Stock Code: 2628
Annual Report 2008
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Contents
Definitions
Corporate Information
Company Profile
Financial Summary
Chairman’s Statement
Business Review
Management Discussion & Analysis
Embedded Value
Report of the Board of Directors
Report of the Supervisory Committee
Report of Corporate Governance
Corporate Social Responsibility
Directors, Supervisors and Senior Management
Connected Transactions
Awards
Report of Auditor
Consolidated Balance Sheet
Balance Sheet
Consolidated Income Statement
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated Financial Statements
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Supplementary Information for ADS Holders
173
China Life Insurance Company Limited Annual Report 2008
Defi nitions
Reporting Period
The financial year ended 31 December 2008
The Company, China Life
China Life Insurance Company Limited
The Group
The Company and its subsidiaries
CLIC
AMC
China Life Insurance (Group) Company
China Life Asset Management Company Limited
Pension Company
China Life Pension Company Limited
P&C Company
China Life Property and Casualty Insurance Company Limited
China
CIRC
CSRC
2
For the purpose of this annual report, “China” refers to the People’s
Republic of China, excluding the Hong Kong Special Administrative
Region, Macau Special Administrative Region, and Taiwan region
China Insurance Regulatory Commission
China Securities Regulatory Commission
Hong Kong Stock Exchange, HKSE
The Stock Exchange of Hong Kong Limited
China Life Insurance Company Limited Annual Report 2008
Corporate Information
COMPANY NAME
China Life Insurance Company Limited
DIRECTORS
Executive Directors
Yang Chao
Wan Feng
Lin Dairen
Liu Yingqi
Non-executive Directors
Miao Jianmin
Shi Guoqing
Zhuang Zuojin
Independent Non-executive Directors
Long Yongtu
Sun Shuyi
Ma Yongwei
Chau Tak Hay
Cai Rang
Ngai Wai Fung
SUPERVISORS
Xia Zhihua
Wu Weimin
Qing Ge
Yang Hong
Tian Hui
BOARD SECRETARY
Liu Yingqi
SECURITIES REPRESENTATIVE
Lan Yuxi
COMPANY SECRETARY
Heng Kwoo Seng
QUALIFIED ACCOUNTANT
Yang Zheng
REGISTERED OFFICE
China Life Tower
16 Chaowai Avenue, Chaoyang District
Beijing 100020, China
Tel: 86(10) 8565 9999
Fax: 86(10) 8525 2232
Website: www.e-chinalife.com
HONG KONG OFFICE
25th Floor, C.L.I. Building
313 Hennessy Road, Wanchai
Hong Kong
Tel: (852) 2919 2628
Fax: (852) 2919 2638
AUDITOR
PricewaterhouseCoopers
LEGAL ADVISERS
King & Wood
Latham &Watkins
Freshfields Bruckhaus Deringer
Debevoise & Plimpton LLP
H SHARE REGISTRAR AND TRANSFER OFFICE
Computershare Hong Kong Investor Services Limited
Room 1712-1716, 17th Floor
Hopewell Centre
183 Queen’s Road East
Hong Kong
DEPOSITARY
JPMorgan Chase Bank
4 New York Plaza, New York
New York 10004
PLACES OF LISTING
H Share: The Stock Exchange of Hong Kong Limited
Stock code: 2628
A Share: Shanghai Stock Exchange
Stock code: 601628
3
AUTHORIZED REPRESENTATIVES
Wan Feng
Heng Kwoo Seng
AMERICAN DEPOSITORY SHARES
The New York Stock Exchange
Stock Code:LFC
China Life Insurance Company Limited Annual Report 2008
Company Profi le
The Company is a life insurance company established in Beijing, China on 30 June 2003 according to the Company
Law of the People’s Republic of China. The Company was successfully listed on the New York Stock Exchange, the
Hong Kong Stock Exchange and the Shanghai Stock Exchange on 17 and 18 December 2003, and 9 January 2007,
respectively. The Company’s registered capital is RMB28,264,705,000.
The Company is the largest life insurance company in China’s life insurance market. Our distribution network,
comprising exclusive agents(Note), direct sales representatives, and dedicated and non-dedicated agencies, is the most
extensive one in China. The Company is one of the largest institutional investors in China, and through its controlling
shareholding in China Life Asset Management Company Limited, the Company is the largest insurance asset
management company in China. The Company also has controlling shareholding in China Life Pension Company
Limited.
Our products and services include individual life insurance, group life insurance, accident and health insurance. The
Company is China’s leading life insurance company, a leading provider of annuity products and life insurance for both
individuals and groups, and a leading provider of accident and health insurance in China. As at the end of the Reporting
Period, the Company had nearly 102 million individual and group life policies and annuities, and long-term health
insurance policies in force. We also provide both individual and group accident and short-term health insurance policies
and services.
Note: include a small number of exclusive agents who have not yet obtained the valid agency qualification.
4
China Life Insurance Company Limited Annual Report 2008
Financial Summary
We set out below a financial summary of the Group for the years from 2004 to 2008.
Unless otherwise stated, all the financial data of the Group set out in this annual report is prepared in accordance with
Hong Kong Financial Reporting Standards (“HKFRS”).
For the year ended 31 December
RMB million (Except earnings per share)
2008
2007
2006
2005
2004
Total revenues
Net profit (Note)
Basic and diluted earnings per share (RMB)
166,811
21,277
0.75
191,372
38,879
1.38
147,311
19,956
0.75
98,212
9,306
0.35
76,806
7,171
0.27
Note: Net profit refers to net profit attributable to shareholders of the Company.
As at 31 December
RMB million
Total assets
Total liabilities
Investment assets (Note1)
Total shareholders’ equity (Note2)
2008
2007
2006
2005
2004
1,044,828
863,255
937,403
180,649
933,704
727,328
850,209
205,500
764,395
624,190
686,804
139,665
559,219
478,410
494,356
80,378
433,671
366,769
374,890
66,530
5
Note 1: Investment assets include debt securities, equity securities, term deposits, statutory deposits-restricted, securities purchased
under agreements to resell, loans, cash and cash equivalents.
Note 2: Total shareholders’ equity refers to equity attributable to the shareholders of the Company.
China Life Insurance Company Limited Annual Report 2008
Chairman’s Statement
To operate with care, serve with integrity,
fulfil social responsibilities proactively,
with a view to further enhancing our
corporate image and brand reputation,
strive to achieve the goals of “maximum
effi ciency, optimal image, and best return”.
Yang Chao, Chairman
6
Dear Shareholders,
I am pleased to present to you the Group’s operating results for the
Reporting Period.
2008 has been an extraordinary year for China. During the first half
of the year, the country was hit by the snow storm in Southern China
at the beginning of the year, and then by the devastating earthquake
in Sichuan on 12 May 2008. In the second half of this year, China
felt the impact of the global financial crisis. Due to these external
factors, the Company’s operating and development environment has
become very challenging. In response to this, the Company accurately
assessed the macroeconomic and financial situation, the competition
landscape and trends of the industry, and adopted proactive and
prudent measures. As a result, the Company continued to be one of the
strongest performers in the industry. The Company further enhanced
its overall strength, leading position in the life insurance industry and
social recognition during the year, making solid progress in the mode
of development with its own characteristics.
For the Reporting Period, the Group’s total revenues reached
RMB166,811 million, net profit attributable to shareholders of the
Company was RMB21,277 million, and the basic and diluted earnings
per share was RMB0.75. The Board of Directors recommended the
payment of a final dividend of RMB0.23 per share for the year ended
31 December 2008. This will come into effect after shareholders’
approval at the Annual General Meeting to be held on Monday, 25
May 2009.
China Life Insurance Company Limited Annual Report 2008
Chairman’s Statement
The Company is the core member of China Life Insurance (Group) Company, which has been listed in “Fortune Global
500” and the World Brand Lab’s “The World’s 500 Most Influential Brands”. In 2008, the Company received the “Best
Corporate Governance” award by Finance Asia, and the “Best Insurance Company in Asia 2008” and the “Best Insurance
Company in China 2008” awards by Euromoney. In January 2009, Standard & Poor Rating Services, Moody’s Investors
Service and Fitch Ratings assigned “A+”, “A1” and “A+” to the Company respectively, with a stable rating outlook.
SUBSTANTIAL BUSINESS GROWTH AND FURTHER ENHANCEMENT IN FINANCIAL
STRENGTH
During the year, the Company fully leveraged the resources of its local branches, sales force and bancassurance channels
by adopting the proactive competition strategy, resulting in a rapid growth of its insurance business. During the
Reporting Period, the Group’s gross written premiums and policy fees reached RMB135,325 million, an increase of
20.9% from 2007.
According to the data released by CIRC, under PRC Generally Accepted Accounting Principles (“PRC GAAP”),
the Company’s market share in 2008 was about 40.3%, up 0.5 percentage points from 2007, further enhancing the
Company’s leading position in the life insurance market of China.
As at the end of the Reporting Period, the Group’s total assets reached RMB1,044,828 million, an increase of 11.9%
from the end of 2007. The embedded value reached RMB240,087 million, and the solvency ratio was 310%. For the
Reporting Period, value of one year’s sales of the Company reached RMB13,924 million, an increase of 15.6% from
2007.
7
MEETING WITH MARKET CHANGES PROACTIVELY AND EMPHASIZING
SUSTAINABILITY OF DEVELOPMENT
In 2008, in response to the increasingly acute competition in the insurance market, the Company continued to optimize
its business structure and enhance long-term development sustainability. The Company focused on the development
of traditional and participating products as well as moderate growth of investment-related products such as unit-linked
insurance products and universal life insurance products, with a view to continually enhancing the profitability of its
insurance products and business; emphasized on the development of long-term regular premium products to further
optimize the business structure; and emphasized on the development of protection-oriented insurance products to
continue to enhance the core competitiveness of its insurance products.
In 2008, the Group’s first-year regular gross written premiums reached RMB30,280 million, an increase of 24.3% from
2007. First-year regular gross written premiums accounted for 93.4% of first-year gross written premiums of long-term
traditional insurance contracts. Moreover, the Company’s Policy Persistency Rate1 (14 months and 26 months) reached
92.50% and 86.05% respectively. Surrender Rate2 fell to 4.38%, a 1.62 percentage point decrease from 2007.
1
2
The Persistency Rate for long-term individual policy is an important operating performance indicator for life insurance
companies. It measures the ratio of in-force policies in a pool of policies after a certain period of time. It refers to the proportion
of policies that are still effective during the designated month in the pool of policies whose issue date was 14 or 26 months ago.
According to PRC GAAP
China Life Insurance Company Limited Annual Report 2008
Chairman’s Statement
PRUDENT INVESTMENT STRATEGY, FURTHER OPTIMIZING INVESTMENT
PORTFOLIO
The sharp fall in capital markets during 2008 due to global financial crisis resulted in substantial pressure on the
Company’s investment. The Company adopted the prudent investment strategy, optimized the investment portfolio
according to the market situations by reducing the proportion of equity investment and increased the investment in
fixed-income securities, and endeavored to increase the efficiency of investment. As at the end of the Reporting Period,
the proportion of debt securities increased from 52.1% at the end of 2007 to 61.4%, the proportion of term deposits
increased from 19.8% at the end of 2007 to 24.4%, and the proportion of equity securities decreased from 23.0% at the
end of 2007 to 8.0%.
The Company correctly assessed the situation in the international financial markets, and effectively controlled its
investment risk during the market turmoil. The Company did not invest in any foreign debts, stocks and derivatives
directly related to the subprime crisis. Moreover, the Company’s US$ 260 million investment in the initial public
offering of Visa International generated an investment return of close to 70%.
As at the end of the Reporting Period, the Group’s investment assets reached RMB937,403 million, an increase of
10.3% from the end of 2007. For the Reporting Period, the net investment yield3 was 4.96% and the gross investment
yield4 was 3.40%.
8
STEADY DEVELOPMENT OF DISTRIBUTION CHANNELS AND SALES TEAMS
In 2008, the exclusive individual agents channel continued to be the core distribution channel for the Company,
supplemented by the group insurance and bancassurance channels. These three channels witnessed steady development
in the year. While ensuring the Company’s business growth, the exclusive agents channel focused on the sale of long-
term regular premium products, the group insurance channel focused on developing the more profitable accident
insurance business, and regular-premium business through the bancassurance channel also grew quite strongly.
As at the end of the Reporting Period, the Company had about 716,000 exclusive agents, an increase of 78,000 from
the end of 2007. The proportion of exclusive agents holding valid licenses was 99.6%. The Company optimized the
structure of its direct sales team, which has over 12,600 representatives. The Company had nearly 94,000 intermediary
bancassurance outlets, including commercial bank branches, postal savings outlets and cooperative savings institutions.
In addition, the Company has over 26,000 client service managers for its bancassurance channel, an increase of 44%
from the end of 2007, while the number of financial advisors in the bancassurance channel was over 11,000, an increase
of 110% from the end of 2007.
3
4
The net investment yield = net investment income / ((investment assets at the beginning of the period - securities sold under
agreements to repurchase at the beginning of the period + investment assets at the end of the period - securities sold under
agreements to repurchase at the end of the period) / 2)
The gross investment yield = (net investment income + net realized gains/(losses) on financial assets + net fair value gains/(losses)
on assets at fair value through income) / ((investment assets at the beginning of the period - securities sold under agreements
to repurchase at the beginning of the period + investment assets at the end of the period - securities sold under agreements to
repurchase at the end of the period) / 2)
China Life Insurance Company Limited Annual Report 2008
Chairman’s Statement
ACCELERATING MANAGEMENT REFORM AND INNOVATION AND ENHANCING RISK
CONTROL CAPABILITY
In 2008, the Company continued to deepen the reform on the modern enterprise management system. While optimizing
the provincial centralization of business management, customer service, finance and information technology, the
Company also initiated centralized management of the exclusive agents distribution channel at the provincial level.
Five regional audit centers directly subordinate to the headquarters were established, and the internal audit system was
rebuilt to strengthen the audit and supervision capabilities of the Company. In addition, the Company restructured the
information technology function, and established its Beijing research and development centre and Shanghai database
centre to form a professional research and development and operation support system.
In 2008, the Company further enhanced its internal risk control system. The Company established Sales Supervision
Department and restructured its Internal Control and Compliance Department and Legal Affairs Department into
Internal Control and Risk Management Department and Legal Affairs and Compliance Department through functional
adjustment to clarify roles and responsibilities of risk management and properly allocate resources. The Company’s risk
control capability was further improved by strengthening its risk prospecting system, implementing special-purpose
risk audits, stepping up efforts on investigation of improper sales cases, and implementing continuous auditing and
effectiveness monitoring of the entire system.
CORPORATE GOVERNANCE
In 2008, the Company aimed at continually improving its corporate governance structure and system so that its
shareholders’ general meeting, Board of Directors, Supervisory Committee and senior management could fully perform
their roles in decision-making, strategy execution, operating management and risk monitoring and control. During the
year, the composition of the Board of Directors and its committees were readjusted with the election of new Directors,
namely, Mr. Miao Jianmin, Mr. Lin Dairen and Ms. Liu Yingqi. The Board of Directors believes that the three newly
elected Directors, with their rich experiences in the insurance industry, would make considerable contribution to the
Company.
9
CORPORATE SOCIAL RESPONSIBILITY
The Company has always been a caring member of the society and has proactively fulfilled its social responsibilities.
In 2008, the Company, the Company’s employees and exclusive agents, together with China Life Charity Foundation
donated more than RMB60 million after the snow storm in Southern China and the earthquake in Wenchuan, Sichuan.
In addition, the Company donated accident insurance to 12 types of disaster relief personnel such as soldiers and
policemen involved in these events. The Company also announced to cover basic living expenses of earthquake orphans
through China Life Charity Foundation. For supporting the national aerospace development, the Company provided
insurance for the astronauts and scientists of the Shenzhou VII spacecraft. The Company was also conferred with the
“Olympic Volunteers Advanced Organizational Units” for the excellent performance of its Olympic Audience Call
Center volunteer team. Further, the Company received the China Charity Award, the highest charity award from the
government, for the Company’s outstanding charitable contributions.
China Life Insurance Company Limited Annual Report 2008
Chairman’s Statement
OUTLOOK
2009 is expected to be a more difficult year full of uncertainties, both for international and domestic economies and
financial markets. In accordance with the requirements of all-round, coordinated and sustainable development, the
Company considers development as its top priority, and will strive to achieve stable growth of insurance business.
Meanwhile, the Company will continue to enhance business profitability through significantly restructuring the mix of
its insurance portfolio. It will also further carry on the reform on its modern operation and management system to drive
the momentum for continuous growth. Moreover, the Company will continue to strengthen its risk management and
control capabilities to ensure sound business development. The Company will strive to capture business opportunities as
its own situation permits, while emphatically guarding against various risks. The Company will continue to operate with
care, serve with integrity, and fulfil social responsibilities proactively, with a view to further enhancing our corporate
image and brand reputation, and strive to achieve the goals of “maximum efficiency, optimal image, and best return”, as
well as create greater value for our shareholders.
By order of the Board
Yang Chao
Chairman
Beijing, China
25 March 2009
10
China Life Insurance Company Limited Annual Report 2008
Business Review
INSURANCE BUSINESS
For the year ended 31 December
Gross written premiums
2007
2008
Change
(%)
Individual life insurance
First-year business
Single
First-year regular
Renewal business
Group life insurance
First-year business
Single
First-year regular
Renewal business
108,235
32,099
1,828
30,271
76,136
91,420
25,480
1,273
24,207
65,940
324
315
306
9
9
876
854
705
149
22
Accident and health insurance
Short-term accident insurance
Short-term health insurance
13,042
6,153
6,889
11,899
5,495
6,404
18.4
26.0
43.6
25.1
15.5
–63.0
–63.1
–56.6
–94.0
–59.1
9.6
12.0
7.6
RMB million
Policy fees
2007
2008
Change
(%)
13,217
7,064
87.1
507
627
–19.1
Deposits
2007
2008
155,163
144,396
139,281
5,115
10,767
21,106
21,106
21,106
–
–
72,069
60,182
56,644
3,538
11,887
22,158
22,143
22,061
82
15
Change
(%)
115.3
139.9
145.9
44.6
–9.4
–4.7
–4.7
–4.3
–100.0
–100.0
11
Total
121,601
104,195
16.7
176,269
94,227
87.1
13,724
7,691
78.4
1. Gross written premiums and policy fees
For the Reporting Period, the Company’s gross written premiums and policy fees were RMB135,325million, an
increase of 20.9% from 2007, among which the gross written premiums and policy fees attributable to individual
life insurance business were RMB121,452million, an increase of 23.3% from 2007.
For the Reporting Period, the gross written premiums from long-term traditional insurance contracts were
RMB108,559 million, and the first-year gross written premiums of long-term traditional insurance contracts were
RMB32,414 million, an increase of 23.1% from 2007, of which the first-year regular gross written premiums were
RMB30,280 million, an increase of 24.3% from 2007. The first-year regular gross written premiums accounted
for 93.4% of the first-year gross written premiums of long-term traditional insurance contracts, an increase of
0.9 percentage points from 2007. The first-year gross written premiums of individual life insurance reached
RMB32,099 million, accounting for 29.7% of the gross written premiums of individual life insurance. And the
first-year regular gross written premiums reached RMB30,271 million, accounting for 94.3% of the first-year gross
written premiums.
The Company sells both participating and non-participating life insurance products. For the Reporting Period,
the gross written premiums attributable to individual life insurance participating products and non-participating
products were RMB60,308 million and RMB47,927 million respectively.
China Life Insurance Company Limited Annual Report 2008
Business Review
12
2. Deposits
Deposits are gross additions to long-term investment-type insurance contracts and investment contracts
(collectively, investment-type contracts). Total deposits increased by 87.1% comparing to the same period of
2007. This increase was primarily due to an increase in business volume.
Total deposits from participating products increased by RMB70,699 million, or 85.0%, to RMB153,880 million
in 2008 from RMB83,181million in 2007. Total policy fees from participating products increased by RMB5,565
million, or 100%, to RMB11,128 million in 2008 from RMB5,563 million in 2007.
INVESTMENTS
For the Reporting Period, the Group’s net investment yield reached 4.96%, an decrease of 0.8 percentage point from
2007. The Group’s gross investment yield reached 3.40%, an decrease of 6.84 percentage points from 2007.
As at the end of the Reporting Period, the investment portfolios of the Group were as follows:
As at 31 December
2008
Volume
Proportion
(%)
2007
Volume
RMB million
Proportion
(%)
Debt Securities
Held-to-maturity securities
Available-for-sale securities
At fair value through income (held-for-trading)
Equity Securities
Available-for-sale securities
At fair value through income (held-for-trading)
Term deposits
Statutory deposits-restricted
Loans
Securities purchased under agreements to resell
Cash and cash equivalents
575,885
211,929
356,220
7,736
75,082
68,719
6,363
228,272
6,153
17,926
–
34,085
61.4
22.6
38.0
0.8
8.0
7.3
0.7
24.4
0.7
1.9
–
3.6
443,181
195,703
241,382
6,096
195,147
176,133
19,014
168,594
5,773
7,144
5,053
25,317
52.1
23.0
28.4
0.7
23.0
20.7
2.3
19.8
0.7
0.8
0.6
3.0
DISTRIBUTION CHANNELS
The Company has the largest and most extensive distribution force and network in the life insurance sector in China.
The distribution network of the Company covers all provinces, municipalities and autonomous regions of China.
Exclusive agents, direct sales force and bancassurance intermediaries comprising mainly outlets of commercial banks,
postal savings bank and cooperative savings institutions are the three major distribution channels of the Company. In
2008, the Company’s distribution channels remained steady.
China Life Insurance Company Limited Annual Report 2008
Business Review
Distribution channel
Exclusive agents
Direct sales force
Bancassurance sales outlets
(1) Exclusive Agents
As at
31 December 2008 31 December 2007
As at
716,000
12,600
94,000
638,000
13,000
90,000
The exclusive agents are the Company’s core distribution channel for individual life, individual accident and
individual health insurance products. As at the end of the Reporting Period, the Company had over 16,000 field
offices and approximately 716,000 exclusive agents. The proportion of certificate holders among our exclusive
agents was 99.6%.
The Company pays high attention to the development of exclusive agents team. In 2008, the Company included
the proportion of certificate holders as one of the performance appraisal parameters for its branches and
strengthened follow-up oversight on the branches’ execution which resulted in the rapid growth of certificate
holders. As at the end of the Reporting Period, the number of certificated exclusive agents reached 713,000,
an increase of nearly 90,000 from the end of 2007. The Company also aimed to continue to enhance agents’
productivity by improving their sales skills, tightening management on their daily activities, further regularizing
fundamental rules and policies on sales force management and their implementation, and strengthening
management skill training to agent managers.
13
(2) Direct Sales Representatives
The Company’s direct sales representatives are the primary distribution force for its group life insurance, group
annuities, accident insurance, short-term health insurance and group long-term health insurance. As at the end of
the Reporting Period, the number of direct sales representatives of the Company was about 12,600.
In 2008, the Company continued to promote the professionalism and capability of the group insurance sales team
by strengthening their training and experimenting with the establishment of sales assistant team. While further
consolidating the direct sales channel, the Company also devoted efforts to expand the intermediary channel
besides banks and post savings banks, and had established cooperative relationship with many dedicated and non-
dedicated agencies
China Life Insurance Company Limited Annual Report 2008
Business Review
(3) Bancassurance Sales Outlets
The Company also sells insurance products through intermediaries such as commercial banks, postal savings bank
and cooperatives savings institutions. As at the end of the Reporting Period, the number of bancassurance sales
outlets of the Company reached approximately 94,000, and the number of client service managers and financial
advisors devoted to this channel was over 26,000 and 11,000 respectively, both increased over the same period of
2007.
In 2008, the Company strengthened the development planning and sales management of the bancassurance sales
team. The Company continued to consolidate the cooperation with the four state-owned commercial banks and
postal savings bank and enhanced the cooperation with the medium and small commercial banks. The Company
also stepped up on intensive management of the bancassurance sales outlets.
BUSINESS MANAGEMENT AND CUSTOMER SERVICE
In 2008, the Company continued to enhance the quantity and efficiency of business management. Through a series of
stringent management measures, the Company further improved the level of business management and customer service.
At the same time, the Company accelerated standardization of its customer service centers and preliminarily established
the standardized customer service system with hardware as the basis and software as the main component.
14
In 2008, the Company further built up the “China Life 1+N” Service Brand with the image of “Nice, Excellent and
Distinguished”. The Company introduced “China Life Crane Card” as the physical carrier of the “China Life 1+N”
Service Brand, and kept on innovating the basic and value-added services of insurance policies. The Company’s
centralized service platform “95519” Call Center was granted “China’s Best Call Center” for the fifth consecutive year.
INTERNAL CONTROL AND RISK MANAGEMENT
In 2008, the Company strived to bring the internal control and risk management work to a higher level, established the
framework for the comprehensive risk management system and issued “Implementation opinions on establishment of
the comprehensive risk management system” to all branches. The Company rolled out internal control standards among
all branches and accomplished continuous compliance with internal control requirements through integrating risk-based
internal control assessment. At the same time, the Company also further standardized the anti-money laundering work
by consummating anti-money laundering rules according to related laws and regulations.
China Life Insurance Company Limited Annual Report 2008
Management Discussion and Analysis
1. OPERATING RESULTS
Year ended 31 December 2008 compared with year ended 31 December 2007
For the year ended 31 December
Net premiums earned and policy fees
Individual life insurance business
Group life insurance business
Accident and health insurance business
(short-term products)
Net investment income
Net realized gains on financial assets
Net fair value gains on assets at fair
value through income (held-for-trading)
Debt securities
Equity securities
Other Income
2008
2007
RMB million
Change(%)
134,650
121,434
831
12,385
44,050
(6,516)
(7,296)
287
(7,583)
1,923
111,404
98,470
1,503
11,431
44,020
15,385
18,843
366
18,477
1,720
20.9
23.3
-44.7
8.3
0.1
-142.4
-138.7
-21.6
-141.0
11.8
Net Premiums Earned and Policy Fees
Net premiums earned and policy fees increased by 20.9% from 2007. This increase was primarily due to increases
in net premiums earned from the individual life insurance and accident and health insurance businesses, and
increase in policy fees from individual life insurance business.
15
Net premiums earned from participating products of long-term traditional insurance contracts were RMB60,305
million in 2008, an increase of 28.4% from RMB46,972 million in 2007. This increase was primarily due to our
increased sales efforts for participating products. Of total net premiums earned in 2008, RMB2,134 million was
attributable to single premium products and RMB106,425 million was attributable to regular premium products
(including both first-year and renewal premiums).
China Life Insurance Company Limited Annual Report 2008
Management Discussion and Analysis
Individual Life Insurance Business
Net premiums earned and policy fees from the individual life insurance business increased by 23.3% from 2007.
This increase was primarily due to increases in the business volume of traditional and participating products of
individual life insurance business.
Group Life Insurance Business
Net premiums earned and policy fees from the group life insurance business decreased by 44.7% from 2007.
This decrease was primarily due to the significant impact on the supplemental corporate annuity market from the
corporate annuity policy put forward by the government. Under such circumstance, the Company changed our
business model and actively readjusted our annuity business strategy.
Accident and Health Insurance Business
Net premiums earned from the accident and health insurance business (both of which comprise short-term
products) increased by 8.3% from 2007. This increase was primarily due to our increased sales efforts for accident
and health insurance business.
Net Investment Income
Net investment income increased by 0.1% from 2007. This increase was primarily due to the increase of fixed-
income investment, which offset in part the decrease in investment yield.
16
The net investment yield for 2008 was 4.96%, a 0.8 percentage point decrease from 2007. This decrease was
primarily due to the decrease of dividends from equity investments.
Net Realized Gains/(losses) on Financial Assets
Net realized gains/(losses) on financial assets decreased by 142.4% from 2007. This decrease was primarily due to
the sharp fall of capital market.
Net Fair Value Gains/(losses) on Assets at Fair Value through Income (Held-for-Trading)
Net fair value gains/(losses) on assets at fair value through income (held-for-trading) decreased by 138.7% from
2007.
In particular, net fair value gains on assets at fair value through income (held-for-trading) on debt securities
decreased by 21.6% from 2007. Net fair value gains/(losses) on assets at fair value through income (held-for-
trading) on equity securities decreased by 141.0% from 2007.
This decrease was primarily due to the sharp fall of capital market.
Other Income
Other income increased by 11.8% from 2007. This increase was primarily due to the increase in the fee income
from relevant agency business.
China Life Insurance Company Limited Annual Report 2008
Management Discussion and Analysis
For the year ended 31 December
2008
2007
RMB million
Change(%)
Insurance benefits and claims
Individual life insurance business
Group life insurance business
Accident and health insurance business (short-term products)
Interest credited to investment contracts
Increase in deferred Income
Policyholder dividends resulting from participation in profits
Amortization of deferred policy acquisition costs
Underwriting and policy acquisition costs
Administrative expenses
Other operating expenses
(89,823)
(82,057)
(213)
(7,553)
(1,358)
(21,139)
(2,492)
(11,784)
(3,394)
(12,110)
(1,891)
(76,288)
(68,990)
(955)
(6,343)
(1,138)
(9,859)
(29,251)
(13,461)
(2,725)
(11,798)
(1,651)
17.7
18.9
–77.7
19.1
19.3
114.4
–91.5
–12.5
24.6
2.6
14.5
Insurance Benefits and Claims
Insurance benefits and claims, net of amounts ceded through reinsurance, increased by 17.7% from 2007. This
increase was due to the increase in business volume and the accumulation of liabilities. Life insurance death and
other benefits increased by 2% to RMB17,777 million in 2008 from RMB17,430 million in 2007. This increase
was primarily due to the increase in business volume and the accumulation of liabilities. Life insurance death and
other benefits as a percentage of gross written premiums and policy fees were 13.1% and 15.6% in 2008 and 2007
respectively. Interest credited to long-term investment-type insurance contracts increased by 28.3% to RMB9,212
million in 2008 from RMB7,181 million in 2007. This increase primarily reflected an increase in the total
policyholder account balance.
17
Insurance benefits and claims, net of amounts ceded through reinsurance, attributable to participating products
increased by 25.2% to RMB47,531 million in 2008 from RMB37,962 million in 2007. Of these insurance
benefits and claims attributable to participating products, life insurance death and other benefits decreased by
4.7% to RMB8,813 million in 2008 from RMB9,248 million in 2007; the increase in liability of long-term
traditional insurance contracts increased by 37.8% to RMB31,060 million in 2008 from RMB22,548 million in
2007; and the interest credited to long-term investment-type insurance contacts increased by 24.2% to RMB7,658
million in 2008 from RMB6,166 million in 2007.
Individual Life Insurance Business
Insurance benefits and claims for the individual life insurance business increased by 18.9% from 2007. This
increase was primarily due to the increase in business volume and the accumulation of liabilities.
Of these insurance benefits and claims, life insurance death and other benefits increased by 2.7% to RMB16,915
million in 2008 from RMB16,463 million in 2007. This increase was primarily due to the increase in the number
of policies in force, the accumulation of liabilities and the number of insurance policies reaching maturity. The
increase in liability of long-term traditional insurance contracts increased by 23.3% to RMB55,957 million in
2008 from RMB45,370 million in 2007. The increase in liability of long-term traditional insurance contracts was
primarily due to the increase in business volume and the accumulation of liabilities.
China Life Insurance Company Limited Annual Report 2008
Management Discussion and Analysis
Group Life Insurance Business
Insurance benefits and claims for the group life insurance business decreased by 77.7% from 2007. This decrease
was primarily due to a decrease in business volume of group life insurance business.
Of these insurance benefits and claims, life insurance death and other benefits decreased by 10.9% to RMB862
million in 2008 from RMB967 million in 2007 and the increment in long-term traditional insurance contracts
liabilities decreased by RMB640 million to RMB(676) million in 2008 from RMB (36) million in 2007.
Accident and Health Insurance Business
Insurance benefits and claims for the accident and health insurance business (both of which comprise short-term
products) increased by 19.1% from 2007. This increase was primarily due to an increase in business volume.
Interest Credited to Investment Contracts
Interest credited to investment contracts increased by 19.3% from 2007. This increase primarily reflected an
increase in the total investment contracts account balance. Interest credited to participating investment contracts
increased by 20.2% to RMB1,309 million in 2008 from RMB1,089 million in 2007.
18
Increase in Deferred Income
Increase in deferred income includes the deferred profit liability arising from long-term traditional insurance
contracts and the unearned revenue liability arising from long-term investment-type insurance contracts and
investment contracts. The increase in deferred income increased by 114.4% from 2007. This increase was
primarily due to an increase in business volume.
Policyholder Dividends Resulting from Participation in Profits
Policyholder dividends resulting from participation in profits decreased by 91.5% from 2007. This decrease was
primarily due to a decrease in investment yield for participating products.
Amortization of Deferred Policy Acquisition Costs
Amortization of deferred policy acquisition costs decreased by 12.5% from 2007. This decrease was primarily due
to a decrease in investment yield.
Underwriting and Policy Acquisition Costs
Underwriting and policy acquisition costs primarily reflect the non-deferrable portion of underwriting and policy
acquisition costs. Underwriting and policy acquisition costs increased by 24.6% from 2007. Underwriting and
policy acquisition costs were approximately 2.5% of net premiums earned and policy fees both in 2008 and 2007.
Underwriting and policy acquisition costs in the individual life insurance business increased by 20.3% from 2007.
This increase was primarily due to an increase of business volume and the more intense market competition.
Underwriting and policy acquisition costs in the group life insurance business increased by 133.3% from 2007.
This increase was primarily due to an increase of business volume and the more intense market competition.
Underwriting and policy acquisition costs in the accident and health insurance business increased 36.3% from
2007. This increase was primarily due to an increase of business volume and the more intense market competition.
China Life Insurance Company Limited Annual Report 2008
Management Discussion and Analysis
Administrative Expenses
Administrative expenses include the non-deferrable portion of policy acquisition costs, as well as employees’
remuneration and other administrative expenses. Administrative expenses increased by 2.6% from 2007. This
increase was primarily due to an increase in business volume and was offset by the impact of stricter cost control.
Other Operating Expenses
Other operating expenses, which primarily consist of foreign exchange losses and expenses for non-core business,
increased by 14.5% from 2007. This increase was primarily due to the increase in donation expense and interest
for securities sold under agreements to repurchase.
Income Tax
We pay income tax according to applicable Chinese enterprise income tax regulations and rules. Income tax
expense, including current and deferred taxations, decreased by 78.0% from 2007. This decrease was primarily
due to a decrease of net profit before income tax. Our effective tax rate for 2008 was 6.1%, which decreased by 7.8
percentage points from an effective tax rate for 2007 of 13.9%. The decrease was due to a decrease in net profit
before income tax.
For the year ended 31 December
2008
2007
RMB million
Change(%)
Net profit attributable to shareholders of the Company
Individual life insurance business
Group life insurance business
Accident and health insurance business (short-term products)
21,277
21,256
499
576
38,879
41,202
1,563
2,356
–45.3
–48.4
–68.1
–75.6
19
Net Profit Attributable to Shareholders of the Company
For the reasons set forth above, net profit attributable to shareholders of the Company decreased by 45.3% from
2007.
Individual Life Insurance Business
Net profit in the individual life insurance business decreased by 48.4% from 2007. This decrease was primarily
due to the decrease in investment income.
Group Life Insurance Business
Net profit in the group life insurance business decreased by 68.1% from 2007. This decrease was primarily due to
the decrease in investment income.
Accident and Health Insurance Business
Net profit in the accident and health insurance business (both of which comprise short-term products) decreased
by 75.6% from 2007. This decrease was primarily due to the more intense market competition.
China Life Insurance Company Limited Annual Report 2008
Management Discussion and Analysis
2. LIQUIDITY AND CAPITAL RESOURCE
20
Liquidity Sources
Our principal cash inflows come from insurance premiums, deposits, proceeds from sales and maturity of financial
assets, and net investment income. The primary liquidity concerns with respect to these cash inflows are the risk
of early withdrawals 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.
Additional sources of liquidity to meet unexpected cash outflows are available from our investment portfolio. As at
the end of the Reporting Period, the amount of cash and cash equivalents was RMB34,085 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 at the end of the Reporting Period, the amount of term deposits was RMB228,272 million.
Our investment portfolio also provides us with a source of liquidity to meet unexpected cash outflows. As at 31
December 2008, investments in debt securities had a fair value of RMB592,554 million. As at 31 December 2008,
investments in equity securities had a fair value of RMB75,082 million. However, the China securities market is
still at an early stage of development, and we are subject to market liquidity risk because the market capitalization
and trading volumes of the public exchanges are much lower than those in more developed financial markets. We
also are subject to market liquidity risk due to the large size of our investments in some of the markets in which
we invest. From time to time some of our positions in our investment securities may be large enough to have an
influence on the market value. These factors may limit our ability to sell these investments at an adequate price, or
at all.
Liquidity Uses
Our principal cash outflows primarily relate to the liabilities associated with our various life insurance, annuity
and accident and health insurance products, dividend and interest payments on our insurance policies and annuity
contracts, operating expenses, income taxes and dividends that may be declared and payable to our shareholders.
Liabilities arising from our insurance activities primarily relate to benefit payments under these insurance
products, as well as payments for policy surrenders, withdrawals and loans.
We believe that our sources of liquidity are sufficient to meet our current cash requirements.
Consolidated Cash Flows
Net cash provided by operating activities was RMB84,779 million in 2008, a decrease of RMB38,075 million
from RMB122,854 million in 2007. This decrease was primarily due to a decrease in net profit before income tax
and an increase of actual expense on policy dividends.
Net cash used in investment activities was RMB156,471 million in 2008, an increase of RMB17,957 million from
RMB138,514 million in 2007. This increase was primarily due to the arrangement of investment activities.
Net cash provided by financing activities was RMB80,748 million in 2008, an increase of RMB89,477 million
from RMB (8,729) million in 2007. This change was primarily due to the arrangement of investment activities.
China Life Insurance Company Limited Annual Report 2008
Management Discussion and Analysis
Our global share offering in December 2003 provided cash proceeds of approximately RMB24,707 million
(US$3,062 million). As at the end of the Reporting Period, part of the cash proceeds from our global offering was
held in bank deposit accounts denominated in foreign currencies in China, part of which were held as structured
deposits. We gradually converted approximately US$300 million of the cash proceeds into Renminbi to reduce
foreign exchange risks and used approximately US$425 million for investments in foreign-currency denominated
debts in China. We used approximately US$433 million for investments in Guangdong Development Bank in
December 2006. In addition, we invested in the H shares of China Construction Bank Corporation, Bank of
China Limited, Industrial and Commercial Bank of China Limited, China CITIC Bank Corporation Limited,
China National Materials Company Limited and China South Locomotive & Rolling Stock Corporation Limited
in their initial public offerings. As at the end of the Reporting Period, we have sold most of these H shares. In
addition, we used approximately US$260 million for investment in IPO of Visa International and generated an
investment return of close to 70%.
Our A share offering in December 2006 provided cash proceeds of approximately RMB27,810 million. We
received such cash proceeds on 29 December 2006. As at the end of the Reporting Period, the cash proceeds from
our A share offering were used to strengthen our capital base.
3. RATIO OF ASSETS AND LIABILITIES
The ratio of assets and liabilities of the Group as at 31 December 2008 and 31 December 2007 are as follows:
31 December 2008 31 December 2007
21
Ratio of assets and liabilities5
82.6%
77.9%
4.
INSURANCE SOLVENCY REQUIREMENTS
The solvency ratio of an insurance company is a measure of capital adequacy, which is calculated by dividing the
actual capital (which is its admissible assets less admissible liabilities, determined in accordance with relevant rules)
by the minimum capital it is required to meet. The following table shows the Company’s solvency ratio as at the
end of the Reporting Period:
Actual capital
Minimum capital
Solvency ratio
As at 31 December 2008
RMB million (except percentage data)
As at 31 December 2007
124,540
40,156
310%
168,357
32,054
525%
The decrease of solvency ratio was primarily due to the substantial growth of insurance business volume and the
sharp fall of capital market.
5
Ratio of assets and liabilities=total liabilities/total assets
China Life Insurance Company Limited Annual Report 2008
Management Discussion and Analysis
5. DIFFERENCE IN ACCOUNTING STANDARDS
On 7 August 2008, the Ministry of Finance issued the No.2 Interpretation of Accounting Standard for Business
Enterprises, which requires dual listed companies to recognize, measure and report the same items with same
accounting policies and estimates unless exempted in the Interpretation. According to the Notification on
the implementation of the No.2 Interpretation of Accounting Standard for Business Enterprises during 2008
Annual Report preparation, issued by the Ministry of Finance on 26 December 2008, and the No.48 [2008]
Announcement issued by CSRC on 28 December 2008, listed companies who issued both A shares and H shares
were required to take steps to remove the differences under different Accounting Standards and make appropriate
disclosures in their 2008 Annual Report. CIRC issued the Notification on the Implementation of the No.2
Interpretation of Accounting Standard for Business Enterprises in the Insurance Sector (No.1 [2009] of CIRC).
According to this notification, when insurance companies prepare their 2009 financial reports, the accounting
policies that cause differences in A Share and H Share financial reports will be modified. The implementation
standard will be issued later. The Group is waiting for the implementation standards to evaluate the effect of the
No.2 Interpretation of Accounting Standard for Business Enterprises.
1. Net profit reconciliation from PRC GAAP to HKFRS
RMB million
For the year ended For the year ended
31 December 2008 31 December 2007
Net profit attributable to shareholders of the Company under the PRC GAAP
Reconciling items:
Insurance related adjustments
– Deferred policy acquisition costs (i)
– Premiums, benefits and reserves of
insurance and investment contracts (ii)
Impact on associates incurred from
difference in accounting standards (iii)
Reversal of property, plant and equipment
revaluation surplus and its related depreciation (iv)
Deferred tax effects
10,068
14,581
13,448
1,133
259
105
(3,736)
28,116
10,486
4,019
6,467
–
112
165
Net profit attributable to shareholders of the Company under HKFRS
21,277
38,879
22
China Life Insurance Company Limited Annual Report 2008
Management Discussion and Analysis
2.
Shareholders’ equity reconciliation from PRC GAAP to HKFRS
Shareholders’ equity attributable to
shareholders of the Company under the PRC GAAP
134,957
170,213
As at 31
December 2008
RMB million
As at 31
December 2007
Reconciling items:
Insurance related adjustments
– Deferred policy acquisition costs (i)
– Premiums, benefits and reserves of
insurance and investment contracts (ii)
Impact on associates incurred from
difference in accounting standards (iii)
Reversal of property, plant and equipment
61,902
58,270
3,632
259
48,393
40,852
7,541
–
revaluation surplus and its related depreciation (iv)
Deferred tax effects
(1,239)
(15,230)
(1,344)
(11,762)
Shareholders’ equity under HKFRS
180,649
205,500
23
Notes:
(i)
Deferred policy acquisition costs (DAC)
Under the PRC GAAP, commission, brokerage and operating expenses are recorded in the income statement when
incurred. The actuarial reserving method employed under the PRC GAAP makes an implicit allowance for first
year expenses in excess of policy loadings. Under HKFRS, The costs of acquiring new and renewal business which
vary with and are primarily related to the production of new and renewal business are deferred. DAC for long-term
traditional insurance contracts are amortized over the premium paying period as a constant percentage of expected
premiums. DAC for long-term investment type insurance contracts and investment contracts are amortized over
the expected life of the contracts as a constant percentage of the present value of estimated gross profits expected to
be realized over the life of the contracts.
(ii)
Premiums, benefits and reserves of insurance and investment contracts
Under the PRC GAAP, the long-term products comprise life insurance and long-term health insurance, whose
premiums received and benefits paid are recognized in current period’s income statement. Under HKFRS, the
long-term products are classified into 4 categories: long-term traditional insurance contracts, long-term investment
type insurance contracts, investment contracts with DPF and investment contracts without DPF. For the last three
categories, premiums and interests earned are accounted as deposits to the related policy accounts while benefits as
well as policy fees, mortality and surrender charges are accounted as withdrawals from the related policy accounts.
The reconciling item also includes an amount resulting from differences in actuarial reserving methodologies.
Under the PRC GAAP, unearned premium reserve is provided for the future insurance obligations from insurance
business with policy terms of no more than one year. In accordance with HKFRS 4 – Insurance Contract,
premiums from short-duration contracts ordinarily shall be recognized as revenue over the period of the contract in
proportion to the amount of insurance protection provided.
China Life Insurance Company Limited Annual Report 2008
Management Discussion and Analysis
(iii)
Impact on associates incurred from difference in accounting standards
The difference between PRC GAAP and HKFRS exist in the Company’s associate, China Life Property and
Casualty Insurance Company Limited. The impact on the profit and shareholders’ equity of China Life Property
and Casualty Insurance Company Limited from above difference influence the Croup through equity method.
(iv) Reversal of property, plant and equipment revaluation surplus and its related depreciation
Under PRC GAAP, the Group recognized capital surplus arising from assets revaluation (mainly property, plant
and equipment). Under Hong Kong Accounting Standard 16 – Property, Plant and Equipment, the Company has
chosen the cost model as its accounting policy and does not recognize any revaluation relating to property, plant
and equipment. The revaluation surplus and its related depreciation under the PRC GAAP are reversed under
HKFRS.
6.
FACTORS WHICH MAY IMPACT ON THE OPERATION OF THE COMPANY
The year 2008 witnessed rapid changes in the world’s economy. The increase of uncertain and unstable factors, the
worldwide spreading of the financial crisis of the United States and the increased turbulence in the international
financial markets had significant impact on the global economic growth. To cope with the complex and volatile
external economic and financial environment, the Chinese government implemented practical yet effective
measures, promptly shifting the macro economic control objective from the former “double prevention” and
“maintenance and control” to “securing increase, expanding domestic demands and adjusting structures,” which
allowed the economic growth rate for the year to remain at the high 9% level, while demonstrating fast growth,
structural improvement and expansion in domestic demand and creating a favorable environment for the rapid
growth of the insurance sector.
24
At the same time, the adjustment to credit policies, fluctuations in exchange rates and interest rates, changes in
cost factor prices and natural disasters, etc. also affected the Company’s operations on different levels:
(1) Effects of the adjustment to credit policies
To ensure ongoing and steady economic growth, China shifted from a tight monetary policy to a moderately
relaxed one. In 2008, the one-year deposit interest rate and deposit reserve ratio were lowered by 1.89
percentage points and 4 percentage points, respectively, which made a considerable impact on the sales of
participating products and investment-type products, revenues from long-term debt securities and bank
negotiated deposits of the Company.
(2) Effects of the adjustment to exchange rate policies
In the course of business, fluctuations in exchange rates will affect the Company’s foreign currency
denominated assets, debts, foreign currency exchange business, solvency, and financing and investment
activities. In 2008, the appreciation in RMB against the United States Dollar had a negative impact on the
exchange losses and gains of the Company’s foreign currency denominated assets. However, since the foreign
currency denominated assets held by the Company accounted for a relatively low percentage of its total
assets, such appreciation only had a small impact on the investment income of the Company in 2008.
China Life Insurance Company Limited Annual Report 2008
Management Discussion and Analysis
(3) Effects of the changes in cost factor prices
Since May 2008, the consumer price index (the “CPI”) rapidly decreased which provided favorable
conditions for the Company to control cost expenditures, reduce operating costs and increase current
profits. In the meantime, the Company strengthened its budget management and cost control, thereby
lowering current operating costs. With the implement of Labor Contract Law, the Company further
standardized its employment regulations and the cost of human resource increased accordingly.
(4) Effects of natural disasters
The snow disaster and Wenchuan earthquake in 2008 increased the current claim payments of the
Company. In 2008, claims payments paid by the Company for the snow disaster and for the earthquake
were RMB11.916 million and about RMB153 million, respectively.
2009 could be the most difficult year for China’s insurance industry since 2000. The harsh external
environment will make increasing product sales and net income difficult for the Company. Restricted
by policies, the Company will not be able to hedge and avoid risks in foreign exchange through financial
derivative products, which will result in certain exchange losses. The slow growth of price of goods
domestically will help the Company lower operating costs. Moreover, the occurrence of natural disasters will
increase the claim payments of the Company. However, the extent of such increase will depend on many
factors, including the nature, severity of the disaster and insurance coverage of the Company.
7. RISK FACTORS WHICH MAY IMPACT ON THE STRATEGIC DEVELOPMENT AND
25
BUSINESS OBJECTIVES OF THE COMPANY
(1) Macro economic policy risk
The business development of the Company is affected to a great extent by macro economic factors such as
government policy, economic growth, changes in demographic structure, consumer spending and demand
and reform of the social security system and medical system. In recent years, China’s economy has been
persistently growing at a high rate, per capita disposable income has been constantly increasing, conditions
for insurance funds application have been improving, and reform of the social security and medical
system has been progressing. These factors foster the rapid development of the insurance sector in China,
particularly life insurance. Since 2008, the subprime lending crisis in the United States has continued to
intensify and gradually turned into a global financial crisis, triggering worldwide financial turmoil and global
economic recession while adversely affecting China’s financial market and substantive economy. In order to
effectively respond to this financial crisis and ensure persistent, rapid and healthy economic development,
the government has been implementing powerful expansionary fiscal and monetary policies, which is
helpful in keeping the economy from declining further and promoting healthy economic development.
However, it is uncertain whether the Company will profit from all such policies. Operating results and
financial conditions of the Company may be exposed to interest risks due to the government’s relaxed
monetary policy. On the other hand, the insurance sector-wide implementation of the No.2 Interpretation
of Accounting Standard for Business Enterprises in 2009 and changes to capital market and tax policies
will also bring uncertainties. If the rate of economic development slows down in the future, the steady
implementation of our business plans and the ongoing improvement of our financial condition may also be
adversely affected.
China Life Insurance Company Limited Annual Report 2008
Management Discussion and Analysis
(2) Insurance business development risk
Should there be a downturn in China’s economy, some enterprises may encounter difficulties in operation,
employment may fall sharply, and the rate of increase in the income of citizens would slow down. Such
factors may affect some enterprises’ and citizens’ ability and appetite to purchase insurance products.
Hence, the rate of increase of premiums of the Company will be affected accordingly. If the proceeds of
participating products of the Company fail to meet consumer expectations, surrenders and withdrawals
of policies of such products may increase. With the presence of an ever-increasing number of insurance
companies in China, the accelerated pace of integrated operations as well as the penetration of the insurance
business by financial institutions and increasing innovation in financial products, the Company faces a
more complicated competitive environment. The Company has always been in a leading position amid keen
competition in the market. We have been adopting market-oriented and active competitive measures to
solidify our market position. However, with the increasingly keen market competition, our business growth
and market position may face increasing pressure.
(3) Investment risk
The Company chooses a variety of investments based on its own characteristics and needs under the
regulatory framework. Investments will be managed according to the principles of return, safety and
liquidity. However, with the ever-increasing uncertainty and complexity of the global economy, investment
risks of the Company will increase accordingly, particularly with overseas investments. If the issuers of the
debt securities we hold fail to pay or otherwise default on their obligations, we may face the risk of losing
our investment. The domestic securities market may experience substantial price fluctuations due to cyclical
factors, macro control, changes to monetary or fiscal policies, system reform and other factors, which may
adversely affect our investment income, create greater difficulties in asset-liability matching management and
increase risks of asset-liability duration mismatch. The Company may invest some of the insurance funds
through new investment channels or use new investment vehicles. There are uncertainties with these new
investment channels and vehicles, which may have a negative impact upon our investment income. Some
of our assets are held in foreign currencies. The value of our foreign currency denominated assets may be
adversely affected by exchange rate movements.
8.
FUNDING REQUIREMENT THAT MAY BE NECESSARY FOR OUR FUTURE
DEVELOPMENT AND APPLICATION OF FUNDS
The Company expects that its own funds will suffice to meet its insurance business expenditures and the needs
for new general investment projects in 2009. In order to facilitate the implementation of our future development
strategies, the Company will make the necessary funding arrangements after taking into consideration of the
market situation.
26
China Life Insurance Company Limited Annual Report 2008
Management Discussion and Analysis
9. TRANSFER OF EQUITY INTEREST OF CHINA LIFE-CMG LIFE ASSURANCE
COMPANY LTD.
China Life-CMG Life Assurance Company Ltd., a subsidiary of CLIC, is a sino-foreign joint venture established
on 4 July 2000 and owned as to 51% by CLIC and as to 49% by CMG Group of Australia. The scope of
operations of China Life-CMG Life Assurance Company Ltd. is to conduct the following businesses (excluding
statutory insurance business) within the administrative district of Shanghai municipality and in the provinces,
autonomous regions and municipalities directly under the Central Government where it has established branches:
(1) insurance business such as life insurance, health insurance and accident and casualty insurance; (2) re-
insurance of the above insurance businesses. CLIC had agreed that it would, within 3 years of the listing of the
Company on the Hong Kong Stock Exchange, dispose all of its interests in this joint venture to any third party or
otherwise eliminate any competition between China Life-CMG Life Assurance Company Ltd. and the Company.
The Company received written notice from CLIC that as at the end of the Reporting Period, CLIC was working
towards the transfer of its interest in China Life-CMG Life Assurance Company Ltd. The Company will make
timely disclosure according to the relevant listing rule requirements of the places where the Company is listed.
10. EMPLOYEES AND REMUNERATION POLICIES
As at the end of the Reporting Period, the Company has 102,241 employees.
The Company has established a remuneration and incentive system with reference to individual employee’s
position, the Company’s results and market conditions, while the remuneration for senior management comprises
basic salaries, performance compensation, welfare and medium and long term incentives.
27
China Life Insurance Company Limited Annual Report 2008
Embedded Value
BACKGROUND
China Life prepares financial statements to public investors in accordance with the Hong Kong Financial Reporting
Standards (“HKFRS”). 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.
China Life believes that reporting the Company’s embedded value and value of one year’s sales provides useful
information to investors in two respects. First, the value of the Company’s in-force business represents the total amount
of 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 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 HKFRS or any other accounting basis.
Investors should not make investment decisions based solely on embedded value information and the value of one year’s
sales.
It is important to note that actuarial standards with respect to the calculation of embedded value are still evolving. There
is still no universal standard which defines the form, calculation methodology or presentation format of the embedded
value of an insurance company. Hence, differences in definition, methodology, assumptions, accounting basis and
disclosures may cause inconsistency when comparing the results of different companies.
28
Also, embedded value calculation 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 effect of the Policy Management Agreement Between China
Life Insurance (Group) Company (“CLIC”) and China Life, the Non-competition Agreement Between CLIC and China
Life, the Trademark License Agreement Between CLIC and China Life and the Property Leasing Agreement Between
CLIC and China Life, nor the future financial impact of transactions of China Life with China Life Insurance Asset
Management Company, China Life Pension Company, and China Life Property and Casualty Insurance Company.
China Life Insurance Company Limited Annual Report 2008
Embedded Value
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 capital supporting a company’s desired solvency margin.
“Adjusted net worth” is equal to the sum of:
(cid:129)
(cid:129)
Net assets, defined as assets less policy reserves and other liabilities, all measured on a PRC statutory basis; and
Net-of-tax adjustments for relevant differences between the market value of assets and the value determined on a
PRC statutory basis, together with relevant net-of-tax adjustments to other assets and liabilities.
According to the PRC accounting basis, some investment assets are not measured on market value. As the embedded
value is based on market value, it is necessary to make adjustments to the value of net assets under the PRC accounting
basis.
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 after-tax distributable profits for existing in-force business at the valuation date and for one
year’s sales in the 12 months immediately preceding the valuation date. Distributable profits arise after allowance for
PRC statutory policy reserves and solvency margins at the required regulatory minimum level.
29
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 and the economic cost of capital through the use of a
risk-adjusted discount rate.
China Life Insurance Company Limited Annual Report 2008
Embedded Value
ASSUMPTIONS
Economic assumptions:
The calculations are based upon assumed corporate tax rate of 25% for all years. The investment returns are assumed
to be 4.25 % in 2008 and grading to 5.5% in 2013 (remaining level thereafter). An average of 18% in 2008, grading
to 12% in 2017 (remaining level thereafter) of the investment returns is assumed to be exempt from income tax. These
returns and tax exempt assumptions are based on the Company’s long term strategic asset mix and expected future
returns. The risk-adjusted discount rate used is 11%.
Other operating assumptions such as mortality, morbidity, lapses and expenses are based on the Company’s recent
operating experience and expected future outlook.
PREPARATION
The embedded value and the value of one year’s sales were prepared by China Life in accordance with “Life Insurance
Embedded Value Reporting Guidelines” issued by China Insurance Regulatory Commission. The Tillinghast insurance
consulting business of Towers Perrin (“Towers Perrin”), an international firm of consulting actuaries performed a review
of China Life’s embedded value. The review statement from Towers Perrin is contained in the “Embedded Value Review
Statement” section.
30
SUMMARY OF RESULTS
The embedded value as at 31 December 2008, the value of one year’s sales for the 12 months to 31 December 2008 and
their corresponding numbers in 2007 are shown below.
Table 1
Components of Embedded Value and Value of One Year’s Sales (RMB million)
ITEM
2008
2007
A
B
C
D
E
F
G
H
Adjusted Net Worth
Value of In-Force Business before Cost of Solvency Margin
Cost of Solvency Margin
Value of In-Force Business after Cost of Solvency Margin (B+C)
Embedded Value (A + D)
Value of One Year’s Sales before Cost of Solvency Margin
Cost of Solvency Margin
Value of One Year’s Sales after Cost of Solvency Margin (F + G)
Note: Numbers may not be additive due to rounding.
137,816
122,898
(20,626)
102,271
240,087
17,528
(3,604)
13,924
168,175
100,659
(16,266)
84,393
252,568
14,578
(2,531)
12,047
China Life Insurance Company Limited Annual Report 2008
Embedded Value
MOVEMENT ANALYSIS
The following analysis tracks the movement of the embedded value from the start to the end of the Reporting Period.
Table 2
Analysis of Embedded Value Movement in 2008 (RMB million)
ITEM
Embedded Value at Start of Year
Expected Return on Embedded Value
Value of New Business in the Period
Operating Experience Variance
Investment Experience Variance
Methodology, Model and Assumption Changes
A
B
C
D
E
F
G Market Value Adjustment
Exchange Gains or Losses
H
Shareholder Dividend Distribution
I
Other
J
Embedded Value as at 31 December 2008 (sum A through J)
K
Notes: 1) Numbers may not be additive due to rounding.
2) Items B through J are explained below:
RMB million
252,568
18,494
13,924
(1,527)
(33,651)
(1,631)
4,897
(905)
(11,873)
(209)
240,087
31
B
Reflects unwinding of the opening value of in-force business and value of new business sales in 2008 plus the expected
return on investments supporting the 2008 opening net worth.
Value of new business sales in 2008.
Reflects the difference between actual 2008 experience (including lapse, mortality, morbidity, and expense etc.) and
the assumptions.
Compares actual with expected investment returns during 2008.
Reflects the effect of projection method enhancements, model and assumption revisions.
Change in the market value adjustment from the beginning of year 2008 to the end of the year 2008.
Reflect the gains or losses due to change in exchange rate.
Reflects dividends distributed to shareholders during 2008.
Other miscellaneous items.
C
D
E
F
G
H
I
J
China Life Insurance Company Limited Annual Report 2008
Embedded Value
SENSITIVITY TESTING
Sensitivity testing was 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.
Table 3
Sensitivity Results (RMB million)
Base case scenario
Risk discount rate of 11.5%
Risk discount rate of 10.5%
10% increase in investment return
10% decrease in investment return
10% increase in expenses
10% decrease in expenses
10% increase in mortality rate for
non-annuity products and 10% decrease
in mortality rate for annuity products
10% decrease in mortality rate for
non-annuity products and 10% increase
in mortality rate for annuity products
10% increase in lapse rates
10% decrease in lapse rates
10% increase in morbidity rates
10% decrease in morbidity rates
Solvency margin at 150% of statutory minimum
10% increase in claim ratio of short term business
10% decrease in claim ratio of short term business
VNB under 2007 Assumptions
32
VALUE OF IN-FORCE VALUE OF ONE YEAR’S
BUSINESS AFTER COST OF SALES AFTER COST OF
SOLVENCY MARGIN
SOLVENCY MARGIN
102,271
96,505
108,493
122,135
82,417
100,472
104,070
13,924
13,061
14,855
16,484
11,366
12,400
15,448
100,952
13,783
103,965
100,841
103,776
100,692
103,864
92,307
102,024
102,519
–
14,066
13,671
14,192
13,757
14,091
12,101
13,421
14,426
14,424
China Life Insurance Company Limited Annual Report 2008
Embedded Value
EMBEDDED VALUE REVIEW STATEMENT
To:
The Directors
China Life Insurance Company Limited
China Life Insurance Company Limited (“China Life”) has engaged the Tillinghast insurance consulting business of
Towers Perrin (“Towers Perrin”) to review China Life’s embedded value as at 31 December 2008 and the value of one
year’s sales in respect of business written in the 12 months to 31 December 2008.
Towers Perrin’s scope of work covered:
(cid:129)
(cid:129)
(cid:129)
a review of the methodology used to develop the embedded value and value of one year’s sales;
a review of the economic and operating assumptions used to develop the embedded value and value of one year’s
sales;
a review of the results of the embedded value and value of one year’s sales, the results of the analysis of movement
of embedded value, and the sensitivity results of the value of in-force business and value of one year’s sales.
Based on this review, Towers Perrin has concluded that, in preparing the embedded value and value of one year’s sales as
at 31 December 2008:
33
(cid:129)
(cid:129)
(cid:129)
(cid:129)
the embedded value methodology used by China Life is consistent with the requirements of the “Life Insurance
Embedded Value Reporting Guidelines” issued by China Insurance Regulatory Commission;
the economic assumptions used by China Life have made allowance for the company’s current and future asset mix
and investment strategy, and consistent with available market information and market environment;
the operating assumptions used by China Life have been set with appropriate regard to past, current and expected
future experience;
the results of China Life’s calculations have been determined in a manner consistent with the methodology and
assumptions described above.
Towers Perrin’s opinion has relied on the general accuracy of audited and unaudited data and information provided by
China Life.
Tillinghast insurance consulting business of Towers Perrin
Adrian Liu, FIAA
Title: General Manager
Lawrence Lee, FSA
Title: Consultant
18 March 2009
China Life Insurance Company Limited Annual Report 2008
Report of Board of Directors
1. PRINCIPAL BUSINESS
The Company is the largest life insurance company in China, which possesses the most extensive distribution
network in China comprising exclusive agents, direct sales representatives, as well as dedicated and non-dedicated
agencies. The Company provides products and services such as individual and group life insurance, accident and
health insurance. The Company is one of the largest institutional investors in China, and has become China’s
largest insurance asset management company through its controlling shareholding in AMC.
Analysis of the Group’s operations by business segments during the Reporting Period is set out in note 5 to the
consolidated financial statements.
2. RESULTS AND ALLOCATION
The results of the Group for the Reporting Period are set out in the Group’s consolidated income statement on
page 83.
3. DIVIDEND
The Board of Directors proposed a final cash dividend of RMB0.23 per share for the year ended 31 December
2008 to shareholders of the Company. This proposal is subject to consideration and approval at the Annual
General Meeting to be held on Monday, 25 May 2009.
34
4. RESERVES
Details of the reserves of the Company are set out in note 32 to the consolidated financial statements.
5. CHARITABLE DONATIONS
The total amount of charitable donations of the Group for the Reporting Period were RMB59.41 million.
6. PROPERTY, PLANT AND EQUIPMENT
Details of the movement in property, plant and equipment of the Company are set out in note 6 to the
consolidated financial statements.
7.
SHARE CAPITAL
Details of movement in share capital of the Company are set out in note 31 to the consolidated financial
statements.
China Life Insurance Company Limited Annual Report 2008
Report of Board of Directors
8. BANK BORROWINGS
As at 31 December 2008, the Company did not have any bank borrowings.
9. PURCHASE, SALES OR REDEMPTION OF THE COMPANY’S SECURITIES
During the Reporting Period, the Company and its subsidiaries have not purchased, sold or redeemed any of the
Company’s listed securities.
10. H SHARES STOCK APPRECIATION RIGHTS
According to relevant policies of the Chinese government, no H Shares Stock Appreciation Rights of the Company
were granted or exercised in 2008.
11. BIOGRAPHICAL DETAILS OF DIRECTORS, SUPERVISORS AND MEMBERS OF THE
SENIOR MANAGEMENT
Brief descriptions of the Directors, Supervisors and members of the senior management of the Company are set
out in this annual report from pages 65 to 72.
12. DIRECTORS’ SERVICE CONTRACTS
The Company entered into “Service Contracts for Independent Non-executive Directors” with Mr. Long Yongtu,
Mr. Chau Tak Hay, Mr. Sun Shuyi and Mr. Cai Rang in 2003 and 2004, respectively. Following the re-election of
the Board of Directors, at the fourth meeting of the second session of the Board of Directors convened in Beijing
on 10 November 2006, the Company entered into service contracts with each of the Directors of the Company
(the service contract with Mr. Ngai Wai Fung, an independent non-executive Director, was entered into on 29
December 2006.). The term of the appointment of each Director was three years, commencing from the date
when the shareholders of the Company elected them as members of the second session of the Board of Directors
until the expiration of the term of the second session of the Board of Directors or the early termination thereof for
other reasons. According to the Procedural Rules for Board of Directors Meetings, Directors serve for a term of
three years and may be re-elected. However, Independent Directors may not be re-elected for more than six years.
These contracts are determinable by the Company within one year without payment of compensation (other than
statutory compensation).
13. DIRECTORS’ AND SUPERVISORS’ INTERESTS IN MATERIAL CONTRACTS
None of the Directors or Supervisors is or was materially interested, directly or indirectly, in any contracts of
significance entered into by the Company or its controlling shareholders or any of their respective subsidiaries at
any time during the Reporting Period.
35
China Life Insurance Company Limited Annual Report 2008
Report of Board of Directors
14. DIRECTORS’ AND SUPERVISORS’ RIGHTS TO ACQUIRE SHARES
At no time during the Reporting Period had the Company authorized its Directors, Supervisors or their respective
spouses or children under the age of 18 to benefit by means of the acquisition of shares or debentures of the
Company or any of its other associated corporations, and no such rights for the acquisition of shares or debentures
were exercised by them.
15. DISCLOSURE OF DIRECTORS’ AND SUPERVISORS’ INTERESTS IN SHARES
As at 31 December 2008, save as disclosed below, none of the Directors, Supervisors or chief executive of the
Company had any interests or short positions in the shares, underlying shares and debentures of the Company
or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter
571 of the Laws of Hong Kong) (the “SFO”)) that were required to be recorded in the register of the Company
required to be kept pursuant to Section 352 of the SFO or which had to be notified to the Company and the
Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers
as set out in Appendix 10 to the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange
(“Listing Rules”).
36
Name of company
China Life Insurance
Company Limited
Name of
Director
Capacity
Nature of
interests
Type of
shares
Number of
shares held
Percentage of
the respective
type of shares
Percentage of the
total number of
shares in issue
Ngai Wai Fung
Beneficial owner
Personal
H Shares
2,000(L)
0.000026877
0.000007076
The letter “L” denotes a long position.
16. PRE-EMPTIVE RIGHTS AND ARRANGEMENTS ON OPTIONS OF SHARES
According to the Articles of Association of the Company (“Articles of Association”) and the relevant PRC laws,
there is no provision for any pre-emptive rights of the shareholders of the Company. At present, the Company
does not have any arrangement on options of shares.
China Life Insurance Company Limited Annual Report 2008
Report of Board of Directors
17. INTEREST OF SUBSTANTIAL SHAREHOLDERS OF THE COMPANY
(1) Shareholders’ Information
As at the end of the Reporting Period, the number of our H Share shareholders is 38,287, and the number of our
A Share shareholders is 325,798. The top ten shareholders of the Company are as follows:
Name of shareholders
Type of shares
Number of
shares held as at
31 December 2008
Percentage of the
total number of
shares in issue (%)
China Life Insurance (Group) Company
A Shares
19,323,530,000
HKSCC Nominees Limited
H Shares
7,281,510,105
State Development and Investment Co., Ltd
A Shares
China National Investment & Guaranty Co., Ltd
A Shares
ICBC-Lion Stock Securities Investment Fund
A Shares
49,800,000
39,200,000
30,500,000
China Everbright Bank Co. Ltd.-Everbright
Pramerica Qualification Core
Securities Investment Fund
A Shares
27,779,423
ICBC-Bosera Third Industry Growth
Stock Securities Investment Fund
A Shares
ICBC-SSE50 ETF Securities Investment Fund
A Shares
CCB-Bosera Value Development
No. 2 Stock Securities Investment Fund
China Shipping (Group) Company
A Shares
A Shares
China International Television Corporation
A Shares
China National Nuclear Corporation
A Shares
25,112,198
21,914,335
20,501,589
20,000,000
20,000,000
20,000,000
37
68.37
25.76
0.18
0.14
0.11
0.10
0.09
0.08
0.07
0.07
0.07
0.07
China Life Insurance Company Limited Annual Report 2008
Report of Board of Directors
(2)
So far as is known to any Directors, Supervisors and chief executive of the Company, as at 31 December 2008,
the following persons (other than the Directors, Supervisors, and chief executive of the Company) had interests
or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the
Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register
required to be kept by the Company pursuant to Section 336 of the SFO, or as otherwise notified to the Company
and Hong Kong Stock Exchange :
Name of substantial shareholder
Capacity
Type of shares
Number of shares held
China Life Insurance (Group) Company
Deutsche Bank Aktiengesellschaft (Note 1)
Beneficial owner
Beneficial owner,
A Shares
H Shares
investment manager
and person having
a security interest in shares
JPMorgan Chase & Co. (Note 2)
Beneficial owner,
H Shares
38
investment manager
and custodian
corporation/approved
lending agent
19,323,530,000(L)
593,793,443(L)
369,181,747(S)
652,723,710(L)
125,563,503(S)
266,005,023(P)
Percentage of
the respective
type of shares
Percentage of the
total number of
shares in issue
92.8
7.98
4.96
8.77
1.69
3.57
68.37
2.10
1.31
2.31
0.44
0.94
The letter “L” denotes a long position. The letter “S” denotes a short position. The letter “P” denotes interest in a
lending pool.
Note (1):
Deutsche Bank Aktiengesellschaft was interested in a total of 593,793,443 H shares in accordance with the
provisions of Part XV, SFO. Of these shares, Deutsche Asset Management (Asia) Limited, Deutsche Asset
Management (Japan) Limited, Deutsche Asset Management Investmentgesellschaft mbH, DWS Finanz-Service
GmgH, DWS Investment GmbH, Deutsche Vermogensbildungsgesellschaft mit beschrankter Haftung, DWS
Investment S.A., Luxemburg, Deutsche Investment Management Americas Inc., Deutsche Bank Trust Company
Americas, Deutsche Bank (Suisse) S.A. and Deutsche Bank AG Singapore Branch were interested in 17,287,000
H shares, 2,000,000 H shares, 1,485,000 H shares, 230,000 H shares, 30,600,000 H shares, 193,000 H shares,
7,430,000 H shares, 15,026,100 H shares, 767,500 H shares, 106,000 H shares and 289,000 H shares respectively.
All of these entities are either controlled or indirectly controlled subsidiaries of Deutsche Bank Aktiengesellschaft.
Deutsche Bank Aktiengesellschaft held by way of attribution a short position as defined under Part XV, SFO in
369,181,747 H shares (4.96%).
China Life Insurance Company Limited Annual Report 2008
Report of Board of Directors
Note (2):
JPMorgan Chase & Co. was interested in a total of 652,723,710 H shares in accordance with the provisions of Part
XV, SFO. Of these shares, JPMorgan Chase Bank, N.A., J.P. Morgan Investment Management Inc., JPMorgan
Asset Management (UK) Limited, China International Fund Management Ltd, JF Asset Management Limited, J.P.
Morgan Securities Ltd., JP Morgan Whitefriars Inc., JPMorgan Asset Management (Taiwan) Limited, Bear, Stearns
International Limited and JF Asset Management (Singapore) Limited – Co Reg #: 197601586K were interested
in 266,997,023 H shares, 3,812,912 H shares, 17,654,109 H shares, 18,055,000 H shares, 165,036,750 H
shares, 40,109,288 H shares, 98,961,661 H shares, 5,910,000 H shares and 10,177,967 and 26,009,000 H shares
respectively. All of these entities are either controlled or indirectly controlled subsidiaries of JPMorgan Chase &
Co.
Included in the 652,723,710 H shares are 266,005,023 H shares (3.57%) which are held in the “lending pool”, as
defined under Section 5(4) of the Securities and Futures (Disclosure of Interests Securities Borrowing and Lending)
Rules.
In addition, JPMorgan Chase & Co. held by way of attribution a short position as defined under Part XV, SFO in
125,563,503 H shares (1.69%).
Save as disclosed above, the Directors, Supervisors and chief executives of the Company are not aware that there is
any party who, as at 31 December 2008, had an interest or short positions in the shares and underlying shares of
the Company which were recorded in the register required to be kept by the Company pursuant to Section 336 of
the SFO.
18. INFORMATION OF TAX DEDUCTION
Main items for tax deduction while calculating the 2008 enterprise income tax of the Company are as follows:
Interest income received from government bonds:
Dividend income from funds:
RMB9.95 billion
RMB8.95 billion
19. MANAGEMENT CONTRACTS
No management or administration contracts for the whole or substantial part of any business of the Company
were entered into during the Reporting Period.
20. CONNECTED TRANSACTIONS
Details of the connected transactions of the Company are set out in the section “Connected Transactions” and
note 30 to the consolidated financial statements.
21. GUARANTEES
During the Reporting Period, the Company did not provide any guarantee.
39
China Life Insurance Company Limited Annual Report 2008
Report of Board of Directors
22. REMUNERATION OF THE DIRECTORS, SUPERVISORS AND MEMBERS OF THE
SENIOR MANAGEMENT
Details of the remuneration of the Directors, Supervisors and members of the senior management for the year
ended 31 December 2008 are set out in note 36 to the consolidated financial statements.
23. BOARD COMMITTEES
The Company has established the Audit Committee, Nomination and Remuneration Committee, Risk
Management Committee and Strategy Committee.
The Audit Committee is responsible for the review and supervision of the Company’s financial reporting
procedures and internal control system. The Audit Committee currently comprises Mr. Sun Shuyi, Mr. Chau
Tak Hay, Mr. Cai Rang and Mr. Ngai Wai Fung. Mr. Sun Shuyi, an Independent Non-executive Director, is the
chairman of the committee.
The Nomination and Remuneration Committee is mainly responsible for reviewing the structure of the Board
of Directors, drawing up plans for the appointment and succession of Directors and senior management and
formulating training and remuneration policies for senior management of the Company. The Nomination and
Remuneration Committee currently comprises Mr. Cai Rang, Mr. Sun Shuyi, Mr. Miao Jianmin and Mr. Shi
Guoqing. Mr. Cai Rang, an Independent Non-executive Director, is the chairman of the committee.
40
The Risk Management Committee is mainly responsible for assisting the management to manage internal and
external risks. The Risk Management Committee currently comprises Mr. Ma Yongwei, Mr. Wan Feng, Ms.
Zhuang Zuojin and Ms. Liu Yingqi. Mr. Ma Yongwei, an Independent Non-executive Director, is the chairman of
the committee.
The Strategy Committee is mainly responsible for the formulation of the overall development plan and decision-
making procedures of investment. The Strategy Committee comprises Mr. Long Yongtu, Mr. Wan Feng and Mr.
Shi Guoqing and Mr. Lin Dairen. Mr. Long Yongtu, an Independent Non-executive Director, is the chairman of
the committee.
24. MAJOR LITIGATION
Class Action Litigation
In 2004, China Life and certain of its former directors were sued in putative class action lawsuits filed in the
United States District Court for the Southern District of New York (the “New York Southern District Court”).
The lawsuits were consolidated as In re China Life Insurance Company Limited Securities Litigation, NO. 04
CV 2112 (TPG). The consolidated amended complaint in the lawsuit, filed on 19 January 2005, named China
Life, Wang Xianzhang (former Director), Miao Fuchun (former Director) and Wu Yan (former Director) as
defendants, and alleged that they violated Sections 10(b) and 20(a) of the U.S. Securities Exchange Act of 1934,
and Rule 10b-5 promulgated thereunder. China Life vigorously contested the lawsuit, including by filing motions
seeking dismissal of the complaints. On 3 September 2008, the New York Southern District Court found that the
plaintiffs’ claims lacked merit and dismissed the complaint. The plaintiffs initially notified the United States Court
of Appeals for the Second Circuit of their intention to appeal the New York Southern District Court’s decision.
However, on 8 January 2009, the plaintiffs voluntarily withdrew that appeal, thus making the New York Southern
District Court’s dismissal of their claims final.
China Life Insurance Company Limited Annual Report 2008
Report of Board of Directors
25. MAJOR CUSTOMERS
During the Reporting Period, the premium income and policy fee from the Company’s five largest customers
accounted for less than 30% of the Company’s total premium income and policy fees for the year. None of the
Directors of the Company or any of their associates or any shareholders (which to the best knowledge of the
Directors, with more than 5% of the Company’s issued share capital) had any beneficial interest in the Company’s
five largest customers.
26. SUFFICIENCY OF PUBLIC FLOAT
Based on the information that is publicly available to the Company and within the knowledge of the Directors as
at the latest practicable date prior to the printing of this annual report, being 25 March 2009 (“Latest Practicable
Date”), not less than 25% of the issued share capital of the Company (being the minimum public float applicable
to the shares of the Company) was held in public hands.
27. COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES
None of the Directors of the Company are aware of any information that would reasonably indicate that the
Company did not meet the applicable code provisions under the Code on Corporate Governance Practices
contained in Appendix 14 to the Listing Rules during the Reporting Period. Details are set out in the “Report of
Corporate Governance” from pages 46 to 62 of this annual report.
28. AUDITORS
PricewaterhouseCoopers and PricewaterhouseCoopers Zhong Tian Certified Public Accountants Co., Ltd.
were the international and PRC auditors to the Company respectively for the year ended 31 December
2008. A resolution for the re-appointment of PricewaterhouseCoopers as the international auditors and
PricewaterhouseCoopers Zhong Tian Certified Public Accountants Co., Ltd. as the PRC auditors to the Company
will be proposed at the forthcoming Annual General Meeting to be held on 25 May 2009.
41
By Order of the Board of Directors
Yang Chao
Chairman
Beijing, China
25 March 2009
China Life Insurance Company Limited Annual Report 2008
Report of the Supervisory Committee
During the year 2008, all members of the Supervisory Committee have, in strict accordance with the provisions
of the Company Law of the PRC, the Articles of Association and the Procedural Rules for Supervisory
Committee Meetings, duly performed their supervisory duties and effectively protected the interests of the
shareholders and the Company. In doing so, they have been guided by the strict principles of integrity.
1. MEETINGS CONVENED BY THE SUPERVISORY COMMITTEE
(1) On 25 March 2008, the eighth meeting of the second session of the Supervisory Committee was held
at the Conference Room on the 29/F of the Company’s headquarters. Five Supervisors or proxies
attended the meeting, complying with the requirements of the Company Law of the PRC and the
Articles of Association. During the meeting, the Supervisory Committee reviewed and approved
the Resolution in relation to the Financial Report and Internal Control Report for 2007, the 2007
H Share Annual Report, the 2007 A Share Annual Report and its summary, the 2007 H Share Report
of the Supervisory Committee, the 2007 A Share Report of the Supervisory Committee, the Report
on the Profit Distribution and Cash Dividend Policy for 2007, the Report on Self-evaluation of the
Company’s Internal Control System for 2007, the Consolidated Work Report of the Supervisory
Committee for 2007 and Highlight on the Work of the Company’s Supervisory Committee for
2008, and the Resolution on convening the ninth meeting of the second session of the Supervisory
Committee.
42
(2) On 25 April 2008, the ninth meeting of the second session of the Supervisory Committee was held
at the Grand Epoch City, Hebei. Five Supervisors or proxies attended the meeting, complying with
the requirements of the Company Law of the PRC and the Articles of Association. During the
meeting, the Supervisory Committee reviewed and approved the 2008 First Quarter Report, the 2008
Work Plan on Investigation and Examination by the Supervisory Committee, and the Resolution on
convening the tenth meeting of the second session of the Supervisory Committee.
(3) On 30 July 2008, the tenth meeting of the second session of the Supervisory Committee was held
at the Conference Room on the 29/F of the Company’s headquarters. Five Supervisors or proxies
attended the meeting, complying with the requirements of the Company Law of the PRC and
the Articles of Association. During the meeting, the Supervisory Committee reviewed the Report
on the Status of Self-audit and Self-rectification in relation to the Specific Measures to Prevent
the Re-occurrence of Capital Misappropriation and Improve the Corporate Governance, and
reviewed and approved the Resolution in relation to the review of the opinion on the Self-audit
and Self-rectification with respect to the Specific Measures to Prevent Re-occurrence of Capital
Misappropriation. Moreover, Supervisors who attended the meeting exchanged opinions on the 2008
Interim Report.
China Life Insurance Company Limited Annual Report 2008
Report of the Supervisory Committee
(4) On 25 August 2008, the eleventh meeting of the second session of the Supervisory Committee was
held at the Conference Room on the 29/F of the Company’s headquarters. Five Supervisors or
proxies attended the meeting, complying with the requirements of the Company Law of the PRC and
the Articles of Association. During the meeting, the Supervisory Committee reviewed and approved
the 2008 A Share Interim Report and the 2008 H Share Interim Report, the Report on Auditing of
the Connected Transactions for 2007, the Resolution on convening the twelfth meeting of the second
session of the Supervisory Committee, and discussed the 2008 Work Plan on Investigation and
Examination by the Supervisory Committee.
(5) On 27 October 2008, the twelfth meeting of the second session of the Supervisory Committee was
held at the Conference Room on the 29/F of the Company’s headquarters. Five Supervisors or
proxies attended the meeting, complying with the requirements of the Company Law of the PRC and
the Articles of Association. During the meeting, the Supervisory Committee reviewed and approved
the 2008 Third Quarter Report, the Resolution on Accounting Principles of the A Share and
H Share Financial Reports of the Company, the Resolution on the Report on Budget Performance in
the Third Quarter of 2008 and the Adjustment of Certain Budget Benchmarks for the year of 2008,
and the Resolution on convening the thirteenth meeting of the second session of the Supervisory
Committee.
2. ACTIVITIES OF THE SUPERVISORY COMMITTEE
(1) The Supervisory Committee insisted on standardisation of its own work. In 2008, the Supervisory
Committee of the Company continued its efforts on standardization by summarizing its work
experience for 2007 and combining such with the key work points for 2008, and upon which it
prepared the Highlight on the Work of the Company’s Supervisory Committee for 2008 after
discussion and revision by all Supervisors. This laid down a good foundation for the commencement
of its monitoring work and performance of its supervisory duty in 2008.
43
(2) The Supervisory Committee also began its detailed investigation and examination work. In
2008, being highly concerned about the development strategies formulated by the management,
the Supervisory Committee started a thorough investigation and examination on the internal
control mechanism and the reform of the Company’s operation and management system. The
investigation and examination covered 12 departments of the Company and 3 provincial branches.
The investigation and examination team reviewed the reports made by functional departments at
the headquarters and the local branches on the Company’s internal control and the reform of
the Company’s operation and management system. Meanwhile, they mostly focused on current
problems and suggestions on improvement. The investigation and examination also traced the
problems detected in the investigation and examination in 2007, sought to understand the current
status of such problems, and the 2008 Report on Investigation and Examination was prepared by the
Supervisory Committee on this basis. In general, the investigation and examination was effective, and
had a positive effect on the exertion of the Supervisory Committee’s duties and the improvement of
the Company’s operation and management.
China Life Insurance Company Limited Annual Report 2008
Report of the Supervisory Committee
(3) The Supervisory Committee also carried out specific tasks to improve the corporate governance.
According to the requirements under the Notice in relation to the Specific Measures to Prevent
the Re-occurrence of Capital Misappropriation and Improve the Corporate Governance issued by
Beijing Securities Regulatory Bureau (the “BSRB”), the Supervisory Committee examined and
reviewed the self-audit and self-rectification work organized by the Board of Directors in terms of
content, procedure, schedule and measures, etc. It gave out an opinion on the status of self-audit
and self-rectification, and the effectiveness of the internal control system on prevention of capital
misappropriation, and submitted the opinion to the BSRB.
(4) The Supervisory Committee sought to understand the Company’s internal control status by field
survey. In 2008, the Chairperson of the Company’s Supervisory Committee and the Chairman of the
Risk Management Committee and the relevant committee members made investigations on internal
control mechanism and risk management status in Xinjiang Provincial Branch, which raised proposals
in relation to the problems on risk management reflected in this investigation, and laid down a
foundation for further investigation and improvement of the Company’s policies and measures on
risk management and organization construction. This investigation was given great attention and
supports by all levels of the Company’s branches and received positive results.
44
3.
INDEPENDENT OPINION OF THE SUPERVISORY COMMITTEE REGARDING
CERTAIN MATTERS
During the Reporting Period, the Supervisory Committee of the Company performed its duties in a
stringent manner in accordance with the terms of reference prescribed by the Company Law of the PRC
and the Articles of Association.
(1) The Company operations’ compliance with the law. During the Reporting Period, the Company’s
operations were in compliance with the law. The Company’s operations and decision-making
procedures were in compliance with the Company Law of the PRC and the Articles of Association.
During the Reporting Period, all Directors, and senior management of the Company maintained
strict principles of diligence and integrity, and the Supervisory Committee is not aware of any of
them having violated any law, regulation, or any provision in the Articles of Association or harmed
the interests of the Company and shareholders in the course of discharging their duties.
(2) The verity of the financial report. The Company’s annual financial report truly and
completely reflected the state of the Company’s financial position and operating results.
PricewaterhouseCoopers has issued a standard auditor’s report with unqualified opinions on the
2008 consolidated financial statements based on their audits conducted in accordance with the Hong
Kong Standards on Auditing.
China Life Insurance Company Limited Annual Report 2008
Report of the Supervisory Committee
(3) Use of proceeds. The recent use of the proceeds has been consistent with the use stated in the IPO
prospectus.
(4) Acquisition and sale of assets. During the Reporting Period, the prices for acquisition and sale of
assets were fair and reasonable. The Supervisory Committee is not aware of any insider trading or any
acts harming the interests of the shareholders or incurring any loss to the Company’s assets.
(5) Connected transactions. During the Reporting Period, the connected transactions of the Company
were on commercial term. The Supervisory Committee is not aware of any acts harming the interests
of the Company.
(6)
Internal control system. During the Reporting Period, the Company has sought to improve its
internal control system, and continued to improve the effectiveness of such system.
2008 is a year in which the Company’s operation and management, business development and corporate
governance moved to a higher level. The work of the Supervisory Committee also developed towards a
higher degree of standardization in the year. I would like to take this opportunity to express my sincere
thanks to each and every Supervisor for his/her tireless efforts, and to the Company’s Board of Directors
and management for their support to and cooperation with the Supervisory Committee.
45
By order of the Supervisory Committee
Xia Zhihua
Chairperson of the Supervisory Committee
Beijing, China
25 March 2009
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
The Company, China’s largest life insurance company, provides insurance services to over 100 million long-term
policy holders. The Company strives to maximize shareholder value, and at the same time is committed to meeting the
increasing insurance needs of our customers by providing a broad range of products and services.
Meanwhile we implement good corporate governance policies and strongly believe that through fostering sound
corporate governance, the Company can further enhance its transparency and accountability. This also helps the
Company achieve the goals mentioned above, operate in a more efficient manner and boost the confidence of investors.
During the year 2008, the Company complied with all the code provisions under the Code on Corporate Governance
Practices (the “Code”) published by the Hong Kong Stock Exchange. The Company also adopted certain recommended
best practices under appropriate circumstances. Of particular noteworthiness, the Company complies with and exceeds
the exacting standards of the Code in the following ways:
(cid:129)
(cid:129)
(cid:129)
Currently the board of directors of the Company (the “Board of Directors”) consists of 13 members. 6 of them
are independent non-executive directors and 3 of them are non-executive directors. This is over half of the Board
of Directors and complies with the minimum requirements of the Listing Rules relating to the appointment of at
least 3 independent non-executive directors and also exceeds the recommended best practice under the Code that
one third of the board be represented by independent non-executive directors.
In order to foster sound corporate governance and operate in a more efficient manner, the Articles of Association,
Procedural Rules for Shareholders’ General Meetings, Procedural Rules for Board of Directors Meetings and
Procedural Rules for Supervisory Committee Meetings have been revised appropriately pursuant to the related
newly enacted laws and regulations of the places where the Company is listed. The shareholders’ general meetings,
the board meetings and the supervisory committee meetings are functioning efficiently pursuant to the Articles of
Association and their respective rules and procedures.
During 2008, in order to improve the corporate governance of the Company and continue with special-purpose
activities for corporate governance, the Company took effective measures and conducted sustaining rectification
tasks with a view to improving operation efficiency of the Board of Directors and enhancing the communication
with investors. The Company also endeavoured to continuously improve its information disclosure system and
procedures, enhance initiative on information disclosure, increase transparency of the Company’s operations, and
ensure that investors, especially medium and small investors, have equal access to information about the Company.
For more details, please refer to the Sustaining Rectification Report on Corporate Governance published on the
Shanghai Stock Exchange (“SSE”) on 30 July 2008.
46
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
CORPORATE GOVERNANCE STRUCTURE
Shareholders’
General Meeting
Board of
Directors
Supervisory
Committee
Audit Committee
Nomination and
Remuneration
Committee
Risk
Management
Committee
Strategy
Committee
Board Secretary/
Board Secretariat/
Company Secretary
BOARD OF DIRECTORS
The main duties of the Board of Directors include the following: convening shareholders’ general meetings,
implementing resolutions passed at such meetings, approving the Company’s development strategies and operation
plans, formulating and supervising the Company’s financial policies and annual budgets, providing an objective
evaluation on the Company’s operating results in its financial reports and other disclosure documents, dealing with
senior management related matters, reviewing internal control systems and implementing the corporate governance
policies of the Company. The day to day management and operation of the Company are delegated to the management.
The responsibilities of non-executive directors include, without limitation, regular attendance at meetings of the Board
of Directors and of board committees of which they are members, provision of independent opinions at meetings of
the Board of Directors and other board committees, resolution of any potential conflict of interest, serving on the
Audit Committee, Nomination and Remuneration Committee and other board committees and inspecting, supervising
and reporting on the performance of the Company. The Board of Directors is accountable to the shareholders of the
Company and report to them.
The Board of Directors is collectively responsible for preparing the consolidated financial statements of the Group,
which are prepared on a going concern basis, set out on pages 79 to 172 of this annual report. The Company Auditor’s
statement about the reporting responsibility in relation to the accounts is set out on pages 78 of this annual report. Mr.
Miao Jianming, Mr. Lin Dairen and Ms. Liu Yingqi were elected as co-opted board members of the Company at the
first extraordinary general meeting of the year 2008 on 27 October 2008. The Board of Directors was increased from ten
members to thirteen members, comprising four executive directors, three non-executive directors and six independent
non-executive directors. Details of the chairman, executive directors, non-executive directors, independent non-
executive directors, president, supervisors and other senior management personnel are set out on pages 65 to 72 of this
annual report. As far as the Company is aware, no financial, business, family or other material relationship exists among
board members, supervisory members or senior management including between the Chairman, Mr. Yang Chao and the
President, Mr. Wan Feng.
47
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
During the year 2008, all independent non-executive directors of the Company were professionals with extensive
experience in various aspects, such as economics, insurance, management, finance and accounting matters. The
Company complies with the requirement of the Listing Rules that at least one of its independent non-executive directors
has appropriate professional qualifications or accounting or related financial management expertise. As required under
the Listing Rules, the Company has obtained a written confirmation from each of its independent non-executive
directors in respect of his independence, and the Company is of the opinion that all its independent non-executive
directors are independent of the Company. Pursuant to the Articles of Association, directors shall be elected at the
shareholders’ general meeting for a term of three years and may be re-elected on expiry of the three-year term. The Board
of Directors of the Company was re-elected at the shareholder’s annual general meeting on 16 June 2006. All directors
of the second session of the Board of Directors were appointed for a term of three years commencing from 16 June 2006.
Mr. Ngai Wai Fung was elected as an independent non-executive director at the third shareholder’s extraordinary general
meeting of the year 2006 on 29 December 2006. He was appointed with a term commencing from 29 December 2006
until the term of the second session of Board of Directors expires. Mr. Miao Jianmin was elected as a non-executive
director, Mr. Lin Dairen and Ms. Liu Yingqi were elected as executive directors at the first extraordinary general meeting
of the year 2008 on 27 October 2008. Each of Mr. Miao Jianmin, Mr. Lin Dairen and Ms. Liu Yingqi was appointed
with a term commencing from 27 October 2008 until the term of the second session of Board of Directors expires.
Meetings of the Board of Directors are held both on a regular and an ad hoc basis. Regular meetings are convened by
the Chairman at least four times a year, at approximately quarterly intervals and 14 days’ notice is given to all directors
before such meetings. Agendas and related documents are sent to directors at least three days prior to such meetings.
During the year 2008, all notices, agendas and related documents in respect of such regular board meetings were sent in
compliance with the above requirements.
48
Regular board meetings are held mainly to review the interim or annual reports of the Company and to deal with other
related matters. Regular board meetings do not apply the practice of obtaining board consent through the circulation of
written resolutions. Under urgent situations, if there is requisition by more than one-tenth of shareholders, more than
one-third of directors, the Supervisory Committee, more than two independent directors, the Chairman or the President,
the Company may convene an ad hoc board meeting. If the resolution to be considered at such ad hoc board meetings
has been circulated to all the directors and more than half of the directors having voting rights sign and consent to such
resolution, the board meeting need not be convened and such resolution in writing shall become an effective resolution.
If a director is materially interested in a matter to be considered by the board, the director having such conflict of
interest shall have no voting right on the matter to be considered and shall not be counted as quorum for the board
meeting.
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
All directors shall have access to the advice and services of the company secretary and the Board of Directors’ secretary.
Detailed minutes of board meetings are kept by the board secretary regarding matters considered by the board and
decisions reached, including any concerns raised by directors or dissenting views expressed. Minutes of board meetings
are open upon reasonable notice for inspection and for comments by any director of the Company. In 2008, four board
meetings were held and attendance records of individual directors are as follows:
Attendees
Meetings Attended
Attendance Rate
Independent non-executive Directors
Long Yongtu
Sun Shuyi
Ma Yongwei
Chau Tak Hay
Cai Rang
Ngai Wai Fung
Non-executive Directors
Miao Jianmin
Shi Guoqing
Zhuang Zuojin
Executive Directors
Yang Chao (Chairman)
Wan Feng (President)
Lin Dairen
Liu Yingqi
4/4
3/4 (Note 1)
4/4
2/4 (Note 2)
2/4 (Note 3)
4/4
1/1 (Note 4)
4/4
4/4
4/4
4/4
1/1 (Note 4)
1/1 (Note 4)
100%
75%
100%
50%
50%
100%
100%
100%
100%
100%
100%
100%
100%
49
Note1:
At the thirteenth meeting of the second session of the Board of Directors held on 27 October 2008, Mr. Sun Shuyi gave
written authorization for Mr. Ma Yongwei to act as his proxy to attend and vote in the meeting.
Note2:
At the eleventh meeting of the second session of the Board of Directors held on 25 April 2008, Mr. Chau Tak Hay gave
written authorization for Mr. Sun Shuyi to act as his proxy to attend and vote in the meeting. At the thirteenth meeting of
the second session of the Board of Directors held on 27 October 2008, Mr. Chau Tak Hay gave written authorization for Mr.
Ngai Wai Fung to act as his proxy to attend and vote in the meeting
Note3:
At the twelfth meeting of the second session of the Board of Directors held on 25 August 2008, Mr. Cai Rang could not
attend the meeting due to conflicting work-related commitments and gave written authorization for Mr. Sun Shuyi to act as
his proxy to attend and vote in the meeting. At the thirteenth meeting of the second session of the Board of Directors held on
27 October 2008, Mr. Cai Rang could not attend the meeting due to conflicting work-related commitments and gave written
authorization for Mr. Long Yongtu to act as his proxy to attend and vote in the meeting.
Note4:
At the first extraordinary general meeting of the year 2008 on 27 October 2008, the board reviewed and approved the
Resolution on Nominating Mr. Miao Jianmin as Non-Executive Director and Nominating Mr. Lin Dairen and Ms. Liu
Yingqi as Executive Directors.
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
From the end of year 2008 up to the Latest Practicable Date, two board meetings were held and attendance records of
individual directors are as follows:
Attendees
Meetings Attended
Attendance Rate
Independent non-executive Directors
Long Yongtu
Sun Shuyi
Ma Yongwei
Chau Tak Hay
Cai Rang
Ngai Wai Fung
Non-executive Directors
Miao Jianmin
Shi Guoqing
Zhuang Zuojin
Executive Directors
Yang Chao (Chairman)
Wan Feng (President)
Lin Dairen
Liu Yingqi
50
2/2
2/2
2/2
2/2
2/2
2/2
1/2 (Note 1)
1/2 (Note 2)
2/2
2/2
2/2
2/2
2/2
100%
100%
100%
100%
100%
100%
50%
50%
100%
100%
100%
100%
100%
Note 1: At the fifteenth meeting of the second session of the Board of Directors held on 25 March 2009, Mr. Miao Jianmin gave
written authorization for Mr. Yang Chao to act as his proxy to attend and vote in the meeting.
Note 2: At the fifteenth meeting of the second session of the Board of Directors held on 25 March 2009, Mr. Shi Guoqing gave
written authorization for Ms. Zhuang Zuojin to act as his proxy to attend and vote in the meeting.
CHAIRMAN AND PRESIDENT
In 2008, Mr. Yang Chao was the Chairman and Mr. Wan Feng was the President of the Company. The Chairman is
the legal representative of the Company, who is primarily responsible for convening and presiding over board meetings,
inspecting the implementation of board resolutions, attending annual general meetings and arranging attendance by
chairpersons of other board committees at general meetings in order to answer questions raised by shareholders, signing
securities issued by the Company and other important documents, and exercising other rights conferred on by the Board
of Directors. The Chairman is responsible to and reports to the Board of Directors. The President is responsible for the
day-to-day operations of the Company, including mainly implementing strategies and policies, the Company’s operation
plans and investment schemes approved by the Board of Directors, formulating the Company’s internal control structure
and fundamental management policies, drawing up basic rules and regulations of the Company, submitting to the Board
of Directors requests for appointment or removal of senior management and exercising other rights granted under the
Articles of Association and by the Board of Directors. The President is fully responsible to the Board of Directors in
respect of the operations of the Company.
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
In 2008, apart from Mr. Ngai Wai Fung, an independent non-executive director, who held 2,000 H Shares of the
Company, none of the directors and supervisors of the Company had any interests in the shares, underlying shares of
derivatives or debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities
and Futures Ordinance of Chapter 571 of the Laws of Hong Kong) that were required to be recorded in the registers of
the Company required to be kept pursuant to Section 352 of the Securities and Futures Ordinance, or which had to be
notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions
by Directors of Listed Companies (the “Model Code”), in Appendix 10 of the Listing Rules. Furthermore, the Board of
Directors has established a code of conduct on no less exacting terms than the Model Code, to govern the dealings in
the securities of the Company by the directors and supervisors of the Company. Upon specific enquiries made by the
Company, all directors and supervisors of the Company confirmed that they have complied with the required standard
set out in the Model Code and its code of conduct for the year 2008.
SUPERVISORY COMMITTEE
Pursuant to the Company Law of the PRC and the Articles of Association, the Company has established a Supervisory
Committee. The Supervisory Committee is empowered by law to perform the following duties: to examine the finances
of the Company, to monitor whether the directors, president, vice presidents and other senior management act in
contravention of the laws, administrative regulations, the Articles of Association and the resolutions of the shareholder’s
general meetings; to demand rectification from the above officers when their acts are detrimental to the interests of
the Company; to review the financial information such as the financial report, results report and plans for distribution
of profits to be submitted by the Board of Directors to the shareholders’ general meetings and if thought necessary,
to authorize a re-examination by certified public accountants and practising auditors of the Company for the time
being in the name of the Company; to propose the convening of a shareholders’ extraordinary general meeting and
propose resolutions on shareholders’ meetings; to represent the Company in negotiations with, or bringing an action
against, a director; and to perform other duties required by laws, regulations and rules imposed by national and overseas
supervisory bodies.
The Supervisory Committee is accountable to the shareholders. Each year, the Supervisory Committee presents the
Report of the Supervisory Committee and reports their work performed according to the laws at the shareholders’
general meetings. The Supervisory Committee also evaluates the diligence in the carrying out of duties and the integrity
of the directors, president, vice presidents and other senior management, and reviews the auditor’s reports issued by the
auditors in accordance with the generally acceptable auditing standards.
The Supervisory Committee consists of five members, one of whom is the chairperson. A supervisor has a term of three
years, and may be re-elected. The Supervisory Committee comprises of two shareholders’ representatives, two employees’
representatives and one external supervisor. The shareholders’ representatives and the external supervisor will be elected
by the shareholders in general meeting, and the employees’ representatives will be democratically elected by the staff and
workers of the Company.
The Supervisory Committee currently consists of Ms. Xia Zhihua, Mr. Wu Weimin, Mr. Qing Ge, Ms. Yang Hong
and Mr. Tian Hui, of whom Ms. Xia Zhihua and Mr. Wu Weimin are shareholder representative supervisors, Mr. Qing
Ge and Ms. Yang Hong are employee representative supervisors, and Mr. Tian Hui is an external supervisor. Ms. Xia
Zhihua was nominated as supervisor by the Supervisory Committee on 5 January 2006. She was approved by poll at the
shareholders’ meeting held on 16 March 2006 and Ms. Xia Zhihua was unanimously appointed the chairperson of the
committee by members of the Supervisory Committee on the same day.
China Life Insurance Company Limited Annual Report 2008
51
Report of Corporate Governance
Meetings of the Supervisory Committee shall be convened by the Chairperson of the Supervisory Committee. According
to the Articles of Association, the Company established Procedural Rules for the Supervisory Committee Meetings.
Meetings of the Supervisory Committees include both regular and ad hoc meetings with at least two regular meetings
each year, mainly to review financial reports, the annual report, to examine the financial situation and internal control of
the Company. Where necessary, ad hoc meetings are convened.
In 2008, five meetings were held by the Supervisory Committee. Details are set out in the Report of the Supervisory
Committee in this annual report. Attendance records of individual supervisors are as follows:
Attendees
Xia Zhihua
Wu Weimin
Qing Ge
Yang Hong
Tian Hui
Meetings Attended
Attendance Rate
5/5
5/5
5/5
5/5
4/5 (Note)
100%
100%
100%
100%
80%
Note: At the twelfth meeting of the second session of the Supervisory Committee held on 27 October 2008, Mr. Tian Hui gave written
authorization for Ms. Xia Zhihua to act as his proxy to attend and vote in the meeting.
52
From the end of the year 2008 up to the Latest Practicable Date, the Supervisory Committee convened two meetings on
25 March 2009 to review such matters as the 2008 annual report and the Consolidated Work Report of the Supervisory
Committee for 2008 and Highlight on the Work of the Company’s Supervisory Committee for 2009. Attendance
records of individual supervisors at meetings of the Supervisory Committee are as follows:
Attendees
Xia Zhihua
Wu Weimin
Qing Ge
Yang Hong
Tian Hui
Meetings Attended
Attendance Rate
2/2
2/2
2/2
2/2
2/2
100%
100%
100%
100%
100%
AUDIT COMMITTEE
The Company established the Audit Committee on 30 June 2003. For the year 2008, the Audit Committee comprised
only independent non-executive Directors of the Company, with Mr. Sun Shuyi as the chairman. Other members
included Mr. Chau Tak Hay, Mr. Cai Rang and Mr. Ngai Wai Fung.
All members of the Audit Committee have broad experience in financial matters. Mr. Ngai Wai Fung is the financial
expert of the Audit Committee. The principal duties of the Audit Committee are to review and supervise the Company’s
financial report, to assess the effectiveness of the Company’s internal control system, to supervise the Company’s internal
audit system and to recommend the engagement or replacement of external auditors. The Audit Committee is also
responsible for communications between the internal and the external auditors.
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
Five meetings were held by the Audit Committee during the year 2008. Attendance records of individual members are as
follows:
Position
Name
Meetings Attended
Attendance Rate
Chairman
Member
Member
Member
Sun Shuyi
Cai Rang
Chau Tak Hay
Ngai Wai Fung
5/5
3/5 (Note 1)
4/5 (Note 2)
5/5
100%
60%
80%
100%
Note 1: At the twelfth meeting of the second session of the Audit Committee held on 25 August 2008, Mr. Cai Rang gave written
authorization for Mr. Sun Shuyi to act as his proxy to attend and vote in the meeting. At the thirteenth meeting of the second
session of the Audit Committee held on 26 October 2008 Mr. Cai Rang gave written authorization for Mr. Sun Shuyi to act
as his proxy to attend and vote in the meeting.
Note 2: At the thirteenth meeting of the second session of the Audit Committee held on 26 October 2008, Mr. Chau Tak Hay gave
written authorization for Mr. Ngai Wai Fung to act as his proxy to attend and vote in the meeting.
During the year 2008, the principal work performed by the Audit Committee were as follows:
1.
2.
reviewing the financial reports for the year ended 31 December 2008 and the six months ended 30 June 2008;
reviewing the financial reports of the Company for the first quarter and third quarter of 2008;
53
examing the effectiveness of the internal control systems; reviewing the Company’s self-assessment of internal
control report in 2008, and the report on internal control appraisal prepared by auditors, which covers all the
substantial aspects of control, including financial control, operative control, regulatory compliance control and risk
management control;
3.
communicating with external auditors, in order to confirm the overall auditing extent and process;
4.
reviewing the external auditors’ statutory auditing arrangement and status;
5.
reviewing and approving the audit costs for the year 2008; and
6.
leading the Company towards compliance with matters related to Section 404 of Sarbanes-Oxley Act of the U.S.
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
54
Form the end of the year 2008 up to the Latest Practicable Date, the Audit Committee has convened one meeting to
review the 2008 annual report, the independent auditors’ Report on Audit Results for 2008 financial reports and the
Report on internal control audit status for 2008, and the Report on internal audit work for 2008, and to approve the
2008 financial reports and the resolution on Auditors’ remuneration for 2008 and auditors’ engagement for 2009.
Attendance records of individual members are as follows:
Position
Name
Meetings Attended
Attendance Rate
Chairman
Member
Member
Member
Sun Shuyi
Cai Rang
Chau Tak Hay
Ngai Wai Fung
1/1
1/1
1/1
1/1
100%
100%
100%
100%
NOMINATION AND REMUNERATION COMMITTEE
The Company established the Management Training and Remuneration Committee on 30 June, 2003. On 16 March
2006, the Board of Directors has resolved to change the name of the Management Training and Remuneration
Committee to the Nomination and Remuneration Committee, and in 2008 majority of the members of the committee
were independent non-executive Directors. The Nomination and Remuneration Committee is mainly responsible for
reviewing the structure of the Board of Directors, drawing up plans for the appointment and succession of directors and
senior management. The committee is also responsible for formulating training and remuneration policies for the senior
management officers of the Company. In 2008, the committee was comprised of Messrs. Cai Rang and Sun Shuyi, both
of whom are independent non-executive Directors and Mr. Shi Guoqing is a non-executive Director. Mr. Miao Jianmin,
a non-executive Director was appointed as a member of the Nomination and Remuneration Committee in late 2008.
Mr. Cai Rang, an independent non-executive Director, is the chairman of the committee.
Regarding the nomination of directors, the Nomination and Remuneration Committee shall first discuss the nomination
of candidates as new directors, and then recommend such candidates to the Board of Directors. The Board of Directors
shall then determine whether such candidates’ appointments should be proposed for approval at the shareholder’s general
meeting. The major criteria considered by the Nomination and Remuneration Committee and the Board of Directors
are the educational background, management and research experience in the finance industry, especially in the insurance
sector, of the candidates and the candidates’ commitment to the Company. Regarding the nomination of independent
non-executive directors, the Nomination and Remuneration Committee will also give special consideration to the
independence of the relevant candidates.
The fixed salary of the executive directors and other senior management is determined in accordance with the market
levels and their respective positions, and the amount of their performance-related bonuses is determined according to
the results of performance appraisal. The amounts of directors’ fees and share appreciation rights are determined with
reference to the market levels and the circumstances of the Company.
Two meetings were held by the Nomination and Remuneration Committee for the year 2008. Attendance records of
individual members are as follows:
Position
Name
Meetings Attended
Attendance Rate
Chairman
Member
Member
Cai Rang
Sun Shuyi
Shi Guoqing
2/2
1/2 (Note)
2/2
100%
50%
100%
Note: At the seventh meeting of the second session of the Nomination and Remuneration Committee held on 20 March 2008, Mr. Sun
Shuyi gave written authorization for Mr. Cai Rang to act as his proxy to attend and vote in the meeting.
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
From the end of the year 2008 up to the Latest Practicable Date, the Nomination and Remuneration Committee has
convened one meeting to review the Resolution on election of a new session following the end of the second session of
the Board of Directors meeting. Attendance records of individual members are as follows:
Position
Name
Meetings Attended
Attendance Rate
Chairman
Member
Member
Member
Cai Rang
Sun Shuyi
Miao Jianmin
Shi Guoqing
1/1
1/1
0/1 (Note 1)
0/1 (Note 2)
100%
100%
–
–
Note 1: At the ninth meeting of the second session of the Nomination and Remuneration Committee held on 24 March 2009,
Mr. Miao Jianmin gave written authorization for Mr. Sun Shuyi to act as his proxy to attend and vote in the meeting.
Note 2: At the ninth meeting of the second session of the Nomination and Remuneration Committee held on 24 March 2009,
Mr. Shi Guoqing gave written authorization for Mr. Cai Rang to act as his proxy to attend and vote in the meeting.
During the year 2008, the principal work performed by the Nomination and Remuneration Committee was as follows:
1.
2.
3.
4.
reviewing and approving the Resolution on interim procedures for the performance evaluation of board directors,
supervisors and senior management and putting the same to the Board meeting for review and approval;
55
reviewing and approving the Resolution on approving the performance evaluation results on senior management of
the Company for 2007;
reviewing and approving the Resolution on nominating Mr. Miao Jianmin, Mr. Lin Dairen and Ms. Liu Yingqi as
board members of the Company;
reviewing and approving the report on Self-evaluation of the Audit Committee and the report on Self-evaluation
of the Nominations and Remuneration Committee.
RISK MANAGEMENT COMMITTEE
The Company established the Risk Management Committee on 30 June 2003. During the year 2008, the Committee
was comprised of Mr. Ma Yongwei, an independent non-executive director, Mr. Wan Feng, an executive director,
Ms. Zhuang Zuojin, a non-executive director, and Ms. Liu Yingqi, an executive director. Under the resolution of the
thirteenth meeting and the second session of the Board of Directors held on 27 October 2008, Ms. Liu Yingqi was
elected as a member of Risk Management Committee. Mr. Ma Yongwei is the Chairman of the Committee.
The Risk Management Committee is mainly responsible for studying the State’s macro-economic financial policy,
analyzing market changes, formulating industry risk management proposals, proposing company risk control standard
system, studying laws and regulations, policies and regulatory standards promulgated by the regulatory authority,
proposing effective implementation measures, assisting the management in establishing and improving the internal
control system, formulating the business risk management policy of the Company, presiding over the feasibility and risk
assessment of important business activities, reviewing assessment reports of the Company in relation to business risks
and internal control status, identifying risks or potential risks in the day-to-day operations and making recommendations
to the management, dealing with sudden and significant risks or crises, and performing and exercising other duties or
powers delegated to or granted by the Board of Directors.
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
For the year 2008, the Risk Management Committee has convened one meeting to review the Resolution on establishing
a comprehensive risk management system for the Company and the Report on risk management work for the six months
ended 30 June 2008. According to business demand, the Risk Management Committee conducted field studies for the
Company’s risk management work in Xinjiang Autonomous Region and Inner Mongolia Autonomous Region in June
and July 2008 respectively and made investigation reports.
STRATEGY COMMITTEE
The Company established the Strategy Committee on 30 June 2003. For the year 2008, the Committee was comprised
of Mr. Long Yongtu, an independent non-executive director, Mr. Wan Feng, an executive director, Mr. Shi Guoqing, a
non-executive director and Mr. Lin Dairen, an executive director. Under the resolution of the thirteenth meeting of the
second session of the Board of Directors held on 27 October, 2008, Mr. Lin Dairen was elected as a co-opted member
of Strategy Committee. Mr. Long Yongtu, an independent non-executive director, is Chairman of the Committee.
The principal duties of the Strategy Committee include drawing up long-term development strategies and significant
investment or financing plans of the Company, proposing significant capital investment for operation projects,
and conducting studies and making recommendations on other important matters affecting the development of the
Company.
For the year 2008, the Strategy Committee has convened one meeting to approve the Report on the evaluation of the
implementation of the eleventh five-year development plan and suggestions on the development strategy in the late stage
of the eleventh five-year plan.
56
AUDITORS’ REMUNERATION
PricewaterhouseCoopers and PricewaterhouseCoopers Zhong Tian Certified Public Accountants Co., Ltd. were the
international auditors and the PRC auditors of the Company for the year ended 31 December 2008. During the year
2008, the external auditors (including any entity that is under the common control, ownership or management with the
auditors which a reasonable and informed third party, having knowledge of all relevant information, would reasonably
conclude as being part of the auditors nationally or internationally) provided the Group with audit and audit related
services at fees detailed below:
Name/Nature of Services
Audit and audit related services
Fee (in RMB million)
64
The Audit Committee has resolved to appoint PricewaterhouseCoopers and PricewaterhouseCoopers Zhong Tian
Certified Public Accountants Co., Ltd., as auditors for the statutory and internal control auditing for the financial
year 2009. The resolution has been approved by the Board of Directors, pending the approval and authorization by
shareholders at the 2009 annual general meeting.
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
INTERNAL CONTROL AND RISK MANAGEMENT
The Company has at all times attached great importance to internal control and risk management. The Company’s
internal control is carried out by an internal control and risk management team comprising the Board of Directors,
the Audit Committee and the Risk Management Committee formed under the Board of Directors, the Supervisory
Committee of the Company, the management and the Internal Control and Risk Management Committee formed by
the management, and the internal control execution and supervision department of the Company. Strictly based on the
corporate governance structure, the Company commenced much work on aspects such as internal control establishment,
system implementation and risk management to enhance the internal control of the Company.
The Company has improved its corporate governance structure, and established a check and balance mechanism between
the Board of Directors, the Supervisory Committee and the operational management. The Company has established
employees’ conduct standards and various policies and systems, risk control procedures for prevention of fraud and staff
conduct guidelines and model code of ethics. The Company has set up a special system to specify the independent status
of the internal audit department in the corporate structure, the terms of reference of the internal audit department and
the reporting relationship with the Audit Committee under the Board of Directors and the Supervisory Committee.
The Company has been devoted to promoting internal control and establishing policies related to internal control.
Based on the experience and achievements from compliance with Sarbanes-Oxley Act-Section 404, it formulated internal
control standards, the application of which was expanded to each aspect of the Company’s operational management. The
Company also began to expand the implementation of the internal control standards, actively promote the culture and
philosophy of internal control, and comprehensively advanced the internal control level of the Company.
57
The Company commenced supervision and investigation work on internal control by various means. It monitored
and examined the execution of the internal control system related to preparation of the financial statements, ensuring
thorough implementation of the internal control system. The audit department and the related departments conduct
various kinds of auditing, accounting and basic accounting appraisal such as economic liability auditing, financial
revenue and expenditure auditing and key investment auditing independently or jointly every year. This is beneficial to
further safeguarding the thorough implementation of the regulations and systems of the Company, reducing operational
risk exposure, strengthening internal control, optimizing resource allocation and improving operational management of
the Company.
An Audit Committee has been established under the Board of Directors. It worked together with the Company’s
management to review and discuss about the information disclosure mechanism and procedure and the internal control
mechanism for financial reporting to ensure the management has fulfilled its duties in relation to such mechanisms
and procedures, and monitored and examined the Company’s financial control, information disclosure mechanism and
procedure, internal control and risk management system. The Board of Directors also reviews the self-assessment of
internal control report, risk assessment report and compliance report.
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
In accordance with the requirements on laws and regulations relating to internal control at places where the Company
is listed, the Company has completed a self assessment on internal control relating to Sarbanes-Oxley Act-Section 404
and requirements of the SSE as at 31 December 2008, and confirmed such internal control was effective. The Company
had also received from independent auditors unqualified opinions on the effectiveness of our internal control relating to
financial reporting as at 31 December 2008. The Company’s assessment report and the report of independent auditors
will be included in our SEC Form 20-F submitted to the U.S. Securities and Exchanges Commission(“SEC”) and the
attachment to the annual report submitted to the SSE.
During the process of enhancing and optimizing its internal control systems, the Company identified and addressed
certain issues that needs to be resolved. The Company believes that the continued improvement and effective operation
of its internal control systems is beneficial to its prevention and mitigation of operational risk and the protection of the
interests of its customers and shareholders.
STOCK APPECIATION RIGHTS
For further details, see page 35, “H Shares Stock Appreciation Rights”, paragraph 10 of “Report of the Board of
Directors”.
SHAREHOLDERS’ INTEREST
To safeguard shareholders’ interests, shareholders have the right to participate in the Company’s affairs by attending
general meetings in addition to the right of convening extraordinary general meetings under certain circumstances.
58
Where the number of directors falls below the minimum requirement by the Articles of Association or law, the loss
incurred reaches one third of the Company’s total share capital, or the Board of Directors or the Supervisory Committee
deems necessary, or where shareholders of 10% or more make a requisition, the Board of Directors shall convene an
extraordinary general meeting within two months of the date of such requisition. Where shareholders of 10% or more
requests for an extraordinary general meeting, such shareholders shall make a request in writing to the Board of Directors
with a clear agenda. The Board of Directors shall upon receipt of such a written request, convene a meeting as soon
as possible. If the Board of Directors fails to convene a meeting within thirty days after the receipt of such a written
request, shareholders making such a request may convene a meeting by themselves at the cost of the Company within
four months after the receipt by the Board of Directors of such a written request.
Shareholders may put forward enquiries to the Board of Directors through the company secretary or the Board of
Directors’ secretary, or put forward proposals at shareholders’ meetings through their proxies. The Company has made
available its contact details in its correspondence with shareholders to enable such enquiries or proposals to be properly
directed.
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
INVESTOR RELATIONS
As at 31 December 2008, the Company had 28,264,705,000 shares in total, of which there were 7,441,175,000 H
Shares and 20,823,530,000 A Shares. Please refer to page 163 of the annual report for details of movement in the
Company’s share capital, and to pages 37 to 39 for the substantial shareholders of the Company and their shareholding
details.
The general meetings convened in 2008 including the 2008 Annual General Meeting on 28 May 2008 and extraordinary
general meeting on 27 October 2008. Results of shareholder votes at such general meetings have been published on the
website of the Hong Kong Stock Exchange.
The Company has established a specific department to handle investor relations. In 2008, the Company has taken
a series of measures to enhance its relationship with investors, which mainly includes holding the Annual General
Meeting, publication of periodic reports, holding press conferences for performance results, holding conference calls with
investors, meeting investment analysts, Corporate Open Day for analysts and investors, attending investors’ meetings,
and establishing the Company’s IR website.
In 2008, the Company communicated with more than 2,400 investors and analysts in all kinds of manners, including
successful reception at the Company of more than 150 groups of investors and analysts, consisting of 600 persons in
total, communicating with about 750 investors by participating in 18 investor’s meetings held in and out of China,
inviting about 100 investors/analysts in and out of China to attend the Corporate Open Day, and meeting or visiting
730 investors in the results release conference and road shows. In addition, we kept close contact with investors’ groups
by phone and email, and communicated through more than 3,000 emails with investors’ groups, and answered and
replied more than 3,300 calls and emails.
59
In 2008, for the first time, the Company released its 2007 financial results at Hong Kong and Beijing simultaneously
through video conference, and successfully organized activities such as the “Corporate Open Day for Global Analysts/
Investors/Media”, further enhancing the communication with investors and analysts.
In 2008, the Company was awarded “Excellence Awards on the Best Improvement on IR (State Owned Enterprise)”
for A Share listed companies and “Excellence Awards on the Best IR Awards” for H Share listed companies issued by
the 2008 IR (Investor Relations) Magazine, and “Top 100 Best IR Management in Chinese A Share Companies” issued
jointly by SSE, Shenzhen Stock Exchange and the Chinese Listing Company IR Management Research Centre in
Nanjing University.
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
SIGNIFICANT DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES FOR
PURPOSES OF SECTION 303A.11 OF NYSE LISTED COMPANY MANUAL
As a Chinese company with H shares, ADSs and A shares publicly traded on the Hong Kong Stock Exchange, New
York Stock Exchange (“NYSE”) and the SSE, respectively, the Company 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 the Company.
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 the Company’s corporate governance practices differ from those followed by
U.S. domestic companies under NYSE rules.
Board Independence
The Company identifies its 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 the Company’s securities or business, relationships with the management and financial dependence
on the Company. These tests vary in certain respects with those set forth under Section 303A.02 of the NYSE Listed
Company Manual.
60
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), and requires companies to identify which directors are
independent and disclose the basis for that determination. 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 is controlled by an individual, a group or
another company (a “controlled company”). Because more than 60% of the Company’s voting power is controlled
by CLIC, the Company, as with controlled U.S. domestic companies, would not be required to comply with this
independent board requirement. As at 31 December 2008, the board of directors comprised thirteen directors, including
four executive directors, three non-executive directors and six independent non-executive directors.
Non-management directors of U.S. domestic companies are required by Section 303A.03 of the NYSE Listed Company
Manual to meet at regularly scheduled executive sessions without management. The Company is not required by PRC or
Hong Kong laws or requirements on mandatory basis to, and did not hold such sessions in the year 2008.
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
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”. The Company, as
with controlled U.S. domestic companies, is not required under NYSE rules to have such a nominating/corporate
governance committee or compensation committee. The Company has established a nomination and remuneration
committee in accordance with the HKSE Listing Rules, comprised of a majority of independent non-executive directors
as construed under those rules. The nomination and remuneration committee is mainly responsible for the review
and recommendation of the nomination of directors and senior officers of the Company, as well as the formulation
of training and remuneration policy for the senior management of the Company. The Chinese Insurance Company
Corporate Governance Guidelines require that nomination and remuneration committees of Chinese insurance
companies be comprised entirely of non-executive directors with the independent directors as the Chairmen. In the
year of 2008, our nomination and remuneration committee comprised two independent non-executive directors and
one non-executive director with one of the independent non-executive directors serving as Chairman. (A non-executive
director was newly elected as a member in late 2008). The Company has complied with the composition requirements
of the nomination and remuneration committee as prescribed under the Chinese Insurance Company Corporate
Governance Guidelines.
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, the Company is 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 is 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.
61
The Company has 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. The audit committee is mainly responsible for the review and supervision of the Company’s financial
reporting procedures, internal control systems, risk management procedures and compliance matters.
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. The Company is not required by Chinese or
Hong Kong laws or requirements to, and currently does not, have such corporate governance guidelines. However, the
Company addresses several of the key subjects required by the NYSE Listed Company Manual to be included in the
corporate governance guidelines in its articles of association, Procedural Rules for Board of Directors Meetings, Rules of
Internal Control and other internal corporate documents.
In addition, under the Hong Kong Stock Exchange Listing Rules, the Company is expected to comply with, but may
choose to deviate from, the provisions of the Code, which sets out the principles of good corporate governance for
issuers. However, the Company should disclose the reasons for deviation, if any, in its interim and annual reports.
China Life Insurance Company Limited Annual Report 2008
Report of Corporate Governance
The Company is required by CSRC to disclose in its annual report filed with the CSRC the actual corporate governance
practice of the Company as compared with CSRC’s rules on corporate governance of listed companies. Under such
rules, the Company is required to disclose the differences between its actual practices and the requirements under such
rules, if any. Accordingly, the Company has disclosed in its annual report for year 2008 filed with the CSRC that it had
established comparatively proper and sound corporate governance strictly in accordance with the PRC Company Law
and PRC Securities Law as well as relevant rules and regulations, and that there were no significant differences between
the Company’s actual corporate governance practices and relevant provisions and requirements under CSRC’s rules.
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. The Company has adopted a Code of Business Conduct and Ethics for Directors and
Senior Officers and Code of Conduct for Employees. The Company has disclosed the Code of Business Conduct and
Ethics for Directors and Senior Officers in its annual report under Form 20-F for fiscal year ended December 31, 2004
and is 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 directors of the Company 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 SSE any of the directors, supervisors or senior management of the listed company shall 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 such company.
During his/her tenure at the company, he/she shall file for record in advance any proposed transaction in the shares of
the company with the SSE in accordance with the relevant rules and regulations. In case of changes in shareholdings
in the company, he/she shall report such changes on a timely basis to the company, which shall then make relevant
announcements on the website of the SSE.
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 company of NYSE corporate
governance listing standards. There are no similar requirements under PRC or Hong Kong laws or requirements.
ENHANCING CORPORATE GOVERNANCE
With a view to further fostering the corporate governance practices of the Company, the Company will continue to
provide training to management, as and when appropriate, in order to keep them abreast of the regulatory requirements
in China and the locations where the Company is listed. The Company will regularly assess and enhance its corporate
governance measures and practices to ensure that they are on par with the development of international governance
structures and in light of the changing regulatory requirements and investors’ needs. This will also help ensure long term
and continuous development of the Company, enhance corporate value and generate returns for shareholders.
62
China Life Insurance Company Limited Annual Report 2008
Corporate Social Responsibility
As China’s largest life insurance company, the Company has been committed to fulfilling its corporate social
responsibilities for many years. The Company seeks to establish a business model that contributes to both its own
development and the society. The Company has played a positive role in complementing the social security system,
contributing to the establishment of new socialist villages, supporting reform and development of the capital market,
helping the disadvantaged, and increasing public knowledge regarding insurance products.
In early 2008, the Company provided free short-term accident insurance for the duration of the disaster period to staff
of the National Grid and Southern Grid and police officers who fought against the severe snowstorm hitting southern
Chinese provinces, and made payment of RMB5.76 million on the claims. China Life Charity Foundation also donated
RMB10 million to the people in the affected regions.
After the 5.12 Wenchuan Earthquake, China Life Charity Foundation responded with an immediate RMB16
million donation through the Red Cross Society of China for the reconstruction of schools in the disaster area. The
Company’s 700,000-plus employees and exclusive agents donated another RMB33.25 million. Thousands of employees
and exclusive agents also participated in blood donations for the disaster-stricken areas. Branches in disaster area,
while helping themselves, also engaged in giving treatment to the wounded and settling down victims. As the only
representative of the nation’s hero collective in fighting against the disaster in insurance industry, Shifang branch of
China Life was commended by Party Centre Committee and State Council. Additionally, the Company also donated
accident insurance to 12 types of rescue workers involved in the rescue work, including soldiers, police officers, etc., and
made payment of RMB8.54 million in total. On 14 May 2008, after careful consideration, the Company announced
its plan of donation through China Life Charity Foundation to take on the responsibility for basic living expenses of
earthquake orphans until they reach the age of 18. On 11 November 2008, China Life Charity Foundation signed a
cooperative agreement with the Ministry of Civil Affairs in relation to China Life’s support program for Wenchuan
Earthquake orphans, and transfered to the Ministry of Civil Affairs RMB4.8672 million in total as loving supportive
money for the first 13 months, which had been handed out monthly to the orphans’ guardians by the Ministry of Civil
Affairs.
.
At the end of May 2008, the Company announced ten “5.12 earthquake insurance claims service commitments”, and
established 69 claim service stations in the areas seriously affected by the disaster, to simplify claim processes and provide
easily accessible and convenient services for people in the disaster-stricken areas. The members of the claim service
stations were selected from branches in non-disaster areas. As at the end of the Reporting Period, the Company made
payment on 16,397 customers’ claims, totaling approximately RMB153 million through seeking confirmation of policy
information from different sources on its own initiative.
The Company focused on “Small Amount Insurance”, “China Life New Industrial Life Insurance” (“New Industrial
Life Insurance”) and “New Village Cooperative Medical Scheme”, devoting to the establishment of village social security
system. As at the end of 2008, more than 30 million rural residents benefited from the above products, and the New
Village Cooperative Medical Scheme had been offered in 90 counties (townships and communities), amounting to more
than 80% of New Village Cooperative Medical Scheme offered by the whole insurance industry. The Company provided
compensatory payment service for medical expense to 11.65million persons in total.
63
China Life Insurance Company Limited Annual Report 2008
Corporate Social Responsibility
In 2008, the Company provided continuous donation of RMB30 million to China Life Charity Foundation. It
continued to work on the “Healthy New Villages” project jointly initiated with the Red Cross Society of China,
assisted with the construction of 57 China Life Fraternity Healthcare Centers, trained 200 rustic doctors from all over
the country, and also actively provide assistance to patients with serious illness. On 5 December 2008, as a result of
its prominent performance in a series of public welfare events in fighting against the snowstorm and the earthquake,
the Company was awarded “China Charity Award — Domestic Enterprise with Greatest Love”, which is the highest
government awards in the area of charity.
In 2008, the Company formally established China Life Volunteers Association, and initiated China Life Volunteers
Program, in order to provide facilities, guidelines, supports and protection for employees and exclusive agents who wish
to provide voluntary service to the society with their own time and skills. The Company encouraged and supported
employees and exclusive agents in all levels of branches to participate in voluntary activities, which cover the areas of
environment protection, sickness assistance, poverty relief, emergency rescue, community construction and other events,
etc., including long period support to the earthquake orphans, and to help others and provide services to the society with
noble spirit of love and dedication.
With the excellent performance and professional capabilities of the Olympic Audience Call Centre volunteer team
organised by the Company, the team members performed their duties and made outstanding contribution to the Beijing
Olympic Games. In addition, the Company provided insurance coverage for the policemen involved in the Olympic
Games security work and made payment of RMB1.4 million on claims.
Through active participation in these charity undertakings, the Company strives to achieve both business development
and contribution to society, and drive growth for the interest of its shareholders, customers and employees.
64
China Life Insurance Company Limited Annual Report 2008
Directors, Supervisors and Senior Management
DIRECTORS
Mr. Yang Chao, born in 1950
Mr. Yang became the Chairman of the Company in July 2005, the President of China Life
Insurance (Group) Company in May 2005 and the Chairman of China Life Property and
Casualty Insurance Company Limited in December 2006. Between May 2005 and January
2006, he was the President of the Company. Between 2000 and 2005, Mr. Yang was the
Chairman and President of both China Insurance (Holdings) Company Limited and China
Insurance H.K. (Holding) Company Limited. Mr. Yang graduated from Shanghai International
Studies University and Middlesex University in the United Kingdom, majored in English and
Business Administration, and had obtained a Master’s degree in Business Administration. Mr.
Yang, a Senior Economist, has more than 30 years of experience in the insurance and banking
industries, and was awarded special allowance by the State Council. He is currently the Vice
President of National Association of Financial Market Institutional Investors, the Chairman
of the Chairmanship of China Federation of Industrial Economics, the member of Shanghai
international financial center construction advisory committee and the member of Association for
Relations Across the Taiwan Straits.
Mr. Wan Feng, born in 1958
Mr. Wan became the President of the Company in September 2007, and at the same time
Vice President of China Life Insurance (Group) Company and Director of China Life Pension
Company Limited. He became an Executive Director of the Company from June 2006 and
served as the Vice President of the Company from 2003. On 31 January 2007, it was resolved
by the Board of Directors to authorize Mr. Wan Feng to be responsible for the day-to-day
operations and management of the Company. He became a Director of China Life Property and
Casualty Insurance Company Limited from November 2006, and became a Director of China
Life Insurance Asset Management Company Limited from January 2006. Mr. Wan received a BA
degree in Economics from Jilin College of Finance and Trade, MBA from Open University of
Hong Kong, and Doctorate in Finance from Nankai University in Tianjin. Mr. Wang, a Senior
Economist, has 27 years of experience in the life insurance industry, and was awarded special
allowance by the State Council. He is currently the Director of China Life Charity Foundation,
the Deputy Director of China Association of Actuaries, the Deputy Director of Insurance
Association of China, the executive Director of Insurance Institute of China and Director of
China Insurance Guarantee Fund Committee.
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China Life Insurance Company Limited Annual Report 2008
Directors, Supervisors and Senior Management
66
Mr. Lin Dairen, born in 1958
Mr. Lin became an Executive Director of the Company on 27 October 2008. Mr. Lin served as
the Vice President of the Company since 2003 and served as the Executive Director and President
of China Life Pension Company Limited from November 2006. Mr. Lin graduated in 1982 with
a Bachelor’s degree in Medicine from Shandong Province Changwei Medical Institute. Mr. Lin, a
Senior Economist, works in life insurance for 27 years and has accumulated extensive experience
in operation and management. He is currently the executive director of Insurance Institute of
China, the standing Director of the China Association for Labour Studies, the executive Director
of Peking University China Center for Insurance and Social Security Research.
Ms. Liu Yingqi, born in 1958
Ms. Liu became an Executive Director of the Company on 27 October 2008. Ms. Liu served as
the Vice President of the Company since January 2006 and acted as Board Secretary from 30 May
2008. Ms. Liu became the Director of China Life Pension Company Limited in November 2006.
Ms. Liu was the Chairperson of the Supervisory Committee of the Company between August
2003 and January 2006. Ms. Liu graduated with a BA in Economics from Anhui University in
1982, Ms. Liu has over 22 years of experience in operation and management of the life insurance
business and insurance administration. Ms. Liu, a Senior Economist, has extensive experience in
operation and management. She is currently the Director of the Insurance Institute of China.
Mr. Miao Jianmin, born in 1965
Mr. Miao Jianmin became a Non-Executive Director of the Company on 27 October 2008.
Mr. Miao became a Vice President of China Life Insurance (Group) Company in December
2005. Currently he also serves as the Chairman of both China Life Insurance Asset Management
Company Limited and China Life Franklin Asset Management Company Limited, the Chinese
Alternate Representative of ABAC (APEC Business Advisory Council) and the Director of the
Insurance Association of China, and was awarded special allowance by the State Council. Mr.
Miao graduated from the post-graduate division of the People’s Bank of China with a major in
money and banking. He studied in the Insurance Faculty of Central University of Finance and
Economics from 1982 to 1986. Mr. Miao is a Senior Economist.
Mr. Shi Guoqing, born in 1952
Mr. Shi became a Non-Executive Director of the Company in 2004. Mr. Shi is also the Vice
President of China Life Insurance (Group) Company from August 2003, and the Chairman
of China Life Insurance (Overseas) Co., Ltd., Chairman of China Life-CMG, Director of
Beijing Oriental Plaza Company Limited, Director of Hong Kong Huiyen Holding Company
Limited, Director of China World Trade Center Limited, Director of China World Trade
Center Company Limited, Director of China World Trade Investments Limited, Chairman of
Shanghai PICC Tower Limited, and Director of Shanghai Lujiazui Finance & Trade Zone United
Development Co., Ltd. Mr. Shi graduated from Foreign Trade and Business College of Beijing
in 1976. Mr. Shi, a Senior Economist, has over 30 years of experiences in the insurance industry,
and has accumulated extensive experiences both in the operation and management of insurance
business.
China Life Insurance Company Limited Annual Report 2008
Directors, Supervisors and Senior Management
Ms. Zhuang Zuojin, born in 1951
Ms. Zhuang became a Non-Executive Director of the Company from June 2006, and served
as the Vice President of China Life Insurance (Group) Company from August 2003, Director
of China Life Insurance Asset Management Company Limited from June 2004. She acted as a
Director of China Life Franklin Asset Management Company Limited from May 2006 and a
Director of China Life-CMG from June 2000. Ms. Zhuang graduated from Correspondence
College of CCP School, majored in Economics and Management, and studied Probability and
Statistics (major in Insurance Actuary) in Zhejiang University from September 1998 to January
2000. Ms. Zhuang, a Senior Accountant, has worked in the insurance industry for over 28 years,
and has accumulated extensive experiences both in the operation and management of insurance
businesses. She is currently the Vice President of Financial Accounting Society of China.
Mr. Long Yongtu, born in 1943
Mr. Long became an Independent Non-Executive Director of the Company in 2003 and is
also the Secretary General of Boao Asian Forum. Before leaving government in early 2003, Mr.
Long served as the Vice Minister and Chief Negotiation Representative of MOFTEC (now
the Ministry of Commerce) from 1997 onwards. Mr. Long also served as the Assistant to the
Minister, Director of International Trade and Economic Affairs, and as Director of International
Communication in the same ministry. A 1965 graduate of the Foreign Language Department of
Guizhou University, Mr. Long studied at the London School of Economics between 1973 and
1974 and received a Honorary Doctorate of Economics from the London School of Economics
and Political Science in 2005.
Mr. Sun Shuyi, born in 1940
Mr. Sun became an Independent Non-Executive Director of the Company in 2004. He is the
Executive Vice President of China Federation of Industrial Economics, Vice Chairman of United
China Enterprise Association, Executive Vice President of China Enterprise Association, Deputy
Supervisor of China Brand Promotion Committee, Member of the 10th Chinese People’s Political
Consultative Conference. From 1993 to 2001, Mr. Sun acted as the Deputy General Manager of
General Office of the Central Steering Committee of Financial Affairs of China, Deputy Minister
of Ministry of Labour, Deputy Party Secretary of Central Government Enterprise Working
Committee. Mr. Sun graduated from the University of Science and Technology of China in 1963
and is a Senior Engineer and Certified Public Accountant.
Mr. Ma Yongwei, born in 1942
Mr. Ma became an Independent Non-Executive Director of the Company in 2006. Mr. Ma has
been a member of the Standing Committee of National Committee of Chinese People’s Political
Consultative Conference since 2003. He was the Chairman of China Insurance Regulatory
Commission from 1998 to 2002. From 1996 to 1998, he served as the Chairman and President
of former China Insurance Group Company. From 1994 to 1996, he served as the Chairman and
President of former People’s Insurance Company of China. From 1984 to 1994, Mr. Ma served
as Governor of Agricultural Bank of China. Mr. Ma graduated from Finance Department of
Liaoning Finance and Economic University in 1966. Mr. Ma, a Researcher, has over 37 years of
experience in the banking industry and the insurance industry.
China Life Insurance Company Limited Annual Report 2008
67
Directors, Supervisors and Senior Management
68
Mr. Chau Tak Hay, born in 1943
Mr. Chau became an Independent Non-Executive Director of the Company in 2003. Prior to
this, Mr. Chau occupied a number of important positions in the Hong Kong Government. They
include Secretary for Commerce and Industry, Secretary for Broadcasting, Culture and Sport,
Director General of Trade, and Secretary for Health and Welfare. Mr. Chau graduated from the
University of Hong Kong in 1967.
Mr. Cai Rang, born in 1957
Mr. Cai became an Independent Non-Executive Director of the Company in 2004. He is the
Party Secretary and Deputy General Manager of China Iron&Steel Research Institute Group,
and the Vice Chairman of Advanced Technology & Materials Company Limited, Committee
Member of Chinese People’s Political Consultative Conference of Beijing and Committee
Member of Chinese People’s Political Consultative Conference. From 1998 to March 2007, Mr.
Cai Rang was the President of Advanced Technology & Materials Company Limited. In 1982,
Mr. Cai graduated from the Machinery Faculty of the Northeastern Industry University with
a Bachelor’s degree in Machinery Architecture. He pursued post graduate studies at New York
State University from 1984 to 1986 to obtain a MBA degree. He pursued on-the-job studies in
the School of Business Administration of Remin University of China from 1997 to 2001 and
obtained a Doctor’s Degree in Business Administration. From 1997 to 1998, Mr. Cai Rang was a
visiting professor of the Cambridge University in the UK. Mr. Cai Rang is a professor-level Senior
Engineer, and was awarded special allowance by the State Council.
Mr. Ngai Wai Fung, born in 1962
Mr. Ngai became an Independent Non-Executive Director of the Company on 29 December
2006. He is the Non-executive Chairman of Top Orient Group of Companies, Director and head
of listing services of KCS Limited (formally the commercial division of KPMG and GT), vice
president of the Hong Kong Institute of Chartered Secretaries, and the Chairman of its China
Affairs Committee and Membership Committee. He has held many senior management positions
of a number of listed companies in Hong Kong, including COSCO, China Unicom Limited
and Industrial and Commercial Bank of China (Asia) Ltd. He is a fellow of The Association of
Chartered Certified Accountants, Hong Kong Institute of Certified Public Accountants, fellow
member of The Institute of Chartered Secretaries and Administrators and The Hong Kong
Institute of Company Secretaries, and member of The Hong Kong Institute of Directors and
Hong Kong Securities Institute. Mr. Ngai graduated from Andrews University of Michigan in
1992, and obtained a Masters Degree in Business Administration, and graduated from Hong
Kong Polytechnic University in 2002, and obtained a Masters Degree in Finance. He is currently
studying for a doctorate in Finance at the Shanghai University of Finance and Economics.
China Life Insurance Company Limited Annual Report 2008
Directors, Supervisors and Senior Management
SUPERVISORS
Ms. Xia Zhihua, born in 1955
Ms. Xia became a Supervisor of the Company in January 2006, and the Chairperson of the
Supervisory Committee of the Company in March 2006. Ms. Xia served as the State Council’s
representative in China Life Insurance (Group) Company, Designated Supervisor of bureau
level grade official and Office Director of the Supervisory Committee of China Export & Credit
Insurance Corporation from August 2003 to December 2005. Before, Ms. Xia had 16 years
work experience in the State Ministry of Finance and the economic and financial management
experience. Ms. Xia graduated from department of Economics at Xiamen University in 1982 and
received a BA degree in Politics and Economics. She graduated from department of Economics at
Xiamen University in 1984 and received a MA degree in World Economics.
Mr. Wu Weimin, born in 1951
Mr. Wu became a Supervisor of the Company from June 2003, and is currently the Deputy
General Manager of our Beijing Auditing Center. From August 2003 to September 2008, Mr.
Wu served as the General Manager of the Compliance Department and Deputy Secretary of
Disciplinary Committee. Mr. Wu graduated from China Insurance Management Staff Institute
majored in insurance. He is a Senior Economist.
Mr. Qing Ge, born in 1950
Mr. Qing became a Supervisor of the Company in June 2006. He is currently the Director of
the Trade Union of the Beijing IT Center of the Company. He was the General Manager of
the Trade Union Department and the Deputy Director for the Committee of the Trade Union
Department of the Company from September 2005 to October 2007. Mr. Qing was the Deputy
General Manager of the Beijing office of the Company from September 2003 to September 2005.
Mr. Qing, a Senior Economist, graduated from the South China University of Technology with
university qualification.
Ms. Yang Hong, born in 1967
Ms. Yang became a Supervisor of the Company in October 2006, and is currently the General
Manager of the Customer Service Department of the Company. From July 2003 to October
2006, Ms. Yang served as Assistant General Manager and Deputy General Manager of the
Business Management Department of the Company. Ms. Yang graduated in the Computer
Department of Jilin University with bachelor degree.
Mr. Tian Hui, born in 1951, Chinese
Mr. Tian became a Supervisor of the Company in June 2004. He is currently the Director and
Party Secretary of China Coal International Engineering Research Institute. He was the Director
and Party Secretary of China Coal International Engineering Research Institute, from June 2006
to April 2008, Director and Deputy Party Secretary of China Coal International Engineering
Research Institute from 2000 to 2006. Mr. Tian obtained Bachelor’s and Doctor’s degrees from
Fuxin Minery School and China University of Mining & Technology Beijing respectively. Mr.
Tian is a professor-level Senior Engineer and a Master of China Construction Design, and was
awarded special allowance by the State Council.
China Life Insurance Company Limited Annual Report 2008
69
Directors, Supervisors and Senior Management
70
SENIOR MANAGEMENT
Mr. Wan Feng, please see the section of “Directors” for his profile.
Mr. Lin Dairen, please see the section of “Directors” for his profile.
Ms. Liu Yingqi, please see the section of “Directors” for her profile.
Mr. Liu Jiade, born in 1963
Mr. Liu became the Vice President of the Company in 2003 and a Director of China Life
Insurance Asset Management Company Limited from June 2004. Mr. Liu served as Director
of China Life Franklin Asset Management Company Limited from May 2006, and became
the Director of Guangdong Development Bank in December 2006. He became the Vice
Director of the Finance Bureau of the Ministry of Finance since 2000. Mr. Liu is a graduate of
Central Finance College in 1984 (now Central University of Finance and Economics), with a
bachelor degree in Public Finance. He is currently the member of Insurance Solvency Standard
Committee the Director of the Insurance Institute of China and the member of the State Ministry
of Finance Accounting Informationization Committee.
Mr. Zhou Ying, born in 1954
Mr. Zhou became the Vice President of the Company since August 2008 and served as the
secretary of the commission for disciplinary inspection of the Company since November 2006.
Mr. Zhou served as Director of the Fifth Office (at Deputy Bureau level) and as a Designated
Director in Beijing State-owned Enterprise Supervisory Committee (at Deputy Bureau level) from
May 2004 to November 2006. Mr. Zhou graduated from University of Science and Technology
of China with a MBA degree.
Mr. Su Hengxuan, born in 1963
Mr. Su became the Vice President of the Company since August 2008. Mr. Su served as Assistant
President of the Company from January 2006 to July 2008. Mr. Su acted as Director of China
Life Property and Casualty Insurance Company Limited from November 2006, and became the
Director of Insurance Professional College from December 2006 and Director of China Life
Security Insurance Agency Company Limited from December 2007. He was the General Manager
of the Company’s Individual Life Insurance Business Department from 2003 to 2006. Mr. Su
graduated from Banking School, Henan Province in 1983 and graduated from Wuhan University
in 1998 with a Bachelor’s degree in Insurance and Finance, majoring in Insurance. Mr. Su, a
Senior Economist, has over 26 years of experience in the Chinese life insurance industry and
insurance management. He is currently the Chairman of Insurance Marketing Association of
Insurance Association of China.
China Life Insurance Company Limited Annual Report 2008
Directors, Supervisors and Senior Management
Mr. Liu Lefei, born in 1973
Mr. Liu became the Chief Investment Officer of the Company and the General Manager of
Investment Management Department of the Company from July 2006 and August 2004,
respectively. Mr. Liu became the Director of China Life Asset Management Company from June
2008, the Director of CITIC Securities Company Limited from May 2008, Director of China
Life Franklin Asset Management Company from October 2007 and the Director of Guangdong
Development Bank from December 2006. He was the General Manager of Investment
Management Department of China Galaxy Securities Company Limited, and General Manager
of Beijing Galaxy Investment Advisers Company from 2003 to 2004. Mr. Liu graduated from
Renmin University of China with a Bachelor’s degree in Economics in 1995, Graduate School
of the Chinese Academy of Social Sciences in 1998, and China Europe International Business
School with a Master’s degree in Business Administration majoring in Finance in 2006.
(Note: On 19 January 2009, the Fourteenth Meeting of the Second Session of the Board of Directors passed
the “Proposal by Wan Feng, President of the Company, on the Designation of Mr. Liu Lefei to CITIC
Securities Company Limited and Removal of his Position as the Chief Investment Officer of the Company”)
Mr. Liu Anlin, born in 1963
Mr. Liu became the Chief Information Technology Officer of the Company in July 2006 and
the General Manager of Beijing R&D Center in June 2008. Mr. Liu was the Deputy Head and
General Manager of Information Technology Department of the Company from November
2002 to July 2006. Mr. Liu graduated from Mathematics and Mechanics Department of Lanzhou
University and majored in Computer Mathematics, with a Bachelor’s degree in Science in 1985
and obtained a Master’s degree in Business Administration from Tsinghua University in 2006.
He is studying the doctorate in Risk Management in Beijing Normal University. Mr. Liu, a
senior engineer, is currently Director of ACORD, member of China Insurance Standardization
Committee, council member of Beijing Computer Users Association, expert consultant of IT
Service Expert Committee of CFIP.
Mr. Liu Ting’an, born in 1962
Mr. Liu became the Secretary of the Board of Directors of the Company from November 2003
to 30 May 2008 and the Spokesman of the Company from November 2007. From 2000 to 2004,
he acted as the General Manager of Investment Department of former China Life Insurance
Company. Mr. Liu graduated from Jiangxi Finance and Economic College, Remin University
of China and obtained Bachelor’s and Master’s degrees in Economics respectively. From 1990
to 1991, he studied in St. Edmund School of Oxford University in Britain. Mr. Liu is a Senior
Economist.
Ms. Hwei-Chung Shao, born in 1954
Ms. Shao served as the Chief Actuary of the Company since March 2007. Ms. Shao had been
the Senior Deputy President and Chief Actuary of subsidiaries under Prudential Financial
Group of the United States, and has accumulated extensive working experience in insurance
companies. She acted as the President and Senior Officer of many actuary societies, and obtained
the qualifications of CFA (Chartered Financial Consultant), CEBS (Certified Employee Benefit
Specialist), CHFC (Chartered Financial Consultant), CLU (Chartered Life Underwriter), MAAA
(Member of the American Academy of Actuaries), FSA, etc.. Ms. Shao obtained a Bachelor’s
degree from National Chengchi University in Taiwan and a Master’s degree from University of
Iowa, US. She is currently the member of Society of Actuaries of Greater China.
China Life Insurance Company Limited Annual Report 2008
71
Directors, Supervisors and Senior Management
COMPANY SECRETARY
Mr. Heng Kwoo Seng, born in 1948
Mr. Heng is the Company Secretary of the Company. Mr. Heng has been a practising accountant
in Hong Kong since 1983 and is currently the Managing Partner of Morison Heng. Prior to
that, he served as the Manager of the Finance Department of Ka Wah Bank Ltd. and as an
Audit Supervisor of Peat Matwick Mitchell & Co. in the United Kingdom. Mr. Heng is a fellow
member of the Institute of Chartered Accountants in England and Wales, and has over 17 years
of experience in serving as company secretary of listed companies in Hong Kong.
QUALIFIED ACCOUNTANT
Mr. Yang Zheng, born in 1970
Mr. Yang became the Qualified Accountant of the Company in 2006. Mr. Yang has been the
Deputy General Manager of the Finance Department of the Company since October 2006 and
was the Assistant General Manager of the Finance Department of the Company from 2005 to
October 2006. Mr. Yang was the Senior Financial Analyst of MOLEX in America between 2000
and 2005. Mr. Yang graduated from Beijing University of Technology in Electric Manufacturing
in 1993 and obtained a Bachelor’s degree in Engineering. He obtained a MBA from Northeastern
University in 2000, and received the qualification of Certified Public Accountants of Illinois in
America in 2004. He became a member of American Institute of Certified Public Accountants in
2005.
72
China Life Insurance Company Limited Annual Report 2008
Connected Transactions
1. CONTINUING CONNECTED TRANSACTIONS
During 2008, the following continuing connected transactions were carried out by the Company pursuant
to Rule 14A.34 of the Listing Rules. These continuing connected transactions were subject to reporting and
announcement but were exempt from independent shareholders’ approval requirements under the Listing Rules.
To ensure the normal business operation of the Company after the restructuring, the Company entered into
several agreements with CLIC before its listing in Hong Kong and the U.S., so as to define clearly the relationship
between both parties after the restructuring. In order to strengthen its investment, the Company and CLIC each
entered into an asset management agreement with AMC, a non-wholly owned asset management subsidiary of
the Company. CLIC is a connected person of the Company by virtue of it being a controlling shareholder of the
Company. AMC, a 60% owned subsidiary of the Company, is owned as to 40% by CLIC and is thus a connected
person of the Company under Rule 14A.11(5) of the Listing Rules.
(1) Policy Management Agreement
As part of the restructuring, CLIC transferred its entire branch services network to the Company. In order
to capitalize on the large customer base of CLIC, increase the utilization of our customer service network
and increase our revenue sources, CLIC engaged the Company to provide policy administration services
relating to the retained policies (“non-transferred policies”) after the restructuring. The policy management
agreement entered into between the Company and CLIC on 30 September 2003 expired on 31 December
2005. On 24 December 2005, the Company and CLIC entered into a renewed policy management
agreement (the “Renewed Policy Management Agreement”) which expired on 31 December 2008. Pursuant
to the Renewed Policy Management Agreement, the Company agreed to provide policy administration
services to CLIC relating to the non-transferred policies, including day-to-day insurance administration
services, customer services, statistics and file management, invoice and receipt management, reinstatement of
non-transferred policies, applications for and renewal of additional coverage to the non-transferred policies,
reinsurance, and handling of disputes relating to the non-transferred policies. The Company acts as a service
provider under the agreement and does not acquire any rights or assume any obligations as an insurer under
the non-transferred policies. As in the policy management agreement entered into in September 2003,
CLIC will pay the Company a service fee based on the estimated cost of providing the services, to which
a profit margin is added. The service fee is equal to, for each semi-annual payment period, the sum of (1)
the number of non-transferred policies in force as of the last day of the period, multiplied by RMB8.0
per policy; (2) 2.50% of the actual premiums and deposits in respect of such policies collected during the
period. The Company and CLIC entered into a confirmation letter on 30 December 2008, pursuant to
which both parties confirmed the further renewal of the Renewed Policy Management Agreement for three
years from 1 January 2009 to 31 December 2011, and the validity of all the other terms and conditions of
the Renewed Policy Management Agreement. The annual cap in respect of the service fees to be paid by
CLIC to the Company for each of the three years ending 31 December 2011 is RMB1,402 million.
For the year ended 31 December 2008, the service fee paid by CLIC to the Company amounted to
RMB1,298 million.
73
China Life Insurance Company Limited Annual Report 2008
Connected Transactions
74
(2) Asset Management Agreements
(a)
Asset Management Agreement between AMC and the Company
The asset management agreement between the Company and AMC was entered into on 30 November
2003 and later renewed till 31 December 2008. The Company and AMC entered into a renewed
company asset management agreement (the “Renewed Company Asset Management Agreement”)
on 30 December 2008. In accordance with the Renewed Company Asset Management Agreement,
AMC agreed to invest and manage assets entrusted to it by the Company, on a discretionary basis,
subject to the investment guidelines given by the Company. The Company 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 the Company. All investment incomes and losses relating to the assets managed
by AMC pursuant to the agreement will be retained and borne by the Company (as the case may
be). In consideration of AMC’s services in respect of investing and managing various categories of
assets entrusted to it by the Company under the agreement, the Company agreed to pay AMC a fixed
service fee and a variable service fee. The fixed service fee is payable monthly and is calculated with
reference to the net asset value of the assets in each specified category managed by AMC and the
applicable management fee rates pre-determined by the parties on an arm’s length basis. The variable
service fee is payable annually and is calculated with reference to the fixed service fee per annum and
the results of the annual appraisal of AMC conducted by the Company. The Renewed Company
Asset Management Agreement is for a term of one year effective from 1 January 2009 and expiring
on 31 December 2009, and subject to compliance with the requirements of the Listing Rules, will be
renewed for another year, unless terminated by either party giving to the other party not less than 90
days’ prior written notice to terminate the agreement at the expiration of the current term. Based on
the historical figures, the Company has set the annual cap amount in respect of the service fees to be
paid by the Company to AMC at RMB800 million for the year ending 31 December 2009.
For the year ended 31 December, 2008, the Company paid AMC an asset management fee of
RMB362 million.
(b)
Asset Management Agreement between CLIC and AMC
The asset management agreement between CLIC and AMC was entered into on 30 November
2003 and later renewed till 31 December 2008. CLIC and AMC entered into a renewed CLIC asset
management agreement (the “Renewed CLIC Asset Management Agreement”) on 30 December
2008. In accordance with the Renewed CLIC Asset Management Agreement, AMC agreed to invest
and manage assets entrusted to it by CLIC, on a discretionary basis, subject to the investment
guidelines and instructions given by CLIC. 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.
In consideration of AMC’s investment and management services, CLIC agreed to pay AMC a service
fee at the rate of 0.05% per annum. Such service fee is calculated and payable on a monthly basis, by
multiplying the average of balance of book value of the assets under management (after deducting
the funds obtained and interests accrued from repurchase transactions) at the beginning and at the
end of any given month by the rate of 0.05%, divided by 12. After the end of each financial year,
CLIC evaluates the investment performance of AMC and adjusts the basic service fee according
China Life Insurance Company Limited Annual Report 2008
Connected Transactions
to the comparsion between actual investment result and target result. The Renewed CLIC Asset
Management Agreement is for a term of three years, effective from 1 January 2009 and expiring on
31 December 2011. The parties will negotiate the terms of renewal of the agreement 90 days prior to
its termination. The Company will comply with the relevant Listing Rules requirements in respect
of such renewal. The annual caps in respect of the service fees to be paid by CLIC to AMC for each
of the three years ending 31 December 2011 are RMB280 million, RMB290 million and RMB300
million, respectively.
For the year ended 31 December 2008, CLIC paid AMC an asset management fee of RMB243
million.
CERTIFICATION BY AUDITOR
The Board of Directors has received a comfort letter from the auditor of the Company with respect to the above
continuing connected transactions for the year ended 31 December 2008 which were subject to the reporting and
announcement requirements, and the letter stated that:
(1)
Such continuing connected transactions have been approved by the Board of Directors;
(2) For transactions involving provision of services by the Group, they are in accordance with the pricing policies of
the Company;
75
(3) The transactions have been entered into in accordance with the relevant agreements governing the transactions;
and
(4) The amounts of the continuing connected transactions have not exceeded the relevant annual caps.
CONFIRMATION BY INDEPENDENT NON-EXECUTIVE DIRECTORS
The Company’s independent non-executive Directors have reviewed the above continuing connected transactions which
were subject to reporting and announcement requirements, and confirmed that:
(1) The transactions were entered into in the ordinary and usual course of business of the Company;
(2) The transactions were conducted either on normal commercial terms or on terms that are fair and reasonable so far
as our independent shareholders are concerned;
(3) The transactions were entered into in accordance with the agreements governing those connected transactions; and
(4) The amounts of the continuing connected transactions have not exceeded the relevant annual caps.
China Life Insurance Company Limited Annual Report 2008
Connected Transactions
2. OTHER CONNECTED TRANSACTIONS
During 2008, the following connected transactions were carried out by the Company pursuant to Rule 14A.32
of the Listing Rules. These connected transactions were subject to reporting and announcement but were exempt
from independent shareholders’ approval requirements under the Listing Rules.
(1) Capital injection to the Pension Company
On 7 May 2008, the Company entered into a capital injection agreement with the Pension Company. Prior
to the capital injection, as CLIC held more than 10% of the issued share capital of the Pension Company,
under Rule 14A.11(5) of the Listing Rules, the Pension Company constituted a connected person of the
Company. Pursuant to the terms and conditions of the agreement, the total amount of capital agreed to be
injected by the Company into the Pension Company was RMB1,854,838,700 which would be contributed
by the subscription of 1,854,838,700 ordinary shares of the Pension Company. Upon completion of the
capital injection, the Pension Company would be held as to 87.4%, 6%, 4.8% and 1.8% by the Company,
CLIC, AMC and an independent third company, respectively. On 25 June 2008, the capital injection was
approved by CIRC.
(2) Capital injection to the P&C Company
On 23 May 2008, the Company entered into a capital injection agreement with P&C Company. Pursuant
to the terms and conditions of the agreement, the total amount of capital agreed to be injected by the
Company into P&C Company was RMB1,200,000,000 which would be contributed by the subscription
of 1,200,000,000 shares of P&C Company. Prior to the capital injection, the registered capital of
P&C Company was RMB1,000,000,000 and was held as to 60% and 40% by CLIC and the Company
respectively. Under Rule 14A.11(4) of the Listing Rules, P&C Company constituted a connected person of
the Company. Upon completion of the capital injection, P&C Company’s registered capital was increased to
RMB4,000,000,000 and CLIC’s and Company’s shareholding in P&C Company remained unchanged. On
6 July 2008, the capital injection was approved by CIRC.
76
China Life Insurance Company Limited Annual Report 2008
Awards
China Charity Award
The World’s 500 Most Influential Brands
2008 Asia Best Insurance Company
2008 China Best Insurance Company
Best Corporate Governance Award
Social Responsibility Award
2008 Best Local Life Insurance Company
Asia Best Insurance Company
The Most Competitive Insurer in Asia
(except Japan and Malaysia)
2008 Best Insurance Company
China Red Cross Award
Best Governance Award For Listed Companies
China Life Insurance Company Limited Annual Report 2008
77
Report of Auditor
羅兵咸永道會計師事務所
PricewaterhouseCoopers
22nd Floor, Prince’s Building
Central, Hong Kong
Telephone : (852) 2289 8888
Facsimile : (852) 2810 9888
www.pwchk.com
Independent auditor’s report
To the shareholders of China Life Insurance Company Limited
(incorporated in the People’s Republic of China with limited liability)
We have audited the consolidated financial statements of China Life Insurance Company Limited (the “Company”)
and its subsidiaries (together, the “Group”) set out on pages 79 to 172, which comprise the consolidated and company
balance sheets as at 31 December 2008, and the consolidated income statement, the consolidated statement of changes
in equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting
policies and other explanatory notes.
DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
78
The directors of the Company are responsible for the preparation and the true and fair presentation of these consolidated
financial statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute
of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This
responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the
true and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error;
selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report
our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept
liability to any other person for the contents of this report.
We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of
Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and true and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OPINION
In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company and
of the Group as at 31 December 2008 and of the Group’s profit and cash flows for the year then ended in accordance
with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure
requirements of the Hong Kong Companies Ordinance.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 25 March 2009
China Life Insurance Company Limited Annual Report 2008
Consolidated Balance Sheet
As at 31 December 2008
ASSETS
Property, plant and equipment
Deferred policy acquisition costs (“DAC”)
Investments in associates
Financial assets
Debt securities
– held-to-maturity securities
– available-for-sale securities
– at fair value through income (held-for-trading)
Equity securities
– available-for-sale securities
– at fair value through income (held-for-trading)
Term deposits
Statutory deposits-restricted
Loans
Securities purchased under agreements to resell
Accrued investment income
Premiums receivables
Reinsurance assets
Other assets
Cash and cash equivalents
As at
31 December
2008
RMB million
As at
31 December
2007
RMB million
18,151
58,268
8,176
575,885
211,929
356,220
7,736
75,082
68,719
6,363
228,272
6,153
17,926
–
13,149
6,433
963
2,285
34,085
16,771
40,851
6,450
443,181
195,703
241,382
6,096
195,147
176,133
19,014
168,594
5,773
7,144
5,053
9,857
6,218
966
2,382
25,317
Note
6
7
8
9.1
9.2
9.3
9.2
9.3
9.5
9.6
9.7
9.8
9.9
11
12
13
79
Total Assets
1,044,828
933,704
The notes on pages 87 to 172 form an integral part of these consolidated financial statements.
China Life Insurance Company Limited Annual Report 2008
Consolidated Balance Sheet
As at 31 December 2008
LIABILITIES AND EQUITY
Liabilities
Insurance contracts
Long-term traditional insurance contracts
Long-term investment type insurance contracts
Short-term insurance contracts
– reserves for claims and claim adjustment expenses
– unearned premium reserves
Deferred income
Financial Liabilities
Investment contracts
– with Discretionary Participation Feature (“DPF”)
– without DPF
Securities sold under agreements to repurchase
Policyholder dividends payable
Annuity and other insurance balances payable
Premiums received in advance
Other liabilities
Deferred tax liabilities
Current income tax liabilities
Statutory insurance fund
80
Total liabilities
Shareholders’ equity
Share capital
Reserves
Retained earnings
Total shareholders’ equity
Minority interest
Total equity
As at
31 December
2008
RMB million
As at
31 December
2007
RMB million
Note
14
14
14
14
15
16
16
17
18
25
19
31
32
273,474
362,241
2,629
6,265
74,487
51,713
1,516
11,390
24,358
28,986
1,811
9,882
12,569
1,668
266
218,165
284,588
2,391
5,728
48,308
49,068
2,234
100
58,344
14,111
2,201
8,870
24,786
8,312
122
863,255
727,328
28,265
85,378
67,006
28,265
114,825
62,410
180,649
205,500
924
876
181,573
206,376
Total liabilities and equity
1,044,828
933,704
Approved and authorized for issue by the Board of Directors on 25 March 2009
Yang Chao
Director
Wan Feng
Director
The notes on pages 87 to 172 form an integral part of these consolidated financial statements.
China Life Insurance Company Limited Annual Report 2008
Balance Sheet
As at 31 December 2008
ASSETS
Property, plant and equipment
Deferred policy acquisition costs (“DAC”)
Investments in subsidiaries
Investments in associates
Financial assets
Debt securities
– held-to-maturity securities
– available-for-sale securities
– at fair value through income (held-for-trading)
Equity securities
– available-for-sale securities
– at fair value through income (held-for-trading)
Term deposits
Statutory deposits-restricted
Loans
Securities purchased under agreements to resell
Accrued investment income
Premiums receivables
Reinsurance assets
Other assets
Cash and cash equivalents
As at
31 December
2008
RMB million
As at
31 December
2007
RMB million
17,819
58,268
2,785
7,278
572,906
211,929
353,260
7,717
74,775
68,424
6,351
228,272
5,653
17,876
–
13,080
6,433
963
2,274
33,934
16,427
40,851
930
6,071
442,545
195,703
240,988
5,854
194,683
175,693
18,990
168,594
5,653
7,144
4,673
9,848
6,218
966
2,344
24,808
Note
6
7
35
8
9.1
9.2
9.3
9.2
9.3
9.5
9.6
9.7
9.8
9.9
11
12
13
81
Total assets
1,042,316
931,755
The notes on pages 87 to 172 form an integral part of these financial statements.
China Life Insurance Company Limited Annual Report 2008
Balance Sheet
As at 31 December 2008
82
LIABILITIES AND EQUITY
Liabilities
Insurance contracts
Long-term traditional insurance contracts
Long-term investment type insurance contracts
Short-term insurance contracts
– reserves for claims and claim adjustment expenses
– unearned premium reserves
Deferred income
Financial liabilities
Investment contracts
– with Discretionary Participation Feature (“DPF”)
– without DPF
Securities sold under agreements to repurchase
Policyholder dividends payable
Annuity and other insurance balances payable
Premiums received in advance
Other liabilities
Deferred tax liabilities
Current income tax liabilities
Statutory insurance fund
Total liabilities
Shareholders’ equity
Share capital
Reserves
Retained earnings
Total shareholders’ equity
As at
31 December
2008
RMB million
As at
31 December
2007
RMB million
Note
14
14
14
14
15
16
16
17
18
25
19
31
32
273,474
362,241
2,629
6,265
74,487
51,713
1,516
11,200
24,358
28,986
1,811
9,764
12,512
1,668
266
218,165
284,588
2,391
5,728
48,308
49,068
2,234
100
58,344
14,111
2,201
8,716
24,743
8,258
122
862,890
727,077
28,265
83,949
67,212
28,265
113,656
62,757
179,426
204,678
Total liabilities and shareholders’ equity
1,042,316
931,755
Approved and authorized for issue by the Board of Directors on 25 March 2009
Yang Chao
Director
Wan Feng
Director
The notes on pages 87 to 172 form an integral part of these financial statements.
China Life Insurance Company Limited Annual Report 2008
Consolidated Income Statement
For the year ended 31 December 2008
REVENUES
Gross written premiums and policy fees
(including gross written premiums and policy fees from insurance contracts
2008: RMB134,849 million, 2007: RMB111,286 million)
Less: premiums ceded to reinsurers
Net written premiums and policy fees
Net change in unearned premium reserves
Net premiums earned and policy fees
Net investment income
Net realised gains/(losses) on financial assets
Net fair value gains/(losses) on assets at fair value
through income (held-for-trading)
Other income
Total revenues
BENEFITS, CLAIMS AND EXPENSES
Insurance benefits and claims
Life insurance death and other benefits
Accident and health claims and claim adjustment expenses
Increase in long-term traditional insurance contracts liabilities
Interest credited to long-term investment type insurance contracts
Interest credited to investment contracts
Increase in deferred income
Policyholder dividends resulting from participation in profits
Amortisation of deferred policy acquisition costs
Underwriting and policy acquisition costs
Administrative expenses
Other operating expenses
Statutory insurance fund
Total benefits, claims and expenses
Share of results of associates
Net profit before income tax expenses
Income tax expenses
Net profit
Attributable to:
– shareholders of the Company
– minority interest
Basic and diluted earnings per share
Dividends
Note
2008
RMB million
2007
RMB million
135,325
(156)
135,169
(519)
134,650
44,050
(6,516)
(7,296)
1,923
111,886
(85)
111,801
(397)
111,404
44,020
15,385
18,843
1,720
166,811
191,372
(17,777)
(7,553)
(55,281)
(9,212)
(1,358)
(21,139)
(2,492)
(11,784)
(3,394)
(12,110)
(1,891)
(244)
(17,430)
(6,343)
(45,334)
(7,181)
(1,138)
(9,859)
(29,251)
(13,461)
(2,725)
(11,798)
(1,651)
(219)
(144,235)
(146,390)
228
22,804
(1,390)
21,414
21,277
137
409
45,391
(6,331)
39,060
38,879
181
RMB0.75
RMB1.38
6,501
11,871
20
21
22
23
23
23
23
7
8
24
25
27
29
83
The notes on pages 87 to 172 form an integral part of these consolidated financial statements.
China Life Insurance Company Limited Annual Report 2008
Consolidated Statement of Changes in Equity
For the year ended 31 December 2008
Attributable to shareholders
of the Company
Share
capital
RMB million
(Note 31)
Reserves
RMB million
(Note 32)
Retained
earnings
RMB million
Minority
Interest
RMB million
Total
RMB million
As at 1 January 2007
28,265
77,368
34,032
540
140,205
Net profit
Dividends paid
Dividends to minority interest
Appropriation to reserve
Unrealised gains, net of tax
Capital contribution
Others
–
–
–
–
–
–
–
–
–
–
6,544
30,913
–
–
38,879
(3,957)
–
(6,544)
–
–
–
181
–
(42)
–
21
179
(3)
39,060
(3,957)
(42)
–
30,934
179
(3)
As at 31 December 2007
28,265
114,825
62,410
876
206,376
84
As at 1 January 2008
Net profit
Dividends paid
Dividends to minority interest
Appropriation to reserve
Unrealised losses, net of tax
Capital contribution
Others
28,265
–
–
–
–
–
–
–
114,825
–
–
–
4,810
(34,247)
–
(10)
62,410
21,277
(11,871)
–
(4,810)
–
–
–
876
137
–
(93)
–
(48)
45
7
206,376
21,414
(11,871)
(93)
–
(34,295)
45
(3)
As at 31 December 2008
28,265
85,378
67,006
924
181,573
The notes on pages 87 to 172 form an integral part of these consolidated financial statements.
China Life Insurance Company Limited Annual Report 2008
Consolidated Cash Flow Statement
For the year ended 31 December 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit before income tax expenses:
Adjustments for:
Net investment income
Net realised and unrealised (gains)/losses on financial assets
Amortisation of deferred policy acquisition costs
Increase in deferred income
Interest credited to long-term investment type insurance
contracts and investment contracts
Policy fees
Depreciation and amortisation
Amortisation of premiums and discounts
Loss on foreign exchange and impairments
Changes in operational assets and liabilities:
Deferred policy acquisition costs
Financial assets at fair value through income (held-for-trading)
Receivables and payables
Reserves for claims and claim adjustment expenses
Unearned premium reserves
Long-term traditional insurance contracts
Cash generated from operating activities
Income tax paid
Interest received
Dividends received
2008
RMB million
2007
RMB million
22,804
45,391
(39,401)
13,812
11,784
21,139
10,570
(13,724)
1,349
(881)
658
(25,230)
4,394
(9,377)
238
537
55,290
(8,583)
29,333
10,067
(45,803)
(34,228)
13,461
9,859
8,319
(7,691)
1,070
(648)
641
(17,480)
31,187
28,626
(107)
382
45,344
(1,261)
26,392
19,400
85
Net cash inflow from operating activities
84,779
122,854
CASH FLOWS FROM INVESTING ACTIVITIES
Sales and maturities:
Sales of debt securities
Maturities of debt securities
Sales of equity securities
Property, plant and equipment
Purchases:
Debt securities
Equity securities
Property, plant and equipment
Investment in associate
Term deposits, net
Securities purchased under agreements to resell, net
Other
19,556
4,143
59,340
188
(119,989)
(49,480)
(2,825)
(1,200)
(60,095)
5,053
(11,162)
26,891
8,548
46,829
207
(134,205)
(80,322)
(3,388)
–
6,572
(5,053)
(4,593)
Net cash outflow from investing activities
(156,471)
(138,514)
The notes on pages 87 to 172 form an integral part of these consolidated financial statements.
China Life Insurance Company Limited Annual Report 2008
Consolidated Cash Flow Statement
For the year ended 31 December 2008
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from investment in securities sold under agreements to repurchase, net
Deposits in long-term investment type insurance contracts and investment contracts
Withdrawals from long-term investment type insurance contracts and investment contracts
Contribution from minority shareholders
Dividends paid to the Company’s shareholders
Dividends paid to minority interest
Cash flow from other financing activities
2008
RMB million
2007
RMB million
11,290
176,269
(94,847)
–
(11,871)
(93)
–
(8,127)
94,227
(90,904)
29
(3,957)
(42)
45
Net cash inflow/(outflow) from financing activities
80,748
(8,729)
Net increase/(decrease) in cash and cash equivalents
9,056
(24,389)
Cash and cash equivalents
Beginning of year
Foreign currency losses on cash and cash equivalents
86
End of year
Analysis of balance of cash and cash equivalents
Cash at bank and in hand
Short-term bank deposits
25,317
(288)
50,213
(507)
34,085
25,317
20,841
13,244
18,536
6,781
The notes on pages 87 to 172 form an integral part of these consolidated financial statements.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
1 ORGANIZATION AND PRINCIPAL ACTIVITIES
China Life Insurance Company Limited (the “Company”) was established in the People’s Republic of China
(“China” or “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 (formerly China Life Insurance Company) (“CLIC”)
and its subsidiaries (the “Restructuring”). The Company and its subsidiaries are hereinafter collectively referred to
as the “Group”. The Group’s principal activity is the writing of life insurance business, providing life, annuities,
accident and health insurance products in China.
The Company is a limited liability company incorporated and located in China. The address of its registered office
is: 16 Chaowai Avenue, Chaoyang District, Beijing, PRC. The Company is listed on the Stock Exchange of Hong
Kong, the New York Stock Exchange 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 for issue by the Board of Directors on 25
March 2009.
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.
2.1 Basis of preparation
These consolidated financial statements have been prepared in accordance with Hong Kong Financial
Reporting Standards (“HKFRS”), under the historical cost convention, as modified by the revaluation of
available-for-sale financial assets and financial assets at fair value through income.
87
The preparation of financial statements in conformity with HKFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying the
Company’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.
The Hong Kong Institute of Certified Public Accountants has issued the following standards, amendments
and interpretations which were effective for accounting periods beginning on or after 1 January 2008.
(a)
Amendments to published standards effective in 2008
(cid:129)
The HKAS 39 (Amendment), Financial instruments: Recognition and measurement,
amendment on reclassification of financial assets permits reclassification of certain financial
assets out of the held-for-trading and available-for-sale categories if specified conditions are met.
The related amendment to HKFRS 7, Financial Instruments: Disclosures, introduces disclosure
requirements with respect to financial assets reclassified out of the held-for-trading and
available-for-sale categories. The amendment is effective prospectively from 1 July 2008. This
amendment does not have any impact on the Group’s financial statements, as the Group has not
reclassified any financial assets.
(b)
Interpretations to published standards effective in 2008 but not relevant to the Group’s operations
(cid:129)
(cid:129)
(cid:129)
HK(IFRIC)-Int 11, HKFRS 2-Group and Treasury Share Transactions
HK(IFRIC)-Int 12, Service Concession Arrangements
HK(IFRIC)-Int 14, HKAS 19-The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction
China Life Insurance Company Limited Annual Report 2008
88
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued)
(c)
Standards and amendments to published standards that are not yet effective and have not been early adopted by the Group
The following have been published that are mandatory for the Group's accounting periods beginning
on or after 1 January 2009 or later periods, but that the Group has not early adopted them.
(cid:129)
(cid:129)
HKAS 1 (Revised), Presentation of financial statements (effective from 1 January 2009). The
revised standard will prohibit the presentation of items of income and expenses (that is, “non-
owner changes in equity") in the statement of changes in equity, requiring "non-owner changes
in equity" to be presented separately from owner changes in equity. All non-owner changes
in equity will be required to be shown in a performance statement, but entities can choose
whether to present one performance statement (the statement of comprehensive income) or two
statements (the consolidated income statement and statement of comprehensive income). Where
entities restate or reclassify comparative information, they will be required to present a restated
balance sheet as at the beginning comparative period in addition to the current requirement
to present balance sheets at the end of the current period and comparative period. The Group
will apply HKAS 1 (Revised) from 1 January 2009. The Group is in the process of making an
assessment of the impact of the revised standard.
HKAS 1 (Amendment), Presentation of financial statements (effective from 1 January 2009).
The amendment clarifies that some rather than all financial assets and liabilities classified as held
for trading in accordance with HKAS 39, Financial instruments: Recognition and measurement
are examples of current assets and liabilities respectively. The Group will apply the HKAS
1 (Amendment) from 1 January 2009. It is not expected to have an impact on the Group’s
financial statements.
(cid:129)
HKAS 19 (Amendment), Employee benefits (effective from 1 January 2009).
1)
2)
3)
The amendment clarifies that a plan amendment that results in a change in the extent
to which benefit promises are affected by future salary increases is a curtailment, while
an amendment that changes benefits attributable to past service gives rise to a negative
past service cost if it results in a reduction in the present value of the defined benefit
obligation.
The definition of return on plan assets has been amended to state that plan administration
costs are deducted in the calculation of return on plan assets only to the extent that such
costs have been excluded from measurement of the defined benefit obligation.
The distinction between short term and long term employee benefits will be based on
whether benefits are due to be settled within or after 12 months of employee service being
rendered.
4) HKAS 37, Provisions, contingent liabilities and contingent assets, requires contingent
liabilities to be disclosed, not recognised. HKAS 19 has been amended to be consistent.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued)
(c)
Standards and amendments to published standards that are not yet effective and have not been early adopted by
the Group (continued)
The Group will apply the HKAS 19 (Amendment) from 1 January 2009. The Group is in the process
of making an assessment of the impact of the amendment.
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
HKAS 27 (Revised), Consolidated and separate financial statements (effective from 1 January
2009).The revised standard requires the effects of all transactions with non-controlling
interests to be recorded in equity if there is no change in control and these transactions will no
longer result in goodwill or gains and losses. The standard also specifies the accounting when
control is lost. Any remaining interest in the entity is re-measured to fair value and a gain or
loss is recognized in profit or loss. The Group will apply HKAS 27 (Revised) prospectively to
transactions with non-controlling interests from 1 January 2009. The Group is in the process of
making an assessment of the impact of the revised standard.
HKAS 28 (Amendment), Investments in associates (and consequential amendments to HKAS 32,
Financial Instruments: Presentation and HKFRS 7, Financial instruments: Disclosures) (effective
from 1 January 2009). An investment in associate is treated as a single asset for the purposes of
impairment testing and any impairment loss is not allocated to specifi c assets included within the
investment, for example, goodwill. Reversals of impairment are recorded as an adjustment to the
investment balance to the extent that the recoverable amount of the associate increases. The Group
will apply the HKAS 28 (Amendment) to impairment tests related to investment in associates and
any related impairment losses from 1 January 2009. The Group is in the process of making an
assessment of the impact of the amendment.
89
HKAS 36 (Amendment), Impairment of assets (effective from 1 January 2009). Where fair
value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent
to those for value-in-use calculation should be made. The Group will apply the HKAS 36
(Amendment) and provide the required disclosure where applicable for impairment tests from
1 January 2009. The Group is in the process of making an assessment of the impact of the
amendment.
HKAS 38 (Amendment), Intangible assets (effective from 1 January 2009). A prepayment may
only be recognized in the event that payment has been made in advance of obtaining right of
access to goods or receipt of services. The Group will apply the HKAS 38 (Amendment) from
1 January 2009. The Group is in the process of making an assessment of the impact of the
amendment.
HKAS 39 (Amendment), Financial instruments: Recognition and measurement (effective from 1 January
2009).
1)
This amendment clarifies that it is possible for there to be movements into and out of the
fair value through profit or loss category where a derivative commences or ceases to qualify
as a hedging instrument in cash flow or net investment hedge.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued)
(c)
Standards and amendments to published standards that are not yet effective and have not been early adopted by
the Group (continued)
2)
3)
The definition of financial asset or financial liability at fair value through profit or loss as
it relates to items that are held for trading is also amended. This clarifies that a financial
asset or liability that is part of a portfolio of financial instruments managed together
with evidence of an actual recent pattern of short-term profit-taking is included in such a
portfolio on initial recognition.
The current guidance on designating and documenting hedges states that a hedging
instrument needs to involve a party external to the reporting entity and cites a segment
as an example of a reporting entity. This means that in order for hedge accounting to be
applied at segment level, the requirements for hedge accounting are currently required
to be met by the applicable segment. The amendment removes this requirement so that
HKAS 39 is consistent with HKFRS 8, “Operating segments” which requires disclosure
for segments to be based on information reported to the chief operating decision maker.
90
4) When remeasuring the carrying amount of a debt instrument on cessation of fair value
hedge accounting, the amendment clarifies that a revised effective interest rate (calculated
at the date fair value hedge accounting ceases) is used.
The Group will apply the HKAS 39 (Amendment) from 1 January 2009. The Group is in the process
of making an assessment of the impact of the amendment.
(cid:129)
(cid:129)
HKFRS 2 (Amendment), Share-based payment (effective from 1 January 2009). The amended
standard deals with vesting conditions and cancellations. It clarifies that vesting conditions are
service conditions and performance conditions only. Other features of a share-based payment are
not vesting conditions. As such these features would need to be included in the grant date fair
value for transactions with employees and others providing similar services, that is, these features
would not impact the number of awards expected to vest or valuation thereof subsequent to
grant date. All cancellations, whether by the entity or by other parties, should receive the same
accounting treatment. It is not expected to have a material impact on the Group’s financial
statements.
HKFRS 3 (Revised), Business combinations (effective from 1 July 2009). The revised standard
continues to apply the acquisition method to business combinations, with some significant
changes. For example, all payments to purchase a business are to be recorded at fair value at the
acquisition date, with contingent payments classified as debt subsequently re-measured through
the consolidated income statement. There is a choice on an acquisition by acquisition basis to
measure the 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. All acquisition-related costs should be
expensed. The Group will apply HKFRS 3 (Revised) prospectively to all business combinations
from 1 January 2010. The Group is in the process of making an assessment of the impact of the
standard.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued)
(c)
Standards and amendments to published standards that are not yet effective and have not been early adopted by
the Group (continued)
(cid:129)
(cid:129)
HKFRS 7 (Revised), Financial Instruments: Disclosures (effective from 1 January 2009). The
standard requires enhanced disclosures about fair value measurements and liquidity risk. It
clarifies that an entity shall classify fair value measurements using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements and shall present
quantitative disclosures. And disclosure of a maturity analysis for financial liabilities that shows
the remaining contractual maturities is required. For insurance contracts, the contractual
maturity refers to the estimated date when contractually required cash flows will occur.
However, HKFRS 4 (amendment) (effective from 1 January 2009) permits various existing
accounting practices for insurance contracts to continue. It states that an insurer need not
provide the maturity analyses required by HKFRS 7 (Revised) if it discloses an analysis, by
estimated timing, of the amounts recognized in the statement of financial position. The Group
will apply HKFRS 4 and HKFRS 7 from 1 January 2009. These amendments are not expected
to have a material impact on the Group’s financial statements.
HKFRS 8, Operating Segments (effective from 1 January 2009). HKFRS 8 replaces HKAS 14.
The new standard requires a "management approach", under which segment information is
presented on the same basis as that used for internal reporting purposes. The Group will apply
HKFRS 8 from 1 January 2009. The Group is in the process of making an assessment of the
impact of the standard.
91
There are a number of minor amendments to HKAS 8, Accounting policies, changes in accounting
estimates and errors, HKAS 10, Events after the balance sheet date, HKAS 18, Revenue and HKAS
34, Interim financial reporting which are not addressed above. These amendments are in the process
of assessing.
(d)
Amendments and interpretations to published standards that are not yet effective and not relevant for the Group’s
operations
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
HKAS 16 (Amendment), Property, plant and equipment
HKAS 20 (Amendment), Accounting for government grants and disclosure of government
assistance
HKAS 23 (Revised), Borrowing Costs
HKAS 29 (Amendment), Financial reporting in hyperinflationary economies
HKAS 31 (Amendment), Interests in joint ventures
HKAS 32 (Amendment), Financial instruments: Presentation
HKAS 40 (Amendment), Investment property
HKAS 41 (Amendment), Agriculture
HKFRS 1 (Revised), First-time adoption of Hong Kong financial reporting standards
HKFRS 5(Amendment), Non-current assets held for sale and discontinued operations
HK(IFRIC)-Int 13, Customer Loyalty Programmes
HK(IFRIC)-Int 15, Agreements for construction of real estates
HK(IFRIC) – Int 16, Hedges of a net investment in a foreign operation
HK(IFRIC) – Int 17, Distributions of non-cash assets to owners
HK(IFRIC) – Int 18, Transfers of assets from customers
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2 Consolidation
Subsidiaries
The consolidated financial statements include the financial statements of the Company and its subsidiaries
made up to 31 December. Subsidiaries are those entities in which the Company controls more than one half
of the voting power; has the power to govern the financial and operating policies; to appoint or remove the
majority of the members of the Board of Directors; or to cast the majority of votes at the meetings of the
Board of Directors.
Inter-company transactions and balances within the Group are eliminated on consolidation. Minority
interest represents the interest of outside shareholders in the operating results and net assets of subsidiaries.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income
statement from the date of acquisition or up to the date of disposal, as appropriate. The gains or losses
on the disposal of a subsidiary represents the difference between the proceeds of the sale and the Group’s
share of its net assets together with any goodwill which was not previously charged or recognized in the
consolidated income statement.
92
In the Company only balance sheet the investments in subsidiaries is stated at cost less provision for
impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividends
received and receivable.
Associates
Associates are all entities over which the Group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates
are accounted for by the equity method of accounting and are initially recognized at cost. The Group’s
investment in associates includes goodwill (net of any accumulated impairment loss) identified on
acquisition. Equity investment other than subsidiaries and associates are classified as available-for-sale
securities when they are not classified to be measured at fair value through income.
The Group’s share of its associates’ post-acquisition profits or losses is recognized in the consolidated income
statement, and its share of post-acquisition movements in reserves is recognized in reserves. The cumulative
post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s
share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognize further losses unless it has incurred obligations or made payments
on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the
Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Associates’ accounting policies have been changed where
necessary to ensure consistency with the policies adopted by the Group.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2 Consolidation (continued)
Associates (continued)
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 associate at the date of acquisition. Goodwill on acquisitions of associates
is included in investments in associates and is tested annually for impairment as part of the overall balance.
Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.
In the Company only balance sheet the investments in associates is stated at cost less provision for
impairment losses. The results of associates are accounted for by the Company on the basis of dividends
received and receivable.
2.3 Segment reporting
Business segments provide products or services that are subject to risks and returns that are different from
those of other business segments. Geographical segments provide products or services within a particular
economic environment that is subject to risks and returns that are different from those of components
operating in other economic environments. In accordance with the Group’s internal financial reporting,
the Group has determined that business segments be presented as the primary reporting format. All assets
and operations of the Group are located in the PRC, which is considered as one geographical location in an
economic environment with similar risks and returns. The accounting policies of the segments are the same
as those described in the summary of significant accounting policies. Details of the segment information are
presented in Note 5.
93
2.4 Foreign currency translation
The functional currencies of the Group’s operations are RMB. Transactions in foreign currencies are
translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in
foreign currencies are translated at rates of exchange ruling at the balance sheet date. Exchange differences
arising in these cases are recognized in the income statement.
2.5 Property, plant and equipment
Property, plant and equipment are stated at historical costs less accumulated depreciation and any
accumulated impairment losses.
The initial cost of property, plant and equipment comprises 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. The cost of a major renovation is included in the carrying
amount of the asset when it is probable that future economic benefits in excess of the originally assessed
standard of performance of the existing asset will flow to the Group.
Assets under construction represent buildings and fixtures under construction and are stated at cost.
Costs include construction and acquisition costs. No provision for depreciation is made on assets under
construction until such time as the relevant assets are completed and ready for use.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.5 Property, plant and equipment (continued)
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 life as follows:
Estimated useful life
Buildings
Office equipment, furniture and fixtures
Motor vehicles
Leasehold improvements
15 to 35 years
5 to 10 years
4 to 8 years
Over the remaining term of the lease
The useful life and depreciation method is 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.
94
Impairment and gain or loss on sales
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 recognized
in the income statement 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 a property, plant and equipment is the difference between the net sales
proceeds and the carrying amount of the relevant asset, and is recognized in the income statement.
2.6 Financial assets
2.6.a Classification
The Group classifies its investments in securities into the following categories: held-to-maturity securities,
financial assets at fair value through income and available-for-sale securities. The classification depends
on the purpose for which the investments were acquired. Management determines the classification of
its investments at initial recognition. Financial assets other than investment in securities are loans and
receivables which 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 available for sale.
Loans and receivables mainly comprise term deposits, loans, securities purchased under agreements to resell
and accrued investment income as presented separately in the balance sheet.
(i) Held-to-maturity securities
Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments
and fixed maturities other than those that meet the definition of loans and receivables that the Group
has the positive intention and ability to hold to maturity.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.6 Financial assets (continued)
2.6.a Classification (continued)
(ii)
Financial assets at fair value through income
This category has two sub-categories: financial assets held for trading and those designated at fair value
through income at inception. A financial asset is classified as held for trading at inception if acquired
principally for the purpose of selling in the short term or if it forms part of a portfolio of financial
assets in which there is evidence of short term profit-taking. Any other additional financial assets may
be designated at fair value through income at inception by the Group. The Group presently has no
financial assets designated at fair value through income at inception.
(iii) Available-for-sale securities
Available-for-sale securities are non-derivative financial assets that are either designated in this
category or not classified in either of the other categories.
2.6.b Recognition and measurement
Purchases and sales of investments are recognized on trade date, on which the Group commits to purchase or
sell assets. Investments are initially recognized at fair value plus, in the case of all financial assets not carried
at fair value through income, transaction costs that are directly attributable to their acquisition. Investments
are derecognized 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.
95
Available-for-sale securities and financial assets at fair value through income are carried at fair value. 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 “financial assets at fair value through income”
category, and the change of available-for-sale debt securities' fair value due to foreign exchange impact on
the amortized cost are included in the income statement in the period in which they arise. Unrealised gains
and losses arising from changes in the fair value of financial assets classified as available-for-sale securities
are recognized in equity. When securities classified as available-for-sale securities are sold or impaired,
the accumulated fair value adjustments are included in the income statement as realised gains or losses on
financial assets.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is
not active, the Group establishes fair value by using valuation techniques. These include the use of recent
arm’s length transactions, reference to other instruments that are substantially the same, discounted cash
flow analysis and option pricing models.
2.6.c Term deposits
Term deposits include both traditional bank deposits and structured deposits. Term deposits have fixed
maturity dates and are stated at amortised cost.
2.6.d Loans
Loans originated by the Group are carried at amortised cost, net of provision for impairment in value.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
96
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.6 Financial assets (continued)
2.6.e Securities purchased under agreements to resell
The Group enters into purchases of securities under agreements to resell substantially identical securities.
These agreements are classified as secured loans. Securities purchased under agreements to resell are recorded
at amortised cost, i.e. their cost plus accrued interest at the balance sheet date, which approximates fair
value. The amounts advanced under these agreements are reflected as assets in the consolidated balance
sheet. The Group does not take physical possession of securities purchased under agreements to resell. Sales
or transfers of the securities are not permitted by the respective clearing house on which they are registered
while the loan is outstanding. In the event of default by the counterparty to repay the loan, the Group has
the right to the underlying securities held by the clearing house.
2.6.f Impairment of financial assets other than at fair value through income
Financial assets other than those accounted for as at fair value through income are adjusted for impairments,
where there are declines in value that are considered to be an impairment. In evaluating whether a decline in
value is an impairment for equity securities, the Group considers several factors including, but not limited
to the following: (1) the extent and the duration of the decline; (2) the financial condition of and near-
term prospects of the issuer; and (3) the Group’s ability and intent to hold the investment for a period of
time to allow for a recovery of value. When the decline in value is considered impairment, relevant financial
assets are written down to their net realised value and the charge is recorded in “Net realised gains/(losses)
on financial assets” in the period the impairment is recognized. The impairment loss is reversed through the
income statement 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 income statement.
2.7 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.
2.8 Insurance contracts and investment contracts
2.8.1 Insurance contracts and investment contracts with DPF
2.8.1.a Recognition and measurement
The Group issues contracts that transfer insurance risk or financial risk or both. 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 with no significant insurance risk. A number
of insurance and investment contracts contain a DPF. This feature entitles the holder to receive, as
a supplement to benefits under the contracts, additional benefits or bonuses that are, at least in part,
discretionary to the Group. Insurance contracts and investment contracts with DPF are classified into three
main categories.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Insurance contracts and investment contracts (continued)
2.8.1 Insurance contracts and investment contracts with DPF (continued)
2.8.1.a Recognition and measurement (continued)
(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.
The unearned premium reserve represents the portion of the premiums written relating to the
unexpired terms of coverage.
Reserves for claims and claim adjustment expenses represent liabilities for claims arising under short
duration accident and health insurance contracts. Claims and claim adjustment expenses are charged
to the income statement as incurred. Unpaid claims and claim adjustment expense reserves represent
the accumulation of estimates for ultimate losses and include provisions for claims incurred but not
yet reported. The reserves represent estimates of future payments of reported and unreported claims
for losses and related expenses with respect to insured events that have occurred. Reserving is a
complex process dealing with uncertainty, requiring the use of informed estimates and judgements.
The Group does not discount its claims reserves, other than for settled claims with fixed payment
terms. Any changes in estimates are reflected in results of operations in the period in which estimates
are changed.
97
(ii)
Long-term traditional insurance contracts
Long-term traditional insurance contracts include whole life and term life insurance, endowment
insurance and annuities policies with significant life contingency risk. Premiums are recognized
as revenue when due from policyholders. Benefits and expenses are provided against such revenue
to recognize profits over the estimated life of the policies. Hence, for single premium and limited
payment contracts, premiums are recorded as income when due with the percent-of-premium profit
margin deferred and recognized in income in a constant relationship to the amount of insurance in-
force for life insurance contracts and the amount of expected benefit payments for annuities.
Liabilities arising from long-term traditional insurance contracts comprise a policyholder reserve based
on the net level premium valuation method and actuarial assumptions as to mortality, persistency,
expenses, withdrawals, and investment return including, where appropriate a provision for adverse
deviation, and a deferred profit liability for the deferred percent-of-premium profit margin, as
described in Note 2.9. The assumptions are established at policy issue and remain unchanged unless
adverse experience causes a deficiency in liability adequacy test as described in Note 2.8.1.b.
(iii) Long-term investment type insurance contracts and investment contracts with DPF
Long-term investment type insurance contracts include life insurance and annuity contracts with
significant investment features but with sufficiently significant insurance risk to still be considered
insurance contracts under HKFRS 4.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Insurance contracts and investment contracts (continued)
2.8.1 Insurance contracts and investment contracts with DPF (continued)
2.8.1.a Recognition and measurement (continued)
(iii) Long-term investment type insurance contracts and investment contracts with DPF (continued)
The liabilities for long-term investment type insurance contracts and investment contracts with DPF
are recognized as accumulation of deposits received less charges plus interest credited. Revenue from a
contract consists of various charges (policy fees, handling fees, management fees, surrender charges) made
against the contract for the cost of insurance, expenses and early surrender. Excess fi rst year charges are
deferred as an unearned revenue liability and are recognized in income over the life of the contracts in a
constant relationship to estimated gross profi ts (as defi ned below in Note 2.8.3). To the extent unrealised
gains or losses from available-for-sale securities affect the estimated gross profi ts, shadow adjustments
are recognized in equity. Policy benefi ts and claims that are charged to expenses include benefi t claims
incurred in the year in excess of related contract balances and interest credited to these contracts.
98
2.8.1.b Liability adequacy test
At each balance sheet date, liability adequacy tests are performed to ensure the adequacy of the contract
liabilities net of related DAC. In performing these tests, current best estimates of future cash flows for each
category of contracts are used to determine any deficiency for those contracts. Any deficiency is immediately
charged to the income statement initially by writing off DAC and by subsequently establishing a provision
for losses arising from the liability adequacy tests.
Any DAC written off as a result of the liability adequacy test cannot be subsequently reinstated.
2.8.1.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 recognized 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 recognized as an expense when due. In certain cases a reinsurance contract is entered into for existing in-
force business. Where the premium due to the reinsurer differs from the liability established by the Group
for the related business, the difference is amortised over the estimated remaining settlement period.
The Group assesses its reinsurance assets for impairment as at the balance sheet date. 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 recognizes that impairment loss in the income statement. If a reinsurer is unable
to satisfy its obligation under the reinsurance contracts, the liability becomes the responsibility of the Group.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Insurance contracts and investment contracts (continued)
2.8.1 Insurance contracts and investment contracts with DPF (continued)
2.8.1.d 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 at 70% of distributable surplus, or at the rate specified in the contracts when higher. The
distributable surplus mainly arises from net investment income, gains and losses arising from the assets
supporting these contracts; if the surplus owe to policyholders has not been declared and paid, it is included
in the policyholder dividends payable.
2.8.2 Investment contracts without DPF
Investment contracts without DPF are not considered to be insurance contracts and are accounted for as a
financial liability. The liability for investment contracts without DPF is recognized as the accumulation of
deposits received less charges plus interest credited.
Revenue from these contracts consists of various charges (policy fees, handling fees, management fees and
surrender charges) made against the contract for the cost of insurance, expenses and early surrender. Excess
first year charges are deferred as an unearned revenue liability and are recognized in income over the life of
the contracts in a constant relationship to estimated gross profits (defined in Note 2.8.3).
99
2.8.3 Deferred policy acquisition costs (“DAC”)
The costs of acquiring new and renewal business including commissions, underwriting and policy issue
expenses, which vary with and are primarily related to the production of new and renewal business, are
deferred. DAC are subject to recoverability testing at the time of policy issue and at the end of each
accounting period. Future investment income is taken into account in assessing recoverability.
DAC for long-term traditional insurance contracts are amortised over the premium paying period as a
constant percentage of expected premiums. Expected premiums are based upon assumptions defined at the
date of policy issue. These assumptions are consistently applied throughout the premium paying period
unless adverse experience causes a deficiency in liability adequacy test as described in Note 2.8.1.b.
DAC for long-term investment type insurance contracts and investment contracts are amortised over the
expected life of the contracts as a constant percent of the present value of estimated gross profits expected
to be realised over the life of the contract. To the extent unrealised gains or losses from available-for-sale
securities affect the estimated gross profits, shadow adjustments are recognized in the shareholders’ equity.
Estimated gross profits include expected amounts to be assessed for mortality, administration, investment
and surrender less benefit claims in excess of policyholder balances, administrative expenses and interest
credited. Estimated gross profits are revised regularly and the future interest rate used to compute the
present value of revised estimates of expected gross profits is the latest revised rate applied to the remaining
benefit periods. Deviations of actual results from estimated experience are reflected in the income statement.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
100
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.9 Deferred income
Deferred income includes the deferred profit liability arising from long-term traditional insurance contracts
and the unearned revenue liability arising from long-term investment type insurance contracts and
investment contracts. Both are described in Note 2.8.1.a and Note 2.8.2. Both deferred income amounts
will be released to income statement over the remaining lifetime of the business.
2.10 Securities sold with agreements to repurchase
Securities sold under agreements to repurchase, which are classifi ed as secured borrowings, generally mature
within 180 days from the transaction date. 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 balance sheet date. 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 balance sheet.
2.11 Derivative instruments
Derivatives are initially recognized 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 recognized in income statement. Fair values are obtained from quoted market prices in
active markets, including recent market transactions and valuation techniques, including discounted cash
flow models and options pricing models, as appropriate. The best evidence of the fair value of a derivative
at initial recognition is the transaction price (i.e. the fair value of the consideration given or received)
unless the fair value of that instrument is evidenced by comparison with other observable current market
transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation
technique whose variables include only data from observable markets. 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 options to surrender
insurance contracts for a fixed amount (or an amount based on a fixed amount and an interest rate). All the
other embedded derivatives held by the Group are deemed either to be closely related to the host contracts
or measured at fair value with changes in fair value recognized in the income statement.
2.12 Employee benefits
Pension benefits
The 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 formulas. These government
agencies are responsible for the pension liability to these retired employees. 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 plan pursuant to the relevant laws and regulations in the PRC, whereby the
Group are 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.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.12 Employee benefits (continued)
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.
2.13 Share capital
Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs
directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds.
2.14 Revenue recognition
Turnover of the Group represents the total revenues.
Premiums and policy fees
Premiums from long-term traditional life insurance contracts are recognized as revenue when due from
the policyholders. Revenue from long-term investment type insurance contracts and investment contracts
consists of policy fees, handling fees, management fees and surrender charges assessed for the cost of
insurance, expenses and early surrenders during the year which are recognized when due.
101
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. Contracts for which
the period of risk differs significantly from the contract period recognize premiums over the period of risk in
proportion to the amount of insurance protection provided.
Net investment income
Net 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 less interest expense from securities sold under agreements to repurchase and investment expenses.
Interest income is recorded on an accrual basis using the effective interest rate method. Dividend income is
recognized when the right to receive dividend payment is established.
2.15 Current and deferred income taxation
The tax expense for the period comprises current and deferred tax. Tax is recognized in the consolidated
income statement, except to the extent that it relates to items recognized directly in equity. In this case, the
tax is also recognized in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at
the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable
income. Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.15 Current and deferred income taxation (continued)
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 financial statements. Substantively
enacted tax rates are used in the determination of deferred income tax.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will
be available against which the temporary differences can be recognized.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and
associates 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.
2.16 Operating leases
Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company
are accounted for as operating leases. Payments under operating leases are charged to the income statement
on a straight-line basis over the lease periods.
2.17 Contingencies
102
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 recognized
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 recognized in the balance sheet but is disclosed in the notes to the financial
statements. When a change in the probability of an outflow occurs so that outflow is probable and can be
reliably measured, it will then be recognized as a provision.
2.18 Dividend distribution
Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s financial
statements in the year in which the dividends are approved by the Company’s shareholders.
2.19 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 remeasured at each balance sheet date to its
fair value until settlement with all changes included in administrative expenses in the consolidated income
statement. The related liability is included in other liabilities.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING
ACCOUNTING POLICIES
The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates
and judgments 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.
3.1 Estimate of future benefit payments and premiums arising from long-term traditional
insurance contracts and related deferred policy acquisition costs
The determination of the liabilities under long-term traditional insurance contracts is dependent on
estimates made by the Group. For the long-term traditional insurance contracts, estimates are made
in two stages. Assumptions about mortality rates, morbidity rates, lapse rates, investment returns, and
administration and claim settlement expenses are made in consideration of the latest experience analysis and
current and future economic conditions at inception of the contract. A provision for adverse deviation in
experience is added to the assumptions, where appropriate. Assumptions are “locked in” for the duration of
the contract unless the liabilities are considered inadequate. New estimates are made each subsequent year in
order to determine whether the previous liabilities are adequate in the light of these latest estimates. If the
liabilities are considered adequate, the assumptions are not altered. If they are not adequate, the assumptions
are altered (“unlocked”) first by reducing the provision for adverse deviation and then by reflecting current
best estimate assumptions. A key feature of the adequacy testing for these contracts is that the effects of
changes in the assumptions on the measurement of the liabilities and related assets are not symmetrical.
Any improvements in experience will have no impact on the value of the liabilities and related assets until
the liabilities are derecognized. However, significant deterioration in experience can lead to an immediate
increase in the liabilities.
The assumed lapsed rates, mortality rates and morbidity rates are described in Note 14. Investment return
assumptions are based on estimates of future yields on the Group’s investments as described in Note 14. The
assumption for policy administration expenses has been based on expected unit costs plus, where applicable,
a margin for adverse deviation as described in Note 14.
3.2 Liability adequacy test
At each balance sheet date, liability adequacy tests are performed to ensure the adequacy of the insurance
and investment contract liabilities net of related DAC. Liability adequacy testing is performed by portfolio
of contracts that are subject to broadly similar risks. In performing these tests, current best estimates of
future cash flows under the contracts are used. As set out in Note 3.1 above, liability assumptions for long-
term traditional insurance contracts are defined at the inception of the contract. When the liability adequacy
test requires the adoption of new best estimate assumptions, such assumptions (without margins for adverse
deviation) are used for the subsequent measurement of these liabilities. Any DAC written off as a result of
this test cannot subsequently be reinstated.
103
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
104
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING
ACCOUNTING POLICIES (continued)
3.3 Investments
The Group’s principal investments are debt securities, equity securities, term deposits and loans. The critical
estimates and judgments are those associated with the recognition of impairment and the determination of
fair value.
The Group considers a wide range of factors in the impairment assessment as described in Note 2.6.f.
Fair value is defined as the amount at which the financial assets and liabilities could be exchanged in a
current transaction between knowledgeable willing parties in an arm’s length transaction, rather than in a
forced or liquidation sale. The methods and assumptions used by the Group in estimating the fair value of
the financial assets are:
–
–
–
–
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 and 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 model. Equity securities, for which fair values cannot be measured
reliably, are recognized at cost less impairment.
Term deposits (excluding structured deposits), loans and securities purchased or sold under
agreements to resell or repurchase: the carrying amounts of these assets in the balance sheet
approximate fair values.
Structured deposits: the market for structured deposits is not active and the Group establishes fair
value by using discounted cash flow analysis and option pricing models as the valuation technique.
The Group uses the US$ swap rate (the benchmark rate) to determine the fair value of financial
instruments.
3.4 Income tax
The Group is subjected to income tax in various localities. During the normal course of business, there are
great uncertainties for the tax treatment on many transactions on the business matters. The Group needs to
exercise significant judgment when determining the income tax expenses. If the final settlement result of the
tax matters are different from the amount booked, these differences will impact the final income tax expense
and deferred tax for the period.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK
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
The risk under any one insurance contract is the possibility that an insured event occurs and there is
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 pricing and provisioning, the principal risk that the Group faces under its insurance contracts
is that the actual claims and benefit payments exceed the carrying amount of 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 about 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 type of insurance risks accepted and within each of these categories to
achieve a sufficiently large population of risks to reduce the variability of the expected outcome. The Group
manages insurance risk through underwriting strategy, 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. The products reinsured include: life insurance,
accident, health insurance, and risk liability embedded annuity or death, disability, accident, illness and
assistance in terms of product category or function respectively. These reinsurances 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 credit risk associated with the
failure of reinsurance companies to fulfil their responsibilities.
105
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)
4.1 Insurance risk (continued)
The Group offers life insurance, annuity, accident and health insurance products. All operations of the
Group are located in the PRC. The table below presents the Group’s major products of long-term traditional
insurance contracts:
Product name
2008
2007
RMB million
%
RMB million
%
Premium
Kang Ning Whole Life (a)
Meiman Yisheng Annuity (b)
Hong Xin Endowment (c)
Others
31,806
15,955
14,198
46,600
29.3%
14.7%
13.1%
42.9%
29,850
10,322
21,673
30,451
32.3%
11.2%
23.5%
33.0%
Total
108,559
100.0%
92,296
100.0%
106
Insurance benefits
Kang Ning Whole Life (a)
Hong Xin Endowment (c)
Qian Xi Endowment (d)
Others
3,916
3,679
2,906
7,276
22.0%
20.7%
16.3%
41.0%
3,184
3,961
3,706
6,579
18.3%
22.7%
21.3%
37.7%
Total
17,777
100.0%
17,430
100.0%
Liabilities of long-term traditional
insurance contracts
Kang Ning Whole Life (a)
Hong Xin Endowment (c)
Qian Xi Endowment (d)
Others
90,241
55,584
26,971
100,678
33.0%
20.3%
9.9%
36.8%
73,405
48,868
25,022
70,870
33.6%
22.4%
11.5%
32.5%
Total
273,474
100.0%
218,165
100.0%
(a) Kang Ning Whole Life is long-term individual whole life traditional insurance contract with options
for premium term of single, 10 years or 20 years. Its critical illness benefit accounts for 200% of basic
sum insured. Both death and disability benefit are paid at 300% of basic sum insured less any paid
critical illness benefit.
(b) Meiman Yisheng Annuity is long-term individual participating traditional insurance contract with
options for premium term of 3 years, 5 years, 8 years or 12 years. The insured can be benefited up
to age of 75. Its endowment benefit accounts for 1% of basic sum insured multiplied by number of
premium payments every year. Death and maturity benefit are paid at 110% and 100% of basic sum
insured multiplied by number of premium payments, respectively.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)
4.1 Insurance risk (continued)
(c) Hong Xin Endowment is long-term individual endowment traditional insurance contract with options
for premium term of single, 3 years, 5 years or 10 years. The insured can be benefited up to age of 80.
Its endowment benefit accounts for 9% of basic sum insured every three years. Death and maturity
benefit are paid at 200% and 150% of basic sum insured, respectively.
(d) Qian Xi Endowment is long-term individual endowment traditional insurance contract with
options for premium term of single, 10 years, 20 years or 30 years. The benefit term is whole life.
Its endowment benefit accounts for 5% of basic sum insured every three years and death benefit is
increased by 5% of basic sum insured every year that renewal premium is paid.
For long-term investment type insurance contracts, Hong Feng Endowment is the major product with
RMB105,343 million of deposits in 2008 (2007: RMB48,430 million), representing 67.2% (2007: 66.8%)
of total received deposits for long-term investment type insurance contracts.
Participating contracts for the year ended 31 December 2008 represented approximately 61% of gross
and net life insurance premium and policy fees, respectively (2007: 53%). The net investment income,
net realised gains or losses on financial assets and net fair value gains or losses on assets at fair value
through income (held-for-trading) attributable to participating contracts in 2008 are RMB28,505 million,
RMB(7,864) million and RMB(5,491) million respectively (2007: RMB29,133 million, RMB10,673
million and RMB11,125 million).
107
Sensitivity Analysis
For liabilities under long-term traditional insurance contracts and long-term investment type insurance
contracts, changes in mortality rates, morbidity rates will not cause a change to the carrying amount of the
liabilities, unless the change is severe enough to trigger a liability adequacy test adjustment. If the actual
mortality rates or morbidity rates increase or decrease from current assumptions by 10%, there will be no
impact to the Group's consolidated financial statements as the deviation will not trigger a liability adequacy
test adjustment.
For liabilities under long-term traditional insurance contracts, long-term investment type insurance
contracts and investment contracts with DPF, changes in investment returns will not cause a change to
the carrying amount of the liabilities, unless the change is severe enough to trigger a liability adequacy test
adjustment. If the investment returns are 50 basis points lower or higher than current assumptions, there
will be no impact to the Group's consolidated financial statements since the variance will not trigger a
liability adequacy test adjustment.
As disclosed in Note 2.8.3 and Note 2.8.1.a, DAC and unearned revenue liability (“URL”) for long-
term investment type insurance contracts and investment contracts are amortised and recognized in
income respectively over the expected life of the contracts as a constant percent of the present value of
estimated gross profits expected to be realised over the life of the contract. Although the Group measures
the expected gross profits based on an investment return assumption updated on an annual basis, change
in the investment return assumption will not cause material impact on the Group’s consolidated financial
statements since the net amount of DAC amortization and change of URL is not material.
China Life Insurance Company Limited Annual Report 2008
108
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)
4.1 Insurance risk (continued)
Short-term insurance contract liabilities are not directly sensitive to the level of investment returns, as they
are undiscounted and contractually non-interest-bearing. Investment contracts without DPF are accounted
for at amortised cost and their carrying amounts are not sensitive to changes in the level of investment
returns.
For liabilities under short-term insurance contracts, if the loss ratio had increased or decreased by 100 basis
points with all other variables held constant, pre-tax profit and post-tax profit for the year would have been
RMB124 million and RMB93 million respectively (2007: RMB114 million and RMB86 million) lower or
higher respectively. Management believes that the 100 basis points deviation used in the sensitivity analysis
represents a deviation in the expected level of claims that could be reasonably expected for this type of
business.
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 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 minimize 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 seen in Note 9 to the consolidated financial
statements.
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 (for
example, change in interest rate and change in market values).
4.2.1 Market risk
(i)
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in
market interest rates. The Group’s financial assets are principally comprised of term deposits and debt
securities. Changes in the level of interest rates can 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.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)
4.2 Financial risk (continued)
4.2.1 Market risk (continued)
(i)
Interest rate risk (continued)
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 reporting date.
At 31 December 2008, if market interest rates had been 50 basis points higher or lower with all other
variables held constant, pre-tax profit for the year would have been RMB626 million (2007: RMB527
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 and debt securities and
the fair value losses or gains on debt securities assets at fair value through income (held-for-trading),
net of impact thereof on undistributed participating policyholders’ dividends. Pre-tax available-for-
sale reserve in equity would have been RMB8,339 million (2007: RMB6,489 million) lower or higher
respectively as a result of a decrease or increase in the fair value of available-for-sale securities, net of
impact thereof on undistributed participating policyholders’ dividends and other shadow adjustments.
109
(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 market risk
largely because China’s stock markets are relatively volatile.
The Group manages price risk by holding an appropriately diversifi ed investment portfolio as permitted by
laws and regulations designed to reduce the risk of concentration in any one specifi c industry or issuer.
At 31 December 2008, if all the Group's equity securities' prices had increased or decreased by 10%
with all other variables held constant, pre-tax profit for the year would have been RMB452 million
(2007: RMB1,072 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, net of impact thereof on
undistributed participating policyholders’ dividends. Pre-tax available-for-sale reserve in equity would
have been RMB4,551 million higher or lower (2007: RMB12,079 million) as a result of an increase
or decrease in fair value of available-for-sale equity securities, net of impact thereof on undistributed
participating policyholders’ dividends and other shadow adjustments.
(iii) Currency risk
Currency risk is volatility of fair value or future cash flows of financial instruments resulting from
changes in foreign currency exchange rates. The Group operates principally in the PRC except for
limited exposure to foreign exchange rate risk arising primarily with respect to structured deposits,
debt securities and common stocks denominated in US dollar (“US$”) or HK dollar (“HK$”).
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)
4.2 Financial risk (continued)
4.2.1 Market risk (continued)
(iii) Currency risk (continued)
The Group holds shares traded on the HK stock market which are traded in HK dollars. Investment
income from H share holdings have offset the adverse impact of the appreciation of the Renminbi and
thus spread the risk indirectly.
The following table summaries financial assets denominated in currencies other than RMB as at 31
December 2008 and 2007.
As at 31 December 2008
US$
RMB million
HK$
RMB million
Total
RMB million
Equity securities
Debt securities
Term deposits (excluding structured deposits)
Structured deposits
Cash and cash equivalents
–
2,905
4,921
2,905
8,236
2,410
–
–
–
511
2,410
2,905
4,921
2,905
8,747
Total
18,967
2,921
21,888
As at 31 December 2007
US$
RMB million
HK$
RMB million
Total
RMB million
Equity securities
Debt securities
Term deposits (excluding structured deposits)
Structured deposits
Cash and cash equivalents
–
3,119
219
4,346
6,844
8,476
–
–
–
45
8,476
3,119
219
4,346
6,889
Total
14,528
8,521
23,049
Monetary assets are exposed to currency risk whereas non-monetary assets, such as equity securities,
expose themselves to price risk. As at 31 December 2008, if RMB had strengthened or weakened by
10% against USD and HK dollar with all other variables held constant, pre-tax profit for the year
would have been RMB1,948 million (2007: RMB1,457 million) lower or higher respectively, mainly
as a result of foreign exchange losses or gains on translation of USD and HK dollar denominated
financial assets other than the equity securities included in the table above.
110
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)
4.2 Financial risk (continued)
4.2.2 Credit risk
Credit risk is the risk that one party to a financial transaction or the issuer of a financial instrument will fail
to discharge an obligation and cause another party to incur a financial loss. Because the Group is limited
in the types of investments as permitted by China Insurance Regulatory Commission (“CIRC”) and a
significant portion of the portfolio is in government bonds, government agency bonds 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 fundamental 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.
Credit exposure
The carrying amount of financial assets included on the consolidated balance sheet represents the maximum
credit exposure without taking account of any collateral held or other credit enhancements attached. The
Group has no credit risk exposures relating to off-balance sheet items as at 31 December 2008 and 2007.
Collateral and other credit enhancements
Securities purchased under agreements to resell are pledged by counterpart's debt securities or term deposits
of which the Group could take the ownership should the owner of the collateral default. Policy loans and
premium receivables are collateralized by their policies' cash value according to the terms and conditions of
policy loan contracts and policy contracts respectively signed by the Group together with policyholders.
111
Credit quality
The Group’s debt securities investment includes government bonds, government agency bonds, corporate
bonds and subordinated bonds or debts. As at 31 December 2008, 100% (as at 31 December 2007: 98.9%)
of the corporate bonds held by the Group have credit rating of AA/A-2 or above. As at 31 December 2008,
99.3% (as at 31 December 2007: 99.1%) of the subordinated bonds or debts held by the Group either have
credit rating of AA/A-2 or above, or were issued by national commercial banks. The bond or debt’s credit
rating is assigned by a qualified appraisal institution in the PRC at the time of its issuance.
As at 31 December 2008, 95.4%(as at 31 December 2007: 94.8%) of the Group's bank deposits are with
the four largest state-owned commercial banks and other national commercial banks in the PRC, and almost
all of the reinsurance agreements of the Group are with a state-owned reinsurance company. The Group
believes these commercial banks and the reinsurance company have a high credit quality. As a result, the
Group concludes credit risk associated with term deposits and accrued investment income thereof, statutory
deposits-restricted, cash equivalents and reinsurance assets will not cause material impact on the Group's
consolidated financial statements as at 31 December 2008 and 2007.
The credit risk associated with securities purchased under agreements to resell, policy loans and premium
receivables will not cause a material impact on the Group's consolidated financial statements taking into
consideration of their collateral held and maturity term of no more than one year as at 31 December 2008
and 2007.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)
4.2 Financial risk (continued)
4.2.3 Liquidity risk
Liquidity risk is the risk that the Group will not have access to sufficient funds to meet its liabilities as they
become due.
In the normal course of business, the Group attempts to match the maturity of investment assets to the
maturity of insurance liabilities.
The following tables set forth the expected undiscounted cash flows for insurance contracts and investment
contracts as well as contractual undiscounted cash flows for financial liabilities excluding investment
contracts.
112
As at 31 December 2008
Expected and contractual cash flows
(undiscounted)
Carrying
amount
Later than
1 year but
not later
than 3 years
(RMB million)
Not later
than 1 year
Later than
3 years
but not
later than
5 years
Later than
5 years
Financial and insurance liabilities
Expected cash flows out/(in)
Short-term insurance contracts
Long-term traditional insurance contracts
Long-term investment type insurance contracts
Investment contracts
Contractual cash flows out
Securities sold under agreements to repurchase
Annuity and other insurance balances payable
8,894
273,474
362,241
53,229
6,314
(53,058)
56,462
14,190
–
(61,685)
101,796
15,533
–
(27,162)
146,605
8,657
–
862,230
145,326
41,916
11,390
28,986
11,395
28,986
–
–
–
–
–
–
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)
4.2 Financial risk (continued)
4.2.3 Liquidity risk (continued)
Expected and contractual cash flows
(undiscounted)
Carrying
amount
Later than
1 year but
not later
than 3 years
(RMB million)
Not later
than 1 year
Later than
3 years
but not
later than
5 years
Later than
5 years
8,119
218,165
284,588
51,302
5,564
(43,182)
67,012
14,345
–
(52,962)
85,571
15,450
–
(24,852)
79,443
8,910
–
717,464
123,878
37,279
113
100
14,111
100
14,111
–
–
–
–
–
–
As at 31 December 2007
Financial and insurance liabilities
Expected cash flows out/(in)
Short-term insurance contracts
Long-term traditional insurance contracts
Long-term investment type insurance contracts
Investment contracts
Contractual cash flows out
Securities sold under agreements to repurchase
Annuity and other insurance balances payable
The amounts set forth in the tables above for insurance and investment contracts in each column are the
cash flows representing expected future benefit payments taking into consideration of future premiums
payments or deposits from policyholders. The estimate is affected by assumptions related to mortality,
morbidity, lapses, withdrawals, credited rates, loss ratio, claim adjustment expenses and other assumptions.
Actual experience may differ from estimates.
As at 31 December 2008, declared dividends of RMB1,179 million (as at 31 December 2007: RMB26,238
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 cash flows are indeterminate due to
the uncertainty of future experiences including investment returns and are subject to future declarations by
the Group.
Another maturity analysis assuming all investment contracts with DPF and without DPF were surrendered
immediately would have been RMB51,713 million and RMB1,516 million respectively as at 31 December
2008 (as at 31 December 2007: RMB49,068 million and RMB2,234 million respectively), payable within
one year. Although contractually these options can be exercised immediately by all policyholders, at
once, the Group's expected cash flows are as shown in the above tables based on its experience and future
expectations.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)
4.2 Financial risk (continued)
4.2.4 Capital management
The Group’s objectives when managing capital, which is actual capital, are to comply with the insurance
capital requirements required by the CIRC to meet the minimum capital and safeguard the Group’s ability
to continue as a going concern so that it can continue to provide returns for shareholders and benefits for
other stakeholders.
The Group is also subject to other local capital requirements, such as statutory deposits-restricted
requirement and Statutory reserve fund requirement, discussed in detail under Note 9.6 and Note 32,
respectively.
The Group ensures its continuous and full compliance with the regulations mainly through monitoring
quarterly and annual static solvency margin, as well as the dynamic solvency margin, which predicts the
solvency margin for the next three years based on different scenarios. It has complied with all the local
capital requirements.
The table below summarises the solvency ratio of the Company, the regulatory capital held (represented by
actual capital) against the minimum required capital (represented by minimum capital).
114
Actual capital
Minimum capital
Solvency ratio
As at 31 December
2008
RMB
million
2007
RMB
million
124,540
40,156
310%
168,357
32,054
525%
According to “Solvency Regulations of Insurance Companies”, the solvency ratio is computed by dividing
the actual capital by the minimum capital. CIRC will closely monitor those insurance companies with
solvency ratio less than 100% and may, depending on the individual circumstances, undertake certain
regulatory measures, including but not limited to restricting the payment of dividends. Insurance companies
with solvency ratio between 100% and 150% would be required to submit and implement plans preventing
capital from being inadequate. And Insurance companies with solvency ratio above 100% but significant
solvency risk noticed would be required to take necessary rectification action.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
5
SEGMENT INFORMATION
5.1 Business segments
The Group has the following main business segments:
(i)
Individual life insurance business
Individual life insurance business relates primarily to the sale of insurance contracts and investment
contracts to individuals and comprises participating and non-participating business. Participating
life insurance business relates primarily to the sale of participating contracts, which provides the
policyholder with a participation in the profits arising from the invested assets relating to the policy
and mortality gains, as described in Note 2.8.1.d. Non-participating insurance business relates
primarily to non-participating life insurance and annuity products, which provides guaranteed benefits
to the insured without a participation in the profits.
(ii) Group life insurance business
Group life insurance business relates primarily to the sale of insurance contracts and investment
contracts to group entities and comprises participating and non-participating business as described
above.
(iii) Accident and health insurance business
Accident and health insurance business relates primarily to the sale of accident and health insurance
and accident only products.
115
(iv) Corporate and other
Corporate and other business relates primarily to income and expenses in respect of the provision of
the services to CLIC, as described in Note 30, share of results of associates and unallocated income
taxes.
5.2 Basis of allocating net investment income, realised and unrealised gains or losses and
administrative and other operating expenses
Net investment income, net realised gains or losses on financial assets, net fair value gains or losses on assets
at fair value through income (held-for-trading) and foreign exchange losses within other operating expenses
are allocated among segments in proportion to each respective segment’s average statutory policyholder
reserve and claims provision at the beginning and end of the year. Administrative and other operating
expenses are allocated among segments in proportion to the unit cost of products in the respective segments.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
5
SEGMENT INFORMATION (continued)
Individual life
For the year ended 31 December 2008
Group life
Accident
& Health
(RMB million)
Corporate
& other
Total
Revenues
Gross written premiums and policy fees
Gross written premiums
– Term Life
– Whole Life
– Endowment
– Annuity
Policy fees
Net premiums earned and policy fees
Net investment income
Net realised losses on financial assets
Net fair value losses on assets at fair
value through income (held-for-trading)
Other income
121,452
108,235
300
35,402
45,816
26,717
13,217
121,434
40,070
(5,927)
(6,637)
–
831
324
25
274
–
25
507
831
3,420
(506)
(566)
–
13,042
13,042
–
–
–
–
–
12,385
560
(83)
(93)
–
Segment revenues
148,940
3,179
12,769
–
–
–
–
–
–
–
–
–
–
–
1,923
1,923
–
–
–
–
–
–
–
–
–
(1,481)
(197)
–
135,325
134,650
44,050
(6,516)
(7,296)
1,923
166,811
(17,777)
(7,553)
(55,281)
(9,212)
(1,358)
(21,139)
(2,492)
(11,784)
(3,394)
(12,110)
(1,891)
(244)
(16,915)
(862)
–
–
(55,957)
(9,185)
–
(21,187)
(2,374)
(10,265)
(2,422)
(7,790)
(1,429)
(160)
–
676
(27)
(1,358)
48
(118)
(469)
(14)
(434)
(111)
(11)
(7,553)
–
–
–
–
–
(1,050)
(958)
(2,405)
(154)
(73)
(127,684)
(2,680)
(12,193)
(1,678)
(144,235)
–
21,256
–
21,256
21,256
–
–
499
–
499
499
–
–
576
–
576
576
–
228
473
228
22,804
(1,390)
(1,390)
(917)
21,414
(1,054)
137
21,277
137
(31,417)
(2,682)
(439)
291
(34,247)
116
Benefits, claims and expenses
Insurance benefits and claims
Life insurance death and other benefits
Accident and health claims and
claim adjustment expenses
Increase/decrease in long-term traditional
insurance contracts liabilities
Interest credited to long-term
investment type insurance contracts
Interest credited to investment contracts
Increase/decrease in deferred income
Policyholder dividends resulting
from participation in profits
Amortization of deferred
policy acquisition costs
Underwriting and policy
acquisition costs
Administrative expenses
Other operating expenses
Statutory insurance fund
Segment benefits,
claims and expenses
Share of results of associates
Segment results
Income tax expenses
Net profit/(loss)
Attributable to
– shareholders of the Company
– minority interest
Unrealised gains/(losses)
included in shareholders’ equity
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
5
SEGMENT INFORMATION (continued)
As at 31 December 2008
Individual life
Group life
Accident
& Health
(RMB million)
Corporate
& other
Total
Assets
Financial assets
Deferred policy acquisition costs
Cash and cash equivalents
833,667
55,950
31,005
71,159
965
2,647
11,641
1,353
433
Segment assets
920,622
74,771
13,427
Unallocated
Property, plant and equipment
Other assets
Total
Liabilities
Insurance contracts
Long-term traditional
insurance contracts
Long-term investment
type insurance contracts
Short-term insurance contracts:
– reserves for claims and
claim adjustment expenses
– unearned premium reserves
Deferred income
Financial liabilities
Investment contracts
– with DPF
– without DPF
Securities sold under
272,265
1,209
360,661
1,580
–
–
73,857
–
–
630
–
–
51,713
1,516
–
–
2,629
6,265
–
–
–
agreements to repurchase
10,361
885
144
Segment liabilities
717,144
57,533
9,038
Unallocated
Other liabilities
Total
117
–
–
–
–
916,467
58,268
34,085
1,008,820
18,151
17,857
1,044,828
–
–
–
–
–
–
–
–
–
273,474
362,241
2,629
6,265
74,487
51,713
1,516
11,390
783,715
79,540
863,255
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
5
SEGMENT INFORMATION (continued)
Revenues
Gross written premiums and policy fees
Gross written premiums
– Term Life
– Whole Life
– Endowment
– Annuity
Policy fees
Net premiums earned and policy fees
Net investment income
Net realised gains on financial assets
Net fair value gains on assets at fair
value through income (held-for-trading)
Other income
Segment revenues
Benefits, claims and expenses
Insurance benefits and claims
Life insurance death
and other benefits
Accident and health claims and
claim adjustment expenses
Increase/decrease in long-term
traditional insurance contracts liabilities
Interest credited to long-term
investment type insurance contracts
Interest credited to investment contracts
Increase in deferred income
Policyholder dividends resulting
from participation in profits
Amortization of deferred
policy acquisition costs
Underwriting and policy acquisition costs
Administrative expenses
Other operating expenses
Statutory insurance fund
For the year ended 31 December 2007
Individual life
Group life
Accident
& Health
(RMB million)
Corporate
& other
Total
98,484
91,420
175
31,943
40,278
19,024
7,064
98,470
39,489
13,801
16,904
–
168,664
1,503
876
9
678
–
189
627
1,503
3,902
1,364
1,670
–
8,439
11,899
11,899
–
–
–
–
–
11,431
629
220
269
–
–
–
–
–
–
–
–
–
–
–
–
1,720
111,886
111,404
44,020
15,385
18,843
1,720
12,549
1,720
191,372
(16,463)
(967)
–
(45,370)
(7,157)
–
(9,828)
(25,729)
(12,182)
(2,013)
(7,214)
(1,343)
(163)
–
36
(24)
(1,138)
(31)
(3,522)
(485)
(6)
(606)
(132)
(1)
–
(6,343)
–
–
–
–
–
–
–
–
–
–
–
–
(794)
(703)
(2,192)
(106)
(55)
–
(3)
(1,786)
(70)
–
(17,430)
(6,343)
(45,334)
(7,181)
(1,138)
(9,859)
(29,251)
(13,461)
(2,725)
(11,798)
(1,651)
(219)
Segment benefits, claims and expenses
(127,462)
(6,876)
(10,193)
(1,859)
(146,390)
118
Share of results of associates
–
–
–
Segment results
Income tax expenses
Net profit/(loss)
Attributable to:
– shareholders of the Company
– minority interest
Unrealised gains/(losses) included
in shareholders’ equity
China Life Insurance Company Limited Annual Report 2008
409
270
409
45,391
41,202
1,563
2,356
–
–
–
(6,331)
(6,331)
41,202
1,563
2,356
(6,061)
39,060
41,202
–
1,563
–
2,356
–
(6,242)
181
38,879
181
27,758
2,743
442
(30)
30,913
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
5
SEGMENT INFORMATION (continued)
As at 31 December 2007
Individual life
Group life
Accident
& Health
(RMB million)
Corporate
& other
Total
Assets
Financial assets
Deferred policy acquisition costs
Cash and cash equivalents
748,831
39,037
22,711
73,988
764
2,244
11,930
1,050
362
Segment assets
810,579
76,996
13,342
Unallocated
Property, plant and equipment
Other assets
Total
Liabilities
Insurance contracts
Long-term traditional
insurance contracts
Long-term investment type
insurance contracts
Short-term insurance contracts:
– reserves for claims and
claim adjustment expenses
– unearned premium reserves
Deferred income
Financial liabilities
Investment contracts
– with DPF
– without DPF
Securities sold under
agreements to repurchase
216,280
1,885
283,520
1,068
–
–
47,761
–
–
90
–
–
547
49,068
2,234
9
–
–
2,391
5,728
–
–
–
1
Segment liabilities
547,651
54,811
8,120
Unallocated
Other liabilities
Total
119
–
–
–
–
–
–
–
–
–
–
–
–
–
834,749
40,851
25,317
900,917
16,771
16,016
933,704
218,165
284,588
2,391
5,728
48,308
49,068
2,234
100
610,582
116,746
727,328
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
6
PROPERTY, PLANT AND EQUIPMENT
Group
2008
Office
equipment,
furniture
and fixtures
RMB
million
Buildings
RMB
million
Motor Assets under
vehicles
RMB
million
Leasehold
construction improvements
RMB
million
RMB
million
Cost
As at 1 January 2008
Additions
Disposals
Transfers upon completion
14,502
566
(87)
416
3,848
752
(309)
–
2,027
203
(186)
–
2,594
898
(52)
(416)
333
369
(11)
–
Total
RMB
million
23,304
2,788
(645)
–
As at 31 December 2008
15,397
4,291
2,044
3,024
691
25,447
120
Accumulated depreciation
and impairment
As at 1 January 2008
Charges for the year
Impairment loss
Disposals
(2,904)
(468)
(9)
28
(2,100)
(531)
–
275
(1,370)
(148)
–
174
As at 31 December 2008
(3,353)
(2,356)
(1,344)
–
–
–
–
–
(159)
(94)
–
10
(6,533)
(1,241)
(9)
487
(243)
(7,296)
Net book value
As at 1 January 2008
11,598
1,748
As at 31 December 2008
12,044
1,935
657
700
2,594
174
16,771
3,024
448
18,151
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
6
PROPERTY, PLANT AND EQUIPMENT (continued)
Group
Office
equipment,
furniture
and fixtures
RMB
million
Buildings
RMB
million
2007
Motor
vehicles
RMB
million
Assets under
construction
RMB
million
Leasehold
improvements
RMB
million
Cost
As at 1 January 2007
Additions
Disposals
Transfers upon completion
12,925
1,014
(51)
614
3,210
789
(151)
–
1,815
310
(98)
–
2,160
1,190
(142)
(614)
218
122
(7)
–
Total
RMB
million
20,328
3,425
(449)
–
As at 31 December 2007
14,502
3,848
2,027
2,594
333
23,304
Accumulated depreciation
and impairment
As at 1 January 2007
Charges for the year
Disposals
(2,509)
(408)
13
(1,800)
(446)
146
(1,337)
(124)
91
As at 31 December 2007
(2,904)
(2,100)
(1,370)
–
–
–
–
(117)
(42)
–
(5,763)
(1,020)
250
(159)
(6,533)
121
Net book value
As at 1 January 2007
10,416
1,410
As at 31 December 2007
11,598
1,748
478
657
2,160
101
14,565
2,594
174
16,771
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
6
PROPERTY, PLANT AND EQUIPMENT (continued)
Company
2008
Office
equipment,
furniture
and fixtures
RMB
million
Buildings
RMB
million
Motor Assets under
vehicles
RMB
million
Leasehold
construction improvements
RMB
million
RMB
million
Cost
As at 1 January 2008
Additions
Disposals
Transfers upon completion
14,190
565
(87)
416
3,801
742
(307)
–
2,020
199
(186)
–
2,588
898
(52)
(416)
333
369
(11)
–
Total
RMB
million
22,932
2,773
(643)
–
As at 31 December 2008
15,084
4,236
2,033
3,018
691
25,062
122
Accumulated depreciation
and impairment
As at 1 January 2008
Charges for the year
Impairment loss
Disposals
(2,892)
(451)
(9)
28
(2,086)
(524)
–
275
(1,368)
(147)
–
174
As at 31 December 2008
(3,324)
(2,335)
(1,341)
–
–
–
–
–
(159)
(94)
–
10
(6,505)
(1,216)
(9)
487
(243)
(7,243)
Net book value
As at 1 January 2008
11,298
1,715
As at 31 December 2008
11,760
1,901
652
692
2,588
174
16,427
3,018
448
17,819
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
6
PROPERTY, PLANT AND EQUIPMENT (continued)
Company
Office
equipment,
furniture
and fixtures
RMB
million
Buildings
RMB
million
2007
Motor
vehicles
RMB
million
Assets under
construction
RMB
million
Leasehold
improvements
RMB
million
Cost
As at 1 January 2007
Additions
Disposals
Transfers upon completion
12,925
1,014
(48)
299
3,179
772
(150)
–
1,811
307
(98)
–
1,852
1,160
(125)
(299)
218
122
(7)
–
Total
RMB
million
19,985
3,375
(428)
–
As at 31 December 2007
14,190
3,801
2,020
2,588
333
22,932
Accumulated depreciation
and impairment
As at 1 January 2007
Charges for the year
Disposals
(2,509)
(396)
13
(1,789)
(442)
145
(1,335)
(124)
91
As at 31 December 2007
(2,892)
(2,086)
(1,368)
–
–
–
–
(117)
(42)
–
(5,750)
(1,004)
249
(159)
(6,505)
123
Net book value
As at 1 January 2007
10,416
1,390
As at 31 December 2007
11,298
1,715
476
652
1,852
101
14,235
2,588
174
16,427
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
7 DEFERRED POLICY ACQUISITION COSTS
Group and Company
Gross
As at 1 January
Acquisition costs deferred
Amortisation charged through income
Amortisation charged through equity
As at 31 December
Ceded
As at 1 January
Acquisition costs deferred
Amortisation charged through income
124
As at 31 December
Net
As at 1 January
Acquisition costs deferred
Amortisation charged through income
Amortisation charged through equity
As at 31 December
DAC excluding unrealised gains
DAC recorded in unrealised losses
Total
Current
Non-current
Total
China Life Insurance Company Limited Annual Report 2008
2008
RMB million
2007
RMB million
40,861
25,240
(11,794)
3,971
39,245
17,490
(13,476)
(2,398)
58,278
40,861
(10)
(10)
10
(10)
40,851
25,230
(11,784)
3,971
(15)
(10)
15
(10)
39,230
17,480
(13,461)
(2,398)
58,268
40,851
61,308
(3,040)
47,862
(7,011)
58,268
40,851
1,353
56,915
1,050
39,801
58,268
40,851
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
8
INVESTMENTS IN ASSOCIATES
Group
At 1 January
Additional capital contribution to China
Life Property & Casualty Insurance
Company Limited (“CLP&C”) (Note 30(b))
Investment in China Life Insurance Brokers (“CIB”)
Share of results
Other equity movements (Note 32)
As at 31 December
2008
RMB million
2007
RMB million
6,450
6,071
1,200
7
228
291
8,176
–
–
409
(30)
6,450
The Group’s share in investment in associates is as follows:
Name
Country of
incorporation
Assets
Liabilities
Revenues
Profit/(Loss)
Interest held
(RMB million)
125
Guangdong Development
Bank (“GDB”)
CLP&C
PRC
PRC
90,584
641
84,419
356
2,534
81
544
(135)
Total at 31 December 2007
91,225
84,775
2,615
409
GDB
CLP&C
CIB
PRC
PRC
PRC
112,252
3,931
7
105,283
2,731
–
3,542
1,300
–
559
(331)
–
20%
40%
20%
40%
49%
Total at 31 December 2008
116,190
108,014
4,842
228
Company
As at 1 January
Additional capital contribution to CLP&C
Investment in CIB
As at 31 December
2008
RMB million
2007
RMB million
6,071
1,200
7
7,278
6,071
–
–
6,071
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
9
FINANCIAL ASSETS
9.1 Held-to-maturity securities
Group and Company
Amortised
cost
RMB million
Gross
unrealised gains
RMB million
Gross
unrealised losses
RMB million
Estimated
fair value
RMB million
As at 31 December 2008
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subordinated bonds/debts
102,688
79,400
3,267
26,574
9,996
5,235
227
1,291
Total
211,929
16,749
126
As at 31 December 2007
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subordinated bonds/debts
Total
96,786
71,273
3,272
24,372
195,703
1,228
1,110
171
62
2,571
(3)
(77)
–
–
(80)
(1,780)
(4,303)
(40)
(562)
112,681
84,558
3,494
27,865
228,598
96,234
68,080
3,403
23,872
(6,685)
191,589
Contractual maturity schedule
Amortised cost
Estimated fair value
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
Maturing:
Within one year
After one year but within five years
After five years but within ten years
After ten years
24,107
28,445
55,866
103,511
2,896
50,059
52,508
90,240
24,493
30,340
61,701
112,064
2,921
50,861
52,835
84,972
Total
211,929
195,703
228,598
191,589
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
9
FINANCIAL ASSETS (continued)
9.2 Available-for-sale securities
Amortised
cost/Cost
RMB million
Gross
unrealised gains
RMB million
Gross
unrealised losses
RMB million
Estimated
fair value
RMB million
73,130
180,135
64,388
17,265
7,066
11,496
3,504
366
(190)
(510)
(387)
(43)
80,006
191,121
67,505
17,588
Group
As at 31 December 2008
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subordinated bonds/debts
Subtotal
334,918
22,432
(1,130)
356,220
Equity securities
Funds
Common stocks
Subtotal
Total
Company
As at 31 December 2008
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subordinated bonds/debts
32,313
38,132
2,331
7,091
(4,754)
(6,394)
29,890
38,829
127
70,445
9,422
(11,148)
68,719
405,363
31,854
(12,278)
424,939
73,060
177,929
64,039
17,065
7,066
11,380
3,490
361
(190)
(510)
(387)
(43)
79,936
188,799
67,142
17,383
Subtotal
332,093
22,297
(1,130)
353,260
Equity securities
Funds
Common stocks
Subtotal
Total
32,046
38,037
2,331
7,083
(4,687)
(6,386)
29,690
38,734
70,083
9,414
(11,073)
68,424
402,176
31,711
(12,203)
421,684
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
9
FINANCIAL ASSETS (continued)
9.2 Available-for-sale securities (continued)
128
Amortised
cost/Cost
RMB million
Gross
unrealised gains
RMB million
Gross
unrealised losses
RMB million
Estimated
fair value
RMB million
83,137
111,906
46,464
10,462
183
686
120
156
(2,732)
(5,438)
(2,842)
(720)
80,588
107,154
43,742
9,898
Group
As at 31 December 2007
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subordinated bonds/debts
Subtotal
251,969
1,145
(11,732)
241,382
Equity securities
Funds
Common stocks
Subtotal
Total
Company
As at 31 December 2007
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subordinated bonds/debts
37,513
51,714
23,328
64,115
89,227
87,443
(217)
(320)
(537)
60,624
115,509
176,133
341,196
88,588
(12,269)
417,515
83,137
111,503
46,464
10,462
183
686
120
156
(2,732)
(5,429)
(2,842)
(720)
80,588
106,760
43,742
9,898
Subtotal
251,566
1,145
(11,723)
240,988
Equity securities
Funds
Common stocks
Subtotal
Total
37,295
51,654
23,210
64,071
88,949
87,281
(217)
(320)
(537)
60,288
115,405
175,693
340,515
88,426
(12,260)
416,681
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
9
FINANCIAL ASSETS (continued)
9.2 Available-for-sale securities (continued)
Group Debt securities
– contractual maturity schedule
Amortised cost
Estimated fair value
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
Maturing:
Within one year
After one year but within five years
After five years but within ten years
After ten years
7,650
69,464
113,112
144,692
616
23,139
89,493
138,721
7,801
73,461
121,916
153,042
612
22,672
87,615
130,483
Total
334,918
251,969
356,220
241,382
Company Debt securities
– contractual maturity schedule
Amortised cost
Estimated fair value
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
129
Maturing:
Within one year
After one year but within five years
After five years but within ten years
After ten years
7,451
67,597
112,354
144,691
616
22,887
89,342
138,721
7,598
71,506
121,114
153,042
612
22,424
87,469
130,483
Total
332,093
251,566
353,260
240,988
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
9
FINANCIAL ASSETS (continued)
9.3 Financial assets at fair value through income (held-for-trading)
Group
Company
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
1,428
4,660
1,648
–
7,736
4,063
2,295
5
693
4,583
513
307
6,096
9,145
9,842
27
1,428
4,660
1,629
–
7,717
4,063
2,283
5
693
4,383
471
307
5,854
9,145
9,818
27
6,363
19,014
6,351
18,990
14,099
25,110
14,068
24,844
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subordinated bonds/debts
Subtotal
Equity securities
Funds
Common stocks
Warrants
Subtotal
Total
130
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
9
FINANCIAL ASSETS (continued)
9.4 Listed and unlisted investments at carrying value
Group
Listed debt securities in PRC
Government bonds
Corporate bonds
Subtotal
Unlisted debt securities in PRC
Government bonds
Government agency bonds
Corporate bonds
Subordinated bonds/debts
Subtotal
Listed equity securities in PRC
Common stocks
– listed in HK, PRC
– listed in mainland, PRC
Funds-listed in mainland, PRC
Warrants-listed in mainland, PRC
Subtotal
Unlisted equity securities in PRC
Funds
Common stocks
Subtotal
Total
131
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
43,700
10,911
51,296
6,571
54,611
57,867
140,422
275,181
61,509
44,162
126,771
183,010
40,956
34,577
521,274
385,314
2,410
38,406
3,656
5
8,476
116,873
17,677
27
44,477
143,053
30,297
308
52,092
2
30,605
52,094
650,967
638,328
As at 31 December 2008, the amount of unlisted debt securities, traded in the inter-bank market, is
RMB519,004 million (as at 31 December 2007: RMB323,058 million).
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
9
FINANCIAL ASSETS (continued)
9.4 Listed and unlisted investments at carrying value (continued)
Company
132
Listed debt securities in PRC
Government bonds
Corporate bonds
Subtotal
Unlisted debt securities in PRC
Government bonds
Government agency bonds
Corporate bonds
Subordinated bonds/debts
Subtotal
Listed equity securities in PRC
Common stocks
– listed in Hong Kong, PRC
– listed in mainland, PRC
Funds-listed in mainland, PRC
Warrants-listed in mainland, PRC
Subtotal
Unlisted equity securities in PRC
Funds
Common Stocks
Subtotal
Total
China Life Insurance Company Limited Annual Report 2008
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
43,700
10,754
51,296
6,529
54,454
57,825
140,352
272,859
61,284
43,957
126,771
182,416
40,956
34,577
518,452
384,720
2,398
38,311
3,456
5
8,465
116,756
17,342
27
44,170
142,590
30,297
308
52,091
2
30,605
52,093
647,681
637,228
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
9
FINANCIAL ASSETS (continued)
9.5 Term deposits
Group and Company
Maturing:
Within one year
After one year but within five years
After five years but within ten years
After ten years
Total
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
64,621
155,320
6,759
1,572
46,706
93,372
26,434
2,082
228,272
168,594
Included in term deposits are structured deposits of RMB2,905 million (31 December 2007: RMB4,346
million). The interest rate on these deposits fluctuates based on changes in interest rate indexes. The Group
uses structured deposits primarily to enhance the returns on investments. Structured deposits are stated at
amortised cost.
133
9.6 Statutory deposits – restricted
Group
Company
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
Contractually maturing:
Within one year
After one year but within five years
Total
200
5,953
6,153
5,353
420
5,773
200
5,453
5,653
5,353
300
5,653
Insurance companies in China are required to deposit an amount equal to 20% of their registered capital
with banks designated by CIRC. These funds may not be used for any purpose, other than to pay off debts
during a liquidation proceeding.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
9
FINANCIAL ASSETS (continued)
9.7 Loans
Policy loans
Other loans
Total
Group
Company
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
8,676
9,250
5,944
1,200
8,676
9,200
17,926
7,144
17,876
5,944
1,200
7,144
Group
Company
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
134
Maturing:
Within one year
After one year but within five years
After five years but within ten years
After ten years
8,676
–
1,200
8,050
5,944
–
1,200
–
8,676
–
1,200
8,000
Total
17,926
7,144
17,876
5,944
–
1,200
–
7,144
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
9
FINANCIAL ASSETS (continued)
9.8 Securities purchased under agreements to resell
Group
Company
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
–
–
5,053
5,053
–
–
4,673
4,673
Group
Company
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
4,525
8,348
276
3,700
6,014
143
4,508
8,298
274
13,149
9,857
13,080
3,696
6,011
141
9,848
Group
Company
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
13,149
–
9,824
33
13,080
–
13,149
9,857
13,080
9,815
33
9,848
135
Maturing:
With 30 days
Total
9.9 Accrued investment income
Bank deposits
Debt securities
Others
Total
Current
Non-current
Total
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
10 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The estimates and judgments to determine the fair value of financial assets are described in Note 3.3.
The fair value of long-term investment type insurance contracts and investment contracts are determined by using
valuation techniques, with consideration of the present value of expected cash flows arising from contracts using
a risk-adjusted discount rate, allowing for risk free rate available on valuation date, the own credit risk and risk
margin associated with the future cash flows.
The table below presents the estimated fair value and carrying value of financial assets and liabilities.
Carrying value
As at 31
As at 31
December 2008 December 2007 December 2008 December 2007
RMB million
RMB million
RMB million
RMB million
As at 31
As at 31
Estimated fair value
136
Debt securities
Equity securities
Term deposits (excluding structured deposits)
Structured deposits
Statutory deposits-restricted
Securities purchased under agreements to resell
Loans
Cash and cash equivalents
Long-term investment type insurance contracts
(excluding universal life insurance contracts)
Investment contracts with DPF
Investment contracts without DPF
Securities sold under agreements to repurchase
575,885
75,082
225,367
2,905
6,153
–
17,926
34,085
(350,974)
(51,713)
(1,516)
(11,390)
443,181
195,147
164,248
4,346
5,773
5,053
7,144
25,317
(282,645)
(49,068)
(2,234)
(100)
592,554
75,082
225,367
2,887
6,153
–
17,926
34,085
(336,021)
(49,815)
(1,397)
(11,390)
439,067
195,147
164,248
4,281
5,773
5,053
7,144
25,317
(271,523)
(39,551)
(2,315)
(100)
11 PREMIUMS RECEIVABLES
The aging of premiums receivables is within 12 months.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
12 REINSURANCE ASSETS
Group and Company
Claims recoverable from reinsurers (Note 14)
Ceded unearned premiums (Note 14)
Long-term traditional insurance contracts ceded (Note 14)
Due from reinsurance companies
Total
Group and Company
Current
Non-current
Total
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
28
63
709
163
963
24
45
707
190
966
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
254
709
963
259
707
966
137
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
13 OTHER ASSETS
Group
Company
As at 31
As at 31
December 2008 December 2007 December 2008 December 2007
RMB million
RMB million
RMB million
RMB million
As at 31
As at 31
Due from CLIC (Note 30(c))
Deposits on fund units pending issuance/receivable
on funds units redeemed
Advances
Others
684
–
273
1,328
739
500
206
937
657
–
273
1,344
730
500
206
908
Total
2,285
2,382
2,274
2,344
Group
Company
As at 31
As at 31
December 2008 December 2007 December 2008 December 2007
RMB million
RMB million
RMB million
RMB million
As at 31
As at 31
138
Current
Non-current
Total
2,168
117
2,297
85
2,179
95
2,285
2,382
2,274
2,266
78
2,344
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
14
INSURANCE CONTRACTS
(a) Process used to decide on assumptions
(i)
Investment return assumptions are based on estimates of future yields on the Group’s investments.
In determining interest rate assumptions, the Group considers expectations about future economic
conditions and company’s investment strategy. The assumed rate of investment return and provision
for adverse deviation used for the past five years are as follows:
Year of policy issue
Interest rate assumptions
Provision for adverse deviation
2004
2005
2006
2007
2008
3.70%-5.17%
4.00%-5.20%
4.60%-5.40%
5.50%
3.625%-5.50%
0.25%-0.50%
0.25%-0.50%
0.25%-0.60%
0.50%
0.125%-0.50%
(ii) Estimates are made for mortality and morbidity rates in each of the years that the Group is exposed to
risk. The assumed mortality rates and morbidity rates, varying by age of the insured and contract type,
are based upon expected experience at the date of contract issue plus, where applicable, a margin for
adverse deviation.
139
The Group bases its mortality assumptions on China Life Insurance Mortality Table (1990-1993) and
China Life Insurance Mortality Table (2000-2003), adjusted where appropriate to reflect the Group’s
recent historical mortality experience. Appropriate but not excessively prudent allowance is made for
future mortality improvement on contracts that insure the risk of longevity, such as annuities. The
main source of uncertainty with life insurance contracts is that epidemics such as avian flu, AIDS,
SARS and wide-ranging lifestyle changes could result in deterioration in future mortality experience,
thus leading to an inadequate liability. Similarly, continuing advancements in medical care and social
conditions could result in improvements in longevity that exceed those allowed for in the estimates
used to determine the liability for contracts where the Group is exposed to longevity risk.
The Group bases its morbidity assumptions for critical illness products on Taiwanese experience in
the critical illness market, as the best proxy for the China’s market adjusted where appropriate to
reflect the Group’s recent historical and projected future experience. 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 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
liability if current morbidity assumptions do not properly reflect such secular trends.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
14
INSURANCE CONTRACTS (continued)
(a) Process used to decide on assumptions (continued)
(iii) The assumption for policy administration expenses has been based on expected unit costs plus,
where applicable, a margin for adverse deviation. Unit costs have been based on an analysis of actual
experience. The unit cost factors are expressed on both a per-policy and a percent-of-premium basis
for the past five years, as follows:
Year of policy issue RMB Per Policy % of Premium
RMB Per Policy
% of Premium
Individual Life
Group Life
2004
2005
2006
2007
2008
10.0-17.5
14.5-19.5
15.0-22.0
15.0-22.0
15.0-22.0
1.65%-2.55%
1.50%-1.80%
1.60%-1.85%
1.60%-1.85%
1.60%-1.85%
17.5
4.0
6.5
6.5
6.5
1.65%
1.30%
1.50%
1.50%
1.50%
(iv) Lapse rates and other assumptions are determined with reference to past experience where creditable,
current conditions and future expectations.
140
The Group did not change its process used to decide on assumptions for the insurance contracts disclosed in
this note.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
14
INSURANCE CONTRACTS (continued)
(b) Net liabilities of insurance contracts and investment contracts
Group and Company
Gross
Long-term traditional insurance contracts
Long-term investment type insurance contracts
Short-term insurance contracts
– claims and claim adjustment expenses
– unearned premiums
Investment contracts
– with DPF
– without DPF
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
273,474
362,241
2,629
6,265
51,713
1,516
218,165
284,588
2,391
5,728
49,068
2,234
Total, gross
697,838
562,174
141
Recoverable from reinsurers
Long-term traditional insurance contracts (Note 12)
Short-term insurance contracts
– claims and claim adjustment expenses (Note 12)
– unearned premiums (Note 12)
Total, ceded
Net
Long-term traditional insurance contracts
Long-term investment type insurance contracts
Short-term insurance contracts
– claims and claim adjustment expenses
– unearned premiums
Investment contracts
– with DPF
– without DPF
(709)
(28)
(63)
(800)
272,765
362,241
2,601
6,202
51,713
1,516
(707)
(24)
(45)
(776)
217,458
284,588
2,367
5,683
49,068
2,234
Total, net
697,038
561,398
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
14
INSURANCE CONTRACTS (continued)
(c) Claims incurred ratio
Group and Company
Claims incurred-net
Claims incurred ratio
2008
RMB million
2007
RMB million
7,553
61%
6,343
55%
(d) Movements in liabilities of short-term insurance contracts
The table below presents movement of reserves of claims and claim adjustment expenses:
142
Group and Company
– Notified claims
– Incurred but not reported
Total as at 1 January-Gross
Cash paid for claims settled in year
– Cash paid for current year claims
– Cash paid for prior year claims
Claims incurred in year
– Claims arising in current year
– Claims arising in prior year
Total as at 31 December-Gross
Notified claims
Incurred but not reported
Total as at 31 December-Gross
China Life Insurance Company Limited Annual Report 2008
2008
RMB million
2007
RMB million
368
2,023
2,391
(5,124)
(2,256)
7,715
(97)
2,629
343
2,286
2,629
487
2,011
2,498
(4,750)
(1,790)
7,082
(649)
2,391
368
2,023
2,391
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
14
INSURANCE CONTRACTS (continued)
(d) Movements in liabilities of short-term insurance contracts (continued)
The table below presents movement of unearned premium reserves:
Group and Company
At as 1 January
Increase
Release
2008
RMB million
Ceded
Net
Gross
2007
RMB million
Ceded
(45)
(63)
45
5,683
6,202
(5,683)
5,346
5,728
(5,346)
(60)
(45)
60
Gross
5,728
6,265
(5,728)
Net
5,286
5,683
(5,286)
At as 31 December
6,265
(63)
6,202
5,728
(45)
5,683
(e) Movements in liabilities for long-term traditional insurance contracts
The table below presents movement in the liabilities of long-term traditional insurance contracts:
Group and Company
143
As at 1 January
Valuation premiums
Liabilities released for death or other termination and related expenses
Accretion of interest
Other movements
2008
RMB million
2007
RMB million
218,165
67,328
(22,083)
9,834
230
172,875
57,979
(20,598)
7,511
398
As at 31 December
273,474
218,165
Valuation premiums are the premiums that would be required to meet the benefits and administration
expenses based on the valuation assumptions used.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
14
INSURANCE CONTRACTS (continued)
(f) Movements in liabilities of long-term investment type insurance contracts
The table below presents movement in the liabilities of long-term investment type insurance contracts:
Group and Company
As at 1 January
Deposits received
Deposits withdrawn and paid on death and other benefits
Fees deducted from account balances
Interest credited
2008
RMB million
2007
RMB million
284,588
156,730
(75,041)
(13,248)
9,212
282,672
72,516
(70,690)
(7,091)
7,181
As at 31 December
362,241
284,588
15 DEFERRED INCOME
The table below presents movement of deferred income:
144
Group and Company
As at 1 January
Income deferred
Amortisation charged through income
Amortisation charged through equity
As at 31 December
Deferred income excluding unrealised gains
Deferred income recognized in unrealised losses
Total deferred income
2008
RMB million
2007
RMB million
48,308
26,235
(5,098)
5,042
41,371
21,867
(12,011)
(2,919)
74,487
48,308
77,723
(3,236)
56,586
(8,278)
74,487
48,308
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
16 LIABILITIES OF INVESTMENT CONTRACTS
The table below presents movement of investment contracts:
Group and Company
As at 1 January
Deposits received
Deposits withdrawn and paid on death and other benefits
Policy fees deducted from account balances
Interest credited
As at 31 December
Investment contracts
– with DPF
– without DPF
Total
2008
RMB million
2007
RMB million
51,302
19,539
(18,494)
(476)
1,358
48,612
21,711
(19,559)
(600)
1,138
53,229
51,302
51,713
1,516
49,068
2,234
53,229
51,302
145
17 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Group
Company
As at 31
As at 31
December 2008 December 2007 December 2008 December 2007
RMB million
RMB million
RMB million
RMB million
As at 31
As at 31
Maturing:
Within thirty days
Total
11,390
11,390
100
100
11,200
11,200
100
100
The carrying values of debt securities pledged as collateral are as follows:
Group
Company
As at 31
As at 31
December 2008 December 2007 December 2008 December 2007
RMB million
RMB million
RMB million
RMB million
As at 31
As at 31
Debt securities pledged
Total
12,048
12,048
99
99
11,849
11,849
99
99
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
18 OTHER LIABILITIES
Group
Company
As at 31
As at 31
December 2008 December 2007 December 2008 December2007
RMB million
RMB million
RMB million
RMB million
As at 31
As at 31
Salary and staff welfare payable
Commission and brokerage payable
Agent deposits
Tax payable
Payable to constructors
Stock appreciation rights (Note 28)
Others
2,936
1,654
632
284
308
716
3,352
1,973
1,134
602
739
293
1,290
2,839
2,790
1,654
632
278
308
716
3,386
Total
9,882
8,870
9,764
1,855
1,131
602
732
285
1,290
2,821
8,716
Group
Company
146
Current
Non-current
Total
As at 31
As at 31
December 2008 December 2007 December 2008 December2007
RMB million
RMB million
RMB million
RMB million
As at 31
As at 31
9,882
–
8,870
–
9,764
–
9,882
8,870
9,764
8,716
–
8,716
19 STATUTORY INSURANCE FUND
As required by CIRC Order [2004] No. 16, all insurance companies have to pay statutory insurance fund
contribution to the CIRC. The Group is subject to statutory insurance fund contribution at 1%, 0.15% and
0.05% of net premium from accident and short-term health policies, long-term life policies with guaranteed
return and long-term health policies and long-term life policies without guaranteed return, respectively. When
the accumulated statutory insurance fund contributions reach 1% of the Group’s total assets, no additional
contribution to the statutory insurance fund is required.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
20 NET INVESTMENT INCOME
Debt securities
– held-to-maturity securities
– available-for-sale securities
– at fair value through income (held-for-trading)
Equity securities
– available-for-sale securities
– at fair value through income (held-for-trading)
Bank deposits
Loans
Securities purchased under agreements to resell
Other
Subtotal
Securities sold under agreements to repurchase
Investment expenses
Total
For the year ended 31 December
2007
RMB million
2008
RMB million
22,688
9,245
13,074
369
10,097
9,566
531
11,378
696
77
(3)
16,678
8,305
7,881
492
19,400
15,728
3,672
9,094
248
206
2
44,933
45,628
(438)
(445)
(1,281)
(327)
44,050
44,020
147
Included in net investment income is interest income of RMB34,851 million (2007: RMB26,238 million) using
the effective interest method. The interest income of impaired assets for the year ended 31 December 2008 is zero
(2007: RMB463 million).
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
21 NET REALISED GAINS/(LOSSES) ON FINANCIAL ASSETS
Debt securities
Gross realised gains
Gross realised losses
Impairments
Subtotal
Equity securities
Gross realised gains
Gross realised losses
Impairments
148
Subtotal
Total
For the year ended 31 December
2007
RMB million
2008
RMB million
443
(59)
2,023
388
(1,256)
(3,403)
2,407
(4,271)
–
16,586
(9,765)
(15,744)
19,868
(212)
–
(8,923)
19,656
(6,516)
15,385
During the year ended 31 December 2008, the Company recognized impairment expense of RMB15,744 million
(2007: RMB3,403 million) of available for sale securities for which the Company determined that objective
evidence of impairment existed.
During the year ended 31 December 2008, RMB2,023 million (2007: nil) of previously recognized impairment
losses relating to certain available for sale debt securities decreased. This decrease related objectively to certain
events occurring after the impairment was recognized and as such the previously recognized impairment loss was
reversed.
The proceeds from sales and maturities of available-for-sale securities and the gross realised gains or losses for the
years ended 31 December 2008 and 2007 were as follows:
Proceeds from sales and maturities of available-for-sale securities
Gross realised gains
Gross realised losses
2008
RMB million
2007
RMB million
80,139
17,029
(9,824)
79,287
20,256
(1,468)
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
22 NET FAIR VALUE GAINS/(LOSSES) ON ASSETS AT FAIR VALUE THROUGH INCOME
(HELD-FOR-TRADING)
Debt securities
Equity securities
Total
23
INSURANCE BENEFITS AND CLAIMS
For the year ended 31 December
2007
RMB million
2008
RMB million
287
(7,583)
366
18,477
(7,296)
18,843
Gross
RMB million
Ceded
RMB million
Net
RMB million
For the year ended 31 December 2008
Life insurance death and other benefits
Accident and health claims and claim adjustment expenses
Increase in long-term traditional insurance contracts
Interest credited to long-term investment type insurance contracts
Total insurance benefits and claims
For the year ended 31 December 2007
Life insurance death and other benefits
Accident and health claims and claim adjustment expenses
Increase in long-term traditional insurance contracts
Interest credited to long-term investment type insurance contracts
17,793
7,618
55,287
9,212
89,910
17,444
6,433
45,337
7,181
149
(16)
(65)
(6)
–
(87)
(14)
(90)
(3)
–
17,777
7,553
55,281
9,212
89,823
17,430
6,343
45,334
7,181
Total insurance benefits and claims
76,395
(107)
76,288
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
24 NET PROFIT BEFORE INCOME TAX EXPENSES
Net profit before income tax expenses is stated after charging the following:
Employee salary and welfare cost
Housing benefits
Contribution to the defined contribution pension plan
Depreciation
Exchange loss
Auditor’s remuneration
For the year ended 31 December
2007
RMB million
2008
RMB million
5,089
336
873
1,241
907
64
5,766
272
575
1,020
1,032
66
25 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 relate to the same fiscal authority.
(a) The amount of taxation charged to the consolidated income statement represents:
150
Current taxation-enterprises income tax
Deferred taxation
Taxation charges
For the year ended 31 December
2007
RMB million
2008
RMB million
2,077
(687)
8,730
(2,399)
1,390
6,331
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
25 TAXATION (continued)
(b) The reconciliation between the Group’s effective tax rate and the statutory tax rate of 25% in the PRC (for
the year ended 31 December 2007: 33%) is as follows:
For the year ended 31 December
2007
RMB million
2008
RMB million
Net profit before income tax expenses
Tax computed at the statutory tax rate
Non-taxable income
Additional tax liability from expenses not deductible for tax purposes
Other
Effect on change in statutory tax rate
(i)
(i)
(ii)
22,804
5,701
(4,530)
196
23
–
45,391
14,979
(6,802)
1,310
–
(3,156)
Income taxes at effective tax rate
1,390
6,331
(i) Non-taxable income mainly includes interest income from government bonds and fund distribution.
Expenses not deductible for tax purposes mainly include commission, brokerage and donation
expenses in excess of deductible amounts as allowed by relevant tax regulations.
151
(ii) On 16 March 2007, the National People’s Congress approved the Corporate Income Tax Law of the
People’s Republic of China (the new “CIT Law”). The new CIT Law reduces the domestic corporate
income tax rate from 33% to 25% with effect from 1 January 2008.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
25 TAXATION (continued)
(c) As at 31 December 2008, deferred income taxation is calculated in full on temporary differences under the
liability method using a principal taxation rate of 25%.
The movement on the deferred income tax liabilities account is as follows:
Group
As at 1 January
Deferred taxation charged to income statement
Deferred taxation charged to equity
As at 31 December
Company
152
As at 1 January
Deferred taxation charged to income statement
Deferred taxation charged to equity
As at 31 December
2008
RMB million
2007
RMB million
24,786
(687)
(11,530)
19,022
(2,399)
8,163
12,569
24,786
2008
RMB million
2007
RMB million
24,743
(724)
(11,507)
18,991
(2,401)
8,153
12,512
24,743
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
25 TAXATION (continued)
(d) The movement in deferred tax assets and liabilities during the year is as follows:
Deferred tax
Group
Long-term
insurance
contracts and
investment
contracts
Short-term
insurance
contracts
Total
RMB million RMB million RMB million RMB million RMB million RMB million
Investments
Others
DAC
As at 1 January 2007
(Charged)/credited to
income statement
(Charged)/credited to equity
6,051
658
(12,963)
(12,944)
176
(19,022)
(5,247)
1,902
(304)
–
5,238
(10,295)
2,502
230
210
–
2,399
(8,163)
As at 31 December 2007
2,706
354
(18,020)
(10,212)
386
(24,786)
As at 1 January 2008
(Charged)/credited to
income statement
(Charged)/credited to equity
2,706
354
(18,020)
(10,212)
386
(24,786)
153
(227)
(1,666)
54
–
3,750
14,188
(3,361)
(992)
471
–
687
11,530
As at 31 December 2008
813
408
(82)
(14,565)
857
(12,569)
Group
Deferred tax assets:
– deferred tax asset to be recovered after more than 12 months
– deferred tax asset to be recovered within 12 months
Subtotal
Deferred tax liabilities:
– deferred tax liability to be settled after more than 12 months
– deferred tax liability to be settled within 12 months
Subtotal
As at 31 December
2008
RMB million
2007
RMB million
5,714
3,917
9,631
8,042
1,027
9,069
(21,771)
(429)
(33,504)
(351)
(22,200)
(33,855)
Total net deferred income tax liabilities
(12,569)
(24,786)
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
25 TAXATION (continued)
(d) The movement in deferred tax assets and liabilities during the year is as follows (continued):
Deferred tax
Company
As at 1 January 2007
(Charged)/credited to
income statement
(Charged)/credited to equity
Long-term
insurance
contracts and
investment
contracts
Short-term
insurance
contracts
Total
RMB million RMB million RMB million RMB million RMB million RMB million
Investments
Others
DAC
6,051
658
(12,932)
(12,944)
176
(18,991)
(5,247)
1,902
(304)
–
5,240
(10,285)
2,502
230
210
–
2,401
(8,153)
As at 31 December 2007
2,706
354
(17,977)
(10,212)
386
(24,743)
154
At 1 January 2008
(Charged)/credited to
income statement
(Charged)/credited to equity
2,706
354
(17,977)
(10,212)
386
(24,743)
(227)
(1,666)
54
–
3,807
14,165
(3,361)
(992)
451
–
724
11,507
As at 31 December 2008
813
408
(5)
(14,565)
837
(12,512)
Company
Deferred tax assets:
– deferred tax asset to be recovered after more than 12 months
– deferred tax asset to be recovered within 12 months
Subtotal
Deferred tax liabilities:
– deferred tax liability to be settled after more than 12 months
– deferred tax liability to be settled within 12 months
Subtotal
As at 31 December
2008
RMB million
2007
RMB million
5,758
3,912
9,670
8,045
1,027
9,072
(21,753)
(429)
(33,464)
(351)
(22,182)
(33,815)
Total net deferred income tax liabilities
(12,512)
(24,743)
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
26 NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY
The net profit attributable to shareholders of the Company is dealt with in the financial statements of the
Company to the extent of RMB21,136 million (2007: RMB38,276 million).
27 EARNINGS PER SHARE
There is no difference between basic and diluted earnings per share. The basic and diluted earnings per share for
the year ended 31 December 2008 are based on the weighted average number of 28,264,705,000 ordinary shares
(for the year ended 31 December 2007: 28,264,705,000).
28 STOCK APPRECIATION RIGHTS
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 date of award and will not be exercisable
before the fourth anniversary of the date of award unless specified market or other conditions have been met. The
exercise price of stock appreciation rights will be the average closing price of the shares in the five trading days
prior to the date of the 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.
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 HK$5.33 and HK$6.83, 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. No stock appreciation right was exerciesed, forfeited or expired
in 2008. As at 31 December 2008, there are 55.71 million units outstanding (as at 31 December 2007: 55.71
million) and 55.71 million units exercisable (as at 31 December 2007: 36.62 million). As at 31 December 2008,
the amount of intrinsic value for the vested stock appreciation rights is RMB826 million (as at 31 December 2007:
RMB1,152 million).
155
The fair value of the stock appreciation rights is estimated on the date of valuation using lattice-based option
valuation models based on expected volatility from 60% to 70%, an expected dividend yield of no higher than
0.5% and risk-free interest rate from 0.2% to 0.3%.
As at 31 December 2008, the Company reversed compensation cost of RMB574 million (as at 31 December
2007: charged RMB846 million) which was included in administrative expenses. RMB703 million and RMB13
million were included in other liabilities (Note 18) for the units not exercised and exercised but not paid as
at 31 December 2008 (as at 31 December 2007: RMB1,277 million and RMB13 million respectively). The
unrecognized compensation cost of outstanding units is approximately RMB121 million as at 31 December 2008
(as at 31 December 2007: RMB471 million), which is expected to be recognized within the next year.
On 12 June 2007, another award of stock appreciation rights was approved by the Board of Directors of the
Company. The exercise price of the award was HK$25.71, the average closing price of shares in the five trading
days prior to 1 January 2007. As at 31 December 2008, the stock appreciation rights had not been granted.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
29 DIVIDENDS
Pursuant to the shareholders’ approval at the Annual General Meeting in May 2008, a final dividend of RMB0.42
per ordinary share totalling RMB11,871 million in respect of the year ended 31 December 2007 was declared and
was paid in July 2008. These dividends have been recorded in the consolidated financial statements for the year
ended 31 December 2008.
Pursuant to a resolution passed at the meeting of the Board of Directors on 25 March 2009, a final dividend of
RMB0.23 per ordinary share totalling approximately RMB6,501 million for the year ended 31 December 2008
was proposed for shareholders’ approval at the Annual General Meeting. The dividend has not been provided in
the consolidated financial statements for the year ended 31 December 2008.
30 SIGNIFICANT RELATED PARTY TRANSACTIONS
(a) Related parties
Related parties are those parties which have the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating decisions. Parties are
also considered to be related if they are subject to common control or common significant influence. The
table set forth below summarises the names of significant related parties and nature of relationship with the
Company as at 31 December 2008:
156
Significant related party
Relationship with the Company
China Life Insurance (Group) Company
China Life Asset Management Company Limited (“AMC”)
GDB
CLP&C
China Life Pension Company Limited (“Pension Company”)
Beijing Zhongbaoxin Real Estate Development Co., Limited
(“Zhongbaoxin”)
China Life Insurance (Overseas) Co.,Limited.
(“China Life Overseas”)
China Life Franklin Asset Management Co., Limited (“AMC HK”)
China Life Insurance Brokers Company Limited
China Life Investment Holding Company Limited (“IHC”)
The ultimate holding company
A subsidiary of the Company
An associate of the Company
An associate of the Company and under
common control of the ultimate holding company
A subsidiary of the Company
A subsidiary of a subsidiary of the ultimate
holding company
Under common control of the ultimate
holding company
A subsidiary of a subsidiary of the Company
An associate of the Company
Under common control of the ultimate
holding company
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
30 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(b) 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 2008.
157
Transactions with CLIC and its subsidiaries
Policy management fee income earned from CLIC
Asset management fee earned from CLIC
Rewards from CLIC for non-transferred policies
Dividends to CLIC
Property, plant and equipment purchased from CLIC
Property leasing expense charged by CLIC
Dividends to CLIC from AMC
Non-performing assets management fee earned from CLIC and others
Pre-operating salary expenses paid on behalf of Pension Company by CLIC
Asset management fee earned from China Life Overseas
Asset management fee earned from CLP&C
Property Insurance payments to CLP&C
Claim payment and others to the Company from CLP&C
Brokerage fee and others from CLIC&C
Additional capital contribution to CLP&C
Rentals, deposits and project payments to Zhongbaoxin
Property leasing expense charged by IHC
Asset management fee earned from IHC
Transaction with GDB
Interest income earned from GDB
Brokerage fee charged by GDB
Transaction with AMC
Asset management fee expense charged to the Company by AMC
Dividends to the company
Insurance payments and other payments to the Company by AMC
Brokerage fee to the Company
Transaction with Pension Company
Additional capital contribution to Pension Company
Expenses paid on behalf of Pension Company
Brokerage fee to the Company
Transaction with AMC HK
Investment management fee expense charged to the Company
by AMC HK
Note
(i)
(ii)
(iii)
(iv)
(ii)
(ii)
(v)
(vi)
(vii)
(iv)
(viii)
(ix)
(ii)
(ii)
(x)
(xi)
(x)
(ii)
For the year ended 31 December
2008
RMB million
2007
RMB million
1,298
243
88
8,116
–
33
93
16
–
15
2
29
46
79
1,200
18
33
21
361
25
362
140
1
1
1,855
79
1
7
1,426
104
70
2,705
495
66
42
–
9
15
4
24
–
–
–
16
–
–
–
140
7
390
62
–
–
–
8
–
–
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
30 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(b) Transactions with significant related parties (continued)
Note:
(i)
As part of the restructuring, CLIC transferred its entire branch services network to the Company. CLIC and
the Company have entered into an agreement on 24 December 2005 to engage the Company to provide policy
administration services to CLIC relating to the non-transferred policies. The Company, as a service provider, does
not acquire any rights or assume any obligations as an insurer under the non-transferred policies. In consideration
of the services provided under the agreement, CLIC will pay the Company a policy management fee based on
the estimated cost of providing the services, to which a profit margin is added. The policy management fee is
equal to, for each semi-annual payment period, the sum of (1) the number of non-transferred policies in force
that were within their policy term as at the last day of the period, multiplied by RMB8.00 per policy and (2)
2.50% of the actual premiums and deposits in respect of such policies collected during the period. The agreement
would be automatically renewed for a three year term subject to compliance with the Stock Exchange regulations
unless a written notice of non renewal is issued by the Company or the Group 180 days prior to the expiration
of the contract or the renewed term. The Company and the Group could modify term of policy management fee
based on the current market terms when renewing the contract. Otherwise, the original fee term would apply.
On 30 December 2008, the Company and CLIC signed a renewal agreement to extend the contract signed on
24 December 2005 to 31 December 2011, with all the terms unchanged. The policy management fee income is
included in other income in consolidated income statement.
158
(ii)
In December 2005, CLIC and the AMC have entered into an agreement, whereby CLIC agreed to pay the AMC
a service fee at the rate of 0.05% per annum. The service fee was calculated and payable on a monthly basis,
by multiplying the average of balance of book value of the assets under management (after deducting the funds
obtained and interests accrued from repurchase transactions) at the beginning and at the end of any given month
by the rate of 0.05%, divided by 12. Such rate was determined with reference to the applicable management fee
rate pre-determined for each specified category of assets managed by the AMC to arrive at a comprehensive service
fee rate. On 30 December 2008, CLIC and AMC signed a renewal agreement, which expanded the effective period
of the original agreement to 31 December 2011. The service fee is calculated in the same way of original agreement
and would be adjusted according to the performance.
In December 2005, The Company and the AMC have entered into a separate agreement, whereby the Company
agreed to pay the AMC a fixed service fee and a variable service fee. The fixed service fee is payable monthly and
is calculated with reference to the net asset value of the assets in each specified category managed by the AMC and
the applicable management fee rates pre-determined by the parties on an arm’s length basis. The variable service
fee equals to 10% of the fixed service fee per annum payable annually. The service fees were determined by the
Company and the AMC based on an analysis of the cost of service, market practice and the size and composition of
the asset pool to be managed. On 30 December 2008, the Company and AMC signed a renewal agreement, which
expanded the effective period of the original agreement to 31 December 2009. The variable service fee changes to
20% of the fixed service fee per annum payable annually and is adjusted according to the performance.
In March 2007, CLP&C and the AMC have entered into an agreement, whereby CLP&C agreed to pay the
AMC a fixed service fee and a variable service fee. The fixed service fee is payable monthly and the service fee is
calculated and payable on a monthly basis, by multiplying the average of balance of book value of the assets under
management at the beginning and at the end of any given month by the rate of 0.2%, divided by 12. The variable
service fee equals to 10% of the excess return per annum payable annually.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
30 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(b) Transactions with significant related parties (continued)
Notes: (continued)
(ii)
(continued)
In September 2007, China Life Overseas and the AMC HK have entered into an agreement, whereby China Life
Overseas agreed to pay the AMC HK a management service fee at a basis rate and calculated based on actual net
investment return yield.
In April 2007, Pension Company and the AMC have entered into an agreement, whereby Pension Company agreed
to pay the AMC a fixed service fee and a bonus for excess return per annum. The fixed service fee is calculated and
payable on a monthly basis, by multiplying the average of balance of book value of the assets under management at
the beginning and at the end of any given month by the rate of 0.05%, divided by 12. The bonus equals to 10% of
the excess return per annum payable annually.
In May 2008, the Company and the AMC HK have entered into a “Offshore Investment Management Service
Agreement for Entrusted Fund”, whereby the Company agreed to pay AMC HK Primary and Secondary Market
asset management fee. The fixed asset management fee is calculated on a monthly basis, and paid quarterly. Asset
management fee for the Primary market is calculated on a rate of 2% of the total investment realised gains. Asset
management fee for the Secondary market is calculated by a fixed rate of 0.45%.
The asset management fee charged to the Company and Pension Company by AMC and AMC HK is eliminated
159
through the consolidated income statement.
(iii) The Company assisted CLIC to mitigate business risk arising from non-transferred policies, and received in 2008
a fee income of RMB88 million (2007: RMB70 million) from CLIC as the reward for such non-transferrable
policies.
(iv)
In January 2007, the Company has entered into a property leasing agreement with CLIC, pursuant to which CLIC
agreed to lease to the Company some of its owned and leased buildings. The annual rent payable by the Company
to CLIC in relation to the CLIC owned properties is determined by reference to market rent or, the costs incurred
by CLIC in holding and maintaining the properties, plus a margin of approximately 5%. The annual rent payable
by the Company to CLIC in relation to the CLIC leased properties is determined by reference to the rent payable
under the head lease plus the actual costs incurred by CLIC arising in connection with the subletting of the
properties. The Company has directly paid the relevant rental expenses raised from CLIC leased properties to the
third-party instead of CLIC. The rental was payed on a semi annual basis and the rent of the buildings subleased by
CLIC was payed directly to the owner. The agreement will expire on December 2009.
In November 2008, the Company, CLIC and IHC entered into a property leasing transfer agreement. According
to the agreement, CLIC has effectively transferred the rights and obligations of the property leasing agreement to
IHC in June 2008. Apart from the transfer of the rights and obligations, the terms of the original property leasing
agreement remains unchanged.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
30 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(b) Transactions with significant related parties (continued)
Notes: (continued)
(v)
In November 2008, the Company and CLP&C entered into an agreement, whereby CLP&C entrusted the
Company to act as an agent to sell appointed insurance products in authorized areas. The service fee is determined
according to cost (tax included) added marginal profit.
(vi)
In May 2008, the Company and CLP&C entered into an agreement, whereby CLP&C’s share capital would
increase RMB3,000 million, of which the Company subscribed for RMB1,200 million. The subscription has been
paid on 26 May, 2008. CIRC approved the change of registered capital of CLP&C on 6 July, 2008.
(vii) The Group made certain project payments to third parties through Zhongbaoxin and paid other miscellaneous
expenditures mainly comprised of rentals and deposits to Zhongbaoxin.
(viii) In December 2007, the Company and IHC entered into a trust agreement on CLIC’s residual asset management,
whereby IHC entrusted the Company to manage CLIC’s fixed assets and non-performing assets. The initial
agreement between IHC and CLIC entitled IHC the right to transfer the residual assets to a third party. Persuant
to the trust agreement, IHC is subject to pay a basic management fee, a third party management fee and clearance
brokerage fee for the residual assets. Basic fee for fixed asset is calculated on a rate of 0.21%. The asset management
fee for non-performing asset is calculated on a rate of 0.24%. Payment is on a semi annual basis. Third party
management fee is for the necessary expense payable to administrative organizations, intermediate organizations
and third party. Clearance brokerage fee in 2008 is calculated by the rate of 12% on net basis of cash receipt and
disposal cost.
(ix)
In April 2007, the Company and GDB entered into a five year individual bank insurance agency agreement. All
insurance products suitable for delivery through bank channels are involved in the agreement. GDB will provide
services, including selling insurance products, receiving premiums, paying benefits. The company has agreed to
pay commission fees as follows: 1) A monthly service fee, calculated on a monthly basis, by multiplying total
premium received and a fixed commission rate; or 2) A monthly commission fee, calculated on a monthly basis, by
multiplying number of policy being handled and fixed commission rate which is not more than RMB1 per policy,
where GDB handles premiums receipts and benefits payments. The agreement will expire in five years.
160
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
30 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(b) Transactions with significant related parties (continued)
Notes: (continued)
(x)
In November 2007, the Company and Pension Company entered into an agreement, whereby Pension Company
entrusted the Company to sale enterprise annuity fund and provide customer service. The service fee is calculated
on a rate of 80% of first year management fee. The agreement term is one year and is subject to an automatic
renewal for one year.
In June 2007, the Company and AMC entered into an agreement, whereby AMC entrusted the Company to
provide market developing service and enterprise annuity asset management service. The service fee is calculated by
the first year actual asset management fee collected deducted by risk reserve and other related fees. The agreement
expired on 31 December 2008.
(xi)
In June 2008, the Company and China Credit Trust Co., Ltd (“CCTIC”) made capital injection to Pension
Company. Pension Company’s share capital was increased to RMB2,500 million after the capital contribution. As
a result, the ownership percentage of the Company, CLIC, AMC and CCTIC was 87.4%, 6.0%, 4.8% and 1.8%,
respectively.
(c) Amounts due from/to significant related parties
The following table summarises the resulting balance due from and to significant related parties. The
balance is non-interest bearing, unsecured and has no fixed repayment terms except for the deposits in GDB.
161
Amount due from CLIC (Note 13)
Amount due to CLIC
Amount due from China Life Overseas
Amount due from CLP&C
Amount due to CLP&C
Amount deposited with GDB
Amount due from Zhongbaoxin
Amount due to Zhongbaoxin
Amount due from IHC
Amount due to IHC
As at 31 December As at 31 December
2007
RMB million
2008
RMB million
684
–
8
2
(28)
7,114
1
(8)
21
(33)
739
(40)
13
5
–
6,832
1
(5)
–
–
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
30 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(d) Key management compensation
Salaries and other short-term employee benefits
Termination benefits
Post-employment benefits
Other long-term benefits
Total
For the year ended 31 December
2007
RMB million
2008
RMB million
24
–
–
–
24
27
–
–
–
27
162
(e) Transactions with state-owned enterprises
Under HKAS 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 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.
As at 31 December 2008, more than 76% (as at 31 December 2007: more than 68%) of bank deposits were
with state-owned banks; approximately 87% (as at 31 December 2007: approximately 96%) of the issuers
of corporate bonds and subordinated bonds held by the Group were state-owned enterprises. For the year
ended 31 December 2008, more than 70% (for the year ended 31 December 2007: more than 74%) of the
group insurance business of the Group were with state-owned enterprises; approximately 83% (for the year
ended 31 December 2007: approximately 83%) of bank assurance brokerage charges of RMB5,883 million
(for the year ended 31 December 2007: RMB2,085 million) were paid to state-owned banks and post office;
almost all of the reinsurance agreements of the Group are entered into with a state-owned reinsurance
company; more than 76% (for the year ended 31 December 2007: more than 68%) of bank deposit interest
income were from state-owned banks.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
31 SHARE CAPITAL
Registered, authorized, issued
and fully paid
Ordinary shares of RMB1 each
As at 31 December 2008
As at 31 December 2007
No. of shares
RMB million
No. of shares
RMB million
28,264,705,000
28,265
28,264,705,000
28,265
As at 31 December 2008, the Company’s share capital is as follows:
Owned by CLIC
Owned by other shareholders
Including: Domestic listed
Overseas listed
Total
As at 31 December 2008
No. of shares
No. of shares
19,323,530,000
8,941,175,000
1,500,000,000
7,441,175,000
19,324
8,941
1,500
7,441
28,264,705,000
28,265
163
Overseas listed shares are traded on the Stock Exchange of Hong Kong and the New York Stock Exchange. The
shares owned by CLIC are not transferable until 11 January 2010.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
32 RESERVES
Group
As at 1 January 2007
Unrealised gains/(losses)
– arising from available-for-sale
securities during the period
– reclassification adjustment for losses
included in income statement
– impact from available-for-sale securities
on other assets and liabilities
Subtotal before tax
– tax on unrealised gains
– arising from share of results of associates
Appropriation to reserve
Change in the year
164
Additional Paid
in Capital
RMB million
Unrealised
gains/(losses)
RMB million
Reserve
Fund
RMB million
(a)
General
reserve
RMB million
(b)
Exchange
differences on
translating
foreign
operations
RMB million
Others
RMB million
Total
RMB million
61,086
13,546
2,736
–
–
–
–
–
–
–
–
64,328
(14,658)
(10,568)
39,102
(8,159)
(30)
–
30,913
–
–
–
–
–
–
–
2,792
2,792
2,792
–
–
–
–
–
–
1,009
–
1,009
3,801
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1)
(1)
(1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(9)
(9)
(9)
77,368
64,328
(14,658)
(10,568)
39,102
(8,159)
(30)
6,544
37,457
114,825
(61,534)
4,853
10,631
(46,050)
11,512
291
4,810
(10)
(29,447)
85,378
–
–
–
–
–
–
3,752
3,752
6,488
–
–
–
–
–
–
3,801
–
3,801
As at 31 December 2007
61,086
44,459
Unrealised gains/(losses)
– arising from available-for-sale
securities during the period
– reclassification adjustment for gains
included in income statement
– impact from available-for-sale securities
on other assets and liabilities
Subtotal before tax
– tax on unrealised losses
– arising from share of results of associates
Appropriation to reserve
Other
Change in the year
–
–
–
–
–
–
–
–
–
(61,534)
4,853
10,631
(46,050)
11,512
291
–
–
(34,247)
As at 31 December 2008
61,086
10,212
10,289
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
32 RESERVES (continued)
Company
Additional paid
in capital
RMB million
Unrealised
gains/(losses)
RMB million
Reserve
fund
RMB million
(a)
General
reserve
RMB million
(b)
Total
RMB million
As at 1 January 2007
Unrealised gains/(losses)
– arising from available-for-sale
securities during the period
– reclassification adjustment for
losses included in income statement
– impact from available-for-sale securities
on other assets and liabilities
Subtotal before tax
– tax on unrealised gains
Appropriation to reserve
Change in the year
As at 31 December 2007
Unrealised gains/(losses)
– arising from available-for-sale
securities during the period
– reclassification adjustment for gains
included in income statement
– impact from available-for-sale
securities on other assets and liabilities
Subtotal before tax
– tax on unrealised gains
Appropriation to reserve
Change in the year
As at 31 December 2008
60,007
13,512
2,688
–
–
–
–
–
–
–
64,222
(14,596)
(10,568)
39,058
(8,153)
–
30,905
60,007
44,417
–
–
–
–
–
–
–
(61,444)
4,789
10,631
(46,024)
11,507
–
(34,517)
–
–
–
–
–
3,752
3,752
6,440
–
–
–
–
–
3,801
3,801
–
–
–
–
–
–
2,792
2,792
76,207
64,222
(14,596)
(10,568)
39,058
(8,153)
6,544
37,449
2,792
113,656
165
–
–
–
–
–
1,009
(61,444)
4,789
10,631
(46,024)
11,507
4,810
1,009
(29,707)
60,007
9,900
10,241
3,801
83,949
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
32 RESERVES (continued)
(a) Under relevant PRC law, the Company is required to transfer 10% of its net profit to statutory reserve
fund. The Company appropriated 10% of net profit which is RMB1,009 million to statutory reserve fund
for the year ended 31 December 2008. In May 2008, approved by Annual General Meeting, the Company
appropriated 10% of net profit for the year ended 31 December 2007 which is RMB2,792 million to
discretionary welfare fund. The total appropriation to discretionary reserve fund and statutory welfare fund
in 2008 is RMB3,801million (for the year ended 31 December 2007: RMB3,752 million).
(b) Pursuant to “Financial Standards of Financial Enterprises-Implementation Guide” issued by Ministry of
Finance of People’s Republic of China on 30 March 2007, for the year ended 31 December 2008, the
Company appropriated 10% of net profit which is RMB1,009 million (for the year ended 31 December
2007: RMB2,792 million) to general reserve for future uncertain disasters, which can not be used for
dividend distribution or share capital increment.
Under related PRC law, dividends may be paid only out of distributable profits. Distributable profits generally
means the Company’s after-tax profits as determined under accounting standards generally accepted in PRC
or HKFRS, whichever is lower, less any recovery of accumulated losses and allocations to statutory funds that
the Company is required to make, subject to further regulatory restrictions. Any distributable profits that are
not distributed in a given year are retained and available for distribution in subsequent years. The amount of
distributable retained earnings based on the above is RMB28,650million as at 31 December 2008 (as at 31
December 2007: RMB31,881 million).
166
33 CONTINGENCIES
The following is a summary of the significant contingent liabilities:
Group
Company
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
Pending lawsuits (b)
96
66
96
66
(a) The Company and certain of its past directors (the “defendants”) have been named in nine putative class
action lawsuits filed in the United States District Court for the Southern District of New York between
16 March 2004 and 14 May 2004. The lawsuits have been ordered to be consolidated and restyled In re
China Life Insurance Company Limited Securities Litigation, NO.04 CV 2112 (TPG). Plaintiffs filed a
consolidated amended complaint on 19 January 2005, which names the Company, Wang Xianzhang (past
director), Miao Fuchun (past director) and Wu Yan (past director) as defendants. The consolidated amended
complaint alleges that the defendants named therein violated Section 10(b) and 20(a) of the Securities
Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The Company has engaged U.S. counsel to
contest vigorously on the lawsuits. On 3 September 2008, the U.S. District Court for the Southern District
of New York granted summary judgement to the Company, finding that the plaintiffs’ claims lacked merit
and dismissed the complaint. The plaintiffs then filed a notice of appeal to the U.S. Court of Appeals for the
Second Circuit on 14 October 2008. Final resolution refers to Note 38. No provision has been made with
respect to these lawsuits.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
33 CONTINGENCIES (continued)
(b) The Group has been named in a number of lawsuits arising in the ordinary course of business. Provision has
been made for the probable losses to the Group on those claims when management can reasonably estimate
the outcome of the lawsuits taking into account the legal advice. No provision has been made for pending
lawsuits when the outcome of the lawsuits cannot be reasonably estimated or management believes a loss is
not probable.
34 COMMITMENTS
(a) Capital commitments
i)
Capital commitments for property, plant and equipment
Group
Company
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
Contracted but not provided for
878
310
620
300
ii)
Capital commitments to acquire Bohai Venture Capital Fund
The Group committed to contribute RMB500 million to Bohai Venture Capital Fund and RMB5
million to Bohai Venture Capital Fund Management Company of which RMB180 million had been
paid at 31 December 2008. The remaining RMB325 million will be paid when called.
167
(b) Operating lease commitments
The future minimum lease payments under non-cancelable operating leases are as follows:
Group
Company
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
As at 31
December 2008
RMB million
As at 31
December 2007
RMB million
Land and buildings
Not later than one year
Later than one year but not
later than five years
Later than five years
Total
238
383
44
665
206
316
29
551
232
381
44
657
202
314
29
545
The operating lease payments charged to the consolidated income statement for the year ended 31 December
2008 was RMB482million (for the year ended 31 December 2007: RMB391 million).
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
35
INVESTMENTS IN SUBSIDIARIES
Company
As at 31 December
2008
RMB million
2007
RMB million
Unlisted investments at cost:
2,785
930
Name
Place of incorporation
and operation
Principal activities
Percentage of equity
interest held
China Life Asset Management
Company Limited
China Life Franklin Asset Management
Co., Limited
China Life Pension Company Limited
People’s Republic of China
Asset management
60% directly
Hong Kong, China
Asset management
50% indirectly
People’s Republic of China
Pension and annuity
92.2% directly
and indirectly
36 DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENT’S REMUNERATION
168
(a) Directors’ emoluments
The aggregate amounts of emoluments paid to directors of the Company for the year ended 31 December
2008 are as follows:
Discretionary
bonuses
RMB
Inducement
fees
RMB
Other
benefits
RMB
Compensation
for loss of office
as director
RMB
290,000
280,000
330,000
330,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
RMB
1,680,000
1,600,000
1,510,000
1,510,000
–
–
–
300,000
320,000
300,000
320,000
320,000
320,000
Fee
RMB
–
–
–
–
–
–
–
300,000
320,000
300,000
320,000
320,000
320,000
Salaries
RMB
1,390,000
1,320,000
1,180,000
1,180,000
–
–
–
–
–
–
–
–
–
Name
Yang Chao
Wan Feng
Lin Dairen (a)
Liu Yingqi (a)
Miao Jianmin (a)
Shi Guoqing
Zhuang Zuojin
Long Yongtu
Sun Shuyi
Ma Yongwei
Chau Tak Hay
Cai Rang
Ngai Wai Fung
Notes:
(a)
Appointed on 27 October 2008
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
36 DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENT’S REMUNERATION
(continued)
(a) Directors’ emoluments (continued)
The aggregate amounts of emoluments paid to directors of the Company for the year ended 31 December
2007 are as follows:
Discretionary
bonuses
RMB
Salaries
RMB
Inducement
fees
RMB
Employer’s Compensation
Other contribution to for loss of office
as director
RMB
benefits pension scheme
RMB
RMB
640,000
53,333
613,625
–
–
–
–
–
–
–
–
1,325,333
1,105,722
1,248,425
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
21,164
1,640
21,164
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
RMB
1,986,497
1,160,695
1,883,214
–
–
250,000
270,000
250,000
270,000
270,000
270,000
169
Fee
RMB
–
–
–
–
–
250,000
270,000
250,000
270,000
270,000
270,000
Name
Yang Chao
Wu Yan (a)
Wan Fen
Shi Guoqing
Zhuang Zuojin
Long Yongtu
Sun Shuyi
Ma Yongwei
Chau Tak Hay
Cai Rang
Ngai Wai Fung
Notes:
(a)
Resigned on 26 January 2007
In addition to the directors’ emoluments disclosed above, certain directors of the Company receive
emoluments from CLIC, amount of which has not been apportioned between their services to the Company
and their services to CLIC.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
36 DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENT’S REMUNERATION
(continued)
(b) Supervisors’ emoluments
The aggregate amounts of emoluments paid to supervisors of the Company for the year ended 31 December
2008 are as follows:
Name
Xia Zhihua
Wu Weimin
Qing Ge
Yang Hong
Tian Hui
Salaries
RMB
1,180,000
603,400
603,400
553,000
–
Discretionary
bonuses
RMB
Inducement
fees
RMB
330,000
196,600
196,600
237,000
–
–
–
–
–
–
Other
benefits
RMB
–
–
–
–
150,000
Total
RMB
1,510,000
800,000
800,000
790,000
150,000
170
The aggregate amounts of emoluments paid to supervisors of the Company for the year ended 31 December
2007 are as follows:
Name
Xia Zhihua
Wu Weimin
Qing Ge
Yang Hong
Tian Hui
Discretionary
bonuses
RMB
Salaries
RMB
Inducement
fees
RMB
533,500
331,500
334,208
344,500
–
1,095,367
499,900
500,775
463,417
–
–
–
–
–
–
Employer’s
contribution
to pension
scheme
RMB
21,164
21,164
21,164
21,164
–
Other
benefits
RMB
–
–
–
–
120,000
Total
RMB
1,650,031
852,564
856,147
829,081
120,000
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
36 DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENT’S REMUNERATION
(continued)
(c) Five highest paid individuals
The five individuals whose emoluments were the highest in the Company include four (2007: two) directors
whose emoluments are reflected in the analysis presented above.
Details of remuneration of the remaining one (2007: three) highest paid individuals are as follows:
Fees
Basic salaries, housing allowances, and other allowances and benefits in kind
The emoluments fell within the following bands:
RMB1,500,000 – RMB2,000,000
RMB4,000,000 – RMB4,500,000
RMB6,000,000 – RMB6,500,000
2008
RMB
2007
RMB
4,347,230
9,619,666
4,347,230
9,619,666
Number of individuals
2008
2007
171
–
1
–
2
–
1
No emoluments have been paid by the Company to the directors or any of the five highest paid individuals
as an inducement to join or upon joining the Company or as compensation for loss of office.
37 ULTIMATE HOLDING COMPANY
The directors regard China Life Insurance (Group) Company, a company incorporated in the PRC, as being the
ultimate holding company.
China Life Insurance Company Limited Annual Report 2008
Notes to the Consolidated Financial Statements
For the year ended 31 December 2008
38 SUBSEQUENT EVENTS
In February 2009, the Company, AMC and CLIC entered into an agreement, whereby AMC’s share capital would
increase RMB2,000 million, in form of cash injection and retained earnings conversion. The Company subscribed
for RMB1,200 million, which is 60% of the additional capital. The subscription has been paid on 16 February
2009 in form of RMB1,080 million cash and RMB120 million retained earnings conversion. MOF approved the
change of registered capital.
For the lawsuit described in Note 33 (a), on 8 January 2009, the plaintiffs filed a motion for voluntary dismissal of
that appeal, which motion was granted by the Second Circuit Court on the same day, thus making the New York
Southern District Court’s dismissal of their claims final.
172
China Life Insurance Company Limited Annual Report 2008
Supplementary Information for ADS Holders
R E C O N C I L I A T I O N O F H K F R S A N D U N I T E D S T A T E S G E N E R A L L Y A C C E P T E D
ACCOUNTING PRINCIPLES (“US GAAP”)
(a) The consolidated financial statements of the Group have been prepared in accordance with HKFRS, which differs
in certain significant respects from US GAAP. Difference between HKFRS and US GAAP, which may have
significant impacts on consolidated net profit or loss and consolidated shareholders’ equity, are described below.
Impairment Reversal
The impairment reversal as disclosed in Note 21 is due to certain events occurring after the impairment was
recognized. Under US GAAP, if an impairment loss is recognized, the adjusted carrying amount of a long-lived
asset shall be its new cost basis. Restoration of a previously recognized impairment loss is prohibited. For the year
ended 31 December 2008, this difference results in a RMB1,834 million decrease in the US GAAP net profit and
a RMB1,834 million increase to the US GAAP equity reserves balance.
Deferred Taxes and Tax Reversal
The tax rate changes as disclosed in Note 25(b) (ii) are accounted for consistently with the accounting for the
transaction itself. Therefore, if the underlying temporary difference and related deferred taxes have been recorded
in equity, a change due to tax law or tax rates is recorded in equity as well. Under US GAAP, the impact of
changes in tax rate or tax law is included in net income even if the original deferred taxes have been recognized in
equity. For the year ended 31 December 2007, this difference results in a RMB4,746 million increase in the US
GAAP net profit and a corresponding RMB4,746 million decrease to the US GAAP equity reserves balance. The
event doesn’t have impact for the year ended 31 December 2008.
173
There are no other material differences between HKFRS and US GAAP that had an effect on shareholders’ equity
as at 31 December 2008 and 2007.
(b) Disclosures under FAS 157
In September 2006, the FASB issued FAS 157, “Fair Value Measurements”. FAS 157 defines fair value, establishes
a framework for measuring fair value and expands disclosure requirements regarding fair value measurements but
does not change existing guidance about whether an asset or liability is recorded at fair value. FAS157 is effective
for financial statements issued for fiscal years beginning after 15 November 2007, and interim periods within those
fiscal years.
In February 2008, the FASB issued FSP 157-2, which delayed the effective date of SFAS No. 157 for all non-
financial assets and non-financial liabilities to fiscal years beginning after 15 November 2008, and interim
periods within those fiscal years. In October 2008, the FASB issued FSP 157-3, “Determining the Fair Value of
a Financial Asset When the Market for That Asset Is Not Active”, which clarifies how FAS 157 should be applied
when valuing securities in markets that are not active.
Fair value is defined as 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 Group recognized financial assets at fair
value through income and available-for-sale securities at fair value on a recurring basis in the balance sheet.
China Life Insurance Company Limited Annual Report 2008
Supplementary Information for ADS Holders
R E C O N C I L I A T I O N O F H K F R S A N D U N I T E D S T A T E S G E N E R A L L Y A C C E P T E D
ACCOUNTING PRINCIPLES (“US GAAP”) (continued)
(b) Disclosures under FAS 157 (continued)
The Group management is responsible for the determination of the value of the financial assets carried at fair
value and the supporting methodologies and assumptions. With respect to debt securities that do not have market
closing price from recent transactions, the management utilizes the fair value measurement for individual securities
from the independent third-party valuation service provider, through the use of widely accepted valuation models.
The inputs used by valuation service providers include, but are not limited to, interest rate yield curves, credit
spreads and other market-observable information. The Group employs specific control processes to determine the
reasonableness of the fair values of the Group’s financial assets. The control processes are designed to ensure that
the value based on quoted prices or received from the valuation service provider are appropriate.
According to the FAS 157, the Group establishes a framework that includes a hierarchy used to classify the
inputs used in measuring fair value for financial assets. The fair value hierarchy prioritizes the inputs to valuation
techniques used to measure fair value into three broad levels. The level in the fair value hierarchy within which
the fair value measurement falls is determined based on the lowest level input that is significant to the fair value
measurement. The levels of the fair value hierarchy are as follows:
174
Level 1: Fair value is based on unadjusted quoted prices in active markets that are accessible to the Group for
identical assets. These generally provide the most reliable evidence and are used to measure fair value whenever
available. Active markets are defined as having the following for the asset being measured: i) sufficient frequency
and volume, ii) current prices, iii) price quotes not varying substantially among market makers, iv) narrow bid or
ask spreads and v) most information publicly available. The Group’s Level 1 assets primarily include certain debt
securities, equity securities and derivative contracts that are traded in an active exchange market or inter-bank
market. Prices are obtained from readily available sources for market transactions involving identical assets.
Level 2: Fair value is based on significant inputs, other than Level 1 quoted price, 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. Level 2 inputs include: i) quoted market prices for similar assets in active markets;
ii) quoted market prices in markets that are not active for identical or similar assets and other market observable
inputs. The Group’s Level 2 assets 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, analyze 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. Fair value provided by valuation service providers are subject to validation
by management.
Under certain conditions, the Group may not received price from independent third party pricing services. In this
instance, the Group may choose to apply internally developed values to the assets being measured. In such cases,
the valuations are generally classified as Level 3. Key inputs involved in internal valuation services include, but are
not limited to market price from recently completed transactions, interest yield curves, credit spreads, currency
rates as well as assumptions made by management based on judgements and experiences.
China Life Insurance Company Limited Annual Report 2008
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R E C O N C I L I A T I O N O F H K F R S A N D U N I T E D S T A T E S G E N E R A L L Y A C C E P T E D
ACCOUNTING PRINCIPLES (“US GAAP”) (continued)
(b) Disclosures under FAS 157 (continued)
Level 3: Fair value is based on at least one or more significant unobservable inputs for the assets being measured.
These unobservable inputs reflect the Group’s view about the assumptions used by market participants in pricing
the assets being measured. The Group’s Level 3 assets primarily include: subordinated debts, certain corporate and
government agency bonds and certain equity securities. Prices are determined using valuation methodologies such
as discounted cash flow models and other similar techniques.
(i) The table below presents the balances of assets measured at fair value on a recurring basis:
Fair Value Measurements at 31 December, 2008
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Debt securities
– available-for-sale securities
– at fair value through income
(held-for-trading)
Equity securities
– available-for-sale securities
– at fair value through income
(held-for-trading)
82,506
273,329
2,001
5,735
67,365
6,341
347
7
Total
158,213
279,418
385
–
1,007
15
1,407
175
Total
356,220
7,736
68,719
6,363
439,038
China Life Insurance Company Limited Annual Report 2008
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ACCOUNTING PRINCIPLES (“US GAAP”) (continued)
(b) Disclosures under FAS 157 (continued)
(ii) The following tables provide a summary of the changes in fair value of Level 3 assets for the year of 2008,
as well as the portion of gains or losses recorded in income for the year of 2008 related to the Level 3 assets
that remained in the consolidated balance sheet at 31 December, 2008::
Fair Value Measurements Using Significant Unobservable Inputs(Level 3)
Debt securities
Equity securities
Financial
assets at fair
value through
income
(held-for-trading)
Available-
for-sales
securities
Financial
assets at fair
value through
income
(held-for-trading)
Available-
for-sales
securities
153
–
–
(121)
–
328
647
1,007
(15)
–
–
–
30
15
Total
453
(15)
(118)
(4)
328
763
1,407
(121)
(15)
(133)
176
As at 1 January 2008
Total gains/(losses) (realized/unrealized):
Included in earnings:
Net fair value losses on assets
at fair value through income
Included in other comprehensive income
Net investment loss
Purchases and sales, issurance and
settlements-net
Transfers in and/or out of Level 3
As at 31 December 2008
Change in unrealized gains or
losses relating to assets still held
at 31 December, 2008 included
in earnings and other
comprehensive income
300
–
3
(4)
–
86
385
3
–
–
–
–
–
–
–
–
China Life Insurance Company Limited Annual Report 2008
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ACCOUNTING PRINCIPLES (“US GAAP”) (continued)
(c) Disclosures about available-for-sale securities held continuously in an unrealised loss position for the time periods.
As at 31 December 2008
More than
6 months but
less than 12
months
RMB million
More
than 12
months
RMB million
Less
than
6 months
RMB million
Total
RMB million
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subordinate bonds/debts
Equity securities
Total temporarily
Fair value
Unrealised losses
Fair value
Unrealised losses
Fair value
Unrealised losses
Fair value
Unrealised losses
Fair value
Unrealised losses
1,612
(166)
14,552
(483)
4,486
(84)
977
(15)
–
–
300
(4)
–
–
74
(3)
2,114
(29)
3,162
(57)
–
–
–
–
–
–
1,612
(166)
14,926
(490)
9,762
(170)
977
(15)
36,127
(11,148)
177
25,230
(5,943)
10,897
(5,205)
impaired securities
Fair value
46,857
13,311
3,236
63,404
Unrealised losses
(6,691)
(5,238)
(60)
(11,989)
China Life Insurance Company Limited Annual Report 2008
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ACCOUNTING PRINCIPLES (“US GAAP”) (continued)
(c) Disclosures about available-for-sale securities held continuously in an unrealised loss position for the time periods
(continued)
As at 31 December 2007
More than
6 months but
less than 12
months
RMB million
More
than 12
months
RMB million
Less
than
6 months
RMB million
Total
RMB million
Debt securities
Government bonds
Government agency bonds
178
Corporate bonds
Subordinate bonds/debts
Equity securities
Total temporarily
Fair value
Unrealised losses
Fair value
Unrealised losses
Fair value
Unrealised losses
Fair value
Unrealised losses
Fair value
Unrealised losses
15,596
(300)
31,872
(1,366)
21,308
(1,498)
5,852
(626)
4,324
(537)
29,715
(2,432)
21,289
(4,072)
11,340
(1,344)
415
(94)
1
–
impaired securities
Fair value
78,952
62,760
Unrealised losses
(4,327)
(7,942)
–
–
–
–
–
–
–
–
–
–
–
–
45,311
(2,732)
53,161
(5,438)
32,648
(2,842)
6,267
(720)
4,325
(537)
141,712
(12,269)
Available-for-sale securities have generally been identified as temporarily impaired if their amortised cost as at 31
December 2008 was greater than their fair value, resulting in an unrealised loss. Unrealised losses in respect of
financial assets at fair value through income have been included in net income and have been excluded from the
above table. Unrealised losses from debt securities are largely due to interest rate fluctuations. Based on a review
of these financial assets, it is believed that the contractual terms of these available-for-sale securities will be met.
A total 71 debt securities positions and 270 equity securities positions were in an unrealised loss position at 31
December 2008 of which 49 debt securities and 191 equity securities positions were in a continuous loss position
for less than 6 months, 4 debt securities and 113 equity security positions for more than 6 months but less than 12
months, 26 debt securities positions for more than 12 months.
China Life Insurance Company Limited Annual Report 2008
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R E C O N C I L I A T I O N O F H K F R S A N D U N I T E D S T A T E S G E N E R A L L Y A C C E P T E D
ACCOUNTING PRINCIPLES (“US GAAP”) (continued)
(d) Comprehensive income
Net profit attributable to shareholders of the Company
Total other comprehensive income, unrealised gains, net of tax
Total comprehensive income
(e) Recently issued US accounting standards
2008
RMB million
2007
RMB million
19,443
(32,413)
43,625
26,167
(12,970)
69,792
In September 2006, the FASB issued FAS 157, “Fair Value Measurements”. Details of FAS 157 has been described
in Note (b). The Group adopted FAS 157 on 1 January 2008 except for non-financial assets and liabilities
recognized or disclosed at fair value on a recurring basis, and disclosed financial information under FAS 157 on
the Group’s consolidated financial statement.
In February 2007, the FASB issued FAS 159, “The Fair Value Option for Financial Assets and Financial
Liabilities”. FAS 159 permits entities to choose to measure at fair value for certain financial instruments and
certain other items those are not currently required to be measured at fair value. Subsequent changes in fair value
for designated items will be required to be reported in earnings in the current period. FAS 159 also establishes
presentation and disclosure requirements for similar types of assets and liabilities measured at fair value. FAS 159
is effective for financial statements issued for accounting periods beginning on or after 15 November 2007. The
Group adopted this guidance on 1 January 2008 and it did not have a material effect on the Group’s consolidated
financial position or results of operations.
179
In April 2007, the FASB issued FSP Interpretation (FIN) 39-1, “Amendment of FASB Interpretation No.
39.” FSP FIN 39-1 modifies FIN No. 39, “Offsetting of Amounts Related to Certain Contracts,” and
permits companies to offset cash collateral receivables or payables with net derivative positions under certain
circumstances. This FSP is effective for fiscal years beginning after 15 November 2007 and is required to be
applied retrospectively to financial statements for all periods presented. The Group adopted this guidance on 1
January 2008 and it did not have a material effect on the Group’s consolidated financial position or results of
operations.
China Life Insurance Company Limited Annual Report 2008
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ACCOUNTING PRINCIPLES (“US GAAP”) (continued)
(e) Recently issued US accounting standards (continued)
In December 2007, the FASB issued FAS 160, “Noncontrolling Interests in Consolidated Financial Statements.”
FAS 160 will change the accounting for minority interests, which will be recharacterized as noncontrolling
interests and classified by the parent company as a component of equity. The noncontrolling interests’ share of
subsidiary income should be reported as a part of consolidated net income with disclosure of the attribution of
consolidated net income to the controlling and noncontrolling interests on the face of the consolidated statement
of income. This statement is effective for fiscal years beginning on or after 15 December 2008, with early adoption
prohibited. Upon adoption, FAS 160 requires retroactive adoption of the presentation and disclosure requirements
for existing minority interests and prospective adoption for all other requirements. The Group is currently
assessing the impact of FAS 160 on the Group’s consolidated financial position and results of operations.
In December 2007, the FASB issued FAS 141R, “Business Combinations.” This statement addresses the
accounting for business acquisitions with a number of changes. Among other things, the new standard broadened
the transactions or events that are considered business combinations. It requires that all acquisition-related costs
be expensed as incurred, and that all restructuring costs related to acquired operations be expensed as incurred.
This new standard also addresses the current and subsequent accounting for assets and liabilities arising from
contingencies acquired or assumed and, for acquisitions both prior and subsequent to 31 December 2008, requires
the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a
business combination either in income from continuing operations in the period of the combination or directly
in contributed capital, depending on the circumstances. This statement is effective for fiscal years beginning on or
after 15 December 2008, with early adoption prohibited, and generally applies to business acquisitions completed
after 31 December 2008. The Group is currently assessing the impact of FAS 141R on the Group’s consolidated
financial position and results of operations.
In February 2008, the FASB issued FSP FAS 140-3, “Accounting for Transfers of Financial Assets and Repurchase
Financing Transactions.” FSP FAS 140-3 provides guidance on accounting for a transfer of a financial asset and
a repurchase financing and presumes that an initial transfer of a financial asset and a repurchase financing are
considered part of the same arrangement (linked transaction) under Statement 140. However, if certain criteria
are met, the initial transfer and repurchase financing shall not be evaluated as a linked transaction and shall be
evaluated separately under Statement 140. This FSP is effective for fiscal years beginning after 15 November 2008,
and interim periods within those fiscal years. Earlier application is not permitted. The Group is currently assessing
the impact on the Group’s consolidated financial position and results of operations.
180
China Life Insurance Company Limited Annual Report 2008
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ACCOUNTING PRINCIPLES (“US GAAP”) (continued)
(e) Recently issued US accounting standards (continued)
In March 2008, the FASB issued FAS 161, “Disclosures about Derivative Instruments and Hedging Activities—an
amendment of FASB Statement No. 133”. The standard requires additional quantitative disclosures (provided
in tabular form) and qualitative disclosures for derivative instruments. The required disclosures include how
derivative instruments and related hedged items affect an entity’s financial position, financial performance, and
cash flows; the relative volume of derivative activity; the objectives and strategies for using derivative instruments;
the accounting treatment for those derivative instruments formally designated as the hedging instrument in a
hedge relationship; and the existence and nature of credit-risk-related contingent features for derivatives. FAS
161 does not change the accounting treatment for derivative instruments. FAS 161 is effective for the Group’s
financial statements for the year beginning on January 1, 2009. The Group is currently assessing the impact of this
statement on the Group’s consolidated financial position and results of operations.
In April 2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of Intangible Assets”, which
amends the factors an entity should consider in developing renewal or extension assumptions used in determining
the useful life of recognized intangible assets under SFAS No. 142, “Goodwill and Other Intangible Assets” This
guidance for determining the useful life of a recognized intangible asset applies prospectively to intangible assets
acquired individually or with a group of other assets in either an asset acquisition or business combination. FSP
FAS 142-3 is effective for the Group’s financial statements for the year beginning on January 1, 2009. The Group
is currently evaluating the impact that FSP FAS 142-3 will have on the Group’s consolidated financial position
and results of operations.
181
In May 2008, the FASB issued FSP Accounting Principles Board (APB) Opinion 14-1, “Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)”. FSP APB 14-1 requires recognition of both the liability and equity components of convertible debt
instruments with cash settlement features. The debt component is required to be recognized at the fair value of a
similar instrument that does not have an associated equity component. The equity component is recognized as the
difference between the proceeds from the issuance of the note and the fair value of the liability. FSP APB 14-1 also
requires an accretion of the resulting debt discount over the expected life of the debt. Retrospective application
to all periods presented is required. FSP APB 14-1 is effective for the Group’s financial statements for the year
beginning on January 1, 2009. The Group is currently evaluating the impact that FSP APB 14-1 will have on the
Group’s consolidated financial position and results of operations.
China Life Insurance Company Limited Annual Report 2008
Supplementary Information for ADS Holders
182
R E C O N C I L I A T I O N O F H K F R S A N D U N I T E D S T A T E S G E N E R A L L Y A C C E P T E D
ACCOUNTING PRINCIPLES (“US GAAP”) (continued)
(e) Recently issued US accounting standards (continued)
In May 2008, the FASB issued FAS 163, Accounting for Financial Guarantee Insurance Contracts. This Statement
requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event)
when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement
also clarifies how FAS 60 applies to financial guarantee insurance contracts, including the recognition and
measurement to be used to account for premium revenue and claim liabilities. It also requires expanded disclosures
about financial guarantee insurance contracts. This Statement does not apply to financial guarantee insurance
contracts that would be within the scope of FAS 133. The standard will be effective for the Group beginning
1 January 2009. The Group is currently assessing the impact of this FSP on the Group’s consolidated financial
position and results of operations.
In June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) Issue 03-6-1, ‘‘Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities’’. This FSP addresses
whether instruments granted in share-based payment transactions are participating securities prior to vesting and,
therefore, need to be included in the earnings allocation in computing earnings per share (‘‘EPS’’) under the two-
class method described in paragraphs 60 and 61 of FASB Statement No. 128, Earnings per Share. The FSP will
be effective for financial statements issued for fiscal years and interim periods beginning after 15 December 2008.
All prior period EPS data presented shall be adjusted retrospectively to conform to the provisions of this FSP. The
Group is currently assessing the impact of this FSP on the Group’s consolidated financial position and results of
operations.
In September 2008, the FASB issued FSP 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement 133 and FASB FIN 45; and Clarification of the Effective Date
of FASB Statement 161” (FSP 133-1). FSP 133-1 requires expanded disclosures about credit derivatives and
guarantees. The expanded disclosure requirements for FSP 133-1 were effective but not applicable for the Group’s
financial statements for the year ending 31 December 2008. The adoption of FSP 133-1 did not impact the
Group’s results of operations, cash flows or financial position.
In September 2008, EITF Issued 08-07: “Accounting for Defensive Intangible Assets”. This issue applies to
acquired intangible assets in situations in which an entity does not intend to actively use the asset, but intends
to hold the asset to prevent others from obtaining access to the asset, except for intangible assets that are used in
research and development activities. This issue is effective for the Company’s financial statements for the year
beginning on 1 January 2009. The Group is currently evaluating the impact that EITF 08-07 will have on the
Group’s consolidated financial position and results of operations.
In December 2008, the FASB issued FSP FAS 132(R)-1, which amends FASB Statement No. 132 (revised 2003),
Employers’ Disclosures about Pensions and Other Postretirement Benefits, to provide guidance on an employer’s
disclosures about plan assets of a defined benefit pension or other postretirement plan. It also includes a technical
amendment to Statement 132(R) that requires a nonpublic entity to disclose net periodic benefit cost for each
annual period for which a statement of income is presented. The disclosures about plan assets required by this FSP
shall be provided for fiscal years ending after 15 December 2009. The Group is currently evaluating the impact
that FSP APB 14-1 will have on the Group’s consolidated financial position and results of operations.
China Life Insurance Company Limited Annual Report 2008
Supplementary Information for ADS Holders
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ACCOUNTING PRINCIPLES (“US GAAP”) (continued)
(e) Recently issued US accounting standards (continued)
In December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, “Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities”. It amends FAS 140
“Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – a replacement of
FASB Statement No. 125” to require public entities to provide additional disclosures about transferors’ continuing
involvements with transferred financial assets. It also amends FIN 46 (revised December 2003) “Consolidation of
Variable Interest Entities – an interpretation of ARB No. 51” (FIN 46R) to require public enterprises, including
sponsors that have a variable interest in a VIE, to provide additional disclosures about their involvement with
VIEs. The expanded disclosure requirements for FSP FAS 140-4 and FIN 46(R)-8 are effective for the first period
ending after 15 December 2008, with earlier application encouraged. The Group is currently assessing the impact
on the Group’s consolidated financial position and results of operations.
In December 2008, the FASB issued FSP FIN 48-3 “Effective Date of FIN No. 48 for Certain Nonpublic
Enterprises”. This FSP defers the effective date of FIN 48, Accounting for Uncertainty in Income Taxes, for
certain nonpublic enterprises. FSP FIN 48-3 is not applicable for the Group.
On January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment and Interest Income
Measurement Guidance of EITF Issue No. 99-20”. FSP EITF 99-20-1 changed the guidance for the determination
of whether an impairment of certain non-investment grade, beneficial interests in securitized financial assets is
considered other-than-temporary. FSP EITF 99-20-1 is effective for the Group’s financial statements for the year
ending 31 December 2008. The adoption of FSP EITF 99-20-1did not impact the Group’s results of operations,
cash flows or financial position.
183
China Life Insurance Company Limited Annual Report 2008
In case of any discrepancy between the printed version and the website version of
this annual report, the website version shall prevail.
Stock Code: 2628
Annual Report 2008
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