1,673     (19     —         —         (83,821

Accident and health claims and claim adjustment expenses

     —         (18,874     (2,945     —         —         (21,819

Increase in insurance contract liabilities

     (209,451     (14,927     (31     —         —         (224,409

Investment contract benefits

     (4,610     (7     —         —         —         (4,617

Policyholder dividends resulting from participation in profits

     (10,780     (56     —         —         —         (10,836

Underwriting and policy acquisition costs

     (34,449     (7,448     (2,648     (1,050     —         (45,595

Finance costs

     (1,484     (89     (5     (352     —         (1,930

Administrative expenses

     (10,614     (3,583     (1,335     (1,426     —         (16,958

Statutory insurance fund contribution

     (510     (162     (65     —         —         (737

Other expenses

     (2,850     (254     (67     (1,839     739       (4,271

Including: inter-segment expenses

     (696     (40     (3     —         739       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment benefits, claims and expenses

     (356,877     (47,073     (7,115     (4,667     739       (414,993
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net gains on investments of associates and joint ventures

     —         —         —         5,665       —         5,665  

Including: share of profit of associates and joint ventures

     —         —         —         5,665       —         5,665  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment results

     27,340       4,506       459       6,588       —         38,893  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax

               (964
            

 

 

 

Net profit

               37,929  
            

 

 

 

Attributable to

            

– Equity holders of the Company

               37,599  

Non-controlling interests

               330  

Other comprehensive income attributable to equity holders of the Company

     18,497       1,098       67       516       —         20,178  

Depreciation and amortisation

     1,262       400       160       208       —         2,030  

 

74


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

6

INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

 

     For the six months ended 30 June  
     2020      2019  
     RMB million      RMB million  

As at 1 January

     222,983        198,772  

Change of the cost

     2,291        15,801  

Share of profit or loss

     4,690        5,665  

Other equity movements

     111        335  

Declared dividends (i)

     (1,604      (1,013

Impairment (ii)

     (707      —    
  

 

 

    

 

 

 

As at 30 June

     227,764        219,560  
  

 

 

    

 

 

 

 

  (i)

The 2019 final dividend of HKD0.026 in cash per ordinary share was approved and declared in the Annual General Meeting of Sino-Ocean Group Holding Limited (“Sino-Ocean”) on 20 May 2020, and the Company’s cash dividend receivable is equivalent to RMB54 million as at 30 June 2020.

The 2019 final dividend of RMB0.0604 in cash per ordinary share was approved and declared in the Annual General Meeting of China United Network Communications Limited (“China Unicom”) on 22 May 2020. The Company received a cash dividend of RMB193 million during the period.

 

  (ii)

Sino-Ocean, the Group’s associate, is listed in Hong Kong. On 30 June 2020, the stock price of Sino-Ocean was HKD1.86 per share. As at 31 December 2019, the cumulative impairment loss of RMB2.51 billion for the investment in Sino-Ocean had been recognised by the Group. The Group performed an impairment test to this investment on 30 June 2020. A further impairment loss of RMB707 million was recognised for this investment valued using the discounted future cash flow method for the six months ended 30 June 2020. In the valuation, the Group separated the development properties and investment properties by considering the different future cash flow features. The discount rates applied in the valuation were 10% and 8% for development properties and investment properties, respectively.

 

75


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

7

FINANCIAL ASSETS

 

  7.1

Held-to-maturity securities

 

     As at
30 June 2020
RMB million
     As at 31
December 2019
RMB million
 

Debt securities

     

Government bonds

     219,870        215,928  

Government agency bonds

     479,405        401,799  

Corporate bonds

     196,454        198,322  

Subordinated bonds/debts

     105,585        112,702  
  

 

 

    

 

 

 

Total

     1,001,314        928,751  
  

 

 

    

 

 

 

Debt securities

     

Listed in Mainland, PRC

     210,532        209,123  

Listed in Hong Kong, PRC

     160        157  

Listed overseas

     84        62  

Unlisted (i)

     790,538        719,409  
  

 

 

    

 

 

 

Total

     1,001,314        928,751  
  

 

 

    

 

 

 

 

  (i)

Unlisted debt securities include those traded on the Chinese interbank market.

The fair value of held-to-maturity securities is determined by reference to other debt securities which are measured by fair value. Please refer to Note 4. As at 30 June 2020, the provision for the investment of held-to-maturity securities was RMB17 million (as at 31 December 2019: same).

 

     As at 30 June 2020      As at 31 December 2019  
     Level 1      Level 2      Total      Level 1      Level 2      Total  

Debt securities – fair value hierarchy

   RMB million      RMB million      RMB million      RMB million      RMB million      RMB million  

Government bonds

     99,368        137,636        237,004        15,749        212,449        228,198  

Government agency bonds

     52,125        448,732        500,857        57,955        357,058        415,013  

Corporate bonds

     2,763        203,521        206,284        7,914        198,879        206,793  

Subordinated bonds/debts

     —          111,377        111,377        —          118,571        118,571  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     154,256        901,266        1,055,522        81,618        886,957        968,575  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Debt securities – Contractual maturity schedule

   As at
30 June 2020
RMB million
     As at
31 December 2019
RMB million
 

Maturing:

     

Within one year

     19,531        24,454  

After one year but within five years

     137,201        128,266  

After five years but within ten years

     218,525        241,372  

After ten years

     626,057        534,659  
  

 

 

    

 

 

 

Total

     1,001,314        928,751  
  

 

 

    

 

 

 

 

76


Notes to the Interim Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

 

7

FINANCIAL ASSETS (continued)

 

  7.2

Loans

 

     As at
30 June 2020
RMB million
     As at
31 December 2019
RMB million
 

Policy loans (i)

     184,722        174,872  

Other loans

     469,384        436,766  
  

 

 

    

 

 

 

Total

     654,106        611,638  
  

 

 

    

 

 

 

Impairment

     (2,718      (2,718
  

 

 

    

 

 

 

Net value

     651,388        608,920  
  

 

 

    

 

 

 

Fair value

     663,533        623,840  
  

 

 

    

 

 

 
     As at
30 June 2020
RMB million
     As at
31 December 2019
RMB million