Form 20-F

20-F 1 d89179d20f.htm FORM 20-F Form 20-F

As filed with the Securities and Exchange Commission on April 29, 2021

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number 001-31914

中国人寿保险股份有限公司

(Exact name of Registrant as specified in its charter)

China Life Insurance Company Limited

(Translation of Registrant’s name into English)

People’s Republic of China

(Jurisdiction of incorporation or organization)

16 Financial Street

Xicheng District

Beijing 100033, China

(Address of principal executive offices)

Yinghui Li

16 Financial Street

Xicheng District

Beijing 100033, China

Tel: (86-10) 6363 1191

Fax: (86-10) 6657 5112

Email: liyh@e-chinalife.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
American depositary shares	LFC	New York Stock Exchange
H shares, par value RMB1.00 per share		New York Stock Exchange*

*	Not for trading, but only in connection with the listing on the New York Stock Exchange of American depositary shares, each representing 5 H shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None.

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None.

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of December 31, 2020, 7,441,175,000 H shares and 20,823,530,000 A shares, par value RMB1.00 per share, were issued and outstanding. H shares are listed on the Hong Kong Stock Exchange. A shares are listed on the Shanghai Stock Exchange. Both H shares and A shares are ordinary shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Yes ☐ No

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S.GAAP ☐

International Financial Reporting Standards as issued

by the International Accounting Standards Board ☒

Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

CHINA LIFE INSURANCE COMPANY LIMITED

TABLE OF CONTENTS


FORWARD-LOOKING STATEMENTS		1

CERTAIN TERMS AND CONVENTIONS		2

PART I		3

Item 1.	Identity of Directors, Senior Management and Advisers	3
Item 2.	Offer Statistics and Expected Timetable	3
Item 3.	Key Information	3
A.	Selected Financial Data	3
B.	Capitalization and Indebtedness	6
C.	Reasons for the Offer and Use of Proceeds	6
D.	Risk Factors	6
Item 4.	Information on the Company	21
A.	History and Development of the Company	21
B.	Business Overview	23
C.	Organizational Structure	61
D.	Property, Plants and Equipment	63
Item 4A.	Unresolved Staff Comments.	63
Item 5.	Operating and Financial Review and Prospects	63
A.	Operating Results	76
B.	Liquidity and Capital Resources	87
C.	Research and Development, Patents and Licenses	89
D.	Trend Information	89
E.	Off-Balance Sheet Arrangements	90
F.	Tabular Disclosure of Contractual Obligations	90
G.	Safe Harbor	90
Item 6.	Directors, Senior Management and Employees	90
A.	Directors and Senior Management	90
B.	Compensation	94
C.	Board Practices	96
D.	Employees	97
E.	Share Ownership	97
Item 7.	Major Shareholders and Related Party Transactions	98
A.	Major Shareholders	98
B.	Related Party Transactions	98
C.	Interests of Experts and Counsel	107
Item 8.	Financial Information.	107
A.	Consolidated Financial Statements and Other Financial Information	107
B.	Significant Changes	108
C.	Embedded Value	108
Item 9.	The Offer and Listing	112
A.	Offer and Listing Details	112
B.	Plan of Distribution	112
C.	Markets	112
D.	Selling Shareholders	112
E.	Dilution	112
F.	Expenses of the Issue	112
Item 10.	Additional Information	112
A.	Share Capital	112
B.	Memorandum and Articles of Association	112
C.	Material Contracts	123
D.	Exchange Controls	123


E.	Taxation	124
F.	Dividends and Paying Agents	130
G.	Statement by Experts	130
H.	Documents on Display	130
I.	Subsidiary Information	130
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	130
Item 12.	Description of Securities Other Than Equity Securities	139
A.	Debt Securities	139
B.	Warrants and Rights	139
C.	Other Securities	139
D.	American Depositary Shares	139

PART II		140

Item 13.	Defaults, Dividend Arrearages and Delinquencies	140
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	140
A.	Material Modification to the Rights of Security Holders	140
B.	Use of Proceeds	140
Item 15.	Controls and Procedures	140
Item 16A.	Audit Committee Financial Expert	141
Item 16B.	Code of Ethics	141
Item 16C.	Principal Accountant Fees and Services	141
Item 16D.	Exemptions from the Listing Standards for Audit Committees	141
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	141
Item 16F.	Change in Registrant’s Certifying Accountant	141
Item 16G.	Corporate Governance	142
Item 16H.	Mine Safety Disclosure	144

PART III		144

Item 17.	Financial Statements	144
Item 18.	Financial Statements	144
Item 19.	Exhibits	144

FORWARD-LOOKING STATEMENTS

This annual report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements state our intentions, beliefs, expectations or predictions for the future, in particular under “Item 4. Information on the Company”, “Item 5. Operating and Financial Review and Prospects” and “Item 8. Financial Information—Embedded Value”.

The forward-looking statements include, without limitation, statements relating to:

•

future developments in the insurance industry in China;

•

changes in interest rates and other economic and business conditions in China;

•

the industry regulatory environment as well as the industry outlook generally;

•

the amount and nature of, and potential for, future development of our business;

•

the outcome of litigation and regulatory proceedings that we currently face or may face in the future;

•

our business strategy and plan of operations;

•

the prospective financial information regarding our business;

•

our dividend policy; and

•

information regarding our embedded value.

In some cases, we use words such as “believe”, “intend”, “anticipate”, “estimate”, “project”, “forecast”, “plan”, “potential”, “will”, “may”, “should” and “expect” and similar expressions to identify forward-looking statements. All statements other than statements of historical facts included in this annual report, including statements regarding our future financial position, strategy, projected costs and plans and objectives of management for future operations, are forward-looking statements. Although we believe that the expectations reflected in those forward-looking statements are reasonable, we can give no assurance that those expectations will prove to have been correct, and you are cautioned not to place undue reliance on such statements. Important factors that could cause actual results to differ materially from our expectations are disclosed under “Item 3. Key Information—Risk Factors” and elsewhere in this annual report, including in conjunction with the forward-looking statements included in this annual report. We undertake no obligation to publicly update or revise any forward-looking statements contained in this annual report, whether as a result of new information, future events or otherwise, except as required by law. All forward-looking statements contained in this annual report are qualified by reference to this cautionary statement.

CERTAIN TERMS AND CONVENTIONS

References in this annual report to “we”, “us”, “our”, the “Company” or “China Life” mean China Life Insurance Company Limited and, as the context may require, its subsidiaries. References to “CLIC” mean China Life Insurance (Group) Company and, as the context may require, its subsidiaries, other than China Life. References in this annual report to “AMC” mean China Life Asset Management Company Limited, the asset management company established by us with CLIC on November 23, 2003. References to “CLPCIC” mean China Life Property and Casualty Insurance Company Limited, the property and casualty company established by us with CLIC on December 30, 2006. References to “China Life Pension” mean China Life Pension Company Limited established by us, CLIC and AMC on January 15, 2007. References to “IHC” mean China Life Investment Management Company Limited, a wholly owned subsidiary of CLIC and formerly known as China Life Investment Holding Company Limited.

The statistical and market share information contained in this annual report has been derived from government sources, including the China Insurance Yearbook 2018, the China Insurance Yearbook 2019, the China Insurance Yearbook 2020 and other public sources. The information has not been verified by us independently, and includes premium information that is not determined in accordance with HKFRS, U.S. GAAP or IFRS.

References to “A shares” mean the RMB ordinary shares which have been listed on the Shanghai Stock Exchange since January 9, 2007.

References to the “CIRC” mean the China Insurance Regulatory Commission, which was established in 1998 and merged with the China Banking Regulatory Commission in April 2018. References to the “CBRC” mean the China Banking Regulatory Commission, which was established in 2003 and merged with the CIRC in April 2018. References to “CBIRC” mean the China Banking and Insurance Regulatory Commission, which was established in April 2018 as a result of the merger of CIRC and CBRC. In this annual report, references to the “CIRC” mean the China’s insurance regulator prior to April 2018 and references to the “CBIRC” mean the China’s insurance regulator after April 2018, as the context may require.

References to “China” or “PRC” mean the People’s Republic of China, excluding, for purposes of this annual report, Hong Kong, Macau and Taiwan. References to “Hong Kong” mean the Hong Kong Special Administrative Region, references to “Macau” mean the Macau Special Administrative Region and references to “Taiwan” mean Taiwan area. References to the “central government” mean the government of the PRC. References to “State Council” mean the State Council of the PRC. References to “MOF” or “Ministry of Finance” mean the Ministry of Finance of the PRC. References to “Ministry of Commerce” mean the Ministry of Commerce of the PRC. References to “PBOC” mean the People’s Bank of China. References to “SAFE” mean the State Administration of Foreign Exchange of the PRC. References to “SAMR” mean the State Administration for Market Regulation of the PRC.

References to “HKSE” or “Hong Kong Stock Exchange” mean The Stock Exchange of Hong Kong Limited. References to “NYSE” or “New York Stock Exchange” mean the New York Stock Exchange. References to “SSE” or “Shanghai Stock Exchange” mean the Shanghai Stock Exchange.

References to “IFRS” mean the International Financial Reporting Standards as issued by the International Accounting Standards Board, references to “U.S. GAAP” mean the generally accepted accounting principles in the United States, references to “HKFRS” mean the Hong Kong Financial Reporting Standards, issued by the Hong Kong Institute of Certified Public Accountants, and references to “PRC GAAP” mean the PRC Accounting Standards for Business Enterprises applicable to companies listed in the PRC. Unless otherwise indicated, our financial information presented in this annual report has been prepared in accordance with IFRS.

References to “Renminbi” or “RMB” in this annual report mean the currency of the PRC, references to “U.S. dollars” or “US$” mean the currency of the United States of America, and references to “Hong Kong dollars”, “H.K. dollars” or “HK$” mean the currency of the Hong Kong Special Administrative Region of the PRC.

Unless otherwise indicated, translations of RMB amounts into U.S. dollars for presentation only in this annual report have been made at the rate of US$1.00 to RMB6.5250, the noon buying rate in the City of New York for cable transfers payable in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2020. No representation is made that Renminbi amounts could have been, or could be, converted into U.S. dollars at that rate on December 31, 2020 or at all. Translations of foreign currency amounts into RMB amounts for the purpose of preparing our audited consolidated financial statements included elsewhere in this annual report or our previous annual reports have been made at the exchange rates published by the PBOC.

Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

If there is any discrepancy or inconsistency between the Chinese names of the PRC entities in this annual report and their English translations, the Chinese version shall prevail.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.

Not applicable.

ITEM 3. KEY INFORMATION.

A. SELECTED FINANCIAL DATA

Selected Historical Consolidated Financial Data

The following tables set forth our selected consolidated financial information for the periods indicated. We have derived the consolidated financial information from our audited consolidated financial statements included elsewhere in this annual report or our previous annual reports.

We prepare our consolidated financial statements in accordance with IFRS as issued by the IASB.

You should read this information in conjunction with the rest of the annual report, including our audited consolidated financial statements and the accompanying notes, “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report and the independent registered public accounting firm’s reports.


	For the year ended December 31,
	2016			2017			2018			2019			2020			2020
	RMB			RMB			RMB			RMB			RMB			US$
Consolidated Statement of Comprehensive Income	(in millions except for per share data)

Revenues
Gross written premiums		430,498			511,966			535,826			567,086			612,265			93,834
Less: premiums ceded to reinsurers		(1,758	)		(3,661	)		(4,503	)		(5,238	)		(6,053	)		(928	)

Net written premiums		428,740			508,305			531,323			561,848			606,212			92,906
Net change in unearned premium reserves		(2,510	)		(1,395	)		700			(1,570	)		(1,546	)		(237	)

Net premiums earned		426,230			506,910			532,023			560,278			604,666			92,669

Investment income		109,147			122,727			125,167			139,919			154,497			23,678
Net realized gains on financial assets		6,038			42			(19,591	)		1,831			14,583			2,235
Net fair value gains through profit or loss		(7,094	)		6,183			(18,278	)		19,251			21,900			3,356
Other income		6,460			7,493			8,098			8,195			9,315			1,428

Total revenues		540,781			643,355			627,419			729,474			804,961			123,366


Benefits, claims and expenses
Insurance benefits and claims expenses
Life insurance death and other benefits		(253,157	)		(259,708	)		(248,736	)		(127,877	)		(113,609	)		(17,411	)
Accident and health claims and claim adjustment expenses		(27,269	)		(33,818	)		(40,552	)		(50,783	)		(52,395	)		(8,030	)
Increase in insurance contract liabilities		(126,619	)		(172,517	)		(189,931	)		(330,807	)		(414,797	)		(63,570	)
Investment contract benefits		(5,316	)		(8,076	)		(9,332	)		(9,157	)		(9,846	)		(1,509	)
Policyholder dividends resulting from participation in profits		(15,883	)		(21,871	)		(19,646	)		(22,375	)		(28,279	)		(4,334	)
Underwriting and policy acquisition costs		(52,022	)		(64,789	)		(62,705	)		(81,396	)		(84,342	)		(12,926	)
Finance costs		(4,767	)		(4,601	)		(4,116	)		(4,255	)		(3,747	)		(574	)
Administrative expenses		(31,854	)		(35,953	)		(37,486	)		(40,275	)		(37,687	)		(5,776	)
Other expenses		(4,859	)		(6,426	)		(7,642	)		(9,602	)		(12,208	)		(1,872	)
Statutory insurance fund contribution		(1,048	)		(1,068	)		(1,097	)		(1,163	)		(1,229	)		(188	)

Total benefits, claims and expenses		(522,794	)		(608,827	)		(621,243	)		(677,690	)		(758,139	)		(116,190	)


Net gains on investments of associates and joint ventures		5,855			7,143			7,745			8,011			7,666			1,175
Including: share of profit of associates and joint ventures		5,855			7,143			7,745			9,159			8,336			1,278
Profit before income tax		23,842			41,671			13,921			59,795			54,488			8,351
Income tax		(4,257	)		(8,919	)		(1,985	)		(781	)		(3,103	)		(476	)

Net profit		19,585			32,752			11,936			59,014			51,385			7,875

Attributable to:
- Equity holders of the Company		19,127			32,253			11,395			58,287			50,268			7,704
- Non-controlling interests		458			499			541			727			1,117			171
Basic and diluted earnings per share⁽¹⁾		0.66			1.13			0.39			2.05			1.77			0.27
Other comprehensive income that may be reclassified to profit or loss in subsequent periods:
Fair value gains/(losses) on available-for-sale securities		(44,509	)		(15,003	)		(24,591	)		69,600			52,547			8,053
Amount transferred to net profit from other comprehensive income		(6,038	)		(42	)		19,549			(4,635	)		(14,386	)		(2,205	)
Portion of fair value changes on available-for-sale securities attributable to participating policyholders		17,372			5,605			(32	)		(19,521	)		(3,959	)		(607	)
Share of other comprehensive income of associates and joint ventures under the equity method		(864	)		20			735			599			672			103
Exchange differences on translating foreign operations		21			(865	)		598			237			(986	)		(150	)
Income tax relating to components of other comprehensive income		8,242			2,359			1,716			(11,292	)		(8,482	)		(1,300	)

Other comprehensive income that may be reclassified to profit or loss in subsequent periods		(25,776	)		(7,926	)		(2,025	)		34,988			25,406			3,894

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		—			—			—			(76	)		344			52
Other comprehensive income for the year, net of tax		(25,776	)		(7,926	)		(2,025	)		34,912			25,750			3,946

Total comprehensive income for the year, net of tax		(6,191	)		24,826			9,911			93,926			77,135			11,821

Attributable to:
- Equity holders of the Company		(6,647	)		24,341			9,325			93,134			75,967			11,642
- Non-controlling interests		456			485			586			792			1,168			179

⁽¹⁾	Numbers are based on the weighted average number of 28,264,705,000 shares in issue.


	As of December 31,
	2016		2017		2018		2019		2020		2020
	RMB		RMB		RMB		RMB		RMB		US$
Consolidated Statement of Financial Position	(in millions)

Assets
Property, plant and equipment		30,389		42,707		47,281		51,758		52,747		8,084
Right-of-use assets		—		—		—		3,520		3,076		471
Investment properties		1,191		3,064		9,747		12,141		14,217		2,179
Investments in associates and joint ventures		119,766		161,472		201,661		222,983		239,584		36,718
Held-to-maturity securities		594,730		717,037		806,717		928,751		1,189,369		182,279
Loans		226,573		383,504		450,251		608,920		658,535		100,925
Term deposits		538,325		449,400		559,341		535,260		545,667		83,627
Statutory deposits - restricted		6,333		6,333		6,333		6,333		6,333		971
Available-for-sale securities		766,423		810,734		870,533		1,058,957		1,215,603		186,299
Securities at fair value through profit or loss		209,124		136,809		138,717		141,608		161,570		24,762
Derivative financial assets		—		—		—		428		—		—
Securities purchased under agreements to resell		43,538		36,185		9,905		4,467		7,947		1,218
Accrued investment income		55,945		50,641		48,402		41,703		45,200		6,927
Premiums receivable		13,421		14,121		15,648		17,281		20,730		3,177
Reinsurance assets		2,134		3,046		4,364		5,161		6,095		934
Other assets		22,013		33,952		33,437		34,029		29,021		4,447
Deferred tax assets		—		—		1,257		128		87		13
Cash and cash equivalents		67,046		48,586		50,809		53,306		56,629		8,679

Total assets		2,696,951		2,897,591		3,254,403		3,726,734		4,252,410		651,710


Liabilities and equity

Liabilities

Insurance contracts		1,847,986		2,025,133		2,216,031		2,552,736		2,973,225		455,667
Investment contracts		195,706		232,500		255,434		267,804		288,212		44,170
Policyholder dividends payable		87,725		83,910		85,071		112,593		122,510		18,775
Interest-bearing loans and borrowings		16,170		18,794		20,150		20,045		19,556		2,997
Lease liabilities		—		—		—		3,091		2,664		408
Bonds payable		37,998		—		—		34,990		34,992		5,363
Financial liabilities at fair value through profit or loss		2,031		2,529		2,680		3,859		3,732		572
Derivative financial liabilities		—		—		1,877		—		—		—
Securities sold under agreements to repurchase		81,088		87,309		192,141		118,088		122,249		18,735
Annuity and other insurance balances payable		39,038		44,820		49,465		51,019		55,031		8,434
Premiums received in advance		35,252		18,505		46,650		60,898		53,021		8,126
Other liabilities		36,836		47,430		58,426		81,114		104,426		16,004
Deferred tax liabilities		7,768		4,871		—		10,330		15,286		2,343
Current income tax liabilities		1,214		6,198		2,630		223		191		29
Statutory insurance fund		491		282		558		602		384		59

Total liabilities		2,389,303		2,572,281		2,931,113		3,317,392		3,795,479		581,682


Equity
Share capital		28,265		28,265		28,265		28,265		28,265		4,332
Other equity instruments		7,791		7,791		7,791		7,791		—		—
Reserves		145,007		145,675		149,293		197,221		237,890		36,458
Retained earnings		122,558		139,202		133,022		170,487		183,896		28,183

Attributable to equity holders of the Company		303,621		320,933		318,371		403,764		450,051		68,973


Non-controlling interests		4,027		4,377		4,919		5,578		6,880		1,055


Total equity		307,648		325,310		323,290		409,342		456,931		70,028


Total liabilities and equity		2,696,951		2,897,591		3,254,403		3,726,734		4,252,410		651,710

Exchange Rate Information

We prepare our consolidated financial statements in Renminbi. This annual report contains translations of Renminbi amounts into U.S. dollars, and U.S. dollars into Renminbi, at RMB6.5250 to US$1.00, the noon buying rate on December 31, 2020 in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York. You should not assume that Renminbi amounts could actually be converted into U.S. dollars at these rates or at all. Translations of foreign currency amounts into RMB amounts for the purpose of preparing our audited consolidated financial statements included elsewhere in this annual report or our previous annual reports have been made at the exchange rates published by the PBOC.

Since July 21, 2005, the PRC government has followed a managed floating exchange rate system that allows the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. Under this system, the PBOC announces the closing price of a foreign currency traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each working day, and makes it the central parity for the trading against the Renminbi on the following working day. On August 11, 2015, the PBOC adjusted the quotation mechanism of the Renminbi central parity to also consider demand and supply in foreign exchange markets and price movements of major currencies, in addition to the closing price on the previous working day. On May 26, 2017, the PBOC introduced a “counter-cyclical factor” into its formula that determines a central parity of Renminbi against the U.S. dollar. Under the current mechanism, the central parity of the Renminbi against the U.S. dollar is determined based on the closing rate, changes in a basket of currencies and the counter-cyclical factor. See “Item 3. Key Information—Risk Factors—Risks Relating to the People’s Republic of China—Government control of currency conversion and the fluctuation of the Renminbi may materially and adversely affect our operations and financial results”. In 2020, the Renminbi appreciated by approximately 6.04% against the U.S. dollar. It remains unclear what further fluctuations may occur or what impact this will have on the value of the Renminbi.

Although PRC governmental policies were introduced in 1996 to reduce restrictions on the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital account items, such as foreign direct investments, loans or securities, usually requires the approval of the SAFE and other relevant authorities. Although experimental policies were introduced in certain pilot areas such as the Shanghai free trade zone to reduce foreign exchange control, restrictions on the convertibility of Renminbi into foreign currency are still in force in most parts of China.

The Hong Kong dollar is freely convertible into other currencies, including the U.S. dollar. Since October 17, 1983, the Hong Kong dollar has been linked to the U.S. dollar at the rate of HK$ 7.80 to US$ 1.00. The central element in the arrangements which give effect to the link is that by agreement between the Hong Kong government and the three Hong Kong banknote issuing banks, The Hongkong and Shanghai Banking Corporation Limited, Standard Chartered Bank (Hong Kong) Limited and the Bank of China (Hong Kong) Limited, certificates of debts, which are issued by the Hong Kong Government Exchange Fund to the banknote issuing banks to be held as cover for their banknote issues, are issued and redeemed only against payment in U.S. dollars, at the fixed exchange rate of HK$7.80 to US$1.00. When the banknotes are withdrawn from circulation, the banknote issuing banks surrender the certificates of debts to the Hong Kong Government Exchange Fund and are paid the equivalent U.S. dollars at the fixed rate.

The market exchange rate of the Hong Kong dollar against the U.S. dollar continues to be determined by the forces of supply and demand in the foreign exchange market. However, against the background of the fixed rate which applies to the issue of the Hong Kong currency in the form of banknotes, as described above, the market exchange rate has not deviated materially from the level of HK$7.80 to US$1.00 since the link was first established. The Hong Kong government has stated its intention to maintain the link at that rate, and it, acting through the Hong Kong Monetary Authority, has a number of means by which it may act to maintain exchange rate stability. Exchange rates between the Hong Kong dollar and other currencies are influenced by the linked rate between the U.S. dollar and the Hong Kong dollar.

B. CAPITALIZATION AND INDEBTEDNESS

Not Applicable.

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

Not Applicable.

D. RISK FACTORS

Our business, financial condition and results of operations can be affected materially and adversely by any of the following risk factors. The risks and uncertainties described below may not be the only ones that we face. Additional risks and uncertainties that we are not aware of or that we currently believe are immaterial may also adversely affect our business, financial condition or results of operations.

Risks Relating to Our Business

Our investments are subject to risks.

We are exposed to potential investment losses if there is an economic downturn in China.

Until November 2006, we were only permitted to invest the premiums and other income we receive in investments in China. We obtained the approval to invest overseas with our foreign currency denominated funds in November 2006. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”. However, we have continued to make our investments mainly in China and, as of December 31, 2020, approximately 98.93% of our total investment assets were in China. In particular, as of December 31, 2020, approximately 45.56% of our total investment assets consisted of debt securities including Chinese government bonds, government agency bonds, corporate bonds, subordinated bonds and other debt securities as permitted by relevant government agencies; approximately 13.32% of our total investment assets consisted of term deposits with Chinese banks, of which 37.53% were placed with the five largest Chinese state-owned commercial banks; and approximately 16.08% of our total investment assets consisted of loans provided to Chinese entities and individuals, including policy loans, investment in debt investment plans and trust schemes. A serious downturn in the Chinese economy may lead to investment losses, which would reduce our earnings.

The PRC securities markets are still emerging markets, which may expose us to risks of loss from our investments there.

As of December 31, 2020, we had RMB700,748 million (US$107,394 million) invested in equity securities, among which RMB251,883 million (US$38,603 million) were invested in PRC securities markets, including securities investment funds and shares traded on the securities markets in China. These securities investment funds and shares are primarily invested in equity securities that are issued by Chinese companies and traded on China’s stock exchanges. The PRC securities markets are still emerging markets and are characterized by evolving regulatory, accounting and disclosure requirements. This may from time to time result in significant price volatility, unexpected losses or lack of liquidity. These factors could cause us to incur losses on our publicly traded investments. Also, as one of the largest institutional investors in China, we may from time to time hold significant positions in many securities in which we invest, and any decision to sell or any perception in the market that we are a major seller of a security could adversely affect the liquidity and market price of that security.

Defaults on our debt investments may materially and adversely affect our profitability.

Approximately 45.56% of our investment assets as of December 31, 2020 were comprised of debt securities. The issuers whose debt securities we hold may fail to pay or otherwise default on their obligations due to bankruptcy, a lack of liquidity, a downturn in the economy, operational failures or other reasons. Losses due to these defaults could reduce our profitability.

Defaults on our investments in loans may materially and adversely affect our profitability.

Approximately 16.08% of our investment assets as of December 31, 2020 were comprised of loans, including policy loans, investments in debt investment plans and trust schemes. The borrowers to whom we provided loans may fail to pay or otherwise default on their obligations due to bankruptcy, a lack of liquidity, a downturn in the economy, operational failures or other reasons. Losses due to these defaults could reduce our profitability.

Investments in new investment channels may not lead to improvements in our rate of investment return or we may incur losses.

The CBIRC has in recent years significantly broadened the investment channels of Chinese life insurance companies. We have considered these alternative channels when making investments. For example, in 2016, we made our first investment in shares traded on the Hong Kong Stock Exchange through the Shanghai-Hong Kong Stock Connect between China’s mainland markets and the Hong Kong Stock Exchange, and we also made our first investment in interbank negotiable certificates of deposit. In 2019, we made our first investment in bonds issued by banks for capital replenishment. However, our experience with these new investment channels, especially overseas channels, is limited, and these new channels are still subject to evolving regulatory requirements, which may increase the risk exposure of our investments.

We may incur foreign exchange and other losses for our investments denominated in foreign currencies.

A portion of our investment assets are held in foreign currencies. We are authorized by the CBIRC to invest our assets held in foreign currencies in the overseas financial markets as permitted by the CBIRC. Thus, our investment results may be subject to foreign exchange gains and losses due to changes in exchange rates as well as the volatility and various other factors of overseas capital markets, including, among others, increase in interest rates. We recorded RMB119 million (US$18 million) in foreign exchange gains for the year ended December 31, 2020, resulting mainly from the change in foreign exchange rates applicable to our assets and liabilities held in foreign currencies. However, it remains unclear what further fluctuations may occur or what impact this will have on the value of the Renminbi. Future movements in the exchange rate of RMB against the U.S. dollar and other foreign currencies may adversely affect our results of operations and financial condition.

The COVID-19 pandemic could have an adverse impact on our business.

The COVID-19 pandemic and the measures taken by governments around the world to contain its spread has negatively impacted the global economy, disrupted travel and business operations and created significant volatility and declines in the financial markets. Although, as of the date of this annual report, the travel and business restrictions imposed in China have largely been lifted, a further imposition of such restrictions, if the pandemic were to worsen, may interfere with our operations by, among other things, affecting the recruitment of exclusive agents or preventing face to face sales, which could have a material adverse impact on sales of our products. In addition, the value of the investments we hold, the income we receive from such investments, and our ability to adjust our portfolio mix, could be affected if there were further volatility or declines in the stock markets or if interest rates were to decline further as a result of government stimulus measures. See “Item 11 Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Risk”. Furthermore, if a worsening of the COVID-19 pandemic were to result in increased claims for certain insurance products, it could reduce our earnings. Although the COVID-19 pandemic has not had a material adverse impact on our business as of the date of this annual report, we cannot guarantee that this will continue to be the case if the pandemic were to worsen.

We are exposed to changes in interest rates.

Changes in interest rates may affect our profitability.

Our profitability is affected by changes in interest rates. Interest rates are highly sensitive to many factors, including economic growth rate, inflation, governmental monetary and tax policies, domestic and international economic and political conditions, financial regulatory requirements and other factors beyond our control. If interest rates were to increase significantly in the future, surrenders and withdrawals of life insurance and annuity policies and contracts may increase as policy holders may seek other investments with higher perceived returns. This process may result in cash outflows requiring that we sell investment assets at a time when the prices of those assets are adversely affected by the increase in market interest rates, which may result in realized investment losses. However, if interest rates were to decline in the future, the income we realize from our investments may decrease, affecting our profitability. In addition, as instruments in our investment portfolio mature, we might have to reinvest the funds we receive in investments bearing low interest rates, which may also affect our profitability. See “Item 11 Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Risk”.

On June 10, 1999, the CIRC set the maximum guaranteed interest rate which insurance companies could commit to pay on new policies at 2.50% (compounded annually) and, in response, we set the guaranteed interest rates on our products at a range of between 1.50% and 2.50%. In August 2013, February 2015 and September 2015, the CIRC removed the 2.50% cap on the guaranteed interest rates for traditional non-participating insurance policies, universal life insurance policies and participating life insurance policies, respectively. From October 1, 2015, the guaranteed interest rates of all long-term life insurance products are to be decided by insurance companies at their discretion in accordance with the principle of prudence, but CBIRC approval is required for products with guaranteed interest rates above the maximum valuation rate set by the CBIRC. This maximum valuation rate varies by product. Although the removal of the 2.50% cap has not resulted in any material impact on the profitability of our insurance policies in force, it could result in the increase of the guaranteed interest rates of our new products and the decrease of our spread. We cannot assure you that the removal of the 2.50% cap will not lead to a material adverse effect on our business, results of operations or financial condition.

As of December 31, 2020, the average guaranteed rate of return for all of our long-term insurance policies in force was 2.77%, while our investment yields for the years ended December 31, 2020, 2019 and 2018 were 5.30%, 5.24% and 3.29%, respectively. See “Item 4. Information on the Company—Business Overview—Investments—Investment Results”. If the rates of return on our investments were to fall below the minimum rates we guarantee, our profitability would be materially and adversely affected.

Because of the general lack of long-term fixed income securities in the Chinese capital markets, we are unable to match closely the duration of our assets and liabilities, which increases our exposure to interest rate risk.

Like other insurance companies, we seek to manage interest rate risk through managing, to the extent possible, the average duration of our investment assets and the insurance policy liabilities they support. Matching the duration of our assets to their related liabilities reduces our exposure to changes in interest rates, because the effect of the changes largely will be offset against each other. However, the limited availability of long-duration investment assets in the markets in which we invest, has resulted in, and in the future may result in, the duration of our assets being shorter than that of our liabilities, particularly with respect to liabilities with durations of more than 20 years. Furthermore, the Chinese financial markets currently do not provide adequate financial derivative products for us to hedge our interest rate risk. We believe that with the development of the Chinese capital markets and the gradual easing of the investment restrictions imposed on insurance companies in China, our ability to match the duration of our assets to that of our liabilities will improve. We also seek to manage the risk of duration mismatch by focusing on product offerings whose maturity profiles are in line with the duration of investments available to us in the prevailing investment environment. However, until we are able to match more closely the duration of our assets and liabilities, we will continue to be exposed to interest rate changes, which may materially and adversely affect our business and earnings.

Our growth is dependent on our ability to attract and retain productive agents.

A substantial portion of our business is conducted through our exclusive agents. Because of differences in productivity, some of our sales agents are responsible for a disproportionately high percentage of our sales of individual products. If we are unable to retain and build on this core group of highly productive agents, our business could be materially and adversely affected. Increasing competition for agents from other insurance companies and business institutions and increasing labor costs in China may also force us to increase the compensation of our agents, which would increase our operating costs and reduce our profitability. As the market competition for qualified agents increases, our costs of attracting and retaining qualified agents may increase.

If we are unable to develop other distribution channels for our products, our growth may be materially and adversely affected.

Commercial banks are rapidly emerging as some of the fastest growing distribution channels in China. Many newly established domestic and foreign-invested life insurance companies have been focusing on commercial banks as one of their main distribution channels. In addition, with the relaxation of the regulatory restrictions of ownership by commercial banks in insurance companies, the number of insurance companies owned or controlled by commercial banks is increasing. Among the six largest Chinese state-owned commercial banks, five banks and the controlling shareholder of the remaining one have set up their own life insurance companies. These insurance companies are able to benefit from their holding relationships with these commercial banks to develop bancassurance as their main distribution channels. We do not have exclusive arrangements with any of the commercial banks through which we sell life insurance and annuity products, and thus our sales may be materially and adversely affected if one or more commercial banks choose to favor our competitors’ products over our own. In addition, as the bancassurance market becomes increasingly competitive, commercial banks may demand higher commission rates, which could increase our cost of sales and reduce our profitability. If we are unable to continue to develop our alternative distribution channels, our growth may be materially and adversely affected.

Agent and employee misconduct is difficult to detect and deter and could harm our reputation or lead to regulatory sanctions or litigation costs.

Agent or employee misconduct could result in violations of law by us, regulatory sanctions, litigation or serious reputational or financial harm. Misconduct could include:

•

engaging in misrepresentation or fraudulent activities when marketing or selling insurance policies or annuity contracts to customers;

•

hiding unauthorized or unsuccessful activities, resulting in unknown and unmanaged risks or losses; or

•

otherwise not complying with laws or our control policies or procedures.

We cannot always deter agent or employee misconduct, and the precautions we take to prevent and detect these activities may not be effective in all cases. We have experienced agent and employee misconduct that has resulted in litigation and administrative actions against us and these agents and employees, and in some cases criminal proceedings and convictions against the agent or employee in question. None of these actions has resulted in material losses, damages, fines or other sanctions against us. We cannot assure you, however, that agent or employee misconduct will not lead to a material adverse effect on our business, results of operations, financial condition or prospects.

Our business is dependent on our ability to attract and retain key personnel, including senior management, underwriting personnel, actuaries, information technology specialists, investment managers and other professionals.

The success of our business is dependent to a large extent on our ability to attract and retain key personnel who have in-depth knowledge and understanding of the life insurance market in China, including members of our senior management, qualified underwriting personnel, actuaries, information technology specialists and experienced investment managers. As of the date of this annual report, we do not carry key personnel insurance for any of these personnel. We compete to attract and retain these key personnel with other life insurance companies and financial institutions, some of which may offer better compensation arrangements. Existing insurers are expanding their operations and the number of other financial institutions is growing. As the insurance and investment businesses continue to expand in China, we expect that competition for these personnel will increase in the future. Although we have not had difficulty in attracting and retaining qualified key personnel in the past, we cannot guarantee that this will continue to be the case. If we were unable to continue to attract and retain key personnel, our business and financial performance could be materially and adversely affected.

Differences in future actual operating results from the assumptions used in pricing and establishing reserves for our insurance and annuity products may materially affect our earnings.

Our earnings depend significantly upon the extent to which our actual operating results are consistent with the assumptions used in pricing and establishing the reserves for insurance contracts in our financial statements. Our assumptions include those for discount rate, mortality, morbidity, lapse rate and expenses. To the extent that trends in actual experiences are less favorable than our underlying assumptions used in establishing these reserves, and these trends are expected to continue in the future, we could be required to increase our reserves. Any such increase could have a material adverse effect on our profitability and, if significant, our financial condition.

We establish the reserves for insurance contracts based on the use of assumptions for discount rate, mortality, morbidity, lapse rate and expenses. These assumptions are based on our previous experience and the data published by other Chinese life insurers, as well as judgments made by the management. These assumptions may deviate from our actual experience, and, as a result, we cannot determine precisely the amounts which we will ultimately pay to fulfill our obligations under the insurance contracts or when these payments will need to be made. These amounts may vary from the estimated amounts, particularly when those payments may not occur until well into the future. The discount rate assumption is affected by certain factors, such as further macro-economy, monetary and exchange rate policies, capital market results and availability of investment channels to invest our insurance funds. We review and update the assumptions used to evaluate the reserves periodically, and establish the reserves for insurance contracts based on such assumptions. If the reserves originally established for future policy benefits prove inadequate, we must increase our reserves established for future policy benefits, which may have a material effect on our earnings and our financial condition.

We have data available for a shorter period of time than life insurance companies operating in some other countries do and, as a result, less claims experience on which to base some of the assumptions used in establishing our reserves. For a discussion of how we establish our assumptions for mortality, morbidity and lapse rate, see “Item 5. Operating and Financial Review and Prospects—Critical Accounting Policies”. Given the limited nature of this experience, it is possible that our actual claims could vary significantly from the assumptions used.

Our risk management and internal reporting systems, policies and procedures may leave us exposed to unidentified or unanticipated risks, which could materially and adversely affect our businesses or result in losses.

Our policies and procedures to identify, monitor and manage risks may not be fully effective. Many of our current methods of managing risk and exposures are based upon our use of observed historical market behavior or statistics based on historical models. As a result, these methods may not fully predict future exposures, which could be significantly greater than what the historical measures indicate. In addition, risk management depends upon the evaluation of information regarding markets, customers or other matters that is publicly available or otherwise accessible to us, which may not always be accurate, complete, up-to-date or properly evaluated. In addition, a significant portion of business information needs to be centralized from our many branch offices. Management of operational, legal and regulatory risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective. Failure or the ineffectiveness of these systems could materially and adversely affect our business or result in losses.

We are likely to offer a broader and more diverse range of insurance and investment products in the future as the insurance market in China continues to develop. At the same time, we anticipate that we may invest in a significantly broader range of asset classes. The combination of these factors will require us to continue to enhance our risk management capabilities and is likely to increase the importance of our risk management policies and procedures to our results of operations and financial condition. If we fail to adapt our risk management policies and procedures to our changing business, our business, results of operations and financial condition could be materially and adversely affected.

Catastrophes could materially reduce our earnings and cash flow.

We could in the future experience catastrophic losses that may have an adverse impact on the business, results of operations and financial condition of our insurance business. Catastrophes can be caused by various events, including terrorist attacks, earthquakes, hurricanes, floods and fires, as well as pandemics and epidemics, including the recent COVID-19 outbreak.

We establish liabilities for claims arising from a specific catastrophe after assessing the exposure and damages arising from the event. Although we have purchased catastrophe reinsurance in order to reduce our catastrophe exposure, we cannot assure you that any significant catastrophic event will not have a material adverse effect on us.

Current or future litigation, arbitration and regulatory proceedings could result in financial losses or harm our businesses.

We are involved in litigation and arbitration proceedings involving our insurance operations on an ongoing basis. In addition, the CBIRC as well as other PRC governmental agencies, including tax and audit bureaus and the PBOC, from time to time make inquiries and conduct examinations or investigations concerning our compliance with PRC laws and regulations. These litigation, arbitration and administrative proceedings have in the past resulted in payments of insurance benefits, damage awards, settlements or administrative sanctions, including fines, which have not been material to us. We currently have control procedures in place to monitor our litigation, arbitration and regulatory exposure and take appropriate actions. See “Item 8. Financial Information—Consolidated Financial Statements and Other Financial Information—Legal and Regulatory Proceedings”. While we cannot predict the outcome of any pending or future litigation, arbitration, examination or investigation, we do not believe that any pending legal matter will have a material adverse effect on our business, financial condition or results of operations. However, we cannot assure you that any future litigation, arbitration or regulatory proceeding will not have an adverse outcome, which could have a material adverse effect on our operating results or cash flows. See “Item 8. Financial Information—Consolidated Financial Statements and Other Financial Information—Legal and Regulatory Proceedings”.

The embedded value information we present in this annual report is based on several assumptions and may vary significantly as those assumptions are changed.

In order to provide investors with an additional tool to understand our economic value and business results, we have disclosed information regarding our embedded value, as discussed in the section entitled “Item 8. Financial Information—Embedded Value”. The embedded value is an estimate of our economic value (excluding the value attributed to new business after the valuation date) and is based on a discounted cash flow valuation determined using commonly applied actuarial methodologies. Standards with respect to the calculation of embedded value are still evolving, however, and there is no universal standard which defines the form, calculation method or presentation format of the embedded value of an insurance company. Assumptions used in embedded value calculations include rate of investment return, discount rate, mortality, morbidity, expenses and surrender rate, as well as certain macro factors, many of which are beyond our control. These assumptions may deviate significantly from our actual experience and therefore the embedded value is consequently not inherently predictive. Furthermore, since our actual market value is determined by investors based on a variety of information available to them, the embedded value should not be construed to be a direct reflection of our performance. The inclusion of the embedded value in this annual report should not be regarded as a representation by us, our management or any other person as to our future profitability. Because of the technical complexity involved in embedded value calculations and the fact that embedded value estimates vary materially as key assumptions are changed, you should read the discussion under the section entitled “Item 8. Financial Information—Embedded Value” in its entirety. You should use special care when interpreting embedded value results and should not place undue reliance solely on them. See also “Forward-Looking Statements”.

A computer system failure, cyber-attacks or other security breaches may disrupt our business, damage our reputation and adversely affect our results of operations and financial condition.

We use computer systems to store, retrieve, evaluate and utilize customer and company data and information. Our business is highly dependent on our ability to access these systems to perform necessary business functions such as developing and selling insurance products, providing customer support, policy management, filing and paying claims, managing our investment portfolios and producing financial statements. Although we have designed and implemented a variety of security measures and backup plans to prevent or limit the effect of failure, our computer systems may be vulnerable to disruptions as a result of natural disasters, man-made disasters, criminal activities, pandemics or other events beyond our control. In addition, our computer systems may be subject to computer viruses or other malicious codes, unauthorized access, cyber-attacks or other computer-related penetrations. The failure of our computer systems for any reason could disrupt our operations and may adversely affect our business, results of operations and financial condition. Although we have not experienced such a computer system failure or security breach in the past, we cannot assure you that we will not encounter a failure or security breach in the future.

We retain confidential information on our computer systems, including customer information and proprietary business information. In addition, for business purposes, from time to time customer information is transmitted between our computer systems and those of third parties, such as third-party agents selling insurance products for us. Any compromise of the security or other errors of our computer systems or those arising during the information transmission process that result in the disclosure of personally identifiable customer information could damage our reputation, expose us to litigation, increase regulatory scrutiny and require us to incur significant technical, legal and other expenses.

The auditors’ reports included in this annual report are prepared by relying on audit work which is not inspected by the Public Company Accounting Oversight Board and, as such, investors may be deprived of the benefits of such inspection.

Auditors of companies that are registered with the SEC and traded publicly in the United States, including our independent registered public accounting firm, must be registered with the US Public Company Accounting Oversight Board (United States), or the PCAOB, and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. Because we have substantial operations within China and our independent registered public accounting firm is based in China, the PCAOB is currently unable to conduct inspections of the work of our auditor as it relates to those operations without the approval of the Chinese authorities, and thus our auditor’s work related to our operations in China is not currently inspected by the PCAOB.

This lack of PCAOB inspection of audit work performed in China prevents the PCAOB from regularly evaluating the audit work of any auditor that was performed in China including those performed by our auditor. As a result, investors may be deprived of the full benefits of PCAOB inspections.

The inability of the PCAOB to conduct inspections of audit work performed in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures as compared to auditors in other jurisdictions that are subject to PCAOB inspections on all of their work. Investors may lose confidence in our reported financial information and procedures and the quality of our consolidated financial statements.

We may be adversely affected if additional remedial measures are imposed on the four China-based accounting firms which reached settlement with the SEC in the administrative proceedings brought by the SEC against them.

In December 2012, the SEC initiated administrative proceedings against five accounting firms in China, alleging that they refused to produce audit work papers and other documents related to certain China-based companies under investigation by the SEC for potential accounting fraud. In January 2014, an SEC administrative law judge ruled in favor of the SEC, issuing an initial decision which censured each of the five accounting firms for failure to provide their audit work papers to the SEC and ordered a six-month suspension of the China-based affiliates of four of the five accounting firms’ right to practice before the SEC. The accounting firms have appealed the decision of the administrative law judge to the SEC, and the decision will not come into force unless and until an order of finality is issued by the SEC. We are not subject to any SEC investigations, nor are we involved in the proceedings brought by the SEC against the accounting firms. However, the China affiliate of the independent registered public accounting firm that has issued the auditor’s report included in our annual reports filed with the SEC for the 2013, 2014 and 2015 fiscal years, which is also our independent registered public accounting firm for the 2016, 2017, 2018, 2019 and 2020 fiscal years, is one of the five accounting firms named in the SEC’s proceedings.

In February 2015, four of the five accounting firms, including the China affiliate of the independent registered public accounting firm that has issued the auditor’s report included in our annual report filed with the SEC for the 2013, 2014 and 2015 fiscal years, which is also our independent registered public accounting firm for the 2016, 2017, 2018, 2019 and 2020 fiscal years, each agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC. The settlement required the firms to follow detailed procedures and to seek to provide the SEC with access to audit documents of China-based companies via the CSRC. If future document productions fail to meet the specified criteria, the SEC retains authority to impose a variety of additional remedial measures on the firms depending on the nature of the failure, including an automatic six-month bar on the performance of certain audit work, commencement of a new proceeding or the resumption of the current proceeding by the SEC. While we cannot predict if the SEC will further review the four China-based accounting firms’ compliance with specified criteria or if the results of such a review would result in the SEC imposing penalties, if they are subject to additional remedial measures, we may be adversely affected, along with other U.S.-listed companies in China audited by these accounting firms. If none of the China-based auditors are able to continue to perform audit work for China-based companies listed in the U.S., we will not be able to meet the reporting requirements under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which may ultimately result in our deregistration by the SEC and delisting of our ADSs from the NYSE.

The enactment of the Holding Foreign Companies Accountable Act may result in enhanced disclosure requirements for us and our delisting from the NYSE and deregistration from the SEC.

On December 18, 2020, the Holding Foreign Companies Accountable Act, or HFCAA, was signed into law. The HFCAA requires the SEC to identify each issuer trading on U.S. exchanges that has retained a registered public accounting firm to issue an audit report where the firm has a branch or office located in a foreign jurisdiction, and the PCAOB has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction. Registrants so identified, or Identified Issuers, are required to submit documentation to the SEC that establishes that they are not owned or controlled by a governmental entity in that foreign jurisdiction. In addition, if the registrant is determined to be an Identified Issuer for three consecutive years, it will be delisted from U.S. exchanges and its securities will be prohibited from trading in the United States. Identified Issuers that are foreign issuers will also be subject to enhanced disclosure requirements, including disclosure on government ownership or control of the issuer, the name of each official of the Chinese Communist Party who is a member of the issuer’s board of directors, and whether the issuer’s articles of incorporation contain any charter of the Chinese Communist Party.

On March 24, 2021, the SEC adopted interim final amendments to implement the disclosure and submission requirements of the HFCAA. A registrant will not be required to comply with theses interim final amendments until it has been identified by the SEC as an Identified Issuer. As of the date of this annual report, the SEC has not issued rules to establish the process for identifying such an Identified Issuer and to address the implementation of the trading prohibitions in the HFCAA. The SEC is also seeking public comments on the interim final amendments. It remains unclear when the SEC will release rules regarding the identification process and the implementation of the trading prohibitions or whether the SEC will issue any further rules to amend the interim final amendments.

The enactment of the HFCAA and any additional implementation rules may have a material adverse impact on the stock performance of China-based issuers listed in the United States, including causing investor uncertainty for affected issuers, including us, and affecting the market price of our ADSs. In addition, whether the PCAOB will be able to conduct inspections of our auditors in the next three years, or at all, is subject to substantial uncertainty and depends on a number of factors out of our control. If we are unable to meet the PCAOB inspection requirement in time, we could be identified by the SEC pursuant to the HFCAA and if so, we will be subject to enhanced disclosure requirements and may face delisting from the NYSE and deregistration form the SEC. In addition, if additional remedial measures are imposed on the Chinese affiliates of the accounting firms, including our independent registered public accounting firm, in administrative proceedings brought by the SEC alleging the firms’ failure to meet specific criteria set by the SEC with respect to requests for the production of documents, we could be unable to timely file future financial statements in compliance with the requirements of the Exchange Act. The audit committee is aware of the policy restriction and regularly communicated with our independent auditor to ensure compliance.

United States Foreign Account Tax Compliance Act

The Foreign Account Tax Compliance Act, or FATCA, generally requires a foreign financial institution, or FFI, to enter into an FFI agreement under which it will agree to identify and provide the United States Internal Revenue Service, or the IRS, with information regarding accounts, including certain insurance policies, held by U.S. persons and U.S.-owned foreign entities, or be subject to a 30% withholding tax on “withholdable payments”, which include, among other items, payments of U.S.-source interest and dividends and gross proceeds from the sale or other disposition of property that may produce U.S.-source interest or dividends. Proposed regulations promulgated on December 13, 2018, or the proposed FATCA regulations, eliminate withholding on payments of gross proceeds from the sale or other disposition of property that may produce U.S.-source interest or dividends. In addition, an FFI that has entered into an FFI agreement may be required to withhold on certain “foreign passthrough payments” that it makes to FFIs that have not entered into their own FFI agreements or to account holders who do not respond to requests to confirm their U.S. person status and/or do not agree to allow the FFI to report certain account related information to the IRS. Under the proposed FATCA regulations, withholding on foreign passthru payments will begin no earlier than the date that is two years after the date of publication in the Federal Register of final regulations that define the term “foreign passthru payment”. Consequently, the scope of any withholding on foreign passthru payments is uncertain at this time.

The United States and the PRC have agreed in substance on the terms of an intergovernmental agreement, or IGA, that is intended to facilitate the type of information reporting required under FATCA. Under the agreed terms, instead of reporting directly to the IRS, Chinese FFIs are required to report specified account information directly to the PRC tax authority, which will then pass that information to the IRS. While compliance with the IGA will not eliminate the risk of withholding described above, it is expected to reduce that risk for FFIs that are resident in China. Although the IGA has not yet been officially signed, the PRC and the United States have agreed to treat the IGA as in effect from June 26, 2014, provided that the PRC continues to demonstrate “firm resolve” to sign the IGA as soon as possible. If the United States and the PRC ultimately fail to officially sign the IGA, then the FATCA reporting and withholding regime described in the prior paragraph will apply to Chinese FFIs.

We will closely monitor developments regarding FATCA and the IGA. If we are required to comply with the terms of the IGA or FATCA, as applicable, we expect that our compliance costs will increase. If we do not comply with the terms of the IGA or FATCA, as applicable, then certain payments to us will be subject to withholding under FATCA. However, since the text of the IGA has not been released, and regulations and other guidance remain under development, the future impact of this law on us is uncertain.

U.S. Holders will be subject to adverse tax consequences if we are considered to be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes

If we are considered a PFIC for U.S. federal income tax purposes, a U.S. Holder will be subject to adverse tax consequences. A non-U.S. corporation will generally be a PFIC if 75% or more of its gross income constitutes “passive income” or 50% or more of its assets produce “passive income” or are held for the production of “passive income”. The PFIC provisions, as modified by the Tax Cuts and Jobs Act, or the TCJA, specifically exclude from the definition of “passive income” any income “derived in the active conduct of an insurance business by a qualifying insurance corporation”. A non-U.S. corporation is a qualifying insurance corporation if it would be subject to tax as an insurance company if it were a domestic corporation and (i) loss and loss adjustment expenses and certain reserves, or “applicable insurance liabilities”, constitute more than 25% of the non-U.S. corporation’s gross assets for the relevant year or (ii) a U.S. Holder makes an election to apply an alternative facts and circumstances test that applies only in certain runoff-related or ratings-related circumstances involving the insurance business. We make various simplifying assumptions to estimate the asset composition and value of our subsidiaries in order to apply the PFIC tests to the income and assets of our 25% or greater owned subsidiaries.

The IRS released final and proposed Treasury regulations regarding the application of the PFIC rules to insurance companies in December 2020. The proposed Treasury regulations are not yet in force but are proposed to be effective for taxable years of U.S. Holders beginning on or after the date that final regulations are issued. The proposed Treasury regulations provide that a company is engaged in the active conduct of an insurance business only if it satisfies a factual requirements test or a “bright-line” test providing that the active conduct requirement is met if the insurance company’s “active conduct percentage” is at least 50%. The factual requirements test requires a company’s officers and employees to carry out substantial managerial and operational activities on a regular and continuous basis with respect to underwriting, investment, contract and claim management and sales activities, and perform virtually all of the active decision-making functions relevant to its underwriting functions. In general, a company’s active conduct percentage is determined by dividing the company’s aggregate expenses for certain insurance-related services of its officers and employees (excluding investment activities) by the company’s aggregate expenses for such insurance-related services, including those paid to unaffiliated persons (excluding investment activities). Activities of officers and employees of certain affiliates may be considered for both the factual requirements test and the “bright-line” test. We cannot assure you that we will not be treated as a PFIC as a result of the finalization of these regulations. Although we believe that we were not classified as a PFIC in 2020, there is no assurance that the IRS will not take a contrary position and assert that we are a PFIC, and no assurances can be given that we will not become a PFIC at some point in the future. U.S. Holders are urged to consult their tax advisors regarding the effects of the PFIC rules.

Risks Relating to the PRC Life Insurance Industry

We expect competition in the Chinese insurance industry to increase, which may materially and adversely affect the growth of our business.

We face competitive pressures from both domestic and foreign-invested life insurance companies operating in China, as well as from property and casualty insurance companies, which may compete with our accident and short-term health insurance businesses, and other financial institutions that sell other financial investment products in competition with ours. In addition, the establishment of other professional health insurance companies and pension annuities companies may also lead to greater competition in the health insurance business and commercial pension insurance business. If we are not able to adapt to these increasingly competitive pressures in the future, our growth rate may decline, which could materially and adversely affect our earnings.

Competition among domestic life insurance companies is increasing.

According to statistical information derived from China Insurance Yearbook and the market share information calculated based on these statistical information, in 2019, the last year for which the market information for separate geographic markets is available, our closest competitors are Ping An Life Insurance Company of China, Ltd., or Ping An Life, China Pacific Life Insurance Co., Ltd., or China Pacific Life, Taiping Life Insurance Company Limited, or Taiping Life and New China Life Insurance Company Ltd., or New China Life. Ping An Life, China Pacific Life, Taiping Life, New China Life and we together accounted for approximately 56% of the life insurance premiums in China in 2019, with our market share in China remaining at approximately 20.4% in 2019. Each of Ping An Life, China Pacific Life, Taiping Life and New China Life has operated in the Chinese insurance market for more than 15 years, and each has a recognized brand name. In 2019, Ping An Life had a greater market share than we did in Shanghai, Guangdong, Shenzhen, Beijing, Tianjin, Heilongjiang, Liaoning, Dalian, Ningbo, Jilin, Qingdao, Hubei, Chongqing, Hainan and Xiamen, Taiping Life had a greater market share than we did in Qingdao, and New China Life had a greater market share than we did in Beijing.

We also face competition from insurance companies owned or controlled by commercial banks. Among the six largest Chinese state-owned commercial banks, five banks and the controlling shareholder of the remaining one have set up their own life insurance companies. These insurance companies are able to benefit from their holding relationships with these commercial banks to develop bancassurance as their main distribution channels. In addition, we also face competition from smaller insurance companies, which may have competitive advantages in various regions in which we operate, and new entrants to the group life insurance market, including professional pension companies that are being established pursuant to a set of regulations promulgated by the Ministry of Human Resources and Social Security of the PRC, and new entrants to the health insurance industry, including newly approved and established professional health insurance companies, following Chinese government’s adoption of policies that encourage the development of health insurance and improved health care in China.

Competition from foreign-invested life insurance companies is increasing, as restrictions on their operations in China are relaxed.

Foreign-invested life insurance companies are insurance companies in which foreign entities hold at least a 25% interest. Foreign-invested life insurers have been permitted to sell individual and group life insurance, health insurance and annuity products nationwide in China since December 2004. According to statistical information derived from China Insurance Yearbook and the market share information calculated based on these statistical information, in 2019, foreign-invested insurers had a life insurance market share of approximately 10.1%. From January 1, 2020, foreign investors are allowed to own 100% in Chinese life insurers. We believe that the relaxation of the restrictions on foreign-invested insurers will continue to increase the competitive pressures we are facing.

We are likely to face increasing competition from property and casualty insurance companies and other companies offering products that compete with our own.

In addition to competition from life insurance companies, we face competition from other companies that may offer products that compete with our own, including:

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Property and casualty companies. Beginning on January 1, 2003, property and casualty insurance companies have been permitted to sell short-term health insurance and accident products, but only with regulatory approval. There were 87 property and casualty insurers as of December 31, 2019. We believe property and casualty insurers have the competitive advantage of being able to bundle, or cross-sell, short-term health and accident products with the other non-life insurance products that they are currently selling to their existing and potential customers. We believe this will lead to greater competition in the accident and health insurance sectors. On December 30, 2006, we established a property and casualty company, CLPCIC, with CLIC. While this joint venture mainly focuses on property insurance business, it also develops short-term health insurance and accident business. Its operations may have a negative impact on sales of our short-term health insurance and accident products in the future.

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Mutual fund companies, commercial banks and other financial services providers. We face increasing competition from other financial services providers, primarily licensed mutual fund companies, commercial banks providing personal banking services and offering various financial products, trust companies and securities brokerage firms licensed to manage separate accounts. These financial service providers provide a variety of financial investment products that may prove to be attractive to the public and thereby adversely affect the sale of some products we offer, including traditional life insurance policies with a savings feature, participating life insurance policies and annuities.

All of our institutional insurance agencies and brokers are required to obtain permits and registered. If a substantial number of our institutional insurance agencies and brokers fail to meet these qualification and registration requirements or this failure results in policyholders canceling their policies, our business may be materially and adversely affected.

Dedicated institutional insurance agencies and institutional insurance brokers are required under the PRC insurance law to register with the administration of market regulation, and obtain business licenses with the permits issued by the CBIRC. It also requires non-dedicated institutional insurance agencies to obtain registrations with the administration of market regulation with the permits issued by the CBIRC. We cannot assure you that all of our institutional agencies and brokers will obtain such permits. The enforcement of this requirement could adversely affect the composition and productivity of our distribution channel, which could have a material adverse effect on our business.

Further development of regulations in China may impose additional costs or restrictions on our activities.

We operate in a highly regulated industry. The CBIRC supervises and administers the insurance industry in China. In exercising its authority, it is given certain discretion to administer the law. China’s insurance regulatory regime is undergoing significant changes toward a more transparent regulatory process and a convergent movement toward international standards. Some of these changes may result in additional costs or restrictions on our activities. For example, the CIRC issued notices in September 2016 and May 2017 to further reinforce the regulation of life insurance products by requiring insurance companies to revise or improve the design of a number of insurance products. For instance, insurance companies are required to (i) increase the death coverage for insurance products including individual term life insurance, individual endowment insurance and individual whole life insurance products, and (ii) seek CIRC approval for universal insurance products with a guaranteed interest rate above 3%. CIRC also required that (i) whole life insurance, annuity insurance and care insurance products must not be designed as short-to-medium term products, (ii) the first payment of survival insurance benefits for endowment products and annuity products must only occur after five years since the policy has become effective, and the annual payment or partial payment must not exceed 20% of the paid premiums, and (iii) insurance companies must not design universal insurance products or investment-linked insurance products in the form of riders. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Regulation of products”. These new requirements apply to a number of key products sold by us. Although these requirements are consistent with our long-term development strategy, revising the design of a number of products during a short period of time may increase our operating costs and may adversely affect our business, results of operations and financial condition.

In addition, because the terms of our products are subject to regulations, changes in regulations may affect our profitability on the policies and contracts we issue. For instance, under the guidelines issued by the CIRC, the dividends on our participating products must be no less than 70% of the distributable earnings from participating products in accordance with CIRC requirements. If this level were to be increased in the future, our profitability could be materially and adversely affected. Furthermore, in August 2013, February 2015 and September 2015, the CIRC removed the 2.50% cap on the guaranteed interest rates for traditional non-participating insurance policies, universal life insurance policies and participating life insurance policies, respectively. From October 1, 2015, the guaranteed interest rates of all long-term life insurance products are to be decided by insurance companies at their discretion in accordance with the principle of prudence, but CBIRC approval is required for products with guaranteed interest rates above the maximum valuation rate set by the CBIRC, which varies by product. Although the removal of the 2.50% cap has not resulted in any material impact on the profitability of our insurance policies in force, it could result in the increase of the guaranteed interest rates of our new products and the decrease of our spread, and therefore we cannot assure you that the removal of the 2.50% cap will not lead to a material adverse effect on our business, results of operations or financial condition.

Our ability to comply with minimum solvency requirements is affected by a number of factors, and our compliance may force us to raise additional capital, which could increase our financing costs or be dilutive to our existing investors, or to reduce our growth.

In February 2015, the CIRC issued the major technical standards for a new set of solvency regulations, the “China Risk Oriented Solvency System”, or C-ROSS, with the aim of replacing the then current solvency requirements on Chinese insurance companies, or Solvency I. C-ROSS adopts the internationally accepted “three-pillar” regulatory system which includes quantitative capital requirements, qualitative regulatory requirements and market discipline mechanisms while its regulatory concept, models, methods and parameters are based on Chinese insurance market conditions. C-ROSS was officially implemented by the CIRC on January 1, 2016. Our core solvency adequacy ratio under C-ROSS as of December 31, 2020 was 260.10%, and our comprehensive solvency adequacy ratio under C-ROSS as of December 31, 2020 was 268.92%. While our solvency ratio is currently above the regulatory requirements, as we are exposed to potential insurance, market and investment risks, we cannot assure you that our solvency ratio under C-ROSS will always be above the required level. If our solvency ratio under C-ROSS is below the required solvency level, we may need to raise additional capital to meet our solvency requirement, including through additional issuance of capital replenishment bonds, which would increase our financing costs, or through additional issuance of shares, which would be dilutive to our existing investors. If we are not able to raise additional capital, we may be forced to reduce the growth of our business. A failure to meet minimum solvency requirement can also lead to various regulatory actions being taken by the CBIRC, which could have a material adverse effect on our business or financial condition. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Solvency requirements”.

Risks Relating to the Restructuring

CLIC has incurred substantial losses on the policies retained by it in the restructuring. If CLIC is unable to meet its obligations to its policyholders, it may seek to increase the level of dividends we pay, sell the China Life shares it owns or take other actions which may have a material adverse effect on the value of the shares our other existing investors own.

In connection with the restructuring, CLIC transferred to us (1) all long-term insurance policies (policies having a term of more than one year from the date of issuance) issued on or after June 10, 1999, having policy terms approved by or filed with the CIRC on or after June 10, 1999 and either (i) recorded as a long-term insurance policy as of June 30, 2003 in an actuarial database attached to the restructuring agreement as an annex or (ii) having policy terms for group supplemental medical insurance (fund type), (2) stand-alone short-term policies (policies having a term of one year or less from the date of issuance) issued on or after June 10, 1999, and (3) all riders supplemental to the policies described in clauses (1) and (2) above, together with the reinsurance contracts specified in an annex to the restructuring agreement. See “Item 4. Information on the Company—History and Development of the Company—Our Restructuring”. CLIC has incurred substantial losses on these non-transferred policies, primarily because the guaranteed interest rates it had committed to pay on these policies are higher than the investment return it was able to generate on its investment assets. This negative spread on non-transferred policies created substantial losses for CLIC and a resulting negative net worth. The amount of accumulated undistributed profits of CLIC itself is expected to remain negative in the short term.

In connection with the restructuring, CLIC established, together with the MOF, a special purpose fund for the purpose of paying claims under the non-transferred policies. The approval of the special purpose fund issued to CLIC provides that in the event there is any deficiency in the special purpose fund for so long as the fund is in existence, the MOF will provide support through the injection of funds to ensure the payments of benefits and claims to the policyholders of the non-transferred policies. See “Item 4. Information on the Company—History and Development of the Company—Our Restructuring”. In connection with the restructuring, we were advised by our PRC legal counsel, King & Wood, that (1) the MOF had the authority to issue this approval regarding the special purpose fund, (2) the approval was valid and effective, and (3) it had no reason to believe that the MOF will revoke the approval. We cannot assure you, however, that changes in law, facts or circumstances that may occur after such date will not affect the conclusions stated in such advice.

We cannot predict the amount of funds that will be available to the special purpose fund from CLIC’s own operations to satisfy its obligations to its policyholders as they become due. CLIC’s cash requirements and available cash resources will be affected by several factors which are subject to uncertainty, including prevailing interest rates and the returns on investment generated by CLIC’s assets, as well as the claims, expenses and persistency experience with respect to CLIC’s insurance policies. The cash resources available to CLIC will also depend in part on our profitability, which will affect the amount of our tax payments and hence the amount of refund contributed to the fund (if CLIC’s application for the extension of the period during which the income tax payments will be rebated is approved; See “Item 4. Information on the Company—History and Development of the Company—Our Restructuring”), the timing and amount of our dividend payments and the market prices of our shares and ADSs, which will affect the proceeds to CLIC from dispositions of our shares. If it is unable to satisfy its obligations to its policyholders from other sources, CLIC may seek, subject to our articles of association and applicable laws, to increase the amount of dividends we pay in order to satisfy its cash flow requirements. Any such increase in our dividend payments would reduce the funds available for reinvestment in our business. In addition, if we are unable to pay dividends in amounts sufficient to satisfy these requirements, CLIC may seek to sell its shareholdings in us or take other actions in order to satisfy these needs. The sale of these holdings or even the market perception of such a sale may materially and adversely affect the price of our shares.

The transfer of policies to us by CLIC and/or the separation of assets between CLIC and us may be subject to challenge.

In connection with the restructuring, we were advised by our PRC legal counsel, King & Wood, that (1) the transferred policies were legally and validly transferred to China Life and (2) following the restructuring, we would not have any continuing obligations to holders of the non-transferred policies who remain policyholders of CLIC and that there was no legal basis on which holders of the non-transferred policies can make a claim against China Life. We were advised by King & Wood that, although there was no specific law applicable to restructurings, these conclusions were supported by, among other things, the approval of the restructuring and various related matters by the State Council, the MOF and the CIRC; the support provided by the MOF with respect to the non-transferred policies as described above; and contract and other law. We cannot assure you that policyholders of CLIC, holders of transferred policies or other parties will not seek to challenge the transfer of the transferred policies or the separation of assets occurring as a consequence of the restructuring, or that a court would decide in a manner consistent with King & Wood’s conclusions. If the transfer of policies to us or the separation of assets were challenged successfully, our financial condition and results of operations would likely be materially and adversely affected.

We do not hold exclusive rights to the trademarks in the “China Life” name (in English and Chinese), the “ball” logos and other business related slogans and logos, and CLIC, which owns these trademarks, may take actions that would impair the benefits we derive from their use.

We conduct our business under the “China Life” brand name, the “ball” logos, the “C” mark and other business related slogans and logos. CLIC owns these trademarks and has registered them with the Trademark Office of the SAMR. CLIC has entered into a trademark license agreement with us, under which CLIC has agreed to grant us and our branches a royalty-free license to use the “China Life” brand name, the “ball” logos and the “C” mark.

Although CLIC has undertaken in a non-competition agreement with us not to compete with us in China, without our prior consent in writing, in any life, accident and health insurance and any other businesses in China which may compete with our insurance business, CLIC, its subsidiaries and affiliates are permitted to use the brand name and logo in their own businesses, including life insurance business outside China and any other businesses they may enter into in the future within China, including property and casualty (other than businesses that compete with our accident and health businesses) and asset management businesses. In addition, they are not precluded from taking actions that may impair the value of the brand name, which could harm our business. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Continuing Related Party Transactions with CLIC”. The China Life brand name and our reputation could be materially harmed if CLIC fails to make payments when due on outstanding policies retained by CLIC in the restructuring or new policies written by CLIC after the restructuring, if CLIC reduces the rates of return payable on policies retained by CLIC or if CLIC is placed into receivership.

As our controlling shareholder, CLIC will be able to exert influence on our affairs and could cause us to make decisions or enter into transactions that may not be in your best interests.

We are controlled by CLIC, whose interests may conflict with those of our other shareholders. As of the date of this annual report, CLIC holds approximately 68.37% of our share capital. As a result of these factors, CLIC, which is wholly owned by the PRC government, will, so long as it holds the majority of our shares, effectively be able to control the composition of our board of directors and, through the board, exercise a significant influence over our management and policies. In addition, subject to our articles of association and applicable laws, CLIC may, so long as it holds the majority of our shares, effectively be able to determine the timing and amount of our dividend payments and approve increases or decreases of our share capital, the issuance of new securities, amendments of our articles of association, mergers and acquisitions and other major corporate transactions. CLIC may also be able to prevent us effectively from taking actions to enforce or exercise our rights under agreements to which we are a party, including the agreements we entered into with CLIC in connection with the restructuring. See “Item 7. Major Shareholders and Related Party Transactions”. As a majority shareholder, CLIC may be able to take these actions without your approval. In addition, CLIC’s control could have the effect of deterring takeovers or delaying or preventing changes in control or changes in management that might be desirable to other shareholders.

CLIC may direct business opportunities elsewhere.

CLIC has other business interests, including the run-off of the insurance policies retained by it in the restructuring. Notwithstanding a general undertaking pursuant to a non-competition agreement with us not to compete with us in our principal areas of business in China, CLIC is permitted to sell riders to these retained policies and enter into other businesses, including life insurance businesses outside of China and property and casualty (other than businesses that compete with our accident and health businesses) and asset management businesses, both inside and outside of China. In 2006, we formed a property and casualty company with CLIC, in connection with which we granted a waiver to CLIC allowing it to engage in accident and short-term health businesses indirectly through the property and casualty company.

CLIC engages in insurance businesses in Hong Kong, Macau, Singapore and Indonesia through China Life Insurance (Overseas) Co., Limited, or China Life Overseas, its wholly owned subsidiary. CLIC also may continue to engage in insurance business in other regions outside of China in the future. Although it is required under the non-competition agreement to give us a right of first refusal over business opportunities it develops in these areas, we may not be in a position to take advantage of these opportunities at that time, which could harm our business. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Continuing Related Party Transactions with CLIC”.

In addition, while we provide policy administration and other services to CLIC for the policies retained by CLIC in the restructuring, and provide investment management services to CLIC through our asset management subsidiary, these agreements can be terminated with notice or upon expiration. If CLIC were to terminate its policy administration and asset management arrangements with us and our asset management subsidiary, respectively, our loss of fees could materially and adversely affect us.

Risks Relating to the People’s Republic of China

China’s economic, political and social conditions, as well as government policies, could affect our business.

Substantially all of our assets are located in China and substantially all of our revenues are derived from our operations in China. Accordingly, our results of operations and prospects are subject, to a significant degree, to economic, political and legal developments in China. The economy of China differs from the economies of most developed countries in many respects, including, without limitation:

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the extent of government involvement;

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its level of development;

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its growth rate; and

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its control of foreign exchange.

The economy of China has been transitioning from one of high-speed growth to one that seeks high-quality development. Although in recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in regulating industrial development. It also exercises significant control over China’s economic growth through controlling payment of foreign currency denominated obligations, setting and implementing financial and monetary policy and providing preferential treatment to particular industries.

The Chinese economy has slowed in recent years compared to the previous decade. The outbreak of COVID-19 in early 2020 and the global effort to contain it have negatively impacted the global economy and have slowed the Chinese economy as well. According to data released by the National Bureau of Statistics of China, China’s Gross Domestic Product, a key indicator of economic growth, was 2.3% in 2020. While China’s Gross Domestic Product increased by 18.3% in the first quarter of 2021 compared to the same period in 2020, it is possible that this rate of growth will not continue. In an effort to bolster the economy, the Chinese government may take certain measures, including adjustment of interest rates and market-oriented financial reforms. Some of the measures taken by the Chinese government to improve China’s economic performance may have a negative effect on our business. For example, our operating results and financial condition could be materially and adversely affected by government monetary policies and changes in interest rate policies, tax regulations and policies and regulations affecting the capital markets and the asset management industry. A slowdown in Chinese growth rates could also adversely affect us by impacting sales of our products, reducing our investment returns, or otherwise.

The PRC legal system has inherent uncertainties that could limit the legal protections available to you.

We are organized under the laws of China and are governed by our articles of association. The Chinese legal system is based on written statutes. Prior court decisions may be cited for reference but are not binding on subsequent cases and have limited precedential value. Since 1979, the Chinese legislative bodies have promulgated laws and regulations dealing with such economic matters as foreign investment, corporate organization and governance, commerce, taxation and trade. However, because these laws and regulations are relatively new, and because of the limited volume of published decisions, the interpretation and enforcement of these laws and regulations involve uncertainties.

Holders of H shares and ADSs generally are required to resolve disputes with us, our senior management and holders of our A shares only through arbitration in Hong Kong or China.

In accordance with the rules applicable to Chinese overseas listed companies, our articles of association provide that, with certain limited exceptions, all disputes or claims based on our articles of association, PRC company law or other relevant laws or administrative rules, and concerning matters between holders of H shares and ADSs and holders of A shares, us, or our directors, supervisors, president, vice presidents or other senior officers, must be submitted for arbitration at either the China International Economic and Trade Arbitration Commission or the Hong Kong International Arbitration Center. If an applicant chooses to have the dispute arbitrated at the Hong Kong International Arbitration Center, either party may request that the venue be changed to Shenzhen, a city in China near Hong Kong. The governing law for any such disputes or claims is Chinese law, unless Chinese law itself provides otherwise. Pursuant to an arrangement of mutual enforcement of arbitration awards between the PRC courts and the Hong Kong courts, Hong Kong arbitration awards are enforceable in China, subject to the satisfaction of certain legal requirements. However, due to the limited number of actions that have been brought in China by holders of shares issued by a Chinese company to enforce an arbitral award, we are uncertain as to the outcome of any action brought in China to enforce a Hong Kong arbitral award made in favor of holders of H shares and ADSs.

The laws in China differ from the laws in the United States and may afford less protection to our minority shareholders.

Although Chinese company law provides that shareholders of a Chinese company may, under certain circumstances, sue the company’s directors, supervisors and senior management in the interests of the company, limited detailed implementation rules or court interpretations have been issued in this regard. Also, class action lawsuits are generally uncommon in China. In addition, PRC company law imposes limited obligations on a controlling shareholder with respect to protection of the interests of minority shareholders, although overseas listed joint stock companies, such as ourselves, are required to adopt certain provisions in their articles of association that are designed to protect minority shareholder rights. These mandatory provisions provide, among other things, that the rights of any class of shares, including H shares, may not be varied without a resolution approved by holders of shares in the affected class holding no less than two-thirds of the shares of the affected class entitled to vote, and provide that in connection with a merger or division involving our company, a dissenting shareholder may require us to purchase the dissenters’ shares at a fair price. Disputes arising from these protective provisions would likely have to be resolved by arbitration. See “—Holders of H shares and ADSs generally are required to resolve disputes with us, our senior management and holders of our A shares only through arbitration in Hong Kong or China”.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in the PRC based on U.S. or other foreign laws against us, our management and some of the experts named in the annual report.

We are a company incorporated under the laws of China, and substantially all of our assets are located in China. In addition, most of our directors, supervisors, executive officers and some of the experts named in this annual report reside within China, and substantially all of the assets of these persons are located within China. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon our directors, supervisors or executive officers or some of the experts named in this annual report, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. Our PRC legal counsel, King & Wood, has advised us that China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States, the United Kingdom, Japan or many other countries. Our Hong Kong legal adviser, Latham & Watkins LLP, has also advised us that Hong Kong has no statutory arrangement for the reciprocal enforcement of judgments with the United States although it may be possible for a civil action to be brought in Hong Kong based on a monetary judgment of the courts of the United States. As a result, recognition and enforcement in China or Hong Kong of judgments of a court in the United States and any of the other jurisdictions mentioned above in relation to any matter may be difficult or impossible. Furthermore, an original action may be brought in the PRC against us, our directors, supervisors, executive officers or the experts named in this annual report only if the actions are not required to be arbitrated by PRC law and our articles of association, and only if the facts alleged in the complaint give rise to a cause of action under PRC law. In connection with any such original action, a PRC court may award civil liability, including monetary damages.

Due to jurisdictional limitations and various other factors, the U.S. Securities and Exchange Commission, the U.S. Department of Justice and other U.S. authorities may also be limited in their ability to pursue companies and individuals in China, in connection with any alleged violation of U.S. securities and other laws.

Holders of H shares may be subject to PRC taxation.

Under current PRC tax laws, regulations and rulings, dividends paid by us to individual holders of H shares outside of the PRC are subject to PRC individual income tax at rates not exceeding 20%, depending on the applicable tax treaties between the home country of the individual holder of H shares and the PRC. When paying dividends to non-resident enterprise holders of H shares outside of the PRC, such dividends are subject to an enterprise income tax, which is currently levied at a rate of 10%. Such non-resident enterprise holders of H shares may be entitled to tax reductions or exemptions according to applicable tax treaties. In addition, to date, relevant tax authorities have not collected capital gains tax on the gains realized by individuals upon the sale or other disposition of H shares. If relevant tax authorities promulgate implementation rules on the taxation of capital gains realized by individuals upon the sale or other disposition of H shares, individual holders of H shares may be required to pay capital gains tax. See “Item 10. Additional Information—Taxation—The People’s Republic of China”.

Government control of currency conversion and the fluctuation of the Renminbi may materially and adversely affect our operations and financial results.

We receive substantially all of our revenues in Renminbi, which currently is not a freely convertible currency. A portion of these revenues must be converted into other currencies to allow us to make payments on declared dividends, if any, on our H shares, and payments of interest and principal on our debt held in foreign currencies.

Under China’s existing foreign exchange regulations, we are able to pay dividends and interest and principal in foreign currencies without prior approval from the SAFE by complying with various procedural requirements. The Chinese government, however, may, at its discretion, restrict access in the future to foreign currencies for current account transactions. If this were to occur, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.

The value of the Renminbi against the U.S. dollar and other currencies fluctuates and is affected by, among other things, changes in China’s political and economic conditions. On July 21, 2005, the PRC government introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. Under this system, the PBOC announces the closing price of a foreign currency traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each working day, and makes it the central parity for the trading against the Renminbi on the following working day. On August 11, 2015, the PBOC adjusted the quotation mechanism of the Renminbi central parity to also consider demand and supply in foreign exchange markets and price movements of major currencies, in addition to the closing price on the previous working day. On May 26, 2017, the PBOC introduced the “counter-cyclical factor” into its formula that determines a central parity of Renminbi against the U.S. dollar. Under the current mechanism, the central parity of the Renminbi against the U.S. dollar is determined based on the closing price, changes in a basket of currency exchange rates and the counter-cyclical factor. From July 21, 2005 to April 9, 2021, the Renminbi appreciated by approximately 19.35% against the U.S. dollar. In 2020, the Renminbi appreciated by 6.04% against the U.S. dollar. A portion of our assets and liabilities are held in foreign currencies and may be subject to foreign exchange gains and losses due to changes in exchange rates. We recorded RMB119 million (US$18 million) in foreign exchange gains for the year ended December 31, 2020, resulting mainly from the change in foreign exchange rates applicable to our assets and liabilities held in foreign currencies. Any future appreciation of the Renminbi may materially and adversely affect the value of, and any dividends payable on, our H shares in foreign currency terms. Our financial condition and results of operations also may be affected by changes in the value of certain currencies other than the Renminbi.

Payment of dividends is subject to restrictions under Chinese law.

Under Chinese law, dividends may be paid only out of distributable profits. Any distributable profits that are not distributed in a given year are retained and available for distribution in subsequent years. However, ordinarily we will not pay any dividends in a year in which we do not have any distributable profits.

Payment of dividends by us is also regulated by the PRC insurance law. See “Item 8. Financial Information—Consolidated Financial Statements and Other Financial Information—Policy on Dividend Distributions”.

ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

We were formed as a joint stock life insurance company pursuant to the PRC company law on June 30, 2003 under the corporate name of 中国人寿保险股份有限公司in connection with the restructuring.

General Information

Our principal executive offices are located at 16 Financial Street, Xicheng District, Beijing 100033, China. Our telephone number is (86-10) 6363-3333. Our official website address is www.e-chinalife.com. The information on our website is not a part of this annual report. We have appointed CT Corporation System at 111 Eighth Avenue, New York, New York 10011 as our agent for service of process in the United States.

Our Restructuring

Upon the approval of the State Council and the CIRC, we were formed on June 30, 2003 as a joint stock company in connection with the restructuring by CLIC, our controlling shareholder. The restructuring was effected through a plan of restructuring, which was approved by the CIRC on August 21, 2003, and a restructuring agreement we entered into with CLIC on September 30, 2003, with retroactive effect to June 30, 2003, which we refer to in this annual report as the effective date. Pursuant to PRC law and the restructuring agreement, we enjoyed the rights and benefits and assumed the obligations and liabilities arising from the restructuring from and after the effective date.

In connection with the restructuring:

•

CLIC transferred to us (1) all long-term insurance policies (policies having a term of more than one year from the date of issuance) issued on or after June 10, 1999, having policy terms approved by or filed with the CIRC on or after June 10, 1999 and either (i) recorded as a long-term insurance policy as of June 30, 2003 in an actuarial database attached to the restructuring agreement as an annex or (ii) having policy terms for group supplemental medical insurance (fund type), (2) stand-alone short-term policies (policies having a term of one year or less from the date of issuance) issued on or after June 10, 1999 and (3) all riders supplemental to the policies described in clauses (1) and (2) above, together with the applicable reinsurance contracts specified in an annex to the restructuring agreement. We refer to these policies in this annual report as the “transferred policies”. All other insurance policies were retained by CLIC. We refer to these policies as the “non-transferred policies”. We assumed all obligations and liabilities of CLIC under the transferred policies. CLIC continues to be responsible for its liabilities and obligations under the non-transferred policies following the effective date.

•

Cash, specified investment assets and various other assets were also transferred to us.

•

CLIC agreed not to, directly or indirectly through its subsidiaries and affiliates, participate, operate or engage in life, accident and health insurance businesses and any other business in China which may compete with our insurance business. CLIC also undertook (1) to refer to us any corporate business opportunity that falls within our business scope and which may directly or indirectly compete with our business and (2) to grant us a right of first refusal, on the same terms and conditions, to purchase any new business developed by CLIC. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Continuing Related Party Transactions with CLIC”.

•

Substantially all of the management personnel and employees who were employed by CLIC in connection with the transferred assets and business were transferred to us. Some management and personnel remained with CLIC.

•

CLIC retained the trademarks used in our business, including the “China Life” name in English and Chinese and the “ball” logos, and granted us and our branches a royalty-free license to use these trademarks. CLIC and its subsidiaries and affiliates will be entitled to use these trademarks, but CLIC may not license or transfer these trademarks to any other third parties. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Continuing Related Party Transactions with CLIC”.

•

CLIC’s contracts with its agents and other intermediaries were transferred to us.

•

We entered into various agreements under which we provide policy administration services to CLIC for the non-transferred policies, manage CLIC’s investment assets and lease office space from CLIC for our branch and field offices. See “Item 7. Major Shareholders and Related Party Transactions”.

In connection with the restructuring, CLIC established, together with the MOF, a special purpose fund for the purpose of paying claims under the non-transferred policies. Under the administrative measures for the special purpose fund as amended in May 2012, the special purpose fund will be funded by renewal premiums paid on the non-transferred policies over time; tax rebates received by CLIC; proceeds from the investments of the special purpose fund; shareholder dividends paid in cash to CLIC by its subsidiaries and shareholding enterprises; proceeds from the disposition by CLIC of its shares in its subsidiaries and shareholding enterprises over time; cash income from the disposition of assets by CLIC; financial assets owned by CLIC; long-term equity investment held by CLIC; and funds injected by the MOF in the event of a deficiency in the special purpose fund. The special purpose fund is co-administered by CLIC and the MOF. The special purpose fund will be available to satisfy CLIC’s operating expenses, including the payment of benefits and claims obligations arising from the non-transferred policies, as well as expenses incurred in operating the special purpose fund, including third-party management fees, professional fees and such other purposes as the management committee of the special purpose fund may agree, as well as capital expenses as approved by the MOF. A management committee of the special purpose fund comprised of four representatives from the MOF and three representatives from CLIC oversees the management of the fund, with specified material items subject to the approval of the MOF. The special purpose fund will be dissolved when all claims and benefits under the non-transferred policies have been paid, or sooner if the management committee so agrees.

The MOF’s approval of the special purpose fund issued to CLIC provides that in the event there is any deficiency in the special purpose fund for so long as the fund is in existence as described above to meet any payment obligation arising out of the non-transferred policies, the MOF will provide support through the injection of funds to ensure the payments of benefits and claims to the policyholders of the non-transferred policies. In connection with the restructuring, we were advised by our PRC legal counsel, King & Wood, that (1) the MOF had the authority to issue this approval regarding the special purpose fund, (2) the approval was valid and effective, and (3) it had no reason to believe that the MOF will revoke the approval. We cannot assure you, however, that changes in law, facts or circumstances that may occur after such date will not affect the conclusions stated in such advice.

In accordance with generally applicable tax laws and regulations, CLIC, AMC and ourselves will file income tax returns and pay our respective income taxes as separate and independent taxpayers. In accordance with a circular issued by the MOF, a portion of the income tax payments made by CLIC and us during the period of January 1, 2003 to December 31, 2010 is required to be rebated to CLIC. All of the income tax payments made by AMC may also be rebated to CLIC, if the current shareholding structure of AMC remains unchanged. After 2010, CLIC has applied to MOF for the extension of the period during which the income tax payments will be rebated, but no substantive progress had been made as of the date of this annual report.

In connection with the restructuring, we were advised by our PRC legal counsel, King & Wood, that following the restructuring we would not have any continuing obligations to holders of the non-transferred policies and that there was no legal basis on which holders of the non-transferred policies could make a claim against China Life. King & Wood based its conclusion on, among other things, the following factors: (1) after the restructuring, China Life was established as a separate legal entity and China Life’s assets and liabilities should be regarded as distinct and separate from those of CLIC; (2) there was no contractual relationship, direct or indirect, between the holders of the non-transferred policies and China Life; (3) the restructuring (including the transfer of the transferred policies to China Life) was approved by the CIRC and was conducted without infringing upon the rights of the holders of non-transferred policies; (4) the arrangements made under the restructuring agreement, in particular the MOF’s support as described above, were expected to enable CLIC to satisfy its obligations under the non-transferred policies; and (5) PRC regulatory authorities had no legal power to direct China Life to assume CLIC’s obligations under the non-transferred policies or to indemnify the holders of the non-transferred policies.

See “Item 3. Key Information—Risk Factors—Risks Relating to the Restructuring”.

Developments After Restructuring

On November 23, 2003, we established an asset management company, AMC, with CLIC, in connection with the restructuring. AMC manages our investment assets and, separately, substantially all of those of CLIC. On December 30, 2006, we established a property and casualty company, CLPCIC, with CLIC. On January 15, 2007, we established a pension insurance company, China Life Pension, with CLIC and AMC.

In December 2003, we successfully completed our initial public offering of H shares, including H shares in the form of American depositary shares, or ADSs, and raised approximately RMB24,707 million in aggregate net proceeds. Upon completion of our initial public offering, our H shares became listed on the Hong Kong Stock Exchange and ADSs each representing 40 of our H shares became listed on the New York Stock Exchange. The ratio of ADSs to H shares was reduced from 40 H shares to 15 H shares on December 29, 2006 and was further reduced from 15 H shares to 5 H shares on May 26, 2015.

In December 2006, we issued 1,500,000,000 new ordinary domestic shares through public offering on the SSE at the offering price of RMB18.88 per share, raising RMB28,320 million in aggregate gross proceeds. The A shares have been listed on the SSE since January 9, 2007. Prior to the offering, CLIC held 19,323,530,000 ordinary domestic shares, or CLIC A shares, which have been registered with the China Securities Depository and Clearing Corporation Limited as circulative A shares with restrictive trading following the A share offering. CLIC has undertaken that for a period of 36 months commencing on January 9, 2007 it will not transfer or put on trust the CLIC A shares held by it or allow such CLIC A shares to be repurchased by China Life. On January 11, 2010, 19,323,530,000 CLIC A shares were released from trading restrictions.

In July 2015, we issued Core Tier 2 Capital Securities in the principal amount of US$1,280 million to qualified investors who meet applicable regulatory requirements at an initial distribution rate of 4.00%. We redeemed all of these issued securities on July 3, 2020.

In March 2019, we issued bonds in the principal amount of RMB35 billion for capital replenishment in the national inter-bank bond market. The bonds have a 10-year maturity and a fixed coupon rate of 4.28% per annum. We have a conditional right to redeem the bonds on the fifth anniversary of issuance. The proceeds from the issuance of the bonds will be used to replenish our capital so as to enhance our solvency according to applicable laws and approvals from regulatory authorities.

We incurred capital expenditures of RMB7,087 million (US$1,086 million), RMB10,562 million, and RMB14,755 million in 2020, 2019 and 2018, respectively. These capital expenditures mainly comprised of the addition of properties for our own use.

SEC’s Website and Our Website

The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our official website address is www.e-chinalife.com. The information on our website is not a part of this annual report.

B. BUSINESS OVERVIEW

We are the leading life insurance company in China. We provide a broad range of insurance products, including individual and group life insurance, annuity, health insurance and accident insurance products. We had nearly 317 million insurance policies in force as of December 31, 2020, including individual and group life insurance policies, annuity contracts, health insurance and accident insurance policies. As of December 31, 2020, the average guaranteed rate of return for all of our long-term insurance policies in force was 2.77%. For the financial year ended December 31, 2020, our lapse rate was approximately 1.09%. The policy persistency rates, which measure the ratio of the insurance policies that are still effective after a certain period, were 85.70% for 14 months after issuance and 82.40% for 26 months after issuance.

The information below is organized in accordance with our identified segments.

Life Insurance

We offer life insurance and annuity products to individuals and groups. We market our individual life insurance and annuity products primarily through a distribution force comprised of approximately 1,378,000 exclusive agents operating in approximately 16,000 field offices throughout China, as well as other non-dedicated agencies located at branch offices of banks and other organizations. We offer group life insurance and annuity products to the employees of companies and institutions through approximately 51,000 direct sales representatives, as well as insurance agencies and insurance brokerage companies. Gross written premiums generated by our life insurance and annuity products totaled RMB480,593 million (US$73,655 million) for the year ended December 31, 2020, RMB446,562 million for the year ended December 31, 2019, and RMB437,540 million for the year ended December 31, 2018, constituting 78.49%, 78.74% and 81.66% of our total gross written premiums for those periods. Gross written premiums generated by our life insurance and annuity products for 2020 increased by 7.62% from 2019.

The following table sets forth selected financial and other data regarding our life insurance and annuity business as of the dates or for the periods indicated.


	As of or for the year ended December 31,								Compound annual growth rate
	2018		2019		2020		2020		(2018-2020)
	RMB		RMB		RMB		US$
	*(in millions, except as otherwise indicated)*
Gross written premiums		437,540		446,562		480,593		73,655		4.80	%
Liabilities of insurance contracts		2,081,822		2,385,407		2,767,642		424,160		15.30	%
Liabilities of investment contracts		240,152		252,362		271,757		41,649		6.38	%

Products

We offer a wide variety of life insurance and annuity products to individuals, providing a wide range of coverage for the whole length of a policyholder’s life. Our individual life insurance products consist of whole life and term life insurance and endowment insurance. We also offer group annuity products and term life insurance products to enterprises and institutions. We market these products as an important part of our group customers’ overall employee benefit plans. We believe we are the market leader in the development of group annuity products.

We offer both non-participating and participating products. There were approximately 262 million non-participating policies and 54.72 million participating policies as of December 31, 2020, among which approximately 163 million non-participating policies and 35.11 million participating policies were sold to individuals.

The following table sets forth selected financial information regarding our life insurance and annuity products.


	For the year ended December 31,								Compound annual growth rate
	2018		2019		2020		2020		(2018-2020)
	RMB		RMB		RMB		US$
	*(in millions, except as otherwise indicated)*
Gross written premiums
Whole life and term life insurance		49,520		64,196		76,421		11,713		24.23	%
Endowment		126,318		113,950		109,275		16,747		(6.99	%)
Annuities		261,702		268,416		294,897		45,195		6.15	%

Whole Life and Term Life Insurance

Non-participating whole life and term life insurance

We offer non-participating whole life and term life insurance products.

Non-participating whole life insurance products provide a guaranteed benefit, pre-determined by the contract, upon the death of the insured, in return for the periodic payment of fixed premiums over a pre-determined period. Premium payments may be required for the length of the contract period, to a specified age or for a specified period, and are typically level throughout the period.

Non-participating term life insurance products provide a guaranteed benefit upon the death of the insured within a specified time period in return for the periodic payment of fixed premiums. Specified coverage periods generally range from 5 to 30 years or expire at specified ages. Death benefits and premiums are typically set at a level amount over the coverage period. Term life insurance products are sometimes referred to as pure protection products, in that there are normally little or no savings or investment elements. Unlike endowment products, term life insurance policies expire without maturity benefits.

Participating whole life insurance

We also offer participating whole life insurance products, which, in addition to the benefit payment of traditional whole life insurance policies, also provide a participation feature in the form of dividends. The policyholder is entitled to share a portion of the distributable earnings from participating products, as determined by us based on formulas prescribed by the CIRC. Under guidelines issued by the CIRC, the dividends must be no less than 70% of the distributable earnings from participating products. We offer participating whole life insurance products only to individual customers.

Endowment

Non-participating endowment products

Non-participating endowment products provide to the insured various guaranteed benefits if the insured survives specified maturity dates or periods stated in the policy, and provide to a beneficiary guaranteed benefits upon the death of the insured within the coverage period, in return for the periodic payment of premiums. Specified coverage periods generally range from 5 to 30 years or end at specified ages. Premiums are typically at a level amount for the coverage period.

Participating endowment products

We also offer participating endowment products, which are endowment policies that also provide a participation feature in the form of dividends. Policyholders are entitled to share a portion of the distributable earnings from participating products, as determined by us based on formulas prescribed by the CIRC. Under guidelines issued by the CIRC, the dividends must be no less than 70% of the distributable earnings from participating products.

China Life Xin Fu Yi Sheng Participating Endowment and China Life Fu Lu Shuang Xi Participating Endowment generated the most income of our participating endowment products in 2020. China Life Xin Fu Yi Sheng Participating Endowment generated RMB16,440 million (US$2,520 million) of net premiums in 2020, representing 3.43% of the net premiums of our life insurance business, and China Life Fu Lu Shuang Xi Participating Endowment generated RMB12,673 million (US$1,942 million) of net premiums in 2020, representing 2.64% of the net premiums of our life insurance business. The net premiums earned from our participating endowment products decreased by RMB9,190 million (US$1,408 million), or 10.32%, to RMB79,886 million (US$12,243 million) in 2020 from RMB89,076 million in 2019.

We offer endowment products only to individual customers.

Annuities

Annuities are used for both asset accumulation and asset distribution needs. Annuitants pay premiums into our accounts, and receive payments of benefits during the payoff period as specified in the contracts. We offer both non-participating and participating annuities. For non-participating annuity products, risks associated with the underlying investments are borne entirely by us. A significant portion of our non-participating annuity products imposes charges upon surrender.

Participating annuity products are annuities that provide a participation feature in the form of dividends in addition to the guaranteed annuity benefits. The dividends are determined by us in the same manner as our life insurance policies. Like non-participating annuities, a significant portion of our participating annuity products imposes charges upon surrender.

In our universal group annuities, interest accrued on an annuitant’s deposits is credited to each participating employee’s personal account, or to each participating employee’s personal account and employer’s group account.

Universal Insurance Products

Universal insurance products are insurance policies with flexible premium and sum insured as well as transparency on costs. For each universal insurance policy, we establish a separate account and determine the interest credit rate, mortality and expense charges specifically for the account. The benefits of universal insurance products are linked to the account value of each separate account.

Personal Tax-deferred Pension Insurance Products

In May 2018, the Chinese government permitted trial sales of personal tax-deferred pension insurance products in Shanghai, the Fujian province (including Xiamen) and Suzhou Industrial Park, and we commenced our personal tax-deferred pension insurance business. Because such business is still at the trial stage and sales are limited geographically, our premium income from personal tax-deferred pension insurance business remains small.

Marketing and Distribution

Individual

We have historically sold most of our individual life insurance and annuity products to the mass market and will continue to actively serve this market. However, we believe our core individual customer base will evolve as China’s economy develops. We will seek to capitalize on the market opportunities in the growing affluent segment of China’s population by focusing our marketing efforts on large and medium-sized cities with an aim to attract more medium- and high-end customers, as we believe that the demand for life insurance and annuity products in these areas is greater. In addition, we have been implementing a customer segmentation sales approach which targets different customers with different products, with these products in many cases supplemented by our individual accident and health products.

We distribute our individual life and annuity products nationwide through multiple channels. Our primary distribution system is comprised of approximately 1,378,000 exclusive agents in approximately 16,000 field offices throughout China. In addition, we are implementing our customer-oriented market segmentation sales initiatives to all exclusive agents nationwide. While continuing to invest in our exclusive agent force, we have also expanded into other distribution channels, primarily non-dedicated agencies located in over 52,000 outlets of commercial banks, to diversify our distribution channels and to achieve higher growth. See “—Distribution Channels”.

Group

We target our group life insurance and annuity products to large institutional customers in China, including branches of foreign companies, which we believe have a greater awareness of and need for group life insurance and annuity products. We have long-term customer relationships with many of China’s largest companies and institutions. We provide large group customers with products having flexible fee and dividend structures, as well as convenient customer service. While continuing to focus on large institutional clients, we also target small- to medium-sized companies to supplement our growth.

We market our group life insurance and annuity products primarily through our direct sales representatives. We also market our group life insurance and annuity products through commercial banks, insurance agency companies and insurance brokerage companies. See “—Distribution Channels”.

Health Insurance

We offer a broad array of health insurance products and services to both individuals and groups, including medical insurance, care insurance, disease insurance and disability income insurance. Our health insurance gross written premiums totaled RMB115,089 million (US$17,638 million) for the year ended December, 2020, RMB105,581 million for the year ended December 31, 2019, and RMB83,614 million for the year ended December 31, 2018, constituting 18.80%, 18.62% and 15.60% of our total gross written premiums for those periods. Gross written premiums generated by our health insurance products for 2020 increased by 9.01% from 2019.

Our health insurance business shares our nationwide life insurance sales force and distribution network of exclusive agents. Our policy review and claim adjustment processes are facilitated through a team of supporting personnel with medical training.

The following table sets forth selected financial and other data regarding our health insurance as of the dates or for the periods indicated. The financial results of both our long-term health insurance and short-term health insurance are reflected in the following table.


	As of or for the year ended December 31,								Compound annual growth rate
	2018		2019		2020		2020		(2018-2020)
	RMB		RMB		RMB		US$
	*(in millions, except as otherwise indicated)*
Gross written premiums		83,614		105,581		115,089		17,638		17.32	%
Liabilities of insurance contracts		125,743		158,800		195,487		29,960		24.69	%
Liabilities of investment contracts		15,282		15,442		16,455		2,522		3.77	%

Products

We offer health insurance products to both individuals and groups. We classify our health insurance products as short-term products, having policy terms of less than or up to one year, and long-term products, having policy terms longer than one year. We offer both short-term and long-term defined health benefit plans, medical expense reimbursement plans, care insurance plans and disease-specific plans to individuals and groups.

Defined health benefit plans

These plans provide a fixed payment based on the number of days of hospitalization resulting from diseases, injuries from accidents or surgical operations. Policyholders either pay premiums in a single payment or on a periodic basis.

Medical expense reimbursement plans

These plans provide for the reimbursement of a portion of the participant’s outpatient or hospitalization treatment fees and expenses. Policyholders pay premiums either in a single payment or on a periodic basis or, for certain group medical expense reimbursement plans, irregularly as determined by the policyholder.

We also provide health care entrusted management services for the basic social medical insurance plans offered by local governments. The entrusted management services include checking and reimbursement of medical expenses and medical service investigations. We do not collect premiums but only charge a specified amount of management fees for these services. As of December 31, 2020, we had carried out more than 300 health care entrusted programs in over 31 provinces and cities, providing services to more than 170 million people.

We also commenced our supplementary major medical insurance business in 2013. As part of the Chinese government’s overall medical insurance scheme, supplementary major medical insurance reimburses policyholders for a specified percentage of their high medical expenses caused by major illnesses which are in excess of the maximum amounts covered by the basic social medical insurance and which would otherwise be borne by the individuals. The Chinese government has implemented supplementary major medical insurance programs nationwide in China. Local governments use a portion of the basic medical insurance funds to purchase supplementary major medical insurance services from qualified insurance companies through a government tender. Supplementary major medical insurance offers protection to all the policyholders covered by the basic social medical insurance in the pilot areas. As of December 31, 2020, we had undertaken over 220 supplementary major medical insurance programs, providing services to approximately 360 million people.

Care insurance plans

These plans provide individuals who have disabilities covered by the insurance contracts with a fixed allowance and reimbursement of expenses for their daily living and medical care. Premium payments are paid either in a single payment or on a periodic basis.

We commenced our care insurance business in 2015. The Chinese government launched pilot long-term care insurance programs beginning in 2016. Under these programs, local governments in pilot areas raise funds through various channels to provide funds or protection services to people who have life disabilities for their daily living and medical care. Some local governments purchase long-term care insurance services from qualified insurance companies through government tender procedures. As of December 31, 2020, we had undertaken more than 40 long-term care insurance programs, providing services to over 15 million people.

Disease-specific plans

These plans provide a payment benefit for various diseases. Premium payments for disease-specific plans are paid either in a single payment or on a periodic basis.

Marketing and Distribution

We offer our health insurance products to both individuals and groups primarily through the same distribution channels we use to market our life insurance products. See “—Distribution Channels”.

We market our health insurance products either as primary products, as riders or as supplementary products packaged with our life, annuity or accident insurance products. We conduct extensive health insurance related training programs for our direct sales representatives and our exclusive agents.

Accident Insurance

We are the leading accident insurance provider in China. Our accident insurance gross written premiums totaled RMB16,583 million (US$2,541 million) for the year ended December 31, 2020, RMB14,943 million for the year ended December 31, 2019, and RMB14,672 million for the year ended December 31, 2018, constituting 2.71%, 2.64%, and 2.74% of our total gross written premiums for those periods. Gross written premiums generated by our accident insurance products for 2020 increased by 10.98% from 2019.

The following table sets forth selected financial and other data regarding our accident insurance as of the dates or for the periods indicated. The financial results of both our long-term accident insurance and short-term accident insurance are reflected in the following table.


	As of or for the year ended December 31,								Compound annual growth rate
	2018		2019		2020		2020		(2018-2020)
	RMB		RMB		RMB		US$
	*(in millions, except as otherwise indicated)*
Gross written premiums		14,672		14,943		16,583		2,541		6.31	%
Liabilities of insurance contracts		8,466		8,529		10,096		1,547		9.20	%

Products

We offer a broad array of accident insurance products to both individuals and groups.

Individual accident insurance

Individual accident insurance products provide a benefit in the event of death or disability of the insured as a result of an accident and, for certain products, a reimbursement of medical expenses to the insured in connection with an accident. Typically, a death benefit is paid if the insured dies as a result of the accident within 180 days of the accident, and a disability benefit is paid if the insured is disabled, with the benefit depending on the extent of the disability. Certain individual accident insurance products may also provide coverage if the insured receives medical treatment at a medical institution approved by us as a result of an accident. We offer a broad array of individual accident insurance products, such as insurance for students and infants against death and disability resulting from accidental injury and comprehensive coverage against accidental injury. We also offer products to individuals requiring special protection, such as accidental death and disability insurance for commercial air travel passengers and automobile passengers and drivers.

Group accident insurance

We offer a number of group accident insurance products and services to businesses, government agencies and other organizations of various sizes. We also offer group accident products targeted at specific groups, such as small-value group accident injury insurance to low-income people in rural areas.

Marketing and Distribution

We market our individual accident insurance products through our direct sales force and our exclusive agent sales force, as well as intermediaries, such as non-dedicated agencies located at outlets of commercial banks, savings cooperatives, travel agencies, hotels and airline sales counters and insurance agency and insurance brokerage companies. We market our group accident insurance products primarily through our direct sales representatives and the same intermediaries we use to sell our individual accident products. See “—Distribution Channels”.

We market our accident insurance products either as primary products, as riders or as supplementary products packaged with our life, annuity or health products. Our direct sales representatives market our individual accident products to employees of our institutional customers.

Product Development

In 2020, in line with our general development strategy, we developed and introduced 237 new products, including: 50 long-term insurance products consisting of 16 life insurance products, 13 annuity products, one accident insurance product and 20 health insurance products; and 187 short-term insurance products consisting of three life insurance products, six accident insurance products and 178 health insurance products.

With respect to long-term insurance products, we developed and introduced, among others:

•

for the individual insurance distribution channel, products including China Life Xin Yao Dong Fang Annuity Insurance, China Life Xin Yao Qian Cheng Annuity Insurance, China Life Xin Yao Zhi Zun Annuity Insurance, China Life Kang Ning Bao Whole Life Critical Illness Insurance (Type C), and China Life Kang Ning Bao Additional Endowment Insurance (Type C); and

•

for the bancassurance distribution channel, products including China Life Xin Xiang Bao Annuity Insurance, China Life Le Ying Yi Sheng Whole Life Insurance and China Life Le Xin Chuan Fu Whole Life Insurance (exclusive edition).

With respect to short-term insurance products, we designed and developed products including, among others, Ru E Kang Yue Proton and Heavy Ion (premium edition), China Life Medical Insurance for the Expenses of Special Drugs for Malignant Tumors, China Life Cancer Medical Insurance, Poverty Alleviation Leaders series, Le Xue Wu You series and Nan Xing An Kang series.

Distribution Channels

We believe we have the largest distribution force with the most extensive geographic reach compared with any of our competitors. Our distribution network reaches almost every county in China. Throughout China, we have approximately 1,378,000 exclusive agents operating in approximately 16,000 field offices for our individual products and approximately 51,000 direct sales representatives for group products. We have a multi-channel distribution network selling individual and group insurance products through intermediaries, primarily non-dedicated agencies located in over 52,000 outlets of commercial banks as of the end of 2020. Commission rates vary by product, based on such factors as the payment terms and period over which the premiums are paid for the product, as well as CIRC regulations. We support our agents and representatives through training programs, sales materials and information technology systems.

Exclusive agent force

Our exclusive agent force of approximately 1,378,000 agents is the primary distribution channel for our individual life, annuity, health and accident insurance products.

The following table sets forth information relating to our exclusive agent force as of the dates indicated.


	As of December 31,
	2018		2019		2020
Number of exclusive agents (approximately)		1,439,000		1,613,000		1,378,000
Number of field offices (approximately)		17,451		16,000		16,000

Our exclusive agent force is among our most valuable assets, allowing us to more effectively control our distribution and build and maintain long-term relationships with our individual customers. The number of our exclusive agents decreased from 1,613,000 as of the end of 2019 to 1,378,000 as of the end of 2020. This was primarily due to the impact of the COVID-19 pandemic. Although the number of our exclusive agents decreased in 2020, we continued to improve the quality of our agent force, including strengthening the agent recruitment and management and improving the structure of our sales force. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Regulation of Insurance Agencies, Insurance Brokers and Other Intermediaries” and “Item 3. Key Information—Risk Factors—Risks Relating to Our business—Our growth is dependent on our ability to attract and retain productive agents”. We believe that our customers and prospective customers prefer the personal approach of our exclusive agents and, therefore, we believe our exclusive agent force will continue to serve as our core distribution channel.

We also have developed a special sales force targeting “orphan policies” (policies which were serviced by former exclusive agents who have since left the company) to improve our service for these policies.

We supervise and provide training to our exclusive agents through more than 6,037 full-time trainers and 179,051 part time trainers. We set product management and customer service standards, and have developed credit rating systems, which we require all of our field offices and agents to meet, and conduct field tests with a view to ensuring quality. We also have an extensive training program.

We compensate our exclusive agent force through a system of commissions and bonuses to reward performance. Our agents are compensated based on a commission rate that generally decreases over the premium period. For short-term insurance products, our exclusive agents are generally compensated with fixed agent fees. We provide group annuities, group commercial supplemental pension insurance, group life and medical insurance for our exclusive agents. We motivate our agents by rewarding them with performance-based bonuses and by organizing sales-related competitions among different field offices and sales units. We also try to increase the loyalty of our exclusive agents through other methods, such as through participation in sales conferences.

We believe we have the largest exclusive agent sales force in China. We intend to improve the quality and productivity of our individual exclusive agent force and reduce the attrition rate of our agents by taking the following actions:

•

improving the overall productivity of our exclusive agents by implementing our market segmentation sales approach, managing, supporting and incentivizing the exclusive agents through different levels, and providing standardized sales services to our customers;

•

motivating our exclusive agents with an improved performance-based evaluation and compensation scheme;

•

building a more professional exclusive agent force by improving our education and training system and enhancing our training efforts;

•

improving the quality of our exclusive agent force and reducing turnover by expanding our recruitment program, strengthening the cultivation, training and support to improve capabilities of our new exclusive agents, and enhancing the integration of training and technologies;

•

improving the productivity of our exclusive agent force by strengthening professional operation and standardized management; and

•

improving the capabilities of our exclusive agent force for customer service and self and team management by providing effective sales support, including establishing a customer service platform and improving and expanding the China Life E-Home sales support system.

Group distribution channel

Our group distribution channel is comprised of our direct sales force and intermediaries.

Direct sales force

Our direct sales force, which consists of approximately 51,000 direct sales representatives, is our primary distribution system for our group life insurance and annuities, group accident insurance and group health insurance products, as well as our individual accident insurance and individual short-term health insurance products. As of the end of 2020, the number of our direct sales representatives was 51,000, and, in particular, the number of direct sales representatives with high productivity increased by 33.28% from the end of 2019. In 2020, we continued to improve the quality of the sales force by dismissing direct sales representatives with lower productivity, and further strengthened and improved our group distribution channel.

We believe maintaining our leading position in the group insurance market depends on a professional and qualified direct sales force. We set product management and customer service standards which we require all of our branch offices and direct sales representatives to meet.

We motivate our direct sales representatives by rewarding them with performance-based bonuses and by organizing sales and services-related competitions among different branch offices and sales units.

Intermediaries

We also offer individual and group products through intermediaries.

We market group products through dedicated insurance agencies and insurance brokerage companies. Dedicated insurance agencies and insurance brokerage companies work with companies primarily to select group insurance providers and group products and services in return for commission fees. Currently, the market of dedicated insurance agencies and insurance brokerage companies in China generally remains underdeveloped. However, we expect that the dedicated insurance agencies and insurance brokerage companies will play a more important role in sales of our group products in the future.

We also sell short-term insurance products through other non-dedicated agencies. Currently, we have non-dedicated agencies operating at outlets of commercial banks, travel agencies, credit cooperatives, small loan companies and airline sales counters. We expect non-dedicated agencies to become an increasingly important distribution channel for individual products.

Bancassurance channel

We have bancassurance arrangements with major commercial banks in China, and currently generate a significant portion of our total sales through bancassurance. Our distribution channels are primarily comprised of non-dedicated agencies located in approximately 52,000 outlets of commercial banks. We have established strategic alliances with many banks. We intend to improve the attractiveness of our products by providing new products and all-around services to each major bank and providing training and integrated systems support to our banking partners.

Other distribution channels

During 2020, we actively participated in various government-sponsored health insurance businesses, including undertaking supplementary major medical insurance programs and health care entrusted programs, and providing supplementary medical insurance and long-term care insurance.

We also continued to improve our Internet-based sales channel and increase the variety of products sold online. Our customers are able to purchase some of our life, health and accident insurance products through our Internet-based channel. We have continued to optimize online services and improve user experience, supporting our other distribution channels through our Internet-based distribution channel.

Gross written premiums attributable to each distribution channel

The following table sets forth gross written premiums attributable to each distribution channel, as of the dates indicated.


	For the year ended December 31,
	2018		2019		2020		2020
	RMB		RMB		RMB		US$
	*(in millions)*
Exclusive agent force¹		456,978		484,517		511,044		78,321
First-year business of long-term insurance		96,864		96,237		99,838		15,301
First-year regular		94,074		95,957		99,555		15,258
Single		2,790		280		283		43
Renewal business		347,407		371,140		391,272		59,965
Short-term insurance business		12,707		17,140		19,934		3,055
Group distribution channel		26,404		28,846		28,872		4,425
First-year business of long-term insurance		3,487		3,018		2,040		313
First-year regular		1,004		968		110		17
Single		2,483		2,050		1,930		296
Renewal business		1,649		1,995		1,862		285
Short-term insurance business		21,268		23,833		24,970		3,827
Bancassurance channel		31,251		25,438		41,240		6,320
First-year business of long-term insurance		15,455		12,516		15,757		2,415
First-year regular		9,330		12,488		15,748		2,414
Single		6,125		28		9		1
Renewal business		15,455		12,516		25,109		3,848
Short-term insurance business		341		406		374		57
Other distribution channels		21,193		28,285		31,109		4,768
First-year business of long-term insurance		12		3		188		29
First-year regular		11		3		8		1
Single		1		—		180		28
Renewal business		167		146		83		13
Short-term insurance business		21,014		28,136		30,838		4,726


Total		535,826		567,086		612,265		93,834

1. Beginning in 2020, we adjusted the scope of premiums attributable to each distribution channel. The premiums for the year of 2019 and 2018 have been restated to reflect the changes on a pro forma basis.

Competition

According to statistical information derived from China Insurance Yearbook and the market share information calculated based on these statistical information, in 2019, the last year for which the market information for each individual insurance company and separate business segments is available, our nearest competitors were Ping An Life, China Pacific Life, Taiping Life and New China Life.

•

In the life insurance market, Ping An Life, China Pacific Life, Taiping Life, New China Life and we collectively represented approximately 53.5% of total life insurance premiums in 2019. We primarily compete based on the nationwide reach of our sales network, our large distribution force and the level of services we provide, as well as our strong brand name.

•

In the accident insurance market, Ping An Life, China Pacific Life, Taiping Life, New China Life and we collectively represented approximately 68.1% of total accident premiums in 2019. We primarily compete based on the nationwide reach of our sales network and the level of services we provide and our strong brand name, as well as our cooperative arrangements with other companies and institutions.

•

In the health insurance market, Ping An Life, China Pacific Life, Taiping Life, New China Life and we collectively represented approximately 62.4% of total health premiums in 2019. We primarily compete based on the nationwide reach of our sales network, the level of services we provide, our multi-layered managed care scheme and systems of policy review and claim management, as well as our strong brand name.

The following table sets forth market share information for the year ended December 31, 2019, the most recent year for which official market information for separate business segments is available, in all segments of the life insurance market in which we do business.


	Life premiums market share			Accident premiums market share			Health premiums market share			Total premiums market share
China Life		21.1	%		23.4	%		17.6	%		20.4	%
Ping An Life Insurance Company of China, Ltd.⁽¹⁾		16.7	%		28.8	%		20.1	%		17.8	%
China Pacific Life Insurance Co., Ltd.		7.1	%		8.6	%		9.3	%		7.6	%
Taiping Life Insurance Co., Ltd		4.7	%		3.9	%		6.5	%		5.1	%
New China Life Insurance Co., Ltd.		3.9	%		3.4	%		8.9	%		5.0	%
Others⁽²⁾		46.5	%		31.9	%		37.6	%		44.1	%

Total		100	%		100	%		100	%		100	%

(1)

For purposes of this annual report, the statistics for Ping An Life Insurance Company of China, Ltd. do not include those of Ping An Health Insurance Company of China, Ltd. and Ping An Annuity Insurance Company of China, Ltd, and the market share information does not reflect those of Huaxia Life Insurance Co., Ltd., which was taken over by CBIRC in July 2020.

(2)

Others include: PICC Life Insurance Company Limited, PICC Health Insurance Company Limited, Taiping Pension Company Limited, Minsheng Life Insurance Co., Ltd., CPIC Allianz Health Insurance Co., Ltd., Ping An Annuity Insurance Company of China, Ltd., Ping An Health Insurance Company of China, Ltd., China United Life Insurance Co., Ltd., Sunshine Life Insurance Corporation Limited, Taikang Life Insurance Co., Ltd., Taikang Pension & Insurance Co., Ltd., Huatai Life Insurance Co., Ltd., Tianan Life Insurance Company Limited of China, Funde Sino Life Insurance Co., Ltd., Dajia Life Insurance Co., Ltd., Dajia Annuity Insurance Co., Ltd., Hexie Health Insurance Co., Ltd., Union Life Insurance Co., Ltd., Greatwall Life Insurance Co., Ltd., ABC Life Insurance Co., Ltd., Kunlun Health Insurance Co., Ltd., J.K. Life Insurance Corporation Limited, Sinatay Life Insurance Co., Ltd., Yingda Taihe Life Insurance Co., Ltd., Guohua Life Insurance Co., Ltd., Happy Life Insurance Co., Ltd., Aeon Life Insurance Company, Ltd., China Post Life Insurance Company Limited, Zhongrong Life Insurance Co., Ltd., Lian Life Insurance Company Limited, Sino-Conflux Insurance Company, Qian Hai Life Insurance Co., Ltd., Soochow Life Insurance Co., Ltd., Hong Kang Life Insurance Co., Ltd., Pearl River Life Insurance Co., Ltd., Chasing Jixiang Life Insurance Company Limited, Bohai Life Insurance Co., Ltd., Guolian Insurance Co., Ltd., Shanghai Life Insurance Company Limited, Hengqin Life Insurance Co., Ltd., Fosun United Health Insurance Co., Ltd., Hetai Life Insurance Co., Ltd., Huagui Life Insurance Co., Ltd., Trust Mutual Life Insurance Company, Aixin Life Insurance Co., Ltd., China Merchants Life Insurance Company Limited, China Three Gorges Life Insurance Co., Ltd., Beijing Life Insurance Co., Ltd., GuoBao Life Insurance Co., Ltd., Ruihua Health Assurance Corporation, Haibao Life Insurance Co., Ltd., Guofu Life Insurance Co., Ltd., Manulife-Sinochem Life Insurance Co., Ltd., CCB Life Insurance Co., Ltd, Allianz China Life Insurance Co., Ltd., ICBC-AXA Assurance Co., Ltd., BoCommLife Insurance Company Limited, Citic-Prudential Life Insurance Company Limited, Generali China Life Insurance Co., Ltd., Sun Life Everbright Life Insurance Co., Ltd., BOB-Cardif Life Insurance Co., Ltd., Founder Meiji Yasuda Life Insurance Co., Ltd., Aviva-COFCO Life Insurance Company Ltd., Aegon THTF Life Insurance Co., Ltd., CIGNA & CMB Life Insurance Company Limited, Great Wall Changsheng Life Insurance Co., Ltd., Heng An Standard Life Company Limited, Oldmutual-Guodian Life Insurance Co., Ltd., Sino-US United MetLife Insurance Company Limited, Cathay Lujiazui Life Insurance Company Limited, BOC–Samsung Life Insurance Company Limited, Sino-French Life Insurance Co., Ltd., Evergrand Life Assurance Co., Ltd., King Dragon Life Insurance Co., Ltd., HSBC Life Insurance Company Limited, Dingcheng Life Insurance Co., Ltd., Pramerica Fosun Life Insurance Co., Ltd., Sino-Korea Life Insurance Co., Ltd., ERGO China Life Insurance Co., Ltd. and American International Assurance Co., Ltd. (China).

Source: China Insurance Yearbook 2020

We face competition not only from domestic life insurance companies, but also from non-life insurance companies and foreign-invested life insurers. According to statistical information derived from China Insurance Yearbook, there were 86 licensed life insurers as of December 31, 2018 and 85 as of December 31, 2019. Property and casualty insurers were allowed to sell accident and short-term health insurance products with regulatory approval starting from January 2003, which we believe will lead to greater competition in the accident and health insurance sectors, especially in the group accident and group health insurance products. In addition, we believe that China’s commitment to accelerate the opening of its insurance sector to foreign investors, including the relaxation on market access requirements applicable to foreign-invested insurance companies and foreign ownership limits in its insurance sector, will further increase competition in China’s life insurance market. From January 1, 2020, foreign investors are allowed to own 100% in Chinese life insurers. We believe that the relaxation of the restrictions on foreign-invested insurers will continue to increase the competitive pressures we are facing.

See “Item 3. Key Information—Risk Factors—Risks Relating to the PRC Life Insurance Industry—We expect competition in the Chinese insurance industry to increase, which may materially and adversely affect the growth of our business”.

We also face increasing competition from other financial services providers, primarily licensed mutual fund companies, commercial banks providing personal banking services and operating business of various financial products, trust companies and brokerage houses licensed to manage separate accounts. These financial services providers may be permitted to manage employer-sponsored defined contribution pension plans, which we believe will compete directly with our group annuity products. We also face competition in the sale of our traditional life insurance savings policies, individual participating policies and annuities from financial institutions which offer investment products to the public.

Business Management

Customer Support Management

We seek to provide quality services to our customers and potential customers and to be responsive to their needs, both before and after a sale, through an extensive customer support network. Our customer service network is managed by specialized customer service departments, which are responsible for setting uniform standards and procedures for providing policy-related services to customers, handling inquiries and complaints from customers and training customer services personnel.

We deliver customer services primarily through customer service centers and customer contact centers operating in our branch offices and in field offices throughout China. We have upgraded our telephone call center to a multimedia coordination center that allows customers to access our various service channels, including our dedicated customer service line “95519”, official WeChat account, official website and China Life Insurance application. We take advantage of alternative customer services channels, such as online electronic notification, cell phone messages and online smart robots, complementing the customer services provided by our customer service centers and customer contact centers.

Customer service centers

We provide comprehensive insurance service to customers through approximately 2,600 customer service centers nationwide. Our customer service centers provide several types of policy-related services to our customers, including policy administration and claims settlement. We apply AI technology to our customer service and use technology products such as Smart Teller Machines, China Life Electronic Counter, Intelligent Appointment and China Life Insurance application, to simplify service process and improve service efficiency. We have uniform service standards for customer service centers nationwide and require our customer service centers to provide these policy related services in accordance with the uniform standards to ensure the high quality of the services we provide. In 2020, we received the award of “Leading Enterprise” by the China Association for Quality Promotion for excellence in services. We also received the award of “Special Prize for Intelligent Service for Pandemic Control” at the Tenth Golden Bell Prize for our services during the pandemic.

Customer contact centers

Our customer contact centers allow customers to make product and service inquiries, file suggestions and complaints, report claims and losses, make appointments and apply for conservations through telephone and Internet channels. Our customer contact centers also allow the customers to access online self-services through a smart voice navigation system, an interactive voice response system and intelligent online robots. They also provide follow-up review of policies, notifications and reminder services to customers. With our dedicated customer service line “95519”, our customers can reach us on a “24 hours/7 days” basis. We have also built an integrated financial service ecology. Through our dedicated customer line “95519”, in addition to access to our service, customers are also able to access other financial services provided by CLPCIC, China Life Pension, CGB, AMP and China Life Insurance Overseas.

We believe our customer contact centers have become popular with our customers because of the quality of services we provide and our continuous efforts in innovation. We received the awards of “China’s Best Customer Contact Center of Year 2019-2020” and “Best Practice for China Customer Contact Center of Year 2019-2020” from the Customer Relationship Management Committee of the China Federation of IT Promotion and Customer Contact Center Committee, the award of “Excellent Service Award (Unit) for Year 2020” from the Customer Contact Center Branch of the China Information Association and the “2020 Top Ten Call Center Award (over 1,000 seats)” from the Call Center and Customer Relationship Management Committee of the China Electronic Chamber of Commerce. We also received the “Best Call Centers in the World” award from the International Customer Management Institute in 2007, 2011 and 2015, respectively. We will use new technology and new services to innovate and continue to promote the intelligent and digital transformation and upgrading of our customer contact centers. We seek to ensure that we have a sufficient number of lines and staff to service the increasing use of our customer contact centers.

We have established system-wide standards for our customer contact centers, which we monitor periodically through regular quality monitoring and customer satisfaction surveys on the contact centers.

Notification services

We send notifications through cellphone messages, WeChat public account, emails and China Life Insurance application to convey such information as business notifications, customer care reminders, value-added service reminders and security verification information.

Internet-based services

Our customers can access our various service guides through our website (www.e-chinalife.com). We also use emails to send messages to our customers throughout China, conveying such information as electronic policies and renewal payment reminders.

Our Internet-based services are offered through our China Life Insurance application and official WeChat account. During 2020, the number of registered users of our online channels increased by 21% from 2019, and 99.9% of policy loans and 99.29% of the receipt of policies were handled online.

Supplementary services

To allow our customers to benefit from superior service and enhance their service experience, we provide several types of supplementary services while continuing to provide quality basic insurance services.

For example, to meet the demand of different customer groups, we have launched an online + offline scenario-based ecological service model to provide value-added services. We also held a series of activities such as “Online Lectures of Famous Doctors” and “China Life 700 Running”. We organized innovative online activities such as customer festival activities and “Little Painters of China Life”, and launched popular activities such as “Care for Women”. In 2020, the number of total customers receiving value-added services increased by 22% year-on-year.

Underwriting and Pricing

Our individual and group insurance underwriting involves the evaluation of applications for life, accident and health insurance products by a professional staff of underwriters and actuaries, who determine the type and the amount of risk that we are willing to accept. We have established qualification requirements and review procedures for our underwriting professionals. We employ detailed underwriting policies, guidelines and procedures designed to assist our underwriters to assess and quantify risks before issuing a policy to qualified applicants.

We generally evaluate the risk characteristics of each prospective insured. Requests for coverage are reviewed on their merits, and a policy is not issued unless the particular risk or risk portfolio has been examined and approved for underwriting.

We have different authorization limits and procedures depending on the amount of the claim. We also have authorization limits for personnel depending on their qualifications.

In order to maintain high standards of underwriting quality and consistency, we engage in periodic internal underwriting audits.

Individual and group product pricing reflects our insurance underwriting standards. Product pricing on insurance products is based on the expected payout of benefits, calculated through the use of mortality table, morbidity, expenses and investment returns. Those assumptions and other assumptions for calculating expected profit margin are based on our own experience, third party consultation, the experience of reinsurance companies and published data from other institutions. For more information on regulation of insurance products, see “—Regulatory and Related Matters—Insurance Company Regulation”.

We primarily offer products denominated in Renminbi.

Claims Management

We manage the claims from policyholders through our claims verification staff at our headquarters and branch offices. Typically, upon receiving a claim, a staff person will make a preliminary verification if all materials supporting the claim have been submitted; if so, the claim and its materials will be forwarded to the claim settlement department to confirm liability and to determine whether a claim investigation is needed. Upon confirming the validity of the claim and insurance liability, the amount payable to the insured will be calculated, and the claim will be paid upon completion of approval procedure. Meanwhile, in order to improve the operational efficiency of claims for small-sum medical insurance with low risks, we have built an automatic operation mode to automatically handle the entire process after the acceptance of the claim.

We manage claims management risk through organizational controls and computer systems controls. Our organizational controls include specific limits on authorization for branches at different levels; periodic case inspection and special inspections in particular situations by risk management departments at all levels of our organization; and management mechanisms linking the expense budget of branches and payout of short-term insurance policies. For insurance claims that are not handled through an automatic process, verification of claims by two staff members is also required. We also periodically provide training for our claims verification personnel and conduct appraisals of their performance. Our claims management is strictly processed with computers to streamline claims verification and handling.

Reinsurance

We have entered into various reinsurance agreements with China Life Reinsurance Company Ltd., or China Life Re, formerly known as China Reinsurance Company, for the reinsurance of individual risks and group risks. In general, individual and group risks are primarily reinsured either on a surplus basis, whereby we are reinsured for risks above a specified amount, or on a quota share basis. Under our reinsurance policy, the specified amount above which the risks are reinsured varies among different types of insurance products. In general, our reinsurance agreements with China Life Re do not have a definite term, but may be terminated with respect to new business thereunder by either party on a date agreed by both parties with three to six months’ notice.

We have also entered into reinsurance agreements separately with other reinsurance companies including the Beijing branch of Munich Reinsurance Company, the Beijing Branch of SCOR, the Shanghai branch of Reinsurance Group of America, the Beijing branch of Swiss Reinsurance Company Limited, the Shanghai branch of Hannover Re, the Shanghai branch of General Re Corporation and Aetna Life & Casualty (Bermuda) Ltd.

In June 2020, we renewed our catastrophe reinsurance in order to reduce our catastrophe exposure.

These reinsurance agreements spread the risk and reduce the effect on us of potential losses. Under the terms of the reinsurance agreements, the reinsurer agrees to assume liabilities for the ceded business in the event the claim is paid. However, we remain liable to our policyholders if the reinsurer fails to meet the obligations assumed by it.

We also accept external auditing of reinsured business by our reinsurers.

Investments

As of December 31, 2020, we had RMB4,095,454 million (US$627,656 million) of investment assets. As provided by China’s insurance laws and regulations, we may invest insurance premiums and other insurance funds in five categories of investment assets, including liquidity assets, fixed income assets, equity assets, real properties and other financial assets, all as defined by the CBIRC and subject to various limitations. Each category of investment assets is also divided into domestic assets and overseas assets. See “—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”. As of December 31, 2020, we have invested our insurance premiums and other insurance funds in term deposits, debt securities, loans, securities investment funds, stocks, resale agreements, investment properties, investments in associates and joint ventures, equity interests of non-listed enterprises and related financial products.

We direct and monitor our investment activities through the application of our strategic asset allocation plan, annual asset allocation plan, investment guidelines and a series of investment management systems, which include: (1) performance goals for the investment fund; (2) specified asset allocations and investment scope based on regulatory provisions, level of indebtedness and market forecasts; (3) specified investment duration and asset-liability matching requirements based on asset-liability matching strategies; (4) specified authorization levels required for approval of significant investment projects; and (5) specified risk management policies and prohibitions. These are subject to review and approval by the board of directors, and, in particular, the strategic asset allocation plan and annual asset allocation plan are subject to review and approval by the board of directors annually. The board of directors may delegate and authorize our management to review and approve investment guidelines and some investment management systems.

Investment proposals typically originate from our investment management department, which is in charge of all of our investment assets except for investment in real properties used by us, which is separately managed by our own-use real property investment management department. Material investment decisions are reviewed and approved by our board of directors or shareholder’s meeting and other investment proposals are reviewed by our president and senior management for final approval.

AMC, the asset management company that we established with CLIC, manages a substantial part of our Renminbi investments and, separately, substantially all of the investments retained by CLIC. See “—Asset Management Business”. IHC, a wholly owned subsidiary of CLIC, also manages our investments in unlisted equity interests, real estate and related financial products and securitization financial products. Other related parties are also entrusted to manage a small amount of our assets. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions”. In addition, as of December 31, 2020, we had also engaged 21 third party domestic investment managers to manage RMB130,345 million (US$19,976 million) for investment in Chinese public markets and 9 third party overseas investment managers to manage US$1,096 million for investment in overseas public markets.

The following table summarizes information concerning our investment assets as of December 31, 2018, 2019 and 2020.


	As of December 31,
	2018					2019					2020
	Carrying value		% of total			Carrying value		% of total			Carrying value		% of total
	*(RMB in millions, except as otherwise indicated)*
Cash and cash equivalents		50,809		1.6	%		53,306		1.5	%		56,629		1.4	%
Term deposits		559,341		18.0	%		535,260		15.0	%		545,667		13.3	%
Statutory deposits—restricted		6,333		0.2	%		6,333		0.2	%		6,333		0.2	%

Debt securities, held-to-maturity		806,717		26.1	%		928,751		26.0	%		1,189,369		29.1	%
Debt securities, available-for-sale		496,590		16.0	%		509,791		14.3	%		580,810		14.2	%
Debt securities, securities at fair value through profit or loss		88,003		2.8	%		85,206		2.4	%		95,615		2.3	%
Debt securities		1,391,310		44.9	%		1,523,748		42.7	%		1,865,794		45.6	%


Loans		450,251		14.5	%		608,920		17.0	%		658,535		16.1	%

Equity securities, available for sale		373,943		12.1	%		549,166		15.4	%		634,793		15.5	%
Equity securities, securities at fair value through profit or loss		50,714		1.6	%		56,402		1.6	%		65,955		1.6	%
Equity securities		424,657		13.7	%		605,568		17.0	%		700,748		17.1	%


Derivative financial assets		—		—			428		0.0	%		—		—
Resale agreements		9,905		0.3	%		4,467		0.1	%		7,947		0.2	%
Investment properties		9,747		0.3	%		12,141		0.3	%		14,217		0.3	%
Investments in associates and joint ventures		201,661		6.5	%		222,983		6.2	%		239,584		5.8	%

Total investment assets		3,104,014		100.0	%		3,573,154		100.0	%		4,095,454		100.0	%


Average investment assets balance		2,928,569					3,338,584					3,834,304

Risk management

Our primary investment objective is to pursue optimal investment yields while considering macroeconomic factors, risk control and regulatory requirements. We are exposed to five primary sources of investment risk:

•

interest rate risk, relating to the market price and cash flow variability associated with changes in interest rates;

•

credit risk, relating to the uncertainty associated with the continued ability of a given obligor to make timely payments of principal and interest;

•

market valuation risk, relating to the changes in market value for our investments, particularly our securities investment fund holdings and shares listed on the Chinese securities exchanges, which are denominated and traded in Renminbi;

•

liquidity risk, relating to the lack of liquidity in many of the debt and equity securities markets we invest in, due to contractual restrictions on transfer or the size of our investments in relation to the overall market; and

•

currency exchange risk, relating to the impact of changes in the value of the Renminbi against the U.S. dollar and other currencies on the value of our investments.

Our investment assets are principally comprised of fixed income securities and term deposits, and therefore changes in interest rates have a significant impact on the rate of our investment return. We manage interest rate risk through adjustments to our portfolio mix and terms, and by managing, to the extent possible, the average duration and maturity of our assets and liabilities. However, because of the general lack of long-term fixed income securities in the Chinese financial markets, the duration of some of our assets is lower than our liabilities. We believe that with the development of China’s financial markets and the gradual easing of our investment restrictions, our ability to match our assets to our liabilities will improve. Although we have been approved to enter into interest rate swaps, it is still not an effective means for us to hedge our interest rate risk as the Chinese interest rate swap market is still in the early stages of development.

We believe we have a relatively low credit risk, because we mainly invest in fixed income products with high credit ratings. We monitor our credit risk through in-house fundamental analysis of the Chinese economy and the underlying obligors and transaction structures.

We are subject to market valuation risk, particularly because China’s bond and stock markets are more volatile than developed markets. We manage valuation risk through industry and issuer diversification and asset allocation.

Since substantially all of our investments are made in China, we are exposed to the effect of changes in the Chinese economy and other factors which affect the Chinese banking industry and securities markets.

We are also subject to market liquidity risk for many of the investments we make, due to the size of our investments in relation to the overall market. We manage liquidity risk through selection of liquid assets and through asset diversification. In addition, we view fundraising through repurchase agreements as a way of managing our short-term liquidity risk.

Our ability to manage our investment risks is limited by the investment restrictions placed on us and the lack of sophisticated investment vehicles for risk management in China’s capital markets. The CBIRC allows insurance companies to invest in financial derivative products with the aim to hedge and reduce investment risks. We are considering these alternative ways of investing to further improve our risk management.

Our assets held in foreign currencies are subject to foreign exchange risks resulting from the fluctuations of the value of the Renminbi against the U.S. dollar and other foreign currencies. As we are approved by the CIRC to invest our assets held in foreign currencies in overseas financial markets, the return from overseas investments could, to a certain extent, reduce the foreign exchange risks we are exposed to.

For further information on our management of interest rate risk and market valuation risk, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk”.

Investment results

Our investment yields for the years ended December 31, 2020, 2019 and 2018 were 5.30%, 5.24%, and 3.29%, respectively.

The following table sets forth the yields on average assets for each major component of our investment portfolios for the periods indicated.


	As of or for the years ended December 31,
	2018						2019						2020
	Yield⁽¹⁾			Amount			Yield⁽¹⁾			Amount			Yield⁽¹⁾			Amount
	*(RMB in millions, except as otherwise indicated*)
Cash, cash equivalents, statutory deposits and term deposits:
Investment income		4.1	%		22,699			4.4	%		26,695			4.3	%		25,860
Ending assets: cash and cash equivalents					50,809						53,306						56,629
Ending assets: statutory deposits—restricted					6,333						6,333						6,333
Ending assets: term deposits					559,341						535,260						545,667

Ending assets					616,483						594,899						608,629
Debt securities:
Investment income					61,517						63,148						70,934
Net realized gains on financial assets					357						(35	)					1,575
Net fair value gains through profit or loss					2,006						778						(583	)

Total		4.8	%		63,880			4.4	%		63,891			4.2	%		71,926
Ending assets					1,391,310						1,523,748						1,865,794
Loans:
Investment income		5.5	%		22,894			5.1	%		27,111			5.0	%		31,948
Ending assets					450,251						608,920						658,535
Equity securities:
Investment income					17,776						22,804						24,983
Net realized gains on financial assets					(19,948	)					1,866						13,008
Net fair value gains through profit or loss					(18,938	)					18,279						22,997

Total		(5.1	%)		(21,110	)		8.3	%		42,949			9.3	%		60,988
Ending assets					424,657						605,568						700,748


	As of or for the years ended December 31,
	2018						2019						2020
	Yield ⁽¹⁾			Amount			Yield ⁽¹⁾			Amount			Yield ⁽¹⁾			Amount
Resale agreements:
Investment income		1.2	%		281			2.2	%		161			12.4	%		772
Ending assets					9,905						4,467						7,947
Investments properties:
Income of investments properties		1.6	%		105			0.3	%		31			(0.4	%)		(50	)
Ending assets					9,747						12,141						14,217
Investments in associates and joint ventures:
Net gains on investments of associates and joint ventures		4.3	%		7,745			3.8	%		8,011			3.3	%		7,666
Ending assets					201,661						222,983						239,584
Securities sold under agreements to repurchase:
Interest expense		(2.6	%)		(3,565	)		(1.5	%)		(2,392	)		(1.3	%)		(1,565	)
Ending liabilities					192,141						118,088						122,249
Total investments:
Investment income					125,167						139,919						154,497
Net realized gains on financial assets					(19,591	)					1,831						14,583
Net fair value gains through profit or loss					(18,278	)					19,251						21,900
Income of Investments properties					105						31						(50	)
Net gains on investments of associates and joint ventures					7,745						8,011						7,666
Interest expense of securities sold under agreements to repurchase					(3,565	)					(2,392	)					(1,565	)
Total		3.29	%		91,583			5.24	%		166,651			5.30	%		197,031
Ending assets excluding securities sold under agreements to repurchase					2,911,873						3,455,066						3,973,205

(1)	Yields for 2020, 2019 and 2018 are calculated by dividing the gross investment income for that year by the average of the ending balances of that year and the previous year.

Term deposits

Term deposits consist principally of term deposits with Chinese commercial banking institutions and represented 13.3% of our total investment assets as of December 31, 2020, 15.0% of our total investment assets as of December 31, 2019, and 18.0% of our total investment assets as of December 31, 2018.

We generally place term deposits with state-owned commercial banks and large joint stock commercial banks. The terms of the term deposits vary. They typically allow us to renegotiate terms with the banks upon prepayment, including the methods for the calculation of accrued interest, if any. We make large term deposits to obtain higher yields than can ordinarily be obtained with regular deposits.

The following table sets forth term deposits by contractual maturity dates, as of the dates indicated.

As of December 31,

2018

2019

2020

Amortized
cost

(RMB in millions)

Due in one year or less

158,920

107,039

63,079

Due after one year and through five years

323,021

420,191

480,848

Due after five years and through ten years

77,400

8,030

1,740

Total term deposits

559,341

535,260

545,667

The following table sets forth term deposits outstanding to Chinese banking institutions as of the dates indicated.


	As of December 31,
	2018		2019		2020
	Amortized cost		Amortized cost		Amortized cost
	*(RMB in millions)*
Industrial & Commercial Bank of China		5,378		3,205		9,092
Agriculture Bank of China		42,264		49,089		61,060
Bank of China		40,000		40,000		—
China Construction Bank		25,200		5,200		3,500
Bank of Communications		200,534		135,950		131,150
Other banks		245,965		301,816		340,865


Total term deposits		559,341		535,260		545,667

Debt securities

Debt securities in which we are permitted to invest mainly consist of the following categories:

•

Chinese government bonds;

•

government agency bonds (including local government bonds issued and repaid by the MOF as agent, central bank notes, financial bonds issued by Chinese state-owned policy banks and RMB-denominated bonds issued by international development institutions);

•

corporate bonds (including financial bonds issued by commercial banks, corporate bonds, convertible corporate bonds, short-term financing bonds and medium-term notes);

•

subordinated bonds and debt (including subordinated bonds issued by Chinese state-owned policy banks, subordinated bonds issued by commercial banks, subordinated debt with fixed terms issued by commercial banks and subordinated debt with fixed terms issued by insurance companies); and

•

tier 2 capital bonds and perpetual capital bonds (including tier 2 capital bonds and perpetual capital bonds issued by Chinese state-owned policy banks, and tier 2 capital bonds and perpetual capital bonds issued by qualified commercial banks).

Debt securities represented 45.6% of our total investment assets as of December 31, 2020, 42.7% of our total investment assets as of December 31, 2019, and 44.9% of our total investment assets as of December 31, 2018.

Based on estimated fair value, Chinese government bonds, Chinese government agency bonds, corporate bonds, subordinated bonds and debt and other debt securities comprised 8.5%, 29.1%, 23.4%, 14.1% and 24.9% of our total available-for-sale debt securities as of December 31, 2020, 4.7%, 33.6%, 29.1%, 10.6% and 22.0% of our total available-for-sale debt securities as of December 31, 2019, and 5.7%, 36.3%,37.5%,4.3% and 16.2% of our total available-for-sale debt securities as of December 31, 2018. Except for a small number of debt securities, which collectively had a carrying value of RMB52,535 million (US$8,051 million) as of December 31, 2020, most of our debt securities are traded on security exchanges or in the unlisted interbank market in China.

We mainly invest in secured bonds and unsecured bonds rated AA or above by the rating agencies recognized by the CBIRC, such as China Chengxin International Credit Rating Co., Ltd., or Chengxin International, and China Lianhe Credit Rating Co., Ltd., or Lianhe Credit. We also invest in short-term financing bonds rated A-2 or above.

Chengxin International is a member of Moody’s Investors Service Inc., with Moody’s owning 30% equity interest in Chengxin International. Chengxin International created its own rating structures by making reference to the rating structures and experience of Moody’s and Fitch Ratings. AAA is the highest rating. Other approved rating agencies, such as Lianhe Credit, have similar rating structures. Ratings given by these entities are not directly comparable to ratings given by U.S. rating agencies.

The following table sets forth the amortized cost and estimated fair value of debt securities, as of the dates indicated.


	As of December 31,
	2018										2019										2020
	Amortized cost		% of total			Estimated fair value		% of total			Amortized cost		% of total			Estimated fair value		% of total			Amortized cost		% of total			Estimated fair value		% of total
	*(RMB in millions)*
Debt securities, available-for-sale:
Government bonds		26,759		1.9	%		28,440		2.0	%		22,500		1.5	%		23,758		1.5	%		48,542		2.6	%		49,256		2.6	%
Government agency bonds		172,250		12.5	%		180,273		12.6	%		163,678		10.9	%		171,189		10.9	%		161,503		8.8	%		169,013		8.9	%
Corporate bonds		181,178		13.2	%		185,720		13.1	%		145,033		9.6	%		148,455		9.5	%		133,133		7.2	%		136,025		7.2	%


	As of December 31,
	2018										2019										2020
	Amortized cost		% of total			Estimated fair value		% of total			Amortized cost		% of total			Estimated fair value		% of total			Amortized cost		% of total			Estimated fair value		% of total
	*(RMB in millions)*
Subordinated bonds/debt		20,953		1.5	%		21,514		1.5	%		53,062		3.5	%		53,922		3.4	%		81,880		4.4	%		81,795		4.3	%
Others		78,136		5.8	%		80,643		5.6	%		109,729		7.3	%		112,467		7.3	%		141,530		7.6	%		144,721		7.6	%

Total debt securities, available-for-sale		479,276		34.9	%		496,590		34.8	%		494,002		32.8	%		509,791		32.6	%		566,588		30.6	%		580,810		30.6	%


Debt securities, held to maturity:
Government bonds		179,943		13.1	%		191,009		13.4	%		215,928		14.3	%		228,198		14.6	%		265,198		14.3	%		275,770		14.5	%
Government agency bonds		266,986		19.4	%		276,484		19.3	%		401,799		26.6	%		415,013		26.6	%		617,515		33.3	%		631,203		33.2	%
Corporate bonds		212,709		15.5	%		220,267		15.4	%		198,322		13.2	%		206,793		13.2	%		201,988		10.9	%		209,873		11.0	%
Subordinated bonds/debt		147,079		10.7	%		155,783		10.9	%		112,702		7.5	%		118,571		7.6	%		104,668		5.7	%		108,694		5.7	%

Total debt securities, held to maturity		806,717		58.7	%		843,543		59.0	%		928,751		61.6	%		968,575		62.0	%		1,189,369		64.2	%		1,225,540		64.4	%


Debt securities, securities at fair value through profit or loss
Government bonds		118		0.0	%		118		0.0	%		41		0.0	%		41		0.0	%		1,640		0.1	%		1,638		0.1	%
Government agency bonds		6,639		0.5	%		6,760		0.5	%		6,829		0.5	%		6,859		0.4	%		4,417		0.2	%		4,422		0.2	%
Corporate bonds		79,390		5.8	%		79,774		5.6	%		76,395		5.0	%		77,215		4.9	%		86,776		4.8	%		86,803		4.6	%
Others		1,346		0.1	%		1,351		0.1	%		1,083		0.1	%		1,091		0.1	%		2,668		0.1	%		2,752		0.1	%
Total debt securities, securities at fair value through profit or loss		87,493		6.4	%		88,003		6.2	%		84,348		5.6	%		85,206		5.4	%		95,501		5.2	%		95,615		5.0	%

Total debt securities		1,373,486		100.0	%		1,428,136		100.0	%		1,507,101		100.0	%		1,563,572		100.0	%		1,851,458		100.0	%		1,901,965		100.0	%

The following table shows the amortized cost and estimated fair value of debt securities excluding securities at fair value through profit or loss by contractual maturity dates, as of the dates indicated.


	As of December 31,
	2018				2019				2020
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
	*(RMB in millions)*
Due in one year or less		28,371		28,529		51,097		50,715		62,234		62,610
Due after one year and through five years		304,467		313,067		279,248		288,711		269,005		276,399
Due after five years and through ten years		485,722		506,005		457,940		478,297		468,612		485,178
Due after ten years		467,433		492,532		634,468		660,643		956,106		982,163


Total debt securities, excluding those at fair value through profit or loss		1,285,993		1,340,133		1,422,753		1,478,366		1,755,957		1,806,350

Our investments in debt securities are subject to strict restrictions under relevant Chinese regulation. See “—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”. We diversify our corporate bonds by industry and issuer to effectively manage and control concentration risks. As of the date of this annual report, we believe that our corporate bond portfolio does not have significant exposure to a single industry or issuer.

Loans

We offer interest-bearing policy loans to our policyholders, who may borrow from us in amounts up to the total cash values of their policies. In general, the loans are secured by the policyholders’ rights under the policies. As of December 31, 2020, the total amount of our policy loans was RMB200,730 million (US$30,763 million), and represented 4.90% of our total investment assets as of that date.

In addition to policy loans, our other loans mainly consist of our investment in debt investment plans and trust schemes. As of and for the year ended December 31, 2020, the total amount of our investment in debt investment plans was RMB84,589 million (US$12,964 million), and we had total investment proceeds from such plans of approximately RMB4,637 million (US$711 million). As of and for the year ended December 31, 2019, the total amount of our investment in debt investment plans was RMB83,924 million, and we had total investment proceeds from such plans of approximately RMB4,489 million. As of and for the year ended December 31, 2018, the total amount of our investment in debt investment plans was RMB75,717 million, and we had total investment proceeds from such plans of approximately RMB4,295 million. As of and for the year ended December 31, 2020, the total amount of our investment in trust schemes was RMB215,277 million (US$32,993 million), and we had total investment proceeds from such schemes of approximately RMB11,718 million (US$1,796 million). As of and for the year ended December 31, 2019, the total amount of our investment in trust schemes was RMB215,306 million, and we had total investment proceeds from such schemes of approximately RMB11,077 million. As of and for the year ended December 31, 2018, the total amount of our investment in trust schemes was RMB185,105 million, and we had total investment proceeds from such schemes of approximately RMB9,276 million.

Securities investment funds

Securities investment funds consist of Chinese domestic investment funds and overseas investment funds that primarily invest in securities. As of December 31, 2020, our investment in securities investment funds was RMB114,311 million (US$17,519 million) and represented 2.79% of our total investment assets as of that date. Our investment in securities investment funds mainly consists of investment in Chinese domestic investment funds.

We invest in both “closed-end” securities investment funds, in which the number of shares is fixed and the share value depends on the trading prices, and “open-end” securities investment funds, in which the number of shares issued by the fund fluctuates and the share value is set by the value of the assets held by the fund. Our investments in securities investment funds are subject to strict restrictions under relevant Chinese regulations. See “—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”. Our holdings in securities investment funds comply with those restrictions.

The following table presents the carrying values of investments in open-end and closed-end securities investment funds as of the dates indicated.


	As of December 31,
	2018					2019					2020
	Carrying value		% of total			Carrying value		% of total			Carrying value		% of total
	*(RMB in millions, except as otherwise indicated)*
Open-end		104,107		98.0	%		118,450		100.0	%		114,311		100.0	%
Closed-end		2,164		2.0	%		—		—			—		—


Total		106,271		100.0	%		118,450		100.0	%		114,311		100.0	%

Stocks

Investments in stocks consist of investment in publicly offered and listed equity securities that are denominated and traded in Renminbi and investment in stocks listed on specified overseas stock exchanges that are permitted by the CIRC. Our investments in stocks are subject to strict restrictions under relevant Chinese regulations. See “—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”. As of December 31, 2020, the total amount of our investment in common stocks was RMB350,107 million (US$53,656 million), and represented 8.5% of our total investment assets as of that date. As of December 31, 2019, the total amount of our investment in common stocks was RMB276,604 million, and represented 7.7% of our total investment assets as of that date. As of December 31, 2018, the total amount of our investment in common stocks was RMB178,710 million, and represented 5.8 % of our total investment assets as of that date.

Resale agreements

We enter into resale agreements, which consist of securities resell activities in resell markets.

The securities purchased under agreements to resell were RMB7,947 million (US$1,218 million) as of December 31, 2020, RMB4,467 million as of December 31, 2019, and RMB9,905 million as of December 31, 2018.

Equity interests in non-listed enterprises and related financial products

Insurance companies are allowed to invest, directly or indirectly, in equity interests in non-listed enterprises. These investments are categorized either as “direct investments”, for investments by an insurance company in its name, or as “indirect investments”, for investments through equity investment funds and other related financial products sponsored and established by an investment management institution. Our investments in equity interests in non-listed enterprises and related financial products are subject to strict restrictions under relevant Chinese regulations. See “—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”.

We started to make investments in equity interests in non-listed enterprises in 2006. In November 2017, we entrusted IHC to invest in Ningbo Meishan Bonded Port Area Baishan Investment Management Partnership, or Baidu Fund Partnership. The total capital commitment in the Baidu Fund Partnership is RMB7.011 billion, of which RMB5.6 billion was subscribed by us and RMB1.4 billion was subscribed by Ningbo Meishan Bonded Port Area Baidu Zhixin Asset Management Company, each as a limited partner. The Baidu Fund Partnership primarily makes mid-to-late stage investments in private equity transactions in the Internet sector, including Internet, mobile Internet, artificial intelligence, Internet finance, consumption upgrade, and Internet+.

In 2018, we subscribed for additional shares of CLPCIC by contributing RMB1.52 billion undistributed profits of CLPCIC. In December 2018, we subscribed for an additional 1,871,875,329 shares of China Guangfa Bank, or CGB, for RMB13.012 billion. Upon closing, we hold 8,600,631,426 shares of CGB, and our shareholding in CGB remains at 43.686%. We are still the largest shareholder of CGB.

In 2018, we invested RMB8 billion in equity interests in China Power Investment Nuclear Power Co., Ltd.

In 2019, we invested RMB9 billion in equity interests in Qinghai Huanghe Hydropower Development Co., Ltd.

The following table presents the carrying values of our major investments in equity interests in non-listed enterprises as of the dates indicated.


	As of December 31,
	2018		2019		2020
	Carrying value		Carrying value		Carrying value
	*(RMB in millions, except as otherwise indicated)*
China Life Property and Casualty Insurance Company Limited		7,963		9,332		10,620
China Guangfa Bank Co., Ltd.		72,655		75,180		79,974
Sinopec Sales Co., Ltd.		10,219		10,232		10,361
Sinopec Sichuan to East China Gas Pipeline Co., Ltd.		21,387		21,433		20,676
Ningbo Meishan Bonded Port Area Baishan Investment Management Partnership		1,698		1,751		1,771
China Power Investment Nuclear Power Co., Ltd.		8,036		8,607		8,802
Qinghai Huanghe Hydropower Development Co., Ltd.		—		9,007		9,732

Asset Management Business

On November 23, 2003, in connection with the restructuring, we established an asset management company, AMC, with CLIC, for the purpose of operating the asset management business more professionally in a separate entity and to better attract and retain qualified investment management professionals. AMC manages our investment assets and, separately, substantially all of those of CLIC. For a description of our investment assets, see “—Investments”.

We own 60% and CLIC owns 40% of AMC. Directors of AMC are appointed by the shareholders at a general meeting. As the controlling shareholder, we effectively control the composition of AMC’s board of directors. In 2014, the registered capital of AMC was increased from RMB3 billion to RMB4 billion. The proportionate shareholding between CLIC and us remains unchanged.

As of and for the year ended December 31, 2020, AMC had total assets of RMB13,897 million (US$2,130 million), net assets of RMB12,237 million (US$1,875 million) and net profit of RMB2,133 million (US$327 million).

Property and Casualty Business

In December 2006, we and CLIC established a property and casualty company, CLPCIC, with us owning 40% and CLIC owning the remaining 60%. In 2018, the registered capital of CLPCIC was increased from RMB15 billion to RMB18.8 billion, with us and CLIC contributing RMB1.52 billion and 2.28 billion undistributed profits of CLPCIC, respectively. The proportionate shareholding between CLIC and us remains unchanged.

As of and for the year ended December 31, 2020, CLPCIC had total assets of RMB106,930 million (US$16,388 million), net assets of RMB26,551 million (US$4,069 million) and net profit of RMB1,730 million (US$265 million).

Pension Insurance Business

In January 2007, we, CLIC and AMC established a pension insurance company, China Life Pension, with us owning 55%, CLIC owning 25% and AMC owning the remaining 20%. In January 2015, the registered capital of China Life Pension was increased from RMB2.5 billion to RMB3.4 billion. China Life Pension is currently held 70.74%, 4.41%, 3.53%, 1.33%, and 19.99% by us, CLIC, AMC, China Credit Trust Company Limited and AMP Life Limited, respectively.

China Life Pension has obtained qualifications to serve as investment manager, trustee and account manager of enterprise annuity funds.

As of and for the year ended December 31, 2020, China Life Pension had total assets of RMB6,789 million (US$1,040 million), net assets of RMB4,931 million (US$756 million) and net profit of RMB817 million (US$125 million).

Information Technology

Our computer systems provide support for many aspects of our businesses, including product development, sales and marketing, business management, cost control and risk control. We have approximately 2,177 experienced engineers, technicians and specialists providing professional and flexible support for our business operations in various aspects, including the design, research and development and operation of our computer systems.

During 2020, we actively applied advanced technologies and pushed forward digital transformation. We took the following steps:

•

Upgrade of sales model. We adopted digital technologies to develop new approaches for online agent recruitment and training as well as online business development. We also applied digital tools in insurance sales to facilitate precise marketing with more powerful intelligent algorithms.

•

Upgrade of field offices and equipment. We widely applied advanced technologies such as 5G, “Internet of Things” and edge computing technology in our filed offices. In 2020, we added new electronic facilities in our field offices such as self-service terminals for business processing, intelligent sensing equipment and visualized smart screens. We also made digital tools available at our field offices, including automatic Internet access, digital coaching and training, multi-dimensional and visualized performance tracking, and AI real-time performance reporting.

•

Upgrade of service and customer experience. We continued to update and improve our online services to better serve our customers. The paperless application rate of long-term individual insurance reached 99.9% and the promotion of paperless application rate of group insurance reached 97.9%, the online processing rate of policy administration and claims settlement for individual and group insurance increased by 20%, 28% and 37% year-on-year, respectively, and the number of electronic notification messages increased by 82.5% year-on-year.

•

Improvement of technology innovation ability. We launched four technological innovation-themed laboratories, namely InsurTech, cloud computing and infrastructures, cyber security and block chain. We carried out nearly 50 research projects on cutting-edge technologies, and introduced 28 intelligent application scenarios including intelligent insurance application, intelligent customer services, intelligent quality review and intelligent recommendations. We also utilized a flexible and nimble hybrid cloud with a powerful hash rate, which fully supported the shift of our operations and management from offline to online and effectively ensured continuity of our business operations during the pandemic.

•

Improvement of digital ecosystem. We continued to improve our digital platform, and released more than 1,700 standardized services and launched more than 740 innovative micro-applications. Our digital platform is also able to cooperate with third-party institutions such as medical and healthcare institutions, and nearly 170,000 services and activities were carried out at the digital platform.

We also continue to attach importance to financial data security and have implemented projects, including the separation of internal and external networks, cloud desktops, providing different levels of protection fitting to the various application systems, intelligent security monitoring and supervision platforms and anti-intrusion systems. User access information obtained through front office applications is gathered and managed at a back office platform. We have built a security protection system to cover assessment, protection, detection, response, recovery and other aspects of data protection. We have an intelligent visualization system to provide real-time monitoring on cyber attacks. We also have internal rules on the procedures for reporting and handling material accidents, including cybersecurity incidents, occurring during business operations.

Trademarks

We conduct our business under the “China Life” brand name (in English and Chinese), the “ball” logos, the “C” mark and other business related slogans and logos. CLIC owns these trademarks and has registered them with the Trademark Office of the SAMR. CLIC has entered into a trademark license agreement with us, under which CLIC has agreed to grant us a royalty-free license to use the “China Life” brand name, the “ball” logos and the “C” mark. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Continuing Related Party Transactions with CLIC”.

Regulatory and Related Matters

Overview

The insurance industry is heavily regulated in the PRC. The applicable laws and regulations governing insurance activities undertaken within the territories of the PRC consist principally of the PRC Insurance Law and rules and regulations promulgated under that law. The CBIRC is the authority authorized by the PRC State Council to regulate and supervise the insurance industry in the PRC. The CBIRC has been the principal regulatory authority over the PRC insurance industry since 2018, when its predecessor, the CIRC, was merged with China’s banking regulator, the CBRC.

The PRC Insurance Law, which provided the initial framework for regulating the PRC insurance industry, was enacted in 1995, and amended on October 28, 2002, February 28, 2009, August 31, 2014 and April 24, 2015. Among other things, the major provisions of the PRC Insurance Law include: (1) licensing of insurance companies and insurance intermediaries, such as agents and brokers; (2) separation of property and casualty business and life insurance business; (3) regulation of market conduct by participants; (4) substantive regulation of insurance products; (5) regulation of the financial condition and performance of insurance companies; and (6) supervisory and enforcement powers of the CBIRC.

The CIRC, the predecessor to the CBIRC, was established in 1998. The CBIRC has extensive supervisory authority over the PRC insurance industry, including: (1) promulgation of regulations applicable to the insurance industry; (2) approval for establishment of insurance companies and their subsidiaries; (3) review of qualifications of senior management of insurance companies; (4) supervision of insurance companies and their solvency and market activities; (5) establishment of investment regulations; (6) approving the policy terms and premium rates for certain insurance products; (7) setting standards for measuring the financial soundness of insurance companies; (8) requiring insurance companies to submit reports concerning their business operations and condition of assets; and (9) ordering the suspension of all or part of an insurance company’s business. Since their establishment, CBIRC and its predecessor CIRC have promulgated a series of regulations indicating a gradual shift in the regulatory approach to a more transparent regulatory process and a convergent movement toward international standards.

Insurance Company Regulation

Licensing requirements

An insurance company is required to obtain a license from the CBIRC in order to engage in an insurance business. In general, a license will be granted only if the company can meet prescribed registered capital requirements and other specified requirements, including requirements relating to its form of organization, the qualifications of its senior management and actuarial staff, the adequacy of its information systems and specifications relating to the insurance products to be offered.

The CBIRC may grant a life insurer a license to offer all or part of the following products: accident insurance, term life insurance, whole life insurance, annuities, short-term and long-term health insurance, endowment insurance (for individuals only) and other personal insurance approved by the CBIRC, as well as reinsurance relating to any of the foregoing.

An insurance company may seek approval for establishing branch offices to meet its business needs so long as it meets minimum capital and other requirements. Our headquarters and all of our branch offices have obtained the requisite insurance licenses.

Minimum capital requirements

The minimum paid-in capital for an insurance company is RMB200 million. For an insurance company whose registered capital is RMB200 million, the minimum incremental capital for each first provincial branch office in a province other than the province where its headquarter is located is RMB20 million. No additional capital will be required when the registered capital has reached RMB500 million, and the insurer’s solvency is sound.

Restriction of ownership in joint stock insurance companies

Any acquisition of shares which results in the acquirer owning 5% or more of the registered capital of a joint stock insurance company, whether or not listed, requires the approval of the CBIRC. A filing with the CBIRC is required with respect to a change of equity interest of less than 5% in an insurance company, unless it is a listed insurance company. Equity interests held by a single shareholder, including its related parties and persons acting in concert, must not exceed one-third of the registered capital of a single insurance company. An exception to the one-third cap applies to insurance companies establishing or investing in other insurance companies for the purposes of innovation and specialization of their business, or consolidating their operations under a single group management. Equity interests held by a single domestic limited partnership must not exceed 5% of the registered capital of a single insurance company. The combined equity interests held by several domestic limited partnerships must not exceed 15% of the registered capital of a single insurance company. Investors are divided into four categories, including financial I shareholders, financial II shareholders, strategic shareholders and controlling shareholders based on their shareholding percentage in the insurance company. Such investors are prohibited from selling their shares for periods varying depending on their classification: five years for a controlling shareholder, three years for a strategic shareholder, two years for a financial II shareholder, and one year for a financial I shareholder.

Fundamental changes

Prior approval must be obtained from the CBIRC before specified fundamental changes relating to a Chinese insurance company may occur. These include: a change of company name, registered capital or address of executive offices of companies or their subsidiaries; an expansion of business scope; an amendment to articles of association; a merger or spin-off; a change in a shareholder whose capital contribution accounts for 5% or more of the total capital of the company or a change in shareholding of 5% or more of the shares of the company; and a termination of a branch office. In addition, certain other changes relating to the insurance company must be reviewed by or filed with the CBIRC.

Regulation of products

Regulation of ordinary personal insurance products. An ordinary personal insurance product is one whose insurance premiums and policy benefits are definite upon issuance of the insurance policy. Beginning from August 5, 2013, the CIRC removed the original 2.50% cap on the guaranteed interest rates of ordinary personal insurance products, and such guaranteed interest rates can be decided by insurance companies at their discretion in accordance with the principle of prudence. Meanwhile, the statutory valuation rates of ordinary personal insurance policies issued on and after August 5, 2013 have been increased from 2.50% to 3.50%. In addition, beginning from August 5, 2013, if the guaranteed interest rate of an ordinary personal insurance product developed by an insurance company is not higher than the maximum valuation rate set by the CBIRC which varies depending on product, the insurance company must file the relevant information of the product with the CBIRC. If such rate is higher than the maximum valuation rate set by the CBIRC, the insurance company is required to obtain the approval of the CBIRC on the product in advance, and during the approval process, the insurance company is not allowed to submit new insurance clauses and premium rates to the CBIRC for approval. On September 2, 2016, the CIRC further required that policy loans provided by an insurer may not exceed 80% of the cash value or account value of the policy. From October 1, 2017, the first payment of survival insurance benefits for the ordinary endowment products and annuity products must occur only after five years since the policy becomes effective and the annual payment or partial payment must not exceed 20% of the paid premiums. Beginning from August 30, 2019, the cap on the valuation rate of premium reserves of ordinary pension annuity products or ordinary long-term annuity products with a term more than ten years issued on and after August 5, 2013 is equal the lower of 3.50% or the guaranteed interest rate.

Regulation of participating products. A participating product is one which the policyholder or annuitant is entitled to share in the distributable earnings of the insurer through “policy dividends”. The participation dividend may be in the form of a cash payment or an increase in the insured amount. At least 70% of the distributable earnings is required to be distributed as dividends. In September 2015, the CIRC removed the original 2.50% cap on the guaranteed interest rate of participating products. From October 1, 2015, the guaranteed interest rate is to be decided by insurance companies at their discretion in accordance with the principle of prudence. If the guaranteed interest rate of a participating product developed by an insurance company is not higher than 3.50%, the insurance company must file the specific information of such product with the CBIRC for record. If such rate is higher than 3.50%, the insurance company is required to obtain the approval of the CBIRC for the product. In addition, the valuation rate of unearned premium reserves of participating products equals to either the guaranteed interest rate or 3.00%, whichever is lower. Beginning from September 2, 2016, if the guaranteed interest rate of a life insurance product newly developed by an insurance company is lower than the maximum valuation rate set by the CIRC, which is 3.00% for participating products, the insurance company is only required to file specified information relating to the product with the CBIRC, and if such rates are higher than 3.00%, the insurance company is required to obtain the approval of the CBIRC for such products. From October 1, 2017, the first payment of survival insurance benefits for the participating endowment products and annuity products must occur only after five years since the policy becomes effective and the annual payment or partial payment must not exceed 20% of the paid premiums.

Regulation of universal products. A universal product is one which offers the typical protection of life insurance with investment accounts providing a minimum yield. The premium payments and coverage of universal products are flexible, usually with a minimum guaranteed interest rate, and the investment yields are settled periodically. Beginning from February 16, 2015, the CIRC removed the original 2.50% cap on the minimum guaranteed interest rate of universal products, with the guaranteed interest rate to be decided by insurance companies at their discretion in accordance with the principle of prudence. Meanwhile, the maximum valuation rate of a universal product has been increased from a compound annual rate of 2.50% to a compound annual rate of 3.50%. Beginning from September 2, 2016, the CIRC changed the maximum valuation rate of a universal product from a compound annual rate of 3.50% to a compound annual rate of 3.00%. If the minimum guaranteed interest rate of a universal product developed by an insurance company is not higher than the maximum valuation rate set by the CBIRC (i.e., a compound annual rate of 3.00%), the insurance company must file specified information relating to the product with the CBIRC. If such rate is higher than the maximum valuation rate set by the CBIRC, the insurance company is required to obtain the approval of the CBIRC for the product. Any amendment to the insurance clauses, premium rates, insurance liabilities, types of insurance or pricing methods of universal products must be filed with or approved by the CBIRC. From October 1, 2017, universal products must be designed to allow the flexibility to pay additional premiums from time to time and to adjust the insured amount. Insurance companies may not design the universal products in the form of riders.

Regulation of investment-linked products. An investment-linked product is one which insures the policyholder or annuitant against one or more separate risks and at the same time gives the policyholder or annuitant an interest in one or more separate investment accounts. Insurance companies must complete the establishment of investment accounts before submitting the required information regarding their investment-linked products to the CBIRC for approval or filing. Insurance companies must report on the establishment, change, consolidation, division, close or settlement of the investment accounts to the CBIRC within 10 business days after occurrence of these events. Transactions between a separate investment account and any other account of the insurance company, other than a transfer of cash to establish the investment account, are prohibited, and, investment-linked products must be designed to allow the flexibility to pay additional premiums from time to time and to adjust the insured amount. Insurance companies may not design investment-linked products in the form of riders. Other CIRC regulations govern the sale and disclosure terms of investment-linked products.

Regulation of variable annuity insurance. Variable annuity insurance is a type of insurance where the policy benefits are associated with the price of the investment unit in the linked investment account, and a minimum amount of policy benefits is guaranteed as stipulated in the insurance agreement. Under variable annuity insurance, the insurance company is obliged to pay an annuity or offer an option for the conversion of the insurance proceeds to be annuitized upon maturity. Variable annuity products may not be sold or amended without the prior approval of the CBIRC. Variable annuity products must be sold and disclosed in accordance with the requirements of the CIRC.

Regulation of pension insurance. A life insurance company or a pension insurance company, as approved by the CIRC, may engage in individual and group pension insurance business. The pension insurance terms and premium rates determined by an insurance company must be filed with or approved by the CBIRC in accordance with its regulatory provisions. Other CIRC regulations govern the sale and disclosure terms of pension insurance, as well as the investments by pension insurance funds.

Regulation of enterprise annuity funds. Subject to the approval of the PRC Ministry of Human Resources and Social Security, insurance companies may serve as the trustee, account manager and investment manager for enterprise annuity funds. China Life Pension has obtained qualifications to serve as investment manager, trustee and account manager of enterprise annuity fund.

Regulation of health insurance. Subject to approval by the CBIRC, life insurance companies may engage in health insurance business. Other insurance companies may, subject to approval by the CBIRC, engage in short-term health insurance business. Insurance companies engaged in health insurance business are required to submit an actuarial report or reserves assessment report for the preceding year in accordance with the relevant provisions of the CIRC. Insurance companies must also submit a pricing review report to the CBIRC before March 15 of each year regarding the short-term health insurance products. Insurance companies were permitted to sell health insurance products eligible for preferential individual income tax policies in accordance with the CIRC’s relevant requirements in 31 pilot cities, including Beijing, Shanghai, Tianjin and Chongqing beginning in 2016 and, from July 1, 2017, nationwide in China. The health insurance products may be offered to taxpayers who have reached the age of 16 but have not reached the statutory retirement age. The expenses incurred by individuals for purchasing such health insurance products will be deductible from their individual income tax up to RMB2,400 per year or RMB200 per month. Survival benefits paid before the expiry of the policy term of a care insurance product may only be paid under the condition that the care required by the insured is caused by disability in activities of daily living as agreed in the insurance contract. Survival benefits paid before the expiry of the policy term of a disability income insurance product may only be paid under the condition that the loss of working ability of the insured is caused by a disease or an accidental injury as agreed in the insurance contract. On December 1, 2019, the new Measures for the Administration of Health Insurance came into effect, pursuant to which sales of products that are not in compliance with the requirements under the new measure must be ceased before April 1, 2020.

Regulation of short-term accidental injury insurance. Short-term accidental injury insurance is a type of insurance that uses death or disability caused by accidents or physical injuries stipulated in the insurance agreement as a condition for paying insurance proceeds. Short-term accidental injury insurance products must be developed and managed by the headquarters of the insurance company and filed with the CBIRC. Insurance companies must also submit a pricing review report to the CBIRC before March 15 of each year regarding the short-term accident insurance products they offer.

Regulation of foreign exchange denominated insurance. Insurance companies may seek approval from the CBIRC and the SAFE to engage in foreign exchange denominated insurance and reinsurance businesses, allowing them to offer products to non-Chinese policyholders or for non-Chinese beneficiaries, as well as policies covering accidents and illnesses which occur outside China, together with related reinsurance.

Regulation of supplementary major medical insurance. As part of the Chinese government’s overall medical insurance scheme, supplementary major medical insurance reimburses policyholders for a specified percentage of their medical expenses which are in excess of the maximum amounts covered by the basic social medical insurance as long as such medical expenses are caused by the diseases covered by the basic social medical insurance. The supplementary major medical insurance programs have now been launched nationwide in China. Local governments use a portion of the basic medical insurance funds to purchase supplementary major medical insurance service from qualified insurance companies through a government tender. Insurance companies are required to apply to the CBIRC for the qualification to engage in such business. Supplementary major medical insurance products must be filed with the CBIRC.

Regulation of investments

Permitted investments. As a Chinese life insurance company, we are subject to restrictions under the PRC Insurance Law, the Measures for the Administration of the Utilization of Insurance Funds and other related rules and regulations on the asset categories and percentages in which we are permitted to invest. Assets that insurance companies may invest in are classified into five broad categories: current assets, fixed-income assets, equity assets, property assets and other financial assets. The amounts in percentages that may be invested in each asset category and the percentages that correspond to concentration risks for investing in a single item and counter-party are limited to specified amounts, and insurance companies are subject to risk monitoring requirements and early warning mechanisms with respect to liquidity, financing scale and asset classes.

Asset categories, investment and concentration risk regulatory percentages. Currently, Chinese life insurance companies are allowed to invest their funds in the following asset categories, subject to the satisfaction of conditions prescribed for each form of investment.


			Regulatory Percentage⁽¹⁾

Asset Category	Definition	Specific Items Included	Investment Regulatory Percentage	Concentration Risk Regulatory Percentage
Current assets	Current assets refer to cash reserves, deposits payable on demand, and highly-liquid assets with shorter terms and less risk of changes in value that can be readily converted into a definite amount of cash.	Domestic items mainly include cash, current deposits, bank call deposits, insurance asset management products on the monetary market, and government bonds, quasi-government bonds and reverse repurchase agreements with residual maturities of one year or less. Overseas items mainly include bank current deposits, monetary market funds, overnight lending, commercial bills, bank bills, negotiable certificates of deposit, reverse repurchase agreements, short-term government bonds, government-backed bonds, bonds of international financial organizations, corporate bonds and convertible bonds with residual maturities of one year or less, as well as other tools or products recognized by the CBIRC in this category.	None.	The total outstanding investments by an insurance company in a single legal person⁽²⁾ must not exceed 20% of the total assets⁽³⁾ of the insurance company as at the end of the last quarter (excluding, among others, investments in domestic central government bonds, quasi-government bonds, and equity investments in insurance enterprises with proprietary funds).


			Regulatory Percentage⁽¹⁾

Asset Category	Definition	Specific Items Included	Investment Regulatory Percentage	Concentration Risk Regulatory Percentage

Fixed-income assets	Fixed-income assets refer to assets characterized by a definite maturity date and payments of interest and principal according to pre-determined interest rates and payment methods, as well as other assets whose main value is dependent on the changes in the value of the aforesaid assets.	Domestic items mainly include term deposits, negotiated deposits, bond funds, fixed-income insurance asset management products, financial institution (company) bonds, non-financial institution (company) bonds and government bonds and quasi-government bonds with residual maturities of more than one year. Overseas items mainly include term deposits, structured deposits with bank guaranteed commitments, securities investment funds with fixed-income commitments, government bonds, government-backed bonds, bonds of international financial organizations, corporate bonds and convertible bonds with residual maturities of more than one year, as well as other tools or products recognized by the CBIRC in this category.	None.	The book balance of investment by an insurance company in a single fixed-income asset⁽⁴⁾ must not exceed 5% of the total assets of the insurance company as at the end of the last quarter, excluding investments in domestic central government bonds, quasi-government bonds and bank deposits. The total outstanding investment by an insurance company in a single legal person must not exceed 20% of the total assets of the insurance company as at the end of the last quarter (excluding, among others, investments in domestic central government bonds, quasi-government bonds and equity investments in insurance enterprises with proprietary funds).

Equity assets	Equity assets include both listed and unlisted equity assets. Listed equity assets refer to the ownership certificate representing the equity or other residual income rights of enterprises that are publicly listed and traded on stock exchanges or financial asset markets, as well as other assets whose main value depends on the changes in the value of the aforesaid assets. Unlisted equity assets refer to the equity or other residual income rights of enterprises that are established and registered but are not publicly listed on exchanges, as well as other assets whose main value depends on the changes in the value of the aforesaid assets.	Domestic items of listed equity assets mainly include shares⁽⁵⁾, equity funds, hybrid funds and equity insurance asset management products. Overseas items of listed equity assets mainly include ordinary shares, preferred shares, global depositary receipts, American depositary receipts and equity securities investment funds, as well as other tools or products recognized by the CBIRC in this category. Domestic and overseas items of unlisted equity assets mainly include equities of unlisted companies, equity investment funds (including venture capital funds), asset backed securities, insurance private equity funds and other related financial products, as well as other tools or products recognized by the CBIRC in this category.	The investment regulatory percentage will be determined according to the solvency adequacy ratio, asset and liability management capability, risk status and other indicators of an insurance company, ranging from 10% to 45% of the total assets of the insurance company as at the end of the last quarter.	The book balance of investments by an insurance company in a single equity asset must not exceed 5%⁽⁵⁾ of the total assets of the insurance company as at the end of the last quarter, except as otherwise provided for significant equity investments, investments in equities of insurance enterprises with self-owned funds and acquisitions of listed companies and investments in shares of listed commercial banks. The total outstanding investments by an insurance company in a single legal person must not exceed 20% of the total assets of the insurance company as at the end of the last quarter (excluding, among others, investments in domestic central government bonds, quasi-government bonds, and equity investments in insurance enterprises with proprietary funds). The total number of shares of a single listed company invested by an insurance company shall not exceed 10% of total capital stock of the listed company.


			Regulatory Percentage⁽¹⁾

Asset Category	Definition	Specific Items Included	Investment Regulatory Percentage	Concentration Risk Regulatory Percentage
Property assets	Property assets refer to purchased or invested land, structures and other land attachments, as well as other assets whose main value depends on the changes in the value of the aforesaid assets.	Domestic items mainly include real estate, infrastructure investment schemes, property investment schemes, property insurance asset management products and other property related financial products. Overseas items mainly include commercial properties, office properties and real estate investment trusts (REITs), as well as other tools or products recognized by the CBIRC in this category.	The total book balance of investments by an insurance company in property assets must not exceed 30%⁽⁵⁾of the total assets of the insurance company as at the end of the last quarter. The book balance does not include the properties purchased by the insurance company for its own use. The book balance of the properties purchased by an insurance company for its own use must not exceed 50% of the net assets of the insurance company as at the end of the last quarter.	The book balance of investments by an insurance company in a single property asset must not exceed 5% of the total assets of the insurance company as at the end of the last quarter, excluding properties purchased for its own use. The total outstanding investments by an insurance company in a single legal person must not exceed 20% of the total assets of the insurance company as at the end of the last quarter (excluding, among others, investments in domestic central government bonds, quasi-government bonds and equity investments in insurance enterprises with proprietary funds).

Other financial assets	Other financial assets refer to other kinds of assets that are distinctively different from all the foregoing categories of assets, including in terms of risk-return characteristics, liquidity and other characteristics, and cannot be classified into any of the foregoing categories.	Domestic items mainly include financial products by commercial banks, asset-backed securities offered by banking financial institutions, trust schemes of collective funds offered by trust companies, special asset management schemes offered by securities companies, project asset-backed schemes offered by insurance asset management companies and other insurance asset management products. Overseas items mainly include structured deposits without bank guaranteed commitments, as well as other tools or products recognized by the CBIRC in this category.	The total book balance of investments by an insurance company in other financial assets must not exceed 25% of the total assets of the insurance company as at the end of the last quarter.	The book balance of investments by an insurance company in a single other financial asset must not exceed 5% of the total assets of the insurance company as at the end of the last quarter, excluding purchase of insurance asset management products within its group. The total outstanding investments by an insurance company in a single legal person must not exceed 20% of the total assets of the insurance company as at the end of the last quarter (excluding, among others, investments in domestic central government bonds, quasi-government bonds, and equity investments in insurance enterprises with proprietary funds).


			Regulatory Percentage⁽¹⁾

Asset Category	Definition	Specific Items Included	Investment Regulatory Percentage	Concentration Risk Regulatory Percentage
Overseas investment	An insurance company is allowed to participate in overseas investments in 25 developed markets, 20 emerging markets and Macau in accordance with the relevant requirements of the CBIRC.	As referred to in the investable overseas items listed in each of the above asset categories.	The total outstanding overseas investments by an insurance company must not exceed 15% of the total assets of the insurance company as at the end of the last quarter.	The total outstanding investments by an insurance company in a single legal person must not exceed 20% of the total assets of the insurance company as at the end of the last quarter (excluding, among others, equity investments in insurance enterprises with proprietary funds).

(1)	When calculating the regulatory percentages for each asset category, an insurance company is required to combine its domestic and overseas investments in assets of the category on a consolidated basis.

(2)	A single legal person refers to a single fund-raising party with legal person status that establishes a direct creditor-debtor or shareholder relationship with an insurance company due to the latter’s investment therein.

(3)

Total assets exclude the balance of the funds raised from bond repurchases and the amount of assets under independent accounts (including investment-linked life insurance products, variable annuity products, health care entrusted management products, pension insurance entrusted management products and investment-oriented non-life insurance products without pre-agreed returns).

(4)	Single asset investments refer to the investments in a single specific item under any category of investment assets. Where an investment product is issued in several phases, the book balance of the investment in a single asset is the sum of the investments in each phase.

(5)

The CBIRC classifies investments in stocks into three categories: (i) ordinary stock investment, which refers to investment in less than 20% of the total share capital of a listed company without control over the company, (ii) material stock investment, which refers to investment in 20% or more of the total share capital of a listed company without control over the company, and (iii) acquisition of a listed company, which refers to becoming the controlling shareholder or actual controller of a listed company or otherwise having control over a listed company. There is no regulatory restriction for ordinary stock investment that does not involve an acquisition in the secondary market of more than 5% of the share capital of a listed company. For ordinary stock investment that involves an acquisition in the secondary market of more than 5% of the share capital of a listed company, information disclosure and reporting after the investment are required. For a material stock investment, filing with the regulatory authorities after the investment is required. For acquisition of a listed company, prior regulatory approval is required.

Investment risk monitoring percentages. To alleviate the risks associated with liquidity and high volatility of assets, an insurance company that experiences any of the following circumstances is required to report to the CBIRC in a timely manner, and the CBIRC will closely monitor the operation of the insurance company and disclose the related information to the public when necessary:

•

Liquidity monitoring. The total book balance of investments by an insurance company in current assets and government bonds and quasi-government bonds with residual maturities of one year or longer is lower than 5% of the total assets of the insurance company as at the end of the last quarter.

•

Financing leverage monitoring. The total outstanding borrowings (including inter-industry lending and bond repurchases) of an insurance company exceed 20% of the total assets of the insurance company as at the end of the last quarter.

•

Monitoring of different categories of assets. The total book balance of investments by an insurance company in domestic bonds with a long-term credit rating of AA or lower as rated by domestic credit rating agencies exceeds 10% of the total assets of the insurance company as at the end of the last quarter, or the total book balance of investments in equity assets exceeds 20% of the total assets of the insurance company as at the end of the last quarter, or the total book balance of investments in property assets exceeds 20% of the total assets of the insurance company as at the end of the last quarter, or the total book balance of investments in other financial assets exceeds 15% of the total assets of the insurance company as at the end of the last quarter, or the total book balance of outstanding overseas investments exceeds 10% of the total assets of the insurance company as at the end of the last quarter.

•

The book balance of a single inter-group insurance asset management product purchased by an insurance company exceeds 5% of the total assets of such insurance company as at the end of the last quarter.

Risk Classification of Insurance Assets. An insurance company must evaluate, at least once every half year, the quality of its insurance assets falling within the categories of fixed-income assets, equity assets and property assets, and divide such assets into five categories based on risk, namely “pass”, “special mention”, “substandard”, “doubtful” and “loss”, with the last three categories collectively referred to as “non-performing assets”. Insurance assets that require risk classification include assets invested by the insurance company other than those subject to fair value measurement and changes to these assets are counted as gains or losses for the period in question or owners’ equity. An insurance company must establish and improve risk classification systems and working processes for its assets and file reports on such systems and processes with the CBIRC. In addition, an insurance company is required to semiannually report to the CBIRC the relevant information on the classification of its assets. An insurance company must also establish feasible plans for annual asset loss provisions and write-offs, as well as plans for the disposal of non-performing assets based on its actual operations and the quality of its assets. These plans must be approved by its board of directors and be filed with the CBIRC.

Insurance private equity funds. Insurance companies are allowed to establish private equity funds that comply with the requirements of the CBIRC, including growth funds, buyout funds, funds for strategic emerging industries, mezzanine funds, real estate funds, venture capital funds, and funds of funds (FoF) primarily investing in the aforementioned funds. Insurance companies must register the establishment of private equity funds with the CBIRC, and periodically submit quarterly reports, annual reports and other related information to the CBIRC during the term of private equity funds.

Financial derivative products. Apart from the regulations on the five asset categories described above, the CIRC has separately issued a series of rules governing the operation of domestic and overseas trading of derivative products by an insurance company. Financial derivative products are financial contracts whose value is determined by one or more types of underlying assets, indices or certain events. Typical financial derivative products include forwards, futures, options and swaps.

Bank capital replenishment bonds. Insurance companies are allowed to invest in Tier 2 capital bonds and non-fixed term capital bonds issued by banks. Investment in Tier 2 capital bonds and non-fixed term capital bonds are regulated in accordance with requirements on investment in either equity assets or fixed-income assets, depending on how such bonds are categorized by the issuer of such bonds.

Insurance companies may participate in derivatives transactions only for the purpose of hedging or averting risks, and not for the purpose of speculation. Legitimate purposes include hedging or averting risks of current assets and liabilities, or the company as a whole, and hedging the risk of assets scheduled to be bought within the next month, or locking in future transaction prices.

“Assets scheduled to be bought”, as used above, refers to assets that an insurance institution has decided to buy after going through its investment decision-making process. If the assets are not bought within one month of the decision date, or the plan was aborted within the aforementioned period, the insurance institution must terminate, liquidate or unwind the relevant derivative upon the expiration of the prescribed period or within five trading days of such decision.

For an insurer carrying out interest rate swaps, the notional principal may not exceed 10% of its fixed-income assets (including bank deposits, bonds and other debt instruments) as of the end of the previous quarter. The notional principal swapped with the same counterparty may not exceed 3% of such counterparty’s fixed-income assets as of the end of the previous quarter.

Solvency requirements

On January 1, 2016, the CIRC implemented a new set of solvency regulations, the “China Risk Oriented Solvency System”, or C-ROSS, which replaced its previous solvency requirements known as “Solvency I”.

C-ROSS adopts the internationally accepted “three-pillar” regulatory system while its regulatory concept, models, methods and parameters are based on Chinese insurance market conditions. The three pillars are:

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Pillar I: quantitative capital requirements which aim to prevent quantifiable risks, and include quantifying capital requirements, criteria for assessment and recognition of actual assets and liabilities, capital classification, stress tests and regulatory measures to be imposed on the insurers which fail to meet the quantitative capital requirements.

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Pillar II: qualitative regulatory requirements which aim to prevent unquantifiable risks, and which include an integrated risk rating, requirements on assessment and management of risks by the insurers, and regulatory inspection and analysis and regulatory measures to be imposed on the insurers which fail to meet the qualitative regulatory requirements.

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Pillar III: market discipline mechanisms which aim to involve, through sufficient information disclosure systems and other means, market players including the public, customers, rating agencies and industry analysts by introducing mechanisms through which they will play an important role in the solvency supervision process.

Under C-ROSS, the three indicators to measure the solvency ratio of an insurer include the following:

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the core solvency adequacy ratio, which is calculated by dividing the core capital of an insurer by the minimum capital it is required to meet;

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the comprehensive solvency adequacy ratio, which is calculated by dividing the sum of core capital and supplementary capital of an insurer by the minimum capital it is required to meet; and

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an integrated risk rating, which is a comprehensive rating system that the CIRC uses to evaluate an insurer’s overall solvency based on both quantitative assessments on quantifiable risks in Pillar I and qualitative risk assessments on unquantifiable risks in Pillar II.

The core solvency adequacy ratio and comprehensive solvency adequacy ratio of an insurer reflect the capital adequacy for quantifiable risks of such insurer, and the integrated risk rating reflects the overall solvency risks of such insurer.

The actual capital of an insurer is admitted assets less admitted liabilities, determined in accordance with relevant rules under C-ROSS. The actual capital is classified into core capital and supplementary capital, depending on the loss absorbing capacity and features of such capital. The minimum capital of an insurer is the capital that the CIRC requires it to meet.

Under C-ROSS, solvency risks are classified into inherent risk and control risk. Inherent risk refers to the risks that are unavoidable in the writing of insurance business. Control risk refers to the risks of failure to identify, evaluate and manage control inherent risk timely due to imperfections in the internal management and control process. Inherent risk includes both quantifiable risks and unquantifiable risks.

Quantifiable risks include the following:

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Insurance risk, which includes life insurance risk and non-life insurance risk;

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Market risk, which includes interest rate risk, equity price risk, property price risk, overseas assets price risk and foreign exchange risk; and

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Credit risk, which includes spread risk and default risk.

Unquantifiable risks include the following:

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Operation risk;

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Reputation risk;

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Strategy risk; and

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Liquidity risk.

The minimum capital requirement for quantifiable risks is determined using a value at risk approach. The minimum capital requirement for control risk is determined based on solvency aligned risk management requirements and assessment, or SARMRA.

The CIRC comprehensively evaluates the inherent risk and control risk of an insurer and determines an integrated risk rating of solvency risks. Insurers will then be classified into the following four supervision categories:

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Category A: an insurer’s solvency adequacy ratio meets the CIRC requirement, and its risk level is very low for the four unquantifiable risks;

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Category B: an insurer’s solvency adequacy ratio meets the CIRC requirement, and its risk level is low for the four unquantifiable risks;

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Category C: an insurer’s solvency adequacy ratio does not meet the CIRC requirement, or an insurer’s solvency adequacy ratio meets the CIRC requirement but its risk level is high for one or more of the four unquantifiable risks; or

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Category D: an insurer’s solvency adequacy ratio does not meet the CIRC requirement, or an insurer’s solvency adequacy ratio meets the CIRC requirement but its risk level is serious for one or more of the four unquantifiable risks.

The CIRC applies different regulatory policies to each of the four supervision categories with respect to, among others, market access, product management, use of insurance funds and on-site inspection.

Category B insurer may be subject to a range of regulatory actions by the CBIRC, including, among others, risk alert, supervisory conversation, rectification of identified problems within a specified deadline, on-site inspection or request to submit and implement plans to prevent insolvency or improve risk management.

If a Category C insurer does not meet the solvency adequacy ratio required by the CBIRC, the CBIRC may in such situations require the insurer to, in addition to the regulatory actions for category B, adjust its business structure, restrict business expansion and increase in assets, restrict the establishment of branch offices, restrict its commercial advertising activities, limit its business scope, transfer its insurance business to others or seek reinsurance of its insurance obligations, adjust investment portfolios or counterparties, limit its channels or percentages of investment, raise additional share capital, limit paying dividends on its shares, limit the remuneration of its directors and senior management or change its management team. If an insurer of category C meets the solvency adequacy ratio as required by the CBIRC but its risk level is high for one or more of the four unquantifiable risks, the CBIRC may take specific regulatory actions that target on the respective issues of each insurer.

For a Category D insurer the CBIRC may, in addition to the regulatory actions for category C, require such insurer to rectify or cease part or all new business, put the insurer into receivership or take other regulatory actions as determined by the CBIRC.

Based on the latest comprehensive rating results regarding the solvency risks of insurers released by the CBIRC for the fourth quarter of 2020, we had been classified as a Category A insurer.

Our core solvency adequacy ratio as of December 31, 2020 was 260.10%, and our comprehensive solvency adequacy ratio as of December 31, 2020 was 268.92%.

Statutory deposits

Insurance companies in China are required to deposit an amount equal to 20% of their registered capital with at least two qualified commercial banks, each of which must, among other things, have net assets of no less than RMB20 billion as of the end of the previous year and have no affiliated relationship with the insurance company. These funds may not be used for any purpose other than to pay off debts during a liquidation proceeding. Insurance companies must choose more than two qualified commercial banks as statutory deposit banks and the statutory deposit period must be for a minimum of one year. In addition, when an insurance company deposits the statutory funds for a business opening or capital increase, renews the deposit upon maturity or transfers the deposit to another bank, changes the nature of the deposit upon maturity or withdraws the deposit before maturity, the insurance company must file with the CBIRC within 10 business days after these funds are duly deposited.

Statutory insurance fund

Chinese life insurance companies are required to contribute to a statutory insurance fund 0.15% of the premiums for life insurance with guaranteed earnings and 0.05% of the premiums for life insurance without guaranteed benefits; 0.8% of insurance premiums for short-term health insurance and 0.15% of insurance premiums for long-term health insurance; 0.8% of the premiums for non-investment accident insurance, 0.08% of the premiums for investment accident insurance with guaranteed benefits, and 0.05% of premiums for investment accident insurance without guaranteed benefits. Contributions are not required once the balance of the statutory insurance fund of a life insurance company reaches 1% of the company’s total assets.

Statutory reinsurance

Insurance companies are required to reinsure, for any single risk, the excess of the maximum potential liability over an amount equal to 10% of the sum of paid-in capital and capital reserves.

Actuaries

Insurance companies are required to employ actuarial professionals and establish a system for actuarial reporting.

Regulation of corporate governance

Directors and senior management qualification and remuneration management requirements. Directors, supervisors and senior management of an insurance company are subject to qualification requirements implemented by the CBIRC. An insurance company must have at least three independent directors and the number of independent directors shall be no less than one third of the number of all the directors. In addition, if any of the shareholders of an insurance company holds more than 50% of the registered capital or equity of the company, then the number of independent directors must be no less than one half of the number of all the directors, unless such 50% or greater shareholder is an insurance group company or an insurance company. An insurance company must reasonably determine the remuneration paid to its directors, supervisors and senior management based on the company’s financial conditions, operating results, risk control and other factors. Where an insurance company has inadequate solvency, the CBIRC will place restrictions on the remuneration of its directors, supervisors and senior management in accordance with relevant regulatory rules on solvency. The senior management of an insurance company receive in-office audits once every three years. If any member of the senior management leaves due to a job change, promotion or any other reasons, a departure audit must be conducted.

Risk management. Insurance companies must establish and adopt procedures, organizational structures, systems and measures to identify, evaluate and control the risks involved in its insurance operation. Insurance companies must report to the regulatory authorities in a timely manner any major risks, and submit an annual risk management report reviewed by the board of directors. In addition, as required by the CBIRC, where an insurance company carries out by itself or is entrusted to carry out various investment management businesses, it shall have the corresponding investment management capabilities, including credit risk management capability, investment capability in the secondary stock market, equity investment capability, real estate investment management capability, derivatives application management capability, product management capability of debt investment plans and product management capability of equity investment plans. For each investment management capability, an insurance company should designate at least two qualified risk officers. Where an insurance company decides to replace a risk officer, impose disciplinary sanctions on a risk officer, dismiss a risk officer or terminate the employment of a risk officer, the insurance company must replace such risk officer within 10 business days from the date of the decision, and report to the CBIRC and state the reasons for such replacement.

Asset-liability management. On July 24, 2019, the CBIRC released interim measures for the supervision and regulation of insurance asset-liability management. The new interim measures, as well as the other regulatory requirements including the previously issued rules on insurance asset-liability management, set forth a set of specific technical criteria and rules on the quantitative and competency assessments on asset-liability management, as well as requirements on preparing and submitting asset-liability management reports. Under the new interim measures, the CBIRC will adopt differential regulation and supervision standards for insurance companies depending on their respective asset-liability management competency and quantitative assessment scores.

Compliance management. Insurance companies must prevent, identify, evaluate, report and manage compliance risks by taking measures such as setting up a compliance department, formulating and implementing compliance policies (which are required to be filed with the CBIRC), exercising compliance monitoring and providing compliance trainings, so as to ensure compliance by the company, its staff and sales agents with the relevant laws and regulations, rules of regulatory authorities, industrial self-regulatory rules, internal management systems and codes of ethics. An annual compliance report must be submitted to the CBIRC by April 30 each year. Each insurance company is required by the CBIRC to appoint a compliance officer and establish a compliance management department in its head office. Where the proposed compliance head of an insurance company for whom the insurance company has applied for CBIRC approval of post-holding qualifications also serves in other senior management positions, the insurance company must submit a statement that the proposed compliance head will not also manage a business or financial department during his or her term of office. Beginning from July 1, 2017, the headquarter and provincial branches of an insurance company must each set up a compliance management department. Where the proposed compliance head of an insurance company for whom the insurance company has applied for approval of post-holding qualifications is to be served by a senior management person other than the general manager, the insurance company must submit a statement that the proposed compliance head will not also manage departments that may be in conflict with his or her responsibilities for compliance management, such as those for business, finance, fund use and internal audit during his or her term of office. As of the date of this annual report, we have set up a compliance management department, established compliance standards and appointed a compliance officer whose qualification has been approved by the CBIRC.

Related party transactions. Insurance companies are required to establish a related party transaction control committee to be responsible for identifying related parties, managing, reviewing and approving related party transactions and controlling risks. The related party transaction control committee must be composed of at least three directors, with an independent director acting as the person in charge. The related party transaction control committee should focus on the compliance, fairness and necessity of related party transactions. According to applicable CBIRC regulations, related party transactions between an insurance company and any of its related parties are classified as either “material related party transactions” or “ordinary related party transactions”. The term “material related party transactions” refers to any single transaction or a series of transactions within any given year between an insurance company or any of its controlled subsidiaries and a related party in which the trading volume exceeds RMB30 million and accounts for 1% or more of the insurance company’s audited net assets as of the end of the previous year. The term “ordinary related party transactions” refers to all related party transactions other than “material related party transactions”. A material related party transaction must be first reviewed by the related party transaction control committee, and then be approved by the board of directors, by vote of more than two thirds of attending non-affiliated directors, or by shareholders’ meeting. An ordinary related party transaction must be reviewed in accordance with the internal management system and authorization process of the insurance company, and then be filed with or approved by the related party transaction control committee. An insurance company is required to maintain a system to manage related party transactions and file them with the CBIRC. Companies must take effective measures to prevent their shareholders, directors, supervisors, senior management and other related parties from taking advantage of their positions and acting against the interests of the company or the insured through related party transactions. In addition, an insurance company must report to the CBIRC each of its material related party transactions, the execution, renewal or substantive change of any framework transaction agreement, as well as any other transaction as required by the CBIRC.

Internal audit. Insurance companies are required to establish an independent department for internal audit purposes, staffed with sufficient internal audit personnel, establish an audit committee, and designate an audit controller whose appointment and replacement must be filed with the CBIRC. An internal audit report must be submitted to the CBIRC by April 30 of each year and any major risk identified during the internal audit process must be reported to the CBIRC in a timely manner.

Reporting and disclosure requirements. An insurance company must disclose to the public various information regarding its operations and business, including financial and accounting information, information on its insurance liabilities and reserves, risk management, its insurance products, solvency, material related transactions and major events, as well as other information required by the CBIRC. An insurance company must disclose this information on its website, and by April 30 of each year, an insurance company must also disclose an annual report on its website and in media designated by the CBIRC. In addition, after the occurrence of a material related party transaction or other material events, an insurance company must disclose information about such transactions and events on its website and in media designated by the CBIRC within the time limit required by the CBIRC.

Internal control assessment. An insurance company must establish an internal control evaluation system in various operations including sales, operation, basic management and fund use. Life insurance companies are required to submit to the CBIRC a corporate governance report each year along with other regulatory information, which includes its internal control evaluation result.

Custody of insurance assets. Insurance companies are required to establish and improve mechanisms for the custody of insurance assets, select qualified commercial banks and other professional institutions, place various assets generated by the investment of insurance funds under third-party custody and oversight, and ensure that the revenue and expenditure concerning the use of insurance funds (except for expenditure of daily expenses) are primarily processed through the custody fund accounts. Insurance companies are required to submit implementing plans relating to the custody of their insurance assets to the CBIRC.

Market conduct

Insurance companies are required to take steps to ensure that sales promotional materials used by their sales representatives and agents are objective, true and correct, with no material omissions or misleading information, contain no forecasts of benefits that are not guaranteed under the insurance or annuity product and do not exaggerate the benefits provided under the insurance or annuity product. The sales promotional materials must also highlight in an appropriate fashion any exclusions of coverage or liability in their products, as well as terms providing for policy or annuity surrenders and return of premiums.

Insurance companies which conduct marketing and promotional activities through we-media platforms (such as websites, apps, blogs, microblogs, corporate accounts and WeChat) are required to establish an appropriate management system. The management criteria of such system should be no less strict than the criteria provided in existing regulations in relation to the insurance promotional materials for off-line channels.

Insurance companies are subject to extensive regulation against any anti-competitive behavior or unfair dealing conduct. They may not pay insurance agents, the insured or the beneficiary any rebates or other illegal payments, nor may they pay their agents commissions over and above the industry norm.

Insurance companies are required to establish internal rules and procedures to protect the personal data of policyholders and insureds. Insurance companies are prohibited from illegally obtaining, using or selling of the personal data of policyholders and insureds.

Insurance companies are also required to comply with anti-money laundering regulations and establish internal operational procedures and anti-money laundering control systems. No insurance activity can be conducted for the purpose of illegal fundraising.

Regulation of issuance of subordinated debt

Insurance companies that meet a series of qualification tests and are approved by the CBIRC may issue subordinated debt with a fixed term of at least five years to certain qualified Chinese legal persons and foreign investors. The audited net asset value of the issuer must be at least RMB500 million as of the end of the prior year and the total amount of unpaid debt at any given point after the issuance, including both principal and interest, must not exceed the issuer’s net asset value as of the end of the prior year. Proceeds from the issuance of subordinated debt may be recorded as supplementary capital of an issuance company, provided that the total amount that has been recorded as supplementary capital may not exceed 50% of the net assets of an insurance company. Proceeds from the issuance of subordinated debt may not be used to offset daily operating losses of an insurance company. The issuer must comply with certain disclosure obligations both at the time of the issuance and during the term of the debt. The issuer may repay the debt only if its solvency ratio would remain at least 100% after the repayment of both principal and the interest. Qualified insurance groups or holding companies are also allowed to issue subordinated debt in accordance with the relevant requirements.

Since 2012, publicly listed insurance companies that meet a series of qualification tests and are approved by the CBIRC have also been permitted to issue subordinated convertible bonds. Subordinated convertible bonds refer to bonds issued by an insurance company in accordance with statutory procedures that satisfy the following conditions: the bonds have a maturity of five years or longer; the principal and interest of the bonds shall be repaid and paid after insurance policy liabilities and other general liabilities in the event of bankruptcy liquidation; and the bonds can be converted into shares of the insurance company in accordance with the agreed conditions within a certain period of time. An insurance company must submit an issuance application to the relevant securities regulatory authority within six months after the CBIRC has approved the issuance of subordinated convertible bonds, and an issuer must report the issuance information to the CBIRC within ten working days after completion of the issuance of subordinated convertible bonds.

Regulation of issuance of capital replenishment bonds by insurance companies

Since January 2015, insurance companies including insurance group companies that meet a series of qualification tests and are approved by the CBIRC and PBOC may issue bonds for capital replenishment in the national inter-bank bond market. The capital replenishment bonds issued by an insurance company must have a maturity of at least five years and be repaid after insurance policy liabilities and other general liabilities, but prior to payment related to the equity capital of such insurance company. The audited net asset value of the issuer as of the end of the prior year and its net asset value in the latest quarterly financial statements must be no less than RMB1 billion, and the total amount of its issued capital replenishment bonds and fixed-term subordinated debts pursuant to CBIRC requirements must not exceed 100% of the issuer’s net asset value. The issuer must comply with certain disclosure obligations both at the time of the issuance and during the term of the bonds. The issuer has the right to redeem the capital replenishment bonds after five years of its issuance provided that its solvency ratio is at least 100% after the redemption.

Regulation of establishment and management of non-insurance subsidiaries

An insurance company may apply to the CBIRC for approval for the direct or indirect establishment of domestic or overseas non-insurance subsidiaries (excluding insurance companies, insurance asset management institutions, dedicated insurance agencies, insurance brokerage institutions and insurance assessment institutions), primarily including: (1) financial institutions that engage in non-insurance financial services; (2) service firms that provide various supporting services to insurance companies; (3) investment platform companies with a strong connection with an insurance business, project companies established for managing the investment of insurance funds in real properties, and companies formed as a result of the investment of insurance funds in the upstream and downstream industry chain of an insurance business; and (4) other types of companies. Unless otherwise prescribed by laws, administrative regulations and the CBIRC, an insurance company is not allowed to guarantee the debts of its non-insurance subsidiaries, or lend funds to its non-insurance subsidiaries. An insurance company must build firewalls between its non-insurance subsidiaries in terms of personnel, capital, business and information to prevent risks spreading from its non-insurance subsidiaries. An insurance company must also cause its non-insurance subsidiaries to establish and improve their respective information disclosure systems, and submit to the CBIRC an annual report on its non-insurance subsidiaries by April 30 of each year.

Regulation of establishment of overseas insurance institutions

An insurance company may apply to the CBIRC for approval for the establishment of overseas branches, overseas insurance companies and overseas insurance intermediaries, or the acquisition of overseas insurance companies or intermediaries. In order to submit such an application, an insurance company must have an operating history of no less than two years, total assets of no less than RMB5 billion as at the end of the prior year and foreign exchange funds of no less than US$ 15 million or its equivalent in other freely convertible currencies as at the end of the preceding year. The applicant insurance company must also comply with applicable solvency, risk management and other requirements as stipulated by the CBIRC.

Compliance with regulatory requirements

Our management confirms that we have complied in all material respects with all applicable regulatory requirements set out above.

Regulation of Foreign-Invested Insurance Companies

China acceded to the WTO on December 11, 2001. As a result of China’s commitments in connection with the accession, the Chinese insurance market is gradually opening up to foreign insurers and insurance-related service providers. The geographic limitation on foreign-invested life insurers, which were permitted to operate only in specified cities, has been lifted since December 11, 2004. Accordingly, foreign-invested life insurers have been permitted to sell individual and group life insurance, health insurance and annuity and other pension-like products since December 11, 2004. Since December 11, 2006, foreign-invested insurance brokers have been permitted to set up wholly owned subsidiaries in China. From January 1, 2020, foreign investors are allowed to own 100% in Chinese life insurers, and the CBIRC also removed the requirements that a foreign insurance company must have engaged in insurance business for more than 30 years and have maintained a representative office in China for at least two years before it can establish a foreign-invested insurance company in China.

Foreign-invested insurance companies, including Sino-foreign equity joint ventures, wholly foreign-owned insurance companies and branches of foreign insurance companies, are generally regulated in the same manner as domestic insurance companies. Without the approval of the CBIRC, foreign-invested insurance companies may not engage in asset purchases and sales or other transactions with their affiliates, but may engage in outward and inward reinsurance with their affiliates. In addition, where the foreign-invested insurance company is a branch of a foreign insurance company, it is required to notify the CBIRC of fundamental events relating to the foreign insurance company within ten days following the occurrence of the event. Reportable events include: (1) a change of name, senior management or jurisdiction of incorporation of the foreign insurance company, (2) a change in the foreign insurance company’s share capital, (3) a change in any person beneficially owning 10% or more of the foreign insurance company’s shares, (4) a change in business scope, (5) the imposition of administrative sanctions by any applicable regulatory authority, (6) a material loss incurred by the foreign insurance company, (7) a spin-off, merger, dissolution, revocation of corporate franchise or bankruptcy involving the foreign insurance company and (8) other events specified by the CBIRC. If the foreign insurance company is dissolved, or its corporate franchise is revoked or it is declared bankrupt, the Chinese branch of the foreign insurance company will be prohibited from conducting any new business.

The CBIRC delegates certain authorities with respect to foreign-invested insurance companies to its provincial and local branch offices: approving the change of place of business of branches and subsidiaries of foreign-invested insurance companies; approving the establishment of subsidiary agencies of foreign-invested insurance companies below the branch-office level; approving the opening of subsidiary agencies of foreign-invested insurance companies below the branch-office level; and approving the qualification of senior management personnel of subsidiary agencies of foreign-invested insurance companies below the branch-office level.

Regulation of Insurance Asset Management Companies

An insurance asset management company is a limited liability company or joint stock company that manages insurance funds on behalf of others. Insurance asset management companies are regulated by the CBIRC.

Minimum capital requirements

The registered capital of an insurance asset management company may not be lower than RMB100 million or the equivalent amount of other freely convertible currencies.

Business operations

An insurance asset management company may conduct the following businesses: (1) managing funds in Renminbi or other foreign currencies entrusted to it, including insurance funds, funds of pension, annuity and housing provident institutions, as well as funds of other qualified investors that are capable of identifying and undertaking corresponding risks; (2) managing and operating its own insurance funds in Renminbi or foreign currencies; (3) as trustee, carrying out asset management business appointed by and on behalf of the trustor, or developing asset management products for the interest of the beneficiary or for specific purposes and carrying out asset management business; (4) applying to relevant financial regulatory authorities to carry out publicly-raised asset management business in accordance with the law, provided that relevant conditions are met; (5) as approved by the CBIRC, issuing relevant asset management products to domestic insurance groups or holding companies, insurance companies, insurance asset management companies and other qualified investors capable of identifying and bearing the applicable risk; and (6) other businesses approved by the CBIRC or other departments of the State Council.

The investments of the insurance funds by insurance asset management companies are subject to the same requirements and limitations applicable to the investments by the insurance companies themselves. With the regulatory expansion of insurance company investment channels, the investment channels of insurance asset management companies over their own funds have been expanded as well to cover subordinated bonds issued by banks and insurance companies, bank subordinated bonds and stock investments.

Insurance asset management companies are also subject to the governance of regulations which generally apply to the asset management businesses of financial institutions. Starting from April 27, 2018, the asset management businesses of financial institutions are subject to new supervision rules, which apply to the participation of insurance funds in publicly-offered funds, private equity funds, trust schemes, equity investment schemes, debt investment schemes and portfolio insurance asset management products through the asset management products of insurance asset management companies.

In connection with the funds being managed by an insurance asset management company, a custodian is required to be appointed. The custodian must be an independent commercial bank or financial institution satisfying applicable CBIRC requirements.

Shareholding restrictions

At least 75% of the shares of an insurance asset management company must be owned by domestic insurance companies, and at least one of the shareholders of an insurance asset management company must be an insurance company or insurance holding company satisfying specified requirements.

Investment risk control

Both insurance companies and asset management companies must establish structures, arrangements and measures to recognize, assess, manage and control investment risks. Members of senior management may not be responsible for the management of departments in charge of investment decisions, investment transactions and risk controls at the same time. Branches of insurance companies may not manage insurance funds. Insurance asset management companies must arrange for separate investment managers to manage their own funds and the insurance funds from other insurance companies, as well as insurance funds from an insurance company that are of a different nature.

Major emergency response management

An insurance asset management company is required to establish a monitoring and precaution mechanism for major emergencies.

Regulation of Insurance Agencies, Insurance Brokers and Other Intermediaries

Insurance agents are business entities or individuals which or who act on behalf of an insurance company in respect of insurance business within the scope authorized by the insurance company, including licensed insurance agencies and individual insurance agents. Licensed insurance agencies fall into two groups: dedicated agencies and non-dedicated agencies. An insurance company is responsible for the acts of its agents when the acts are within the scope of their agency.

A dedicated agency is a company (and its branches) organized under the PRC law whose principal business is to act as an agent of insurance companies. Dedicated agencies are subject to minimum capital and other requirements, and their business is generally limited to insurance-related activities.

A non-dedicated agency is a business entity whose principal business is other than as an insurance agency. To receive a license, the agency business must have a direct relationship with its principal business, which the CBIRC has interpreted as permitting commercial banks to act as non-dedicated insurance agencies. Sales representatives of insurance companies are prohibited from selling insurance products at commercial bank outlets. The bancassurance management personnel of insurance companies are responsible for providing services (including training and the exchange of documents) to commercial banks and assisting commercial banks to provide related customer services, such as the payment of maturity benefits and handling of renewal fee after selling insurance products.

Prior to August 3, 2015, individual insurance agents, representatives of insurance agencies and insurance brokers were required to obtain qualification certificates issued by the CIRC. Under such CIRC regulations, we were subject to sanctions if we retained exclusive agents without CIRC qualification certificates, and policyholders who bought insurance policies through our unqualified agents were allowed to cancel the policies under some circumstances. On August 3, 2015, the CIRC issued a Notice on the Administration of Insurance Intermediary Personnel, effective on the same day. Under the new regulations, the CIRC canceled the requirements on qualification certificates or practice certificates for individual insurance agents, representatives of insurance agencies and insurance brokers, with the effect that insurance companies are now only required to complete registration for their individual insurance agents in the insurance intermediary regulatory information system maintained by the CIRC. In addition, insurance companies are required to take adequate measures to ensure the good conduct and professional competence of their individual insurance agents, representatives of insurance agencies and insurance brokers.

All insurance agencies and agents are required to enter into agency agreements that specify the duration of the agency; the amount of the agency fee and the method of payment; the scope of the agency, including the insurance products to be marketed; and other relevant matters. Absent specific CBIRC approval, insurance agents are prohibited from signing insurance and annuity products on behalf of the insurance companies they represent. None of our agents is authorized to sign insurance policies or annuity contracts for us.

Insurance agencies are required to open special accounts for the handling of funds that they hold or collect for the insurance companies they represent. They may not engage in the following activities: dealing with unauthorized insurers or insurance intermediaries, engaging in activities beyond their authorized business scope or geographical area, causing injury to the rights of the insurance companies they represent, spreading rumors or otherwise injuring the reputation of others in the insurance industry, misappropriating the funds of the insurance companies they represent, defrauding insurance customers through false or misleading representations or material omissions, using undue influence to induce insurance customers to purchase insurance, or defrauding the insurance companies they represent through collusion with the insured or the insurance beneficiary. In addition, dedicated insurance agencies are subject to various reporting requirements, including submission of annual financial reports, and are subject to supervision and examination by the CBIRC.

Insurance brokers who represent individuals and companies purchasing insurance and other intermediaries are subject to similar regulatory requirements regarding their activities. Among other things, they are subject to supervision and examination by the CBIRC, and fundamental corporate changes must be approved by the CBIRC. Only companies organized under the PRC company law and meeting requirements set by the CBIRC are authorized to act as insurance brokers. Insurance brokers are required to comply with standards prescribed by the CBIRC. Insurance brokerage agencies must provide training to their brokerage personnel regarding insurance laws and provide education on ethics and other matters.

Regulation of Internet Insurance Businesses

On December 7, 2020, CBIRC issued supervision rules to regulate China’s online insurance sector. Under the new rules, online insurance business is defined as entering into insurance contracts and providing insurance services through an Internet-based platform. The new rules prohibit unlicensed institutions and individuals from engaging in online insurance businesses. Insurance institutions that are permitted to engage in online insurance businesses include traditional insurers, mutual insurers, online insurers, insurance brokers, insurance assessors and insurance agents (including dedicated insurance agencies, bancassurance agencies and Internet companies that have obtained the license to engage in insurance agency business). The new rules provide specific requirements on the management of the Internet-based platforms used for insurance business. The new rules also strengthen the requirements on sale management and information disclosure during the online sales process and the after sales duties and responsibilities of insurance institutions engaging in online insurance business.

No.2 Interpretation of Accounting Standard for Business Enterprises

On August 7, 2008, the MOF issued the No.2 Interpretation of Accounting Standard for Business Enterprises, requiring listed companies which issue both H shares and A shares to adopt consistent accounting policies to recognize, calculate and report a particular transaction in their H share financial statements and A share financial statements, except for certain differences in relation to the reversal of impairment losses of long-term assets and disclosures in relation to related party transactions.

On January 5, 2009, the CIRC issued the Notification on the Implementation of the No.2 Interpretation of Accounting Standards for Business Enterprises in the Insurance Sector (No.1 [2009] of CIRC), which requires insurance companies to make appropriate changes to their accounting policies that cause differences between onshore and offshore financial statements when preparing their 2009 annual financial statements, such that the same accounting policies and estimates will apply to a particular transaction.

On December 22, 2009, the MOF issued the Notification on the Promulgation of the Regulations regarding the Accounting Treatment of Insurance Contracts, which regulates issues relating to, among other things, the unbundling of mixed insurance contracts, tests for significant insurance risks and the calculation of reserves for insurance contracts, and requires insurance companies to comply with these requirements beginning with the preparation of their financial statements for the year ended December 31, 2009. The accounting treatment of any transaction item adopted in previous year which differs from those set out in the MOF’s regulations must be retrospectively adjusted, unless any such adjustment is not practicable under the circumstances.

Implementation of VAT

Following the decision of the PRC State Council, the Value Added Tax, or VAT, has applied to the financial and insurance sector since May 1, 2016. Therefore, our primary business has been subject to 6% VAT from May 1, 2016 instead of the 5% business tax, or BT, which previously had applied to our business.

Policy on pre-tax deduction of underwriting and policy acquisition costs

In May 2019, the MOF and SAT issued a policy on pre-tax deduction of underwriting and policy acquisition costs of insurance companies. Under the policy, from January 1, 2019, the underwriting and policy acquisition costs incurred by insurance companies in connection with their operating activities that do not exceed 18% of the balance of total premium income for the year, after deducting surrender payments and other expenses, can be deducted when calculating taxable income, and the portion that exceeds 18% can be carried forward and deducted in following years. The policy applies to the final settlement of enterprise income tax of insurance companies for the 2018 tax year. Therefore, the pre-tax deduction percentage for enterprise income tax on our underwriting and policy acquisition costs has been adjusted to 18% from the previous 10%, which will result in a reduction in our income tax in 2019 and future years.

Administrative Penalty by the PBOC

In July 2018, the PBOC imposed a fine of RMB700,000 on us for non-compliance with anti-money laundering laws and regulations during the period from July 1, 2015 to June 30, 2016. The non-compliance issues identified by the PBOC include failure to preserve clients’ identity information and transaction records and failure to submit reports on transactions of large payments and suspicious transactions to the PBOC. We have taken corrective measures and improved our anti-money laundering system by refining the process for identifying customers’ data, retaining transaction records and reporting large payment transactions and suspicious transactions. The fine imposed by the PBOC did not have a material impact on the business operations and financial results of our company.

C. ORGANIZATIONAL STRUCTURE

The following is our simplified corporate structure as of the date of this annual report:

(1)	Wholly owned by CLIC

(2)	Formerly known as China Life Asset Management (Hong Kong) Company Limited

List of Significant Subsidiaries


Name of Subsidiary	Jurisdiction of Incorporation	Proportion of Ownership Interest Owned by China Life

中国人寿资产管理有限公司 China Life Asset Management Company Limited	The People’s Republic of China	60% (directly)

中国人寿富兰克林资产管理有限公司 China Life Franklin Asset Management Company Limited ⁽¹⁾	Hong Kong	50%⁽²⁾ (indirectly through affiliate)

中国人寿养老保险股份有限公司 China Life Pension Company Limited	The People’s Republic of China	74.27%⁽³⁾ (directly and indirectly through affiliate)

国寿安保基金管理有限公司 China Life AMP Asset Management Co., Ltd.	The People’s Republic of China	85.03%⁽⁴⁾ (indirectly through affiliate)

国寿财富管理有限公司 China Life Wealth Management Company Limited	The People’s Republic of China	100%⁽⁵⁾ (indirectly through affiliate)

(1)	Formerly known as China Life Asset Management (Hong Kong) Company Limited.

(2)	AMC, which is 60% owned by us, owns 50%.

(3)	We own 70.74% and AMC, which is 60% owned by us, owns 3.53%.

(4)	AMC, which is 60% owned by us, owns 85.03%.

(5)	AMC, which is 60% owned by us, owns 48%, and China Life AMP, which is 85.03% owned by AMC, owns 52%.

D. PROPERTY, PLANTS AND EQUIPMENT

As of December 31, 2020, we owned and leased 4,536 and 14,167 properties, respectively, and had 279 properties under construction. Among the 4,536 properties owned by us, 1,178 properties are leased to third parties (including partial leasing) while the remaining properties are mainly occupied by us as office premises. 161 properties are recognized as investment properties.

On December 31, 2020, we entered into a new property leasing agreement with China Life Investment Management Company Limited, or IHC. Under this property leasing agreement, which will expire on December 31, 2021, IHC agreed to lease to us 1,134 properties owned by it. The annual rent is determined by reference to market rent or, where there is no available comparison, by reference to the costs incurred by IHC in holding and maintaining the properties, plus a margin of approximately 5%.

ITEM 4A. UNRESOLVED STAFF COMMENTS.

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

You should read the following discussion and analysis in conjunction with the audited consolidated financial statements and accompanying notes included elsewhere in this annual report.

Overview of Our Business

We are the leading life insurance company in China. We provide a broad range of insurance products, including individual and group life insurance, annuity contracts, health insurance and accident insurance products. We had nearly 317 million insurance policies in force as of December 31, 2020, including individual and group life insurance policies, annuity contracts, health insurance and accident insurance policies.

We report our financial results according to the following three principal business segments:

•

Life insurance, which offers participating and non-participating life insurance and annuities to individuals and groups.

•

Health insurance, which offers short-term and long-term health insurance to individuals and groups. The financial results of our supplementary major medical insurance are also reflected in our health insurance business segment.

•

Accident insurance, which offers short-term and long-term accident insurance to individuals and groups.

In addition, we have an “other” reporting segment, in which we primarily report the income and cost of the agency business in respect of transactions with CLIC and other companies, net share of profit of associates and joint ventures, income and expenses of subsidiaries, and unallocated income and expenditure of our company. See Note 5 to our consolidated financial statements included elsewhere in this annual report.

Financial Overview of Our Business

We had total gross written premiums of RMB612,265 million (US$93,834 million) and net profit of RMB51,385 million (US$7,875 million) for the year ended December 31, 2020. Our principal business segments had the following results:

•

Life insurance had total gross written premiums of RMB480,593 million (US$73,655 million) in 2020.

•

Health insurance had total gross written premiums of RMB115,089 million (US$17,638 million) in 2020.

•

Accident insurance had total gross written premiums of RMB16,583 million (US$2,541 million) in 2020.

Our business has been characterized by growth of premium income over the past several years, together with a move towards an improved business structure which has been evidenced by a rapid increase in first-year regular premiums, with the percentage of first-year regular premiums for products with regular premiums of ten years or more in first-year regular premiums being above 50% since 2013. At the same time, our business has also been affected by certain unfavorable factors, including the increasing cross-industry competition from companies in other financial industries, and the rapid development of the insurance companies owned or controlled by commercial banks and some other small and medium-sized insurance companies, which have secured an increasing market share, as well as the changing economic and investment environment within China, including slowing economic growth and fluctuations in interest rates.

Factors Affecting Our Results of Operations

Revenues, Expenses and Profitability

We earn our revenues primarily from:

•

insurance premiums from the sale of life insurance policies and annuity contracts, including participating and non-participating policies and annuity contracts with life contingencies, as well as accident and health insurance products. Net premiums earned accounted for 75.12% of total revenues in 2020.

•

investment income and net realized gains on financial assets, net fair value gains through profit or loss. Investment income and net realized gains on financial assets, net fair value gains through profit or loss accounted for 23.73% of total revenues in 2020.

In addition, following the restructuring, we receive service fees for policy management services we provide to CLIC. AMC also receives asset management fees for asset management services provided to CLIC. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions”.

Our operating expenses primarily include:

•

insurance benefits provided to our policyholders, accident and health claims and claim adjustment expenses;

•

increase in insurance contracts liabilities;

•

investment contract benefits;

•

policyholder dividends resulting from participation in profits;

•

underwriting and policy acquisition costs; and

•

administrative and other expenses.

We also pay rent to IHC on the properties we lease from it.

Our profitability depends principally on our ability to price and manage risk on insurance and annuity products, our ability to maximize the return on investment assets, our ability to attract and retain customers, and our ability to manage expenses. In particular, factors affecting our profitability include:

•

our ability to design and distribute products and services and to introduce new products which gain market acceptance on a timely basis;

•

our ability to price our insurance and investment products at levels that enable us to earn a margin over the costs of providing benefits and the expense of acquiring customers and administering those products;

•

our returns on investment assets;

•

our mortality and morbidity experience, which affects our insurance reserves;

•

our lapse experience, which affects our ability to recover the cost of acquiring new business over the lives of the contracts;

•

our cost of administering insurance contracts and providing customer services;

•

our ability to manage liquidity, market and credit risk in our investment portfolio and to manage duration risk in our asset and policy portfolios through asset-liability management; and

•

changes in regulations.

In addition, other factors, such as competition, securities market conditions, taxes and general economic conditions, affect our profitability.

Interest Rates

For our long-term life insurance products including annuity products, we are obligated to pay contractual benefits to our policyholders or the beneficiaries based on a guaranteed interest rate, which is established when the product is priced. These products expose us to the risk that changes in interest rates may change our “spread”, or the difference between the amount of return we are able to earn on our investments and the amount of return we are required to pay under the policies. In August 2013, February 2015 and September 2015, the CIRC removed the 2.50% cap on the guaranteed interest rates for the traditional participating insurance policies, universal life insurance policies, and participating life insurance policies, respectively. From October 1, 2015, the guaranteed interest rates of all long-term life insurance products are to be decided by insurance companies at their discretion in accordance with the principle of prudence, but CBIRC approval is required for products with guaranteed interest rates above the maximum valuation rate set by the CBIRC, which varies by product. If the rates of return on our investments fall below the rates we guarantee, our profitability would be adversely affected. In November 2014, the interest rate on one-year term deposits, a key benchmark rate, was reduced from 3.00% to 2.75%, and in 2015, the interest rate was further reduced five times from 2.75% to 1.50%. As of the date of this annual report, this interest rate remained unchanged. If economic conditions change in the future, the Chinese government may adjust the interest rates accordingly. As of December 31, 2020, the average guaranteed rate of return for all of our long-term insurance policies in force was 2.77%, while our investment yields for the years ended December 31, 2020, 2019 and 2018 were 5.30%, 5.24% and 3.29%, respectively. However, if the rates of return on our investments were to fall below the rates we guarantee, our profitability would be materially and adversely affected. If the interest rates were to be increased, but we did not raise the guaranteed rates of our products, sales of some of our products could be adversely impacted.

Interest rates also affect our returns on investment assets, a large proportion of which is held in term deposits and debt securities. In a declining interest rate environment, interest rate changes expose us to reinvestment risks. In a rising interest rate environment, higher rates may yield greater interest income but also may result in a decline in the fair value of debt securities designated as trading.

For further information on our exposure to interest rate risk, see “Item 11 Quantitative and Qualitative Disclosure about Market Risk—Interest Rate Risk” and Note 4 to our consolidated financial statements included elsewhere in this annual report.

Investments

As an insurance company, we are permitted to invest in five categories of investment assets, including liquidity assets, fixed income assets, equity assets, real properties and other financial assets. However, we are limited by Chinese laws and regulations in the maximum amount that we may invest in each type of assets. See “Item 4. Information on the Company—Business Overview—Investments” and “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”. Our material concentration risks relate to our investments in bank deposits and Chinese government securities.

Our investments are subject to risks. Volatility or declines in Chinese and international financial markets may expose us to higher market and credit risks, such as when domestic and international economic conditions differ from market expectations. We may also invest in new investment channels, use new investment tools or engage new investment managers, which may expose us to new risks. These factors could affect our investment income and the book value of our investment assets. In addition, as a portion of our investment assets are held in foreign currencies, our investment results may also be subject to foreign exchange gains and losses due to changes in exchange rates. Furthermore, our investments in associates are also affected by the operational conditions, financial risks and volatility in profits of these associates, which, in turn, will affect our profitability. See “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—Our investments are subject to risks”.

Our results can be materially affected by investment impairments. The following table sets forth impairment charges and reversal of impairment charges, which are included in net realized gains on financial assets and net gains on investments of associates and joint ventures, for the years ended December 31, 2018, 2019 and 2020.


Impairment	For the year ended December 31,
Impairment	2018			2019			2020			2020
	(RMB in millions)									US$
Debt securities		(42	)		(3,749	)		288			44
Equity securities		(8,163	)		(2,638	)		(11,917	)		(1,826	)
Associates and joint ventures		—			(1,500	)		(707	)		(108	)

Total		(8,205	)		(7,887	)		(12,336	)		(1,890	)

During the year ended December 31, 2020, we recognized an impairment expense of RMB11,917 million (US$1,826 million) for available-for-sale equity securities for which we determined that objective evidence of impairment existed. During the year ended December 31, 2019, we recognized an impairment expense of RMB2,638 million for available-for-sale equity securities for which we determined that objective evidence of impairment existed. During the year ended December 31, 2018, we recognized an impairment expense of RMB8,163 million for available-for-sale equity securities for which we determined that objective evidence of impairment existed. Our rationale for the impairment is based on a severe or prolonged decline in value. These securities were not impaired due to company-specific events such as bankruptcies.

During the year ended December 31, 2020, we recognized an impairment expense of RMB3 million (US$0.46 million) in debt securities with a reversal of impairment charges of RMB291 million (US$45 million). During the year ended December 31, 2019, we recognized an impairment expense of RMB3,749 million in debt securities. During the year ended December 31, 2018, we recognized an impairment expense of RMB42 million in debt securities.

During the year ended December 31, 2020, we recognized an impairment expense of RMB707 million (US$108 million) in associates and joint ventures. During the year ended December 31, 2019, we recognized an impairment expense of RMB1,500 million in associates and joint ventures. During the years ended December 31, 2018, we recognized no impairment expense in associates and joint ventures.

Available-for-sale securities comprised of the following asset classes as of December 31, 2018, 2019 and 2020.


	As of December 31,
	2018				2019				2020
	Cost or amortized cost		Estimated fair value		Cost or amortized cost		Estimated fair value		Cost or amortized cost		Estimated fair value
	*(RMB in millions)*
Debt securities
Government bonds		26,759		28,440		22,500		23,758		48,542		49,256
Government agency bonds		172,250		180,273		163,678		171,189		161,503		169,013
Corporate bonds		181,178		185,720		145,033		148,455		133,133		136,025
Subordinated bonds/debt		20,953		21,514		53,062		53,922		81,880		81,795
Other		78,136		80,643		109,729		112,467		141,530		144,721


Subtotal		479,276		496,590		494,002		509,791		566,588		580,810


Equity securities
Funds		115,949		92,304		97,208		102,349		72,691		97,476
Common stocks		160,231		143,469		217,564		236,323		278,512		301,249
Other		126,253		138,170		195,360		210,494		214,059		236,068

Subtotal		402,433		373,943		510,132		549,166		565,262		634,793


Total		881,709		870,533		1,004,134		1,058,957		1,131,850		1,215,603

The difference between the aggregate cost/amortized cost and the aggregate estimated fair value reflects the amount of the unrealized gains and losses, and provision for impairment losses. As of December 31, 2020, we had gross unrealized gains of RMB114,895 million (US$17,608 million) and gross unrealized losses of RMB18,528 million (US$2,840 million), and made a provision for impairment losses of RMB12,614 million (US$1,933 million). As of December 31, 2019, we had gross unrealized gains of RMB63,261 million and gross unrealized losses of RMB5,055 million, and made a provision for impairment losses of RMB3,383 million. As of December 31, 2018, we had gross unrealized gains of RMB37,125 million and gross unrealized losses of RMB43,884 million, and made a provision for impairment losses of RMB4,417 million. The unrealized losses as of December 31, 2020 related primarily to the unrealized losses of available-for-sale stocks.

The following tables set forth the length of time that each class of available-for-sale securities has continuously been in an unrealized loss position as of December 31, 2020, 2019 and 2018. For the year ended December 31, 2020, the increase of our unrealized losses on equity securities, mainly resulting from the decline in the price of certain stocks we invested in, constituted a significant component of the movement of the total unrealized losses compared to the prior year. For the year ended December 31, 2019, the decrease of our unrealized losses on equity securities, mainly resulting from the overall upturn of the Chinese stock market, constituted a significant component of the movement of the total unrealized losses compared to the prior year. For the year ended December 31, 2018, unrealized losses on equity securities, mainly resulting from the overall volatility and downturn of the Chinese stock market, constituted a significant component of the movement of the total unrealized losses compared to the prior year.


As of December 31, 2020	0-6 months			7-12 months			More than 12 months			Total
	*(RMB in millions)*
Debt securities
Unrealized losses		981			341			277			1,599
Carrying amounts		82,099			18,463			7,212			107,774
Unrealized losses as a percentage of carrying amounts		1.20	%		1.85	%		3.84	%		1.48	%

Equity securities
Unrealized losses		10,725			5,382			822			16,929
Carrying amounts		90,297			36,979			5,399			132,675
Unrealized losses as a percentage of carrying amounts		11.88	%		14.55	%		15.23	%		12.76	%

Total
Total unrealized losses		11,706			5,723			1,099			18,528
Total carrying amounts		172,396			55,442			12,611			240,449
Unrealized losses as a percentage of carrying amounts		6.79	%		10.32	%		8.71	%		7.71	%

As of December 31, 2019	0-6 months			7-12 months			More than 12 months			Total
	*(RMB in millions)*
Debt securities
Unrealized losses		374			141			531			1,046
Carrying amounts		28,298			2,794			25,884			56,976
Unrealized losses as a percentage of carrying amounts		1.32	%		5.05	%		2.05	%		1.84	%

Equity securities
Unrealized losses		2,084			1,029			896			4,009
Carrying amounts		50,291			26,006			3,175			79,472
Unrealized losses as a percentage of carrying amounts		4.14	%		3.96	%		28.22	%		5.04	%

Total
Total unrealized losses		2,458			1,170			1,427			5,055
Total carrying amounts		78,589			28,800			29,059			136,448
Unrealized losses as a percentage of carrying amounts		3.13	%		4.06	%		4.91	%		3.70	%

As of December 31, 2018	0-6 months			7-12 months			More than 12 months			Total
	*(RMB in millions)*
Debt securities
Unrealized losses		126			473			1,046			1,645
Carrying amounts		9,665			11,075			41,365			62,105
Unrealized losses as a percentage of carrying amounts		1.30	%		4.27	%		2.53	%		2.65	%

Equity securities
Unrealized losses		7,445			21,813			12,981			42,239
Carrying amounts		50,073			92,845			52,549			195,467
Unrealized losses as a percentage of carrying amounts		14.87	%		23.49	%		24.70	%		21.61	%

Total
Total unrealized losses		7,571			22,286			14,027			43,884
Total carrying amounts		59,738			103,920			93,914			257,572
Unrealized losses as a percentage of carrying amounts		12.67	%		21.45	%		14.94	%		17.04	%

Financial assets other than those accounted for as at fair value through profit or loss are adjusted for impairments.

In evaluating whether a decline in value is an impairment for these financial assets, we consider several factors including, but not limited to, the following:

•

significant financial difficulty of the issuer or debtor;

•

a breach of contract, such as a default or delinquency in payments;

•

it becomes probable that the issuer or debtor will enter into bankruptcy or other financial reorganization; and

•

the disappearance of an active market for that financial asset because of financial difficulties.

In evaluating whether a decline in value is impairment for equity securities, we also consider the extent or the duration of the decline. The quantitative factors include the following:

•

the market price of the equity securities was more than 50% below their cost at the reporting date;

•

the market price of the equity securities was more than 20% below their cost for a period of at least six months at the reporting date; and

•

the market price of the equity securities was below their cost for a period of more than one year (including one year) at the reporting date.

When the decline in value is considered an impairment, held-to-maturity debt securities are written down to their present value of estimated future cash flows discounted at the securities’ effective interest rates, and available-for-sale debt securities and equity securities are written down to their fair value, and the change is recorded in net realized gains on financial assets in the period the impairment is recognized. The impairment loss is reversed through the net profit if in a subsequent period the fair value of a debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognized through net profit. The impairment losses recognized in net profit on equity investments are not reversed. See “—Critical Accounting Policies”.

As of December 31, 2020, our total investment assets were RMB4,095,454 million (US$627,656 million) and the investment yield for the year ended December 31, 2020 was 5.30%. The investment yield primarily reflected the increase in spread income of equity investments we have invested in. As of December 31, 2019, our total investment assets were RMB3,573,154 million and the investment yield for the year ended December 31, 2019 was 5.24%. As of December 31, 2018, our total investment assets were RMB3,104,014 million and the investment yield for the year ended December 31, 2018 was 3.29%.

We calculate the investment yields for a given year by dividing the gross investment income for that year by the average of the ending balance of investment assets of that year and the previous year.

Mix of Products

The following table sets forth premium information as of or for the years ended December 31, 2020, 2019 and 2018 by type of product in our life insurance business, health insurance business and accident insurance business.


	As of or for the year ended December 31,								Compound annual growth rate
	2018		2019		2020		2020		(2018-2020)
	RMB		RMB		RMB		US$
Life insurance business

Whole life and term life insurance:
Gross written premiums		49,520		64,196		76,421		11,713		24.23	%

Endowment:
Gross written premiums		126,318		113,950		109,275		16,747		(6.99	%)

Annuities:
Gross written premiums		261,702		268,416		294,897		45,195		6.15	%
Health insurance business⁽¹⁾

Gross written insurance premiums		83,614		105,581		115,089		17,638		17.32	%
Accident insurance business⁽²⁾

Gross written insurance premiums		14,672		14,943		16,583		2,541		6.31	%

(1)	Including long-term and short-term health products.

(2)	Including long-term and short-term accident products.

Under guidelines issued by the CBIRC, we are required to pay to our participating policyholders dividends which are no less than 70% of the distributable earnings on participating products. Participating products tend to present us with less market risk, since we have more flexibility to set the level of dividends and participating products are subject to guaranteed interest rates which are generally lower than those of non-participating products. In addition, changes in interest rates have less of impact on their lapse rates than on those of non-participating policies. Conversely, participating products tend to be less profitable for us than non-participating products, largely because the terms of these contracts effectively commit us to sharing a portion of our earnings from participating products with our policyholders. However, participating products still provide us with attractive profit contributions given the growing level of sales volume they produce.

Products classified as investment contracts also affect our revenues, since only a portion of the payments we received under such products are recorded in our consolidated income statement as policy fees, and the majority of such payments are recorded as investment contracts under financial liabilities on our balance sheet.

We have adjusted our premium structure to focus more on sales of products with regular premiums, especially products with regular premiums for ten years or more, which has reduced the proportion of single written premiums of our total first-year gross written premiums. We believe that this strategy could contribute to a more steady development of our business and enhance the loyalty of our customers and the retention rate of our sales agent force.

Regulation

We operate in a highly regulated industry. Changes in regulation can have a significant impact on our revenues, expenses and profitability. China’s insurance regulatory regime is undergoing significant changes toward a more transparent regulatory process and a convergent movement toward international standards. Among other things, recent changes to permitted investment channels for insurance companies have impacted our investment portfolio and returns. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters”.

Critical Accounting Policies

We prepared the consolidated financial statements under the historical cost convention, except for financial assets and financial liabilities at fair value through profit or loss, available-for-sale financial assets, insurance contract liabilities and certain property, plant and equipment at deemed cost during restructuring process. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires our management to exercise its judgments in the process of applying our accounting policies. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our businesses and operations. The following sections discuss the accounting policies applied in preparing our consolidated financial statements that we believe are most dependent on the application of these judgments and estimates. However, uncertainty about these judgments and estimates could result in outcomes that require a material adjustment to the carrying amounts of assets and liabilities in the future periods.

Liability for Long-term Insurance Contracts

Long-term insurance contracts include whole life insurance, term life insurance, endowment insurance and annuity policies with significant life contingency risk. Premiums are recognized as revenue when the insurance contracts are recognized and premiums are due from policyholders.

We use the discounted cash flow method to estimate the reserve of long-term insurance contracts. The reserve of long-term insurance contracts consists of a reasonable estimate of liability, a risk margin and a residual margin. The long-term insurance contracts liabilities are calculated using various assumptions, including assumptions on mortality rates, morbidity rates, lapse rates, discount rates and expense assumptions, and based on the following principles:

•

The reasonable estimate for liability of long-term insurance contracts is the present value of reasonable estimates of future cash outflows less future cash inflows. The expected future cash inflows include cash inflows of future premiums arising from the undertaking of insurance obligations, with consideration of decrement mostly from death and surrenders. The expected future cash outflows are cash outflows incurred to fulfill contractual obligations, consisting of the following:

(i)

Guaranteed benefits based on contractual terms, including payments for deaths, disabilities, diseases, survivals, maturities and surrenders;

(ii)

Additional non-guaranteed benefits, such as policyholder dividends; and

(iii)

Reasonable expenses incurred to manage insurance contracts or to process claims, including maintenance expenses and claim settlement expenses. Future administration expenses are included in the maintenance expense. Expenses are determined based on expense analysis with consideration of future inflation and our expense management control.

On each reporting date, we review the assumptions for reasonable estimates of liability and risk margins, with consideration of all available information, taking into account our historical experience and expectation of future events. Changes in assumptions are recognized in net profit. Assumptions for the amortization of residual margin are locked in at policy issuance date and are not adjusted at each reporting date. We incorporate the potential impact of future risk factors on our operating results in the determination of assumptions. The sensitivity analysis disclosed in the Note 4.1.3 on page F-40 of this annual report provides a detailed analysis of impact of assumption changes on our operating results.

•

Margins have been taken into consideration while computing the reserves of insurance contracts, measured separately and recognized in net profit in each period over the life of the contracts. At the inception of the contracts, we do not recognize Day One gain, whereas on the other hand, Day One loss is recognized in profit immediately.

Margins comprise risk margin and residual margin. Risk margin is the reserve accrued to compensate for the uncertain amount and timing of future cash flows. At the inception of the contract, the residual margin is calculated net of certain acquisition costs, mainly consist of underwriting and policy acquisition costs, by us representing Day One gain and will be amortized over the life of contracts. For insurance contracts of which future returns are affected by investment yields of corresponding investment portfolios, their related residual margins are amortized based on estimated future participating dividends payable to the policyholders. For insurance contracts in which future returns are not affected by investment yields of corresponding investment portfolios, their related residual margins are amortized based on sum assured of outstanding policies. The subsequent measurement of residual margin is independent from the reasonable estimate of future discounted cash flows and risk margin. The assumption changes have no effect on the subsequent measurement of the residual margin.

•

We have considered the impact of time value on the reserve calculation for insurance contracts.

We establish liabilities for long-term traditional insurance contracts based on the following assumptions:

•

For the insurance contracts of which future insurance benefits are affected by investment yields of corresponding investment portfolios, the discount rate assumption is based on expected investment returns of the asset portfolio backing these liabilities, considering the impact of time value on liabilities. In developing discount rate assumptions, we consider investment experience, current investment portfolio and trend of the relevant yield curve. The assumed discount rates reflect the future economic outlook as well as our investment strategy. The assumed discount rates with risk margin was 4.85% as at December 31, 2018, 2019 and 2020.

For the insurance contracts of which the future insurance benefits are not affected by the investment yields of the corresponding investment portfolios, the discount rate assumption is based on the “yield curve of reserve computation benchmark for insurance contracts”, published on the “China Bond” website, with consideration of liquidity spreads, taxation and other relevant factors. The assumed spot discount rates with risk margin ranged from 3.47% to 4.86% as at December 31, 2018, from 3.52% to 4.83% as at December 31, 2019 and from 3.09% to 4.80% as at December 31, 2020, respectively.

There is uncertainty relating to the discount rate assumption, which is affected by factors such as future macro-economy, monetary and foreign exchange policies, capital market and availability of investment channels of insurance funds. We determine the discount rate assumption based on the information obtained at the end of each reporting period, including consideration of risk margin.

•

The mortality and morbidity assumptions are based on the historical mortality and morbidity experience. The assumed mortality rates and morbidity rates vary by age of the insured and contract type.

We base our mortality assumptions on the China Life Insurance Mortality Table (2010-2013), adjusted where appropriate to reflect our recent historical mortality experience. The main source of uncertainty with life insurance contracts is that epidemics and wide-ranging lifestyle changes could result in deterioration in future mortality experience, thus leading to an inadequate reserve. Similarly, improvements in longevity due to continuing advancements in medical care and social conditions could expose us to longevity risk.

We base our morbidity assumptions for critical illness products on analysis of historical experience and expectations of future developments. There are two main sources of uncertainty. First, wide-ranging lifestyle changes could result in future deterioration in morbidity experience. Second, future development of medical technologies and improved coverage of medical facilities available to the policyholders may bring forward the timing of diagnosing critical illness, which demands earlier payment of the critical illness benefits. Both could ultimately result in an inadequate reserving of liability if current morbidity assumptions do not properly reflect such trends.

Risk margin is considered in our mortality and morbidity assumptions.

•

The expense assumptions are based on expected unit costs with the consideration of previous expenses study and future trends. Our expense assumptions are affected by certain factors, such as future inflation and market competition which bring uncertainty to these assumptions. We consider risk margin for expense assumptions based on the information obtained at the end of each reporting period. Components of expense assumptions include cost per policy and percentage of premium. Our expense assumptions for each of the past three years were as follows: the percentage of premiums costs of 0.85% to 0.90% of premiums for individual life products and 0.90% for group life products, in each case plus a fixed per-policy expense.

•

The lapse rates and other assumptions are affected by certain factors, such as the future macro economy, availability of financial substitutions and market competition, which bring uncertainty to lapse rates and other assumptions. The lapse rates and other assumptions are determined with reference to creditable past experience, current conditions, future expectations and other information.

The method used to determine risk margin has been consistently applied. We consider risk margin for each of the discount rate, mortality and morbidity and expense assumptions to compensate for the uncertain amount and timing of future cash flow. When determining risk margin, we consider historical experience, future expectations and other factors. Risk margin is determined by us and does not include any elements imposed by regulators.

We adopted a consistent process to determine assumptions for the insurance contracts, which are detailed in Note 15 to our consolidated financial statements included elsewhere in this annual report. On each reporting date, we review the assumptions for reasonable estimates of liability and risk margin, with consideration of all available information, and taking into account our historical experience and expectation of future events.

Universal Life Contracts and Unit-linked Contracts

Universal life contracts and unit-linked contracts are unbundled into the following components:

•

Insurance components; and

•

Non-insurance components.

The insurance components are accounted for as insurance contracts, and the non-insurance components are accounted for as investment contracts, which are stated in the investment contract liabilities.

Investment Contracts

For investment contracts with or without discretionary participating feature, our policy fee income mainly consists of acquisition cost and various fee incomes (including handling fees and management fees) over the period during which the service is provided. Policy fee income net of certain acquisition cost is amortized over the expected life of the contracts by period and recognized in revenue.

Except for unit-linked contracts, of which the liabilities for transferred financial risks are carried at fair value, the liabilities of investment contracts are carried at amortized cost.

Valuation of Investments

We classify our financial assets into the following categories: securities at fair value through profit or loss, held-to-maturity securities, loans and receivables and available-for-sale securities. Management determines the classification of our financial assets at initial recognition, with the classification depending on the purpose for which the assets are acquired. The following are the policies used:

Securities at fair value through profit or loss. This category has two sub-categories: securities held for trading and those designated as at fair value through profit or loss at inception. Securities are classified as held for trading at inception if acquired principally for the purpose of selling in the short-term or if they form part of a portfolio of financial assets in which there is evidence of short term profit-taking. Other financial assets are classified as at fair value through profit or loss if they meet the criteria in IAS 39 and designated as such at inception by us.

Held-to-maturity securities. Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixed maturities that we have the positive intention and ability to hold to maturity and do not meet the definition of loans and receivables nor designated as available-for-sale securities or securities at fair value through profit or loss. These investments are carried at amortized cost.

Loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those that we intend to sell in the short term or held as available-for-sale. Loans and receivables mainly comprise term deposits, loans, securities purchased under agreements to resell, accrued investment income and premium receivables as presented separately in the statement of financial position. These investments are carried at amortized cost.

Available-for-sale securities. Available-for-sale securities are non-derivative financial assets that are either designated in this category or not classified in any of the other categories.

Impairment of financial assets other than securities at fair value through profit or loss. Financial assets other than those accounted for as at fair value through profit or loss are adjusted for impairments, where there are declines in value that are considered to be impairment. In evaluating whether a decline in value is an impairment for these financial assets, we consider several factors including, but not limited to, the following:

•

significant financial difficulty of the issuer or debtor;

•

a breach of contract, such as a default or delinquency in payments;

•

it becomes probable that the issuer or debtor will enter into bankruptcy or other financial reorganization; and

•

the disappearance of an active market for that financial asset because of financial difficulties.

In evaluating whether a decline in value is impairment for equity securities, we also consider the extent or the duration of the decline. The quantitative factors include the following:

•

the market price of the equity securities was more than 50% below their cost at the reporting date;

•

the market price of the equity securities was more than 20% below their cost for a period of at least six months at the reporting date; and

•

the market price of the equity securities was below their cost for a period of more than one year (including one year) at the reporting date.

When the decline in value is considered impairment, held-to-maturity debt securities are written down to their present value of estimated future cash flows discounted at the securities effective interest rates; available-for-sale debt securities and equity securities are written down to their fair value, and the change is recorded in net realized gains on financial assets in the period the impairment is recognized. The impairment loss is reversed through net profit if in a subsequent period the fair value of a debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognized through net profit. The impairment losses recognized in net profit on equity instruments are not reversed through net profit.

As of December 31, 2020, debt securities of RMB176,306 million (US$27,020 million) contained guarantees issued by third parties and, of those, 86.15% were guaranteed by either the Chinese government or a Chinese government controlled financial institution. Of the guarantees issued by government or government controlled financial institutions, 94.58% related to debt securities issued by a government railway infrastructure entity. We monitor the credit worthiness of the third parties which have issued these guarantees using local Chinese credit ratings which are generally only utilized within China.

The methods and assumptions used by us in measuring the fair value of the financial instruments are as follows:

Debt securities. The fair values of debt securities are generally based on current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions, values obtained from current bid prices of comparable investments or valuation techniques when the market is not active.

Equity securities. The fair values of equity securities are generally based on current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions or commonly used market pricing model. Equity securities, for which fair values cannot be measured reliably, are recognized at cost less impairment.

Securities purchased under agreements to resell, policy loans, term deposits, interest-bearing loans and borrowings, and securities sold under agreements to repurchase. The carrying amounts of these assets in the consolidated statement of financial position approximate fair value. Fair values of other loans are obtained from valuation techniques.

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, analyze and interpret information related to market transactions and other key valuation model inputs from multiple sources, and, through the use of widely accepted valuation models, provide a theoretical quote on various securities.

We utilize one pricing service for substantially all of our Chinese domestic debt securities. This pricing service provider is the only publicly-recognized pricing service provider in China, and its pricing information is used by the mutual fund industry and almost all companies in China. We utilize international pricing services for our overseas debt securities. These pricing service providers are internationally-recognized, and their pricing information is commonly used by international companies. The prices obtained from the pricing service are non-binding. Our review and testing have shown the prices obtained from our pricing service to be appropriate. As such, during the year ended December 31, 2020, we did not consider it necessary to adjust the prices obtained from our pricing service.

As at December 31, 2020, RMB1,211,416 million of RMB1,273,277 million debt securities with prices obtained from our pricing service were issued by the Chinese government and government controlled organizations. This pricing service utilized a discounted cash flow valuation model using market observable inputs, mainly interest rates, to determine a fair value. There are no other significant market inputs. As such, we have classified these debt securities as Level 2 in the fair value hierarchy.

Management subjects the fair values provided by valuation service providers to a number of validation procedures. These procedures include a review of the valuation models utilized, as well as our own test recalculation of the prices obtained from the pricing service at each reporting date.

We consider a combination of many factors in determining whether we believe a market for a financial instrument is active or inactive. Among these factors include:

•

whether there has been any trades within past 30 days of the reporting date;

•

the volume of the trades within this 30 day period; and

•

the degree which the implied yields for a debt security for observed transactions differs from our understanding of the current relevant market rates and information.

Associates and joint ventures

Associates are entities on which we have significant influence, generally together with a shareholding of between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of such entities but without control or joint control over these decisions.

Joint ventures are joint arrangements whereby the parties have joint control of the arrangement and have rights to the net assets of the joint arrangement. Joint control is the contractually-agreed sharing of control of an arrangement, which exists only when decisions on relevant activities require unanimous consent of the parties sharing control.

We determine at each reporting date whether there is any objective evidence that the investments in associates and joint ventures are impaired. If this is the case, an impairment loss is recognized at the amount of the carrying amount of investment less its recoverable amount. The recoverable amount is the higher of the fair value of investment less costs of disposal and value in use. The impairment of investment in associates and joint ventures is reviewed for possible reversal at each reporting date.

Revenue Recognition

Premiums. Premiums from long-term insurance contracts are recognized as revenue when due from the policyholders.

Premiums from the sale of short-term accident and health insurance contracts are recorded when written and are accreted to earnings on a pro-rata basis over the term of the related policy coverage.

Policy fee income. The policy fee income for investment contracts mainly consists of acquisition costs and various fee incomes (including handling fees and management fees) over the period during which service is provided. Policy fee income net of certain acquisition costs is amortized over the expected life of the contracts and recognized as other income.

Investment income. Investment income is comprised of interest income from term deposits, cash and cash equivalents, debt securities, securities purchased under agreements to resell, loans and dividend income from equity securities. Interest income is recorded on an accrual basis using the effective interest rate method. Dividend income is recognized when the right to receive a dividend payment is established.

Deferred taxation

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Substantively enacted tax rates are used in the determination of deferred income tax.

Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the reversal of temporary differences can be recognized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Recently Issued Accounting Standards

The following standards and amendments are adopted by us for the first time for the financial year beginning on January 1, 2020.


Standards/Amendments	Content	Effective for annual periods beginning on or after
IFRS 3 Amendments	Definition of a Business	January 1, 2020
IAS 1 and IAS 8 Amendments	Definition of Material	January 1, 2020
IFRS 9, IAS 39 and IFRS 7 Amendments	Interest Rate Benchmark Reform	January 1, 2020
IFRS 16 Amendment	Covid-19-Related Rent Concessions (early adopted)	June 1, 2020

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. We have applied the amendments prospectively to transactions or other events that occurred on or after January 1, 2020. The amendments did not have any significant impact on our 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, or both. The amendments did not have any significant impact on our 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 our 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 June 30, 2021; and (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 June 1, 2020 with earlier application permitted.

We have early adopted the amendment on January 1, 2020. Because we were 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 our consolidated financial statements.

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


Standards/Amendments	Content	Effective for annual periods beginning on or after
IFRS 9	Financial Instruments	January 1, 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 January 1, 2018, with early adoption permitted. Based on the current assessment, we expect the adoption of IFRS 9 will have a significant impact on our consolidated financial statements. We have adopted and will continue to adopt the temporary exemption permitted in Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (“IFRS 4 Amendment”) to apply IAS 39 rather than IFRS 9, until the effective date of IFRS 17. Refer to Note 33 to our consolidated financial statements included elsewhere in this annual report for more details.

Classification and measurement

IFRS 9 requires that we classify 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 are to 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 are to be measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss, based on their respective business models. We analyzed the contractual cash flow characteristics of financial assets as at December 31, 2020 and made relevant disclosures in Note 33 to our consolidated financial statements included elsewhere in this annual report in accordance with the IFRS 4 Amendments.

Equity instruments would generally be measured at fair value through profit or loss unless we elect to measure at fair value through other comprehensive income for certain equity investments not held for trading. This will result in unrealized gains and losses on equity instruments currently classified as available-for-sale securities being recorded in income going forward. Currently, these unrealized gains and losses are recognized in other comprehensive income. If we elect to record equity investments at fair value through other comprehensive income, gains and losses would never be recognized in income 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. We are in the process of developing and testing the key models required under IFRS 9 and analyzing the impact on the expected loss provision; we believe that the provision for our debt instruments under the “expected credit loss” model would be larger than that under the previous “incurred loss” model.

Hedge accounting

We do not apply the hedge accounting currently, so we expect that the new hedge accounting model under IFRS 9 will have no impact on our consolidated financial statements.

The following standards and amendments are not yet effective and have not been early adopted by us for the financial year beginning on January 1, 2020.


Standards/Amendments	Content	Effective for annual periods beginning on or after
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Amendments	Interest Rate Benchmark Reform -Phase 2	January 1, 2021
IFRS 17	Insurance Contracts	January 1, 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

For a detailed discussion of the recently issued accounting standards, see Note 2.1.1, Note 2.1.2 and Note 2.1.3 to our consolidated financial statements included elsewhere in this annual report.

Inflation

According to the National Statistics Bureau of China, China’s overall national inflation rates, as represented by the general consumer price index, were approximately 2.5%, 2.9%, 2.1%, 1.6% and 2.0% in 2020, 2019, 2018, 2017, and 2016, respectively. Inflation has not had a significant effect on our business during the past three years.

Foreign Currency Fluctuation

See “Item 3. Key Information—Risk Factors—Risks Relating to the People’s Republic of China—Government control of currency conversion and the fluctuation of the Renminbi may materially and adversely affect our operations and financial results” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Exchange Risk”.

A. OPERATING RESULTS

Year Ended December 31, 2020 Compared with Year Ended December 31, 2019


Total Revenues	For the year ended December 31,
	2019		2020
	RMB		RMB
	*(in millions)*
Net premiums earned		560,278		604,666
Life insurance business		445,719		479,600
Health insurance business		99,575		109,091
Accident insurance business		14,984		15,975
Investment income		139,919		154,497
Investment income from securities at fair value through profit or loss		4,527		4,280
Investment income from available-for-sale securities		43,196		46,880
Investment income from held-to-maturity securities		38,229		44,757
Investment income from bank deposits		26,695		25,860
Investment income from loans		27,111		31,948
Other investment income		161		772
Net realized gains on financial assets		1,831		14,583
Net fair value gains through profit or loss		19,251		21,900
Other income		8,195		9,315

Total		729,474		804,961

Net Premiums Earned

Net premiums earned increased by RMB44,388 million, or 7.9%, to RMB604,666 million in 2020 from RMB560,278 million in 2019.

Life Insurance Business

Net premiums earned from life insurance business increased by RMB33,881 million, or 7.6%, to RMB479,600 million in 2020 from RMB445,719 million in 2019. This was primarily due to the steady growth of our life insurance business.

Health Insurance Business

Net premiums earned from health insurance business increased by RMB9,516 million, or 9.6%, to RMB109,091 million in 2020 from RMB99,575 million in 2019. This was primarily due to our increased efforts to develop our health insurance business.

Accident Insurance Business

Net premiums earned from accident insurance business increased by RMB991 million, or 6.6%, to RMB15,975 million in 2020 from RMB14,984 million in 2019. This was primarily due to the growth of our accident insurance business.

Investment Income

Investment income increased by RMB14,578 million, or 10.4%, from RMB139,919 million in 2019 to RMB154,497 million in 2020.

Investment Income from Securities at Fair Value through Profit or Loss

Investment income from securities at fair value through profit or loss decreased by RMB247 million, or 5.5%, to RMB4,280 million in 2020 from RMB4,527 million in 2019. This was primarily due to a decrease in dividends at fair value through profit or loss.

Investment Income from Available-for-Sale Securities

Investment income from available-for-sale securities increased by RMB3,684 million, or 8.5%, to RMB46,880 million in 2020 from RMB43,196 million in 2019. This was primarily due to an increase in dividends from available-for-sale equity securities investment stocks.

Investment Income from Held-to-Maturity Securities

Investment income from held-to-maturity securities increased by RMB6,528 million, or 17.1%, to RMB44,757 million in 2020 from RMB38,229 million in 2019. This was primarily due to an increase in interest income resulting from the increase in the allocation in government agency bonds.

Investment Income from Bank Deposits

Investment income from bank deposits decreased by RMB835 million, or 3.1%, to RMB25,860 million in 2020 from RMB26,695 million in 2019. This was primarily due to a decrease in interest income resulting from the decrease in the allocation in negotiated deposits.

Investment Income from Loans

Investment income from loans increased by RMB4,837 million, or 17.8%, to RMB31,948 million in 2020 from RMB27,111 million in 2019. This was primarily due to an increase in interest income from trust schemes.

Net Realized Gains on Financial Assets

Net realized gains on financial assets increased by RMB12,752 million to gains of RMB14,583 million in 2020 from gains of RMB1,831 million in 2019. This was primarily due to an increase in spread income of equity assets in available-for-sale securities.

Net Fair Value Gains through Profit or Loss

Net fair value gains through profit or loss increased by RMB2,649 million to gains of RMB21,900 million in 2020 from gains of RMB19,251 million in 2019. This was primarily due to an increase in spread income of stocks in securities at fair value through profit or loss.

Other Income

Other income increased by RMB1,120 million, or 13.7%, to RMB9,315 million in 2020 from RMB8,195 million in 2019. This was primarily due to an increase in income of investment management service fees received by our subsidiaries.


Benefits, Claims and Expenses	For the year ended December 31,
	2019		2020
	RMB		RMB
	*(in millions)*
Insurance benefits and claims expenses
Life insurance death and other benefits		127,877		113,609
Accident and health claims and claim adjustment expenses		50,783		52,395
Increase in insurance contracts liabilities		330,807		414,797
Investment contracts benefits		9,157		9,846
Policyholder dividends resulting from participation in profits		22,375		28,279
Underwriting and policy acquisition costs		81,396		84,342
Finance costs		4,255		3,747
Administrative expenses		40,275		37,687
Statutory insurance fund contribution		1,163		1,229
Other expenses		9,602		12,208

Total		677,690		758,139


Segment information of insurance benefits and claims expenses
Life insurance business		427,673		490,994
Health insurance business		75,471		82,146
Accident insurance business		6,323		7,661

Total		509,467		580,801

Insurance Benefits and Claims Expenses

Insurance benefits and claims, net of amounts ceded through reinsurance, increased by RMB71,334 million, or 14.0%, to RMB580,801 million in 2020 from RMB509,467 million in 2019.

Life insurance death and other benefits payouts decreased by RMB14,268 million, or 11.2%, to RMB113,609 million in 2020 from RMB127,877 million in 2019. This was primarily due to a decrease in surrender payment of certain products. Accident and health claims and claim adjustment expenses increased by RMB1,612 million, or 3.2%, to RMB52,395 million in 2020 from RMB50,783 million in 2019. This was primarily due to an increase in the volume of short-term health insurance and accident insurance business. Increase in insurance contracts liabilities increased by RMB83,990 million, or 25.4%, to RMB414,797 million in 2020 from RMB330,807 million in 2019. This was primarily due to the growth of our insurance business.

Life Insurance Business

Insurance benefits and claims expenses attributable to life insurance business increased by RMB63,321 million, or 14.8%, to RMB490,994 million in 2020 from RMB427,673 million in 2019. This was primarily due to the steady growth of our life insurance business.

Health Insurance Business

Insurance benefits and claims expenses attributable to health insurance business increased by RMB6,675 million, or 8.8%, to RMB82,146 million in 2020 from RMB75,471 million in 2019. This was primarily due to the growth in our health insurance business.

Accident Insurance Business

Insurance benefits and claims expenses attributable to accident insurance business increased by RMB1,338 million, or 21.2%, to RMB7,661 million in 2020 from RMB6,323 million in 2019. This was primarily due to an increase in claims expenses of certain businesses.

Investment Contract Benefits

Investment contract benefits increased by RMB689 million, or 7.5%, to RMB9,846 million in 2020 from RMB9,157 million in 2019. This was primarily due to an increase in the scale of universal insurance accounts.

Policyholder Dividends Resulting from Participation in Profits

Policyholder dividends resulting from participation in profits increased by RMB5,904 million, or 26.4%, to RMB28,279 million in 2020 from RMB22,375 million in 2019. This was primarily due to an increase in investment yields from participating accounts.

Underwriting and Policy Acquisition Costs

Underwriting and policy acquisition costs increased by RMB2,946 million, or 3.6%, to RMB84,342 million in 2020 from RMB81,396 million in 2019. This was primarily due to the growth of our business.

Finance Costs

Finance costs decreased by RMB508 million, or 11.9%, to RMB3,747 million in 2020 from RMB4,255 million in 2019. This was primarily due to a decrease in interest paid for securities sold under agreements to repurchase.

Administrative Expenses

Administrative expenses include employees’ remuneration and other administrative expenses. Administrative expenses decreased by RMB2,588 million, or 6.4%, to RMB37,687 million in 2020 from RMB40,275 million in 2019. This was primarily due to a decrease in expenses during the COVID-19 pandemic and our reinforced cost administration.

Other Expenses

Other expenses increased by RMB2,606 million, or 27.1%, to RMB12,208 million in 2020 from RMB9,602 million in 2019. This was primarily due to the increase of expenses in investment management fees.


Profit	For the year ended December 31,
	2019		2020
	RMB		RMB
	(in millions)
Profit before income tax		59,795		54,488
Life insurance business		42,418		28,073
Health insurance business		5,875		11,611
Accident insurance business		489		572
Other businesses		11,013		14,232
Income tax		781		3,103
Net profit attributable to equity holders of the company		58,287		50,268

Profit before Income Tax

Our profit before income tax decreased by RMB5,307 million, or 8.9%, to RMB54,488 million in 2020 from RMB59,795 million in 2019.

Life Insurance Business

Profit before income tax in the life insurance business decreased by RMB14,345 million, or 33.8%, to RMB28,073 million in 2020 from RMB42,418 million in 2019. This was 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.

Health Insurance Business

Profit before income tax in the health insurance business increased by RMB5,736 million, or 97.6%, to RMB11,611 million in 2020 from RMB5,875 million in 2019. This was primarily due to the growth of our short-term health insurance business and the improvement of the business quality.

Accident Insurance Business

Profit before income tax in the accident insurance business increased by RMB83 million, or 17.0%, to RMB572 million in 2020 from RMB489 million in 2019. This was primarily due to the growth of our accident insurance business and the improvement of the business quality.

Other Businesses

Profit before income tax in other businesses increased by RMB3,219 million, or 29.2%, to RMB14,232 million in 2020 from RMB11,013 million in 2019. This was primarily due to an increase in profits from subsidiaries.

Income Tax

We pay income tax according to applicable Chinese enterprise income tax regulations and rules. Income tax increased by RMB2,322 million, or 297.3%, to RMB3,103 million in 2020 from RMB781 million in 2019. This was primarily due to the impact of the new policy on pre-tax deduction of underwriting and policy acquisition costs adopted in 2019. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Policy on pre-tax deduction of underwriting and policy acquisition costs”.

Net Profit Attributable to Equity Holders of the Company

For the reasons set forth above, net profit attributable to equity holders of the Company decreased by RMB8,019 million, or 13.8%, to RMB50,268 million in 2020 from RMB58,287 million in 2019. This was primarily due to the combined impact of the update of discount rate assumptions for reserves of traditional insurance contracts, the new policy on pre-tax deduction of underwriting and policy acquisition costs adopted in 2019 and the change in gross investment income.


Major Assets	As of December 31,
	2019		2020
	RMB		RMB
	(in millions)
Investment assets		3,573,154		4,095,454
Term deposits		535,260		545,667
Held-to-maturity securities		928,751		1,189,369
Available-for-sale securities		1,058,957		1,215,603
Securities at fair value through profit or loss		141,608		161,570
Derivative financial assets		428		—
Securities purchased under agreements to resell		4,467		7,947
Cash and cash equivalents		53,306		56,629
Loans		608,920		658,535
Statutory deposits—restricted		6,333		6,333
Investment properties		12,141		14,217
Investment in associates and joint ventures		222,983		239,584
Other assets		153,580		156,956

Total		3,726,734		4,252,410

Investment Assets

Our total investment assets increased by RMB522,300 million, or 14.6%, to RMB4,095,454 million as of December 31, 2020 from RMB3,573,154 million as of December 31, 2019.

Term Deposits

Term deposits increased by RMB10,407 million, or 1.9%, to RMB545,667 million as of December 31, 2020 from RMB535,260 million as of December 31, 2019. This was primarily due to the increase of term deposits other than negotiated term deposits.

Held-to-Maturity Securities

Held-to-maturity securities increased by RMB260,618 million, or 28.1%, to RMB1,189,369 million as of December 31, 2020 from RMB928,751 million as of December 31, 2019. This was primarily due to an increase in the allocation of government agency bonds.

Available-for-Sale Securities

Available-for-sale securities increased by RMB156,646 million, or 14.8%, to RMB1,215,603 million as of December 31, 2020 from RMB1,058,957 million as of December 31, 2019. This was primarily due to an increase in the allocation of available-for-sale securities

Securities at Fair Value Through Profit or Loss

Securities at fair value through profit or loss increased by RMB19,962 million, or 14.1%, to RMB161,570 million as December 31, 2020 from RMB141,608 million as of December 31, 2019. This was primarily due to an increase in the scale of debt-type assets in securities at fair value through profit or loss.

Securities Purchased under Agreements to Resell

Securities purchased under agreements to resell increased by RMB3,480 million, or 77.9%, to RMB7,947 million as of December 31, 2020 from RMB4,467 million as of December 31, 2019. This was primarily due to the needs for liquidity management.

Cash and Cash Equivalents

Cash and cash equivalents increased by RMB3,323 million, or 6.2%, to RMB56,629 million as of December 31, 2020 from RMB53,306 million as of December 31, 2019. This was primarily due to the needs for liquidity management.

Loans

Loans increased by RMB49,615 million, or 8.1%, to RMB658,535 million as of December 31, 2020 from RMB608,920 million as of December 31, 2019. This was primarily due to an increase in policy loans and certificates of deposit.

Investment Properties

Investment properties increased by RMB2,076 million, or 17.1%, to RMB14,217 million as of December 31, 2020 from RMB12,141 million as of December 31, 2019. This was primarily due to new investments in investment properties.

Investments in associates and joint ventures

Our investments in associates and joint ventures increased by RMB16,601 million, or 7.4%, to RMB239,584 million as of December 31, 2020 from RMB222,983 million as of December 31, 2019. This was primarily due to new investments in associates and joint ventures.


Major Liabilities	As of December 31,
	2019		2020
	RMB		RMB
	(in millions)
Liabilities
Insurance contracts		2,552,736		2,973,225
Investment contracts		267,804		288,212
Securities sold under agreements to repurchase		118,088		122,249
Policyholder dividends payable		112,593		122,510
Annuity and other insurance balances payable		51,019		55,031
Interest-bearing loans and borrowings		20,045		19,556
Deferred tax liabilities		10,330		15,286
Other liabilities		184,777		199,410

Total		3,317,392		3,795,479

Liabilities

Our total liabilities increased by RM478,087 million, or 14.4%, to RMB3,795,479 million as of December 31, 2020 from RMB3,317,392 million as of December 31, 2019.

Insurance Contracts

Liabilities of insurance contracts increased by RMB420,489 million, or 16.5%, to RMB2,973,225 as of December 31, 2020 from RMB2,552,736 million as of December 31, 2019. This was primarily due to the accumulation of insurance liabilities from new insurance business and renewal business. As at the date of the statement of financial position, our insurance contracts reserves passed liability adequacy testing.

Investment Contracts

The account balance of investment contracts increased by RMB20,408 million, or 7.6%, to RMB288,212 million as of December 31, 2020 from RMB267,804 million as of December 31, 2019. This was primarily due to an increase in the scale of universal insurance accounts.

Securities Sold under Agreements to Repurchase

Securities sold under agreements to repurchase increased by RMB4,161 million, or 3.5%, to RMB122,249 million as of December 31, 2020 from RMB118,088 million as of December 31, 2019. This was primarily due to the needs for liquidity management.

Policyholder Dividends Payable

Policyholder dividends payable increased by RMB9,917 million, or 8.8%, to RMB122,510 million as of December 31, 2020 from RMB112,593 million as of December 31, 2019. This was primarily due to an increase in investment yields from participating accounts.

Annuity and Other Insurance Balances Payable

Annuity and other insurance balances payable increased by RMB4,012 million, or 7.9%, to RMB55,031 million as of December 31, 2020 from RMB51,019 million as of December 31, 2019. This was primarily due to an increase in maturities payable.

Interest-bearing Loans and Borrowings

Our borrowings in foreign currency decreased in 2020. Interest-bearing loans and other borrowings include a three-year bank loan of EUR330 million with a maturity date on September 8, 2023, a five-year bank loan of GBP275 million with a maturity date on June 25, 2024, a five-year bank loan of US$860 million with a maturity date on September 16, 2024, a six-month bank loan of EUR127 million with a maturity date on January 13, 2021 which is automatically renewed upon maturity pursuant to the terms of the agreement, a six-month bank loan of EUR78 million with a maturity date on January 4, 2021 which is automatically renewed upon maturity pursuant to the terms of the agreement, all of which are fixed rate loans, and a five-year bank loan of US$970 million with a maturity date on September 27, 2024, and an eighteen-month bank loan of EUR110 million with a maturity date on March 9, 2022, both of which are floating rate loans.

Deferred Tax Liabilities

Deferred tax liabilities as of December 31, 2020 were RMB15,286 million, an increase of RMB4,956 million, or 48.0%, from RMB10,330 million as of December 31, 2019. This change was primarily due to the increase in the fair value of available-for-sale securities.

Equity Attributable to Equity Holders of the Company

As of December 31, 2020, equity attributable to our equity holders was RMB450,051 million, an increase of RMB46,287 million, or 11.5%, from RMB403,764 million as of December 31, 2019. This was primarily due to the combined impact of total comprehensive income and profit distributions during 2020.

Year Ended December 31, 2019 Compared with Year Ended December 31, 2018


Total Revenues	For the year ended December 31,
	2018			2019
	RMB			RMB
	*(in millions)*
Net premiums earned		532,023			560,278
Life insurance business		436,863			445,719
Health insurance business		80,279			99,575
Accident insurance business		14,881			14,984
Investment income		125,167			139,919
Investment income from securities at fair value through profit or loss		5,153			4,527
Investment income from available-for-sale securities		39,483			43,196
Investment income from held-to-maturity securities		34,657			38,229
Investment income from bank deposits		22,699			26,695
Investment income from loans		22,894			27,111
Other investment income		281			161
Net realized gains on financial assets		(19,591	)		1,831
Net fair value gains through profit or loss		(18,278	)		19,251
Other income		8,098			8,195

Total		627,419			729,474

Net Premiums Earned

Net premiums earned increased by RMB28,255 million, or 5.3%, to RMB560,278 million in 2019 from RMB532,023 million in 2018.

Life Insurance Business

Net premiums earned from life insurance business increased by RMB8,856 million, or 2.0%, to RMB445,719 million in 2019 from RMB436,863 million in 2018. This was primarily due to the steady growth of our life insurance business.

Health Insurance Business

Net premiums earned from health insurance business increased by RMB19,296 million, or 24.0%, to RMB99,575 million in 2019 from RMB80,279 million in 2018. This was primarily due to our increased efforts to develop our health insurance business.

Accident Insurance Business

Net premiums earned from accident insurance business increased by RMB103 million, or 0.7%, to RMB14,984 million in 2019 from RMB14,881 million in 2018. This was primarily due to the steady growth of our accident insurance business.

Investment Income

Investment income increased by RMB14,752 million, or 11.8%, from RMB125,167 million in 2018 to RMB139,919 million in 2019.

Investment Income from Securities at Fair Value through Profit or Loss

Investment income from securities at fair value through profit or loss decreased by RMB626 million, or 12.1%, to RMB4,527 million in 2019 from RMB5,153 million in 2018. This was primarily due to a decrease in interest income resulting from a decrease in investments in commercial paper at fair value through profit or loss.

Investment Income from Available-for-Sale Securities

Investment income from available-for-sale securities increased by RMB3,713 million, or 9.4%, to RMB43,196 million in 2019 from RMB39,483 million in 2018. This was primarily due to an increase in dividends from available-for-sale equity securities investment stocks.

Investment Income from Held-to-Maturity Securities

Investment income from held-to-maturity securities increased by RMB3,572 million, or 10.3%, to RMB38,229 million in 2019 from RMB34,657 million in 2018. This was primarily due to an increase in interest income resulting from the increase in the allocation in government agency bonds.

Investment Income from Bank Deposits

Investment income from bank deposits increased by RMB3,996 million, or 17.6%, to RMB26,695 million in 2019 from RMB22,699 million in 2018. This was primarily due to an increase in interest income resulting from the increase in the allocation in negotiated deposits.

Investment Income from Loans

Investment income from loans increased by RMB4,217 million, or 18.4%, to RMB27,111 million in 2019 from RMB22,894 million in 2018. This was primarily due to an increase in interest income from trust schemes.

Net Realized Gains on Financial Assets

Net realized gains on financial assets increased by RMB21,422 million to gains of RMB1,831 million in 2019 from losses of RMB19,591 million in 2018. This was primarily due to an increase in spread income of stocks and funds in available-for-sale securities.

Net Fair Value Gains through Profit or Loss

Net fair value gains through profit or loss increased by RMB37,529 million to gains of RMB19,251 million in 2019 from losses of RMB18,278 million in 2018. This was primarily due to an increase in spread income and fair value of stocks in securities at fair value through profit or loss.

Other Income

Other income increased by RMB97 million, or 1.2%, to RMB8,195 million in 2019 from RMB8,098 million in 2018. This was primarily due to the business growth of China Life Pension.


Benefits, Claims and Expenses	For the year ended December 31,
	2018		2019
	RMB		RMB
	*(in millions)*
Insurance benefits and claims expenses
Life insurance death and other benefits		248,736		127,877
Accident and health claims and claim adjustment expenses		40,552		50,783
Increase in insurance contracts liabilities		189,931		330,807
Investment contracts benefits		9,332		9,157
Policyholder dividends resulting from participation in profits		19,646		22,375
Underwriting and policy acquisition costs		62,705		81,396
Finance costs		4,116		4,255
Administrative expenses		37,486		40,275
Other expenses		7,642		9,602
Statutory insurance fund contribution		1,097		1,163

Total		621,243		677,690


Segment information of insurance benefits and claims expenses
Life insurance business		412,876		427,673
Health insurance business		59,689		75,471
Accident insurance business		6,654		6,323

Total		479,219		509,467

Insurance Benefits and Claims Expenses

Insurance benefits and claims, net of amounts ceded through reinsurance, increased by RMB30,248 million, or 6.3%, to RMB509,467 million in 2019 from RMB479,219 million in 2018.

Life insurance death and other benefits payouts decreased by RMB120,859 million, or 48.6%, to RMB127,877 million in 2019 from RMB248,736 million in 2018. This was primarily due to a decrease in maturities payable. Accident and health claims and claim adjustment expenses increased by RMB10,231 million, or 25.2%, to RMB50,783 million in 2019 from RMB40,552 million in 2018. This was primarily due to an increase in the volume of short-term health insurance and accident insurance business. Increase in insurance contracts liabilities increased by RMB140,876 million, or 74.2%, to RMB330,807 million in 2019 from RMB189,931 million in 2018. This was primarily due to an increase in the scale of insurance business.

Life Insurance Business

Insurance benefits and claims expenses attributable to life insurance business increased by RMB14,797 million, or 3.6%, to RMB427,673 million in 2019 from RMB412,876 million in 2018. This was primarily due to an increase in the scale of life insurance business.

Health Insurance Business

Insurance benefits and claims expenses attributable to health insurance business increased by RMB15,782 million, or 26.4%, to RMB75,471 million in 2019 from RMB59,689 million in 2018. This was primarily due to the growth in our health insurance business.

Accident Insurance Business

Insurance benefits and claims expenses attributable to accident insurance business decreased by RMB331 million, or 5.0%, to RMB6,323 million in 2019 from RMB6,654 million in 2018. This was primarily due to a decrease in claims expenses of certain businesses.

Investment Contract Benefits

Investment contract benefits decreased by RMB175 million, or 1.9%, to RMB9,157 million in 2019 from RMB9,332 million in 2018. This was primarily due to a decrease in the settlement interest rate of universal insurance accounts.

Policyholder Dividends Resulting from Participation in Profits

Policyholder dividends resulting from participation in profits increased by RMB2,729 million, or 13.9%, to RMB22,375 million in 2019 from RMB19,646 million in 2018. This was primarily due to an increase in investment yields from participating accounts.

Underwriting and Policy Acquisition Costs

Underwriting and policy acquisition costs increased by RMB18,691 million, or 29.8%, to RMB81,396 million in 2019 from RMB62,705 million in 2018. This was primarily due to an increase in commissions of regular business due to the growth of our business and the optimization of our business structure.

Finance Costs

Finance costs increased by RMB139 million, or 3.4%, to RMB4,255 million in 2019 from RMB4,116 million in 2018. This was primarily due to an increase in interest paid for bonds payable.

Administrative Expenses

Administrative expenses include employees’ remuneration and other administrative expenses. Administrative expenses increased by RMB2,789 million, or 7.4%, to RMB40,275 million in 2019 from RMB37,486 million in 2018. This was primarily due to the growth of our business.

Other Expenses

Other expenses increased by RMB1,960 million, or 25.6%, to RMB9,602 million in 2019 from RMB7,642 million in 2018. This was primarily due to the increase in interest from dividends.


Profit	For the year ended December 31,
	2018		2019
	RMB		RMB
	(in millions)
Profit before income tax		13,921		59,795
Life insurance business		1,630		42,418
Health insurance business		4,100		5,875
Accident insurance business		495		489
Other businesses		7,696		11,013
Income tax		1,985		781
Net profit attributable to equity holders of the company		11,395		58,287

Profit before Income Tax

Our profit before income tax increased by RMB45,874 million, or 329.5%, to RMB59,795 million in 2019 from RMB13,921 million in 2018.

Life Insurance Business

Profit before income tax in the life insurance business increased by RMB40,788 million, or 2,502.3%, to RMB42,418 million in 2019 from RMB1,630 million in 2018. This was primarily due to an increase in our gross investment income.

Health Insurance Business

Profit before income tax in the health insurance business increased by RMB1,775 million, or 43.3%, to RMB5,875 million in 2019 from RMB4,100 million in 2018. This was primarily due to an increase in our gross investment income.

Accident Insurance Business

Profit before income tax in the accident insurance business decreased by RMB6 million, or 1.2%, to RMB489 million in 2019 from RMB495 million in 2018. This was primarily due to an increase in underwriting and policy acquisition costs resulting from structure adjustment of certain of our businesses.

Other Businesses

Profit before income tax in other businesses increased by RMB3,317 million, or 43.1%, to RMB11,013 million in 2019 from RMB7,696 million in 2018. This was primarily due to an increase in our gross investment income.

Income Tax

We pay income tax according to applicable Chinese enterprise income tax regulations and rules. Income tax decreased by RMB1,204 million, or 60.7%, to RMB781 million in 2019 from RMB1,985 million in 2018. This was primarily due to the impact of the new policy on pre-tax deduction of underwriting and policy acquisition costs. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Policy on pre-tax deduction of underwriting and policy acquisition costs”.

Net Profit Attributable to Equity Holders of the Company

For the reasons set forth above, net profit attributable to equity holders of the Company increased by RMB46,892 million, or 411.5%, to RMB58,287 million in 2019 from RMB11,395 million in 2018. This was primarily due to an increase in our gross investment income and the impact of the new policy on pre-tax deduction of underwriting and policy acquisition costs.


Major Assets	As of December 31,
	2018		2019
	RMB		RMB
	(in millions)
Investment assets¹		3,104,014		3,573,154
Term deposits		559,341		535,260
Held-to-maturity securities		806,717		928,751
Available-for-sale securities		870,533		1,058,957
Securities at fair value through profit or loss		138,717		141,608
Derivative financial assets		—		428
Securities purchased under agreements to resell		9,905		4,467
Cash and cash equivalents		50,809		53,306
Loans		450,251		608,920
Statutory deposits—restricted		6,333		6,333
Investment properties		9,747		12,141
Investment in associates and joint ventures		201,661		222,983
Other assets		150,389		153,580

Total		3,254,403		3,726,734

Beginning in 2018, the scope of investment assets has been revised to include investments in associates and joint ventures.

Investment Assets

Our total investment assets increased by RMB469,140 million, or 15.1%, to RMB3,573,154 million as of December 31, 2019 from RMB3,104,014 million as of December 31, 2018.

Term Deposits

Term deposits decreased by RMB24,081 million, or 4.3%, to RMB535,260 million as of December 31, 2019 from RMB559,341 million as of December 31, 2018. This was primarily due to the maturity of term deposits.

Held-to-Maturity Securities

Held-to-maturity securities increased by RMB122,034 million, or 15.1%, to RMB928,751 million as of December 31, 2019 from RMB806,717 million as of December 31, 2018. This was primarily due to an increase in the allocation of government agency bonds.

Available-for-Sale Securities

Available-for-sale securities increased by RMB188,424 million, or 21.6%, to RMB1,058,957 million as of December 31, 2019 from RMB870,533 million as of December 31, 2018. This was primarily due to an increase in the allocation of stocks in available-for-sale securities.

Securities at Fair Value Through Profit or Loss

Securities at fair value through profit or loss increased by RMB2,891 million, or 2.1%, to RMB141,608 million as of December 31, 2019 from RMB138,717 million as of December 31, 2018. This was primarily due to an increase in the fair value of stocks in securities at fair value through profit or loss.

Securities Purchased under Agreements to Resell

Securities purchased under agreements to resell decreased by RMB5,438 million, or 54.9%, to RMB4,467 million as of December 31, 2019 from RMB9,905 million as of December 31, 2018. This was primarily due to the needs for liquidity management.

Cash and Cash Equivalents

Cash and cash equivalents increased by RMB2,497 million, or 4.9%, to RMB53,306 million as of December 31, 2019 from RMB50,809 million as of December 31, 2018. This was primarily due to the needs for liquidity management.

Loans

Loans increased by RMB158,669 million, or 35.2%, to RMB608,920 million as of December 31, 2019 from RMB450,251 million as of December 31, 2018. This was primarily due to an increase in policy loans and certificates of deposit.

Investment Properties

Investment properties increased by RMB2,394 million, or 24.6%, to RMB12,141 million as of December 31, 2019 from RMB9,747 million as of December 31, 2018. This was primarily due to new investments in investment properties.

Investments in associates and joint ventures

Our investments in associates and joint ventures increased by RMB21,322 million, or 10.6%, to RMB222,983 million as of December 31, 2019 from RMB201,661 million as of December 31, 2018. This was primarily due to new investments in associates and joint ventures.


Major Liabilities	As of December 31,
	2018		2019
	RMB		RMB
	(in millions)
Liabilities
Insurance contracts		2,216,031		2,552,736
Investment contracts		255,434		267,804
Securities sold under agreements to repurchase		192,141		118,088
Policyholder dividends payable		85,071		112,593
Annuity and other insurance balances payable		49,465		51,019
Interest-bearing loans and borrowings		20,150		20,045
Deferred tax liabilities		—		10,330
Other liabilities		112,821		184,777

Total		2,931,113		3,317,392

Liabilities

Our total liabilities increased by RMB386,279 million, or 13.2%, to RMB3,317,392 million as of December 31, 2019 from RMB2,931,113 million as of December 31, 2018.

Insurance Contracts

Liabilities of insurance contracts increased by RMB336,705 million, or 15.2%, to RMB2,552,736 million as of December 31, 2019 from RMB2,216,031 million as of December 31, 2018 . This was primarily due to the accumulation of insurance liabilities from new insurance business and renewal business. As at the date of the statement of financial position, our insurance contracts reserves passed liability adequacy testing.

Investment Contracts

The account balance of investment contracts increased by RMB12,370 million, or 4.8%, to RMB267,804 million as of December 31, 2019 from RMB255,434 million as of December 31, 2018. This was primarily due to an increase in the scale of universal insurance accounts.

Securities Sold under Agreements to Repurchase

Securities sold under agreements to repurchase decreased by RMB74,053 million, or 38.5%, to RMB118,088 million as of December 31, 2019 from RMB192,141 million as of December 31, 2018. This was primarily due to the needs for liquidity management.

Policyholder Dividends Payable

Policyholder dividends payable increased by RMB27,522 million, or 32.4%, to RMB112,593 million as of December 31, 2019 from RMB85,071 million as of December 31, 2018. This was primarily due to an increase in investment yields from participating accounts.

Annuity and Other Insurance Balances Payable

Annuity and other insurance balances payable increased by RMB1,554 million, or 3.1%, to RMB51,019 million as of December 31, 2019 from RMB49,465 million as of December 31, 2018. This was primarily due to an increase in maturities and annuities payable.

Interest-bearing Loans and Borrowings

Our borrowings in foreign currency decreased in 2019. Interest-bearing loans and other borrowings include a three-year bank loan of EUR67 million with a maturity date on January 18, 2021, a five-year bank loan of GBP275 million with a maturity date on June 25, 2024, a five-year bank loan of US$860 million with a maturity date on September 16, 2024, and a six-month bank loan of EUR127 million with a maturity date on January 11, 2020 which is automatically renewed upon maturity pursuant to the terms of the agreement, all of which are fixed rate loans, and a five-year bank loan of US$970 million with a maturity date on September 27, 2024, a three-year loan of EUR400 million with a maturity date on December 6, 2020, and a one-year bank loan of US$18 million with a maturity date on November 6, 2020, all of which are floating rate loans.

Deferred Tax Liabilities

Deferred tax liabilities as of December 31, 2019 were RMB10,330 million, and there were no deferred tax liabilities as of December 31, 2018. This change was primarily due to the increase in the fair value of available-for-sale securities.

Equity Attributable to Equity Holders of the Company

As of December 31, 2019, equity attributable to our equity holders was RMB403,764 million, an increase of RMB85,393 million, or 26.8%, from RMB318,371 million as of December 31, 2018. This was primarily due to the combined impact of total comprehensive income and profit distributions during 2019.

B. LIQUIDITY AND CAPITAL RESOURCES

Liquidity Sources

Our principal cash inflows come from insurance premiums, deposits from investment contracts, proceeds from sales and maturity of investment assets and investment income. The primary liquidity risks with respect to these cash inflows are the risk of surrenders by contract holders and policyholders, as well as the risks of default by debtors, interest rate changes and other market volatilities. We closely monitor and manage these risks. See “Item 4. Information on the Company—Business Overview—Investments”.

Our cash and bank deposits provide us with a source of liquidity to meet normal cash outflows. As of December 31, 2020, the amount of cash and cash equivalents was RMB56,629 million. In addition, substantially all of our term deposits with banks allow us to withdraw funds on deposit, subject to a penalty interest charge. As of December 31, 2020, the amount of term deposits was RMB545,667 million.

Our investment portfolio also provides us with a source of liquidity to meet unexpected cash outflows. We are also subject to market liquidity risk due to the large size of our investments in some of the markets in which we invest. In some circumstances, some of our holdings of investment securities may be large enough to have an influence on the market value. These factors may adversely affect our ability to sell these investments at an adequate price, or at all.

Liquidity Uses

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

We believe that our sources of liquidity are sufficient to meet our current cash requirements.

Consolidated Cash Flows

We have established a cash flow testing system and conduct regular tests to monitor the cash inflows and outflows under various changing circumstances and adjust accordingly the asset portfolio to ensure sufficient sources of liquidity.

Net cash flow from operating activities amounted to a net inflow of RMB304,024 million (US$46,594 million) in 2020. Net cash flow from operating activities amounted to a net inflow of RMB286,032 million in 2019. The change was primarily due to an increase in premiums due to the steady growth of our business.

Net cash flow from investing activities amounted to a net outflow of RMB292,797 million (US$44,873 million) in 2020. Net cash flow from investing activities amounted to a net outflow of RMB247,515 million in 2019. This change was primarily due to the needs for investment management.

Net cash flow from financing activities amounted to net outflow of RMB7,760 million (US$1,189 million) in 2020. Net cash flow from financing activities amounted to net outflow of RMB36,075 million in 2019. This change was primarily due to the needs for liquidity management.

Our global share offering in December 2003 provided cash proceeds of approximately RMB24,707 million which are held in Hong Kong dollars or U.S dollars. As of the date of this annual report, a part of the cash proceeds from our global offering was held in bank deposit accounts denominated in foreign currencies in China, and part of the cash proceeds was invested in securities listed on overseas stock exchanges, multi-asset portfolios and private equity funds. We invested approximately US$433 million, in addition to RMB2,282 million, in China Guangfa Bank in December 2006. We used a total of approximately HK$12 billion for investments in Sino-Ocean Group Holding Limited in 2009, 2010 and 2013. As of December 31, 2020, we had engaged 9 third party overseas investment managers to manage US$1,096 million for investment in overseas public markets.

Our A share offering in December 2006 provided cash proceeds of approximately RMB27,810 million. As at the end of 2020, the cash proceeds from our A share offering were used to increase our share capital.

Our issuance of Core Tier 2 Capital Securities in July 2015 provided cash proceeds of approximately US$1,274 million. As at the end of 2020, cash proceeds from the issuance of Core Tier 2 Capital Securities were used to replenish our capital and raise our solvency ratio in accordance with applicable laws and approvals by regulatory authorities. We redeemed all of these issued securities on July 3, 2020.

In March 2019, we issued bonds in the principal amount of RMB35 billion in the national inter-bank bond market. The bonds have a 10-year maturity and a fixed coupon rate of 4.28% per annum. We have a conditional right to redeem the bonds on the fifth anniversary of issuance. The proceeds from the issuance of the bonds will be used to replenish our capital so as to enhance our solvency according to applicable laws and approvals from regulatory authorities.

Ratio of Assets and Liabilities

Our ratio of assets and liabilities (total liabilities divided by total assets) as at December 31, 2020, 2019 and 2018 are as follows:


	As at December 31, 2018			As at December 31, 2019			As at December 31, 2020

Ratio of assets and liabilities		90.07	%		89.02	%		89.25	%

Insurance Solvency Requirements

We are required to maintain our solvency at a level in excess of minimum solvency levels under C-ROSS solvency regulations, which have been effective from January 1, 2016. Under C-ROSS, the core solvency adequacy ratio of an insurer is calculated by dividing the core capital of an insurer by the minimum capital it is required to meet, and the comprehensive solvency adequacy ratio of an insurer is calculated by dividing the sum of core capital and supplementary capital of an insurer by the minimum capital it is required to meet. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Solvency requirements”. The following table shows our solvency as of December 31, 2018, 2019 and 2020:


	As of December 31, 2020			As of December 31, 2019			As of December 31, 2018
	*(RMB in millions, except percentage data)*
Core capital		1,031,947			952,030			761,353
Actual capital		1,066,939			987,067			761,367
Minimum capital		396,749			356,953			303,872
Core solvency ratio		260.10	%		266.71	%		250.55	%
Comprehensive solvency ratio		268.92	%		276.53	%		250.56	%

The decrease in our solvency ratio in 2020 was primarily due to the continuous increase of the size of our insurance business and investment assets, the distribution of dividends, the decrease of the valuation rate of the solvency reserve and the redemption of other equity instruments.

In 2018, the CBIRC conducted a review under the Solvency Aligned Risk Management Requirements and Assessment framework, or SARMRA, on the solvency aligned risk management of some insurers, including ourselves, and we received one of the highest scores among life insurers that were reviewed. The SARMRA score links the risk management capacity of insurers with capital requirements. In 2019 and 2020, the CBIRC did not conduct such a review on us, and pursuant to applicable regulatory requirements, we continued to determine our capital requirements based on the score we received in the 2018 review.

Contractual Obligations and Commitments

The following table sets out our contractual obligations and commitments as of December 31, 2020.


	Not later than 1 year			Later than 1 year but not later than 3 years			Later than 3 years but not later than 5 years			Later than 5 years		Total
As of December 31, 2020	*(RMB in millions)*
Securities sold under agreements to repurchase		122,249			—			—			—		122,249
Bonds payable		328			2,996			36,498			—		39,822
Annuity and other insurance balances payable		55,031			—			—			—		55,031
Insurance contracts		(190,123	)		(151,280	)		93,971			5,618,867		5,371,435
Investment contracts		29,149			13,861			(68,882	)		798,317		772,445
Interest bearing loans and borrowings		2,044			4,384			14,680			—		21,108
Lease liabilities		1,273			1,250			331			41		2,895
Capital commitments		9,927			1,364			1,823			68,903		82,017

Total		29,878			(127,425	)		78,421			6,486,128		6,467,002

Capital commitments mainly represent our commitments with respect to the acquisition of property, plant and equipment, and our investments.

The amounts set forth in the table above for insurance contracts and investment contracts in each column represent expected future cash inflows and outflows on policies in force as at December 31, 2020. The estimate is affected by numerous assumptions, including assumptions related to mortality, morbidity, surrenders and other expense assumptions. Many of these estimates are inherently uncertain and the actual experience may differ from our estimates.

The expected net cash outflows for our insurance contracts are negative in the period not later than 1 year and later than 1 year but not later than 3 years in the above table. This is primarily because we have increased our sales of products with regular premiums, which has resulted in an increase in the proportion of insurance contracts that are in premium payment period. As premiums for products with regular premiums are paid by installments during the premium payment period, insurance future cash inflows occur at an earlier stage of the policy term, while benefits payments and other insurance future cash outflows occur gradually throughout the entire policy period. The expected net cash outflows for our investment contracts are negative in the period later than 3 years but not later than 5 years in the above table. This is primarily because under the terms of some of our insurance contracts, survival benefits payments under these contracts will be transferred to respective investment contracts during the next three to five years, and accordingly, there is expected to be a large amount of cash inflows for some of our investment contracts during the next three to five years. Furthermore, as the expected future cashflows reported in the table above are not discounted from the date of payment back to December 31, 2020, the sum of the expected future cashflows are different from the amount of corresponding liabilities in our consolidated balance sheet as of December 31, 2020. Policyholder dividends will not become a contractual obligation until the applicable policy anniversary is reached and the dividend amount is credited to the policy benefit liability or paid to the policyholder, and hence are not included in the table above. Reinsurance recoveries have not been taken into account.

Other than as set forth under capital commitments, we had no material, individually or in the aggregate, purchase obligations as of December 31, 2020.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

None.

D. TREND INFORMATION

Please refer to our discussion in each section under “—Overview of Our Business”, “—Factors Affecting Our Results of Operations”, “—Critical Accounting Policies” and “—Operating Results”.

We review assumptions used in establishing reserves for long term insurance contracts and the impact of changes in these assumptions on our net profit. Changes in these assumptions may have a significant impact on our operating results. Changes in these assumptions resulted in a decrease of RMB38,543 million in profit before income tax in 2020, a decrease of RMB2,402 million in profit before income tax in 2019 and an increase of RMB3,074 million in profit before income tax in 2018. The sensitivity analysis of these assumptions is as follows:

•

holding all other variables constant, if mortality rates and morbidity rates were to increase or decrease from the current best estimate by 10%, pre-tax profit for the year would have been RMB34,590 million lower or RMB35,955 million higher, respectively.

•

holding all other variables constant, if lapse rates were to increase or decrease from the current best estimate by 10%, pre-tax profit for the year would have been RMB707 million lower or RMB646 million higher, respectively.

•

holding all other variables constant, if the discount rates were 50 basis points higher or lower than the current best estimate, pre-tax profit for the year would have been RMB114,536 million higher or RMB131,732 million lower, respectively.

See also Note 4.1.3 and Note 15 to our consolidated financial statements included elsewhere in this annual report.

E. OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2020, there were no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

See “—Liquidity and Capital Resources—Contractual Obligations and Commitments”.

G. SAFE HARBOR

See “Forward-Looking Statements” at the beginning of this annual report.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

The following table sets forth information regarding our current directors and executive officers. Unless otherwise indicated, their business address is c/o China Life Insurance Company Limited, 16 Financial Street, Xicheng District, Beijing 100033, China.


Namea	Date of Birth	Position

Wang Bin	November 1958	Chairman of the board of directors and executive director
Su Hengxuan	February 1963	Executive director and president
Li Mingguang	July 1969	Executive director, vice president, chief actuary and board secretary
Yuan Changqing	September 1961	Non-executive director
Wang Junhui	July 1971	Non-executive director
Chang Tso Tung Stephen	November 1948	Independent director
Robinson Drake Pike	October 1951	Independent director
Tang Xin	September 1971	Independent director
Leung Oi-Sie Elsie	April 1939	Independent director
Huang Xiumei	June 1967	Vice president and chief financial officer
Ruan Qi	July 1966	Vice president
Zhan Zhong	April 1968	Vice president
Yang Hong	February 1967	Vice president
Zhao Guodong	November 1967	Assistant president
Xu Chongmiao	October 1969	Compliance officer
Yang Chuanyong	March 1963	Audit officer

Directors

Wang Bin has been the chairman of the board of directors of our company since December 2018. He is the chairman of the board of directors and the secretary to the party committee of CLIC and a director and the chairman of the board of directors of China Guangfa Bank Co., Ltd. Mr. Wang has successively been employed by government authorities and financial institutions with nearly 30 years of experience in financial management. He has worked at the People’s Bank of China, participating in the preparation and establishment of Agricultural Development Bank of China as an important member. Mr. Wang served as the general manager of Jiangxi Branch of Agricultural Development Bank of China, and the president of Tianjin Branch and Beijing Branch of the Bank of Communications Co., Ltd. (the “Bank of Communications”). He also served as the vice president of the Bank of Communications from 2005 to 2012 and concurrently served as an executive director of the Bank of Communications from 2010 to 2012. From March 2012 to August 2018, he served as the chairman of the board of directors and the secretary to the Party Committee of China Taiping Insurance Group Ltd. Mr. Wang holds a doctoral degree in economics. He is a researcher, a delegate to the 19th National Congress of the Communist Party of China and a member of the 12th and 13th National Committee of the Chinese People’s Political Consultative Conferences.

Su Hengxuan has been an executive director of our company since December 2018 and has been our president since April 2019. He has served as the vice president of CLIC since December 2017 and a director of China Guangfa Bank Co., Ltd. since September 2020. He was the president of China Life Pension from March 2015 to February 2018. Mr. Su served various positions in our company from 2000 to 2015, including the deputy general manager of our Henan Branch, the general manager of the individual insurance department of our company, the general manager of the individual insurance sales department of our company and as an assistant to the president and the vice president of our company. Mr. Su graduated from Wuhan University and the University of Science and Technology of China and obtained a doctoral degree in management science and engineering from the University of Science and Technology of China in 2011. Mr. Su, a senior economist, has over 35 years of experience in the operation and management of life insurance businesses.

Li Mingguang has been an executive director of our company since August 2019. He has been a vice president of our company since November 2014 and our chief actuary since March 2012. He has been the chief actuary of China Life Pension since May 2012. Mr. Li has been our board secretary since June 2017. Mr. Li joined our company in 1996 and subsequently served as deputy division chief, division chief, assistant to the general manager of product development department, responsible actuary of our company and general manager of our actuarial department. Mr. Li graduated from Shanghai Jiao Tong University with a bachelor’s degree in computer science in 1991, Central University of Finance and Economics majoring in monetary banking (actuarial science) with a master’s degree in 1996 and Tsinghua University with an EMBA in 2010, and also studied at the University of Pennsylvania in the United States in 2011. Mr. Li is a fellow of the China Association of Actuaries (FCAA) and a fellow of the Institute and Faculty of Actuaries (FIA). He was the chairman of the first session of the China Actuarial Working Committee and the secretary-general of the first and the second session of the China Association of Actuaries. He is currently an executive director of the China Association of Actuaries, and a member of the China National Master of Insurance Education Supervisory Committee.

Yuan Changqing has been a non-executive director of our company since February 2018. He serves as the vice chairman and president of CLIC and the deputy secretary to the party committee of CLIC. Mr. Yuan served as the chairman of the supervisory committee and the deputy secretary to the party committee of Agricultural Bank of China Limited from April 2015 to May 2017. He served as the deputy general manager and the secretary to the discipline inspection committee of China Everbright Group Corporation Limited from November 2014 to April 2015, the secretary to the discipline inspection committee of China Everbright Group Limited from December 2008 to August 2012, and an executive director, the deputy general manager and the secretary to the discipline inspection committee of China Everbright Group Limited from August 2012 to November 2014, during which he concurrently acted as the chairman of Everbright Securities Company Limited. During the period from 1995 to 2008, he served as the vice president, president and secretary to the party committee of Xinjiang branch, the president and secretary to the party committee of Henan branch, and the director of the organization department of the party committee and the general manager of the human resources department of the head office of Industrial and Commercial Bank of China Limited. During the period from 1981 to 1995, he held various professional and management positions in branch offices of the People’s Bank of China and Industrial and Commercial Bank of China. Mr. Yuan, a senior economist, graduated from the University of Hong Kong, majoring in international business administration with a master’s degree in business administration.

Wang Junhui has been a non-executive director of our company since August 2019. He has been the chief investment officer of CLIC and president of China Life Asset Management Company Limited since August 2016, and the chairman of China Life AMP Asset Management Co., Ltd. since December 2016. From 2004 to 2016, he served as an assistant to the president and the vice president of China Life Asset Management Company Limited, and the president of China Life Investment Holding Company Limited. From 2002 to 2004, he served as the director of the investment department and an assistant to the general manager of Harvest Fund Management Co., Ltd. Mr. Wang graduated from the School of Computer Science of Beijing University of Technology with a bachelor’s degree in software in 1995, and Chinese Academy of Fiscal Sciences of the Ministry of Finance of the PRC with a doctoral degree in finance in 2008. He is a senior economist.

Chang Tso Tung Stephen has been an independent director of our company since October 2014. He served as the vice chairman of the Greater China Region of Ernst & Young, the managing partner for professional services and the chairman of auditing and consulting service of Ernst & Young until his retirement in 2004. From 2007 to 2013, Mr. Chang was an independent non-executive director of China Pacific Insurance (Group) Co., Ltd. Mr. Chang is currently an independent non-executive director of Kerry Properties Limited and Hua Hong Semiconductor Limited, all of which are listed on the Hong Kong Stock Exchange. Mr. Chang has been practicing as a certified public accountant in Hong Kong for approximately 30 years and has extensive experience in accounting, auditing and financial management. Mr. Chang holds a bachelor’s degree of science from the University of London, and is a fellow member of the Institute of Chartered Accountants in England and Wales.

Robinson Drake Pike has been an independent director of our company since July 2015. Before his retirement from Goldman Sachs in 2014, Mr. Pike served as the managing director of Goldman Sachs and the chief representative of the Beijing Representative Office of Goldman Sachs International Bank UK from August 2011 to May 2014, and the managing director of Goldman Sachs and a senior advisor and project coordinator seconded to the Industrial and Commercial Bank of China by Goldman Sachs from January 2007 to August 2011. From July 2000 to December 2006, he was Lehman Brothers’ senior vice president, deputy head and head of Asia Credit Risk Management. He has over 30 years of experience in Asian financial industry with a focus on risk management and China’s banking industry. He holds a bachelor’s degree of arts in Chinese Language and Literature from Yale University and a master’s degree of public affairs in development economics from Princeton University’s Woodrow Wilson School.

Tang Xin has been an independent director of our company since March 2016. He is a professor of the School of Law of Tsinghua University, the deputy head of the commercial law research center of Tsinghua University, an associate editor of “Tsinghua Law Review”, a member of the listing committee of the Shanghai Stock Exchange, a member of the legal professional advisory committee of the Shenzhen Stock Exchange, the chairman of the independent director committee of the China Association for Public Companies, and an independent director of each of Harvest Fund Management Co., Ltd. and Bank of Guizhou Co., Ltd. Mr. Tang was elected as a member of the first and second sessions of the merger, acquisition and reorganization review committee of the China Securities Regulatory Commission from 2008 to 2010. He served as an independent director of China Spacesat Co., Ltd. from 2008 to 2014, an independent director of each of SDIC Power Holdings Co., Ltd. and Changjiang Securities Company Limited from 2009 to 2013, and an independent director of Beijing Rural Commercial Bank Co., Ltd. from 2009 to 2015. Mr. Tang graduated from Renmin University of China with bachelor’s, master’s and doctorate degrees in law.

Leung Oi-Sie Elsie has been an independent director of our company since July 2016. She was previously the first Secretary for Justice of Hong Kong as well as a member of the Executive Council of Hong Kong, the deputy director of the Hong Kong Basic Law Committee of the Standing Committee of the 2nd, 3rd and 4th National People’s Congress and a consultant of Iu, Lai & Li Solicitors & Notaries. Ms. Leung served as a member of the Social Welfare Advisory Committee and the Equal Opportunities Commission, an executive committee member and a council member of the Hong Kong Federation of Women, the Chairperson and President of the International Federation of Women Lawyers and the Honorary President of the Nanhai Worldwide Friendship Federation. She is a Justice of the Peace, a notary public and a China-appointed attesting officer. She has been awarded the “Grand Bauhinia Medal” and admitted as a solicitor by the Law Societies of Hong Kong and England. Ms. Leung graduated from the University of Hong Kong with a master’s degree in law, and is a fellow of the International Academy of Matrimonial Lawyers. She has been an independent non-executive director of United Company RUSAL Plc since December 2009, an independent non-executive director of China Resources Power Holdings Company Limited since April 2010. She has been an independent non-executive director of PetroChina Company Limited since June 2017.

Supervisors

The following table sets forth information regarding our current supervisors.


Name	Date of Birth	Position

Jia Yuzeng	June 1962	Chairperson of the board of supervisors
Han Bing	November 1971	Supervisor
Cao Qingyang	May 1963	Employee representative supervisor
Wang Xiaoqing	October 1965	Employee representative supervisor

Jia Yuzeng has been the chairperson of our board of supervisors since July 2018. He has been an executive director of the Insurance Society of China since July 2020 and a director of China Insurance Security Fund Co., Ltd. since December 2020. During the period from 2006 to March 2018, he served as a supervisor, the general manager of the human resources department, an assistant to the president, the vice president, the board secretary, an executive director and the compliance officer of China Life Pension Company Limited. During the period from 2004 to 2006, he served as the general manager of the work department of the Trade Union, the executive deputy director of the Trade Union and a supervisor of the company. During the period from 1988 to 2004, he successively served as the division head of the General Office and a secretary (at the deputy director level) of the PRC Ministry of Supervision, the deputy director (responsible for daily operation) of the minister office of the general supervision office under the supervision department of the Central Commission for Discipline Inspection, and an inspector (at the director level), supervisor, inspector (at the deputy bureau chief level) and special supervisor of the general office of the Central Commission for Discipline Inspection. Mr. Jia graduated from the Open University of Hong Kong in 2003, majoring in business administration with a master’s degree in business administration.

Han Bing has been a supervisor of our company since July 2019. He has been the general manager of the human resources department of our company since December 2018. He served as the general manager of the human resources department of China Life Pension Company Limited from March 2016 to December 2018. During the period from 2014 to 2016, he successively served as the deputy general manager and the secretary to the discipline inspection committee of Ningbo branch, and the deputy general manager and the secretary to the discipline inspection committee of Tibet Autonomous Region branch of our company. During the period from 2006 to 2014, he served as the deputy general manager of the human resources department of our company. Mr. Han graduated from Beijing College of Economics in 1994, majoring in labor economy with a bachelor’s degree in economics.

Cao Qingyang has been a supervisor of our company since July 2019. He has been the general manager of the product development department of our company since February 2011. From 2008 to 2011, he successively served as the deputy general manager of Tianjin branch and the group leader of the statistics working group of our company. From 2004 to 2008, he successively served as the general manager of the investor relations department, the deputy secretary-general of the board secretariat and concurrently the general manager of the investor relations department, and the deputy secretary-general of the board secretariat of our company. Mr. Cao Qingyang graduated from Nankai University in 2004, majoring in finance with a doctoral degree in economics.

Wang Xiaoqing has been a supervisor of our company since December 2019. She has successively been serving as the deputy general manager and the general manager of the risk management department of our company since April 2018. From May 2016 to April 2018, she served as the secretary to the discipline inspection committee of our Tibet branch. From 2010 to 2016, she successively served as an assistant to the general manager and the deputy general manager of the county insurance management department, and the deputy general manager of the audit department of our company. From 2003 to 2010, she successively served as the deputy division chief of the training division, the deputy division chief of the business inspection division, the division chief of the agent management division, the senior manager of the comprehensive development division of the individual insurance sales department of our company, and the deputy general manager of No.5 Sales Office in our Beijing branch. Ms. Wang graduated from Nanjing Communication Engineering College in 1988, majoring in radio communication engineering with a bachelor’s degree in engineering.

Senior Management

Su Hengxuan, see “—Directors and Senior Management—Directors” for his profile.

Li Mingguang see “—Directors and Senior Management—Directors” for his profile.

Huang Xiumei has been a vice president and the chief financial officer of our company since May 2020. Ms. Huang has been a director of Sino-Ocean Group Holding Limited since March 2021, a director of China Life Franklin Asset Management Company Limited since February 2021, and a director of China Life Pension Company Limited since July 2018. From 2016 to 2020, she served as the vice president, the board secretary and person in charge of finance of China Life Pension Company Limited. From 2014 to 2016, she served as the financial controller and the general manager of the financial management department of our company. From 2005 to 2014, Ms. Huang Xiumei held various positions at our Fujian branch, including the assistant to the general manager, the deputy general manager, the branch head, the deputy general manager (responsible for daily operations) and the general manager. From 1999 to 2005, she served as the deputy division chief of the planning and finance division, the manager of the planning and finance department and the manager of the finance department of our Fujian branch, and during the period from 2004 to 2005, she also served as the deputy general manager of our Fuzhou branch. Ms. Huang Xiumei graduated from Fuzhou University, majoring in accounting with a bachelor’s degree. She is a senior accountant.

Ruan Qi has been a vice president of our company since April 2018. He has been the chief information technology officer of our company from January 2018 to April 2018. Mr. Ruan served as the chief information technology officer and the general manager (at the general manager level of the provincial branches) of the information technology department of our company from October 2016 to January 2018. He also served as the general manager (at the general manager level of the provincial branches) of the information technology department of our company from March 2016 to October 2016. He served as the general manager of China Life Data Center and the general manager (at the general manager level of the provincial branches) of the information technology department of our company from 2014 to 2016, and the deputy general manager and the general manager of the information technology department of our company from 2004 to 2014. He successively served as the deputy division chief of the computer division of our Fujian branch, and the deputy manager (responsible for daily operations) and the manager of the information technology department of our company from 2000 to 2004. Mr. Ruan is a senior engineer. He graduated from Beijing Institute of Posts and Telecommunications in August 1987, majoring in computer science and communications with a bachelor’s degree in engineering; and from Xiamen University with a master’s degree in business administration for senior management (EMBA) in December 2007.

Zhan Zhong has been a vice president of our company since July 2019. He has been the marketing director of our company since August 2017. He has been the general manager (at the general manager level of the provincial branches) of the individual insurance division of our company since July 2014 and was an employee representative supervisor of our company from July 2015 to August 2017. Mr. Zhan served as the deputy general manager (responsible for daily operations) and the general manager of our Qinghai branch from 2013 to 2014. From 2009 to 2013, Mr. Zhan successively served as the deputy general manager (responsible for daily operations) and the general manager of the individual insurance division of our company. From 2005 to 2009, he successively served as the general manager of the individual insurance division of our Guangdong branch and an assistant to the general manager of our Guangdong branch. From 1996 to 2005, he successively served as the director of the marketing department of the Chengdu high-tech sub-branch, and an assistant to the manager and the manager of the marketing department of the Chengdu branch of Zhongbao Life Insurance Company, and the deputy general manager of the Chengdu branch of Taikang Life Insurance Company. Mr. Zhan graduated from Kunming Institute of Technology in July 1989, majoring in industrial electric automation with a bachelor’s degree in engineering.

Yang Hong has been a vice president of our company since July 2019. She has been the operating director of our company since March 2018. She has been the general manager of the operation service center of our company since January 2018. Ms. Yang successively served as the deputy general manager (responsible for daily operations) and general manager of the research and development center, the general manager (at the general manager level of the provincial branches) of the business management department and the general manager (at the general manager level of the provincial branches) of the business process management department of our company from 2011 to 2018. From 2002 to 2011, she successively served as an assistant to the general manager and the deputy general manager of the business management department, and the general manager of the customer service department of our company. Ms. Yang graduated from the Computer Science Department of Jilin University in 1989, majoring in system structure with a bachelor’s degree of science, and from the School of Economics and Management of Tsinghua University in 2013 with a master’s degree in business administration for senior management.

Zhao Guodong has been an assistant to the president of our company since October 2019. He served as the general manager of our Jiangsu branch from July 2018. During the period from 2016 to 2018, he successively served as the deputy general manager (responsible for daily operation) and the general manager of our Chongqing branch, and the general manager of our Hunan branch. From 2007 to 2016, he successively served as the deputy general manager of our Fujian branch and the deputy general manager of our Hunan branch. From 2001 to 2007, he was the deputy general manager of our Changde Branch in Hunan and the general manager of our Yiyang branch. Mr. Zhao graduated from Hunan College of Computer Science majoring in computer software in 1988, and from China Central Radio and TV University majoring in business administration in 2006.

Xu Chongmiao has been the compliance officer of our company since July 2018. He has been the general manager of the legal and compliance department and the legal officer of our company since September 2014. From 2006 to 2014, he successively served as the deputy general manager of the legal affairs department, the deputy general manager of the legal and compliance department and the legal officer at the general manager level of our company. From 2000 to 2006, he successively served as the deputy division chief of the regulations division of the development and research department and a senior regulations researcher of the legal affairs department of our company. Mr. Xu graduated from Fudan University in August 1991, majoring in economic law with a bachelor’s degree in law, and from Renmin University of China in July 1996 and July 2005, respectively, majoring in economic law with master’s and doctorate degrees in law. Mr. Xu is admitted as a lawyer and certified public accountant in the PRC.

Yang Chuanyong has been the audit officer of our company since December 2020. He served as the general manager of the audit department of our company from June 2019 to February 2021. He served as the general manager of our branch of Guangxi Zhuang Autonomous Region from 2017 to 2019. From 2012 to 2017, he successively served as the general manager of the legal and compliance department and the director of the office of our company. From 2004 to 2012, he successively served as an assistant to the director of the office, the deputy director of the office, the general manager of the strategic planning department, and the deputy general manager of our Beijing branch. Mr. Yang graduated from the Tsinghua University with an EMBA degree in January 2010, majoring in business administration for executives.

None of our directors, supervisors or members of our senior management was selected as a result of any arrangement or understanding with any major shareholders, customers or suppliers. None of the above directors, supervisors or senior management of our company has any family relationship with any directors, supervisors, senior management and substantial shareholders of our company.

B. COMPENSATION

Compensation of Directors, Supervisors and Officers

Our directors, supervisors and executive officers receive compensation in the form of salaries, bonuses and other benefits-in-kind, including our contribution to the pension plan on behalf of our directors, supervisors and executive officers. As required by PRC regulations, we participate in various defined contribution retirement plans organized by provincial and municipal governments for our employees, including employees who are directors, supervisors and executive officers.

The following table sets forth the amounts of compensation paid to each of our directors and supervisors for the fiscal year ended December 31, 2020. The total compensation package for our executive directors and chairman of the board of supervisors for the year ended December 31, 2020 has not yet been finalized in accordance with regulations of the relevant PRC authorities. The amount of the compensation not provided for is not expected to have a significant impact on our financial statements for the year ended December 31, 2020. We will make further disclosure of the amount of the final compensation when it is determined.


Name	Salaries/Fees		Inducement Fees		Other ⁽¹⁾ Benefits		Compensation for loss of office as director		Total
	*RMB in ten thousands*
Wang Bin		0		—		0		—		0
Su Hengxuan		0		—		0		—		0
Li Mingguang		125.30		—		22.60		—		147.90
Zhao Peng⁽²⁾		0		—		0		—		0
Yuan Changqing		0		—		0		—		0
Liu Huimin⁽³⁾		0		—		0		—		0
Yin Zhaojun⁽⁴⁾		0		—		0		—		0
Wang Junhui		0		—		0		—		0
Chang Tso Tung Stephen		32		—		0		—		32
Robinson Drake Pike		32		—		0		—		32
Tang Xin		32		—		0		—		32
Leung Oi-Sie Elsie		30		—		0		—		30
Jia Yuzeng		143.20		—		22.55		—		165.75
Luo Zhaohui⁽⁵⁾		0		—		0		—		0
Han Bing		50.55		—		33.70		—		84.25
Cao Qingyang		59.36		—		33.55		—		92.91
Wang Xiaoqing		51.84		—		32.25		—		84.09
Song Ping⁽⁶⁾		4.21		—		2.87		—		7.08
Total		560.46		—		147.52		—		707.98

⁽¹⁾	Include benefits-in-kind, social insurance, housing fund and enterprise annuity to be paid by the employer.

⁽²⁾	Appointed as executive director in February 2020 and resigned as executive director in April 2020.

⁽³⁾	Resigned as non-executive director on February 7, 2021.

⁽⁴⁾	Resigned as non-executive director on January 15, 2021.

⁽⁵⁾	Resigned as supervisor on July 22, 2020.

⁽⁶⁾	Resigned as employee representative supervisor on January 3, 2020.

The following table sets forth the amounts of compensation paid to each of our executive officers other than those disclosed in the table above, including vice presidents who are not our directors, our chief financial officer, our assistant president, our compliance officer and our audit officer for the year ended December 31, 2020. The total compensation package for our executive officers for the year ended December 31, 2020 has not yet been finalized in accordance with regulations of the relevant PRC authorities. The amount of the compensation not provided for is not expected to have a significant impact on our financial statements for the year ended December 31, 2020. We will make further disclosure of the amount of the final compensation when it is determined.


Name	Salaries/Fees		Inducement Fees		Other⁽¹⁾Benefits		Compensation for loss of office as director		Total
	*RMB in ten thousands*
Huang Xiumei⁽²⁾		95.47		—		15.17		—		110.64
Ruan Qi		125.30		—		22.22		—		147.52
Zhan Zhong		143.20		—		22.53		—		165.73
Yang Hong		125.30		—		22.56		—		147.86
Zhao Guodong		65.00		—		22.44		—		87.44
Xu Chongmiao		52.75		—		34.24		—		86.99
Yang Chuanyong⁽³⁾		4.84		—		3.10		—		7.94
Zhao Peng⁽⁴⁾		0		—		0		—		0

Total		611.86		—		142.26		—		754.12

Note:

⁽¹⁾	Include benefits-in-kind, social insurance, housing fund and enterprise annuity to be paid by the employer.

⁽²⁾	Appointed as vice president and chief financial officer in May 2020.

⁽³⁾	Appointed as audit officer in December 2020.

⁽⁴⁾	Resigned as vice president in May 2020.

The aggregate amount of compensation we paid to our five highest paid individual employees, including one director who is also our executive officer, one supervisor and three members of senior management, during the year ended December 31, 2020, was approximately RMB7.75 million (US$1.19 million). The amount of compensation we paid to our highest paid individual employee, during the year ended December 31, 2020, was approximately RMB1.66 million.

Senior Management Compensation

Our senior management’s compensation consists of four components, including basic salaries, performance-based salaries, fringe benefits and mid to long-term incentive compensation.

We have established a comprehensive performance management system. A performance appraisal method for our officers is used to appraise the performance of the officers annually. Measures for such appraisal include a business performance index based on our budget and targets as approved by our board of directors; a management performance index based on the duties and functions of the office position; and a risk compliance index based on risk management and compliance management of our daily operation, establishing a connection between the achievement of our major business targets and the office performance appraisal.

In accordance with relevant policies of the PRC government, no stock appreciation rights of our company were granted or exercised in 2020. For other details of the stock appreciation rights which were previously granted by us, please refer to Note 31 to our consolidated financial statements included elsewhere in this annual report.

C. BOARD PRACTICES

General

Our board of directors consists of nine members. Our directors are elected to serve a term of three years, which is renewable upon re-election. Our directors are elected at meetings of our shareholders, and, unless they resign at an earlier date, are deceased or removed, will serve three-year terms. The current term for our board of directors began in June 2018. Our directors are not currently entitled to severance benefits other than benefits provided by law upon termination of employment. In the event our Company is acquired, including an acquisition of control by another person, and a director leaves employment or retires following the acquisition, the director may receive severance and other payments upon approval by the shareholders in general meeting.

We have identified various board members as being “independent”, in accordance with Hong Kong laws and regulations. These requirements vary in certain respects from independence requirements under U.S. law. The members of our audit committee are independent as defined by the rules of the Securities and Exchange Act and the New York Stock Exchange which are applicable to us.

The PRC company law requires a joint stock company with limited liability to establish a board of supervisors. Our board of supervisors is responsible for monitoring our financial matters and supervising the actions of our board of directors and our management personnel. Our board of supervisors consists of four members. At least one-third of our board of supervisors must be elected by our employees. The remaining members must be elected by our shareholders in a general meeting. One member of our board of supervisors is designated as the chairman. Members of our board of supervisors may not serve as director or member of senior management. The term of office for our supervisors is three years, which is renewable upon re-election. The current term for our board of supervisors began in June 2018.

Board Committees

We have established the following standing committees: an audit committee, a nomination and remuneration committee, a risk management and consumer rights protection committee, a strategy and assets and liabilities management committee, and a connected transactions control committee.

The primary duties of the audit committee are to review and supervise the financial reporting, to assess the effectiveness of our internal control system, to supervise our internal audit system and its implementation and to recommend the engagement or replacement of external auditors. Our audit committee is also responsible for communications between our internal and external auditors and our internal reporting system. Our audit committee is currently comprised of Robinson Drake Pike, Chang Tso Tung Stephen and Tang Xin. Mr. Robinson Drake Pike serves as the chairman.

The primary duties of the nomination and remuneration committee are to review the structure of our board of directors, its number of members and composition, to formulate plans for the appointment, succession and appraisal criteria of our directors and senior management, and to formulate training and remuneration policies for our senior management. Our nomination and remuneration committee is currently comprised of Tang Xin, Robinson Drake Pike and Yuan Changqing. Mr. Tang Xin serves as the chairman.

The primary duties of the risk management and consumer rights protection committee are to formulate our risk control benchmark system, to establish and improve our risk management and internal control system as well as the system for the management of consumer rights protection, to review our risk preference and tolerance policy and work reports from our senior management and department in charge of consumer rights protection, to formulate our risk management policy and major policy on consumer rights protection, to review the assessment reports with respect to our risk management and internal control, to conduct research on important findings from internal investigations with respect to risk management and internal control and management’s responses to such findings and to coordinate and handle disagreements on risk management and sudden and significant risks or crises, and to supervise and direct our senior management and relevant departments to resolve any issues identified during the rectification process in a timely manner. Our risk management and consumer rights protection committee is currently comprised of Leung Oi-Sie Elsie, Li Mingguang, and Wang Junhui. Ms. Leung-Oi-Sie Elsie serves as the chairman.

The primary duties of the strategy and assets and liabilities management committee are to formulate our long-term development strategies, and to conduct research and to make recommendations on significant matters and policies and systems in respect of the management of assets and liabilities, the management system for insurance fund usage and significant strategic investments. Our strategy and assets and liabilities management committee is currently comprised of Chang Tso Tung Stephen, Su Hengxuan, Wang Junhui and Leung Oi-Sie Elsie. Mr. Chang Tso Tung Stephen serves as the chairman.

The primary duties of the connected transactions control committee are to determine our connected persons, to administer, examine and approve connected transactions, to conduct risk control of connected transactions, with a particular focus on compliance and the fairness and necessity of connected transactions, so as to provide an important basis for the decision-making by the board of directors in respect of the management of connected transactions. Our connected transactions control committee is currently comprised of four independent directors including Tang Xin, Robinson Drake Pike, Chang Tso Tung Stephen and Leung Oi-Sie Elsie. Mr. Tang Xin serves as the chairman.

D. EMPLOYEES

As of December 31, 2018, 2019 and 2020, we had approximately 102,817, 103,826 and 104,160 employees, respectively. The following table sets forth the number of our employees by their functions as of December 31, 2018, 2019 and 2020.


	As of December 31
	2018					2019					2020
	Number of employees		% of total			Number of employees		% of total			Number of employees		% of total
Management and administrative staff		23,166		22.53	%		18,495		17.81	%		19,061		18.30	%
Financial and auditing staff		5,140		5.00	%		4,911		4.73	%		5,412		5.20	%
Sales and sales management staff		40,194		39.09	%		46,678		44.96	%		47,301		45.41	%
Insurance verification, claims processing and customer service staff		26,695		25.96	%		25,622		24.68	%		24,430		23.45	%
Other professional and technical staff⁽¹⁾		4,274		4.16	%		4,749		4.57	%		4,212		4.05	%
Other		3,348		3.26	%		3,371		3.25	%		3,744		3.59	%


Total⁽²⁾		102,817		100.00	%		103,826		100	%		104,160		100	%

(1)	Includes actuaries, product development personnel, investment management personnel and information technology specialists.

(2)	Includes employees of our subsidiaries.

As of December 31, 2018, 2019 and 2020, we had approximately 1,439,000, 1,613,000 and 1,378,000 exclusive agents, respectively. Although the number of our exclusive agents decreased in 2020, we continued to improve the quality of our agent force, including strengthening the agent recruitment and management and improving the structure of our sales force. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Regulation of Insurance Agencies, Insurance Brokers and Other Intermediaries” and “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—Our growth is dependent on our ability to attract and retain productive agents”.

None of our employees is subject to collective bargaining agreements governing employment with us. We believe that our employee relations are satisfactory.

E. SHARE OWNERSHIP

As of the date of this annual report, none of our directors, supervisors or senior management is a legal or beneficial owner of any shares of our share capital.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

A. MAJOR SHAREHOLDERS

The table below sets forth information regarding the ownership of our share capital as of April 9, 2021 by all persons who are known to us to be the beneficial owners of 5% or more of each class of our share capital.


Title of Class	Identity of Person or Group	Amount Owned	Percentage of Class			Percentage of Total Share Capital
A Shares	China Life Insurance (Group) Company	19,323,530,000 (Long position)		92.80	%		68.37	%
H Shares	BlackRock, Inc.⁽¹⁾	516,306,981 (Long position) 403,000 (Short position)		6.94 0.01	% %		1.83 0.00	% %

Note (1):

BlackRock, Inc. was interested in a total of 516,306,981 H shares of the Company 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 4,595,645 H shares, 9,383,000 H shares, 125,661,588 H shares, 174,993,000 H shares, 873,000 H shares, 47,928,096 H shares, 1,109,000 H shares, 3,975,000 H shares, 23,100,787 H shares, 966,000 H shares, 2,164,000 H shares, 1,440,000 H shares, 51,806,211 H shares, 3,407,000 H shares, 32,814,923 H shares, 494,000 H shares, 20,600,488 H shares, 8,948,828 H shares, 1,530,000 H shares, 77,660 H shares and 438,755 H shares, respectively. All of these entities are either controlled or indirectly controlled subsidiaries of BlackRock, Inc. Of these 516,306,981 H shares, 3,152,000 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 403,000 H shares (0.01%). These 403,000 H shares were cash settled unlisted derivatives.

Our A shares and H shares generally vote together as a single class, including in the election of directors. Each A share and each H share is entitled to one vote. In addition, in certain matters which affect the rights of the holders of H shares or A shares, the H shares or A shares, as the case may be, are entitled to vote as a separate class.

CLIC converted and sold 676,470,000 domestic shares in the form of H shares or ADSs in connection with our global offering in December 2003.

Based on the information provided by Deutsche Bank Trust Company Americas, our depositary bank, as of December 31, 2020 and April 9, 2021, there were, respectively, 24,736,779 ADRs representing 123,683,895 H shares, with 51 registered holders, and 25,277,934 ADRs representing 126,389,670 H shares, with 51 registered holders. Since certain of the ADSs are held by nominees, the above number may not be representative of the actual number of U.S. beneficial holders of ADSs or number of ADSs beneficially held by U.S. persons.

CLIC, our controlling shareholder, is a wholly state-owned enterprise controlled by the PRC government. See “Item 4. Information on the Company—History and Development of the Company”. None of our major shareholders has voting rights that differ from the voting rights of other shareholders, except that in certain matters which affect the rights of the holders of H shares or A shares, holders of H shares or A shares, as the case may be, are entitled to vote as a separate class. We are not aware of any arrangement which may at a subsequent date result in a change of control of our company.

B. RELATED PARTY TRANSACTIONS

As at the date of this annual report, CLIC owns approximately 68.37% of our issued share capital, a 40% equity interest in AMC, a 60% equity interest in CLPCIC, a 100% equity interest in IHC, and a 100% equity interest in China Life E-commerce Company Limited, or China Life E-commerce. CLIC, AMC, CLPCIC, IHC and China Life E-commerce are therefore considered as our connected persons under the HKSE Listing Rules. AMC owns a direct 48% equity interest and an indirect 52% equity interest in China Life Wealth Management Company Limited, or China Life Wealth, and approximately 85.03% equity interest in China Life AMP Asset Management Co., Ltd., or AMP. China Life Wealth and AMP are therefore also considered as our connected persons under the HKSE Listing Rules. Each of AMC, China Life Wealth and AMP is also a subsidiary of the Company. Chongqing International Trust Inc., or Chongqing Trust, is an associate of CLIC and CLPCIC by virtue of its acting as the trustee of a trust scheme of which CLPCIC is a beneficiary, and is therefore also a connected person of the Company under the HKSE Listing Rules. China Life Capital Investment Company Limited, or China Life Capital, an indirect wholly owned subsidiary of CLIC, is an associate of CLIC and also a connected person of the Company under the HKSE Listing Rules.

During the reporting period, we entered into the following new related party transactions with these companies:

•

On July 1, 2020, we and CLIC each entered into a new asset management agreement with AMC;

•

On December 31, 2020, we and CLIC entered into a new policy management agreement;

•

On December 31, 2020, we and IHC entered into a new property leasing agreement; and

•

On February 20, 2021, we and CLPCIC entered into a new insurance sales framework agreement.

We also continued to carry out certain other continuing related party transactions with CLIC, AMC, IHC, China Life Pension, CLPCIC, China Life Capital, China Life Wealth, AMP and Chongqing Trust in the reporting period. These transactions constitute connected transactions for us under the HKSE Listing Rules. Details of these transactions are set forth below.

As at the date of this annual report, we own a 43.686% equity interest in CGB and are the largest shareholder of CGB. Our chairman and executive director, Wang Bin, serves as the chairman of CGB. CGB is therefore considered as our related party under applicable PRC laws and regulations. In 2020, we entered into five new negotiated deposit agreements with CGB. We also continued to carry out continuing related party transactions with CGB in the reporting period. These transactions are not regarded as connected transactions for us under the HKSE Listing Rules. Details of these transactions are set forth below.

As at the date of this annual report, we directly own a 70.74% equity interest in China Life Pension. China Life Pension is not considered as our related party under the HKSE Listing Rules or applicable PRC laws and regulations. As our subsidiary, China Life Pension also continued to carry out continuing related party transactions with CLIC, AMC and China Life Wealth in the reporting period. These transactions are regarded as connected transactions for us under the HKSE Listing Rules. Details of these transactions are set forth below.

Continuing Related Party Transactions with CLIC

During the reporting period, we engaged in continuing related party transactions with CLIC. These transactions are governed by several agreements between CLIC and us, including a restructuring agreement, a policy management agreement, a trademark license agreement and a non-competition agreement. A detailed discussion of these agreements is set forth in Note 34 to our consolidated financial statements included elsewhere in this annual report and under the heading “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” in our annual report on Form 20-F filed with the Securities and Exchange Commission on April 28, 2009.

On December 26, 2017, we and CLIC entered into a policy management agreement for a term of three years. Pursuant to this policy management agreement, we accepted CLIC’s entrustment to provide policy administration services relating to non-transferred policies, and CLIC will pay a service fee to us in cash on a semi-annual basis. The service fees paid by CLIC to us under the policy management agreement for the year ended on December 31, 2020 were RMB563.70 million (US$86.39 million). This agreement expired on December 31, 2020.

On December 31, 2020, we and CLIC entered into a new policy management agreement for a term of one year ending on December 31, 2021. During its term, this new agreement may be terminated by either party by giving to the other party not less than 90 days’ prior written notice. Pursuant to this new policy management agreement, we will continue to accept CLIC’s entrustment to provide policy administration services relating to non-transferred policies, and CLIC will pay a service fee to us in cash on a semi-annual basis. The annual cap in respect of the service fees to be paid by CLIC to us under the new policy management agreement for the year ending on December 31, 2021 is RMB599 million.

Continuing Related Party Transactions with AMC

Asset Management Agreement between AMC and Us

On December 28, 2018, we entered into an asset management agreement with AMC for a term of three years effective from January 1, 2019 and expiring on December 31, 2021. Under the asset management agreement, AMC agreed to invest and manage assets entrusted to it by us, and we agreed to pay service fees to AMC.

On July 1, 2020, we and AMC entered into a new asset management agreement to replace the original agreement. The new asset management agreement became effective upon signing by the parties on July 1, 2020, and will expire on December 31, 2022. The original agreement was automatically terminated from the effective date of the new agreement. Pursuant to the new asset management agreement, AMC will invest and manage assets entrusted to it by us, on a discretionary basis, within the scope granted by us and in accordance with our investment guidelines. We retain the title of the entrusted assets and AMC is authorized to operate the accounts associated with the entrusted assets for and on behalf of us. We may add to or withdraw from the assets managed by AMC pursuant to the agreement. We have the right to establish, amend and change the investment guidelines and also have the right to monitor the investment management activities of AMC.

In consideration of AMC’s service in respect of investing and managing assets entrusted to it by us under the new agreement, we agreed to pay service fees to AMC, which consist of a fixed service fee and a variable service fee. The fixed service fee is payable on a quarterly basis and is calculated according to the net asset value of the assets under management and a fixed service fee rate within a range between 0.02% and 0.3%. The variable service fee is payable on an annual basis and is determined after an appraisal has been conducted by us with respect to the assets under management and the relevant services provided by AMC each year. The variable service fee is calculated on the basis of 20% of the fixed service fee per annum, by multiplying a payment ratio determined by us based on the results of our annual appraisal of AMC. The service fees under the new agreement were determined by us and AMC based on an analysis of the cost of service, market practice, the rate charged by AMC to us in previous years, the rates charged by independent third parties for the provision of similar services, and the size and composition of the assets managed by AMC. Under the original agreement, the annual cap in respect of the service fees to be paid by us to AMC for each of the three years ending on December 31, 2021 is RMB2,000 million. Based on the estimate on our investment scale and service fee rates for the years to come, under the new agreement, we and AMC revised the annual caps in respect of the service fees to be paid by us to AMC for the two years ending on December 31, 2021 to RMB3,000 million and RMB4,000 million, respectively, and set the annual cap in respect of the service fees to be paid by us to AMC for the year ending on December 31, 2022 to RMB5,000 million.

The service fees paid by us to AMC under the asset management agreement for the year ended December 31, 2020 were RMB2,089.15 million (US$320.18 million).

Asset Management Agreement between AMC and CLIC

On December 29, 2018, AMC and CLIC entered into an asset management agreement for a term expiring on December 31, 2021. Under the asset management agreement, AMC agreed to invest and manage assets entrusted to it by CLIC, and CLIC agreed to pay service fees to AMC.

On July 1, 2020, AMC and CLIC entered into a new asset management agreement to replace the original agreement. The new asset management agreement became effective upon signing by the parties on July 1, 2020, and will expire on December 31, 2022. The original agreement was automatically terminated from the effective date of the new agreement. Pursuant to the new asset management agreement, AMC will invest and manage assets entrusted to it by CLIC, on a discretionary basis, subject to the investment guidelines and instructions given by CLIC. CLIC retains the title of the entrusted assets and AMC is authorized to operate the accounts associated with the entrusted assets for and on behalf of CLIC. CLIC may add to or withdraw from the assets managed by AMC pursuant to the new asset management agreement. CLIC has the right to establish, amend and change the investment guidelines and also has the right to monitor the investment management activities of AMC.

In consideration of AMC’s service in respect of investing and managing assets entrusted to it by CLIC under the new agreement, CLIC agreed to pay AMC service fees, which consist of a fixed service fee and a variable service fee. The fixed service fee is payable on a quarterly basis. The fixed service fee rate applicable to each type of investment products is set forth in the new agreement and is within a range between 0.02% and 0.3%. In general, the average fixed service fee rate is expected to be no higher than 0.08%. At the end of each fiscal year, CLIC will evaluate the investment performance with respect to the assets entrusted to AMC in the previous year, and adjust the fixed service fee for asset management by reference to the actual and targeted investment returns. The adjustment amount will not be higher than 10% of the fixed service fee. The service fees under the new asset management agreement were determined by AMC and CLIC based on an analysis of the cost of service, market practice, the rate charged by AMC to CLIC in previous years, the rates charged by independent third parties for the provision of similar services, and the size and composition of the assets managed by AMC. Under the original agreement, the annual cap in respect of the service fees to be paid by CLIC to AMC for each of the three years ending on December 31, 2021 is RMB320 million, RMB310 million and RMB300 million, respectively. Based on the size and composition of assets entrusted by CLIC to AMC for management as at December 31, 2019, the service fee rate of each type of investment products under the new agreement, and the expected development of CLIC’s investment business in the years to come, under the new agreement, CLIC and AMC revised the annual caps in respect of the service fees to be paid by CLIC to AMC for each of the two years ending on December 31, 2021 to RMB500 million, and set the annual cap in respect of the service fees to be paid by CLIC to AMC for the year ending on December 31, 2022 to RMB500 million.

The service fees paid by CLIC to AMC under the asset management agreement for the year ended on December 31, 2020 were RMB125.36 million (US$19.21 million).

Continuing Related Party Transactions with IHC

Property Leasing Agreement with IHC

On December 29, 2017, we entered into a property leasing agreement with IHC. This agreement expired on December 31, 2020. The rent paid by us to IHC under the property leasing agreement for the year ended December 31, 2020 was approximately RMB70.56 million (US$10.81 million).

100

On December 31, 2020, we entered into a new property leasing agreement with IHC for a term of one year ending on December 31, 2021. Under the new property leasing agreement, IHC agreed to lease to us 1,134 properties owned by it. The annual rent is determined by reference to market rent or, where there is no available comparison, by reference to the costs incurred by IHC in holding and maintaining the properties, plus a margin of approximately 5%.

Asset Management Agreement with IHC

On December 31, 2018, we entered into an asset management agreement with IHC, which took effect from January 1, 2019 with a term of two years. 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. No party served such notice for non-renewal and the agreement has been automatically extended for one year to December 31, 2021. Pursuant to the asset management agreement, IHC will invest, operate and manage the assets entrusted to it by us for investment in real property, equity interests of companies, related financial products and quasi-securitization financial products on a discretionary basis, subject to the investment guidelines and instructions given by us.

In consideration of the services provided by IHC under the asset management agreement, we agreed to pay IHC fees based on fixed return projects and non-fixed return projects, respectively. With respect to the fixed return projects, we agreed to pay IHC a basic service fee which is determined based on the investment rate of return of the projects. With respect to the non-fixed return projects, we agreed to pay IHC a basic service fee and also pay a performance-based fee at the time of exit from the projects with reference to the internal rate of return of the projects. In addition, we will make adjustments to the basic service fee for fixed return projects and non-fixed return projects based on the result of our annual business evaluation on IHC (such adjusted amount is referred to as floating management fee). In consideration of the management services for real estate operation provided by IHC or its subsidiaries, we agreed to pay IHC a real estate operation management service fee.

The basic service fee is paid on a quarterly basis, calculated separately for the projects invested prior to the execution of the agreement and those newly invested during the term of the agreement. With respect to the projects invested prior to the execution of the agreement, the basic service fee is calculated by multiplying the total amount of assets invested by the applicable management fee rate (which is set forth in the relevant entrusted investment and management agreements for alternative investments with insurance funds then in force when such projects were entrusted). With respect to the projects newly invested during the term of the agreement, the basic service fee is calculated by multiplying the total annual amount of assets newly invested by the applicable management fee rate stipulated in the agreement and our investment guidelines. The floating management fee and the performance-based fee are calculated and confirmed by both parties annually, and then paid by us to IHC upon confirmation. The real estate operation management service fee is paid on a quarterly basis, calculated separately for the well-developed real estate projects and the new real estate projects. With respect to the well-developed real estate projects, the real estate operation management service fee is calculated by multiplying the earnings before interest, taxes, depreciation of fixed assets and amortization of intangible assets, long-term deferred assets and prepaid interest (“EBITDA”) derived from the relevant real estate project in a given year, by the fee rate of 3%. With respect to the new real estate projects, the real estate operation management service fee is calculated as follows: (i) the real estate operation management service fee for the first three years will be calculated by multiplying the estimated EBITDA derived from the relevant real estate project in the fourth year by the fee rate of 3%; and (ii) commencing from the fourth year, the real estate operation management service fee will be calculated in the same manner as the well-developed real estate projects as mentioned above. In addition, the assets entrusted by us to IHC will also be partially used for the subscription of the related financial products established and issued by IHC or of which IHC has participated in the establishment and issuance, and such related financial products will be limited to infrastructure investment plans and asset-backed plans. For each of the three years ending December 31, 2021, the annual cap on the amount of the basic service fee, floating management fee, performance-based fee and the real estate operation management service fee payable by us to IHC is RMB1,391 million, RMB1,982 million and RMB2,266 million, respectively. For each of the three years ending December 31, 2021, the annual cap on the contractual amount of assets newly entrusted by us to IHC for investment and management is RMB200,000 million, RMB200,000 million and RMB200,000 million, respectively. For the year ending December 31, 2020, the contractual amount of assets newly entrusted by us to IHC for investment and management was RMB58,385.07 million (US$8,947.90 million) and the fees paid by us to IHC were RMB650.74 million (US$99.73 million).

Continuing Related Party Transaction with China Life Pension

On March 22, 2014, we, CLIC and AMC entered into an agreement for the entrustment and management of enterprise annuity funds with China Life Pension. This agreement will be automatically renewed for a successive three-year term, provided that no objection has been raised by any party within one month prior to the expiration of the agreement. The agreement became effective retroactively to December 2, 2013 and expired on December 31, 2016. After that, the agreement has been renewed for two successive three-year terms in 2016 and 2019, respectively. Under the agreement, China Life Pension was entrusted to serve as the trustee and account manager and to provide entrusted management services and account management services for the enterprise annuity funds of the Company, CLIC and AMC. China Life Pension was further entrusted to serve as the investment manager and to provide investment management service for the enterprise annuity funds of the Company, CLIC and AMC. In consideration of the services provided by China Life Pension, we, CLIC and AMC agreed to pay China Life Pension entrusted management fee, account management fees and investment management fee.

101

Continuing Related Party Transactions with CLPCIC

On January 31, 2018, we entered into an insurance sales framework agreement with CLPCIC. This agreement expired on March 7, 2021.

On February 20, 2021, we entered into a new insurance sales framework agreement with CLPCIC for a term of two years from March 8, 2021 to March 7, 2023. Unless a party serves the other party a written notice for non-renewal within 30 days before the expiration of the agreement, the agreement will automatically be extended for one year to March 7, 2024. Under the new insurance sales framework agreement, CLPCIC continued to entrust us to act as its agent to sell selected insurance products within authorized regions, and agreed to pay us an agency service fee in cash on a monthly basis. The agency service fee will be calculated by the parties at a certain percentage of the insurance premiums actually earned from the insurance agency business. The annual caps in respect of the agency service fees to be paid by CLPCIC to us under the new insurance sales framework agreement for the three years ending December 31, 2023 are RMB3,500 million, RMB3,830 million and RMB4,240 million, respectively.

The service fees paid to us for the year ended December 31, 2020 were RMB2,211.17 million (US$338.88 million).

Continuing Related Party Transactions with China Life Capital

On December 31, 2019, we and China Life Capital entered into a cooperation framework agreement with a term ending on December 31, 2022. Under this agreement, we subscribed as limited partner for the fund products in which insurance funds are permitted for investment (“Fund Products”) and of which China Life Capital or any of its subsidiaries serves as the general partner, and/or Fund Products of which China Life Capital serves as the manager. We will enter into specific agreements with the counterparties including China Life Capital (or its subsidiaries) in respect of the subscription of specific Fund Products, and such specific agreements shall be subject to the principles set out in the framework agreement. Upon execution of the specific agreements, we will make our capital contribution as required by the payment notice of the general partner. The capital contribution to be made by us will be funded by our internal resources. As the general partner or the manager of the Fund Products, China Life Capital (or its subsidiaries) will provide daily operation, investment management and consulting services to the Fund Products. The investment scope of the Fund Products includes real estate, warehousing logistics, apartments for long-term lease, urban renewal, infrastructure assets, corporate shareholdings in relation to the operation of such underlying assets and asset securitization products in relation to such assets (including, but not limited to, asset-backed securities, real estate investment trusts and quasi-real estate investment trusts). For the three years ending December 31, 2022, the annual caps for the subscription by us as limited partner of the Fund Products of which China Life Capital or any of its subsidiaries serves as the general partner are RMB5,000 million, RMB5,000 million and RMB5,000 million, respectively, and the annual caps for the management fee charged by China Life Capital as the general partner or the manager of the Fund Products are RMB200 million, RMB200 million and RMB200 million respectively.

For the year ended December 31, 2020, the subscription by us as limited partner of the Fund Products of which China Life Capital or any of its subsidiaries serves as the general partner were RMB0 million and the management fee charged by China Life Capital as the general partner or the manager of the Fund Products were RMB93.16 million (US$14.28 million).

Framework Agreements with China Life Wealth

Framework Agreement between China Life Wealth and Us

On December 28, 2017, we and China Life Wealth entered into a framework agreement in relation to daily connected transactions, which has a term of three years ending on December 31, 2020. Under the agreement, we will enter into certain daily transactions with China Life Wealth, including asset management services and sales agency services for asset management products. Pricing of the transactions under the agreement will be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending December 31, 2020, the annual caps on the management fee payable by us for asset management services are RMB240 million, RMB240 million and RMB240 million, respectively; the annual caps on the fees payable by China Life Wealth in connection with sales agency services (including the sales commission fee, client maintenance fee, handling fee and intermediary fee) are RMB100 million, RMB100 million and RMB100 million, respectively, and the annual caps on the fees for other daily transactions are RMB100 million, RMB100 million and RMB100 million, respectively. This agreement expired on December 31, 2020.

For the year ended December 31, 2020, the fee payable by us for asset management services was RMB3.60 million (US$0.55 million), the fees in connection with the sales agency services payable by China Life Wealth (including the sales commission fee, client maintenance fee, handling fee and intermediary fee) were RMB0 million, and the fees for other daily transactions were RMB7.19 million (US$1.10 million).

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Framework Agreement between China Life Wealth and CLIC

On December 27, 2017, CLIC and China Life Wealth entered into a framework agreement in relation to daily connected transactions, which has a term of three years ending on December 31, 2020. Under the agreement, CLIC and China Life Wealth will conduct certain daily transactions, including asset management services and advisory services. Pricing of the transactions under the agreement will be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending on December 31, 2020, the annual caps on the management fee payable by CLIC for asset management services are RMB50 million, RMB120 million and RMB180 million, respectively, and the annual caps on the advisory fee payable by CLIC for the advisory services are RMB50 million, RMB80 million and RMB120 million, respectively. This agreement expired on December 31, 2020.

For the year ended December 31, 2020, the management fee payable by CLIC for asset management services was RMB1.35 million (US$0.21 million) and the advisory fee payable by CLIC was RMB1.63 million (US$0.25 million).

Framework Agreement between China Life Wealth and CLPCIC

On December 29, 2017, CLPCIC and China Life Wealth entered into a framework agreement in relation to daily connected transactions, which has a term of three years ending on December 31, 2020. Under the agreement, CLPCIC and China Life Wealth will conduct certain daily transactions, including asset management services, advisory services and other daily transactions permitted by laws and regulations. Pricing of the transactions under the agreement will be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending December 31, 2020, the annual caps on the management fee payable by CLPCIC for asset management services are RMB50 million, RMB150 million and RMB240 million, respectively; the annual caps on the advisory fee payable by CLPCIC for the advisory services are RMB40 million, RMB80 million and RMB120 million, respectively; and the annual caps on the fees for other daily transactions are RMB150 million, RMB400 million and RMB700 million, respectively. This agreement expired on December 31, 2020.

For the year ended December 31, 2020, the management fee payable by CLPCIC for asset management services was RMB2.36 million (US$0.36 million), the advisory fee payable by CLPCIC for advisory services was RMB2.74 million (US$0.42 million), and the fees for other daily transactions were RMB 0.01 million (US$1,533).

Framework Agreement between China Life Wealth and IHC

On December 20, 2017, IHC and China Life Wealth entered into a framework agreement in relation to daily connected transactions, which has a term of three years ending on December 31, 2020. Under the agreement, IHC and China Life Wealth will conduct certain daily transactions, including asset management services, advisory services and other daily transactions permitted by laws and regulations. Pricing of the transactions under the agreement will be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending December 31, 2020, the annual caps on the management fee for asset management services are RMB40 million, RMB80 million and RMB120 million, respectively; the annual caps on the advisory fee for the advisory services are RMB40 million, RMB80 million and RMB120 million, respectively; and the annual caps on the fees for other daily transactions are RMB20 million, RMB80 million and RMB160 million, respectively. This agreement expired on December 31, 2020.

For the year ended December 31, 2020, there was no payment made under the agreement.

Framework Agreement between China Life Wealth and China Life E-commerce

On December 29, 2017, China Life E-commerce and China Life Wealth entered into a framework agreement in relation to asset management services, advisory services and other daily transactions permitted by laws and regulations. The agreement has a term from January 1, 2018 to December 31, 2020. Pricing of the transactions under the agreement will be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending December 31, 2020, the annual caps on the management fee for asset management services are RMB5 million, RMB10 million and RMB15 million, respectively; the annual caps on the advisory fee for the advisory services payable by China Life E-commerce for the advisory services are RMB5 million, RMB10 million and RMB15 million, respectively; and the annual caps on the fees for other daily transactions are RMB200 million, RMB300 million and RMB400 million, respectively. This agreement expired on December 31, 2020.

For the year ended December 31, 2020, there was no payment made under the agreement.

Framework Agreement between China Life Wealth and China Life Pension

On March 26, 2018, China Life Pension and China Life Wealth entered into a framework agreement in relation to asset management services, advisory services and other daily transactions permitted by laws and regulations. The agreement has a term from January 1, 2018 to December 31, 2020. Pricing of the transactions under the agreement will be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending December 31, 2020, the annual caps on the management fee payable by China Life Pension for asset management services are RMB100 million, RMB150 million and RMB200 million, respectively; the annual caps on the advisory fee payable by China Life Pension for the advisory services are RMB40 million, RMB80 million and RMB90 million, respectively; and the annual caps on the fees for other daily transactions are RMB90 million, RMB180 million and RMB270 million, respectively. This agreement expired on December 31, 2020.

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For the year ended December 31, 2020, the fee payable by China Life Pension for asset management services was RMB0 million, the advisory fee for the advisory services payable by China Life Pension was RMB0.01 million (US$1,533), and the fees for other daily transactions were RMB0 million.

Framework Agreements with AMP

Framework Agreement between AMP and Us

On December 31, 2019, we and AMP entered into a framework agreement for a term commencing on January 1, 2020 and ending on December 31, 2022. Under the agreement, we will enter into certain daily transactions with AMP, including 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 will be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending December 31, 2022, the annual caps on the subscription price and corresponding subscription fee for the subscription of fund products are RMB72,600 million, RMB72,600 million and RMB72,600 million, respectively; the annual caps on the redemption price and corresponding redemption fee for the redemption of fund products are RMB72,600 million, RMB72,600 million and RMB72,600 million, respectively; the annual caps on the sales commission fee and client maintenance fee payable by AMP are RMB700 million, RMB800 million and RMB900 million, respectively; the annual caps on the management fee (including performance-based fee) payable by us for the asset management for specific clients are RMB300 million, RMB400 million and RMB500 million, respectively; and the annual caps on the fees for other daily transactions are RMB100 million, RMB100 million and RMB100 million, respectively.

For the year ended December 31, 2020, the subscription price and corresponding subscription fee for the subscription of fund products was RMB2,939.00 million (US$450.42 million), the redemption price and corresponding redemption fee for the redemption of fund products was RMB3,430.25 million (US$525.71 million), the sales commission fee and client maintenance fee paid by AMP was RMB2.50 million (US$0.38 million), the management fee (including performance-based fee) paid by us for the asset management for specific clients was RMB37.51 million (US$5.75 million) and the fees for other daily transactions were RMB9.28 million (US$1.42 million).

Framework Agreement between AMP and CLIC

On September 6, 2019, CLIC and AMP entered into a framework agreement for a term commencing on January 1, 2020 and ending on December 31, 2022. Under the agreement, CLIC will enter into certain daily transactions with AMP, including subscription and redemption of fund products and private asset management. Pricing of the transactions under the agreement will be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending December 31, 2022, the annual caps on the subscription price and corresponding subscription fee for the subscription of fund products are RMB10,000 million, RMB10,000 million and RMB10,000 million, respectively; the annual caps on the redemption price and corresponding redemption fee for the redemption of fund products are RMB10,000 million, RMB10,000 million and RMB10,000 million, respectively; and the annual caps on the management fee payable by CLIC for the private asset management (including a performance-based fee) are RMB100 million, RMB100 million and RMB100 million, respectively.

For the year ended December 31, 2020, the subscription price and corresponding subscription fee for the subscription of fund products was RMB700.00 million (US$107.28 million), the redemption price and corresponding redemption fee for the redemption of fund products was RMB1,470.58 million (US$225.38 million) and the management fee paid by CLIC for the private asset management (including a performance-based fee) were RMB23.79 million (US$3.65 million).

Framework Agreement between AMP and CLPCIC

On December 3, 2019, CLPCIC and AMP entered into a framework agreement for a term commencing on January 1, 2020 and ending on December 31, 2022. Under the agreement, CLPCIC will enter into certain daily transactions with AMP, including 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 will be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending December 31, 2022, the annual caps on the subscription price for the fund products are RMB10,000 million, RMB10,000 million and RMB10,000 million, respectively; the annual caps on the redemption price for the fund products are RMB10,000 million, RMB10,000 million and RMB10,000 million, respectively; the annual caps for the subscription fee for the fund products are RMB100 million, RMB100 million and RMB100 million, respectively; the annual caps for the redemption fee for the fund products are RMB100 million, RMB100 million and RMB100 million, respectively; the annual caps on the management fee (including a performance-based fee) payable by CLPCIC for the asset management for specific clients are RMB100 million, RMB100 million and RMB100 million, respectively; and the annual caps on the fees for other daily transactions are RMB100 million, RMB100 million and RMB100 million, respectively.

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For the year ended December 31, 2020, the subscription price for fund products was RMB0 million, the redemption price for fund products was RMB0 million, the subscription fee for fund products was RMB0 million, the redemption fee for the fund products was RMB0 million, the management fee (including a performance-based fee) paid by CLPCIC for asset management for specific clients was RMB7.03 million (US$1.08 million) and the fees for other daily transactions were RMB0.10 million (US$0.02 million).

Framework Agreement between AMP and IHC

On February 17, 2020, IHC and AMP entered into a framework agreement for a term commencing on January 1, 2020 and ending on December 31, 2022. Under the agreement, IHC will enter into certain daily transactions with AMP, including subscription and redemption of fund products, asset management for specific clients, advisory services and other daily transactions permitted by laws and regulations. Pricing of the transactions under the framework agreement will be determined by the parties through arm’s length negotiations with reference to industry practices. For each of the three years ending December 31, 2022, the annual caps on the subscription price and corresponding subscription fee for the subscription of fund products are RMB10,000 million; the annual caps on the redemption price and corresponding redemption fee for the redemption of fund products are RMB10,000 million; the annual caps on the management fee (including a performance-based fee) payable by IHC and its subsidiaries for the asset management for specific clients are RMB150 million; the annual caps on the management fee (including performance-based fee) paid by subsidiaries of AMP for the asset management for specific clients are RMB150 million; the annual caps on the advisory fee paid by IHC and its subsidiaries for the advisory services are RMB150 million; the annual caps on the advisory fee paid by AMP and its subsidiaries for the advisory services are RMB150 million, and the annual caps on the fees for other daily transactions are RMB150 million.

For the year ended December 31, 2020, the subscription price and corresponding subscription fee for the subscription of fund products was RMB1,057.00 million (US$161.99 million), the redemption price and corresponding redemption fee for the redemption of fund products was RMB549.65 million (US$84.24 million), the management fee (including a performance-based fee) paid by IHC and its subsidiaries for asset management for specific clients was RMB0 million, the management fee (including performance-based fee) paid by subsidiaries of AMP for the asset management for specific clients was RMB0 million, the advisory fee paid by IHC 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 RMB3.32 million (US$0.51 million).

Framework Agreement with Chongqing Trust

On December 27, 2019, we entered into a framework agreement with Chongqing Trust for a term commencing on January 1, 2020 and ending on December 31, 2022. Under the framework agreement, we and Chongqing Trust will enter into transactions including subscription and redemption of trust products and other daily transactions permitted by laws and regulations. Pricing of the transactions under the framework agreement will be determined by the parties through arm’s length negotiations with reference to industry practices. For each of the three years ending December 31, 2022, the annual caps on the total amount of subscription and redemption of trust products are RMB30,000 million (including the trustee’s remuneration of no more than RMB500 million per year to be received by Chongqing Trust from the trust assets); and the annual caps on the fees for other daily transactions are RMB100 million.

For the year ended December 31, 2020, the total amount of subscription and redemption of trust products was RMB2,999.98 million (US$459.77 million) (including the trustee’s remuneration of RMB0.06 million (US$0.01 million) received by Chongqing Trust from the trust assets), and the fees for other daily transactions were RMB0 million.

Continuing Related Party Transactions with CGB

Insurance Products Cooperation Agreement with CGB

On August 17, 2020, we entered into an insurance products cooperation agreement with CGB. This agreement has a term of two years. Under this agreement, CGB will act as an intermediary to sell such products and will also act on our behalf to receive premiums. In return, we will pay CGB a commission fee for each such product sold by it, calculated and paid on a monthly basis, by multiplying (a) total new premiums received in such month minus the premiums for the policies cancelled during the cooling-off period in such month and (b) a fixed commission rate, which ranges from 0.8% to 38%.

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New Negotiated Deposit Agreements with CGB

During the reporting period, we entered into five new negotiated deposit agreements with CGB in March 2020. Under the five agreements, we agreed to deposit in CGB a total of RMB9.4 billion (US$1,441 million) for a term of 61 months. The annual interest rate applicable to our deposits will be fixed at 4.20% per annum.

Framework Agreement with CGB for Daily Related Party Transactions

On December 26, 2019, we entered into a framework agreement for daily connected transaction with CGB. Pursuant to this framework agreement, we and the subsidiaries controlled by us will, in the ordinary course of business, carry out deposit, financial market and peer, financing, investment and wealth management, co-investment, enterprise annuity, asset management and investment consultation, entrustment, agency and other daily connected transactions with CGB based on normal commercial terms. A detailed discussion of this new agreement is set forth in our report on Form 6-K filed with the Securities and Exchange Commission on October 29, 2019.

As at December 31, 2020, the amount of our deposit balance at CGB for deposit related party transactions was RMB71,418.52 million, the interest income arising from these transactions was RMB2,937.64 million, the amount of the balance for financial market and peer related party transactions was RMB160.10 million and the relevant fees or incomes arising from these transactions were RMB201.30 million. For the year ended December 31, 2020, the amount of the financing related party transactions was RMB0 million, the amount of investment and wealth management related party transactions was RMB3.01 million, the amount of the co-investment related party transactions was RMB0 million, the scale of entrusted funds under enterprise annuity related party transactions was RMB357.78 million, the amount of transaction fees related to enterprise annuity related party transactions (including management fee, entrustment fee, account management fee and performance-based fee) was RMB1.06 million, the amount of transaction fees related to asset management and investment consultation related party transactions (including management fee, service fee and handling fee) was RMB0 million, the amount of transaction fees related to entrustment related party transactions (including entrustment fee, service fee and handling fee) was RMB30.70 million, the amount of transaction fees related to agency related party transactions (including agency fee, service fee, handling fee and commissions) was RMB189.02 million and the amount of other daily related party transactions was RMB103.98 million.

Compliance with HKSE Listing Rules

The policy management agreement between CLIC and us, the asset management agreement between AMC and us, the insurance sales framework agreement between CLPCIC and us, the framework agreements between China Life Wealth and each of CLIC, CLPCIC, IHC, China Life Pension and China Life E-commerce, the framework agreement between Chongqing Trust and us and the framework agreement entered into by us and China Life Capital are only subject to reporting, announcement and annual review requirements under the HKSE Listing Rules and are exempt from independent shareholders’ approval requirements. In compliance with applicable HKSE Listing Rules requirements, we made announcements disclosing these transactions on October 26, 2017, December 19, 2017, December 20, 2018, August 22, 2019, December 19, 2019, March 25, 2020 and December 17, 2020, respectively. For the year ended December 31, 2020, the transaction under the policy management agreement between CLIC and us is subject to reporting, announcement and annual review requirements under the HKSE Listing Rules and is exempt from independent shareholders’ approval requirements. CLIC and us renewed the policy management agreement on December 31, 2020. For the year ending December 31, 2021, the transaction under the renewed policy management agreement is exempt from reporting, announcement, annual review and independent shareholders’ approval requirements under the HKSE Listing Rules.

The new asset management agreement entered into between IHC and us on December 31, 2018 is subject to reporting, announcement, annual review and independent shareholders’ approval requirements under the HKSE Listing Rules. We made an announcement disclosing this transaction on April 26, 2018 and obtained the approval of the shareholders’ general meeting of our company on June 6, 2018.

The framework agreements entered into by AMP with us, CLIC, CLPCIC and IHC, respectively, are subject to reporting, announcement, annual review and independent shareholders’ approval requirements under the HKSE Listing Rules. In compliance with applicable HKSE Listing Rules requirements, we made an announcement disclosing these transactions on August 22, 2019 and obtained the approval of the shareholders’ general meeting of our company on December 19, 2019.

The remaining related party transactions discussed above, other than the transactions with CGB, are exempt from reporting, announcement and independent shareholders’ approval requirements under the HKSE Listing Rules. The related party transactions with CGB are not regarded as connected transactions for us under the HKSE Listing Rules.

Confirmation of Independent Non-executive Directors:

Our independent non-executive directors have reviewed the above continuing connected transactions that were subject to reporting, announcement, annual review and/or independent shareholders’ approval requirements under the HKSE Listing Rules and confirmed that:

the transactions were entered into in the ordinary and usual course of our business;

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the transactions were conducted on normal commercial terms or more preferential terms;

the transactions were conducted in accordance with the agreements governing those transactions and on the terms that are fair and reasonable and in the interest of the shareholders; and

the amounts of the transactions had not exceeded the relevant annual caps as announced by us.

C. INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

ITEM 8. FINANCIAL INFORMATION.

A. CONSOLIDATED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION

Our audited consolidated financial statements are set forth beginning on page F-1.

Legal and Regulatory Proceedings

We are involved in litigation and arbitration proceedings involving our insurance operations on an ongoing basis. In addition, the CBIRC, as well as other PRC governmental agencies, including tax and audit bureaus and the PBOC, from time to time make inquiries and conduct examinations, audits or investigations concerning our compliance with PRC laws and regulations. For example, in July 2018, the PBOC imposed a fine of RMB700,000 on us for non-compliance with the anti-money laundering law and regulations during the period from July 1, 2015 to June 30, 2016. The non-compliance issues identified by the PBOC include failure to preserve clients’ identity information and transaction records and failure to submit reports on transactions of large payments and suspicious transactions to the PBOC. These litigation, arbitration and administrative proceedings have in the past resulted in damage awards, settlements or administrative sanctions, including fines, which have not been material to us. While we cannot predict the outcome of any pending or future litigation, arbitration, examination or investigation, we do not believe that any pending legal matter will have a material adverse effect on our business, financial condition or results of operations. However, we cannot assure you that any future litigation, arbitration or regulatory proceeding will not have an adverse outcome, which could have a material adverse effect on our operating results or cash flows.

We currently have control procedures in place to monitor our litigation, arbitration and regulatory exposure. We have established a systematic prevention system whereby our management at each corporate level is responsible for compliance with laws, regulations and internal codes of conduct within their individual territories or departments. Our branches at the provincial level are required to report material litigation, arbitration and regulatory matters to our corporate headquarters on a timely basis. We plan to continue to improve our control and compliance policies in the future.

We may penalize or punish our employees or exclusive agents who commit misconduct or fraud, breach the terms of their employment or agency agreements, exceed their authorization limits or fail to follow prescribed procedures in delivering insurance policies and premium payments, in each case having regard to the severity of the offense. Employees or exclusive agents are required to reimburse us for any losses suffered by us resulting from their misconduct or fraud. In serious cases, we may terminate their employment or agency agreements. We report criminal offenses to the PRC authorities and may also bring concurrent civil actions against employees or exclusive agents. We have experienced agent and employee misconduct that has resulted in litigation, arbitration and administrative actions against us and these agents and employees, and in some cases criminal proceedings and convictions against the agent or employee in question. None of these actions has resulted in material losses, damages, fines or other sanctions against us. We cannot assure you, however, that agent or employee misconduct will not lead to a material adverse effect on our business, results of operations or financial condition.

Policy on Dividend Distributions

Our board of directors passed a resolution on March 25, 2021 to propose for approval at the annual general meeting of the declaration of final dividends of RMB0.64 per share, totaling approximately RMB18,089 million (US$2,772 million), for the year ended December 31, 2020. The proposed dividends have not been provided in our consolidated financial statements for the year ended December 31, 2020.

The payment of any dividend by us must be approved by shareholders in a shareholders’ meeting. Our board of directors intends to make its recommendations regarding the declaration of cash dividends to the shareholders in general meeting. The decision to make a recommendation for the payment of any dividend and the amount of the dividend depends on, among other things:

•

our results of operations and cash flows;

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•

our financial position;

•

statutory solvency requirements as determined under CBIRC rules;

•

our shareholders’ interests;

•

general business conditions;

•

our future prospects;

•

statutory and regulatory restrictions on the payment of dividends by us; and

•

other factors that our board of directors deems relevant.

We will pay dividends out of our after-tax profits only after we have made the following allowances and allocations:

•

recovery of accumulated losses, if any;

•

allocations to the statutory common reserve fund equivalent to 10% of our after-tax profits, as determined under PRC GAAP;

•

allocations to the general risks reserve fund equivalent to 10% of our after-tax profits, as determined under PRC GAAP; and

•

allocations to a discretionary common reserve fund as approved by the shareholders in a shareholders’ meeting.

When the statutory common reserve fund reaches and is maintained at or above 50% of our registered capital, as determined under PRC GAAP, no further allocations to this fund will be required.

Payment of dividends by us is also regulated by the PRC insurance law. If we do not meet the minimum solvency margin required by the CBIRC, we may be prohibited from paying dividends. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Solvency requirements”.

We paid dividends of RMB0.24 per share in respect of 2016, RMB0.40 per share in respect of 2017, RMB0.16 per share in respect of 2018 and RMB0.73 per share in respect of 2019. Our board of directors has recommended the declaration of final dividends of RMB0.64 per share in respect of 2020. We expect to continue to pay dividends in line with our financial performance thereafter. We will declare dividends, if any, in Renminbi with respect to the H shares on a per share basis and will pay such dividends in Hong Kong dollars.

B. SIGNIFICANT CHANGES

As of the date of this annual report, there was no significant change since the date of the financial statements filed as part of this annual report that has or is reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

C. EMBEDDED VALUE

Background

China Life 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 one year’s sales represents an actuarially determined estimate of the economic value arising from new life insurance business issued in one year based on a particular set of assumptions about future experience.

China Life believes that reporting our embedded value and value of one year’s sales provides useful information to investors in two respects. First, the value of our 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 one 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 one 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 one year’s sales.

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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 one 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 China Life and CLIC, IHC, AMC, China Life Pension, CLPCIC, etc.

Definitions of Embedded Value and Value of One 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:

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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 one 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 one year’s sales in the 12 months immediately preceding the valuation date.

The value of in-force business and the value of one 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 one year’s sales were prepared by China Life 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

Economic assumptions: The calculations are based upon assumed corporate tax rate of 25% for all years. The investment return is assumed to be 5% per annum. 16% grading to 20% (remaining level thereafter) of the investment return is assumed to be exempt from income tax. The investment return and tax exempt assumptions are based on our strategic asset mix and expected future returns. The risk-adjusted discount rate used is 10% per annum.

Other operating assumptions such as mortality, morbidity, lapses and expenses are based on our recent operating experience and expected future outlook.

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Summary of Results

The embedded value as at December 31, 2020, the value of one year’s sales for the 12 months ended December 31, 2020, and the corresponding results as at December 31, 2019 are shown below:


Components of Embedded Value and Value of One Year’s Sales		RMB million
ITEM		December 31, 2020			December 31, 2019
A	Adjusted Net Worth		568,587			482,793
B	Value of In-Force Business before Cost of Required Capital		565,797			509,515
C	Cost of Required Capital		(62,244	)		(50,220	)
D	Value of In-Force Business after Cost of Required Capital (B + C)		503,553			459,295
E	Embedded Value (A + D)		1,072,140			942,087
F	Value of One Year’s Sales before Cost of Required Capital		64,354			63,745
G	Cost of Required Capital		(5,981	)		(5,047	)
H	Value of One Year’s Sales after Cost of Required Capital (F + G)		58,373			58,698
	Including: Value of One Year’s Sales of Individual Agent Business sector		57,669			56,972

Note 1: Numbers may not be additive due to rounding.

Note 2: The results of individual agent business sector for the year 2019 have been restated to allow for new sector definitions on a pro forma basis.

The new business margin of one year’s sales of individual agent business sector for the 12 months ended December 31, 2020 is shown below:


New Business Margin of One Year’s Sales of Individual Agent Business Sector
	December 31, 2020			December 31, 2019
By First Year Premium		47.9	%		49.4	%
By Annual Premium Equivalent		48.1	%		49.4	%

Note 1: First Year Premium is the written premium used for calculation of the value of one 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.

Note 2: The results of individual agent business sector for the year 2019 have been restated to allow for new sector definitions on a pro forma basis.

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 2020		RMB million
ITEM
A	Embedded Value at the Start of Year		942,087
B	Expected Return on Embedded Value		75,991
C	Value of New Business in the Period		58,373
D	Operating Experience Variance		567
E	Investment Experience Variance		24,024
F	Methodology, Model and Assumption Changes		950
G	Market Value and Other Adjustments		(1,293	)
H	Exchange Gains or Losses		(518	)
I	Shareholder Dividend Distribution and Capital Changes		(28,626	)
J	Others		585
K	Embedded Value as at December 31, 2020 (sum A through J)		1,072,140

Notes: Items B through J are explained below:

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

Value of one year’s sales for the 12 months ended December 31, 2020.

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

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Compares actual with expected investment returns during 2020.

Reflects the effects of appraisal methodology and model enhancement, and assumption changes.

Change in the market value adjustment from the beginning of year 2020 to December 31, 2020 and other adjustments.

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

Reflects dividends distributed to shareholders during 2020 and redemption of other equity instruments.

Other miscellaneous items.

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 One Year’s Sales after Cost of Required Capital
Base case scenario			503,553		58,373
1.	Risk discount rate +50bps		480,522		55,630
2.	Risk discount rate –50bps		528,297		61,344
3.	Investment return +50bps		598,225		68,247
4.	Investment return –50bps		409,278		48,499
5.	10% increase in expenses		497,088		54,817
6.	10% decrease in expenses		510,018		61,930
7.	10% increase in mortality rate for non-annuity products and 10% decrease in mortality rate for annuity products		499,989		57,440
8.	10% decrease in mortality rate for non-annuity products and 10% increase in mortality rate for annuity products		507,089		59,310
9.	10% increase in lapse rates		502,802		57,061
10.	10% decrease in lapse rates		504,252		59,735
11.	10% increase in morbidity rates		496,380		56,121
12.	10% decrease in morbidity rates		510,867		60,631
13.	Using 2019 EV appraisal assumptions		501,482		59,106
14.	Allowing for diversification in calculation of VIF		545,333		—

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 December 31, 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 one year’s sales as at December 31, 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 one year’s sales as at December 31, 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.

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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 Stanley Lu

March 25, 2021

ITEM 9. THE OFFER AND LISTING.

A. OFFER AND LISTING DETAILS

In connection with our initial public offering, our American depositary shares, or ADSs, each representing 40 H shares, were listed and commenced trading on New York Stock Exchange on December 17, 2003 under the symbol “LFC”. Our H shares were listed and commenced trading on the Hong Kong Stock Exchange on December 18, 2003 under the stock code “2628”. Prior to these listings, there was no public market for our equity securities. The New York Stock Exchange and the Hong Kong Stock Exchange are the principal trading markets for our ADSs and H shares, which are not listed on any other exchanges in or outside the United States.

On December 29, 2006, the ratio of ADSs to H shares was reduced from 40 H shares to 15 H shares. On May 26, 2015, the ratio of ADSs to H shares was further reduced from 15 H shares to 5 H shares.

Our A shares were listed and commenced trading on the Shanghai Stock Exchange on January 9, 2007 under the stock code “601628”.

B. PLAN OF DISTRIBUTION

Not Applicable.

C. MARKETS

See “Offer and Listing Details” above.

D. SELLING SHAREHOLDERS

Not Applicable.

E. DILUTION

Not Applicable.

F. EXPENSES OF THE ISSUE

Not Applicable.

ITEM 10. ADDITIONAL INFORMATION.

A. SHARE CAPITAL

Not applicable.

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

The following is a brief summary of certain provisions of our current articles of association, the PRC company law and certain other laws and regulations applicable to us. Such summary is not purported to be complete. For further information, you should refer to the full text of our articles of association and to the texts of applicable laws and regulations.

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Objects and Purposes

We are organized under the PRC company law as a joint stock company. We are registered with the Beijing Administration for Market Regulation and our unified social credit registration number is 9110000071092841XX.

Our business scope, set forth in Article 12 of our articles of association, is to engage in life, accident and health insurance businesses; reinsurance business relating to the foregoing; fund investment businesses authorized by laws, regulations or the State Council; agency business, consulting business and provision of services, in each case relating to life insurance; securities investment fund sales business; and other business as approved by the insurance regulatory authority of the PRC.

Sources of Shareholders’ Rights

The primary sources of shareholders’ rights are the PRC company law, our articles of association, Special Rules applicable to overseas listed joint stock companies promulgated by the State Council, or Special Rules, relevant CSRC regulations, the Shanghai Stock Exchange Listing Rules, and the Hong Kong Stock Exchange Listing Rules that, among other things, impose certain standards of conduct, fairness and disclosure on us, our directors and CLIC, our controlling shareholder. The PRC company law was enacted in December 1993 and serves as the primary body of law regulating corporate actions of companies organized in the PRC and its directors and shareholders.

Our articles of association have incorporated the provisions set forth in the Mandatory Provisions for the Articles of Association of Companies Listed Overseas, or the Mandatory Provisions, adopted in 1994 pursuant to the requirements of the CSRC and the provisions set forth in the Guidelines on the Articles of Association of Listed Companies, or the Guidelines, as amended in 2019 by the CSRC. Any amendment to the relevant mandatory provisions will only become effective after approval by the relevant governmental departments authorized by the State Council and the CSRC. The Hong Kong Stock Exchange Listing Rules require a number of provisions in addition to the Mandatory Provisions to be included in our articles of association.

According to the HKSE Listing Rules, we may not amend certain provisions of our articles of association that have been mandated by the Hong Kong Stock Exchange. These provisions include, among others:

•

varying the rights of existing classes of shares;

•

voting rights;

•

our power to purchase our own shares;

•

rights of minority shareholders; and

•

liquidation procedures.

In addition, upon the listing of the H shares and for so long as the H shares are listed on the Hong Kong Stock Exchange, we are subject to the relevant ordinances, rules and regulations applicable to companies listed on the Hong Kong Stock Exchange, including, among other things, the Hong Kong Stock Exchange Listing Rules, the Securities and Futures Ordinance and the Hong Kong Codes on Takeovers and Mergers and Share Repurchases.

Unless otherwise specified, all rights, obligations and protections discussed below are derived from our articles of association and the PRC company law.

Enforceability of Shareholders’ Rights

Enforceability of our shareholders’ rights may be limited.

In June 1999, an arrangement was made between the People’s Courts of the PRC and the courts of Hong Kong for mutual enforcement of arbitration rewards rendered in the PRC and Hong Kong according to their respective laws. This arrangement was approved by the Supreme Court of the PRC and the Hong Kong Legislative Council and became effective on February 1, 2000.

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There has not been any published report of judicial enforcement in the PRC by H shareholders of their rights under charter documents of PRC joint stock companies or the PRC company law or in the application or interpretation of the PRC or Hong Kong regulatory provisions applicable to PRC joint stock companies.

The PRC company law allows shareholders to sue, on behalf of the corporation, against persons, including corporate officers, directors, who have allegedly wronged the corporation, where the corporation itself has failed to enforce such claim against such persons directly. Class action lawsuits based on violations of securities laws are generally not available. In accordance with the amended PRC Securities Law which came into effect in March 2020, in civil lawsuits based on violations of securities law including making false statements, if the subject matter of the lawsuits is the same and there are a sufficient number of plaintiffs, a representative can be selected to sue on behalf of them.

We are subject to the Hong Kong Exchange Listing Rules, the Hong Kong Securities and Futures Ordinance, or Securities and Futures Ordinance, and the Hong Kong Codes on Takeovers and Mergers and Share Repurchases. However, holders of H shares will not be able to bring actions on the basis of violations of the Hong Kong Stock Exchange Listing Rules and must instead rely on the Hong Kong Stock Exchange to enforce its rules. The Hong Kong Codes on Takeovers and Mergers and Share Repurchases do not have the force of law and are only standards of commercial conduct considered acceptable for takeover and merger transactions and share repurchases in Hong Kong as established by the Securities and Futures Commission of Hong Kong and the securities and futures industry in Hong Kong. The Securities and Futures Ordinance establishes various obligations in relation to disclosure of shareholders’ interests in Hong Kong listed companies, the violation of which is subject to prosecution by the Securities and Futures Commission of Hong Kong.

See “Item 3. Key Information—Risk Factors—Risks Relating to the People’s Republic of China—The laws in China differ from the laws in the United States and may afford less protection to our minority shareholders” and “Item 3. Key Information—Risk Factors—Risks Relating to the People’s Republic of China—You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in the PRC based on U.S. or other foreign laws against us, our management and some of the experts named in the annual report”.

Dividends

Our board of directors may propose dividend distributions. A distribution of dividends for any fiscal year is subject to shareholders’ approval. Dividends may be distributed in the form of cash or shares or a combination of both. The H shares rank equally with A shares with regard to dividend rights. A distribution of shares must be approved by special resolution of the shareholders’ meeting.

We may only distribute dividends after allowance has been made for:

•

recovery of accumulated losses, if any;

•

allocations to the statutory common reserve fund equivalent to 10% of our after-tax profits;

•

allocations to the general risks reserve fund equivalent to 10% of our after-tax profits, as determined under PRC GAAP; and

•

allocations to a discretionary common reserve fund as approved by the shareholders in a shareholders’ meeting.

Under Chinese law, dividends may be paid only out of distributable profits. Any distributable profits that are not distributed in a given year are retained and available for distribution in subsequent years. However, we will ordinarily not pay any dividends in a year when we do not have any distributable profits.

Payment of dividends by us is also regulated by the PRC insurance law. If we do not meet the solvency margin required by the CBIRC, we will be prohibited from paying dividends. See “Item 4. Information on the Company—Business Overview—Regulation and Related Matters—Insurance Company Regulation—Solvency requirements”.

Our articles of association require us to appoint, on behalf of the holders of H shares, a receiving agent that is registered as a trust corporation under the Trustee Ordinance of Hong Kong to receive dividends declared by us in respect of the H shares on behalf of such shareholders. Our articles of association require that cash dividends in respect of H shares be declared in Renminbi and paid by us in Hong Kong dollars. The depositary will convert these proceeds into U.S. dollars and will remit the converted proceeds to holders of our ADSs.

Subject to the requirements under applicable PRC laws and rules of the securities regulatory authorities of the PRC, Hong Kong and United States, we may exercise the power to forfeit unclaimed dividends, provided that such power cannot be exercised until after the expiration of applicable limitation period.

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We anticipate that our controlling shareholder, CLIC, may incur future operating losses arising in part from the runoff of policies retained by it in connection with the restructuring. Dividends received from us may become one of CLIC’s principal means of funding these losses. Although we believe that the reserves held by CLIC and other financial resources available to it will fund substantially all of any future operating shortfalls arising out of these policies, which should reduce CLIC’s reliance on dividends from us, subject to the relevant provisions of the PRC company law and our articles of association as described above and in “Item 8. Financial Information—Consolidated Financial Statements and Other Financial Information—Policy on Dividend Distributions”, CLIC may seek to increase the amount of dividends we pay in order to satisfy its cash flow requirements. See “Item 3. Key Information—Risk Factors—Risks Relating to the Restructuring”.

Dividend payments may be subject to Chinese withholding tax. See “—Taxation—The People’s Republic of China—Taxation of Dividends”.

Voting Rights and Shareholders’ Meetings

Our board of directors will convene a shareholders’ annual general meeting once every year within six months from the end of the preceding fiscal year. Our board of directors must convene an interim meeting within two months of the occurrence of any of the following events:

•

where the number of directors is less than the number stipulated in the PRC company law or two-thirds of the number specified in our articles of association;

•

where our unrecovered losses reach one-third of the total amount of our share capital;

•

where shareholders, individually or jointly, holding 10% or more of our issued and outstanding voting shares so request in writing;

•

whenever our board of directors deems necessary, or more than half of directors (including at least two independent directors) or our board of supervisors so requests; or

•

any other event as maybe provided by applicable laws, rules, regulations or our articles of association.

All shareholders’ meetings must be convened by our board of directors by written notice given to shareholders no less than 45 days before the meeting. Shareholders holding at least one-half of our total voting shares will constitute a quorum for a shareholders’ meeting. If a quorum is not reached, we are required to notify our shareholders within five days by public announcement of the agenda, the date and the venue of the adjourned meeting. After the notice, we may conduct the shareholders’ meeting. The accidental omission by us to give notice of a meeting to, or the non-receipt of notice of a meeting by, a shareholder will not invalidate the proceedings at that shareholders’ meeting.

Shareholders at meetings have the power, among other matters, to approve or reject our profit distribution plans, annual budget, financial statements, increases or decreases in share capital, issuances of debentures, mergers, liquidation, any equity-based incentive plan and any amendment to our articles of association. In addition, the rights of a class of shareholders may not be modified or abrogated, unless approved by a special resolution of shareholders at a general shareholders’ meeting and by a special resolution of shareholders of that class of shares at a separate meeting. Our articles of association enumerate various amendments which would be deemed to be a modification or abrogation of the rights of a class of shareholders, including, among others, increasing or decreasing the number of shares of a class disproportionate to increases or decreases of other classes of shares, removing or reducing rights to receive dividends in a particular currency or creating shares with voting or equity rights superior to those of shares of that class. There are no restrictions under PRC law or our articles of association on the ability of investors that are not Chinese residents to hold H shares and exercise voting rights, except that holders of H shares are unable to vote online and the prior approval of the CBIRC is required in respect of any acquisition which results in the acquirer holding more than 5% of the outstanding share capital of our company and the other restrictions set out under “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Restriction of ownership in joint stock insurance companies”.

Each of our ordinary shares, whether it be an A share or an H share, is entitled to one vote on all matters submitted for vote at all shareholders’ meetings, except for meetings of a special class of shareholders where only holders of shares of the affected class are entitled to vote on the basis of one vote per share of the affected class.

Shareholders are entitled to attend and vote at meetings either in person or by proxy. Proxies must be in writing and deposited at our legal address or such other place as is specified in the meeting notice, no less than 24 hours before the time for holding the meeting at which the proxy proposes to vote or the time appointed for the passing of the relevant resolution.

Resolutions on any of the following matters must be approved by more than two-thirds of the voting rights held by shareholders who are present in person or by proxy:

•

an increase or decrease in our share capital or the issuance of shares, warrants, debentures and other similar securities;

•

our division, merger, dissolution or liquidation (shareholders who object to a proposed merger are entitled to demand that either we or the shareholders who approved the merger purchase their shares at a fair price);

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•

amendments to our articles of association;

•

purchase or sale within any single year of any material assets exceeding 30% of our latest audited total assets;

•

any equity-based incentive plan;

•

removal of any independent director; and

•

any other matters as provided under applicable laws or regulations or determined by a majority of shareholders at a general meeting to have a material impact on us and should be approved by two-thirds of the voting rights.

An amendment of shareholders’ rights of any class of shares must be approved by more than two-thirds of the voting rights held by holders of shares in the affected class who are present in person or by proxy.

All other actions taken by the shareholders will be approved by a majority of the voting rights held by shareholders who are present in person or by proxy at the shareholders’ meeting.

Any shareholder resolution that is in violation of any laws or regulations of China or the articles of association will be null and void.

Liquidation Rights

We are organized as a joint stock company with limited liability of indefinite duration, and we must submit our annual report to the SAMR. In the event of our liquidation, the H shares will rank equally with the A shares, and payment of debts out of our remaining assets is required to be made in the order of priority prescribed by applicable laws and regulations or, if no such standards exist, in accordance with such procedures as the liquidation committee that has been appointed either by us or the People’s Courts of China may consider to be fair and reasonable. After payment of debts, we are required to distribute the remaining property to shareholders in proportion to the number of shares they hold.

Information Rights

Our shareholders may, subject to reasonable fees and costs, obtain a copy of our articles of association and inspect and copy all parts of our register of shareholders, personal particulars of the directors, supervisors, president and other senior officers, reports on the state of our share capital, reports showing the aggregate par value, highest and lowest price paid in respect of each class of shares repurchased by us since the end of the last accounting year and the aggregate amount paid by us for this purpose, minutes of shareholders’ general meetings, and counterfoils of company debt securities, resolutions of board meetings, resolutions of board of supervisors.

Our fiscal year is the calendar year ending December 31. We must send to holders of H shares, no more than four months after the end of the relevant financial year, our annual report (including our annual accounts, together with a copy of the auditors’ report thereon). Further, we must publish a preliminary results announcement no later than three months after the end of the relevant fiscal year. The results announcement in respect of the relevant financial year is required to be published on the HKSE’s website no later than the time that is 30 minutes before the earlier of the commencement of the morning trading session or any pre-opening session on the next business day after approval by or on behalf of our board of directors. These and any interim financial statements must be prepared in accordance with HKFRS, IFRS or PRC GAAP in the case of a PRC issuer that has adopted PRC GAAP for the preparation of its annual financial statements. The annual financial statements must be approved by a majority of our shareholders who are present in person or by proxy at the annual general meeting.

The HKSE Listing Rules also require us to send to holders of H shares an interim report no later than three months after the end of the first six months of each fiscal year. Further, we must publish a preliminary results announcement no later than two months after the end of the six-month period. The results announcement in respect of the relevant six-month period is required to be published on the HKSE’s website no later than the time that is 30 minutes before the earlier of the commencement of the morning trading session or any pre-opening session on the next business day after approval by or on behalf of our board of directors.

According to the HKSE Listing Rules, where in the view of the HKSE there is or there is likely to be a false market in our securities, we must, as soon as reasonably practicable after consultation with the HKSE, announce the information necessary to avoid a false market in our securities. In addition, according to the provisions of inside information under the Securities and Futures Ordinance of Hong Kong, we must, as soon as reasonably practicable after any inside information has come to our knowledge, disclose the information to the public. Inside information, in relation to a listed corporation, means specific information that—

•

is about the corporation, a shareholder or officer of the corporation, or the listed securities of the corporation or their derivatives; and

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•

is not generally known to the persons who are accustomed or would be likely to deal in the listed securities of the corporation but would if generally known to them be likely to materially affect the price of the listed securities.

Depending on the size of the transaction, we may also be required to disclose to the public and our shareholders details of various acquisitions or disposals of assets and other transactions (including transactions with controlling shareholders).

Restrictions on Transferability and the Share Register

Unless otherwise permitted by relevant PRC rules or regulations or approved by relevant PRC authorities, H shares may be traded only among investors who are legal or natural persons resident outside of China, and may not be sold to investors resident within the PRC. There are no restrictions under PRC law or our articles of association on the ability of investors who are not PRC residents to hold H shares. However, under relevant PRC law, a legal person resident outside of China is only allowed to hold not more than 20% of our issued share capital and legal persons resident outside of China are only allowed to hold in aggregate not more than 25% of our issued share capital, unless otherwise approved by competent authorities.

We are required to keep a register of our shareholders comprised of various parts, including one part which is to be maintained in Hong Kong in relation to holders of H shares. Shareholders have the right to inspect and, for a reasonable charge, to copy the share register. No transfers of ordinary shares will be recorded in our share register within thirty days prior to the date of a shareholders’ general meeting or within five days prior to the record date established for the purpose of distributing a dividend.

We have appointed Computershare Hong Kong Investor Services Limited to act as the registrar of our H shares. This registrar maintains our register of holders of H shares and enters transfers of H shares in such register upon the presentation of the documents described above.

Increases in Share Capital

Under our articles of association, issuance of new securities, including ordinary shares, securities convertible into ordinary shares, options, warrants or similar rights to subscribe for any ordinary shares or convertible securities, must be approved by at least two-thirds of the shareholders who attend the shareholders meeting in person or by proxy. In addition, the issuance of A shares or H shares must be approved by two-thirds of the class of domestic shares or H shares, as the case may be, unless the number of shares to be issued shall not exceed 20% of the number of shares of the same class then outstanding in any 12-month period.

A special resolution was passed at the shareholders’ annual general meeting held on June 29, 2020 to authorize our board of directors to issue additional shares, and amend the articles of association accordingly, in a nominal amount of no more than 20% of the aggregate nominal amount of our H shares in issue as at the date of such resolution, by the conclusion of next shareholders’ annual general meeting, or the expiration of the 12-month period following the passing of this resolution, or the date on which the resolution is otherwise revised or revoked by a special resolution of our shareholders, whichever is the earliest.

Shareholders are not liable to make any further contribution to the share capital other than according to the terms that were agreed upon by the subscriber of the relevant shares at the time of subscription. New issues of shares must also be approved by relevant Chinese authorities.

Decreases in Share Capital and Repurchases

We may reduce our registered share capital only upon obtaining the approval of at least two-thirds of the shareholders who attend the shareholders meeting in person or by proxy and, in certain circumstances, of relevant Chinese authorities. The number of H shares that may be repurchased is subject to the Hong Kong Codes on Takeovers and Mergers and Share Repurchases.

Restrictions on Ownership

Equity interests held by a single shareholder, including its related parties and persons acting in concert, must not exceed one-third of the registered capital of a single insurance company. An exception to the one-third cap applies to insurance companies establishing or investing in other insurance companies for the purposes of innovation and specialization of their business, or consolidating their operations under a single group management. See “Item 4. Information on the Company—Business Overview—Regulation and Related Matters—Insurance Company Regulation—Restriction of ownership in joint stock insurance companies”.

Restrictions on Large or Controlling Shareholders

Our articles of association define a controlling shareholder as any person who acting alone or in concert with others:

•

is in a position to elect more than one-half of the board of directors;

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•

has the power to exercise, or to control the exercise of, 30% or more of our voting rights;

•

holds 30% or more of our issued and outstanding shares; or

•

has de facto control of us in any other way.

As of the date of this annual report, CLIC, a wholly state-owned enterprise, is our only controlling shareholder.

Our articles of association provide that, in addition to any obligation imposed by laws and administrative regulations or required by the Hong Kong Stock Exchange Listing Rules, a controlling shareholder shall not exercise its voting rights in a manner prejudicial to the interests of other shareholders:

•

to relieve a director or supervisor from his or her duty to act honestly in our best interests;

•

to approve the appropriation by a director or supervisor, for his or her own benefit or for the benefit of any other person, of our assets in any way, including without limitation opportunities which may be advantageous to us; or

•

to approve the appropriation by a director or supervisor, for his or her own benefit or for the benefit of another person, of the individual rights of other shareholders, including without limitation rights to distributions and voting rights (except in accordance with a restructuring of our company which has been approved by the shareholders at a general meeting in accordance with our articles of association).

Our articles of association also provide that a controlling shareholder or an actual controlling person shall not exploit its affiliated relation in a manner prejudicial to the interest of our company, and shall be liable for any losses suffered by us as a result thereof. The controlling shareholder or actual controlling person shall have fiduciary duties to both our company and our public shareholders. The controlling shareholder shall exercise its rights as a capital contributor of our company in strict compliance with the law. The controlling shareholder shall not cause any damage to the lawful rights and interest of our company and our public shareholders through, among others, any connected transactions, profit distribution, asset restructuring, external investment, fund appropriation and loan guarantee, or impair the interest of our company and our public shareholders through its controlling position.

Board of Directors

Our non-employee directors are elected by our shareholders at shareholders’ general meetings, and employee directors are elected by our employees or other democratic means at the employee representative conference. Directors are elected for a term of three years and may serve consecutive terms if re-elected.

Article 23 of Special Regulations on the Overseas Offering and Listing of Shares by Joint Stock Limited Companies provides that directors, supervisors, and senior officers of a company owe duties of honesty, care and diligence to their company.

Our articles of association provide that, in exercising their duties and powers, our directors, supervisors and senior officers will act with the care, diligence and skills that are expected of a reasonable person under similar circumstances, observe fiduciary principles and not place themselves in a situation where their interests conflict with the duties they are charged with performing. In addition to these fiduciary duties to our company, each director, supervisor and officer is obligated to each shareholder:

•

to act honestly in our company’s best interests;

•

not to exploit corporate assets for personal gains; and

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not to expropriate the rights of our shareholders.

If directors, supervisors or officers are found to have misappropriated our company’s assets or misused their position for personal gain, the PRC company law provides that any misappropriated or misused property be returned and any illegal proceeds received by such director, supervisor or officer be confiscated, and allows us to impose punishment on them. In serious cases, criminal liability may also be imposed. According to our articles of association, our shareholders may bring a derivative suit against any director, supervisor or officer who has breached his fiduciary duties. Most disputes between H shareholders and directors, supervisors and officers are required to be resolved by final and binding arbitration.

Moreover, our articles of association provide that our directors, supervisors and senior officers must not enter into transactions or contracts with us or agree to make corporate loans to any persons or provide guarantees for loans of any shareholder or any other person with corporate assets. In particular, our directors, supervisors and senior officers have obligations to disclose to the board of directors any direct or indirect material interest they may have in any contracts or transactions with us. They may not vote on any contracts, transactions or arrangements in which they have any material interest. Further, we may not make loans or provide guarantees to directors, supervisors or senior officers, unless such loans or guarantees are approved at a shareholders’ meeting or made in the ordinary course of business and to the extent permitted by applicable laws. All decisions relating to the compensation of directors are made at shareholders’ meetings.

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There are no provisions under our articles of association or PRC law which relate to:

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the retirement or non-retirement of directors under any age limit requirement;

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directors’ borrowing power; or

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number of shares required for directors’ qualification.

Subject to all relevant laws and administrative regulations, the shareholders may remove any director before the expiration of his or her term of office by a majority vote of the shareholders present in person or by proxy at shareholders’ general meetings. A director, supervisor, president, vice president or other senior officer may be relieved of liability for a specific breach of his or her duties by the consent of shareholders so long as specified conditions are met.

Board of Supervisors

Our board of supervisors consists of four supervisors. At least one-third of our board of supervisors must be employee representatives elected by our employees. The remaining members must be elected by our shareholders in a general meeting. One member of our board of supervisors is designated as the chairman. Members of the board of supervisors may not serve as director, president, vice president or other senior management of our company. The term of office for our supervisors is three years, which is renewable upon re-election.

The primary duty of the board of supervisors is to monitor our financial matters and management. The board of supervisors’ powers are generally limited to carrying out investigations and reporting to shareholders, the China Securities Regulatory Commission and other relevant governmental authorities having jurisdiction over our affairs and to convening shareholders’ interim meetings. Reasonable expenses incurred by the board of supervisors in carrying out its duties will be paid by us.

Our supervisors owe fiduciary duties to our company and our shareholders. Please see the discussion of the duties and the nature of recourse our shareholders may have against supervisors in breach of these duties in the subsection entitled “—Board of Directors”.

The board of supervisors is accountable, and will report, to the shareholders at the shareholders’ general meetings.

Certain Differences Between PRC Company Law and Delaware Corporate Law

The PRC company law and other laws applicable to us differ in a number of respects from laws generally applicable to United States corporations and their shareholders. The description set forth below includes a summary of certain provisions of the PRC company law, Special Rules, Mandatory Provisions and the Guidelines applicable to companies listed both in the PRC and overseas, such as us, which differ from provisions of the corporate law of the State of Delaware.

General

We are a PRC joint stock company, which is a corporate entity organized under the PRC company law. Under the PRC company law, the registered capital of a joint stock company is divided into shares of equal par value. These shares are commonly called domestic ordinary shares. Each share of a joint stock company ranks equally with all other shares in its class as to voting rights (except for specified class voting rights) and rights to dividends and other distributions. Upon receiving approval from the relevant authorities, a joint stock company may offer its shares for sale to the public and seek to be listed on a stock exchange. The State Council may formulate separate regulations for the issuance of other classes of shares, including H shares. All of our issued shares are fully paid and nonassessable. Holders of H shares may transfer their shares without the approval of other shareholders. Among other things, a joint stock company must have (1) a board of directors of not fewer than five and not more than 19 members, and (2) a board of supervisors of not fewer than three members.

The shareholders’ meeting of a joint stock company is the highest authority of the company and exercises the powers of the company with respect to significant matters, subject to applicable law and the articles of association of the company. The business of a joint stock company is under the overall management of a board of directors, subject to the PRC company law, other applicable laws and regulations (which in our case include the PRC insurance law and regulations), the company’s articles of association and duly adopted resolutions of its shareholders. The day-to-day operations of a joint stock company are under the direction of its general manager or president, subject to applicable laws and regulations, the company’s articles of association and duly adopted resolutions of the directors and shareholders. In addition, the PRC company law provides for the establishment of a board of supervisors for each joint stock company. The supervisors perform and exercise the functions and powers described below, including examination of the joint stock company’s affairs and monitoring the actions of the directors and officers of the company. The directors, supervisors and officers are not required to hold any qualifying shares in the joint stock company.

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A joint stock company may be liquidated involuntarily due to insolvency or voluntarily in accordance with the terms of its articles of association or duly adopted shareholders’ resolutions. The property of a joint stock company remaining after full payment of its liquidation expenses, wages, labor insurance premiums of its employees and statutory compensations, outstanding taxes and debts, is distributed in proportion to the holdings of its shareholders.

Meetings of shareholders

Under PRC law, shareholders are given the power to approve specified matters. See “—Voting Rights and Shareholders’ Meetings”. In addition, the Mandatory Provisions provide that at shareholders’ meetings shareholders are entitled to consider any proposals made by shareholders holding in the aggregate at least 3% of voting power over the company’s shares. These proposals must fall within the scope of powers of the shareholder’s meeting, have a clear agenda and specific matters and comply with laws, administrative regulations and articles of association of the company.

Under Delaware law, the business and affairs of a Delaware corporation are, in general, managed by or under the direction of its board of directors. Only certain fundamental matters regarding the corporation are reserved by statute to be exercised by the shareholders. These matters include, in general, election or removal of directors, retention or dismissal of the corporation’s independent auditors, mergers or other business combinations involving the corporation, amendment of the corporation’s certificate of incorporation and liquidation or dissolution of the corporation.

Shareholders’ approval by written consent

PRC law does not provide shareholders of overseas listed joint stock companies with rights to approve corporate matters by written consent. Under Delaware law, unless otherwise provided in the certificate of incorporation, any action which is required or permitted to be taken at any shareholders’ meeting may be taken without a meeting, subject to various conditions.

Amendments of articles of association

Under PRC law, an amendment of the articles of association must be approved by an affirmative vote of two-thirds of shareholders attending a shareholders’ meeting. Amendments with respect to the Mandatory Provisions only become effective after approval by the relevant governmental department authorized by the State Council and the China Securities Regulatory Commission.

Under Delaware law, with certain exceptions, shareholder approvals must be obtained for any amendment to the certificate of incorporation. Board approvals are also required for any amendment to the certificate of incorporation, but no governmental approval is generally required.

Powers and responsibilities of directors

Under PRC law, the board of directors is responsible for specified actions, including the following functions and powers of a joint stock company:

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convening shareholders’ meetings and reporting its work to shareholders at these meetings;

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implementing shareholders’ resolutions;

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determining the company’s business plans and investment proposals;

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formulating the company’s annual financial budgets and final accounts;

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formulating the company’s profit distribution plans and loss recovery plans;

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formulating proposals for the increase or decrease in the company’s registered capital and the issue of debentures;

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formulating major acquisition and disposal plans and plans for the merger, division or dissolution of the company;

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to the extent authorized by the shareholders’ meeting, deciding on such matters as external investments, purchase or sale of assets, assets pledge and connected transactions of the company;

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deciding on the company’s internal management structure and formulating its basic management system; and

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appointing or removing the company’s principal executive officers; appointing and removing other senior officers based on the recommendation of the principal executive officer and deciding on the remuneration of the senior officers.

In addition, the Mandatory Provisions provide that the board has the authority to formulate any proposal to amend the articles of association and to exercise any other power conferred by a decision of the shareholders’ meeting.

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Under Delaware law, the business and affairs of a Delaware corporation are managed by or under the direction of its board of directors. Their powers include fixing the remuneration of directors, except as otherwise provided by statute or in the certificate of incorporation or by-laws of the corporation.

Powers and responsibilities of supervisors

Under PRC law, a PRC joint stock company must have a board of supervisors consisting of shareholder representatives and one or more employee representatives. Supervisors attend board meetings as non-voting observers. Directors, officers and company personnel in charge of financial matters may not serve as supervisors. The supervisors perform and exercise the following functions and powers:

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examining the company’s financial affairs;

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monitoring compliance with laws, regulations, the articles of association of the company and the shareholders resolutions by the directors and officers of the company; and suggesting removing the directors and officers who violate these laws and regulations;

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requiring corrective action from directors and officers whose actions are contrary to the interests of the company;

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examining the financial information, including financial statements, operation reports and plans for profit distribution, to be submitted by the board of directors to the shareholders’ meetings; and authorizing, in the company’s name, public certified accountants or licensed auditors to assist in the re-examination of such information, should any doubt arise in respect thereof;

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proposing the holding of extraordinary shareholders’ meetings;

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proposing new items to be inserted in the agenda of the shareholders’ meeting;

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bringing lawsuits against directors or members of senior management, if they violate laws, regulations or articles of association of the company; and

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exercising and performing other powers and functions provided for in the company’s articles of association.

In addition, the Mandatory Provisions provide that supervisors of overseas listed joint stock companies are entitled to retain auditors in the name of the company to examine any financial or business reports or profit distribution proposals to be submitted by the directors to a meeting of the shareholders which the supervisors consider questionable, and negotiate or take legal action against any director or the directors in the name of the company. The fees and expenses of attorneys and other professionals incurred by the supervisors in connection with the discharge of their duties are to be paid by the company.

Delaware law makes no provision for a comparable corporate institution.

Duties of directors, supervisors and officers

Under PRC law, directors, supervisors and officers of a joint stock company are required to comply with relevant laws and regulations and the company’s articles of association. A director, supervisor or officer who contravenes any law, regulation or the company’s articles of association in the performance of his duties shall be personally liable to the company for any loss incurred by the company. Directors, supervisors and officers are required to carry out their duties honestly and diligently, and protect the interests of the company. They are also under a duty of confidentiality to the company and prohibited from divulging confidential information concerning the company, except as permitted by relevant laws and regulations or by a decision of a shareholders’ meeting. They may not use their position and authority in the company to seek personal gain. Directors and officers may not directly or indirectly engage in the same business as the company or in any other business detrimental to the interests of the company, and they are required to forfeit any profits from these activities to the company.

Under Delaware law, the business and affairs of a corporation are managed by or under the direction of its board of directors. In exercising their powers, directors are charged with a fiduciary duty of care to protect the interests of the corporation and a fiduciary duty of loyalty to act in the best interests of its shareholders.

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Limitations on transactions with interested directors, supervisors and officers

Under PRC law, directors and officers of a joint stock company may not enter into any contracts or transactions with the company unless permitted by the articles of association or approved by the shareholders. A company may not provide any guarantees to shareholders or any de facto control person of the company unless such guarantees are approved by a majority of shareholders present at the shareholders’ meeting, excluding the shareholder who will be provided such guarantees. Under the Mandatory Provisions, a director, supervisor or officer is required to disclose to the board any transaction with the company in which he has a direct or indirect interest or in which there is a material conflict of interest between the company and himself. A director is not entitled to vote or be counted for quorum purposes in any board decision on any such transaction. A company may set aside any interested transaction which did not comply with these requirements, unless the other party to such transaction was honestly unaware of the breach of obligations by the interested director, supervisor or officer. A company may not loan or provide any guarantees to directors, supervisors or officers (including persons related to them), except for the loans made in accordance with employment contracts approved by the shareholders, or unless the company’s business scope allows for the provision of loans and guarantees and such loans or guarantees are made under regular commercial terms.

Under Delaware law, an interested transaction is not voidable if (1) the material facts as to the interested director’s relationship or interests are disclosed or are known to the board of directors and the board in good faith authorizes the transaction by the affirmative vote of a majority of the disinterested directors, (2) such material facts are disclosed or are known to the shareholders entitled to vote on such transaction and the transaction is specifically approved in good faith by vote of the majority of shares entitled to vote thereon or (3) the transaction is fair as to the corporation as of the time it is authorized, approved or ratified. Under Delaware law, the interested director could be held liable for a transaction in which such a director derived an improper personal benefit.

Election and removal of directors

Under PRC law, the term of office of directors of a joint stock company must be specified in the articles of association, but may not exceed three years. Directors may be re-elected. No director may be removed from office without cause by shareholders prior to the expiration of the director’s term. PRC law does not contemplate a classified board of directors.

Under Delaware law, directors of a Delaware corporation can be removed from office with or without cause by the holders of a majority of shares then entitled to vote at an election of directors, provided that except where the certificate of incorporation of the Delaware corporation otherwise provides, a member of a classified board may be removed by shareholders only for cause, and in a corporation with cumulative voting, if less than all of the directors are removed, no director may be removed if the votes cast against the director’s removal is sufficient to elect the director if cumulatively voted at an election of directors. The Court of Chancery may remove a director who has been convicted of a felony or found by a court to have committed a breach of the duty of loyalty in connection with his or her duties to the corporation following application by the corporation or derivatively in the right of the corporation by any shareholder. The court may order the removal only if it determines that the director did not act in good faith in performing the acts resulting in the prior conviction or judgment and that removal is necessary to avoid irreparable harm to the corporation.

Dividend payments

Under PRC law, proposals for distribution of profits are formulated by the board of directors and submitted for shareholder approval at a shareholders’ meeting. Dividends may be distributed in the form of cash or shares.

Under Delaware law, the board of directors of a Delaware corporation may declare dividends out of distributable earnings and profits without the approval of the shareholders.

Amalgamations and business combinations; appraisal rights

Under PRC law, amalgamations and divisions involving joint stock companies are required to be approved by shareholders voting at a shareholders’ meeting. The Mandatory Provisions require an amalgamation or division involving the company to be approved by an affirmative vote of two-thirds of the votes present at the shareholders’ meeting called to consider the transaction. Any opposing shareholder may request the company or the consenting shareholders to purchase its shares at a fair price. In addition, a sale of fixed assets having a value exceeding 33% of the fixed assets as shown on the company’s latest balance sheet most recently reviewed by the shareholders’ meeting requires the approval of at least one third of the shareholders’ meeting.

Under Delaware law, with certain exceptions, a merger, consolidation or sale of all or substantially all the assets of a corporation must be approved by the board of directors and holders of a majority of the outstanding shares entitled to vote. A shareholder objecting to the merger is entitled to appraisal rights pursuant to which the shareholder may receive cash in the amount of the fair value of the shares held by such shareholder (as determined by a court) in lieu of the consideration the shareholder would otherwise receive in the transaction.

Transactions with significant shareholders

Under Delaware law, a business combination between a Delaware corporation and an interested shareholder which takes place at any time during a period of three years commencing with the date the interested shareholder became an interested shareholder would need prior approval from the board of directors or a supermajority of the shareholders of the corporation, unless the corporation opted out of the relevant Delaware business combination statute. Under Delaware law, an interested shareholder of a corporation is someone who, together with its affiliates and associates, owns more than 15% of the outstanding common shares of the corporation. No such business combination statute or regulation applies to PRC joint stock companies.

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Shareholders’ lawsuits

The PRC law provides that most disputes involving an H shareholder are to be resolved by final and binding arbitration.

Class actions and derivative actions generally are available to shareholders under Delaware law for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law.

Limitations on liability and indemnification of directors and officers

PRC law does not provide for any specific limitations on liability or indemnification of directors and officers.

Under Delaware law, a corporation may indemnify a current director or officer of the corporation against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in defense of an action, suit or proceeding by reason of such position if (1) the director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and (2) with respect to any criminal action or proceeding, the director or officer had no reasonable cause to believe that his conduct was unlawful. Persons serving at the request of the corporation as directors, officers, employees or agents of another entity such as a subsidiary or an employee stock trust may receive advancement of expenses from the corporation. A corporation may not retroactively impair or eliminate indemnification or advancement rights by amending the corporation’s certificate of incorporation or bylaws after the occurrence of the act or omission that gives rise to indemnification or advancement rights, unless the provision contains, at the time of the act or omission, an explicit authorization of such elimination or limitation.

Shareholders’ rights of inspection of corporate records

Under PRC law, shareholders are entitled to inspect the articles of association, register of shareholders, corporate bond counter foils, minutes of shareholders’ meetings and board meetings and reports of the financial accounts of the company. In addition, the Mandatory Provisions provide that, after paying reasonable fees, shareholders are entitled to inspect the company’s shareholder list, certain personal information on the directors, supervisors and officers, the company’s capital position and certain information regarding share repurchases conducted by the company during the most recent fiscal year.

Delaware law permits any shareholder of a Delaware corporation to examine or obtain copies of or extracts from the corporation’s shareholder list and its other books and records for any purpose reasonably related to such person’s interest as a shareholder.

C. MATERIAL CONTRACTS

See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” for certain arrangements we have entered into with CLIC, AMC, IHC, China Life Pension, CLPCIC, China Life Capital, China Life Wealth, AMP, Chongqing Trust and CGB.

D. EXCHANGE CONTROLS

The Renminbi currently is not a freely convertible currency. The SAFE, under the authority of the PBOC, controls the conversion of Renminbi into foreign currency. Until July 20, 2005, the PBOC had been setting and publishing daily a base exchange rate with reference primarily to the supply and demand of Renminbi against the U.S. dollar in the market during the prior day. The PBOC also took into account other factors, such as the general conditions existing in the international foreign exchange markets. From 1994 to July 20, 2005, the official exchange rate for the conversion of Renminbi to U.S. dollars was generally stable. On July 21, 2005, the PRC government introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. Under this system, the PBOC announces the closing price of a foreign currency traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each working day, and makes it the central parity for the trading against the Renminbi on the following working day. On August 11, 2015, the PBOC adjusted the quotation mechanism of the Renminbi central parity to also consider demand and supply in foreign exchange markets and price movements of major currencies, in addition to the closing price on the previous working day. On May 26, 2017, the PBOC introduced the “counter-cyclical factor” into its formula that determines a central parity of the Renminbi against the U.S. dollar. Under the current mechanism, the central parity of the Renminbi against the U.S. dollar is determined based on the closing price, changes in a basket of currencies and the counter-cyclical factor. See “Item 3. Key Information—Risk Factors—Risks Relating to the People’s Republic of China—Government control of currency conversion and the fluctuation of the Renminbi may materially and adversely affect our operations and financial results”.

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Although PRC governmental policies were introduced in 1996 to reduce restrictions on the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, usually requires the approval of the SAFE and other relevant authorities. Although experimental policies were introduced in certain pilot areas such as the Shanghai free trade zone to reduce foreign exchange control, restrictions on the convertibility of Renminbi into foreign currency still remain in force in most parts of China. In the event of shortages of foreign currencies, we may be unable to convert sufficient Renminbi into foreign currency to meet our foreign currency obligations or to pay dividends in foreign currency.

Our H shares are traded on the Hong Kong Stock Exchange. There are no limitations on the right of non-resident or foreign owners to remit dividends or capital including capital gains imposed by Hong Kong law.

E. TAXATION

The taxation of income and capital gains of holders of H shares or ADSs is subject to the laws and practices of China and of jurisdictions in which holders of H shares or ADSs are resident or otherwise subject to tax. The following summary of certain relevant taxation provisions is based on current law and practice, is subject to change and does not constitute legal or tax advice. The discussion does not deal with all possible tax consequences relating to an investment in the H shares or ADSs. In particular, the discussion does not address the tax consequences under state, local and other laws, such as non-U.S. federal laws other than the laws of the PRC and Hong Kong. Accordingly, you should consult your own tax adviser regarding the tax consequences of an investment in the H shares and ADSs. The discussion is based upon laws and relevant interpretations in effect as of the date of this annual report, all of which are subject to change.

The People’s Republic of China

The following is a discussion of the material Chinese tax provisions relating to the ownership and disposition of H shares or ADSs held by the investors as capital assets. This discussion does not address all of the tax considerations that may be relevant to specific investors in light of their particular circumstances or to other investors subject to special treatment under the tax laws of the PRC. This discussion is based on the tax laws of China as in effect as of the date of this annual report, as well as on the Agreement between the United States of America and the People’s Republic of China for the Avoidance of Double Taxation, or the “China-U.S. Tax Treaty”, all of which are subject to change (or changes in interpretation), possibly with retroactive effect.

This discussion does not address any aspects of Chinese taxation other than income taxation, capital taxation, stamp taxation and estate taxation. Prospective investors are urged to consult their tax advisers regarding Chinese and other tax consequences of owning and disposing of H shares.

Taxation of Dividends

Individual investors. According to the PRC Individual Income Tax Law, as amended, dividends paid by Chinese companies are ordinarily subject to a Chinese withholding tax levied at a flat rate of 20%. For a foreign individual who is not a resident of China, the receipt of dividends from a company in China is normally subject to a withholding tax of 20% unless reduced pursuant to an applicable tax treaty. According to a notice issued by the Chinese State Administration of Taxation, or the SAT, on June 28, 2011, if the withholding tax rate under applicable tax treaties is 10% or less, the receipt of dividends will be subject to 10% withholding tax; and if the withholding tax rate under applicable tax treaties is between 10% and 20%, the receipt of dividends will be subject to the actual tax rate as agreed under such tax treaties.

Enterprises. According to the PRC Enterprise Income Tax Law and its implementation rules, effective on January 1, 2008, as well as any amendments from time to time and the Circular on Issues Relating to the Withholding of Enterprise Income Tax for Dividends Distributed by Resident Enterprises in China to Non-resident Enterprises Holding H-shares of the Enterprises, issued by the SAT on November 6, 2008, resident enterprises in China are required to, in distributing dividends for 2008 or any year hereafter to non-resident enterprises holding Overseas Shares including H-shares and ADSs of the enterprises, withhold enterprise income tax for such dividends at a tax rate of 10%. Non-resident enterprises holding H shares of any resident enterprise can, after receiving dividends due to them, apply for preferential tax treatment with competent tax authorities in accordance with tax treaties.

Tax treaties. Investors who do not reside in China and reside in countries that have entered into treaties for the avoidance of double-taxation with China may be entitled to a reduction of the withholding tax imposed on the payment of dividends to our investors who do not reside in China. China currently has treaties for the avoidance of double-taxation with a number of other countries, which include Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the United States.

Under the China-U.S. Tax Treaty, China may tax a dividend paid by us to an Eligible U.S. Holder up to a maximum of 10% of the gross amount of the dividend. For the purposes of this discussion, an “Eligible U.S. Holder” is a U.S. holder that (i) is a resident of the United States for the purposes of the China-U.S. Tax Treaty, (ii) does not maintain a permanent establishment or fixed base in China to which H shares are attributable and through which the beneficial owner carries on or has carried on business (or, in the case of an individual, performs or has performed independent personal services) and (iii) is not otherwise ineligible for benefits under the China-U.S. Tax Treaty with respect to income and gains derived in connection with the H shares.

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Taxation of Capital Gains

According to the PRC Enterprise Income Tax Law and its implementation rules (effective on January 1, 2008) as well as any amendments from time to time, capital gains realized by foreign enterprises which have no establishment or residence in China or whose capital gains from China do not relate to their establishment or residence in China, are ordinarily subject to enterprise income tax at the rate of 10% with respect to the gains realized within China, unless reduced pursuant to an applicable tax treaty.

According to the Announcement on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source issued by the SAT on October 17, 2017, the balance of the income from the transfer of equity less the net value of equity is taxable income. Income from transfer of equity refers to the consideration received by the transferor of equity for transfer of equity, including various cash and non-cash incomes. Net value of equity refers to the taxable base for obtaining such equity. Taxable base is the cost of capital actually paid by the equity transferor when purchasing such equity.

According to the PRC Individual Income Tax Law, as amended, capital gains realized by individuals upon the transfer of shares, including Overseas Shares, are subject to capital gains tax levied at a flat rate of 20%; and relevant tax authorities are authorized to promulgate implementation rules in this regard. To date, the relevant tax authorities have not promulgated any implementation rules on the taxation of capital gains realized by individuals upon the transfer of shares, including Overseas Shares. If the relevant tax authorities promulgate such implementation rules in the future, a 20% tax may be levied on capital gains realized by foreign individuals in accordance with the PRC Individual Income Tax Law, as amended, unless reduced pursuant to an applicable tax treaty. To date, the relevant tax authorities have not collected capital gains tax on the income from the transfer of shares.

Additional Chinese Tax Considerations

Chinese stamp duty. Chinese stamp duty imposed on the transfer of shares of Chinese publicly traded companies under the Provisional Regulations of China Concerning Stamp Duty should not apply to the acquisition and disposal by non-Chinese investors of H shares or ADSs outside of China by virtue of the Provisional Regulations of China Concerning Stamp Duty, which became effective on October 1, 1988 and which provide that Chinese stamp duty is imposed only on documents executed or received within China that are legally binding in China and are protected under Chinese law.

Estate tax. No liability for estate tax under Chinese law will arise from non-Chinese nationals holding H shares.

Investors under the Shanghai-Hong Kong Stock Connect Program. According to the Notice on Tax Policies for the Shanghai-Hong Kong Stock Connect Pilot Program, jointly issued by the MOF, SAT and CSRC which became effective on November 17, 2014, between November 17, 2014 to November 16, 2017, gains realized by Chinese individual investors upon a transfer of H shares through the Shanghai-Hong Kong Stock Connect program were exempted from individual income tax. Gains realized by Chinese enterprise investors upon a transfer of H shares through the Shanghai-Hong Kong Stock Connect program must be included in their gross income and subject to enterprise income tax. For dividends received by Chinese individual investors and securities investment funds from investing in H shares through the Shanghai-Hong Kong Stock Connect program, the Chinese issuer of such H shares must withhold income tax at a tax rate of 20%. Dividends received by Chinese enterprise investors from investing in H shares through the Shanghai-Hong Kong Stock Connect program must be included in their gross income and subject to enterprise income tax, and the Chinese issuer of such H shares will not withhold income tax for the dividends. The enterprise investors in these circumstances must make tax filings by themselves. According to the Notice on Continuation of the Tax Policies for the Shanghai-Hong Kong Stock Connect Pilot Program, which was jointly issued by the MOF, SAT and CSRC and became effective on November 17, 2017, gains realized by Chinese individual investors upon a transfer of H shares through the Shanghai-Hong Kong Stock Connect Program are further exempted from individual income tax for the period from November 17, 2017 to December 4, 2019. According to the Announcement on Continuation of the Individual Income Tax Policies for the Shanghai-Hong Kong Stock Connect Program and Shenzhen-Hong Kong Stock Connect Program and for the Mainland-Hong Kong Mutual Recognition of Fund, which became effective on December 5, 2019, gains realized by Chinese individual investors from a transfer of shares listed on the Hong Kong Stock Exchange through the Shanghai-Hong Kong Stock Connect Program and Shenzhen-Hong Kong Stock Connect Program, as well as from sale and purchase of interest in funds set up in Hong Kong through the mutual fund recognition, are further exempted from individual income tax for the period from December 5, 2019 to December 31, 2022.

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Hong Kong

The following is a discussion of the material Hong Kong tax provisions relating to the ownership and disposition of H shares or ADSs held by the investors as capital assets. This discussion does not address all of the tax considerations that may be relevant to specific investors in light of their particular circumstances or to investors subject to special treatment under the tax laws of Hong Kong. This discussion is based on the tax laws of Hong Kong as in effect on the date of this annual report, which are subject to change (or changes in interpretation), possibly with retroactive effect. This discussion does not address any aspects of Hong Kong taxation other than income taxation, capital taxation, stamp taxation and estate taxation. Prospective investors are urged to consult their tax advisers regarding Hong Kong and other tax consequences of owning and disposing of H shares.

Tax on Dividends

Under current practice, no tax is payable in Hong Kong in respect of dividends paid by us.

Tax on Gains from Sale

No tax is imposed in Hong Kong in respect of capital gains from the sale of property. However, trading gains from the sale of property by persons carrying on a trade, profession or business in Hong Kong where the gains are derived from or arise in Hong Kong from such trade, profession or business will be chargeable to Hong Kong profits tax, which is imposed at the rate of 16.5% on corporations and at a rate of 15% on unincorporated businesses for the year of assessment 2008/09 onwards. Commencing from the year of assessment 2018/19 (i.e. on or after April 1, 2018), the profits tax rate for the first HK$2,000,000 of profits of corporations will be lowered to 8.25% while the remaining profits will continue to be taxed at the rate of 16.5%; and the profits tax rate for the first HK$2,000,000 of profits of unincorporated businesses will be lowered to 7.5%, while the remaining profits will continue to be taxed at the rate of 15%.

Trading gains from sales of H shares effected on the Hong Kong Stock Exchange will be considered to be derived from or arise in Hong Kong. Liability for Hong Kong profits tax would thus arise in respect of trading gains from sales of H shares effected on the Hong Kong Stock Exchange realized by persons carrying on a business of trading or dealing in securities in Hong Kong.

There will be no liability for Hong Kong profits tax in respect of profits from the sale of ADSs, where purchases and sales of ADSs are effected outside Hong Kong, for example, on the New York Stock Exchange.

Stamp Duty

Hong Kong stamp duty, currently charged at the ad valorem rate of 0.1% on the higher of the consideration for, or the market value of, the H shares, will be payable by the purchaser on every purchase and by the seller on every sale of H shares (in other words, a total of 0.2% is currently payable on a typical sale and purchase transaction involving H shares). Subject to the completion of the legislative process, the rate of stamp duty will be increased from 0.1% to 0.13% with effect from August 1, 2021. In addition, a fixed duty of HK$ 5.00 is currently payable on any instrument of transfer of H shares. If stamp duty is not paid on or before the due date, a penalty of up to ten times the duty payable may be imposed.

The withdrawal of H shares upon the surrender of ADRs, and the issuance of ADRs upon the deposit of H shares, will also attract stamp duty at the rate described above for sale and purchase transactions unless such withdrawal or deposit does not result in a passing of the beneficial interest in the H shares under Hong Kong law. The issuance of the ADRs upon the deposit of H shares issued directly to the depositary of the ADSs, or for the account of the depositary, will not be subject to any stamp duty. No Hong Kong stamp duty is payable upon the transfer of ADSs outside Hong Kong.

Estate Duty

The Revenue (Abolition of Estate Duty) Ordinance 2005 came into effect on February 11, 2006 in Hong Kong. No Hong Kong estate duty is payable and no estate duty clearance papers are needed for an application for a grant of representation in respect of holders of H shares whose deaths occur on or after February 11, 2006.

United States of America

The following is a discussion of the material United States federal income tax consequences relating to the purchase, ownership and disposition of H shares or ADSs by U.S. Holders (as defined below) that acquire H shares or ADSs for cash and hold them as capital assets. This discussion is based on the Internal Revenue Code of 1986, as amended, or “the Code”, Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion does not address all of the tax considerations that may be relevant to specific U.S. Holders in light of their particular circumstances or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as banks, insurance companies, tax-exempt entities, retirement plans, regulated investment companies, real estate investment trusts, partnerships, dealers in securities, or other U.S. Holders that generally mark their securities to market for U.S. federal income tax purposes, certain former citizens or residents of the United States, persons who have acquired our H shares or ADSs as part of a straddle, hedge, conversion, or other integrated investment, persons who own, directly or by attribution, 10% or more of the combined voting power or value of all classes of stock of China Life or persons that have a “functional currency” other than the U.S. dollar). This discussion does not address any U.S. state or local or any U.S. federal estate, gift or alternative minimum tax considerations.

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As used in this discussion, the term “U.S. Holder” means a beneficial owner of H shares or ADSs that is, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation created or organized in or under the laws of the United States or of any state or political subdivision thereof, or therein, including the District of Columbia or (iii) an estate or trust the income of which is subject to U.S. federal income tax regardless of the source thereof.

Investors are urged to consult their own tax advisers as to the particular tax considerations applicable to them relating to the purchase, ownership and disposition of H shares or ADSs in their individual circumstances, including the applicability of U.S. federal, state and local tax laws, any changes in applicable tax laws and any pending or proposed legislation or regulations.

Taxation of Dividends

Subject to the discussion below under “—Special Rules”, cash distributions with respect to the H shares or ADSs owned by a U.S. Holder will, upon receipt, be includible in the gross income of such U.S. Holder as ordinary dividend income to the extent of our current and accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent that the amount of any such cash distribution exceeds our current and accumulated earnings and profits as so computed, it will be treated first as a non-taxable return of capital to the extent of the U.S. Holder’s adjusted tax basis in such H shares or ADSs and, to the extent the amount of such cash distribution exceeds adjusted tax basis, will be treated as gain from the sale of such H shares or ADSs. Dividends paid by us generally will constitute income from sources outside the United States for foreign tax credit limitation purposes and will not be eligible for the “dividends received” deduction.

Dividends received by individuals from “qualified foreign corporations” are generally subject to a maximum U.S. federal income tax rate of 20%, so long as certain holding period requirements are met. A non-U.S. corporation (other than a passive foreign investment company) generally will be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive income tax treaty with the United States which the Secretary of the Treasury determines is satisfactory for purposes of the relevant provision and which includes an exchange of information program or (ii) with respect to any dividend it pays on stock which is readily tradable on an established securities market in the United States. The Treasury Department has determined that the China-U.S. Tax Treaty as currently in effect meets the requirements described in clause (i) above. In addition, the ADSs are readily tradable on the New York Stock Exchange, an established securities market in the United States. Each U.S. Holder that is an individual is urged to consult his or her tax adviser regarding the applicability of this reduced rate to dividends received with respect to the H shares or ADSs in his particular circumstance.

The U.S. dollar value of any distribution made by us in Hong Kong dollars (or other currency that is not the U.S. dollar, or a “foreign currency”), should be calculated by reference to the exchange rate in effect on the date of receipt of such distribution by Deutsche Bank Trust Company Americas, as depositary, in the case of ADSs, or by the U.S. Holder, in the case of H shares held directly by such U.S. Holder regardless of whether the Hong Kong dollars (or such other foreign currency) so received are converted into U.S. dollars on the date of receipt. If the Hong Kong dollars (or such other foreign currency) so received are converted into U.S. dollars on the date of receipt, such U.S. Holder generally should not recognize foreign currency gain or loss on such conversion. If the Hong Kong dollars (or such other foreign currency) are not converted into U.S. dollars on the date of receipt, such U.S. Holder will have a basis in the Hong Kong dollars (or such other foreign currency) equal to their U.S. dollar value on the date of receipt. Any gain or loss on a subsequent conversion or other disposition of the Hong Kong dollars (or such other foreign currency) generally will be treated as ordinary income or loss from sources within the United States for foreign tax credit limitation purposes.

Subject to certain limitations, the Chinese tax withheld from dividends paid with respect to H shares or ADSs and paid over to China, as described above under “—The People’s Republic of China—Taxation of Dividends”, may be creditable against a U.S. Holder’s U.S. federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 20% U.S. federal income tax rate. A U.S. Holder of H shares or ADSs that does not elect to claim a U.S. foreign tax credit may instead claim a deduction for such withheld tax, but only for a taxable year in which the U.S. Holder elects to do so with respect to all non-U.S. income taxes paid or accrued in such taxable year. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and U.S. Holders are urged to consult their own U.S. tax advisers with respect to foreign tax credit considerations in their individual circumstances.

Sale or other Disposition of H Shares or ADSs

Subject to the discussion below under “—Special Rules”, a U.S. Holder generally will recognize gain or loss for U.S. federal income tax purposes upon a sale or other disposition of H shares or ADSs that it owns in an amount equal to the difference, if any, between the amount realized from the sale or disposition and such U.S. Holder’s adjusted tax basis in such H shares or ADSs. The gain or loss generally will be a capital gain or loss and will be long-term capital gain (taxable at a reduced rate for individuals) or loss if, on the date of sale or disposition, such H shares or ADSs were held by the U.S. Holder for more than one year and will generally be U.S. source gain or loss. The claim of a deduction in respect of a capital loss may be subject to limitations.

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A U.S. Holder that receives Hong Kong dollars (or other foreign currency) from the sale or disposition generally will realize an amount equal to the U.S. dollar value of the Hong Kong dollars (or such other foreign currency) on the settlement date of the sale or disposition if (i) the U.S. Holder is a cash basis or electing accrual basis taxpayer and our H shares or ADSs, as the case may be, are treated as being “traded on an established securities market” for this purpose or (ii) the settlement date is the date of the sale or disposition. If the Hong Kong dollars (or such other foreign currency) so received are converted into U.S. dollars on the settlement date, the U.S. Holder should not recognize foreign currency gain or loss on the conversion. If the Hong Kong dollars (or such other foreign currency) so received are not converted into U.S. dollars on the settlement date, the U.S. Holder will have a basis in the Hong Kong dollars (or such other foreign currency) equal to the U.S. dollar value on the settlement date. Any gain or loss on a subsequent conversion or other disposition of the Hong Kong dollars (or such other foreign currency) generally will be treated as ordinary income or loss from sources within the United States for foreign tax credit limitation purposes. A U.S. Holder should consult its own tax adviser regarding the U.S. federal income tax consequences of receiving Hong Kong dollars (or other currency) from a sale or disposition of the H shares or ADSs in cases not described in this paragraph.

A U.S. Holder that is a non-resident enterprise may be subject to Chinese tax on the gain realized upon the sale or other disposition of H shares or ADS. See “—The People’s Republic of China—Taxation of Capital Gains” above. Holders should consult their own tax advisers concerning their ability to credit such Chinese taxes against their U.S. federal income tax liability in their particular situation.

Special Rules

Related Person Insurance Income. Certain adverse U.S. income and tax reporting rules may apply to U.S. shareholders who, directly or indirectly, own stock of a non-U.S. corporation that earns “related person insurance income” (“RPII”), if 25% or more of the non-U.S. corporation’s direct or indirect shareholders are U.S. persons. RPII is generally defined as insurance income derived from the insurance (or reinsurance) of insureds who are U.S. shareholders in the non-U.S. corporation or who are related to such U.S. shareholders. If applicable, these rules would require U.S. Holders to include in taxable income each year their pro rata share of any RPII incurred by us for the year, regardless of whether such income is distributed, and also to file IRS Form 5471, disclosing certain information regarding their direct or indirect ownership of China Life. Special rules apply for purposes of determining each U.S. shareholder’s pro rata share of any RPII. For organizations that are otherwise exempt from U.S. federal income tax under section 501(a) of the Code, any such income would constitute “unrelated business taxable income”. These rules could also apply to convert some or all of the gain recognized from the sale or disposition of H shares or ADSs from capital gain to ordinary income and to require such gain to be reported on IRS Form 5471.

Under a statutory exception, these rules do not apply if less than 20% of the non-U.S. corporation’s insurance income is RPII or if less than 25% of the non-U.S. corporation’s stock is owned by U.S. shareholders. Because CLIC holds approximately 68.37% of our share capital, and because we do not offer or intend to offer our products and services in the United States, it is highly unlikely that the RPII rules will apply. If more of our shares are sold to the public in the future, it is possible that such rules could apply at a later date.

Passive Foreign Investment Company. In general, a non-U.S. corporation will be a PFIC if 75% or more of its gross income constitutes “passive income” or 50% or more of its assets produce “passive income” or are held for the production of “passive income”. In determining whether we are a PFIC, we will be treated as if we directly owned our proportionate share of the assets and received our proportionate share of the income of any other corporation in which we own 25% or more of the shares by value.

For the purpose of determining whether a non-U.S. corporation is a PFIC, “passive income” is defined to include income of the kind which would be foreign personal holding company income under section 954(c) of the Code, and generally includes interest, dividends, annuities and other investment income. Passive income does not include interest income or dividends received from controlled subsidiaries or certain other related persons, to the extent properly allocable to income of such related person that is not passive income. The PFIC provisions, as modified by the TCJA, specifically exclude from the definition of “passive income” any income “derived in the active conduct of an insurance business by a qualifying insurance corporation” (the “active insurance business exception”). The active insurance business exception is intended to ensure that income derived by a bona fide insurance company is not treated as passive income. A non-U.S. corporation is a qualifying insurance corporation if it would be subject to tax as an insurance company if it were a domestic corporation and (i) loss and loss adjustment expenses and certain reserves, or “applicable insurance liabilities”, constitute more than 25% of the non-U.S. corporation’s gross assets for the relevant year or (ii) a U.S. Holder makes an election to apply an alternative facts and circumstances test that applies only in certain runoff-related or ratings-related circumstances involving the insurance business. The PFIC provisions also exclude from the definition of “passive income” any income derived in the active conduct of a banking trade or business.

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The IRS released final and proposed Treasury regulations regarding the application of the PFIC rules to insurance companies in December 2020. The proposed Treasury regulations are not yet in force but are proposed to be effective for taxable years of U.S. Holders beginning on or after the date that final regulations are issued. The proposed Treasury regulations provide that a company is engaged in the active conduct of an insurance business only if it satisfies a factual requirements test or a “bright-line” test providing that the active conduct requirement is met if the insurance company’s “active conduct percentage” is at least 50%. The factual requirements test requires a company’s officers and employees to carry out substantial managerial and operational activities on a regular and continuous basis with respect to underwriting, investment, contract and claim management and sales activities, and perform virtually all of the active decision-making functions relevant to its underwriting functions. In general, a company’s active conduct percentage is determined by dividing the company’s aggregate expenses for certain insurance-related services of its officers and employees (excluding investment activities) by the company’s aggregate expenses for such insurance-related services, including those paid to unaffiliated persons (excluding investment activities). Activities of officers and employees of certain affiliates may be considered for both the factual requirements test and the “bright-line” test. The proposed regulations would also expand the circumstances in which a shareholder of a non-U.S. corporation is treated as owning shares of a subsidiary that is treated as a PFIC even if the corporation is not treated as a PFIC. We cannot assure you that we will not be treated as a PFIC as a result of the finalization of these regulations. We make various simplifying assumptions to estimate the asset composition and value of our subsidiaries in order to apply the PFIC tests to the income and assets of our 25% or greater owned subsidiaries. Based on our analysis of our assets and income, which takes into account these assumptions, we believe that we were not classified as a PFIC in 2020. However, there is no assurance that the IRS will not take a contrary position and assert that we are a PFIC. Furthermore, an actual determination of PFIC status is inherently factual in nature and cannot be made until the close of each applicable tax year and, accordingly, no assurances can be given that we will not become a PFIC at some point in the future.

In general, a U.S. shareholder of a PFIC is subject to a special tax and an interest charge at the time of the sale of (or receipt of an “excess distribution” with respect to) its shares in the PFIC. In general, a shareholder is treated as having received an “excess distribution” if the amount of the distribution was more than 125% of the average distribution with respect to its shares during the three preceding taxable years (or shorter period during which the taxpayer held the shares). The special tax is computed by assuming that the excess distribution or, in the case of a sale, the gain with respect to the shares was earned in equal portions throughout the holder’s period of ownership. The portion allocable to each year prior to the year of sale is taxed at the maximum marginal tax rate applicable for each such period. The interest charge is determined based on the applicable rate imposed on underpayments of U.S. federal income tax for the period. The special tax and the interest charge generally will not apply to a U.S. shareholder that validly makes a “qualified electing fund” election under section 1295 of the Code with respect to the shares of the PFIC. We do not intend to comply with the requirements necessary to permit a U.S. Holder to make such an election with respect to H shares or ADSs.

The above results may also be avoided if a “mark-to-market” election is available and a U.S. Holder validly makes such an election. If the election is made, such U.S. Holder generally will be required to take into account the difference, if any, between the fair market value of, and its adjusted tax basis in, its H shares or ADSs at the end of each taxable year as ordinary income or ordinary loss (to the extent of any net mark-to-market gain previously included in income), and to make corresponding adjustments to the tax basis of such H shares or ADSs. In addition, any gain from a sale or other disposition of H shares or ADSs will be treated as ordinary income, and any loss will be treated as ordinary loss (to the extent of any net mark-to-market gain previously included in income). A mark-to-market election is available to a U.S. Holder only if our H shares or ADSs are considered “marketable stock” for these purposes. Generally, stock will be considered marketable stock if it is “regularly traded” on a “qualified exchange” within the meaning of applicable U.S. Treasury regulations. A class of stock is regularly traded during any calendar year during which such class of stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. A non-U.S. securities exchange will constitute a qualified exchange if it is regulated or supervised by a governmental authority of the country in which the market is located and meets certain trading, listing, financial disclosure and other requirements set forth in the Treasury regulations. We do not know whether our H shares or ADSs will be treated as marketable stock for these purposes.

If we are a PFIC in any taxable year during which a U.S. Holder owns H Shares or ADSs, such U.S. Holder (i) may also suffer adverse tax consequences under the PFIC rules described above with respect to any other PFIC in which we have a direct or indirect equity interest and (ii) generally will be required to file annually a statement with its U.S. federal income tax returns. U.S. Holders should consult their own tax advisers regarding the U.S. federal income tax consequences of a direct or indirect investment in a PFIC.

Medicare Taxes

Certain U.S. Holders that are individuals, estates or trusts are subject to an additional tax at the rate of 3.8% on all or a portion of their “net investment income”, which may include all or a portion of their income arising from a distribution with respect to an ADS or an H Share and gain upon the sale, exchange or other disposition of such ADS or H Share.

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Information Reporting and Backup Withholding

Under certain circumstances, information reporting and/or backup withholding may apply to U.S. Holders with respect to payments made on or proceeds from the sale, exchange or other disposition of ADSs or H Shares, unless an applicable exemption is satisfied. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the IRS.

Reportable Transactions

U.S. Holders that participate in “reportable transactions” (as defined in the Treasury regulations) must attach to their federal income tax returns a disclosure statement on Form 8886. We urge U.S. Holders to consult their own tax advisers as to the possible obligation to file Form 8886 with respect to the ownership or disposition of any Hong Kong dollars (or other foreign currency) received as a dividend or as proceeds from the sale of H shares or ADSs, or any other aspect of the purchase, ownership or disposition of H shares or ADSs.

Disclosure Requirements for Specified Foreign Financial Assets

Individual U.S. Holders (and certain U.S. entities to the extent specified in future IRS guidance) who, during any taxable year, hold any interest in any “specified foreign financial asset” generally will be required to file with their U.S. federal income tax returns Form 8938, setting forth certain information with respect to such asset, if the aggregate value of all such assets exceeds the applicable reporting threshold. “Specified foreign financial asset” generally includes any financial account maintained with a non-U.S. financial institution and may also include H Shares or ADSs if they are not held in an account maintained with a U.S. financial institution. Substantial penalties may be imposed for a failure to comply. U.S. Holders should consult their own tax advisers as to the possible application to them of these filing requirements.

F. DIVIDENDS AND PAYING AGENTS

Not applicable.

G. STATEMENT BY EXPERTS

Not applicable.

H. DOCUMENTS ON DISPLAY

You may read and copy documents referred to in this annual report on Form 20-F that have been filed with the U.S. Securities and Exchange Commission, or SEC, at its public reference room located at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information regarding the registrations that file electronically with the SEC.

The SEC allows us to “incorporate by reference” the information we filed with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report on Form 20-F.

I. SUBSIDIARY INFORMATION

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Our exposure to financial market risks relates primarily to changes in interest rates, equity prices and exchange rates.

The following discussions and tables, which constitute “forward-looking statements” that involve risks and uncertainties, summarize our market-sensitive financial instruments including fair value and maturity. Such discussions address market risk only and do not present other risks which we face in the normal course of business.

For further information on our management of market risk, including the objectives and general strategies of risk management, see “Item 4 Information on the Company—Business Overview—Investments—Risk Management” and Note 4 to our consolidated financial statements included elsewhere in this annual report.

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Interest Rate Risk

Our profitability is affected by changes in interest rates. Interest rates are highly sensitive to many factors, including economic growth rate, inflation, governmental monetary and tax policies, domestic and international economic and political conditions, financial regulatory requirements and other factors beyond our control. If interest rates were to increase in the future, surrenders and withdrawals of life insurance and annuity policies and contracts may increase as policy holders may seek other investments with higher perceived returns. This process may result in cash outflows requiring that we sell investment assets at a time when the prices of those assets are adversely affected by the increase in market interest rates, which may result in realized investment losses. However, if interest rates were to decline in the future, the income we realize from our investments may decrease, affecting our profitability. In addition, as instruments in our investment portfolio mature, we might have to reinvest the funds we receive in investments bearing low interest rates, which may also affect our profitability.

For the years ended December 31, 2020, 2019 and 2018, our investment yield was 5.30%, 5.24% and 3.29%, respectively. Investment contracts are generally priced with guaranteed interest rates. Dividends on participating policies are required to be at least 70% of distributable earnings attributable to such policies.

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The following tables set forth selected assets and liabilities with exposure to interest rates as of December 31, 2020, 2019 and 2018.


	Expected Maturity Date
As of December 31, 2020	2021		2022		2023		2024		2025		Thereafter		Total		Fair value
	*(RMB in millions, except as otherwise stated)*
Assets
Held-to-maturity and available-for-sale debt securities
Fixed rate bonds
in RMB		56,203		81,903		58,418		37,050		55,351		1,311,235		1,600,160		1,636,069
Average interest rate		3.05%		3.28%		3.61%		3.42%		3.28%		3.78%		3.70%

in US$		3,655		—		6		33		38		103		3,835		3,857
Average interest rate		0.60%		—		5.97%		5.63%		5.22%		4.82%		0.81%

Variable rate bonds
in RMB		353		175		454		92		126		20,263		21,463		21,703
Average interest rate		3.35%		3.13%		3.89%		3.87%		4.51%		4.08%		4.05%

Term deposits
in RMB		55,089		111,661		178,287		152,800		38,100		1,740		537,677		537,677
Average interest rate		3.74%		4.47%		4.90%		4.69%		4.27%		4.60%		4.59%

in US$		7,990		—		—		—		—		—		7,990		7,990
Average interest rate		2.06%		—		—		—		—		—		2.06%

Liabilities
Securities sold under agreements to repurchase		122,249		—		—		—		—		—		122,249		122,249
Average interest rate		0.93%		—		—		—		—		—		0.93%

Interest-bearing loans and other borrowings
in British pound		—		—		—		2,444		—		—		2,444		2,444
Average interest rate		—		—		—		3.08%		—		—		3.08%

in US$		—		—		—		11,940		—		—		11,940		11,940
Average interest rate		—		—		—		2.63%		—		—		2.63%

in Euro		5,172		—		—		—		—		—		5,172		5,172
Average interest rate		1.17%		—		—		—		—		—		1.17%

Investment contracts		3,430		1,041		1,500		1,598		1,296		279,347		288,212		276,521
Average guaranteed interest rate		1.97%		2.26%		2.27%		1.89%		2.13%		2.41%		2.39%

Long-term insurance contracts		75,978		21,253		15,885		16,928		30,316		2,776,173		2,936,533
Average guaranteed interest rate		2.71%		2.51%		2.50%		2.52%		3.12%		2.81%		2.81%

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	Expected Maturity Date
As of December 31, 2019	2020		2021		2022		2023		2024		Thereafter		Total		Fair value
	*(RMB in millions, except as otherwise stated)*
Assets
Held-to-maturity and available-for-sale debt securities
Fixed rate bonds
in RMB		37,262		64,853		84,960		57,526		35,163		1,038,319		1,318,083		1,357,890
Average interest rate		4.82%		4.37%		4.62%		4.91%		5.03%		4.29%		4.38%

in US$		7,571		46		—		7		36		115		7,775		7,792
Average interest rate		2.36%		5.50%		—		5.97%		5.44%		4.53%		2.43%

Variable rate bonds
in RMB		10		—		—		—		—		207		217		217
Average interest rate		2.78%		—		—		—		—		4.54%		4.46%

Term deposits
in RMB		98,981		33,830		111,661		122,800		151,900		8,030		527,202		527,202
Average interest rate		4.95%		3.90%		4.47%		5.31%		4.69%		4.33%		4.78%

in US$		8,026		—		—		—		—		—		8,026		8,026
Average interest rate		3.21%		—		—		—		—		—		3.21%

in HK$		32		—		—		—		—		—		32		32
Average interest rate		2.57%		—		—		—		—		—		2.57%

Liabilities
Securities sold under agreements to repurchase		118,088		—		—		—		—		—		118,088		118,088
Average interest rate		1.51%		—		—		—		—		—		1.51%

Interest-bearing loans and other borrowings
in British pound		—		—		—		—		2,515		—		2,515		2,515
Average interest rate		—		—		—		—		3.08%		—		3.08%

in US$		126		—		—		—		12,766		—		12,892		12,892
Average interest rate		2.70%		—		—		—		3.18%		—		3.18%

in Euro		4,115		523		—		—		—		—		4,638		4,638
Average interest rate		3.25%		2.50%		—		—		—		—		3.16%

Investment contracts		4,153		677		782		1,634		1,456		259,102		267,804		260,592
Average guaranteed interest rate		1.90%		2.30%		2.18%		2.29%		1.81%		2.40%		2.39%

Long-term insurance contracts		69,839		23,490		20,951		17,419		16,689		2,372,943		2,521,331
Average guaranteed interest rate		2.64%		2.64%		2.51%		2.49%		2.52%		2.75%		2.74%

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	Expected Maturity Date
As of December 31, 2018	2019		2020		2021		2022		2023		Thereafter		Total		Fair value
	*(RMB in millions, except as otherwise stated)*
Assets
Held-to-maturity and available-for-sale debt securities
Fixed rate bonds
in RMB		25,976		56,949		72,536		97,279		60,894		906,409		1,220,043		1,256,866
Average interest rate		5.19%		4.86%		4.46%		4.71%		5.06%		4.42%		4.52%

in US$		2,241		13		21		6		35		74		2,390		2,393
Average interest rate		2.93%		5.33%		6.55%		5.12%		5.05%		5.05%		3.07%

Variable rate bonds
in RMB		—		30		—		—		—		201		231		231
Average interest rate		—		5.23%		—		—		—		4.66%		4.73%

Term deposits
in RMB		151,418		77,441		33,830		88,950		122,800		77,400		551,839		551,839
Average interest rate		4.48%		5.17%		3.90%		4.58%		5.31%		4.78%		4.78%

in US$		7,502		—		—		—		—		—		7,502		7,502
Average interest rate		2.21%		—		—		—		—		—		2.21%

Liabilities
Securities sold under agreements to repurchase		192,141		—		—		—		—		—		192,141		192,141
Average interest rate		1.86%		—		—		—		—		—		1.86%

Interest-bearing loans and other borrowings
in British pound		2,385		—		—		—		—		—		2,385		2,385
Average interest rate		3.54%		—		—		—		—		—		3.54%

in US$		13,108		—		—		—		—		—		13,108		13,108
Average interest rate		2.35%		—		—		—		—		—		2.35%

in Euro		993		3,139		525		—		—		—		4,657		4,657
Average interest rate		1.50%		3.80%		2.50%		—		—		—		3.16%

Investment contracts		2,867		3,213		451		986		1,296		246,621		255,434		245,803
Average guaranteed interest rate		1.77%		1.61%		2.21%		2.20%		2.27%		2.40%		2.38%

Long-term insurance contracts		62,349		24,371		22,294		26,533		16,696		2,037,551		2,189,794
Average guaranteed interest rate		2.59%		2.56%		2.61%		2.68%		2.49%		2.67%		2.67%

134

Equity Price Risk

Our investments in securities investment funds or equity securities expose us to changes in equity prices. We manage this risk on an integrated basis with other risks through our asset-liability management strategies. We also manage equity price risk through industry and issuer diversification and asset allocation techniques.

The following table sets forth our exposure to equity securities as of December 31, 2020, 2019 and 2018.

As of December 31,

2018

2019

2020

Carrying amount

Fair value

Carrying amount

Fair value

Carrying amount

Fair value

(RMB in millions)

Equity securities

424,657

605,568

700,748

Securities at fair value through profit or loss

50,714

56,402

65,955

Available-for-sale

373,943

549,166

634,793

A hypothetical 10% decline in the December 31, 2020, 2019 and 2018 value of the securities at fair value through profit or loss equity securities would result in an unrealized loss charged to the income statement of approximately RMB6,596 million, RMB5,640 million and RMB5,071 million, respectively.

A hypothetical 10% decline in the December 31, 2020, 2019 and 2018 value of the available-for-sale equity securities would result in an unrealized loss charged to the income statement of approximately RMB63,479 million, RMB54,917 million and RMB37,394 million , respectively.

The selection of a 10% immediate change in the value of equity securities should not be construed as a prediction by us of future market events but rather as an illustration of the potential impact of such an event.

Foreign Exchange Risk

Our exposure to fluctuations in foreign currency exchange rates against RMB results primarily from our holdings in non-RMB denominated term deposits and our foreign currency-denominated loans. Our debts and capital expenditures are predominantly denominated in RMB, and the principal currencies which create foreign currency exchange rate risk in our deposits are the U.S. dollar and Hong Kong dollar. The principal currencies which expose us to foreign currency exchange risk in our loans are the British pound, U.S. dollar and Euro. Our borrowings in foreign currencies include a three-year bank loan of EUR330 million with a maturity date on September 8, 2023, a five-year bank loan of GBP275 million with a maturity date on June 25, 2024, a five-year bank loan of US$860 million with a maturity date on September 16, 2024, a six-month bank loan of EUR127 million with a maturity date on January 13, 2021 which is automatically renewed upon maturity pursuant to the terms of the agreement, a six-month bank loan of EUR78 million with a maturity date on January 4, 2021 which is automatically renewed upon maturity pursuant to the terms of the agreement, all of which are fixed rate loans, and a five-year bank loan of US$970 million with a maturity date on September 27, 2024, and an eighteen-month bank loan of EUR110 million with a maturity date on March 9, 2022, both of which are floating rate loans. We recorded RMB119 million (US$18 million) in foreign exchange gains for the year ended December 31, 2020, resulting mainly from the change in foreign exchange rates applicable to our assets and liabilities held in foreign currencies. Future movements in the exchange rate of RMB against the U.S. dollar and other foreign currencies may adversely affect our results of operations and financial condition.

135

The following tables set forth assets denominated in currencies other than RMB as of December 31, 2020, 2019 and 2018.


	Expected Maturity Date
As of December 31, 2020	2021		2022		2023		2024		2025		Thereafter		Total		Fair value
	*(in millions)*
Debt securities
in US$		3,804		—		31		33		75		189		4,132		4,154
Average interest rate		0.58%		—		4.67%		5.63%		4.12%		4.44%		0.89%

Other		—		1		—		—		2		39		42		42
Average interest rate		—		2.76%		—		—		0.11%		1.12%		1.13%

Term deposits
in US$		7,990		—		—		—		—		—		7,990		7,990
Average interest rate		2.06%												2.06%

Loans
in US$		—		—		—		—		—		1,445		1,445		1,586
Average interest rate		—		—		—		—		—		4.12%		4.12%

Cash and cash equivalents
in US$		598		—		—		—		—		—		598		598
Average interest rate		0.07%		—		—		—		—		—		0.07%

in HK$		1,297		—		—		—		—		—		1,297		1,297
Average interest rate		—		—		—		—		—		—		—

in British pound		358		—		—		—		—		—		358		358
Average interest rate		—		—		—		—		—		—		—

in Euro		140		—		—		—		—		—		140		140
Average interest rate		—		—		—		—		—		—		—

Other		7		—		—		—		—		—		7		7
Average interest rate		—		—		—		—		—		—		—

Liabilities
Interest-bearing loans and other borrowings
in British pound		—		—		—		2,444		—		—		2,444		2,444
Average interest rate		—		—		—		3.08%		—		—		3.08%

in US$		—		—		—		11,940		—		—		11,940		11,940
Average interest rate		—		—		—		2.63%		—		—		2.63%

in Euro		5,172		—		—		—		—		—		5,172		5,172
Average interest rate		1.17%		—		—		—		—		—		1.17%

136


	Expected Maturity Date
As of December 31, 2019	2020			2021			2022			2023			2024			Thereafter			Total			Fair value
	*(in millions)*
Debt securities
in US$		7,804			46			6			37			36			294			8,223			8,240
Average interest rate		2.29	%		5.50	%		0.12	%		3.75	%		5.44	%		3.67	%		2.38	%

Other		—			—			1			—			3			55			59			59
Average interest rate		—			—			2.69	%		—			0.27	%		0.77	%		0.77	%

Term deposits
in US$		8,026			—			—			—			—			—			8,026			8,026
Average interest rate		3.21	%		—			—			—			—			—			3.21	%

in HK$		32			—			—			—			—			—			32			32
Average interest rate		2.57	%		—			—			—			—			—			2.57	%

Loans
in US$		—			—			—			—			—			1,592			1,592			1,778
Average interest rate		—			—			—			—			—			4.12	%		4.12	%

Cash and cash equivalents
in US$		1,842			—			—			—			—			—			1,842			1,842
Average interest rate		0.05	%		—			—			—			—			—			0.05	%

in HK$		444			—			—			—			—			—			444			444
Average interest rate		—			—			—			—			—			—			—

in British pound		406			—			—			—			—			—			406			406
Average interest rate		—			—			—			—			—			—			—

in Euro		20			—			—			—			—			—			20			20
Average interest rate		—			—			—			—			—			—			—

Other		3			—			—			—			—			—			3			3
Average interest rate		—			—			—			—			—			—			—

Liabilities
Interest-bearing loans and other borrowings
in British pound		—			—			—			—			2,515			—			2,515			2,515
Average interest rate		—			—			—			—			3.08	%		—			3.08	%

in US$		126			—			—			—			12,766			—			12,892			12,892
Average interest rate		2.70	%		—			—			—			3.18	%		—			3.18	%

in Euro		4,115			523			—			—			—			—			4,638			4,638
Average interest rate		3.25	%		2.50	%		—			—			—			—			3.16	%

137


	Expected Maturity Date
As of December 31, 2018	2019			2020			2021			2022			2023			Thereafter			Total			Fair value
	*(in millions)*
Debt securities
in US$		2,814			17			25			12			35			114			3,017			3,019
Average interest rate		2.52	%		4.33	%		5.60	%		2.75	%		5.05	%		4.04	%		2.64	%

Other		3			—			—			—			—			28			31			31
Average interest rate		0.14	%		—			—			—			—			0.91	%		0.85	%
Term deposits

in US$		7,502			—			—			—			—			—			7,502			7,502
Average interest rate		2.21	%		—			—			—			—			—			2.21	%
Loans

in US$		—			—			—			—			—			1,766			1,766			1,835
Average interest rate		—			—			—			—			—			4.12	%		4.12	%
Cash and cash equivalents

in US$		1,768			—			—			—			—			—			1,768			1,768
Average interest rate		0.01	%		—			—			—			—			—			0.01	%

in HK$		261			—			—			—			—			—			261			261
Average interest rate		—			—			—			—			—			—			—

in British pound		286			—			—			—			—			—			286			286
Average interest rate		—			—			—			—			—			—			—

in Euro		43			—			—			—			—			—			43			43
Average interest rate		—			—			—			—			—			—			—

Other		—			—			—			—			—			—			—			—
Average interest rate		—			—			—			—			—			—			—

Liabilities
Interest-bearing loans and other borrowings
in British pound		2,385			—			—			—			—			—			2,385			2,385
Average interest rate		3.54	%		—			—			—			—			—			3.54	%

in US$		13,108			—			—			—			—			—			13,108			13,108
Average interest rate		2.35	%		—			—			—			—			—			2.35	%

in Euro		993			3,139			525			—			—			—			4,657			4,657
Average interest rate		1.50	%		3.80	%		2.50	%		—			—			—			3.16	%

138

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

A. DEBT SECURITIES

Not applicable.

B. WARRANTS AND RIGHTS

Not applicable.

C. OTHER SECURITIES

Not applicable.

D. AMERICAN DEPOSITARY SHARES

The table below sets forth all fees and charges that a holder of our ADRs may have to pay to the depositary bank of our ADR program, either directly or indirectly.


Category	Depositary Actions	Associated Fee

(a) Depositing or substituting the underlying shares	Each person to whom ADRs are issued against deposits of shares, including deposits and issuances in respect of: share distributions, rights, merger exchange of securities or any other transaction or event or other distribution affecting the ADSs or the deposited securities	US$5.00 for each 100 ADSs (or portion thereof) evidenced by the new ADRs delivered

(b) Receiving or distributing dividends	Distribution of dividends	US$0.02 or less per ADS

(c) Selling or exercising rights	Distribution or sale of securities, the fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities	US$5.00 for each 100 ADSs (or portion thereof)

(d) Withdrawing an underlying security	Acceptance of ADRs surrendered for withdrawal of deposited securities	US$5.00 for each 100 ADSs (or portion thereof) evidenced by the ADRs surrendered

(e) Transferring, splitting or grouping receipts	Transfers, combining or grouping of depositary receipts	US$1.50 per ADS

(f) Expenses of the depositary	Expenses incurred on behalf of ADR holders in connection with: compliance with foreign exchange control regulations or any law or regulation relating to foreign investment; the depositary’s or its custodian’s compliance with applicable law, rule or regulation; stock transfer or other taxes and other governmental charges; cable, telex, facsimile transmission and delivery; expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars (which are paid out of such foreign currency); and any other charge payable by depositary or its agents.	Expenses payable at the sole discretion of the depositary by billing ADR holders or by deducting charges from one or more cash dividends or other cash distributions.

Deutsche Bank Trust Company Americas, or Deutsche Bank, has served as the depositary bank of our ADR program since January 4, 2010. Deutsche Bank has agreed to reimburse certain reasonable company expenses related to our ADR program and incurred by us in connection with our ADR program. The table below sets forth the amounts reimbursed from January 1, 2020 to April 9, 2021.


Category of Expenses	Amount Reimbursed from January 1, 2020 to April 9, 2021
NYSE listing fees	US$	142,000.00
Legal fees	US$	3,530.00
Investor relations⁽¹⁾	US$	105,136.29
Broker reimbursements⁽²⁾	US$	70,508.51

Total	US$	321,174.80

139

⁽¹⁾	Includes expenses related to announcement of results, ADR training programs, non-deal roadshows and investor relations activities.

⁽²⁾

Broker reimbursements are fees payable to Broadridge and other service providers for the distribution of hard copy material to beneficial ADR holders holding in the Depositary Trust Company. Corporate material includes information related to shareholders’ meetings and related voting instruction cards. These fees are SEC approved.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.

A. MATERIAL MODIFICATION TO THE RIGHTS OF SECURITY HOLDERS

See “Item 10. Additional Information—Memorandum and Articles of Association”.

B. USE OF PROCEEDS

The following use of proceeds information relates to our registration statement on Form F-1 (File No. 333-110615), filed by us in connection with our initial public offering of H shares in the United States. In connection with the registration of the H shares, a registration statement on Form F-6 (File No.333-110622) was also filed for ADSs representing such H shares. Each of these two registration statements was declared effective by the SEC on December 11, 2003. Our H shares commenced trading on the Hong Kong Stock Exchange on December 18, 2003 and the ADSs on the New York Stock Exchange on December 17, 2003.

The net proceeds from the initial public offering of our shares, after deduction of fees and expenses, amounted to approximately RMB24,707 million and were held in either H.K. dollars or U.S. dollars. As of the date of this annual report, a part of the cash proceeds from our global offering was held in bank deposit accounts denominated in foreign currencies in China, and part of the cash proceeds was invested in securities listed on overseas stock exchanges, multi-asset portfolios and private equity funds. We invested approximately US$433 million, in addition to 2,282 million in Renminbi, in China Guangfa Bank in December 2006. We used approximately HK$ 12 billion for investments in Sino-Ocean Group Holding Limited in 2009, 2010 and 2013. As of December 31, 2020, we had engaged 9 third party overseas investment managers to manage US$1,096 million for investment in overseas public markets.

ITEM 15. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, we have carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the effectiveness of our disclosure controls and procedures as of December 31, 2020, the end of the period covered by this annual report. Based on that evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2020.

Management’s Annual Report on Internal Control over Financial Reporting

Management of China Life Insurance Company Limited (together with its consolidated subsidiaries, the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with applicable generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:

•

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets and liabilities of the Company;

•

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with the applicable generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

•

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

140

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013 framework). Based on this assessment, management determined that the Company’s internal control over financial reporting was effective as of December 31, 2020.

The Company’s internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young Hua Ming LLP, an independent registered public accounting firm, as stated in their report which is on pages F-6 and F-7 of this annual report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020.

Attestation Report of the Registered Public Accounting Firm

See the attestation report included in our consolidated financial statements included elsewhere in this annual report.

Changes in Internal Control over Financial Reporting

There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT.

Our board of directors has determined that Mr. Chang Tso Tung Stephen qualifies as an audit committee financial expert as defined in Item 16A of Form 20-F. Mr. Chang Tso Tung Stephen is “independent” in accordance with the applicable requirements of Rule 10A-3 of the Securities Exchange Act of 1934. Mr. Chang was appointed as an independent non-executive director and a member of the audit committee of our Company in October 2014. For Mr. Chang’s biographical information, see “Item 6. Directors, Senior Management and Employees”.

ITEM 16B. CODE OF ETHICS.

At the board of directors meeting held on June 29, 2004, we adopted a code of business conduct and ethics that applies to our chief executive officer, chief financial officer, controller and other senior officers of our company. We have filed the adopted code of business conduct and ethics as Exhibit 11.1 to this annual report, and a copy of which will be provided to any person free of charge upon written request to Yinghui Li, China Life Insurance Company Limited at 16 Financial Street, Xicheng District, Beijing 100033, China.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The following table sets forth the aggregate audit fees, audit-related fees, tax fees and all other fees paid to our principal accountants for the fiscal years of 2020 and 2019.


	Audit Fees⁽¹⁾		Audit-Related Fees		Tax Fees		All Other Fees⁽²⁾
	*(RMB in millions)*
2020		63		—		—		3
2019		61		—		—		3

(1)	Audit fees include fees billed for professional services rendered for audits of the consolidated financial statements and review of interim financial statements of China Life and fees billed for performing agreed-upon procedures.

(2)	All other fees include fees billed for advisory services which do not affect the independence of our principal accountants.

According to our current internal rules, before our principal accountants are engaged by us to render audit or non-audit services, the engagement must be approved by our audit committee.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

As of December 31, 2020, China Life and its subsidiaries had not purchased, sold or redeemed any of China Life’s shares.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.

Not Applicable.

141

ITEM 16G.

CORPORATE GOVERNANCE

As a Chinese company with H shares, ADSs and A shares publicly traded on the HKSE, the NYSE and the SSE, respectively, we must comply with the corporate governance standards provided by PRC company law and other laws, as well as the securities laws and regulations in Hong Kong, United States and the listing requirements of the HKSE, the NYSE and the SSE that are applicable to us. The description set forth below includes, for purpose of Section 303A.11 of the NYSE Listed Company Manual, a summary of the significant ways in which our corporate governance practices differ from those followed by U.S. domestic companies under NYSE rules.

Board Independence

We identify our independent non-executive directors in accordance with the qualifications provided by relevant PRC and Hong Kong regulations, which prohibit independent directors from having, among other things, specified interests in our securities or business, relationships with the management and financial dependence on us. These tests vary in certain respects with those set forth under Section 303A.02 of the NYSE Listed Company Manual.

Section 303A.02 of the NYSE Listed Company Manual also requires the board of directors to affirmatively determine that the director has no material relationship with the company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). Under the HKSE Listing Rules, each independent non-executive director must provide an annual confirmation of his independence to the listed company. Under the Tentative Guidelines on Corporate Governance of Insurance Companies issued by the CIRC in 2006 (the “Chinese Insurance Company Corporate Governance Guidelines”), each independent director must make a public announcement of the director’s independence and commitment to duties.

Section 303A.01 of the NYSE Listed Company Manual provides that a U.S. domestic issuer must have a majority of independent directors, unless more than 50% of such issuer’s voting power for the election of directors is controlled by an individual, a group or another company (a “controlled company”). Because more than 60% of our voting power is controlled by CLIC, we, as with controlled U.S. domestic companies, would not be required to comply with this independent board requirement. As of the date of this annual report, our board of directors comprised nine directors, including three executive directors, two non-executive directors and four independent non-executive directors.

Section 303A.03 of the NYSE Listed Company Manual requires a U.S. domestic company to have its non-management directors meet at regularly scheduled executive sessions without management and hold an executive session including only independent directors at least once a year, or hold regular executive sessions of independent directors. Under the HKSE corporate governance rules, from January 1, 2019, the chairman of our board of directors is required to have a meeting with independent non-executive directors only without the other directors present at least once a year. On August 26, 2020, the chairman of our board convened a meeting with independent non-executive directors only without the other directors present to discuss the operational management and development reform of our company.

Nominating/Corporate Governance Committee and Compensation Committee

Under Section 303A.04 of the NYSE Listed Company Manual, a U.S. domestic company must have a nominating/corporate governance committee composed entirely of independent directors with a written charter that addresses certain specified responsibilities, unless it is a “controlled company”. Section 303A.05 of the NYSE Listed Company Manual requires a U.S. domestic company to have a compensation committee composed entirely of independent directors with a written charter that addresses certain specified duties, unless it is a “controlled company”. We, as with controlled U.S. domestic companies, are not required under NYSE rules to have such a nominating/corporate governance committee or compensation committee. We have established a nominating and remuneration committee in accordance with the HKSE Listing Rules, comprised of a majority of independent non-executive directors as required under those rules. The primary duties of the nomination and remuneration committee are to review the structure of our board of directors, its number of members and composition, to formulate plans for the appointment, succession and appraisal criteria of our directors and senior management, and to formulate training and remuneration policies for our senior management.

The Guiding Opinions on Regulating Governance Structure of Insurance Companies require that nominating and remuneration committees of Chinese insurance companies be comprised entirely of non-executive directors with the independent directors as the Chairmen. In 2020, our nominating and remuneration committee comprised two independent non-executive directors and one non-executive director with one of the independent non-executive directors serving as the chairman. We have complied with the composition requirements of the nomination and remuneration committee as prescribed under the Chinese Insurance Company Corporate Governance Guidelines.

142

Audit Committee

The NYSE rules set forth two levels of audit committee standards for U.S. domestic companies and foreign private issuers. As a foreign private issuer, we are required to comply with the audit committee requirements under Section 303A.06 of the NYSE Listed Company Manual, such as audit committee independence and certain functions and powers, but are not subject to the additional qualifications, independence, function and other requirements for U.S. domestic companies provided under Section 303A.07 of the NYSE Listed Company Manual.

We have established an audit committee in accordance with the requirements of Section 303A.06 of the NYSE Listed Company Manual, the HKSE Listing Rules and the Chinese Insurance Company Corporate Governance Guidelines. In 2020, our audit committee comprised three independent non-executive directors with one of them serving as the chairman. The primary duties of the audit committee are to review and supervise the financial reporting process, to assess the effectiveness of our risk management and internal control system, to supervise our internal audit system and its implementation and to implement and recommend the engagement or replacement of external auditors. Our audit committee is also responsible for communications between our internal and external auditors and our internal reporting system.

Corporate Governance Guidelines

Under Section 303A.09 of the NYSE Listed Company Manual, a U.S. domestic company must adopt and disclose corporate governance guidelines that address specified key subjects. We are not required by Chinese or Hong Kong laws or requirements to, and currently do not, have such corporate governance guidelines. However, we address several of the key subjects required by the NYSE Listed Company Manual to be included in the corporate governance guidelines in our articles of association, Rules of Procedures for Board of Directors, Rules of Internal Control and other internal corporate documents.

In addition, under the HKSE Listing Rules, we are expected to comply with, but may choose to deviate from, the provisions of the Corporate Governance Code in the HKSE Listing Rules, which sets out the principles of good corporate governance for issuers. However, we are required to disclose the reasons for deviation, if any, in our interim and annual reports.

We are required by the CSRC to disclose in our annual report filed with the Shanghai Stock Exchange our actual corporate governance practice as compared with CSRC’s rules on corporate governance of listed companies. Under such rules, we are required to disclose whether there is any material difference between our actual practices and the requirements under such rules, and explain the details and reasons for such differences, if any. Accordingly, we have disclosed in our annual report for the year of 2020 filed with the Shanghai Stock Exchange that we had established a corporate governance structure with well-defined duties and responsibilities strictly in accordance with the PRC Company Law and PRC Securities Law as well as relevant rules and regulations, and that our actual corporate governance practices are generally in compliance with the applicable regulatory rules and requirements of the jurisdictions where we are listed.

Code of Business Conduct and Ethics

Section 303A.10 of the NYSE Listed Company Manual requires U.S. domestic companies to adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. We have adopted a Code of Business Conduct and Ethics for Directors and Senior Officers and Code of Conduct for Employees. We have disclosed the Code of Business Conduct and Ethics for Directors and Senior Officers in our annual report under Form 20-F for fiscal year ended December 31, 2004 and are required to disclose in the annual report under Form 20-F any waivers of the code for directors or executive officers. In addition, according to the HKSE Listing Rules, all of our directors must comply with the Model Code for Securities Transactions by Directors of Listed Companies that sets forth the required standards with which the directors of a listed company must comply in securities transactions of the listed company. Under the Listing Rules of the Shanghai Stock Exchange, any of the directors, supervisors or senior management of the listed company may not transfer any shares of such company held by him/her within one year of the listing of the company or six months after leaving the company. During his/her tenure at the company, the number of shares transferred each year must not exceed 25% of the total number of shares of the company held by him/her, provided, however, if the directors, supervisors or senior management leave the company before the expiration of his/her tenure, during the term of his/her original tenure determined at the time of his/her appointment, the number of shares transferred each year must not exceed 25% of the total number of shares of the company held by him/her and may not transfer any shares within half a year after the expiration of the term of his/her original tenure determined at the time of his/her appointment. During his/her tenure at the company, he/she must file with the Shanghai Stock Exchange for record in advance any proposed transaction in the shares of the company in accordance with the relevant rules and regulations. In case of changes in shareholdings in the company, he/she shall report the changes on a timely basis to the company, which must then make relevant announcements on the website of the Shanghai Stock Exchange.

Certification Requirements

Under Section 303A.12(a) of the NYSE Listed Company Manual, each U.S. domestic company Chief Executive Officer must certify to the NYSE each year that he or she is not aware of any violation by the listed company of NYSE corporate governance listing standards. There are no similar requirements under PRC or Hong Kong laws or requirements.

143

ITEM 16H. MINE SAFETY DISCLOSURE.

Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS.

We have elected to provide the financial statements and related information specified in Item 18 in lieu of Item 17.

ITEM 18. FINANCIAL STATEMENTS.

See Index to Consolidated Financial Statements for a list of all financial statements filed as part of this annual report.

ITEM 19. EXHIBITS.

(a) See Item 18 for a list of the financial statements filed as part of this annual report.

(b) Exhibits to this annual report.

144

EXHIBIT INDEX


No.		Description of Exhibit

1.1		Amended and Restated Articles of Association of the Registrant⁽⁸⁾

2.1		Form of H Share Certificate⁽¹⁾

2.2		Form of Deposit Agreement, including the Form of American Depositary Receipt⁽²⁾

2.3		Amendment No. 1 to Deposit Agreement⁽³⁾

2.4		Amendment No. 2 to Deposit Agreement⁽⁴⁾

2.5		Description of Rights of Each Class of Securities Registered under Section 12 of the Exchange Act

4.1		Restructuring Agreement⁽¹⁾

4.2		Trademark License Agreement⁽¹⁾

4.3		Policy Management Agreement

4.4		Non-Competition Agreement⁽¹⁾

4.5		Asset Management Agreement between China Life Insurance (Group) Company and China Life Asset Management Company Limited

4.6		Asset Management Agreement between China Life Insurance Company Limited and China Life Investment Holding Company Limited⁽⁷⁾

4.7		Asset Management Agreement between China Life Insurance Company Limited and China Life Asset Management Company Limited

4.8		Property Leasing Agreement

4.9		Entrustment and Account Management Agreement for Corporate Annuity Fund⁽⁶⁾

4.10		Insurance Sales Framework Agreement between China Life Insurance Company Limited and China Life Property and Casualty Insurance Company Limited

8.1		List of Subsidiaries of the Registrant

11.1		Code of Business Conduct and Ethics⁽⁵⁾

12.1		Certification pursuant to Rule 13a-14(a)

12.2		Certification pursuant to Rule 13a-14(a)

13.1		Certification pursuant to Rule 13a-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code

101		Interactive Data File

(1)	Incorporated by reference to the Registration Statement on Form F-1 (File No. 333-110615), filed with the Commission on December 9, 2003.

(2)	Incorporated by reference to the Registration Statement on Form F-6 (File No. 333-164005), filed with the Commission on January 4, 2010.

(3)	Incorporated by reference to the Post-Effective Amendment No. 1 to Form F-6 (File No. 333-164005), filed with the Commission on January 27, 2015.

(4)	Incorporated by reference to the Post-Effective Amendment No. 2 to Form F-6 (File No. 333-164005), filed with the Commission on May 1, 2015.

(5)	Incorporated by reference to the Annual Report on Form 20-F for the fiscal year ended December 31, 2004, filed with the Commission on May 27, 2005.

(6)	Incorporated by reference to the Annual Report on Form 20-F for the fiscal year ended December 31, 2014, filed with the Commission on April 24, 2015.

(7)	Incorporated by reference to the Annual Report on Form 20-F for the fiscal year ended December 31, 2018, filed with the Commission on April 24, 2019.

(8)	Incorporated by reference to the Annual Report on Form 20-F for the fiscal year ended December 31, 2019, filed with the Commission on April 29, 2020.

145

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.


China Life Insurance Company Limited

By:		/s/ Su Hengxuan
		Name: Su Hengxuan
		Title: President and Executive Director

Date: April 29, 2021

China Life Insurance Company Limited

Contents


	Pages
Independent Auditor’s report		F-2 - F-7

Consolidated Statement of Financial Position		F-8 - F-9

Consolidated Statement of Comprehensive Income		F-10 - F-11

Consolidated Statement of Changes in Equity		F-12

Consolidated Statement of Cash Flows		F-13 - F-14

Notes to the Consolidated Financial Statements		F-15 - F-112

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of China Life Insurance Company Limited

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of China Life Insurance Company Limited (the Company) as of 31 December 2020 and 2019, the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the three years in the period ended 31 December 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at 31 December 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended 31 December 2020, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of 31 December 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated 29 April 2021 expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

As discussed in Note 2.7 to the consolidated financial statements, the Company changed its method for accounting for leases in 2019 and 2020.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F-2

Report of Independent Registered Public Accounting Firm (continued)

Critical Audit Matters (continued)


		*Valuation of insurance contract liabilities*

Description of the Matter		At 31 December 2020, the Group had significant insurance contract liabilities in the amount of RMB2,973.23 billion. As disclosed in Notes 2.12 and 15 to the consolidated financial statements, the Group’s insurance contract liabilities are primarily comprised of long-term insurance contract liabilities. The Group uses the discounted cash flow method to estimate the reserve of long-term insurance contracts. Auditing the Group’s long-term insurance contract liabilities was complex due to the complexity of the actuarial models and highly judgmental nature of the actuarial assumptions used by management to estimate the liabilities. The actuarial assumptions include mortality, morbidity, lapse rates, discount rates, and expenses. Changes in these assumptions could have significant effects on the valuation of the long-term insurance contract liabilities.

How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Group’s long-term insurance contract liabilities valuation processes. For example, we tested controls over management’s review of the actuarial models, the actuarial assumptions, and the data inputs used. To test the valuation of long-term insurance contract liabilities, our audit procedures included, among others, comparing the methodology, actuarial models and actuarial assumptions used by the Group to recognised actuarial practices and testing the completeness and accuracy of the underlying insurance policy data used in the valuation. We involved our actuarial specialists to assist us with assessing the reasonableness of the assumptions by comparing them to industry data, historical experiences and expectations of the Group. For a sample of selected insurance products, our actuarial specialists performed an independent recalculation of the long-term insurance contract liabilities. In addition, our actuarial specialists assisted in performing analytical procedures over the movement of long-term insurance contract liabilities considering changes in the actuarial assumptions in the reporting period.

F-3

Report of Independent Registered Public Accounting Firm (continued)

Critical Audit Matters (continued)


		*The impairment test for investment in an associate*

Description of the Matter		At 31 December 2020, the Group held a material investment in an associate, Sino-Ocean Group Holding Limited (“Sino-Ocean”), a company listed on the Stock Exchange of Hong Kong Limited, with a carrying value of RMB11.29 billion. As disclosed in Note 9 to the consolidated financial statements, as the quoted market price of this investment has been continuously below its carrying value, the Group performed an impairment test, and recognised an impairment loss of RMB707 million in 2020. Auditing management’s impairment test of Sino-Ocean was complex due to the significant estimates and judgements involved in management’s assessment of its value in use, including the selling prices of properties under development rental prices of investment properties included in the projection of future cash flows and the discount rates used. These estimates and judgements may be affected by unexpected changes in the future market or economic conditions.

How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Group’s investment impairment test of Sino-Ocean. For example, we tested controls over management’s review of the impairment test methodology and the significant assumptions used in the valuation. To test the impairment test of Sino-Ocean, our audit procedures included, among others, evaluating the Group’s valuation methodology and testing the completeness and accuracy of the underlying data used in the cash flows projection. We compared the selling prices of properties under development and rental prices of investment properties used in the cash flow projection to the historical business results of Sino-Ocean and industry data. We also involved our valuation specialists to assist us with assessing the reasonableness of the Group’s valuation methodology with reference to valuation guidelines and industry practice. In addition, we compared the discount rate used by the Group with the discount rate developed by our valuation specialists using information of comparable companies.

F-4

Report of Independent Registered Public Accounting Firm (continued)

Critical Audit Matters (continued)


		*Fair value of level III financial assets*

Description of the Matter		At 31 December 2020, the Group held material investments in certain level III financial assets such as private equity funds, preference shares, other equity and debt investments, which are accounted for as available-for-sale securities at fair value or securities at fair value through profit or loss with a combined carrying value of RMB293.92 billion. As disclosed in Note 4.4 to the consolidated financial statements, these investments are classified as level III in the fair value hierarchy as their fair values are measured using valuation methodologies with significant unobservable inputs. Auditing the fair value measurement of the Group’s level III financial assets was complex due to the significant estimates and judgements involved in the assessment of valuation methodologies and significant unobservable inputs, including discount rates and discounts for lack of marketability, among others. The use of different valuation methodologies and changes in significant unobservable inputs could result in significantly different fair value estimates.

How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Group’s fair value measurement of level III financial assets. For example, we tested management’s review controls over the valuation methodologies and the significant unobservable inputs used in the fair value measurements. To test the fair value measurement of level III financial assets, our audit procedures included, among others, evaluating the Group’s valuation methodologies, testing the significant unobservable inputs used by the Group in determining the fair values, and testing the mathematical accuracy of the Group’s valuation calculations. We involved our valuation specialists to assist us with evaluating the Group’s valuation methodologies and assessing the reasonableness of the significant unobservable inputs, including discount rates and discounts for lack of marketability, among others used in the valuations by comparing them to information available from third-party sources and market data. For a sample of the Group’s level III financial assets, our valuation specialists also independently developed fair value estimates and compared them to the Group’s valuation results.

/s/ Ernst & Young Hua Ming LLP

We have served as the Company’s auditor since 2013.

Beijing, People’s Republic of China

29 April 2021

F-5

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of China Life Insurance Company Limited

Opinion on Internal Control over Financial Reporting

We have audited China Life Insurance Company Limited’s internal control over financial reporting as of 31 December 2020, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, China Life Insurance Company Limited (the Company) maintained, in all material respects, effective internal control over financial reporting as of 31 December 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Company as of 31 December 2020 and 2019, the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the three years in the period ended 31 December 2020, and the related notes, and our report dated 29 April 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

F-6

Report of Independent Registered Public Accounting Firm (continued)

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

/s/ Ernst & Young Hua Ming LLP

Beijing, People’s Republic of China

29 April 2021

F-7

CHINA LIFE INSURANCE COMPANY LIMITED

Consolidated Statement of Financial Position

As at 31 December 2020

Notes

As at 31
December
2020
RMB million

As at 31
December
2019
RMB million

ASSETS

Property, plant and equipment

52,747

51,758

Right-of-use assets

3,076

3,520

Investment properties

14,217

12,141

Investments in associates and joint ventures

239,584

222,983

Held-to-maturity securities

10.1

1,189,369

928,751

Loans

10.2

658,535

608,920

Term deposits

10.3

545,667

535,260

Statutory deposits - restricted

10.4

6,333

6,333

Available-for-sale securities

10.5

1,215,603

1,058,957

Securities at fair value through profit or loss

10.6

161,570

141,608

Derivative financial assets

10.7

—

428

Securities purchased under agreements to resell

10.8

7,947

4,467

Accrued investment income

10.9

45,200

41,703

Premiums receivable

20,730

17,281

Reinsurance assets

6,095

5,161

Other assets

29,021

34,029

Deferred tax assets

128

Cash and cash equivalents

56,629

53,306

Total assets

4,252,410

3,726,734

The notes on pages 15 to 112 form an integral part of these consolidated financial statements.

F-8

CHINA LIFE INSURANCE COMPANY LIMITED

Consolidated Statement of Financial Position (continued)

As at 31 December 2020


	Notes		As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
LIABILITIES AND EQUITY
Liabilities
Insurance contracts		15		2,973,225		2,552,736
Investment contracts		16		288,212		267,804
Policyholder dividends payable				122,510		112,593
Interest-bearing loans and borrowings		17		19,556		20,045
Lease liabilities				2,664		3,091
Bonds payable		18		34,992		34,990
Financial liabilities at fair value through profit or loss				3,732		3,859
Securities sold under agreements to repurchase		19		122,249		118,088
Annuity and other insurance balances payable				55,031		51,019
Premiums received in advance				53,021		60,898
Other liabilities		20		104,426		81,114
Deferred tax liabilities		29		15,286		10,330
Current income tax liabilities				191		223
Statutory insurance fund		21		384		602

Total liabilities				3,795,479		3,317,392

Equity
Share capital		35		28,265		28,265
Other equity instruments		36		—		7,791
Reserves		37		237,890		197,221
Retained earnings				183,896		170,487

Attributable to equity holders of the Company				450,051		403,764

Non-controlling interests				6,880		5,578

Total equity				456,931		409,342

Total liabilities and equity				4,252,410		3,726,734

Approved and authorised for issue by the Board of Directors on 25 March 2021.

The notes on pages 15 to 112 form an integral part of these consolidated financial statements.

F-9

CHINA LIFE INSURANCE COMPANY LIMITED

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2020


	Notes		2020 RMB million			2019 RMB million			2018 RMB million
REVENUES
Gross written premiums				612,265			567,086			535,826
Less: premiums ceded to reinsurers				(6,053	)		(5,238	)		(4,503	)

Net written premiums				606,212			561,848			531,323
Net change in unearned premium reserves				(1,546	)		(1,570	)		700

Net premiums earned				604,666			560,278			532,023

Investment income		22		154,497			139,919			125,167
Net realised gains on financial assets		23		14,583			1,831			(19,591	)
Net fair value gains through profit or loss		24		21,900			19,251			(18,278	)
Other income				9,315			8,195			8,098

Total revenues				804,961			729,474			627,419

BENEFITS, CLAIMS AND EXPENSES
Insurance benefits and claims expenses
Life insurance death and other benefits		25		(113,609	)		(127,877	)		(248,736	)
Accident and health claims and claim adjustment expenses		25		(52,395	)		(50,783	)		(40,552	)
Increase in insurance contract liabilities		25		(414,797	)		(330,807	)		(189,931	)
Investment contract benefits		26		(9,846	)		(9,157	)		(9,332	)
Policyholder dividends resulting from participation in profits				(28,279	)		(22,375	)		(19,646	)
Underwriting and policy acquisition costs				(84,342	)		(81,396	)		(62,705	)
Finance costs		27		(3,747	)		(4,255	)		(4,116	)
Administrative expenses				(37,687	)		(40,275	)		(37,486	)
Statutory insurance fund contribution		21		(1,229	)		(1,163	)		(1,097	)
Other expenses				(12,208	)		(9,602	)		(7,642	)

Total benefits, claims and expenses				(758,139	)		(677,690	)		(621,243	)

Net gains on investments of associates and joint ventures		9		7,666			8,011			7,745
Including: share of profit of associates and joint ventures				8,336			9,159			7,745

Profit before income tax		28		54,488			59,795			13,921
Income tax		29		(3,103	)		(781	)		(1,985	)

Net profit				51,385			59,014			11,936

Attributable to:
- Equity holders of the Company				50,268			58,287			11,395
- Non-controlling interests				1,117			727			541
Basic and diluted earnings per share		30		RMB1.77			RMB2.05			RMB0.39

The notes on pages 15 to 112 form an integral part of these consolidated financial statements.

F-10

CHINA LIFE INSURANCE COMPANY LIMITED

Consolidated Statement of Comprehensive Income (continued)

For the year ended 31 December 2020


	Note		2020 RMB million			2019 RMB million			2018 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				52,547			69,600			(24,591	)
Amount transferred to net profit from other comprehensive income				(14,386	)		(4,635	)		19,549
Portion of fair value changes on available-for-sale securities attributable to participating policyholders				(3,959	)		(19,521	)		(32	)
Share of other comprehensive income of associates and joint ventures under the equity method				672			599			735
Exchange differences on translating foreign operations				(986	)		237			598
Income tax relating to components of other comprehensive income		29		(8,482	)		(11,292	)		1,716

Other comprehensive income that may be reclassified to profit or loss in subsequent periods				25,406			34,988			(2,025	)

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				344			(76	)		—

Other comprehensive income for the year, net of tax				25,750			34,912			(2,025	)

Total comprehensive income for the year, net of tax				77,135			93,926			9,911

Attributable to:
- Equity holders of the Company				75,967			93,134			9,325
- Non-controlling interests				1,168			792			586

The notes on pages 15 to 112 form an integral part of these consolidated financial statements.

F-11

CHINA LIFE INSURANCE COMPANY LIMITED

Consolidated Statement of Changes in Equity

For the year ended 31 December 2020


	Attributable to equity holders of the Company											Non- controlling interests			Total
	Share capital RMB million		Other equity instruments RMB million			Reserves RMB million			Retained earnings RMB million			RMB million			RMB million
	(Note 35)		(Note 36)			(Note 37)
As at 1 January 2018		28,265		7,791			145,675			139,202			4,377			325,310
Net profit		—		—			—			11,395			541			11,936
Other comprehensive income		—		—			(2,070	)		—			45			(2,025	)

Total comprehensive income		—		—			(2,070	)		11,395			586			9,911

Transactions with owners
Capital paid in by non-controlling interests		—		—			—			—			105			105
Appropriation to reserves (Note 37)		—		—			5,885			(5,885	)		—			—
Dividends paid (Note 32)		—		—			—			(11,690	)		—			(11,690	)
Dividends to non-controlling interests		—		—			—			—			(149	)		(149	)
Others		—		—			(197	)		—			—			(197	)

Total transactions with owners		—		—			5,688			(17,575	)		(44	)		(11,931	)

As at 31 December 2018		28,265		7,791			149,293			133,022			4,919			323,290

Effect of associates’ adoption of new accounting standards		—		—			16			(2,905	)		—			(2,889	)
As at 1 January 2019		28,265		7,791			149,309			130,117			4,919			320,401
Net profit		—		—			—			58,287			727			59,014
Other comprehensive income		—		—			34,847			—			65			34,912

Total comprehensive income		—		—			34,847			58,287			792			93,926

Transactions with owners
Appropriation to reserves (Note 37)		—		—			13,087			(13,087	)		—			—
Dividends paid (Note 32)		—		—			—			(4,916	)		—			(4,916	)
Dividends to non-controlling interests		—		—			—			—			(133	)		(133	)
Reserves to retained earnings (Note 37)		—		—			(86	)		86			—			—
Others		—		—			64			—			—			64

Total transactions with owners		—		—			13,065			(17,917	)		(133	)		(4,985	)

As at 31 December 2019		28,265		7,791			197,221			170,487			5,578			409,342

As at 1 January 2020		28,265		7,791			197,221			170,487			5,578			409,342
Net profit		—		—			—			50,268			1,117			51,385
Other comprehensive income		—		—			25,699			—			51			25,750

Total comprehensive income		—		—			25,699			50,268			1,168			77,135

Transactions with owners
Appropriation to reserves (Note 37)		—		—			16,025			(16,025	)		—			—
Dividends paid (Note 32)		—		—			—			(20,834	)		—			(20,834	)
Dividends to non-controlling interests		—		—			—			—			(174	)		(174	)
Others		—		(7,791	)		(1,055	)		—			308			(8,538	)

Total transactions with owners		—		(7,791	)		14,970			(36,859	)		134			(29,546	)

As at 31 December 2020		28,265		—			237,890			183,896			6,880			456,931

The notes on pages 15 to 112 form an integral part of these consolidated financial statements.

F-12

CHINA LIFE INSURANCE COMPANY LIMITED

Consolidated Statement of Cash Flows

For the year ended 31 December 2020


	2020			2019			2018
	RMB million			RMB million			RMB million
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before income tax		54,488			59,795			13,921
Adjustments for:
Investment income		(154,497	)		(139,919	)		(125,167	)
Net realised and unrealised losses/(gains) on financial assets		(36,483	)		(21,082	)		37,869
Insurance contracts		419,866			335,971			190,210
Depreciation and amortisation		5,161			4,379			2,638
Foreign exchange losses/(gains)		(119	)		67			194
Net gains on investments of associates and joint ventures		(7,666	)		(8,011	)		(7,745	)
Changes in operating assets and liabilities:
Decrease/(increase) in securities at fair value through profit or loss, net		(21,954	)		6,858			(9,020	)
Financial liabilities at fair value through profit or loss		3,004			1,213			1,114
Receivables and payables		40,592			50,622			48,838
Income tax paid		(3,263	)		(8,636	)		(9,991	)
Interest received—securities at fair value through profit or loss		4,120			3,811			3,527
Dividends received—securities at fair value through profit or loss		775			964			1,164

Net cash inflow/(outflow) from operating activities		304,024			286,032			147,552

CASH FLOWS FROM INVESTING ACTIVITIES
Disposals and maturities:
Disposals of debt investments		36,774			112,182			48,942
Maturities of debt investments		198,640			133,519			110,425
Disposals of equity investments		308,406			450,014			278,003
Disposals of property, plant and equipment		57			72			274
Disposals of subsidiaries		2,175			1,432			—
Purchases:
Debt investments		(593,917	)		(504,292	)		(294,238	)
Equity investments		(338,306	)		(545,657	)		(335,301	)
Property, plant and equipment		(7,467	)		(11,415	)		(19,546	)
Investments in associates and joint ventures		(14,942	)		(23,389	)		(34,928	)
Decrease/(increase) in term deposits, net		(10,947	)		24,102			(109,590	)
Decrease/(increase) in securities purchased under agreements to resell, net		(3,850	)		5,468			26,258
Interest received		126,848			116,846			106,342
Dividends received		29,590			25,169			19,503
Increase in policy loans, net		(25,858	)		(32,707	)		(34,208	)
Cash paid related to other investing activities		—			—			(309	)
Cash received related to other investing activities		—			1,141			—

Net cash inflow/(outflow) from investing activities		(292,797	)		(247,515	)		(238,373	)

The notes on pages 15 to 112 form an integral part of these consolidated financial statements.

F-13

CHINA LIFE INSURANCE COMPANY LIMITED

Consolidated Statement of Cash Flows (continued)

For the year ended 31 December 2020


	2020			2019			2018
	RMB million			RMB million			RMB million
CASH FLOWS FROM FINANCING ACTIVITIES
Increase/(decrease) in securities sold under agreements to repurchase, net		4,912			(73,552	)		104,832
Interest paid		(3,779	)		(3,072	)		(3,990	)
Repayment of borrowings		(6,505	)		(365	)		—
Dividends paid to equity holders of the Company		(20,834	)		(4,916	)		(11,690	)
Dividends paid to non-controlling interests		(161	)		(133	)		(149	)
Proceeds from issue of bonds		—			34,988			—
Cash received from borrowings		6,822			123			727
Payment of principal portion of lease liabilities		(1,478	)		(1,348	)		—
Cash paid for redemption of other equity instruments		(9,060	)		—			—
Capital injected into subsidiaries by non-controlling interests		22,846			12,961			3,560
Cash received related to other financing activities		1,069			—			—
Cash paid related to other financing activities		(1,592	)		(761	)		(327	)

Net cash inflow/(outflow) from financing activities		(7,760	)		(36,075	)		92,963

Foreign exchange gains/(losses) on cash and cash equivalents		(144	)		55			81

Net increase in cash and cash equivalents		3,323			2,497			2,223

Cash and cash equivalents
Beginning of the year		53,306			50,809			48,586

End of the year		56,629			53,306			50,809

Analysis of balances of cash and cash equivalents
Cash at banks and in hand		56,510			52,800			50,792
Short-term bank deposits		119			506			17

The notes on pages 15 to 112 form an integral part of these consolidated financial statements.

F-14

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 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 “Restructuring”). 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 Company is a joint stock company incorporated in the PRC with limited liability. 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 consolidated financial statements are presented in millions of Renminbi (“RMB million”) unless otherwise stated. These consolidated financial statements have been approved and authorised for issue by the Board of Directors on 25 March 2021.

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1

Basis of preparation

The Group has prepared these consolidated financial statements in accordance with International Financial Reporting Standards (“IFRSs”), amendments to IFRSs and interpretations issued by the International Accounting Standards Board (“IASB”). These consolidated financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and the applicable disclosure requirements of the Hong Kong Companies Ordinance. The Group has prepared the consolidated financial statements under the historical cost convention, except for financial assets and liabilities at fair value through profit or loss, available-for-sale securities, insurance contract liabilities and certain property, plant and equipment at deemed cost as part of the Restructuring process. The preparation of financial statements in compliance with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3.

2.1.1

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

F-15

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1

Basis of preparation (continued)

2.1.1

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, or both. 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.

F-16

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1

Basis of preparation (continued)

2.1.2

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 33 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, based on their respective business models. The Group analysed the contractual cash flow characteristics of financial assets as at 31 December 2020 and made relevant disclosures in Note 33.

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 the 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.

F-17

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1

Basis of preparation (continued)

2.1.3

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 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Amendments	Interest Rate Benchmark Reform — Phase 2		1 January 2021
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 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Amendments – Interest Rate Benchmark Reform – Phase 2

In August 2020, the IASB issued IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Amendments Interest Rate Benchmark Reform – Phase 2. The amendments address issues not dealt with in the previous amendments which affect financial reporting when an existing interest rate benchmark is replaced with an alternative benchmark rate. The Phase 2 amendments provide a practical expedient to allow the effective interest rate to be updated without adjusting the carrying amount when accounting for changes in the basis for determining the contractual cash flows of financial assets and liabilities, if the change is a direct consequence of the interest rate benchmark reform and the new basis for determining the contractual cash flows is economically equivalent to the previous basis immediately preceding the change. In addition, the amendments permit changes required by the interest rate benchmark reform to be made to hedge designations and hedge documentation without the hedging relationship being discontinued. Any gains or losses that could arise on transition are dealt with through the normal requirements of IFRS 9 to measure and recognise hedge ineffectiveness. The amendments also provide a temporary relief to entities from having to meet the separately identifiable requirement when the alternative benchmark rate is designated as a risk component. The relief allows an entity, upon designation of the hedge, to assume that the separately identifiable requirement is met, provided the entity reasonably expects the risk component to become separately identifiable within the next 24 months. Furthermore, the amendments require an entity to disclose additional information to enable users of financial statements to understand the effect of interest rate benchmark reform on an entity’s financial instruments and risk management strategy. The amendments are effective for annual periods beginning on or after 1 January 2021 and shall be applied retrospectively, but entities are not required to restate the comparative information.

The Group had certain interest-bearing bank borrowings denominated in US dollars and Euros based on the London Interbank Offered Rate (“LIBOR”) and the Europe Interbank Offered Rate (“EURIBOR”) as at 31 December 2020. If the interest rates of these borrowings are replaced by alternative benchmark rates in a future period, the Group will apply this practical expedient upon the modification of these borrowings when the “economically equivalent” criterion is met and expects that no significant modification gain or loss will arise as a result of applying the amendments to these changes.

F-18

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1

Basis of preparation (continued)

2.1.3

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

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.

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.

IFRS 10 and IAS 28 Amendments – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Amendments to IFRS 10 and IAS 28 address an inconsistency between the requirements in IFRS 10 and IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments require a full recognition of a gain or loss when the sale or contribution of assets between an investor and its associate or joint venture constitutes a business. For a transaction involving assets that do not constitute a business, a gain or loss resulting from the transaction is recognised in the investor’s profit or loss only to the extent of the unrelated investor’s interest in that associate or joint venture. The IASB has deferred the effective date of these amendments indefinitely, but an entity that early adopts the amendments must apply them prospectively. The Group will apply these amendments when they become effective.

F-19

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.2

Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended 31 December 2020. Subsidiaries are those entities which are controlled by the Group (including the structured entities controlled by the Group). Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

•

power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);

•

exposure, or rights, to variable returns from its involvement with the investee; and

•

the ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

•

the contractual arrangement with the other vote holders of the investee;

•

rights arising from other contractual arrangements; and

•

the Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.

Profit or loss and each component of OCI are attributed to the equity holders of the Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full upon consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

•

derecognises the assets (including goodwill) and liabilities of the subsidiary;

•

derecognises the carrying amount of any non-controlling interests;

•

derecognises the cumulative translation differences recorded in equity;

•

recognises the fair value of the consideration received;

•

recognises the fair value of any investment retained;

•

recognises any surplus or deficit in profit or loss; and

•

reclassifies the Group’s share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as if the Group had directly disposed of the related assets or liabilities.

F-20

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.2

Consolidation (continued)

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interest issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

The excess of the aggregate of the consideration transferred, the fair value of any non-controlling interest in the acquiree, and the fair value of any previous equity interest in the acquiree at the acquisition date over the fair value of the net identifiable assets acquired and liabilities assumed is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed, and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. If there is any indication that goodwill is impaired, recoverable amount is estimated and the difference between carrying amount and recoverable amount is recognised as an impairment charge. Impairment losses on goodwill are not reversed in subsequent periods. Gains or losses on the disposal of an entity take into consideration the carrying amount of goodwill relating to the entity sold.

The investments in subsidiaries are accounted for only in the Company’s statement of financial position at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

Transactions with non-controlling interests

The Group treats transactions with non-controlling interests that do not result in loss of controls as equity transactions. For shares purchased from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposal of shares to non-controlling interests are also recorded in equity.

When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in OCI in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in OCI are reclassified to profit or loss.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in OCI is reclassified to profit or loss as appropriate.

F-21

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.3

Associates and joint ventures

Associates are entities over which the Group has significant influence, generally accompanying a shareholding of between 20% and 50% of the voting rights of the investee. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

Joint ventures are the type of joint arrangements whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

Investments in associates and joint ventures are accounted for using the equity method of accounting and are initially recognised at cost.

The Group’s share of post-acquisition profit or loss of its associates and joint ventures is recognised in net profit, and its share of post-acquisition movements in OCI is recognised in the consolidated statement of comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture, including any other unsecured receivables, the Group does not recognise further losses unless it has obligations to make payments on behalf of the associate or joint venture.

Unrealised gains on transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group’s interests in the associates or joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Associates and joint ventures’ accounting policies have been changed where necessary to ensure consistency with the policies adopted by the Group.

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of acquired associates or joint ventures at the date of acquisition. Goodwill on acquisitions of associates and joint ventures is included in investments in associates and joint ventures and is tested for impairment as part of the overall balance. Impairment losses on goodwill are not reversed. Gains or losses on the disposal of an entity take into consideration the carrying amount of goodwill relating to the entity sold.

The Group determines at each reporting date whether there is any objective evidence that the investments in associates and joint ventures are impaired. If this is the case, an impairment loss is recognised for the amount by which the investment’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the investment’s fair value less costs of disposal and value in use. The impairment of investments in the associates and joint ventures is reviewed for possible reversal at each reporting date.

The investments in associates and joint ventures are stated at cost less impairment in the Company’s statement of financial position. The results of associates and joint ventures are accounted for by the Company on the basis of dividends received and receivable.

2.4

Segment reporting

The Group’s operating segments are presented in a manner consistent with the internal management reporting provided to the operating decision maker - president office for deciding how to allocate resources and for assessing performance.

Operating segment refers to the segment within the Group that satisfies the following conditions: i) the segment generates income and incurs costs from daily operating activities; ii) management evaluates the operating results of the segment to make resource allocation decision and to evaluate the business performance; and iii) the Group can obtain relevant financial information of the segment, including financial condition, operating results, cash flows and other financial performance indicators.

F-22

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.5

Foreign currency translation

The Company’s functional currency is RMB. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. The reporting currency of the consolidated financial statements of the Group is RMB. Transactions in foreign currencies are translated at the exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates ruling at the end of the reporting period. Exchange differences arising in these cases are recognised in net profit.

2.6

Property, plant and equipment

Property, plant and equipment, are stated at historical costs less accumulated depreciation and any accumulated impairment losses, except for those acquired prior to 30 June 2003, which are stated at deemed cost less accumulated depreciation and any accumulated impairment losses.

The historical costs of property, plant and equipment comprise its purchase price, including import duties and non-refundable purchase taxes, and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after terms of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the statement of comprehensive income in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the assets as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

Depreciation

Depreciation is computed on a straight-line basis to write down the cost of each asset to its residual value over its estimated useful lives as follows:


Estimated useful lives
Buildings			15 to 35 years
Office equipment, furniture and fixtures			3 to 11 years
Motor vehicles			4 to 8 years
Leasehold improvements			Over the shorter of the remaining term of the lease and the useful lives

The residual values, depreciation method and useful lives are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items of property, plant and equipment.

Assets under construction mainly represent buildings under construction, which are stated at cost less any impairment losses and are not depreciated, except for those acquired prior to 30 June 2003, which are stated at deemed cost less any accumulated impairment losses. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. Assets under construction are reclassified to the appropriate category of property, plant and equipment, investment properties or other assets when completed and ready for use.

Impairment and gains or losses on disposals

Property, plant and equipment are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised in net profit for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset’s net selling price and value in use.

The gain or loss on disposal of an item of property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in net profit.

F-23

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.7

Leases

(i)

Applicable from 1 January 2019

At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset for a period of a time, the Group assesses whether, throughout the period of use, the lessee has the right to obtain substantially all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset.

As a lessee

Initial measurement

At the commencement date of the lease, the Group recognises right-of-use assets representing the right to use the leased assets, including buildings and land use rights, etc. The Group measures the lease liability at the present value of the lease payments that are not paid at that date, except for short-term leases and leases of low-value assets. In calculating the present value of the lease payments, the lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Group uses its own incremental borrowing rate.

The lease term is the non-cancellable period of a lease when the Group has the right to use lease assets. When the Group has an option to extend a lease and is reasonably certain to exercise that option to extend a lease, the lease term also comprises the periods covered by the option to extend the lease. When the Group has an option to terminate the lease and is reasonably certain not to exercise that option, the lease term also comprises the periods covered by the option to terminate the lease. The Group reassesses whether it is reasonably certain to exercise an extension option, to exercise a purchase option or not to exercise a termination option, upon the occurrence of either a significant event or a significant change in circumstances that are within the control of the Group and affects whether the Group is reasonably certain to exercise the commensurate options.

Subsequent measurement

The Group applies the straight-line method in depreciating the right-of-use assets. If it is reasonably certain that ownership of a leased asset transfers to the Group at the end of the lease term, the leased asset is depreciated under the remaining useful life of the asset. If it cannot be reasonably determined that ownership of a leased asset transfers to the Group at the end of the lease term, the Group depreciates the right-of-use asset from the commencement date to the earlier of the end of the lease term or the end of the useful life of the right-of-use asset.

The Group uses a constant periodic rate of interest to calculate interest on the lease liability in each period during the lease term and recognises the interest in profit or loss.

F-24

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.7

Leases (continued)

(i)

Applicable from 1 January 2019 (continued)

As a lessee (continued)

Subsequent measurement (continued)

Variable lease payments not included in the measurement of the lease liability are recognised in profit or loss in the period in which the event or condition that triggers the payment occurs.

After the commencement date of a lease, when there is a change in in-substance fixed payments, a change in the amounts expected to be payable under a residual value guarantee, a change in future lease payments resulting from a change in an index or a rate used to determine those payments, a change in the assessment or actual exercise situation of a purchase option, an extension option or a termination option, the Group uses the changed present value of lease payments to remeasure the lease liability and adjust the carrying amount of right-of-use asset accordingly. If the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Group recognises any remaining amount of the remeasurement in profit or loss.

The Group assesses whether there is any indication that a right-of-use asset may be impaired at the end of reporting period. If any such indication exists, the Group performs the impairment test. An impairment loss is recognised in net profit for the amount by which the carrying amount of the right-of-use asset exceeds its recoverable amount, which is the higher of the right-of-use asset’s net selling price and value in use.

Covid-19-Related Rent Concessions

The Group partly adopts the simplified method for rental concessions arising as a direct consequence of Covid-19 reached by the Group and the lessor on the existing lease contracts of buildings. The Group treats the rent concessions as variable lease payments. When a concession agreement is reached to relieve the original rent payment obligation, the undiscounted cash amount will be used to offset the cost of the related asset or expense, and adjust the related liability.

As a lessor

At the commencement date of the lease, leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss.

(ii)

Applicable before 1 January 2019

As for leased assets, leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental expenses of operating leases are recognised in the cost of assets or profit or loss on a straight-line basis. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss.

F-25

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.8

Investment properties

Investment properties are interests in land use rights and buildings that are held to earn rental income and/or for capital appreciation, rather than for the supply of services or for administrative purposes.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and any impairment loss.

Depreciation is computed on the straight-line basis over the estimated useful lives. The estimated useful lives of investment properties are 15 to 35 years.

Overseas investment properties, that are held by the Group in the form of property ownership, equity investment, or other forms, have expected useful lives not longer than 50 years, determined based on the usage in their locations.

The useful lives and depreciation method are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from the individual investment properties.

An investment property is derecognised when either it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the statement of comprehensive income in the year of retirement or disposal. A transfer to, or from, an investment property is made when, and only when, there is evidence of a change in use.

2.9

Financial assets

2.9.a

Classification

The Group classifies its financial assets into the following categories: securities at fair value through profit or loss, held-to-maturity securities, loans and receivables and available-for-sale securities. Management determines the classification of its financial assets at initial recognition which depends on the purpose for which the assets are acquired. The Group’s investments in securities fall into the following four categories:

(i)

Securities at fair value through profit or loss

This category has two sub-categories: securities held for trading and those designated as at fair value through profit or loss at inception. Securities are classified as held for trading at inception if acquired principally for the purpose of selling in the short-term or if they form part of a portfolio of financial assets in which there is evidence of taking short-term profit. The Group may classify other financial assets as at fair value through profit or loss if they meet the criteria in IAS 39 and designated as such at inception.

(ii)

Held-to-maturity securities

Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group has the positive intention and ability to hold to maturity and do not meet the definition of loans and receivables nor designated as available-for-sale securities or securities at fair value through profit or loss.

(iii)

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those that the Group intends to sell in the short-term or held as available-for-sale. Loans and receivables mainly comprise term deposits, loans, securities purchased under agreements to resell, accrued investment income and premium receivables as presented separately in the statement of financial position.

(iv)

Available-for-sale securities

Available-for-sale securities are non-derivative financial assets that are either designated in this category or not classified in any of the other categories.

F-26

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.9

Financial assets (continued)

2.9.b

Recognition and measurement

Purchase and sale of investments are recognised on the trade date, when the Group commits to purchase or sell assets. Investments are initially recognised at fair value plus, in the case of all financial assets not carried at fair value through profit or loss, transaction costs that are directly attributable to their acquisition. Investments are derecognised when the rights to receive cash flows from the investments have expired or when they have been transferred and the Group has also transferred substantially all risks and rewards of ownership.

Securities at fair value through profit or loss and available-for-sale securities are carried at fair value. Equity investments that do not have a quoted price in an active market and whose fair value cannot be reliably measured are carried at cost, net of allowance for impairments. Held-to-maturity securities are carried at amortised cost using the effective interest method. Investment gains and losses on sales of securities are determined principally by specific identification. Realised and unrealised gains and losses arising from changes in the fair value of the securities at fair value through profit or loss category, and the change of fair value of available-for-sale debt securities due to foreign exchange impact on the amortised cost are included in net profit in the period in which they arise. The remaining unrealised gains and losses arising from changes in the fair value of available-for-sale securities are recognised in OCI. When securities classified as available-for-sale securities are sold or impaired, the accumulated fair value adjustments are included in net profit as realised gains on financial assets.

Term deposits primarily represent traditional bank deposits which have fixed maturity dates and are stated at amortised cost.

Loans are carried at amortised cost, net of allowance for impairment.

The Group purchases securities under agreements to resell substantially identical securities. These agreements are classified as secured loans and are recorded at amortised cost, i.e., their costs plus accrued interests at the end of the reporting period, which approximates fair value. The amounts advanced under these agreements are reflected as assets in the consolidated statement of financial position. The Group does not take physical possession of securities purchased under agreements to resell. Sale or transfer of the securities is not permitted by the respective clearing house on which they are registered while the lent capital is outstanding. In the event of default by the counterparty, the Group has the right to the underlying securities held by the clearing house.

2.9.c

Impairment of financial assets other than securities at fair value through profit or loss

Financial assets other than those accounted for as at fair value through profit or loss are adjusted for impairment, where there are declines in value that are considered to be impairment. In evaluating whether a decline in value is an impairment for these financial assets, the Group considers several factors including, but not limited to, the following:

•

significant financial difficulty of the issuer or debtor;

•

a breach of contract, such as a default or delinquency in payments;

•

it becomes probable that the issuer or debtor will enter into bankruptcy or other financial reorganisation; and

•

the disappearance of an active market for that financial asset because of financial difficulties.

F-27

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.9

Financial assets (continued)

2.9.c

Impairment of financial assets other than securities at fair value through profit or loss (continued)

In evaluating whether a decline in value is impairment for equity securities, the Group also considers the extent or the duration of the decline. The quantitative factors include the following:

•

the market price of the equity securities was more than 50% below their cost at the reporting date;

•

the market price of the equity securities was more than 20% below their cost for a period of at least six months at the reporting date; and

•

the market price of the equity securities was below their cost for a period of more than one year (including one year) at the reporting date.

When the decline in value is considered impairment, held-to-maturity debt securities are written down to their present value of estimated future cash flows discounted at the securities’ effective interest rates, available-for-sale debt securities and equity securities are written down to their fair value, and the change is recorded in net realised gains on financial assets in the period the impairment is recognised. The impairment loss is reversed through net profit if in a subsequent period the fair value of a debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognised through net profit. The impairment losses recognised in net profit on equity instruments are not reversed through net profit.

2.10

Fair value measurement

The Group measures financial instruments, such as securities at fair value through profit or loss and available-for-sale securities, at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement of assets and liabilities is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

•

in the principal market for the asset or liability, or

•

in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group at the measurement date.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorised within the fair value hierarchy, described in Notes 4.4, 8 and 11 based on the lowest level input that is significant to the fair value measurement as a whole.

For assets and liabilities that are measured at fair value on a recurring basis, the Group determines whether transfers have occurred between each level in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

F-28

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.11

Cash and cash equivalents

Cash amounts represent cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments with original maturities of 90 days or less, whose carrying value approximates fair value.

2.12

Insurance contracts and investment contracts

2.12.1

Classification

The Group issues contracts that transfer insurance risk or financial risk or both. The contracts issued by the Group are classified as insurance contracts and investment contracts. Insurance contracts are those contracts that transfer significant insurance risk. They may also transfer financial risk. Investment contracts are those contracts that transfer financial risk without significant insurance risk. A number of insurance and investment contracts contain a discretionary participating feature (“DPF”). This feature entitles the policyholders to receive additional benefits or bonuses that are, at least in part, at the discretion of the Group.

2.12.2

Insurance contracts

2.12.2.a

Recognition and measurement

(i)

Short-term insurance contracts

Premiums from the sale of short duration accident and health insurance products are recorded when written and are accreted to earnings on a pro-rata basis over the term of the related policy coverage. Reserves for short duration insurance products consist of unearned premium reserve and expected claims and claim adjustment expenses reserve. Actual claims and claim adjustment expenses are charged to net profit as incurred.

The unearned premium reserve represents the portion of the premiums written net of certain acquisition costs relating to the unexpired terms of coverage.

Reserves for claims and claim adjustment expenses consist of the reserves for reported and unreported claims and reserves for claims expenses with respect to insured events. In developing these reserves, the Group considers the nature and distribution of the risks, claims cost development, and experiences in deriving the reasonable estimated amount and the applicable margins. The methods used for reported and unreported claims include the case-by-case estimation method, average cost per claim method, chain ladder method, etc. The Group calculates the reserves for claims expenses based on the reasonable estimates of the future payments for claims expenses.

(ii)

Long-term insurance contracts

The Group uses the discounted cash flow method to estimate the reserve of long-term insurance contracts. The reserve of long-term insurance contracts consists of a reasonable estimate of liability, a risk margin and a residual margin. The long-term insurance contract liabilities are calculated using various assumptions, including assumptions on mortality rates, morbidity rates, lapse rates, discount rates, and expense assumptions, and based on the following principles:

F-29

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.12

Insurance contracts and investment contracts (continued)

2.12.2

Insurance contracts (continued)

2.12.2.a

Recognition and measurement (continued)

(ii)

Long-term insurance contracts (continued)

(a)

The reasonable estimate of liability for long-term insurance contracts is the present value of reasonable estimates of future cash outflows less future cash inflows. The expected future cash inflows include cash inflows of future premiums arising from the undertaking of insurance obligations, with consideration of decrement mostly from death and surrenders. The expected future cash outflows are cash outflows incurred to fulfil contractual obligations, consisting of the following:

•

guaranteed benefits based on contractual terms, including payments for deaths, disabilities, diseases, survivals, maturities and surrenders;

•

additional non-guaranteed benefits, such as policyholder dividends; and

•

reasonable expenses incurred to manage insurance contracts or to process claims, including maintenance expenses and claim settlement expenses. Future administration expenses are included in the maintenance expenses. Expenses are determined based on expense analysis with consideration of future inflation and the Group’s expense management control.

On each reporting date, the Group reviews the assumptions for reasonable estimates of liability and risk margins, with consideration of all available information, taking into account the Group’s historical experience and expectation of future events. Changes in assumptions are recognised in net profit. Assumptions for the amortisation of residual margin are locked in at policy issuance and are not adjusted at each reporting date.

(b)

Margin has been taken into consideration while computing the reserve of insurance contracts, measured separately and recognised in net profit in each period over the life of the contracts. At the inception of the contracts, the Group does not recognise Day 1 gain, whereas on the other hand, Day 1 loss is recognised in net profit immediately.

Margin comprises risk margin and residual margin. Risk margin is the reserve accrued to compensate for the uncertain amount and timing of future cash flows. At the inception of the contract, the residual margin is calculated net of certain acquisition costs, mainly consist of underwriting and policy acquisition costs, by the Group representing Day 1 gain and will be amortised over the life of the contracts. For insurance contracts of which future returns are affected by investment yields of corresponding investment portfolios, their related residual margins are amortised based on estimated future participating dividends payable to policyholders. For insurance contracts of which future returns are not affected by investment yields of corresponding investment portfolios, their related residual margins are amortised based on sum assured of outstanding policies. The subsequent measurement of the residual margin is independent from the reasonable estimate of future discounted cash flows and risk margin. The assumption changes have no effect on the subsequent measurement of the residual margin.

(c)

The Group has considered the impact of time value on the reserve calculation for insurance contracts.

(iii)

Universal life contracts and unit-linked contracts

Universal life contracts and unit-linked contracts are unbundled into the following components:

•

insurance components

•

non-insurance components

The insurance components are accounted for as insurance contracts; and the non-insurance components are accounted for as investment contracts (Note 2.12.3), which are stated in the investment contract liabilities.

F-30

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.12

Insurance contracts and investment contracts (continued)

2.12.2

Insurance contracts (continued)

2.12.2.b

Liability adequacy test

The Group assesses the adequacy of insurance contract reserves using the current estimate of future cash flows with available information at the end of each reporting period. If that assessment shows that the carrying amount of its insurance liabilities (less related intangible assets, if applicable) is inadequate in light of the estimated future cash flows, the insurance contract reserves will be adjusted accordingly, and any changes of the insurance contract liabilities will be recognised in net profit.

2.12.2.c

Reinsurance contracts held

Contracts with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classification requirements for insurance contracts are classified as reinsurance contracts held. Contracts with reinsurers that do not meet these classification requirements are classified as financial assets. Insurance contracts entered into by the Group under which the contract holder is another insurer (inwards reinsurance) are included with insurance contracts.

The benefits to which the Group is entitled under its reinsurance contracts held are recognised as reinsurance assets. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts and are recognised as expenses when due.

The Group assesses its reinsurance assets for impairment as at the end of reporting period. If there is objective evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in net profit.

2.12.3

Investment contracts

For investment contracts with or without DPF, the Company’s policy fee income mainly consists of acquisition cost and various fees (handling fees and management fees, etc.) over the period of which the service is provided. Policy fee income net of certain acquisition cost is amortised over the expected life of the contracts by period and recognised in revenue.

Except for unit-linked contracts, of which the liabilities are carried at fair value, the liabilities of investment contracts are carried at amortised cost.

2.12.4

DPF in long-term insurance contracts and investment contracts

DPF is contained in certain long-term insurance contracts and investment contracts. These contracts are collectively called participating contracts. The Group is obligated to pay to the policyholders of participating contracts as a group at the higher of 70% of accumulated surplus available and the rate specified in the contracts. The accumulated surplus available mainly arises from net investment income and gains and losses arising from the assets supporting these contracts. To the extent unrealised gains or losses from available-for-sale securities are attributable to policyholders, shadow adjustments are recognised in OCI. The surplus owed to policyholders is recognised as policyholder dividend payable whether it is declared or not. The amount and timing of distribution to individual policyholders of participating contracts are subject to future declarations by the Group.

F-31

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.13

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss are the portions owned by the external investors in the consolidated structured entities (open-ended funds). Such financial liabilities are designated at fair value upon initial recognition, and all realised or unrealised gains or losses are recognised in net profit.

2.14

Securities sold under agreements to repurchase

The Group retains substantially all the risk and rewards of ownership of securities sold under agreements to repurchase which generally mature within 180 days from the transaction date. Therefore, securities sold under agreements to repurchase are classified as secured borrowings. The Group may be required to provide additional collateral based on the fair value of the underlying securities. Securities sold under agreements to repurchase are recorded at amortised cost, i.e., their cost plus accrued interest at the end of the reporting period. It is the Group’s policy to maintain effective control over securities sold under agreements to repurchase which includes maintaining physical possession of the securities. Accordingly, such securities continue to be carried on the consolidated statement of financial position.

2.15

Bonds payable

Bonds payable are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any discount or premium at acquisition and transaction costs.

2.16

Derivative instruments

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value. The resulting gain or loss of derivative financial instruments is recognised in net profit. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.

Embedded derivatives that are not closely related to their host contracts and meet the definition of a derivative are separated and fair valued through profit or loss. The Group does not separately measure embedded derivatives that meet the definition of an insurance contract or embedded derivatives that are closely related to host insurance contracts including embedded options to surrender insurance contracts for a fixed amount (or an amount based on a fixed amount and an interest rate).

2.17

Employee benefits

Pension benefits

Full-time employees of the Group are covered by various government-sponsored pension plans under which the employees are entitled to a monthly pension based on certain formulae. These government agencies are responsible for the pension liability to these employees upon retirement. The Group contributes on a monthly basis to these pension plans. In addition to the government-sponsored pension plans, the Group established an employee annuity fund pursuant to the relevant laws and regulations in the PRC, whereby the Group is required to contribute to the schemes at fixed rates of the employees’ salary costs. Contributions to these plans are expensed as incurred. Under these plans, the Group has no legal or constructive obligation for retirement benefit beyond the contributions made.

Housing benefits

All full-time employees of the Group are entitled to participate in various government-sponsored housing funds. The Group contributes on a monthly basis to these funds based on certain percentages of the salaries of the employees. The Group’s liability in respect of these funds is limited to the contributions payable in each year.

F-32

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.17

Employee benefits (continued)

Stock appreciation rights

Compensation under the stock appreciation rights is measured based on the fair value of the liabilities incurred and is expensed over the vesting period. Valuation techniques including option pricing models are used to estimate fair value of relevant liabilities. The liability is re-measured at the end of each reporting period to its fair value until settlement. Fair value changes in the vesting period are included in administrative expenses and changes after the vesting period are included in net fair value gains through profit or loss in net profit. The related liability is included in other liabilities.

2.18

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction, net of tax, from the proceeds.

2.19

Other equity instruments

Other equity instruments are Core Tier 2 Capital Securities issued by the Group. These securities contain no contractual obligation to deliver cash or another financial asset; or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Group; or to be settled in the Group’s own equity instruments. Therefore, the Group classifies these securities as other equity instruments. Fees, commissions and other transaction costs of these securities’ issuance are deducted from equity. The distributions of the securities are recognised as profit distribution at the time of declaration.

2.20

Revenue recognition

Turnover of the Group represents the total revenues which include the following:

Premiums

Premiums from long-term insurance contracts are recognised as revenue when due from the policyholders.

Policy fee income

The policy fee income for investment contracts mainly consists of acquisition costs and various fees (handling fees and management fees, etc.) over the period of which the service is provided. Policy fee income net of certain acquisition costs is amortised over the expected life of the contracts and recognised as other income.

Investment income

Investment income comprises interest income from term deposits, cash and cash equivalents, debt securities, securities purchased under agreements to resell, loans and dividend income from equity securities. Interest income is recorded on an accrual basis using the effective interest rate method. Dividend income is recognised when the right to receive dividend payment is established.

F-33

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.21

Finance costs

Interest expenses for bonds payable, securities sold under agreements to repurchase, interest-bearing loans, borrowings and lease liabilities are recognised within finance costs in net profit using the effective interest rate method.

2.22

Current and deferred income taxation

Income tax expense for the period comprises current and deferred tax. Income tax is recognised in net profit, except to the extent that it relates to items recognised directly in OCI where the income tax is recognised in OCI.

Current income tax assets and liabilities for the current period are calculated on the basis of the tax laws enacted or substantively enacted at the end of each reporting period in the jurisdictions where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken with respect to situations in which applicable tax regulations are subject to interpretation.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Substantively enacted tax rates are used in the determination of deferred income tax.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are reassessed by the end of each reporting period and are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income tax levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

F-34

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.23

Provisions and contingencies

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required, or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised in the consolidated statement of financial position but is disclosed in the notes to the consolidated financial statements. When a change in the probability of an outflow occurs so that such outflow is probable and can be reliably measured, it will then be recognised as a provision.

2.24

Dividend distribution

Dividend distribution to the Company’s equity holders is recognised as a liability in the Group’s consolidated financial statements in the year in which the dividends are approved by the Company’s equity holders.

3	CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group exercises significant judgement in making appropriate assumptions.

Areas susceptible to changes in critical estimates and judgements, which affect the carrying value of assets and liabilities, are set out below. It is possible that actual results may be different from the estimates and judgements referred to below.

3.1

Estimates of future benefit payments and premiums arising from long-term insurance contracts

The determination of the liabilities under long-term insurance contracts is based on estimates of future benefit payments, premiums and relevant expenses made by the Group and the margins. Assumptions about mortality rates, morbidity rates, lapse rates, discount rates, expense assumptions and policy dividend assumptions are made based on the most recent historical analysis and current and future economic conditions. The liability uncertainty arising from uncertain future benefit payments, premiums and relevant expenses is reflected in the risk margin.

The residual margin relating to the long-term insurance contracts is amortised over the expected life of the contracts, based on the assumptions (mortality rates, morbidity rates, lapse rates, discount rates, expenses assumption and policy dividend assumptions) that are determined at inception of the contracts and remain unchanged for the duration of the contracts.

The judgements exercised in the valuation of insurance contract liabilities (including contracts with DPF) affect the amounts recognised in the consolidated financial statements as insurance contract benefits and insurance contract liabilities.

The impact of the various assumptions and their changes are described in Note 15.

F-35

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

3	CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

3.2

Financial instruments

The Group’s principal investments are debt securities, equity securities, term deposits and loans. The critical estimates and judgements are those associated with the recognition of impairment and the measurement of fair value.

The Group considers a wide range of factors in the impairment assessment as described in Note 2.9.c.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When the fair values of financial assets and liabilities recorded in the consolidated statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques which require a degree of judgements. The methods and assumptions used by the Group in measuring the fair value of financial instruments are as follows:

•

debt securities: fair values are generally based upon current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions, values obtained from current bid prices of comparable investments or valuation techniques when the market is not active.

•

equity securities: fair values are generally based upon current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions or commonly used market pricing models. Equity securities, for which fair values cannot be measured reliably, are recognised at cost less impairment.

•

securities purchased under agreements to resell, policy loans, term deposits, interest-bearing loans and borrowings, and securities sold under agreements to repurchase: the carrying amounts of these assets in the consolidated statement of financial position approximate fair value.

•

fair values of other loans are obtained from valuation techniques.

For the description of valuation techniques, please refer to Note 4.4. Using different valuation techniques and parameter assumptions may lead to some differences of fair value estimations.

3.3

Impairment of investments in associates and joint ventures

The Group assesses whether there are any indicators of impairment for investments in associates and joint ventures at the end of each reporting period. Investments in associates and joint ventures are tested for impairment when there are indicators that the carrying amounts may not be recoverable. An impairment exists when the carrying value of investments in associates and joint ventures exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The calculation of the fair value less costs of disposal is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of investments in associates and joint ventures. When value in use calculations are undertaken, the Group must estimate the expected future cash flows from investments in associates and joint ventures and choose a suitable discount rate in order to calculate the present value of those cash flows.

3.4

Income tax

The Group is subject to income tax in numerous jurisdictions. During the normal course of business, certain transactions and activities for which the ultimate tax determination is uncertain, the Group needs to exercise significant judgement when determining the income tax. If the final settlement results of the tax matters are different from the amounts recorded, these differences will impact the final income tax expense and deferred tax for the period.

F-36

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

3	CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

3.5

Determination of control over investee

The Group applies its judgement to determine whether the control indicators set out in Note 2.2 indicate that the Group controls structured entities such as funds and asset management products.

The Group issues certain structured entities (e.g. funds and asset management products), and acts as a manager for such entities according to the contracts. In addition, the Group may be exposed to variability of returns as a result of holding shares of the structured entities. Determining whether the Group controls such structured entities usually focuses on the assessment of the aggregate economic interests of the Group in the entities (including any carried interests and expected management fees) and the decision-making rights on the entity. As at 31 December 2020, the Group has consolidated some funds, debt investment schemes and asset management products issued and managed by the Company’s subsidiaries, China Life AMP Asset Management Company (“CL AMP”), China Life Asset Management Company Limited (“AMC”) and China Life Wealth Management Company (“CL Wealth”) and some trust schemes and debt investment schemes issued and managed by third parties in the consolidated financial statements.

4	RISK MANAGEMENT

Risk management is carried out by the Company’s Risk Management Committee under policies approved by the Company’s Board of Directors.

The Group issues contracts that transfer insurance risk or financial risk or both. This section summarises these risks and the way the Group manages them.

4.1

Insurance risk

4.1.1

Types of insurance risks

The risk under any one insurance contract is the possibility that an insured event occurs and the uncertainty about the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable. For a portfolio of insurance contracts where the theory of probability is applied to the pricing and provisioning, the principal risk that the Group faces under its insurance contracts is that the actual claims and benefit payments are less favourable than the underlying assumptions used in establishing the insurance liabilities. This occurs when the frequency or severity of claims and benefits exceeds the estimates. Insurance events are random, and the actual number of claims and the amount of benefits paid will vary each year from estimates established using statistical techniques.

Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability of the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The Group has developed its insurance underwriting strategy to diversify the types of insurance risks accepted and within each of these categories to achieve a sufficiently large population to reduce the variability of the expected outcome. The Group manages insurance risk through underwriting strategies, reinsurance arrangements and claims handling.

The Group manages insurance risks through two types of reinsurance agreements, ceding on a quota share basis or a surplus basis, to cover insurance liability risk. Reinsurance contracts cover almost all products, which contain risk liabilities. The products reinsured include: life insurance, accident and health insurance or death, disability, accident, illness and assistance in terms of product category or function, respectively. These reinsurance agreements spread insured risk to a certain extent and reduce the effect of potential losses to the Group. However, the Group’s direct insurance liabilities to the policyholder are not eliminated because of the credit risk associated with the failure of reinsurance companies to fulfil their responsibilities.

4.1.2

Concentration of insurance risks

All insurance operations of the Group are located in the PRC. There are no significant differences among the regions where the Group underwrites insurance contracts.

F-37

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.1

Insurance risk (continued)

4.1.2

Concentration of insurance risks (continued)

The table below presents the Group’s major products of long-term insurance contracts:


Product name	For the year ended 31 December
	2020				2019
	RMB million		%		RMB million		%
Premiums of long-term insurance contracts
Xin Xiang Zhi Zun Annuity (Celebration Version) (a)		42,657		7.96%		238		0.05%
Xin Fu Ying Jia (b)		24,116		4.50%		37,024		7.44%
Kang Ning Whole Life (c)		17,553		3.27%		19,701		3.96%
Fu Lu Shuang Xi Participating Endowment (d)		12,673		2.36%		15,129		3.04%
Hong Ying Participating Endowment (e)		137		0.03%		558		0.11%
Others (f)		439,014		81.88%		424,920		85.40%

Total		536,150		100.00%		497,570		100.00%

Insurance benefits of long-term insurance contracts
Xin Xiang Zhi Zun Annuity (Celebration Version) (a)		21		0.03%		—		—
Xin Fu Ying Jia (b)		1,823		2.17%		1,799		2.25%
Kang Ning Whole Life (c)		5,075		6.05%		5,119		6.39%
Fu Lu Shuang Xi Participating Endowment (d)		3,918		4.67%		3,108		3.88%
Hong Ying Participating Endowment (e)		11,393		13.59%		7,906		9.87%
Others (f)		61,624		73.49%		62,192		77.61%

Total		83,854		100.00%		80,124		100.00%

As at 31 December 2020

As at 31 December 2019

RMB million

RMB million

Liabilities of long-term insurance contracts

Xin Xiang Zhi Zun Annuity (Celebration Version) (a)

30,885

1.05%

140

0.01%

Xin Fu Ying Jia (b)

114,111

3.89%

86,876

3.45%

Kang Ning Whole Life (c)

338,286

11.52%

309,519

12.28%

Fu Lu Shuang Xi Participating Endowment (d)

163,395

5.56%

152,713

6.06%

Hong Ying Participating Endowment (e)

24,398

0.83%

35,403

1.40%

Others (f)

2,265,458

77.15%

1,936,680

76.80%

Total

2,936,533

100.00%

2,521,331

100.00%

F-38

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.1

Insurance risk (continued)

4.1.2

Concentration of insurance risks (continued)

(a)

Xin Xiang Zhi Zun Annuity (Celebration Version) is an annuity insurance contract with the options for regular premium of 3 years and 5 years paid annually or monthly. Its insured period is 10 years. This product is applicable to healthy policyholders between 28-day-old and 68-year-old. From the first effective date after the fifth policy years to the expiration period, if the policyholders live to the annual corresponding effective date, the annuity payment shall be paid at 60% of annual premium according to the basic sum insured if the payment period is 3 years; and the annuity payment shall be paid at 100% of annual premium according to the basic sum insured if the payment period is 5 years. If the policyholders live to the annual corresponding effective date of the expiration period, the contract terminates and maturity benefit is paid at the basic sum insured. If death incurred over insured period, the contract terminates and death benefit is paid at the premium received (without interest).

(b)

Xin Fu Ying Jia Annuity is an annuity insurance contract with the options for regular premium of 3 years, 5 years or 10 years. Its insured period extends from the effective date of Xin Fu Ying Jia Annuity to the corresponding date when policyholders reach the age of 88. This product is applicable to healthy policyholders between 28-day-old and 70-year-old. From the effective date to the contractual date starting to claim of Xin Fu Ying Jia Annuity, the annuity payment of first policy year is paid at 20% of the first premium of the product, and the following annuity payments are paid at 20% of the basic sum insured by Xin Fu Ying Jia Annuity. From the first corresponding date after the contractual date starting to claim of annuity, to the corresponding date when the policyholders reach the age of 88-year-old, annuity is paid at 3% of the basic sum insured during the insured period if policyholders live to the annual corresponding effective date; annuity is paid at the premium received (without interest) during the insured period if policyholders live to the contractual date starting to claim of annuity; the contract terminates and death benefit is paid at the premium received (without interest) or the cash value of the contract, whichever greater when death incurred before the contractual date starting to claim of annuity; the contract terminates and death benefit is paid at the cash value of the contract when death incurred after contractual date starting to claim of annuity; the contract terminates and accidental death benefit is paid at the premium received (without interest) less any death benefit paid when accidents occurred and due to which death incurred within 180 days. Death benefit and accidental death benefit are paid only once.

(c)

Kang Ning Whole Life is a whole life insurance contract with the options for single premium or regular premium of 10 years or 20 years. This product is applicable to healthy policyholders under 70-year-old. The critical illness benefit is paid at 200% of the basic sum insured. If the critical illness benefits are paid within the payment period, the insurance premium of each subsequent period shall be exempted, and the contract shall continue to be valid from the date of the payment of the critical illness benefits. Both death and disability benefits are paid at 300% of the basic sum insured less any critical illness benefits paid.

F-39

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.1

Insurance risk (continued)

4.1.2

Concentration of insurance risks (continued)

(d)

Fu Lu Shuang Xi Participating Endowment is a participating insurance contract with the options for regular premium of 3 years, 5 years and 10 years paid annually, semiannually, quarterly or monthly. Its insured period extends from the effective date of the insurance contract to the corresponding date of the year when the policyholders turn 75-year-old. This product is applicable to healthy policyholders between 30-day-old and 60-year-old. Starting from the effective date of the insurance contract, the survival benefit is paid every two policy years on the corresponding date at 10% of the basic sum insured. If death incurred over insured period, the contract terminates and death benefit is paid at death benefit amount. If the policyholders live to the annual corresponding effective date of the expiration period, the contract terminates and maturity benefit is paid at maturity benefit amount.

(e)

Hong Ying Participating Endowment is a participating endowment insurance contract with the options for single premium or regular premium of 3 years, 5 years or 10 years. Its insured period can be 6 years, 10 years or 15 years. This product is applicable to healthy policyholders between 30-day-old and 70-year-old. Maturity benefit of a single premium policy is paid at the basic sum insured, while that of a regular premium policy is paid at the basic sum insured multiplied by the number of years of the premium payments. Disease death benefit incurred within the first policy year is paid at the premium received (without interest). Disease death benefit incurred after the first policy year is paid at the basic sum insured for a single premium policy or the basic sum insured multiplied by the number of years of premium payments for a regular premium policy. When accidents occurred during taking a train, a ship or a flight period, death benefit is paid at the basic sum multiplied by 3 insured for a single premium policy or the basic sum multiplied by 3 and times the number of years of premium payments insured for a regular premium policy. When accidents occurred out of the period of taking a train, a ship or a flight, death benefit is paid at the basic sum multiplied by 2 insured for a single premium policy or the basic sum multiplied by 2 and times the number of years of premium payments insured for a regular premium policy.

(f)

Others consist of various long-term insurance contracts with no significant concentration.

4.1.3

Sensitivity analysis

Sensitivity analysis of long-term insurance contracts

Liabilities for long-term insurance contracts and liabilities unbundled from universal life insurance contracts and unit-linked insurance contracts with insurance risk are calculated based on the assumptions on mortality rates, morbidity rates, lapse rates and discount rates. Changes in insurance contract reserve assumptions reflect the Company’s actual operating results and changes in its expectation of future events. The Company considers the potential impact of future risk factors on its operating results and incorporates such potential impact in the determination of assumptions.

Holding all other variables constant, if mortality rates and morbidity rates were to increase or decrease from the current best estimate by 10%, pre-tax profit for the year would have been RMB34,590 million or RMB35,955 million (as at 31 December 2019: RMB28,045 million or RMB29,286 million) lower or higher, respectively.

Holding all other variables constant, if lapse rates were to increase or decrease from the current best estimate by 10%, pre-tax profit for the year would have been RMB707 million or RMB646 million (as at 31 December 2019: RMB1,336 million or RMB1,253 million) lower or higher, respectively.

Holding all other variables constant, if the discount rates were 50 basis points higher or lower than the current best estimate, pre-tax profit for the year would have been RMB114,536 million or RMB131,732 million (as at 31 December 2019: RMB96,131 million or RMB108,946 million) higher or lower, respectively.

F-40

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.1

Insurance risk (continued)

4.1.3

Sensitivity analysis (continued)

Sensitivity analysis of short-term insurance contracts

The assumptions of reserves for claims and claim adjustment expenses may be affected by other variables such as claims payment of short-term insurance contracts, which may result in the synchronous changes to reserves for claims and claim adjustment expenses.

Holding all other variables constant, if claim ratios are 100 basis points higher or lower than the current assumption, pre-tax profit is expected to be RMB733 million (as at 31 December 2019: RMB670 million) lower or higher, respectively.

The following table indicates the claim development for short-term insurance contracts without taking into account the impacts of ceded business:


	Short-term insurance contracts (accident year)
Estimated claims expenses	2016			2017			2018			2019			2020			Total
Year end		27,120			33,926			40,601			49,727			52,589
1 year later		27,303			34,845			42,785			51,051
2 years later		26,851			34,328			41,945
3 years later		26,851			34,328
4 years later		26,851

Estimated accumulated claims expenses		26,851			34,328			41,945			51,051			52,589			206,764
Accumulated claims expenses paid		(26,851	)		(34,328	)		(41,945	)		(48,845	)		(32,804	)		(184,773	)

Unpaid claims expenses		—			—			—			2,206			19,785			21,991

F-41

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.1

Insurance risk (continued)

4.1.3

Sensitivity analysis (continued)

Sensitivity analysis of short-term insurance contracts (continued)

The following table indicates the claim development for short-term insurance contracts taking into account the impacts of ceded business:


	Short-term insurance contracts (accident year)
Estimated claims expenses	2016			2017			2018			2019			2020			Total
Year end		26,897			33,700			40,157			49,175			51,994
1 year later		27,107			34,560			42,280			50,414
2 years later		26,655			34,045			41,442
3 years later		26,655			34,045
4 years later		26,655

Estimated accumulated claims expenses		26,655			34,045			41,442			50,414			51,994			204,550
Accumulated claims expenses paid		(26,655	)		(34,045	)		(41,442	)		(48,229	)		(32,397	)		(182,768	)

Unpaid claims expenses		—			—			—			2,185			19,597			21,782

4.2

Financial risk

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 Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Risk management is carried out by a designated department under policies approved by management. The responsible department identifies, evaluates and manages financial risks in close cooperation with the Group’s operating units. The Group provides written principles for overall risk management, as well as written policies covering specific areas, such as managing market risk, credit risk, and liquidity risk.

The Group manages financial risk by holding an appropriately diversified investment portfolio as permitted by laws and regulations designed to reduce the risk of concentration in any one specific industry or issuer. The structure of the investment portfolio held by the Group is disclosed in Note 10.

The sensitivity analyses below are based on a change in an assumption while holding all other assumptions constant. In practice this is unlikely to occur, and changes in some of the assumptions may be correlated, such as change in interest rate and change in market price.

F-42

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.2

Financial risk (continued)

4.2.1

Market risk

(i)

Interest rate risk

Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Group’s financial assets are principally composed of term deposits, debt securities and loans which are exposed to interest rate risk. Changes in the level of interest rates could have a significant impact on the Group’s overall investment return. Many of the Group’s insurance policies offer guaranteed returns to policyholders. These guarantees expose the Group to interest rate risk.

The Group manages interest rate risk through adjustments to portfolio structure and duration, and, to the extent possible, by monitoring the mean duration of its assets and liabilities.

The sensitivity analysis for interest rate risk illustrates how changes in interest income and the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates at the end of the reporting period.

As at 31 December 2020, if market interest rates were 50 basis points higher or lower with all other variables held constant, pre-tax profit for the year would have been RMB627 million (as at 31 December 2019: RMB528 million) higher or lower, respectively, mainly as a result of higher or lower interest income on floating rate cash and cash equivalents, term deposits, statutory deposits—restricted, debt securities and loans and the fair value losses or gains on debt securities assets at fair value through profit or loss. Pre-tax available-for-sale reserve in equity would have been RMB13,906 million (as at 31 December 2019: RMB9,854 million) lower or higher, as a result of a decrease or increase in the fair value of available-for-sale securities.

(ii)

Price risk

Price risk arises mainly from the volatility of prices of equity securities held by the Group. Prices of equity securities are determined by market forces. The Group is subject to increased price risk mainly because China’s capital markets are relatively volatile.

The Group manages price risk by holding an appropriately diversified investment portfolio as permitted by laws and regulations designed to reduce the risk of concentration in any one specific industry or issuer.

As at 31 December 2020, if the prices of all the Group’s equity securities had increased or decreased by 10% with all other variables held constant, pre-tax profit for the year would have been RMB6,596 million (as at 31 December 2019: RMB5,641 million) higher or lower, respectively, mainly as a result of an increase or decrease in fair value of equity securities excluding available-for-sale securities. Pre-tax available-for-sale reserve in equity would have been RMB45,939 million (as at 31 December 2019: RMB38,559 million) higher or lower, respectively, as a result of an increase or decrease in fair value of available-for-sale equity securities. If prices decreased to the extent that the impairment criteria were met, a portion of such decrease of the available-for-sale equity securities would reduce pre-tax profit through impairment.

(iii)

Currency risk

Currency risk is the volatility of fair value or future cash flows of financial instruments resulted from changes in foreign currency exchange rates. The Group’s currency risk exposure mainly arises from cash and cash equivalents, term deposits, debt investments, equity investments, interest-bearing loans and borrowings denominated in currencies other than the functional currency, such as US dollar, HK dollar, GB pound and EUR, etc.

F-43

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.2

Financial risk (continued)

4.2.1

Market risk (continued)

(iii)

Currency risk (continued)

The following table summarises primary financial assets and financial liabilities denominated in currencies other than RMB as at 31 December 2020 and 2019, expressed in RMB equivalent:

As at 31 December 2020

US dollar

HK dollar

GB pound

EUR

Others

Total

Financial assets

Equity securities

- Available-for-sale securities

9,711

108,493

—

118,204

- Securities at fair value through profit or loss

4,352

185

350

1,219

847

6,953

Debt securities

- Held-to-maturity securities

220

—

220

- Loans

1,445

—

1,445

- Available-for-sale securities

3,615

—

3,615

- Securities at fair value through profit or loss

297

—

339

Term deposits

7,990

—

7,990

Cash and cash equivalents

598

1,297

358

140

2,400

Total

28,228

109,975

729

1,370

864

141,166

Financial liabilities

Interest-bearing loans and other borrowings

11,940

—

2,444

5,172

—

19,556

Total

11,940

—

2,444

5,172

—

19,556


As at 31 December 2019	US dollar		HK dollar		GB pound		EUR		Others		Total
Financial assets
Equity securities
- Available-for-sale securities		11,086		95,428		—		—		—		106,514
- Securities at fair value through profit or loss		4,549		660		871		2,166		1,292		9,538
Debt securities
- Held-to-maturity securities		218		—		—		—		—		218
- Loans		1,592		—		—		—		—		1,592
- Available-for-sale securities		7,557		—		—		—		—		7,557
- Securities at fair value through profit or loss		448		—		35		15		9		507
Term deposits		8,026		32		—		—		—		8,058
Cash and cash equivalents		1,842		444		406		20		3		2,715

Total		35,318		96,564		1,312		2,201		1,304		136,699

Financial liabilities
Interest-bearing loans and other borrowings		12,892		—		2,515		4,638		—		20,045

Total		12,892		—		2,515		4,638		—		20,045

F-44

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.2

Financial risk (continued)

4.2.1

Market risk (continued)

(iii)

Currency risk (continued)

As at 31 December 2020, if RMB had strengthened or weakened by 10% against US dollar, HK dollar, GB pound, EUR and other foreign currencies, with all other variables held constant, pre-tax profit for the year would have been RMB339 million (as at 31 December 2019: RMB1,013 million) lower or higher, respectively, mainly as a result of foreign exchange losses or gains on translation of US dollar, HK dollar, GB pound, EUR and other foreign currencies denominated financial assets and financial liabilities other than the available-for-sale equity securities included in the table above. Pre-tax available-for-sale reserve in equity would have been RMB11,593 million (as at 31 December 2019: RMB10,423 million) lower or higher, respectively, as a result of foreign exchange losses or gains on translation of the available-for-sale equity securities at fair value. The actual exchange gains in 2020 were RMB119 million (2019: exchange losses of RMB67 million).

4.2.2

Credit risk

Credit risk is the risk that one party of a financial transaction or the issuer of a financial instrument will fail to discharge its obligation and cause another party to incur a financial loss. Because the Group’s investment portfolio is restricted to the types of investments as permitted by the China Banking and Insurance Regulatory Commission (“CBIRC”) and a significant portion of the portfolio is in government bonds, government agency bonds, corporate bonds with higher credit rating and term deposits with the state-owned commercial banks, the Group’s overall exposure to credit risk is relatively low.

Credit risk is controlled by the application of credit approvals, limits and monitoring procedures. The Group manages credit risk through in-house research and analysis of the Chinese economy and the underlying obligors and transaction structures. Where appropriate, the Group obtains collateral in the form of rights to cash, securities, property and equipment to lower the credit risk.

Credit risk exposure

The carrying amount of financial assets included on the consolidated statement of financial position represents the maximum credit risk exposure at the reporting date without taking account of any collateral held or other credit enhancements attached. The Group has no credit risk exposure relating to off-balance sheet items as at 31 December 2020 and 2019.

F-45

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.2

Financial risk (continued)

4.2.2

Credit risk (continued)

Collateral and other credit enhancements

Securities purchased under agreements to resell are pledged by counterparties debt securities or term deposits of which the Group could take the ownership if the owner of the collateral defaults. Policy loans and most of premium receivables are collateralised by their policies cash value according to the terms and conditions of policy loan contracts and policy contracts, respectively.

Credit quality

The Group’s debt securities investment mainly includes government bonds, government agency bonds, corporate bonds and subordinated bonds or debts, and most of the debt securities are guaranteed by either the Chinese government or Chinese government controlled financial institutions. As at 31 December 2020, 99.9% (as at 31 December 2019: 99.8%) of the corporate bonds held by the Group or the issuers of these corporate bonds had credit ratings of AA/A-2 or above. As at 31 December 2020, 100.0% (as at 31 December 2019: 100.0%) of the subordinated bonds or debts held by the Group either had credit ratings of AA/A-2 or above, or were issued by national commercial banks. The bonds, debts or their issuers’ credit ratings are assigned by a qualified appraisal institution in the PRC and updated at each reporting date.

As at 31 December 2020, 99.7% (as at 31 December 2019: 99.7%) of the Group’s bank deposits are with the four largest state-owned commercial banks, other national commercial banks and China Securities Depository and Clearing Corporation Limited (“CSDCC”) in the PRC. The Group believes these commercial banks, and CSDCC have a high credit quality. The Group’s most other loans excluding policyholder loans, are guaranteed by third parties or with pledge, or have the fiscal annual budget income as the source of repayment, or have higher credit rating borrowers. As a result, the Group concludes that the credit risk associated with term deposits and accrued investment income thereof, statutory deposits—restricted, other loans, and cash and cash equivalents has not caused a material impact on the Group’s consolidated financial statements as at 31 December 2020 and 2019.

The credit risk associated with securities purchased under agreements to resell, policy loans and most of premium receivables has not caused a material impact on the Group’s consolidated financial statements taking into consideration their sufficient collateral held and maturity terms of no more than one year as at 31 December 2020 and 2019.

F-46

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.2

Financial risk (continued)

4.2.3

Liquidity risk

Liquidity risk is the risk that the Group is unable to obtain funds at a reasonable funding cost when required to meet a repayment obligation and fund its asset portfolio within a certain time.

In the normal course of business, the Group attempts to match the maturity of financial assets to the maturity of insurance and financial liabilities.

The following tables set forth the contractual and expected undiscounted cash flows for primary financial assets and liabilities and insurance liabilities:

Contractual and expected cash flows (undiscounted)

As at 31 December 2020

Carrying
value

Without
maturity

Not
later
than 1
year

Later than 1
year but not
later than 3
years

Later than 3
years but not
later than 5
years

Later
than 5
years

Financial assets

Contractual cash inflows

Equity securities

700,748

—

Debt securities

1,865,794

—

136,885

349,334

287,939

2,260,215

Loans

658,535

—

235,901

219,840

129,813

173,729

Term deposits

545,667

—

75,353

329,191

197,867

1,753

Statutory deposits - restricted

6,333

—

297

6,098

720

—

Securities purchased under agreements to resell

7,947

—

7,947

—

Accrued investment income

45,200

—

44,197

565

438

—

Premiums receivable

20,730

—

20,730

—

Cash and cash equivalents

56,629

—

56,629

—

Subtotal

3,907,583

700,748

577,939

905,028

616,777

2,435,697

Financial and insurance liabilities

Expected cash outflows

Insurance contracts

2,973,225

—

190,123

151,280

(93,971

)

(5,618,867

)

Investment contracts

288,212

—

(29,149

)

(13,861

)

68,882

(798,317

)

Contractual cash outflows

Securities sold under agreements to repurchase

122,249

—

(122,249

)

—

Financial liabilities at fair value through profit or loss

3,732

(3,732

)

—

Annuity and other insurance balances payable

55,031

—

(55,031

)

—

Interest-bearing loans and other borrowings

19,556

—

(2,044

)

(4,384

)

(14,680

)

—

Bonds payable

34,992

—

(328

)

(2,996

)

(36,498

)

—

Lease liabilities

2,664

—

(1,273

)

(1,250

)

(331

)

(41

)

Subtotal

3,499,661

(3,732

)

(19,951

)

128,789

(76,598

)

(6,417,225

)

Net cash inflow/(outflow)

407,922

697,016

557,988

1,033,817

540,179

(3,981,528

)

F-47

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.2

Financial risk (continued)

4.2.3

Liquidity risk (continued)


						Contractual and expected cash flows (undiscounted)
As at 31 December 2019	Carrying value		Without maturity			Not later than 1 year			Later than 1 year but not later than 3 years			Later than 3 years but not later than 5 years			Later than 5 years
Financial assets
Contractual cash inflows
Equity securities		605,996		605,996			—			—			—			—
Debt securities		1,523,748		—			107,632			319,656			250,805			1,701,886
Loans		608,920		—			232,715			174,260			117,001			191,290
Term deposits		535,260		—			119,827			184,707			294,477			8,087
Statutory deposits - restricted		6,333		—			479			2,315			4,594			—
Securities purchased under agreements to resell		4,467		—			4,467			—			—			—
Accrued investment income		41,703		—			40,710			561			432			—
Premiums receivable		17,281		—			17,281			—			—			—
Cash and cash equivalents		53,306		—			53,306			—			—			—

Subtotal		3,397,014		605,996			576,417			681,499			667,309			1,901,263

Financial and insurance liabilities
Expected cash outflows
Insurance contracts		2,552,736		—			179,925			209,603			(35,264	)		(5,015,173	)
Investment contracts		267,804		—			(24,020	)		(29,900	)		23,462			(606,662	)
Contractual cash outflows
Securities sold under agreements to repurchase		118,088		—			(118,088	)		—			—			—
Financial liabilities at fair value through profit or loss		3,859		(3,859	)		—			—			—			—
Annuity and other insurance balances payable		51,019		—			(51,019	)		—			—			—
Interest-bearing loans and other borrowings		20,045		—			(4,776	)		(1,572	)		(16,111	)		—
Bonds payable		34,990		—			(332	)		(2,996	)		(37,996	)		—
Lease liabilities		3,091		—			(1,331	)		(1,491	)		(440	)		(74	)

Subtotal		3,051,632		(3,859	)		(19,641	)		173,644			(66,349	)		(5,621,909	)

Net cash inflow/(outflow)		345,382		602,137			556,776			855,143			600,960			(3,720,646	)

The amounts set forth in the tables above for insurance and investment contracts in each column are the undiscounted cash flows representing expected future benefit payments taking into consideration of future premiums payments or deposits from policyholders. The excess cash inflows from matured financial assets will be reinvested to cover any future liquidity exposures. The estimate is subject to assumptions related to mortality, morbidity, the lapse rate, the loss ratio of short-term insurance contracts, expense and other assumptions. Actual experience may differ from estimates.

F-48

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.2

Financial risk (continued)

4.2.3

Liquidity risk (continued)

The liquidity analysis above does not include policyholder dividends payable of RMB122,510 million as at 31 December 2020 (as at 31 December 2019: RMB112,593 million). As at 31 December 2020, declared dividends of RMB82,154 million (as at 31 December 2019: RMB77,512 million) included in policyholder dividends payable have a maturity not later than one year. For the remaining policyholder dividends payable, the amount and timing of the undiscounted cash flows are indeterminate due to the uncertainty of future experiences including investment returns and are subject to future declarations by the Group.

Although all investment contracts with DPF and investment contracts without DPF contain contractual options to surrender that can be exercised immediately by all policyholders at any time, the Group’s expected cash flows as shown in the above tables are based on past experience and future expectations. Should these contracts be surrendered immediately, it would cause a cash outflow of RMB64,445 million and RMB220,973 million, respectively for the year ended 31 December 2020 (2019: RMB61,178 million and RMB204,037 million, respectively), payable within one year.

4.2.4

Capital management

The Group’s objectives for managing capital are to comply with the insurance capital requirements based on the minimum capital and actual capital required by the CBIRC, prevent risk in operation and safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for equity holders and benefits for other stakeholders. The Group replenishes capital to improve the solvency ratio by issuing Core Tier 2 Capital Securities and bonds for capital replenishment according to the relevant laws and the approval of the relevant authorities.

The Group is also subject to other local capital requirements, such as statutory deposits—restricted requirement, statutory insurance fund requirement, statutory reserve fund requirement and general reserve requirement discussed in detail in Note 10.4, Note 21 and Note 37, respectively.

The Group manages capital to ensure its continuous and full compliance with the regulations mainly through monitoring its quarterly solvency ratios, as well as the solvency ratio based on annual stress testing.

The table below summarises the core and comprehensive solvency ratio, core capital, actual capital and minimum capital of the Company under Insurance Institution Solvency Regulations (No.1—No.17):


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Core capital		1,031,947		952,030
Actual capital		1,066,939		987,067
Minimum capital		396,749		356,953
Core solvency ratio		260%		267%
Comprehensive solvency ratio		269%		277%

According to the solvency ratios results mentioned above, and the unquantifiable evaluation results of operational risk, strategic risk, reputational risk and liquidity risk of insurance companies, the CBIRC evaluates the comprehensive solvency of insurance companies and supervises insurance companies by classifying them into four categories:

(i)

Category A: solvency ratios meet the requirements, and the operational risk, strategic risk, reputational risk and liquidity risk are very low;

(ii)

Category B: solvency ratios meet the requirements, and the operational risk, strategic risk, reputational risk and liquidity risk are low;

(iii)

Category C: solvency ratios do not meet the requirements or solvency ratios meet the requirements but one or several risks in operation, strategy, reputation and liquidity are high;

(iv)

Category D: solvency ratios do not meet the requirements or solvency ratios meet the requirements but one or several risks in operation, strategy, reputation and liquidity are severe.

According to the Supervision Information System of the China Risk Oriented Solvency System, the latest Integrated Risk Rating result of the Company was Category A.

F-49

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.3

Disclosures about interest in unconsolidated structured entities

The Group’s interest in unconsolidated structured entities are recorded as securities at fair value through profit or loss, available-for-sale securities and loans. These structured entities typically raise funds by issuing securities or other beneficiary certificates. The purpose of these structured entities is primarily to generate management service fees, or provide finance to public and private infrastructure construction. Refer to Note 3.5 for the Group’s consolidation judgements related to structured entities.

These structured entities that the Group has interest in are guaranteed by third parties with higher credit ratings, or by pledging, or by having the fiscal budget income as the source of repayment, or by borrowers with higher credit ratings.

The Group did not guarantee or provide any financing support for the structured entities that the Group had interest in or sponsored.

(i)

The unconsolidated structured entities that the Group has interest in

The Group believes that the maximum exposure approximates the carrying amount of interest in these unconsolidated structured entities. The size of unconsolidated structured entities as well as the Group’s carrying amount of the assets recognised in the financial statements relating to its interest in unconsolidated structured entities and the Group’s maximum exposure are shown below:

Unconsolidated structured entities

As at 31 December 2020

Size
RMB Million

Carrying
amount
of assets
RMB Million

Maximum
exposure
RMB Million

Interest held by
the Group

Funds managed by affiliated entities

158,182

8,232

Investment income
and service fee

Funds managed by third parties

Note 1

99,649

Investment income

Trust schemes managed by affiliated entities

2,096

1,298

Investment income

Trust schemes managed by third parties

Note 1

63,229

Investment income

Debt investment schemes managed by affiliated entities

18,275

9,172

Investment income
and service fee

Debt investment schemes managed by third parties

Note 1

27,747

Investment income

Others managed by affiliated entities ^{Note 2}

290,937

12,681

Investment income
and service fee

Others managed by third parties ^{Note 2}

Note 1

75,551

Investment income

F-50

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.3

Disclosures about interest in unconsolidated structured entities (continued)

(i)

The unconsolidated structured entities that the Group has interest in (continued)


	Unconsolidated structured entities
As at 31 December 2019	Size RMB Million		Carrying amount of assets RMB Million		Maximum exposure RMB Million		Interest held by the Group
Funds managed by affiliated entities		185,158		6,497		6,497		Investment income and service fee
Funds managed by third parties		Note 1		106,205		106,205		Investment income
Trust schemes managed by affiliated entities		6,400		3,588		3,588		Investment income and service fee
Trust schemes managed by third parties		Note 1		71,707		71,707		Investment income
Debt investment schemes managed by affiliated entities		34,025		14,832		14,832		Investment income and service fee
Debt investment schemes managed by third parties		Note 1		37,112		37,112		Investment income
Others managed by affiliated entities ^{Note 2}		452,814		10,827		10,827		Investment income and service fee
Others managed by third parties ^{Note 2}		Note 1		98,003		98,003		Investment income

Note 1:

Funds, trust schemes, debt investment schemes and others managed by third parties were sponsored by third party financial institutions and the information related to size of these structured entities were not publicly available.

Note 2:

Others included wealth management products, special asset management schemes, and asset-backed plans, etc.

(ii)

The unconsolidated structured entities that the Group has sponsored but does not have interest in

As at 31 December 2020, the size of the unconsolidated structured entities that the Group sponsored but had no interest was RMB686,989 million (as at 31 December 2019: RMB600,223 million), which were mainly funds, special asset management schemes, pension security products and pension products, etc., sponsored by the Group to generate management service fee income. In 2020, the management service fee from these structured entities was RMB2,092 million (2019: RMB1,749 million), which was recorded as other income. The Group did not transfer assets to these structured entities.

F-51

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.4

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.

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 31 December 2020, assets classified as Level 1 accounted for approximately 36.56% of 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 quotations. 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 31 December 2020, assets classified as Level 2 accounted for approximately 41.77% of 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.

At 31 December 2020, assets classified as Level 3 accounted for approximately 21.67% of 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.

For the accounting policies regarding the determination of fair values of financial assets and liabilities, see Note 3.2.

F-52

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.4

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 2020:

Fair value measurement using

Quoted prices

in active

markets

Significant

observable

inputs

Significant

unobservable

inputs

Total

Level 1

Level 2

Level 3

RMB million

Assets measured at fair value

Available-for-sale securities

- Equity securities

Funds

97,476

—

97,476

Common stocks

278,255

22,994

—

301,249

Preferred stocks

—

53,778

Wealth management products

—

13,013

—

13,013

Others

11,038

41,401

96,232

148,671

- Debt securities

Government bonds

5,838

43,418

—

49,256

Government agency bonds

25,297

143,716

—

169,013

Corporate bonds

2,408

133,617

—

136,025

Subordinated bonds/debts

6,244

75,551

—

81,795

Others

—

816

143,905

144,721

Securities at fair value through profit or loss

- Equity securities

Funds

16,731

104

—

16,835

Common stocks

48,334

524

—

48,858

Others

221

—

262

- Debt securities

Government bonds

336

1,302

—

1,638

Government agency bonds

972

3,450

—

4,422

Corporate bonds

2,957

83,837

86,803

Others

—

2,752

—

2,752

Total

495,927

566,716

293,924

1,356,567

Liabilities measured at fair value

Financial liabilities at fair value through profit or loss

(3,732

)

—

(3,732

)

Investment contracts at fair value through profit or loss

(10

)

—

(10

)

Total

(3,742

)

—

(3,742

)

F-53

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.4

Fair value hierarchy (continued)

The following table presents the changes in Level 3 financial instruments for the year ended 31 December 2020:

Available-for-sale
securities

Securities at
fair
value through
profit or loss

Derivative
financial
assets

Total

Debt

securities

Equity

securities

Debt

securities

RMB
million

RMB
million

RMB
million

Opening balance

105,650

128,899

428

234,993

Purchases

38,486

19,953

—

58,439

Total gains/(losses) recorded in profit or loss

—

)

(121

)

(128

)

Total gains/(losses) recorded in other comprehensive income

653

7,127

—

7,780

Disposals or exercises

—

(5,969

)

—

(307

)

(6,276

)

Maturity

(884

)

—

(884

)

Closing balance

143,905

150,010

—

293,924

F-54

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.4

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
	Quoted prices in active markets			Significant observable inputs		Significant unobservable inputs		Total
	Level 1			Level 2		Level 3
	RMB million			RMB million		RMB million		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	)

F-55

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.4

Fair value hierarchy (continued)

The following table presents the changes in Level 3 financial instruments for the year ended 31 December 2019:


	Available-for-sale securities						Securities at fair value through profit or loss		Derivative financial assets		Total assets			Derivative financial liabilities			Total liabilities
	Debt securities			Equity securities			Debt securities
	RMB million			RMB million			RMB million		RMB million		RMB million			RMB million			RMB million
Opening balance		79,248			100,000			—		—		179,248			(1,877	)		(1,877	)
Purchases		35,453			46,561			—		—		82,014			—			—
Transferred into Level 3		—			—			16		—		16			—			—
Transferred out of Level 3		—			(15,866	)		—		—		(15,866	)		—			—
Total gains/(losses) recorded in profit or loss		—			—			—		428		428			404			404
Total gains/(losses) recorded in other comprehensive income		221			3,205			—		—		3,426			—			—
Disposals or exercises		(200	)		(4,000	)		—		—		(4,200	)		1,473			1,473
Maturity		(9,072	)		(1,001	)		—		—		(10,073	)		—			—

Closing balance		105,650			128,899			16		428		234,993			—			—

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 year ended 31 December 2020, RMB12,084 million (2019: RMB13,307 million) debt securities were transferred from Level 1 to Level 2 within the fair value hierarchy, whereas RMB9,825 million (2019: RMB9,716 million) debt securities were transferred from Level 2 to Level 1. No material equity securities were transferred from Level 1 to Level 2 (2019: same), whereas no material equity securities were transferred from Level 2 to Level 1 (2019: RMB853 million).

For the years ended 31 December 2020 and 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 31 December 2020 and 2019, significant unobservable inputs such as discount rate and discounts for lack of marketability were used in the valuation of primary 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.

F-56

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

4	RISK MANAGEMENT (continued)

4.4

Fair value hierarchy (continued)

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


	Fair value	Valuation techniques	Significant unobservable inputs	Range	Relationships between fair value and unobservable inputs
Equity securities	31 December 2020: 28,162 31 December 2019: 26,265	Comparable companies approach	Discounts for lack of marketability	31 December 2020: 12%-35% 31 December 2019: 11%-35%	The fair value is inversely related to the discounts for lack of marketability
	31 December 2020: 36,697 31 December 2019: 28,346	Net asset value method	N/A	N/A	N/A
	31 December 2020: 84,212 31 December 2019: 72,477	Discounted cash flow method	Discount rate	31 December 2020: 3.80%-6.07% 31 December 2019: 3.80%-6.38%	The fair value is inversely related to discount rate
Debt securities	31 December 2020: 143,905 31 December 2019: 105,666	Discounted cash flow method	Discount rate	31 December 2020: 3.88%-9.82% 31 December 2019: 3.02%-6.22%	The fair value is inversely related to discount rate
Derivative financial assets	31 December 2020: - 31 December 2019: 428	Comparable companies approach	Discounts for lack of marketability	31 December 2020: N/A 31 December 2019: 15%	The fair value is inversely related to the discounts for lack of marketability

F-57

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 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 34, 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 year. Administrative expenses are allocated among segments in proportion to the unit cost of respective products in the different segments. Unallocated other income and other expenses are presented in the “Others” segment directly. Income tax is not allocated.

5.3

Allocation basis of assets and liabilities

Financial assets, securities sold under agreements to repurchase and derivative financial liabilities 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 year. Insurance and investment contract liabilities are presented under the respective segments. The remaining assets and liabilities are not allocated.

F-58

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

5	SEGMENT INFORMATION (continued)


	For the year ended 31 December 2020
		Life		Health		Accident		Others		Elimination		Total
	RMB million

Revenues
Gross written premiums		480,593		115,089		16,583		—		—		612,265
- Term life		2,674		—		—		—		—
- Whole life		73,747		—		—		—		—
- Endowment		109,275		—		—		—		—
- Annuity		294,897		—		—		—		—
Net premiums earned		479,600		109,091		15,975		—		—		604,666
Investment income		140,963		9,202		462		3,870		—		154,497
Net realised gains on financial assets		13,523		877		44		139		—		14,583
Net fair value gains through profit or loss		17,727		1,148		58		2,967		—		21,900
Other income		1,284		75		—		10,404		(2,448	)	9,315
Including: inter-segment revenue		—		—		—		2,448		(2,448	)	—
Segment revenues		653,097		120,393		16,539		17,380		(2,448	)	804,961

Benefits, claims and expenses
Insurance benefits and claims expenses
Life insurance death and other benefits		(108,862	)	(4,714	)	(33	)	—		—		(113,609	)
Accident and health claims and claim adjustment expenses		—		(44,987	)	(7,408	)	—		—		(52,395	)
Increase in insurance contract liabilities		(382,132	)	(32,445	)	(220	)	—		—		(414,797	)
Investment contract benefits		(9,494	)	(352	)	—		—		—		(9,846	)
Policyholder dividends resulting from participation in profits		(28,129	)	(150	)	—		—		—		(28,279	)
Underwriting and policy acquisition costs		(60,841	)	(15,921	)	(5,315	)	(2,265	)	—		(84,342	)
Finance costs		(2,798	)	(183	)	(7	)	(759	)	—		(3,747	)
Administrative expenses		(23,360	)	(8,677	)	(2,649	)	(3,001	)	—		(37,687	)
Statutory insurance fund contribution		(833	)	(302	)	(94	)	—		—		(1,229	)
Other expenses		(8,575	)	(1,051	)	(241	)	(4,789	)	2,448		(12,208	)
Including: inter-segment expenses		(2,292	)	(148	)	(8	)	—		2,448		—
Segment benefits, claims and expenses		(625,024	)	(108,782	)	(15,967	)	(10,814	)	2,448		(758,139	)

Net gains on investments of associates and joint ventures		—		—		—		7,666		—		7,666
Including: share of profit of associates and joint ventures		—		—		—		8,336		—		8,336
Segment results		28,073		11,611		572		14,232		—		54,488

Income tax												(3,103	)

Net profit												51,385

Attributable to
- Equity holders of the Company												50,268
- Non-controlling interests												1,117
Other comprehensive income attributable to equity holders of the Company		23,685		1,534		78		402		—		25,699
Depreciation and amortisation		3,086		1,118		351		606		—		5,161

F-59

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

5	SEGMENT INFORMATION (continued)

As at 31 December 2020

Life

Health

Accident

Others

Elimination

Total

RMB million

Assets

Financial assets

3,537,020

222,559

10,964

117,237

—

3,887,780

Others

10,076

14,939

675

239,584

—

265,274

Segment assets

3,547,096

237,498

11,639

356,821

—

4,153,054

Unallocated

Property, plant and equipment

52,747

Others

46,609

Total

4,252,410

Liabilities

Insurance contracts

2,767,642

195,487

10,096

—

2,973,225

Investment contracts

271,757

16,455

—

288,212

Securities sold under agreements to repurchase

109,156

7,070

358

5,665

—

122,249

Others

84,668

6,013

370

23,288

—

114,339

Segment liabilities

3,233,223

225,025

10,824

28,953

—

3,498,025

Unallocated

Others

297,454

Total

3,795,479

F-60

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

5	SEGMENT INFORMATION (continued)


	For the year ended 31 December 2019
	Life			Health			Accident			Others			Elimination			Total
	RMB million
Revenues
Gross written premiums		446,562			105,581			14,943			—			—			567,086
- Term life		2,584			—			—			—			—
- Whole life		61,612			—			—			—			—
- Endowment		113,950			—			—			—			—
- Annuity		268,416			—			—			—			—
Net premiums earned		445,719			99,575			14,984			—			—			560,278
Investment income		129,334			7,849			443			2,293			—			139,919
Net realised gains on financial assets		1,646			100			6			79			—			1,831
Net fair value gains through profit or loss		16,947			1,027			58			1,219			—			19,251
Other income		1,110			60			—			8,698			(1,673	)		8,195
Including: inter-segment revenue		—			—			—			1,673			(1,673	)		—
Segment revenues		594,756			108,611			15,491			12,289			(1,673	)		729,474

Benefits, claims and expenses
Insurance benefits and claims expenses
Life insurance death and other benefits		(124,194	)		(3,649	)		(34	)		—			—			(127,877	)
Accident and health claims and claim adjustment expenses		—			(44,613	)		(6,170	)		—			—			(50,783	)
Increase in insurance contract liabilities		(303,479	)		(27,209	)		(119	)		—			—			(330,807	)
Investment contract benefits		(8,810	)		(347	)		—			—			—			(9,157	)
Policyholder dividends resulting from participation in profits		(22,251	)		(124	)		—			—			—			(22,375	)
Underwriting and policy acquisition costs		(57,071	)		(16,554	)		(5,443	)		(2,328	)		—			(81,396	)
Finance costs		(3,288	)		(200	)		(12	)		(755	)		—			(4,255	)
Administrative expenses		(25,328	)		(9,075	)		(2,962	)		(2,910	)		—			(40,275	)
Statutory insurance fund contribution		(797	)		(273	)		(93	)		—			—			(1,163	)
Other expenses		(7,120	)		(692	)		(169	)		(3,294	)		1,673			(9,602	)
Including: inter-segment expenses		(1,573	)		(95	)		(5	)		—			1,673			—
Segment benefits, claims and expenses		(552,338	)		(102,736	)		(15,002	)		(9,287	)		1,673			(677,690	)

Net gains on investments of associates and joint ventures		—			—			—			8,011			—			8,011
Including: share of profit of associates and joint ventures		—			—			—			9,159			—			9,159
Segment results		42,418			5,875			489			11,013			—			59,795

Income tax																	(781	)

Net profit																	59,014

Attributable to
- Equity holders of the Company																	58,287
- Non-controlling interests																	727
Other comprehensive income attributable to equity holders of the Company		31,861			1,931			109			946			—			34,847
Depreciation and amortisation		2,671			917			312			479			—			4,379

F-61

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

5	SEGMENT INFORMATION (continued)


	As at 31 December 2019
	Life		Health		Accident		Others		Elimination		Total
	RMB million
Assets
Financial assets		3,111,140		183,142		10,080		76,907		—		3,381,269
Others		8,953		12,109		572		222,983		—		244,617

Segment assets		3,120,093		195,251		10,652		299,890		—		3,625,886

Unallocated
Property, plant and equipment												51,758
Others												49,090

Total												3,726,734

Liabilities
Insurance contracts		2,385,407		158,800		8,529		—		—		2,552,736
Investment contracts		252,362		15,442		—		—		—		267,804
Securities sold under agreements to repurchase		106,377		6,447		365		4,899		—		118,088
Others		80,820		5,687		346		23,904		—		110,757

Segment liabilities		2,824,966		186,376		9,240		28,803		—		3,049,385

Unallocated
Others												268,007

Total												3,317,392

F-62

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

5	SEGMENT INFORMATION (continued)


	For the year ended 31 December 2018
	Life			Health			Accident			Others			Elimination			Total
	RMB million

Revenues
Gross written premiums		437,540			83,614			14,672			—			—			535,826
- Term life		3,145			—			—			—			—
- Whole life		46,375			—			—			—			—
- Endowment		126,318			—			—			—			—
- Annuity		261,702			—			—			—			—
Net premiums earned		436,863			80,279			14,881			—			—			532,023
Investment income		116,721			6,393			441			1,612			—			125,167
Net realised gains on financial assets		(18,439	)		(1,008	)		(70	)		(74	)		—			(19,591	)
Net fair value gains through profit or loss		(16,946	)		(927	)		(65	)		(340	)		—			(18,278	)
Other income		1,088			84			—			8,505			(1,579	)		8,098
Including: inter-segment revenue		—			—			—			1,579			(1,579	)		—
Segment revenues		519,287			84,821			15,187			9,703			(1,579	)		627,419

Benefits, claims and expenses
Insurance benefits and claims expenses
Life insurance death and other benefits		(245,786	)		(2,922	)		(28	)		—			—			(248,736	)
Accident and health claims and claim adjustment expenses		—			(33,801	)		(6,751	)		—			—			(40,552	)
Increase in insurance contract liabilities		(167,090	)		(22,966	)		125			—			—			(189,931	)
Investment contract benefits		(9,020	)		(312	)		—			—			—			(9,332	)
Policyholder dividends resulting from participation in profits		(19,523	)		(123	)		—			—			—			(19,646	)
Underwriting and policy acquisition costs		(43,108	)		(11,806	)		(4,808	)		(2,983	)		—			(62,705	)
Finance costs		(3,304	)		(181	)		(12	)		(619	)		—			(4,116	)
Administrative expenses		(23,728	)		(7,881	)		(2,982	)		(2,895	)		—			(37,486	)
Statutory insurance fund contribution		(759	)		(242	)		(96	)		—			—			(1,097	)
Other expenses		(5,339	)		(487	)		(140	)		(3,255	)		1,579			(7,642	)
Including: inter-segment expenses		(1,492	)		(82	)		(5	)		—			1,579			—
Segment benefits, claims and expenses		(517,657	)		(80,721	)		(14,692	)		(9,752	)		1,579			(621,243	)

Net gains on investments of associates and joint ventures		—			—			—			7,745			—			7,745
Including: share of profit of associates and joint ventures		—			—			—			7,745			—			7,745
Segment results		1,630			4,100			495			7,696			—			13,921

Income tax																	(1,985	)

Net profit																	11,936

Attributable to
- Equity holders of the Company																	11,395
- Non-controlling interests																	541
Other comprehensive income attributable to equity holders of the Company		(2,579	)		(141	)		(10	)		660			—			(2,070	)
Depreciation and amortisation		1,589			505			202			342			—			2,638

F-63

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

6	PROPERTY, PLANT AND EQUIPMENT


	Buildings			Office equipment, furniture and fixtures			Motor vehicles			Assets under construction			Leasehold improvements			Total
	RMB million
Cost
As at 1 January 2020		44,771			8,368			1,364			14,378			2,619			71,500
Transfers upon completion		6,010			3			—			(6,456	)		322			(121	)
Additions		222			626			131			5,509			—			6,488
Transfers into investment properties		—			—			—			(2,098	)		—			(2,098	)
Disposals		(575	)		(906	)		(143	)		—			(143	)		(1,767	)

As at 31 December 2020		50,428			8,091			1,352			11,333			2,798			74,002

Accumulated depreciation
As at 1 January 2020		(11,811	)		(5,484	)		(841	)		—			(1,581	)		(19,717	)
Charge for the year		(1,582	)		(725	)		(189	)		—			(377	)		(2,873	)
Disposals		308			776			139			—			137			1,360

As at 31 December 2020		(13,085	)		(5,433	)		(891	)		—			(1,821	)		(21,230	)

Impairment
As at 1 January 2020		(24	)		—			—			(1	)		—			(25	)
Charge for the year		—			—			—			—			—			—
Disposals		—			—			—			—			—			—

As at 31 December 2020		(24	)		—			—			(1	)		—			(25	)

Net book value
As at 1 January 2020		32,936			2,884			523			14,377			1,038			51,758

As at 31 December 2020		37,319			2,658			461			11,332			977			52,747

F-64

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

6	PROPERTY, PLANT AND EQUIPMENT (continued)


	Buildings			Office equipment, furniture and fixtures			Motor vehicles			Assets under construction			Leasehold improvements			Total
	RMB million
Cost
As at 1 January 2019		37,262			7,658			1,340			16,902			2,191			65,353
Transfers upon completion		7,171			288			—			(8,164	)		532			(173	)
Additions		415			1,026			195			8,656			3			10,295
Transfers into investment properties		—			—			—			(2,977	)		—			(2,977	)
Disposals		(77	)		(604	)		(171	)		(39	)		(107	)		(998	)

As at 31 December 2019		44,771			8,368			1,364			14,378			2,619			71,500

Accumulated depreciation
As at 1 January 2019		(10,414	)		(5,443	)		(813	)		—			(1,377	)		(18,047	)
Charge for the year		(1,397	)		(620	)		(190	)		—			(283	)		(2,490	)
Other additions		(48	)		—			—			—			—			(48	)
Disposals		48			579			162			—			79			868

As at 31 December 2019		(11,811	)		(5,484	)		(841	)		—			(1,581	)		(19,717	)

Impairment
As at 1 January 2019		(24	)		—			—			(1	)		—			(25	)
Charge for the year		—			—			—			—			—			—
Disposals		—			—			—			—			—			—

As at 31 December 2019		(24	)		—			—			(1	)		—			(25	)

Net book value
As at 1 January 2019		26,824			2,215			527			16,901			814			47,281

As at 31 December 2019		32,936			2,884			523			14,377			1,038			51,758

As at 31 December 2020, the net book value of buildings above which were in process to obtain title certificates was RMB6,159 million (as at 31 December 2019: RMB8,852 million).

F-65

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

7	LEASES

(a)

Right-of-use assets


	Buildings			Others			Total
	RMB million
Cost
As at 1 January 2020		4,686			2			4,688
Additions		1,157			1			1,158
Deductions		(413	)		(1	)		(414	)

As at 31 December 2020		5,430			2			5,432

Accumulated depreciation
As at 1 January 2020		(1,167	)		(1	)		(1,168	)
Charge for the year		(1,517	)		(1	)		(1,518	)
Deductions		329			1			330

As at 31 December 2020		(2,355	)		(1	)		(2,356	)

Impairment
As at 1 January 2020		—			—			—
Charge for the year		—			—			—
Deductions		—			—			—

As at 31 December 2020		—			—			—

Net book value
As at 1 January 2020		3,519			1			3,520

As at 31 December 2020		3,075			1			3,076

F-66

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

7	LEASES (continued)

(a)

Right-of-use assets (continued)


	Buildings			Others			Total
	RMB million
Cost
As at 1 January 2019		2,554			1			2,555
Additions		2,262			1			2,263
Deductions		(130	)		—			(130	)

As at 31 December 2019		4,686			2			4,688

Accumulated depreciation
As at 1 January 2019		—			—			—
Charge for the year		(1,196	)		(1	)		(1,197	)
Deductions		29			—			29

As at 31 December 2019		(1,167	)		(1	)		(1,168	)

Impairment
As at 1 January 2019		—			—			—
Charge for the year		—			—			—
Deductions		—			—			—

As at 31 December 2019		—			—			—

Net book value
As at 1 January 2019		2,554			1			2,555

As at 31 December 2019		3,519			1			3,520

The Group had no significant profit or loss from subleasing right-of-use assets or sale and leaseback transactions for the year ended 31 December 2020 (2019: same).

The Group’s right-of-use assets include the above assets and land use rights disclosed in Note 14.

(b)

The amounts recognised in profit or loss in relation to leases are as follows:


	As at 31		As at 31
	December 2020		December 2019
	RMB million		RMB million
Interest on lease liabilities		113		106
Depreciation charge of right-of-use assets		1,518		1,197
Expense relating to short-term leases		259		440
Expense relating to leases of low-value assets (except for short-term lease liabilities)		2		3

Total		1,892		1,746

F-67

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

8	INVESTMENT PROPERTIES


	Buildings RMB million
Cost
As at 1 January 2020		12,898
Additions		2,487

As at 31 December 2020		15,385

Accumulated depreciation
As at 1 January 2020		(757	)
Additions		(411	)

As at 31 December 2020		(1,168	)

Net book value
As at 1 January 2020		12,141

As at 31 December 2020		14,217

Fair value
As at 1 January 2020		14,870

As at 31 December 2020		17,285


	Buildings RMB million
Cost
As at 1 January 2019		10,227
Additions		3,022
Deductions		(351	)

As at 31 December 2019		12,898

Accumulated depreciation
As at 1 January 2019		(480	)
Additions		(325	)
Deductions		48

As at 31 December 2019		(757	)

Net book value
As at 1 January 2019		9,747

As at 31 December 2019		12,141

Fair value
As at 1 January 2019		12,449

As at 31 December 2019		14,870

F-68

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

8	INVESTMENT PROPERTIES (continued)

The Company leases part of its investment properties to its subsidiaries and charges rentals based on the areas occupied by the respective entities. These properties are categorised as property, plant and equipment of the Group in the consolidated statement of financial position.

The Group has no restrictions on the use of its investment properties and no contractual obligations to each investment property purchased, constructed or developed or for repairs, maintenance and enhancements.

As at 31 December 2020, the net book value of investment properties which were in process to obtain title certificates was RMB1,044 million (as at 31 December 2019: RMB5,809 million).

The fair value of investment properties of the Group as at 31 December 2020 amounted to RMB17,285 million (as at 31 December 2019: RMB14,870 million), which was estimated by the Group having regards to valuations performed by independent appraisers. The investment properties were classified as Level 3 in the fair value hierarchy.

The Group uses the market comparison approach as its primary method to estimate the fair value of its investment properties. Under the market comparison approach, the estimated fair value of a property is based on the average sale price of comparable properties recently sold, with consideration of the comprehensive adjustment coefficient, which is composed of a number of adjusting factors, including the time and the conditions of sale, the geographical location, age, decoration, floor area, lot size of the property and other factors.

Under the market comparison approach, an increase (decrease) in the comprehensive adjustment coefficient will result in an increase (decrease) in the fair value of investment properties.

9	INVESTMENTS IN ASSOCIATES AND JOINT VENTURES


	2020 RMB million			2019 RMB million
As at 1 January		222,983			198,772
Change of the cost		13,997			18,590
Share of profit or loss		8,336			9,159
Declared dividends		(5,253	)		(3,227	)
Other equity movements		228			1,189
Impairment		(707	)		(1,500	)

As at 31 December		239,584			222,983

F-69

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

9	INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (continued)


							Movement
	Accounting method		Cost		As at 31 December 2019		Change of the cost			Share of profit or loss			Declared dividends			Other equity movements			Provision of impairment			As at 31 December 2020		Percentage of equity interest		Accumulated amount of impairment
Associates
China Guangfa Bank Co., Ltd. (“CGB”) (i)		Equity Method		45,176		75,180		—			6,185			(550	)		(841	)		—			79,974		43.686%		—
Sino-Ocean Group Holding Limited (“Sino-Ocean”) (ii)		Equity Method		11,245		11,387		—			717			(178	)		66			(707	)		11,285		29.59%		(3,217	)
China Life Property & Casualty Insurance Company Limited (“CLP&C”)		Equity Method		6,000		9,332		—			746			(271	)		813			—			10,620		40.00%		—
COFCO Futures Company Limited (“COFCO Futures”)		Equity Method		1,339		1,550		—			73			(10	)		(1	)		—			1,612		35.00%		—
Sinopec Sichuan to East China Gas Pipeline Co., Ltd. (“Pipeline Company”)		Equity Method		20,000		21,433		—			1,231			(1,998	)		10			—			20,676		43.86%		—
China United Network Communications Limited (“China Unicom”) (iii)		Equity Method		21,801		22,068		(28	)		516			(193	)		70			—			22,433		10.29%		—
Others (iv)		Equity Method		42,391		29,755		13,160			(1,032	)		(789	)		461			—			41,555				—

Subtotal				147,952		170,705		13,132			8,436			(3,989	)		578			(707	)		188,155				(3,217	)

Joint ventures
Joy City Commercial Property Fund L.P. (“Joy City”)		Equity Method		6,281		5,849		—			100			(154	)		(16	)		—			5,779		66.67%		—
Mapleleaf Century Limited (“MCL”)		Equity Method		7,656		5,140		—			(477	)		—			73			—			4,736		75.00%		—
Others (iv)		Equity Method		42,786		41,289		865			277			(1,110	)		(407	)		—			40,914				—

Subtotal				56,723		52,278		865			(100	)		(1,264	)		(350	)		—			51,429				—

Total				204,675		222,983		13,997			8,336			(5,253	)		228			(707	)		239,584				(3,217	)

F-70

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

9.	INVESTMENT IN ASSOCIATES AND JOINT VENTURES (continued)

(i)	The 2019 final dividend of RMB0.0639 in cash per ordinary share was approved and declared in the Annual General Meeting of CGB on 23 June 2020. The Company received a cash dividend of RMB550 million.

(ii)

The 2019 final dividend of HKD0.026 in cash per ordinary share was approved and declared in the Annual General Meeting of Sino-Ocean on 20 May 2020. The Company received a cash dividend equivalent to RMB54 million. The 2020 interim dividend of HKD0.062 in cash per ordinary share was approved and declared by the Board of Directors of Sino-Ocean on 17 August 2020. The Company received a cash dividend equivalent to RMB124 million.

Sino-Ocean, the Group’s associate is listed in Hong Kong. On 31 December 2020, the stock price of Sino-Ocean was HKD1.55 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. On 31 December 2020, the Group continued to perform an impairment test to this investment and no further impairment loss should be made, which involved significant assumptions including selling prices of properties under development, rental prices of investment properties and discount rates, and the Group used 10% as the discount rate of cash flow for properties under development and investment properties (As at 31 December 2019: 10% for properties under development and 8% for investment properties).

(iii)

The 2019 final dividend of RMB0.0604 in cash per ordinary share was approved and declared in the Annual General Meeting of China Unicom on 22 May 2020. The Company received a cash dividend of RMB193 million. On 31 December 2020, China Unicom’s share price was RMB4.46 per share.

(iv)	The Group invested in real estate, industrial logistics assets and other industries through these enterprises.

(v)	There is no significant restriction for the Group to dispose of its associates and joint ventures.

F-71

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

9	INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (continued)

As at 31 December 2020, the major associates and joint ventures of the Group are as follows:


Name	Place of incorporation		Percentage of equity interest held
Associates
CGB		PRC		43.686%
Sino-Ocean		Hong Kong, PRC		29.59%
CLP&C		PRC		40.00%
COFCO Futures		PRC		35.00%
Pipeline Company		PRC		43.86%
China Unicom		PRC		10.29%
Joint ventures
Joy City		The British Cayman Islands		66.67%
MCL		The British Virgin Islands		75.00%

As at 31 December 2019, the major associates and joint ventures of the Group are as follows:


Name	Place of incorporation		Percentage of equity interest held
Associates
CGB		PRC		43.686%
Sino-Ocean		Hong Kong, PRC		29.59%
CLP&C		PRC		40.00%
COFCO Futures		PRC		35.00%
Pipeline Company		PRC		43.86%
China Unicom		PRC		10.29%
Joint ventures
Joy City		The British Cayman Islands		66.67%
MCL		The British Virgin Islands		75.00%

F-72

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

9	INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (continued)

The following table illustrates the financial information of the Group’s major associates and joint ventures as at 31 December 2020 and for the year ended 31 December 2020:

CGB
RMB million

Sino-Ocean
RMB million

CLP&C
RMB million

COFCO Futures
RMB million

Pipeline Company
RMB million

China Unicom
RMB million

Joy City
RMB million

MCL
RMB million

Total assets

3,027,972

263,528

106,930

20,567

34,933

582,475

10,306

24,196

Total liabilities

2,809,822

193,806

80,379

17,512

1,068

251,001

13,342

Total equity

218,150

69,722

26,551

3,055

33,865

331,474

10,221

10,854

Total equity attributable to equity
holders of the associates and
joint ventures

173,159

52,273

26,551

3,048

33,865

147,709

10,221

10,854

Total adjustments (i)

2,612

(6,528

)

—

427

16,981

(1,552

)

(4,540

)

Total equity attributable to equity
holders of the associates and joint
ventures after adjustments

175,771

45,745

26,551

3,048

34,292

164,690

8,669

6,314

Proportion of the Group’s ownership

43.686%

29.59%

40.00%

35.00%

43.86%

10.29%

66.67%

75.00%

Gross carrying value of the investments

79,974

14,502

10,620

1,612

20,676

22,433

5,779

4,736

Impairment

—

(3,217

)

—

Net carrying value of the investments

79,974

11,285

10,620

1,612

20,676

22,433

5,779

4,736

Total revenues

80,525

61,271

77,990

2,193

5,259

306,490

360

853

Net profit/(loss)

13,812

4,675

1,730

208

2,823

12,525

339

185

Other comprehensive income

(1,944

)

630

1,991

)

—

(1,706

)

(25

)

650

Total comprehensive income

11,868

5,305

3,721

203

2,823

10,819

314

835

F-73

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

9	INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (continued)

The following table illustrates the financial information of the Group’s major associates and joint ventures as at 31 December 2019 and for the year ended 31 December 2019:


	CGB RMB million		Sino-Ocean RMB million			CLP&C RMB million		COFCO Futures RMB million		Pipeline Company RMB million		China Unicom RMB million			Joy City RMB million			MCL RMB million
Total assets		2,632,798		243,700			91,167		12,671		36,327		564,231			10,281			24,381
Total liabilities		2,423,234		178,088			67,837		9,792		777		240,735			168			13,620
Total equity		209,564		65,612			23,330		2,879		35,550		323,496			10,113			10,761
Total equity attributable to equity holders of the associates and joint ventures		164,573		49,909			23,330		2,872		35,550		143,327			10,113			10,761
Total adjustments (i)		412		(6,209	)		—		—		449		17,454			(1,339	)		(3,908	)
Total equity attributable to equity holders of the associates and joint ventures after adjustments		164,985		43,700			23,330		2,872		35,999		160,781			8,774			6,853
Proportion of the Group’s ownership		43.686%		29.59%			40.00%		35.00%		43.86%		10.29%			66.67%			75.00%
Gross carrying value of the investments		75,180		13,897			9,332		1,550		21,433		22,068			5,849			5,140
Impairment		—		(2,510	)		—		—		—		—			—			—
Net carrying value of the investments		75,180		11,387			9,332		1,550		21,433		22,068			5,849			5,140

Total revenues		76,312		56,704			69,498		793		5,008		291,435			306			795
Net profit/(loss)		12,581		4,166			2,123		153		2,635		11,264			287			348
Other comprehensive income		643		152			1,310		1		—		(501	)		—			—
Total comprehensive income		13,224		4,318			3,433		154		2,635		10,763			287			348

(i)	Including adjustments for the difference of accounting policies, fair value and others.

The Group had no contingent liabilities with the associates and joint ventures as at 31 December 2020 and 31 December 2019. The Group had a capital contribution commitment of RMB25,364 million with joint ventures as at 31 December 2020 (as at 31 December 2019: RMB24,430 million). The capital contribution commitment amount has been included in the capital commitments in Note 40.

F-74

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

10	FINANCIAL ASSETS

10.1

Held-to-maturity securities


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Debt securities
Government bonds		265,198		215,928
Government agency bonds		617,515		401,799
Corporate bonds		201,988		198,322
Subordinated bonds/debts		104,668		112,702

Total		1,189,369		928,751

Debt securities
Listed in Mainland, PRC		215,671		209,123
Listed in Hong Kong, PRC		148		157
Listed overseas		70		62
Unlisted (i)		973,480		719,409

Total		1,189,369		928,751

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

As at 31 December 2020, an accumulated impairment loss of RMB20 million (2019: RMB17 million) for the investment of held-to-maturity securities has been recognised by the Group.

As at 31
December 2020

As at 31
December 2019

Debt securities - fair value and hierarchy

Level 1
RMB
million

Level 2
RMB
million

Total
RMB
million

Level 1
RMB
million

Level 2
RMB
million

Total
RMB
million

Government bonds

37,134

238,636

275,770

15,749

212,449

228,198

Government agency bonds

71,715

559,488

631,203

57,955

357,058

415,013

Corporate bonds

4,433

205,440

209,873

7,914

198,879

206,793

Subordinated bonds/debts

12,332

96,362

108,694

—

118,571

Total

125,614

1,099,926

1,225,540

81,618

886,957

968,575


Debt securities - Contractual maturity schedule	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Maturing:
Within one year		25,520		24,454
After one year but within five years		146,463		128,266
After five years but within ten years		206,134		241,372
After ten years		811,252		534,659

Total		1,189,369		928,751

F-75

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

10	FINANCIAL ASSETS (continued)

10.2

Loans


	As at 31 December 2020 RMB million			As at 31 December 2019 RMB million
Policy loans (i)		200,730			174,872
Other loans		460,248			436,766

Total		660,978			611,638

Impairment		(2,443	)		(2,718	)

Net value		658,535			608,920


	As at 31 December 2020 RMB million			As at 31 December 2019 RMB million
Maturing:
Within one year		231,291			213,937
After one year but within five years		287,196			229,415
After five years but within ten years		114,885			129,596
After ten years		27,606			38,690

Total		660,978			611,638

Impairment		(2,443	)		(2,718	)

Net value		658,535			608,920

(i)	As at 31 December 2020, maturities of policy loans were within 6 months (as at 31 December 2019: same).

10.3

Term deposits


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Maturing:
Within one year		63,079		107,039
After one year but within five years		480,848		420,191
After five years but within ten years		1,740		8,030

Total		545,667		535,260

As at 31 December 2020, the Group’s term deposits of RMB750 million (as at 31 December 2019: RMB3,491 million) were deposited in banks to back overseas borrowings and are restricted to use.

F-76

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

10	FINANCIAL ASSETS (continued)

10.4

Statutory deposits - restricted


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Contractual maturity schedule:
Within one year		—		180
After one year but within five years		6,333		6,153

Total		6,333		6,333

Insurance companies in China are required to deposit an amount that equals 20% of their registered capital with banks in compliance with regulations of the CBIRC. These funds may not be used for any purpose other than for paying off debts during liquidation proceedings.

10.5

Available-for-sale securities


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Available-for-sale securities, at fair value
Debt securities
Government bonds		49,256		23,758
Government agency bonds		169,013		171,189
Corporate bonds		136,025		148,455
Subordinated bonds/debts		81,795		53,922
Others (i)		144,721		112,467

Subtotal		580,810		509,791

Equity securities
Funds		97,476		102,349
Common stocks		301,249		236,323
Preferred stocks		53,778		58,314
Wealth management products		13,013		32,640
Others (i)		148,671		98,904

Subtotal		614,187		528,530

Available-for-sale securities, at cost
Equity securities
Others (i)		20,606		20,636

Total		1,215,603		1,058,957

(i)	Other available-for-sale securities mainly include unlisted equity investments, private equity funds, trust schemes and perpetual bonds.

F-77

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

10	FINANCIAL ASSETS (continued)

10.5

Available-for-sale securities (continued)


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Debt securities
Listed in Mainland, PRC		42,154		46,505
Unlisted		538,656		463,286

Subtotal		580,810		509,791

Equity securities
Listed in Mainland, PRC		200,254		152,293
Listed in Hong Kong, PRC		108,493		95,428
Listed overseas		278		1,458
Unlisted		325,768		299,987

Subtotal		634,793		549,166

Total		1,215,603		1,058,957

Unlisted debt securities include those traded on the Chinese interbank market and those not publicly traded. Unlisted equity securities include those not traded on stock exchanges, which are mainly open-ended funds with public market price quotations, wealth management products and private equity funds.


Debt securities - Contractual maturity schedule	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Maturing:
Within one year		36,870		26,075
After one year but within five years		125,202		155,110
After five years but within ten years		271,394		226,421
After ten years		147,344		102,185

Total		580,810		509,791

F-78

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

10	FINANCIAL ASSETS (continued)

10.6

Securities at fair value through profit or loss


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Debt securities
Government bonds		1,638		41
Government agency bonds		4,422		6,859
Corporate bonds		86,803		77,215
Others		2,752		1,091

Subtotal		95,615		85,206

Equity securities
Funds		16,835		16,101
Common stocks		48,858		40,281
Others		262		20

Subtotal		65,955		56,402

Total		161,570		141,608

Debt securities
Listed in Mainland, PRC		32,333		35,804
Listed in Hong Kong, PRC		72		102
Listed overseas		262		167
Unlisted		62,948		49,133

Subtotal		95,615		85,206

Equity securities
Listed in Mainland, PRC		51,629		39,770
Listed in Hong Kong, PRC		80		611
Listed overseas		4,213		6,418
Unlisted		10,033		9,603

Subtotal		65,955		56,402

Total		161,570		141,608

F-79

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

10	FINANCIAL ASSETS (continued)

10.7

Derivative financial assets


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Forward contracts		—		428

The derivative financial assets of the Company above were all forward contracts to purchase equity securities. The fair value was based on active quoted price of the equity security with consideration of discounts for lack of marketability, which was classified as Level 3.

10.8

Securities purchased under agreements to resell


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Maturing:
Within 30 days		7,947		4,467

Total		7,947		4,467

10.9

Accrued investment income


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Bank deposits		12,570		12,310
Debt securities		26,454		25,048
Others		6,176		4,345

Total		45,200		41,703

Current		44,197		40,710
Non-current		1,003		993

Total		45,200		41,703

F-80

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

11	FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The table below presents the carrying value and estimated fair value of major financial assets and liabilities, and investment contracts:


	Carrying value						Estimated fair value (i)
	As at 31 December 2020 RMB million			As at 31 December 2019 RMB million			As at 31 December 2020 RMB million			As at 31 December 2019 RMB million
Held-to-maturity securities (ii)		1,189,369			928,751			1,225,540			968,575
Loans (iii)		658,535			608,920			667,545			623,840
Term deposits		545,667			535,260			545,667			535,260
Statutory deposits - restricted		6,333			6,333			6,333			6,333
Available-for-sale securities, at fair value		1,194,997			1,038,321			1,194,997			1,038,321
Securities at fair value through profit or loss		161,570			141,608			161,570			141,608
Derivative financial assets		—			428			—			428
Securities purchased under agreements to resell		7,947			4,467			7,947			4,467
Cash and cash equivalents		56,629			53,306			56,629			53,306
Investment contracts (iii)		(288,212	)		(267,804	)		(276,521	)		(260,592	)
Financial liabilities at fair value through profit or loss		(3,732	)		(3,859	)		(3,732	)		(3,859	)
Securities sold under agreements to repurchase		(122,249	)		(118,088	)		(122,249	)		(118,088	)
Bonds payable		(34,992	)		(34,990	)		(35,602	)		(35,551	)
Interest-bearing loans and borrowings		(19,556	)		(20,045	)		(19,556	)		(20,045	)

(i)	The estimates and judgements to determine the fair value of financial assets are described in Note 3.2.

(ii)	The fair value of held-to-maturity securities is determined by reference with other debt securities which are measured by fair value. Please refer to Note 4.4.

(iii)

Investment contracts at fair value through profit or loss have quoted prices in active markets, and therefore, their fair value was classified as Level 1.

The fair value of policy loans approximated its carrying value. The fair values of other loans and investment contracts at amortised cost were determined using valuation techniques, with consideration of the present value of expected cash flows arising from contracts using a risk-adjusted discount rate, allowing for the risk-free rate available on the valuation date, credit risk and risk margin associated with the future cash flows. The fair values of other loans and investment contracts at amortised cost were classified as Level 3.

F-81

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

12	PREMIUMS RECEIVABLE

As at 31 December 2020, the carrying value of premiums receivable within one year was RMB20,458 million (as at 31 December 2019: RMB17,205 million).

13	REINSURANCE ASSETS


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Long-term insurance contracts ceded (Note 15)		4,228		3,839
Due from reinsurance companies		1,135		808
Ceded unearned premiums (Note 15)		523		369
Claims recoverable from reinsurers (Note 15)		209		145

Total		6,095		5,161

Current		1,867		1,318
Non-current		4,228		3,843

Total		6,095		5,161

14	OTHER ASSETS


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Land use rights (i)		8,056		7,830
Disbursements		5,866		5,946
Automated policy loans		3,522		3,377
Tax prepaid		2,257		5,615
Investments receivable and prepaid		1,559		2,665
Due from related parties		722		757
Prepayments to constructors		187		847
Others		6,852		6,992

Total		29,021		34,029

Current		19,706		24,175
Non-current		9,315		9,854

Total		29,021		34,029

(i)	The Group’s right-of-use assets include the above land use rights and right-of-use assets disclosed in Note 7.

F-82

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

15	INSURANCE CONTRACTS

(a)

Process used to decide on assumptions

(i)

For the insurance contracts of which future insurance benefits are affected by investment yields of the corresponding investment portfolios, the discount rate assumption is based on expected investment returns of the asset portfolio backing these liabilities, considering the impacts of time value on reserves.

In developing discount the rate assumptions, the Group considers investment experience, the current investment portfolio and the trend of the relevant yield curves. The assumed discount rates reflect the future economic outlook as well as the Group’s investment strategy. The assumed discount rates with risk margin are as follows:


	Discount rate assumptions
As at 31 December 2020		4.85	%
As at 31 December 2019		4.85	%

For the insurance contracts of which future insurance benefits are not affected by investment yields of the corresponding investment portfolios, the discount rate assumption is based on the “Yield curve of reserve computation benchmark for insurance contracts”, published on the “China Bond” website with consideration of liquidity spreads, taxation and other relevant factors. The assumed spot discount rates with risk margin are as follows:


	Discount rate assumptions
As at 31 December 2020		3.09%~4.80%
As at 31 December 2019		3.52%~4.83%

There is uncertainty on the discount rate assumption, which is affected by factors such as future macro-economy, monetary and foreign exchange policies, capital market and availability of investment channels of insurance funds. The Group determines the discount rate assumption based on the information obtained at the end of each reporting period, including the consideration of risk margin.

(ii)

The mortality and morbidity assumptions are based on the Group’s historical mortality and morbidity experience. The assumed mortality rates and morbidity rates vary with the age of the insured and contract type.

The Group bases its mortality assumptions on China Life Insurance Mortality Table (2010-2013), adjusted where appropriate to reflect the Group’s recent historical mortality experience. The main source of uncertainty with life insurance contracts is that epidemics and wide-ranging lifestyle changes could result in deterioration in future mortality experience, thus leading to an inadequate reserving of liability. Similarly, improvements in longevity due to continuing advancements in medical care and social conditions may expose the Group to longevity risk.

The Group bases its morbidity assumptions for critical illness products on analysis of historical experience and expectations of future developments. There are two main sources of uncertainty. Firstly, wide-ranging lifestyle changes could result in future deterioration in morbidity experience. Secondly, future development of medical technologies and improved coverage of medical facilities available to policyholders may bring forward the timing of diagnosing critical illness, which demands earlier payment of the critical illness benefits. Both could ultimately result in an inadequate reserving of liability if current morbidity assumptions do not properly reflect such trends.

Risk margin is considered in the Group’s mortality and morbidity assumptions.

F-83

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

15	INSURANCE CONTRACTS (continued)

(a)

Process used to decide on assumptions (continued)

(iii)

Expense assumptions are based on expected unit costs with the consideration of previous expense studies and future trends. Expense assumptions are affected by certain factors such as future inflation and market competition which bring uncertainty to these assumptions. The Group determines expense assumptions based on information obtained at the end of each reporting period and risk margin. Components of expense assumptions include the cost per policy and percentage of premium as follows:

Individual Life

Group Life

RMB Per Policy

% of Premium

RMB Per Policy

% of Premium

As at 31 December 2020

45.00

0.85%~0.90%

25.00

0.90%

As at 31 December 2019

45.00

0.85%~0.90%

25.00

0.90%

(iv)

The lapse rates and other assumptions are affected by certain factors, such as future macro-economy, availability of financial substitutions, and market competition, which bring uncertainty to these assumptions. The lapse rates and other assumptions are determined with reference to creditable past experience, current conditions, future expectations and other information.

(v)

The Group applied a consistent method to determine risk margin. The Group considers risk margin for the discount rate, mortality and morbidity and expense assumptions to compensate for the uncertain amount and timing of future cash flows. When determining risk margin, the Group considers historical experience, future expectations and other factors. The Group determines the risk margin level by itself as the regulations have not imposed any specific requirement on it.

The Group adopted a consistent process to decide on assumptions for the insurance contracts disclosed in this note. On each reporting date, the Group reviews the assumptions for reasonable estimates of liability and risk margin, with consideration of all available information, and taking into account the Group’s historical experience and expectation of future events.

(b)

Net liabilities of insurance contracts


	As at 31 December 2020			As at 31 December 2019
	RMB million			RMB million
Gross
Long-term insurance contracts		2,936,533			2,521,331
Short-term insurance contracts
- Claims and claim adjustment expenses		21,991			18,404
- Unearned premiums		14,701			13,001

Total, gross		2,973,225			2,552,736

Recoverable from reinsurers
Long-term insurance contracts (Note 13)		(4,228	)		(3,839	)
Short-term insurance contracts
- Claims and claim adjustment expenses (Note 13)		(209	)		(145	)
- Unearned premiums (Note 13)		(523	)		(369	)

Total, ceded		(4,960	)		(4,353	)

Net
Long-term insurance contracts		2,932,305			2,517,492
Short-term insurance contracts
- Claims and claim adjustment expenses		21,782			18,259
- Unearned premiums		14,178			12,632

Total, net		2,968,265			2,548,383

F-84

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

15	INSURANCE CONTRACTS (continued)

(c)

Movements in liabilities of short-term insurance contracts

The table below presents movements in claims and claim adjustment expense reserve:


	2020			2019
	RMB million			RMB million
Notified claims		2,781			2,536
Incurred but not reported		15,623			12,269

Total as at 1 January - Gross		18,404			14,805

Cash paid for claims settled
- Cash paid for current year claims		(32,804	)		(33,244	)
- Cash paid for prior year claims		(16,682	)		(14,551	)
Claims incurred
- Claims arising in current year		52,589			49,727
- Claims arising in prior years		484			1,667

Total as at 31 December - Gross		21,991			18,404

Notified claims		4,319			2,781
Incurred but not reported		17,672			15,623

Total as at 31 December - Gross		21,991			18,404

The table below presents movements in unearned premium reserves:


	2020									2019
	RMB million									RMB million
	Gross			Ceded			Net			Gross			Ceded			Net
As at 1 January		13,001			(369	)		12,632			11,432			(370	)		11,062
Increase		14,701			(523	)		14,178			13,001			(369	)		12,632
Release		(13,001	)		369			(12,632	)		(11,432	)		370			(11,062	)

As at 31 December		14,701			(523	)		14,178			13,001			(369	)		12,632

F-85

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

15	INSURANCE CONTRACTS (continued)

(d)

Movements in liabilities of long-term insurance contracts

The table below presents movements in the liabilities of long-term insurance contracts:


	2020			2019
	RMB million			RMB million
As at 1 January		2,521,331			2,189,794
Premiums		536,150			497,570
Release of liabilities (i)		(288,959	)		(282,189	)
Accretion of interest		129,679			114,234
Change in assumptions
- Change in discount rates		35,071			(4,906	)
- Change in other assumptions (ii)		3,472			7,308
Other movements		(211	)		(480	)

As at 31 December		2,936,533			2,521,331

(i)	The release of liabilities mainly consists of release due to death or other benefits and related expenses, release of residual margin and change of reserves for claims and claim adjustment expenses.

(ii)

For the year ended 31 December 2020, the change in other assumptions was mainly caused by the change in morbidity rate assumptions of certain products, which increased insurance contract liabilities by RMB2,081 million. This change reflected the Group’s most recent experience and future expectations about the morbidity rates as at the reporting date. Changes in assumptions other than morbidity rates increased insurance contract liabilities by RMB1,391 million.

For the year ended 31 December 2019, the change in other assumptions was mainly caused by the change in morbidity rate assumptions of certain products, which increased insurance contract liabilities by RMB4,737 million. This change reflected the Group’s most recent experience and future expectations about the morbidity rates as at the reporting date. Changes in assumptions other than morbidity rates increased insurance contract liabilities by RMB2,571 million.

16	INVESTMENT CONTRACTS


	As at 31 December 2020		As at 31 December 2019
	RMB million		RMB million
Investment contracts with DPF at amortised cost		64,950		61,657
Investment contracts without DPF
- At amortised cost		223,252		206,137
- At fair value through profit or loss		10		10

Total		288,212		267,804

The table below presents movements of investment contracts with DPF:


	2020			2019
	RMB million			RMB million
As at 1 January		61,657			59,129
Deposits received		5,000			4,238
Deposits withdrawn, payments on death and other benefits		(3,008	)		(2,959	)
Policy fees deducted from account balances		(39	)		(38	)
Interest credited		1,340			1,287

As at 31 December		64,950			61,657

F-86

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

17	INTEREST-BEARING LOANS AND BORROWINGS

Maturity date

Interest rate

As at 31
December 2020
RMB million

As at 31
December 2019
RMB million

Guaranteed loans

11 January 2020

1.50%

—

989

Credit loans

6 November 2020

LIBOR+2.70%(i)

—

126

Guaranteed loans

6 December 2020

EURIBOR +3.80%(ii)

—

3,126

Credit loans

4 January 2021

1.80%

626

—

Guaranteed loans

13 January 2021

1.50%

1,015

—

Credit loans

18 January 2021(iii)

2.50%

—

523

Guaranteed loans

9 March 2022

EURIBOR+3.00%(iv)

883

—

Guaranteed loans

8 September 2023

3.10%

2,648

—

Credit loans

25 June 2024

3.08%

2,444

2,515

Credit loans

16 September 2024

3.30%

5,611

5,999

Credit loans

27 September 2024

USD LIBOR+1.00%(v)

6,329

6,767

Total

19,556

20,045

(i)	2.70% when LIBOR is negative.

(ii)	3.80% when EURIBOR is negative.

(iii)

The loan has been repaid in advance.

(iv)	3.00% when EURIBOR is negative.

(v)	1.00% when USD LIBOR is negative.

18	BONDS PAYABLE

As at 31 December 2020, all bonds payable were the bonds for capital replenishment (the “Bond”) with a total carrying value of RMB34,992 million (as at 31 December 2019: RMB34,990 million), and the fair value of RMB35,602 million (as at 31 December 2019: RMB35,551 million). The fair value of the Bond was classified as level 2 in the fair value hierarchy. The following table presents the par value of the bonds payable:

Issue date

Maturity date

Interest rate p.a.

As at 31
December 2020
RMB million

As at 31
December 2019
RMB million

22 March 2019

22 March 2029

4.28%

35,000

35,000

Total

35,000

35,000

The fair value of bonds payable is based on the valuation results of China Central Depository & Clearing Co., Ltd.

On 20 March 2019, the Company issued a bond in the national inter-bank bond market at a principal amount of RMB35 billion, and completed the issuance on 22 March 2019. The bond has a 10-year maturity and a fixed coupon rate of 4.28% per annum. The Company has a conditional right to redeem the bonds at the end of the fifth year. If the Company does not redeem the bonds at the end of the fifth year, the coupon rate per annum for the remaining 5 years will be raised to 5.28%.

Bonds payable are measured at amortised cost as described in Note 2.15.

F-87

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

19	SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE


	As at 31 December 2020		As at 31 December 2019
	RMB million		RMB million
Interbank market		97,974		63,631
Stock exchange market		24,275		54,457

Total		122,249		118,088

Maturing:
Within 30 days		122,101		117,928
More than 30 days within 90 days		140		—
After 90 days		8		160

Total		122,249		118,088

As at 31 December 2020, bonds with a carrying value of RMB113,454 million (as at 31 December 2019: RMB92,011 million) were pledged as collateral for financial assets sold under agreements to repurchase resulting from repurchase transactions entered into by the Group in the interbank market.

For debt repurchase transactions through the stock exchange, the Group is required to deposit certain exchange-traded bonds into a collateral pool with fair value converted at a standard rate pursuant to the stock exchange’s regulation which should be no less than the balance of the related repurchase transaction. As at 31 December 2020, the carrying value of securities deposited in the collateral pool was RMB256,062 million (as at 31 December 2019: RMB256,700 million). The collateral is restricted from trading during the period of the repurchase transaction.

20	OTHER LIABILITIES


	As at 31 December 2020		As at 31 December 2019
	RMB million		RMB million
Payable to the third-party holders of consolidated structured entities		42,654		21,400
Interest payable to policyholders		16,139		14,113
Salary and welfare payable		11,318		11,475
Brokerage and commission payable		7,051		7,418
Payable to constructors		2,594		3,329
Agent deposits		1,811		1,998
Interest payable of debt instruments		1,320		1,327
Tax payable		889		674
Stock appreciation rights (Note 31)		493		748
Others		20,157		18,632

Total		104,426		81,114

Current		104,426		81,114
Non-current		—		—

Total		104,426		81,114

F-88

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

21	STATUTORY INSURANCE FUND

As required by the CIRC Order [2008] No. 2, “Measures for Administration of Statutory Insurance Fund”, all insurance companies have to pay the statutory insurance fund contribution from 1 January 2009. The Group is subject to the statutory insurance fund contribution, (i) at 0.15% and 0.05% of premiums and accumulated policyholder deposits from life policies with guaranteed benefits and life policies without guaranteed benefits, respectively; (ii) at 0.8% and 0.15% of premiums from short-term health policies and long-term health policies, respectively; (iii) at 0.8% of premiums from accident insurance contracts, at 0.08% and 0.05% of accumulated policyholder deposits from accident investment contracts with guaranteed benefits and without guaranteed benefits, respectively. When the accumulated statutory insurance fund contributions reach 1% of total assets, no additional contribution to the statutory insurance fund is required.

22	INVESTMENT INCOME


	For the year ended 31 December
	2020		2019		2018
	RMB million		RMB million		RMB million
Debt securities
- held-to-maturity securities		44,757		38,229		34,657
- available-for-sale securities		22,695		21,373		22,991
- at fair value through profit or loss		3,482		3,546		3,869
Equity securities
- available-for-sale securities		24,185		21,823		16,492
- at fair value through profit or loss		798		981		1,284
Bank deposits		25,860		26,695		22,699
Loans		31,948		27,111		22,894
Securities purchased under agreements to resell		772		161		281

Total		154,497		139,919		125,167

For the year ended 31 December 2020, the interest income included in investment income was RMB129,514 million (2019: RMB117,115 million, 2018: RMB107,391 million). All interest income was accrued using the effective interest method.

23	NET REALISED GAINS ON FINANCIAL ASSETS


	For the year ended 31 December
	2020			2019			2018
	RMB million			RMB million			RMB million
Debt securities
Realised gains (i)		1,287			3,714			399
Impairment (ii)		288			(3,749	)		(42	)

Subtotal		1,575			(35	)		357

Equity securities
Realised gains (i)		24,925			4,504			(11,785	)
Impairment (ii)		(11,917	)		(2,638	)		(8,163	)

Subtotal		13,008			1,866			(19,948	)

Total		14,583			1,831			(19,591	)

F-89

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

23	NET REALISED GAINS ON FINANCIAL ASSETS (continued)

(i)	Realised gains were generated mainly from available-for-sale securities.

(ii)

During the year ended 31 December 2020, the Group recognised an impairment charge of RMB111 million (2019: RMB888 million, 2018: RMB4,542 million) of available-for-sale funds, an impairment charge of RMB11,732 million (2019: RMB1,750 million, 2018: RMB3,621 million) of available-for-sale stock securities, an impairment charge of RMB74 million (2019: nil, 2018: nil) of available-for-sale other equity securities, an impairment reverse of RMB16 million (2019: an impairment charge of RMB1,027 million, 2018: nil) of available-for-sale debt securities, an impairment reverse of RMB275 million (2019: an impairment charge of RMB2,718 million, 2018: nil) of loans and an impairment charge of RMB3 million (2019: RMB4 million, 2018: RMB42 million) of held-to maturity securities, for which the Group determined that objective evidence of impairment existed.

24	NET FAIR VALUE GAINS THROUGH PROFIT OR LOSS


	For the year ended 31 December
	2020			2019			2018
	RMB million			RMB million			RMB million
Debt securities		(583	)		778			2,006
Equity securities		22,997			18,279			(18,938	)
Stock appreciation rights		255			(258	)		343
Financial liabilities at fair value through profit or loss		(648	)		(380	)		188
Derivative financial instruments		(121	)		832			(1,877	)

Total		21,900			19,251			(18,278	)

25	INSURANCE BENEFITS AND CLAIMS EXPENSES


	Gross		Ceded			Net
	RMB million		RMB million			RMB million
For the year ended 31 December 2020
Life insurance death and other benefits		117,129		(3,520	)		113,609
Accident and health claims and claim adjustment expenses		53,073		(678	)		52,395
Increase in insurance contract liabilities		415,186		(389	)		414,797

Total		585,388		(4,587	)		580,801

For the year ended 31 December 2019
Life insurance death and other benefits		130,975		(3,098	)		127,877
Accident and health claims and claim adjustment expenses		51,394		(611	)		50,783
Increase in insurance contract liabilities		331,523		(716	)		330,807

Total		513,892		(4,425	)		509,467

For the year ended 31 December 2018
Life insurance death and other benefits		250,627		(1,891	)		248,736
Accident and health claims and claim adjustment expenses		41,056		(504	)		40,552
Increase in insurance contract liabilities		190,703		(772	)		189,931

Total		482,386		(3,167	)		479,219

26	INVESTMENT CONTRACT BENEFITS

Benefits of investment contracts are mainly the interest credited to investment contracts.

F-90

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

27	FINANCE COSTS


	For the year ended 31 December
	2020 RMB million		2019 RMB million		2018 RMB million
Interest expenses for securities sold under agreements to repurchase		1,565		2,392		3,565
Interest expenses for bonds payable		1,503		1,168		—
Interest expenses for interest-bearing loans and borrowings		566		589		551
Interest on lease liabilities		113		106		—

Total		3,747		4,255		4,116

28	PROFIT BEFORE INCOME TAX

Profit before income tax is stated after charging/(crediting) the following:


	For the year ended 31 December
	2020 RMB million			2019 RMB million		2018 RMB million
Employee salaries and welfare costs		19,523			20,125		19,268
Housing benefits		1,317			1,189		1,061
Contribution to the defined contribution pension plan		2,455			2,905		2,531
Depreciation and amortisation		5,161			4,379		2,638
Foreign exchange losses/(gains)		(119	)		67		194
Remuneration in respect of audit services provided by auditors		63			60		59

29	TAXATION

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax relates to the same tax authority.

(a)

The amount of taxation charged to net profit represents:


	For the year ended 31 December
	2020 RMB million			2019 RMB million		2018 RMB million
Current taxation - Enterprise income tax		6,588			614		6,397
Deferred taxation		(3,485	)		167		(4,412	)

Total tax charges		3,103			781		1,985

(b)

The reconciliation between the Group’s effective tax rate and the statutory tax rate of 25% in the PRC (2019: 25%, 2018: 25%) is as follows:


	For the year ended 31 December
	2020 RMB million			2019 RMB million			2018 RMB million
Profit before income tax		54,488			59,795			13,921
Tax computed at the statutory tax rate		13,622			14,949			3,480
Adjustment on current income tax of previous period (i)		(464	)		(5,228	)		(324	)
Non-taxable income (ii)		(10,787	)		(9,589	)		(6,771	)
Expenses not deductible for tax purposes (ii)		202			313			5,319
Unused tax losses		495			239			25
Tax losses utilised from previous periods		—			—			(86	)
Others		35			97			342

Income tax at the effective tax rate		3,103			781			1,985

F-91

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

29	TAXATION (continued)

(b)

The reconciliation between the Group’s effective tax rate and the statutory tax rate of 25% in the PRC (2019: 25%, 2018: 25%) is as follows (continued):

(i)

According to Cai Shui [2019] No.72, Notice on Pre-tax Deduction Policy of Commissions and Handling Charges for Insurance Companies, the commissions and handling charges incurred by insurance companies related to its operating activities, which do not exceed 18% of the total premium income of the year after deducting surrender premium, etc., are allowed to be deducted in calculating the taxable income, and the excessive part is allowed to be brought forward to subsequent years. This notice issued above was effective from 1 January 2019 and applicable to the final settlement and payment of enterprise income tax filing for the year ended 31 December 2018. Accordingly, the Company’s current income tax for the year ended 31 December 2019 was deducted by RMB5,154 million regarding to the final settlement and payment.

(ii)

Non-taxable income mainly includes interest income from government bonds, dividend income from applicable equity securities, etc. Expenses not deductible for tax purposes mainly include donations and other expenses that do not meet the criteria for deduction according to the relevant tax regulations.

(c)

As at 31 December 2020 and 31 December 2019, the amounts of deferred tax assets and liabilities are as follows:


	As at 31 December 2020 RMB million			As at 31 December 2019 RMB million
Deferred tax assets		17,174			13,352
Deferred tax liabilities		(32,373	)		(23,554	)

Net deferred tax assets		87			128
Net deferred tax liabilities		(15,286	)		(10,330	)

As at 31 December 2020 and 31 December 2019, deferred income tax was calculated in full on temporary differences under the liability method using the principal tax rate of 25%. The movements in net deferred income tax assets and liabilities during the period were as follows:

Net deferred tax assets/(liabilities)


	Insurance RMB million			Investments RMB million			Others RMB million			Total RMB million
	(i)			(ii)			(iii)
As at 1 January 2019		(5,308	)		3,927			2,638			1,257
(Charged)/credited to net profit		1,985			(2,428	)		276			(167	)
(Charged)/credited to other comprehensive income
- Available-for-sale securities		—			(16,260	)		—			(16,260	)
- Portion of fair value changes on available-for-sale securities attributable to participating policyholders		4,880			—			—			4,880
- Others		—			88			—			88

As at 31 December 2019		1,557			(14,673	)		2,914			(10,202	)

As at 1 January 2020		1,557			(14,673	)		2,914			(10,202	)
(Charged)/credited to net profit		1,787			1,759			(61	)		3,485
(Charged)/credited to other comprehensive income
- Available-for-sale securities		—			(9,446	)		—			(9,446	)
- Portion of fair value changes on available-for-sale securities attributable to participating policyholders		990			—			—			990
- Others		—			(26	)		—			(26	)

As at 31 December 2020		4,334			(22,386	)		2,853			(15,199	)

F-92

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

29	TAXATION (continued)

(c)

As at 31 December 2020 and 31 December 2019, the amounts of deferred tax assets and liabilities are as follows (continued):

(i)

The deferred tax liabilities arising from the insurance category are mainly related to the change of long-term insurance contract liabilities at 31 December 2008 as a result of the first time adoption of IFRSs in 2009 and the temporary differences of short-term insurance contract liabilities and policyholder dividends payable.

(ii)

The deferred tax arising from the investments category is mainly related to the temporary differences of unrealised gains/(losses) on available-for-sale securities, securities at fair value through profit or loss, and others.

(iii)

The deferred tax arising from the others category is mainly related to the temporary differences of employee salaries and welfare costs payable.

Unrecognised deductible tax losses of the Group amounted to RMB3,300 million as at 31 December 2020 (as at 31 December 2019: RMB1,321 million). Unrecognised deductible temporary differences of the Group amounted to RMB1 million as at 31 December 2020 (as at 31 December 2019: RMB1 million).

(d)

The analysis of net deferred tax assets and deferred tax liabilities is as follows:


	As at 31 December 2020 RMB million			As at 31 December 2019 RMB million
Deferred tax assets:
- deferred tax assets to be recovered after 12 months		10,882			7,508
- deferred tax assets to be recovered within 12 months		6,292			5,844

Subtotal		17,174			13,352

Deferred tax liabilities:
- deferred tax liabilities to be settled after 12 months		(28,107	)		(19,906	)
- deferred tax liabilities to be settled within 12 months		(4,266	)		(3,648	)

Subtotal		(32,373	)		(23,554	)

Net deferred tax liabilities		(15,199	)		(10,202	)

30	EARNINGS PER SHARE

There is no difference between the basic and diluted earnings per share. The basic and diluted earnings per share for the year ended 31 December 2020 are calculated based on the net profit for the year attributable to ordinary equity holders of the Company and the weighted average of 28,264,705,000 ordinary shares (2019: same).

F-93

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

31	STOCK APPRECIATION RIGHTS

The Board of Directors of the Company approved, on 5 January 2006, an award of stock appreciation rights of 4.05 million units and on 21 August 2006, another award of stock appreciation rights of 53.22 million units to eligible employees. The exercise prices of the two awards were HKD5.33 and HKD6.83, respectively, the average closing price of shares in the five trading days prior to 1 July 2005 and 1 January 2006, the dates for vesting and exercise price setting purposes of this award. Upon the exercise of stock appreciation rights, exercising recipients will receive payments in RMB, subject to any withholding tax, equal to the number of stock appreciation rights exercised times the difference between the exercise price and market price of the H shares at the time of exercise.

Stock appreciation rights have been awarded in units, with each unit representing the value of one H share. No shares of common stock will be issued under the stock appreciation rights plan. According to the Company’s plan, all stock appreciation rights will have an exercise period of five years from the date of award and will not be exercisable before the fourth anniversary of the date of award unless specific market or other conditions have been met. On 26 February 2010, the Board of Directors of the Company extended the exercise period of all stock appreciation rights, which is also subject to government policy.

As at 31 December 2020, there were 55.01 million units outstanding and exercisable (as at 31 December 2019: same). As at 31 December 2020, the amount of intrinsic value for the vested stock appreciation rights was RMB480 million (as at 31 December 2019: RMB735 million).

The fair value of the stock appreciation rights is estimated on the date of valuation at each reporting date using lattice-based option valuation models based on expected volatility from 35% to 40%, an expected dividend yield of no higher than 6% and a risk-free interest rate ranging from 0.03% to 0.51%.

The Company recognised a gain of RMB255 million in the net fair value through profit or loss in the consolidated comprehensive income representing the fair value change of the rights during the year ended 31 December 2020 (2019: fair value loss of RMB258 million, 2018: fair value gain of RMB343 million). RMB480 million and RMB13 million were included in salary and staff welfare payable included under other liabilities for the units not exercised and exercised but not paid as at 31 December 2020 (as at 31 December 2019: RMB735 million and RMB13 million), respectively. There was no unrecognised compensation cost for the stock appreciation rights as at 31 December 2020 (as at 31 December 2019: nil).

32	DIVIDENDS

Pursuant to the shareholders’ approval at the Annual General Meeting on 29 June 2020, a final dividend of RMB0.73 (inclusive of tax) per ordinary share totalling RMB20,633 million in respect of the year ended 31 December 2019 was declared and paid in 2020. The dividend has been recorded in the consolidated financial statements for the year ended 31 December 2020.

Pursuant to the shareholders’ approval at the Annual General Meeting on 30 May 2019, a final dividend of RMB0.16 (inclusive of tax) per ordinary share totalling RMB4,522 million in respect of the year ended 31 December 2018 was declared and paid in 2019. The dividend has been recorded in the consolidated financial statements for the year ended 31 December 2019.

Pursuant to the shareholders’ approval at the Annual General Meeting on 6 June 2018, a final dividend of RMB0.40 (inclusive of tax) per ordinary share totalling RMB11,306 million in respect of the year ended 31 December 2017 was declared and paid in 2018. The dividend has been recorded in the consolidated financial statements for the year ended 31 December 2018.

A distribution of RMB201 million (inclusive of tax) to the holders of Core Tier 2 Capital Securities was approved by management in 2020 according to the authorisation by the Board of Directors, which was delegated by the General Meeting.

A distribution of RMB394 million (inclusive of tax) to the holders of Core Tier 2 Capital Securities was approved by management in 2019 according to the authorisation by the Board of Directors, which was delegated by the General Meeting.

A distribution of RMB384 million (inclusive of tax) to the holders of Core Tier 2 Capital Securities was approved by management in 2018 according to the authorisation by the Board of Directors, which was delegated by the General Meeting.

Pursuant to a resolution passed at the meeting of the Board of Directors on 25 March 2021, a final dividend of RMB0.64 (inclusive of tax) per ordinary share totalling approximately RMB18,089 million for the year ended 31 December 2020 was proposed for shareholders’ approval at the forthcoming Annual General Meeting. The dividend has not been recorded in the consolidated financial statements for the year ended 31 December 2020.

F-94

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

33	DISCLOSURES ABOUT THE TEMPORARY EXEMPTION FROM IFRS 9

According to IFRS 4 Amendments, the Company made the assessment based on the Group’s financial position of 31 December 2015, concluding that the carrying amount of the Group’s liabilities arising from contracts within the scope of IFRS 4, which includes any deposit components or embedded derivatives unbundled from insurance contracts, was significant compared to the total carrying amount of all its liabilities. The percentage of the total carrying amount of its liabilities connected with insurance relative to the total carrying amount of all its liabilities is greater than 90 percent. There had been no significant change in the activities of the Group since then that requires reassessment. Therefore, the Group’s activities are predominantly connected with insurance, meeting the criteria to apply temporary exemption from IFRS 9.

Sino-Ocean, China Unicom, CGB and certain associates of the Group, have adopted IFRS 9. According to IFRS 4 Amendments, the Group elected not to apply uniform accounting policies when using the equity method for these associates.

(a)

The tables below present the fair value of the following groups and fair value changes for the years of financial assets ⁽ⁱ⁾ under IFRS 9:


	Fair value as at 31 December
	2020 RMB million			2019 RMB million
Held for trading financial assets		161,570			141,608
Financial assets that are managed and whose performance are evaluated on a fair value basis		—			—
Other financial assets
- Financial assets with contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (“SPPI”)		1,978,361			1,615,856
- Financial assets with contractual terms that do not give rise to SPPI		929,597			860,644

Total		3,069,528			2,618,108


	Fair value changes for the year ended 31 December
	2020 RMB million			2019 RMB million
Held for trading financial assets		22,414			19,057
Financial assets that are managed and whose performance are evaluated on a fair value basis		—			—
Other financial assets
-Financial assets with contractual terms that give rise to SPPI		(11,064	)		6,029
-Financial assets with contractual terms that do not give rise to SPPI		55,151			77,741

Total		66,501			102,827

(i)

Only including securities at fair value through profit or loss, loans (excluding policy loans), available-for-sale securities and held-to-maturity securities.

F-95

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

33	DISCLOSURES ABOUT THE TEMPORARY EXEMPTION FROM IFRS 9 (continued)

(b)

The table below presents the credit risk exposure ⁽ⁱⁱ⁾ for aforementioned financial assets with contractual terms that give rise to SPPI:


	Carrying amount ⁽ⁱⁱⁱ⁾
	As at 31 December 2020 RMB Million		As at 31 December 2019 RMB Million
Domestic
Rating not required ^(iv)		719,142		657,905
AAA		1,207,034		893,336
AA+		4,197		7,671
AA		170		1,163
AA-		3,000		3,000

Subtotal		1,933,543		1,563,075

Overseas
AAA		—		30
A+		25		4,014
A		3,654		3,541
A-		45		35
BBB+		112		135
BBB-		13		14
Not rated		24		25

Subtotal		3,873		7,794

Total		1,937,416		1,570,869

(c)

The table below presents financial assets without low credit risk for aforementioned financial assets with contractual terms that give rise to SPPI:



	As at 31 December 2020
	Carrying amount ⁽ⁱⁱⁱ⁾ RMB Million		Fair value RMB Million
Domestic		7,367		4,966
Overseas		24		4

Total		7,391		4,970



	As at 31 December 2019
	Carrying amount ⁽ⁱⁱⁱ⁾ RMB Million		Fair value RMB Million
Domestic		11,834		8,237
Overseas		25		9
Total		11,859		8,246

(ii)

Credit risk ratings for domestic assets are provided by domestic qualified external rating agencies and credit risk ratings for overseas assets are provided by overseas qualified external rating agencies.

(iii)

For financial assets measured at amortised cost, the carrying amount before adjusting impairment allowance is disclosed here.

(iv)

Mainly including government bonds and policy financial bonds.

F-96

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

34	SIGNIFICANT RELATED PARTY TRANSACTIONS

(a)

Related parties with control relationship

Information of the parent company is as follows:


Name	Location of registration	Principal business	Relationship with the Company	Nature of ownership	Legal representative
CLIC	Beijing, China	Insurance services including receipt of premiums and payment of benefits in respect of the in-force life, health, accident and other types of personal insurance business, and the reinsurance business; holding or investing in domestic and overseas insurance companies or other financial insurance institutions; fund management business permitted by national laws and regulations or approved by the State Council of the People’s Republic of China; and other businesses approved by insurance regulatory agencies.	Immediate and ultimate holding company	State-owned	Wang Bin

(b)

Subsidiaries

Refer to Note 34(f) for the basic and related information of subsidiaries.

(c)

Associates and joint ventures

Refer to Note 9 for the basic and related information of associates and joint ventures.

(d)

Other related parties


Significant related parties		Relationship with the Company
China Life Real Estate Co., Limited (“CLRE”)		Under common control of CLIC
China Life Insurance (Overseas) Company Limited (“CL Overseas”)		Under common control of CLIC
China Life Investment Management Company Limited (Formerly known as “China Life Investment Holding Company Limited”)(“CLI”)		Under common control of CLIC
China Life Ecommerce Company Limited (“CL Ecommerce”)		Under common control of CLIC
China Life Healthcare Investment company limited (“CLHI”)		Under common control of CLIC
China Life Enterprise Annuity Fund (“EAP”)		A pension fund jointly set up by the Company and others

F-97

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

34	SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

(e)

Registered capital of related parties with control relationship and changes during the year

Name of related party

As at 31
December 2019
million

Increase
million

Decrease
million

As at 31
December 2020
million

CLIC

RMB4,600

—

RMB4,600

AMC

RMB4,000

—

RMB4,000

China Life Pension Company Limited (“Pension Company”)

RMB3,400

—

RMB3,400

China Life (Suzhou) Pension and Retirement Investment Company Limited (“Suzhou Pension Company”)

RMB1,991

—

RMB1,991

CL AMP

RMB1,288

—

RMB1,288

CL Wealth

RMB200

—

RMB200

Shanghai Rui Chong Investment Co., Limited (“Rui Chong Company”)

RMB6,800

—

RMB6,800

China Life (Beijing) Health Management Co., Limited (“CL Health”)

RMB1,530

—

RMB1,530

China Life Franklin (Shenzhen) Equity Investment Fund Management Co., Limited (“Franklin Shenzhen Company”)

USD2

—

USD2

Xi’an Shengyi Jingsheng Real Estate Co., Ltd. (“Shengyi Jingsheng”)

RMB1,131

—

RMB1,131

Dalian Hope Building Company Ltd. (“Hope Building”)

RMB484

—

RMB484

(i)	The table above does not include the partnerships and the subsidiaries which were not set up or invested in Mainland China that having control relationship with the Group. These partnerships and subsidiaries do not have related information about registered capital.

F-98

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

34	SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

(f)

Percentages of holding of related parties with control relationship and changes during the year

Shareholder

As at 31 December 2019

As at 31 December 2020

Amount
million

Percentage of

holding

Increase
million

Decrease
million

Amount
million

Percentage of
holding

CLIC

RMB19,324

68.37%

—

RMB19,324

68.37%

Subsidiaries

As at 31 December 2019

As at 31 December 2020

Amount
million

Percentage of

holding

Increase
million

Decrease
million

Amount
million

Percentage of
holding

AMC

RMB1,680

60.00% directly

—

RMB1,680

60.00% directly

Pension Company

RMB2,746

74.27% directly

and indirectly

—

RMB2,746

74.27% directly

and indirectly

China Life Franklin Asset Management Company Limited (“AMC HK”)

HKD130

50.00% indirectly

—

HKD130

50.00% indirectly

Suzhou Pension Company

RMB1,786

100.00% directly

RMB205

—

RMB1,991

100.00% directly

CL AMP

RMB1,095

85.03% indirectly

—

RMB1,095

85.03% indirectly

CL Wealth

RMB200

100.00% indirectly

—

RMB200

100.00% indirectly

Golden Phoenix Tree Limited

—

100.00% directly

—

100.00% directly

King Phoenix Tree Limited

—

100.00% indirectly

—

100.00% indirectly

Rui Chong Company

RMB6,800

100.00% directly

—

RMB6,800

100.00% directly

New Aldgate Limited

RMB1,167

100.00% directly

—

RMB1,167

100.00% directly

Glorious Fortune Forever Limited

—

100.00% directly

—

100.00% directly

CL Hotel Investor, L.P.

—

100.00% directly

RMB95

—

RMB95

100.00% directly

Golden Bamboo Limited

RMB1,993

100.00% directly

—

RMB1,993

100.00% directly

Sunny Bamboo Limited

RMB1,876

100.00% directly

—

RMB1,876

100.00% directly

Fortune Bamboo Limited

RMB2,435

100.00% directly

—

RMB2,435

100.00% directly

China Century Core Fund Limited

USD1,125

100.00% indirectly

—

USD1,125

100.00% indirectly

CL Health

RMB1,530

100.00% directly

—

RMB1,530

100.00% directly

Franklin Shenzhen Company

USD2

100.00% indirectly

—

USD2

100.00% indirectly

F-99

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

34	SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

(f)

Percentages of holding of related parties with control relationship and changes during the year (continued)

Subsidiaries (continued)

As at 31 December 2019

As at 31 December 2020

Amount
million

Percentage of

holding

Increase
million

Decrease
million

Amount
million

Percentage of
holding

Guo Yang Guo Sheng

RMB3,150

99.997% directly

—

RMB315

RMB2,835

89.997% directly

New Capital Wisdom Limited

—

100.00% indirectly

—

100.00% indirectly

New Fortune Wisdom Limited

—

100.00% indirectly

—

100.00% indirectly

Wisdom Forever Limited Partnership

USD452

100.00% indirectly

—

USD452

100.00% indirectly

Shanghai Yuan Shu Yuan Jiu Investment
Management Partnership (Limited
Partnership) (“Yuan Shu Yuan Jiu”)

RMB606

99.98% directly

—

RMB35

RMB571

99.98% directly

Shanghai Yuan Shu Yuan Pin Investment
Management Partnership (Limited
Partnership) (“Yuan Shu Yuan Pin”)

RMB606

99.98% directly

—

RMB35

RMB571

99.98% directly

Shanghai Wansheng Industry Partnership
(Limited Partnership) (“Shanghai
Wansheng”)

RMB4,000

99.98% directly

RMB12

—

RMB4,012

99.98% directly

Ningbo Meishan Bonded Port Area Bai Ning
Investment Partnership (Limited
Partnership) (“Bai Ning”)

RMB1,680

99.98% directly

—

RMB1,680

99.98% directly

Hope Building

RMB484

100.00% indirectly

—

RMB484

100.00% indirectly

Wuhu Yuanxiang Tianfu Investment
Management Partnership (Limited
Partnership) (“Yuanxiang Tianfu”)

RMB533

99.98% directly

—

RMB533

99.98% directly

Wuhu Yuanxiang Tianyi Investment
Management Partnership (Limited
Partnership) (“Yuanxiang Tianyi”)

RMB533

99.98% directly

—

RMB533

99.98% directly

Shengyi Jingsheng

RMB1,063

100.00% indirectly

—

RMB1,063

100.00%indirectly

CBRE Global Investors U.S. Investments I,
LLC (“CG Investments”)

RMB2,859

99.99% directly

RMB801

—

RMB3,660

99.99% directly

China Life Guangde(Tianjin) Equity
Investment Fund Partnership (Limited
Partnership) (“CL Guang De”)

RMB10

99.95% directly

RMB285

—

RMB295

99.95% directly

Beijing China Life Pension Industry
Investment Fund (Limited Partnership)
(“CL Pension Industry”) (i)

—

RMB9

—

RMB9

99.90% directly

China Life Qihang Phase I (Tianjin) Equity
Investment Fund Partnership (Limited
Partnership) (“China Life Qihang Fund I”) (i)

—

RMB1

—

RMB1

99.99% directly

(i)	CL Pension Industry and China Life Qihang Fund I were newly included in the consolidated financial statements of the Group for the year ended 31 December 2020.

F-100

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

34	SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

(g)

Transactions with significant related parties

The following table summarises significant transactions carried out by the Group with its significant related parties:


			For the year ended 31 December
			2020		2019		2018
	Notes		RMB million		RMB million		RMB million
Transactions with CLIC and its subsidiaries
Policy management fee received from CLIC		(i) (viii)		564		575		629
Asset management fee received from CLIC		(ii.a)		125		89		100
Distribution of dividends from the Company to CLIC				14,106		3,092		7,729
Distribution of profits from AMC to CLIC				147		122		128
Asset management fee received from CL Overseas		(ii.b)		73		86		63
Asset management fee received from CLP&C		(ii.c)		41		14		14
Payment of insurance premium to CLP&C				52		48		47
Claim and other payments received from CLP&C				14		16		14
Agency fee received from CLP&C		(iii)(viii)		2,211		2,297		2,959
Rental and a service fee received from CLP&C				54		51		50
Dividend from CLP&C (Note 9)				271		—		66
Payment of rental, project fee and other expenses to CLRE				43		43		45
Property leasing expenses charged by CLI		(iv)		71		78		83
Retained asset management fee received from CLI				3		13		7
Payment of asset management fee to CLI		(ii.d) (viii)		651		653		529
Property leasing income received from CLI				63		39		37
Payment of real estate purchase to CLI				135		5		1
Payment of a operation management service fee to CLHI		(vii)		106		—		—
Payment of a business management service fee to CL Ecommerce				—		—		53
Transactions between CGB and the Group
Interest on deposits received from CGB				2,938		2,584		1,425
Commission expenses charged by CGB		(v)		189		158		112
Dividend from CGB (Note 9)				550		284		—
Capital contribution to CGB				—		—		13,012
Transactions between Sino-Ocean and the Group
Dividend from Sino-Ocean (Note 9)				178		369		558
Interest of corporate bonds received from Sino-Ocean				26		27		27
Management fee charged by Sino-Ocean				30		2		2
Transaction between EAP and the Group
Contribution to EAP				1,140		1,003		593
Transaction between other associates and joint ventures and the Group
Distribution of profits from other associates and joint ventures to the Group (Note 9)				4,254		2,574		2,279
Transactions between AMC and the Company
Payment of asset management fee to AMC		(ii.e) (viii)		2,089		1,353		1,326
Distribution of profits from AMC				220		183		193
Transactions between Pension Company and the Company
Rental received from Pension Company				68		54		45
Agency fee received from Pension Company for entrusted sales of annuity funds and other businesses		(vi)		57		54		43
Marketing fee income for promotion of annuity business from Pension Company				14		8		13
Transaction between AMC HK and the Company
Payment of an asset management fee to AMC HK		(ii.f)		18		18		18
Transaction between Suzhou Pension Company and the Company
Capital contribution to Suzhou Pension Company				205		200		—
Transaction between Rui Chong Company and the Company
Rental fee charged by Rui Chong Company				45		47		47

F-101

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

34	SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

(g)

Transactions with significant related parties (continued)

The following table summarises significant transactions carried out by the Group with its significant related parties:


		For the year ended 31 December
		2020		2019		2018
	Notes	RMB million		RMB million		RMB million
Transaction between CL Hotel Investor, L.P. and the Company
Capital contribution to CL Hotel Investor, L.P.			95		—		—
Transaction between CL Health and the Company
Capital withdrawal from CL Health			—		200		—
Transaction between Guo Yang Guo Sheng and the Company
Capital withdrawal from Guo Yang Guo Sheng			—		100		—
Transaction between Yuan Shu Yuan Jiu and the Company
Capital withdrawal from Yuan Shu Yuan Jiu			35		—		—
Transaction between Yuan Shu Yuan Pin and the Company
Capital withdrawal from Yuan Shu Yuan Pin			35		—		—
Transaction between Shanghai Wansheng and the Company
Capital contribution to Shanghai Wansheng			12		—		—
Transaction between CG Investments and the Company
Capital contribution to CG Investments			801		—		—
Transaction between CL Guang De and the Company
Capital contribution to CL Guang De			285		10		—
Transaction between other associates and joint ventures and the Company
Distribution of profits from other associates and joint ventures to the Company			3,864		2,210		1,424
Transactions between the consolidated structured entities/other subsidiaries and the Company
Distribution of profits from the consolidated structured entities to the Company			14,429		10,965		8,247
Distribution of profits from the other subsidiaries to the Company			301		206		426

Notes:

(i)

On 26 December 2017, the Company and CLIC renewed a renewable insurance agency agreement, effective from 1 January 2018 to 31 December 2020. The Company performs its duties of insurance agents in accordance with the agreement, but does not acquire any rights and profits or assume any obligations, losses and risks as an insurer of the non-transferable policies. The policy management fee was payable semi-annually, and is equal to the sum of (1) the number of policies in force as at the last day of the period, multiplied by RMB8.0 per policy and (2) 2.5% of the actual premiums and deposits received during the period, in respect of such policies. The policy management fee income is included in other income in the consolidated statement of comprehensive income. On 31 December 2020, the Company and the CLIC renewed the insurance agency agreement. This agreement is effective from 1 January 2021 to 31 December 2021.

(ii.a)

In December 2018, CLIC renewed an asset management agreement with AMC, entrusting AMC to manage and make investments for its insurance funds. The agreement is effective from 1 January 2019 to 31 December 2021. In accordance with the agreement, CLIC paid AMC a basic service fee at the rate of 0.05% per annum for the management of insurance funds. The service fee was calculated on a monthly basis and payable on a seasonal basis, by multiplying the average book value of the assets under management (after deducting the funds and interests of positive repurchase transactions and deducting the principal and interests of debt and equity investment schemes, project asset-backed schemes and customised non-standard products) at the beginning and the end of any given month by the rate of 0.05%, divided by 12. According to specific projects, debt investment schemes, equity investment plans, project asset-backed plans, and customised non-standard products are based on the contractual agreed rate, without paying for an extra management fee. At the end of each year, CLIC assessed the investment performance of the assets managed by AMC, compared the actual results against benchmark returns and made adjustment to the basic service fee. In July 2020, CLIC revised the asset management agreement with AMC, effective from 1 July 2020 to 31 December 2022. The annual rate of the basic service fee has been changed from 0.05% to 0.08%, and the other terms mentioned above remain unchanged.

F-102

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

34	SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

(g)

Transactions with significant related parties (continued)

Notes (continued):

(ii.b)

In 2018, CL Overseas renewed an investment management agreement with AMC HK, effective from 1 January 2018 to 31 December 2022. In accordance with the agreement, CL Overseas entrusted AMC HK to manage and make investments for its insurance funds and paid AMC HK a basic investment management fee and an investment performance fee. The basic investment management fee was accrued by multiplying the weighted average total funds by the basic fee rate. The investment performance fee was calculated based on the difference between the total actual annual yields and predetermined net realised yield. The basic investment management fee was calculated and payable on a semi-annual basis. The investment performance fee was payable according to the total actual annual yield at the end of each year.

(ii.c)

On 15 May 2018, CLP&C renewed an agreement for the management of insurance funds with AMC, entrusting AMC to manage and make investments for its insurance funds, effective from 1 January 2018 to 31 December 2019. The agreement was subject to an automatic one-year renewal if no objections were raised by both parties upon expiry. From 1 January 2020, the agreement automatically renewed for one year. In accordance with the agreement, CLP&C paid AMC a fixed service fee and a variable service fee. The fixed service fee was calculated on a monthly basis and payable on an annual basis, by multiplying the average net asset value of assets of each category under management at the beginning and the end of any given month by the responding annual investment management fee rate, divided by 12. The variable service fee was payable on an annual basis, and linked to investment performance. On 1 July 2020, CLP&C formulated asset management investment guidelines. The guidelines were effective from 1 July 2020 and modified the fixed service fee rate with AMC from the annual investment management fee rate for assets of each category under management to 0.08%, while the other terms above remained unchanged.

(ii.d)

On 31 December 2018, the Company and CLI renewed a management agreement of alternative investment of insurance funds, effective from 1 January 2019 to 31 December 2020. In accordance with the agreement, the Company entrusted CLI to engage in investment, operation and management of equities, real estate and related financial products, and securitised financial products under the instructions of the annual guidelines. The Company paid CLI an asset management fee and a performance related bonus based on the agreement. For fixed-income projects, the management fee rate was between 0.05% and 0.6% according to different ranges of returns; for non-fixed-income projects, the management fee rate for invested projects was 0.3%, the management fee rates for newly signed projects were between 0.05% and 0.3% according to CLI’s involvement in project management and the performance-related bonus is based on the internal return rate upon expiry of the project. In addition, the Company adjusts the investment management fees for fixed-income projects and non-fixed-income projects based on the annual evaluation results on CLI’s performance. The adjustment (variable management fee) ranges from negative 10% to positive 15% of the investment management fee in the current period.

F-103

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

34	SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

(g)

Transactions with significant related parties (continued)

Notes (continued):

(ii.e)

On 28 December 2018, the Company and AMC renewed the agreement for the management of insurance funds, effective from 1 January 2019 to 31 December 2021. In accordance with the agreement, the Company entrusted AMC to manage and make investments for its insurance funds and paid AMC a fixed investment management service fee and a variable investment management service fee. The fixed annual service fee was calculated and payable on a seasonal basis, by multiplying the average net value of the assets under management by the rate of 0.05%; the variable investment management service fee was payable annually, based on the results of performance evaluation, at 20% of the fixed service fee per annum. On 1 July 2020, the Company and AMC revised the agreement for the management of insurance funds, effective from 1 July 2020 to 31 December 2022. The calculation method of the fixed annual service fee has been changed from five ten thousandths of the net value of the total investment assets to daily accrued fixed service fee by multiplying the net value of the total investment assets on the day by the variety-based annual investment management fee rate divided by 360. The other terms above remain unchanged. Asset management fees charged to the Company by AMC are eliminated in the consolidated statement of comprehensive income.

(ii.f)

On 31 December 2018, the Company and AMC HK renewed the management agreement of insurance funds investment, which is effective from 1 January 2019 to 31 December 2021. In accordance with the agreement, the Company entrusted AMC HK to manage and make investments for its insurance funds and paid AMC HK an asset management fee on a seasonal basis and the maximum investment management fee paid annually is RMB30 million. The management fee rate for financial products, such as investment plans, project asset-backed plans, customised products and insurance asset management products, set up by AMC HK in the industry permitted by regulatory policies, is set according to contractual terms. The management fee rate for the directive investment operation of term deposits, common stocks, funds, financial products and other investment products, universal account B-2 and entrusted assets account alike was 0.02%; the management fee rate for unlisted equity investment was 0.3%; the management fee rate for customised investment portfolio was agreed upon the management fee of market-oriented entrusted investment. Asset management fees charged to the Company by AMC HK are eliminated in the consolidated statement of comprehensive income.

(iii)

On 31 January 2018, the Company and CLP&C signed a new insurance agency framework agreement, whereby CLP&C entrusted the Company to act as an agent to sell designated insurance products in certain authorised jurisdictions. The agency fee was determined based on cost (tax included) plus a margin. The agreement is effective for three years, from 8 March 2018 to 7 March 2021.

(iv)

On 29 December 2017, the Company renewed a property leasing agreement with CLI, effective from 1 January 2018 to 31 December 2020, pursuant to which CLI leased to the Company certain buildings of its own. Annual rental payable by the Company to CLI in relation to the CLI properties is determined either by reference to the market rent, or, the costs incurred by CLI in holding and maintaining the properties, plus a margin of approximately 5%. The rental was paid on a semi-annual basis, and each payment was equal to one half of the total annual rental. On 31 December 2020, the Company renewed a property leasing agreement with CLI, effective from 1 January 2021 to 31 December 2021.

F-104

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

34	SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

(g)

Transactions with significant related parties (continued)

Notes (continued):

(v)

On 19 October 2018, the Company and CGB renewed an insurance agency agreement to distribute insurance products. All individual insurance products suitable for distribution through bancassurance channels are included in the agreement. CGB provides agency services, including the sale of insurance products, collecting premiums and paying benefits. The Company paid the agency commission by multiplying the net amount of total premiums received from the sale of each category individual insurance products after deducting the surrender premiums in the hesitation period, by the responding fixed commission rate. The commission rates for various insurance products sold by CGB are agreed based on arm’s length transactions. The commissions are payable on a monthly basis. On 22 August 2020, the Company and CGB renewed an insurance agency agreement to distribute insurance products, effective from the signing date to 22 August 2022.

On 28 December 2018, the Company and CGB signed another insurance agency agreement to distribute corporate group insurance products. The corporate group insurance products suitable for distribution through bancassurance channels are included in the agreement. The Company paid the agency commission by multiplying the net amount of total premiums received from the sale of each category group insurance product after deducting the surrender premiums, by the responding fixed commission rate. The commission rates for various insurance products sold by CGB are agreed by reference to comparable market prices of independent third-parties. The commissions are paid on a monthly basis. The agreement is effective for two years from 1 January 2019, with an automatic one-year renewal if no objections were raised by either party upon expiry.

(vi)

On 1 January 2019, the Company and Pension Company renewed an entrusted agency agreement for pension business acted by life business. The agreement is effective from 1 January 2019 to 31 December 2021. The business means that Pension Company entrusted the Company to sell enterprise annuity funds, pension security business, occupational pension business and the third-party asset management business. The commissions agreed upon in the agreement include the daily business commissions and the annual promotional plans commissions. According to the agreement, the commissions for the entrusting service of enterprise annuity fund management, which is the core business of Pension Company, are calculated at 30% to 80% of the annual entrusting management fee revenues, depending on the duration of the agreement. The commissions for account management service are calculated at 60% of the first year’s account management fee and were only charged for the first year, regardless of the duration of the agreement. The commissions for investment management services, in accordance with the duration of the agreement, are calculated at 60% to 3% of the annual investment management fee (excluding risk reserves for investment), decreasing annually. The commissions of the group pension plan are, in accordance with the duration of the contracts, calculated at 50% to 3% of the annual investment management fee, decreasing annually; the commissions of the personal pension plan are calculated at 30% to 50% of the annual investment management fee according to the various rates of the daily management fee applied to the various individual pension management products in all of the management years; the commissions of occupation annuity and third-party asset management business are in accordance with the provision of annual promotional plans, which should be determined by both parties on a separate occasion. The commissions charged to Pension Company by the Company are eliminated in the consolidated statement of comprehensive income of the Group.

(vii)

On 25 November 2020, the Company and CLHI signed a new aged-care projects management service agreement, effective from 1 January 2020 to 31 December 2021. In accordance with the agreement, the Company entrusted CLHI to operate and manage existed aged-care projects and paid CLHI a management service fee. The management service fee was calculated and payable on a seasonal basis, by multiplying the total amount of the investments under management (based on the daily weighted average investment amount) by the annual rate of 2.7%.

(viii)

These transactions constitute continuing connected transactions which are subject to reporting and announcement requirements but are exempt from independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. The Company has complied with the disclosure requirements in accordance with Chapter 14A of the Listing Rules.

F-105

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

34	SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

(h)

Amounts due from/to significant related parties

The following table summarises the balances due from and to significant related parties. The balances of the Group are all unsecured. The balances of the Group are non-interest-bearing and have no fixed repayment dates except for deposits with CGB, wealth management products and other securities of CGB, and corporate bonds issued by Sino-Ocean.


	As at 31 December 2020			As at 31 December 2019
	RMB million			RMB million
The resulting balances due from and to significant related parties of the Group
Amount due from CLIC		348			334
Amount due from CL Overseas		43			56
Amount due from CLP&C		245			334
Amount due to CLP&C		(22	)		(31	)
Amount due from CLI		32			18
Amount due to CLI		(447	)		(401	)
Amount due from CLRE		2			2
Amount due to CLHI		(38	)		—
Amount deposited with CGB		71,419			59,420
Wealth management products and other financial instruments of CGB		603			844
Amount due from CGB		1,240			894
Amount due to CGB		(51	)		(75	)
Corporate bonds of Sino-Ocean		361			922
Amount due from Sino-Ocean		7			8
Amount due from CL Ecommerce		12			13
Amount due to CL Ecommerce		(17	)		(68	)
The resulting balances due from and to subsidiaries of the Company
Amount due to AMC		(1,293	)		(381	)
Amount due to AMC HK		(8	)		(9	)
Amount due from Pension Company		39			30
Amount due to Pension Company		(43	)		(35	)
Amount due from Rui Chong Company		114			118

(i)

Key management personnel compensation


	For the year ended 31 December
	2020		2019		2018
	RMB million		RMB million		RMB million
Salaries and other benefits		15		29		34

The total compensation package for the Company’s key management personnel for the year ended 31 December 2020 has not yet been finalised in accordance with regulations of the relevant PRC authorities. The final compensation will be disclosed in a separate announcement when determined. The compensation of 2019 has been approved by the relevant authorities. The total compensation of 2019 was RMB29 million, including a deferred payment about RMB6 million.

F-106

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

34	SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

(j)

Transactions with state-owned enterprises

Under IAS 24 Related Party Disclosures (“IAS 24”), business transactions between state-owned enterprises controlled by the PRC government are within the scope of related party transactions. CLIC, the ultimate holding company of the Group, is a state-owned enterprise. The Group’s key business is insurance and investment related and therefore the business transactions with other state-owned enterprises are primarily related to insurance and investment activities. The related party transactions with other state-owned enterprises were conducted in the ordinary course of business. Due to the complex ownership structure, the PRC government may hold indirect interests in many companies. Some of these interests may, in themselves or when combined with other indirect interests, be controlling interests which may not be known to the Group. Nevertheless, the Group believes that the following captures the material related parties and has applied IAS 24 exemption and disclosed only qualitative information.

As at 31 December 2020, most of the bank deposits of the Group were with state-owned banks; the issuers of corporate bonds and subordinated bonds held by the Group were mainly state-owned enterprises. For the year ended 31 December 2020, a large portion of group insurance business of the Group was with state-owned enterprises; the majority of bancassurance commission charges were paid to state-owned banks and postal offices; and the majority of the reinsurance agreements of the Group were entered into with a state-owned reinsurance company.

35	SHARE CAPITAL

As at 31 December 2020

As at 31 December 2019

No. of shares

RMB million

No. of shares

RMB million

Registered, authorised, issued and fully paid

Ordinary shares of RMB1 each

28,264,705,000

28,265

28,264,705,000

28,265

As at 31 December 2020, the Company’s share capital was as follows:


			As at 31 December 2020
	No. of shares		RMB million
Owned by CLIC (i)		19,323,530,000		19,324
Owned by other equity holders		8,941,175,000		8,941
Including: domestic listed		1,500,000,000		1,500
overseas listed (ii)		7,441,175,000		7,441


Total		28,264,705,000		28,265

(i)	All shares owned by CLIC are domestic listed shares.

(ii)	Overseas listed shares are traded on the Stock Exchange of Hong Kong Limited and the New York Stock Exchange.

F-107

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

36	OTHER EQUITY INSTRUMENTS

(a)

Basic information


	As at 31 December 2019 RMB million		Increase RMB million		Decrease RMB million			As at 31 December 2020 RMB million
Core Tier 2 Capital Securities		7,791		—		(7,791	)		—

Total		7,791		—		(7,791	)		—

The Company issued Core Tier 2 Capital Securities at par with the nominal value of USD1,280 million on 3 July 2015, and listed such securities on the Stock Exchange of Hong Kong Limited on 6 July 2015. The securities were issued in the specified denomination of USD200,000 and integral multiples of USD1,000 in excess thereof. After a deduction of the issue expense, the total amount of the proceeds raised from this issuance was USD1,274 million or RMB7,791 million. The issued capital securities have a term of 60 years, extendable upon expiry. Distributions shall be payable on the securities semi-annually and the Company has the option to redeem the securities at the end of the fifth year after issuance and on any distribution payment date thereafter. The initial distribution rate for the first five interest-bearing years is 4.00% and if the Company does not exercise this option, the rate of distribution will be reset based on the comparable US treasury yield plus a margin of 2.294% at the end of the fifth year and every five years thereafter. The Company has redeemed the securities at the end of the fifth year.

(b)

Equity attributable to equity holders


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Equity attributable to equity holders of the Company		450,051		403,764
Equity attributable to ordinary equity holders of the Company		450,051		395,973
Equity attributable to other equity instruments holders of the Company		—		7,791
Equity attributable to non-controlling interests		6,880		5,578
Equity attributable to ordinary equity holders of non-controlling interests		6,880		5,578

Refer to Note 32 for the information of distribution to other equity instruments holders of the Company for the year ended 31 December 2020.

F-108

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

37	RESERVES


	Share premium RMB million		Other reserves RMB million			Unrealised gains/ (losses) from available- for-sale securities RMB million			Other comprehensive income reclassifiable to profit or loss under the equity method RMB million			Statutory reserve fund RMB million		Discretionary reserve fund RMB million (b)		General reserve RMB million		Exchange differences on translating foreign operations RMB million			Other comprehensive income non- reclassifiable to profit or loss under the equity method RMB million			Total RMB million
												(a)		Discretionary reserve fund RMB million (b)		(c)
As at 1 January 2018		53,860		1,281			(1,986	)		(717	)		33,384		30,152		30,541		(840	)		—			145,675
Other comprehensive income for the year		—		—			(3,426	)		770			—		—		—		586			—			(2,070	)
Appropriation to reserves		—		—			—			—			1,275		3,218		1,392		—			—			5,885
Others		—		(197	)		—			—			—		—		—		—			—			(197	)

As at 31 December 2018		53,860		1,084			(5,412	)		53			34,659		33,370		31,933		(254	)		—			149,293

Effect of associates’ adoption of new accounting standards		—		—			—			16			—		—		—		—			—			16
As at 1 January 2019		53,860		1,084			(5,412	)		69			34,659		33,370		31,933		(254	)		—			149,309
Other comprehensive income for the year		—		—			34,006			687			—		—		—		230			(76	)		34,847
Appropriation to reserves		—		—			—			—			5,857		1,275		5,955		—			—			13,087
Other comprehensive income to retained earnings		—		—			—			—			—		—		—		—			(86	)		(86	)
Others		—		64			—			—			—		—		—		—			—			64

As at 31 December 2019		53,860		1,148			28,594			756			40,516		34,645		37,888		(24	)		(162	)		197,221

As at 1 January 2020		53,860		1,148			28,594			756			40,516		34,645		37,888		(24	)		(162	)		197,221
Other comprehensive income for the year		—		—			25,674			646			—		—		—		(965	)		344			25,699
Appropriation to reserves		—		—			—			—			5,009		5,857		5,159		—			—			16,025
Others		—		(1,055	)		—			—			—		—		—		—			—			(1,055	)

As at 31 December 2020		53,860		93			54,268			1,402			45,525		40,502		43,047		(989	)		182			237,890

(a)	Pursuant to the relevant PRC laws, the Company appropriated 10% of its net profit under Chinese Accounting Standards (“CAS”) to statutory reserve which amounted to RMB5,009 million for the year ended 31 December 2020 (2019: RMB5,857 million, 2018: RMB1,275 million).

(b)	Approved at the Annual General Meeting in June 2020, the Company appropriated RMB5,857 million to the discretionary reserve fund for the year ended 31 December 2019 based on net profit under CAS (2019: RMB1,275 million, 2018: RMB3,218 million).

(c)

Pursuant to “Financial Standards of Financial Enterprises - Implementation Guide” issued by the Ministry of Finance of the PRC on 30 March 2007, for the year ended 31 December 2020, the Company appropriated 10% of net profit under CAS which amounted to RMB5,009 million to the general reserve for future uncertain catastrophes, which cannot be used for dividend distribution or conversion to share capital increment (2019: RMB5,857 million, 2018: RMB1,275 million). In addition, pursuant to the CAS, the Group appropriated RMB150 million to the general reserve of its subsidiaries attributable to the Company in the consolidated financial statements (2019: RMB98 million, 2018: RMB117 million).

Under related PRC law, dividends may be paid only out of distributable profits. Any distributable profits that are not distributed in a given year are retained and available for distribution in the subsequent years.

F-109

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

38	NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

Changes in liabilities arising from financing activities


	Interest- bearing loans and borrowings RMB million			Bonds payable RMB million		Lease liabilities RMB million			Securities sold under agreements to repurchase RMB million			Other liability- payable to the third- party holders of consolidated structured entities RMB million		Other liability- interest payable related to financing activities RMB million			Total RMB million
At 1 January 2018		18,794			—		—			87,309			6,252		127			112,482
Changes from financing cash flows		727			—		—			104,832			3,155		(3,990	)		104,724
Foreign exchange movement		629			—		—			—			—		—			629
Interest expense		—			—		—			—			—		4,115			4,115

At 31 December 2018		20,150			—		—			192,141			9,407		252			221,950

At 1 January 2019		20,150			—		2,185			192,141			9,407		252			224,135
Changes from financing cash flows		(242	)		34,988		(1,348	)		(73,552	)		11,993		(3,072	)		(31,233	)
Foreign exchange movement		137			—		—			—			—		—			137
Changes arising from losing control of consolidated structured entities		—			—		—			(501	)		—		—			(501	)
New leases		—			—		2,239			—			—		—			2,239
Interest expense		—			2		106			—			—		4,147			4,255
Others		—			—		(91	)		—			—		—			(91	)

At 31 December 2019		20,045			34,990		3,091			118,088			21,400		1,327			198,941

F-110

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

38	NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

Changes in liabilities arising from financing activities (continued)


	Interest- bearing loans and borrowings RMB million			Bonds payable RMB million		Lease liabilities RMB million			Securities sold under agreements to repurchase RMB million			Other liability- payable to the third- party holders of consolidated structured entities RMB million		Other liability- interest payable related to financing activities RMB million			Total RMB million
At 1 January 2020		20,045			34,990		3,091			118,088			21,400		1,327			198,941
Changes from financing cash flows		317			—		(1,618	)		4,912			21,254		(3,639	)		21,226
Foreign exchange movement		(806	)		—		—			—			—		—			(806	)
Changes arising from losing control of consolidated structured entities		—			—		—			(751	)		—		—			(751	)
New leases		—			—		1,156			—			—		—			1,156
Interest expense		—			2		113			—			—		3,632			3,747
Others		—			—		(78	)		—			—		—			(78	)

At 31 December 2020		19,556			34,992		2,664			122,249			42,654		1,320			223,435

F-111

CHINA LIFE INSURANCE COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

FOR THE YEAR ENDED 31 DECEMBER 2020

39	PROVISIONS AND CONTINGENCIES

The following is a summary of the significant contingent liabilities:


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Pending lawsuits		403		523

The Group involves in certain lawsuits arising from the ordinary course of business. In order to accurately disclose the contingent liabilities for pending lawsuits, the Group analysed all pending lawsuits case by case at the end of each interim and annual reporting period. A provision will only be recognised if management determines, based on third-party legal advice, that the Group has present obligations and the settlement of which is expected to result in an outflow of the Group’s resources embodying economic benefits, and the amount of such obligations could be reasonably estimated. Otherwise, the Group will disclose the pending lawsuits as contingent liabilities. As at 31 December 2020 and 2019, the Group had other contingent liabilities but disclosure of such was not practical because the amounts of liabilities could not be reliably estimated and were not material in aggregate.

40	COMMITMENTS

(a)

Capital commitments

The Group had the following capital commitments relating to property development projects and investments:


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Contracted, but not provided for
Investments		78,954		64,866
Property, plant and equipment		3,063		3,941

Total		82,017		68,807

(b)

Operating lease commitments

As lessor, the future minimum rentals receivable under non-cancellable operating leases are as follows:


	As at 31 December 2020 RMB million		As at 31 December 2019 RMB million
Not later than one year		768		578
Later than one year but not later than five years		1,526		1,133
Later than five years		193		231

Total		2,487		1,942

F-112