Stock Code: 2628
Annual Report 2012
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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, and 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 2012, the
Company had approximately 149 million long-term individual and group life policies, annuity contracts, and long-term health insurance policies
in force. We also provide both individual and group accident and short-term health insurance policies and services.
Definitions and Material Risk Alert
Company Profile
Financial Summary
Chairman’s Statement
Management Discussion and Analysis
Report of the Board of Directors
Report of the Supervisory Committee
Significant Events
Changes in Share Capital and Shareholdings of Substantial Shareholders
Directors, Supervisors, Senior Management and Employees
Corporate Governance
Internal Control
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
China Life Insurance Company Limited Annual Report 2012
Contents
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198
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China Life Insurance Company Limited Annual Report 2012
Defi nitions and Material Risk Alert
In this annual report, unless the context otherwise requires, the following expressions have the following meanings:
The Company 1
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
Material Risk Alert:
The Company has stated the details of its existing risks including risks relating to macro trends, risks relating to business
and risks relating to investments. Please refer to the analysis of the risks which the Company may face in its future
development in the section headed “Management Discussion and Analysis”.
1
Except for “the Company” referred to in the Consolidated Financial Statements.
2
China Life Insurance Company Limited Annual Report 2012
Company Profi le
Registered Name in Chinese:
中國人壽保險股份有限公司（簡稱「中國人壽」）
Registered Name in English:
China Life Insurance Company Limited（ “China Life”）
Legal Representative: Yang Mingsheng
Board Secretary: 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
* Mr. Lan Yuxi, Securities Representative of the Company, is also the main contact person of the external Company
Secretary engaged by the Company
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
Newspapers for the Company’s A Share Disclosure:
China Securities Journal
Shanghai Securities News
Securities Times
CSRC’s Designated Website for the Company’s Annual Report Disclosure:
www.sse.com.cn
3
China Life Insurance Company Limited Annual Report 2012
Company Profi le
The Company’s H Share Disclosure Websites:
HKExnews website at www.hkexnews.hk
The Company’s website at www.e-chinalife.com
The Company’s Annual Reports may be Obtained at:
12/F, China Life Plaza, 16 Financial Street, Xicheng District, Beijing, P.R.China
Stock Information:
Stock Type
A Share
H Share
Stock Exchange
Shanghai Stock Exchange
Stock Short Name
Stock Code
China Life
601628
H Share Registrar and Transfer Office:
The Stock Exchange of
Hong Kong Limited
China Life
2628
ADR
New York Stock
Exchange
–
LFC
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 Mallesons
International Legal Advisers:
Latham & Watkins
Debevoise & Plimpton LLP
Date of First Registration of the Company:
30 June 2003
Initial Registered Address of the Company:
16 Chaowai Avenue, Chaoyang District, Beijing, P.R.China 100020
Date of the Latest Change of Registration of the Company:
20 June 2012
Latest Change of the Registered Address of the Company:
16 Financial Street, Xicheng District, Beijing, P.R.China 100033
4
China Life Insurance Company Limited Annual Report 2012
Company Profi le
Corporate Business Licence Serial Number:
100000000037965
Tax Registration Certificate Number:
11010271092841X
Organization Code:
71092841-X
Auditors of the Company:
Domestic Auditor: PricewaterhouseCoopers Zhong Tian CPAs Limited Company
Address: 11/F, PricewaterhouseCoopers Center, 2 Corporate Avenue, 202 Hu Bin Road,
Huangpu District, Shanghai 200021, P.R.China
Name of Signing Auditors: Xu Kangwei, Ma Qianlu
International Auditor: PricewaterhouseCoopers
Address: 22/F, Prince’s Building, Central, Hong Kong
Changes in the Main Business of the Company since the Company’s Initial Public Offering:
None
Changes of the Controlling Shareholder of the Company since the Company’s Initial Public Offering:
None
5
China Life Insurance Company Limited Annual Report 2012
Financial Summary
Major Financial Data1
2012
2011
Change
2010
2009
2008
Under International Financial
Reporting Standards (IFRS)
RMB million
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
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
Notes:
371,485
322,126
363,554
300,562
10,968
11,061
132,182
370,899
318,276
352,599
290,717
20,513
18,331
133,953
0.2%
1.2%
3.1%
3.4%
-46.5%
385,838
318,088
346,601
279,632
41,008
339,290
275,077
298,249
237,038
41,745
300,385
265,177
280,370
231,949
19,959
-39.7%
-1.3%
33,626
178,600
32,881
149,700
19,137
126,077
1,898,916
1,790,838
1,675,815
221,085
1,583,907
1,494,969
1,390,519
191,530
19.9%
19.8%
20.5%
15.4%
1,410,579
1,336,245
1,200,104
208,710
1,226,257
1,172,145
1,013,481
211,072
987,493
937,403
812,622
173,947
0.39
7.82
4.68
5.38
88.25
2.79
0.65
6.78
4.74
-39.7%
15.4%
-1.3%
1.19
7.38
6.32
1.16
7.47
5.30
0.68
6.15
4.46
9.16
87.79
3.51
decrease of 3.78
percentage points
increase of 0.46
percentage points
decrease of 0.72
percentage points
16.02
17.13
10.29
85.08
82.65
82.29
5.11
5.78
3.48
1.
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.
2.
Investment assets = Cash and cash equivalents + Securities at fair value through profit or loss + Available-for-sale securities +
Held-to-maturity securities + Term deposits + Securities purchased under agreements to resell + Loans + Statutory deposits
3.
4.
5.
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）
The Company adopted IFRS in 2009, and financial results of 2008 are adjusted in accordance with IFRS.
6
China Life Insurance Company Limited Annual Report 2012
Chairman’s Statement
Yang Mingsheng, Chairman
2012 was a year in which China’s life insurance industry experienced enormous challenges and endured great business
difficulties. With China’s economic growth slowing down, capital markets experiencing continuous depression,
and the growth of the life insurance industry slowing down significantly, the Company encountered unprecedented
severe challenges in both underwriting and investment businesses. Faced with this difficult business environment, all
employees of the Company firmly adhered to the keynote of “tackling difficulties, making steady progress and striving
for development” and actively promoted innovation in products and technology, which enabled the Company to grow its
business and steadily enhance new business value, maintain its market leading position, continue to improve the quality
and structure of its business, and take an encouraging step towards a scale-value balanced business model.
As at the end of the Reporting Period, the Company’s total assets reached RMB1,898,916 million, an increase of 19.9%
from the end of 2011. The Company’s embedded value was RMB337,596 million, an increase of 15.3% from 2011; and
one-year new business value was RMB20,834 million, an increase of 3.1% from 2011. During the Reporting Period,
the Company’s total revenue was RMB371,485 million, an increase of 0.2% from 2011. The Company’s market share2
2
Calculated according to the premium data of life insurance companies in 2012 released by the CIRC.
7
China Life Insurance Company Limited Annual Report 2012
Chairman’s Statement
in 2012 was approximately 32.4%, maintaining a leading position in life insurance market. Affected by various internal
and external factors, net profit attributable to equity holders of the Company was RMB11,061 million, a decrease of
39.7% from 2011; and earnings per share (basic and diluted) were RMB0.39, a decrease of 39.7% from 2011. During
the Reporting Period, the Company issued subordinated term debts of RMB38 billion in a timely manner pursuant to its
solvency management objective and long-term capital plan. As at 31 December 2012, the Company’s solvency ratio was
235.58%.
The Board of Directors of the Company recommends the payment of a final dividend of RMB0.14 per share (inclusive
of tax), subject to the shareholders’ approval at the Annual General Meeting to be held on Wednesday, 5 June 2013.
The Company continued to improve its corporate governance. In July 2012, the Company successfully completed
the change of sessions of the Board of Directors and the Supervisory Committee, and elected members of the fourth
session of the Board of Directors and the Supervisory Committee. Mr. Zhang Xiangxian, Mr. Wang Sidong and Mr.
Tang Jianbang joined the new session of the Board of Directors, and Mr. Luo Zhongmin, Ms. Yang Cuilian and Mr.
Li Xuejun joined the new session of the Supervisory Committee. The new sessions of the Board of Directors and the
Supervisory Committee will continue to play decision-making and supervisory roles in areas of strategic planning, risk
management, internal control and compliance, and performance appraisal. Meanwhile, the Company would like to
express its gratitude to the retired Directors Mr. Yuan Li, Mr. Shi Guoqing, Ms. Zhuang Zuojin and Mr. Ma Yongwei,
as well as the retired Supervisors Ms. Yang Hong, Mr. Wang Xu and Mr. Tian Hui for their contribution to the
development of the Company during their tenure!
During the Reporting Period, the total amount of insurance benefits and claims paid by the Company reached
RMB75,075 million, which further highlighted the Company’s role in providing economic compensation and insurance
protection to the society. While fulfilling its obligations under insurance policies, the Company actively undertook its
corporate social responsibility. Relying on its competitive advantages in professionalism and business scale, the Company
continued to develop policy businesses including New Village Cooperative Medical Insurance, New Rural Pension
Insurance, Basic Medical Insurance Program for Urban and Township Residents, Rural Medical Assistance Insurance,
as well as Rural Micro-insurance business. The Company also made a good start in the supplementary major illness
insurance business by winning bids in a number of provinces, cities and districts. In addition, the Company provided
insurance coverage for the astronauts of Shenzhou-9 and approximately 190,000 college-graduate village officials.
The Company actively participated in public welfare and charitable undertakings. During the Reporting Period, the
Company continued to provide support for Wenchuan earthquake orphans, Yushu earthquake orphans and Zhouqu
mudslide orphans through the China Life Foundation, and organized the fourth session of the “China Life Summer
Camp” to provide orphans from these disaster-stricken areas with long-term, continuous physical and emotional support.
The Company continued to provide funding for the construction of China Life primary schools. The Company also
donated to relevant foundations to provide women in impoverished areas with “Screening for Two Gynecological
Cancers” and protection against serious diseases, and provide subsidies for particularly poor police families.
8
China Life Insurance Company Limited Annual Report 2012
Chairman’s Statement
2013 is a key nexus for the implementation of the “Twelfth Five-Year Plan”. The international economic environment
remains intricate and complex, and salient issues such as unbalanced, uncoordinated and unsustainable development
continue to exist in the domestic economy. The insurance industry, and the life insurance industry in particular, remains
in a period of profound adjustment and transformation of its development model. Taking a long-term perspective, the
goal of building a moderately prosperous society and deepening the “Reform and Opening up” in all respects laid and
strengthened the economic and institutional foundation for the development of the insurance industry. Overall, the
Company is still at a significant stage with strategic opportunities for development. These new opportunities we face are
opportunities which enable us to make better use of the unique functions and advantages of insurance, participate in
the process of “four new modernizations”, provide services to the pension system, the social security system and people’s
livelihood, and promote the transformation of the model of development. In 2013, the Company intends to implement
the “innovation-driven development strategy” with great effort, continue to adhere to the keynote of “tackling
difficulties, making steady progress and striving for development”, focus on both scale and value, strive to accomplish
the general task of “steady growth, adjusting structure, transforming model and preventing risk”, continue to reinforce
the market leading position, and accelerate the transition from a scale-speed model to a scale-value model. The Company
intends to focus on the development of first-year business and the growth of business value, coordinate the development
of regional markets, and carry out the work of supplementary major illness insurance and New Village Cooperative
Medical Insurance. The Company intends to establish innovation as a driving force, focus on the innovation in its
products, technology and systems and mechanisms, thus continuously enhancing the Company’s vitality and creativity.
The Company intends to further improve the means of its service to customers, diversify the substance of service,
enhance the capabilities of service, and continue to strengthen the construction of local branches and sales teams. The
Company also intends to do a solid job in risk prevention and proactively handle the intensive payments for maturity
benefits so as to ensure the stable operation of the Company.
2013 marks the tenth anniversary of the listing of the Company. The path of development over the past ten years tells
us that in order to achieve development, the Company must always adhere to serving the country’s economic and social
development, must always adhere to reform and innovation, must always adhere to the principle of “customer first”, and
must always adhere to risk prevention. On behalf of the Board of Directors, I wish to take this opportunity to express
our sincere gratitude for the trust and support given by all the shareholders, customers and business partners over the
years, and our heartfelt thanks for the contribution and hard work made by the management and all the staff!
At present, the Company is stepping into a period of transformation of its development model, as well as a critical
period for its reform and development. The Company will engage in comprehensive planning, advance in all dimensions,
stimulate innovative vitality and release its potential of development to the maximum extent, and pursue a path of
innovative development with China Life’s distinct characteristics. With the solid foundation laid in the past decade,
unremitting efforts of the management and staff, and steadfast support of the customers and shareholders, it is my belief
that the Company will be able to properly deal with changes in the environment, proactively transform the development
model, and embark on a sustainable path to create new brilliance!
By Order of the Board
Yang Mingsheng
Chairman
Beijing, China
27 March 2013
9
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
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 2012
In 2012, the Company achieved a steady growth of its business and maintained its leading position in the
market, with a market share of approximately 32.4%. The structure and quality of the business of the Company
were further improved, ensuring a steady growth of the new business value. One-year new business value was
RMB20,834 million, an increase of 3.1% from 2011. As at the end of the Reporting Period, the Company’s
embedded value was RMB337,596 million, an increase of 15.3% from 2011. The percentage of first-year regular
premiums in first-year premiums increased to 36.11% in 2012 from 32.56% in 2011. The percentage of first-
year regular premiums with 10 years or longer payment duration in first-year regular premiums increased to
41.35% in 2012 from 39.75% in 2011. The percentage of accident insurance premiums in short-term insurance
premiums increased to 57.98% in 2012 from 55.47% in 2011. Benefiting from the strategy of focusing more
on selling regular payment duration products, which has been consistently adopted by the Company for several
years, the renewal premiums grew rapidly during the Reporting Period, which clearly showed the driving force
of the renewal premiums. Renewal premiums increased by 16.5% from 2011, and the percentage of renewal
premiums in gross written premiums increased to 55.83% in 2012 from 48.62% in 2011. Due to the impact of
the macro-economic environment, bancassurance regulations and financial products such as wealth management
products offered by banks, there was a significant drop in first-year premiums earned through the bancassurance
channel. Meanwhile, due to the Company’s intensive efforts in developing its medium and long-term business and
traditional protection type business, even though the first-year premiums earned through the exclusive individual
agent channel decreased, the Company further optimized its business structure. As a result of the foregoing factors,
during the Reporting Period, the Company’s net premiums earned was RMB322,126 million, an increase of 1.2%
from 2011; first-year premiums decreased by 14.6% from 2011, and first-year regular premiums decreased by
5.3% from 2011. As at 31 December 2012, the number of in-force policies increased by 7.2% from the end of
2011; the Policy Persistency Rate (14 months and 26 months)3 reached 91.00% and 88.50%, respectively; and the
Surrender Rate4 was 2.72%, a 0.07 percentage point decrease from 2011.
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.
Surrender Rate = Surrender payment/(Liability of long-term insurance contracts at the beginning of the period + Premium of
long-term insurance contracts)
10
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
With respect to the exclusive individual agent channel, the Company achieved a steady growth of its business
volume and consolidated its leading position in the market. The Company continued to optimize its business
structure, and premiums earned from traditional protection type products such as Kang Ning Whole Life (2012)
Critical Illness Insurance (the “new Kang Ning”) increased rapidly. With the gradual promotion of the “effective
expansion” strategy for team development, the size of the sales force increased slightly, the number of productive
exclusive individual agents increased steadily, and the productivity of the sales force continued to improve. The
Company made significant breakthroughs in channel professionalism in the sales support segment, and E-China
Life provided strong support for the promotion of the new model of mobile marketing. As at the end of the
Reporting Period, the Company had a total of 693,000 exclusive individual agents.
With respect to the group insurance channel, the Company achieved steady growth in premiums, and maintained
its market leading position. The Company actively provided services to economic and social development, and
participated in the building of the social security system. The Company also engaged in the policy businesses
including insurance for college-graduate village officials, provided personal insurance for the astronauts of
Shenzhou-9, and actively prepared for the launch of the pilot project of tax deferred individual pension insurance
business. The Company made great efforts to enhance customer service teams in group insurance channel and
improve satisfaction of group customers. As at the end of the Reporting Period, the Company had approximately
16,000 direct sales representatives.
In 2012, due to increasingly tight industry regulation and continued challenges from various types of wealth
management products offered by banks, the overall business growth of the bancassurance market slowed down.
With respect to the bancassurance channel, the Company strengthened its efforts in product innovation, enhanced
agency channel cooperation, made innovations in the sales platform, improved service and support, enhanced
the quality of the sales team, and accelerated the channel’s transformation and development. As a result, the
Company’s business in bancassurance channel achieved a faster growth as compared to the industry average, and
its market share increased slightly from 2011, allowing it to continue to maintain an absolute market leading
position. As at the end of the Reporting Period, the number of intermediary bancassurance outlets was 96,000,
with a total of 46,000 sales representatives.
In 2012, the global economy remained weak, and China’s economic growth slowed down. Benchmark interest
rates were lowered, government bond performances were lackluster, the debenture bond market expanded, and
the stock market remained depressed for most of the year. The CIRC issued a series of new rules and regulations
governing investment, which aimed to diversify insurance investment types and channels. The Company
proactively responded to changes in the capital markets, and effectively seized opportunities presented by the new
insurance investment policies. With respect to traditional investments, the Company took advantage of periodic
and seasonal opportunities for the allocation of negotiated deposits, and the proportion of term deposits increased
to 35.80% as at the end of 2012 from 34.84% as at the end of 2011. Based on the characteristics of performance
differentiation in the bond markets, the Company optimized its bond portfolio, and increased its allocation in
debenture bonds and extra long-term interest rate bonds. The proportion of debt securities increased to 46.24%
as at the end of 2012 from 44.60% as at the end of 2011. The Company responded to trends in the equity
securities market with caution, and the proportion of equity securities decreased to 9.20% as at the end of 2012
11
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
from 12.17% as at the end of 2011. With respect to alternative investments, the Company optimized its financial
strategic layout, and broadened the sources of investment income. The Company made an investment in COFCO
Futures Co., Ltd. by acquiring a 35% shareholding, which was the first direct equity investment project since
the publication of new insurance regulations in 2010. The Company invested in CITIC Private Equity Fund III,
with an investment amount of RMB600 million. The Company made new investments of RMB11,743 million
in infrastructure debt investment plans and real estate investment plans. These alternative investment projects
diversified the sources of long-term investment income. As at the end of the Reporting Period, the Company’s
investment assets reached RMB1,790,838 million, an increase of 19.8% from the end of 2011. During the
Reporting Period, interest income increased significantly, and net investment yield5 was 4.44%. However, due to
the continued weakness in the capital markets, the impairment losses of equity securities increased significantly,
as a result of which the gross investment yield was 2.79% and gross investment yield including share of profit of
associates6 was 2.93%. The comprehensive investment yield taking account of current net fair value changes of
available-for-sale securities recognized in other comprehensive income7 was 4.97%.
The Company continued to optimize its operational system and steadily improved the quality of its services.
The Company undertook to promote product innovation, introduced 19 new products that focus on protection,
including the new Kang Ning, and effectively boosted business development. The Company undertook to
promote technological innovation, made full use of its mobile marketing system of E-China Life, optimized its
sales business process, enhanced the efficiency of policy issuance, and lowered operational costs. The Company
fully promoted the unified work platform for policy administration, continued to optimize its business process,
and took full advantage of the benefits of centralized operation. The Company made efforts to promote counter
service upgrades, improved the quality of claims settlement service, and provided satisfactory service to customers.
The Company installed new integrated equipment at its service counters and significantly improved customer
experience. The Company promoted telephone underwriting, and expanded its first-mover advantage in the
industry. The Company engaged in key operational risk control, and ensured standardized and orderly overall
operation. The Company further enhanced its customer relationship management by applying the customer
relationship management system in greater depth and breadth. The Company also shortened the time required for
handling 95519 customer queries, enhanced its efficiency in handling customer complaints, increased the return
visit to new policyholders and completed the integration of the notification service. The Company continued to
conduct activities such as “Hand in Hand”, “China Life Customer Day” and the upgrade of counter services.
The Company complied with Section 404 of the U.S. Sarbanes-Oxley Act continuously. Meanwhile, it carried
out the work for the compliance with standard systems of corporate internal control by following the “Standard
Regulations on Corporate Internal Control” and the “Implementation Guidelines for Corporate Internal
Control” jointly issued by five PRC ministries including the Ministry of Finance and the “Basic Standards of
Internal Control for Insurance Companies” issued by the CIRC. With the promotion of its internal control
5
6
7
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)
Gross investment yield including share of profit of associates = (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 + Share of
profit of associates) / ((Investment assets at the beginning of the period + Investments in associates at the beginning of the period
+ Investment assets at the end of the period + Investments in associates at the end of the period) / 2)
Comprehensive investment yield = (Investment income + Net realised gains/(losses) and impairment on financial assets + Net
fair value gains/(losses) through profit or loss + Current net fair value changes of available-for-sale securities recognized in other
comprehensive 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)
12
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
implementation manual, which covers all aspects of the Company, and the comprehensive assessment on its
internal controls, the Company further improved its internal control system. By exploring and using the internal
control management information system, which covers the entire process of internal control management,
the Company significantly improved the efficiency and effectiveness of its internal control management.
The Company continuously complied with the Guidelines for the Implementation of Comprehensive Risk
Management of Personal Insurance Companies issued by the CIRC, carried out risk preference projects, and laid
the groundwork for a sound management mechanism with respect to the formation, execution, transmission, and
re-examination and adjustment of risk preferences. The Company strengthened its efforts in risk early-warning
and risk classification management, and intensified its control over key risks, thus forming a standardized and
systematic early-warning system. The Company conducted risk evaluation and risk classification management with
respect to sales risks at local branches, utilized the updated version of the sales risk monitoring and evaluation
system, so as to carry out risk monitoring through different channels and on branches at prefectural and municipal
levels, and conducted risk differentiation management. The Company conducted sales risk early-warning screening
on exclusive individual agents, and by improving key risk standards, further enhanced the sensitivity and reliability
of sale risk identification.
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 realised gains and impairment on financial assets
Net fair value (losses)/gains through profit or loss
Other income
2012
322,126
305,732
465
15,929
73,243
(26,876)
(313)
3,305
RMB million
2011
318,276
301,986
434
15,856
60,722
(11,208)
337
2,772
Total
371,485
370,899
Net Premiums Earned
1
2
Individual Life Insurance Business
During the Reporting Period, net premiums earned from individual life insurance business increased
by 1.2% from 2011. This was primarily due to an increase in renewal premiums resulting from the
strategy of focusing more on selling regular payment duration products consistently adopted by the
Company for several years.
Group Life Insurance Business
During the Reporting Period, net premiums earned from group life insurance business increased by
7.1% from 2011. This was primarily due to an increase in premiums earned from group term life
insurance products.
13
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
3
Short-term Insurance Business
During the Reporting Period, net premiums earned from short-term insurance business increased by
0.5% from 2011. This was primarily due to an increase in premiums earned from accident insurance
products resulting from the Company’s focus on the adjustment of its business structure and increased
efforts for the development of accident insurance business.
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
2012
305,841
125,649
80,118
45,531
180,192
469
462
458
4
7
16,432
9,527
6,905
RMB million
2011
302,012
147,286
99,190
48,096
154,726
438
435
427
8
3
15,802
8,766
7,036
Total
322,742
318,252
14
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
2012
179,761
32,197
415
31,782
141,999
5,565
13,562
2,165
2,002
163
593
10,804
128,863
91,524
78,151
13,373
37,283
56
556
225
8
217
324
7
RMB million
20112
160,588
33,051
620
32,431
121,838
5,699
12,809
2,106
1,941
165
664
10,039
144,363
112,273
96,974
15,299
32,033
57
492
291
82
209
194
7
322,742
318,252
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
Other Channels1
First-year business of long-term insurance
Single
First-year regular
Renewal business
Short-term insurance business
Total
Notes:
1.
2.
Other channels mainly include telephone sales channel.
In 2012, the Company’s channel premium breakdown was presented based on the separate groups of sales
personnels belonging to exclusive individual agent team, direct sales representatives, bancassurance sales team, and
other distribution channels respectively, with the corresponding data for 2011 adjusted accordingly.
15
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
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
2012
1,567
20,992
15,194
30,512
4,339
639
RMB million
2011
486
21,811
10,691
24,978
2,658
98
Total
73,243
60,722
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 222.4% from 2011. This was primarily due to an increase in interest income resulting
from the Company’s increased allocation in securities at fair value through profit or loss in light of
market conditions.
Investment Income from Available-for-Sale Securities
During the Reporting Period, investment income from available-for-sale securities decreased by 3.8%
from 2011. This was primarily due to a decrease in the volume of available-for-sale securities.
Investment Income from Held-to-Maturity Securities
During the Reporting Period, investment income from held-to-maturity securities increased by
42.1% from 2011. This was primarily due to an increase in the volume of held-to-maturity securities
resulting from the Company’s increased allocation in held-to-maturity securities.
Investment Income from Bank Deposits
During the Reporting Period, investment income from bank deposits increased by 22.2% from 2011.
This was primarily due to the increased volume of deposits attributable to the Company’s increased
allocation in deposits by taking advantage of favorable market opportunities when interest rates were
relatively high.
Investment Income from Loans
During the Reporting Period, investment income from loans increased by 63.2% from 2011. This
was primarily due to an increase in the volume of policy loans resulting from an increase in demand
for policy loans, as well as a continued increase in the volume of debt investment plans attributable to
the Company’s increased efforts for investment in debt investment plans by taking advantages of the
market opportunities.
16
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
Net Realised Gains and Impairment on Financial Assets
During the Reporting Period, net realised gains and impairment on financial assets decreased by 139.8%
from 2011. This was primarily due to a significant increase in impairment losses of equity securities which
meet the conditions for recognizing impairment losses, resulting from the continued weakness in Chinese
capital market.
Net Fair Value (Losses)/Gains through Profit or Loss
During the Reporting Period, the decrease in net fair value (losses)/gains through profit or loss was primarily
due to the fluctuation in the value of financial instruments at fair value through profit or loss.
Other Income
During the Reporting Period, other income increased by 19.2% from 2011. This was primarily due to the
Company’s increased efforts in developing intermediary business and expanding sources of income.
(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
2012
RMB million
2011
292,312
352
7,898
2,032
3,435
27,754
2,575
23,283
3,304
609
282,575
353
7,789
2,031
6,125
27,434
873
21,549
3,275
595
Total
363,554
352,599
17
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
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 3.4% from 2011. This was primarily due to an increase in surrender
payments and an increase 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 remained stable as compared to 2011. This was primarily due to the combined
effects of an increase in claims and benefits resulting from business growth and a decrease in surrender
payments.
Short-term Insurance Business
During the Reporting Period, insurance benefits and claims expenses attributable to short-term
insurance business increased by 1.4% from 2011. This was primarily due to an increase in accident
insurance claims payment resulting from the increase in business volume.
Investment Contract Benefits
During the Reporting Period, investment contract benefits remained stable as compared to 2011. This was
primarily due to the steady account volume of investment contracts.
Policyholder Dividends Resulting from Participation in Profits
During the Reporting Period, policyholder dividends resulting from participation in profits decreased by
43.9% from 2011. This was primarily due to a decrease in investment yields for participating products.
Underwriting and Policy Acquisition Costs
During the Reporting Period, underwriting and policy acquisition costs increased by 1.2% from 2011.
This was primarily due to the Company’s proactive adoption of measures to strengthen cost control while
promoting a healthy development of its business, as a result of which the increase in underwriting and policy
acquisition costs was in proportion to the growth of business.
Finance Costs
During the Reporting Period, finance costs increased by 195.0% from 2011. This was primarily due to an
increase in interest payments for subordinated term debts.
Administrative Expenses
During the Reporting Period, administrative expenses increased by 8.0% from 2011. This was primarily due
to the fact that the Company increased its costs on team building so as to enhance its ability for sustainable
development.
Other Operating Expenses
During the Reporting Period, other operating expenses increased by 0.9% from 2011. This was primarily
due to an increase in business tax and surcharges expenses.
18
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
2012
7,450
(216)
191
3,543
RMB million
2011
17,967
57
502
1,987
10,968
20,513
(3) Profit before Income Tax
For the year ended 31 December
Individual life insurance business
Group life insurance business
Short-term insurance business
Other
Total
1
2
3
Individual Life Insurance Business
During the Reporting Period, profit before income tax of the Company in the individual life insurance
business decreased by 58.5% from 2011. This was primarily due to the decline in investment yield and
the increase in impairment losses resulting from the continued weakness in the capital markets.
Group Life Insurance Business
During the Reporting Period, the change in profit before income tax of the Company in the group life
insurance business was primarily due to the decline in investment yield and the increase in impairment
losses resulting from the continued weakness in the capital markets.
Short-term Insurance Business
During the Reporting Period, profit before income tax of the Company in the short-term insurance
business decreased by 62.0% from 2011. This was primarily due to the decline in investment yield and
the increase in impairment losses resulting from the continued weakness in the capital markets.
(4) Income Tax
During the Reporting Period, income tax of the Company was RMB-304 million. This change was primarily
due to the combined effect of a decrease in taxable income and the impact of the deferred tax.
(5) Net Profit
During the Reporting Period, net profit attributable to equity holders of the Company was RMB11,061
million, a 39.7% decrease from 2011. This was primarily due to the decline in investment yield and the
increase in impairment losses resulting from the continued weakness in the capital markets.
19
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
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 2012
RMB million
As at 31
December 2011
1,790,838
641,080
452,389
506,416
34,035
894
69,452
80,419
6,153
108,078
1,494,969
520,793
261,933
562,948
23,683
2,370
55,985
61,104
6,153
88,938
Total
1,898,916
1,583,907
Term Deposits
As at the end of the Reporting Period, term deposits increased by 23.1% from the end of 2011. This was
primarily due to the Company’s increased allocation in term deposits by taking advantage of favorable
market opportunities when interest rates were relatively high.
Held-to-Maturity Securities
As at the end of the Reporting Period, held-to-maturity securities increased by 72.7% from the end of
2011. This was primarily due to the fact that the Company reduced fluctuation of the book value of its
investments in debt securities and increased its allocation in held-to-maturity securities.
Available-for-Sale Securities
As at the end of the Reporting Period, available-for-sale securities decreased by 10.0% from the end of 2011.
This was primarily due to the fact that the Company actively adjusted its allocation structure in light of
market conditions, reduced fluctuation of the book value of its investment assets, and decreased the volume
of available-for-sale 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 43.7% from
the end of 2011. This was primarily due to the fact that the Company adopted a more initiative and flexible
investment approach in light of market conditions and increased the volume of securities at fair value
through profit or loss accordingly.
20
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
Cash and Cash Equivalents
As at the end of the Reporting Period, cash and cash equivalents increased by 24.1% from the end of 2011.
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 31.6% from the end of 2011. 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.
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 2012
As at 31 December 2011
Amount
Percentage
Amount
Percentage
RMB million
69,452
641,080
828,098
59,207
102,089
90,912
3.88%
35.80%
46.24%
3.30%
5.70%
5.08%
55,985
520,793
666,684
85,057
95,553
70,897
3.74%
34.84%
44.60%
5.69%
6.39%
4.74%
Total
1,790,838
100%
1,494,969
100%
(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 2012
RMB million
As at 31
December 2011
1,384,537
66,639
68,499
44,240
16,890
67,981
7,834
19,195
1,199,373
69,797
13,000
46,368
11,954
29,990
1,454
18,583
Total
1,675,815
1,390,519
21
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
Insurance Contracts
As at the end of the Reporting Period, liabilities of insurance contracts increased by 15.4% from the end of
2011. This was primarily due to new insurance business and the accumulation of insurance liabilities from
renewal business. 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 4.5% from
the end of 2011. This was primarily due to the fact that certain group annuity customers transferred their
funds to their accounts of enterprise annuity, which resulted in the decrease in the account volume of group
annuity products specified in investment contracts.
Securities Sold under Agreements to Repurchase
As at the end of the Reporting Period, securities sold under agreements to repurchase increased by 426.9%
from the end of 2011. 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 4.6% from the end of
2011. 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 41.3%
from the end of 2011. This was primarily due to the accumulation of insurance liabilities.
Bonds Payable
As at the end of the Reporting Period, bonds payable increased by 126.7% from the end of 2011. This was
primarily due to the issuance of subordinated term debts by the Company in 2012.
Deferred Tax Liabilities
As at the end of the Reporting Period, deferred tax liabilities increased by 438.8% from the end of 2011.
This was primarily due to an increase in the fair value of available-for-sale securities.
(3) Equity Holders’ Equity
As at the end of the Reporting Period, equity holders’ equity was RMB221,085 million, a 15.4% increase
from the end of 2011. This was primarily due to an increase in the fair value of available-for-sale securities
and the influence of the net profit during the Reporting Period.
22
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
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 risks 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 RMB69,452 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 RMB641,080
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 RMB826,574 million,
while investments in equity securities had a fair value of RMB164,742 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.
(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 from financing activities
Foreign currency losses on cash and cash equivalents
2012
132,182
(203,804)
85,089
–
RMB million
2011
133,953
(133,591)
7,991
(222)
Net increase in cash and cash equivalents
13,467
8,131
23
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
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 1.3% from 2011. This was primarily due to an increase in insurance benefits. Net cash outflow from
investing activities increased by 52.6% from 2011. This was primarily due to the needs for investment
management. Net cash inflow from financing activities increased by 964.8% from 2011. This was primarily
due to the needs for liquidity management.
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 the end of the Reporting Period:
Actual capital
Minimum capital
Solvency ratio
As at 31
December 2012
RMB million
As at 31
December 2011
176,024
74,718
235.58%
113,685
66,826
170.12%
Benefiting from the increase in the Company’s comprehensive income in 2012, the Company’s solvency ratio
increased to some extent. Meanwhile, the Company successfully issued subordinated term debts of RMB38 billion
by actively taking advantage of favorable opportunities, thereby further raising its solvency ratio.
VI ANALYSIS OF CORE COMPETITIVENESS
The Company has the advantage of very strong brand recognition. It is the only life insurance company in China
with shares listed on the Shanghai Stock Exchange, the Hong Kong Stock Exchange and the New York Stock
Exchange. It is also a core member of China Life Insurance (Group) Company which is one of the “Fortune
Global 500” and the “World’s 500 Most Influential Brands”. As at 2012, the brand of China Life has been ranked
as one of the “World’s 500 Most Influential Brands” published by World Brand Lab for six consecutive years. The
brand was also ranked as No. 5 on the “China’s 500 Most Valuable Brands” list, with brand value estimated at
RMB126,155 million, ranking No. 1 among all seven insurance companies that made the list.
The Company has an extensive services and distribution network in China, with its business outlets and services
counters covering both urban and rural areas. The 693,000 exclusive individual agents, 16,000 direct sales
representatives, 96,000 intermediary bancassurance outlets and 46,000 sales representatives at those bancassurance
outlets form a unique distribution and services network in China, and make the Company the life insurance
service provider closest to the customers. Making use of internationally leading information technology and
expanding telephone, Internet, email and other electronic service channels, the Company strives to meet customer
demand for purchasing insurance products through multiple channels.
24
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
The Company has the most extensive customer base. As at 31 December 2012, the Company had approximately
149 million long-term individual and group life insurance policies, annuity contracts and long-term health
insurance policies in force.
The Company possesses great financial strength. As at 31 December 2012, the registered capital of the Company
was RMB28,265 million. The total assets of the Company reached RMB1,898,916 million, which ranked first
in China’s life insurance industry. As at the end of 2012, the total market capitalization of the Company was
US$95,800 million, which ranked first among all listed life insurance companies in the world.
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. As at 31 December 2012, the investment assets reached RMB1,790,838 million, an increase of
19.8% from the end of 2011.
The Company has rich experience in life insurance management. The predecessor of China Life was the first
enterprise to underwrite life insurance business in China, and played the role of an explorer and pioneer in China’s
life insurance industry. During the long course of its development, the Company has accumulated a wealth of
experience in operation and management, has a stable, professional management team, and has become well versed
in the art of management in China’s life insurance market.
VII BUSINESS OPERATIONS OF OUR MAIN SUBSIDIARIES AND AFFILIATES
RMB million
Registered
Capital
Shareholding
Total
Assets
Net
Assets
3,000
60%
5,098
4,703
Net
Profit
579
1,631
1,406
(285)
2,500
87.4% is held by
the Company,
and 4.8% is held
by AMC
8,000
40%
30,333
7,379
375
Company Name
Business Scope
China Life Asset
Management 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
China Life Pension
Company Limited
China Life Property
and Casualty Insurance
Company Limited
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 approved by CIRC
Property loss insurance; liability insurance; credit
insurance and bond insurance; short-term health
and accident insurance; reinsurance of the above
insurance business
25
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
VIII USE OF RAISED AND NON-RAISED CAPITAL
During the Reporting Period, the Company had neither raised capital nor used capital raised in the previous
periods. The Company had not invested in any major projects with non-raised capital, the total investments of
which were over 10% of the audited equity holder’s equity as at the end of the previous year.
IX FUTURE PROSPECT AND RISK ANALYSIS
In 2013, the Company intends to strengthen its in-depth analysis of macro-economic trends and complex risk
factors to maintain its continuous and healthy growth. 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 2013, the international economic environment remains intricate and complex, with increasing pressure
of potential inflation and asset bubbles, and the world economy has entered into a stage of profound
transformation and adjustment. Although China has regained momentum of economic growth and the
operation of the financial system remains generally stable, salient issues such as unbalanced, uncoordinated
and unsustainable development continue to exist in the domestic economy. At a time when international
and domestic economies and finance have become highly integrated, changes in international and domestic
situations can be transferred to the insurance industry through multiple channels such as the real economy,
financial markets and consumer demand, which in turn impact business development, the use of funds
and solvency in a variety of ways, and increase the difficulty and pressure of maintaining stability and risk
prevention in the insurance market.
2. Risks relating to our business
China’s insurance industry remains at a significant stage with strategic opportunities. At this stage,
competition in the financial markets has intensified, and the development model of insurance industry is in
urgent need of transformation. The insurance industry, and the life insurance industry in particular, remains
in a period of profound adjustment and transformation of its development model. Affected by these factors,
the Company is experiencing more difficulties in maintaining steady business growth, as well as facing
more uncertainties and complexities, which may cause more irregular surrenders. Due to factors such as
investment income, it may be more difficult for the Company to improve its operational results. Meanwhile,
factors such as relatively slow growth of productive exclusive individual agents in the sales force and its high
turnover rate may also adversely affect the business development of the Company.
26
China Life Insurance Company Limited Annual Report 2012
Management Discussion and Analysis
3. Risks relating to investments
In light of the complexity and uncertainty 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 scope 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 2013, the Company intends to vigorously implement the “innovation-driven development strategy”,
carry out differentiated business strategies among all branches, steadily promote the adjustment and
optimization of the business structure, expedite the transformation from the scale-speed model to the scale-
value model, and strive to maintain steady growth in premiums income and new business value. Given the
above mentioned risk factors, the Company intends to firmly adhere to its core development objectives,
and may fine-tune its business development objectives in accordance with market trends to an appropriate
degree, so as to efficiently respond to challenges from market competitors and changes in the external
environment. Meanwhile, the Company intends to focus on innovation in products, technology and systems
and mechanisms, in order to constantly enhance its vitality, creativity, competitiveness and capacity for
sustainable development. The Company believes that it will have sufficient capital to meet its insurance
business expenditures and general new investment needs in 2013. At the same time, the Company will make
corresponding arrangements in accordance with the capital markets conditions to further implement its
business development strategies.
27
China Life Insurance Company Limited Annual Report 2012
Report of the Board of Directors
From left to right:
Mr. Tang Jianbang,
Mr. Bruce Douglas Moore,
Ms. Liu Yingqi,
Mr. Lin Dairen,
Mr. Wan Feng,
Mr. Yang Mingsheng,
Mr. Miao Jianmin,
Mr. Zhang Xiangxian,
Mr. Wang Sidong,
Mr. Sun Changji,
Mr. Anthony Francis Neoh
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.
FORMULATION AND IMPLEMENTATION OF PROFIT DISTRIBUTION POLICY
(I)
In accordance with Article 212 of the Articles of Association, the cash dividend policy of the Company is as
follows:
1.
2.
The Company’s profit distribution shall focus on a reasonable investment return for investors and its
profit distribution policies shall be sustainable and steady.
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.
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China Life Insurance Company Limited Annual Report 2012
Report of the Board of Directors
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.
Pursuant to the “Notice on Issues Concerning Further Implementation of Cash Dividends Distribution of
Listed Companies” issued by the CSRC, the Company considered and approved the “Proposal Concerning
Amendments to the Articles of Association” at the second meeting of the fourth session of the Board held
on 28 August 2012, so as to clearly define its profit distribution policy, in particular the details of its cash
dividends distribution policy. The Directors are of the view that the amended profit distribution policy
serves the long-term interest of the Company and the interest of the shareholders as a whole and is in line
with the sustainable development of the Company. The above proposal was considered and approved at the
First Extraordinary General Meeting 2013 of the Company held on 19 February 2013. The amendments to
the Articles of Association will come into effect after the approval of the CIRC is obtained. Please refer to
the notice of the First Extraordinary General Meeting 2013 of the Company dated 24 December 2012 for
the full text of the amendments to the Articles of Association.
(II) Profit distribution plan and public reserves capitalization plan
1.
Profit distribution plan or public reserves capitalization plan for the year of 2012
In accordance with the profit distribution plan for the year 2012 approved by the Board on 27
March 2013, with the appropriation to its discretionary surplus reserve fund of RMB1,107 million
(10% of the net profit for 2012), the Company, based on 28,264,705,000 shares in issue, proposed
to distribute cash dividends amounting to RMB3,957 million to all shareholders of the Company at
RMB0.14 per share (inclusive of tax). The foregoing profit distribution plan is subject to the approval
by the Annual General Meeting to be held on 5 June 2013 (Wednesday). Dividends payable to
domestic shareholders are declared, valued and paid in RMB. Dividends payable to shareholders of
the Company’s foreign-listed shares are declared and valued in RMB 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 closing rate published by the People’s Bank of China one
week before the declaration of the distribution of dividends or other payments.
No public reserve capitalization is provided for in the profit distribution plan for the current financial
year.
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China Life Insurance Company Limited Annual Report 2012
Report of the Board of Directors
2.
The dividend distribution of the Company for the recent 3 years is as follows:
Unit: RMB million
Year in which
dividends were
distributed
Number of
bonus stocks per
ten shares (shares)
Amount of
dividends per
ten shares (RMB)
(including tax)
Transfer of
public reserve
into share
capital per
ten shares (shares)
Amount of
cash dividends
(including tax)
Net profit
attributable to
equity holders of
the Company in
the consolidated
statement for
the year in which
Percentage of
amount of cash
dividends
in net profit
attributable to
equity holders
of the Company
dividends were in the consolidated
statement
distributed
2012
2011
2010
–
–
–
1.4
2.3
4.0
–
–
–
3,957
6,501
11,306
11,061
18,331
33,626
36%
35%
34%
4. CHANGES IN ACCOUNTING ESTIMATES AND ASSUMPTIONS
The changes in accounting estimates and assumptions of the Company during the Reporting Period are set out in
Note 3 in the Notes to the Consolidated Financial Statements in this annual report.
5. 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.
6. CHARITABLE DONATIONS
The total amount of charitable donations made by the Company during the Reporting Period was approximately
RMB42 million.
7. 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.
8.
SHARE CAPITAL
Details of the 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.
9. BANK BORROWINGS
As at the end of the Reporting Period, the Company did not have any bank borrowings.
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China Life Insurance Company Limited Annual Report 2012
Report of the Board of Directors
10. 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 31 May 2012 for the
information on income tax in respect of the dividend distributed to A Share 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 22 May 2012 for the information on income tax in respect of the dividend
distributed to H Share shareholders during the Reporting Period.
11. 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.
12. H SHARE STOCK APPRECIATION RIGHTS
No H Share Stock Appreciation Rights of the Company were granted or exercised in 2012. The Company will
deal with such rights and related matters in accordance with PRC governmental policy.
13. DAY-TO-DAY OPERATIONS OF THE BOARD
Details of the Board 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.
14. 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).
15. 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.
16. 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 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 2012
Report of the Board of Directors
17. DISCLOSURE OF INTERESTS OF DIRECTORS, SUPERVISORS AND THE CHIEF
EXECUTIVE IN THE SHARES OF THE COMPANY
As at the end of the Reporting Period, none of the Directors, Supervisors and the chief executive of the Company
had any interests or short positions in the shares, underlying shares or debentures of the Company or its associated
corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws
of Hong Kong) (the “SFO”)) that were required to be recorded in the register of the Company required to be
kept pursuant to Section 352 of the SFO or which had to be notified to the Company and the 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 Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (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 2012.
18. PRE-EMPTIVE RIGHTS AND ARRANGEMENTS ON SHARE OPTIONS
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 share options.
19. MANAGEMENT CONTRACTS
No management or administration contracts for the whole or substantial part of any business of the Company
were entered into during the Reporting Period.
20. 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 is in compliance 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.
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China Life Insurance Company Limited Annual Report 2012
Report of the Board of Directors
21. RESPONSIBILITY STATEMENT OF DIRECTORS ON FINANCIAL REPORTS
The Directors are responsible for overseeing the preparation of the financial report for each financial period which
gives a true and fair view of the Company’s financial position, performance results and cash flow for that period.
To the best knowledge of the Directors, there was no material event or condition during the Reporting Period that
might have a material adverse effect on the continuing operation of the Company.
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 2012.
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.
24. SUFFICIENCY OF PUBLIC FLOAT
Based on the information publicly available to the Company and within the knowledge of the Directors as at the
Latest Practicable Date (27 March 2013), 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 CORPORATE GOVERNANCE CODE
Save as disclosed below, the Company has applied the principles and complied with all code provisions of the
Code on Corporate Governance Practices during the period from 1 January 2012 to 31 March 2012 and the
Corporate Governance Code (the “CG Code”) during the period from 1 April 2012 to 31 December 2012 as set
out in Appendix 14 to the Listing Rules. In respect of code provisions A.6.7 and E.1.2 of the CG Code, Mr. Yuan
Li, the Chairman of the Board of Directors, was unable to attend the 2011 Annual General Meeting due to other
business commitments and authorized Mr. Wan Feng, an Executive Director, in writing to attend and chair the
meeting on his behalf; Mr. Bruce Douglas Moore, an Independent Director, was unable to attend the 2011 Annual
General Meeting due to other business commitments and authorized Mr. Sun Changji, an Independent Director,
in writing to attend the meeting on his behalf; Mr. Miao Jianmin, a Non-executive Director, and Mr. Ma
Yongwei, an Independent Director, were unable to attend the 2011 Annual General Meeting due to other business
commitments.
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China Life Insurance Company Limited Annual Report 2012
Report of the Board of Directors
26. AUDITORS
Resolutions were passed at the 2011 Annual General Meeting to engage PricewaterhouseCoopers Zhong Tian
Certified Public Accountants Limited Company and PricewaterhouseCoopers as the PRC and international
auditors of the Company for the year 2012. PricewaterhouseCoopers Zhong Tian Certified Public Accountants
Limited Company and PricewaterhouseCoopers have been the Company’s auditors for 10 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 2012 was as follows:
Service/Nature
Audit-related expenses
Fees (RMB million)
63.90
Pursuant to the relevant requirements of the “Measures for Administration of Accounting Firm Selection by
Financial Enterprises through Bidding (Trial)” issued by the Ministry of Finance of the PRC in relation to the
service term of auditors continuously engaged by a financial institution, the service term of the current external
auditors of the Company will exceed the prescribed time limit soon. In this connection, the Company conducted a
bidding process for the selection of auditors for the year 2013 in accordance with the above-mentioned regulation.
Based on the bidding results, the Company convened the fourth meeting of the fourth session of the Board on
21 December 2012, at which the “Proposal in relation to the Appointment of Auditors of the Company for the
Year 2013” submitted by the Audit Committee was considered and approved. The proposal was then considered
and approved at the First Extraordinary General Meeting 2013 of the Company held on 19 February 2013,
pursuant to which Ernst & Young Hua Ming LLP and Ernst & Young were appointed as the PRC auditor and
the international auditor of the Company for the year 2013 respectively. Pursuant to Rule 13.88 of the Listing
Rules, the Board will put forward at the 2012 Annual General Meeting to be held on 5 June 2013 an resolution on
the appointment of Ernst & Young Hua Ming LLP and Ernst & Young as the PRC auditor and the international
auditor of the Company for the year 2013, who will hold office until the conclusion of the 2013 Annual General
Meeting.
By Order of the Board
Yang Mingsheng
Chairman
Beijing, China
27 March 2013
34
China Life Insurance Company Limited Annual Report 2012
Report of the Supervisory Committee
From left to right:
Mr. Li Xuejun,
Mr. Shi Xiangming,
Ms. Xia Zhihua,
Mr. Luo Zhongmin,
Ms. Yang Cuilian
1. ACTIVITIES OF THE SUPERVISORY COMMITTEE
1.
2.
3.
Completing the election of the new session of the Supervisory Committee pursuant to the regulatory
requirements. The third session of the Supervisory Committee of the Company comprised 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. In accordance with the Company Law, the Articles of
Association and the relevant regulatory requirements, the term of the third session of the Supervisory
Committee expired in 2012. The Company elected the fourth session of the Supervisory Committee strictly
in accordance with the regulatory requirements. The fourth session of the Supervisory Committee comprises
Ms. Xia Zhihua, Mr. Shi Xiangming, Mr. Luo Zhongmin, Ms. Yang Cuilian and Mr. Li Xuejun, 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. Luo Zhongmin are Non-employee Representative
Supervisors, and Ms. Yang Cuilian and Mr. Li Xuejun are Employee Representative Supervisors.
Attending the 2011 Annual General Meeting and the First Extraordinary General Meeting 2012 of the
Company and participating in each regular meeting of the Board and the specialized Board committees to
actively perform its supervisory role. In 2012, all members of the Supervisory Committee participated in
the regular meetings of the Board, and respectively participated in the meetings of the Nomination and
Remuneration Committee, the Risk Management Committee and the Strategy and Investment Decision
Committee in accordance with the work allocation among Supervisors determined by the Supervisory
Committee, with its focus on the meetings of the Audit Committee. By attending these meetings, all
Supervisors diligently performed their duties, oversaw the procedures for convening meetings, carefully
listened to the matters considered at the meetings, and participated in discussions when necessary, thus
bringing positive impacts on further enhancement of corporate governance.
Attending meetings of the Supervisory Committee and diligently performing duties. Pursuant to the
regulatory requirements of the Company’s listed jurisdictions, the Articles of Association and the
Procedural Rules for Supervisory Committee Meetings, and in accordance with the work arrangement of
the Supervisory Committee, the Supervisory Committee convened its regular meetings in a timely manner,
at which it considered and approved proposals in relation to the financial reports, periodic reports, internal
control, and risk management of the Company. In 2012, each of the third session and the fourth session
of the Supervisory Committee held 4 meetings. At these meetings, the Supervisors earnestly expressed their
views, actively participated in discussions and diligently performed their duties, thereby providing valuable
advice for the business development of the Company.
35
China Life Insurance Company Limited Annual Report 2012
Report of the Supervisory Committee
4.
5.
6.
Actively promoting standardized operations and carrying out self-examination and self-correction pursuant
to the requirements of the Beijing Securities Regulatory Bureau. The Supervisory Committee organized
and conducted special activities from May to July 2012 in this regard. Adhering to the principles of
“objectiveness, fairness and responsibility”, the Supervisory Committee directed functional departments to
undertake inspections on an item-by-item basis, assessed their inspection results by phases, and arranged
for the audit department to conduct audit, so as to ensure the accuracy and effectiveness of such activities.
The Supervisory Committee submitted a work report for self-examination and self-correction to the Beijing
Securities Regulatory Bureau in a timely manner. By conducting the self-examination and self-correction
activities, the Supervisory Committee further strengthened the Company’s awareness of risk prevention and
promoted its corporate governance practice.
Conducting in-depth investigation and research on local branches to further strengthen the basis for the
performance of duties of the Supervisory Committee. The Supervisory Committee carried out its 2012
investigation and research on Fujian branch to have a general understanding of the situations of the local
branches, including their implementation of policies set by the headquarters in relation to the budget
management, centralized management at provincial level, internal control and risk prevention, New Village
Cooperative Medical Insurance business and team building. It also listened to questions from the local
branches with respect to the difficulties in their work and the recommendations for work improvement, and
reported its investigation results to the Board and the management, which improved the performance of
duties by the Supervisory Committee and brought a positive impact on the operation and management of
the Company.
Strengthening training and improving the Supervisors’ abilities to perform their duties. In 2012, in
accordance with the regulatory requirements, the Supervisors took turns to participate in the training course
for directors and supervisors of listed companies organized by the Beijing Securities Regulatory Bureau.
The training covered corporate governance theory and practice. In accordance with the requirements of
the CIRC, new Supervisors attended training courses for directors, supervisors and senior management of
insurance companies to study the regulatory requirements and understand their duties. The Supervisors
also participated in the training courses on special topics covering risk control and inside information
management organized by the Company. Through communication and study, the Supervisors built up a
good foundation of corporate governance theory, broadened their horizon and improved their abilities to
perform duties.
36
China Life Insurance Company Limited Annual Report 2012
Report of the Supervisory Committee
2.
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 requirements of the Company Law, 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 and the Articles of Association. All Directors and senior
management of the Company maintained strict principles of diligence and integrity and performed their
duties conscientiously. 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 authenticity of the financial report. The Company’s annual financial report truly and completely
reflected 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 auditor’s reports for the year ended 2012 in accordance with the China Standards on
Auditing of PRC Certified Public Accountants and the 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
27 March 2013
37
China Life Insurance Company Limited Annual Report 2012
Signifi cant Events
1. MATERIAL LITIGATIONS, ARBITRATIONS AND MATTERS GENERALLY ENQUIRED
BY MEDIA
During the Reporting Period, the Company was not involved in any material litigation, arbitration or matter
generally enquired by media.
2. CONNECTED TRANSACTIONS
(I) 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 from time to time signed policy management agreements since 30
September 2003. The Company and CLIC entered into the 2011 confirmation letter on 15 December
2011, pursuant to which both parties confirmed the renewal of the policy management agreement
for three years from 1 January 2012 to 31 December 2014. 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 ending 31 December
2014 is RMB1,188 million.
For the year ended 31 December 2012, the service fee paid by CLIC to the Company amounted to
RMB1,063 million.
2. Asset Management Agreements
(1) Asset Management Agreement between the Company and AMC
Since 30 November 2003, the Company has from time to time entered 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 had been automatically extended to 31 December 2012 pursuant to its renewal 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. 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
38
China Life Insurance Company Limited Annual Report 2012
Signifi cant Events
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 annual cap of the asset management fee for the year 2012 is RMB900 million. On 27
December 2012, the Company entered into the 2012 asset management agreement with AMC,
which is for a term of two years effective from 1 January 2013 and expiring on 31 December
2014, and subject to compliance with the Listing Rules, will be renewed for another year, unless
terminated by either party giving to the other party no less than 90 days’ prior written notice to
terminate the agreement at the expiration of its term. The annual cap of the asset management
fee for each of the three years ending 31 December 2015 is RMB1,200 million.
For the year ended 31 December 2012, the Company paid AMC an asset management fee of
RMB761 million.
(2) Asset Management Agreement between CLIC and AMC
Since 30 November 2003, CLIC has from time to time entered into asset management
agreements with AMC. The renewed asset management agreement between the parties expired
on 31 December 2011. CLIC and AMC entered into the 2011 asset management agreement on
29 December 2011, which was for a term of three years from 1 January 2012 to 31 December
2014. In accordance with the asset management agreement, AMC agreed to invest and manage
assets entrusted to it by CLIC, on a discretionary basis, subject to the investment guidelines
and instructions given by CLIC. In consideration of AMC’s services in respect of investing and
managing assets entrusted to it by CLIC under the agreement, CLIC agreed to pay AMC a
service fee. For details as to the method of calculation of the asset management 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 RMB300 million, RMB310 million and RMB320
million, respectively.
For the year ended 31 December 2012, CLIC paid AMC an asset management fee of RMB133
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 were substantially the same as those of the 2008 insurance sales framework agreement. The
2012 insurance sales framework agreement was for a term of two years and would 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 original annual caps for the three years ending 31 December 2014 are
39
China Life Insurance Company Limited Annual Report 2012
Signifi cant Events
RMB660 million, RMB800 million and RMB960 million, respectively. With the approval given at the
first ad hoc meeting of the fourth session of the Board, the Company revised the annual caps for 2013
and 2014 under the 2012 insurance sales framework agreement to RMB1,250 million and RMB1,950
million, respectively.
For the year ended 31 December 2012, P&C Company paid the Company an agency service fee of
RMB648 million.
AUDITOR’S LETTER ON CONTINUING CONNECTED TRANSACTIONS
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) with respect to the aggregate amount of each of the continuing connected transactions set out above,
nothing has come to the auditors’ attention that causes them to believe that the 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.
40
China Life Insurance Company Limited Annual Report 2012
Signifi cant Events
(II) Other Connected Transactions
1. Acquisition of Properties from CLI
On 27 June 2012, the Company and China Life Investment Holding Company Limited (the “CLI”)
entered into a property transfer framework agreement, which was for a term of three years. Pursuant
to the framework agreement, the Company proposed to acquire from CLI properties for use by the
Company’s branches as office premises, which consist of 1,198 properties with a total gross floor
area of approximately 803,424.09 square meters. The properties shall be transferred in batches with
standalone agreement to be entered into for each transfer. The actual purchase price of each property
shall be valued and determined by the qualified intermediaries agreed upon by the parties with
reference to prevailing market price. The total consideration for the property purchase is expected to
be no more than RMB1.7 billion. The parties shall cooperate with each other to complete the transfer
of ownership and deliver the properties if standalone property transfer agreements in respect of such
properties will be signed prior to the expiry of the framework agreement. The parties shall not transfer
any properties under the framework agreement if standalone property transfer agreements in respect of
such properties cannot be signed prior to the expiry of the framework agreement.
2. 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
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. The agreement expired on 1 December 2012. As considered and
approved at the fourth meeting of the fourth session of the Board of Directors of the Company, the
Company, CLIC, AMC and Pension Company renewed the agreement in the form of memorandum
for a tentative period of one year.
The above connected transaction in relation to the Company’s acquisition of properties from CLI was
subject to reporting and announcement requirements but was exempt from independent shareholders’
approval requirements pursuant to Rule 14A.32 of the Listing Rules. As CLIC holds the entire equity
interest of CLI, CLI constitutes a connected person of the Company. With respect to this connected
transaction, the Company has complied with the disclosure requirements in accordance with Chapter 14A of
the Listing Rules.
(III) Statement on Claims, Debt Transactions and Guarantees 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.
41
China Life Insurance Company Limited Annual Report 2012
Signifi cant Events
3. ASSET TRANSACTIONS, MERGERS AND ACQUISITIONS DURING THE REPORTING
PERIOD
During the Reporting Period, the Company did not undertake any material asset transaction, merger and
acquisition.
4. 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 profit or loss from which
accounted for 10% or above of the Company’s profits for the year.
2.
3.
The Company neither gave external guarantees nor provided guarantees to its subsidiaries during the
Reporting Period.
Except otherwise disclosed in this annual report, the Company had no other material contracts during the
Reporting Period.
5. 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, the ownership registration formalities of which had not been
completed due to historical reasons, all other formalities in relation to the change of land and property ownership
had been completed. The Shenzhen Branch of the Company continues to use such properties and land, and no
other parties have questioned or hindered the use of such properties and land by the Company.
At present, the Company’s Shenzhen Branch and the co-owner and the original owner of the properties have
reached an agreement that the ownership of the properties of each party will be determined by legal proceeding
and the parties intend to bring the legal proceedings in the near future. CLIC will bear the costs incurred in
accordance with its undertakings.
42
China Life Insurance Company Limited Annual Report 2012
Signifi cant Events
6. OTHER AFFAIRS
With the approvals from the seventeenth meeting of the third session of Board and the 2011 Annual General
Meeting, the Company may, subject to the approvals from relevant regulatory authorities, (1) issue subordinated
term debts in the PRC with an aggregate amount of not exceeding RMB38 billion, which will be issued in one or
more tranche(s) to qualified investors who meet the relevant regulatory requirements, with a term of no less than
10 years and by reference to market interest rate; and (2) depending on the market condition, issue subordinated
debt financing instruments outside the PRC with an aggregate amount of not exceeding RMB8 billion or its
equivalent in other foreign currency.
With the approval from CIRC and within the approved limit, the Company completed the first tranche issuance
of RMB28 billion subordinated term debts in the PRC to qualified investors who meet the relevant regulatory
requirements in June 2012 and completed the second tranche issuance of RMB10 billion subordinated term debts
in November 2012. 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
approvals from regulatory authorities. For details as to the abovementioned issuance of the subordinated term
debts, please refer to Note 15 in the Notes to the Consolidated Financial Statements and the announcements of
the Company posted on the website of the SSE and the HKExnews website of the Hong Kong Exchanges and
Clearing Limited on 27 March, 5 April, 23 May, 30 June, 17 July and 20 November 2012, respectively.
43
China Life Insurance Company Limited Annual Report 2012
Changes in Share Capital and Shareholdings of Substantial Shareholders
I
II
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.
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.
III
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: 197,344
No. of H shareholders: 35,688
Particulars of top ten shareholders of the Company
Name of shareholder
China Life Insurance (Group)
Company
HKSCC Nominees Limited 1
State Development & Investment
Corporation 2
National Social Security
Fund-Portfolio 103
China Construction Bank-Bosera
Theme Industry Stock Securities
Investment Fund
Bosera Value Growth Securities
Investment Fund
China National Nuclear Corporation 2
China International Television
Corporation 2
Bank of China – Dacheng Wealth
Management 2020 Life-cycle
Securities Investment Fund
China National Investment &
Guaranty Co., Ltd. 2
Nature of
shareholder
State-owned corporate
shareholder
Foreign shareholder
Other
Other
Other
Other
Other
Other
Other
Other
Unit: Shares
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
shares pledged
or frozen
68.37%
19,323,530,000
–
25.74%
0.13%
7,276,301,503
+5,472,401
35,685,900
–14,114,100
0.11%
31,799,547
+28,218,790
0.11%
31,730,494
+27,150,581
0.11%
29,810,389
+29,810,389
0.07%
0.07%
20,000,000
18,452,300
–
–
0.06%
16,561,985
+16,561,985
0.06%
16,500,000
–12,700,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
44
Changes in Share Capital and Shareholdings of Substantial Shareholders
China Life Insurance Company Limited Annual Report 2012
Details of shareholders
1.
2.
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.
State Development & Investment Corporation, China National Nuclear Corporation, China International Television Corporation and China National
Investment & Guaranty Co., Ltd. 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.
Both China Construction Bank-Bosera Theme Industry Stock Securities Investment Fund and Bosera Value Growth Securities Investment Fund have
Bosera Asset Management Co., Ltd. as their fund manager and China Construction Bank Corporation as their fund depository. Save as disclosed above,
the Company was not aware of any connected relationship and concerted parties as defined by the “Measures for the Administration of the Takeover of
Listed Companies” among the top ten shareholders of the Company.
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
China Life Insurance (Group) Company
Legal representative
Yang Mingsheng
Date of incorporation
Organization code
Registered capital
Main Business
Future Development Strategy
Shareholdings in other
subsidiaries and affiliates listed
in China or abroad during the
Reporting Period
21 July 2003 (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.)
10002372-8
4.6 billion
Insurance services including receipt of premiums and payment of benefits in respect of
the in-force life, health, accident and other types of personal insurance business, and the
reinsurance business; holding or investing in domestic and overseas insurance companies
or other financial insurance institutions; funds management business permitted by
national laws and regulations or approved by State Council of the People’s Republic of
China; other business approved by insurance regulatory agencies.
The strategy is to implement the “innovation-driven development strategy”, and build
China Life into an industry-leading, customer-favored and most valuable company,
with “excellent products and services, advanced technology, well-utilized resources,
accurate market positioning, strong profitability, and flexible institutional mechanism”.
Further, the strategy is to build the enterprise into a modern, comprehensive financial
and insurance company that “covers four business segments including insurance, asset
management, financial services and insurance related industries, owns three supporting
platforms including co-branding, channel sharing and back-office support sharing, and
is able to provide customers with a variety of products and one-stop shop service”, so
as to lay a solid foundation for building a top-notch international financial insurance
group.
As at 31 December 2012, CLIC held 231,141,935 A shares of CITIC Securities Co.,
Ltd., 2.1% of the total shares issued by CITIC.
45
China Life Insurance Company Limited Annual Report 2012
Changes in Share Capital and Shareholdings of Substantial Shareholders
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.
IV
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 any Directors, Supervisors and the chief executive of the Company, as at 31 December 2012,
the following persons (other than the Directors, Supervisors and the chief executive of the Company) had interests
or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the
Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register
required to be kept by the Company pursuant to Section 336 of the SFO, or as otherwise notified to the Company
and HKSE:
Name of substantial shareholder
Capacity
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
Beneficial owner
A Shares
19,323,530,000(L)
92.80%
68.37%
BlackRock, Inc. (Note)
Interest in controlled corporations
H Shares
520,896,721(L)
85,549,486(S)
7.00%
1.15%
1.84%
0.30%
The letter “L” denotes a long position. The letter “S” denotes a short position.
46
Changes in Share Capital and Shareholdings of Substantial Shareholders
China Life Insurance Company Limited Annual Report 2012
Note: BlackRock, Inc. was interested in a total of 520,896,721 H shares in accordance with the provisions of Part XV of the
SFO. Of these shares, BlackRock Investment Management, LLC., BlackRock Financial Management, Inc., BlackRock
Institutional Trust Company, N.A., BlackRock Fund Advisors, BlackRock Advisors, LLC., BlackRock Asset Management
Canada Limited, BlackRock Investments Canada, Inc., BlackRock Japan Co. Ltd., BlackRock Asset Management
Australia Limited, BlackRock Asset Management North Asia Limited, BlackRock (Netherlands) B.V., BlackRock
International Limited, Blackrock Advisors (UK) Limited, BlackRock Asset Management Ireland Limited, BlackRock
(Luxembourg) S.A., BlackRock Fund Managers Limited and BlackRock Asset Management Deutschland AG were
interested in 7,172,158 H shares, 513,724,563 H shares, 87,732,051 H shares, 193,913,880 H shares, 4,271,000 H
shares, 693,000 H shares, 2,782,470 H shares, 112,000 H shares, 437,000 H shares, 92,147,865 H shares, 324,000 H
shares, 6,678,700 H shares, 51,503,539 H shares, 59,984,058 H shares, 7,433,000 H shares, 1,036,000 H shares and
976,000 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 of the SFO in 85,549,486 H shares
(1.15%).
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 2012, 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.
47
China Life Insurance Company Limited Annual Report 2012
Directors, Supervisors, Senior Management and Employees
I DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
1. CURRENT DIRECTORS
Total
emolument
received from
the Company
during the
Reporting
Period in RMB
ten thousands
(before tax)
Total
emolument
received from
shareholders
during the
Reporting Period
in RMB ten
thousands
Other benefits,
social security,
and housing
provident
fund paid by
the Company
in RMB ten
thousands
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
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
/
/
/
/
/
/
/
/
/
/
/
/
32.06
38.48
38.05
38.05
0
0
0
0
32.00
30.00
0
/
25.01
32.66
32.31
32.31
0
0
0
0
0
0
0
/
57.07
71.14
70.36
70.36
0
0
0
0
32.00
30.00
0
0
0
0
0
0
36.49
36.54
0
0
0
0
330.93
73.03
Name
Position
Gender
Age
Term
Yang Mingsheng
Wan Feng
Lin Dairen
Liu Yingqi
Chairman,
Executive Director
Executive Director
Executive Director
Executive Director
Miao Jianmin
Non-executive Director
Zhang Xiangxian
Non-executive Director
Wang Sidong
Sun Changji
Non-executive Director
Independent Director
Bruce Douglas Moore
Independent Director
Anthony Francis Neoh
Independent Director
Tang Jianbang
Independent Director
/
Total
Notes:
Male
57
Since 10 July 2012
Male
Male
Female
Male
Male
Male
Male
Male
Male
Male
/
54
54
54
48
57
51
70
63
66
66
/
Since 10 July 2012
Since 10 July 2012
Since 10 July 2012
Since 10 July 2012
Since 24 July 2012
Since 24 July 2012
Since 10 July 2012
Since 10 July 2012
Since 10 July 2012
Since 24 July 2012
/
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 10 July 2012, the fourth session of the Board of Directors of the Company was elected in the First
Extraordinary General Meeting 2012. On 24 July 2012, CIRC approved the qualifications of Mr. Zhang
Xiangxian, Mr.Wang Sidong and Mr. Tang Jianbang as Directors of the Company.
4.
According to the relevant rules and regulations of China, Mr. Sun Changji and Mr. Tang Jianbang, Independent
Directors, did not receive 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.
48
China Life Insurance Company Limited Annual Report 2012
Directors, Supervisors, Senior Management and Employees
2. CURRENT SUPERVISORS
Total
emolument
received from
the Company
during the
Reporting
Period in RMB
ten thousands
(before tax)
Total
emolument
received from
shareholders
during the
Reporting Period
in RMB ten
thousands
Other benefits,
social securities,
and housing
provident
fund paid by
the Company
in RMB ten
thousands
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
0
0
0
0
0
0
0
0
0
0
0
0
/
/
/
/
/
/
38.05
58.98
7.50
28.20
28.20
32.31
30.56
0
16.67
16.22
70.36
89.54
7.50
44.87
44.42
/
/
256.69
0
0
0
0
0
/
Position
Gender
Age
Term
Chairperson of the
Supervisory Committee
Supervisor
Supervisor
Employee Representative
Supervisor
Employee Representative
Supervisor
Female
58
Since 10 July 2012
Male
Male
Female
53
62
48
Since 24 July 2012
Since 24 July 2012
Since 24 July 2012
Male
42
Since 24 July 2012
/
/
/
/
Name
Xia Zhihua
Shi Xiangming
Luo Zhongmin
Yang Cuilian
Li Xuejun
Total
Notes:
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.
On 10 July 2012, the fourth session of the Supervisory Committee of the Company was elected in the First
Extraordinary General Meeting 2012. On 24 July 2012, CIRC approved the qualifications of Mr. Shi Xiangming,
Mr. Luo Zhongmin, Ms. Yang Cuilian and Mr. Li Xuejun as Supervisors of the Company.
4.
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.
49
China Life Insurance Company Limited Annual Report 2012
Directors, Supervisors, Senior Management and Employees
3. CURRENT SENIOR MANAGEMENT
Total
emolument
received from
the Company
during the
Reporting
Period in RMB
ten thousands
(before tax)
Total
emolument
received from
shareholders
during the
Reporting Period
in RMB ten
thousands
Other benefits,
social securities,
and housing
provident
fund paid by
the Company
in RMB ten
thousands
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
/
/
/
/
/
/
/
/
/
/
38.48
38.05
38.05
38.05
38.05
38.05
38.05
35.48
49.15
/
32.66
32.31
32.31
32.31
32.31
32.31
32.25
29.85
27.68
71.14
70.36
70.36
70.36
70.36
70.36
70.30
65.33
76.83
/
635.40
0
0
0
0
0
0
0
0
0
/
Position
President
Vice President
Vice President,
Board Secretary
Vice President
Vice President
Vice President
Vice President
Chief Operating Officer
Chief Actuary
/
Gender
Age
Term
Male
Male
Female
Male
Male
Male
Male
Male
Male
/
54
54
54
50
59
50
54
54
43
/
Since September
2007
Since August 2003
Since January 2006
Since August 2003
Since August 2008
Since August 2008
Since December 2009
Since August 2010
Since March 2012
/
Name
Wan Feng
Lin Dairen
Liu Yingqi
Liu Jiade
Zhou Ying
Su Hengxuan
Miao Ping
Xu Hengping
Li Mingguang
Total
Notes:
1.
The positions of the members of the Senior Management in this annual report reflect their positions as at the date
of submission of this annual report to the Board for their review and approval. 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.
50
China Life Insurance Company Limited Annual Report 2012
Directors, Supervisors, Senior Management and Employees
4. RESIGNATION 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
received from
the Company
during the
Reporting
Period in
RMB ten
thousands
(before tax)
Total
emolument
received from
shareholders
during the
Reporting
Period in
RMB ten
thousands
Number of
share held
at the beginning
of the year
Number of
share 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
0
0
0
0
0
0
/
/
/
/
/
/
/
/
/
10.69
5.27
15.96
0
0
0
0
0
0
0
0
0
0
32.90
13.81
46.71
32.90
16.59
49.49
8.75
0
8.75
54.23
16.79
71.02
28.10
28.13
0
0
0
0
0
/
/
191.93
56.23
Reason for changes
Resigned due to
reallocation to other
job duties
Retired due to his
age
Retired due to her
age
Retired due to
change of session
of the Board of
Directors
Retired due to
change of session
of the Supervisory
Committee
Retired due to
change of session
of the Supervisory
Committee
Retired due to
change of session
of the Supervisory
Committee
Expiration of
her employment
contract
/
Name
Yuan Li
Shi Guoqing
Zhuang Zuojin
Ma Yongwei
Yang Hong
Wang Xu
Previous Position
Gender
Chairman,
Executive Director
Male
Male
Non-executive
Director
Non-executive
Director
Independent Director Male
Female
Age
50
61
61
70
Female
46
Male
45
Employee
Representative
Supervisor
Employee
Representative
Supervisor
Tian Hui
Supervisor
Male
61
Hwei-Chung Shao
Chief Actuary
Female
58
Term
3 June 2011 –
22 May 2012
25 May 2009 –
22 May 2012
25 May 2009 –
22 May 2012
25 May 2009 –
10 July 2012
25 May 2009 –
10 July 2012
25 May 2009 –
10 July 2012
25 May 2009 –
10 July 2012
March 2007–
February 2012
Total
/
/
/
/
Note: According to the relevant rules and regulations of China, Mr. Ma Yongwei, an Independent Director, did not
receive any emoluments from the Company during the Reporting Period.
51
China Life Insurance Company Limited Annual Report 2012
Directors, Supervisors, Senior Management and Employees
DIRECTORS
Mr. Yang Mingsheng, born in 1955, Chinese
Mr. Yang became the Chairman, Executive Director of the Company in May 2012. He became
the Chairman of China Life Insurance (Group) Company in March 2012. Mr. Yang has many
years of experience in financial industry. He acted as Vice Chairman of China Insurance
Regulatory Commission from 2007 to 2012, and worked for Agricultural Bank of China from
1980 to 2007, where he held various positions such as Vice President of Shenyang Branch,
Head of Industrial Credit Department and President of Tianjin Branch. He was appointed as
Vice President of Agricultural Bank of China in 1997 and was then promoted to President of
Agricultural Bank of China in 2003. Mr. Yang, a Senior Economist, graduated from the Faculty
of Finance of Nankai University majoring in Monetary Banking with a Master’s degree in
Economics.
Mr. Wan Feng, born in 1958, Chinese
Mr. Wan became an Executive Director of the Company in June 2006. He also served as 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 served as a Vice President of the Company from 2003 and became the President
of the Company in September 2007. 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 in the Jilin Branch of People’s
Insurance Company of China, Hong Kong Branch of China Life, Hong Kong Branch of Taiping
Life Insurance Company and Shenzhen Branch of China Life, he has accumulated over 30 years
of experience in the life insurance industry. Mr. Wan, a Senior Economist, was awarded special
allowance by the State Council. He is concurrently the 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.
52
China Life Insurance Company Limited Annual Report 2012
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 31 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 China Center
for Insurance and Social Security Research of Peking University.
Ms. Liu Yingqi, born in 1958, Chinese
Ms. Liu became an Executive Director of the Company on 27 October 2008. Ms. Liu was the
Chairperson of the Supervisory Committee of the Company between August 2003 and January
2006. 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 graduated with a BA in Economics from Anhui University
in 1982. Ms. Liu has over 26 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 Executive Director of the
Insurance Association of China and the Director of China Finance 40 Forum. 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.
53
China Life Insurance Company Limited Annual Report 2012
Directors, Supervisors, Senior Management and Employees
Mr. Zhang Xiangxian, born in 1955, Chinese
Mr. Zhang became a Non-executive Director of the Company in July 2012. He became the
Secretary of Commission for Disciplinary Inspection of China Life Insurance (Group) Company
in October 2006. He also served as the Vice President and Compliance Officer of China Life
Insurance (Group) Company from August 2008. Mr. Zhang has many years of experience in
the insurance industry and held various positions from 1993 to 2006, including the Director
of Promotion Division of General Office and Deputy General Manager of General Office
of the People’s Insurance Company of China, the Office Director of the CIRC, the Deputy
Office Director (in charge) of Shenzhen office of the CIRC, and the Director of Administrative
Department of Representative Agencies of the CIRC. Mr. Zhang is a Senior Editor and obtained
a Master’s degree in Business Administration for senior management from Zhongnan University
of Economics and Law.
Mr. Wang Sidong, born in 1961, Chinese
Mr. Wang became a Non-executive Director of the Company in July 2012. He became the Vice
President of China Life Insurance (Group) Company, the Chairman of China Life Investment
Holding Company Limited and a Director of China Life Pension Company Limited in June
2004. Mr. Wang worked for the Ministry of Foreign Economic Relations and Trade, the Xinhua
News Agency Hong Kong Branch, and the Hong Kong Chinese Enterprises Association. He
served as Deputy Director of the General Office of China Life Insurance Company, Deputy
General Manager of its Zhejiang Branch and Deputy Director of the Shares Reform Office of
China Life from 2000. Mr. Wang was the Director of the General Office of China Life Insurance
(Group) Company in 2003. Mr. Wang graduated from Shandong University majoring in Chinese
Language and Literature with a Bachelor’s degree of Arts.
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 served as Vice Chairman
of China Machinery Industry Federation concurrently. Mr. Sun, now a Researcher-Level Senior
Engineer, graduated from Tsinghua University in September 1966.
54
China Life Insurance Company Limited Annual Report 2012
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 and 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 Organization 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.
Mr. Tang Jianbang, born in 1946, Chinese
Mr. Tang became an Independent Director of the Company in July 2012. He has many
years of experience in financial service sector. He successively served as the Deputy Director,
Deputy Head and Head of the Information Computer Department of Agricultural Bank of
China, headquarters from November 1983 to March 1996. He was the General Manager of the
International Business Department of Agricultural Bank of China in March 1996, the Assistant
President and General Manager of the International Business Department of its headquarters in
June 1998, the Assistant President and concurrently the President of Agricultural Bank of China,
Hong Kong Branch, in October 1999, and the Vice President of Agricultural Bank of China in
October 2000. He retired in April 2008. From May 2008 to May 2012, Mr. Tang served as the
Chairman of the Supervisory Committee of ABC-CA Fund Management Co., Ltd. Mr. Tang
obtained a Master’s degree in Computer Science and Engineering from Tsinghua University in
1981 and a Doctor’s degree in Science and Management Engineering from Beijing University of
Aeronautics and Astronautics in 2000.
55
China Life Insurance Company Limited Annual Report 2012
Directors, Supervisors, Senior Management and Employees
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 acted as a Deputy Director of National Debt Bereau of the Ministry of Finance from July
1997 to June 1998 and a Deputy Director of National Debt and Finance Bureau of the Ministry
of Finance from July 1998 to June 2000. Ms. Xia served as the State Council’s representative in
Supervisory Committee of state-owned important financial institutions, Designated Supervisor
of assistant bureau-level grade official from July 2000 to October 2001, and the State Council’s
representative in Supervisory Committee of state-owned important financial institutions,
Designated Supervisor of bureau-level grade official from October 2001 to December 2005. 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.
Mr. Luo Zhongmin, born in 1950, Chinese
Mr. Luo became a Supervisor of the Company in July 2012. Mr. Luo has many years of
experience in the insurance sector and is familiar with the insurance market and insurance
regulatory matters. He joined the People’s Insurance Company of China, Gansu Branch, in 1988
and subsequently served as the Deputy General Manager of the provincial branch. He served as
the Director of Hunan Insurance Regulatory Bureau in 2001 and the Chairman of the Insurance
Institute of China from 2008 to November 2011. Mr. Luo, a Senior Economist, graduated
from Gansu Finance and Trade College with a college diploma in Business and Economic
Management.
Ms. Yang Cuilian, born in 1965, Chinese
Ms. Yang became a Supervisor of the Company in July 2012. Ms. Yang has been serving as the
General Manager of the Group Business Department of the Company since January 2011. Ms.
Yang joined the Company in July 1984. She successively served as Deputy General Manager of
Jiangxi Branch, General Manager of Pingxiang Branch, Manager of the Group Sales Department
of Jiangxi Branch, and Manager of the Business Management Department of Jiangxi Branch.
Ms. Yang, a Senior Economist, graduated from Party School of the Central Committee of C.P.C
majoring in Economic Management with a Bachelor’s degree.
56
China Life Insurance Company Limited Annual Report 2012
Directors, Supervisors, Senior Management and Employees
Mr. Li Xuejun, born in 1970, Chinese
Mr. Li became a Supervisor of the Company in July 2012. Mr. Li has been serving as the General
Manager of the Training Department of the Company since January 2011. Mr. Li joined the
Company in November 1997. He successively served as Deputy General Manager of the Training
Department of the Company (in charge), Assistant General Manager of Shanghai Branch, General
Manager of Shanghai Songjiang Sub-branch, and General Manager of the Human Resource
Department of Shanghai Branch. Mr. Li worked for Shanghai Finance College (now known as
Shanghai Finance University) from July 1994 to October 1997. Mr. Li, a Senior Economist,
graduated from the Department of Insurance at Central Finance College (now known as Central
University of Finance and Economics) in 1994, majoring in International Insurance with a
Bachelor’s degree in Economics.
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 Gurangfa 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 in August 2008 and the secretary of the
commission for disciplinary inspection of the Company in November 2006. Mr. Zhou served as
a Designated Supervisor and as Director of the Fifth Office in Beijing State-owned Enterprise
Supervisory Committee from May 2004 to November 2006. Mr. Zhou graduated from Dongbei
University of Finance and Economics with a Ph.D in Economics.
57
China Life Insurance Company Limited Annual Report 2012
Directors, Supervisors, Senior Management and Employees
Mr. Su Hengxuan, born in 1963, Chinese
Mr. Su became the Vice President of the Company in 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 30 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 and a member of Financial Planning Standards Board China
Advisory Panel.
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 became the Chief Operating Officer of the Company in 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, Assistant to the General Manager of the
Company’s Fujian branch from September 1998, and Director of Personal Insurance Division
of the Company’s Fujian branch from July 1996. Mr. Xu once served as General Manager of
Sales Department and General Manager of Longyan Branch of Fuzhou Life Insurance Company
Limited. Mr. Xu graduated from Hunan University, majoring in Finance. Mr. Xu, a Senior
Economist, has over 32 years of experience in life insurance management.
Mr. Li Mingguang, born in 1969, Chinese
Mr. Li became the Chief Actuary of the Company in 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.
58
China Life Insurance Company Limited Annual Report 2012
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 Business Advisor 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 21 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).
59
China Life Insurance Company Limited Annual Report 2012
Directors, Supervisors, Senior Management and Employees
II POSITIONS HOLD BY CURRENT DIRECTORS, SUPERVISORS AND SENIOR
MANAGEMENT IN SHAREHOLDERS OF THE COMPANY
Name
Yang Mingsheng
Name of shareholders
China Life Insurance (Group) Company
Position
Chairman
Term
Since March 2012
Wan Feng
China Life Insurance (Group) Company
Vice President
Since September 2007
Miao Jianmin
China Life Insurance (Group) Company
Vice President
Since December 2005
Zhang Xiangxian
China Life Insurance (Group) Company
Vice President
Since August 2008
Wang Sidong
China Life Insurance (Group) Company
Vice President
Since June 2004
Whether receiving
remuneration and
allowance from
shareholders
No
No
No
Yes
Yes
III CORE TECHNICAL TEAM OR KEY PERSONNEL
The Company’s key personnel comprise those who have in-depth knowledge and understanding of the life
insurance market in China, including members of the Company’s senior management, qualified underwriting
personnel, actuaries and experienced investment managers. During the Reporting Period, none of the movement of
these personnel occurred which may have material impacts on the Company.
IV EMPLOYEES
1. Employees
Number of employees of the Company
Number of employees of the Company’s subsidiaries
Employees in total
Retired employees of the Company for which extra costs have to be incurred
Retired employees of the Company’s subsidiaries for which extra costs have to be incurred
99,271
1,069
100,340
0
1
As at the end of the Reporting Period, the composition of the Company’s employees is as follows:
(1) Structure of Expertise
Class of Expertise
Number of Employees
Management and administration
Sales and sales management
Finance and auditing
Insurance verification, claim processing and customer services
Other expertise and technicians
Others
Total
23,657
31,366
7,167
32,707
4,023
1,420
100,340
60
China Life Insurance Company Limited Annual Report 2012
Directors, Supervisors, Senior Management and Employees
(2) Education Level
Education level
Master or above
Bachelor
College Diploma
Secondary School
Others
Total
Number of Employees
2,642
43,360
41,978
4,687
7,673
100,340
Chart of the Structure of Expertise
4%
1%
24%
33%
7%
31%
Chart of the Education Level
8%
5%
3%
Management and administration
Sales and sales management
Finance and auditing
Insurance verification, claim processing and customer services
Other expertise and technicians
Others
Master or above
Bachelor
College Diploma
Secondary School
42%
Others
42%
61
China Life Insurance Company Limited Annual Report 2012
Directors, Supervisors, Senior Management and Employees
2. Remuneration Policy
The Company has established a remuneration and incentive system with reference to employee’s positions,
the Company’s results and market conditions.
3. Training Plans
By adhering to the people-oriented operational and management philosophy and the strategic development
goals determined in accordance with the “Twelfth Five-Year Plan”, the Company formulated its 2012
staff training plan, which is based on the Company’s education and training system and management
system framework and has taken into account the dual demands of the Company’s development and
employees’ development. Annual training work was carried out based on the model of managing by
class, level and category, and effectively covered the staff of all levels including operational management
and professional technical teams. Based on the dual dimensions of basic theory and skills training, and
relying on a combination of internal and external lecturers, strong support from training resources and
diversified education and training tools, annual training helps the Company to achieve its operational and
management goals, as well as the common development of employees and the Company. In 2012, through
the implementation of a series of targeted training programs, the Company’s education and training
department promoted relevant work of the Company in risk prevention, customer service, market expansion,
management improvement, team building and cultural cultivation.
62
China Life Insurance Company Limited Annual Report 2012
Corporate Governance
OVERVIEW OF CORPORATE GOVERNANCE
The Company implements good corporate governance policies and strongly believes that through fostering sound
corporate governance, further enhancing its transparency and establishing effective system of accountability, the
Company can operate in a more systematic manner, make decisions in a more scientific way, and boost the confidence of
investors.
(I) Summary of corporate governance
Shareholders’
General Meeting
Board
Supervisory
Committee
Audit Committee
Nomination and
Remuneration
Committee
Risk
Management
Committee
Strategy and
Investment Decision
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, enhance its transparency and actively serve the interest of public investors so as to enhance
its image and position in the capital market.
1.
The Company has set up a corporate governance structure with well-defined duties and responsibilities
strictly in accordance with relevant laws, regulations and regulatory requirements, including the Company
Law and the Securities Law of the PRC. The corporate governance structure of the Company generally meets
the regulatory requirements of its listed jurisdictions. The Company has carried out its corporate governance
procedures strictly in accordance with relevant laws, regulations and regulatory requirements, including the
Company Law and the Securities Law of the PRC, as well as the requirements of its Articles of Association
and procedural rules. Shareholders’ general meetings, Board meetings and Supervisory Committee meetings
of the Company have been functioning independently and coordinately.
63
China Life Insurance Company Limited Annual Report 2012
Corporate Governance
2. During the Reporting Period, the Company has successfully completed the election of the new sessions
of the Board and the Supervisory Committee in accordance with the regulatory requirements of its listed
jurisdictions and its Articles of Association. The Company strictly carried out the relevant procedures. Based
on opinions collected from various channels and the strict selection criteria, and after careful deliberation
of the Company, members of the fourth session of the Board and the fourth session of the Supervisory
Committee have been elected at the shareholders’ general meeting and the employee representative meeting
of the Company.
3.
4.
5.
6.
In accordance with the requirements of its listed jurisdictions and relevant provisions of its Articles of
Association, the Company has continuously improved the decision-making mechanism of the Board. The
Board is accountable to shareholders of the Company with respect to the assets and resources entrusted to
it by the shareholders 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 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. By setting up mechanisms including regular reporting of
business development strategy and marketing tactics, the management of the Company can periodically
report the business operation, development strategies and marketing tactics to the Board, which provides a
basis for the decision-making of the Board.
The Company has actively promoted the establishment of corporate governance, continuously improved
its corporate governance structure and enhanced its scientific decision-making ability. In order to improve
the decision-making efficiency of the specialized Board committees, the fourth session of the Board has set
up four specialized Board committees, including the Audit Committee, the Nomination and Remuneration
Committee, the Risk Management Committee, and the Strategy and Investment Decision 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 the Board’s
consideration, and deal with matters entrusted or authorized by the Board, for the purpose of improving the
Board’s efficiency and capabilities.
The Supervisory Committee of the Company has carried out its work and performed its duties in accordance
with the Articles of Association and the Procedural Rules for Supervisory Committee Meetings. Members
of the Supervisory Committee attended the shareholders’ general meetings and the Supervisory Committee
meetings, participated in the Board meetings, respectively participated in the meetings of the specialized
Board committees based on their work allocation, and conducted investigations on local branches to have
an in-depth understanding of the implementation of the decisions made by the Board, so as to diligently
perform their supervisory role.
The Company has made information disclosure in a timely, open and transparent manner pursuant to the
requirements of the listing rules of its listed jurisdictions. The Company has continuously improved its
management of investor relations and enhanced its communication with investors, thus ensuring that all
shareholders enjoy equal rights and have access to information about the Company in an open, fair, true and
accurate manner.
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China Life Insurance Company Limited Annual Report 2012
Corporate Governance
7.
The Board and Supervisory Committee of the Company conducted extensive investigation and research
activities. Members of the Board carried out investigation and research in Anhui Province and Jiangxi
Province, which enabled them to have a deeper understanding of the operations management, financial
management, internal control and internal audit of the Company’s local branches, and to examine the
implementation of the operational decisions made by the Board at a local level. Members of the Supervisory
Committee carried out investigation and research on local branches of the Company in Fujian Province,
exchanged ideas with employees of the local branches and conducted special projects on topics of business
development and risk management and control, thus further improving their performance of duties.
8. Directors and Supervisors of the Company actively attended various training courses. They attended
regulatory training courses organized by the CIRC and the Beijing Securities Regulatory Bureau for
directors, supervisors and senior management and the training courses organized by the Hong Kong Institute
of Chartered Secretaries; they also attended training courses organized by the Company in relation to the
performance of duties for new Directors and Supervisors, the new system of disclosure of price sensitive
information in Hong Kong and the comprehensive risk management strategies; Directors, Supervisors and
the management have referred to the handbooks on regulatory systems of the Company’s listed jurisdictions
on a regular basis, thus ensuring that the Board, the Supervisory Committee and the management keep
abreast of the latest regulatory development in a timely manner.
(II) Development of the corporate governance system
Relevant amendments to the Listing Rules and the Corporate Governance Code of the HKSE became effective
in 2012. Based on such amendments, the Company studied and made amendments to the “Procedural Rules for
Board Meetings”, the “Procedural Rules for Supervisory Committee Meetings”, the “Procedural Rules for Audit
Committee Meetings” and the “Procedural Rules for Nomination and Remuneration Committee Meetings”, and
published the “Procedures for Shareholders to Propose a Person for Election as a Director” and the “Shareholders
Communication Policy” on its website. For the purposes of further promoting the management of information
disclosure and inside information, the Company, having taken into account the requirements of the CSRC and
the Beijing Securities Regulatory Bureau and its own practice, amended the “Measures for the Administration
of Persons Who Have Knowledge of Inside Information”, which was examined and approved at the seventeenth
meeting of the third session of the Board, so as to standardize the workflow for the management of inside
information and improve the information disclosure system. In accordance with the relevant requirements of the
“Notice on Issues Concerning Further Implementation of Cash Dividends Distribution of Listed Companies”
issued by the CSRC, the Company considered and approved the “Proposal Concerning Amendments to the
Articles of Association” at the second meeting of the fourth session of the Board held on 28 August 2012, thereby
further defining its profit distribution policy and its business scope. The relevant amendments were considered and
approved at the First Extraordinary General Meeting 2013 held on 19 February 2013.
65
China Life Insurance Company Limited Annual Report 2012
Corporate Governance
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.
1.
Shareholders’ general meetings convened during the Reporting Period are as follows:
Session of the meeting
Date of the meeting
Index for websites on which
resolutions were published
Date of publication
of resolutions
2011 Annual General
Meeting
22 May 2012
First Extraordinary
General Meeting 2012
10 July 2012
http://www.sse.com.cn
http://www.hkexnews.hk
http://www.e-chinalife.com
http://www.sse.com.cn
http://www.hkexnews.hk
http://www.e-chinalife.com
23 May 2012
11 July 2012
The following resolutions were considered and approved by open ballot at the 2011 Annual General Meeting:
Proposal in relation to the Report of the Board of Directors of the Company for the Year 2011, Proposal in
relation to the Report of the Supervisory Committee of the Company for the Year 2011, Proposal in relation
to the Financial Report of the Company for the Year 2011, Proposal in relation to the Profit Distribution Plan
of the Company for the Year 2011, Proposal in relation to the Remuneration of Directors and Supervisors of
the Company, Proposal in relation to the Remuneration of Auditors of the Company for the Year 2011 and the
Appointment of Auditors of the Company for the Year 2012, Proposal in relation to the Issue of Debt Financing
Instruments, Proposal in relation to the Amendments to the “Articles of Association of China Life Insurance
Company Limited”, Proposal in relation to the Amendments to the “Procedural Rules for the Board of Directors
Meetings of China Life Insurance Company Limited”, Proposal in relation to the Amendments to the “Procedural
Rules for Supervisory Committee Meetings of China Life Insurance Company Limited”, and Proposal in relation
to the Election of Mr. Yang Mingsheng as an Executive Director of the Company.
66
China Life Insurance Company Limited Annual Report 2012
Corporate Governance
The following resolutions were considered and approved by open ballot at the First Extraordinary General
Meeting 2012: Proposal in relation to the Election of Mr. Yang Mingsheng as an Executive Director of the
Fourth Session of the Board of Directors of the Company, Proposal in relation to the Election of Mr. Wan Feng
as an Executive Director of the Fourth Session of the Board of Directors of the Company, Proposal in relation to
the Election of Mr. Lin Dairen as an Executive Director of the Fourth Session of the Board of Directors of the
Company, Proposal in relation to the Election of Ms. Liu Yingqi as an Executive Director of the Fourth Session
of the Board of Directors of the Company, Proposal in relation to the Election of Mr. Miao Jianmin as a Non-
executive Director of the Fourth Session of the Board of Directors of the Company, Proposal in relation to the
Election of Mr. Zhang Xiangxian as a Non-executive Director of the Fourth Session of the Board of Directors of
the Company, Proposal in relation to the Election of Mr. Wang Sidong as a Non-executive Director of the Fourth
Session of the Board of Directors of the Company, Proposal in relation to the Election of Mr. Sun Changji as an
Independent Director of the Fourth Session of the Board of Directors of the Company, Proposal in relation to the
Election of Mr. Bruce Douglas Moore as an Independent Director of the Fourth Session of the Board of Directors
of the Company, Proposal in relation to the Election of Mr. Anthony Francis Neoh as an Independent Director
of the Fourth Session of the Board of Directors of the Company, Proposal in relation to the Election of Ms. Xia
Zhihua as a Shareholder Representative Supervisor of the Fourth Session of the Supervisory Committee of the
Company, Proposal in relation to the Election of Mr. Shi Xiangming as a Shareholder Representative Supervisor
of the Fourth Session of the Supervisory Committee of the Company, Proposal in relation to the Election of Mr.
Tang Jianbang as an Independent Director of the Fourth Session of the Board of Directors of the Company, and
Proposal in relation to the Election of Mr. Luo Zhongmin as an External Supervisor of the Fourth Session of the
Supervisory Committee of the Company.
2.
Attendance records of Directors at the shareholders’ general meetings convened during the Reporting Period:
Number of
shareholders’
Name of Director
Type of Director
Yang Mingsheng
Yuan Li
Wan Feng
Lin Dairen
Liu Yingqi
Miao Jianmin
Zhang Xiangxian
Shi Guoqing
Zhuang Zuojin
Wang Sidong
Ma Yongwei
Sun Changji
Bruce Douglas Moore
Anthony Francis Neoh
Tang Jianbang
Executive Director
Executive Director
Executive Director
Executive Director
Executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
general meetings Number of Number of Number of
the Director was
required to attend
during the year
meetings
meetings
physically attended by
telephony
attended
meetings Number of
attended
by proxies
absent
meetings Attendance
rate
1
1
2
2
2
2
/
1
1
/
2
2
2
2
/
0
0
2
1
2
1
/
1
1
/
0
1
1
1
/
0
0
0
0
0
0
/
0
0
/
0
0
0
0
/
1 Note 1
1 Note 2
0
0
0
0
/
0
0
/
0
0
1 Note 3
0
/
0
0
0
1
0
1
/
0
0
/
2
1
0
1
/
0
0
100%
50%
100%
50%
/
100%
100%
/
0
50%
50%
50%
/
67
China Life Insurance Company Limited Annual Report 2012
Corporate Governance
Notes:
1.
At the First Extraordinary General Meeting 2012 held on 10 July 2012, Mr. Yang Mingsheng, the Chairman of the
Board, gave written authorization for Mr. Wan Feng, an Executive Director, to act as presider of the meeting;
2.
At the 2011 Annual General Meeting held on 22 May 2012, Mr. Yuan Li, the Chairman of the Board, gave written
authorization for Mr. Wan Feng, an Executive Director, to act as presider of the meeting;
3.
At the 2011 Annual General Meeting held on 22 May 2012, Mr. Bruce Douglas Moore, the Chairman of the Audit
Committee, gave written authorization for Mr. Sun Changji, an Independent Director, to act as his proxy to attend the
meeting.
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, improving the Company’s corporate governance policies, 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, arranging for Directors and
senior management to attend various training courses, attaching importance to the enhancement of their professional
quality, reviewing the compliance policies of the Company, and assessing the internal control systems 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 the specialized Board committees of which they are members, providing opinions at meetings of the Board
and the specialized 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 22 May 2012, Mr. Yuan Li, the former Chairman of the Board, tendered his resignation as the Chairman and
Executive Director due to reallocation to other job duties. Mr. Shi Guoqing and Ms. Zhuang Zuojin, the former Non-
executive Directors of the Company, tendered their resignations as the Non-executive Directors due to age. On the same
date, Mr. Yang Mingsheng was elected as an Executive Director at the 2011 Annual General Meeting. At the nineteenth
meeting of the third session of the Board, Mr. Yang Mingsheng was elected as the Chairman of the third session of the
Board.
On 10 July 2012, the term of office of Mr. Ma Yongwei ended on the expiry of the term of the third session of the
Board, and he retired as Director of the Company at the conclusion of the First Extraordinary General Meeting 2012.
On the same date, Mr. Yang Mingsheng, Mr. Wan Feng, Mr. Lin Dairen and Ms. Liu Yingqi were elected as the
Executive Directors of the fourth session of the Board, Mr. Miao Jianmin, Mr. Zhang Xiangxian and Mr. Wang Sidong
were elected as the Non-executive Directors of the fourth session of the Board, and Mr. Sun Changji, Mr. Bruce Douglas
Moore, Mr. Anthony Francis Neoh and Mr. Tang Jianbang were elected as the Independent Directors of the fourth
session of the Board at the First Extraordinary General Meeting 2012.
68
China Life Insurance Company Limited Annual Report 2012
Corporate Governance
On 25 July 2012, Mr. Yang Mingsheng was elected as the Chairman of the fourth session of the Board and the
composition of all specialized Board committees was determined at the first meeting of the fourth session of the
Board. At present, the Board comprises 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 and the requirement that at least one-third of the Board be represented by Independent Directors
under the Listing Rules of the HKSE. All members of the Board have devoted sufficient time in dealing with the affairs
of the Board and attended the relevant training courses organized by regulatory authorities and the Company according
to regulatory requirements. They have referred to regulatory documents on a regular basis so as to keep themselves
informed of the regulatory development in a timely manner. 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. Yang Mingsheng and the President, Mr. Wan Feng).
In 2012, all Executive Directors and Non-executive Directors of the Company attended training courses organized by
the Beijing Securities Regulatory Bureau for directors and supervisors of listed companies in 4 batches. All Directors
of the fourth session of the Board also attended training courses organized by the Company on topics covering the
regulatory requirements of the Company’s listed jurisdictions, the directors’ duties and the new system of disclosure of
price sensitive information in Hong Kong. Members of the Risk Management Committee of the fourth session of the
Board attended a training course organized by the Company on the topic of comprehensive risk management strategies.
In 2012, 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 SSE
and 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.
Meetings of the Board are held both on a regular and an ad-hoc basis. Regular meetings are convened at least four times
a year for the examination and approval of proposals, such as annual report, interim report, first quarter and third
quarter reports and related financial reports, and major business operations of the year. Meetings are convened by the
Chairman and a notice is given to all Directors 14 days before such meetings. Agendas and related documents are sent
to the Directors at least three days prior to such meetings. In 2012, 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 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.
69
China Life Insurance Company Limited Annual Report 2012
Corporate Governance
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 Board Secretary and the Company 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 comment upon by any Director.
1. Meetings and attendance
In 2012, 4 Board meetings were held by the third session of the Board, of which 1 was physical meeting and 3
were combined physical and telephony meetings. The attendance records of individual Directors are as follows:
Number of
meetings the
Director was
required to
attend during
the year
Number of
meetings
physically
attended
Number of
meetings
attended by
telephony
Number of
meetings
attended
by proxies
Number of
meetings
absent
Whether the
Director failed
to attend two
consecutive
meetings
in person
Attendance
rate
1
3
4
4
4
4
3
3
4
4
4
4
1
1
4
3
4
3
2
3
3
4
3
2
0
0
0
0
0
0
0
0
0
0
1 Note 6
2 Note 7
0
2 Note 1
0
1 Note 2
0
1 Note 3
1 Note 4
0
1 Note 5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
100%
33%
100%
75%
100%
75%
67%
100%
75%
100%
100%
100%
No
Yes
No
No
No
No
No
No
No
No
No
No
Name of Director
Type of Director
Executive Director
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
Yang Mingsheng
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:
1.
At the seventeenth meeting of the third session of the Board held on 26 March 2012 and the eighteenth meeting of the
third session of the Board held on 25 April 2012, Mr. Yuan Li, Chairman of the Board, gave written authorization for Mr.
Miao Jianmin to act as his proxy to attend and vote at the meetings;
2.
At the nineteenth meeting of the third session of the Board held on 22 May 2012, 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 nineteenth meeting of the third session of the Board held on 22 May 2012, Mr. Miao Jianmin gave written
authorization for Ms. Liu Yingqi to act as his proxy to attend and vote at the meeting;
4.
At the eighteenth meeting of the third session of the Board held on 25 April 2012, Mr. Shi Guoqing gave written
authorization for Ms. Zhuang Zuojin to act as his proxy to attend and vote at the meeting;
70
China Life Insurance Company Limited Annual Report 2012
Corporate Governance
5.
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;
6.
At the nineteenth meeting of the third session of the Board held on 22 May 2012, Mr. Bruce Douglas Moore attended the
meeting by way of telephony;
7.
At the sixteenth meeting of the third session of the Board held on 5 January 2012 and the eighteenth meeting of the third
session of the Board held on 25 April 2012, Mr. Anthony Francis Neoh attended the meetings by way of telephony.
In 2012, 4 Board meetings were held by the fourth session of the Board, of which 3 were physical meetings and 1
was combined physical and telephony meeting. The attendance records of individual Directors are as follows:
Number of
meetings the
Director was
required to
attend during
the year
Number of
meetings
physically
attended
Number of
meetings
attended by
telephony
Number of
meetings
attended
by proxies
Number of
meetings
absent
Whether the
Director failed
to attend two
consecutive
meetings
in person
Attendance
rate
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
2
4
3
4
3
3
4
0
0
0
0
0
0
0
0
0
1 Note 4
0
0
0
0
0
2 Note 1
0
1 Note 2
0
1 Note 3
0
0
0
0
0
0
0
0
0
0
0
0
0
100%
100%
100%
100%
50%
100%
75%
100%
75%
100%
100%
No
No
No
No
Yes
No
No
No
No
No
No
Name of Director
Type of Director
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
Yang Mingsheng
Wan Feng
Lin Dairen
Liu Yingqi
Miao Jianmin
Zhang Xiangxian
Wang Sidong
Sun Changji
Bruce Douglas Moore
Anthony Francis Neoh
Tang Jianbang
Notes:
1.
At the first meeting of the fourth session of the Board held on 25 July 2012, Mr. Miao Jianmin gave written authorization
for Ms. Liu Yingqi to act as his proxy to attend and vote at the meeting; at the second meeting of the fourth session of the
Board held on 28 August 2012, Mr. Miao Jianmin gave written authorization for Mr. Wang Sidong to act as his proxy to
attend and vote at the meeting;
2.
At the first meeting of the fourth session of the Board held on 25 July 2012, Mr. Wang Sidong gave written authorization
for Mr. Zhang Xiangxian to act as his proxy to attend and vote at the meeting;
3.
At the first meeting of the fourth session of the Board held on 25 July 2012, Mr. Bruce Douglas Moore gave written
authorization for Mr. Anthony Francis Neoh to act as his proxy to attend and vote at the meeting;
4.
At the second meeting of the fourth session of the Board held on 28 August 2012, Mr. Anthony Francis Neoh attended
the meeting by way of telephony.
71
China Life Insurance Company Limited Annual Report 2012
Corporate Governance
From the end of year 2012 up to the Latest Practicable Date (i.e. 27 March 2013), 2 Board meetings were held.
The attendance records of individual Directors are as follows:
Number of
meetings the
Director was
required to
attend
Number of
meetings
physically
attended
Number of
meetings
attended by
telephony
Number of
meetings
attended
by proxies
Number of
meetings
absent
Whether the
Director failed
to attend two
consecutive
meetings
in person
Attendance
rate
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
1
2
1
2
1
1
2
0
0
0
0
0
0
0
0
1 Note 3
1 Note 4
0
0
0
0
0
1 Note 1
0
1 Note 2
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
100%
100%
100%
100%
50%
100%
50%
100%
100%
100%
100%
No
No
No
No
No
No
No
No
No
No
No
Name of Director
Type of Director
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
Yang Mingsheng
Wan Feng
Lin Dairen
Liu Yingqi
Miao Jianmin
Zhang Xiangxian
Wang Sidong
Sun Changji
Bruce Douglas Moore
Anthony Francis Neoh
Tang Jianbang
Notes:
1.
At the sixth meeting of the fourth session of the Board held on 27 March 2013, Mr. Miao Jianmin gave written
authorization for Mr. Wan Feng to act as his proxy to attend and vote at the meeting;
2.
At the sixth meeting of the fourth session of the Board held on 27 March 2013, Mr. Wang Sidong gave written
authorization for Mr. Zhang Xiangxian to act as his proxy to attend and vote at the meeting;
3.
At the fifth meeting of the fourth session of the Board held on 25 February 2013, Mr. Bruce Douglas Moore attended the
meeting by way of telephony;
4.
At the fifth meeting of the fourth session of the Board held on 25 February 2013, Mr. Anthony Francis Neoh attended
the meeting by way of telephony.
2. Performance of duties by Independent Directors
In 2012, 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.
72
China Life Insurance Company Limited Annual Report 2012
Corporate Governance
All Independent Directors diligently fulfilled their responsibilities and faithfully performed their duties by
attending meetings of the Board and the specialized Board committees in 2012, 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, and expressing their opinions
and exercising their functions and powers at Board meetings, thus actively performing their duties as Independent
Directors in an effective manner. The Board attached great importance to opinions and advice from Independent
Directors, actively strengthened its communication with them and adopted their advice after careful deliberation
and discussion.
In 2012, 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 formed the basis of their
scientific and prudent decisions.
In 2012, the Independent Directors of the Company carried out investigation and research on local branches
of the Company in Jiangxi Province and Anhui Province 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.
CHAIRMAN AND PRESIDENT
On 22 May 2012, Mr. Yuan Li, the former Chairman of the Board, tendered his resignation as the Chairman and
Executive Director due to reallocation to other job duties. On the same date, Mr. Yang Mingsheng was elected as an
Executive Director at the 2011 Annual General Meeting. At the nineteenth meeting of the third session of the Board,
Mr. Yang Mingsheng was elected as the Chairman of the third session of the Board. On 25 July 2012, Mr. Yang
Mingsheng was elected as the Chairman of the fourth session of the Board at the first meeting of the fourth 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 Chairmen of Board committees to answer questions raised by shareholders, signing securities
issued by the Company and other important documents, providing leadership for the Board to ensure that the Board
works effectively and performs its responsibilities, encouraging all Directors to make a full and active contribution to the
Board’s affairs, promoting a culture of openness and debate, convening special meetings with Non-executive Directors
and Independent Directors, and exercising other rights conferred on him by the Board. The Chairman is accountable to
and reports to the Board. Mr. Wan Feng is 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.
73
China Life Insurance Company Limited Annual Report 2012
Corporate Governance
SUPERVISORY COMMITTEE
Pursuant to the Company Law 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 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; 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.
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.
The third session of the Supervisory Committee of the Company comprised 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. In accordance with the Company Law, the Articles of Association and the relevant regulatory requirements,
the term of the third session of the Supervisory Committee expired in 2012. The Company elected the fourth session
of the Supervisory Committee strictly in accordance with the regulatory requirements. The fourth session of the
Supervisory Committee of the Company comprises Ms. Xia Zhihua, Mr. Shi Xiangming, Mr. Luo Zhongmin, Ms.
Yang Cuilian and Mr. Li Xuejun, 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. Luo Zhongmin are
Non-employee Representative Supervisors, and Ms. Yang Cuilian and Mr. Li Xuejun are Employee Representative
Supervisors.
1. Meetings and attendance
In 2012, 4 meetings were held by the third session of the Supervisory Committee. Attendance records of
individual Supervisors are as follows:
Name of Supervisor
Number of meetings attended
Attendance rate
Xia Zhihua
Shi Xiangming
Yang Hong
Wang Xu
Tian Hui
74
4/4
4/4
4/4
4/4
4/4
100%
100%
100%
100%
100%
China Life Insurance Company Limited Annual Report 2012
Corporate Governance
In 2012, 4 meetings were held by the fourth session of the Supervisory Committee. Attendance records of
individual Supervisors are as follows:
Name of Supervisor
Number of meetings attended
Attendance rate
Xia Zhihua
Shi Xiangming
Luo Zhongmin
Yang Cuilian
Li Xuejun
Notes:
4/4
3/4 Note 1
3/4 Note 2
4/4
4/4
100%
75%
75%
100%
100%
1.
At the fourth meeting of the fourth session of the Supervisory Committee held on 21 December 2012, Mr. Shi Xiangming
gave written authorization for Mr. Li Xuejun to act as his proxy to attend and vote at the meeting;
2.
At the third meeting of the fourth session of the Supervisory Committee held on 26 October 2012, Mr. Luo Zhongmin
gave written authorization for Mr. Li Xuejun to act as his proxy to attend and vote at the meeting.
From the end of the year 2012 up to the Latest Practicable Date, the Supervisory Committee convened 1 meeting.
Attendance records of individual Supervisors are as follows:
Name of Supervisor
Number of meetings attended
Attendance rate
Xia Zhihua
Shi Xiangming
Luo Zhongmin
Yang Cuilian
Li Xuejun
1/1
1/1
1/1
1/1
1/1
100%
100%
100%
100%
100%
2. The Supervisory Committee had no objection in respect of the matters under its supervision
during the Reporting Period.
3. Activities of the Supervisory Committee during the Reporting Period
For the activities of the Supervisory Committee during the Reporting Period, please refer to the “Report of the
Supervisory Committee” in this annual report.
AUDIT COMMITTEE
The Company established its Audit Committee on 30 June 2003. In 2012, 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. On 25 July 2012, it was
determined at the first meeting of the fourth session of the Board that the Audit Committee of the fourth session of the
Board comprises Mr. Bruce Douglas Moore, Mr. Sun Changji and Mr. Tang Jianbang, with Mr. Bruce Douglas Moore
acting as the Chairman.
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Corporate Governance
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, and recommend the engagement or replacement
of external auditors. The Audit Committee is also responsible for communications between the internal and external
auditors and the establishment of the internal reporting mechanism of the Company.
1. Meetings and attendance
In 2012, 2 meetings were held by the Audit Committee of the third session of the Board. 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
2/2
2/2
1/2 Note
100%
100%
50%
Note: At the fifteenth meeting of the Audit Committee of the third session of the Board held on 24 April 2012, Mr. Sun
Changji gave written authorization for Mr. Ma Yongwei to act as his proxy to attend and vote at the meeting.
In 2012, 3 meetings were held by the Audit Committee of the fourth session of the Board. Attendance records of
individual members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Bruce Douglas Moore
Sun Changji
Tang Jianbang
Independent Director, Chairman of the Audit
Committee of the fourth session of the Board
Independent Director, member of the Audit
Committee of the fourth session of the Board
Independent Director, member of the Audit
Committee of the fourth session of the Board
3/3
3/3
3/3
100%
100%
100%
From the end of the year 2012 up to the Latest Practicable Date, the Audit Committee of the fourth session of the
Board convened 1 meeting. Attendance records of individual members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Bruce Douglas Moore
Sun Changji
Tang Jianbang
Independent Director, Chairman of the Audit
Committee of the fourth session of the Board
Independent Director, member of the Audit
Committee of the fourth session of the Board
Independent Director, member of the Audit
Committee of the fourth session of the Board
1/1
1/1
1/1
100%
100%
100%
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Corporate Governance
2. Performance of duties by the Audit Committee
(1) Reviewing and approving the “Proposal on the 2011 Financial Report”, the “Proposal on the Financial
Report for the First Quarter of 2012”, the “Proposal on the 2012 Interim Report”, the “Proposal on the
Financial Report for the Third Quarter of 2012” and the “Proposal on the 2012 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 2012 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 2011 Audit Results”,
the “Report on the Results of Agreed-upon Procedures Performed in relation to the First Quarter of 2012”,
the “Preliminary Report on the 2012 Audit Plan”, the “Report on the Review Results of the 2012 Interim
Report” and the “Report on the Results of Agreed-upon Procedures Performed in relation to the Third
Quarter of 2012”; and reporting to the Board the “Proposal in relation to Auditors’ Remuneration for
2012”.
(3)
Selecting and appointing auditors for the year 2013, reviewing and approving the “Proposal in relation to
the Selection and Appointment of Auditors of the Company for the Year 2013”; listening to the “Report on
the Progress of the Selection and Appointment of Auditors of the Company for the Year 2013”; listening
to the report on the independence of the proposed auditor, Ernst & Young, pursuant to Rule 3526 of the
Public Company Accounting Oversight Board (“PCAOB”); reviewing, approving and submitting to the
Board the “Proposal in relation to the Appointment of Auditors of the Company for the Year 2013”, and
making recommendation on the appointment of Ernst & Young Hua Ming LLP and Ernst & Young as the
PRC auditor and the international auditor of the Company for the year 2013, respectively.
(4) Examining the internal audit functions of the Company; reviewing proposals including the “2011 Internal
Audit Summary and the 2012 Internal Audit Work Plan” and the “Internal Audit Summary for the First
Half of 2012, Internal Audit Work Plan for the Second Half of 2012 and 2012 Budget of Operating
Costs” in order to facilitate the communication between the Company’s internal audit department and the
independent auditors.
(5) Monitoring the Company’s internal control function; reviewing the “Proposal concerning the Report
on Internal Control Assessments of the Company” and the “Proposal concerning the Work Plan of the
2012 Internal Control Assessment” pursuant to Section 404 of the U.S. Sarbanes-Oxley Act; listening to
the “Report on the Internal Control Assessments for the First Half of 2012” and the “Report on Issues
Identified in the 2012 Internal Control Assessment and Audit and the Implementation of Improvements”.
(6) Reviewing the “Proposal concerning the Compliance Report of the Company for 2011” and the “Proposal
concerning the 2011 Audit Report of Connected Transactions”, and listening to the “Report on Compliance
for the First Half of 2012” pursuant to the relevant requirements of the CIRC and the SSE; reviewing the
report on the list of connected parties of the Company and submitting a report relating thereto to the Board
and the Supervisory Committee.
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Corporate Governance
(7)
Sending members of the Audit Committee to branch companies in Anhui Province to conduct investigation
and research, including visiting local branches of the Company, examining their financial practices and
inspecting their internal control and audit relating to finance, thereby understanding the overall operations
and management of the Company and the development of its counter and back office support, and
monitoring the implementation of the Board resolutions.
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. On 25 July 2012, it was determined at the first meeting of
the fourth session of the Board that the Nomination and Remuneration Committee of the fourth session of the Board
comprises Mr. Sun Changji, Mr. Bruce Douglas Moore and Mr. Miao Jianmin, 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 Nomination and Remuneration Committee determines, with delegated responsibility, the remuneration packages of
all Executive Directors and senior management officers. The fixed salary of the Executive Directors and other members
of senior management is 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.
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Corporate Governance
1. Meetings and attendance
In 2012, 3 meetings were held by the Nomination and Remuneration Committee of the third session of the Board.
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
Notes:
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
3/3
100%
3/3 Note 1
100%
2/3 Note 2
67%
1.
At the eighth meeting of the Nomination and Remuneration Committee of the third session of the Board held on 22 May
2012, Mr. Bruce Douglas Moore attended the meeting by way of telephony;
2.
At the eighth meeting of the Nomination and Remuneration Committee of the third session of the Board held on 22 May
2012, Mr. Miao Jianmin gave written authorization for Mr. Sun Changji to act as his proxy to attend and vote at the
meeting.
In 2012, the Nomination and Remuneration Committee of the fourth session of the Board did not convene any
meeting. From the end of the year 2012 up to the Latest Practicable Date, the Nomination and Remuneration
Committee of the fourth session of the Board 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 fourth session of the Board
Independent Director, member of the
Nomination and Remuneration Committee
of the fourth session of the Board
Non-executive Director, member of the
Nomination and Remuneration Committee
of the fourth session of the Board
1/1
1/1
100%
100%
0/1 Note
0
Note: At the first meeting of the Nomination and Remuneration Committee of the fourth session of the Board held on 27
March 2013, Mr. Miao Jianmin gave written authorization for Mr. Sun Changji to act as his proxy to attend and vote at
the meeting.
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Corporate Governance
2. Performance of duties by the Nomination and Remuneration Committee
In 2012, the Nomination and Remuneration Committee of the third session of the Board convened three
meetings, and performed its relevant duties and functions strictly in accordance with the “Procedural Rules for
Nomination and Remuneration Committee Meetings”. Based on the amendments to the Listing Rules and the
CG Code of the HKSE, the Nomination and Remuneration Committee studied and made amendments to the
“Procedural Rules for Nomination and Remuneration Committee Meetings” and published the “Procedures for
Shareholders to Propose a Person for Election as a Director” on its website. The Nomination and Remuneration
Committee carefully reviewed the structure of the Board, its number of members and composition, selected and
recommended Director candidates of the fourth session of the Board, fully reviewed the professional qualifications
and industrial background of the Director candidates and the members of the specialized Board committees, and
the independence of the Independent Directors, carefully examined and determined the remuneration packages
of all Executive Directors and senior management officers, approved the terms of service contracts between the
Company and each of the Executive Directors, Non-executive Directors and Independent Directors and pushed
forward the signing of service contracts between the Company and all Directors, defined the rights, obligations
and remunerations of Directors, and appraised the performance of Directors in the discharge of their duties.
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. On 25 July 2012, it was determined at the first
meeting of the fourth session of the Board that the Risk Management Committee of the fourth session of the Board
comprises Mr. Anthony Francis Neoh, an Independent Director, Mr. Zhang Xiangxian, a Non-executive Director, and
Ms. Liu Yingqi, an Executive Director, with Mr. Anthony Francis Neoh acting as the Chairman of the committee.
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Corporate Governance
1. Meetings and attendance
In 2012, 2 meetings were held by the Risk Management Committee of the third session of the Board. 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
2/2 Note
100%
2/2
100%
2/2
100%
Note: At the tenth meeting of the Risk Management Committee of the third session of the Board held on 24 April 2012, Mr.
Anthony Francis Neoh attended the meeting by way of telephony.
In 2012, 2 meetings were held by the Risk Management Committee of the fourth session of the Board. Attendance
records of individual members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Anthony Francis Neoh
Zhang Xiangxian
Liu Yingqi
Independent Director, Chairman of the Risk
Management Committee of the fourth
session of the Board
Non-executive Director, member of the Risk
Management Committee of the fourth
session of the Board
Executive Director, member of the Risk
Management Committee of the fourth
session of the Board
2/2 Note
100%
2/2
100%
2/2
100%
Note: At the first meeting of the Risk Management Committee of the fourth session of the Board held on 28 August 2012, Mr.
Anthony Francis Neoh attended the meeting by way of telephony.
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Corporate Governance
From the end of the year 2012 up to the Latest Practicable Date, the Risk Management Committee of the fourth
session of the Board convened 1 meeting. Attendance records of individual members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Anthony Francis Neoh
Zhang Xiangxian
Liu Yingqi
Independent Director, Chairman of the Risk
Management Committee of the fourth
session of the Board
Non-executive Director, member of the Risk
Management Committee of the fourth
session of the Board
Executive Director, member of the Risk
Management Committee of the fourth
session of the Board
1/1
1/1
1/1
100%
100%
100%
2. Performance of duties by the Risk Management Committee
In 2012, 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 on-site visits at local branches of the Company in Jiangxi Province in October 2012,
examined the risk management measures implemented by the local branches, and compiled investigation and
research reports containing advice and recommendations in relation to the strengthening of risk management.
In 2012, the Risk Management Committee convened four meetings, reviewed the “Proposal concerning the
2011 Comprehensive Risk Management Report of the Company” and the “Proposal concerning the Report on
the Progress of Risk Preference Projects and 2012 Risk Preference Statement”, listened to the investigation and
research report of the Risk Management Committee and the report on risk early-warning of the Company, and
provided training courses on comprehensive risk management strategies.
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. On 25 July 2012, it was determined at the first meeting of the fourth session of the Board that the
Strategy and Investment Decision Committee of the fourth session of the Board comprises Mr. Tang Jianbang, an
Independent Director, Mr. Wan Feng, an Executive Director, Mr. Wang Sidong, a Non-executive Director, Mr. Lin
Dairen, an Executive Director, and Mr. Anthony Francis Neoh, an Independent Director, with Mr. Tang Jianbang
acting as the Chairman.
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1. Meetings and attendance
In 2012, 3 meetings were held by the Strategy and Investment Decision Committee of the third session of the
Board. 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
2/3 Note 1
67%
3/3
100%
2/3 Note 2
67%
3/3
100%
3/3 Note 3
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 ninth meeting of the Strategy and Investment Decision Committee of the third session of the Board held on 24
April 2012, Mr. Shi Guoqing gave written authorization for Mr. Wan Feng to act as his proxy to attend and vote at the
meeting;
3.
At the seventh meeting of the Strategy and Investment Decision Committee of the third session of the Board held on 5
January 2012 and the ninth meeting of the Strategy and Investment Decision Committee of the third session of the Board
held on 24 April 2012, Mr. Anthony Francis Neoh attended the meetings by way of telephony.
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China Life Insurance Company Limited Annual Report 2012
Corporate Governance
In 2012, 2 meetings were held by the Strategy and Investment Decision Committee of the fourth session of the
Board. Attendance records of individual members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Tang Jianbang
Wan Feng
Wang Sidong
Lin Dairen
Anthony Francis Neoh
Independent Director, Chairman of the Strategy
and Investment Decision Committee
of the fourth session of the Board
Executive Director, member of the Strategy
and Investment Decision Committee
of the fourth session of the Board
Non-executive Director, member of the Strategy
and Investment Decision Committee
of the fourth session of the Board
Executive Director, member of the Strategy
and Investment Decision Committee
of the fourth session of the Board
Independent Director, member of the Strategy
and Investment Decision Committee
of the fourth session of the Board
2/2
2/2
2/2
2/2
2/2
100%
100%
100%
100%
100%
From the end of the year 2012 up to the Latest Practicable Date, the Strategy and Investment Decision Committee
of the fourth session of the Board convened 2 meetings. Attendance records of individual members are as follows:
Name of member
Position
Number of meetings attended
Attendance rate
Tang Jianbang
Wan Feng
Wang Sidong
Lin Dairen
Anthony Francis Neoh
Independent Director, Chairman of the Strategy
and Investment Decision Committee
of the fourth session of the Board
Executive Director, member of the Strategy
and Investment Decision Committee
of the fourth session of the Board
Non-executive Director, member of the Strategy
and Investment Decision Committee
of the fourth session of the Board
Executive Director, member of the Strategy
and Investment Decision Committee
of the fourth session of the Board
Independent Director, member of the Strategy
and Investment Decision Committee
of the fourth session of the Board
2/2
2/2
100%
100%
1/2 Note 1
50%
2/2
100%
2/2 Note 2
100%
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China Life Insurance Company Limited Annual Report 2012
Corporate Governance
Notes:
1.
At the fourth meeting of the Strategy and Investment Decision Committee of the fourth session of the Board held on 26
March 2013, Mr. Wang Sidong gave written authorization for Mr. Tang Jianbang to act as his proxy to attend and vote at
the meeting;
2.
At the third meeting of the Strategy and Investment Decision Committee of the fourth session of the Board held on 25
February 2013, Mr. Anthony Francis Neoh attended the meeting by way of telephony.
2. Performance of duties by the Strategy and Investment Decision Committee
In 2012, 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 2012, the Strategy
and Investment Decision Committee held five meetings and reviewed such matters as the “Proposal in relation
to the 2012 Entrusted Investment Guideline of the Company”, the “Proposal in relation to the Application for
the Authorization of Real Estate Investment Plan”, the “Proposal in relation to the Outline of Twelfth Five-Year
Plan of China Life Insurance Company Limited”, the “Proposal in relation to the Purchase of Properties of China
Life Investment Holding Company Limited”, the “Proposal in relation to the Application for the Authorization
of Investment in Equity Investment Funds for 2013”, the “Proposal in relation to the 2013 Self-used Real Estate
Investment Plan and its Authorization” and the “Proposal in relation to the Approval for Conducting Stock Index
Futures Trading Business”.
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.
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China Life Insurance Company Limited Annual Report 2012
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, performance target contracts 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 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, or the uncovered losses incurred amount to one-third of the Company’s total share capital,
or if the Board or the Supervisory Committee deems necessary, or more than half of the Directors (including at least
two Independent Directors) requests, or 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.
In accordance with the Articles of Association, when the Company convenes the shareholders’ general meeting,
shareholders individually or in aggregate holding 3% or more of the shares of the Company shall have the right to
submit proposals to the Company. The Company should include such matters that fall into the scope of the functions
and powers of the shareholders’ general meeting in the agenda of the meeting. Shareholders individually or in aggregate
holding 3% or more of the shares of the Company may submit provisional proposals in writing to the convenor sixteen
days prior to the shareholders’ general meeting. The provisional proposals shall fall into the scope of the functions and
powers of the shareholders’ general meeting and specify explicit topics and specific resolution matters.
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.
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China Life Insurance Company Limited Annual Report 2012
Corporate Governance
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 and continued to improve the quality of its information disclosure
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.
In 2012, the Company has continued to strengthen the construction of its information disclosure system and implement
the regulatory requirements relating to information disclosure in a practical manner: in accordance with the regulatory
requirements of the CSRC and the Beijing Securities Regulatory Bureau with respect to the establishment by listed
companies of well-developed systems of registration and administration of persons who have knowledge of inside
information, and having taken into account the implementation of its original systems, the Company amended and
issued the “Measures for the Administration of Persons Who Have Knowledge of Inside Information” to further
standardize its workflow for the management of inside information and broaden the scope of inside information
management. The Company strictly implemented the registration and filing procedures of persons who have knowledge
of inside information, thereby further improving its information disclosure system.
In 2012, the Company has continued to promote the innovation of its periodic reports. The Company fully considered
the needs of its shareholders and investors on information, actively studied and improved the method of disclosure of key
information, and extended the scope and depth of information disclosure so as to enable the shareholders and investors
to have a deeper understanding of the development strategies and business operations of the Company, thus further
enhancing the quality of information disclosure of periodic reports. The Company issued important announcements
in relation to its financial results with initiative and prudence, which ensured the shareholders and investors to obtain
timely and accurate information. The Company regularly organized training courses relating to information disclosure,
carried out timely study and promotion of new regulatory rules of its listed jurisdictions, strengthened its internal
information exchange, continuously improved its workflow for information disclosure and improved the quality of 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 2012, 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, delivering investor newsletters, establishing an investor relations hotline and an
exclusive electronic mailbox to ensure timely replies to any enquiries made by investors and investment analysts.
In 2012, the Company communicated with more than 2,700 investors and analysts through different channels,
including the reception at the Company of 161 groups of investors and analysts consisting of 850 individuals in total,
communicating with more than 1,300 investors by participating in 26 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.
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China Life Insurance Company Limited Annual Report 2012
Corporate Governance
In 2012, the Company was awarded the “Award for Information Disclosure of Listed Company in 2012” in the “Special
Awards for Corporate Governance in 2012” by the SSE, and the “Most Popular Website of Listed Companies Among
Investors (Financial Service Category)” and the “Best Commercial Platform Website” in the “Fourth Session of the
Election of the Outstanding Website of Listed Companies in China” held by the Securities Times. Ms. Liu Yingqi, Vice
President and Board Secretary of the Company, was awarded the “100 Best Board Secretaries of Companies Listed on
the Main Board of China in 2011” and the “Best Board Secretary for Investor Relations Management” in the “Election
of Most Valuable Listed Companies in China in 2011” and the “Fourth Session of the Election of the Outstanding
Website of Listed Companies in China” held by the Securities Times, respectively.
CHANGES OF THE ARTICLES OF ASSOCIATION
With the approval at the 2011 Annual General Meeting held on 22 May 2012, the Company made amendments to its
Articles of Association in relation to the establishment and composition of the specialized Board committees. These
amendments have been approved by the CIRC. For details of such amendments, please refer to the notice of 2011
Annual General Meeting of the Company and relevant meeting documents dated 5 April 2012.
With the approval at the First Extraordinary General Meeting 2013 held on 19 February 2013, the Company made a
number of amendments to its Articles of Association, including amending its business scope described in the Articles of
Association, adjusting the establishment and composition of the specialized Board committees, and defining its profit
distribution policy, in particular the details of its cash dividends distribution policy, in its Articles of Association in
accordance with the “Notice on Issues Concerning Further Implementation of Cash Dividends Distribution of Listed
Companies” issued by the CSRC and the “Notice on Issues Concerning Further Improvement of Cash Dividends
Distribution of Listed Companies” issued by the Beijing Securities Regulatory Bureau. These amendments will
become effective upon approval by the CIRC. For details of such amendments, please refer to the notice of the First
Extraordinary General Meeting 2013 of the Company and relevant meeting documents dated 24 December 2012.
88
China Life Insurance Company Limited Annual Report 2012
Internal Control
I
ESTABLISHMENT OF AN INTERNAL CONTROL SYSTEM
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 (2012 Edition)” to 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.
Pursuant to the requirements of the “Notice on the Proper Preparation of 2012 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 2012 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 2012 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,
the Company has completed internal control self-assessments in relation to the requirements of Section 404 of the
U.S. Sarbanes-Oxley Act and the SSE for the period ended 31 December 2012, 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 2012. 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, assesses 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.
89
China Life Insurance Company Limited Annual Report 2012
Internal Control
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, bancassurance, health insurance, rural insurance and e-commerce. 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.
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. These 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 unified 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.
90
China Life Insurance Company Limited Annual Report 2012
Internal Control
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 makes use of information system tools such as risk early-warning, risk
monitoring and credit evaluation to monitor and inspect sales risks; the Internal Control and Risk Management
Department identifies issues with system design, control implementation, and risk management in a timely
manner through the adoption of various measures such as walk-through test, control test and risk analysis. 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.
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 implementing various measures, providing
training courses, signing undertaking letters, conducting examinations on relevant knowledge, comparing
the implementation, and conducting quality check, so as to urge the employees of the Company to
study, understand and implement the specific control requirements contained in the “Internal Control
Implementation Manual of China Life Insurance Company Limited (2012 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 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 the persons involved
will be attributed proper responsibility.
91
China Life Insurance Company Limited Annual Report 2012
Internal Control
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.
In 2012, the Company continued to implement the “Guidelines for the Implementation of Comprehensive
Risk Management of Personal 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 “Measures for the Administration
of Risk Preference” to improve the management mechanism of the Company with respect to the formation,
execution, transmission, and re-examination and adjustment of risk preference. The Company also
continued to strengthen its efforts in risk early-warning and risk classification management, and intensify 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.
II ACCOUNTABILITY SYSTEM FOR MAJOR ERRORS IN ANNUAL REPORTS AND ITS
IMPLEMENTATION
The Company formulated the “Provisional Measures on Accountability System for Major Errors in Periodic
Report Disclosures of China Life Insurance Company Limited”, which were adopted throughout the Company
after being examined and approved by the Board in March 2011, and organized the related internal departments
and personnel to study and implement it. In 2012, there were no incidents of major error in the annual report of
the Company.
92
China Life Insurance Company Limited Annual Report 2012
Honours & Awards
“Forbes”
Forbes Global 2000 for 2012, ranking No.65
“FORTUNE China”
Top 500 Chinese Enterprises 2012, ranking No.10
Hexun “The Tenth Session of Award
for Chinese Finance 2012”
2012 Most Reliable Life Insurance Company
China Business Newspaper “Award for
Financial Institutions with Outstanding
Competitiveness in 2012
(The Fourth Session)”
2012 Domestic Insurance Company with
Outstanding Competitiveness
Finet.hk and Tencent.com “Top 100
Hong Kong Listed Companies 2012”
2012 Top 100 Hong Kong Stocks and Top 10
Market Capitalization
“World Entrepreneur Forum 2012”
co-sponsored by institutions including
World Executive Group and
World Brand Lab
2012 Most Respected Listed Company of China
2012 Top 10 Board of Directors of Listed
Companies of China
Moneyweek “China’s Millions of
Middle-class Families Preferred
Insurance Brand List 2012”
2012 Top 10 Insurance Companies of China
Millward Brown “BrandZ Top 50
Most Valuable Chinese Brands 2013”
2013 Top 50 Most Valuable Chinese Brands,
ranking No. 7
Shanghai Stock Exchange “Special Awards
for Corporate Governance in 2012”
The Award for Information Disclosure of Listed
Company in 2012
China Institute of Internal Audit
Leading Internal Audit Enterprise
China Women’s Development Foundation
of All-China Women’s Federation
Chinese Women Charity Award-Contribution Award
93
China Life Insurance Company Limited Annual Report 2012
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 95 to 197, which comprise the consolidated and company
statements of financial position as at 31 December 2012, 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.
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 2012, 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, 27 March 2013
94
Consolidated Statement of Financial Position
China Life Insurance Company Limited Annual Report 2012
As at 31 December 2012
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
2012
RMB million
As at 31
December
2011
RMB million
22,335
28,991
452,389
80,419
641,080
6,153
506,416
34,035
894
28,926
8,738
948
18,140
69,452
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
Note
6
7
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
10
11
12
Total assets
1,898,916
1,583,907
The notes on pages 104 to 197 form an integral part of these consolidated financial statements.
95
China Life Insurance Company Limited Annual Report 2012
Consolidated Statement of Financial Position
As at 31 December 2012
LIABILITIES AND EQUITY
Liabilities
Insurance contracts
Investment contracts
Policyholder dividends payable
Bonds payable
Securities sold under agreements to repurchase
Annuity and other insurance balances payable
Premiums received in advance
Other liabilities
Deferred tax liabilities
Current income tax liabilities
Statutory insurance fund
Total liabilities
Equity
Share capital
Reserves
Retained earnings
Note
As at 31
December
2012
RMB million
As at 31
December
2011
RMB million
13
14
15
16
17
26
18
32
33
1,384,537
66,639
44,240
67,981
68,499
16,890
2,576
16,435
7,834
22
162
1,199,373
69,797
46,368
29,990
13,000
11,954
3,719
13,968
1,454
750
146
1,675,815
1,390,519
28,265
112,428
80,392
28,265
83,371
79,894
Attributable to equity holders of the Company
221,085
191,530
Non-controlling interests
Total equity
Total liabilities and equity
2,016
1,858
223,101
193,388
1,898,916
1,583,907
Approved and authorized for issue by the Board of Directors on 27 March 2013
Yang Mingsheng
Director
Wan Feng
Director
The notes on pages 104 to 197 form an integral part of these consolidated financial statements.
96
China Life Insurance Company Limited Annual Report 2012
Statement of Financial Position
As at 31 December 2012
Note
6
36
7
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
10
11
12
As at 31
December
2012
RMB million
As at 31
December
2011
RMB million
21,785
3,865
21,389
451,838
80,229
639,780
5,653
504,341
33,987
844
28,837
8,738
948
17,913
68,655
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
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
Total assets
1,888,802
1,577,125
The notes on pages 104 to 197 form an integral part of these consolidated financial statements.
97
China Life Insurance Company Limited Annual Report 2012
Statement of Financial Position
As at 31 December 2012
LIABILITIES AND EQUITY
Liabilities
Insurance contracts
Investment contracts
Policyholder dividends payable
Bonds payable
Securities sold under agreements to repurchase
Annuity and other insurance balances payable
Premiums received in advance
Other liabilities
Deferred tax liabilities
Current income tax liabilities
Statutory insurance fund
Total liabilities
Equity
Share capital
Reserves
Retained earnings
Total equity
Note
As at 31
December
2012
RMB million
As at 31
December
2011
RMB million
13
14
15
16
17
26
18
32
33
1,384,537
66,639
44,240
67,981
68,499
16,890
2,576
15,959
7,922
–
162
1,199,373
69,797
46,368
29,990
13,000
11,954
3,719
13,596
1,539
737
146
1,675,405
1,390,219
28,265
112,348
72,784
28,265
83,514
75,127
213,397
186,906
Total liabilities and equity
1,888,802
1,577,125
Approved and authorized for issue by the Board of Directors on 27 March 2013
Yang Mingsheng
Director
Wan Feng
Director
The notes on pages 104 to 197 form an integral part of these consolidated financial statements.
98
Consolidated Statement of Comprehensive Income
China Life Insurance Company Limited Annual Report 2012
For the year ended 31 December 2012
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 and impairment on financial assets
Net fair value (losses)/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
2012
RMB million
2011
RMB million
322,742
(384)
322,358
(232)
318,252
(232)
318,020
256
322,126
318,276
73,243
(26,876)
(313)
3,305
60,722
(11,208)
337
2,772
371,485
370,899
(107,674)
(7,898)
(184,990)
(2,032)
(3,435)
(27,754)
(2,575)
(23,283)
(3,304)
(609)
(101,349)
(7,789)
(181,579)
(2,031)
(6,125)
(27,434)
(873)
(21,549)
(3,275)
(595)
(363,554)
(352,599)
3,037
2,213
10,968
304
20,513
(2,022)
11,272
18,491
11,061
211
18,331
160
19
20
21
22
22
22
23
24
18
7
25
26
Basic and diluted earnings per share
28
RMB0.39
RMB0.65
The notes on pages 104 to 197 form an integral part of these consolidated financial statements.
99
China Life Insurance Company Limited Annual Report 2012
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2012
Note
2012
RMB million
2011
RMB million
Other comprehensive income
Fair value gains/(losses) on available-for-sale securities
Amount transferred to net profit from other comprehensive income
Portion of fair value (losses)/gains 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
26
Other comprehensive income for the year
Total comprehensive income for the year
Attributable to:
– equity holders of the Company
– non-controlling interests
8,864
26,876
(2,635)
167
–
(8,265)
(45,576)
11,054
2,521
(201)
(1)
7,989
25,007
(24,214)
36,279
(5,723)
36,056
223
(5,874)
151
The notes on pages 104 to 197 form an integral part of these consolidated financial statements
100
Consolidated Statement of Changes in Equity
China Life Insurance Company Limited Annual Report 2012
As at 31 December 2012
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
–
–
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)
–
7,064
(18,370)
–
–
(58)
(58)
–
(11,306)
(58)
(11,364)
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
As at 31 December 2011
28,265
83,371
79,894
1,858
193,388
As at 1 January 2012
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
–
–
83,371
–
24,995
79,894
11,061
–
1,858
211
12
193,388
11,272
25,007
–
–
–
–
–
24,995
11,061
223
36,279
4,062
–
–
(4,062)
(6,501)
–
4,062
(10,563)
–
–
(65)
(65)
–
(6,501)
(65)
(6,566)
As at 31 December 2012
28,265
112,428
80,392
2,016
223,101
The notes on pages 104 to 197 form an integral part of these consolidated financial statements.
101
China Life Insurance Company Limited Annual Report 2012
Consolidated Statement of Cash Flows
For the year ended 31 December 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before income tax:
Adjustments for:
Investment income
Net realised and unrealised gains 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 – Securities at fair value through profit or loss
Dividends received – Securities at fair value through profit or loss
2012
RMB million
2011
RMB million
10,968
20,513
(73,243)
27,189
185,106
1,949
–
49
(3,037)
(10,152)
(4,434)
(3,675)
833
629
(60,722)
10,871
181,184
1,909
1
547
(2,213)
(14,196)
(925)
(3,456)
404
36
Net cash inflow from operating activities
132,182
133,953
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
Increase/(decrease) in securities purchased under agreements to resell, net
Interest received
Dividends received
Increase in policy loan, net
Other
51,281
5,277
105,519
218
(228,296)
(70,557)
(5,293)
(1,339)
(120,287)
1,476
61,410
4,768
(7,572)
(409)
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
Net cash outflow from investing activities
(203,804)
(133,591)
The notes on pages 104 to 197 form an integral part of these consolidated financial statements.
102
China Life Insurance Company Limited Annual Report 2012
Consolidated Statement of Cash Flows
For the year ended 31 December 2012
2012
RMB million
2011
RMB million
55,499
(1,832)
(6,501)
(65)
37,988
85,089
–
13,467
(10,065)
(570)
(11,306)
(58)
29,990
7,991
(222)
8,131
55,985
47,854
69,452
55,985
69,448
4
52,001
3,984
CASH FLOWS FROM FINANCING ACTIVITIES
Increase/(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
Net cash inflow from financing activities
Foreign currency losses on cash and cash equivalents
Net increase in cash and cash equivalents
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
The notes on pages 104 to 197 form an integral part of these consolidated financial statements.
103
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 joint stock company incorporated in PRC with limited liability. The address of its registered
office is: 16 Financial Street, Xicheng District, Beijing, PRC. The Company is listed on the New York Stock
Exchange, the Stock Exchange of Hong Kong Limited and the Shanghai Stock Exchange.
These consolidated fi nancial statements are presented in millions of Renminbi (“RMB million”) unless otherwise stated.
These consolidated fi nancial statements have been approved for issue by the Board of Directors on 27 March 2013.
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 fi nancial statements in accordance with IFRS, its amendments and interpretations issued by the
International Accounting Standards Board (“IASB”). These consolidated fi nancial statements also comply with
the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange
of Hong Kong Limited and the requirements of the Hong Kong Company’s Ordinance. The Group prepared
the consolidated fi nancial statements under the historical cost convention, as modifi ed by fi nancial assets and
fi nancial liabilities at fair value through profi t 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 fi nancial 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
signifi cant to the consolidated fi nancial statements are disclosed in Note 3.
2.1.1 Standards, amendments and interpretations effective in 2012
The following revised amendment is mandatory for the fi rst time for the fi nancial year beginning on 1 January
2012.
Amendment
Content
Effective for annual period
beginning on or after
IAS 12 Amendment
IFRS 7 Amendment
Deferred Tax: Recovery of Underlying Assets
Disclosures: Transfers of Financial Assets
1 January 2012
1 July 2011
The adoption of IAS 12 Amendment has no impact on the operating results, financial position or
comprehensive income of the Group.
The adoption of IFRS 7 Amendment has no material impact on the Group’s annual financial information.
104
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012
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 2012.
Standard/Amendment
Content
Effective for annual period
beginning on or after
IAS 1 Amendment
IAS 19 Amendment
IAS 32 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
IFRS10, IFRS11,
IFRS12 Amendments
Presentation of Financial Statements:
Other Comprehensive Income
Employee Benefits
Financial Instruments: Presentation
Disclosure: Offsetting Financial Assets
and Financial Liabilities
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
Transition Guidance
IFRS 13
Fair Value Measurement
1 July 2012
1 January 2013
1 January 2014
1 January 2013
1 January 2015
1 January 2013
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 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.
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.
105
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012 (continued)
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 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.
IFRS10, IFRS11, IFRS12 Amendments provide additional transition relief to IFRS 10, IFRS 11 and IFRS
12, limiting the requirement to provide adjusted comparative information to only the preceding comparative
period. For disclosures related to unconsolidated structured entities, the amendments will remove the
requirement to present comparative information for periods before IFRS 12 is first applied.
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.
In addition, “Annual Improvements 2011” was issued in May 2012. These annual improvements process
was established to make non-urgent but necessary amendments to IFRSs. The amendments in “Annual
Improvements 2011” are effective for annual periods beginning on or after 1 January 2013. No amendment
was early adopted by the Group and no material changes to accounting policies are expected as a result of
these improvements.
106
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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.
107
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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.
108
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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
Except for China Life Franklin Asset Management Company Limited (Note 36), the functional currency
of the Group is RMB. The presentation currency of Consolidated Statement of the Group is 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.
109
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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.
110
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 or 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 or losses arising from changes in the fair value of available-for-sale debt securities and unrealised gains
or 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 are carried at amortised cost, net of allowance for impairment.
111
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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)
(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;
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. The quantitative factors include the followings:
(cid:129)
(cid:129)
(cid:129)
The market price of the equity securities was more than 50% below its cost at the balance sheet date;
The market price of the equity securities was more than 20% below its cost for a period of at least six
months at the balance sheet date; and
The market price of the equity securities was below its cost for a period of more than one year.
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.
112
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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:
113
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 outfl ows less future cash infl ows. 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 outfl ows are cash outfl ows incurred to fulfi l 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 infl ation 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 immediately.
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, mainly
consist of underwriting and policy acquisition costs, by the Group representing Day 1 gain
and will be amortized over the life of the contracts. For insurance contracts of which future
returns are affected by investment yields of corresponding investment portfolios, their related
residual margins are amortized based on estimated future participating dividends payable to
policyholders. For insurance contracts of which future returns are not affected by investment
yields of corresponding investment portfolios, their related residual margins are amortized
based on sum assured of outstanding policies. 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.
114
contracts.
(c) The Group has considered the impact of time value on the reserve calculation for insurance
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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.
115
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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.
116
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 fund 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.
117
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 is 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
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.
118
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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.
119
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
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 impact of the various assumptions and their changes is 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.
120
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (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 subject 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.
121
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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.
122
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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
2012
2011
RMB million
%
RMB million
%
Premiums of long-term insurance contracts
Hong Ying Participating Endowment (a)
Hong Tai Participating Endowment (b)
Kang Ning Whole Life (c)
Mei Man Yi Sheng Participating
Endowment (d)
Hong Feng Participating Endowment (e)
Others (f)
49,397
34,020
26,640
20,972
3,129
172,152
16.13%
11.11%
8.70%
6.85%
1.02%
56.19%
56,000
58,432
27,696
23,932
6,096
130,294
18.52%
19.32%
9.16%
7.91%
2.02%
43.07%
Total
306,310
100.00%
302,450
100.00%
Insurance benefits expenses of
long-term insurance contracts
Hong Ying Participating Endowment (a)
Hong Tai Participating Endowment (b)
Kang Ning Whole Life (c)
Mei Man Yi Sheng Participating
Endowment (d)
Hong Feng Participating Endowment (e)
Others (f)
317
124
3,165
2,778
42,182
18,391
0.47%
0.19%
4.73%
4.15%
63.00%
27.46%
168
35
2,987
2,875
40,856
17,914
0.26%
0.05%
4.61%
4.43%
63.02%
27.63%
Total
66,957
100.00%
64,835
100.00%
As at 31 December 2012
As at 31 December 2011
RMB million
%
RMB million
%
Liabilities of long-term insurance contracts
Hong Ying Participating Endowment (a)
Hong Tai Participating Endowment (b)
Kang Ning Whole Life (c)
Mei Man Yi Sheng Participating
Endowment (d)
Hong Feng Participating Endowment (e)
Others (f)
158,752
86,195
149,034
98,651
174,634
708,238
11.54%
6.27%
10.83%
7.17%
12.70%
51.49%
113,038
54,300
127,258
80,768
218,519
596,603
9.5%
4.56%
10.69%
6.78%
18.36%
50.11%
Total
1,375,504
100.00%
1,190,486
100.00%
123
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
4
RISK MANAGEMENT (continued)
4.1 Insurance risk (continued)
4.1.2 Concentration of insurance risks (continued)
(a) 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 benefi t for single premium is paid at 100% of basic sum
insured. Maturity benefi t for regular premium is paid at basic sum insured multiplied by number of
year of premium payments. Disease Death benefi t incurred within fi rst year is paid at premium received
(without interest). Disease death benefi t incurred after one year is paid at basic sum insured or 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 fl ight, accident death benefi t is paid at 300% of
basic sum insured or 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 fl ight,
accident death benefi t is paid at 200% of basic sum insured or 200% of basic sum insured multiplied by
number of year of premium payments for single premium and regular premium, respectively.
(b) 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 or 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 1% of basic sum insured multiplied by number of year of premium payments. 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 110% of basic sum insured multiplied by number of year 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.
124
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 RMB11,319 million or
RMB11,901 million (2011: RMB10,462 million or RMB10,976 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 RMB5,683 million or RMB6,022 million (2011:
RMB5,896 million or RMB6,249 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 RMB37,263 million or RMB42,574 million
(2011: RMB29,124million or RMB33,545 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 RMB159 million lower or higher, respectively (2011: RMB159
million).
125
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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
2008
Short-term insurance contracts (accident year)
2009
2010
2011
2012
Total
Current year
1 year later
2 years later
3 years later
4 years later
Estimated accumulated
claims expenses
Accumulated claims
expenses paid
7,725
7,591
7,411
7,411
7,411
8,102
8,291
8,063
8,063
8,826
8,967
8,640
8,002
8,279
8,056
7,411
8,063
8,640
8,279
8,056
40,449
(7,411)
(8,063)
(8,640)
(7,830)
(5,427)
(37,371)
Unpaid claims expenses
–
–
–
449
2,629
3,078
The following table indicates the claim development for short-term insurance contracts taking account of
reinsurance impacts:
Estimated claims expenses
2008
Short-term insurance contracts (accident year)
2009
2010
2011
2012
Total
Current year
1 year later
2 years later
3 years later
4 years later
Estimated accumulated
claims expenses
Accumulated claims
expenses paid
7,671
7,538
7,360
7,360
7,360
8,018
8,205
7,979
7,979
8,741
8,879
8,557
7,889
8,161
7,916
7,360
7,979
8,557
8,161
7,916
39,973
(7,360)
(7,979)
(8,557)
(7,720)
(5,333)
(36,949)
Unpaid claims expenses
–
–
–
441
2,583
3,024
126
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
4
RISK MANAGEMENT (continued)
4.2 Financial risk
The Group’s activities are exposed to a variety of fi nancial risks. The key fi nancial risk is that proceeds from the
sale of fi nancial assets will not be suffi cient to fund obligations arising from the Group’s insurance and investment
contracts. The most important components of fi nancial 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 2012, 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 RMB1,844 million (2011:
RMB1,712 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.
Pre-tax available-for-sale reserve in equity would have been RMB10,291 million (2011: RMB16,995
million) lower or RMB7,238 million (2011: RMB16,995 million) higher respectively, as a result of a
decrease or increase in the fair value of available-for-sale securities.
127
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
4
RISK MANAGEMENT (continued)
4.2 Financial risk (continued)
4.2.1 Market risk (continued)
(ii)
Price risk (continued)
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 2012, 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 RMB792 million
(2011: RMB124 million) higher or lower, respectively, mainly as a result of an increase or decrease in
fair value of equity securities excluding available-for-sale securities. Pre-tax available-for-sale reserve
in equity would have been RMB9,568 million (2011: RMB17,942 million) higher or RMB13,047
million (2011: RMB17,942 million) lower, respectively, as a result of an increase or decrease in fair
value of available-for-sale equity securities. If prices decreased to the extent that the impairment
criteria were met, a portion of such decrease of the available-for-sale equity securities would reduce
pre-tax profit through impairment.
(iii) Currency risk
Currency risk is 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 financial assets
denominated in US dollar or HK dollar.
128
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012 and 2011, expressed in RMB equivalent:
As at 31 December 2012
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
–
1,886
266
9,678
251
2,757
36
–
–
2,691
2,757
1,922
266
9,678
2,942
Total
12,081
5,484
17,565
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
1,890
175
5,476
4,108
36
–
–
237
4,783
1,926
175
5,476
4,345
Total
11,649
5,056
16,705
As at 31 December 2012, 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 RMB1,481
million (2011: RMB1,192 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
available-for-sale equity securities included in the table above. The actual exchange loss in year 2012
was RMB49 million (2011: RMB547 million).
129
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012 and 2011.
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.
130
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 Chinese government controlled financial institutions. As at 31 December 2012, 99.9% (as at
31 December 2011: 99.8%) of the corporate bonds held by the Group had credit rating of AA/A-2 or above.
As at 31 December 2012, 99.7% (as at 31 December 2011: 99.6%) 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 2012, 99.8% (as at 31 December 2011: 99.8%) 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, presented as other loans, 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 2012 and 2011.
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 2012
and 2011.
4.2.3 Liquidity risk
Liquidity risk is the risk that the Group is unable to obtain funds at a reasonable funding cost when required
to meet a repayment obligation and fund its asset portfolio within a certain time.
In the normal course of business, the Group attempts to match the maturity of financial assets to the
maturity of insurance and financial liabilities.
131
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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)
As at 31 December 2012
Financial assets
Contractual cash inflows
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
Carrying
amount
Without
maturity
Later than 1 year Later than 3 years
but not later
than 5 years
but not later
than 3 years
Not later
than 1 year
164,748
828,075
80,419
641,080
6,153
894
28,926
8,738
69,434
164,748
–
–
–
–
–
–
–
–
–
45,520
42,174
107,139
4,167
894
28,926
8,738
69,434
–
116,994
8,237
273,690
419
–
–
–
–
–
161,960
12,713
351,527
2,181
–
–
–
–
Later Than
5 years
–
1,007,416
32,487
603
–
–
–
–
–
Subtotal
1,828,467
164,748
306,992
399,340
528,381
1,040,506
Financial and insurance liabilities
Expected cash outflows
Insurance contracts
Investment contracts
Contractual cash outflows
Securities sold under agreements
to repurchase
Annuity and other insurance
balances payable
Bonds payable
1,384,537
66,604
68,499
16,890
67,981
Subtotal
1,604,511
–
–
–
–
–
–
30,970
16,053
70,702
18,294
192,336
11,325
2,062,150
45,846
68,499
16,890
2,077
–
–
6,848
–
–
73,198
–
–
–
134,489
95,844
276,859
2,107,996
Net cash inflows/(outflows)
223,956
164,748
172,503
303,496
251,522
(1,067,490)
132
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
4
RISK MANAGEMENT (continued)
4.2 Financial risk (continued)
4.2.3 Liquidity risk (continued)
Contractual and expected cash flows (undiscounted)
As at 31 December 2011
Financial assets
Contractual cash inflows
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
Carrying
amount
Without
maturity
Later than 1 year Later than 3 years
but not later
than 5 years
but not later
than 3 years
No 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
–
–
–
–
–
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)
133
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 RMB44,240
million as at 31 December 2012 (2011: RMB46,368 million). At 31 December 2012, declared dividends
of RMB34,081 million (2011: RMB37,451 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, insurance contracts 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 RMB47,601 million, RMB6,961 million and RMB11,520 million, respectively for the period ended 31
December 2012 (2011: RMB51,678 million, RMB4,342 million and RMB13,191 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 2012, 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.
134
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012
RMB million
As at 31
December 2011
RMB million
176,024
74,718
236%
113,685
66,826
170%
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.
135
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
4
RISK MANAGEMENT (continued)
4.3 Fair value hierarchy (continued)
At 31 December 2012, investments classified as Level 1 comprise approximately 37.01% of financial assets
measured at fair value. 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 and open-ended funds. The
Group considers a combination of certain factors to determine whether a market for a financial instrument
is active, including the occurrence of trades within the specific period, the respective trading volume, and
the degree which the implied yields for a debt security for observed transactions differs from the Group’s
understanding of the current relevant market rates and information. Trading prices from Chinese interbank
market are determined by both trading counterparties and can be observed publicly. The Company adopted
this price of the debt securities traded on Chinese interbank market at balance sheet date as their fair market
value and classified the investments as Level 1. Open-ended funds also have active markets. Fund companies
publish the net asset value of these funds on their websites on each trading date. Investors subscribe for and
redeem units of these funds in accordance with the fund net asset value published by the fund companies on
each trading date. The Company adopted the unadjusted net asset value of the funds at balance sheet dates
as their fair market value and classified the investments as Level 1.
At 31 December 2012, investments classified as Level 2 comprise approximately 62.24% 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. Debt securities
are classified as Level 2 when they are valued at recent quoted price from Chinese interbank market or from
valuation service providers.
At 31 December 2012, investments classified as Level 3 comprise approximately 0.75% 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 2012 and 2011, 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.
136
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
4
RISK MANAGEMENT (continued)
4.3 Fair value hierarchy (continued)
The following table presents the Group’s financial assets and liabilities measured at fair value at 31
December 2012:
Level 1
RMB million
Level 2
RMB million
Level 3
RMB million
Total balance
RMB million
Financial assets
Available-for-sale securities
– Equity securities
– Debt securities
Securities at fair value through
profit or loss
– Equity securities
– Debt securities
150,874
28,218
2,303
321,071
7,798
13,144
33
12,975
3,649
301
85
–
156,826
349,590
7,916
26,119
Total assets
200,034
336,382
4,035
540,451
Financial liabilities
Investment contracts at fair value
through profit or loss
Total liabilities
(35)
(35)
–
–
–
–
(35)
(35)
The following table presents the changes in Level 3 instruments for the year ended 31 December 2012:
Available-for-sale Securities
Securities at fair value
through profit or loss
Equity securities
RMB million
Equity securities
RMB million
Opening balance
Purchases
Transfer into Level 3
Fair value changes recognised
in equity
Fair value changes recognised
in profit
Debt securities
RMB million
301
–
–
–
–
2,437
1,234
65
77
(164)
Closing balance
301
3,649
–
–
78
–
7
85
Total assets
RMB million
2,738
1,234
143
77
(157)
4,035
137
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
4
RISK MANAGEMENT (continued)
4.3 Fair value hierarchy (continued)
The following table presents the Group’s financial assets and liabilities measured at fair value at 31
December 2011:
Level 1
RMB million
Level 2
RMB million
Level 3
RMB million
Total balance
RMB million
Financial assets
Available-for-sale securities
– Equity securities
– Debt securities
Securities at fair value through
profit or loss
– Equity securities
– Debt securities
174,987
30,465
1,997
352,761
2,437
301
179,421
383,527
2,459
8,687
–
12,537
–
–
2,459
21,224
Total assets
216,598
367,295
2,738
586,631
Financial 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
Transferred into Level 3
Fair value changes recognised in equity
Closing balance
Debt securities
RMB million
Available-for-sale Securities
Equity securities
RMB million
Total assets
RMB million
301
–
–
–
301
1,384
1,011
50
(8)
2,437
1,685
1,011
50
(8)
2,738
In 2012 and 2011, the instruments valued under Level 3 above did not have material impact to the profit of
the Group and there have been no significant transfers between Level 1 and Level 2.
138
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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) Other business (Other)
Other business relates primarily to income (Note 31) and allocated cost of insurance agency business
in respect of the provision of services to CLIC, 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/(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 “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.
139
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
5
SEGMENT INFORMATION (continued)
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/(losses) through
profit or loss
Other income
Including: inter-segment revenue
Individual life Group life Short–term
Other Elimination
Total
For the year ended 31 December 2012
(RMB million)
305,841
2,616
37,594
227,770
37,861
305,732
69,407
469
413
53
–
3
465
3,043
16,432
–
–
–
–
15,929
481
–
–
–
–
–
–
312
(25,466)
(1,116)
(169)
(125)
–
–
–
–
–
–
–
–
322,742
322,126
73,243
(26,876)
(304)
402
–
(13)
343
–
(2)
–
–
6
3,356
796
–
(796)
(796)
(313)
3,305
–
Segment revenues
349,771
2,722
16,239
3,549
(796)
371,485
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
(107,340)
(334)
–
–
(184,972)
(500)
–
(18)
(1,532)
(3,357)
(23,568)
(2,447)
(16,865)
(2,795)
(758)
(477)
(78)
(103)
(107)
(618)
(130)
(33)
(18)
(7,898)
–
–
–
(3,470)
(17)
(3,956)
(593)
(5)
(114)
–
–
–
–
–
(613)
(4)
(1,844)
(582)
–
–
–
–
–
–
(107,674)
(7,898)
(184,990)
(2,032)
–
–
–
–
796
796
–
(3,435)
(27,754)
(2,575)
(23,283)
(3,304)
–
(609)
Segment benefits, claims and expenses
(342,321)
(2,938)
(16,048)
(3,043)
796
(363,554)
Share of profit of associates
–
–
–
3,037
7,450
(216)
191
3,543
Segment results
Income tax
Net profit
Attributable to
– equity holders of the Company
– non-controlling interests
Unrealised gains from available-for-sale
securities included in equity holders’ equity
23,731
1,040
Depreciation and amortisation
1,480
54
165
355
59
60
140
–
–
–
–
3,037
10,968
304
11,272
11,061
211
24,995
1,949
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
5
SEGMENT INFORMATION (continued)
Individual life Group life Short–term
Other Elimination
Total
As at 31 December 2012
(RMB million)
Assets
Financial assets (including cash
and cash equivalents)
Other
1,728,469
758
73,986
–
11,710
155
5,599
28,991
–
–
1,819,764
29,904
Segment assets
1,729,227
73,986
11,865
34,590
–
1,849,668
Unallocated
Property, plant and equipment
Other
Total
Liabilities
Insurance contracts
Investment contracts
Securities sold under agreements
to repurchase
Other
1,374,777
11,646
727
54,993
65,191
64,913
2,856
3,107
9,033
–
452
449
Segment liabilities
1,516,527
61,683
9,934
Unallocated
Other
Total
–
–
–
–
–
22,335
26,913
1,898,916
–
–
–
–
1,384,537
66,639
68,499
68,469
–
1,588,144
87,671
1,675,815
141
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
5
SEGMENT INFORMATION (continued)
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/(losses) through
profit or loss
Other income
Including: inter-segment revenue
Individual life Group life Short–term
Other Elimination
Total
For the year ended 31 December 2011
(RMB million)
302,012
2,299
37,934
221,925
39,854
301,986
57,080
438
333
85
–
20
434
2,893
15,802
–
–
–
–
15,856
460
–
–
–
–
–
–
289
(10,404)
(527)
(86)
(191)
–
–
–
–
–
–
–
–
318,252
318,276
60,722
(11,208)
319
477
–
16
163
–
3
–
–
(1)
2,901
769
–
(769)
(769)
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)
(339)
–
–
(181,565)
(574)
–
(14)
(1,457)
(5,780)
(23,723)
(818)
(14,961)
(2,604)
(726)
(456)
(345)
(81)
(41)
(522)
(107)
(37)
(16)
(7,789)
–
–
–
(3,275)
(7)
(3,989)
(548)
(6)
(123)
–
–
–
–
–
(355)
(7)
(2,077)
(785)
–
–
–
–
–
–
–
–
–
–
769
769
–
(101,349)
(7,789)
(181,579)
(2,031)
(6,125)
(27,434)
(873)
(21,549)
(3,275)
–
(595)
Segment benefits, claims and expenses
(331,491)
(2,922)
(15,731)
(3,224)
769
(352,599)
Share of profit of associates
Segment results
Income tax
Net profit
Attributable to
– equity holders of the Company
– non-controlling interests
–
17,967
–
57
–
502
2,213
1,987
–
–
2,213
20,513
(2,022)
18,491
18,331
160
Unrealised losses from available-for-sale
securities included in equity holders’ equity
(22,800)
(1,154)
Depreciation and amortisation
1,409
49
(186)
380
(65)
71
–
–
(24,205)
1,909
142
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
5
SEGMENT INFORMATION (continued)
Individual life Group life Short–term
Other Elimination
Total
As at 31 December 2011
(RMB million)
Assets
Financial assets (including cash
and cash equivalents)
Other
1,430,528
730
70,759
–
11,399
121
5,229
24,448
–
–
1,517,915
25,299
Segment assets
1,431,258
70,759
11,520
29,677
–
1,543,214
Unallocated
Property, plant and equipment
Other
Total
Liabilities
Insurance contracts
Investment contracts
Securities sold under agreements
to repurchase
Other
1,189,777
13,349
709
56,448
12,279
28,650
621
1,677
8,887
–
100
230
Segment liabilities
1,244,055
59,455
9,217
Unallocated
Other
Total
–
–
–
–
–
20,231
20,462
1,583,907
–
–
–
–
1,199,373
69,797
13,000
30,557
–
1,312,727
77,792
1,390,519
143
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
6
PROPERTY, PLANT AND EQUIPMENT
Group
Office
equipment
furniture and
fixtures
Buildings
2012
Motor Assets under
vehicles
Leasehold
construction improvements
Total
(RMB Million)
Cost
As at 1 January 2012
Transfers upon completion
Additions
Disposals
18,722
551
47
(73)
5,739
15
914
(386)
1,639
–
186
(294)
3,082
(732)
2,812
(36)
936
166
4
(26)
30,118
–
3,963
(815)
As at 31 December 2012
19,247
6,282
1,531
5,126
1,080
33,266
Accumulated depreciation
As at 1 January 2012
Charge for the year
Disposals
(4,570)
(729)
34
(3,632)
(696)
355
(1,042)
(156)
266
As at 31 December 2012
(5,265)
(3,973)
(932)
Impairment
As at 1 January 2012
Charge for the year
Disposals
As at 31 December 2012
Net book value
As at 1 January 2012
(26)
–
1
(25)
–
–
–
–
14,126
2,107
As at 31 December 2012
13,957
2,309
–
–
–
–
597
599
–
–
–
–
–
–
–
–
(617)
(141)
22
(9,861)
(1,722)
677
(736)
(10,906)
–
–
–
–
(26)
–
1
(25)
3,082
319
20,231
5,126
344
22,335
144
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
6
PROPERTY, PLANT AND EQUIPMENT (continued)
Group
Office
equipment
furniture and
fixtures
Buildings
2011
Motor
vehicles
Assets under
construction
Leasehold
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
145
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
6
PROPERTY, PLANT AND EQUIPMENT (continued)
Company
Office
equipment
furniture and
fixtures
Buildings
2012
Motor Assets under
vehicles
Leasehold
construction improvements
Total
(RMB Million)
Cost
As at 1 January 2012
Transfers upon completion
Additions
Disposals
18,161
541
48
(74)
5,635
15
890
(385)
1,620
–
185
(294)
3,068
(715)
2,807
(34)
923
159
–
(26)
29,407
–
3,930
(813)
As at 31 December 2012
18,676
6,155
1,511
5,126
1,056
32,524
Accumulated depreciation
As at 1 January 2012
Charge for the year
Disposals
(4,483)
(706)
34
(3,586)
(680)
355
(1,034)
(154)
266
As at 31 December 2012
(5,155)
(3,911)
(922)
Impairment
As at 1 January 2012
Charge for the year
Disposals
As at 31 December 2012
Net book value
As at 1 January 2012
(26)
–
1
(25)
–
–
–
–
13,652
2,049
As at 31 December 2012
13,496
2,244
–
–
–
–
586
589
–
–
–
–
–
–
–
–
(612)
(136)
22
(9,715)
(1,676)
677
(726)
(10,714)
–
–
–
–
(26)
–
1
(25)
3,068
311
19,666
5,126
330
21,785
146
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
6
PROPERTY, PLANT AND EQUIPMENT (continued)
Company
Office
Equipment
Furniture and
fixtures
Buildings
2011
Motor
vehicles
Assets under
construction
Leasehold
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
147
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
7
INVESTMENTS IN ASSOCIATES
Group
As at 1 January
Investment in associates (i)
Scrip dividend from associates (ii)
Share of profit
Other equity movements
Dividend received
2012
RMB million
2011
RMB million
24,448
1,339
182
3,037
167
(182)
20,892
1,600
91
2,213
(201)
(147)
As at 31 December
28,991
24,448
The Group’s investments in associates are unlisted except for Sino-Ocean which is listed in Hong Kong. As at 31
December 2012, the stock price of Sino-Ocean was HK$5.79 per share. The Group’s share of associates’ assets and
liabilities as at 31 December 2012 and revenue and profit after tax for the year 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%
236,676
220,924
40.00%
12,129
9,182
(“Sino-Ocean”)
Hong Kong, PRC
24.85%
30,387
21,435
COFCO Futures Company Limited
(“COFCO Futures”)
PRC
35.00%
2,996
1,656
Total as at 31 December 2012
282,188
253,197
CGB
CLP&C
Sino-Ocean
PRC
PRC
Hong Kong, PRC
20.00%
40.00%
24.45%
186,843
8,962
25,757
173,255
6,370
17,489
Total as at 31 December 2011
221,562
197,114
148
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
7
INVESTMENTS IN ASSOCIATES (continued)
Share of revenue and profit after tax of associates
Name
CGB
CLP&C
Sino-Ocean
COFCO Futures
Total for the year ended 31 December 2012
CGB
CLP&C
Sino-Ocean
Total for the year ended 31 December 2011
Company
As at 1 January
Additional capital contribution to CLP&C
Investment in COFCO Futures (i)
Scrip dividend from Sino-Ocean (ii)
As at 31 December
Revenue
RMB million
Profit after tax
RMB million
6,221
7,981
7,122
5
21,329
5,635
5,282
4,865
15,782
2,244
150
642
1
3,037
1,917
168
128
2,213
2012
RMB million
2011
RMB million
19,868
–
1,339
182
21,389
18,177
1,600
–
91
19,868
(i) On 26 December 2012, the Company purchased 35% of shares of COFCO Futures at the total cost of
RMB1,339 million.
(ii) A dividend payable in cash with a scrip dividend alternative in respect of the 2011 final dividend of HKD0.1
per ordinary share was approved and declared by Sino-Ocean at the Annual General Meeting on 11 May
2012. Sino-Ocean issued a circular on HKExnews website and announced a Scrip Dividend Scheme on 22
May 2012, under which each shareholder may elect to receive the 2011 final dividend in cash or in scrip
shares. The Company elected the scrip shares option and received scrip shares amounted to RMB113 million
on 28 June 2012 with a corresponding increase in the carry value of investments in associates.
A dividend payable in cash with a scrip dividend alternative in respect of the 2012 interim dividend of
HKD0.06 per ordinary share was approved and declared by Sino-Ocean at Board Meeting on 16 August
2012. Sino-Ocean issued a circular on HKExnews website and announced a Scrip Dividend Scheme on 12
September 2012, under which each shareholder may elect to receive the 2012 interim dividend in cash or
in scrip shares. The Company elected the scrip shares option and received scrip shares amounted to RMB69
million on 17 October 2012 with a corresponding increased in the carry value of investments in associates.
149
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012
RMB million
As at 31
December 2011
RMB million
96,097
111,759
83,084
161,449
87,451
89,631
6,437
78,414
452,389
261,933
41,927
12
18
410,432
452,389
34,006
12
18
227,897
261,933
The estimated fair value of listed held-to-maturity securities was RMB43,313 million as at 31 December
2012 (31 December 2011: RMB35,842 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 2012
RMB million
As at 31
December 2011
RMB million
96,097
111,759
82,539
161,443
87,451
89,631
6,406
78,409
451,838
261,897
41,927
409,911
451,838
34,006
227,891
261,897
The estimated fair value of listed held-to-maturity securities was RMB43,280 million as at 31 December
2012 (31 December 2011: RMB35,815 million).
Unlisted debt securities include those traded on Chinese interbank market and those not publicly traded.
150
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012
RMB million
As at 31
December 2011
RMB million
2,234
55,079
91,426
303,650
1,428
25,324
52,080
183,101
452,389
261,933
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
2,234
55,072
91,180
303,352
1,428
25,317
52,051
183,101
451,838
261,897
151
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
8
FINANCIAL ASSETS (continued)
8.2 Loans
Group
Policy loans
Other loans(i)
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(i)
Total
Maturing:
Within one year
After one year but within five years
After five years but within ten years
Total
(i) Other loans are debt investment plans.
152
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
39,893
40,526
80,419
32,321
28,783
61,104
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
39,893
10,036
30,490
80,419
32,321
6,270
22,513
61,104
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
39,893
40,336
80,229
32,321
28,593
60,914
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
39,893
9,896
30,440
80,229
32,321
6,200
22,393
60,914
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
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
92,045
548,435
600
44,876
453,117
22,800
641,080
520,793
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
92,045
547,135
600
44,876
451,817
22,800
639,780
519,493
153
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
3,933
2,220
6,153
1,820
4,333
6,153
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
3,553
2,100
5,653
1,600
4,053
5,653
Insurance companies in China are required to deposit an amount equal to 20% of their registered capital
with banks in conformity with regulations of CIRC. These funds may not be used for any purpose, other
than to pay off debts during liquidation proceedings.
154
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 Singapore
Unlisted
Subtotal
Equity securities
Listed in mainland, PRC
Listed in Hong Kong, PRC
Unlisted
Subtotal
Total
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
42,946
135,870
139,286
31,488
60,325
148,539
125,407
49,256
349,590
383,527
57,019
96,361
3,446
84,767
93,384
1,270
156,826
179,421
506,416
562,948
34,844
266
314,480
31,642
175
351,710
349,590
383,527
102,379
2,757
51,690
97,633
4,783
77,005
156,826
179,421
506,416
562,948
155
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 Singapore
Unlisted
Subtotal
Equity securities
Listed in mainland, PRC
Listed in Hong Kong, PRC
Unlisted
Subtotal
Total
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
42,543
135,821
138,614
31,373
59,855
148,390
124,679
48,943
348,351
381,867
56,751
96,268
2,971
84,360
93,177
1,270
155,990
178,807
504,341
560,674
34,339
266
313,746
30,963
175
350,729
348,351
381,867
102,035
2,753
51,202
97,133
4,783
76,891
155,990
178,807
504,341
560,674
Unlisted equity securities include those not traded on stock exchanges, which are mainly open-ended funds.
Unlisted debt securities include those traded on Chinese interbank market and those not publicly traded.
156
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012
RMB million
As at 31
December 2011
RMB million
5,627
70,959
137,962
135,042
4,191
46,199
138,659
194,478
349,590
383,527
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
5,577
70,898
137,499
134,377
4,186
45,548
138,217
193,916
348,351
381,867
157
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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
Subtotal
Total
Debt securities
Listed in mainland, PRC
Unlisted
Subtotal
Equity securities
Listed in mainland, PRC
Unlisted
Subtotal
Total
158
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
1,697
6,291
18,131
589
4,285
16,350
26,119
21,224
2,188
5,728
7,916
290
2,169
2,459
34,035
23,683
5,501
20,618
5,830
15,394
26,119
21,224
6,096
1,820
7,916
2,279
180
2,459
34,035
23,683
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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
Subtotal
Total
Debt securities
Listed in mainland, PRC
Unlisted
Subtotal
Equity securities
Listed in mainland, PRC
Unlisted
Subtotal
Total
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
1,697
6,291
18,083
589
4,285
16,110
26,071
20,984
2,188
5,728
7,916
290
2,169
2,459
33,987
23,443
5,453
20,618
5,791
15,193
26,071
20,984
6,096
1,820
7,916
2,279
180
2,459
33,987
23,443
Unlisted equity securities include those not traded on stock exchanges, which are mainly open-ended funds.
Unlisted debt securities include those traded on Chinese interbank market and those not publicly traded.
159
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012
RMB million
As at 31
December 2011
RMB million
894
–
894
1,572
798
2,370
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
844
–
844
1,372
798
2,170
160
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012
RMB million
As at 31
December 2011
RMB million
16,478
11,642
806
12,985
9,394
567
28,926
22,946
28,926
–
22,946
–
28,926
22,946
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
16,415
11,617
805
12,920
9,369
565
28,837
22,854
28,837
–
22,854
–
28,837
22,854
161
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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
Estimated fair value (i)
As at 31
As at 31
December 2012 December 2011 December 2012 December 2011
RMB million
RMB million
RMB million
RMB million
As at 31
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
452,389
80,419
641,080
6,153
506,416
34,035
894
69,452
(66,639)
(68,499)
(67,981)
261,933
61,104
520,793
6,153
562,948
23,683
2,370
55,985
(69,797)
(13,000)
(29,990)
450,865
80,419
641,080
6,153
506,416
34,035
894
69,452
(65,074)
(68,499)
(68,000)
264,385
61,104
520,793
6,153
562,948
23,683
2,370
55,985
(68,580)
(13,000)
(30,000)
(i) The estimates and judgements 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
As at 31 December 2012, the carrying value of premiums receivable within one year is RMB8,735 million (As at
31 December 2011: RMB8,253 million).
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
162
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
758
35
101
54
948
190
758
948
730
27
76
45
878
148
730
878
12 OTHER ASSETS
Group
Land use rights
Due from CLIC (Note 31(f))
Automated policy loan
Tax refundable
Others
Total
Current
Non-current
Total
Company
Land use rights
Due from CLIC
Automated policy loan
Tax refundable
Others
Total
Current
Non-current
Total
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
6,330
560
1,787
6,563
2,900
6,381
596
1,450
2,182
1,573
18,140
12,182
11,794
6,346
5,788
6,394
18,140
12,182
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
6,330
549
1,787
6,563
2,684
6,381
574
1,450
2,182
1,325
17,913
11,912
11,567
6,346
5,518
6,394
17,913
11,912
163
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
13
INSURANCE CONTRACTS
(a) Process used to decide on assumptions
(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 2012
As at 31 December 2011
Discount rate assumptions
4.80%~5.00%
4.50%~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 2012
As at 31 December 2011
Discount rate assumptions
3.12%~5.61%
2.65%~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.
164
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012
As at 31 December 2011
37.0~45.0
37.0~45.0
0.85%~0.90%
0.85%~0.90%
14.0
14.0
0.90%
0.90%
(iv) The lapse rates and other assumptions are affected by certain factors, such as future macro-economy,
availability of financial substitutions, and market competition, which brings uncertainty to these
assumptions. The lapse rates and other assumptions are determined with reference to creditable past
experience, current conditions, future expectations and other information obtained at the end of each
reporting period.
The method used to determine risk margin has been consistently applied. The Company considers
risk margin for each of the discount rate, mortality and morbidity and expense assumptions to
compensate for the uncertain amount and timing of future cash flow. When determining risk margin,
the Company considers historical experience, future expectations and other factors. Risk margin is
determined by the Company and does not include any elements imposed by regulators.
165
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
13
INSURANCE CONTRACTS (continued)
(a) Process used to decide on assumptions (continued)
(v) 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.
(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
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
1,375,504
1,190,486
3,078
5,955
3,189
5,698
1,384,537
1,199,373
(758)
(54)
(101)
(913)
(730)
(45)
(76)
(851)
1,374,746
1,189,756
3,024
5,854
3,144
5,622
1,383,624
1,198,522
166
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 years
Total as at 31 December-Gross
– Notified claims
– Incurred but not reported
Total as at 31 December-Gross
2012
RMB million
2011
RMB million
354
2,835
3,189
(5,427)
(2,691)
8,056
(49)
3,078
202
2,876
3,078
326
2,978
3,304
(5,436)
(2,594)
8,002
(87)
3,189
354
2,835
3,189
Net
5,878
5,622
(5,878)
The table below presents movements in unearned premium reserves:
Group and Company
2012
RMB million
Ceded
Net
Gross
2011
RMB million
Ceded
(76)
(101)
76
5,622
5,854
(5,622)
5,935
5,698
(5,935)
(57)
(76)
57
Gross
5,698
5,955
(5,698)
As at 1 January
Increase
Release
As at 31 December
5,955
(101)
5,854
5,698
(76)
5,622
167
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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
– Change in discount rates
– Change in other assumptions (ii)
Other movements
2012
RMB million
2011
RMB million
1,190,486
306,309
(182,271)
58,259
(548)
230
3,039
1,008,896
302,450
(174,189)
47,090
4,100
(832)
2,971
As at 31 December
1,375,504
1,190,486
(i) The release of liabilities mainly consists of release due to death or other termination and related
expenses, release of residual margin and change of reserves for claims and claim adjustment expenses.
(ii) During the year ended 31 December 2012, change in other assumptions is mainly caused by change
in mortality assumptions of certain products, which increased insurance liability by RMB229 million.
This change reflected the Group’s most recent historical mortality experience and future expectations
as at reporting date. No significant changes made to other assumptions. During the year ended 31
December 2011, change in other assumptions is mainly caused by change in lapse rates assumptions
of certain products, which decreased insurance liability by RMB848 million. This change reflected
the Group’s most recent creditable past experience and future expectations as at reporting date. No
significant changes made to other assumptions.
14
INVESTMENT CONTRACTS
Group and Company
Investment contracts with DPF at amortised cost
Investment contracts without DPF
– At amortised cost
– Designated as at fair value through profit or loss
Total
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
47,977
18,627
35
66,639
52,072
17,668
57
69,797
168
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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
2012
RMB million
2011
RMB million
52,072
6,424
(11,868)
(30)
1,379
50,839
6,981
(7,089)
(59)
1,400
As at 31 December
47,977
52,072
15 BONDS PAYABLE
As at 31 December 2012, all bonds payable were with total carrying value of RMB67,981 million (as of 31
December 2011: RMB29,990 million) and the par value of RMB68,000 million (as of 31 December 2011:
RMB30,000 million).
Group and Company
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
Issue date
Maturity date
Annual Interest rate
Par Value
26 October 2011
29 June 2012
5 November 2012
Total
26 October 2021
29 June 2022
5 November 2022
5.50%
4.70%
4.58%
30,000
28,000
10,000
30,000
–
–
68,000
30,000
The Company issued 3 subordinated debts with maturity term of 10 years to qualified investors who met the
relevant regulatory requirements. The coupon rates per annum for the first 5 years are 5.50%, 4.70%, 4.58%
issued on 26 October 2011, 29 June 2012 and 5 November 2012 respectively. The Company has the right to call
the subordinated debts at par at the end of the fifth year since issuance. If the Company does not exercise the call
option, the coupon rate per annum for the remaining 5 years will be 7.50%, 6.70% and 6.58% issuance on 26
October 2011, 29 June 2012 and 5 November 2012, respectively.
Subordinated debts are measured at amortized cost as described in Note 2.10.
169
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
16 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Group and Company
Interbank market
Stock Exchange market
Total
Maturing:
Within thirty days
After thirty but within ninety days
After ninety days
Total
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
68,499
–
11,500
1,500
68,499
13,000
64,499
–
4,000
13,000
–
–
68,499
13,000
As of 31 December 2012, bonds with carrying value of RMB70,515 million (as of 31 December 2011:
RMB13,305 million) were pledged as collateral for securities sold under agreements to repurchase resulted from
repurchase transactions entered into by the Group in the inter-bank market.
For debt repurchase transactions through stock exchange, the Group and the Company is required to deposit
certain exchange-traded bonds into a collateral pool with fair value converted at a standard rate pursuant to
stock exchange’s regulation which should be no less than the balance of related repurchase transaction. As of 31
December 2011, the carrying value of securities deposited in the collateral pool was RMB1,569 million. The
collateral is restricted from trading during the period of the repurchase transaction.
170
17 OTHER LIABILITIES
Group
Salary and welfare payable
Interest payable to policyholder
Commission and brokerage payable
Interest payable of subordinated debts
Stock appreciation rights (Note 29)
Payable to constructors
Agent deposits
Tax payable
Others
Total
Current
Non-current
Total
Company
Salary and welfare payable
Interest payable to policyholder
Commission and brokerage payable
Interest payable of subordinated debts
Stock appreciation rights (Note 29)
Payable to constructors
Agent deposits
Tax payable
Others
Total
Current
Non-current
Total
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
4,035
3,492
2,459
1,044
841
761
686
403
2,714
4,207
2,523
1,871
303
569
449
666
393
2,987
16,435
13,968
16,435
–
13,968
–
16,435
13,968
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
3,632
3,492
2,459
1,044
841
760
686
387
2,658
3,869
2,523
1,871
303
569
449
666
383
2,963
15,959
13,596
15,959
–
13,596
–
15,959
13,596
171
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
18 STATUTORY INSURANCE FUND
As required by CIRC Order [2008] No. 2, “Measures for Administration of Statutory Insurance Fund”, 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
Others
For the year ended 31 December
2011
RMB million
2012
RMB million
15,194
16,219
911
4,773
656
30,512
4,339
633
6
10,691
16,935
449
4,876
37
24,978
2,658
98
–
Total
73,243
60,722
Included in investment income is interest income of RMB67,814 million (2011: RMB55,809 million). All interest
is accrued using the effective interest method.
The investment income from listed debt and equity securities and unlisted debt and equity securities for the year
ended 31 December 2012 were RMB6,009 million and RMB31,744 million, respectively (2011: RMB5,105
million and RMB27,883 million).
172
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
20 NET REALISED GAINS 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
2011
RMB million
2012
RMB million
1,192
51
1,243
433
11
444
2,975
(31,094)
1,272
(12,924)
(28,119)
(11,652)
(26,876)
(11,208)
Net realised gains on financial assets are from available-for-sale securities.
During the year ended 31 December 2012, the Group recognized impairment charge of RMB14,950 million
(2011: RMB4,133 million) of available-for-sale funds, RMB15,980 million (2011: RMB8,791 million) of
available-for-sale common stocks and RMB164 million (2011: Nil) of other available-for-sale securities, for which
the Group determined that objective evidence of impairment existed.
21 NET FAIR VALUE (LOSSES)/GAINS THROUGH PROFIT OR LOSS
Debt securities
Equity securities
Stock appreciation rights
Total
For the year ended 31 December
2011
RMB million
2012
RMB million
47
(88)
(272)
(313)
(405)
134
608
337
173
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
22
INSURANCE BENEFITS AND CLAIMS EXPENSES
Gross
RMB million
Ceded
RMB million
Net
RMB million
For the year ended 31 December 2012
Life insurance death and other benefits
Accident and health claims and claim adjustment expenses
Increase in insurance contracts liabilities
107,688
8,011
185,018
(14)
(113)
(28)
107,674
7,898
184,990
Total insurance benefits and claims expenses
300,717
(155)
300,562
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
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 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
Auditors’ remuneration
174
For the year ended 31 December
2011
RMB million
2012
RMB million
2,394
181
2,575
303
570
873
For the year ended 31 December
2011
RMB million
2012
RMB million
9,699
643
1,743
1,949
49
65
8,416
552
1,555
1,909
547
65
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
26 TAXATION
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income tax relate to the same fiscal authority.
(a) The amount of taxation charged to net profit represents:
Current taxation – Enterprise income tax
Deferred taxation
Taxation charges
For the year ended 31 December
2011
RMB million
2012
RMB million
1,581
(1,885)
4,355
(2,333)
(304)
2,022
(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 2011: 25%) is as follows:
Profit before income tax
Tax computed at the statutory tax rate
Non-taxable income
Additional tax liability from expenses
not deductible for tax purposes
Unused tax losses
Other
For the year ended 31 December
2011
RMB million
2012
RMB million
10,968
2,742
(3,462)
364
49
3
20,513
5,128
(3,511)
325
57
23
(i)
(i)
Income tax at effective tax rate
(304)
2,022
(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.
175
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
26 TAXATION (continued)
(c) As at 31 December 2012, 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
As at 1 January 2011
(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
As at 31 December 2011
As at 1 January 2012
(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
Insurance
RMB million
(i)
Investment
RMB million
(ii)
Others
RMB million
(iii)
Total
RMB million
(11,131)
(505)
(1,502)
2,740
857
98
(11,776)
2,333
–
8,619
(630)
(12,266)
(12,266)
(180)
–
9,857
9,857
2,128
–
(8,924)
659
–
–
–
955
955
(63)
–
–
8,619
(630)
(1,454)
(1,454)
1,885
(8,924)
659
As at 31 December 2012
(11,787)
3,061
892
(7,834)
(i)
The deferred tax arising from the insurance category is mainly 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 and 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.
176
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2011
(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
attributable to participating
policyholders
As at 31 December 2011
As at 1 January 2012
(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
(11,131)
(505)
(1,500)
2,727
803
83
(11,828)
2,305
–
8,614
(630)
(12,266)
(12,266)
(180)
–
9,841
9,841
2,128
–
(8,917)
659
–
–
–
886
886
(73)
–
–
8,614
(630)
(1,539)
(1,539)
1,875
(8,917)
659
As at 31 December 2012
(11,787)
3,052
813
(7,922)
177
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012
RMB million
As at 31
December 2011
RMB million
6,729
1,342
10,306
1,595
8,071
11,901
(15,555)
(350)
(13,105)
(250)
(15,905)
(13,355)
Total net deferred tax liabilities
(7,834)
(1,454)
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 2012
RMB million
As at 31
December 2011
RMB million
6,632
1,342
10,220
1,595
7,974
11,815
(15,547)
(349)
(13,104)
(250)
(15,896)
(13,354)
Total net deferred tax liabilities
(7,922)
(1,539)
178
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 RMB8,220 million (2011: RMB18,448 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 2012 are based on the weighted average number of 28,264,705,000 ordinary shares
(for the year ended 31 December 2011: 28,264,705,000 ordinary shares).
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.
All the stock appreciation rights awarded were fully vested as at 31 December 2012. As at 31 December 2012,
there were 55.01 million units outstanding and exercisable (as at 31 December 2011: 55.01 million). As at 31
December 2012, the amount of intrinsic value for the vested stock appreciation rights is RMB828 million (as at 31
December 2011: RMB556 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%.
The Company recognized a loss of RMB272 million in the net fair value losses/gains through profit or loss in
the consolidated comprehensive income representing the fair value change of the rights during the year ended 31
December 2012 (2011 fair value gain: RMB608 million). No reversed cost due to the abstentions of the stock
appreciation rights during the year ended 31 December 2012 (2011: RMB15 million). RMB828 million and
RMB13 million were included in salary and staff welfare payable included under Other Liabilities for the units
not exercised and exercised but not paid as at 31 December 2012 (as at 31 December 2011, RMB556 million and
RMB13 million), respectively. No unrecognized compensation cost due to the stock appreciation rights as at 31
December 2012 and 2011.
179
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
30 DIVIDENDS
Pursuant to the equity holders’ approval at the Annual General Meeting in May 2012, a final dividend of
RMB0.23 per ordinary share totalling RMB6,501 million in respect of the year ended 31 December 2011 was
declared and was paid in 2012. These dividends have been recorded in the consolidated financial statements for
the year ended 31 December 2012.
Pursuant to a resolution passed at the meeting of the Board of Directors on 27 March 2013, a final dividend of
RMB0.14 per ordinary share totalling approximately RMB3,957 million for the year ended 31 December 2012
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 2012.
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 2012:
Significant related parties
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 Company Limited (“CLRE”)
China Life Insurance (Overseas) Company 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 Company 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 jointly set up by the
Company and others.
China Life Yuantong Property Company Limited
Under common control of CLIC
(“China Life Yuantong”)
180
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(b) Related parties with control relationship
Information of the parent company is as follows:
Name
Location of
registration
Principal business
Relationship with
the company
Nature of
economic
Legal
Representative
Immediate and
ultimate holding
company
State owned
Yang
Mingsheng
CLIC
Beijing, China
Insurance services including receipt
of premiums and payment of benefi ts
in respect of the in-force life, health,
accident and other types of personal
insurance business, and the reinsurance
b u s i n e s s ; h o l d i n g o r i n v e s t i n g i n
d o m e s t i c a n d o v e r s e a s i n s u r a n c e
companies or other fi nancial insurance
i n s t i t u t i o n s ; f u n d s m a n a g e m e n t
business permitted by national laws
and regulations or approved by State
Council of the People’s Republic of
China; other business approved by
insurance regulatory agencies.
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 2011
million
RMB4,600
RMB3,000
RMB2,500
HK dollar 60
Increase
million
Decrease
million
As at 31
December 2012
million
–
–
–
–
–
–
–
–
RMB4,600
RMB3,000
RMB2,500
HK dollar 60
181
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(d) Percentage of holding of related parties with control relationship and changes during the
year
Equity holder
As at 31 December 2011
Percentage
of holding
Amount
million
Increase
million
Decrease
million
As at 31 December 2012
Percentage
of holding
Amount
million
CLIC
RMB19,324
68.37%
–
–
RMB19,324
68.37%
Subsidiaries
As at 31 December 2011
Percentage
of holding
Amount
million
Increase
million
Decrease
million
As at 31 December 2012
Percentage
of holding
Amount
million
AMC
RMB1,680
Pension Company
RMB2,305
AMC HK
HK dollar 30
60.00%
directly
92.20%
directly
and indirectly
50.00%
indirectly
–
–
–
–
–
RMB1,680
RMB2,305
– HK dollar 30
60.00%
directly
92.20%
directly
and indirectly
50.00%
indirectly
182
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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.
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)
Brokerage fee payment to CLP&C
Rentals and service 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 fee earned from IHC
Prepayment to China Life Yuantong
Additional capital contribution to China Life Yuantong
Transaction with CGB
Interest income earned from CGB
Brokerage fee charged by CGB
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
Note
(i)
(ii.a)
(ii.d)
(ii.c)
(iii)
(iv)
(v)
(viii)
(vi)
For the year ended 31 December
2011
RMB million
2012
RMB million
1,063
133
4,444
65
–
2
20
12
58
19
648
–
16
28
38
63
5
14
61
23
–
361
733
9
2
–
182
–
26
61
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
183
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(e) Transactions with significant related parties (continued)
Note
For the year ended 31 December
2011
RMB million
2012
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 from pension company
Annuity promotion fee from pension company
Investment brokerage fee from pension company
IT services fee income earned from Pension Company
Business promotion income from Pension Company
Transaction with AMC HK
Investment management fee charged to the Company
by AMC HK
Note:
(ii.b)
(vii)
261
761
97
1
3
104
7
18
2
3
2
(ii.e)
8
235
692
87
1
3
97
6
32
36
2
3
9
(i)
On 15 December 2011, CLIC and the Company entered into a renewal agreement, with effective period to 31
December 2014, to engage the Company to provide policy administration services to CLIC relating to the non-
transferred policies. The Company, as a service provider, does not acquire any rights or assume any obligations
as an insurer under the non-transferred policies. In consideration of the services provided under the agreement,
CLIC will pay the Company a policy management fee based on the estimated cost of providing the services, to
which a profit margin is added. The policy management fee is equal to, for each semi-annual payment period, the
sum of (1) the number of non-transferred policies in force that were within their policy term as at the last day
of the period, multiplied by RMB8.00 per policy and (2) 2.50% of the actual premiums and deposits in respect
of such policies collected during the period. The policy management fee income is included in other income in
consolidated statement of comprehensive income.
184
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(e) Transactions with significant related parties (continued)
Note: (continued)
(ii.a) On 29 December 2011, CLIC and AMC entered into a renewal agreement, with effective period to 31 December
2014, 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 2010, the Company and the AMC entered into an agreement, with effective period to 31
December 2011. The agreement was subject to an automatic renewal for one year if there was no objection by both
parties upon expiry. The Company agreed to pay the AMC a fixed service fee and a performance fee. The annual
fixed service fee is calculated with reference to the net asset value of the total invested assets by the rate of 0.05%
per annum and is payable monthly. The performance fee is charged at 20% of the fixed service fee per annum
subject to performance assessment and is 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 31 December 2011, the agreement automatically renewed for one year with effective period
to 31 December 2012. Asset management fees charged to the Company by AMC is eliminated in the consolidated
statement of comprehensive income.
(ii.c) In 2012, CLP&C and the AMC signed an agreement, with effective period to 31 December 2013. The agreement
is subject to an automatic renewal for one year if there was no objection by both parties upon expiry. 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.
(ii.d) In 2012, China Life Overseas and the AMC HK entered into an agreement whereby China Life Overseas and AMC
HK set a benchmark for annual net investment return yield and China Life Overseas agreed to pay AMC HK a
management service fee at a rate calculated based on actual annual net investment return yield. This agreement was
in effect from 1 January 2012 to 31 December 2012.
185
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(e) Transactions with significant related parties (continued)
Note: (continued)
(ii.e) In September 2011, 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 2012 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 2012. 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 2012 annual
instruction, the calculation and payment of asset management fees remain the same as 2011. Asset management
fees charged to the Company by AMC HK are eliminated in the consolidated statement of comprehensive income.
(ii.f) On 1 January 2011, Pension Company and AMC signed an agreement with effective period to 31 December
2011. The agreement was subject to an automatic renewal for one year if there was no objection by both parties
upon expiry. 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 2012, the agreement automatically renewed for one year to 31 December
2012. Asset management fees charged to Pension Company by AMC are 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) plus a margin. The agreement was subject to an automatic renewal
for one year if there was no objection by both parties upon expiry. 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 expiry 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.
186
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
31 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(e) Transactions with significant related parties (continued)
Note: (continued)
(iv) The Group made certain project payments to CLRE and paid other miscellaneous expenditure mainly comprised
rentals and deposits to CLRE.
(v) On 22 February 2010, the Company and IHC entered into a property leasing agreement with effective period
to 31 December 2012, 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.
(vi) On 19 April 2012, 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 commission fee, calculated on a monthly basis, by
multiplying total premium of policy sold 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 RMB1 per policy, where CGB handles premiums receipts and benefits payments. The agreement has a term of
three years and is subject to an automatic renewal for one year.
(vii) In December 2011, the Company and Pension Company entered into an enterprise annuity funds distribution
and customer service agency agreement, whereby Pension Company entrusted the Company to distribute
enterprise annuity funds and provide customer service. The service fee is calculated at 50% to 80% of the first year
management fee according to the terms of insurance contracts. The agreement term was one year and subject to an
automatic renewal for one year if there was no objection by both parties upon expiry. The terms and conditions of
the agreement remain unchanged.
(viii) At the 23rd meeting of the third session of the Board Committee held on 9 May 2012, AMC made additional
capital contribution of RMB361 million to China Life Yuantong in proportion to its equity holding ratio of 19%.
As a result, the total capital contribution from AMC to China Life Yuantong is increased to RMB475 million.
187
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 resulting balance due from and to significant related parties of 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 China Life Yuantong
Amount due from CLRE
Amount due to CLRE
Amount deposited with CGB
Amount due from CGB
Amount due to CGB
Held Subordinated debts of Sino-Ocean
The resulting balance due from and to subsidiaries of 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 2012
RMB million
As at 31
December 2011
RMB million
560
(5)
11
65
(2)
16
(8)
–
1
(4)
14,701
218
(1)
266
50
(2)
(68)
(2)
596
(1)
5
51
(1)
15
(8)
167
1
–
16,000
311
–
260
75
(2)
(59)
(4)
For the year ended 31 December
2011
RMB million
2012
RMB million
Salaries and other benefits
12
25
The total compensation package for the Company’s key management for the year ended 31 December
2012 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 2011
has been approved by relevant authorities. The total compensation of 2011 was RMB25 million, including
deferral payment about RMB5 million.
188
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012, 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 2012, 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 2012
RMB million
No. of shares
As at 31 December 2011
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 2012, 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 2012
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.
189
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
33 RESERVES
Group
Unrealised
gains/(losses)
from
Additional available-for-sale
securities
RMB million
paid in capital
RMB million
Statutory
reserve fund(a)
RMB million
Discretionary
reserve fund(b)
RMB million
General
reserve(c)
RMB million
Exchange
differences on
translating
foreign
operations
RMB million
Total
RMB million
As at 1 January 2011
Other comprehensive
income for the year
Appropriation to reserves
53,860
4,600
16,216
12,834
13,004
(2)
100,512
–
–
(24,204)
–
–
1,848
–
3,368
–
1,848
(1)
–
(24,205)
7,064
As at 31 December 2011
53,860
(19,604)
18,064
16,202
14,852
(3)
83,371
Other comprehensive
income for the year
Appropriation to reserves
–
–
24,995
–
–
1,107
–
1,848
–
1,107
–
–
24,995
4,062
As at 31 December 2012
53,860
5,391
19,171
18,050
15,959
(3)
112,428
Company
Unrealised
gains/(losses)
from
Additional available-for-sale
securities
RMB million
paid in capital
RMB million
Statutory
reserve fund(a)
RMB million
Discretionary
reserve fund(b)
RMB million
General
reserve(c)
RMB million
Total
RMB million
As at 1 January 2011
Other comprehensive
income for the year
Appropriation to reserve
53,860
4,533
16,168
12,834
13,004
100,399
–
–
(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
Other comprehensive
income for the year
Appropriation to reserve
–
–
24,772
–
–
1,107
–
1,848
–
1,107
24,772
4,062
As at 31 December 2012
53,860
5,356
19,123
18,050
15,959
112,348
190
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
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 2012 amounting to RMB1,107 million under the relevant PRC laws
(2011: RMB1,848 million).
(b) Approved by the Annual General Meeting in June 2012, the Company appropriated RMB1,848 million
to discretionary reserve fund for the year ended 31 December 2011 based on net profit under CAS (2011:
RMB3,368 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 2012, the
Company appropriated 10% of net profit under CAS which amounts to RMB1,107 million to general
reserve for future uncertain disasters, which cannot be used for dividend distribution or share capital
increment (2011: RMB1,848 million).
Under related PRC law, dividends may be paid only out of distributable profits. Any distributable profits
that are not distributed in a given year are retained and available for distribution in subsequent years.
34 PROVISIONS AND CONTINGENCIES
The following is a summary of the significant contingent liabilities:
Group
Company
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
Pending lawsuits
183
168
183
168
The Group involves 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 reporting
period. A provision will only be recognized if the management determines, based on third-party legal advice, that
the Group has present obligations and the settlement of which is expected to result in an outflow of the Group’s
resources embodying economic benefits, and the amount of such obligations could be reasonably estimated.
Otherwise, the Group will disclose the pending lawsuits as contingent liabilities. As at 31 December 2012 and
2011, the Group has other contingent liabilities but disclosure of such was not practical because the amount of
liabilities could not be reliably estimated.
191
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
35 COMMITMENTS
(a) Capital commitments
Capital commitments contracted for at the end of the reporting period but not yet paid/provided for are as
follows:
Group
Company
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
Investment
Property, plant and equipment
Others
3,327
8,685
48
3,543
3,562
42
3,327
8,685
48
Total
12,060
7,147
12,060
3,543
3,562
42
7,147
(b) Operating lease commitments
The future minimum lease payments under non-cancellable operating leases are as follows:
Group
Company
As at 31
December 2012
RMB million
As at 31
December 2011
RMB million
As at 31
December 2012
RMB million
As at 31
December 2011
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
394
477
17
888
403
509
29
941
365
453
17
835
374
487
29
890
The operating lease payments charged to profit before income tax for the year ended 31 December 2012
were RMB690 million (for the year ended 31 December 2011: RMB644 million).
192
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
36
INVESTMENTS IN SUBSIDIARIES
Company
As at 31 December
2012
RMB million
2011
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 2012:
Name
AMC
Place of
incorporation
and operation
Percentage
of equity
interest held
Registered capital
Principal
activities
People’s Republic of China
60% directly
RMB3,000 million
Asset management
Pension Company
People’s Republic of China
92.2% directly
and indirectly
RMB2,500 million
Pension and annuity
AMC HK
Hong Kong, PRC
50% indirectly
HK$ 60 million
Asset management
193
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
37 DIRECTORS’, SUPERVISORS’, CHIEF EXECUTIVE’S AND SENIOR MANAGEMENTS’
REMUNERATION
The total compensation package for these directors, supervisors, chief executive and senior managements for the
year ended 31 December 2012 has not yet been finalised in accordance with regulations of the relevant PRC
authorities. The amount of the compensation not provided for is not expected to have a significant impact on the
Group’s 2012 financial statements. The final compensation will be disclosed in a separate announcement when
determined.
(a) Directors’ and chief executive’s emoluments
The aggregate amounts of emoluments paid to directors and chief executive of the Company for the year
ended 31 December 2012 are as follows:
Name
Yuan Li (i)
Yang Mingsheng(ii)
Wan Feng (iii)
Lin Dairen
Liu Yingqi
Miao Jianmin
Shi Guoqing(iv)
Zhuang Zuojin(iv)
Zhang Xiangxian(v)
Wang Sidong(v)
Ma Yongwei (vi) (viii)
Sun Changji (viii)
Bruce D. Moore
Anthony Francis Neoh
Tang Jianbang(vii)(viii)
Note:
Remuneration paid
Benefits in kind
RMB Thousand
106.9
320.6
384.8
380.5
380.5
–
–
–
–
–
–
–
320.0
300.0
–
52.7
250.1
326.6
323.1
323.1
–
–
–
–
–
–
–
–
–
–
Total
159.6
570.7
711.4
703.6
703.6
–
–
–
–
–
–
–
320.0
300.0
–
(i)
Resigned as Executive director in 2011 annual general meeting on 22 May 2012.
(ii)
Appointed as Executive director in 2011 annual general meeting on 22 May 2012.
(iii) Mr. Wan Feng is Chief Executive.
(iv) Retired as Non-executive director due to age on 22 May 2012.
(v)
Appointed as Non-executive director in the first 2012 extraordinary general meeting on 10 July 2012.
(vi) Resigned as independent director in the first 2012 extraordinary general meeting on 10 July 2012.
(vii) Appointed as The independent director in the first 2012 extraordinary general meeting on 10 July 2012.
(viii) In accordance with regulations of the relevant PRC authorities, the Company didn’t pay any emoluments to
independent directors Sun Changji, Tang Jianbang and Ma Yongwei.
194
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
37 DIRECTORS’, SUPERVISORS’, CHIEF EXECUTIVE’S AND SENIOR MANAGEMENTS’
REMUNERATION (continued)
(a) Directors’ and chief executive’s emoluments (continued)
The aggregate amounts of emoluments paid to directors and chief executive of the Company for the year
ended 31 December 2011 are as follows:
Name
Basic
salaries
Inducement
salaries
Yang Chao
Yuan Li
Wan Feng
Lin Dairen
Liu Yingqi
Miao Jianmin
Shi Guoqing
Zhuang Zuojin
Ma Yongwei
Sun Changji
Bruce D. Moore
Anthony Francis Neoh
187.3
262.2
404.5
400.1
400.1
–
–
–
–
–
250.0
250.0
439.7
615.7
949.9
939.3
939.3
–
–
–
–
–
70.0
50.0
Delay in
payment
included
in salary
income
Benefits
in kind
RMB Thousand
219.9
307.9
475.0
469.7
469.7
–
–
–
–
–
–
–
161.7
99.4
262.0
259.4
259.4
–
–
–
–
–
–
–
Subtotal
of salary
income
627.0
877.9
1,354.4
1,339.4
1,339.4
–
–
–
–
–
320.0
300.0
Delay in
payment
included
in total
Actual paid
included in
total
219.9
307.9
475.0
469.7
469.7
–
–
–
–
–
–
–
568.8
669.4
1,141.4
1,129.1
1,129.1
–
–
–
–
–
320.0
300.0
Total
788.7
977.3
1,616.4
1,598.8
1,598.8
–
–
–
–
–
320.0
300.0
The compensation amounts for these directors for the year ended 31 December 2011 were restated based on
the finalised amounts determined during 2012.
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.
195
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
37 DIRECTORS’, SUPERVISORS’, CHIEF EXECUTIVE’S AND SENIOR MANAGEMENTS’
REMUNERATION (continued)
(b) Supervisors’ emoluments
The aggregate amounts of emoluments paid to supervisors of the Company for the year ended 31 December
2012 are as follows:
Name
Xia Zhihua
Shi Xiangming
Luo Zhongmin(i)
Yang Cuilian(i)
Li Xuejun(i)
Yang Hong(ii)
Wang Xu(ii)
Tian Hui(ii)
Note:
Remuneration paid
Benefits in kind
RMB Thousand
380.5
589.8
75.0
282.0
282.0
329.0
329.0
87.5
323.1
305.6
–
166.7
162.2
138.1
165.9
–
Total
703.6
895.4
75.0
448.7
444.2
467.1
494.9
87.5
(i)
Appointed as supervisors in the first 2012 extraordinary general meeting on 10 July 2012.
(ii)
Resigned as supervisors in the first 2012 extraordinary general meeting on 10 July 2012.
The aggregate amounts of emoluments paid to supervisors of the Company for the year ended 31 December
2011 are as follows:
Name
Basic
salaries
Inducement
salaries
Xia Zhihua
Shi Xiangming
Yang Hong
Wang Xu
Tian Hui
400.1
589.8
564.1
564.1
120.0
939.3
415.3
398.6
398.6
30.0
Delay in
payment
included
in salary
income
Benefits
in kind
RMB Thousand
469.7
–
–
–
–
259.4
250.2
222.6
241.4
–
Subtotal
of salary
income
1,339.4
1,005.1
962.7
962.7
150.0
Delay in
payment
included
in total
Actual paid
included in
total
469.7
–
–
–
–
1,129.1
1,255.3
1,185.3
1,204.1
150
Total
1,598.8
1,255.3
1,185.3
1,204.1
150.0
The compensation amounts for these supervisors for the year ended 31 December 2011 were restated based
on the finalised amounts determined during 2012.
196
China Life Insurance Company Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
37 DIRECTORS’, SUPERVISORS’, CHIEF EXECUTIVE’S AND SENIOR MANAGEMENTS’
REMUNERATION (continued)
(c) Five highest paid individuals
The five individuals whose emoluments were the highest in the Company include two directors (2011: three
directors) whose emoluments are reflected in the analysis presented above.
Details of remuneration of the remaining three (2011: two) highest paid individuals are as follows:
2012
RMB
Thousand
2011
RMB
Thousand
Basic salaries, housing allowances, other allowances and benefits in kind
2,374
5,734
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
2012
2011
3
–
–
–
–
–
1
–
–
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.
197
China Life Insurance Company Limited Annual Report 2012
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 based on a particular set of
assumptions about future experience.
China Life Insurance Company Limited believes that reporting the Company’s embedded value and value of 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 based on the assumptions used and hence the potential of the business. However,
the information on embedded value and value of one year’s sales should not be viewed as a substitute of financial
measures under the relevant accounting basis. Investors should not make investment decisions based solely on embedded
value information and the value of one year’s sales.
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 and the value of one year’s sales’ calculation involve substantial technical complexity and estimates
can vary materially as key assumptions are changed. Therefore, special care is advised when interpreting embedded value
results.
The values shown below do not consider the future financial impact of transactions between the Company and CLIC,
China Life Investment Holding Company Limited, AMC, Pension Company, P&C Company, and etc.
198
China Life Insurance Company Limited Annual Report 2012
Embedded Value
DEFINITIONS OF EMBEDDED VALUE AND VALUE OF ONE YEAR’S SALES
The embedded value of a life insurer is defined as the sum of the adjusted net worth and the value of in-force business
allowing for the cost of capital supporting a company’s desired solvency margin.
“Adjusted net worth” is equal to the sum of:
(cid:129)
(cid:129)
Net assets, defined as assets less 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, the risk of operating experience’s fluctuation and the
economic cost of capital through the use of a risk-adjusted discount rate.
PREPARATION AND REVIEW
The embedded value and the value of one year’s sales were prepared by China Life 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
and value of one year’s sales. The review statement from Towers Watson is contained in the “Towers Watson’s review
opinion report on embedded value” section.
On 15 May 2012, the Ministry of Finance and the State Administration of Taxation issued the “Notice on Corporate
Income Tax Deduction of Reserves for Insurance Companies” (Cai Shui [2012] No. 45), requiring the taxation basis
to be based on accounting profits. Based on the above regulation, in preparing the 2012 embedded value report, the
adjusted net worth has reflected the tax treatment in accordance with accounting profits. When calculating the value of
in-force business and value of one year’s sales, as there is uncertainty in the accounting liability assumptions in future
valuation periods (such as valuation interest rates), correspondingly, numerous scenarios could be possible as to future
accounting profits. Consequently, we have adopted the profits based on the solvency liability in projecting future tax
payable in the base scenario. We also disclose the value of in-force business and value of one year’s sales calculated using
tax payable based on the accounting profits in accordance to the “Provisions on the Accounting Treatment Related to
Insurance Contracts” under one possible scenario in the table 3 of “SENSITIVITY RESULTS”.
199
China Life Insurance Company Limited Annual Report 2012
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 5.1% in 2012 and grading to 5.5% in 2016 (remaining level thereafter). 15% from 2012 to 2015, and grading
to 17% in 2017 (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 2012 and the value of one year’s sales for the 12 months to 31 December 2012,
and their corresponding results in 2011 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)
RMB million
31 December
2012
31 December
2011
128,507
245,134
(36,046)
209,088
337,596
24,129
(3,295)
20,834
110,266
215,608
(33,020)
182,588
292,854
23,756
(3,557)
20,199
Notes: 1) Numbers may not be additive due to rounding.
2) Taxable incomes in embedded value and the value of one year’s sales are based on earnings calculated using solvency
reserves.
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China Life Insurance Company Limited Annual Report 2012
Embedded Value
MOVEMENT ANALYSIS
The following analysis tracks the movement of the embedded value from the start to the end of the Reporting Period.
Table 2
Analysis of Embedded Value Movement in 2012
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 December 2012 (sum A through J)
RMB million
292,854
30,215
20,834
(879)
9,676
(1,905)
(6,954)
(49)
(6,501)
304
337,596
Notes: 1) Numbers may not be additive due to rounding.
2)
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 2012 plus the
expected return on investments supporting the 2012 opening net worth.
Value of new business sales in 2012.
Reflects the difference between actual experience in 2012 (including lapse, mortality, morbidity, and expense etc.)
and the assumptions.
Compares actual with expected investment returns during 2012.
Reflects the effect of projection method, model enhancements and assumption changes.
Change in the market value adjustment from the beginning of year 2012 to 31 December 2012, tax adjustment and
other related adjustments.
Reflect the gains or losses due to changes in exchange rate.
Reflects dividends distributed to shareholders during 2012.
Other miscellaneous items.
C
D
E
F
G
H
I
J
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China Life Insurance Company Limited Annual Report 2012
Embedded Value
SENSITIVITY RESULTS
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 2011 EV assumptions
17. Taxable income based on the accounting profit
in accordance to the “Provisions on the Accounting
Treatment Related to Insurance Contracts” under one
possible scenario
RMB million
VALUE OF IN-FORCE VALUE OF ONE YEAR’S
BUSINESS AFTER COST OF SALES AFTER COST OF
SOLVENCY MARGIN
SOLVENCY MARGIN
209,088
198,792
220,146
244,490
173,935
206,480
211,697
207,185
211,023
207,821
210,399
207,035
211,161
208,808
209,369
200,097
209,383
20,834
19,745
22,002
23,618
18,076
19,073
22,594
20,746
20,921
20,656
21,011
20,716
20,952
20,238
21,429
19,154
21,068
211,901
20,191
Note: Taxable income is based on earnings calculated using solvency reserves for Scenarios 1 to 16.
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China Life Insurance Company Limited Annual Report 2012
Embedded Value
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 2012 (“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
2012, 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 2012;
a review of the results of China Life’s calculation of the EV Results.
In carrying out our review, we have relied on the accuracy of audited and unaudited data and information provided by
China Life.
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China Life Insurance Company Limited Annual Report 2012
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
14th March 2013
204
In case of any discrepancy between the Chinese version and the English version of
this report, the Chinese version shall prevail; in case of any discrepancy between
the printed version and the website version of this report, the website version shall
prevail.
The cover photo of the printed version of this report was photographed by
Mr. Gao Jian of the Shenzhen Branch of the Company.
Stock Code: 2628
Annual Report 2012
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