Stock Code: 2628
Annual Report 2011
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The Company is a life insurance company established in Beijing, China on 30 June 2003 according to the Company Law and Insurance 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. Our distribution network, comprising exclusive agents, 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 a leading
provider of individual and group life insurance, annuity products and accident and health insurance in China. As at 31 December 2011, the
Company had nearly 139 million individual and group life policies, 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.
China Life Insurance Company Limited Annual Report 2011
Contents
1
Definitions
Company Profile
Financial Summary
Chairman’s Statement
Management Discussion and Analysis
Changes in Share Capital and Shareholdings of Substantial Shareholders
Directors, Supervisors, Senior Management and Employees
Corporate Governance
Report of the Board of Directors
Report of the Supervisory Committee
Significant Events
Honors and Awards
Independent Auditor’s Report
Consolidated Statement of Financial Position
Statement of Financial Position
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Embedded Value
2
3
6
7
9
24
27
40
66
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190
2
China Life Insurance Company Limited Annual Report 2011
Defi nitions
The Company1
China Life Insurance Company Limited and its subsidiaries
CLIC
AMC
China Life Insurance (Group) Company
China Life Asset Management Company Limited, a subsidiary of the
Company
Pension Company
China Life Pension Company Limited, a subsidiary of the Company
P&C Company
China Life Property and Casualty Insurance Company Limited
CIRC
CSRC
HKSE
SSE
Company Law
Insurance Law
Securities Law
China Insurance Regulatory Commission
China Securities Regulatory Commission
The Stock Exchange of Hong Kong Limited
Shanghai Stock Exchange
Company Law of the People’s Republic of China
Insurance Law of the People’s Republic of China
Securities Law of the People’s Republic of China
Articles of Association
Articles of Association of China Life Insurance Company Limited
China
RMB
for the purpose of this report, “China” refers to the People’s Republic of
China, excluding the Hong Kong Special Administrative Region, Macau
Special Administrative Region and Taiwan region
Renminbi Yuan
1
Except for “the Company” referred to in the Consolidated Financial Statements.
China Life Insurance Company Limited Annual Report 2011
Company Profi le
3
Registered Name in Chinese:
中國人壽保險股份有限公司（「中國人壽」）
Registered Name in English:
China Life Insurance Company Limited (“China Life”)
Legal Representative: Yuan Li
Secretary to the Board of Directors: Liu Yingqi
Office Address: 16 Financial Street, Xicheng District, Beijing, P.R.China 100033
Telephone: 86-10-63631191
Fax: 86-10-66575112
Email: ir@e-chinalife.com
Securities Representative: Lan Yuxi
Office Address: 16 Financial Street, Xicheng District, Beijing, P.R.China 100033
Telephone: 86-10-63631068
Fax: 86-10-66575112
Email: lanyuxi@e-chinalife.com
Registered Office Address:
16 Financial Street, Xicheng District, Beijing, P.R.China 100033
Current Office Address:
16 Financial Street, Xicheng District, Beijing, P.R.China 100033
Telephone: 86-10-63633333
Fax: 86-10-66575722
Website: www.e-chinalife.com
Email: ir@e-chinalife.com
Hong Kong Office:
Office Address: 25th Floor, C.L.I. Building, 313 Hennessy Road, Wanchai, Hong Kong
Telephone: 852-29192628
Fax: 852-29192638
4
China Life Insurance Company Limited Annual Report 2011
Company Profi le
Newspapers for the Company’s A Share Disclosure:
China Securities Journal
Shanghai Securities News
Securities Times
CSRC’s Nominated Website for the Company’s Annual Report Disclosure:
www.sse.com.cn
The Company’s H Share Disclosure Websites:
HKExnews website at www.hkexnews.hk
The Company’s website at www.e-chinalife.com
Location where the Company’s Annual Reports may be Obtained:
12/F, China Life Plaza, 16 Financial Street, Xicheng District, Beijing, P.R.China
Stock Information:
A Share:
Shanghai Stock Exchange
Short Name: China Life
Stock Code: 601628
H Share:
The Stock Exchange of Hong Kong Limited
Short Name: China Life
Stock Code: 2628
ADR:
New York Stock Exchange
Stock Code: LFC
H Share Registrar and Transfer Office:
Computershare Hong Kong Investor Services Limited
Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong
Depositary:
Deutsche Bank
60 Wall Street, New York, NY 10005
Domestic Legal Adviser:
King & Wood
International Legal Advisers:
Latham & Watkins
Debevoise & Plimpton LLP
China Life Insurance Company Limited Annual Report 2011
Company Profi le
5
Date of First Registeration of the Company:
30 June 2003
Initial Registered Address of the Company:
16 Chaowai Avenue, Chaoyang District, Beijing, P.R.China 100020
Date of Change of Registeration of the Company:
21 October 2010
Current Registered Address of the Company:
16 Financial Street, Xicheng District, Beijing, P.R.China 100033
Corporate Business Licence Serial Number:
100000000037965
Tax Registration Certificate Number:
11010271092841X
Organization Code:
71092841-X
Auditors of the Company:
Domestic Auditor: PricewaterhouseCoopers Zhong Tian Certified Public Accountants Limited Company
Address: 11/F, PricewaterhouseCoopers Center, Corporate Avenue 2, 202 Hu Bin Road,
Huangpu District, Shanghai 200021, P.R.China
International Auditor: PricewaterhouseCoopers
Address: 22/F, Prince’s Building, Central, Hong Kong
6
China Life Insurance Company Limited Annual Report 2011
Financial Summary
RMB million
Under
Hong Kong
Financial
Reporting
Standards
(HKFRS)
Under International Financial
Reporting Standards (IFRS)
Major Financial Data1
2011
2010
Change
2009
2008
2007
For the year ended
Total revenues
Net premiums earned
Benefits, claims and expenses
Insurance benefits and claims expenses
Net profit before income tax
Net profit attributable to equity holders of
the Company
Net cash inflow from operating activities
As at 31 December
Total assets
Investment assets2
Total liabilities
Total equity holders’ equity
370,899
318,276
352,599
290,717
20,513
18,331
133,953
385,838
318,088
346,601
279,632
41,008
33,626
178,600
-3.9%
0.1%
1.7%
4.0%
-50.0%
339,290
275,077
298,249
237,038
41,745
300,385
265,177
280,370
231,949
19,959
191,372
103,713
146,390
76,288
45,391
-45.5%
-25.0%
32,881
149,700
19,137
126,077
38,879
122,854
1,583,907
1,494,969
1,390,519
191,530
1,410,579
1,336,245
1,200,104
208,710
12.3%
11.9%
15.9%
-8.2%
1,226,257
1,172,145
1,013,481
211,072
987,493
937,403
812,622
173,947
933,704
850,209
727,328
205,500
Per share (RMB)
Earnings per share (basic and diluted)
Equity holders’ equity per share
Net cash inflow from operating activities per share
Major financial ratio
Weighted average ROE(%)
Ratio of assets and liabilities(%)3
Gross investment yield(%)4
0.65
6.78
4.74
9.16
87.79
3.51
1.19
7.38
6.32
-45.5%
-8.2%
-25.0%
1.16
7.47
5.30
0.68
6.15
4.46
1.38
7.27
4.35
16.02
85.08
5.11
decrease of 6.86
percentage points
increase of 2.71
percentage points
decrease of 1.60
percentage points
17.13
10.29
22.53
82.65
82.29
77.90
5.78
3.48
10.24
Notes:
1.
2.
3.
4.
Net profit refers to net profit attributable to equity holders of the Company, while equity holders’ equity refers to equity
attributable to equity holders of the Company.
Investment assets = Cash and cash equivalents + Securities at fair value through profit or loss + Available-for-sale securities +
Held-to-maturity securities + Term deposits + Securities purchased under agreements to resell + Loans + Statutory deposits
Ratio of assets and liabilities = Total liabilities/Total assets
Gross investment yield = (Investment income + Net realised gains/(losses) and impairment on financial assets + Net fair value
gains/(losses) through profit or loss – Business tax and extra charges for investment)/((Investment assets at the beginning of the
period + Investment assets at the end of the period)/2)
5.
The Company adopted IFRS in 2009, and financial results of 2008 are adjusted in accordance with IFRS.
China Life Insurance Company Limited Annual Report 2011
Chairman’s Statement
7
In 2011, the Chinese economy maintained a stable and
relatively fast growth, which provided a solid foundation
for the continuous development of the insurance industry.
At the same time, however, continued inflationary
pressure led to an increased tightening of monetary policy
and the capital markets experienced depression. The CIRC
strengthened regulation concerning solvency ratios and
market conducts, further ensuring an orderly business
environment in the insurance industry. At the same time,
however, due to a number of factors such as changes in
bancassurance regulations, less competitive investment
type life insurance products and increasing labor costs, the
insurance industry faced heavy pressures.
During the Reporting Period, the Company’s total
revenues reached RMB370,899 million, a decrease of
3.9% from 2010. As at the end of the Reporting Period,
the Company’s total assets reached RMB1,583,907 million,
an increase of 12.3% from 2010. The Company’s
embedded value was RMB292,854 million, a decrease
of 1.8% from 2010, and one-year new business value
was RMB20,199 million, an increase of 1.8% from
2010. The Company’s market share 2 in 2011 was
approximately 33.3%, maintaining a leading position in
life insurance market. During the Reporting Period, net
profit attributable to equity holders of the Company was
RMB18,331 million, a decrease of 45.5% from 2010. The
Company strengthened the management of its solvency ratio and issued subordinated term debts of RMB30 billion. As
at 31 December 2011, the Company’s solvency ratio was 170.12%.
Yuan Li, Chairman
The Board of Directors of the Company recommended the payment of a final dividend of RMB0.23 per share. This will
come into effect after shareholders’ approval at the Annual General Meeting to be held on Tuesday, 22 May 2012.
In 2011, the Company actively promoted its corporate governance. The Board of Directors set up a new Budget,
Execution and Assessment Committee, which further strengthened the role of specialized committees. The Company
established a periodic reporting system of management’s analysis concerning the Company’s operations, development
and market strategies, which provided a basis for the decision-making of the Board of Directors.
The Company actively undertook its corporate social responsibility while fulfilling its obligations under insurance
policies. During the Reporting Period, the total amount of insurance benefits and claims reached RMB72,864 million,
which further highlighted the Company’s role in providing economic compensation to the society. Relying on its
competitive advantages in professionalism and scale of business, the Company devoted great efforts to develop its policy
businesses. The Company expanded the residents covered by its rural micro-insurance products, and also expanded the
service and geographical scope of and residents covered by the New Village Cooperative Medical Insurance, New Rural
Pension Insurance, Basic Medical Insurance Program for Urban and Township Residents and Rural Medical Assistance
Insurance.
2
Calculated according to the premium data of life insurance companies in 2011 released by the CIRC.
8
China Life Insurance Company Limited Annual Report 2011
Chairman’s Statement
The Company actively participated in public welfare and charity undertakings. During the Reporting Period, the
Company made continuous donation of RMB30 million to China Life Foundation. Through China Life Foundation, in
addition to the continuous support for Wenchuan earthquake orphans, the Company also undertook to provide support
for 459 Yushu earthquake orphans and Zhouqu mudslide orphans, paying subsidies totaling RMB9,896.4 thousands,
and provided orphans from disasters-stricken areas with long-term, continuous physical and emotional support.
Moreover, construction began on the Nangqian China Life Children’s Welfare Institute in Yushu. The Company
donated RMB1 million to Yunnan Zhaotong Charity Society and jointly initiated China Life Zhaotong Relief Fund,
aiming to help those who have sustained injuries in the course of acting heroically or suffered serious disease and great
financial difficulties. The Company donated RMB1 million to China Women’s Development Foundation, in order to
provide women in impoverished areas with “Screening for Two Gynecological Cancers” and protection against serious
diseases.
2012 is an important nexus for the implementation of the “Twelfth Five-Year Plan”. Faced with a complex external
environment, the Company plans to strengthen its in-depth analysis of macro-economic trends, improve foresight
and flexibility of work, and improve its ability to respond to and steer through complex situations. The Company
will uphold its business philosophy of “customers as the center, local branches as the focus, and value as the core”,
and intend to continue to make steady progress and maintain the balance between scale and speed of business and
improved structure and efficiency of business. Under the premise of maintaining steady business growth, the Company
intends to further accelerate the development of medium and long-term regular premium business, make great efforts
to enhance business value and strengthen sustainable development capability. The Company firmly intends to promote
reforms in all areas and improve innovation so as to continuously create new competitive advantages. The Company
intends to further strengthen the development of its local branches by allocating more resources to local branches and
fully mobilizing their potential. The Company intends to devote great efforts to develop its distribution channels by
continuing to build up its exclusive agent team and to improve the productivity of such team, proactively developing
new distribution approaches in response to the changes in bancassurance regulations, improving the profitability of
group insurance distribution channel and promoting the development of new distribution channels. The Company also
intends to strengthen management, optimize management process and strengthen back-office support. The Company
also plans to strengthen risk prevention so as to ensure the stable operation of the Company.
At present, China Life is stepping into a critical period for its reform and development. Striving to enhance the
Company’s value is not only the expectation of our shareholders, customers and society in general, but also the
unshirkable responsibility of all our employees. The Company will pursue a development path with China Life’s distinct
characteristics. By diligently working together, we are greatly committed to firmly grasping the industry development
opportunities, advancing towards our goal of developing into a leading international life insurance company, and
offering excellent services to our customers and long-term, stable returns to our shareholders.
By Order of the Board
Yuan Li
Chairman
Beijing, China
26 March 2012
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
9
From left to right:
Mr. Li Mingguang, Mr. Miao Ping,
Mr. Zhou Ying, Ms. Liu Yingqi,
Mr. Wan Feng, Mr. Lin Dairen,
Mr. Liu Jiade, Mr. Su Hengxuan,
Mr. Xu Hengping
I OVERVIEW OF OPERATIONS IN 2011
The Company proactively responded to the changes in the external environment. Braving the difficulties and
forging ahead, the Company made great efforts to promote the transformation of development mode, and achieved
steady business growth and continued improvement of business structure. During the Reporting Period, the
Company’s net premiums earned was RMB318,276 million, an increase of 0.1% from 2010, and the Company’s
market share was 33.3%, maintaining a leading position in life insurance market. One-year new business value
was RMB20,199 million, an increase of 1.8% from 2010. Continuous business structure adjustments had
gradually showed positive results. Renewal premiums increased by 20.9% from 2010 and the percentage of renewal
premiums in gross written premiums increased to 48.62% in 2011 from 40.22% in 2010. The percentage of first-
year regular premiums in first-year premiums increased to 32.56% in 2011 from 29.76% in 2010. First-year
regular premiums with 10 years or longer payment duration increased by 8.4% from 2010, and the percentage of
first-year regular premiums with 10 years or longer payment duration in first-year regular premiums increased to
39.75% in 2011 from 33.81% in 2010. The percentage of accident insurance premiums in short-term insurance
premiums increased to 55.47% in 2011 from 51.13% in 2010. Due to the impact of other financial products
and the changes in bancassurance regulations, there was a significant drop of the premiums earned through
bancassurance channel, resulting in first-year premiums decreasing by 15.7% from 2010 and first-year regular
premiums decreasing by 7.8% from 2010. As at 31 December 2011, the number of in-force policies increased
by 7.8% from the end of 2010, the Policy Persistency Rate (14 months and 26 months)3 reached 92.50% and
86.90%, respectively, and the Surrender Rate4 was 2.79%, a 0.48 percentage point increase from 2010.
With respect to the exclusive individual agent channel, the Company took advantage of competitive opportunities,
achieved a steady business growth and maintained its leading position in the market. The Company steadily
achieved the unity, upgrade and transformation of the Exclusive Individual Agents Management Measures, which
effectively enhanced the competitiveness and incentive function of such system. As at the end of the Reporting
Period, the Company had a total of 685,000 exclusive individual agents, a decrease of 21,000 agents from 2010.
However, through the implementation of the “effective expansion” strategy, the number of exclusive individual
agents steadily increased compared to the first half of 2011. With respect to group insurance channel, there
3
4
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.
The Surrender Rate = Current surrender payment/(Reserve of life insurance and long-term health insurance at the beginning of the period +
Current premium of life insurance and long-term health insurance)
10
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
were steady growth in premiums and improvement in operational efficiency. Premiums earned from short-
term insurance business achieved relatively fast growth and the percentage of premiums earned from accident
insurance further increased. As at the end of the Reporting Period, the Company had approximately 14,000 direct
sales representatives. With respect to the bancassurance channel, the Company actively responded to the macro-
economic control and the changes in bancassurance regulations, strengthened its efforts in product innovation,
enhanced agency channel cooperation, improved support and services, enhanced the quality of the sales team
and accelerated the channel’s upgrade and development. Due to various factors, premiums earned from the
bancassurance channel declined, but the decline was below market average and business structure was further
improved. As at the end of the Reporting Period, the number of intermediary bancassurance outlets was 96,000,
with a total of 44,000 sales representatives. With respect to the telephone sales channel, the Company regarded
infrastructure building as its core goal, aiming to establish high-quality nationwide centers to overlook telephone
sales at provincial levels. The number of sales outlets, premiums earned and sales representatives with respect to
the telephone sales channel increased simultaneously and the number of telephone sales centers increased to 11, as
a result of which the development of telephone sales business has accelerated.
The Company proactively responded to changes in the capital markets and allocated investment assets
with flexibility and prudence. The Company took advantage of market opportunities in a high interest rate
environment to increase allocation of fixed-interest negotiated deposits and long-term bonds. The proportion
of term deposits increased to 34.84% in 2011 from 33.05% in 2010, and the investment yield for fixed income
investment assets increased significantly. The Company effectively responded to the decline in the equity securities
market by making prudent investments. The proportion of equity securities decreased to 12.17% in 2011 from
14.66% in 2010, which to a certain extent reduced the risk associated with equity securities. The Company
actively developed its capacities in new investment channels, proactively sought out investment opportunities, and
was the first to complete filings with the CIRC relating to equity investment in the Chinese insurance industry,
which allowed for alternative investments. The Company completed the first private equity fund investment in the
insurance industry with a RMB1,500 million capital commitment. The Company increased investment in debt
investment plans in the infrastructure industry by making 14 new investments totaling RMB15.41 billion. The
Company also invested RMB3.3 billion in a Beijing real estate investment plan. The duration of these alternative
investment assets effectively match the duration of the Company’s liabilities and are expected to create long-term
and stable investment returns for the Company. These alternative investments also demonstrated the Company’s
capability to invest in new investment channels. As at the end of the Reporting Period, the Company’s investment
assets reached RMB1,494,969 million, an increase of 11.9% from 2010. During the Reporting Period, the interest
income earned from the Company’s investment portfolio increased significantly, and the net investment yield5 was
4.28%. However, due to the continuous depression of the Chinese capital markets, after taking factors including
the impairment losses of equity securities into account, the Company’s gross investment yield was 3.51%.
The Company made great efforts to tackle its development challenges, stimulate business vitalities and strengthen
management innovation through reform. By promoting in-depth reforms to its operations management system,
the Company effectively achieved a separation between sales and administration, and improved the function of
its vertical management system. Business management was further improved by centralizing management at the
provincial levels, and business processing became more efficient. In addition, the Company enhanced its IT service
level to provide sufficient back-up support and service guarantees to each sales channel.
5
Net investment yield=(Investment income-Business tax and extra charges for investment)/((Investment assets at the beginning of the
period+Investment assets at the end of the period)/2)
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
11
China Life was a global insurance partner of the 2011 Xi’an International Horticultural Exposition. The Company
successfully launched the China Life Week and China Life Customer Day activities under the theme of “Hand in
Hand with China Life, Making a Green and Energetic China”, and made great efforts to improve the quality of its
customer service.
The Company adopted the Guidelines for the Implementation of Comprehensive Risk Management of Personal
Insurance Companies issued by the CIRC, improved its comprehensive risk management system, advanced
the implementation and evaluation of its internal control standards, ensured the training and practice of the
Internal Control Implementation Manual from the level of management to the level of its 100,000 employees,
and established a solid basis for internal controls. Moreover, the Company utilized its sales risk monitoring and
evaluating system to instantly and quantitatively monitor and evaluate the sales risks in each provincial branch on
a quarterly basis, and fully implemented a system for assessing the credibility of its individual agents, which helped
to detect sales risk and provide a means for controlling the risk at an earlier stage.
II ANALYSIS OF MAJOR ITEMS OF CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
(1) Total Revenues
For the year ended 31 December
Net premiums earned
Individual life insurance business
Group life insurance business
Short-term insurance business
Investment income
Net realized gains/(losses) and impairment on financial assets
Net fair value gains through profit or loss
Other income
2011
318,276
301,986
434
15,856
60,722
(11,208)
337
2,772
RMB million
2010
318,088
302,753
468
14,867
48,872
15,841
280
2,757
Total
370,899
385,838
Net Premiums Earned
1
Individual Life Insurance Business
During the Reporting Period, net premiums earned from individual life insurance business decreased
by 0.3% from 2010. The Company’s individual life insurance products are mainly distributed through
exclusive individual agent channel and bancassurance channel. Although sales through the exclusive
agent channel increased, as the bancassurance business was affected by the adjustment of regulatory
policies, first-year premiums decreased, which resulted in a decrease in net premiums earned from
individual life insurance business.
12
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
2
3
Group Life Insurance Business
During the Reporting Period, net premiums earned from group life insurance business decreased by
7.3% from 2010. This was primarily due to the adjustment of the Company’s operation strategies
with respect to group life insurance business, pursuant to which the Company reduced its sales on
group whole life insurance products.
Short-term Insurance Business
During the Reporting Period, net premiums earned from short-term insurance business increased by
6.7% from 2010. This was primarily due to the Company’s increased efforts for the development of
accident insurance business by the implementation of policies on business performance evaluation and
costs.
Gross written premiums categorized by business:
For the year ended 31 December
Individual Life Insurance Business
First-year business
Single
First-year regular
Renewal business
Group Life Insurance Business
First-year business
Single
First-year regular
Renewal business
Short-term Insurance Business
Short-term accident insurance business
Short-term health insurance business
2011
302,012
147,286
99,190
48,096
154,726
438
435
427
8
3
15,802
8,766
7,036
RMB million
2010
302,781
174,808
122,659
52,149
127,973
473
469
459
10
4
14,975
7,657
7,318
Total
318,252
318,229
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
13
Gross written premiums categorized by channel:
For the year ended 31 December
Exclusive Individual Agent Channel
First-year business of long-term insurance
Single
First-year regular
Renewal business
Short-term insurance business
Group Insurance Channel
First-year business of long-term insurance
Single
First-year regular
Renewal business
Short-term insurance business
Bancassurance Channel
First-year business of long-term insurance
Single
First-year regular
Renewal business
Short-term insurance business
2011
155,621
33,047
300
32,747
122,475
99
17,731
2,025
2,018
7
3
15,703
144,900
112,649
97,299
15,350
32,251
–
RMB million
2010
143,356
31,310
527
30,783
111,980
66
17,038
2,125
2,115
10
4
14,909
157,835
141,842
120,476
21,366
15,993
–
Total
318,252
318,229
Investment Income
For the year ended 31 December
Investment income from securities at fair value through profit or loss
Investment income from available-for-sale securities
Investment income from held-to-maturity securities
Investment income from bank deposits
Investment income from loans
Other investment income
2011
486
21,811
10,691
24,978
2,658
98
RMB million
2010
126
20,173
10,538
16,363
1,583
89
Total
60,722
48,872
14
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
1
2
3
4
5
Investment Income from Securities at Fair Value Through Profit or Loss
During the Reporting Period, investment income from securities at fair value through profit or loss
increased by 285.7% from 2010. This was primarily due to an increase in interest income from debt
securities at fair value through profit or loss resulting from the joint effects of the increased volume of
investment in debt securities at fair value through profit or loss and an increase in interest rates.
Investment Income from Available-for-Sale Securities
During the Reporting Period, investment income from available-for-sale securities increased by 8.1%
from 2010. This was primarily due to an increase in interest income from available-for-sale debt
securities.
Investment Income from Held-to-Maturity Securities
During the Reporting Period, investment income from held-to-maturity securities increased by 1.5%
from 2010. This was primarily due to the increased volume of investments and an increase in interest
rates.
Investment Income from Bank Deposits
During the Reporting Period, investment income from bank deposits increased by 52.6% from 2010.
This was primarily due to the increased volume of deposits attributable to the Company’s increased
allocation in deposits, and an increase in the interest rates on deposits.
Investment Income from Loans
During the Reporting Period, investment income from loans increased by 67.9% from 2010. This was
primarily due to the increased volume of policy loans and debt investment plans, as well as an increase
in interest rates.
Net Realized Gains/(Losses) and Impairment on Financial Assets
During the Reporting Period, net realized gains/(losses) and impairment on financial assets decreased from
2010. This was primarily due to an increase in impairment losses of available-for-sale securities resulting
from the continuous depression in Chinese capital market.
Net Fair Value Gains Through Profit or Loss
During the Reporting Period, net fair value gains through profit or loss increased by 20.4% from 2010. This
was primarily due to an increase in income from the buy-sale price differential in the trading of funds at fair
value through profit or loss.
Other Income
During the Reporting Period, other income increased by 0.5% from 2010. This was primarily due to an
increase in commission fees earned from P&C Company.
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
15
(2) Benefits, Claims and Expenses
For the year ended 31 December
Insurance benefits and claims expenses
Individual life insurance business
Group life insurance business
Short-term insurance business
Investment contract benefits
Policyholder dividends resulting from participation in profits
Underwriting and policy acquisition costs
Finance costs
Administrative expenses
Other operating expenses
Statutory insurance fund contribution
2011
RMB million
2010
282,575
353
7,789
2,031
6,125
27,434
873
21,549
3,275
595
270,341
551
8,740
1,950
13,224
27,256
304
20,285
3,351
599
Total
352,599
346,601
Insurance Benefits and Claims Expenses
1
2
3
Individual Life Insurance Business
During the Reporting Period, insurance benefits and claims expenses attributable to individual life
insurance business increased by 4.5% from 2010. This was primarily due to an increase in benefits
payment and a decrease in increase in insurance contracts liabilities.
Group Life Insurance Business
During the Reporting Period, insurance benefits and claims expenses attributable to group life
insurance business decreased by 35.9% from 2010. This was primarily due to a decrease in increase in
insurance contracts liabilities.
Short-term Insurance Business
During the Reporting Period, insurance benefits and claims expenses attributable to short-term
insurance business decreased by 10.9% from 2010. This was primarily due to the optimization of
short-term insurance business structure and the enhancement of business quality control.
Investment Contract Benefits
During the Reporting Period, investment contract benefits increased by 4.2% from 2010. This was primarily
due to an increase in interest payments.
Policyholder Dividends Resulting from Participation in Profits
During the Reporting Period, policyholder dividends resulting from participation in profits decreased by
53.7% from 2010. This was primarily due to a decrease in investment yields for participating products.
16
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
Underwriting and Policy Acquisition Costs
During the Reporting Period, underwriting and policy acquisition costs increased by 0.7% from 2010. Such
increase was generally in proportion to the growth of business and was also affected by the adjustment of
business structure.
Finance Costs
During the Reporting Period, finance costs increased by 187.2% from 2010. This was primarily due to an
increase in interest payments for securities sold under agreements to repurchase and subordinated term debts
issued by the Company.
Administrative Expenses
During the Reporting Period, administrative expenses increased by 6.2% from 2010. This was primarily
due to an increase in operation and management costs resulting from certain factors including inflation,
increasing market competition and rising labor costs.
Other Operating Expenses
During the Reporting Period, other operating expenses decreased by 2.3% from 2010. This was primarily
due to a decrease in business tax and surcharges expenses.
(3) Profit Before Income Tax
For the year ended 31 December
Individual life insurance business
Group life insurance business
Short-term insurance business
Other
2011
17,967
57
502
1,987
RMB million
2010
37,690
740
385
2,193
20,513
41,008
Total
1
2
Individual Life Insurance Business
During the Reporting Period, profit before income tax of the Company in the individual life insurance
business decreased by 52.3% from 2010. This was primarily due to the impact on individual life
insurance segment caused by the decrease in investment income and increase in impairment losses
resulting from the continuous depression in Chinese capital market.
Group Life Insurance Business
During the Reporting Period, profit before income tax of the Company in the group life insurance
business decreased by 92.3% from 2010. This was primarily due to the impact on group life insurance
segment caused by the decrease in investment income and increase in impairment losses resulting from
the continuous depression in Chinese capital market.
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
17
3
Short-term Insurance Business
During the Reporting Period, profit before income tax of the Company in the short-term insurance
business increased by 30.4% from 2010. This was primarily due to the optimization of short-term
insurance business structure and a decrease in claims payments.
(4) Income Tax
During the Reporting Period, income tax of the Company was RMB2,022 million, a 71.9% decrease from
2010. This was primarily due to a decrease in taxable income and the impact of the deferred tax. Our
effective tax rate for 2011 was 9.86%.
(5) Net Profit
During the Reporting Period, net profit attributable to equity holders of the Company was RMB18,331
million, a 45.5% decrease from 2010. This was primarily due to a decrease in investment income and an
increase in impairment losses resulting from the continuous depression in Chinese capital market.
III ANALYSIS OF MAJOR ITEMS OF CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
(1) Major Assets
Investment assets
Term deposits
Held-to-maturity securities
Available-for-sale securities
Securities at fair value through profit or loss
Securities purchased under agreements to resell
Cash and cash equivalents
Loans
Statutory deposits – restricted
Other assets
As at 31
December 2011
RMB million
As at 31
December 2010
1,494,969
520,793
261,933
562,948
23,683
2,370
55,985
61,104
6,153
88,938
1,336,245
441,585
246,227
548,121
9,762
–
47,854
36,543
6,153
74,334
Total
1,583,907
1,410,579
Term Deposits
As at the end of the Reporting Period, term deposits increased by 17.9% from 2010. This was primarily due
to the Company’s increased efforts for investment in negotiated deposits by taking advantages of the market
opportunities of high interest rates at different stages.
18
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
Held-to-Maturity Securities
As at the end of the Reporting Period, held-to-maturity securities increased by 6.4% from 2010. This was
primarily due to an increase in the volume of investment assets.
Available-for-Sale Securities
As at the end of the Reporting Period, available-for-sale securities increased by 2.7% from 2010. This was
primarily due to an increase in the volume of available-for-sale debt securities, which was partially offset by
the decrease in fair value of equity securities.
Securities at Fair Value Through Profit or Loss
As at the end of the Reporting Period, securities at fair value through profit or loss increased by 142.6%
from 2010. This was primarily due to the increased volume of debt securities at fair value through profit or
loss.
Cash and Cash Equivalents
As at the end of the Reporting Period, cash and cash equivalents increased by 17.0% from 2010. This was
primarily due to the needs for investment assets allocation and liquidity management.
Loans
As at the end of the Reporting Period, loans increased by 67.2% from 2010. This was primarily due to an
increase in the demand for policy loans, as well as the Company’s increased efforts for investment in debt
investment plans by taking advantages of the market opportunities of high interest rates at different stages.
As at the end of the Reporting Period, our investment assets are categorized as below in terms of asset
classes:
Cash and cash equivalents
Term deposits
Bonds
Funds
Common stocks
Other investment form
As at 31 December 2011
As at 31 December 2010
Amount
Percentage
Amount
Percentage
RMB million
55,985
520,793
666,684
85,057
95,553
70,897
3.74%
34.84%
44.60%
5.69%
6.39%
4.74%
47,854
441,585
608,192
96,329
99,580
42,705
3.58%
33.05%
45.51%
7.21%
7.45%
3.20%
Total
1,494,969
100%
1,336,245
100%
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
19
(2) Major Liabilities
Insurance contracts
Investment contracts
Securities sold under agreements to repurchase
Policyholder dividends payable
Annuity and other insurance balances payable
Bonds payable
Deferred tax liabilities
Other liabilities
As at 31
December 2011
RMB million
As at 31
December 2010
1,199,373
69,797
13,000
46,368
11,954
29,990
1,454
18,583
1,018,135
70,171
23,065
52,828
8,275
–
11,776
15,854
Total
1,390,519
1,200,104
Insurance Contracts
As at the end of the Reporting Period, liabilities of insurance contracts increased by 17.8% from 2010. This
was primarily due to new insurance business and the accumulation of insurance liabilities. As at the balance
sheet date, the Company’s reserves for insurance contracts passed liability adequacy testing.
Investment Contracts
As at the end of the Reporting Period, account balance of investment contracts decreased by 0.5% from
2010. This was primarily due to a decrease in the account volume of universal insurance products.
Securities Sold under Agreements to Repurchase
As at the end of the Reporting Period, securities sold under agreements to repurchase decreased by 43.6%
from 2010. This was primarily due to the needs for liquidity management.
Policyholder Dividends Payable
As at the end of the Reporting Period, policyholder dividends payable decreased by 12.2% from 2010. This
was primarily due to a decrease in investment yields for participating products.
Annuity and Other Insurance Balances Payable
As at the end of the Reporting Period, annuity and other insurance balances payable increased by 44.5%
from 2010. This was primarily due to an increase in maturity benefits payable.
Bonds Payable
As at the end of the Reporting Period, the change in the amount of bonds payable was primarily due to the
issuance of subordinated term debts by the Company in 2011.
Deferred Tax Liabilities
As at the end of the Reporting Period, deferred tax liabilities decreased by 87.7% from 2010. This was
primarily due to a decrease in the fair value of available-for-sale securities.
20
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
(3) Equity Holders’ Equity
As at the end of the Reporting Period, equity holders’ equity was RMB191,530 million, a 8.2% decrease
from 2010. This was primarily due to a decrease in the fair value of available-for-sale securities resulting
from the continuous depression in Chinese capital market, and the distribution of dividends to equity
holders last year.
IV ANALYSIS OF CASH FLOWS
(1) Liquidity Sources
Our principal cash inflows come from insurance premiums, deposits from investment contracts, proceeds
from sales and maturity of financial assets, and 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.
Our cash and bank deposits can provide us with a source of liquidity to meet normal cash outflows. As at the
end of the Reporting Period, the amount of cash and cash equivalents was RMB55,985 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 RMB520,793
million.
Our investment portfolio also provides us with a source of liquidity to meet unexpected cash outflows. As
at the end of the Reporting Period, investments in debt securities had a fair value of RMB669,136 million,
while investments in equity securities had a fair value of RMB181,880 million. We are also subject to
market liquidity risk due to the large size of our investments in some of the markets in which we invest. In
some circumstances, some of our holdings of investment securities may be large enough to have an influence
on the market value. These factors may limit our ability to sell these investments or sell them at an adequate
price.
(2) 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
paid to our equity holders. Cash outflows 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.
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
21
(3) Consolidated Cash Flows
For the year ended 31 December
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash inflow/(outflow) from financing activities
Foreign currency losses on cash and cash equivalents
2011
133,953
(133,591)
7,991
(222)
RMB million
2010
178,600
(135,937)
(30,681)
(325)
Net increase in cash and cash equivalents
8,131
11,657
We have established a cash flow testing system, and conduct regular tests to monitor the cash inflows and
outflows under various changing circumstances and adjust accordingly the asset portfolio to ensure sufficient
sources of liquidity. During the Reporting Period, net cash inflow from operating activities decreased
by 25.0% from 2010. This was primarily due to an increase in claims payments and an increase in cash
outflow from the allocation of securities at fair value through profit or loss. Net cash outflow from investing
activities decreased by 1.7% from 2010. This was primarily due to the needs for investment management.
The change of net cash inflow/(outflow) from financing activities was primarily due to cash inflow from the
issuance of subordinated term debts.
V
SOLVENCY RATIO
The solvency ratio of an insurance company is a measure of capital adequacy, which is calculated by dividing the
actual capital of the company (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 our solvency ratio as
at 31 December 2011:
Actual capital
Minimum capital
Solvency ratio
RMB million
As at 31 December As at 31 December
2010
2011
113,685
66,826
170.12%
123,769
58,385
211.99%
The change of our solvency ratio was primarily due to the combined effects of the continuous depression in
Chinese capital market, business development of the Company and dividend distribution to equity holders
last year. Meanwhile, the Company closely monitored changes in its slovency ratio, and successfully issued
subordinated term debts of RMB30 billion at relatively low costs by actively taking advantages of favorable
opportunities, thereby effectively improving its solvency ratio.
22
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
VI BUSINESS OPERATIONS OF OUR SUBSIDIARIES AND AFFILIATES DURING THE
REPORTING PERIOD
Registered
capital
Shareholding
Total
assets
3,000
60%
4,611
RMB million
Net
assets
4,261
Net
profit
468
1,875
1,648
(373)
2,500
87.4% is held by
the Company,
and 4.8% is held
by AMC
8,000
40%
22,417
6,491
421
Name
Business scope
China Life Asset
Management Company
Limited
China Life Pension
Company Limited
China Life Property
and Casualty Insurance
Company Limited
Management and utilization of owned capital and
insurance funds; entrusted capital management;
consulting business relevant to the assets management
business; other assets management business
permitted by applicable PRC laws and regulations
Group and individual pension insurance and
annuity; short-term health insurance; accident
insurance; reinsurance of the above insurance
business; business for the use of insurance funds
that are permitted by applicable PRC laws and
regulations; other business permitted by CIRC
Property loss insurance; liability insurance; credit
insurance and bond insurance; short-term health
and accident insurance; reinsurance of the above
insurance business
VII FUTURE PROSPECT AND RISK ANALYSIS
In 2012, adhering to its business philosophy of “customers as the center, local branches as the focus, and value as
the core”, the Company firmly intends to strengthen its in-depth analysis of macro-economic trends and complex
risk factors to maintain steady business growth and effectively enhance its value. The major risk factors which may
have an impact on the Company’s future development strategy and business objectives include:
1. Risks relating to macro trends
In 2012, domestic and international conditions may become even more complex and severe. There may be
more instability and uncertainty in the global economic recovery and increased risk of economic downturn.
There are still prominent issues in the Chinese economic development, such as unequal development,
uncoordinated development and unsustainability, and the issues of economic slowdown and inflation still
exist. There are also other potential economic and financial risks to consider. Changes in the domestic and
international conditions could have an impact, through a number of channels such as financial markets,
real economy and consumers of insurance products, on underwriting, use of premiums and capital raising
with respect to insurance industry, which will increase the pressure and difficulty for insurance industry
development and risk prevention, and will also impose more demanding requirements on the Company to
scientifically analyze the macro economic trend and precisely grasp favorable opportunities.
China Life Insurance Company Limited Annual Report 2011
Management Discussion and Analysis
23
2. Risks relating to our business
Due to economic trends and its unique features, the insurance industry may continue to face greater
challenges in 2012. Therefore, it may be more difficult for the Company to improve its business structure
and preserve a steady rate of business growth. In addition, changes in bancassurance regulations may
continue to have an adverse impact on the Company, and financial products with investment features may
bring more challenges to the sale of the Company’s insurance products. Increasing labor costs may also
continue to put pressure on the Company’s operational cost control.
3. Risks relating to investments
In light of the complexity of the domestic and international economies, the uncertain financial markets
may adversely affect the Company’s investment income and the book value of its assets. In addition, with
the gradual expansion of the investment channels for insurance funds, the Company may invest some of its
insurance funds through new investment channels or utilize new investment vehicles, which may have an
impact on its investment income and the book value of its assets. Moreover, some of the Company’s assets
are held in foreign currencies, which may be adversely affected by exchange rate movements.
In 2012, the Company firmly intends to continue to promote the transformation of development mode and
maintain a steady business growth. Given the above mentioned risk factors, the Company firmly intends to
adhere to its core development objectives, and may adjust its business development objectives in accordance
with market trends, in a timely manner and to an appropriate degree, to efficiently respond to challenges
from market competitors and changes in the economy. Meanwhile, the Company firmly intends to improve
its product and business structure, and strategically devote more efforts and resources to team building
and significant business areas, in an effort to improve the Company’s profitability and ability to achieve
sustainable development. The Company believes that it will have sufficient capital to meet its insurance
business expenditures and general new investment needs in 2012. At the same time, the Company will make
corresponding arrangements in accordance with the capital markets conditions to further implement its
business development strategies.
24
China Life Insurance Company Limited Annual Report 2011
Changes in Share Capital and Shareholdings of Substantial Shareholders
(1) CHANGES IN SHARE CAPITAL
During the Reporting Period, there was no change in the total number of shares and the share capital of the
Company.
(2) ISSUE AND LISTING OF SECURITIES
As at the end of the Reporting Period, the Company had not issued any securities in the last three years. During
the Reporting Period, there was no change in the total number of shares and the share structure of the Company
due to bonus issues or placings, nor were there any internal employees’ shares.
(3) INFORMATION ON SHAREHOLDERS AND EFFECTIVE CONTROLLER
1. Number of shareholders and their shareholding
Total number of shareholders
at the end of the Reporting Period
No. of A shareholders: 242,194
No. of H shareholders: 36,280
Particulars of top ten shareholders of the Company
Nature of
shareholder
State-owned corporate
shareholder
Foreign shareholder
Other
Other
Other
Other
Other
Other
Other
Other
Name of shareholder
China Life Insurance (Group)
Company
HKSCC Nominees Limited 1
State Development & Investment
Corporation 2
China Construction Bank – Changsheng
Tongqing Detachable Transaction Stock
Securities Investment Fund
China National Investment &
Guaranty Co., Ltd 2
PICC Life Insurance Company Limited –
Participating–Participating Products of
Individual Life Insurance
China National Nuclear Corporation 2
China International Television Corporation 2
Ping An Property & Casualty Insurance
Company of China, Ltd – Owned Fund
IFC – Standard Chartered – GOVERNMENT
OF SINGAPORE INVESTMENT
CORPORATION PTE LTD
Unit: Shares
Total number of shareholders at the end
of the last month before the issue date of
the annual report
No. of A shareholders: 234,414
No. of H shareholders: 36,174
Total number of
shares held as at the
end of the Reporting
Period
Percentage of
shareholding
Increase/decrease
during the
Reporting Period
Number of
shares subject to
selling restrictions
Number of
pledged or
lock-up shares
68.37%
19,323,530,000
–
25.72%
0.18%
7,270,829,102
+17,843,826
49,800,000
–
0.11%
30,473,170
+30,473,170
0.10%
29,200,000
–
0.10%
27,290,623
+19,135,438
0.07%
0.07%
0.06%
20,000,000
18,452,300
16,769,832
–
–
+15,364,996
0.06%
16,552,328
-2,583,617
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
China Life Insurance Company Limited Annual Report 2011
Changes in Share Capital and Shareholdings of Substantial Shareholders
25
Details of shareholders
Notes:
1.
HKSCC Nominees Limited is a company that holds shares on behalf of the clients of the Hong Kong stock brokers and other participants of the
CCASS system. The relevant regulations of the HKSE do not require such persons to declare whether their shareholdings are pledged or frozen. Hence,
HKSCC Nominees Limited is unable to calculate or provide the number of shares that are pledged or frozen.
2.
State Development & Investment Corporation, China National Investment & Guaranty Co., Ltd., China National Nuclear Corporation and China
International Television Corporation became the top 10 shareholders of the Company through the strategic placement during the initial public offering
of A shares of the Company in December 2006. The trading restriction period of the shares from the strategic placement was from 9 January 2007 to 9
January 2008.
3.
The Company was not aware of any connected relationship and concerted parties as defined by the“Measures for the Administration of the Takeover of
Listed Companies” among the top ten shareholders of the Company.
2.
Information relating to the Controlling Shareholder and Effective Controller
The controlling shareholder of the Company is CLIC, and its relevant information is set out below:
Name of company
Legal
representative
Registered
capital
Date of
incorporation Main business
CLICNote
Yuan Li
4.6 billion
21 July 2003 Life insurance, health insurance, accident
and other types of personal insurance; re-
insurance of personal insurance business;
businesses for use of funds that are
permitted under the national laws and
regulations or approved by the State
Council; all kinds of personal insurance
services, consulting and agency services;
other business approved by the CIRC.
Note: CLIC was formerly known as China Life Insurance Company, a company approved and formed by the State
Council in January 1999. With the approval of the CIRC in 2003, China Life Insurance Company was
restructured as CLIC.
The effective controller of the Company is the Ministry of Finance of the People’s Republic of China. The
equity and controlling relationship between the Company and its effective controller is set out in below:
Ministry of Finance
100%
China Life Insurance (Group) Company
68.37%
China Life Insurance Company Limited
During the Reporting Period, there was no change to the controlling shareholder and the effective controller
of the Company. As at the end of the Reporting Period, there was no other corporate shareholder holding
more than 10% of the shares in the Company.
26
China Life Insurance Company Limited Annual Report 2011
Changes in Share Capital and Shareholdings of Substantial Shareholders
(4) INTERESTS AND SHORT POSITIONS IN THE SHARES AND UNDERLYING SHARES
OF THE COMPANY HELD BY SUBSTANTIAL SHAREHOLDERS AND OTHER
PERSONS UNDER HONG KONG LAWS AND REGULATIONS
So far as is known to the Directors, Supervisors and the chief executive of the Company, as at 31 December 2011,
the following persons (other than the Directors, Supervisors and the chief executive of the Company) had interests
or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the
Company under the provisions of Divisions 2 and 3 of Part XV of the Securities and Futures Ordinance (Chapter
571 of the Laws of Hong Kong)(the “SFO”), or which were recorded in the register required to be kept by the
Company pursuant to Section 336 of the SFO, or as otherwise notified to the Company and HKSE:
Name of substantial shareholder
Capacity
Type of shares
Number of
shares held
Percentage of
the respective
type of shares
Percentage of
the total number
of shares in issue
China Life Insurance (Group)
Company
Blackrock, Inc. (Note 1)
Beneficial owner
A Shares
19,323,530,000(L)
92.80%
68.37%
Interest in controlled
corporations
H Shares
445,333,380(L)
37,102,207(S)
5.98%
0.49%
1.58%
0.13%
The letter “L” denotes a long position. The letter “S” denotes a short position.
(Note 1): Blackrock, Inc. was interested in a total of 445,333,380 H shares in accordance with the provisions of Part XV, SFO.
Of these shares, BlackRock Investment Management, LLC., BlackRock Financial Management, Inc., BlackRock
Institutional Trust Company, N.A., BlackRock Fund Advisors, BlackRock Advisors, LLC., BlackRock Asset
Management Canada Limited, BlackRock Asset Management Australia Limited, BlackRock Investment Management
(Australia) Limited, BlackRock Asset Management North Asia Limited, BlackRock (Netherlands) B.V., BlackRock
International Ltd., BlackRock Pensions Limited, BlackRock Advisors UK Ltd., BlackRock Asset Management Ireland
Ltd, BlackRock Investment Management (LUX), BlackRock Fund Managers Ltd and BlackRock Asset Management
Deutschland AG were interested in 22,755,313 H shares, 422,578,067 H shares, 286,295,300 H shares, 200,808,300
H shares, 15,134,180 H shares, 605,000 H shares, 125,000 H shares, 83,205 H shares, 37,928,889 H shares,
402,000 H shares, 5,168,000 H shares, 312,000 H shares, 4,813,000 H shares, 51,593,058 H shares, 8,205,480 H
shares, 4,464,395 H shares and 655,000 H shares respectively. All of these entities are either controlled or indirectly
controlled subsidiaries of Blackrock, Inc.
Blackrock, Inc. held by way of attribution a short position as defined under Part XV, SFO in 37,102,207 H shares
(0.49%).
Save as disclosed above, the Directors, Supervisors and the chief executive of the Company are not aware that there
is any party who, as at 31 December 2011, had an interest or short position 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.
China Life Insurance Company Limited Annual Report 2011
Directors, Supervisors, Senior Management and Employees
27
I DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
1. Current Directors
Number
of shares
held at the
beginning of
the year
Number of
shares held
at the end of
the year
Remuneration
paid/fee
in RMB ten
thousands
Reason for
changes
Other benefits,
social security,
and housing
provident
fund paid by
the Company
in RMB ten
thousands
Whether
receiving
remuneration and
allowance from
shareholders or
other associates
Total
emolument
in RMB ten
thousands
(before tax)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
/
/
/
/
/
/
/
/
/
/
/
/
22.42
34.58
34.20
34.20
0
0
0
0
0
32.00
30.00
/
9.94
26.20
25.94
25.94
0
0
0
0
0
0
0
/
32.36
60.78
60.14
60.14
0
0
0
0
0
32.00
30.00
275.42
No
Yes (Paid to the
Company)
No
No
Yes
Yes
Yes
No
No
No
No
/
Name
Yuan Li
Position
Gender
Age
Term
Chairman,
Executive Director
Male
49
Since 3 June 2011
Wan Feng
Executive Director
Male
53
Since 25 May 2009
Lin Dairen
Liu Yingqi
Miao Jianmin
Shi Guoqing
Executive Director
Executive Director
Non-executive Director
Non-executive Director
Male
Female
Male
Male
Zhuang Zuojin
Non-executive Director
Female
Ma Yongwei
Sun Changji
Independent Director
Independent Director
Bruce Douglas Moore
Independent Director
Anthony Francis Neoh
Independent Director
Total
/
Male
Male
Male
Male
/
53
53
47
60
60
69
69
62
65
/
Since 25 May 2009
Since 25 May 2009
Since 25 May 2009
Since 25 May 2009
Since 25 May 2009
Since 25 May 2009
Since 25 May 2009
Since 25 May 2009
Since 21 June 2010
/
Notes:
1.
According to the Procedural Rules for Board of Directors Meetings of China Life Insurance Company Limited,
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.
2.
The positions of the Directors in this annual report reflect their positions as at the submission date of this annual
report. The emoluments are calculated based on their terms of office during the Reporting Period.
3.
On 3 June 2011, Mr. Yuan Li was appointed as an Executive Director of the Company in the Annual General
Meeting for the year 2010. On the same day, Mr. Yuan Li was elected as Chairman of the Board of the Company
at the thirteenth meeting of the third session of the Board of Directors.
4.
According to the relevant rules and regulations of China, Mr. Ma Yongwei and Mr. Sun Changji, Independent
Directors, have not received any emoluments from the Company during the Reporting Period.
5.
According to the relevant rules and regulations of China, the final amount of emoluments of the Chairman and
Executive Directors is currently subject to review and approval. The result of the review will be revealed when the
final amount is confirmed.
28
China Life Insurance Company Limited Annual Report 2011
Directors, Supervisors, Senior Management and Employees
2. CURRENT SUPERVISORS
Name
Xia Zhihua
Position
Gender
Age
Term
Chairperson of
the Supervisory Committee
Female
57
Since 25 May 2009
Shi Xiangming
Supervisor
Male
Female
52
45
Since 25 May 2009
Since 25 May 2009
Male
44
Since 25 May 2009
Employee Representative
Supervisor
Employee Representative
Supervisor
Supervisor
/
Male
/
60
/
Since 25 May 2009
/
Yang Hong
Wang Xu
Tian Hui
Total
Notes:
Other benefits,
social securities,
and housing
provident
fund paid by
the Company
in RMB ten
thousands
Whether
receiving
remuneration and
allowance from
shareholders or
other associates
Total
emolument
in RMB ten
thousands
(before tax)
No. of
shares
held at the
beginning of
the year
No. of
shares held
at the end of
the year
Remuneration
paid/fee
in RMB ten
thousands
Reason for
changes
0
0
0
0
0
0
0
0
0
0
0
0
/
/
/
/
/
/
34.20
58.98
56.41
56.41
15.00
/
25.94
25.02
22.26
24.14
0
/
60.14
84.00
78.67
80.55
15.00
318.36
No
No
No
No
No
/
1.
Pursuant to the Articles of Association, Supervisors serve for a term of three years and may be re-elected.
2.
The positions of the Supervisors in this annual report reflect their positions as at the submission date of this annual
report. The emoluments are calculated based on their terms of office during the Reporting Period.
3.
According to the relevant rules and regulations of China, the final amount of emoluments of the Chairperson of
the Supervisory Committee is currently subject to review and approval. The result of the review will be revealed
when the final amount is confirmed.
China Life Insurance Company Limited Annual Report 2011
Directors, Supervisors, Senior Management and Employees
29
3. CURRENT SENIOR MANAGEMENT
Other benefits,
social securities,
and housing
provident
fund paid by
the Company
in RMB ten
thousands
Whether
receiving
remuneration and
allowance from
shareholders or
other associates
Total
emolument
in RMB ten
thousands
(before tax)
Number
of share
held at the
beginning of
the year
Number of
share held at
the end of
the year
Remuneration
paid
in RMB ten
thousands
Reason for
changes
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
/
/
/
/
/
/
/
/
/
/
34.58
34.20
34.20
34.20
34.20
34.20
34.20
31.90
–
/
26.20
25.94
25.94
25.94
25.94
25.94
25.94
21.05
–
/
60.78
60.14
60.14
60.14
60.14
60.14
60.14
52.95
–
474.57
Yes (Paid to the
Company)
No
No
Yes (Paid to the
Company)
No
No
No
No
No
/
Name
Wan Feng
Lin Dairen
Liu Yingqi
Liu Jiade
Zhou Ying
Su Hengxuan
Miao Ping
Xu Hengping
Li Mingguang
Position
President
Vice President
Vice President,
Board Secretary
Vice President
Vice President
Vice President
Vice President
Chief Operating Officer
Chief Actuary
Total
/
Notes:
Gender
Age
Term
Male
Male
Female
53
53
53
Since September
2007
Since August 2003
Since January 2006
Male
49
Since August 2003
Male
Male
Male
Male
Male
/
58
49
53
53
42
/
Since August 2008
Since August 2008
Since December
2009
Since August 2010
Since March 2012
/
1.
The positions of the members of the Senior Management in this annual report reflect their positions as at the
submission date of this annual report. The emoluments are calculated based on their terms of office during the
Reporting Period.
2.
According to the relevant rules and regulations of China, the final amount of emoluments of the Senior
Management is currently subject to review and approval. The result of the review will be revealed when the final
amount is confirmed.
3. With the approval given at the seventeenth meeting of the third session of the Board of Directors and the approval
from CIRC, Mr. Li Mingguang was appointed as the Chief Actuary of the Company since 26 March 2012.
30
China Life Insurance Company Limited Annual Report 2011
Directors, Supervisors, Senior Management and Employees
4. RE-DESIGNATION AND RETIREMENT OF DIRECTORS, SUPERVISORS AND
SENIOR MANAGEMENT
Other benefits,
social securities,
and housing
provident fund paid
by the Company
in RMB
ten thousands
Total
emolument
in RMB
ten
thousands
(before tax)
Whether
receiving
remuneration
and allowance
from
shareholders or
other associates
16.17
32.18
97.21
413.55
Remuneration
paid
in RMB
ten thousands
16.01
316.34
Reason for
changes
Retired due to
his age
Expiration
of her
employment
contract
/
No
No
/
/
/
/
445.73
Name
Previous position
Gender
Age
Term
Yang Chao
Hwei-Chung
Shao
Chairman,
Executive Director
Male
Chief Actuary
Female
Total
/
/
62
57
/
25 May 2009 –
3 June 2011
March 2007–
February 2012
China Life Insurance Company Limited Annual Report 2011
Directors, Supervisors, Senior Management and Employees
31
DIRECTORS
Mr. Yuan Li, born in 1962, Chinese
Mr. Yuan became the Chairman of the Company in June 2011. He became the President of
China Life Insurance (Group) Company in May 2011. Mr. Yuan has many years of experience
in banking, insurance and regulatory areas. From 1998 to 2011, Mr. Yuan worked in China
Insurance Regulatory Commission, as Director of Policies and Regulations Department, Director
of Development and Reform Department, Assistant to Chairman and Press Spokesman. From
1990 to 1998, he worked in China Ping An Insurance Company, as General Manager of China
Ping An Insurance (U.S.) Company Limited, General Manager of Administration Department
and Assistant Manager of Property and Casualty Insurance Department of China Ping An
Insurance Company. Mr. Yuan started his career in insurance industry since 1984 when he joined
Jilin Branch of the People’s Insurance Company of China. After graduating from university in
1982, Mr. Yuan engaged in credit work in Panshi Branch of the People’s Bank of China. Mr.
Yuan obtained a Ph.D in Finance from the School of Economics, Peking University as an on-
job postgraduate, and obtained the titles of Senior Economist, Associate Research Fellow and
Research Fellow.
Mr. Wan Feng, born in 1958, Chinese
Mr. Wan became the President of the Company in September 2007, and at the same time he
became the Vice President of China Life Insurance (Group) Company, a Director of China Life
Asset Management Company Limited, a Director of China Life Property and Casualty Insurance
Company Limited, a Director of China Life Pension Company Limited, and a Director of China
Guangfa Bank Co., Ltd.. He became an Executive Director of the Company from June 2006 and
served as a 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. Mr. Wan received a BA degree in Economics from Jilin
College of Finance and Trade, a MBA from Open University of Hong Kong, and a Doctorate in
Finance from Nankai University in Tianjin. Having worked with the Company’s Jilin Branch, the
Company’s Shenzhen Branch, the Company’s Hong Kong Branch and Hong Kong Taiping Life
Insurance Company, he has accumulated 30 years of experience in the life insurance industry. Mr.
Wan, a Senior Economist, was awarded special allowance by the State Council. He is currently
Director of the China Life Foundation, Deputy Director of the China Association of Actuaries,
Deputy Director of the Insurance Association of China, Executive Director of the Insurance
Institute of China and Director of the China Insurance Guarantee Fund Committee.
32
China Life Insurance Company Limited Annual Report 2011
Directors, Supervisors, Senior Management and Employees
Mr. Lin Dairen, born in 1958, Chinese
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,
who is a Senior Economist and awarded special allowance by the State Council, has worked in
the life insurance industry for 30 years and has accumulated extensive experience in operation
and management. He is currently the Executive Director of the Insurance Institute of China,
the Executive Director of the Labor Institute of China and the Executive Director of Peking
University China Center for Insurance and Social Security Research.
Ms. Liu Yingqi, born in 1958, Chinese
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 a 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 25 years of experience in operation and management of the life insurance
business and in 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, Chinese
Mr. Miao 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 Asset Management Company
Limited and China Life Franklin Asset Management Company Limited, the Chinese Alternate
Representative of ABAC (APEC Business Advisory Council), the Director of the Insurance
Association of China, the Director of China Finance 40 Forum and a member of the expert panel
for the planning of the People’s Bank of China’s “12th Five-year Program for Development and
Reform of the Financial Industry”. He was awarded special allowance by the State Council. In
2009, he was named as a “State-level Candidate for the New Century Talents Project” and one
of the “60 People in China Insurance Industry in the 60-year History of New China”. Mr. Miao
graduated from the post-graduate division of the People’s Bank of China with a major in Money
and Banking in 1989. 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, Chinese
Mr. Shi became a Non-executive Director of the Company in 2004. Mr. Shi served as the
Vice President of China Life Insurance (Group) Company from August 2003, the Chairman
of China Life Insurance (Overseas) Co., Ltd., Director of Beijing Oriental Plaza 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 35 years of experiences in the insurance industry,
and has accumulated extensive experiences both in the operation and management of insurance
businesses.
China Life Insurance Company Limited Annual Report 2011
Directors, Supervisors, Senior Management and Employees
33
Ms. Zhuang Zuojin, born in 1951, Chinese
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, and the
Director of China Life Asset Management Company Limited from June 2004. She acted as a
Director of China Life Franklin Asset Management Company Limited from May 2006. Ms.
Zhuang graduated from Correspondence College of CCP School, majoring in Economics and
Management, and studied Probability and Statistics (major in Insurance Actuarial Science) in
Zhejiang University from September 1998 to January 2000. Ms. Zhuang, a Senior Accountant,
has worked in the insurance industry for over 31 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. Ma Yongwei, born in 1942, Chinese
Mr. Ma became an Independent 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 General Manager of
former China Insurance Group Company. From 1994 to 1996, he served as the Chairman and
General Manager of the former People’s Insurance Company of China. From 1984 to 1994, Mr.
Ma served as Governor of the Agricultural Bank of China. Mr. Ma graduated from the Finance
Department of Liaoning Finance and Economic University in 1966. Mr. Ma, a Researcher, has
over 39 years of experience in the banking industry and the insurance industry.
Mr. Sun Changji, born in 1942, Chinese
Mr. Sun became an Independent Director of the Company in May 2009. From January 1968,
Mr. Sun worked in Sichuan Oriental Turbine Factory, serving as Section Head, Workshop
Director, Deputy Factory Manager and Factory Manager. In July 1991, he was appointed as
Deputy Director-general of the production department of the Ministry of Machinery Industry
of the PRC, and he became Vice Minister of the Ministry of Machinery Industry of the PRC in
April 1993. In April 1998, he became First Deputy Director-general of the State Administration
of Machinery Industry of the PRC (deputy ministerial level). He became Deputy Party Secretary
and Vice President (deputy ministerial level) of Bank of China in January 1999. From September
1999 to August 2001, he served concurrently as President of China Orient Asset Management
Corporation. He became Vice Chairman of Bank of China in November 2000, Vice Chairman
of Bank of China (Hong Kong) Limited in September 2001 and Secretary of Commission for
Discipline Inspection of Bank of China in June 2003 concurrently. From August 2004, he has
served as Vice Chairman of Bank of China (Hong Kong) Limited and Vice Chairman of China
Machinery Industry Federation concurrently. Mr. Sun, now a Researcher-Level Senior Engineer,
graduated from Tsinghua University in September 1966.
34
China Life Insurance Company Limited Annual Report 2011
Directors, Supervisors, Senior Management and Employees
Mr. Bruce Douglas Moore, born in 1949, American
Mr. Moore became an Independent Director of the Company in May 2009. From 2002 to 2007,
Mr. Moore was Partner-in-charge of Asian actuarial services for Ernst & Young. He was based in
Beijing for this job. He had served in actuarial leadership roles with Ernst & Young in New York
and Tokyo. From 1995 to 2000, he was the head of international actuarial services in New York
with Ernst & Young. In 2000, Mr. Moore worked with Ernst & Young in Beijing and was in
charge of the business in Asian markets (including Japan). In 2001, he was responsible for Japan
actuarial services in Tokyo. Since 2002, he was responsible for actuarial services in Asian market
(excluding Japan) in Ernst & Young’s Beijing office. From 1982 to 1995, he worked in various
senior financial management roles at Prudential Life Insurance (U.S.). Mr. Moore graduated from
Brown University in 1971, majoring in Applied Mathematics. Mr. Moore has obtained FSA,
FCAS, MAAA and CFA qualifications. Mr. Moore has over 36 years of experience serving the
insurance industry as an executive or a consultant.
Mr. Anthony Francis Neoh, born in 1946, Chinese
Mr. Neoh became an Independent Director of the Company in June 2010. He currently serves
as a member of the International Consultation Committee of the CSRC. He previously served
as Chief Advisor to the CSRC, a member of the Basic Law Committee of the Hong Kong
Special Administrative Region under the Standing Committee of the National People’s Congress
of China, Chairman of the Hong Kong Securities and Futures Commission, etc. From 1996
to 1998, he was Chairman of the Technical Committee of the International Organisation of
Securities Commissions. He was appointed as Queen’s Counsel (since retitled as Senior Counsel)
in Hong Kong in 1990. Mr. Neoh graduated from the University of London with a degree in Law
in 1976. He is a barrister of England and Wales and admitted to the State Bar of California. In
2003, he was conferred the degree of Doctor of Laws, honoris causa by the Chinese University
of Hong Kong. He was elected Honorary Fellow of the Hong Kong Securities Institute and
Academician of the International Euro-Asian Academy of Sciences in 2009. Mr. Neoh was a
Non-executive Director of Global Digital Creations Holdings Limited from November 2002 to
December 2005, and an Independent Non-executive Director of the Link Management Limited,
Manager of the Link Real Estate Investment Trust, from September 2004 to March 2006. Since
August 2004, he has been serving as an Independent Non-executive Director of Bank of China
Limited.
China Life Insurance Company Limited Annual Report 2011
Directors, Supervisors, Senior Management and Employees
35
SUPERVISORS
Ms. Xia Zhihua, born in 1955, Chinese
Ms. Xia became the Chairperson of the Supervisory Committee of the Company in March 2006.
Ms. Xia served as the State Council’s representative in Supervisory Committee of state-owned
important financial institutions, Designated Supervisor of bureau-level and assistant bureau-
level grade official from July 2000 to December 2005. Ms. Xia acted as an assistant inspector
of National Treasury Bureau of the Ministry of Finance in June 2000, a Deputy Director of
National Debt and Finance Bureau of the Ministry of Finance from July 1998 to June 2000, and
a Deputy Director of National Debt Bereau of the Ministry of Finance from July 1997 to June
1998. Ms. Xia graduated from Xiamen University, majoring in Politics and Economics at the
Department of Economics, and majoring in World Economics at the College of Economics from
February 1978 to November 1984, and received a BA degree and a MA degree in Economics
respectively. Ms. Xia is also the Executive Director of China Institution of Internal Audit, and
obtained the qualification of Certified Internal Auditor (CIA).
Mr. Shi Xiangming, born in 1959, Chinese
Mr. Shi became a Supervisor of the Company in May 2009, and served as the General Manager
of the Supervisory Department of the Company since September 2008. Mr. Shi served as Deputy
General Manager of the Human Resources Department and Office Director in the Company
from September 2003 to September 2008. From March 2002 to August 2003, Mr. Shi served as
Deputy General Manager of the Supervisory Department of China Life Insurance Company. Mr.
Shi graduated from the Chemistry School of the first branch college of Beijing University, and
received a Bachelor’s degree in Science.
Ms. Yang Hong, born in 1967, Chinese
Ms. Yang became a Supervisor of the Company in October 2006, and is currently the Deputy
General Manager (in charge) of the R&D Center of the Company. From July 2003 to January
2011, Ms. Yang served as Assistant General Manager and Deputy General Manager of the
Business Management Department and General Manager of the Customer Service Department
of the Company. Ms. Yang graduated from Computer Department of Jilin University with a
Bachelor’s degree.
Mr. Wang Xu, born in 1967, Chinese
Mr. Wang became a Supervisor of the Company in May 2009, and served as the Chief of General
Office of the Company since April 2009. He served as Deputy Chief (in charge) of the General
Office, Deputy General Manager of the Group Life Insurance Sales Department, and Deputy
Chief, Chief and Deputy General Manager of the Health Insurance Department of the Company
from January 1999 to April 2009. He also served as doctor-in-charge of the Orthopedics
Department of China Aerospace Central Hospital from 1989 to 1999. Mr. Wang graduated from
Suzhou Medical Institute with a Bachelor’s degree in Medicine in 1989 and obtained a financial
MBA degree from Chinese University of Hong Kong in 2004. Mr. Wang is an associate senior
doctor.
36
China Life Insurance Company Limited Annual Report 2011
Directors, Supervisors, Senior Management and Employees
Mr. Tian Hui, born in 1951, Chinese
Mr. Tian became a Supervisor of the Company in June 2004. He is currently the Vice Chairman
and Party Secretary of China Coal Technology & Engineering Group Corp, the Vice President
of China National Coal Association, and the Deputy Director of Coal Industry Committee of
Technology. He was the Director and Party Secretary of China Coal International Engineering
Research Institute from June 2006 to April 2008, and 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.
SENIOR MANAGEMENT
Mr. Wan Feng, please see the section “Directors” for his profile.
Mr. Lin Dairen, please see the section “Directors” for his profile.
Ms. Liu Yingqi, please see the section “Directors” for her profile.
Mr. Liu Jiade, born in 1963, Chinese
Mr. Liu became a Vice President of the Company in 2003 and a Director of China Life 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
China Guangfa Bank Co., Ltd. since 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’s degree in
Public Finance. He is currently the Director of the Insurance Institute of China and a member of
the State Ministry of Finance Accounting Information Committee.
Mr. Zhou Ying, born in 1954, Chinese
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 a Designated Supervisor (at Deputy Bureau level) and as Director of the Fifth
Office (at Deputy Bureau level) in Beijing State-owned Enterprise Supervisory Committee from
May 2004 to November 2006. Mr. Zhou graduated from University of Science and Technology
of China with a Master’s degree in Business Administration.
China Life Insurance Company Limited Annual Report 2011
Directors, Supervisors, Senior Management and Employees
37
Mr. Su Hengxuan, born in 1963, Chinese
Mr. Su became the Vice President of the Company since August 2008. Mr. Su served as Assistant
to 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. 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, graduated from Wuhan University in
1998 with a Bachelor’s degree in Insurance and Finance, majoring in Insurance, and graduated
from the School of Management in University of Science and Technology of China in July
2011 with a Ph.D in Management, majoring in Management Science and Engineering. Mr. Su,
a Senior Economist, has over 29 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.
Mr. Miao Ping, born in 1958, Chinese
Mr. Miao became the Vice President of the Company in December 2009. He served as the
General Manager of the Company’s Jiangsu branch from September 2006. Mr. Miao has served
as the General Manager of the Company’s Jiangxi branch from September 2004 and has been a
Deputy General Manager of the Company’s Jiangsu branch from April 2002. Mr. Miao graduated
from the Correspondence College of Yangzhou University in 1996, majoring in Economics and
Management. Mr. Miao, a Senior Economist, has over 30 years of experience in the operation of
life insurance business and the management of insurance business.
Mr. Xu Hengping, born in 1958, Chinese
Mr. Xu served as the Chief Operating Officer of the Company since August 2010. Mr. Xu had
been the General Manager of the Company’s Fujian branch from April 2007, Deputy General
Manager of the Company’s Fujian branch from December 2002 and Assistant to the General
Manager of the Company’s Fujian branch from September 1998. Mr. Xu once took positions
in Fuzhou Life Insurance Company Limited and Longyan branch of the Company. Mr. Xu
graduated from Fujian Institute of Financial Administrators in 1987, majoring in insurance,
and from the Network College of Hunan University in 2004, majoring in Finance. Mr. Xu also
studied in the Graduate School of Xiamen University, majoring in monetary banking. Mr. Xu, a
Senior Economist, has over 32 years of experience in life insurance management.
Mr. Li Mingguang, born in 1969, Chinese
Mr. Li served as the Chief Actuary of the Company since March 2012. Mr. Li joined the
Company in 1996 and subsequently served as Deputy Director, Director, Assistant to General
Manager of Product Development Department, Responsible Actuary of the Company and
General Manager of Actuarial Department. He graduated from Shanghai Jiao Tong University
in Computer Science with a Bachelor’s degree in 1991, Central University of Finance and
Economics in Actuarial Science with a Master’s degree in 1996 and Tsinghua University with an
EMBA in 2010, and also studied in University of Pennsylvania in the United States in 2011. Mr.
Li is a Fellow of the China Association of Actuaries (FCAA) and a Fellow of the Institute and
Faculty of Actuaries (FIA). He was the Chairman of the first session of the China Actuarial Work
Committee and the Secretary-general of the first session of the China Association of Actuaries. He
is currently the Secretary-general of the China Association of Actuaries and a Guest Director of
the board of directors of the Insurance Institute of China.
38
China Life Insurance Company Limited Annual Report 2011
Directors, Supervisors, Senior Management and Employees
COMPANY SECRETARY
Mr. Heng Kwoo Seng, born in 1948, Chinese
Mr. Heng is the Company Secretary of the Company. Mr. Heng was the Managing Partner
of Morison Heng, and is currently the Consultant of the firm. 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 was a fellow member of the Institute
of Chartered Accountants in England and Wales, and had over 20 years of experience in serving
as company secretary of listed companies in Hong Kong.
QUALIFIED ACCOUNTANT
Mr. Yang Zheng, born in 1970, Chinese
Mr. Yang became the Qualified Accountant of the Company in 2006. He served as Assistant to
the General Manager, Deputy General Manager and General Manager of the Finance Department
of the Company since 2005. Mr. Yang has been a Director of China Life Asset Management
Company Limited since 2009 and has been a Director of Sino-Ocean Land Holdings Limited
since 2011. 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 America in 2000. He is a member of American Institute of Certified Public
Accountants (AICPA) and a member of the Association of Chartered Certified Accountants
(ACCA).
China Life Insurance Company Limited Annual Report 2011
Directors, Supervisors, Senior Management and Employees
39
II POSITIONS HOLD BY CURRENT DIRECTORS, SUPERVISORS AND SENIOR
MANAGEMENT IN THE SHAREHOLDERS OF THE COMPANY
Name
Wan Feng
Name of shareholder
China Life Insurance (Group) Company
Position
Vice President
Term
Since September 2007
Whether receiving
remuneration and
allowance from
shareholders
No
Miao Jianmin
China Life Insurance (Group) Company
Vice President
Since December 2005
No
III EMPLOYEES
As at the end of the Reporting Period, we have 100,319 employees. The Company does not have any retired
employees for which extra costs have to be incurred.
As at the end of the Reporting Period, our employee structure is as follows:
1. Expertise
Class of Expertise
Management and administration
Sales and sales management
Finance and auditing
Insurance verification, claim processing and customer services
Other expertise and technicians
Others
2. Education Level
Education Level
Master or above
Bachelor
College Diploma
Secondary School
Others
Number of Employees
20,880
28,480
6,874
32,853
3,750
7,482
Number of Employees
2,151
39,860
42,706
15,073
529
40
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
OVERVIEW
The Company implements good corporate governance policies and strongly believes that through fostering sound
corporate governance, the Company can further enhance its transparency and its system of accountability, achieve the
above-mentioned aims of the Company, operate in a more systematic manner and boost the confidence of investors.
(I) Summary of corporate governance
Shareholders’
General Meeting
Board of Directors
Supervisory
Committee
Audit Committee
Nomination and
Remuneration
Committee
Risk
Management
Committee
Strategy and
Investment Decision
Committee
Budget, Execution
and Assessment
Committee
Board Secretary
Board Secretariat/Company Secretary
(Corporate Governance Structure Chart)
With the establishment of a corporate governance system with reasonably designed structure, well-developed
mechanism, strict rules and regulations, as well as high efficiency in operation as its core objectives, the Company
continues to promote development of its corporate governance framework, strictly perform its obligation of
information disclosure, actively serve the interest of public investors and enhance its transparency. By setting up an
effective accountability system, the Company strengthens the standardization of its operation so as to enhance its
image and position in the capital market.
1.
The Company has set up a relatively standardized and comprehensive corporate governance structure
strictly in accordance with relevant laws, regulations and regulatory rules, such as the Company Law and
the Securities Law of the PRC. There were no major differences between the corporate governance structure
of the Company being implemented and that prescribed and required in the relevant documents of the
CSRC. The Company complied with all code provisions under the Code on Corporate Governance Practices
contained in Appendix 14 to the Listing Rules published by the HKSE (the “Code”).
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
41
2.
3.
4.
The Company has streamlined its corporate governance system, timely revised its Articles of Association, the
“Procedural Rules for Board Meetings” and the terms of reference of relevant specialized Board committees
pursuant to the newly enacted laws and regulations of its listed jurisdictions and in line with the Company’s
development needs. In 2011, the Company improved its existing system by revising and formulating more
than 10 rules and regulations, such as the “Working Rules for Board Secretary of China Life Insurance
Company Limited”, the “Annual Report Work System for Independent Directors and Audit Committee
of China Life Insurance Company Limited”, the “Management System for Shares Held by Directors,
Supervisors and Senior Management of China Life Insurance Company Limited and the Change in their
Shareholdings” and the “Procedural Rules for Budget, Execution and Assessment Committee Meetings”,
according to regulatory requirements with a view to further improving its corporate governance system.
Shareholders’ General Meetings, Board Meetings and Supervisory Committee Meetings of the Company
have been functioning independently and efficiently pursuant to Articles of Association and their respective
rules and procedures.
In accordance with the requirements of the CSRC and relevant provisions of its Articles of Association,
the Company continuously improved decision-making mechanism for its Board. The Board has been
accountable to shareholders of the Company with respect to their assets and resources entrusted to it for
the performance of its duty of corporate governance. All members of the Board have taken the initiative to
look into the Company’s affairs and have had a comprehensive understanding of the Company’s businesses.
They have devoted sufficient time in performing their duties as Directors with due care and in a diligent
and efficient manner. The Company has gradually improved the ancillary mechanism for the operation
of the Board. The launch of a daily financial information inquiry system for its Non-executive Directors
and Independent Directors ensures that the Non-executive Directors and Independent Directors are well
informed of the development of the Company in a comprehensive and timely manner so that they can
accurately determine the status of the Company’s operation. By setting up a mechanism of regular reporting
of business development strategy and marketing tactics, the management of the Company can report the
business operation, development strategies and marketing tactics to the Board in a timely manner, which
would therefore provide a basis for the decision-making of the Board.
The Company has actively promoted the establishment of corporate governance for the continuous
improvement of its corporate governance structure. To strengthen the general control over budget
and optimize resource and policy allocation, the Board has set up a Budget, Execution and Assessment
Committee to further strengthen the support for the Board’s decisions and the supervision over their
implementation. At present, the Board has five specialized Board committees, which consists of the Audit
Committee, Nomination and Remuneration Committee, Risk Management Committee, Strategy and
Investment Decision Committee, and Budget, Execution and Assessment Committee. These specialized
Board committees conduct studies on specific matters, hold meetings on both regular and ad hoc basis,
communicate with the management, provide advice and recommendations for Board’s consideration, and
deal with matters entrusted or authorized by the Board, for the purpose of improving the Board’s efficiency
and capabilities. In order to fully exercise the functions of the specialized Board committees, a working
group of each of the Risk Management Committee and the Audit Committee has been established to further
improve the work mechanism of specialized Board committees.
42
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
5.
6.
7.
The Company continues to promote the operational efficiency of the Supervisory Committee. The
Supervisory Committee of the Company has set up five working groups for supervision of special projects,
namely, the Consultation Working Group for Changes in Financial Policies, Consultation Working
Group for Major Connected Transactions, Working Group for Effective Preparation of Financial Reports,
Consultation Working Group for Compliance of Major Investment Decisions and Consultation Working
Group for Establishment of the Company’s Systems, to promote the efficiency and professional standards of
supervision work of the Supervisory Committee. Members of the Supervisory Committee attended meetings
of the Board, and attended each meeting of the specialized Board committees respectively so as to perform
their supervisory role in a serious manner.
The Company continues to strengthen its management on information disclosure and actively launch
activities for investor relations. The Company has consistently made information disclosure pursuant to
the requirements of the listing rules in its listed jurisdictions, implemented its policies on communication
with shareholders in an efficient and effective manner and continuously enhanced its communication with
investors, thus ensuring that all shareholders and investors have access to information about the Company in
an open, fair, true and accurate manner, and the level of transparency of the Company’s operations has been
further improved.
The Board and Supervisory Committee of the Company conducted extensive on-site inspection activities.
Members of the Board carried out on-site inspections of local branches of the Company in several occasions,
which enabled them to have a deeper understanding of the business development, operations management
and infrastructures of the Company’s local branches, and to carry out inspections over the implementation
of operational decisions made by the Board at a local level. In addition to on-site inspections of local
branches of the Company, members of the Supervisory Committee carried out on-site inspections of special
projects on corporate governance and risk management and control, thereby further widening its horizon on
corporate governance and acquiring more experiences on risk management, control and prevention.
8. Directors and Supervisors of the Company actively attended various regulatory training courses. They
attended training courses held by the CIRC and the Beijing Securities Regulatory Bureau for Directors,
Supervisors and senior management and training course held by SSE and the Hong Kong Institute of
Chartered Secretaries; consistently implemented the requirements of the “Notice of the General Office
of State Council on Forwarding the Opinions of the China Securities Regulatory Commission and other
Relevant Departments on Preventing and Controlling Insider Trading on Capital Markets” in a serious
manner and organized and conducted studies and examination on prevention of insider trading; actively
consolidated, streamlined and improved the systems of the Company based on its actual needs and the
revised requirements of the Code published by the HKSE, so as to obtain updates on relevant regulatory
policies and improve the corporate governance of the Company in a timely manner.
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
43
(II) Development of the corporate governance system
For the purpose of further promoting the management of information disclosure and insider information, the
Company, having taken into account the regulatory requirements and its own practice, formulated special
rules and regulations, such as the “Provisional Measures of China Life Insurance Company Limited for the
Administration of Persons Who Have Knowledge of Insider Information”, the “Annual Report Work System for
Independent Directors and Audit Committee of China Life Insurance Company Limited”, the “Management
System for Shares Held by Directors, Supervisors and Senior Management of China Life Insurance Company
Limited and the Change in their Shareholdings”, the “Provisional Measures on Accountability System for Major
Errors in Periodic Report Disclosures of China Life Insurance Company Limited”, on the basis of the “Regulations
for Information Disclosure of China Life Insurance Company Limited” and the “Internal Reporting System for
Material Information of China Life Insurance Company Limited”. The above-mentioned rules and regulations
were printed and distributed to relevant units and departments for study and implementation after being examined
and approved by the Board. During the year of 2011, the Company attached great importance to the management
of insider information and strictly implemented the system for the administration of registration of persons who
have knowledge of insider information. For projects relating to the preparation of annual reports, connected
transactions or major investments, a reminder of insider information had been sent to all functional departments,
intermediaries, shareholders and regulatory authorities of the Company, a confidentiality agreement had been
signed in respect thereof and the procedures for registration of persons who have knowledge of insider information
had been completed.
The Company stepped up its studies and researches on all regulatory requirements and continued to perfect the
rules and regulations of corporate governance in its practices. In order to increase its accuracy and effectiveness
of the Board’s decision-making, the Company prepared handbooks containing the latest rules and regulations of
various listed jurisdictions and regulatory authorities for the Board’s reference in a timely manner. In 2011, the
Company published five issues of Reference Materials to ensure that the Board comprehended the latest regulatory
requirements.
SHAREHOLDERS’ GENERAL MEETING
The Shareholders’ General Meeting, as an organ of highest authority of the Company, exercises its duties and functions
in accordance with relevant laws. Its duties and powers include the election, appointment and removal of Directors and
Supervisors, review and approval of the reports of the Board and the Supervisory Committee, review and approval of the
annual budget and final accounts of the Company, and any other matters required by the Articles of Association to be
approved by way of resolution of the Shareholders’ General Meeting. The Company ensures that all shareholders have
equal status so as to ensure that the rights of all shareholders are protected, including the right of access to information
in relation to, and the right to vote in respect of, major matters of the Company. The Company has the ability to
operate and manage its business autonomously, and is separate and independent from its controlling shareholder in its
business operations, personnel, assets and financial matters.
44
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
Shareholders’ General Meetings convened during the Reporting Period are as follows:
Session of the meeting
Date of the meeting
Newspapers in which
resolutions were published
Annual General Meeting
for the year 2010
First Extraordinary General
Meeting for the year 2011
3 June 2011
14 October 2011
China Securities Journal, Shanghai
Securities News and Securities Times
China Securities Journal, Shanghai
Securities News and Securities Times
Date of publication
of resolutions
4 June 2011
15 October 2011
BOARD
The Board is a standing decision-making body of the Company and its main duties include the following: performing
the function of corporate governance of the Company, 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, annual budgets and financial reports, providing an objective evaluation
on the Company’s operating results in its financial reports and other disclosure documents, dealing with senior
management personnel 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 and Independent Directors include, without limitation, regularly attending
meetings of the Board and of Board committees of which they are members, providing independent opinions at meetings
of the Board and of Board committees, resolving any potential conflict of interest, serving on the Audit Committee,
Nomination and Remuneration Committee and other specialized Board committees and inspecting, supervising and
reporting on the performance of the Company. The Board is accountable to the shareholders of the Company and
reports to them.
On 3 June 2011, Mr. Yang Chao, the former Chairman of the Company, tendered his resignation as Chairman and
Executive Director due to age. On the same date, Mr. Yuan Li was elected as Executive Director at the Shareholders’
General Meeting. At the 13th meeting of the third session of the Board, Mr. Yuan Li was elected as the Chairman of
the third session of the Board. At present, the Board consists of 11 members, including 4 Executive Directors, 3 Non-
executive Directors and 4 Independent Directors. The number of Independent Directors complies with the minimum
requirement of 3 Independent Directors under the Listing Rules of the HKSE and the recommended best practices
under the Code that one-third of the Board be represented by Independent Directors. All members of the Board have
devoted sufficient time in dealing with the affairs of the Board and attended the relevant training courses according to
regulatory requirements. So far as the Company is aware, no financial, business, family or other material relationship
exists among Board members, members of the Supervisory Committee or senior management (including between the
Chairman, Mr. Yuan Li and the President, Mr. Wan Feng).
In 2011, all Independent Directors of the Company possessed extensive experience in various fields, such as economics,
insurance, management, finance and accounting. The Company also complies with the requirement of the Listing Rules
of the HKSE that at least one of its Independent Directors has appropriate professional qualifications or accounting
qualifications or related financial management expertise. As required under the Listing Rules of the HKSE, the Company
has obtained a written confirmation from each of its Independent Directors in respect of their independence, and
the Company is of the opinion that all of the Independent Directors are independent of the Company and strictly
perform their duties as Independent Directors. 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.
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
45
Meetings of the Board are held both on a regular and an ad-hoc basis. Regular meetings are convened at least five times
a year for the examination and approval of proposals, such as annual budget, annual report, interim report, first quarter
and third quarter reports, and related financial reports, respectively. Meetings are convened by the Chairman and 14
days’ notice is given to all Directors before such meetings. Agendas and related documents are sent to the Directors at
least three days prior to such meetings. In 2011, all notices, agendas and related documents in respect of such regular
Board meetings were sent in compliance with the above requirements. By fully reviewing all the relevant proposals, the
Board of Directors has confirmed that the information contained in its periodic reports and financial reports is true,
accurate and complete and contains no false representations, misleading statements or material omissions, and no event
or situation was found which would have material adverse impacts on the Company’s ongoing operation.
Regular Board meetings are held mainly to review the quarterly, interim and annual reports of the Company and to deal
with other related matters. The practice of obtaining Board consent through the circulation of written resolutions does
not constitute a regular Board meeting. An ad-hoc Board meeting may be convened in urgent situations if requisitioned
by any of the following: shareholders representing over one-tenth of voting shares, Directors constituting more than one-
third of the total number of Directors, the Supervisory Committee, more than 2 Independent Directors, the Chairman
or the President. 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 approve such resolution by signing the resolution in writing, 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 rights on the matter to be considered and shall not be counted in the quorum for the Board meeting.
All Directors shall have access to the advice and services of the Company Secretary and the Board Secretary. Detailed
minutes of Board meetings regarding matters considered by the Board and decisions reached, including any concerns
raised by Directors or dissenting views expressed, are kept by the Board Secretary. Minutes of Board meetings are
available upon reasonable notice for inspection and commenting upon by any Director.
1. Regular meetings of the Board convened in 2011
Session of the meeting
Date of the meeting
Newspapers in which resolutions
were published
Date of publication
of resolutions
11th Meeting of the Third
Session of the Board
12th Meeting of the Third
Session of the Board
13th Meeting of the Third
Session of the Board
14th Meeting of the Third
Session of the Board
15th Meeting of the Third
Session of the Board
22 March 2011
25 April 2011
3 June 2011
23 August 2011
27 October 2011
China Securities Journal, Shanghai
Securities News and Securities Times
China Securities Journal, Shanghai
Securities News and Securities Times
China Securities Journal, Shanghai
Securities News and Securities Times
China Securities Journal, Shanghai
Securities News and Securities Times
China Securities Journal, Shanghai
Securities News and Securities Times
23 March 2011
26 April 2011
4 June 2011
24 August 2011
28 October 2011
46
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
The resolutions passed at the above Board meetings were published on the HKExnews website of the Hong Kong
Exchanges and Clearing Limited as overseas regulatory announcements.
Pursuant to the requirements of the recommended best practices in the Code published by the HKSE, the
Company convened a special meeting on 27 October 2011, which was presided by its Chairman, Mr. Yuan Li
and attended by the Company’s Non-executive Directors and Independent Directors. The purpose of the meeting
was to consult with, and solicit advice and recommendations from all Non-executive Directors and Independent
Directors in respect of the operation, management, capital allocation and systems of the Company.
2. Meetings and attendance
In 2011, 5 Board meetings were held, of which 3 were physical meetings and 2 were combined physical and
telephony meetings. The attendance records of individual Directors are as follows:
Name of Director
Type of Director
meetings the Director
was required to attend
during the year
meetings
meetings
physically
attended
attended by telephony
meetings Number of
meetings
attended
absent
by proxies
Number of Number of Number of Number of
Whether the
Director
failed to
attend two
consecutive
meetings
in person
Yang Chao
Yuan Li
Wan Feng
Lin Dairen
Liu Yingqi
Miao Jianmin
Shi Guoqing
Zhuang Zuojin
Ma Yongwei
Sun Changji
Bruce Douglas Moore
Anthony Francis Neoh
Notes:
Executive Director Note 1
Executive Director
Executive Director
Executive Director
Executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Independent Director
Independent Director
Independent Director
Independent Director
3
3
5
5
5
5
5
5
5
5
5
5
3
3
5
4
5
5
5
4
2
3
5
5
0
0
0
0
0
0
0
0
1 Note 4
1 Note 6
0
0
0
0
0
1 Note 2
0
0
0
1 Note 3
2 Note 5
1 Note 7
0
0
0
0
0
0
0
0
0
0
0
0
0
0
No
No
No
No
No
No
No
No
No
No
No
No
1.
On 3 June 2011, Mr. Yang Chao resigned from his posts of Chairman and Executive Director of the Company;
2.
At the fifteenth meeting of the third session of the Board held on 27 October 2011, Mr. Lin Dairen gave written
authorization for Mr. Wan Feng to act as his proxy to attend and vote at the meeting;
3.
At the fifteenth meeting of the third session of the Board held on 27 October 2011, Ms. Zhuang Zuojin gave written
authorization for Mr. Shi Guoqing to act as her proxy to attend and vote at the meeting;
4.
At the twelfth meeting of the third session of the Board held on 25 April 2011, Mr. Ma Yongwei attended the meeting by
way of telephony;
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
47
5.
At the eleventh meeting of the third session of the Board held on 22 March 2011, Mr. Ma Yongwei gave written
authorization for Mr. Sun Changji to act as his proxy to attend and vote at the meeting; at the thirteenth meeting of
the third session of the Board held on 3 June 2011, Mr. Ma Yongwei gave written authorization for Mr. Bruce Douglas
Moore to act as his proxy to attend and vote at the meeting;
6.
At the fifteenth meeting of the third session of the Board held on 27 October 2011, Mr. Sun Changji attended the
meeting by way of telephony;
7.
At the thirteenth meeting of the third session of the Board held on 3 June 2011, Mr. Sun Changji gave written
authorization for Mr. Anthony Fracis Neoh to act as his proxy to attend and vote at the meeting.
From the end of year 2011 up to the Latest Practicable Date (26 March 2012), 2 Board meetings were held. The
attendance records of individual Directors are as follows:
Name of Director
Type of Director
meetings the Director
was required to attend
during the year
meetings
meetings
physically
attended
attended by telephony
meetings Number of
meetings
attended
absent
by proxies
Number of Number of Number of Number of
Whether the
Director
failed to
attend two
consecutive
meetings
in person
Yuan Li
Wan Feng
Lin Dairen
Liu Yingqi
Miao Jianmin
Shi Guoqing
Zhuang Zuojin
Ma Yongwei
Sun Changji
Bruce Douglas Moore
Anthony Francis Neoh
Executive Director
Executive Director
Executive Director
Executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Independent Director
Independent Director
Independent Director
Independent Director
Notes:
2
2
2
2
2
2
2
2
2
2
2
1
2
2
2
2
2
2
1
2
2
1
0
0
0
0
0
0
0
0
0
0
1 Note 3
1 Note 1
0
0
0
0
0
0
1 Note 2
0
0
0
0
0
0
0
0
0
0
0
0
0
0
No
No
No
No
No
No
No
No
No
No
No
1.
At the seventeenth meeting of the third session of the Board held on 26 March 2012, Mr. Yuan Li gave written
authorization for Mr. Wan Feng to act as presider of the meeting and gave written authorization for Mr. Miao Jianmin to
act as his proxy to attend and vote at the meeting;
2.
At the sixteenth meeting of the third session of the Board held on 5 January 2012, Mr. Ma Yongwei gave written
authorization for Mr. Sun Changji to act as his proxy to attend and vote at the meeting;
3.
At the sixteenth meeting of the third session of the Board held on 5 January 2012, Mr. Anthony Francis Neoh attended
the meeting by way of telephony.
48
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
3. Performance of duties by Independent Directors
In 2011, all Independent Directors of the Company possessed extensive experience in various fields, such as
insurance, management, finance and accounting, and law. They satisfied the criteria for Independent Directors
under the regulatory rules of the Company’s listed jurisdictions. The Independent Directors of the Company
performed their duties pursuant to the Articles of Association and the provisions and requirements of the listing
rules of the Company’s listed jurisdictions.
All Independent Directors diligently fulfilled their responsibilities and faithfully performed their duties
by attending Board meetings of the Company in 2011, examining and approving the Company’s business
development, financial management and connected transactions, participating in the establishment of specialized
Board committees, providing professional and constructive advice in respect of major decisions of the Company,
seriously listening to the reports from relevant personnel, understanding the daily operation and any possible
operational risks of the Company in a timely manner, expressing their opinions and exercising their functions and
powers at Board meetings and actively performing their duties as Independent Directors in an effective manner.
In 2011, the Company provided various materials to Independent Directors, which enabled them to comprehend
information associated with the insurance industry. All Independent Directors obtained information relating to
the operation and management of the Company through various channels, which therefore formed the basis of
their scientific and prudent decisions.
In 2011, the Independent Directors of the Company inspected local branches of the Company in Xinjiang and
Zhejiang, etc. and carried out on-site inspections of the business, operations and management of the Company.
During the Reporting Period, no Independent Director has raised any objection against Board resolutions or other
matters of the Company.
4.
Implementation by the Board of resolutions adopted at Shareholders’ General Meetings
During the Reporting Period, the Company convened two Shareholders’ General Meetings. The Board made
decisions strictly within the authorizations given under the Shareholders’ General Meetings, performed its duties
and functions with diligence and implemented the resolutions adopted at the Shareholders’ General Meetings
pursuant to the relevant requirements of the Company Law and Securities Law of the PRC and its Articles of
Association.
The profit distribution plan of the Company for 2010 was considered and approved at the Annual General
Meeting for the year 2010, being a resolution to “declare a dividend of RMB0.40 per share in cash (including
taxes)” (equivalent to HK$0.47978). The record date for the entitlement to dividend payment on A Shares was 17
June 2011; ex-dividend date was 20 June 2011 and dividend payment date was 29 June 2011. The announcement
for profit distribution in 2010 was published in the China Securities Journal, Shanghai Securities News and
Securities Times on 14 June 2011. Dividends on H Shares were distributed to the holders of H Shares whose
names appeared on the H Share register of members on 3 June 2011 and the payment in respect thereof was made
on 24 August 2011. Resolutions adopted at the Shareholders’ General Meeting and the announcement regarding
the distribution of final dividend were posted on the HKExnews website of the Hong Kong Exchanges and
Clearing Limited (www.hkexnews.hk) on 3 June 2011. The implementation of the above distribution plan has
been completed.
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
49
The resolution regarding the issuance of subordinated term debts of the Company was considered and approved
at the First Extraordinary General Meeting for the year 2011. It was approved at the meeting that the Company
would issue subordinated term debts of not more than RMB30 billion to replenish its supplementary capital.
In October 2011, the Company issued subordinated term debts of RMB30 billion to qualified investors who
meet the relavant regulatory requirements, the proceeds from which would be used to replenish the Company’s
supplementary capital and to raise the solvency ratio.
CHAIRMAN AND PRESIDENT
In June 2011, Mr. Yang Chao, the former Chairman of the Company, tendered his resignation as Chairman and
Executive Director due to age. On 3 June 2011, Mr. Yuan Li was elected as Executive Director at the Shareholders’
General Meeting. At the thirteenth meeting of the third session of the Board held on the same date, Mr. Yuan Li was
elected as the Chairman of the third session of the Board. The Chairman is the legal representative of the Company,
primarily responsible for convening and presiding over Board meetings, ensuring the implementation of Board
resolutions, attending Annual General Meetings and arranging attendance by chairpersons of Board committees to
answer questions raised by shareholders, signing securities issued by the Company and other important documents,
and exercising other rights conferred on him by the Board. The Chairman is accountable to and reports to the Board.
Mr. Wan Feng was the President of the Company. The President is responsible for the day-to-day operations of the
Company, including implementing strategies, policies, operation plans and investment schemes approved by the
Board, formulating the Company’s internal management structure and fundamental management policies, drawing up
basic rules and regulations of the Company, submitting to the Board requests for appointment or removal of senior
management officers and exercising other rights granted to him under the Articles of Association and by the Board. The
President is fully accountable to the Board for the operations of the Company.
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 performs the following duties in accordance with the Company Law, the
Articles of Association and the Procedural Rules for the Supervisory Committee Meetings: to examine the finances
of the Company; to monitor whether the Directors, President, Vice Presidents and other senior management officers
of the Company have acted in contravention of laws, regulations, the Articles of Association and resolutions of the
Shareholders’ General Meetings when discharging their duties; to review the financial information of the Company such
as financial reports, results reports and profit distribution plans to be approved by Board of Directors; to propose the
convening of extraordinary Shareholders’ General Meetings, to propose resolutions at Shareholders’ General Meetings
and to perform any other duties under the laws, regulations and supervisory rules of the Company’s onshore and offshore
listed jurisdictions.
The Supervisory Committee is accountable to the shareholders and reports its work to the Shareholders’ General
Meeting according to relevant laws. It is also responsible for appraising the Company’s operations, financial reports,
connected transactions and internal control, etc.
The Supervisory Committee currently consists of Ms. Xia Zhihua, Mr. Shi Xiangming, Ms. Yang Hong, Mr. Wang Xu
and Mr. Tian Hui, with Ms. Xia Zhihua acting as the Chairperson of the Supervisory Committee. Of the members of
the Supervisory Committee, Ms. Xia Zhihua, Mr. Shi Xiangming and Mr. Tian Hui are Non-employees’ Representative
Supervisors, and Ms. Yang Hong and Mr. Wang Xu are Employees’ Representative Supervisors.
50
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
Meetings of the Supervisory Committee are convened by the chairperson of the Supervisory Committee. According to
the Articles of Association, the Company formulated the “Procedural Rules for Supervisory Committee Meetings” and
established protocols for Supervisory Committee Meetings. Supervisory Committee Meetings are categorized as regular
or ad-hoc meetings in accordance with the degree of pre-planning involved. There are at least four regular meetings each
year, mainly to adopt and review financial reports and annual reports, and examine the financial conditions and internal
control of the Company. Ad-hoc meetings are convened when necessary.
1. Meetings and attendance
In 2011, 4 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 at the meetings of the Supervisory
Committee are as follows:
Name of Supervisor
Number of meetings attended
Attendance rate
Xia Zhihua
Shi Xiangming
Yang Hong
Wang Xu
Tian Hui
Notes:
4/4
4/4
4/4
3/4 Note 1
2/4 Note 2
100%
100%
100%
75%
50%
1.
At the twelfth meeting of the third session of the Supervisory Committee held on 25 April 2011, Mr. Wang Xu gave
written authorization for Ms. Yang Hong to act as his proxy to attend and vote at the meeting;
2.
At the twelfth meeting of the third session of the Supervisory Committee held on 25 April 2011, Mr. Tian Hui gave
written authorization for Ms. Xia Zhihua to act as his proxy to attend and vote at the meeting; at the thirteenth meeting
of the third session of the Supervisory Committee held on 23 August 2011, Mr. Tian Hui gave written authorization for
Mr. Wang Xu to act as his proxy to attend and vote at the meeting.
From the end of the year 2011 up to the Latest Practicable Date, the Supervisory Committee convened 2
meetings. Attendance records of individual Supervisors at the meetings of the Supervisory Committee are as
follows:
Name of Supervisor
Number of meetings attended
Attendance rate
Xia Zhihua
Shi Xiangming
Yang Hong
Wang Xu
Tian Hui
2/2
2/2
2/2
2/2
2/2
100%
100%
100%
100%
100%
2. Activities of the Supervisory Committee during the Reporting Period
For the work done by the Supervisory Committee during the Reporting Period, please refer to the “Report of the
Supervisory Committee” in this annual report.
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
51
AUDIT COMMITTEE
The Company established its Audit Committee on 30 June 2003. In 2011, the Audit Committee comprised only
Independent Directors of the Company, with Mr. Bruce Douglas Moore acting as the Chairman of the Audit Committee
of the third session of the Board. Other members were Mr. Ma Yongwei and Mr. Sun Changji.
All members of the Audit Committee have extensive experience in financial matters. Mr. Bruce Douglas Moore is the
financial expert of the Audit Committee. The principal duties of the Audit Committee are to review and supervise
the preparation of the Company’s financial reports, assess the effectiveness of the Company’s internal control system,
supervise the Company’s internal audit system and its implementation, recommend the engagement or replacement
of external auditors. The Audit Committee is also responsible for communications between the internal and external
auditors.
1. Meetings and attendance
In 2011, 4 meetings were held by the Audit Committee. Attendance records of individual members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Bruce Douglas Moore
Ma Yongwei
Sun Changji
Independent Director, Chairman of the Audit
Committee of the third session of the Board
Independent Director, member of the Audit
Committee of the third session of the Board
Independent Director, member of the Audit
Committee of the third session of the Board
4/4
3/4 Note
4/4
100%
75%
100%
Note: At the tenth meeting of the third session of the Audit Committee held on 21 March 2011, Mr. Ma Yongwei gave written
authorization for Mr. Sun Changji to act as his proxy to attend and vote at the meeting.
From the end of the year 2011 up to the Latest Practicable Date, the Audit Committee convened 1 meeting.
Attendance records of individual members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Bruce Douglas Moore
Ma Yongwei
Sun Changji
Independent Director, Chairman of the Audit
Committee of the third session of the Board
Independent Director, member of the Audit
Committee of the third session of the Board
Independent Director, member of the Audit
Committee of the third session of the Board
1/1
1/1
1/1
100%
100%
100%
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China Life Insurance Company Limited Annual Report 2011
Corporate Governance
2. Performance of duties by the Audit Committee
(1) Reviewing and approving the “Proposal on the 2010 Financial Report”, the “Proposal on the Financial
Report for the First Quarter of 2011”, the “Proposal on the 2011 Interim Report”, the “Proposal on the
Financial Report for the Third Quarter of 2011” and the “Proposal on the 2011 Financial Report”. The
Audit Committee was of the view that the financial reports of the Company reflected the overall situation of
the Company in a true, accurate and complete manner, and gave its written opinion in this regard.
(2) Determining the overall audit scope and agenda of 2011 after having consulted the independent
auditors (PricewaterhouseCoopers Zhong Tian Certified Public Accountants Limited Company and
PricewaterhouseCoopers); receiving from the independent auditors the “Report on the 2010 Audit Results”,
the “Report on the Results of Agreed-upon Procedures Performed in relation to the First Quarter of 2011”,
the “Report on the Review Results of the 2011 Interim Report”, the “Report on the 2011 Audit Plan”,
and the “Report on the Results of Agreed-upon Procedures Performed in relation to the Third Quarter of
2011”; reporting to the Board in relation to the “Proposal in relation to Auditors’ Remuneration for 2011
and the Appointment of Auditors for 2012”; and confirming the re-appointment of PricewaterhouseCoopers
Zhong Tian Certified Public Accountants Limited Company as the PRC auditor of the Company and
PricewaterhouseCoopers as the international auditor of the Company.
(3) Examining the internal audit functions and the effectiveness of the internal control system of the Company;
reviewing proposals such as those in relation to the “2010 Internal Audit Summary, the 2011 Internal
Audit Work Plan and Budget of Operating Costs”; receiving the “Internal Audit Summary of the First
Half of 2011 and the Internal Audit Work Plan of the Second Half of 2011” in order to facilitate the
communication between the Company’s internal audit department and the independent auditors.
(4) Leading the implementation of the Company’s internal control management so as to ensure the compliance
with Section 404 of the U.S. Sarbanes-Oxley Act; reviewing the “Proposal concerning the Report on
Internal Control Assessments”, and the “Proposal concerning the Work Plan of the 2011 Internal Control
Assessment”; receiving the “Report on the 2011 Interim Internal Control Assessments”, and the “Report on
Issues Identified in the 2011 Interim Internal Control and the Implementation of Improvements”.
(5) Monitoring and guiding the Company to operate its business in compliance with laws; reviewing the
“Proposal concerning the Compliance Report of the Company for 2010”, and the “Proposal concerning
the 2010 Audit Report of Connected Transactions”; and listening to the “Report on Requesting the Audit
Committee to Confirm the Name List of Connected Parties as of 30 June 2011”.
(6) Practically performing the relevant responsibilities and duties of the Audit Committee. In 2011, the Audit
Committee convened several communication meetings with the independent auditor, Finance Department,
Actuarial Department, Legal and Compliance Department, Audit Department, and Internal Control
and Risk Management Department of the Company, in order to fully exert its functions in the aspects of
external audit, financial management, internal control, actuary and compliance.
(7)
Sending members of the Audit Committee to branch companies in Xinjiang and Zhejiang Province to
conduct investigative information gathering exercises, including visiting local branches of the Company,
examining their financial practices and inspecting their internal control system, thereby understanding
the overall operations and management of the Company and monitoring the implementation of the Board
resolutions.
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
53
NOMINATION AND REMUNERATION COMMITTEE
The Company established the Management Training and Remuneration Committee on 30 June 2003. On 16
March 2006, the Board resolved to change the name of the Management Training and Remuneration Committee to
the Nomination and Remuneration Committee, with a majority of Independent Directors on the committee. The
Nomination and Remuneration Committee is mainly responsible for reviewing the structure of the Board, its number of
members and composition and drawing up plans for the appointment, succession and appraisal criteria of Directors and
senior management. The committee is also responsible for formulating training and remuneration policies for the senior
management of the Company.
The Nomination and Remuneration Committee of the third session of the Board comprised Mr. Sun Changji and
Mr. Bruce Douglas Moore, both of whom are Independent Directors, and Mr. Miao Jianmin, who is a Non-executive
Director, with Mr. Sun Changji acting as the Chairman.
The Nomination and Remuneration Committee, as an advisor to the Board on the nomination of Directors, shall
first discuss and agree on the list of candidates to be nominated as new Directors, following which such candidates are
recommended to the Board. The Board shall then determine whether such candidates’ appointments should be proposed
for approval at the Shareholders’ General Meeting. The major criteria considered by the Nomination and Remuneration
Committee and the Board are educational background, management and research experience in the insurance industry,
and the candidates’ commitment to the Company. As to the nomination of Independent Directors, the Nomination and
Remuneration Committee will give special consideration to the independence of the relevant candidates.
The fixed salary of the Executive Directors and other members of senior management are determined in accordance
with market levels and their respective positions, and the amount of their performance-related bonuses is determined
according to the results of performance appraisals. Directors’ fees and the volume of share appreciation rights to be
granted are determined with reference to market levels and the actual circumstances of the Company.
54
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
1. Meetings and attendance
In 2011, 1 meeting was held by the Nomination and Remuneration Committee. Attendance records of individual
members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Sun Changji
Bruce Douglas Moore
Miao Jianmin
Independent Director, Chairman of the
Nomination and Remuneration Committee
of the third session of the Board
Independent Director, member of the
Nomination and Remuneration Committee
of the third session of the Board
Non-executive Director, member of the
Nomination and Remuneration Committee
of the third session of the Board
1/1
1/1
1/1
100%
100%
100%
From the end of the year 2011 up to the Latest Practicable Date, the Nomination and Remuneration Committee
convened 1 meeting. Attendance records of individual members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Sun Changji
Bruce Douglas Moore
Miao Jianmin
Independent Director, Chairman of the
Nomination and Remuneration Committee
of the third session of the Board
Independent Director, member of the
Nomination and Remuneration Committee
of the third session of the Board
Non-executive Director, member of the
Nomination and Remuneration Committee
of the third session of the Board
1/1
1/1
1/1
100%
100%
100%
2. Performance of duties by the Nomination and Remuneration Committee
In 2011, the Nomination and Remuneration Committee convened 1 meeting, and performed its relevant duties
and functions strictly in accordance with the “Procedural Rules for Nomination and Remuneration Committee
Meetings”. The Nomination and Remuneration Committee carefully reviewed the structure of the Board, its
number of members and composition, and the skills, knowledge and experience of all Directors, members of Board
committees and senior management of the Company, examined and determined the remuneration package of each
of the Executive Directors and senior management officers, facilitated the signing of service contracts between the
Company and each of the Executive Directors, Non-executive Directors and Independent Directors, defined the
rights, obligations and remunerations of Directors, and appraised the performance of Directors in the discharge of
their duties.
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
55
RISK MANAGEMENT COMMITTEE
The Company established its Risk Management Committee on 30 June 2003. The Risk Management Committee is
mainly responsible for formulating the Company’s system of risk control benchmarks, assisting the management in
establishing and improving the Company’s internal control system, formulating the operational risk management policy
of the Company, reviewing the assessment reports in relation to the Company’s operational risk and internal control,
and coordinating the handling of sudden and significant risks or crises.
The Risk Management Committee of the third session of the Board comprised Mr. Anthony Francis Neoh, an
Independent Director, Ms. Zhuang Zuojin, a Non-executive Director, and Ms. Liu Yingqi, an Executive Director, with
Mr. Anthony Francis Neoh acting as the Chairman of the committee.
1. Meetings and attendance
In 2011, the Risk Management Committee held 4 meetings. Attendance records of individual members are as
follows:
Name of member
Position
Number of meetings attended
Attendance rate
Anthony Francis Neoh
Zhuang Zuojin
Liu Yingqi
Independent Director, Chairman of the Risk
Management Committee of the third
session of the Board
Non-executive Director, member of the Risk
Management Committee of the third
session of the Board
Executive Director, member of the Risk
Management Committee of the third
session of the Board
4/4
100%
3/4 Note
75%
4/4
100%
Note: At the eighth meeting of the Risk Management Committee of the third session of the Board held on 27 October 2011,
Ms. Zhuang Zuojin gave written authorization for Ms. Liu Yingqi to act as her proxy to attend and vote at the meeting.
From the end of the year 2011 up to the Latest Practicable Date, the Risk Management Committee convened
1 meeting. Attendance records of individual members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Anthony Francis Neoh
Zhuang Zuojin
Liu Yingqi
Independent Director, Chairman of the Risk
Management Committee of the third
session of the Board
Non-executive Director, member of the Risk
Management Committee of the third
session of the Board
Executive Director, member of the Risk
Management Committee of the third
session of the Board
1/1
1/1
1/1
100%
100%
100%
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China Life Insurance Company Limited Annual Report 2011
Corporate Governance
2. Performance of duties by the Risk Management Committee
In 2011, the Risk Management Committee performed its duties and functions in strict compliance with the
“Procedural Rules for Risk Management Committee Meetings”. In order to fulfill its duties, the Risk Management
Committee conducted site visits at local branches of the Company in Zhejiang Province in October 2011,
examined the risk management measures implemented by these local branches, and compiled investigation reports
containing advice and recommendations in relation to the strengthening of risk management. In the year 2011, the
Risk Management Committee convened 4 meetings, continuously monitored the implementation by the Company
of the “Implementing Guidelines for Comprehensive Risk Management of Personal Insurance Companies”
published by the CIRC, reviewed the “Proposal concerning the 2010 Comprehensive Risk Management Report of
the Company” and the “Proposal concerning Regulations for Comprehensive Risk Management of the Company
(Trial)”, and received the investigation report of the Risk Management Committee and the report on risk early-
warning indicators of the Company.
STRATEGY AND INVESTMENT DECISION COMMITTEE
The Company established the Strategy Committee on 30 June 2003. In October 2010, the proposal to establish the
Strategy and Investment Decision Committee on the basis of the Strategy Committee was reviewed and approved at the
ninth meeting of the third session of the Board. The Strategy and Investment Decision Committee is mainly responsible
for the drawing-up of long-term development strategies and significant investment or financing plans of the Company,
proposing significant projects of capital operation and assets management, and conducting studies and making
recommendations on other important matters affecting the development of the Company.
The Strategy and Investment Decision Committee of the third session of the Board comprised Mr. Ma Yongwei, an
Independent Director, Mr. Wan Feng, an Executive Director, Mr. Shi Guoqing, a Non-executive Director, Mr. Lin
Dairen, an Executive Director, and Mr. Anthony Francis Neoh, an Independent Director, with Mr. Ma Yongwei acting
as the Chairman.
1. Meetings and attendance
In 2011, the Strategy and Investment Decision Committee held 4 meetings. Attendance records of individual
members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Ma Yongwei
Wan Feng
Shi Guoqing
Lin Dairen
Anthony Francis Neoh
Independent Director, Chairman of the
Strategy and Investment Decision Committee
of the third session of the Board
Executive Director, member of the
Strategy and Investment Decision Committee
of the third session of the Board
Non-executive Director, member of the
Strategy and Investment Decision Committee
of the third session of the Board
Executive Director, member of the Strategy
and Investment Decision Committee of the third
session of the Board
Independent Director, member of the Strategy
and Investment Decision Committee of the third
session of the Board
3/4 Note 1
75%
4/4
4/4
100%
100%
3/4 Note 2
75%
4/4
100%
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
57
Notes:
1.
At the third meeting of the Strategy and Investment Decision Committee of the third session of the Board held on 21
March 2011, Mr. Ma Yongwei gave written authorization for Mr. Anthony Francis Neoh to act as his proxy to attend and
vote at the meeting;
2.
At the sixth meeting of the Strategy and Investment Decision Committee of the third session of the Board held on 27
October 2011, Mr. Lin Dairen gave written authorization for Mr. Wan Feng to act as his proxy to attend and vote at the
meeting.
From the end of the year 2011 up to the Latest Practicable Date, the Strategy and Investment Decision Committee
convened 2 meetings. Attendance records of individual members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Ma Yongwei
Wan Feng
Shi Guoqing
Lin Dairen
Anthony Francis Neoh
Notes:
Independent Director, Chairman of the Strategy
and Investment Decision Committee
of the third session of the Board
Executive Director, member of the Strategy
and Investment Decision Committee
of the third session of the Board
Non-executive Director, member of the Strategy
and Investment Decision Committee
of the third session of the Board
Executive Director, member of the Strategy
and Investment Decision Committee
of the third session of the Board
Independent Director, member of the Strategy
and Investment Decision Committee
of the third session of the Board
1/2 Note 1
50%
2/2
2/2
2/2
100%
100%
100%
2/2 Note 2
100%
1.
At the seventh meeting of the Strategy and Investment Decision Committee of the third session of the Board held on 5
January 2012, Mr. Ma Yongwei gave written authorization for Mr. Wan Feng to act as his proxy to attend and vote at the
meeting;
2.
At the seventh meeting of the Strategy and Investment Decision Committee of the third session of the Board held on 5
January 2012, Mr. Anthony Francis Neoh attended the meeting by way of telephony.
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China Life Insurance Company Limited Annual Report 2011
Corporate Governance
2. Performance of duties by the Strategy and Investment Decision Committee
In 2011, the Strategy and Investment Decision Committee performed its duties and functions in strict compliance
with the “Procedural Rules for Strategy and Investment Decision Committee Meetings”. In 2011, the Strategy
and Investment Decision Committee held 4 meetings and reviewed such matters as the “Proposal in relation to
the Investment in Infrastructure Debt Investment Plan and its Authorization”, the “Proposal on the Approval for
Conducting Equity Investment Business by the Company”, the “Proposal on the Approval for Conducting Real
Estate Investment Business by the Company”, the “Proposal on the Approval for the Authorization of Investment
in Real Estate Investment Plan by the Company”, the “Proposal on the Issuance of Subordinated Term Debts of
China Life Insurance Company Limited” and the “Proposal in relation to the Application for the Authorization of
Infrastructure Debt Investment Plan”.
BUDGET, EXECUTION AND ASSESSMENT COMMITTEE
To further perfect its corporate governance structure, strengthen the management and supervision of the implementation
of Board’s decisions, carry out comprehensive budget management, optimize resource and policy allocation, evaluate the
results of implementation of budgets and indicators of operating results and inspect and monitor the implementation of
the Board resolutions, the Company established the Budget, Execution and Assessment Committee on 27 October 2011
according to an approval given at the fifteenth meeting of the third session of the Board. The Budget, Execution and
Assessment Committee is mainly responsible for reviewing the proposal of budget preparation and performance appraisal
put forward by the management, directing the preparation of budget, evaluating the implementation of budget and
conducting other matters authorized or entrusted by the Board.
The Budget, Execution and Assessment Committee of the third session of the Board comprised Mr. Yuan Li, an
Executive Director, Mr. Wan Feng, an Executive Director, Ms. Liu Yingqi, an Executive Director, Mr. Shi Guoqing, a
Non-executive Director, Ms. Zhuang Zuojin, a Non-executive Director, Mr. Ma Yongwei, an Independent Director, and
Mr. Sun Changji, an Independent Director, with Mr. Yuan Li acting as the Chairman.
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
59
1. Meetings and attendance
In 2011, the Budget, Execution and Assessment Committee held 1 meeting. Attendance records of individual
members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Yuan Li
Wan Feng
Liu Yingqi
Shi Guoqing
Zhuang Zuojin
Ma Yongwei
Sun Changji
Chairman, Executive Director, Chairman
of the Budget, Execution and Assessment
Committee of the third session of the Board
Executive Director, member of Budget,
Execution and Assessment Committee
of the third session of the Board
Executive Director, member of the
Budget, Execution and Assessment
Committee of the third session of the Board
Non-executive Director, member of Budget,
Execution and Assessment Committee
of the third session of the Board
Non-executive Director, member of Budget,
Execution and Assessment Committee
of the third session of the Board
Independent Director, member of Budget,
Execution and Assessment Committee
of the third session of the Board
Independent Director, member of the Budget,
Execution and Assessment Committee
of the third session of the Board
1/1
1/1
1/1
1/1
1/1
1/1
1/1
100%
100%
100%
100%
100%
100%
100%
2. Performance of duties by the Budget, Execution and Assessment Committee
In 2011, the Budget, Execution and Assessment Committee performed its duties and functions in strict
compliance with the “Procedural Rules for Budget, Execution and Assessment Committee Meetings”. In 2011,
the Budget, Execution and Assessment Committee held 1 meeting and reviewed such matters as the 2012 financial
budget of the Company.
INTERNAL CONTROL
The Company has always devoted significant effort towards the promotion of internal control and the establishment
of internal control related systems. In accordance with the requirements of the “Standard Regulations on Corporate
Internal Control”, the “Implementation Guidelines for Corporate Internal Control”, the “Guidance on Internal Control
for Companies Listed on the Shanghai Stock Exchange”, the “Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited”, and the “Basic Standards of Internal Control for Insurance Companies” issued by
the CIRC, the Company has carried out a lot of work on its internal control system improvement, rules implementation
and risk management by strictly following its corporate governance structure. The Company also formulated and issued
the “Internal Control Implementation Manual of China Life Insurance Company Limited (2011 Edition)” to further
supplement internal control standards relating to non-financial reporting, strengthen the implementation of internal
control standards and internal control assessments, and actively promote the culture and philosophy of internal control,
thereby continuously enhancing the internal control of the Company.
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China Life Insurance Company Limited Annual Report 2011
Corporate Governance
Pursuant to the requirements of the “Notice on the Proper Preparation of 2011 Annual Reports of Listed Companies”
promulgated by the SSE, the Company shall release an Internal Control Self-assessment Report simultaneously with
the publication of its 2011 annual report. The Company, as an overseas private issuer, was required to provide a
specific assessment report on its internal control system relating to financial reporting for the year ended 31 December
2011 in its Form 20-F (U.S. Annual Report) submitted to the U.S. Securities and Exchange Commission (the “SEC”)
in accordance with Section 404 of the U.S. Sarbanes-Oxley Act. In accordance with the requirements of laws and
regulations relating to internal control at the Company’s listed jurisdictions and as response to the requirements of
Section 404 of the U.S. Sarbanes-Oxley Act and the SSE, the Company has completed internal control self-assessments
for the period ended 31 December 2011 and confirmed that its internal controls were effective. The Company had also
received from its independent auditors an unqualified opinion on the effectiveness of its internal control in relation
to financial reporting as at 31 December 2011. The Company’s assessment report and the report of its independent
auditors will be included as an attachment to its annual report submitted to the SSE and its Form 20-F submitted to the
SEC.
The Board and the Audit Committee are responsible for providing leadership for the implementation of internal control
measures of the Company, and the Supervisory Committee supervises the internal control assessments made by the
Board. The Company has established Internal Control and Risk Management Departments and Internal Control and
Compliance Departments in its headquarters and branches. The Company also conducts tests on the management
level, assessing the effectiveness of the established and implemented internal control systems in accordance with the
requirements of the PRC regulations and Section 404 of the U.S. Sarbanes-Oxley Act, and reports to the Board,
the Audit Committee and the management. In compliance with regulatory requirements and having considered the
characteristics of its business and management requirements, the Company established and implemented a series of
internal control measures and procedures with respect to currency and funds, insurance operations, foreign investments,
physical assets, information technology, financial reporting and information disclosure to ensure the safety and integrity
of its assets, complied with relevant PRC laws and regulations and the internal rules and regulations of the Company,
while at the same time improving the quality of accounting data.
A relatively well-developed internal control system has been established in terms of team-building, sales and operations,
and systems management for the sales channels of products such as individual insurance, group insurance, health
insurance, rural insurance and bancassurance. This internal control system regulates the relevant administrative rights
and operational workflows, and effectively adopts the measures used to guard against and manage risks relating to the
operation of exclusive agents. The Company has issued clear regulations for the workflows and administrative rights
relating to the verification of insurance policies, insurance claims, and the safe custody of documents. The Company has
also defined business operation standards and service quality standards, developed systems of business, document and
file management, and further regulated the management of business approval authority to strengthen its control over
business risk and improve the quality of its services.
The Company has formulated and issued the “Accounting System of China Life Insurance Company Limited” and the
“Accounting Practices of China Life Insurance Company Limited” in accordance with the relevant laws and regulations,
such as the “Accounting Law of the People’s Republic of China” and the “Enterprise Accounting Standards” and after
taking into account the needs of the Company for business development and its operation and management, and has
made amendments to the same pursuant to the “Interpretation No. 2 of the Enterprise Accounting Standards”. The
accounting units of the Company at all levels have implemented them in strict compliance with the requirements of
accounting system and various basic systems to regulate any works relating to financial accounting and the preparation
of financial reports. The accounting units of the Company at all levels have assigned positions in a reasonable manner,
clearly defined the responsibilities and duties of such positions and their scope of authority on management, and strictly
prohibited employees from serving incompatible positions concurrently, thus exercising the control over financial risks in
an efficient manner.
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
61
The Company has formulated the “Provisional Measures on Accountability System for Major Errors in Periodic Report
Disclosures of China Life Insurance Company Limited”, which was reviewed and approved at the twelfth ad hoc meeting
of the third session of the Board held on 15 March 2011. Theses Provisional Measures have made provisions with
regard to the basic responsibilities of periodic report disclosures, the major errors in periodic report disclosures and the
responsibility attribution.
The Company established transparent and standardized investment decision-making procedures and procedural rules
to ensure that insurance funds are used in a safe manner. The Company has set up an Investment Decisions Committee
with its own procedural rules for meetings. Any investment plans of entrusted funds and direct investment plans of the
Company are implemented only after receiving approval from the Investment Decisions Committee. This ensures that all
investment decisions are in compliance with the requirements of PRC laws, regulations and administrative rules, and also
take into consideration the balance between assets and liabilities of the Company.
The Company has improved the organizational structure of its research center and data center, and established a well-
developed project management and operation system. The establishment of a comprehensive information technology
system formed a centralized management and control mechanism with uniform distribution, review and inspection.
Further, the formulation of an information safety mechanism plan has promoted the construction of an information
safety system. The Company has also formulated a series of effective internal control rules and measures in the course
of system development and testing and day-to-day operation and management, and continues to make improvements in
response to actual operational demands.
The Sales Supervision Department, Internal Control and Risk Management Department, Audit Department, and
Supervision Department of the Company are responsible for overseeing the implementation of its internal control. The
Sales Supervision Department supervises and inspects every aspect of the sales process through sales pre-warnings and
risk monitoring; the Internal Control and Risk Management Department identifies issues with systems design, control
implementation and risk management in a timely manner through the adoption of various measures such as assessments
at the Company level, testing at the workflow level and risk analyses. It also plugs loopholes, guards against risks and
reduces loss by employing measures such as improving systems, strengthening legal compliance and pursuing responsible
parties. The Audit Department and Supervision Department conduct re-assessments on risk management and internal
control compliance through various auditing and monitoring activities and the personnel violating such regulations and
disciplines will be attributed proper responsibility.
1. Progress on internal supervision and self-assessment of internal control
Specialized committees have been established under the Board. They work together with the Company’s
management to review and discuss information disclosure mechanisms and procedures, as well as internal control
mechanisms, to ensure that the management has fulfilled its duties in relation to mechanisms and procedures
it regards as effective. The specialized committees also monitor and examine the Company’s financial control,
information disclosure mechanisms and procedures, internal control and risk management systems. The Board
also reviews the Company’s internal control self-assessment reports, risk assessment reports and compliance reports
annually.
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China Life Insurance Company Limited Annual Report 2011
Corporate Governance
In accordance with the requirements laid down by the provisions of the “Standard Regulations on Corporate
Internal Control” and the “Implementation Guidelines for Corporate Internal Control” jointly issued by 5
ministries including the Ministry of Finance, the “Basic Standards of Internal Control for Insurance Companies”
issued by the CIRC and Section 404 of the U.S. Sarbanes-Oxley Act, the Company conducted comprehensive
self-assessments of its internal controls. On one hand, the Company implemented the internal control standards.
Through a series of steps, such as partition of measures, training courses, signing undertaking letters, examination
of relevant knowledge, comparison and implementation, and quality check, employees of the Company have been
urged to learn, understand and implement the specific control requirements contained in the “Internal Control
Implementation Manual of China Life Insurance Company Limited (2011 Edition)”. On the other hand, the
internal control departments at all levels carried out comprehensive internal control evaluation, and conducted
internal control assessment on the key control measures taken by companies at all levels, including headquarters,
provincial and local branches, by ways of walk-through test, control test and survey.
Every year, the Audit Department and its related departments independently and jointly conduct various kinds
of audits, accounting and basic accounting appraisals such as economic liability audits, financial revenue and
expenditure audits and key investment project audits. 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 the operational management of the Company.
The Company has specifically formulated regulations with respect to the report, investigation, handling of and
responsibility attribution for cases involving any breach of laws, discipline and regulations by employees, such
being implemented by the Supervision Department. This ensures that cases involving any breach of laws, discipline
and regulations by employees are dealt with in a timely manner, and that personnel involved will be attributed
proper responsibility.
2. Defects in internal control and improvements
The Company has established a workflow called “evaluate-defect discovery-improve-cross-check”, which when
combined with the implementation of its defect improvement, follow-up, inspection and responsibility attribution
system, ensures that once a defect is identified in its internal control system, swift improvement measures, follow-
up arrangements and cross-checks will be made. The Company conducted a self-assessment on internal control
system, and no material defect was found in the design and implementation of its internal control during the
Reporting Period.
3. Risk management
The Company established a well-developed organizational structure of risk management and internal control,
properly defining the relevant duties and functions at different levels. The Board has set up the Risk Management
Committee and the Audit Committee, while the President’s Office of the Company has set up several functional
departments, such as the Internal Control and Risk Management Committee, the Internal Control and Risk
Management Department, the Sales Supervision Department, the Audit Department, the Legal and Compliance
Department, and the Supervision Department. Provincial branches have also set up Internal Control and Risk
Management Committees, Internal Control and Compliance Departments, Sales Supervision Departments, and
Supervision Departments. In addition, the Company has established audit centers in Beijing, Shanghai, Shenyang,
Chengdu, Xi’an and Shenzhen.
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
63
In 2011, the Company continued to implement the “Implementing Guidelines for Comprehensive Risk
Management of Life Insurance Companies” issued by the CIRC so as to further promote the establishment of a
comprehensive risk management system for the Company. Taking into account the regulatory requirement and its
actual needs, the Company formulated the “Regulations for the Administration of Comprehensive Risks (Trial)”
as an outline document for the establishment of a comprehensive risk management system of the Company, which
clearly defined the organization, workflow, early-warning, supervision and reporting of risk management. The
Company also carried out in great depth the management of risk early-warning and classification, strengthened its
control over key risks, thus forming a standardized and systematic early-warning system.
For an analysis of the major risk factors of the Company, please refer to Note 4 in the Notes to the Consolidated
Financial Statements of this annual report.
INDEPENDENCE OF THE COMPANY FROM ITS CONTROLLING SHAREHOLDER
Employees: The Company is independent in the aspects of employment, human resources and remuneration
management.
Assets: The Company owns all assets relating to the operation of its principal business. At present, the Company does
not provide any guarantee for its shareholders. The Company’s assets are independent, complete, and independent of the
shareholders of the Company and other related parties.
Finance: The Company has established a separate financial department, and an independent financial accounting system
and financial management system; further, the Company makes financial decisions on its own; it employs separate
financial personnel, opens separate accounts with banks and does not share bank accounts with CLIC; the Company, as a
separate taxpayer, pays taxes individually according to laws.
Organization: The Company has established a well-developed organizational system, under which internal bodies such as
the Board and the Supervisory Committee operate separately. There is no subordinate relationship between such internal
bodies and the functional departments of the Company’s controlling shareholder.
Business operations: The Company independently develops its business, including its life insurance, accident and injury
insurance and health insurance businesses, reinsurance relating to the above insurance business, use of funds permitted
by the government and regulatory authorities, as well as its agency business, consulting business and other services
in relation to personal insurance. The Company currently possesses the “Insurance Company Legal Person Permit”
(Number: 000005) issued by the CIRC. The Company is independently engaged in the businesses as prescribed in its
business scope according to law, has separate sales and agency channels and is licensed to use licensed trademarks without
consideration. The completeness and independence of the Company’s business operations will not be adversely affected
by its relationship with related parties.
64
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
PERFORMANCE APPRAISAL AND INCENTIVES FOR SENIOR MANAGEMENT
The Company implements a term-of-service and target-related responsibility system for senior management. At the
beginning of each year, a performance target contract will be entered into between the Chairman and the President, the
President and the Vice Presidents, and the President’s Office and the senior management of branches of the Company.
The performance target contract system is an important tool in disassembling the strategic goals of the Company in a
scientific manner, which is conducive towards the breakdown of targets and transmission of responsibility, enhancing
the implementation capacity of the Company and ensuring the successful completion of its annual business targets. The
performance appraisal criteria listed in the individual performance target contracts of senior management are partially
linked to the business targets of the Company and partially formulated with reference to the duties and functions of their
respective positions.
The Company has established a remuneration and incentive system with reference to an individual employee’s position,
the Company’s results and market conditions. The remuneration for senior management comprises basic salary,
performance compensation, welfare benefits and medium and long term incentives.
SHAREHOLDERS’ INTERESTS
To safeguard shareholders’ interests, in addition to the right to participate in the Company’s affairs by attending
Shareholders’ General Meetings, shareholders have the right to convene extraordinary Shareholders’ General Meetings
under certain circumstances.
If the number of Directors is less than the number stipulated in the Company Law or two-thirds of the number specified
by the Articles of Association, the losses incurred reaches one-third of the Company’s total share capital, or if the Board
or the Supervisory Committee deems necessary, or where shareholders holding 10% or more shares of the Company
make a requisition, the Board shall convene an extraordinary Shareholders’ General Meeting within two months. Where
shareholders holding 10% or more shares request an extraordinary Shareholders’ General Meeting, such shareholders
shall make a request in writing to the Board with a clear agenda. The Board shall, upon receipt of such a written request,
convene a meeting as soon as possible. If the Board fails to convene a meeting within 30 days of 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 of the receipt by the Board of such a written request.
Shareholders may put forward enquiries to the Board through the Company Secretary or the Board Secretary, or put
forward proposals at Shareholders’ General 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.
INFORMATION DISCLOSURE AND INVESTOR RELATIONS
The Company has established a well-developed and practical information disclosure system in strict compliance with
the laws and regulatory rules of its listed jurisdictions so as to ensure that domestic and overseas investors obtain true,
accurate and complete information. The Company has proactively developed investor relations and strengthened its
contact and communication with domestic and overseas investors through innovative work models, which enabled
domestic and overseas investors to understand the business operations of the Company in a timely manner.
China Life Insurance Company Limited Annual Report 2011
Corporate Governance
65
In 2011, the Company has continued to strengthen the construction of its information disclosure system and
implement all regulatory requirements relating to information disclosure in a practical manner: through the issue and
implementation of the “Detailed Rules for the Implementation of the ‘Measures for the Administration of Information
Disclosure of Insurance Companies’”, the Company improved the framework and content of the public disclosure
of information on the Company’s website; in accordance with the regulatory requirements of the CSRC and Beijing
Securities Regulatory Bureau with respect to the establishment of well-developed systems by listed companies, the
Company formulated and issued the “Provisional Measures for the Administration of Persons Who Have Knowledge
of Insider Information” and the “Provisional Measures on Accountability System for Major Errors in Periodic Report
Disclosure” to further regulate the workflow procedures of matters relating to insider information and carefully deal with
the registration and filing procedures. The Company made further amendments to the relevant systems in accordance
with subsequent regulatory requirements and work practices.
In 2011, the Company further consolidated the results from the integration of A Share and H Share periodic reports,
improved the information disclosure in onshore and offshore financial reports and enhanced the quality of information
disclosure of periodic reports. The Company regularly organized training courses relating to information disclosure,
strengthened its internal information exchange and continuously improved its information disclosure. The carrying out
of such substantial and effective information disclosure measures has laid down a sound foundation for the continuous
improvement of information disclosure of the Company in future.
In 2011, the Company has continuously improved and strengthened investor relations, which mainly includes holding
the Annual General Meeting, holding results release conferences, embarking on global non-deal roadshows, meeting and
holding conference calls with investors and analysts, attending investors’ meetings, updating information on its investor
relations website in a timely manner, establishing an investor relations hotline and an exclusive electronic mailbox to
ensure timely replies to any enquiries made by investors and investment analysts.
In 2011, the Company communicated with more than 2,700 investors and analysts through different channels,
including the reception at the Company of 195 groups of investors and analysts consisting of 792 individuals in total,
communicating with more than 850 investors by participating in 29 investors’ meetings held locally or overseas, and
meeting and visiting more than 210 investors in roadshows. In addition, the Company kept in close contact with
investors’ groups by phone and email, communicated through more than 1,500 emails with investors’ groups, and
answered and replied more than 1,000 calls and emails.
In 2011, the Company was named as the “100 Most Valuable Companies Listed on the Main Board of China in
2010”, its management was awarded the “Ten Best Management Team of Companies Listed on the Main Board of
China in 2010”, and Ms. Liu Yingqi, Vice President and Board Secretary of the Company, was awarded the “100 Best
Board Secretary of Companies Listed on the Main Board of China in 2010” in the election of the “100 Most Valuable
Listed Companies in China of 2010” by the Securities Times. In the “4th Most Popular Investor Relations Interactive
Platform in China Awards – Election of the Outstanding Website of Listed Companies in China” by the Securities
Times, the Company was awarded the “Most Popular Website of Listed Companies Among Investors”. Ms. Liu Yingqi,
Vice President and Board Secretary of the Company, was also awarded the “Golden Governance – Prize for the Board
Secretary in Information Disclosure of Companies” in the “Golden Governance – Outstanding Board Secretary of Listed
Companies Awards” of 2011 by Shanghai Securities News.
66
China Life Insurance Company Limited Annual Report 2011
Report of the Board of Directors
From left to right:
Ms. Liu Yingqi,
Mr. Anthony Francis Neoh,
Mr. Sun Changji,
Ms. Zhuang Zuojin,
Mr. Wan Feng,
Mr. Yuan Li,
Mr. Miao Jianmin,
Mr. Shi Guoqing,
Mr. Ma Yongwei,
Mr. Bruce Douglas Moore,
Mr. Lin Dairen
1. PRINCIPAL BUSINESS
The Company is the largest life insurance company in China’s life insurance market and 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 is China’s largest insurance asset management company through its controlling shareholding in China Life
Asset Management Company Limited. The Company also has controlling shareholding in China Life Pension
Company Limited.
2. MANAGEMENT DISCUSSION AND ANALYSIS
For an analysis of the Company’s operating and financial results during the Reporting Period, please refer to the
section headed “Management Discussion and Analysis” in this annual report.
3. D E T A I L S O F A N Y P R O F I T D I S T R I B U T I O N P L A N O R P U B L I C R E S E R V E S
CAPITALIZATION PLAN
In accordance with the profit distribution plan approved by the Board on 26 March 2012 for the year 2011, after
the appropriation to its discretionary surplus reserve fund of RMB1,848 million (10% of the net profit for 2011),
the Company, based on 28,264,705,000 shares in issue, proposed to distribute cash dividends amounting to
RMB6,501 million to all shareholders of the Company at RMB0.23 per share. The foregoing profit distribution
plan is to take effect after approval by the Annual General Meeting to be held on 22 May 2012 (Tuesday).
Domestic shareholders’ dividends are declared, valued and paid in Renminbi. Dividends payable to shareholders
of the Company’s foreign-listed shares are declared and valued in Renminbi and paid in the currency of the
jurisdiction in which the foreign-listed shares are listed (if the Company is listed in more than one jurisdiction,
dividends shall be paid in the currency of the Company’s principal jurisdiction of listing as determined by the
Board). The Company shall pay dividends to shareholders of foreign-listed shares in conformity with PRC
regulations on foreign exchange control. If no such regulations are in place, the applicable exchange rate is the
average exchange rate published by the People’s Bank of China one week before the declaration of the distribution
of dividends or other payments.
China Life Insurance Company Limited Annual Report 2011
Report of the Board of Directors
67
For the purposes of distributing after-tax profits, the relevant amount of after-tax profits shall be the lesser of:
the amount as appeared in the financial statements prepared in accordance with China Accounting Standards or
the amount as appeared in the financial statements prepared in accordance with IFRS or the financial reporting
standards of the Company’s offshore listed jurisdictions.
No public reserve capitalization is provided for in the profit distribution plan for the current financial year.
4.
FORMULATION AND IMPLEMENTATION OF CASH DIVIDEND POLICY
In accordance with Article 212 of the Articles of Association, the cash dividend policy of the Company is as
follows:
(1) The Company’s profit distribution shall focus on a reasonable investment return for investors and its profit
distribution policies shall be sustainable and steady.
(2) The Company may distribute dividends in the form of cash or share and may distribute interim dividends
in the form of cash. The Company’s dividends shall not bear interest, unless the Company fails to distribute
the dividends to the shareholders on the day when the dividends were due to be distributed.
(3) Unless otherwise provided by applicable laws and regulations, any public issue of the Company’s securities
shall be subject to the satisfaction of the condition that the cumulative profits distributed in cash over the
past three years by the Company shall be no less than 30% of the average annual distributable profit under
the China Accounting Standards for Business Enterprises achieved over the past three years.
(4) The dividends paid by the Company shall not exceed its distributable profit. If the Company’s solvency
ratio falls short of 100% of the regulatory requirement, the Company shall not distribute profit to its
shareholders; if the Company’s solvency ratio falls short of 150% of the regulatory requirement, the lower
of the following two factors shall be taken as the basis for profit distribution: (i) the distributable profit
as ascertained under the Accounting Standards for Business Enterprises; (ii) the residual overall income
ascertained pursuant to the preparation rules of the Company’s solvency report.
(5)
In the event that there are profits realized in the current year but no cash profit distribution plan is
presented, relevant information shall be disclosed in the annual report.
68
China Life Insurance Company Limited Annual Report 2011
Report of the Board of Directors
The dividend distribution of the Company for the past 3 years is as follows:
Amount of
dividends per
ten shares
(RMB)
(including tax)
Net profit attributable
to equity holders
of the Company
in the consolidated
statement for the year
in which dividends
were distributed Note
Amount of
cash dividends
(including tax)
Unit: RMB million
Percentage of
amount of cash
dividends in net
profit attributable
to equity holders
of the Company
in the consolidated
statement
4.0
7.0
2.3
11,306
19,785
6,501
33,626
32,881
10,068
34%
60%
65%
Year in which
dividends were
distributed
2010
2009
2008
Note: Net profit attributable to equity holders of the Company for 2008 was the financial data of the Company derived under
its original accounting policies in accordance with China Accounting Standards for Business Enterprises.
5. CHANGES IN ACCOUNTING ESTIMATE AND ASSUMPTIONS
The changes in accounting estimate and assumptions of the Company during the Reporting Period are set out in
Note 13 in the Notes to the Consolidated Financial Statements in this annual report.
6. RESERVES
Details of the reserves of the Company are set out in Note 33 in the Notes to the Consolidated Financial
Statements in this annual report.
7. CHARITABLE DONATIONS
The total amount of charitable donations made by the Company for the Reporting Period was approximately
RMB70.28 million.
8. PROPERTY, PLANT AND EQUIPMENT
Details of the movement in property, plant and equipment of the Company are set out in Note 6 in the Notes to
the Consolidated Financial Statements in this annual report.
9.
SHARE CAPITAL
Details of movement in share capital of the Company are set out in Note 32 in the Notes to the Consolidated
Financial Statements in this annual report.
10. BANK BORROWINGS
As at the end of the Reporting Period, the Company did not have any bank borrowings.
China Life Insurance Company Limited Annual Report 2011
Report of the Board of Directors
69
11. INFORMATION OF TAX DEDUCTION FOR HOLDERS OF LISTED SECURITIES
Shareholders are taxed and/or enjoy tax relief for the dividend income received from the Company in accordance
with the Individual Income Tax Law of the People’s Republic of China, the Enterprise Income Tax Law of the
People’s Republic of China, and relevant administrative rules, governmental regulations and guiding documents.
Please refer to the announcement published by the Company on the website of the SSE on 14 June 2011 for the
information on income tax in respect of the dividend distributed to A Shareholders during the Reporting Period,
and the announcements published by the Company on the HKExnews website of the Hong Kong Exchanges
and Clearing Limited on 3 June and 18 July 2011 for the information on income tax in respect of the dividend
distributed to H Shareholders during the Reporting Period.
12. PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S SECURITIES
During the Reporting Period, the Company and its subsidiaries did not purchase, sell or redeem any of the
Company’s listed securities.
13. H SHARE STOCK APPRECIATION RIGHTS
No H Share Stock Appreciation Rights of the Company were granted or exercised in 2011. The Company will
deal with such rights and related matters in accordance with PRC governmental policy.
14. DAY-TO-DAY OPERATIONS OF THE BOARD
Details of Board meetings, implementation by the Board of resolutions passed at Shareholders’ General Meetings
and the Board’s performance of its duties during the Reporting Period are set out in the section headed “Corporate
Governance” in this annual report.
15. DIRECTORS’ AND SUPERVISORS’ SERVICE CONTRACTS
None of the Directors or Supervisors has entered into any service contract with the Company that are not
terminable within one year or can only be terminated by the Company with payment of compensation (other than
statutory compensation).
16. 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.
17. 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.
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China Life Insurance Company Limited Annual Report 2011
Report of the Board of Directors
18. DISCLOSURE OF DIRECTORS’ AND SUPERVISORS’ INTERESTS IN SHARES
As at the end of the Reporting Period, none of the Directors or Supervisors 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 SFO) that were required to be recorded in the register of the Company required to be kept
pursuant to Section 352 of the SFO or which had to be notified to the Company and the HKSE pursuant to the
Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix
10 to the Listing Rules. In addition, the Board has created a Code of Conduct in relation to the sale and purchase
of the Company’s securities by Directors and Supervisors, which is no less stringent than the Model Code. Upon
specific inquiry by the Company, the Directors and Supervisors have confirmed observation of the Model Code
and the Company’s own Code of Conduct in the year of 2011.
19. PRE-EMPTIVE RIGHTS AND ARRANGEMENTS ON OPTIONS OF SHARES
According to the Articles of Association and 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 for options on shares.
20. 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.
21. MATERIAL GUARANTEES
Independent Directors of the Company have rendered their independent opinions on the Company’s external
guarantees, and are of the view that:
(1)
during the Reporting Period, the Company did not provide any external guarantee;
(2)
the Company’s internal control system regarding external guarantees complied with laws, regulations,
and the requirements under the “Notice in relation to the standardization of capital flows between
Listed Companies and Connected Parties and Issues in relation to External Guarantees granted by Listed
Companies”; and
(3)
the Company has expressly provided in its Articles of Association the level of authority required for
approving external guarantees and the approval procedures.
22. BOARD’S STATEMENT ON INTERNAL CONTROL
In accordance with the requirements of the “Standard Regulations on Corporate Internal Control”, the Board
conducted an assessment on internal control relating to the Company’s financial reporting functions, and
confirmed that its internal control was effective as at 31 December 2011.
23. MAJOR CUSTOMERS
During the Reporting Period, the gross written premiums received from the Company’s five largest customers
accounted for less than 30% of the Company’s gross written premiums for the year.
China Life Insurance Company Limited Annual Report 2011
Report of the Board of Directors
71
24. 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 (26 March 2012), 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.
25. 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 section
headed “Corporate Governance” in this annual report.
26. AUDITORS
Resolutions were passed at the Annual General Meeting for the year 2010 to engage PricewaterhouseCoopers
Zhong Tian Certified Public Accountants Limited Company and PricewaterhouseCoopers as the PRC and
international auditors to the Company in 2011. PricewaterhouseCoopers Zhong Tian Certified Public
Accountants Limited Company and PricewaterhouseCoopers have been the Company’s auditors for 9 consecutive
years.
Remuneration paid by the Company to the auditors is approved at the Annual General Meeting, pursuant to
which the Board is authorized to determine the amount and make payment. Audit fees paid by the Company to
the auditors will not affect the independence of the auditors.
Remuneration paid by the Company to the auditors in 2011 was as follows:
Service/Nature
Audit-related expenses
Fees (RMB million)
64.25
A resolution for the re-appointment of PricewaterhouseCoopers Zhong Tian Certified Public Accountants Limited
Company as the PRC auditor and PricewaterhouseCoopers as the international auditor of the Company will be
proposed at the forthcoming Annual General Meeting for the year 2011 to be held on 22 May 2012.
By Order of the Board
Yuan Li
Chairman
Beijing, China
26 March 2012
72
China Life Insurance Company Limited Annual Report 2011
Report of the Supervisory Committee
From left to right:
Mr. Wang Xu
Mr. Shi Xiangming
Ms. Xia Zhihua
Mr. Tian Hui
Ms. Yang Hong
1. MEETINGS CONVENED BY THE SUPERVISORY COMMITTEE
Date
Issues Discussed
22 March 2011
The Eleventh Meeting of the Third Session
of the Supervisory Committee
1.
2.
3.
4.
5.
6.
7.
8.
9.
Reviewed and approved the “Proposal in relation to the 2010
Financial Report”
Reviewed and approved the “2010 Annual Report” (A Share/
H Share)
Reviewed and approved the “2010 Report of the Supervisory
Committee” and the submission of the same for the approval
at the Shareholders’ General Meeting
Reviewed and approved the “Proposal in relation to the
‘2010 Supervisory Committee’s Performance of Duties
Report’”
Reviewed and approved the “Proposal in relation to the 2010
Profit Distribution Plan”
Reviewed and approved the “Proposal in relation to the
‘Evaluation Report regarding the Company’s Internal
Control Systems’ (A Share)”
Reviewed and approved the “Proposal in relation to the
‘2010 Self-evaluation Report on the Company’s Internal
Control Systems’”
Reviewed and approved the “Proposal in relation to the
‘Work Proposal on the Implementation of Enterprises
Internal Control Standard System’”
Reviewed and approved the “Proposal in relation to
the ‘2010 Report on Connected Transactions and the
Implementation of the Connected Transactions Management
System’”
10. Reviewed and approved the “Proposal in relation to the
‘2011 Work Plan of the Supervisory Committee’”
China Life Insurance Company Limited Annual Report 2011
Report of the Supervisory Committee
73
Date
Issues Discussed
25 April 2011
The Twelfth Meeting of the Third Session
of the Supervisory Committee
23 August 2011
The Thirteenth Meeting of the Third
Session of the Supervisory Committee
27 October 2011
The Fourteenth Meeting of the Third
Session of the Supervisory Committee
1.
2.
3.
4.
5.
1.
2.
3.
4.
1.
2.
Reviewed and approved the “2011 First Quarter Report”
Reviewed and approved the “Proposal in relation to the
‘2010 Corporate Governance Report’”
Reviewed and approved the “Proposal in relation to the
‘2010 Compliance Report’”
Reviewed and approved the “Proposal in relation to the
‘2010 Comprehensive Risk Management Report’”
Reviewed and approved the “Proposal in relation to the
‘2010 Audit Report of Connected Transactions’”
Reviewed and approved the “2011 A Share Interim Report”
and the “2011 H Share Interim Report”
Reviewed and approved the “Proposal in relation to the
Solvency Report for the First Half of 2011”
Reviewed and approved the “Proposal in relation to the
Internal Audit”
Reviewed and approved the “Proposal in relation to the
‘Regulations for the Administration of Comprehensive Risks
of China Life Insurance Company Limited (Trial)’”
Reviewed and approved the “2011 Third Quarter Report”
Reviewed and approved the “Proposal in relation to
the Review of the ‘Measures for the Administration of
Connected Transactions of China Life Insurance Company
Limited’”
2. ACTIVITIES OF THE SUPERVISORY COMMITTEE
1.
Attending each regular meetings of the Board and its specialized committees and participating in the 2010
Annual General Meeting and the 2011 First Extraordinary General Meeting of the Company to actively
perform its supervisory role. In accordance with the spirit of resolutions passed at the tenth and eleventh
meetings of the third session of the Supervisory Committee and in order to further play its supervisory
role and functions and to better perform the duties of Supervisors, the Supervisors respectively attended
regular meetings of Audit Committee, Risk Management Committee, Strategy and Investment Decision
Committee, Nomination and Remuneration Committee, and Budget, Execution and Assessment Committee
in 2011 in accordance with the work allocation among Supervisors determined by the Supervisory
Committee, thus bringing positive impacts on further enhancement of corporate governance.
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China Life Insurance Company Limited Annual Report 2011
Report of the Supervisory Committee
2.
3.
Carrying out special supervision projects and further strengthening the supervisory role of the Supervisory
Committee. In order to further carry out and implement the “Corporate Governance – Outline for the
Workflow of the Supervisory Committee’s Performance of Duties”, and promote the efficiency and
professional standards of its supervisory work, the Supervisory Committee set up five working groups for
special projects, namely, the Consultation Working Group for Changes in Financial Policies, Consultation
Working Group for Major Connected Transactions, Working Group for Effective Preparation of Financial
Reports, Consultation Working Group for Compliance of Major Investment Decisions and Consultation
Working Group for Establishment of the Company’s Systems in May 2011, with each Supervisor
responsible for one special project. On 16 August 2011, the Supervisory Committee convened a research and
communication meeting with respect to the interim financial report, with several departments in attendance
including the Finance Department, Actuary Department, Internal Control and Risk Management
Department. During the meeting, the situations about the preparation of financial reports and risk control
were introduced. The research and communication meeting enabled the Supervisory Committee to
communicate with the relevant departments in respect of the above situations and strengthened the base for
Supervisors to perform their duties.
Combining special research studies and in-depth activities of local branches to carry out the Supervisory
Committee’s investigation and research. In order to further understand the development of international
corporate governance and risk management and control, the Supervisory Committee conducted research
studies on corporate governance and risk management and control. Through the exchange of ideas and
interaction with institutions such as overseas insurance companies, the Supervisory Committee broadened
its horizon in corporate governance and accumulated considerable experience in risk prevention, which
effectively promoted the development of its work. In accordance with the 2011 Investigation Work Plan
of the Supervisory Committee, the investigation and research activities of the Supervisory Committee in
2011 were independently conducted by each Supervisor. The investigation and research activities helped
the Supervisory Committee have a better understanding of the situations of the local branches, including
their general information in the aspects of business development, operation and management, and
infrastructure, the implementation of the annual budget, the implementation of the reforms arranged by
the headquarters, and risk management and control conducted by the local branches. From 16 November
2011 to 18 November 2011, Ms. Xia Zhihua, chairperson of the Supervisory Committee, carried out an
investigation and research in Yunnan branch, received work reports from the branch, conducted an on-site
investigation and research in local companies, local customer service centers and counters, and held meetings
with local companies relating to the risk management and control, so as to realize the work objectives of the
Supervisory Committee.
4.
Participating in supervision training and improving the Supervisors’ abilities to perform their duties. In
2011, in accordance with regulatory requirements, the Supervisors took turns to take part in Stage 2, Stage
3 and Stage 4 of the training courses for Directors, Supervisors and senior management held by the Beijing
Securities Regulatory Bureau. The training covered corporate governance theory and practice. Through the
exchange of ideas and study, the Supervisors built up a good foundation of corporate governance theory,
broadened their horizon and improved their abilities to perform duties.
China Life Insurance Company Limited Annual Report 2011
Report of the Supervisory Committee
75
3.
INDEPENDENT OPINION OF THE SUPERVISORY COMMITTEE ON CERTAIN
MATTERS
During the Reporting Period, the Supervisory Committee of the Company performed its duties in a diligent
manner in accordance with the terms of reference prescribed by the Company Law of the PRC, the Articles of
Association and the Procedural Rules for Supervisory Committee Meetings.
1.
2.
3.
4.
5.
The Company’s operational 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 in the
course of discharging their duties.
The fairness 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 Zhong Tian
Certified Public Accountants Limited Company and PricewaterhouseCoopers have performed audits and
have issued unqualified auditors’ reports for the year ended 2011 in accordance with China Standards on
Auditing of PRC Certified Public Accountants and International Standards on Auditing, respectively.
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, any acts harming the
interests of shareholders or incurring any loss to the Company’s assets.
Connected transactions. During the Reporting Period, the connected transactions of the Company were
on commercial terms. The Supervisory Committee is not aware of any acts harming the interests of the
Company.
Internal control system and self-evaluation report on internal control. During the Reporting Period, the
Company sought to improve its internal control system, and continued to improve the effectiveness of such
system. The Supervisory Committee of the Company reviewed the Self-evaluation Report on the Company’s
Internal Control Systems and did not raise any objection against the Self-evaluation Report of the Board
regarding the Company’s Internal Control Systems.
By Order of the Supervisory Committee
Xia Zhihua
Chairperson of the Supervisory Committee
Beijing, China
26 March 2012
76
China Life Insurance Company Limited Annual Report 2011
Signifi cant Events
1. USE OF FUNDS RAISED
During the Reporting Period, the Company had neither raised funds nor used funds raised in the previous periods.
2. CONNECTED TRANSACTIONS
(1) Continuing Connected Transactions
During the Reporting Period, the following continuing connected transactions were carried out by the
Company pursuant to Rule 14A.34 of the Listing Rules, including the policy management agreement
between the Company and CLIC, the asset management agreement between the Company and AMC,
the asset management agreement between CLIC and AMC, and the insurance sales framework agreement
between the Company and P&C Company. These continuing connected transactions were subject to
reporting and announcement requirements but were exempt from independent shareholders’ approval
requirements under the Listing Rules. CLIC, the controlling shareholder of the Company, holds 40% of
the equity interest of AMC and 60% of the equity interest of P&C Company. Therefore, each of CLIC,
AMC and P&C Company constitutes a connected person of the Company. With respect to these continuing
connected transactions, the Company has complied with the disclosure requirements in accordance with
Chapter 14A of the Listing Rules.
(1) Policy Management Agreement
The Company and CLIC have constantly signed policy management agreements since 30 September
2003. The Company and CLIC entered into the 2008 confirmation letter on 30 December 2008,
pursuant to which both parties confirmed the renewal of the policy management agreement for three
years from 1 January 2009 to 31 December 2011. Pursuant to the policy management agreement, the
Company agreed to provide policy administration services to CLIC 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. For details as to
the method of calculation of the service fee, please refer to Note 31 in the Notes to the Consolidated
Financial Statements. The annual cap for each of the three years ended 31 December 2011 was
RMB1,402 million. The Company and CLIC entered into the 2011 confirmation letter on 15
December 2011 to further renew the policy management agreement to 31 December 2014. The
annual cap for each of the three years ending 31 December 2014 is RMB1,188 million.
For the year ended 31 December 2011, the service fee paid by CLIC to the Company amounted to
RMB1,112 million.
(2) Asset Management Agreements
(a) Asset Management Agreement between the Company and AMC
Since 30 November 2003, the Company has been entering into asset management agreements
with AMC. The renewed asset management agreement between the parties expired on 31
December 2010. The Company and AMC entered into an asset management agreement on
30 December 2010, which was for a term of one year from 1 January 2011 to 31 December
2011, and would be automatically renewed for another year, unless terminated by either party
giving to the other party no less than 90 days’ written notice prior to the expiry of the then
current term. As neither of the parties served a termination notice, such agreement had been
automatically extended to 31 December 2012 pursuant to its terms. In accordance with the
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.
China Life Insurance Company Limited Annual Report 2011
Signifi cant Events
77
In consideration of AMC’s services in respect of investing and managing various categories of
assets entrusted to it by the Company under the agreement, the Company agreed to pay AMC a
service fee. For details as to the method of calculation of the asset management fee, please refer
to Note 31 in the Notes to the Consolidated Financial Statements. The Company has set the
annual cap amount of the asset management fee at RMB900 million for 2011 and 2012.
For the year ended 31 December 2011, the Company paid AMC an asset management fee of
RMB692 million.
(b) Asset Management Agreement between CLIC and AMC
Since 30 November 2003, CLIC has been entering into asset management agreements with
AMC. CLIC and AMC entered into a renewed CLIC asset management agreement on 30
December 2008, which was for a term of three years from 1 January 2009 to 31 December
2011. In accordance with the agreement, AMC agreed to invest and manage assets entrusted
to it by CLIC and engage in investment and management of securities on behalf of CLIC, on
a discretionary basis, subject to the investment guidelines and instructions given by CLIC. For
details as to the method of calculation of the asset management fee, please refer to Note 31 in
the Notes to the Consolidated Financial Statements. The annual caps for the three years ended
31 December 2011 were RMB280 million, RMB290 million and RMB300 million, respectively.
On 29 December 2011, CLIC and AMC entered into an asset management agreement, pursuant
to which CLIC would continue to entrust AMC to invest and manage its assets for a term from
1 January 2012 to 31 December 2014. The annual caps for the three years ending 31 December
2014 are RMB300 million, RMB310 million and RMB320 million, respectively.
For the year ended 31 December 2011, CLIC paid AMC an asset management fee of RMB129
million.
(3)
Insurance Sales Framework Agreement
On 18 November 2008, the Company and P&C Company entered into the 2008 insurance sales
framework agreement, which expired on 17 November 2011. On 8 March 2012, the Company and
P&C Company entered into the 2012 insurance sales framework agreement, the terms and conditions
of which are substantially same as those of the 2008 insurance sales framework agreement. The 2012
insurance sales framework agreement is for a term of two years and will be automatically extended for
another year after its expiry unless terminated by either party by giving to the other party a written
notice within 30 days prior to its expiry. The parties agreed that they would confirm and recognize the
rights and obligations arisen based on the terms and conditions of the 2008 insurance sales framework
agreement in respect of the period after the expiry of the 2008 insurance sales framework agreement
and before the commencement of the term of the 2012 insurance sales framework agreement. Pursuant
to the agreement, P&C Company entrusted the Company to act as an agent to sell selected insurance
products within the authorized regions, and agreed to pay an agency service fee to the Company in
consideration of the services provided. For details as to the method of calculation of the agency service
fee, please refer to Note 31 in the Notes to the Consolidated Financial Statements. The annual caps
for the three years ending 31 December 2014 are RMB660 million, RMB800 million and RMB960
million, respectively.
For the year ended 31 December 2011, P&C Company paid the Company an agency service fee of
RMB405 million.
78
China Life Insurance Company Limited Annual Report 2011
Signifi cant Events
CERTIFICATION BY AUDITOR
The Board has received a comfort letter from the auditor of the Company with respect to the above
continuing connected transactions which were subject to reporting and announcement requirements, and
the letter stated that during the Reporting Period:
(1)
nothing has come to the auditors’ attention that causes them to believe that the disclosed continuing
connected transactions have not been approved by the Company’s Board of Directors;
(2)
(3)
for transactions involving the provision of goods or services by the Company, nothing has come to the
auditors’ attention that causes them to believe that the transactions were not, in all material respects,
in accordance with the pricing policies of the Company;
nothing has come to the auditors’ attention that causes them to believe that the transactions were
not entered into, in all material respects, in accordance with the relevant agreements governing such
transactions; and
(4) Except for that no maximum aggregate annual value of year 2011 was set for agency service fee from
P&C Company, nothing has come to the auditors’ attention that causes them to believe that the other
disclosed continuing connected transactions have exceeded the maximum aggregate annual value
disclosed in the previous announcements made.
CONFIRMATION BY INDEPENDENT DIRECTORS
The Company’s Independent 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 the Company’s 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.
(2) Other Connected Transactions
(1) Capital Injection to P&C Company
On 24 June 2011, the Company and CLIC entered into the “China Life Property and Casualty
Insurance Company Limited Capital Injection Contract” with P&C Company, pursuant to which the
Company and CLIC agreed to inject RMB1.6 billion and RMB2.4 billion into P&C Company by
the subscription of 1.6 billion shares and 2.4 billion shares at RMB1.00 per share, respectively (being
40% and 60% of the increased registered capital of P&C Company, respectively). CIRC approved
the change of registered capital of P&C Company on 19 July 2011. Following the completion of
the capital injection, the Company’s accumulative investment to P&C Company would increase to
RMB3.2 billion in total, and P&C Company would continue to be held as to 40% by the Company
and 60% by CLIC.
China Life Insurance Company Limited Annual Report 2011
Signifi cant Events
79
(2) Acquisition of Property by the Company and P&C Company
On 5 May 2011, the Ningbo Branch of the Company and the Ningbo Branch of P&C Company (as
purchasers) and Ningbo Jinghe Property Development Company Limited ( 寧波靖合房地產開發有
限公司 ) (“Ningbo Jinghe”)(as seller) signed the “Commercial Property Sale and Purchase Contract of
Zhejiang Province”, pursuant to which the Ningbo Branch of the Company and the Ningbo Branch
of P&C Company agreed to acquire Sanbao Century Plaza ( 三寶世紀大樓 ) from Ningbo Jinghe
at the total purchase price of RMB920,461,815. The Ningbo Branch of the Company shall pay
RMB774,161,535 for 31,598.43 square meters of Sanbao Century Plaza (representing 84.11% of the
saleable area), and the Ningbo Branch of P&C Company shall pay RMB146,300,280 for 5,971.44
square meters of Sanbao Century Plaza (representing 15.89% of the saleable area). Sanbao Century
Plaza should be delivered to the Ningbo Branch of the Company and the Ningbo Branch of P&C
Company by 30 September 2012.
(3) AMC’s Participation in Investment and Development of Land
On 1 July 2011, AMC, China Life Investment Holding Company Limited ( 國壽投資控股有限公司 )
(“CLI”), Beijing Wanyang Shiji Chuangye Investment Management Limited ( 北京萬洋世紀創業投
資管理有限公司 ) (“Beijing Wanyang”) and Beijing Vantone Real Estate Co., Ltd. ( 北京萬通地產股
份有限公司 ) (“Beijing Vantone”) entered into the “Joint Bidding Agreement in relation to the State-
owned Construction Land Located at Plot Z13, Core Zone, Beijing Central Business District (CBD),
East Third Ring Road, Chaoyang District, Beijing”, according to which a consortium was formed by
the four companies to participate in the bid of the land of Plot Z13. The parties to the consortium
agreed that, if the bidding is successful, the parties will form a project company to implement the
development and construction of the land, and the parties will be jointly and severally liable for the
consortium’s bidding activities. After the consortium successfully won the bid for the state-owned
construction land use right of the land, the consortium signed the State-owned Construction Land
Use Right Transfer Contract with Beijing Municipal Bureau of Land and Resources on 31 August
2011. The land of Plot Z13 has a total site area of approximately 7,840 square meters, and the land
transfer price is RMB2,656,280,000. Subsequently, the consortium formed China Life Yuantong
Property Company Limited ( 國壽遠通置業有限公司 ) (“China Life Yuantong”) as the project
company and signed a supplemental agreement with Beijing Municipal Bureau of Land and Resources
to change the transferee of the land transfer contract to China Life Yuantong. China Life Yuantong
has a registered capital of RMB600,000,000, with AMC, CLI, Beijing Wanyang and Beijing Vantone
holding 19%, 51%, 29% and 1% of its equity interest, respectively.
(4) Entrustment of Enterprise Annuity Funds and Account Management Agreement
On 27 July 2009, the Company, CLIC and AMC signed the “Entrustment of Enterprise Annuity
Funds and Account Management Agreement of China Life Insurance (Group) Company” with the
Pension Company. The agreement is valid for three years from the date on which the entrusted
funds are transferred into a special entrustment account. As a trustee and account manager, Pension
Company provides trusteeship and account management services for the enterprise annuity funds of
the Company, CLIC and AMC and charges trustee management fees and account management fees in
accordance with the agreement.
80
China Life Insurance Company Limited Annual Report 2011
Signifi cant Events
The above connected transactions in relation to the Company’s capital injection to P&C Company,
the acquisition of property by the Company and P&C Company, and the AMC’s participation in
the investment and development of land were subject to reporting and announcement requirements
but were exempt from independent shareholders’ approval requirements pursuant to Rule 14A.32 of
the Listing Rules. As CLIC holds 60% of the equity interest of P&C Company and the entire equity
interest of CLI, each of P&C Company and CLI constitutes a connected person of the Company.
With respect to these connected transactions, the Company has complied with the disclosure
requirements in accordance with Chapter 14A of the Listing Rules.
(3) Statement on Claims, Debt Transactions and Guarantee Transactions etc. with Connected
Parties outside the Course of Business
During the Reporting Period, the Company was not involved in claims, debt transactions or guarantees with
connected parties outside the course of its business.
3. MATERIAL CONTRACTS AND THE PERFORMANCE OF MATERIAL CONTRACTS
1. During the Reporting Period, the Company neither acted as trustee, contractor or lessee of other companies’
assets, nor entrusted, contracted or leased its assets to other companies, the income from which accounted
for 10% or above of the Company’s profits for the year.
2.
3.
4.
The Company neither gave external guarantees nor provided guarantees to its subsidiaries during the
Reporting Period.
Apart from entrusting funds with AMC and its subsidiaries for asset management purposes, the Company
did not entrust other companies with the management of cash assets during the Reporting Period.
Except otherwise disclosed in this annual report, the Company had no other material contracts during the
Reporting Period.
4. UNDERTAKINGS OF THE COMPANY OR SHAREHOLDERS HOLDING MORE THAN
5% OF THE SHARE CAPITAL OF THE COMPANY WHICH ARE EITHER GIVEN OR
EFFECTIVE DURING THE REPORTING PERIOD
Prior to the listing of the Company’s A Shares (30 November 2006), land use rights were injected by CLIC into
the Company during its reorganization. Out of these, four pieces of land (with a total area of 10,421.12 square
meters) had not had its formalities in relation to the change of ownership completed. Further, out of the properties
injected into the Company, there were six properties (with a gross floor area of 8,639.76 square meters) in respect
of which the formalities in relation to the change of ownership had not been completed. CLIC undertook to
complete the above mentioned formalities within 1 year of the date of listing of the Company’s A Shares, and in
the event such formalities could not be completed within such period, CLIC would bear any potential losses to the
Company in relation thereto. CLIC strictly followed these commitments. As at the end of the Reporting Period,
save for the two properties and related land of the Company’s Shenzhen Branch, all other formalities in relation
to the change of land and property ownership have been completed. The Shenzhen Branch of the Company
continues to use such properties and land, and no other parties have questioned or hindered the use of such
properties and land by the Company.
China Life Insurance Company Limited Annual Report 2011
Signifi cant Events
81
5. MAJOR LITIGATION AND ARBITRATION
The Company was not a party to any major litigation or arbitration during the Reporting Period.
6. OTHER AFFAIR
With the approval by the 2011 First Extraordinary General Meeting of the Company and the approval by the
CIRC, the Company issued subordinated term debts of RMB30 billion in October 2011 to qualified investors
who meet the relavant regulatory requirements. The proceeds from the issuance of subordinated term debts would
be used to replenish the Company’s supplementary capital and to raise the solvency ratio according to applicable
laws and regulations and the approval of regulatory authorities. For details as to the issuance of the subordinated
term debts, please refer to Note 16 in the Notes to the Consolidated Financial Statements of this annual report
and the announcement of the Company posted on the website of Shanghai Stock Exchange and HKExnews
website of the Hong Kong Exchanges and Clearing Limited on 25 October 2011 and 10 November 2011,
respectively.
82
China Life Insurance Company Limited Annual Report 2011
Honors and Awards
“Forbes”
Forbes Global 2000 for 2011, ranking No.68
“FORTUNE China”
Top 500 Chinese Enterprises 2011, ranking No.6
“The Eighth Session of Award for the Best
Chinese Corporate Citizen 2011”
Best Chinese Corporate Citizen in 2011
Hexun “The Ninth Session of Award for
Chinese Finance 2011”
Most Reliable Life Insurance Company for the Year
Outstanding Brand Building in Insurance Industry
for the Year
Best Listed Company in Investor Relations
for the Year
Best Brand Insurance Company for the Year
NetEase “Golden Diamond 2011”
Best Insurance Brand of the Year 2011
“China Business Newspaper” Award for
Financial Institutions with Outstanding
Competitiveness in 2011 (The Third Session)
Domestic Insurance Company with
Outstanding Competitiveness
Eastmoney.com
2011 Best Insurance Company
“China Insurance Marketing” the Top List of The Best Social Responsibility Award for the Year
the Insurance Industry of China in 2011
China Life Insurance Company Limited Annual Report 2011
Independent Auditor’s Report
83
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 85 to 189, which comprise the consolidated and company
statements of financial position as at 31 December 2011, and the consolidated statement of comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a
summary of significant accounting policies and other explanatory information.
DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation of consolidated financial statements that give a true
and fair view in accordance with International Financial Reporting Standards and the disclosure requirements of the
Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted
our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks
of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial
statements that give a true and fair view 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 consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
PricewaterhouseCoopers, 22/F Prince’s Building, Central, Hong Kong
T: +852 2289 8888, F: +852 2810 9888, www.pwchk.com
84
China Life Insurance Company Limited Annual Report 2011
Independent Auditor’s Report
OPINION
In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Company
and of the Group as at 31 December 2011, and of the Group’s financial performance and cash flows for the year then
ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance
with the disclosure requirements of the Hong Kong Companies Ordinance.
OTHER MATTERS
This report, including the opinion, has been prepared for and only for 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.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 26 March 2012
China Life Insurance Company Limited Annual Report 2011
Consolidated Statement of Financial Position
As at 31 December 2011
85
ASSETS
Property, plant and equipment
Investments in associates
Held-to-maturity securities
Loans
Term deposits
Statutory deposits – restricted
Available-for-sale securities
Securities at fair value through profit or loss
Securities purchased under agreements to resell
Accrued investment income
Premiums receivable
Reinsurance assets
Other assets
Cash and cash equivalents
As at 31
December
2011
RMB million
As at 31
December
2010
RMB million
20,231
24,448
261,933
61,104
520,793
6,153
562,948
23,683
2,370
22,946
8,253
878
12,182
55,985
18,946
20,892
246,227
36,543
441,585
6,153
548,121
9,762
–
18,193
7,274
830
8,199
47,854
Note
6
7
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
10
11
12
Total assets
1,583,907
1,410,579
The notes on pages 94 to 189 form an integral part of these consolidated financial statements.
86
China Life Insurance Company Limited Annual Report 2011
Consolidated Statement of Financial Position
As at 31 December 2011
LIABILITIES AND EQUITY
Liabilities
Insurance contracts
Investment contracts
Securities sold under agreements to repurchase
Policyholder dividends payable
Annuity and other insurance balances payable
Premiums received in advance
Bonds payable
Other liabilities
Deferred tax liabilities
Current income tax liabilities
Statutory insurance fund
Total liabilities
Equity
Share capital
Reserves
Retained earnings
As at 31
December
2011
RMB million
As at 31
December
2010
RMB million
Note
13
14
15
16
17
26
18
32
33
1,199,373
69,797
13,000
46,368
11,954
3,719
29,990
13,968
1,454
750
146
1,018,135
70,171
23,065
52,828
8,275
1,880
–
13,746
11,776
34
194
1,390,519
1,200,104
28,265
83,371
79,894
28,265
100,512
79,933
Attributable to equity holders of the Company
191,530
208,710
Non-controlling interests
Total equity
Total liabilities and equity
1,858
1,765
193,388
210,475
1,583,907
1,410,579
Approved and authorized for issue by the Board of Directors on 26 March 2012
Yuan Li
Director
Wan Feng
Director
The notes on pages 94 to 189 form an integral part of these consolidated financial statements.
China Life Insurance Company Limited Annual Report 2011
Statement of Financial Position
As at 31 December 2011
87
ASSETS
Property, plant and equipment
Investments in subsidiaries
Investments in associates
Held-to-maturity securities
Loans
Term deposits
Statutory deposits – restricted
Available-for-sale securities
Securities at fair value through profit or loss
Securities purchased under agreements to resell
Accrued investment income
Premiums receivable
Reinsurance assets
Other assets
Cash and cash equivalents
As at 31
December
2011
RMB million
As at 31
December
2010
RMB million
19,666
3,865
19,868
261,897
60,914
519,493
5,653
560,674
23,443
2,170
22,854
8,253
878
11,912
55,585
18,389
3,865
18,178
246,220
36,353
440,217
5,653
544,744
9,676
–
18,098
7,274
830
8,151
47,545
Note
6
36
7
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
10
11
12
Total assets
1,577,125
1,405,193
The notes on pages 94 to 189 form an integral part of these consolidated financial statements.
88
China Life Insurance Company Limited Annual Report 2011
Statement of Financial Position
As at 31 December 2011
LIABILITIES AND EQUITY
Liabilities
Insurance contracts
Investment contracts
Securities sold under agreements to repurchase
Policyholder dividends payable
Annuity and other insurance balances payable
Premiums received in advance
Bonds payable
Other liabilities
Deferred tax liabilities
Current income tax liabilities
Statutory insurance fund
Total liabilities
Equity
Share capital
Reserves
Retained earnings
Total equity
As at 31
December
2011
RMB million
As at 31
December
2010
RMB million
Note
13
14
15
16
17
26
18
32
33
1,199,373
69,797
13,000
46,368
11,954
3,719
29,990
13,596
1,539
737
146
1,018,135
70,171
22,660
52,828
8,275
1,880
–
13,465
11,828
9
194
1,390,219
1,199,445
28,265
83,514
75,127
28,265
100,399
77,084
186,906
205,748
Total liabilities and equity
1,577,125
1,405,193
Approved and authorized for issue by the Board of Directors on 26 March 2012
Yuan Li
Director
Wan Feng
Director
The notes on pages 94 to 189 form an integral part of these consolidated financial statements.
China Life Insurance Company Limited Annual Report 2011
Consolidated Statement of Comprehensive Income
89
For the year ended 31 December 2011
REVENUES
Gross written premiums
Less: premiums ceded to reinsurers
Net written premiums
Net change in unearned premium reserves
Net premiums earned
Investment income
Net realised gains/(losses) and impairment on financial assets
Net fair value gains through profit or loss
Other income
Total revenues
BENEFITS, CLAIMS AND EXPENSES
Insurance benefits and claims expenses
Life insurance death and other benefits
Accident and health claims and claim adjustment expenses
Increase in insurance contracts liabilities
Investment contract benefits
Policyholder dividends resulting from participation in profits
Underwriting and policy acquisition costs
Finance costs
Administrative expenses
Other operating expenses
Statutory insurance fund contribution
Total benefits, claims and expenses
Share of profit of associates
Profit before income tax
Income tax
Net profit
Attributable to:
– equity holders of the Company
– non-controlling interests
Note
2011
RMB million
2010
RMB million
318,252
(232)
318,020
256
318,229
(177)
318,052
36
318,276
318,088
60,722
(11,208)
337
2,772
48,872
15,841
280
2,757
370,899
385,838
(101,349)
(7,789)
(181,579)
(2,031)
(6,125)
(27,434)
(873)
(21,549)
(3,275)
(595)
(71,237)
(8,740)
(199,655)
(1,950)
(13,224)
(27,256)
(304)
(20,285)
(3,351)
(599)
(352,599)
(346,601)
2,213
1,771
20,513
(2,022)
41,008
(7,197)
18,491
33,811
18,331
160
33,626
185
19
20
21
22
22
22
23
24
18
7
25
26
Basic and diluted earnings per share
28
RMB0.65
RMB1.19
The notes on pages 94 to 189 form an integral part of these consolidated financial statements.
90
China Life Insurance Company Limited Annual Report 2011
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2011
Other comprehensive income
Fair value losses on available-for-sale securities
Amount transferred to net profit from other comprehensive income
Portion of fair value losses on available-for-sale securities
attributable to participating policyholders
Share of other comprehensive income of associates
Others
Income tax relating to components of other comprehensive income
Note
2011
RMB million
2010
RMB million
(45,576)
11,054
2,521
(201)
(1)
7,989
(13,666)
(15,763)
7,983
(131)
(1)
5,362
26
Other comprehensive income for the year
(24,214)
(16,216)
Total comprehensive income for the year
(5,723)
17,595
Attributable to:
– equity holders of the Company
– non-controlling interests
(5,874)
151
17,423
172
The notes on pages 94 to 189 form an integral part of these consolidated financial statements
China Life Insurance Company Limited Annual Report 2011
Consolidated Statement of Changes in Equity
For the year ended 31 December 2011
91
Attributable to equity holders
of the Company
Share
capital
RMB million
(Note 32)
Reserves
RMB million
(Note 33)
Retained Non-controlling
interests
earnings
RMB million
RMB million
Total
RMB million
28,265
–
–
102,787
–
(16,203)
80,020
33,626
–
1,704
185
(13)
212,776
33,811
(16,216)
–
–
–
–
–
(16,203)
33,626
172
17,595
13,928
–
–
(13,928)
(19,785)
–
–
–
(111)
–
(19,785)
(111)
13,928
(33,713)
(111)
(19,896)
As at 1 January 2010
Net profit
Other comprehensive income
Total comprehensive income
Transactions with owners
Appropriation to reserve (Note 33)
Dividends paid
Dividends to non-controlling interests
Total transactions with equity holders
As at 31 December 2010
28,265
100,512
79,933
1,765
210,475
As at 1 January 2011
Net profit
Other comprehensive income
Total comprehensive income
Transactions with owners
Appropriation to reserve (Note 33)
Dividends paid
Dividends to non-controlling interests
Total transactions with equity holders
28,265
–
–
100,512
–
(24,205)
79,933
18,331
–
1,765
160
(9)
210,475
18,491
(24,214)
–
–
–
–
–
(24,205)
18,331
151
(5,723)
7,064
–
–
(7,064)
(11,306)
–
–
–
(58)
–
(11,306)
(58)
7,064
(18,370)
(58)
(11,364)
As at 31 December 2011
28,265
83,371
79,894
1,858
193,388
The notes on pages 94 to 189 form an integral part of these consolidated financial statements.
92
China Life Insurance Company Limited Annual Report 2011
Consolidated Statement of Cash Flows
For the year ended 31 December 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before income tax:
Adjustments for:
Investment income
Net realised and unrealised (gains)/losses and impairment on financial assets
Insurance contracts
Depreciation and amortisation
Amortisation of premiums and discounts
Loss on foreign exchange
Share of profit of associates
Changes in operating assets and liabilities:
Securities at fair value through profit or loss
Receivables and payables
Income tax paid
Interest received
Dividends received
2011
RMB million
2010
RMB million
20,513
41,008
(60,722)
10,871
181,184
1,909
1
547
(2,213)
(14,196)
(925)
(3,456)
404
36
(48,872)
(16,121)
199,978
1,802
(5)
392
(1,771)
(809)
13,056
(10,236)
135
43
Net cash inflow from operating activities
133,953
178,600
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
Additional capital contribution to associates
Increase in term deposits, net
Decrease in securities purchased under agreements to resell, net
Interest received
Dividends received
Increase in policy loan, net
Other
32,676
24,530
98,639
258
(116,000)
(132,294)
(5,108)
(1,600)
(79,208)
(2,370)
49,976
4,874
(8,344)
380
38,245
8,199
133,111
240
(74,324)
(171,379)
(4,849)
(2,999)
(96,602)
89
38,873
5,321
(10,146)
284
Net cash outflow from investing activities
(133,591)
(135,937)
The notes on pages 94 to 189 form an integral part of these consolidated financial statements.
China Life Insurance Company Limited Annual Report 2011
Consolidated Statement of Cash Flows
For the year ended 31 December 2011
93
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in securities sold under agreements to repurchase, net
Interest paid
Dividends paid to the Company’s equity holders
Dividends paid to non-controlling interests
Proceeds from issuance of subordinated debt
2011
RMB million
2010
RMB million
(10,065)
(570)
(11,306)
(58)
29,990
(10,488)
(297)
(19,785)
(111)
–
Net cash inflow/(outflow) from financing activities
7,991
(30,681)
Foreign currency losses on cash and cash equivalents
(222)
(325)
Net increase in cash and cash equivalents
8,131
11,657
Cash and cash equivalents
Beginning of year
End of year
Analysis of balance of cash and cash equivalents
Cash at bank and in hand
Short-term bank deposits
47,854
36,197
55,985
47,854
52,001
3,984
45,143
2,711
The notes on pages 94 to 189 form an integral part of these consolidated financial statements.
94
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
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 (“CLIC”, formerly China Life Insurance Company) and
its subsidiaries (the “Restructuring”). The Company and its subsidiaries are hereinafter collectively referred to
as the “Group”. The Group’s principal 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 Financial Street, Xicheng 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 26
March 2012.
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation
The Group adopted International Financial Reporting Standards (“IFRS”) in 2009. The Group prepared
these consolidated financial statements in accordance with IFRS, its amendments and interpretations
issued by the International Accounting Standards Board (“IASB”). These consolidated financial statements
also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on
the Stock Exchange Limited and the requirements of the Hong Kong Company’s Ordinance. The Group
prepared the consolidated financial statements under the historical cost convention, as modified by financial
assets and financial liabilities at fair value through profit or loss, available-for-sale securities, insurance
contract liabilities and certain property, plant and equipment at deemed cost as part of the Restructuring
process. The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in the process of applying the
Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas
where assumptions and estimates are significant to the consolidated financial statements are disclosed in
Note 3.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
95
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued)
2.1.1 Standards, amendments and interpretations effective in 2011
International Accounting Standard (“IAS”) 24 (Revised) – Related Party Disclosures clarifies and simplifies
the definition of a related party, provides a partial exemption from the disclosure requirements for
transactions with government-related entities, and requires for additional disclosure such as commitments
with related parties. The Group has adopted the partial exemption regarding disclosure requirements for
transactions with government-related entities in the consolidated financial statements for the year ended 31
December 2009. Full adoption of IAS 24 (Revised) effective from 1 January 2011 has resulted in revised
scope of related parties and additional disclosures for commitments with related parties.
The standards, amendments and interpretations effective in 2011 as noted below are relevant to the Group
but had no material impact on the consolidated annual financial statements of the Group.
IAS 1 Amendment
IAS 21, IAS 28 and
IAS 31 Amendment
IAS 34 Amendment
IFRS 3 Amendment
The International Financial
Reporting Interpretations
Committee (“IFRIC”)
13 Amendment
IFRIC 14 Amendment
IFRIC 19
Presentation of Financial Statements: Clarification of Statement of
Changes in Equity
Transition Requirements for Amendments Arising as a Result of IAS 27
Interim Financial Reporting: Significant Events and Transactions
Business Combinations: Contingent Consideration, Measurement of
Non-controlling Interest and Share-based Payment
Customer Loyalty Programmes: Fair Value of Award Credits
Prepayments of a Minimum Funding Requirement
Extinguishing Financial Liabilities with Equity Instruments
96
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued)
2.1.2 Standards, amendments and interpretations that are not yet effective and have not been
early adopted by the Group in 2011
The standards, amendments and interpretations noted below are relevant to the Group but are not yet
effective and have not been early adopted by the Group in 2011.
Effective for annual period
beginning on or after
IAS 1 Amendment
IAS 12 Amendment
IAS 19 Amendment
IAS 32 Amendment
IFRS 7 Amendment
IFRS 7 Amendment
IFRS 9, IFRS 9 Amendments
and IFRS 7 Amendment
IFRS 10
IFRS 11
IFRS 12
IAS 27 Revised
IAS 28 Revised
IFRS 13
Presentation of Financial Statements:
Other Comprehensive Income
Deferred Tax: Recovery of Underlying Assets
Employee Benefits
Financial Instruments: Presentation
Disclosure: Offsetting Financial Assets
and Financial Liabilities
Disclosures: Transfers of Financial Assets
Financial Instruments and Financial
Instruments – Disclosures
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Separate Financial Statements
Investments in Associates and Joint Ventures
Fair Value Measurement
1 July 2012
1 January 2012
1 January 2013
1 January 2014
1 January 2013
1 July 2011
1 January 2015
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
IAS 1 Amendment requires to separate items presented in other comprehensive income into two groups
based on whether or not they may be recycled to profit or loss in the future.
IAS 12 Amendment provides a practical approach for measuring deferred tax assets and liabilities related to
investment properties measured using the fair value model under IAS 40 Investment Property.
IAS 19 Amendment makes changes to the recognition and measurement of defined benefit pension expense
and termination benefits, and to the disclosures for all employee benefits. The most significant change
is that actuarial gains and losses will be recognised in other comprehensive income rather than operating
expenses.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
97
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1 Basis of preparation (continued)
2.1.2 Standards, amendments and interpretations that are not yet effective and have not been
early adopted by the Group in 2011 (continued)
IAS 32 Amendment provides additional application guidance to clarify some of the requirements for
offsetting financial assets and financial liabilities on the statement of financial position. IFRS 7-Disclosure:
Offsetting Financial Assets and Financial Liabilities is also amended to require disclosures to include
information that will enable users of an entity’s financial statements to evaluate the effect or potential effect
of netting arrangements, including rights of set-off associated with the entity’s recognised financial assets
and recognised financial liabilities, on the entity’s financial position.
IFRS 7 Amendment – Disclosures: Transfers of Financial Assets introduces new disclosure requirements to
help users of financial statements evaluate the risk exposures relating to transfer of financial assets and the
effect of those risks on an entity’s financial position.
IFRS 9 and IFRS 9 Amendments replaced those parts of IAS 39 relating to the classification, measurement
and de-recognition of financial assets and liabilities with key changes mainly related to the classification
and measurement of financial assets and certain types of financial liabilities. Together with the amendments
to IFRS 9, IFRS 7-Financial Instruments: Disclosures is also amended to require additional disclosures on
transition from IAS 39 to IFRS 9.
The five new standards (IFRS 10, IFRS 11, IFRS 12, IAS 27 Revised and IAS 28 Revised) establish new
guidance for consolidation and joint arrangements and principally address:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
A revised definition of control for the purposes of determining which arrangements should be
consolidated;
A reduction in the types of joint arrangements to two: joint operations and joint ventures, and
classification based on rights and obligations rather than legal structure;
Elimination of the policy choice of proportionate consolidation for joint ventures; and
New requirements to disclose significant judgements and assumptions in determining whether an
entity controls, jointly controls or significantly influences its interests in other entities.
IFRS 13 defines and sets out in a single IFRS a framework for measuring fair value, and requires disclosures
about fair value measurement.
The Group is considering the impact of these new standards and amendments on the consolidated and
separate financial statements of the Group and the Company, respectively.
98
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
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 majority votes at the meetings of the Board of
Directors.
The Group uses the acquisition method of accounting to account for business combinations. The
consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the
liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the
fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related
costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured initially at their fair value at the acquisition date. On an acquisition-
by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or
at the non-controlling interest’s proportionate share of the acquiree’s net assets.
The investments in subsidiaries are accounted for in the company only statement of financial position at cost
less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration
amendments. Cost also includes direct attributable costs of investment. The results of subsidiaries are
accounted for by the Company on the basis of dividend received and receivable.
The excess of the aggregate of the consideration transferred, the fair value of any non-controlling interest in
the acquiree, and the fair value of any previous equity interest in the acquiree at the acquisition date over
the fair value of the net identifiable assets acquired and liabilities assumed is recorded as goodwill. If this
is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the
difference is recognised directly in the statement of comprehensive income. Goodwill is tested annually for
impairment and carried at cost less accumulated impairment losses. If there is any indication that goodwill
is impaired, recoverable amount is estimated and the difference between carrying amount and recoverable
amount is recognised as an impairment charge. Impairment losses on goodwill are not reversed. Gains and
losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Inter-company transactions, balances and unrealised gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment
of the assets transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
99
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2 Consolidation (continued)
Transactions with non-controlling interests
The Group treats transactions with non-controlling interests that does not result in loss of controls as
transactions with equity holders of the Group. For purchases from non-controlling interests, the difference
between any consideration paid and the relevant share acquired of the carrying value of net assets of the
subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in
equity.
When the Group ceases to have control or significant influence, any retained interest in the entity is re-
measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value
is the initial carrying amount for the purposes of subsequently accounting for the retained interest as
an associate, joint venture or financial asset. In addition, any amounts previously recognised in other
comprehensive income in respect of that entity are accounted for as if the group had directly disposed of
the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive
income are reclassified to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate
share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss as
appropriate.
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 using 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.
The Group’s share of its associates’ post-acquisition profit or loss is recognized in net profit, and its share
of post-acquisition movements in other comprehensive income is recognized in consolidated statement
of comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying
amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in
the associate, including any other unsecured receivables, the Group does not recognize further losses unless it
has 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.
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 take into
consideration the carrying amount of goodwill relating to the entity sold.
100
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2 Consolidation (continued)
Associates (continued)
The Group determines at each reporting date whether there is any objective evidence that the investment in
the associate is impaired. If this is the case, an impairment loss is recognised for the amount by which the
investment’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the
investment’s fair value less costs to dispose and value in use. The impairment of investment in the associate
is reviewed for possible reversal at each reporting date.
The investment in associates is stated at cost less impairment in the company only statement of financial
position. The results of associates are accounted for by the Company on the basis of dividends received and
receivable.
2.3 Segment reporting
The Group’s operating segments are presented in a manner consistent with the internal management
reporting provided to the president office for deciding how to allocate resources and for assessing
performance.
Operating segment refers to the segment within the Group that satisfies the following conditions: i)
the segment generates income and incurs costs from daily operating activities; ii) management evaluate
the operating results of the segment to make resource allocation decision and to evaluate the business
performance; and iii) the Group can obtain relevant financial information of the segment, including
financial condition, operating results, cash flows and other financial performance indicators.
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 end of the reporting period. Exchange
differences arising in these cases are recognized in net profit.
2.5 Property, plant and equipment
Property, plant and equipment are stated at historical costs less accumulated depreciation and any
accumulated impairment losses, except for those acquired prior to 30 June 2003, which are stated at deemed
cost less accumulated depreciation and any accumulated impairment losses.
The historical costs of property, plant and equipment comprise its purchase price, including import duties
and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working
condition and location for its intended use. 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 costs.
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 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
101
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:
Buildings
Office equipment, furniture and fixtures
Motor vehicles
Leasehold improvements
Estimated useful life
15 to 35 years
5 to 10 years
4 to 8 years
Over the lesser of the remaining term of
the lease or the useful life
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.
Impairment and gains or losses 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
net profit for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is
the higher of an asset’s net selling price and value in use.
The gain or loss on disposal of 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 net profit.
2.6 Financial assets
2.6.a Classification
The Group classifies its financial assets into the following categories: held-to-maturity securities, securities
at fair value through profit or loss, available-for-sale securities and loans and receivables. Management
determines the classification of its financial assets at initial recognition which depends on the purpose
for which the assets are acquired. Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market other than those that the Group intends
to sell in the short term or held as available-for-sale. Loans and receivables mainly comprise term deposits,
loans, securities purchased under agreements to resell, accrued investment income and receivables arising
from the insurance contracts as presented separately in the statement of financial position. The Group’s
investments in securities are mainly in the below three categories:
(i) Held-to-maturity securities
Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments
and fixed maturities that the Group has the positive intention and ability to hold to maturity and
do not meet the definition of loans and receivables nor designated as available-for-sale securities or
securities at fair value through profit or loss.
102
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.6 Financial assets (continued)
2.6.a Classification (continued)
(ii)
Securities at fair value through profit or loss
This category has two sub-categories: securities held for trading and those designated at fair value
through profit or loss at inception. Securities are classified as held for trading at inception if acquired
principally for the purpose of selling in the short term or if they form part of a portfolio of financial
assets in which there is evidence of short term profit-taking. The Group may classify other financial
assets as at fair value through profit or loss if they meet certain criteria and designated as such 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 any of the other categories.
2.6.b Recognition and measurement
Purchase and sale of investments are recognized on trade date, when 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 profit or loss, 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.
Available-for-sale securities and securities at fair value through profit or loss 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 securities at fair value through profit or loss
category, and the change of fair value of available-for-sale debt securities due to foreign exchange impact
on the amortized cost are included in net profit in the period in which they arise. The remaining unrealised
gains and losses arising from changes in the fair value of available-for-sale debt securities and unrealised
gains and losses arising from changes in the fair value of available-for-sale equity securities are recognized in
other comprehensive income. When securities classified as available-for-sale securities are sold or impaired,
the accumulated fair value adjustments are included in net profit as realised gains or losses and impairment
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.
Term deposits primarily represent traditional bank deposits which have fixed maturity date and are stated at
amortised cost.
Loans originated by the Group are carried at amortised cost, net of allowance for impairment.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
103
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.6 Financial assets (continued)
2.6.b Recognition and measurement (continued)
The Group purchases securities under agreements to resell substantially identical securities. These
agreements are classified as secured loans and are recorded at amortised cost, i.e. their cost plus accrued
interest at the end of the reporting period, which approximates fair value. The amounts advanced under
these agreements are reflected as assets in the consolidated statement of financial position. The Group
does not take physical possession of securities purchased under agreements to resell. Sale or transfer of the
securities is not permitted by the respective clearing house on which they are registered while the 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.c Impairment of financial assets other than securities at fair value through profit or loss
Financial assets other than those accounted for as at fair value through profit or loss are adjusted for
impairment, where there are declines in value that are considered to be an impairment. In evaluating
whether a decline in value is an impairment for these financial assets, the Group considers several factors
including, but not limited to:
(cid:129)
(cid:129)
(cid:129)
Significant financial difficulty of the issuer or debtor;
A breach of contract, such as a default or delinquency in payments;
It becomes probable that the issuer or debtor will enter into bankruptcy or other financial
reorganisation;
(cid:129)
The disappearance of an active market for that financial asset because of financial difficulties.
In evaluating whether a decline in value is impairment for equity securities, the Group also considers the
extent or the duration of the decline.
When the decline in value is considered impairment, held-to-maturity debt securities are written down
to their present value of estimated future cash flows discounted at the securities effective interest rates;
available-for-sale debt securities and equity securities are written down to their fair value, and the change
is recorded in net realised gains/(losses) and impairment on financial assets in the period the impairment is
recognized. The impairment loss is reversed through net profit if in a subsequent period the fair value of a
debt security increases and the increase can be objectively related to an event occurring after the impairment
loss was recognized through net profit. The impairment losses recognised in net profit on equity instruments
are not reversed through net profit.
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.
104
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Insurance contracts and investment contracts
2.8.1 Classification
The Group issues contracts that transfer insurance risk or financial risk or both. The contracts issued by
the Group are classified as insurance contracts and investment contacts. Insurance contracts are those
contracts that transfer significant insurance risk. They may also transfer financial risk. Investment contracts
are those contracts that transfer financial risk without significant insurance risk. A number of insurance
and investment contracts contain a discretionary participating feature (“DPF”). This feature entitles the
policyholders to receive additional benefits or bonuses that are, at least in part, at discretion of the Group.
2.8.2 Insurance contracts
2.8.2.a Recognition and measurement
(i)
Short-term insurance contracts
Premiums from the sale of short duration accident and health insurance products are recorded when
written and are accreted to earnings on a pro-rata basis over the term of the related policy coverage.
Reserves for short duration insurance products consist of unearned premium reserve and expected
claims and claim adjustment expenses reserve. Actual claims and claim adjustment expenses are
charged to net profit as incurred.
The unearned premium reserve represents the portion of the premiums written net of certain
acquisition costs relating to the unexpired terms of coverage.
Reserves for claims and claim adjustment expenses consist of the reserves for reported and unreported
claims and reserves for claim expenses with respect to insured events. In developing these reserves, the
Group considered the nature and distribution of the risks, claims cost development, and experiences in
deriving the best estimated amount and the applicable margins. The methods used for reported claims
include average cost per claim method, chain ladder method, etc. The Group calculated the reserves
for claim expenses based on the best estimates of the future payments for claim expenses.
(ii)
Long-term insurance contracts
Long-term 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.
The Company uses the discounted cash flow method to estimate the liabilities for long-term insurance
contracts. The reserve of long-term insurance contracts consists of a reasonable estimate of liability, a
risk margin and a residual margin. The long-term insurance contracts liabilities are calculated using
various assumptions, including assumptions on mortality rates, morbidity rates, lapse rates, discount
rates, and expenses assumption, and based on the following principles:
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
105
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Insurance contracts and investment contracts (continued)
2.8.2 Insurance contracts (continued)
2.8.2.a Recognition and measurement (continued)
(ii)
Long-term insurance contracts (continued)
(a) The reasonable estimate of liability for long-term insurance contracts is the present value of
reasonable estimates of future cash outflows less future cash inflows. The expected future cash
inflows include cash inflows of future premiums arising from the undertaking of insurance
obligations, with consideration of decrement mostly from death and surrenders. The expected
future cash outflows are cash outflows incurred to fulfil contractual obligations, consisting of the
following:
(cid:129)
(cid:129)
(cid:129)
The guaranteed benefits based on contractual terms, including payments for deaths,
disabilities, diseases, survivals, maturities and surrenders.
Additional non-guaranteed benefits, such as policyholder dividends.
Reasonable expenses incurred to manage insurance contracts or to process claims,
including maintenance expenses and claim settlement expenses. Future administration
expenses are included in the maintenance expenses. Expenses are determined based
on expense analysis with consideration of future inflation and the Company’s expense
management control.
On each reporting date, the Company reviews the assumptions for reasonable estimates of
liability and risk margins, with consideration of all available information, and taking into
account the Company’s historical experience and expectation of future events. Changes in
assumptions are recognized in net profit. Assumptions for residual margin are locked in at policy
issuance and are not adjusted at each reporting date.
(b) Margin has been taken into consideration while computing the reserve of insurance contracts,
measured separately and recognized in net profit in each period over the life of the contracts. At
the inception of the contracts, the Group does not recognize Day 1 gain, whereas on the other
hand, Day 1 loss is recognized in net profit as incurred.
Margin comprises of risk margin and residual margin. Risk margin is the reserve accrued to
compensate for the uncertain amount and timing of future cash flows. At the inception of
the contract, the residual margin is calculated net of certain acquisition costs by the Group
representing Day 1 gain and will be amortized over the life of the contracts. The subsequent
measurement of residual margin is independent from best estimate of future discounted cash
flows and risk margin. The assumption changes have no effect on the subsequent measurement
of residual margin.
(c) The Group has considered the impact of time value on the reserve calculation for insurance
contracts.
106
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Insurance contracts and investment contracts (continued)
2.8.2 Insurance contracts (continued)
2.8.2.a Recognition and measurement (continued)
(iii) Universal life contracts and unit-linked contracts
Universal life contracts and unit-linked contracts are unbundled into the following components:
(cid:129)
(cid:129)
Insurance components
Non-insurance components
The insurance components are accounted for as insurance contracts; and the non-insurance
components are accounted for as investment contracts (Note 2.8.3), which are stated in the
investment contracts liabilities.
2.8.2.b Liability adequacy test
The Group assesses the adequacy of insurance contract reserves using the current estimate of future cash
flows with available information at the end of each reporting period. If that assessment shows that the
carrying amount of its insurance liabilities (less related intangible assets, if applicable) is inadequate in the
light of the estimated future cash flows, the insurance contract reserves will be adjusted accordingly, and any
changes of the insurance contract liabilities will be recognized in net profit.
2.8.2.c Reinsurance contracts held
Contracts with reinsurers under which the Group is compensated for losses on one or more contracts
issued by the Group and that meet the classification requirements for insurance contracts are classified as
reinsurance contracts held. Contracts with reinsurers that do not meet these classification requirements are
classified as financial assets. Insurance contracts entered into by the Group under which the contract holder
is another insurer (inwards reinsurance) are included with insurance contracts.
The benefits to which the Group is entitled under its reinsurance contracts held are 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.
The Group assesses its reinsurance assets for impairment as at the end of reporting period. If there is
objective evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the
reinsurance asset to its recoverable amount and recognizes that impairment loss in net profit.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
107
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Insurance contracts and investment contracts (continued)
2.8.3 Investment contracts
Revenue from investment contracts with or without DPF is recognized as policy fee income, which consists
of various fee income (policy fees, handling fees and management fees, etc.) during the period. Policy fee
income net of certain acquisition cost are deferred as unearned revenue and amortized over the expected life
of the contracts.
Except for unit-linked contracts, of which the liabilities are carried at fair value, the liabilities of investment
contracts are carried at amortised cost.
2.8.4 DPF in long-term insurance contracts and investment contracts
DPF is contained in certain long-term insurance contracts and investment contracts. These contracts are
collectively called participating contracts. The Group is obligated to pay to the policyholders of participating
contracts as a group higher of 70% of accumulated surplus available and the rate specified in the contracts.
The accumulated surplus available mainly arises from net investment income and gains and losses arising
from the assets supporting these contracts. To the extent unrealised gains or losses from available-for-sale
securities are attributable to policyholders, shadow adjustments are recognized in other comprehensive
income. The surplus owed to policyholders is recognized as policyholder dividend payable whether it
is declared or not. The amount and timing of distribution to individual policyholders of participating
contracts are subject to future declarations by the Group.
2.9 Securities sold under agreements to repurchase
The Group retains substantially all the risk and rewards of ownership of securities sold under agreements
to repurchase which generally mature within 180 days from the transaction date. Therefore securities sold
under agreements to repurchase are classified as secured borrowings. The Group may be required to provide
additional collateral based on the fair value of the underlying securities. Securities sold under agreements
to repurchase are recorded at amortised cost, i.e. their cost plus accrued interest at the end of the reporting
period. It is the Group’s policy to maintain effective control over securities sold under agreements to
repurchase which includes maintaining physical possession of the securities. Accordingly, such securities
continue to be carried on the consolidated statement of financial position.
2.10 Bonds payable
Bonds payable primarily include subordinated debts. Subordinated debts are initially recognized at fair value
and subsequently measured at amortized cost using the effective interest rate method. Amortized cost is
calculated by taking into account any discount or premium at acquisition and transaction costs.
108
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 net profit. Fair values are obtained from quoted market prices in active market,
taking into consideration of recent market transactions or 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 market transactions in
the same instrument (i.e. without modification or repackaging) or based on a valuation technique whose
variables include only observable markets data. All derivatives are carried as assets when fair value is positive
and as liabilities when fair value is negative.
Embedded derivatives that are not closely related to their host contracts and meet the definition of a
derivative are separated and fair valued through profit or loss. The Group does not separately measure
embedded derivatives that meet the definition of an insurance contract or embedded derivatives that are
closely relate to host insurance contracts including embedded options to surrender insurance contracts for a
fixed amount (or an amount based on a fixed amount and an interest rate).
2.12 Employee benefits
Pension benefits
Full-time employees of the Group are covered by various government-sponsored pension plans under which
the employees are entitled to a monthly pension based on certain formulae. These government agencies
are responsible for the pension liability to these employees upon retirement. The Group contributes on a
monthly basis to these pension plans. In addition to the government-sponsored pension plans, the Group
established an employee annuity 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.
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.
Stock appreciation rights
Compensation under the stock appreciation rights is measured based on the fair value of the liabilities
incurred and is expensed over the vesting period. Valuation techniques including option pricing models are
used to estimate fair value of relevant liabilities. The liability is re-measured at the end of each reporting
period to its fair value until settlement. Fair value changes in the vesting period is included in administrative
expenses and changes after vesting period is included in net fair value gains/(losses) through profit or loss in
net profit. The related liability is included in other liabilities.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
109
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.13 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of equity
instruments are shown in equity as a deduction, net of tax, from the proceeds.
2.14 Revenue recognition
Turnover of the Group represents the total revenues which include the following:
Premiums
Premiums from long-term insurance contracts are recognized as revenue when due from the policyholders.
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.
Policy fee income
Revenue from investment contracts is recognized as policy fee income, which consists of various fee income
(policy fees, handling fees and management fees, etc.) over period service is provided. Policy fee income
net of certain acquisition costs are deferred as unearned revenue and amortized over the expected life of the
contracts. Policy fee income is recognised in revenue as part of other income.
Investment income
Investment income is comprised of interest income from term deposits, cash and cash equivalents, debt
securities, securities purchased under agreements to resell, loans, and dividend income from equity securities.
Interest income is recorded on an accrual basis using the effective interest rate method. Dividend income is
recognized when the right to receive dividend payment is established.
2.15 Finance costs
Interest expenses for bonds payable and securities sold under agreements to repurchase are recognized within
finance costs in net profit using effective interest rate method.
2.16 Current and deferred income taxation
The tax expense for the period comprises current and deferred tax. Tax is recognized in net profit, except
to the extent that it relates to items recognized directly in other comprehensive income where the tax is
recognized in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted
at the end of the reporting period in the jurisdictions where the Company and its subsidiaries operate and
generate taxable income. Management periodically evaluates positions taken with respect to situations in
which applicable tax regulation is subject to interpretation.
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.
110
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.16 Current and deferred income taxation (continued)
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.
2.17 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 net profit on a straight-
line basis over the lease periods.
2.18 Provisions and Contingencies
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past
events; it is probable that an outflow of resources will be required to settle the obligation; and the amount
has been reliably estimated. Provisions are not recognised for future operating losses.
A contingent liability is a possible obligation that arises from past events and whose existence will only be
confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within
the control of the Group. It can also be a present obligation arising from past events that is not recognized
because it is not probable that outflow of resources will be required or the amount of obligation cannot be
measured reliably.
A contingent liability is not recognized in the statement of financial position 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.
2.19 Dividend distribution
Dividend distribution to the Company’s equity holders is recognized as a liability in the Group’s financial
statements in the year in which the dividends are approved by the Company’s equity holders.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
111
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. The Group exercises
significant judgement in making appropriate assumptions.
Areas susceptible to changes in critical estimates and judgements, which affect the carrying value of assets and
liabilities, are set out below. It is possible that actual results may be different from the estimates and judgements
referred to below.
3.1 Estimate of future benefit payments and premiums arising from long-term insurance
contracts
The determination of the liabilities under long-term insurance contracts is based on estimates of future
benefit payments, premiums and relevant expenses made by the Group, and the margins. Assumptions about
mortality rates, morbidity rates, lapse rates, discount rates, and expenses assumption are made based on the
most recent historical analysis and current and future economic conditions. The liability uncertainty arising
from uncertain future benefit payments, premiums and relevant expenses, is reflected in the risk margin.
The residual margin relating to the long-term insurance contracts is amortized over the expected life of
the contracts, based on the assumptions (mortality rates, morbidity rates, lapse rates, discount rates, and
expenses assumption) that are determined at inception of the contracts and remain unchanged for the
duration of the contracts.
The judgements exercised in the valuation of insurance contract liabilities (including contracts with DPF)
affect the amounts recognised in the consolidated financial statements as insurance contract benefits and
insurance contract liabilities.
The various assumptions and their impact are described in Note 13.
3.2 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.c.
112
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING
ACCOUNTING POLICIES (continued)
3.2 Investments (continued)
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
investments are as follows:
–
–
–
Debt securities: fair values are generally based upon current bid prices. Where current bid prices are
not readily available, fair values are estimated using either prices observed in recent transactions, values
obtained from current bid prices of comparable investments or valuation techniques when the market
is not active.
Equity securities: fair values are generally based upon current bid prices. Where current bid prices
are not readily available, fair values are estimated using either prices observed in recent transactions
or commonly used market pricing model. Equity securities, for which fair values cannot be measured
reliably, are recognized at cost less impairment.
Term deposits and loans: the carrying amounts of these assets in the statement of financial position
approximate fair value.
The valuation methodology of various investments is described in Note 4.3.
3.3 Income tax
The Group is subjected to income tax in numerous jurisdictions. During the normal course of business,
certain transaction and activity for which the ultimate tax determination is uncertain. The Group needs
to exercise significant judgment when determining the income tax. 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 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
113
4
RISK MANAGEMENT
Risk management is carried out by the Risk Management Committee under policies approved by the Board of
Directors.
The Group issues contracts that transfer insurance risk or financial risk or both. This section summarises these
risks and the way the Group manages them.
4.1 Insurance risk
4.1.1 Types of insurance risks
The risk under any one insurance contract is the possibility that an insured event occurs and 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 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 and health insurance 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.
4.1.2 Concentration of insurance risks
The Group offers life insurance, annuity, accident and health insurance products. All operations of the
Group are located in the PRC. There are no significant differences among the regions where the Group
underwrites insurance contracts.
114
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (continued)
4.1 Insurance risk (continued)
4.1.2 Concentration of insurance risks (continued)
The table below presents the Group’s major products of long-term insurance contracts:
Product name
2011
2010
RMB million
%
RMB million
%
Premiums
Hong Tai Participating Endowment (a)
Hong Ying Participating Endowment (b)
Kang Ning Whole Life (c)
Mei Man Yi Sheng Participating
Endowment (d)
Hong Feng Participating Endowment (e)
Others (f)
58,432
56,000
27,696
23,932
6,096
130,294
19.32%
18.52%
9.16%
7.91%
2.02%
43.07%
55
68,612
28,853
28,594
29,868
147,272
0.02%
22.63%
9.51%
9.43%
9.85%
48.56%
Total
302,450
100.00%
303,254
100.00%
Insurance benefits expenses
Hong Tai Participating Endowment (a)
Hong Ying Participating Endowment (b)
Kang Ning Whole Life (c)
Mei Man Yi Sheng Participating
Endowment (d)
Hong Feng Participating Endowment (e)
Others (f)
35
168
2,987
2,875
40,856
17,914
0.05%
0.26%
4.61%
4.43%
63.02%
27.63%
–
27
2,879
2,979
28,869
10,787
–
0.06%
6.32%
6.54%
63.39%
23.69%
Total
64,835
100.00%
45,541
100.00%
Liabilities of long-term insurance contracts
Hong Tai Participating Endowment (a)
Hong Ying Participating Endowment (b)
Kang Ning Whole Life (c)
Mei Man Yi Sheng Participating
Endowment (d)
Hong Feng Participating Endowment (e)
Others (f)
54,300
113,038
127,258
80,768
218,519
596,603
4.56%
9.50%
10.69%
6.78%
18.36%
50.11%
52
62,538
104,800
61,716
260,896
518,894
0.01%
6.20%
10.39%
6.12%
25.85%
51.43%
Total
1,190,486
100.00%
1,008,896
100.00%
115
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (continued)
4.1 Insurance risk (continued)
4.1.2 Concentration of insurance risks (continued)
(a) Hong Tai is long-term individual participating endowment insurance contract with options for single
premium or regular premium of 10 years, designed for healthy policyholders of age between 30-day-
old and 75-year-old. Insured period can be 5 years, 6 years or 10 years. Maturity benefit for single
premium is paid at 100% of basic sum insured. Maturity benefit for regular premium is paid at basic
sum insured multiplied by number of year of premium payments. Disease Death benefit incurred
within first year is paid at premium received (without interest). All other death benefits incurred are
paid at basic sum insured and basic sum insured multiplied by number of year of premium payments
for single premium and regular premium, respectively.
(b) Hong Ying is long-term individual participating endowment insurance contract with options for
single premium or regular premium of 3 years, 5 years or 10 years, designed for healthy policyholders
of age between 30-day-old and 70-year-old. Maturity benefit for single premium is paid at 100%
of basic sum insured. Maturity benefit for regular premium is paid at basic sum insured multiplied
by number of year of premium payments. Disease Death benefit incurred within first year is paid at
premium received (without interest). Disease death benefit incurred after one year is paid at basic sum
insured and basic sum insured multiplied by number of year of premium payments for single premium
and regular premium, respectively. For accident death occurs on train, ship or flight, accident death
benefit is paid at 300% of basic sum insured and 300% of basic sum insured multiplied by number of
year of premium payments for single premium and regular premium, respectively. For accident death
not on train, ship and flight, accident death benefit is paid at 200% of basic sum insured and 200% of
basic sum insured multiplied by number of year of premium payments for single premium and regular
premium, respectively.
(c) Kang Ning Whole Life is long-term individual whole life insurance contract with options for single
premium or regular premium of 10 years or 20 years. Its maximum critical illness benefit is paid at
200% of basic sum insured. Both death and disability benefit are paid at 300% of basic sum insured
less any paid critical illness benefit.
(d) Mei Man Yi Sheng is long-term individual participating endowment insurance contract with options
for regular premium of 3 years, 5 years, 8 years or 12 years, designed for healthy policyholders of age
between 30-day-old and 60-year-old. The insured can be benefited up to age of 75. Annuity is paid at
basic sum insured multiplied by the period of the payments and times 1%. Maturity benefit is paid at
basic sum insured multiplied by number of year of premium payments. Disease Death benefit incurred
within first 2 years is paid at premium received (without interest). Accident death or disease death
after first 2 years is paid at basic sum insured multiplied by 110% of premium payments.
(e) Hong Feng is long-term individual participating endowment insurance contract with single premium.
Insured period can be 5 years or 10 years. The policy holder can be benefited up to age of 65.
Maturity benefit is paid at 100% of basic sum insured. Disease Death benefit incurred within first year
is paid at premium received (without interest). Disease death benefit incurred after one year is paid at
basic sum insured. Accident death benefit is paid at 300% of basic sum insured.
(f) Others consist of various long-term insurance contracts with no significant concentration.
116
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (continued)
4.1 Insurance risk (continued)
4.1.3 Sensitivity Analysis
Sensitivity analysis of long-term insurance contracts
Liabilities for long-term insurance contracts and liabilities unbundled from universal life insurance contracts
and unit-linked insurance contracts with insurance risk are calculated based on the assumptions on mortality
rates, morbidity rates, lapse rates and discount rates. Changes in insurance contract reserve assumptions
reflect the Company’s actual operating results and changes in its expectation of future events. The Company
considers the potential impact of future risk factors on its operating results and incorporates such potential
impact in the determination of assumptions.
Holding all other variables constant, if mortality rates and morbidity rates were to increase or decrease from
current best estimate by 10%, pre-tax profit for the year would have been RMB 10,462 million or RMB
10,976 million (2010: RMB 9,993 million or RMB 10,435 million) lower or higher, respectively.
Holding all other variables constant, if lapse rates were to increase or decrease from current best estimate by
10%, pre-tax profit for the year would have been RMB 5,896 million or RMB 6,249 million (2010: RMB
5,862 million or RMB 6,221 million) lower or higher, respectively.
Holding all other variables constant, if the discount rates were 50 basis points higher or lower than current
best estimate, pre-tax profit for the year would have been RMB 29,124 million or RMB 33,545 million
(2010: RMB 26,858 million or RMB 31,084 million) higher or lower, respectively.
Sensitivity analysis of short-term insurance contracts
The assumptions of reserves for claims and claim adjustment expenses may be affected by other variables
such as claims payment of short term insurance contracts, which may result in the synchronous changes to
reserves for claims and claim adjustment expenses.
Holding all other variables constant, if claim ratios are 100 basis points higher or lower than current
assumption, pre-tax profit is expected to be RMB 159 million lower or higher, respectively (2010: RMB 149
million).
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
117
4
RISK MANAGEMENT (continued)
4.1 Insurance risk (continued)
4.1.3 Sensitivity Analysis (continued)
The following table indicates the claim development for short-term insurance contracts without taking into
account reinsurance impacts:
Estimated claims expenses
2007
Short-term insurance contracts (accident year)
2008
2009
2010
2011
Total
Current year
1 year later
2 years later
3 years later
4 years later
7,082
6,891
6,990
6,990
6,990
7,725
7,591
7,411
7,411
8,102
8,291
8,063
8,826
8,967
8,002
Estimated claims expenses
6,990
7,411
8,063
8,967
8,002
39,433
Accumulated claims
expenses paid
(6,990)
(7,411)
(8,063)
(8,344)
(5,436)
(36,244)
Unpaid claims expenses
–
–
–
623
2,566
3,189
The following table indicates the claim development for short-term insurance contracts taking account of
reinsurance impacts:
Estimated claims expenses
2007
Short-term insurance contracts (accident year)
2008
2009
2010
2011
Total
Current year
1 year later
2 years later
3 years later
4 years later
7,036
6,847
6,945
6,945
6,945
7,671
7,538
7,360
7,360
8,018
8,205
7,979
8,741
8,879
7,889
Estimated claims expenses
6,945
7,360
7,979
8,879
7,889
39,052
Accumulated claims
expenses paid
(6,945)
(7,360)
(7,979)
(8,264)
(5,360)
(35,908)
Unpaid claims expenses
–
–
–
615
2,529
3,144
118
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (continued)
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 minimise potential adverse effects on the financial performance of the Group. Risk management is carried
out by a designated department under policies approved by management. The responsible department
identifies, evaluates and manages financial risks in close cooperation with the Group’s operating units. The
Group provides written principles for overall risk management, as well as written policies covering specific
areas, such as managing market risk, credit risk, and liquidity risk.
The Group manages financial risk by holding an appropriately diversified investment portfolio as permitted
by laws and regulations designed to reduce the risk of concentration in any one specific industry or issuer.
The structure of the investment portfolio held by the Group is disclosed in Note 8 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,
such as change in interest rate and change in market price.
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 could have a significant impact on the Group’s overall
investment return. Many of the Group’s insurance policies offer guaranteed returns to policyholders.
These guarantees expose the Group to interest rate risk.
The Group manages interest rate risk through adjustments to portfolio structure and duration, and, to
the extent possible, by monitoring the mean duration of its assets and liabilities.
The sensitivity analysis for interest rate risk illustrates how changes in interest income and the fair
value of future cash flows of a financial instrument will fluctuate because of changes in market interest
rates at the end of the reporting period.
At 31 December 2011, if market interest rates were 50 basis points higher or lower with all other
variables held constant, pre-tax profit for the year would have been RMB 1,712 million (2010: RMB
1,066 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 profit or loss, net of the
portion attributable to participating policyholders. Pre-tax available-for-sale reserve in equity would
have been RMB 16,995 million (2010: RMB 8,771 million) lower or higher, respectively, as a result
of a decrease or increase in the fair value of available-for-sale securities, net of portion attributable to
participating policyholders.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
119
4
RISK MANAGEMENT (continued)
4.2 Financial risk (continued)
4.2.1 Market risk (continued)
(ii)
Price risk
Price risk arises mainly from the volatility of prices of equity securities held by the Group. Prices of
equity securities are determined by market forces. The Group is subject to increased price risk largely
because China’s stock markets are relatively volatile.
The Group manages price risk by holding an appropriately diversified investment portfolio as
permitted by laws and regulations designed to reduce the risk of concentration in any one specific
industry or issuer.
At 31 December 2011, 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 RMB 124
million (2010: RMB 113 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 portion
attributable to participating policyholders. Pre-tax available-for-sale reserve in equity would have been
RMB 17,942 million (2010: RMB 11,942 million) higher or lower, respectively, as a result of an
increase or decrease in fair value of available-for-sale equity securities, net of portion attributable to
participating policyholders. If prices decreased to the extent that the impairment criteria were met, a
portion of such decrease of the available-for-sale equity securities would reduce pre-tax profit through
impairment.
(iii) Currency risk
Currency risk is 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 debt securities and
common stocks denominated in US dollar or HK dollar.
The Group holds shares traded on the HK stock market, which are traded in HK dollar. Investment
income from H share holdings partially compensates adverse impact of appreciation of Renminbi.
120
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (continued)
4.2 Financial risk (continued)
4.2.1 Market risk (continued)
(iii) Currency risk (continued)
The following table summarizes financial assets denominated in currencies other than RMB as at 31
December 2011 and 2010, expressed in RMB equivalent:
As at 31 December 2011
US dollar
HK dollar
Total
Equity securities
– Available-for-sale securities
Debt securities
– Held-to-maturity securities
– Available-for-sale securities
Term deposits
Cash and cash equivalents
–
4,783
4,783
1,890
175
5,476
4,108
36
–
–
237
1,926
175
5,476
4,345
Total
11,649
5,056
16,705
As at 31 December 2010
US dollar
HK dollar
Total
Equity securities
– Available-for-sale securities
Debt securities
– Held-to-maturity securities
– Available-for-sale securities
Term deposits
Cash and cash equivalents
Total
–
1,987
–
33
8,855
10,875
5,845
6
20
–
1,458
7,329
5,845
1,993
20
33
10,313
18,204
Monetary assets are exposed to currency risk whereas non-monetary assets, such as equity securities,
are exposed to price risk. As at 31 December 2011, if RMB had strengthened or weakened by 10%
against US dollar and HK dollar with all other variables held constant, pre-tax profit for the year
would have been RMB 1,192 million (2010: RMB 1,236 million) lower or higher, respectively, mainly
as a result of foreign exchange losses or gains on translation of US dollar and HK dollar denominated
financial assets other than the equity securities included in the table above. The actual exchange loss in
year 2011 was RMB 547 million (2010: RMB 392 million).
121
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (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 its obligation and cause another party to incur a financial loss. Because the Group’s investment
portfolio is restricted to the types of investments as permitted by 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 research and analysis of the Chinese economy and the
underlying obligors and transaction structures. Where appropriate, the Group obtains collateral in the form
of rights to cash, securities, property and equipment.
Credit risk exposure
The carrying amount of financial assets included on the consolidated statement of financial position
represents the maximum credit risk exposure without taking account of any collateral held or other credit
enhancements attached. The Group has no credit risk exposure relating to off balance sheet items as at 31
December 2011 and 2010.
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.
122
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (continued)
4.2 Financial risk (continued)
4.2.2 Credit risk (continued)
Credit quality
The Group’s debt securities investment includes government bonds, government agency bonds, corporate
bonds and subordinated bonds or debts, and most of the debt securities are guaranteed by either the Chinese
government or a Chinese government controlled financial institution. As at 31 December 2011, 99.8% (as
at 31 December 2010: 100%) of the corporate bonds held by the Group had credit rating of AA/A-2 or
above. As at 31 December 2011, 99.6% (as at 31 December 2010: 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 and updated at each reporting date.
As at 31 December 2011, 100% (as at 31 December 2010: 100%) of the Group’s bank deposits are with
the four largest state-owned commercial banks, other national commercial banks and China Securities
Depository and Clearing Corporation Limited (CSDCC) in the PRC. The Group’s debt investment plans
are supported by fiscal income in budget of Central Government or third party guarantee. The Group
believes these commercial banks and CSDCC 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, and cash equivalents will not cause material impact on the Group’s consolidated financial
statements as at 31 December 2011 and 2010.
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 2011
and 2010.
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 financial assets to the
maturity of insurance and financial liabilities.
123
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (continued)
4.2 Financial risk (continued)
4.2.3 Liquidity risk (continued)
The following tables set forth the contractual and expected undiscounted cash flows for financial assets,
insurance and financial liabilities:
Contractual and expected cash flows
(undiscounted)
Later than 1
year but not
later than
3 years
Later than 3
years but not
later than
5 years
Carrying
amount
Without
maturity
Not later
than 1 year
181,869
666,652
61,104
520,793
6,153
2,370
22,946
8,253
55,971
181,869
–
–
–
–
–
–
–
–
–
36,819
34,056
59,279
2,026
2,370
22,946
8,253
55,971
–
89,304
3,653
181,522
4,202
–
–
–
–
–
103,078
9,623
341,592
324
–
–
–
–
Later than
5 years
–
821,211
26,278
23,506
–
–
–
–
–
As at 31 December 2011
Financial assets
Contractual cash inflows/(outflows)
Equity securities
Debt securities
Loans
Term deposits
Statutory deposits-restricted
Securities purchased under
agreements to resell
Accrued investment income
Premiums receivable
Cash and cash equivalent
Subtotal
1,526,111
181,869
221,720
278,681
454,617
870,995
Financial and insurance liabilities
Expected cash outflows/(inflows)
Insurance contracts
Investment contracts
1,199,373
69,740
Contractual cash outflows/(inflows)
Securities sold under
agreements to repurchase
Annuity and other insurance
balances payable
Bonds payable
13,000
11,954
29,990
Subtotal
1,324,057
–
–
–
–
–
–
(29,343)
15,652
74,813
18,800
162,936
11,909
1,912,073
47,107
13,000
11,954
1,347
–
–
3,300
–
–
33,300
–
–
–
12,610
96,913
208,145
1,959,180
Net cash inflows/(outflows)
202,054
181,869
209,110
181,768
246,472
(1,088,185)
124
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (continued)
4.2 Financial risk (continued)
4.2.3 Liquidity risk (continued)
Contractual and expected cash flows
(undiscounted)
Later than 1
year but not
later than
3 years
Later than 3
years but not
later than
5 years
Carrying
amount
Without
maturity
Not later
than 1 year
195,899
608,142
36,543
441,585
6,153
–
18,193
7,274
47,839
195,899
–
–
–
–
–
–
–
–
–
42,602
24,754
30,097
522
–
17,537
7,274
47,839
–
68,533
1,602
152,241
5,913
–
656
–
–
–
97,955
3,330
246,050
214
–
–
–
–
Later than
5 years
–
733,144
13,689
85,383
–
–
–
–
–
As at 31 December 2010
Financial assets
Contractual cash inflows/(outflows)
Equity securities
Debt securities
Loans
Term deposits
Statutory deposits-restricted
Securities purchased under
agreements to resell
Accrued investment income
Premiums receivable
Cash and cash equivalent
Subtotal
1,361,628
195,899
170,625
228,945
347,549
832,216
Financial and insurance liabilities
Expected cash outflows/(inflows)
Insurance contracts
Investment contracts
Contractual cash outflows/(inflows)
Securities sold under
agreements to repurchase
Annuity and other insurance
balances payable
Subtotal
1,018,135
70,087
23,065
8,275
1,119,562
–
–
–
–
–
(12,805)
15,566
59,027
18,495
98,822
14,320
1,679,736
47,219
23,065
8,275
–
–
–
–
–
–
34,101
77,522
113,142
1,726,955
Net cash inflows/(outflows)
242,066
195,899
136,524
151,423
234,407
(894,739)
125
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (continued)
4.2 Financial risk (continued)
4.2.3 Liquidity risk (continued)
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 excess cash inflow from matured financial assets will be
reinvested to cover any future liquidity exposures. The estimate is subject to assumptions related to
mortality, morbidity, investment return, loss ratio, expenses assumption and other assumptions. Actual
experience may differ from estimates.
The liquidity analysis above does not include policy holder dividends payable amounting to RMB 46,368
million as at 31 December 2011 (2010: RMB 52,828 million). At 31 December 2011, declared dividends
of RMB 37,451 million (2010: RMB 31,785 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.
Although all investment contracts (with DPF and without DPF) and universal life insurance contracts
contain contractual options to surrender that can be exercised immediately by all policyholders at any
time, the Group’s expected cash flows as shown in the above tables are based on past experience and future
expectations. Should these contracts were surrendered immediately, it would cause a cash outflow of
RMB 51,678 million, RMB 4,342 million and RMB 13,191 million, respectively for the period ended 31
December 2011 (2010: RMB 50,434 million, RMB 3,639 million and RMB 15,456 million, respectively),
payable within one year.
4.2.4 Capital management
The Group’s objectives when managing capital, which is actual capital, calculated as the difference between
admitted assets (defined by CIRC) and the admitted liabilities (defined by CIRC), 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 equity
holders and benefits for other stakeholders. In 2011, the Group issued subordinated debt to replenish the
Company’s supplementary capital and raise the solvency ratio according to applicable law and approvals
from regulatory authorities.
The Group is also subject to other local capital requirements, such as statutory deposits-restricted
requirement, statutory reserve fund requirement, general reserve requirement and statutory insurance fund
requirement discussed in detail under Note 8.4, Note 33 and Note 18, respectively.
The Group ensures its continuous and full compliance with the regulations mainly through monitoring its
quarterly and annual solvency ratio, as well as the solvency ratio based on dynamic solvency testing.
126
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (continued)
4.2 Financial risk (continued)
4.2.4 Capital management (continued)
The table below summarises the solvency ratio of the Company, the actual capital held against the minimum
required capital:
Actual capital
Minimum capital
Solvency ratio
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
113,685
66,826
170%
123,769
58,385
212%
According to “Solvency Regulations of Insurance Companies”, the solvency ratio is computed by dividing
the actual capital by the minimum capital. CIRC closely monitors those insurance companies with solvency
ratio less than 100% and may, depending on the individual circumstances, undertakes certain regulatory
measures, including but not limited to restriction of payment of dividends. Insurance companies with
solvency ratio between 100% and 150% will be required to submit and implement plans preventing capital
deterioration to an inadequate level. Insurance companies with solvency ratio above 100% but significant
solvency risk identified would be required to take necessary rectifying actions.
4.3 Fair value hierarchy
Level 1 fair value is based on quoted prices (unadjusted) in active markets for identical assets or liabilities
that the entity can obtain at the measurement date.
Level 2 fair value is based on valuation technique using 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. Observable inputs generally used to measure
the fair value of securities classified as Level 2 include quoted market prices for similar assets in active
markets; quoted market prices in markets that are not active for identical or similar assets and other market
observable inputs. This level includes the debt securities for which quotations are available from pricing
services providers. Fair value provided by pricing services providers are subject to a number of validation
procedures by management. These procedures include a review of the valuation models utilized and the
results of these models, and as well as the recalculation of prices obtained from pricing services at the end of
each reporting period.
Under certain conditions, the Group may not receive 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 are not based on observable market data. They reflect assumptions made by management based on
judgements and experiences.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (continued)
4.3 Fair value hierarchy (continued)
127
At 31 December 2011, investments classified as Level 1 comprise approximately 36.92% of financial assets
measured at fair value on a recurring basis. Fair value measurements classified as Level 1 include certain debt
securities, equity securities that are traded in an active exchange market or inter-bank market. The Group
considers a combination of certain factors to determine whether a market for a financial instrument is active,
including the occurrence of trades within the specific period, the respective trading volume, and the degree
which the implied yields for a debt security for observed transactions differs from the Group’s understanding
of the current relevant market rates and information.
At 31 December 2011, investments classified as Level 2 comprise approximately 62.61% of financial
assets measured at fair value on a recurring basis. They primarily include certain debt securities and equity
securities. Valuations are generally obtained from third party pricing services for identical or comparable
assets, or through the use of valuation methodologies using observable market inputs, or recent quoted
market prices. Valuation service providers typically gather, 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.
At 31 December 2011, investments classified as Level 3 comprise approximately 0.47% of financial assets
measured at fair value on a recurring basis. They 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. Determinations to classify
fair value measures within Level 3 of the valuation hierarchy are generally based on the significance of the
unobservable factors to the overall fair value measurement, and valuation methodologies such as discounted
cash flow models and other similar techniques.
For the years ended 31 December 2011 and 2010, most of these prices obtained from the pricing services
are for debt securities issued by the Chinese government and government controlled organizations. These
pricing services utilize a discounted cash flow valuation model using market observable inputs, mainly
interest rates, to determine a fair value.
For the accounting policies regarding the determination of fair values of financial assets and financial
liabilities, see Note 3.2.
128
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (continued)
4.3 Fair value hierarchy (continued)
The following table presents the Group’s assets and liabilities measured at fair value at 31 December 2011:
Level 1
Level 2
Level 3
Total balance
Assets
Available-for-sale securities
– Equity securities
– Debt securities
Securities at fair value through profi t or loss
– Equity securities
– Debt securities
174,987
30,465
2,459
8,687
1,997
352,761
–
12,537
2,437
301
–
–
179,421
383,527
2,459
21,224
Total assets
216,598
367,295
2,738
586,631
Liabilities
Investment contracts at fair value
through profit or loss
Total liabilities
(57)
(57)
–
–
–
–
(57)
(57)
The following table presents the changes in Level 3 instruments for the year ended 31 December 2011:
Opening balance
Purchases
Transfer into Level 3
Fair value changes recognised in equity
Closing balance
Total gains or losses for 2011 included
in net profit for assets and liabilities
held at 31 December 2011
Debt securities
Available-for-sale Securities
Equity securities
Total assets
301
–
–
–
301
1,384
1,011
50
(8)
2,437
1,685
1,011
50
(8)
2,738
–
–
–
There have been no significant transfers between level 1 and level 2 during 2011.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
4
RISK MANAGEMENT (continued)
4.3 Fair value hierarchy (continued)
129
The following table presents the Group’s assets and liabilities measured at fair value at 31 December 2010:
Level 1
Level 2
Level 3
Total balance
Assets
Available-for-sale securities
– Equity securities
– Debt securities
Securities at fair value through profit or loss
– Equity securities
– Debt securities
189,600
39,141
2,249
5,182
2,685
315,010
–
2,331
1,384
301
–
–
193,669
354,452
2,249
7,513
Total assets
236,172
320,026
1,685
557,883
Liabilities
Investment contracts at fair value
through profit or loss
Total liabilities
(84)
(84)
–
–
–
–
(84)
(84)
The following table presents the changes in Level 3 instruments for the year ended 31 December 2010:
Opening balance
Purchases
Transfer into Level 3
Fair value changes recognised in equity
Closing balance
Total gains or losses for 2010 included
in net profit for assets and liabilities
held at 31 December 2010
Debt securities
Available-for-sale Securities
Equity securities
Total assets
301
–
–
–
301
1,238
128
17
1
1,384
1,539
128
17
1
1,685
–
–
–
In 2011 and 2010, the Group transferred certain debt and equity securities between Level 1, Level 2 and
Level 3 due to changes in availability of market observable inputs.
130
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
5
SEGMENT INFORMATION
5.1 Operating segments
The Group operates in four operating segments:
(i)
Individual life insurance business (Individual life)
Individual life insurance business relates primarily to the sale of long-term life insurance contracts and
universal life contracts which are mainly term life, whole life, endowment and annuity products, to
individuals and assumed individual reinsurance contracts.
(ii) Group life insurance business (Group life)
Group life insurance business relates primarily to the sale of insurance contracts and investment
contracts, which are mainly term life, whole life and annuity products, to group entities.
(iii) Short-term insurance business (Short-term)
Short-term insurance business relates primarily to the sale of short-term insurance contracts, which are
mainly the short-term accident and health insurance contracts.
(iv) Corporate and other business (Corporate & other)
Corporate and other business relates primarily to income and allocated cost of insurance agency
business in respect of the provision of services to CLIC, as described in Note 31, share of results of
associates, income and expenses of subsidiaries, unallocated income and expenditure of the Group.
5.2 Allocation basis of income and expenses
Investment income, net realised gains/(losses) and impairment on financial assets, net fair value gains or
losses through profit or loss and foreign exchange losses within other operating expenses are allocated among
segments in proportion to each respective segment’s average liabilities of insurance contracts and investment
contracts at the beginning and end of the year. Administrative expenses and certain other operating expenses
are allocated among segments in proportion to the unit cost of respective products in the different segments.
Except for amounts arising from investment contracts which can be allocated to the corresponding segments
above, other income and other operating expenses are presented in the “Corporate & Other” segment
directly. Income tax is not allocated.
5.3 Allocation basis of assets and liabilities
Financial assets and securities sold under agreements to repurchase are allocated among segments in
proportion to each respective segment’s average liabilities of insurance contracts and investment contracts
at the beginning and end of the year. Insurance liabilities are presented under the respective segments. The
remaining assets and liabilities are not allocated.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
5
SEGMENT INFORMATION (continued)
131
For the year ended 31 December 2011
Individual
life
Group
life
Short-
term
(RMB million)
Corporate
& other
Elimination
Total
Revenues
Gross written premiums
– Term Life
– Whole Life
– Endowment
– Annuity
Net premiums earned
Investment income
Net realised loss and impairment on financial assets
Net fair value gains/(losses) through profit or loss
Other income
Including: inter-segment revenue
302,012
2,299
37,934
221,925
39,854
301,986
57,080
(10,404)
319
477
–
438
333
85
–
20
434
2,893
(527)
16
163
–
15,802
–
–
–
–
15,856
460
(86)
3
–
–
–
–
–
–
–
–
289
(191)
(1)
2,901
769
–
–
–
–
–
–
–
–
–
(769)
(769)
318,252
318,276
60,722
(11,208)
337
2,772
–
Segment revenues
349,458
2,979
16,233
2,998
(769)
370,899
Benefits, claims and expenses
Insurance benefits and claims expenses
Life insurance death and other benefits
Accident and health claims and claim adjustment expenses
Increase in insurance contracts liabilities
Investment contract benefits
Policyholder dividends resulting
from participation in profits
Underwriting and policy acquisition costs
Finance costs
Administrative expenses
Other operating expenses
Including: Inter-segment expenses
Statutory insurance fund contribution
(101,010)
–
(181,565)
(574)
(5,780)
(23,723)
(818)
(14,961)
(2,604)
(726)
(456)
(339)
–
(14)
(1,457)
(345)
(81)
(41)
(522)
(107)
(37)
(16)
–
(7,789)
–
–
–
(3,275)
(7)
(3,989)
(548)
(6)
(123)
–
–
–
–
–
(355)
(7)
(2,077)
(785)
–
–
Segment benefits, claims and expenses
(331,491)
(2,922)
(15,731)
(3,224)
–
17,967
–
57
–
502
2,213
1,987
Share of profit of associates
Segment results
Income tax
Net profit
Attributable to
– equity holders of the Company
– non-controlling interests
Unrealised losses from available-for-sale
–
–
–
–
–
–
–
–
769
769
–
769
–
–
(101,349)
(7,789)
(181,579)
(2,031)
(6,125)
(27,434)
(873)
(21,549)
(3,275)
–
(595)
(352,599)
2,213
20,513
(2,022)
18,491
18,331
160
securities included in equity holders’ equity
(22,800)
(1,154)
Depreciation and amortisation
1,409
49
(186)
380
(65)
71
–
–
(24,205)
1,909
132
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
5
SEGMENT INFORMATION (continued)
Individual
life
Group
life
As at 31 December 2011
Corporate
& other
Short-
term
(RMB million)
Elimination
Total
Assets
Financial assets (including cash and cash equivalents)
Other
1,430,528
730
70,759
–
11,399
121
5,229
24,448
Segment assets
1,431,258
70,759
11,520
29,677
Unallocated
Property, plant and equipment
Other
Total
Liabilities
Insurance contracts
Investment contracts
Securities sold under agreements to repurchase
Other
1,189,777
13,349
12,279
28,650
709
56,448
621
1,677
8,887
–
100
230
Segment liabilities
1,244,055
59,455
9,217
–
–
–
–
–
Unallocated
Other
Total
–
–
–
–
–
–
–
–
1,517,915
25,299
1,543,214
20,231
20,462
1,583,907
1,199,373
69,797
13,000
30,557
1,312,727
77,792
1,390,519
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
5
SEGMENT INFORMATION (continued)
133
For the year ended 31 December 2010
Individual
life
Group
life
Short-
term
(RMB million)
Corporate
& other
Elimination
Total
Revenues
Gross written premiums
– Term Life
– Whole Life
– Endowment
– Annuity
Net premiums earned
Investment income
Net realised gains and impairment on financial assets
Net fair value gains through profit or loss
Other income
Including: inter-segment revenue
302,781
1,964
37,783
220,505
42,529
302,753
45,535
14,738
247
614
–
473
287
165
–
21
468
2,691
871
14
244
–
14,975
–
–
–
–
14,867
448
145
2
–
–
–
–
–
–
–
–
198
87
17
2,583
684
–
–
–
–
–
–
–
–
–
(684)
(684)
318,229
318,088
48,872
15,841
280
2,757
–
Segment revenues
363,887
4,288
15,462
2,885
(684)
385,838
Benefits, claims and expenses
Insurance benefits and claims expenses
Life insurance death and other benefits
Accident and health claims and claim adjustment expenses
Increase in insurance contracts liabilities
Investment contract benefits
Policyholder dividends resulting
from participation in profits
Underwriting and policy acquisition costs
Finance costs
Administrative expenses
Other operating expenses
Including: Inter-segment expenses
Statutory insurance fund contribution
(70,872)
–
(199,469)
(1,264)
(12,277)
(24,182)
(277)
(14,927)
(2,440)
(640)
(489)
(365)
–
(186)
(686)
(947)
(88)
(17)
(429)
(816)
(38)
(14)
–
(8,740)
–
–
–
(2,794)
(3)
(2,952)
(492)
(6)
(96)
–
–
–
–
–
(192)
(7)
(1,977)
(287)
–
–
Segment benefits, claims and expenses
(326,197)
(3,548)
(15,077)
(2,463)
–
37,690
–
740
–
385
1,771
2,193
Share of profit of associates
Segment results
Income tax
Net profit
Attributable to
– equity holders of the Company
– non-controlling interests
Unrealised losses from available-for-sale
securities included in equity holders’ equity
Depreciation and amortisation
–
–
–
–
–
–
–
–
684
684
–
684
–
–
(71,237)
(8,740)
(199,655)
(1,950)
(13,224)
(27,256)
(304)
(20,285)
(3,351)
–
(599)
(346,601)
1,771
41,008
(7,197)
33,811
33,626
185
(15,088)
1,418
(892)
40
(148)
283
(75)
61
–
–
(16,203)
1,802
134
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
5
SEGMENT INFORMATION (continued)
Individual
life
Group
life
As at 31 December 2010
Corporate
& other
Short-
term
(RMB million)
Elimination
Total
Assets
Financial assets (including cash and cash equivalents)
Other
1,263,081
719
73,241
–
12,185
89
5,931
20,892
Segment assets
1,263,800
73,241
12,274
26,823
Unallocated
Property, plant and equipment
Other
Total
Liabilities
Insurance contracts
Investment contracts
Securities sold under agreements to repurchase
Other
1,008,201
15,664
21,199
331
695
54,507
1,253
223
9,239
–
208
–
Segment liabilities
1,045,395
56,678
9,447
–
–
405
–
405
Unallocated
Other
Total
–
–
–
–
–
–
–
–
1,354,438
21,700
1,376,138
18,946
15,495
1,410,579
1,018,135
70,171
23,065
554
1,111,925
88,179
1,200,104
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
6
PROPERTY, PLANT AND EQUIPMENT
Group
135
Office
equipment
furniture and
fixtures
Buildings
2011
Motor Assets under
vehicles
Leasehold
construction improvements
Total
(RMB Million)
Cost
As at 1 January 2011
Transfers upon completion
Additions
Disposals
17,471
1,233
72
(54)
5,359
3
574
(197)
1,809
–
126
(296)
2,080
(1,322)
3,251
(927)
864
86
13
(27)
27,583
–
4,036
(1,501)
As at 31 December 2011
18,722
5,739
1,639
3,082
936
30,118
Accumulated depreciation
As at 1 January 2011
Charge for the year
Disposals
(3,895)
(684)
9
(3,079)
(727)
174
(1,137)
(169)
264
As at 31 December 2011
(4,570)
(3,632)
(1,042)
Impairment
As at 1 January 2011
Charge for the year
Disposals
As at 31 December 2011
Net book value
As at 1 January 2011
(30)
(1)
5
(26)
–
–
–
–
13,546
2,280
As at 31 December 2011
14,126
2,107
–
–
–
–
672
597
–
–
–
–
–
–
–
–
(496)
(146)
25
(8,607)
(1,726)
472
(617)
(9,861)
–
–
–
–
(30)
(1)
5
(26)
2,080
368
18,946
3,082
319
20,231
136
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
6
PROPERTY, PLANT AND EQUIPMENT (continued)
Group
Office
equipment
furniture and
fixtures
Buildings
2010
Motor
vehicles
Assets under
construction
Leasehold
improvements
Total
(RMB Million)
Cost
As at 1 January 2010
Transfers upon completion
Additions
Disposals
14,072
2,975
484
(60)
4,635
104
871
(251)
1,846
–
194
(231)
3,536
(3,147)
2,030
(339)
792
68
20
(16)
24,881
–
3,599
(897)
As at 31 December 2010
17,471
5,359
1,809
2,080
864
27,583
Accumulated depreciation
As at 1 January 2010
Charge for the year
Disposals
(3,276)
(627)
8
(2,587)
(680)
188
(1,149)
(179)
191
As at 31 December 2010
(3,895)
(3,079)
(1,137)
Impairment
As at 1 January 2010
Charge for the year
Disposals
As at 31 December 2010
Net book value
As at 1 January 2010
(30)
–
–
(30)
–
–
–
–
10,766
2,048
As at 31 December 2010
13,546
2,280
–
–
–
–
697
672
–
–
–
–
–
–
–
–
(372)
(141)
17
(7,384)
(1,627)
404
(496)
(8,607)
–
–
–
–
(30)
–
–
(30)
3,536
420
17,467
2,080
368
18,946
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
137
6
PROPERTY, PLANT AND EQUIPMENT (continued)
Company
Office
equipment
furniture and
fixtures
Buildings
2011
Motor Assets under
vehicles
Leasehold
construction improvements
Total
(RMB Million)
Cost
As at 1 January 2011
Transfers upon completion
Additions
Disposals
16,910
1,234
71
(54)
5,275
3
553
(196)
1,793
–
123
(296)
2,080
(1,323)
3,237
(926)
860
86
4
(27)
26,918
–
3,988
(1,499)
As at 31 December 2011
18,161
5,635
1,620
3,068
923
29,407
Accumulated depreciation
As at 1 January 2011
Charge for the year
Disposals
(3,829)
(663)
9
(3,044)
(715)
173
(1,131)
(167)
264
As at 31 December 2011
(4,483)
(3,586)
(1,034)
Impairment
As at 1 January 2011
Charge for the year
Disposals
As at 31 December 2011
Net book value
As at 1 January 2011
(30)
(1)
5
(26)
–
–
–
–
13,051
2,231
As at 31 December 2011
13,652
2,049
–
–
–
–
662
586
–
–
–
–
–
–
–
–
(495)
(143)
26
(8,499)
(1,688)
472
(612)
(9,715)
–
–
–
–
(30)
(1)
5
(26)
2,080
365
18,389
3,068
311
19,666
138
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
6
PROPERTY, PLANT AND EQUIPMENT (continued)
Company
Office
Equipment
Furniture and
fixtures
Buildings
2010
Motor
vehicles
Assets under
construction
Leasehold
improvements
Total
(RMB Million)
Cost
As at 1 January 2010
Transfers upon completion
Additions
Disposals
13,760
2,775
435
(60)
4,557
104
859
(245)
1,832
–
192
(231)
3,336
(2,947)
2,030
(339)
791
68
19
(18)
24,276
–
3,585
(893)
As at 31 December 2010
16,910
5,275
1,793
2,080
860
26,918
Accumulated depreciation
As at 1 January 2010
Charge for the year
Disposals
(3,232)
(607)
10
(2,558)
(669)
183
(1,145)
(178)
192
As at 31 December 2010
(3,829)
(3,044)
(1,131)
Impairment
As at 1 January 2010
Charge for the year
Disposals
As at 31 December 2010
Net book value
As at 1 January 2010
(30)
–
–
(30)
–
–
–
–
10,498
1,999
As at 31 December 2010
13,051
2,231
–
–
–
–
687
662
–
–
–
–
–
–
–
–
(371)
(140)
16
(7,306)
(1,594)
401
(495)
(8,499)
–
–
–
–
(30)
–
–
(30)
3,336
420
16,940
2,080
365
18,389
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
139
7.
INVESTMENTS IN ASSOCIATES
Group
As at 1 January
Additional capital contribution to associates (i)
Transfer in associates
Scrip dividend from associates (ii)
Share of profit
Other equity movements
Dividend received
2011
RMB million
2010
RMB million
20,892
1,600
–
91
2,213
(201)
(147)
8,470
5,777
5,123
–
1,771
(131)
(118)
As at 31 December
24,448
20,892
The Group’s investments in associates are unlisted except for Sino-Ocean which is listed in Hong Kong. As at 31
December 2011, the stock price of Sino-Ocean was HK$3.60 per share. The Group’s share of associates’ assets and
liabilities as at 31 December 2011 and revenue and profit after tax for the year then ended are as followings:
Share of assets and liabilities of associates
Name
China Guangfa Bank (“CGB”)
China Life Property & Casualty Insurance
Company Limited (“CLP&C”)
Sino-Ocean Land Holdings Limited
Country of
incorporation
PRC
PRC
Interest held
Assets
RMB million
Liabilities
RMB million
20.00%
186,843
173,255
40.00%
8,962
6,370
(“Sino-Ocean”)
Hong Kong, PRC
24.45%
25,757
17,489
Total as at 31 December 2011
221,562
197,114
CGB
CLP&C
Sino-Ocean
PRC
PRC
Hong Kong, PRC
20.00%
40.00%
24.07%
165,979
6,042
22,409
154,356
4,870
14,312
Total as at 31 December 2010
194,430
173,538
140
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
7.
INVESTMENTS IN ASSOCIATES (continued)
Share of revenues and profit after tax of associates
Name
CGB
CLP&C
Sino-Ocean
Total for the year ended 31 December 2011
CGB
CLP&C
Sino-Ocean
Total for the year ended 31 December 2010
Company
As at 1 January
Additional capital contribution to CGB
Additional capital contribution to CLP&C (i)
Investment in Sino-Ocean
Scrip dividend from Sino-Ocean (ii)
Divestment from Investment in China Life Insurance Brokers
Revenue
RMB million
Profit after tax
RMB million
5,635
5,282
4,865
15,782
4,392
3,557
3,303
11,252
1,917
168
128
2,213
1,237
245
289
1,771
2011
RMB million
2010
RMB million
18,177
–
1,600
–
91
–
7,278
2,999
–
7,907
–
(7)
As at 31 December
19,868
18,177
(i) On 25 May 2011, CLP&C’s Board of Directors Meeting and Shareholders Meeting approved the proposal
to raise additional capital from the existing shareholders. The Company injected additional capital of RMB
1,600 million in cash. As a result, the Company held shares of CLP&C at a total cost of RMB 3,200 million
and its interest in CLP&C remains at 40% of CLP&C’s registered capital.
(ii) A dividend in respect of 2010 of HK$ 0.08 per ordinary share was approved and declared by Sino-Ocean at
the Annual General Meeting on 12 May 2011. Sino-Ocean announced a Scrip Dividend Scheme on 22 May
2011, under which each shareholder may elect to receive the 2010 final dividend in cash or in scrip shares.
The Company elected the scrip shares option and received scrip shares amounted to RMB 91 million on 28
June 2011 with a corresponding increase in the carry value of investments in associates.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
141
8
FINANCIAL ASSETS
8.1 Held-to-maturity securities
Group
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subordinated bonds/debts
Total
Debt securities
Listed in mainland, PRC
Listed in Hong Kong, PRC
Listed in Singapore
Unlisted
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
87,451
89,631
6,437
78,414
261,933
34,006
12
18
227,897
261,933
105,006
90,230
3,138
47,853
246,227
15,785
–
–
230,442
246,227
The estimated fair value of listed held-to-maturity securities was RMB 35,842 million as at 31 December
2011 (31 December 2010: RMB 16,250 million).
Company
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subordinated bonds/debts
Total
Debt securities
Listed in mainland, PRC
Unlisted
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
87,451
89,631
6,406
78,409
261,897
34,006
227,891
261,897
105,006
90,230
3,131
47,853
246,220
15,785
230,435
246,220
The estimated fair value of listed held-to-maturity securities was RMB 35,815 million (31 December 2010:
RMB 16,250 million).
The unlisted debt securities refer to both debt securities traded on the interbank market in China and debt
securities not publicly traded.
142
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
8
FINANCIAL ASSETS (continued)
8.1 Held-to-maturity securities (continued)
Group debt securities
– Contractual maturity schedule
Maturing:
Within one year
After one year but within five years
After five years but within ten years
After ten years
Total
Company debt securities
– Contractual maturity schedule
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 2011
RMB million
As at 31
December 2010
RMB million
1,428
25,324
52,080
183,101
18,891
25,696
47,897
153,743
261,933
246,227
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
1,428
25,317
52,051
183,101
18,891
25,689
47,897
153,743
261,897
246,220
143
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
8
FINANCIAL ASSETS (continued)
8.2 Loans
Group
Policy loans
Other loans
Total
Maturing:
Within one year
After one year but within five years
After five years but within ten years
Total
Company
Policy loans
Other loans
Total
Maturing:
Within one year
After one year but within five years
After five years but within ten years
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
32,321
28,783
23,977
12,566
61,104
36,543
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
32,321
6,270
22,513
23,977
1,770
10,796
61,104
36,543
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
32,321
28,593
23,977
12,376
60,914
36,353
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
32,321
6,200
22,393
23,977
1,700
10,676
60,914
36,353
144
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
8
FINANCIAL ASSETS (continued)
8.3 Term deposits
Group
Maturing:
Within one year
After one year but within five years
After five years but within ten years
Total
Company
Maturing:
Within one year
After one year but within five years
After five years but within ten years
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
44,876
453,117
22,800
19,268
340,917
81,400
520,793
441,585
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
44,876
451,817
22,800
19,200
339,617
81,400
519,493
440,217
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
8
FINANCIAL ASSETS (continued)
8.4 Statutory deposits – restricted
Group
Contractual maturity schedule:
Within one year
After one year but within five years
Total
Company
Contractual maturity schedule:
Within one year
After one year but within five years
Total
145
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
1,820
4,333
6,153
400
5,753
6,153
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
1,600
4,053
5,653
300
5,353
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 liquidation proceedings.
146
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
8
FINANCIAL ASSETS (continued)
8.5 Available-for-sale securities
Group
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subordinated bonds/debts
Subtotal
Equity securities
Funds
Common stocks
Other
Subtotal
Total
Debt securities
Listed in mainland, PRC
Listed in Hong Kong, PRC
Unlisted
Subtotal
Equity securities
Listed in mainland, PRC
Listed in Hong Kong, PRC
Unlisted
Subtotal
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
60,325
148,539
125,407
49,256
57,871
145,538
125,423
25,620
383,527
354,452
84,767
93,384
1,270
95,380
97,915
374
179,421
193,669
562,948
548,121
31,642
175
351,710
29,618
13
324,821
383,527
354,452
97,633
4,783
77,005
104,100
5,845
83,724
179,421
193,669
562,948
548,121
147
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
8
FINANCIAL ASSETS (continued)
8.5 Available-for-sale securities (continued)
Company
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subordinated bonds/debts
Subtotal
Equity securities
Funds
Common stocks
Other
Subtotal
Total
Debt securities
Listed in mainland, PRC
Listed in Hong Kong, PRC
Unlisted
Subtotal
Equity securities
Listed in mainland, PRC
Listed in Hong Kong, PRC
Unlisted
Subtotal
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
59,855
148,390
124,679
48,943
57,533
144,961
124,603
24,786
381,867
351,883
84,360
93,177
1,270
94,762
97,725
374
178,807
192,861
560,674
544,744
30,963
175
350,729
29,261
–
322,622
381,867
351,883
97,133
4,783
76,891
103,376
5,835
83,650
178,807
192,861
560,674
544,744
The unlisted securities include equity securities not traded on stock exchanges, debt securities traded on the
interbank market in China, and debt securities not publicly traded.
148
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
8
FINANCIAL ASSETS (continued)
8.5 Available-for-sale securities (continued)
Group debt securities
– contractual maturity schedule
Maturing:
Within one year
After one year but within five years
After five years but within ten years
After ten years
Total
Company debt securities
– contractual maturity schedule
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 2011
RMB million
As at 31
December 2010
RMB million
4,191
46,199
138,659
194,478
3,804
40,401
129,977
180,270
383,527
354,452
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
4,186
45,548
138,217
193,916
3,685
39,315
128,861
180,022
381,867
351,883
149
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
8
FINANCIAL ASSETS (continued)
8.6 Securities at fair value through profit or loss
Group
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subtotal
Equity securities
Funds
Common stocks
Warrants
Subtotal
Total
Debt securities
Listed in mainland, PRC
Unlisted
Subtotal
Equity securities
Listed in mainland, PRC
Unlisted
Subtotal
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
589
4,285
16,350
21,224
290
2,169
–
2,459
23,683
5,830
15,394
21,224
2,279
180
2,459
23,683
883
1,915
4,715
7,513
575
1,665
9
2,249
9,762
3,497
4,016
7,513
1,697
552
2,249
9,762
150
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
8
FINANCIAL ASSETS (continued)
8.6 Securities at fair value through profit or loss (continued)
Company
Debt securities
Government bonds
Government agency bonds
Corporate bonds
Subtotal
Equity securities
Funds
Common stocks
Warrants
Subtotal
Total
Debt securities
Listed in mainland, PRC
Unlisted
Subtotal
Equity securities
Listed in mainland, PRC
Unlisted
Subtotal
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
589
4,285
16,110
20,984
290
2,169
–
2,459
23,443
5,791
15,193
20,984
2,279
180
2,459
23,443
883
1,915
4,629
7,427
575
1,665
9
2,249
9,676
3,450
3,977
7,427
1,697
552
2,249
9,676
The unlisted securities include equity securities not traded on stock exchanges, debt securities traded on the
interbank market in China, and debt securities not publicly traded.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
151
8
FINANCIAL ASSETS (continued)
8.7 Securities purchased under agreements to resell
Group
Maturing:
Within thirty days
After 30 days but within 90 days
Total
Company
Maturing:
Within thirty days
After 30 days but within 90 days
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
1,572
798
2,370
–
–
–
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
1,372
798
2,170
–
–
–
152
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
8
FINANCIAL ASSETS (continued)
8.8 Accrued investment income
Group
Bank deposits
Debt securities
Others
Total
Current
Non-current
Total
Company
Bank deposits
Debt securities
Others
Total
Current
Non-current
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
12,985
9,394
567
9,537
8,363
293
22,946
18,193
22,946
–
18,193
–
22,946
18,193
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
12,920
9,369
565
9,486
8,321
291
22,854
18,098
22,854
–
18,098
–
22,854
18,098
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
153
9
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The table below presents the carrying value and estimated fair value of major financial assets and liabilities:
Carrying value
As at 31
As at 31
December 2011 December 2010 December 2011 December 2010
RMB million
RMB million
RMB million
RMB million
As at 31
Estimated fair value
As at 31
Held-to-maturity securities
Loans
Term deposits
Statutory deposits-restricted
Available-for-sale securities
Securities at fair value through profit or loss
Securities purchased under agreement to resell
Cash and cash equivalents
Investment contracts (ii)
Securities sold under agreements to repurchase
Bonds payable
261,933
61,104
520,793
6,153
562,948
23,683
2,370
55,985
(69,797)
(13,000)
(29,990)
246,227
36,543
441,585
6,153
548,121
9,762
–
47,854
(70,171)
(23,065)
–
264,385
61,104
520,793
6,153
562,948
23,683
2,370
55,985
(68,580)
(13,000)
(30,000)
244,304
36,543
441,585
6,153
548,121
9,762
–
47,854
(69,432)
(23,065)
–
(i) The estimates and judgment to determine the fair value of financial assets are described in Note 3.2.
(ii) The fair value of 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, credit risk and risk margin associated with the future cash flows.
10 PREMIUMS RECEIVABLE
The aging of premiums receivable is within 12 months.
11 REINSURANCE ASSETS
Group and Company
Long-term insurance contracts ceded (Note 13)
Due from reinsurance companies
Ceded unearned premiums (Note 13)
Claims recoverable from reinsurers (Note 13)
Total
Current
Non-current
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
730
27
76
45
878
148
730
878
719
22
57
32
830
111
719
830
154
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
12 OTHER ASSETS
Group
Land use rights
Due from CLIC (Note 31(f))
Automated policy loan
Business tax refundable
Others
Total
Current
Non-current
Total
Company
Land use rights
Due from CLIC (Note 31(f))
Automated policy loan
Business tax refundable
Others
Total
Current
Non-current
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
6,381
596
1,450
2,182
1,573
12,182
5,788
6,394
12,182
3,609
598
1,091
219
2,682
8,199
4,573
3,626
8,199
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
6,381
574
1,450
2,182
1,325
11,912
5,518
6,394
11,912
3,609
598
1,091
219
2,634
8,151
4,543
3,608
8,151
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
13
INSURANCE CONTRACTS
(a) Process used to decide on assumptions
155
(i)
For the insurance contracts of which future returns are affected by investment yields of corresponding
investment portfolios, investment return assumptions are applied as discount rates to assess the time
value impacts on reserve computation.
In developing discount rate assumptions, the Group considers investment experience, current
investment portfolio and trend of the relevant yield curves. The discount rates reflect the future
economic outlook as well as the company’s investment strategy. The assumed discount rates with risk
margin for the past two years are as follows:
As at 31 December 2011
As at 31 December 2010
Discount rate assumptions
4.50%~5.00%
4.58%~5.00%
For the insurance contracts of which the future returns are not affected by investment yields of the
corresponding investment portfolios, the Group uses discount rate assumption to assess the time
value impacts based on the “Yield curve of reserve computation benchmark for insurance contracts”,
published on the “China Bond” website, with consideration including liquidity spreads, taxation
impacts and other relevant factors. The assumed discount rates with risk margin for the past two years
are as follows:
As at 31 December 2011
As at 31 December 2010
Discount rate assumptions
2.65%~5.66%
2.61%~5.66%
The discount rate assumption is affected by factors such as future macro-economy, fiscal policies,
capital market and availability of investment channel of insurance funds. The Group determines
discount rate assumption based on the information obtained at the end of each reporting period
including consideration of risk margin.
156
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
13
INSURANCE CONTRACTS (continued)
(a) Process used to decide on assumptions (continued)
(ii) The mortality and morbidity assumptions are based on the Group’s historical mortality and morbidity
experience. The assumed mortality rates and morbidity rates vary by age of the insured and contract
type.
The Group bases its mortality assumptions on China Life Insurance Mortality Table (2000-2003),
adjusted where appropriate to reflect the Group’s recent historical mortality experience. The main
source of uncertainty with life insurance contracts is that epidemics and wide-ranging lifestyle changes
could result in deterioration in future mortality experience, thus leading to an inadequate reserving
of liability. Similarly, 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 analysis of historical
experience and expectations of future developments. There are two main sources of uncertainty. First,
wide-ranging lifestyle changes could result in future deterioration in morbidity experience. Second,
future development of medical technologies and improved coverage of medical facilities available
to policyholders may bring forward the timing of diagnosing critical illness, which demands earlier
payment of the critical illness benefits. Both could ultimately result in an inadequate reserving of
liability if current morbidity assumptions do not properly reflect such trends.
Risk margin is considered in the Group’s mortality and morbidity assumptions.
(iii) Expense assumptions are based on expected unit costs with the consideration of risk margin. Such
assumptions are affected by actual experience and a number of other factors including inflation and
market competition based on information obtained at the end of each reporting period. Components
of expense assumptions include cost per policy and percentage of premium as follows:
Individual Life
Group Life
RMB Per Policy
% of Premium
RMB Per Policy
% of Premium
As at 31 December 2011
As at 31 December 2010
37.0~45.0
30.4~44.6
0.85%~0.90%
0.90%~1.00%
14.0
13.1
0.90%
0.86%
(iv) The lapse rates and other assumptions are affected by certain factors, such as future macro-economy,
availability of financial substitutions, and market competition, which brings uncertainty to these
assumptions. The lapse rates and other assumptions are determined with reference to past experience
where creditable, current conditions, future expectations and other information obtained at the end of
each reporting period.
The Group adopted consistent process used to decide on assumptions for the insurance contracts
disclosed in this note. On each reporting date, the Company reviews the assumptions for reasonable
estimates of liability and risk margins, with consideration of all available information, and taking into
account the Company’s historical experience and expectation of future events.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
13
INSURANCE CONTRACTS (continued)
(b) Net liabilities of insurance contracts
Group and Company
Gross
Long-term insurance contracts
Short-term insurance contracts
– claims and claim adjustment expenses
– unearned premiums
Total, gross
Recoverable from reinsurers
Long-term insurance contracts (Note 11)
Short-term insurance contracts
– claims and claim adjustment expenses (Note 11)
– unearned premiums (Note 11)
Total, ceded
Net
Long-term insurance contracts
Short-term insurance contracts
– claims and claim adjustment expenses
– unearned premiums
Total, net
157
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
1,190,486
1,008,896
3,189
5,698
3,304
5,935
1,199,373
1,018,135
(730)
(45)
(76)
(851)
(719)
(32)
(57)
(808)
1,189,756
1,008,177
3,144
5,622
3,272
5,878
1,198,522
1,017,327
158
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
13
INSURANCE CONTRACTS (continued)
(c) Movements in liabilities of short-term insurance contracts
The table below presents movements in claims and claim adjustment expenses reserve:
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
2011
RMB million
2010
RMB million
326
2,978
3,304
(5,436)
(2,594)
8,002
(87)
3,189
354
2,835
3,189
228
2,716
2,944
(5,959)
(2,516)
8,826
9
3,304
326
2,978
3,304
Net
5,914
5,878
(5,914)
The table below presents movements in unearned premium reserves:
Group and Company
2011
RMB million
Ceded
Net
Gross
2010
RMB million
Ceded
(57)
(76)
57
5,878
5,622
(5,878)
5,997
5,935
(5,997)
(83)
(57)
83
Gross
5,935
5,698
(5,935)
As at 1 January
Increase
Release
As at 31 December
5,698
(76)
5,622
5,935
(57)
5,878
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
159
13
INSURANCE CONTRACTS (continued)
(d) Movements in liabilities of long-term insurance contracts
The table below presents movements in the liabilities of long-term insurance contracts:
Group and Company
As at 1 January
Premiums
Release of liabilities (i)
Accretion of interest
Change in assumptions
Other movements
As at 31 December
2011
RMB million
2010
RMB million
1,008,896
302,450
(174,189)
47,090
3,268
2,971
809,223
303,254
(138,159)
38,298
(6,382)
2,662
1,190,486
1,008,896
(i) The release of liabilities mainly consists of payments for death or other termination and related
expenses, release of residual margin and change of reserves for claims and claim adjustment expenses.
14
INVESTMENT CONTRACTS
Group and Company
Investment contracts with DPF
Investment contracts without DPF
– At amortised cost
– Designated as at fair value through profit or loss
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
52,072
17,668
57
50,839
19,248
84
69,797
70,171
160
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
14
INVESTMENT CONTRACTS (continued)
The table below presents movements of investment contracts with DPF:
As at 1 January
Deposits received
Deposits withdrawn, payments on death and other benefits
Policy fees deducted from account balances
Interest credited
2011
RMB million
2010
RMB million
50,839
6,981
(7,089)
(59)
1,400
50,219
9,459
(9,990)
(95)
1,246
As at 31 December
52,072
50,839
15 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Group
Maturing:
Within thirty days
Total
Company
Maturing:
Within thirty days
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
13,000
23,065
13,000
23,065
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
13,000
22,660
13,000
22,660
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
161
15 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (continued)
The transactions are conducted under terms that are customary for standard secured lending activities. Carrying
values of debt securities pledged as collateral representing available-for-sale investments are as follows:
Group
Debt securities pledged
Total
Company
Debt securities pledged
Total
16 BONDS PAYABLE
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
13,305
24,377
13,305
24,377
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
13,305
23,939
13,305
23,939
Included in Bonds payable are subordinated debts of RMB 29,990 million as at 31 December 2011. On 26
October 2011, the Company issued RMB 30 billion subordinated debts to qualified investors who met the
relevant regulatory requirements (the “Issuance”). The total principal amount of the Issuance is RMB 30 billion,
with a maturity term of 10 years. The coupon rate per annum is 5.50% for the first 5 years. The Company has the
right to call the subordinated debts at par at the end of the fifth year. If the Company does not exercise the call
option, the coupon rate per annum will be 7.50% for the remaining 5 years. Subordinated debts are measured at
amortized cost as described in Note 2.10.
162
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
17 OTHER LIABILITIES
Group
Salary and staff welfare payable
Commission and brokerage payable
Agent deposits
Tax payable
Payable to constructors
Stock appreciation rights (Note 29)
Others
Total
Current
Non-current
Total
Company
Salary and staff welfare payable
Commission and brokerage payable
Agent deposits
Tax payable
Payable to constructors
Stock appreciation rights (Note 29)
Others
Total
Current
Non-current
Total
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
4,207
1,871
666
393
449
569
5,813
3,780
1,944
656
378
372
1,192
5,424
13,968
13,746
13,968
–
13,746
–
13,968
13,746
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
3,869
1,871
666
383
449
569
5,789
3,528
1,944
656
366
359
1,192
5,420
13,596
13,465
13,596
–
13,465
–
13,596
13,465
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
163
18 STATUTORY INSURANCE FUND
As required by CIRC Order [2008] No. 2, all insurance companies have to pay statutory insurance fund
contribution to the CIRC from 1 January 2009. The Group is subject to statutory insurance fund contribution,
(i) at 0.15% and 0.05% of premiums and accumulated policyholder deposits from life policies with guaranteed
benefits and life policies without guaranteed benefits, respectively. (ii) at 0.8% and 0.15% of premiums from
short-term health policies and long-term health policies, respectively. (iii) at 0.8% of premiums from accident
insurance contracts, at 0.08% and 0.05% of accumulated policyholder deposits from accident investment contracts
with guaranteed benefits and without guaranteed benefits, respectively. When the accumulated statutory insurance
fund contributions reach 1% of the Group’s total assets, no additional contribution to the statutory insurance
fund is required.
19
INVESTMENT INCOME
Debt securities
– Held-to-maturity securities
– Available-for-sale securities
– At fair value through profit or loss
Equity securities
– Available-for-sale securities
– At fair value through profit or loss
Bank deposits
Loans
Securities purchased under agreements to resell
For the year ended 31 December
2010
RMB million
2011
RMB million
10,691
16,935
449
4,876
37
24,978
2,658
98
10,538
14,962
86
5,211
40
16,363
1,583
89
Total
60,722
48,872
Included in investment income is interest income of RMB 55,809 million (2010: RMB 43,621 million). All
interest is accrued using the effective interest method.
The investment income from listed and unlisted debt and equity securities for the year ended 31 December 2011
were RMB 5,105 million and RMB 27,883 million, respectively (2010: RMB 4,797 million and RMB 26,038
million).
164
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
20 NET REALISED GAINS/(LOSSES) AND IMPAIRMENT ON FINANCIAL ASSETS
Debt securities
Net realised gains
Reversal of impairment
Subtotal
Equity securities
Net realised gains
Impairment
Subtotal
Total
For the year ended 31 December
2010
RMB million
2011
RMB million
433
11
444
508
76
584
1,272
(12,924)
17,028
(1,771)
(11,652)
15,257
(11,208)
15,841
Net realised gains on financial assets are from available-for-sale securities.
During the year ended 31 December 2011, the Group recognized impairment charge of RMB 4,133 million
(2010: RMB 259 million) of available-for-sale funds and RMB 8,791 million (2010: RMB 1,512 million) of
available-for-sale common stocks, for which the Group determined that objective evidence of impairment existed.
21 NET FAIR VALUE GAINS THROUGH PROFIT OR LOSS
Debt securities
Equity securities
Stock appreciation rights
Total
For the year ended 31 December
2010
RMB million
2011
RMB million
(405)
134
608
337
403
(486)
363
280
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
165
22
INSURANCE BENEFITS AND CLAIMS EXPENSES
Gross
RMB million
Ceded
RMB million
Net
RMB million
For the year ended 31 December 2011
Life insurance death and other benefits
Accident and health claims and claim adjustment expenses
Increase in insurance contracts liabilities
101,362
7,903
181,590
(13)
(114)
(11)
101,349
7,789
181,579
Total insurance benefits and claims expenses
290,855
(138)
290,717
For the year ended 31 December 2010
Life insurance death and other benefits
Accident and health claims and claim adjustment expenses
Increase in insurance contracts liabilities
71,255
8,835
199,673
(18)
(95)
(18)
71,237
8,740
199,655
Total insurance benefits and claims expenses
279,763
(131)
279,632
23
INVESTMENT CONTRACT BENEFITS
Benefits of investment contract are mainly the interest credited to investment contracts and universal life contracts.
24 FINANCE COSTS
Interest expenses for the bonds payable
Interest expenses for securities sold under agreements to repurchase
Total finance costs
25 PROFIT BEFORE INCOME TAX
Profit before income tax is stated after charging the following:
Employee salary and welfare cost
Housing benefits
Contribution to the defined contribution pension plan
Depreciation and amortisation
Exchange loss
Auditor’s remuneration
For the year ended 31 December
2010
RMB million
2011
RMB million
303
570
873
–
304
304
For the year ended 31 December
2010
RMB million
2011
RMB million
8,416
552
1,555
1,909
547
65
8,240
507
1,344
1,802
392
65
166
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
26 TAXATION
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current liabilities and when the deferred income tax relate to the same fiscal authority.
(a) The amount of taxation charged to net profit represents
Current taxation – Enterprise income tax
Deferred taxation
Taxation charges
For the year ended 31 December
2010
RMB million
2011
RMB million
4,355
(2,333)
6,420
777
2,022
7,197
(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 2010: 25%) is as follows:
For the year ended 31 December
2010
RMB million
2011
RMB million
Profit before income tax
20,513
41,008
Tax computed at the statutory tax rate
Non-taxable income
Additional tax liability from expenses
not deductible for tax purposes
Unused tax losses
Other
(i)
(i)
5,128
(3,511)
325
57
23
10,252
(3,413)
317
41
–
Income tax at effective tax rate
2,022
7,197
(i)
Non-taxable income mainly includes interest income from government bonds and funds. Expenses not deductible
for tax purposes mainly include commission, brokerage and donation expenses that do not meet the criteria for
deduction according to the relevant tax regulations.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
167
26 TAXATION (continued)
(c) As at 31 December 2011, deferred income tax was calculated in full on temporary differences under the
liability method using a principal tax rate of 25%. The movements in deferred tax assets and liabilities
during the year are as follows:
Deferred tax assets/(liabilities)
Group
Insurance
RMB million
(i)
Investment
RMB million
(ii)
Others
RMB million
(iii)
Total
RMB million
As at 1 January 2010
(Charged)/credited to net profit
(Charged)/credited to other
comprehensive income
– Available-for-sale securities
– Portion of fair value gains on
available-for-sale securities
allocated to participating
policyholders
(8,531)
(604)
(8,484)
(376)
–
7,358
(1,996)
–
Subtotal
(1,996)
7,358
654
203
–
–
–
(16,361)
(777)
7,358
(1,996)
5,362
As at 31 December 2010
(11,131)
(1,502)
857
(11,776)
As at 1 January 2011
(Charged)/credited to net profit
(Charged)/credited to other
comprehensive income
– Available-for-sale securities
– Portion of fair value losses on
available-for-sale securities
allocated to participating
policyholders
Subtotal
(11,131)
(505)
(1,502)
2,740
857
98
(11,776)
2,333
–
8,619
(630)
(630)
–
8,619
9,857
–
–
–
8,619
(630)
7,989
955
(1,454)
As at 31 December 2011
(12,266)
(i)
The deferred tax liability brought forward as at 1 January 2010 arising from the insurance category represented
mainly the tax impact related to the change of long term insurance contracts liabilities at 31 December 2008 as
a result of the first time adoption of IFRS in 2009. Change during the 2011 was mainly related to the temporary
difference of short duration insurance contracts liabilities and policyholder dividend payables.
(ii)
The deferred tax arising from the investment category is mainly related to the temporary difference of unrealised
gains/(losses) of available-for-sale securities and securities at fair value through profit or loss.
(iii) The deferred tax arising from the other category is mainly related to the temporary difference of employee salary
and welfare cost payables.
168
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
26 TAXATION (continued)
(c) The movements in deferred tax assets and liabilities during the year are as follows (continued):
Deferred tax assets/(liabilities)
Company
As at 1 January 2010
(Charged)/credited to net profit
(Charged)/credited to other
comprehensive income
– Available-for-sale securities
– Portion of fair value losses on
available-for-sale securities
attributable to participating
policyholders
Insurance
RMB million
Investment
RMB million
Others
RMB million
Total
RMB million
(8,531)
(604)
(8,456)
(378)
610
193
(16,377)
(789)
–
7,334
(1,996)
–
–
–
–
7,334
(1,996)
5,338
Subtotal
(1,996)
7,334
As at 31 December 2010
(11,131)
(1,500)
803
(11,828)
As at 1 January 2011
(Charged)/credited to net profit
(Charged)/credited to other
comprehensive income
– Available-for-sale securities
– Portion of fair value losses on
available-for-sale securities
attributable to participating
policyholders
Subtotal
(11,131)
(505)
(1,500)
2,727
803
83
(11,828)
2,305
–
8,614
(630)
(630)
–
8,614
9,841
–
–
–
8,614
(630)
7,984
886
(1,539)
As at 31 December 2011
(12,266)
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
169
26 TAXATION (continued)
(d) The analysis of deferred tax assets and deferred tax liabilities is as follows:
Group
Deferred tax assets:
– deferred tax assets to be recovered after more than 12 months
– deferred tax assets to be recovered within 12 months
Subtotal
Deferred tax liabilities:
– deferred tax liabilities to be settled after more than 12 months
– deferred tax liabilities to be settled within 12 months
Subtotal
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
10,306
1,595
11,901
3,217
617
3,834
(13,105)
(250)
(15,262)
(348)
(13,355)
(15,610)
Total net deferred tax liabilities
(1,454)
(11,776)
Company
Deferred tax assets:
– deferred tax assets to be recovered after more than 12 months
– deferred tax assets to be recovered within 12 months
Subtotal
Deferred tax liabilities:
– deferred tax liabilities to be settled after more than 12 months
– deferred tax liabilities to be settled within 12 months
Subtotal
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
10,220
1,595
11,815
3,161
617
3,778
(13,104)
(250)
(15,258)
(348)
(13,354)
(15,606)
Total net deferred tax liabilities
(1,539)
(11,828)
170
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
27 NET PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
Net profit attributable to equity holders of the Company is recognised in the financial statements of the Company
to the extent of RMB 18,448 million (2010: RMB 33,560 million).
28 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 2011 are based on the weighted average number of 28,264,705,000 ordinary shares
(for the year ended 31 December 2010: 28,264,705,000).
29 STOCK APPRECIATION RIGHTS
The Board of Directors of the Company approved, on 5 January 2006, an award of stock appreciation rights of
4.05 million units and on 21 August 2006, another award of stock appreciation rights of 53.22 million units to
eligible employees. The exercise prices of the two awards were 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. The exercise prices of stock appreciation rights were 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.
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. On
26 February 2010, the Board of Directors of the Company extended the exercise period of all stock appreciation
rights subject to government policy.
A small part of the stock appreciation right was abstained in 2011. As at 31 December 2011, there were 55.01
million units outstanding (as at 31 December 2010: 55.71 million) and 55.01 million units exercisable (as at
31 December 2010: 55.71 million). As at 31 December 2011, the amount of intrinsic value for the vested stock
appreciation rights is RMB 556 million (as at 31 December 2010: RMB 1,185 million).
The fair value of the stock appreciation rights is estimated on the date of valuation at each reporting date using
lattice-based option valuation models based on expected volatility from 60% to 70%, an expected dividend yield of
no higher than 0.5% and risk-free interest rate from 0.2% to 0.3%.
All the stock appreciation rights awarded were fully vested as at 31 December 2011. The Company recognized
a gain of RMB 608 million in the fair value gain in the consolidated comprehensive income representing the
fair value change of the rights for the year ended 31 December 2011 (2010: RMB 363 million). The Company
reversed RMB 15 million due to the abstentions of the stock appreciation right. RMB 556 million and RMB
13 million were included in salary and staff welfare payable included under Other Liabilities for the units not
exercised and exercised but not paid as at 31 December 2011 (as at 31 December 2010, RMB 1,179 million and
RMB 13 million), respectively. No unrecognized compensation cost due to the stock appreciation rights as at 31
December 2011.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
171
30 DIVIDENDS
Pursuant to the shareholders’ approval at the Annual General Meeting in June 2011, a final dividend of RMB 0.40
per ordinary share totalling RMB 11,306 million in respect of the year ended 31 December 2010 was declared and
paid in 2011. These dividends have been recorded in the consolidated financial statements for the year ended 31
December 2011.
Pursuant to a resolution passed at the meeting of the Board of Directors on 26 March 2012, a final dividend of
RMB 0.23 per ordinary share totalling approximately RMB 6,501 million for the year ended 31 December 2011
was proposed for equity holders’ approval at the Annual General Meeting. The dividend has not been recorded in
the consolidated financial statements for the year ended 31 December 2011.
31 SIGNIFICANT RELATED PARTY TRANSACTIONS
(a) Related parties
The table set forth below summarises the names of significant related parties and nature of relationship with
the Company as at 31 December 2011:
Significant related party
Relationship with the Company
CLIC
China Life Asset Management Company Limited
The ultimate holding company
A subsidiary of the Company
(“AMC”)
China Life Pension Company Limited
(“Pension Company”)
Sino-Ocean
CGB
CLP&C
China Life Real Estate Co., Limited (“CLRE”)
China Life Insurance (Overseas) Co., Limited
(“China Life Overseas”)
A subsidiary of the Company
An associate of the Company
An associate of the Company
An associate of the Company
Under common control of CLIC
Under common control of CLIC
China Life Franklin Asset Management Co., Limited
An indirect subsidiary of the Company
(“AMC HK”)
China Life Investment Holding Company Limited
Under common control of CLIC
(“IHC”)
China Life Enterprise Annuity Fund (“EAP”)
A pension fund operated for the benefit of
employees in the Company and AMC
China Life Yuantong Property Company Limited
Under common control of CLIC
(“China Life Yuantong”)
172
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(b) Information of the parent company is as follows:
Name
CLIC
Location of
registration
Principal business
Relationship with
the company
Nature of
economic
Legal
Representative
State owned
Yuan Li
Immediate and
ultimate holding
company
Beijing, China Life, health and accident insurance
and other types of personal insurance
and reinsurance. Funds management
business permitted by national laws and
regulations or by State Council of the
People’s Republic of China. Provision
of various types of personal insurance
services, consulting and agency services.
Other business approved by CIRC and
other regulatory department
Refer to Note 36 for basic and related information of subsidiaries.
(c) Registered capital of related parties with control relationship and changes during the year
Name of related party
CLIC
AMC
Pension Company
AMC HK
As at 31
December 2010
million
RMB 4,600
RMB 3,000
RMB 2,500
HK dollar 60
Increase
million
Decrease
million
As at 31
December 2011
million
–
–
–
–
–
–
–
–
RMB 4,600
RMB 3,000
RMB 2,500
HK dollar 60
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
173
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(d) Percentage of holding and changes during the year
Equity holder
As at 31 December 2010
Percentage
of holding
Amount
million
Increase
million
Decrease
million
As at 31 December 2011
Percentage
of holding
Amount
million
CLIC
RMB 19,324
68.37%
–
–
RMB 19,324
68.37%
Subsidiaries
As at 31 December 2010
Percentage
of holding
Amount
million
Increase
million
Decrease
million
As at 31 December 2011
Percentage
of holding
Amount
million
AMC
RMB 1,680
Pension Company
RMB 2,305
AMC HK
HK dollar 30
60.00%
directly
92.20%
directly
and indirectly
50.00%
indirectly
–
–
–
–
–
RMB 1,680
RMB 2,305
– HK dollar 30
60.00%
directly
92.20%
directly
and indirectly
50.00%
indirectly
174
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(e) Transactions with significant related parties
The following table summarises significant transactions carried out by the Group with its significant related
parties.
Note
(i)
(ii.a)
(ii.d)
(ii.c)
(iii)
(iv)
(v)
(viii)
(vi)
Transactions with CLIC and its subsidiaries
Policy management fee income earned from CLIC
Asset management fee earned from CLIC
Dividends to CLIC
Dividends to CLIC from AMC
Awards on recovery of non-performing assets and
others earned from CLIC
Retired Personnel management fee earned from 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 from CLP&C
Additional capital contribution to CLP&C (Note 7)
Rentals and policy management fee income earned from CLP&C
Rentals, project payments and others to CLRE
Property leasing expense charged by IHC
Asset management fee earned from IHC
Service fee and other income earned from IHC
PP&E purchase payment to IHC
Property leasing expense from IHC
Prepayment to China Life Yuantong
Transaction with CGB
Interest income earned from CGB
Brokerage fee charged by CGB
Additional capital contribution to CGB
Interest income earned from CGB of additional capital contribution
Premium earned from CGB
Transaction with Sino-Ocean
Subordinated debts purchased from Sino-Ocean
Scrip dividends from Sino-Ocean (Note 7)
Cash Dividends from Sino-Ocean
Interest earned from subordinated debts
Project management fee paid to Sino-Ocean
For the year ended 31 December
2010
RMB million
2011
RMB million
1,112
129
7,729
58
14
2
17
23
51
14
405
1,600
22
26
66
6
34
2
8
167
690
9
–
–
5
260
91
56
13
4
1,154
123
13,526
111
–
–
27
5
44
38
216
–
23
14
67
6
14
–
–
–
376
16
2,999
13
–
–
–
118
–
–
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
175
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(e) Transactions with significant related parties (continued)
Note
For the year ended 31 December
2010
RMB million
2011
RMB million
Transaction with EAP
Payment to EAP
Transaction with AMC
Asset management fee expense charged to the Company by AMC
Dividends to the Company
Payments of insurance policies by AMC to the Company
Project consulting fee paid to AMC
Transaction with Pension Company
Rental and disbursement from Pension Company
Brokerage fee to the Company
Annuity promotion fee to the Company
Investment brokerage fee charged by the Company
IT services fee income earned from Pension Company
Business promotion bonus from Pension Company
(ii.b)
(vii)
Transaction with AMC HK
Investment management fee expense charged to the Company
by AMC HK
(ii.e)
Note:
235
692
87
1
3
97
6
32
36
2
3
9
210
659
167
1
–
134
7
8
5
2
–
8
(i)
On 30 December 2008, CLIC and the Company entered into a renewal agreement, with effective period to 31
December 2011, 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 RMB 8.00 per policy and (2) 2.50% of the actual premiums and deposits in respect
of such policies collected during the period. The policy management fee income is included in other income in
consolidated statement of comprehensive income.
176
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(e) Transactions with significant related parties (continued)
Note: (continued)
(ii.a) On 30 December 2008, CLIC and AMC entered into a renewal agreement, with effective period to 31 December
2011, 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 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. The service fee could be
adjusted according to the performance.
(ii.b) On 30 December 2009, the Company and the AMC entered into a renewal agreement, with effective period to 31
December 2010, whereby the Company agreed to pay the AMC a fixed service fee and a performance 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 performance fee if earned is charged at 20% 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 2010, the Company
and AMC signed a renewal agreement, which extended the expiration date of the agreement to 31 December
2011. The agreement is subject to an automatic renewal for one year if there was no objection by both parities
upon expiration. With the exception that the fixed service fee is calculated with reference to the net asset value
of the assets by the rate of 0.05%, the terms and conditions of the revised agreement remain unchanged. Asset
management fees charged to the Company by AMC is eliminated in the consolidated statement of comprehensive
Income.
(ii.c) In 2009, CLP&C and the AMC signed an agreement, with effective period to 31 December 2010. The agreement
is subject to an automatic renewal for one year if there was no objection by both parities upon expiring. According
to the agreement, the fixed service fee is calculated and payable on a monthly basis, by multiplying the average
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 variable service fee is calculated based on investment performance. As at 31 December
2010, there is no objection by both parties and the agreement renewed automatically.
(ii.d) In September 2007, China Life Overseas and the AMC HK entered into an agreement, whereby China Life
Overseas agreed to pay AMC HK a management service fee at a rate calculated based on actual net investment
return yield. In February 2011, China Life Overseas and the AMC HK signed a renewal agreement, which
extended the expiration date of the original agreement to 31 December 2011.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
177
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(e) Transactions with significant related parties (continued)
Note: (continued)
(ii.e) In September 2009, the Company and AMC HK renewed the agreement of Offshore Investment Management
Service Agreement. In accordance with the agreement, the Company agreed to pay AMC HK asset management fee
calculated and collected based the annual investment instruction and related terms and conditions. In accordance
with the 2010 annual instruction and related terms and conditions, asset management fees were calculated at a
fixed rate of 0.4% of portfolio asset value and a performance element capped at 0.15% of portfolio asset value
for assets managed on a discretionary basis. Management fees on assets managed on a non-discretionary basis is
calculated at 0.05% of portfolio asset value for 2010. Management fees at fixed rates are calculated based on the
portfolio asset value at the end of each month based on the monthly report provided by AMC HK and payable
quarterly. Performance elements are calculated and payable on an annual basis. In accordance with the 2011
annual instruction, the calculation and payment of asset management fees are same as 2010. Asset management fees
charged to the Company by AMC HK is eliminated in the consolidated Statement of Comprehensive Income.
(ii.f)
In 2009, Pension Company and AMC signed an agreement with effective period to 31 December 2009. The
agreement was subject to an automatic renewal for one year if there was no objection by both parties upon
expiration. According to the agreement, the fixed service fee is calculated and payable on a monthly basis, by
multiplying the average 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. There is a performance portion based on 10% of the excess return
which is payable annually. On 1 January 2011, Pension Company and AMC signed a renewal agreement, with
effective period to 31 December 2011. The agreement is subject to an automatic renewal for one year if there was
no objection by both parities upon expiration. Asset management fees charged to Pension Company by AMC is
eliminated in the consolidated Statement of Comprehensive Income.
(iii)
In November 2008, the Company and CLP&C entered into a 2-year agreement, whereby CLP&C entrusted
the Company to act as an agent to sell selected insurance products in certain jurisdictions. The service fee is
determined according to cost (tax included) added marginal profit. The agreement was subject to an automatic
renewal for one year if there was no objection by both parties upon expiration. On 8 March 2012, the Company
and CLP&C entered into a new 2-year agreement, which was subject to an automatic renewal for one year if there
was no objection by both parties upon expiration with all the original terms remaining the same. The parties also
agreed that the agreement signed in 2008 remains effective until 2012 agreement becomes effective.
178
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(e) Transactions with significant related parties (continued)
Note: (continued)
(iv) The Group made certain project payments to third parties through CLRE and paid other miscellaneous
expenditure mainly comprised rentals and deposits to CLRE.
(v) On 22 February 2010, the Company entered into a property leasing agreement with IHC, pursuant to which IHC
agreed to lease to the Company certain of its owned and leased buildings. Annual rental payable by the Company
to IHC in relation to the IHC owned properties is determined by reference to market rent or, the costs incurred by
IHC in holding and maintaining the properties, plus a margin of approximately 5%. The rental was paid on a semi
annual basis. Rental of buildings subleased by IHC was paid directly by the Company to the owner. The agreement
will expire on 31 December 2012.
(vi) On 29 April 2007, the Company and CGB entered into an individual bank insurance agency agreement. All
insurance products suitable for distribution through banking network are included in the agreement. CGB will
provide services, including selling of insurance products, receiving premiums and 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 at a fixed commission rate; or 2) A monthly commission fee, calculated on a
monthly basis, by multiplying the number of policy being handled at fixed commission rate which is not more than
RMB 1 per policy, where CGB handles premiums receipts and benefits payments. The agreement has a term of five
years.
(vii) In November 2007, the Company and Pension Company entered into an agreement, whereby Pension Company
entrusted the Company to distribute enterprise annuity funds and provide customer service. The service fee is
calculated at 80% of the first year management fee. The agreement term was one year and subject to an automatic
renewal for one year. In December 2010, the Company and Pension Company signed a renewal agreement, with
effective period to December 2011. The agreement is subject to an automatic renewal for one year if there was no
objection by both parties upon expiration. The terms and conditions of the agreement remain unchanged.
(viii) In September 2011, AMC, IHC, Beijing Wanyang and Beijing Vantone jointly invested and established China Life
Yuantong to develop and construct the parcel of land located at Plot Z13, Core Zone, Central Business District
(CBD), East Third Ring Road, Chaoyang District, Beijing. AMC has made its capital contribution to China Life
Yuantong in proportion to its equity holding ratio of 19%. The total amount was RMB 281 million, of which
RMB 167 million is payment in advance.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
179
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(f) 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 CGB
and subordinated debts issued by Sino-Ocean.
The Group
Amount due from CLIC (Note 12)
Amount due to CLIC
Amount due from China Life Overseas
Amount due from CLP&C
Amount due to CLP&C
Amount due from IHC
Amount due to IHC
Amount due from Yuantong
Amount due from CLRE
Amount deposited with CGB
Available-for-sale securities from Sino-Ocean
The Company
Amount due from Pension Company
Amount due to Pension Company
Amount due to AMC
Amount due to AMC HK
(g) Key management compensation
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
596
(1)
5
51
(1)
15
(8)
167
1
16,311
260
75
(2)
(59)
(4)
598
(1)
22
37
(4)
17
(33)
–
–
11,667
–
91
(3)
(62)
(2)
For the year ended 31 December
2010
RMB million
2011
RMB million
Salaries and other benefits
13
20
The total compensation package for the Company’s key management for the year ended 31 December
2011 has not yet been finalised in accordance with regulations of the PRC relevant authorities. The final
compensation will be disclosed in a separate announcement when determined. The compensation of 2010
has been approved by relevant authorities. The total compensation of 2010 is RMB 20 million, including
deferral payment about RMB 5 million.
180
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(h) Transactions with state-owned enterprises
Under IAS 24 (Revised), business transactions between state-owned enterprises controlled by the PRC
government are within the scope of related party transactions. CLIC, the ultimate holding company of the
Group, is a state-owned enterprise. The Group’s key business is insurance relevant and therefore the business
transactions with other state-owned enterprises are primarily related to insurance and investment activities.
The related party transactions with other state-owned enterprises were conducted in the ordinary course
of business. Due to the complex ownership structure, the PRC government may hold indirect interests in
many companies. Some of these interests may, in themselves or when combined with other indirect interests,
be controlling interests which may not be known to the Group. Nevertheless, the Group believes that the
following captures the material related parties and applied IAS 24 (Revised) exemption and disclose only
qualitative information.
As at and during the year ended 31 December 2011, most of bank deposits of the Group were with state-
owned banks; the issuers of corporate bonds and subordinated bonds held by the Group were mainly state-
owned enterprises. For the year ended 31 December 2011, a large portion of its group insurance business of
the Group were with state-owned enterprises; the majority of bancassurance brokerage charges were paid to
state-owned banks and postal office; almost all of the reinsurance agreements of the Group were entered into
with a state-owned reinsurance company.
32 SHARE CAPITAL
As at 31 December 2011
RMB million
No. of shares
As at 31 December 2010
RMB million
No. of shares
Registered, authorized, issued and fully paid
Ordinary shares of RMB1 each
28,264,705,000
28,265
28,264,705,000
28,265
As at 31 December 2011, the Company’s share capital was as follows:
Owned by CLIC (i)
Owned by other equity holders
Including: Domestic listed
Overseas listed (ii)
Total
(i)
All shares owned by CLIC are A shares.
As at 31 December 2011
RMB million
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
(ii) Overseas listed shares are traded on the Stock Exchange of Hong Kong and the New York Stock Exchange.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
181
33 RESERVES
Group
Unrealised
gains/(losses)
from
Additional available-for-sale
securities
RMB million
paid in capital
RMB million
Exchange
differences on
translating
foreign
operations
RMB million
Total
RMB million
Statutory
reserve fund
RMB million
(a)
Discretionary
reserve fund
RMB million
(b)
General
reserve
RMB million
(c)
As at 1 January 2010
Other comprehensive income
Appropriation to reserves
53,860
–
–
20,802
(16,202)
–
12,848
–
3,368
5,642
–
7,192
9,636
–
3,368
As at 31 December 2010
53,860
4,600
16,216
12,834
13,004
Other comprehensive income
Appropriation to reserves
–
–
(24,204)
–
–
1,848
–
3,368
–
1,848
As at 31 December 2011
53,860
(19,604)
18,064
16,202
14,852
(1)
(1)
–
(2)
(1)
–
(3)
102,787
(16,203)
13,928
100,512
(24,205)
7,064
83,371
182
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
33 RESERVES (continued)
Company
Unrealised
gains/(losses)
from
Additional available-for-sale
securities
RMB million
paid in capital
RMB million
Statutory
reserve fund
RMB million
(a)
Discretionary
reserve fund
RMB million
(b)
General
reserve
RMB million
(c)
Total
RMB million
As at 1 January 2010
Other comprehensive income
Appropriation to reserve
53,860
–
–
20,547
(16,014)
–
12,800
–
3,368
5,642
–
7,192
9,636
–
3,368
102,485
(16,014)
13,928
As at 31 December 2010
53,860
4,533
16,168
12,834
13,004
100,399
Other comprehensive income
Appropriation to reserve
–
–
(23,949)
–
–
1,848
–
3,368
–
1,848
(23,949)
7,064
As at 31 December 2011
53,860
(19,416)
18,016
16,202
14,852
83,514
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
183
33 RESERVES (continued)
(a) The Company appropriated 10% of its net profit under Chinese Accounting Standards (“CAS”) to statutory
reserve for the year ended 31 December 2011 and 2010 amounting to RMB 1,848 million and RMB 3,368
million, respectively, under the relevant PRC laws.
(b) Approved by the Annual General Meeting in June 2011, the Company appropriated RMB 3,368 million
to discretionary reserve fund for the year ended 31 December 2010 based on net profit under CAS (2010:
RMB 3,293 million).
(c)
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 2011 and
2010, the Company appropriated 10% of net profit under CAS which amounts to RMB 1,848 million and
RMB 3,368 million, respectively to general reserve for future uncertain disasters, which cannot 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 CAS or IFRS, whichever is lower,
less any accumulated losses and appropriation to statutory reserve 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 was RMB 74,136 million as at 31 December 2011 (as at 31 December 2010: RMB
76,832 million).
34 PROVISIONS AND CONTINGENCIES
The following is a summary of the significant contingent liabilities:
Group
Company
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
Pending lawsuits
168
139
168
139
The Group has been involved in certain lawsuits arising from ordinary course of businesses. In order to accurately
disclose the contingent liabilities for pending lawsuits, the Group analyzed all pending lawsuits at the end of each
fiscal year. A provision will only be recognized if the management determines, based on third-party legal advice,
that we have present obligations and the settlement of which is expected to result in an outflow of the Group’s
resources embodying economic benefits, and the amount of such obligations could be reasonably estimated.
Otherwise, the Group will disclose the pending lawsuits as contingent liabilities. As at 31 December 2011, the
Group did not recognize any provision for such certain lawsuits.
184
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
35 COMMITMENTS
(a) Capital commitments
i)
Capital commitments for property, plant and equipment
Group
Company
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
Contracted but not provided for
7,147
5,082
7,147
5,082
ii) Capital commitments to contribute to Bohai Venture Capital Fund
The Group committed to contribute RMB 500 million to Bohai Venture Capital Fund of which RMB
374 million had been paid as at 31 December 2011. The remaining RMB 126 million will be paid
when called.
iii) Capital commitments in relation to the China South to North Water Diversion Project
The Group committed to contribute RMB 2,500 million to the China South to North Water
Diversion Project of which RMB 213 million had been paid at 31 December 2011. The remaining
RMB 2,287 million will be paid when called.
iv) Capital commitments in relation to the Datang international Thermal power plant project
The Group committed to contribute RMB 510 million to the Datang international Thermal power
plant project of which none had been paid as at 31 December 2011. The remaining RMB 510 million
will be paid when called.
v)
Capital commitments to contribute to Hony Capital RMB Fund
The Group committed to contribute RMB 1,500 million to Hony Capital RMB Fund 2010,L.P.of
which RMB 880 million had been paid as at 30 December 2011. The remaining RMB 620 million
will be paid when called.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
185
35 COMMITMENTS (continued)
(b) Operating lease commitments
The future minimum lease payments under non-cancellable operating leases are as follows:
Group
Company
As at 31
December 2011
RMB million
As at 31
December 2010
RMB million
As at 31
December 2011
RMB million
As at 31
December 2010
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
403
509
29
941
338
453
42
833
374
487
29
890
332
449
42
823
The operating lease payments charged to profit before income tax for the year ended 31 December 2011 was
RMB 644 million (for the year ended 31 December 2010: RMB 606 million).
36
INVESTMENTS IN SUBSIDIARIES
Company
As at 31 December
2011
RMB million
2010
RMB million
Unlisted investments at cost
3,865
3,865
The table below presents the basic information of the Company’s subsidiaries at 31 December 2011:
Name
AMC
Place of
incorporation
and operation
Percentage
of equity
interest held
Registered capital
Principal
activities
People’s Republic of China
60% directly
RMB 3,000 million
Asset management
Pension Company
People’s Republic of China
92.2% directly
and indirectly
RMB 2,500 million
Pension and annuity
AMC HK
Hong Kong, PRC
50% indirectly
HK$ 60 million
Assent management
186
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
37 DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENT’S REMUNERATION
The total compensation package for these directors, supervisors and senior managements for the year ended 31
December 2011 has not yet been finalised in accordance with regulations of the PRC relevant authorities. The
amount of the compensation not provided for is not expected to have significant impact to the Group’s 2011
financial statements. The final compensation will be disclosed in a separate announcement when determined.
(a) Directors’ emoluments
The aggregate amounts of emoluments paid to directors of the Company for the year ended 31 December
2011 are as follows:
Name
Yuan Li (i)
Wan Feng
Lin Dairen
Liu Yingqi
Yang Chao(ii)
Miao Jianmin
Shi Guoqing
Zhuang Zuojin
Ma Yongwei (iii)
Sun Changji (iii)
Bruce D. Moore
Anthony Francis Neoh
Note:
Remuneration paid
Benefits in kind
RMB Thousand
Total
224
346
342
342
160
–
–
–
–
–
320
300
99
262
259
259
162
–
–
–
–
–
–
–
323
608
601
601
322
–
–
–
–
–
320
300
(i)
Appointed as Executive director in 2010 annual general meeting on 3 June 2011.
(ii)
Resigned as Executive director on 3 June 2011.
(iii)
In accordance with regulations of the PRC relevant authorities, the Company did not pay any emoluments to
independent directors Ma Yongwei and Sun Changji.
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
187
37 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
2010 are as follows:
Name
Basic
salaries
Inducement
salaries
Yang Chao
Wan Feng
Lin Dairen
Liu Yingqi
Miao Jianmin
Shi Guoqing
Zhuang Zuojin
Sun Shuyi
Ma Yongwei
Sun Changji
Bruce D. Moore
Anthony Francis Neoh
428
385
381
381
–
–
–
–
–
–
250
146
1,129
1,016
1,004
1,004
–
–
–
–
–
–
70
29
Delay in
payment
included
in salary
income
Benefits
in kind
RMB Thousand
564
508
502
502
–
–
–
–
–
–
–
–
386
346
338
338
–
–
–
–
–
–
–
–
Subtotal
of salary
income
1,557
1,401
1,385
1,385
–
–
–
–
–
–
320
175
Delay in
payment
included
in total
Actual paid
included in
total
564
508
502
502
–
–
–
–
–
–
–
–
1,379
1,239
1,221
1,221
–
–
–
–
–
–
320
175
Total
1,943
1,747
1,723
1,723
–
–
–
–
–
–
320
175
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.
188
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
37 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
2011 are as follows:
Name
Xia Zhihua
Shi Xiangming
Yang Hong
Wang Xu
Tian Hui
Remuneration paid
Benefits in kind
RMB Thousand
342
590
564
564
150
259
250
223
241
–
Total
601
840
787
805
150
The aggregate amounts of emoluments paid to supervisors of the Company for the year ended 31 December
2010 are as follows:
Name
Basic
salaries
Inducement
salaries
Xia Zhihua
Shi Xiangming
Yang Hong
Wang Xu
Tian Hui
381
588
562
562
120
1,004
440
451
395
30
Delay in
payment
included
in salary
income
Benefits
in kind
RMB Thousand
502
–
–
–
–
338
289
285
269
–
Subtotal
of salary
income
1,385
1,028
1,013
957
150
Delay in
payment
included
in total
Actual paid
included in
total
502
–
–
–
–
1,221
1,317
1,298
1,226
150
Total
1,723
1,317
1,298
1,226
150
China Life Insurance Company Limited Annual Report 2011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2011
189
37 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 one (2010: two) director
whose emoluments are reflected in the analysis presented above.
Details of remuneration of the remaining four (2010: three) highest paid individuals are as follows:
2011
RMB
Thousand
2010
RMB
Thousand
Basic salaries, housing allowances, other allowances and benefits in kind
6,568
5,996
The emoluments fell within the following bands:
RMB0 – RMB1,000,000
RMB1,000,000 – RMB2,000,000
RMB2,000,000 – RMB3,000,000
RMB3,000,000 – RMB4,000,000
RMB4,000,000 – RMB4,500,000
Number of individuals
2011
2010
3
–
–
–
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.
38 SUBSEQUENT EVENTS
On 26 March 2012, the Company’s Board of Directors approved the proposal to issue the fixed-term subordinated
debts with par value of no more than RMB 38 billion in single or multi-tranches to domestic qualified investors
who meet the relevant regulatory requirements. Meanwhile, the Company’s Board of Directors approved the
proposal, subject to regulation of the relevant authorities, to issue subordinated liability instruments overseas with
par value of no more than RMB 8 billion or equivalent amount in other currency. The proposal is subject to the
approval by the Company’s shareholders, the CIRC as well as other relevant government authorities.
190
China Life Insurance Company Limited Annual Report 2011
Embedded Value
BACKGROUND
China Life Insurance Company Limited prepares financial statements to public investors in accordance with the relevant
accounting standards. An alternative measure of the value and profitability of a life insurance company can be provided
by the embedded value method. Embedded value is an actuarially determined estimate of the economic value of the life
insurance business of an insurance company based on a particular set of assumptions about future experience, excluding
the economic value of future new business. In addition, the value of 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 Insurance Company Limited 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 the relevant
accounting bases. 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.
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 Insurance Company Limited, the Non-competition
Agreement Between CLIC and China Life Insurance Company Limited, the Trademark License Agreement Between
CLIC and China Life Insurance Company Limited, and the Property Leasing Agreement Between China Life Investment
Holding Company Limited and China Life Insurance Company Limited, nor the future financial impact of transactions
of China Life Insurance Company Limited with China Life Asset Management Company Limited, China Life Pension
Company Limited, and China Life Property and Casualty Insurance Company Limited.
China Life Insurance Company Limited Annual Report 2011
Embedded Value
191
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 PRC solvency policy reserves and other liabilities; and
Net-of-tax adjustments for relevant differences between the market value and the book value of assets, together
with relevant net-of-tax adjustments to certain liabilities.
The market value of assets can fluctuate significantly over time due to the impact of the prevailing market environment.
Hence the adjusted net worth can fluctuate significantly between valuation dates.
The “value of in-force business” and the “value of one year’s sales” are defined here as the discounted value of the
projected stream of future 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 solvency reserves and solvency margins at the required regulatory minimum level.
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.
PREPARATION AND REVIEW
The embedded value and the value of one year’s sales were prepared by China Life Insurance Company Limited in
accordance with “Life Insurance Embedded Value Reporting Guidelines” issued by China Insurance Regulatory
Commission. Towers Watson, an international firm of consultants, performed a review of China Life’s embedded value.
The review statement from Towers Watson is contained in the “Towers Watson’s review opinion report on embedded
value” section.
192
China Life Insurance Company Limited Annual Report 2011
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 4.85% in 2011 and grading to 5.35% in 2013, rising to 5.5% in 2014 (remaining level thereafter). Starting at 13%
in 2011, and grading to 15% in 2013 (remaining level thereafter) of the investment return is assumed to be exempt from
income tax. These investment return and tax exempt assumptions are based on the Company’s 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.
SUMMARY OF RESULTS
The embedded value as at 31 December 2011, and the value of one year’s sales for the 12 months to 31 December 2011,
and their corresponding results in 2010 are shown below:
Table 1
Components of Embedded Value and Value of One Year’s Sales
ITEM
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: Taxable income is based on earnings calculated using solvency reserves.
RMB million
31 Dec 2011
31 Dec 2010
110,266
215,608
(33,020)
182,588
292,854
23,756
(3,557)
20,199
144,655
183,008
(29,564)
153,444
298,099
23,726
(3,887)
19,839
China Life Insurance Company Limited Annual Report 2011
Embedded Value
193
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 2011
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 and Other Adjustments
H
I
J
K
Exchange Gains or Losses
Shareholder Dividend Distribution
Other
Embedded Value as at 31 Dec 2011 (sum A through J)
RMB million
298,099
27,781
20,199
(1,320)
(32,224)
(584)
(8,615)
(545)
(11,306)
1,369
292,854
Notes: Items B through J are explained below:
B
Reflects unwinding of the opening value of in-force business and value of new business sales in 2011 plus the expected
return on investments supporting the 2011 opening net worth.
Value of new business sales in 2011.
Reflects the difference between actual operating experience in 2011 (including lapse, mortality, morbidity, and expense
etc.) and the assumptions.
Compares actual with expected investment returns during 2011.
Reflects the effect of projection method, model enhancements and assumption changes.
Change in the market value adjustment from the beginning of year 2011 to 31 Dec 2011, and other related adjustments.
Reflect the gains or losses due to changes in exchange rate.
Reflects dividends distributed to shareholders during 2011.
Other miscellaneous items.
C
D
E
F
G
H
I
J
194
China Life Insurance Company Limited Annual Report 2011
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
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
10% increase in claim ratio of short term business
10% decrease in claim ratio of short term business
Solvency margin at 150% of statutory minimum
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13
14.
15.
16. Using 2010 EV assumptions
RMB million
VALUE OF IN-FORCE VALUE OF ONE YEAR’S
BUSINESS AFTER COST OF SALES AFTER COST OF
SOLVENCY MARGIN
SOLVENCY MARGIN
182,588
173,358
192,509
215,496
150,134
180,036
185,138
180,837
184,368
181,284
183,936
180,653
184,539
182,303
182,872
176,412
182,885
20,199
19,181
21,289
22,853
17,578
18,423
21,976
20,123
20,276
20,125
20,268
20,121
20,278
19,596
20,802
18,384
20,278
17. Taxable income based on accounting profit in accordance to
“the Provisions on the Accounting Treatment Related to Insurance Contracts”
179,982
20,104
Base Case Scenario
18. Taxable income based on accounting profit in accordance to
Adjusted Net Worth
110,266
“the Provisions on the Accounting Treatment Related to Insurance Contracts”
99,901
Note: Taxable income is based on earnings calculated using solvency reserves for Scenarios 1 to 16.
China Life Insurance Company Limited Annual Report 2011
Embedded Value
195
TOWERS WATSON’S REVIEW OPINION REPORT ON EMBEDDED VALUE
To The Directors of China Life Insurance Company Limited
China Life Insurance Company Limited (“China Life”) has prepared embedded value results for the financial year ended
31 December 2011 (“EV Results”). The disclosure of these EV Results, together with a description of the methodology
and assumptions that have been used, are shown in the Embedded Value section.
China Life has engaged Towers Watson Management Consulting (Shenzhen) Co. Ltd. Beijing Branch (“Towers
Watson”) to review its EV Results. This report is addressed solely to China Life in accordance with the terms of our
engagement letter, and sets out the scope of our work and our conclusions. To the fullest extent permitted by applicable
law, we do not accept or assume any responsibility, duty of care or liability to anyone other than China Life for or in
connection with our review work, the opinions we have formed, or for any statement set forth in this report.
Scope of work
Our scope of work covered:
(cid:129)
(cid:129)
(cid:129)
a review of the methodology used to develop the embedded value and value of one year’s sales as at 31 December
2011, in the light of the requirements of the “Life Insurance Embedded Value Reporting Guidelines” issued by the
China Insurance Regulatory Commission (“CIRC”) in September 2005;
a review of the economic and operating assumptions used to develop the embedded value and value of one year’s
sales as at 31 December 2011;
a review of the results of China Life’s calculation of the EV Results.
In carrying out our review, we have relied on the accuracy of audited and unaudited data and information provided by
China Life.
196
China Life Insurance Company Limited Annual Report 2011
Embedded Value
Opinion
Based on the scope of work above, we have concluded that:
(cid:129)
(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 the CIRC. The methodology applied by China Life is a
common methodology used to determine embedded values of life insurance companies in China at the current
time;
the economic assumptions used by China Life are internally consistent, have been set with regard to current
economic conditions, and have made allowance for the company’s current and expected future asset mix and
investment strategy;
the operating assumptions used by China Life have been set with appropriate regard to past, current and expected
future experience;
no changes have been assumed to the treatment of tax, but some sensitivity results relating to tax have been shown
by China Life; and
the EV Results have been prepared, in all material respects, in accordance with the methodology and assumptions
set out in the Embedded Value section.
For and on behalf of Towers Watson
Adrian Liu FIAA, FCAA
16th March 2012
In case of any discrepancy between the Chinese version and the English version of
this annual report, the Chinese version shall prevail.
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 2011
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