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| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Title of each class |
Name of each exchange on which registered | |
* | ||
* |
| * | On August 22, 2022, the Company filed a Form 25 to d its American depositary shares from the New York Stock Exchange. The delisting became effective on September 2, 2022, and the American depositary receipt program was terminated on November 11, 2022. el ist |
| ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | ||||||
| Emerging growth company | ||||||||||
| U.S. GAAP ☐ | |
Other ☐ | ||||||
| by the International Accounting Standards Board | ☒ |
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CHINA LIFE INSURANCE COMPANY LIMITED
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FORWARD-LOOKING STATEMENTS
This annual report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements state our intentions, beliefs, expectations or predictions for the future, in particular under “Item 4. Information on the Company”, “Item 5. Operating and Financial Review and Prospects” and “Item 8. Financial Information—Embedded Value”.
The forward-looking statements include, without limitation, statements relating to:
| • | future developments in the insurance industry in China; |
| • | changes in interest rates and other economic and business conditions in China; |
| • | the industry regulatory environment as well as the industry outlook generally; |
| • | the amount and nature of, and potential for, future development of our business; |
| • | the outcome of litigation and regulatory proceedings that we currently face or may face in the future; |
| • | our business strategy and plan of operations; |
| • | the prospective financial information regarding our business; |
| • | our dividend policy; and |
| • | information regarding our embedded value. |
In some cases, we use words such as “believe”, “intend”, “anticipate”, “estimate”, “project”, “forecast”, “plan”, “potential”, “will”, “may”, “should” and “expect” and similar expressions to identify forward-looking statements. All statements other than statements of historical facts included in this annual report, including statements regarding our future financial position, strategy, projected costs and plans and objectives of management for future operations, are forward-looking statements. Although we believe that the expectations reflected in those forward-looking statements are reasonable, we can give no assurance that those expectations will prove to have been correct, and you are cautioned not to place undue reliance on such statements. Important factors that could cause actual results to differ materially from our expectations are disclosed under “Item 3. Key Information—Risk Factors” and elsewhere in this annual report, including in conjunction with the forward-looking statements included in this annual report. We undertake no obligation to publicly update or revise any forward-looking statements contained in this annual report, whether as a result of new information, future events or otherwise, except as required by law. All forward-looking statements contained in this annual report are qualified by reference to this cautionary statement.
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CERTAIN TERMS AND CONVENTIONS
References in this annual report to “we”, “us”, “our”, the “Company” or “China Life” mean China Life Insurance Company Limited and, as the context may require, its subsidiaries. References to “CLIC” mean China Life Insurance (Group) Company and, as the context may require, its subsidiaries, other than China Life. References in this annual report to “AMC” mean China Life Asset Management Company Limited, the asset management company established by us with CLIC on November 23, 2003. References to “CLPCIC” mean China Life Property and Casualty Insurance Company Limited, the property and casualty company established by us with CLIC on December 30, 2006. References to “China Life Pension” mean China Life Pension Company Limited established by us, CLIC and AMC on January 15, 2007. References to “IHC” mean China Life Investment Management Company Limited, a wholly owned subsidiary of CLIC and formerly known as China Life Investment Holding Company Limited.
The statistical and market share information contained in this annual report has been derived from government sources, including the China Insurance Yearbook 2020, the China Insurance Yearbook 2021, the China Insurance Yearbook 2022 and other public sources. The information has not been verified by us independently, and includes premium information that is not determined in accordance with HKFRS, U.S. GAAP or IFRS.
References to “A shares” mean the RMB ordinary shares which have been listed on the Shanghai Stock Exchange since January 9, 2007.
References to the “CIRC” mean the China Insurance Regulatory Commission, which was established in 1998 and merged with the China Banking Regulatory Commission in April 2018. References to the “CBRC” mean the China Banking Regulatory Commission, which was established in 2003 and merged with the CIRC in April 2018. References to “CBIRC” mean the China Banking and Insurance Regulatory Commission, which was established in April 2018 as a result of the merger of CIRC and CBRC. In this annual report, references to the “CIRC” mean the China’s insurance regulator prior to April 2018 and references to the “CBIRC” mean the China’s insurance regulator after April 2018, as the context may require.
References to “China” or “PRC” mean the People’s Republic of China, excluding, for purposes of this annual report, Hong Kong, Macau and Taiwan. References to “Hong Kong” mean the Hong Kong Special Administrative Region, references to “Macau” mean the Macau Special Administrative Region and references to “Taiwan” mean Taiwan area. References to the “central government” mean the government of the PRC. References to “State Council” mean the State Council of the PRC. References to “MOF” or “Ministry of Finance” mean the Ministry of Finance of the PRC. References to “Ministry of Commerce” mean the Ministry of Commerce of the PRC. References to “PBOC” mean the People’s Bank of China. References to “SAFE” mean the State Administration of Foreign Exchange of the PRC. References to “SAMR” mean the State Administration for Market Regulation of the PRC. References to “CSRC” mean the China Securities Regulatory Commission.
References to “HKSE” or “Hong Kong Stock Exchange” mean The Stock Exchange of Hong Kong Limited. References to “NYSE” or “New York Stock Exchange” mean the New York Stock Exchange. References to “SSE” or “Shanghai Stock Exchange” mean the Shanghai Stock Exchange. References to “Exchange Act” mean the Securities Exchange Act of 1934, as amended.
References to “IFRS” mean the International Financial Reporting Standards as issued by the International Accounting Standards Board, references to “U.S. GAAP” mean the generally accepted accounting principles in the United States, references to “HKFRS” mean the Hong Kong Financial Reporting Standards, issued by the Hong Kong Institute of Certified Public Accountants, and references to “PRC GAAP” mean the PRC Accounting Standards for Business Enterprises applicable to companies listed in the PRC. Unless otherwise indicated, our financial information presented in this annual report has been prepared in accordance with IFRS.
References to “Renminbi” or “RMB” in this annual report mean the currency of the PRC, references to “U.S. dollars” or “US$” mean the currency of the United States of America, and references to “Hong Kong dollars”, “H.K. dollars” or “HK$” mean the currency of the Hong Kong Special Administrative Region of the PRC.
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Unless otherwise indicated, translations of RMB amounts into U.S. dollars for presentation only in this annual report have been made at the rate of US$1.00 to RMB6.8972, the noon buying rate in the City of New York for cable transfers payable in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York on December 30, 2022. No representation is made that Renminbi amounts could have been, or could be, converted into U.S. dollars at that rate on December 30, 2022 or at all. Translations of foreign currency amounts into RMB amounts for the purpose of preparing our audited consolidated financial statements included elsewhere in this annual report or our previous annual reports have been made at the exchange rates published by the PBOC.
Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.
If there is any discrepancy or inconsistency between the Chinese names of the PRC entities in this annual report and their English translations, the Chinese version shall prevail.
PART I
| ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS. |
Not applicable.
| ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE. |
Not applicable.
| ITEM 3. | KEY INFORMATION. |
A. [RESERVED]
B. CAPITALIZATION AND INDEBTEDNESS
Not Applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not Applicable.
D. RISK FACTORS
Our business, financial condition and results of operations can be affected materially and adversely by any of the following risk factors. The risks and uncertainties described below may not be the only ones that we face. Additional risks and uncertainties that we are not aware of or that we currently believe are immaterial may also adversely affect our business, financial condition or results of operations.
Summary of Risk Factors
Below please find a summary of the principal risks we face, organized under relevant headings.
Risks Relating to Our Business
| • | Our investments are subject to risks. |
| • | We are exposed to potential investment losses if there is an economic downturn in China. |
| • | The PRC securities markets are still emerging markets, which may expose us to risks of loss from our investments there. |
| • | Defaults on our debt investments or our investments in loans may materially and adversely affect our profitability. |
| • | Investments in new investment channels may not lead to improvements in our rate of investment return or we may incur losses. |
| • | We may incur foreign exchange and other losses for our investments denominated in foreign currencies. |
| • | The COVID-19 pandemic could have a material adverse impact on our business. |
| • | We are exposed to changes in interest rates. |
| • | Our growth is dependent on our ability to attract and retain productive agents and key personnel. |
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| • | If we are unable to develop other distribution channels for our products, our growth may be materially and adversely affected. |
| • | Misconduct of directors, senior management, employees and agents is difficult to detect and deter and could harm our reputation or lead to regulatory sanctions or litigation costs. |
| • | Differences in future actual operating results from the assumptions used in pricing and establishing reserves for our insurance and annuity products may materially affect our earnings. |
| • | Our risk management and internal reporting systems, policies and procedures may leave us exposed to unidentified or unanticipated risks. |
| • | Current or future litigation, arbitration and regulatory proceedings could result in financial losses or harm our businesses. |
| • | The embedded value information we present in this annual report is based on several assumptions and may vary significantly as those assumptions are changed. |
| • | We are subject to stringent laws and contractual obligations related to data privacy and cybersecurity, and we may be exposed to risks related to our management of personal information and other data. |
| • | A computer system failure, cyber-attacks or other security breaches may disrupt our business, damage our reputation and adversely affect our results of operations and financial condition. |
| • | Whether our investors in the U.S. who rely on our auditor’s audit reports will have the benefit of PCAOB oversight in the future is subject to uncertainty. |
| • | The enactment of the Holding Foreign Companies Accountable Act and identification of the Company by the SEC will result in enhanced disclosure requirements for us. |
Risks Relating to the PRC Life Insurance Industry
| • | We expect competition in the Chinese insurance industry to increase. |
| • | Further development of regulations in China may impose additional costs or restrictions on our activities. |
| • | Our ability to comply with minimum solvency requirements is affected by a number of factors, and our compliance may force us to raise additional capital, which could increase our financing costs or be dilutive to our existing investors, or to reduce our growth. |
Risks Relating to the Restructuring
| • | CLIC has incurred substantial losses on the policies retained by it in the restructuring. If CLIC is unable to meet its obligations to its policyholders, it may seek to increase the level of dividends we pay, sell the China Life shares it owns or take other actions which may have a material adverse effect on the value of the shares our other existing investors own. |
| • | The transfer of policies to us by CLIC and/or the separation of assets between CLIC and us may be subject to challenge. |
| • | We do not hold exclusive rights to the trademarks in the “China Life” name (in English and Chinese), the “ball” logos and other business related slogans and logos, and CLIC, which owns these trademarks, may take actions that would impair the benefits we derive from their use. |
| • | As our controlling shareholder, CLIC will be able to exert influence on our affairs and could cause us to make decisions or enter into transactions that may not be in your best interests. |
| • | CLIC may direct business opportunities elsewhere. |
Risks Relating to the People’s Republic of China
| • | The PRC legal system has inherent uncertainties that could limit the legal protections available to you. |
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| • | Any actions by the Chinese government may cause us to make material changes to our operations and could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. |
| • | Government control of currency conversion and the fluctuation of the Renminbi may materially and adversely affect our operations and financial results. |
Risks Relating to Our Business
Our investments are subject to risks.
We are exposed to potential investment losses if there is an economic downturn in China.
Until November 2006, we were only permitted to invest the premiums and other income we receive in investments in China. We obtained the approval to invest overseas with our foreign currency denominated funds in November 2006. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”. However, we have continued to make our investments mainly in China and, as of December 31, 2022, approximately 99.08% of our total investment assets were in China. In particular, as of December 31, 2022, approximately 52.22% of our total investment assets consisted of debt securities including Chinese government bonds, government agency bonds, corporate bonds, subordinated bonds and other debt securities as permitted by relevant government agencies; approximately 9.59% of our total investment assets consisted of term deposits with Chinese banks, of which 43.78% were placed with the five largest Chinese state-owned commercial banks; and approximately 11.78% of our total investment assets consisted of loans provided to Chinese entities and individuals, including policy loans, investment in debt investment plans and trust schemes. A serious downturn in the Chinese economy may lead to investment losses, which would reduce our earnings. Although the Chinese economy grew by 3.0% in 2022 (8.4% in 2021 and 2.2% in 2020), the rate of growth was significantly lower than in previous years, and we cannot assure you that growth will not continue to slow in the future.
The PRC securities markets are still emerging markets, which may expose us to risks of loss from our investments there.
As of December 31, 2022, we had RMB890,926 million (US$129,172 million) invested in equity securities, among which RMB437,188 million (US$63,386 million) were invested in PRC securities markets, including securities investment funds and shares traded on the securities markets in China. These securities investment funds and shares are primarily invested in equity securities that are issued by Chinese companies and traded on China’s stock exchanges. The PRC securities markets are still emerging markets and are characterized by evolving regulatory, accounting and disclosure requirements. This may from time to time result in significant price volatility, unexpected losses, lack of liquidity or difficulty in transaction settlement. These factors could cause us to incur losses on our publicly traded investments. On February 17, 2023, China announced a set of detailed mechanism and regulations for a registration-based IPO system across the board of the A-share market. The new rules are effective immediately to replace the previous approval-based IPO system which was established back in 1993. This reform marks a milestone in the development of China’s capital market. However, it remains to be seen how this new system would impact the Chinese capital market, and any potential significant price volatility or lack of liquidity caused by the implementation of the new system may expose us to risks of loss from our investments in the Chinese securities market. Also, as one of the largest institutional investors in China, we may from time to time hold significant positions in many securities in which we invest, and any decision to sell or any perception in the market that we are a major seller of a security could adversely affect the liquidity and market price of that security.
Defaults on our debt investments may materially and adversely affect our profitability.
Approximately 52.22% of our investment assets as of December 31, 2022 were comprised of debt securities. The issuers whose debt securities we hold may fail to pay or otherwise default on their obligations due to bankruptcy, a lack of liquidity, a downturn in the economy, operational failures or other reasons. Losses due to these defaults could reduce our profitability.
Defaults on our investments in loans may materially and adversely affect our profitability.
Approximately 11.78% of our investment assets as of December 31, 2022 were comprised of loans, including policy loans, investments in debt investment plans and trust schemes. The borrowers to whom we provided loans may fail to pay or otherwise default on their obligations due to bankruptcy, a lack of liquidity, a downturn in the economy, operational failures or other reasons. Losses due to these defaults could reduce our profitability.
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Investments in new investment channels may not lead to improvements in our rate of investment return or we may incur losses.
The CBIRC has in recent years significantly broadened the investment channels of Chinese life insurance companies. We have considered these alternative channels when making investments. For example, in 2016, we made our first investment in shares traded on the Hong Kong Stock Exchange through the Shanghai-Hong Kong Stock Connect between China’s mainland markets and the Hong Kong Stock Exchange, and we also made our first investment in interbank negotiable certificates of deposit. In 2019, we made our first investment in bonds issued by banks for capital replenishment. In 2021, we made our first investment in debt-to-equity investment plans. In 2022, we made our first investment in the public infrastructure securities investment fund and the bond lending business. However, our experience with these new investment channels, especially overseas channels, is limited, and these new channels are still subject to evolving regulatory requirements, which may increase the risk exposure of our investments.
We may incur foreign exchange and other losses for our investments denominated in foreign currencies.
A portion of our investment assets are held in foreign currencies. We are authorized by the CBIRC to invest our assets held in foreign currencies in the overseas financial markets as permitted by the CBIRC. Thus, our investment results may be subject to foreign exchange gains and losses due to changes in exchange rates as well as the volatility and various other factors of overseas capital markets, including, among others, increase in interest rates. We recorded RMB69 million (US$10 million) in foreign exchange losses for the year ended December 31, 2022, resulting mainly from the change in foreign exchange rates applicable to our assets and liabilities held in foreign currencies. However, it remains unclear what further fluctuations may occur or what impact this will have on the value of the Renminbi. Future movements in the exchange rate of RMB against the U.S. dollar and other foreign currencies may adversely affect our results of operations and financial condition.
The COVID-19 pandemic could have a material adverse impact on our business.
The COVID-19 pandemic and the measures taken by governments around the world to contain its spread has negatively impacted the global economy and created significant volatility in the financial markets. In the insurance market in China, the growth of life insurance premiums slowed due to the pandemic. The recruitment and training of our exclusive agents and other marketing activities were subject to certain restrictions, which has negatively impacted our businesses. Further, the pandemic also created volatility in the capital markets. The value of the investments we hold, the income we receive from such investments, and our ability to adjust our portfolio mix, could be affected if there were further volatility or declines in the stock or bond markets or if market interest rates were to decline. For example, in 2022, China’s interest rates were at a historically low level, which negatively impacted our allocation in fixed-income assets. The domestic equity market experienced a relatively substantial fall as compared to the beginning of the year, which resulted in a decline in our investment income from equity investment in 2022 compared to 2021. See “Item 11 Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Risk”. Furthermore, if a worsening of the COVID-19 pandemic were to result in increased claims for certain insurance products, it could reduce our earnings.
Since December 2022, the Chinese government has modified its COVID-19 control policy, and most of the travel restrictions and quarantine requirements have been lifted. However, the impact of COVID-19 pandemic on us in the future will depend on future developments which are highly unpredictable and beyond our control, such as the frequency, duration and severity of the resurgence of COVID-19 and the emergence of new variants, as well as the measures that may be taken by governments around the world in response to these developments, the impact of the pandemic on the global economy and the measures taken by governments to stimulate the general economy. Therefore, we cannot guarantee that the pandemic will not continue to have an adverse effect on our business and results of operations in the future, which may be material.
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We are exposed to changes in interest rates.
Changes in interest rates may affect our profitability.
Our profitability is affected by changes in interest rates. Interest rates are highly sensitive to many factors, including economic growth rate, inflation, governmental monetary and tax policies, domestic and international economic and political conditions, financial regulatory requirements and other factors beyond our control. If interest rates were to increase significantly in the future, surrenders and withdrawals of life insurance and annuity policies and contracts may increase as policy holders may seek other investments with higher perceived returns. This process may result in cash outflows requiring that we sell investment assets at a time when the prices of those assets are adversely affected by the increase in market interest rates, which may result in realized investment losses. However, if interest rates were to decline in the future, the income we realize from our investments may decrease, affecting our profitability. In addition, as instruments in our investment portfolio mature, we might have to reinvest the funds we receive in investments bearing low interest rates, which may also affect our profitability. See “Item 11 Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Risk”.
For our long-term life insurance products including annuity products, we are obligated to pay contractual benefits to our policyholders or the beneficiaries based on a guaranteed interest rate, which is established when the product is priced. These products expose us to the risk that changes in interest rates may change our “spread”, or the difference between the amount of return that we are able to earn on our investments and the amount of return that we are required to pay based on a guaranteed interest rate under the policies.
On June 10, 1999, the CIRC set the maximum guaranteed interest rate which insurance companies could commit to pay on new policies at 2.50% (compounded annually) and, in response, we set the guaranteed interest rates on our products at a range of between 1.50% and 2.50%. In August 2013, February 2015 and September 2015, the CIRC removed the 2.50% cap on the guaranteed interest rates for traditional non-participating insurance policies, universal life insurance policies and participating life insurance policies, respectively. From October 1, 2015, the guaranteed interest rates of all long-term life insurance products are to be decided by insurance companies at their discretion in accordance with the principle of prudence, but CBIRC approval is required for products with guaranteed interest rates above the maximum valuation rate set by the CBIRC. This maximum valuation rate varies by product. Although the removal of the 2.50% cap has not resulted in any material impact on the profitability of our insurance policies in force, it could result in the increase of the guaranteed interest rates of our new products and the decrease of our spread. We cannot assure you that the removal of the 2.50% cap will not lead to a material adverse effect on our business, results of operations or financial condition.
As of December 31, 2022, the average guaranteed rate of return for all of our long-term insurance policies in force was 2.87%, while our investment yields for the years ended December 31, 2022, 2021 and 2020 were 3.94%, 4.98% and 5.30%, respectively. See “Item 4. Information on the Company—Business Overview—Investments—Investment Results”. If the rates of return on our investments were to fall below the minimum rates we guarantee, our profitability would be materially and adversely affected.
Because of the general lack of long-term fixed income securities in the Chinese capital markets, we are unable to match closely the duration of our assets and liabilities, which increases our exposure to interest rate risk.
Like other insurance companies, we seek to manage interest rate risk through managing, to the extent possible, the average duration of our investment assets and the insurance policy liabilities they support. Matching the duration of our assets to their related liabilities reduces our exposure to changes in interest rates, because the effect of the changes largely will be offset against each other. However, the limited availability of long-duration investment assets in the markets in which we invest, has resulted in, and in the future may result in, the duration of our assets being shorter than that of our liabilities, particularly with respect to liabilities with durations of more than 30 years. Furthermore, the Chinese financial markets currently provide only very limited financial derivative products for us to hedge our interest rate risk. We believe that with the development of the Chinese capital markets, our ability to match the duration of our assets to that of our liabilities will improve. We also seek to manage the risk of duration mismatch by focusing on product offerings whose maturity profiles are in line with the duration of investments available to us in the prevailing investment environment. However, until we are able to match more closely the duration of our assets and liabilities, we will continue to be exposed to interest rate changes, which may materially and adversely affect our business and earnings.
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Operating and financial risks of our associates may have an adverse impact on our business and profitability.
We have investments in associates. Associates are entities over which we have significant influence, generally with a shareholding of between 20% and 50% of the voting rights. We can participate in the financial and operating policy decisions of the associates we have invested in, but we do not have sole control over the operations of these entities. Our associates’ business, operations and financial conduct and results, including any deficiency in corporate governance and volatility in profits of these associates, may have an adverse impact on our business and our profitability.
Our growth is dependent on our ability to attract and retain productive agents.
A substantial portion of our business is conducted through our exclusive agents. Because of differences in productivity, some of our sales agents are responsible for a disproportionately high percentage of our sales of individual products. If we are unable to retain and build on this core group of highly productive agents, our business could be materially and adversely affected. Increasing competition for agents from other insurance companies and business institutions and increasing labor costs in China may also force us to increase the compensation of our agents, which would increase our operating costs and reduce our profitability. As the market competition for qualified agents increases, our costs of attracting and retaining qualified agents may increase.
If we are unable to develop other distribution channels for our products, our growth may be materially and adversely affected.
Commercial banks are rapidly emerging as some of the fastest growing distribution channels in China. Many newly established domestic and foreign-invested life insurance companies have been focusing on commercial banks as one of their main distribution channels. In addition, with the relaxation of the regulatory restrictions of ownership by commercial banks in insurance companies, the number of insurance companies owned or controlled by commercial banks is increasing. Among the six largest Chinese state-owned commercial banks, five banks and the controlling shareholder of the remaining one have set up their own insurance companies. These insurance companies are able to benefit from their holding relationships with these commercial banks to develop bancassurance as their main distribution channels. We do not have exclusive arrangements with any of the commercial banks through which we sell life insurance and annuity products, and thus our sales may be materially and adversely affected if one or more commercial banks choose to favor our competitors’ products over our own. In addition, as the bancassurance market becomes increasingly competitive, commercial banks may demand higher commission rates, which could increase our cost of sales and reduce our profitability. If we are unable to continue to develop our alternative distribution channels, our growth may be materially and adversely affected.
Misconduct of directors, senior management, employees and agents is difficult to detect and deter and could harm our reputation or lead to regulatory sanctions or litigation costs.
Misconduct of directors, senior management, employees and agents could result in violations of law by us, regulatory sanctions, litigation or serious reputational or financial harm. Misconduct could include:
| • | engaging in misrepresentation or fraudulent activities when marketing or selling insurance policies or annuity contracts to customers; |
| • | hiding unauthorized or unsuccessful activities, resulting in unknown and unmanaged risks or losses; |
| • | not complying with our internal policies, including a director or senior officer’s non-compliance with our code of business conduct and ethics; or |
| • | otherwise not complying with laws or our control policies or procedures. |
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We have adopted a Code of Business Conduct and Ethics for Directors and Senior Officers and Code of Conduct for Employees. However, we cannot always deter misconduct of directors, senior management, employees and agents, and the internal policies we adopt and precautions we take to prevent and detect these activities may not be effective in all cases. Wang Bin, our former chairman until his resignation on February 23, 2022, was placed under investigation by the Central Commission for Discipline Inspection and the National Supervisory Commission in January 2022. On December 22, 2022 and January 19, 2023, the Central Commission for Discipline Inspection and the National Supervisory Commission released on its website that it has concluded its disciplinary review and investigation into Wang Bin, finding that, during the period from 2018 to 2021, Wang Bin accepted on several occasions gifts and cash in violation of regulations and accepted banquets and travel arrangements that might affect the impartiality of performing his official duties, and committed other serious violations of discipline and laws. Wang Bin has been expelled from the Communist Party of China and removed from public posts. Wang Bin has also been officially charged with taking bribes and concealing overseas deposits by prosecutors. We have also experienced agent and employee misconduct that has resulted in litigation and administrative actions against us and these agents and employees, and in some cases criminal proceedings and convictions against the agent or employee in question. To date, none of these investigations or actions have resulted in material losses, damages, fines or other sanctions against us. We cannot assure you, however, that misconduct will not have a material adverse effect on our business, results of operations, financial condition or prospects.
Our business is dependent on our ability to attract and retain key personnel, including senior management, underwriting personnel, actuaries, information technology specialists, investment managers and other professionals.
The success of our business is dependent to a large extent on our ability to attract and retain key personnel who have in-depth knowledge and understanding of the life insurance market in China, including members of our senior management, qualified underwriting personnel, actuaries, information technology specialists, experienced investment managers and risk management teams. As of the date of this annual report, we do not carry key personnel insurance for any of these personnel. We compete to attract and retain these key personnel with other life insurance companies and financial institutions, some of which may offer better compensation arrangements. Existing insurers are expanding their operations and the number of other financial institutions is growing. As the insurance and investment businesses continue to expand in China, we expect that competition for these personnel will increase in the future. Although we have not had difficulty in attracting and retaining qualified key personnel in the past, we cannot guarantee that this will continue to be the case. If we were unable to continue to attract and retain key personnel, our business and financial performance could be materially and adversely affected.
Differences in future actual operating results from the assumptions used in pricing and establishing reserves for our insurance and annuity products may materially affect our earnings.
Our earnings depend significantly upon the extent to which our actual operating results are consistent with the assumptions used in pricing and establishing the reserves for insurance contracts in our financial statements. Our assumptions include those for discount rate, mortality, morbidity, lapse rate and expenses. To the extent that trends in actual experiences are less favorable than our underlying assumptions used in establishing these reserves, and these trends are expected to continue in the future, we could be required to increase our reserves. Any such increase could have a material adverse effect on our profitability and, if significant, our financial condition.
We establish the reserves for insurance contracts based on the use of assumptions for discount rate, mortality, morbidity, lapse rate and expenses. These assumptions are based on our previous experience and the data published by other Chinese life insurers, as well as judgments made by the management. These assumptions may deviate from our actual experience, and, as a result, we cannot determine precisely the amounts which we will ultimately pay to fulfill our obligations under the insurance contracts or when these payments will need to be made. These amounts may vary from the estimated amounts, particularly when those payments may not occur until well into the future. The discount rate assumption is affected by certain factors, such as further macro-economy, monetary and exchange rate policies, capital market results and availability of investment channels to invest our insurance funds. We review and update the assumptions used to evaluate the reserves periodically, and establish the reserves for insurance contracts based on such assumptions. If the reserves originally established for future policy benefits prove inadequate, we must increase our reserves established for future policy benefits, which may have a material effect on our earnings and our financial condition.
We have data available for a shorter period of time than life insurance companies operating in some other countries do and, as a result, less claims experience on which to base some of the assumptions used in establishing our reserves. For a discussion of how we establish our assumptions for mortality, morbidity and lapse rate, see “Item 5. Operating and Financial Review and Prospects—Critical Accounting Policies”. Given the limited nature of this experience, it is possible that our actual claims could vary significantly from the assumptions used.
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Our risk management and internal reporting systems, policies and procedures may leave us exposed to unidentified or unanticipated risks, which could materially and adversely affect our businesses or result in losses.
Our policies and procedures to identify, monitor and manage risks may not be fully effective. Many of our current methods of managing risk and exposures are based upon our use of observed historical market behavior or statistics based on historical models. As a result, these methods may not fully predict future exposures, which could be significantly greater than what the historical measures indicate. In addition, risk management depends upon the evaluation of information regarding markets, customers or other matters that is publicly available or otherwise accessible to us, which may not always be accurate, complete, up-to-date or properly evaluated. In addition, a significant portion of business information needs to be centralized from our many branch offices. Management of operational, legal and regulatory risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective. Failure or the ineffectiveness of these systems could materially and adversely affect our business or result in losses.
We are likely to offer a broader and more diverse range of insurance and investment products in the future as the insurance market in China continues to develop. At the same time, we anticipate that we may invest in a significantly broader range of asset classes. The combination of these factors will require us to continue to enhance our risk management capabilities and is likely to increase the importance of our risk management policies and procedures to our results of operations and financial condition. If we fail to adapt our risk management policies and procedures to our changing business, our business, results of operations and financial condition could be materially and adversely affected.
Catastrophes could materially reduce our earnings and cash flow.
We could in the future experience catastrophic losses that may have an adverse impact on the business, results of operations and financial condition of our insurance business. Catastrophes can be caused by various events, including terrorist attacks, earthquakes, hurricanes, floods and fires, as well as pandemics and epidemics.
We establish liabilities for claims arising from a specific catastrophe after assessing the exposure and damages arising from the event. Although we have purchased catastrophe reinsurance in order to reduce our catastrophe exposure, we cannot assure you that any significant catastrophic event will not have a material adverse effect on us.
Current or future litigation, arbitration and regulatory proceedings could result in financial losses or harm our businesses.
We are involved in litigation and arbitration proceedings involving our insurance operations on an ongoing basis. In addition, the CBIRC as well as other PRC governmental agencies, including tax and audit bureaus and the PBOC, from time to time make inquiries and conduct examinations or investigations concerning our compliance with PRC laws and regulations. These litigation, arbitration and administrative proceedings have in the past resulted in payments of insurance benefits, damage awards, settlements or administrative sanctions, including fines, which have not been material to us. We currently have control procedures in place to monitor our litigation, arbitration and regulatory exposure and take appropriate actions. See “Item 8. Financial Information—Consolidated Financial Statements and Other Financial Information—Legal and Regulatory Proceedings”. While we cannot predict the outcome of any pending or future litigation, arbitration, examination or investigation, we do not believe that any pending legal matter will have a material adverse effect on our business, financial condition or results of operations. However, we cannot assure you that any future litigation, arbitration or regulatory proceeding will not have an adverse outcome, which could have a material adverse effect on our operating results or cash flows. See “Item 8. Financial Information—Consolidated Financial Statements and Other Financial Information—Legal and Regulatory Proceedings”.
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The embedded value information we present in this annual report is based on several assumptions and may vary significantly as those assumptions are changed.
In order to provide investors with an additional tool to understand our economic value and business results, we have disclosed information regarding our embedded value, as discussed in the section entitled “Item 8. Financial Information—Embedded Value”. The embedded value is an estimate of our economic value (excluding the value attributed to new business after the valuation date) and is based on a discounted cash flow valuation determined using commonly applied actuarial methodologies. Standards with respect to the calculation of embedded value are still evolving, however, and there is no universal standard which defines the form, calculation method or presentation format of the embedded value of an insurance company. Assumptions used in embedded value calculations include rate of investment return, discount rate, mortality, morbidity, expenses and surrender rate, as well as certain macro factors, many of which are beyond our control. These assumptions may deviate significantly from our actual experience and therefore the embedded value is consequently not inherently predictive. Furthermore, since our actual market value is determined by investors based on a variety of information available to them, the embedded value should not be construed to be a direct reflection of our performance. The inclusion of the embedded value in this annual report should not be regarded as a representation by us, our management or any other person as to our future profitability. Because of the technical complexity involved in embedded value calculations and the fact that embedded value estimates vary materially as key assumptions are changed, you should read the discussion under the section entitled “Item 8. Financial Information—Embedded Value” in its entirety. You should use special care when interpreting embedded value results and should not place undue reliance solely on them. See also “Forward-Looking Statements”.
We are subject to stringent laws and contractual obligations related to data privacy and cybersecurity, and we may be exposed to risks related to our management of personal information and other data.
The regulatory environment in China and elsewhere as it relates to the collection, use, transfer, and other processing of data, “important data,” and personal data and other types of information is rapidly evolving and is likely to remain uncertain for the foreseeable future. Regulatory authorities in China have implemented a number of new laws and administrative measures that could impose significant obligations on us, adversely impact our operations or impede our ability to transfer or share information with foreign regulators and others inside and outside of China. For more information on such laws and measures, see “—Chinese Data Privacy and Cybersecurity Laws.”
We routinely receive, collect, generate, store, process, transmit and maintain personal information along with other sensitive data. We may also receive, store, process, generate, control, or otherwise have access to “important data” in our businesses. As such, we are subject to the relevant PRC data security, cyber-security, and privacy and data protection laws, regulations, and standards that apply to the collection, generation, use, retention, protection, disclosure, transfer and other processing of personal information and “important data”. Based on the size of our company, the industry sectors in which we operate, and the fact that we are also listed abroad, we expect to be subject to potentially heightened scrutiny and obligations with regard to cybersecurity, data security, and the protection of personal information once all the relevant regulations and rules have been promulgated. We are also subject to contractual obligations regarding the processing of personal information. Legal requirements regarding data protection and privacy continue to evolve and may result in ever-increasing public scrutiny and escalating levels of enforcement and sanctions and increased costs of compliance.
In addition, failure to comply with any of these laws could result in enforcement action against us, including investigations, civil, administrative, and criminal enforcement action, fines, administrative penalties, imprisonment of company officers and public censure, claims for damages by customers and other affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations or prospects.
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We have established procedures to protect the confidentiality of the personal information and “important data” we receive, store, process, generate, or otherwise have access to or control over. While we have adopted security policies and measures to protect our proprietary data, important data, and data subjects’ privacy, personal information or important information could be subject to leaks caused by hacking activities, human error, employee misconduct or negligence or system breakdown. We also cooperate with third parties including technology support vendors, hospitals and other third-party contractors and consultants for our operations. Any leakage or abuse of personal data or important data by our third-party partners may be perceived by relevant regulators or the data subjects to have resulted from a failure by us. Furthermore, any change in applicable laws and regulations or the enforcement thereof could affect our ability to use medical data or other data we process as part of our operations and subject us to liability for the use of such data for previously permitted purposes. Any failure or perceived failure by us to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations, or any compromise of information security that results in the unauthorized release or transfer of personally identifiable information, important data, or other data, could cause our customers or regulators to lose trust in us and could expose us to legal claims or other sanctions. See “—A computer system failure, cyber-attacks or other security breaches may disrupt our business, damage our reputation and adversely affect our results of operations and financial condition.”
In addition to the restrictions on the ability of the PCAOB to conduct inspections of audit work performed in China including the work of our auditor (see “—The auditors’ reports included in this annual report are prepared by relying on audit work which is not inspected by the Public Company Accounting Oversight Board and, as such, investors may be deprived of the benefits of such inspection”), the DSL and PIPL contain provisions restricting our ability to share personal, important, and other information with foreign regulatory or judicial authorities. These provisions could affect our ability to respond to requests or demands for information from such authorities, including the SEC, or in judicial proceedings.
A computer system failure, cyber-attacks or other security breaches may disrupt our business, damage our reputation and adversely affect our results of operations and financial condition.
We use computer systems to store, retrieve, evaluate and utilize customer and company data and information. Our business is highly dependent on our ability to access these systems to perform necessary business functions such as developing and selling insurance products, providing customer support, policy management, filing and paying claims, managing our investment portfolios and producing financial statements. Although we have designed and implemented a variety of security measures and backup plans to prevent or limit the effect of failure, our computer systems may be vulnerable to disruptions as a result of natural disasters, man-made disasters, criminal activities, pandemics or other events beyond our control. In addition, our computer systems may be subject to computer viruses or other malicious codes, unauthorized access, cyber-attacks or other computer-related penetrations. The failure of our computer systems for any reason could disrupt our operations and may adversely affect our business, results of operations and financial condition. Although we have not experienced such a computer system failure or security breach in the past, we cannot assure you that we will not encounter a failure or security breach in the future.
We may retain confidential information on our computer systems, including “important data”, customer personal information and proprietary business information. In addition, for business purposes, from time to time customer personal information is transmitted between our computer systems and those of third parties, such as third-party agents selling insurance products for us. Any compromise of the security or other errors of our computer systems or those arising during the information transmission process that result in the disclosure of personally identifiable customer information could damage our reputation, expose us to litigation, increase regulatory scrutiny and require us to incur significant technical, legal and other expenses.
Whether our investors in the U.S. who rely on our auditor’s audit reports will have the benefit of PCAOB oversight in the future is subject to uncertainty.
Auditors of companies that are registered with the SEC and traded publicly in the United States, including our independent registered public accounting firm, must be registered with the US Public Company Accounting Oversight Board (United States), or the PCAOB, and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. Because we have substantial operations within China and our independent registered public accounting firm is based in China, in the past, the PCAOB was unable to conduct inspections of the work of our auditor as it related to those operations without the approval of the Chinese authorities, and thus our auditor’s work related to our operations in China was not subject to PCAOB inspection. This lack of PCAOB inspection of audit work performed in China prevented the PCAOB from regularly evaluating the audit work of any auditor that was performed in China including those performed by our auditor. As a result, investors may have been deprived of the full benefits of PCAOB inspections.
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On August 26, 2022, the PCAOB, the CSRC and the Ministry of Finance of the PRC signed a Statement of Protocol governing inspections and investigations of accounting firms based in mainland China and Hong Kong, which established a framework to make possible complete inspections and investigations by the PCAOB of audit firms headquartered in mainland China and Hong Kong.
On December 15, 2022, the PCAOB determined that it was able to inspect and investigate completely registered public accounting firms headquartered in mainland China and Hong Kong in 2022, and vacated its previous 2021 determinations to the contrary. However, whether the PCAOB will continue to be able to conduct complete inspections and investigations of registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainties and depends on a number of factors out of our control. The PCAOB has indicated that it will act immediately to issue new determinations pursuant to the Holding Foreign Companies Accountable Act if needed. Therefore it remains unclear whether our investors will continue to have the benefit of PCAOB oversight. The inability of the PCAOB to conduct inspections of audit work performed in China would make it more difficult to evaluate the effectiveness of our auditor’s audit procedures as compared to auditors in other jurisdictions that are subject to PCAOB inspections on all of their work. Investors and potential investors may lose confidence in our reported financial information and procedures and the quality of our consolidated financial statements.
We may be adversely affected if additional remedial measures are imposed on the four China-based accounting firms which reached settlement with the SEC in the administrative proceedings brought by the SEC against them.
In December 2012, the SEC initiated administrative proceedings against five accounting firms in China, alleging that they refused to produce audit work papers and other documents related to certain China-based companies under investigation by the SEC for potential accounting fraud. In January 2014, an SEC administrative law judge ruled in favor of the SEC, issuing an initial decision which censured each of the five accounting firms for failure to provide their audit work papers to the SEC and ordered a six-month suspension of the China-based affiliates of four of the five accounting firms’ right to practice before the SEC. The accounting firms have appealed the decision of the administrative law judge to the SEC, and the decision will not come into force unless and until an order of finality is issued by the SEC. We are not subject to any SEC investigations, nor are we involved in the proceedings brought by the SEC against the accounting firms. However, the China affiliate of the independent registered public accounting firm that has issued the auditor’s report included in our annual reports filed with the SEC for the 2013, 2014 and 2015 fiscal years, which is also our independent registered public accounting firm for the 2016 to 2020 fiscal years, and our independent registered public accounting firm for the 2021 and 2022 fiscal years, are among the five accounting firms named in the SEC’s proceedings.
In February 2015, four of the five accounting firms, including the China affiliate of the independent registered public accounting firm that has issued the auditor’s report included in our annual report filed with the SEC for the 2013, 2014 and 2015 fiscal years, which is also our independent registered public accounting firm for the 2016 to 2020 fiscal years, and our independent registered public accounting firm for the 2021 and 2022 fiscal years, each agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC. The settlement required the firms to follow detailed procedures and to seek to provide the SEC with access to audit documents of China-based companies via the CSRC. If future document productions fail to meet the specified criteria, the SEC retains authority to impose a variety of additional remedial measures on the firms depending on the nature of the failure, including an automatic six-month bar on the performance of certain audit work, commencement of a new proceeding or the resumption of the current proceeding by the SEC. While we cannot predict if the SEC will further review the four China-based accounting firms’ compliance with specified criteria or if the results of such a review would result in the SEC imposing penalties, if they are subject to additional remedial measures, we may be adversely affected, along with other China-based issuers audited by these accounting firms. If none of the China-based auditors are able to continue to perform audit work for China-based issuers, we will not be able to meet the reporting requirements under the Exchange Act, which may ultimately result in our deregistration by the SEC.
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The enactment of the Holding Foreign Companies Accountable Act and identification of the Company by the SEC will result in enhanced disclosure requirements for us.
On December 18, 2020, the Holding Foreign Companies Accountable Act, or HFCAA, was signed into law. The HFCAA requires the SEC to identify each issuer required to file reports under section 13 or 15(d) of the Exchange Act that has retained a registered public accounting firm to issue an audit report where the firm has a branch or office located in a foreign jurisdiction, and the PCAOB has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction. Registrants so identified, or Commission-Identified Issuers, are required to submit documentation to the SEC that establishes that they are not owned or controlled by a governmental entity in that foreign jurisdiction. In addition, if the registrant is determined to be a Commission-Identified Issuer for three consecutive “non-inspection” years, it will be delisted from U.S. exchanges and its securities will be prohibited from trading in the United States. Commission-Identified Issuers that are foreign issuers will also be subject to enhanced disclosure requirements, including disclosure on government ownership or control of the issuer, the name of each official of the Chinese Communist Party who is a member of the issuer’s board of directors, and whether the issuer’s articles of incorporation contain any charter of the Chinese Communist Party.
On March 24, 2021, the SEC adopted interim final amendments to implement the disclosure and submission requirements of the HFCAA. On December 2, 2021, the SEC adopted amendments to finalize its rules implementing the HFCAA.
On December 16, 2021, the PCAOB issued a report on its determinations that it was unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by PRC authorities in those jurisdictions (“PCAOB-Identified Firm”).
Our auditor, PricewaterhouseCoopers Zhong Tian LLP, is an independent registered public accounting firm with the PCAOB that is headquarted in mainland China, and was therefore a PCAOB-Identified Firm under the PCAOB 2021 determinations. On May 26, 2022, we were identified in the conclusive list of issuers under the HFCAA as our auditor was a PCAOB-Identified Firm, and we will be required to comply with the submission and disclosure requirements in the annual report for each year in which we are identified.
On August 26, 2022, the PCAOB, the CSRC and the Ministry of Finance of the PRC signed a Statement of Protocol governing inspections and investigations of accounting firms based in mainland China and Hong Kong, which established a framework to make possible complete inspections and investigations by the PCAOB of audit firms headquartered in mainland China and Hong Kong.
On December 15, 2022, the PCAOB determined that it was able to inspect and investigate completely registered public accounting firms headquartered in mainland China and Hong Kong in 2022, and vacated its previous 2021 determinations to the contrary. However, whether the PCAOB will continue to be able to conduct complete inspections and investigations of registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainties and depends on a number of factors out of our control. The PCAOB has indicated that it will act immediately to issue new determinations pursuant to the HFCAA if needed.
On December 29, 2022, the President signed the Consolidated Appropriations Act, 2023, which, among other things, amended the HFCAA to reduce the number of consecutive years, from three years to two years, an issuer has been identified as a Commission-Identified Issuer before the SEC must impose an initial trading prohibition on the issuer’s securities. Therefore, once an issuer is identified as a Commission-Identified Issuer for two consecutive years, the SEC is required under the HFCAA to prohibit the trading of the issuer’s securities on a national securities exchange and in the over-the-counter market.
Based on the lasted PCAOB determination in 2022, the PCAOB removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file this annual report. In addition, we have voluntarily delisted our ADSs from the NYSE, which has become effective from September 2, 2022, and have terminated our ADR program, which has become effective from November 11, 2022. We also intend to file Form 15F to deregister our ADSs and the underlying H shares and terminate our reporting obligations under the Exchange Act once the criteria for deregistration have been satisfied. Therefore, we do not expect to be subject to the submission and disclosure requirements in the annual report for the year of 2023, even if we have not filed a Form 15F before April 30, 2024 and are still required to file the annual report for the year of 2023, or to be subject to the trading prohibitions under the HFCAA as our ADSs are already no longer traded in U.S. from November 11, 2022. However, we cannot guarantee you that the SEC will not continue to identify us under the HFCAA or that Form 15F to be filed will not be delayed, withdrawn or denied. If, before the deregistration of our ADS and underlying H shares become effective, the PCAOB issues new determination to re-identify our auditor as the PCAOB-Identified Firm or the SEC continues to identify us under the HFCAA in the future, we may still be subject to the submission and disclosure requirements in the annual report for each year in which we are so identified.
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United States Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act, or FATCA, generally requires a foreign financial institution, or FFI, to enter into an FFI agreement under which it will agree to identify and provide the United States Internal Revenue Service, or the IRS, with information regarding accounts, including certain insurance policies, held by U.S. persons and U.S.-owned foreign entities, or be subject to a 30% withholding tax on “withholdable payments”, which include, among other items, payments of U.S.-source interest and dividends and gross proceeds from the sale or other disposition of property that may produce U.S.-source interest or dividends. Proposed regulations promulgated on December 13, 2018, or the proposed FATCA regulations, eliminate withholding on payments of gross proceeds from the sale or other disposition of property that may produce U.S.-source interest or dividends. In addition, an FFI that has entered into an FFI agreement may be required to withhold on certain “foreign passthrough payments” that it makes to FFIs that have not entered into their own FFI agreements or to account holders who do not respond to requests to confirm their U.S. person status and/or do not agree to allow the FFI to report certain account related information to the IRS. Under the proposed FATCA regulations, withholding on foreign passthru payments will begin no earlier than the date that is two years after the date of publication in the Federal Register of final regulations that define the term “foreign passthru payment”. Consequently, the scope of any withholding on foreign passthru payments is uncertain at this time.
The United States and the PRC have agreed in substance on the terms of an intergovernmental agreement, or IGA, that is intended to facilitate the type of information reporting required under FATCA. Under the agreed terms, instead of reporting directly to the IRS, Chinese FFIs are required to report specified account information directly to the PRC tax authority, which will then pass that information to the IRS. While compliance with the IGA will not eliminate the risk of withholding described above, it is expected to reduce that risk for FFIs that are resident in China. Although the IGA has not yet been officially signed, the PRC and the United States have agreed to treat the IGA as in effect from June 26, 2014, provided that the PRC continues to demonstrate “firm resolve” to sign the IGA as soon as possible. If the United States and the PRC ultimately fail to officially sign the IGA, then the FATCA reporting and withholding regime described in the prior paragraph will apply to Chinese FFIs.
We will closely monitor developments regarding FATCA and the IGA. If we are required to comply with the terms of the IGA or FATCA, as applicable, we expect that our compliance costs will increase. If we do not comply with the terms of the IGA or FATCA, as applicable, then certain payments to us will be subject to withholding under FATCA. However, since the text of the IGA has not been released, and regulations and other guidance remain under development, the future impact of this law on us is uncertain.
U.S. Holders will be subject to adverse tax consequences if we are considered to be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes
If we are considered a PFIC for U.S. federal income tax purposes, a U.S. Holder will be subject to adverse tax consequences. A non-U.S. corporation will generally be a PFIC if 75% or more of its gross income constitutes “passive income” or 50% or more of its assets produce “passive income” or are held for the production of “passive income”. The PFIC provisions, as modified by the Tax Cuts and Jobs Act, or the TCJA, specifically exclude from the definition of “passive income” any income “derived in the active conduct of an insurance business by a qualifying insurance corporation”. A non-U.S. corporation is a qualifying insurance corporation if it would be subject to tax as an insurance company if it were a domestic corporation and (i) loss and loss adjustment expenses and certain reserves, or “applicable insurance liabilities”, constitute more than 25% of the non-U.S. corporation’s gross assets for the relevant year or (ii) a U.S. Holder makes an election to apply an alternative facts and circumstances test that applies only in certain runoff-related or ratings-related circumstances involving the insurance business. We make various simplifying assumptions to estimate the asset composition and value of our subsidiaries in order to apply the PFIC tests to the income and assets of our 25% or greater owned subsidiaries.
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The IRS released final and proposed Treasury regulations regarding the application of the PFIC rules to insurance companies in December 2020. The proposed Treasury regulations are not yet in force but are proposed to be effective for taxable years of U.S. Holders beginning on or after the date that final regulations are issued. The proposed Treasury regulations provide that a company is engaged in the active conduct of an insurance business only if it satisfies a factual requirements test or a “bright-line” test providing that the active conduct requirement is met if the insurance company’s “active conduct percentage” is at least 50%. The factual requirements test requires a company’s officers and employees to carry out substantial managerial and operational activities on a regular and continuous basis with respect to underwriting, investment, contract and claim management and sales activities, and perform virtually all of the active decision-making functions relevant to its underwriting functions. In general, a company’s active conduct percentage is determined by dividing the company’s aggregate expenses for certain insurance-related services of its officers and employees (excluding investment activities) by the company’s aggregate expenses for such insurance-related services, including those paid to unaffiliated persons (excluding investment activities). Activities of officers and employees of certain affiliates may be considered for both the factual requirements test and the “bright-line” test. We cannot assure you that we will not be treated as a PFIC as a result of the finalization of these regulations. Although we believe that we were not classified as a PFIC in 2022, there is no assurance that the IRS will not take a contrary position and assert that we are a PFIC, and no assurances can be given that we will not become a PFIC at some point in the future. U.S. Holders are urged to consult their tax advisors regarding the effects of the PFIC rules.
Risks Relating to the PRC Life Insurance Industry
We expect competition in the Chinese insurance industry to increase, which may materially and adversely affect the growth of our business.
We face competitive pressures from both domestic and foreign-invested life insurance companies operating in China, as well as from property and casualty insurance companies, which may compete with our accident and short-term health insurance businesses, and other financial institutions that sell other financial investment products in competition with ours. In addition, the establishment of other professional health insurance companies and pension annuities companies may also lead to greater competition in the health insurance business and commercial pension insurance business. If we are not able to adapt to these increasingly competitive pressures in the future, our growth rate may decline, which could materially and adversely affect our earnings.
Competition among domestic life insurance companies is increasing.
According to statistical information derived from China Insurance Yearbook and the market share information calculated based on these statistical information, in 2021, the last year for which the market information for separate geographic markets is available, our closest competitors were Ping An Life Insurance Company of China, Ltd., or Ping An Life, China Pacific Life Insurance Co., Ltd., or China Pacific Life, New China Life Insurance Company Ltd., or New China Life and Taikang Life Insurance Co., Ltd., or Taikang Life. Ping An Life, China Pacific Life, New China Life, Taikang Life and we together accounted for 51.6% of the life insurance premiums in China in 2021, with our market share in China decreasing from 20.8% in 2020 to 19.9% in 2021. Each of Ping An Life, China Pacific Life, New China Life and Taikang Life has operated in the Chinese insurance market for more than 15 years, and each has a recognized brand name. In 2021, Ping An Life had a greater market share than we did in Shanghai, Shenzhen, Beijing, Tianjin, Heilongjiang, Liaoning, Dalian, Ningbo, Chongqing, Hainan and Xiamen.
We also face competition from insurance companies owned or controlled by commercial banks. Among the six largest Chinese state-owned commercial banks, five banks and the controlling shareholder of the remaining one have set up their own insurance companies. These insurance companies are able to benefit from their holding relationships with these commercial banks to develop bancassurance as their main distribution channels. In addition, we also face competition from smaller insurance companies, which may have competitive advantages in various regions in which we operate, and new entrants to the group life insurance market, including professional pension companies that are being established pursuant to a set of regulations promulgated by the Ministry of Human Resources and Social Security of the PRC, and new entrants to the health insurance industry, including newly approved and established professional health insurance companies, following Chinese government’s adoption of policies that encourage the development of health insurance and improved health care in China.
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Competition from foreign-invested life insurance companies is increasing, as restrictions on their operations in China are relaxed.
Foreign-invested life insurance companies are insurance companies in which foreign entities hold at least a 25% interest. Foreign-invested life insurers have been permitted to sell individual and group life insurance, health insurance and annuity products nationwide in China since December 2004. According to statistical information derived from China Insurance Yearbook, in 2021, foreign-invested life insurers had a market share of 10.74%. From January 1, 2020, foreign investors are allowed to own 100% in Chinese life insurers. We believe that the relaxation of the restrictions on foreign-invested insurers will continue to increase the competitive pressures we are facing.
We are likely to face increasing competition from property and casualty insurance companies and other companies offering products that compete with our own.
In addition to competition from life insurance companies, we face competition from other companies that may offer products that compete with our own, including:
| • | Property and casualty companies. Beginning on January 1, 2003, property and casualty insurance companies have been permitted to sell short-term health insurance and accident products, but only with regulatory approval. There were 87 property and casualty insurers as of December 31, 2021. We believe property and casualty insurers have the competitive advantage of being able to bundle, or cross-sell, short-term health and accident products with the other non-life insurance products that they are currently selling to their existing and potential customers. We believe this will lead to greater competition in the accident and health insurance sectors. On December 30, 2006, we established a property and casualty company, CLPCIC, with CLIC. While this joint venture mainly focuses on property insurance business, it also develops short-term health insurance and accident business. Its operations may have a negative impact on sales of our short-term health insurance and accident products in the future. |
| • | Mutual fund companies, commercial banks and other financial services providers. We face increasing competition from other financial services providers, primarily licensed mutual fund companies, commercial banks providing personal banking services and offering various financial products, trust companies and securities brokerage firms licensed to manage separate accounts. These financial service providers provide a variety of financial investment products that may prove to be attractive to the public and thereby adversely affect the sale of some products we offer, including traditional life insurance policies with a savings feature, participating life insurance policies and annuities. |
All of our institutional insurance agencies and brokers are required to obtain permits and be registered. If a substantial number of our institutional insurance agencies and brokers fail to meet these qualification and registration requirements or this failure results in policyholders canceling their policies, our business may be materially and adversely affected.
Dedicated institutional insurance agencies, non-dedicated institutional insurance agencies and institutional insurance brokers are required under the PRC insurance law to meet relevant qualifications as required by the CBIRC, and obtain permits to operate insurance agency business or insurance brokerage business. We cannot assure you that all of our institutional agencies and brokers will obtain such permits. The enforcement of this requirement could adversely affect the composition and productivity of our distribution channel, which could have a material adverse effect on our business.
Further development of regulations in China may impose additional costs or restrictions on our activities.
We operate in a highly regulated industry. The CBIRC supervises and administers the insurance industry in China. In exercising its authority, it is given certain discretion to administer the law. China’s insurance regulatory regime is undergoing significant changes toward a more transparent regulatory process and a convergent movement toward international standards. Some of these changes may result in additional costs or restrictions on our activities. For example, in November 2020, the Insurance Association of China issued a notice on revising the definition of critical illnesses, including revisions to the applicable scope and principles of critical illnesses as well as relevant provisions on insurance clauses for critical illnesses. From February 1, 2021, insurers may not continue to sell critical illness insurance products which were developed based on previous rules. The CBIRC in the same month also issued a notice stipulating that Critical Illness Morbidity Table in the Chinese Personal Insurance Industry (2020) promulgated by the China Association of Actuaries will serve as the evaluation table and pricing reference table for statutory liability reserve of life insurance products that include critical illness insurance liability. The notice also imposed restrictions on the applicable scope, evaluation of statutory reserves and pricing of the products. These new requirements apply to a number of key products sold by us. Although these new requirements are consistent with our long-term development strategy, making adjustments to relevant products during a short period of time may increase our operating costs and may adversely affect our business, results of operations and financial condition.
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In addition, because the terms of our products are subject to regulations, changes in regulations may affect our profitability on the policies and contracts we issue. For instance, under the guidelines issued by the CIRC, the dividends on our participating products must be no less than 70% of the distributable earnings from participating products in accordance with CIRC requirements. If this level were to be increased in the future, our profitability could be materially and adversely affected. Furthermore, in August 2013, February 2015 and September 2015, the CIRC removed the 2.50% cap on the guaranteed interest rates for traditional non-participating insurance policies, universal life insurance policies and participating life insurance policies, respectively. From October 1, 2015, the guaranteed interest rates of all long-term life insurance products are to be decided by insurance companies at their discretion in accordance with the principle of prudence, but CBIRC approval is required for products with guaranteed interest rates above the maximum valuation rate set by the CBIRC, which varies by product. Although the removal of the 2.50% cap has not resulted in any material impact on the profitability of our insurance policies in force, it could result in the increase of the guaranteed interest rates of our new products and the decrease of our spread, and therefore we cannot assure you that the removal of the 2.50% cap will not lead to a material adverse effect on our business, results of operations or financial condition.
On March 10, 2023, China approved an institutional reform plan, which includes the establishment of a new National Financial Regulatory Administration, or NFRA, directly under the State Council. NFRA will be in charge of regulating the PRC financial industry except for the securities sector. CBIRC will be dismantled with its functions being carried out by NFRA. We will be subject to the supervision and regulation of NFRA once it is established. As of the date of this Annual Report, it remains unclear when such institutional reform plan will be completed.
Our ability to comply with minimum solvency requirements is affected by a number of factors, and our compliance may force us to raise additional capital, which could increase our financing costs or be dilutive to our existing investors, or to reduce our growth.
In December 2021, the CBIRC issued the Solvency Regulatory Rules for Insurance Companies (II) and the corresponding notice on implementing the new rules, or C-ROSS II, with the aim of replacing the then-current solvency requirements for Chinese insurance companies, C-ROSS. C-ROSS II continues to adopt the internationally accepted “three-pillar” regulatory system which includes quantitative capital requirements, qualitative regulatory requirements and market discipline mechanisms, and also enhances capital classification requirements and strengthens risk capital measurement. C-ROSS II was officially implemented in the Chinese insurance sector from the preparation of the quarterly solvency report for the first quarter of 2022. Our core solvency adequacy ratio under C-ROSS II as of December 31, 2022 was 143.59%, and our comprehensive solvency adequacy ratio under C-ROSS II as of December 31, 2022 was 206.78%. While our solvency ratio is currently above the regulatory requirements, as we are exposed to potential insurance, market and investment risks, we cannot assure you that our solvency ratio under C-ROSS II will always be above the required level. If our solvency ratio under C-ROSS II is below the required solvency level, we may need to raise additional capital to meet our solvency requirement, including through additional issuance of capital replenishment bonds, which would increase our financing costs, or through additional issuance of shares, which would be dilutive to our existing investors. If we are not able to raise additional capital, we may be forced to reduce the growth of our business. A failure to meet minimum solvency requirement can also lead to various regulatory actions being taken by the CBIRC, which could have a material adverse effect on our business or financial condition. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Solvency requirements”.
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Risks Relating to the Restructuring
CLIC has incurred substantial losses on the policies retained by it in the restructuring. If CLIC is unable to meet its obligations to its policyholders, it may seek to increase the level of dividends we pay, sell the China Life shares it owns or take other actions which may have a material adverse effect on the value of the shares our other existing investors own.
In connection with the restructuring, CLIC transferred to us (1) all long-term insurance policies (policies having a term of more than one year from the date of issuance) issued on or after June 10, 1999, having policy terms approved by or filed with the CIRC on or after June 10, 1999 and either (i) recorded as a long-term insurance policy as of June 30, 2003 in an actuarial database attached to the restructuring agreement as an annex or (ii) having policy terms for group supplemental medical insurance (fund type), (2) stand-alone short-term policies (policies having a term of one year or less from the date of issuance) issued on or after June 10, 1999, and (3) all riders supplemental to the policies described in clauses (1) and (2) above, together with the reinsurance contracts specified in an annex to the restructuring agreement. We refer to these policies in this annual report as the “transferred policies”. All other insurance policies were retained by CLIC. We refer to these policies as the “non-transferred policies”. See “Item 4. Information on the Company—History and Development of the Company—Our Restructuring”. CLIC has incurred substantial losses on these non-transferred policies, primarily because the guaranteed interest rates it had committed to pay on these policies are higher than the investment return it was able to generate on its investment assets. This negative spread on non-transferred policies created substantial losses for CLIC and a resulting negative net worth. The amount of accumulated undistributed profits of CLIC itself is expected to remain negative in the short term.
In connection with the restructuring, CLIC established, together with the MOF, a special purpose fund for the purpose of paying claims and benefits under the non-transferred policies. The approval of the special purpose fund issued to CLIC provides that in the event there is any deficiency in the special purpose fund for so long as the fund is in existence, the MOF will provide support through the injection of funds to ensure the payments of benefits and claims to the policyholders of the non-transferred policies. See “Item 4. Information on the Company—History and Development of the Company—Our Restructuring”. In connection with the restructuring, we were advised by our PRC legal counsel, King Wood, that (1) the MOF had the authority to issue this approval regarding the special purpose fund, (2) the approval was valid and effective, and (3) it had no reason to believe that the MOF will revoke the approval. We cannot assure you, however, that changes in law, facts or circumstances that may occur after such date will not affect the conclusions stated in such advice.
We cannot predict the amount of funds that will be available to the special purpose fund from CLIC’s own operations to satisfy its obligations to its policyholders as they become due. CLIC’s cash requirements and available cash resources will be affected by several factors which are subject to uncertainty, including prevailing interest rates and the returns on investment generated by CLIC’s assets, as well as the claims, expenses and persistency experience with respect to CLIC’s insurance policies. The cash resources available to CLIC will also depend in part on our profitability, which will affect the amount of our tax payments and hence the amount of refund contributed to the fund (if CLIC’s application for the extension of the period during which the income tax payments will be rebated is approved; See “Item 4. Information on the Company—History and Development of the Company—Our Restructuring”), the timing and amount of our dividend payments and the market price of our shares, which will affect the proceeds to CLIC from dispositions of our shares. If it is unable to satisfy its obligations to its policyholders from other sources, CLIC may seek, subject to our articles of association and applicable laws, to increase the amount of dividends we pay in order to satisfy its cash flow requirements. Any such increase in our dividend payments would reduce the funds available for reinvestment in our business. In addition, if we are unable to pay dividends in amounts sufficient to satisfy these requirements, CLIC may seek to sell its shareholdings in us or take other actions in order to satisfy these needs. The sale of these holdings or even the market perception of such a sale may materially and adversely affect the price of our shares.
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The transfer of policies to us by CLIC and/or the separation of assets between CLIC and us may be subject to challenge.
In connection with the restructuring, we were advised by our PRC legal counsel, King Wood, that (1) the transferred policies were legally and validly transferred to China Life and (2) following the restructuring, we would not have any continuing obligations to holders of the non-transferred policies who remain policyholders of CLIC and that there was no legal basis on which holders of the non-transferred policies can make a claim against China Life. We were advised by King Wood that, although there was no specific law applicable to restructurings, these conclusions were supported by, among other things, the approval of the restructuring and various related matters by the State Council, the MOF and the CIRC; the support provided by the MOF with respect to the non-transferred policies as described above; and contract and other law. We cannot assure you that policyholders of CLIC, holders of transferred policies or other parties will not seek to challenge the transfer of the transferred policies or the separation of assets occurring as a consequence of the restructuring, or that a court would decide in a manner consistent with King Wood’s conclusions. If the transfer of policies to us or the separation of assets were challenged successfully, our financial condition and results of operations would likely be materially and adversely affected.
We do not hold exclusive rights to the trademarks in the “China Life” name (in English and Chinese), the “ball” logos and other business related slogans and logos, and CLIC, which owns these trademarks, may take actions that would impair the benefits we derive from their use.
We conduct our business under the “China Life” brand name, the “ball” logos, the “C” mark and other business related slogans and logos. CLIC owns these trademarks and has registered them with the Trademark Office of the SAMR. CLIC has entered into a trademark license agreement with us, under which CLIC has agreed to grant us and our branches a royalty-free license to use the “China Life” brand name, the “ball” logos and the “C” mark.
Although CLIC has undertaken in a non-competition agreement with us not to compete with us in China, without our prior consent in writing, in any life, accident and health insurance and any other businesses in China which may compete with our insurance business, CLIC, its subsidiaries and affiliates are permitted to use the brand name and logo in their own businesses, including life insurance business outside China and any other businesses they may enter into in the future within China, including property and casualty (other than businesses that compete with our accident and health businesses) and asset management businesses. In addition, they are not precluded from taking actions that may impair the value of the brand name, which could harm our business. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Continuing Related Party Transactions with CLIC”. The China Life brand name and our reputation could be materially harmed if CLIC fails to make payments when due on outstanding policies retained by CLIC in the restructuring or new policies written by CLIC after the restructuring, if CLIC reduces the rates of return payable on policies retained by CLIC or if CLIC is placed into receivership.
As our controlling shareholder, CLIC will be able to exert influence on our affairs and could cause us to make decisions or enter into transactions that may not be in your best interests.
We are controlled by CLIC, whose interests may conflict with those of our other shareholders. As of the date of this annual report, CLIC holds approximately 68.37% of our share capital. As a result of these factors, CLIC, which is wholly owned by the PRC government, will, so long as it holds the majority of our shares, effectively be able to control the composition of our board of directors and, through the board, exercise a significant influence over our management and policies. In addition, subject to our articles of association and applicable laws, CLIC may, so long as it holds the majority of our shares, effectively be able to determine the timing and amount of our dividend payments and approve increases or decreases of our share capital, the issuance of new securities, amendments of our articles of association, mergers and acquisitions and other major corporate transactions. CLIC may also be able to prevent us effectively from taking actions to enforce or exercise our rights under agreements to which we are a party, including the agreements we entered into with CLIC in connection with the restructuring. See “Item 7. Major Shareholders and Related Party Transactions”. As a majority shareholder, CLIC may be able to take these actions without your approval. In addition, CLIC’s control could have the effect of deterring takeovers or delaying or preventing changes in control or changes in management that might be desirable to other shareholders.
CLIC may direct business opportunities elsewhere.
CLIC has other business interests, including the run-off of the insurance policies retained by it in the restructuring. Notwithstanding a general undertaking pursuant to a non-competition agreement with us not to compete with us in our principal areas of business in China, CLIC is permitted to sell riders to these retained policies and enter into other businesses, including life insurance businesses outside of China and property and casualty (other than businesses that compete with our accident and health businesses) and asset management businesses, both inside and outside of China. In 2006, we formed a property and casualty company with CLIC, in connection with which we granted a waiver to CLIC allowing it to engage in accident and short-term health businesses indirectly through the property and casualty company.
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CLIC engages in insurance businesses in Hong Kong, Macau, Singapore and Indonesia through China Life Insurance (Overseas) Co., Limited, or China Life Overseas, its wholly owned subsidiary. CLIC also may continue to engage in insurance business in other regions outside of China in the future. Although it is required under the non-competition agreement to give us a right of first refusal over business opportunities it develops in these areas, we may not be in a position to take advantage of these opportunities at that time, which could harm our business. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Continuing Related Party Transactions with CLIC”.
In addition, while we provide policy administration and other services to CLIC for the policies retained by CLIC in the restructuring, and provide investment management services to CLIC through our asset management subsidiary, these agreements can be terminated with notice or upon expiration. If CLIC were to terminate its policy administration and asset management arrangements with us and our asset management subsidiary, respectively, our loss of fees could adversely affect us.
Risks Relating to the People’s Republic of China
China’s economic, political and social conditions, as well as government policies, could affect our business.
Substantially all of our assets are located in China and substantially all of our revenues are derived from our operations in China. Accordingly, our results of operations and prospects are subject, to a significant degree, to economic, political and legal developments in China. The economy of China differs from the economies of most developed countries in many respects, including, without limitation:
| • | the extent of government involvement; |
| • | its level of development; |
| • | its growth rate; and |
| • | its control of foreign exchange. |
The economy of China has been transitioning from one of high-speed growth to one that seeks high-quality development. Although in recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in regulating industrial development. It also exercises significant control over China’s economic growth through controlling payment of foreign currency denominated obligations, setting and implementing financial and monetary policy and providing preferential treatment to particular industries.
The Chinese economy has slowed in recent years compared to the previous decade. Since 2020, COVID-19 has negatively impacted the global economy and have slowed the Chinese economy as well. Since December 2022, the Chinese government has modified its COVID-19 control policy, and most of the travel restrictions and quarantine requirements have been lifted. While we expect that these actions will reduce the impact of COVID-19 on the growth of Chinese economy, it remains uncertain as to the growth rate of the Chinese economy in the future. China’s economy may also be affected by global conditions, including the inflationary pressures and interest rate levels around the world and the conflict between Russia and Ukraine as well as sanctions taken by certain governments in response. In an effort to bolster the economy, the Chinese government may take certain measures, including adjustment of interest rates and market-oriented financial reforms. We cannot assure you that some of the measures taken by the Chinese government to improve China’s economic performance will not have a negative effect on our business. A slowdown in Chinese growth rates could also adversely affect us by impacting sales of our products, reducing our investment returns, or otherwise.
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The PRC legal system has inherent uncertainties that could limit the legal protections available to you.
We are organized under the laws of China and are governed by our articles of association. The Chinese legal system is based on written statutes. Prior court decisions may be cited for reference but are not binding on subsequent cases and have limited precedential value. Since 1979, the Chinese legislative bodies have promulgated laws and regulations dealing with such economic matters as foreign investment, corporate organization and governance, commerce, taxation and trade. However, as these laws and regulations are relatively new, and the PRC legal system continues to evolve quickly, these laws, regulations and legal requirements, like other laws, regulations and legal requirements in China (including with respect to the insurance industry), can change quickly and their interpretation and enforcement involve uncertainties.
Any actions by the Chinese government, including any decision to influence our operations or to exert more oversight and control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to our operations and could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
The Chinese government has exercised and continues to exercise significant oversight and regulation over almost every sector of the Chinese economy, including the insurance industry, and has discretion over many aspects in which it exercises such authority. Our operations are subject to various regulatory requirements. The Chinese government may also impose new and stricter regulations or impose new interpretations of existing regulations and take other actions that may influence our operations. These government actions, including changes in laws and regulations, particularly those relating to insurance, overseas listing, taxation, land use rights, foreign investment limitations, may result in a material change in our operations and the value of our securities.
Holders of H shares and ADSs generally are required to resolve disputes with us, our senior management and holders of our A shares only through arbitration in Hong Kong or China.
In accordance with our articles of association provide that, with certain limited exceptions, all disputes or claims based on our articles of association, PRC company law or other relevant laws or administrative rules, and concerning matters between holders of H shares and ADSs and holders of A shares, us, or our directors, supervisors, president, vice presidents or other senior officers, must be submitted for arbitration at either the China International Economic and Trade Arbitration Commission or the Hong Kong International Arbitration Center. If an applicant chooses to have the dispute arbitrated at the Hong Kong International Arbitration Center, either party may request that the venue be changed to Shenzhen, a city in China near Hong Kong. The governing law for any such disputes or claims is Chinese law, unless Chinese law itself provides otherwise. Pursuant to an arrangement of mutual enforcement of arbitration awards between the PRC courts and the Hong Kong courts, Hong Kong arbitration awards are enforceable in China, subject to the satisfaction of certain legal requirements. However, due to the limited number of actions that have been brought in China by holders of shares issued by a Chinese company to enforce an arbitral award, we are uncertain as to the outcome of any action brought in China to enforce a Hong Kong arbitral award made in favor of holders of H shares and ADSs.
The laws in China differ from the laws in the United States and may afford less protection to our minority shareholders.
Although Chinese company law provides that shareholders of a Chinese company may, under certain circumstances, sue the company’s directors, supervisors and senior management in the interests of the company, limited detailed implementation rules or court interpretations have been issued in this regard. Also, our articles of association provide that the rights of any class of shares, including H shares, may not be varied without a resolution approved by holders of shares in the affected class holding no less than two-thirds of the shares of the affected class entitled to vote, and provide that in connection with a merger or division involving our company, a dissenting shareholder may require us to purchase the dissenters’ shares at a fair price. Disputes arising from these protective provisions would likely need to be resolved by arbitration. See “—Holders of H shares and ADSs generally are required to resolve disputes with us, our senior management and holders of our A shares only through arbitration in Hong Kong or China”.
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You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in the PRC based on U.S. or other foreign laws against us, our management and some of the experts named in the annual report.
We are a company incorporated under the laws of China, and substantially all of our assets are located in China. In addition, most of our directors, supervisors, executive officers and some of the experts named in this annual report reside within China, and substantially all of the assets of these persons are located within China. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon our directors, supervisors or executive officers or some of the experts named in this annual report, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. Our PRC legal counsel, King Wood, has advised us that China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States, the United Kingdom, Japan or many other countries. Our Hong Kong legal adviser, Latham Watkins LLP, has also advised us that Hong Kong has no statutory arrangement for the reciprocal enforcement of judgments with the United States although it may be possible for a civil action to be brought in Hong Kong based on a monetary judgment of the courts of the United States. As a result, recognition and enforcement in China or Hong Kong of judgments of a court in the United States and any of the other jurisdictions mentioned above in relation to any matter may be difficult or impossible. Furthermore, an original action may be brought in the PRC against us, our directors, supervisors, executive officers or the experts named in this annual report only if the actions are not required to be arbitrated by PRC law and our articles of association, and only if the facts alleged in the complaint give rise to a cause of action under PRC law. In connection with any such original action, a PRC court may award civil liability, including monetary damages.
Due to jurisdictional limitations and various other factors, the U.S. Securities and Exchange Commission, the U.S. Department of Justice and other U.S. authorities may also be limited in their ability to pursue companies and individuals in China, in connection with any alleged violation of U.S. securities and other laws.
Holders of H shares may be subject to PRC taxation.
Under current PRC tax laws, regulations and rulings, dividends paid by us to individual holders of H shares outside of the PRC are subject to PRC individual income tax at rates not exceeding 20%, depending on the applicable tax treaties between the home country of the individual holder of H shares and the PRC. When paying dividends to non-resident enterprise holders of H shares outside of the PRC, such dividends are subject to an enterprise income tax, which is currently levied at a rate of 10%. Such non-resident enterprise holders of H shares may be entitled to tax reductions or exemptions according to applicable tax treaties. In addition, to date, relevant tax authorities have not collected capital gains tax on the gains realized by individuals upon the sale or other disposition of H shares. If relevant tax authorities promulgate implementation rules on the taxation of capital gains realized by individuals upon the sale or other disposition of H shares, individual holders of H shares may be required to pay capital gains tax. See “Item 10. Additional Information—Taxation—The People’s Republic of China”.
Government control of currency conversion and the fluctuation of the Renminbi may materially and adversely affect our operations and financial results.
We receive substantially all of our revenues in Renminbi, which currently is not a freely convertible currency. A portion of these revenues must be converted into other currencies to allow us to make payments on declared dividends, if any, on our H shares, and payments of interest and principal on our debt held in foreign currencies.
Under China’s existing foreign exchange regulations, we are able to pay dividends and interest and principal in foreign currencies without prior approval from the SAFE by complying with various procedural requirements. The Chinese government, however, may, at its discretion, restrict access in the future to foreign currencies for current account transactions. If this were to occur, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.
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The value of the Renminbi against the U.S. dollar and other currencies fluctuates and is affected by, among other things, changes in political and economic conditions in China and the world. On July 21, 2005, the PRC government introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. Under this system, the PBOC announces the closing price of a foreign currency traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each working day, and makes it the central parity for the trading against the Renminbi on the following working day. On August 11, 2015, the PBOC adjusted the quotation mechanism of the Renminbi central parity to also consider demand and supply in foreign exchange markets and price movements of major currencies, in addition to the closing price on the previous working day. On May 26, 2017, the PBOC introduced the “counter-cyclical factor” into its formula that determines a central parity of Renminbi against the U.S. dollar. Under the current mechanism, the central parity of the Renminbi against the U.S. dollar is determined based on the closing price, changes in a basket of currency exchange rates and the counter-cyclical factor. From July 21, 2005 to April 7, 2023, the Renminbi appreciated by approximately 20.4% against the U.S. dollar. In 2022, the Renminbi depreciated by 8.91% against the U.S. dollar. A portion of our assets and liabilities are held in foreign currencies and may be subject to foreign exchange gains and losses due to changes in exchange rates. We recorded RMB69 million (US$10 million) in foreign exchange losses for the year ended December 31, 2022, resulting mainly from the change in foreign exchange rates applicable to our assets and liabilities held in foreign currencies. Any future appreciation of the Renminbi may materially and adversely affect the value of, and any dividends payable on, our H shares in foreign currency terms. Our financial condition and results of operations also may be affected by changes in the value of certain currencies other than the Renminbi.
Payment of dividends is subject to restrictions under Chinese law.
Under Chinese law, dividends may be paid only out of distributable profits. Any distributable profits that are not distributed in a given year are retained and available for distribution in subsequent years. However, ordinarily we will not pay any dividends in a year in which we do not have any distributable profits.
Payment of dividends by us is also regulated by the PRC insurance law. See “Item 8. Financial Information—Consolidated Financial Statements and Other Financial Information—Policy on Dividend Distributions”.
| ITEM 4. | INFORMATION ON THE COMPANY |
A. HISTORY AND DEVELOPMENT OF THE COMPANY
We were formed as a joint stock life insurance company pursuant to the PRC company law on June 30, 2003 under the corporate name of 中国人寿保险股份有限公司in connection with the restructuring.
General Information
Our principal executive offices are located at 16 Financial Street, Xicheng District, Beijing 100033, China. Our telephone number is (86-10) 6363-3333. Our official website address is www.e-chinalife.com. The information on our website is not a part of this annual report. We have appointed CT Corporation System at 111 Eighth Avenue, New York, New York 10011 as our agent for service of process in the United States.
Our Restructuring
Upon the approval of the State Council and the CIRC, we were formed on June 30, 2003 as a joint stock company in connection with the restructuring by CLIC, our controlling shareholder. The restructuring was effected through a plan of restructuring, which was approved by the CIRC on August 21, 2003, and a restructuring agreement we entered into with CLIC on September 30, 2003, with retroactive effect to June 30, 2003, which we refer to in this annual report as the effective date. Pursuant to PRC law and the restructuring agreement, we enjoyed the rights and benefits and assumed the obligations and liabilities arising from the restructuring from and after the effective date.
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In connection with the restructuring:
| • | CLIC transferred to us (1) all long-term insurance policies (policies having a term of more than one year from the date of issuance) issued on or after June 10, 1999, having policy terms approved by or filed with the CIRC on or after June 10, 1999 and either (i) recorded as a long-term insurance policy as of June 30, 2003 in an actuarial database attached to the restructuring agreement as an annex or (ii) having policy terms for group supplemental medical insurance (fund type), (2) stand-alone short-term policies (policies having a term of one year or less from the date of issuance) issued on or after June 10, 1999 and (3) all riders supplemental to the policies described in clauses (1) and (2) above, together with the applicable reinsurance contracts specified in an annex to the restructuring agreement. We refer to these policies in this annual report as the “transferred policies”. All other insurance policies were retained by CLIC. We refer to these policies as the “non-transferred policies”. We assumed all obligations and liabilities of CLIC under the transferred policies. CLIC continues to be responsible for its liabilities and obligations under the non-transferred policies following the effective date. |
| • | Cash, specified investment assets and various other assets were also transferred to us. |
| • | CLIC agreed not to, directly or indirectly through its subsidiaries and affiliates, participate, operate or engage in life, accident and health insurance businesses and any other business in China which may compete with our insurance business. CLIC also undertook (1) to refer to us any corporate business opportunity that falls within our business scope and which may directly or indirectly compete with our business and (2) to grant us a right of first refusal, on the same terms and conditions, to purchase any new business developed by CLIC. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Continuing Related Party Transactions with CLIC”. |
| • | Substantially all of the management personnel and employees who were employed by CLIC in connection with the transferred assets and business were transferred to us. Some management and personnel remained with CLIC. |
| • | CLIC retained the trademarks used in our business, including the “China Life” name in English and Chinese and the “ball” logos, and granted us and our branches a royalty-free license to use these trademarks. CLIC and its subsidiaries and affiliates will be entitled to use these trademarks, but CLIC may not license or transfer these trademarks to any other third parties. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Continuing Related Party Transactions with CLIC”. |
| • | CLIC’s contracts with its agents and other intermediaries were transferred to us. |
| • | We entered into various agreements under which we provide policy administration services to CLIC for the non-transferred policies, manage CLIC’s investment assets and lease office space from CLIC for our branch and field offices. See “Item 7. Major Shareholders and Related Party Transactions”. |
In connection with the restructuring, CLIC established, together with the MOF, a special purpose fund for the purpose of paying claims and benefits under the non-transferred policies. Under the administrative measures for the special purpose fund as amended in May 2012, the special purpose fund will be funded by renewal premiums paid on the non-transferred policies over time; tax rebates received by CLIC; proceeds from the investments of the special purpose fund; shareholder dividends paid in cash to CLIC by its subsidiaries and shareholding enterprises; proceeds from the disposition by CLIC of its shares in its subsidiaries and shareholding enterprises over time; cash income from the disposition of assets by CLIC; financial assets owned by CLIC; long-term equity investment held by CLIC; and funds injected by the MOF in the event of a deficiency in the special purpose fund. The special purpose fund is co-administered by CLIC and the MOF. The special purpose fund will be available to satisfy CLIC’s operating expenses, including the payment of benefits and claims obligations arising from the non-transferred policies, as well as expenses incurred in operating the special purpose fund, including third-party management fees, professional fees and such other purposes as the management committee of the special purpose fund may agree, as well as capital expenses as approved by the MOF. A management committee of the special purpose fund comprised of four representatives from the MOF and three representatives from CLIC oversees the management of the fund, with specified material items subject to the approval of the MOF. The special purpose fund will be dissolved when all claims and benefits under the non-transferred policies have been paid, or sooner if the management committee so agrees.
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The MOF’s approval of the special purpose fund issued to CLIC provides that in the event there is any deficiency in the special purpose fund for so long as the fund is in existence as described above to meet any payment obligation arising out of the non-transferred policies, the MOF will provide support through the injection of funds to ensure the payments of benefits and claims to the policyholders of the non-transferred policies. In connection with the restructuring, we were advised by our PRC legal counsel, King Wood, that (1) the MOF had the authority to issue this approval regarding the special purpose fund, (2) the approval was valid and effective, and (3) it had no reason to believe that the MOF will revoke the approval. We cannot assure you, however, that changes in law, facts or circumstances that may occur after such date will not affect the conclusions stated in such advice.
In accordance with generally applicable tax laws and regulations, CLIC, AMC and ourselves will file income tax returns and pay our respective income taxes as separate and independent taxpayers. In accordance with a circular issued by the MOF, a portion of the income tax payments made by CLIC and us during the period of January 1, 2003 to December 31, 2010 is required to be rebated to CLIC. All of the income tax payments made by AMC may also be rebated to CLIC, if the current shareholding structure of AMC remains unchanged. After 2010, CLIC has applied to MOF for the extension of the period during which the income tax payments will be rebated, but no substantive progress had been made as of the date of this annual report.
In connection with the restructuring, we were advised by our PRC legal counsel, King Wood, that following the restructuring we would not have any continuing obligations to holders of the non-transferred policies and that there was no legal basis on which holders of the non-transferred policies could make a claim against China Life. King Wood based its conclusion on, among other things, the following factors: (1) after the restructuring, China Life was established as a separate legal entity and China Life’s assets and liabilities should be regarded as distinct and separate from those of CLIC; (2) there was no contractual relationship, direct or indirect, between the holders of the non-transferred policies and China Life; (3) the restructuring (including the transfer of the transferred policies to China Life) was approved by the CIRC and was conducted without infringing upon the rights of the holders of non-transferred policies; (4) the arrangements made under the restructuring agreement, in particular the MOF’s support as described above, were expected to enable CLIC to satisfy its obligations under the non-transferred policies; and (5) PRC regulatory authorities had no legal power to direct China Life to assume CLIC’s obligations under the non-transferred policies or to indemnify the holders of the non-transferred policies.
See “Item 3. Key Information—Risk Factors—Risks Relating to the Restructuring”.
Developments After Restructuring
On November 23, 2003, we established an asset management company, AMC, with CLIC, in connection with the restructuring. AMC manages our investment assets and, separately, substantially all of those of CLIC. On December 30, 2006, we established a property and casualty company, CLPCIC, with CLIC. On January 15, 2007, we established a pension insurance company, China Life Pension, with CLIC and AMC.
In December 2003, we successfully completed our initial public offering of H shares, including H shares in the form of American depositary shares, or ADSs, and raised approximately RMB24,707 million in aggregate net proceeds. Upon completion of our initial public offering, our H shares became listed on the Hong Kong Stock Exchange and ADSs each representing 40 of our H shares became listed on the New York Stock Exchange. The ratio of ADSs to H shares was reduced from 40 H shares to 15 H shares on December 29, 2006 and was further reduced from 15 H shares to 5 H shares on May 26, 2015.
In December 2006, we issued 1,500,000,000 new ordinary domestic shares through public offering on the SSE at the offering price of RMB18.88 per share, raising RMB28,320 million in aggregate gross proceeds. The A shares have been listed on the SSE since January 9, 2007. Prior to the offering, CLIC held 19,323,530,000 ordinary domestic shares, or CLIC A shares, which have been registered with the China Securities Depository and Clearing Corporation Limited as circulative A shares with restrictive trading following the A share offering. CLIC has undertaken that for a period of 36 months commencing on January 9, 2007 it will not transfer or put on trust the CLIC A shares held by it or allow such CLIC A shares to be repurchased by China Life. On January 11, 2010, 19,323,530,000 CLIC A shares were released from trading restrictions.
In July 2015, we issued Core Tier 2 Capital Securities in the principal amount of US$1,280 million to qualified investors who meet applicable regulatory requirements at an initial distribution rate of 4.00%. We redeemed all of these issued securities on July 3, 2020.
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In March 2019, we issued bonds in the principal amount of RMB35 billion for capital replenishment in the national inter-bank bond market. The bonds have a 10-year maturity and a fixed coupon rate of 4.28% per annum. We have a conditional right to redeem the bonds on the fifth anniversary of issuance. The proceeds from the issuance of the bonds will be used to replenish our capital so as to enhance our solvency according to applicable laws and approvals from regulatory authorities.
On August 22, 2022, we filed a Form 25 to delist our ADSs from the New York Stock Exchange. The delisting became effective on September 2, 2022, and our ADR program was terminated on November 11, 2022.
We incurred capital expenditures of RMB3,086 million (US$447 million), RMB6,302 million, and RMB7,284 million in 2022, 2021 and 2020, respectively. These capital expenditures mainly comprised of the addition of properties for our own use.
SEC’s Website and Our Website
The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our official website address is www.e-chinalife.com. The information on our website is not a part of this annual report.
B. BUSINESS OVERVIEW
We are the leading life insurance company in China. We provide a broad range of insurance products, including individual and group life insurance, annuity, health insurance and accident insurance products. We had approximately 325 million long-term insurance policies in force as of December 31, 2022, including long-term individual and group life insurance policies, annuity contracts and long-term health insurance policies. As of December 31, 2022, the average guaranteed rate of return for all of our long-term insurance policies in force was 2.87%. For the financial year ended December 31, 2022, our lapse rate was approximately 0.95%. The policy persistency rates, which measure the ratio of the insurance policies that are still effective after a certain period, were 83.00% for 14 months after issuance and 74.20% for 26 months after issuance.
The information below is organized in accordance with our identified segments.
Life Insurance
We offer life insurance and annuity products to individuals and groups. We market our individual life insurance and annuity products primarily through a distribution force comprised of approximately 668,300 exclusive agents operating in approximately 15,000 field offices throughout China, as well as other non-dedicated agencies located at branch offices of banks and other organizations. We offer group life insurance and annuity products to the employees of companies and institutions through approximately 39,800 direct sales representatives, as well as insurance agencies and insurance brokerage companies. Gross written premiums generated by our life insurance and annuity products totaled RMB485,642 million (US$70,411 million) for the year ended December 31, 2022, RMB481,311 million for the year ended December 31, 2021, and RMB480,593 million for the year ended December 31, 2020, constituting 78.94%, 77.84%, and 78.49% of our total gross written premiums for those periods. Gross written premiums generated by our life insurance and annuity products for 2022 increased by 0.9% from 2021.
The following table sets forth selected financial and other data regarding our life insurance and annuity business as of the dates or for the periods indicated.
| As of or for the year ended December 31, | Compound annual growth rate |
|||||||||||||||||||
| 2020 | 2021 | 2022 | 2022 | (2020-2022) | ||||||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||||||
| (in millions, except as otherwise indicated) | ||||||||||||||||||||
| Gross written premiums |
480,593 | 481,311 | 485,642 | 70,411 | 0.52 | % | ||||||||||||||
| Liabilities of insurance contracts |
2,767,642 | 3,180,931 | 3,605,769 | 522,787 | 14.14 | % | ||||||||||||||
| Liabilities of investment contracts |
271,757 | 296,104 | 355,750 | 51,579 | 14.41 | % | ||||||||||||||
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Products
We offer a wide variety of life insurance and annuity products to individuals, providing a wide range of coverage for the whole length of a policyholder’s life. Our individual life insurance products consist of whole life and term life insurance and endowment insurance. We also offer group annuity products and term life insurance products to enterprises and institutions. We market these products as an important part of our group customers’ overall employee benefit plans. We believe we are the market leader in the development of group annuity products.
We offer both non-participating and participating products. There were approximately 273 million non-participating policies and 52.16 million participating policies as of December 31, 2022, among which approximately 167 million non-participating policies and 31.83 million participating policies were sold to individuals.
The following table sets forth selected financial information regarding our life insurance and annuity products.
| For the year ended December 31, | Compound annual growth rate |
|||||||||||||||||||
| 2020 | 2021 | 2022 | 2022 | (2020-2022) | ||||||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||||||
| (in millions, except as otherwise indicated) | ||||||||||||||||||||
| Gross written premiums |
||||||||||||||||||||
| Whole life and term life insurance |
76,421 | 72,424 | 80,569 | 11,681 | 2.68 | % | ||||||||||||||
| Endowment |
109,275 | 97,791 | 137,467 | 19,931 | 12.16 | % | ||||||||||||||
| Annuities |
294,897 | 311,096 | 267,606 | 38,799 | (4.74 | %) | ||||||||||||||
Whole Life and Term Life Insurance
Non-participating whole life and term life insurance
We offer non-participating whole life and term life insurance products.
Non-participating whole life insurance products provide a guaranteed benefit, pre-determined by the contract, upon the death of the insured, in return for the periodic payment of fixed premiums over a pre-determined period. Premium payments may be required for the length of the contract period, to a specified age or for a specified period, and are typically level throughout the period.
Non-participating term life insurance products provide a guaranteed benefit upon the death of the insured within a specified time period in return for the periodic payment of fixed premiums. Specified coverage periods generally range from 5 to 30 years or expire at specified ages. Death benefits and premiums are typically set at a level amount over the coverage period. Term life insurance products are sometimes referred to as pure protection products, in that there are normally little or no savings or investment elements. Unlike endowment products, term life insurance policies expire without maturity benefits.
Participating whole life insurance
We also offer participating whole life insurance products, which, in addition to the benefit payment of traditional whole life insurance policies, also provide a participation feature in the form of dividends. The policyholder is entitled to share a portion of the distributable earnings from participating products, as determined by us based on formulas prescribed by the CIRC. Under guidelines issued by the CIRC, the dividends must be no less than 70% of the distributable earnings from participating products. We offer participating whole life insurance products only to individual customers.
Endowment
Non-participating endowment products
Non-participating endowment products provide to the insured various guaranteed benefits if the insured survives specified maturity dates or periods stated in the policy, and provide to a beneficiary guaranteed benefits upon the death of the insured within the coverage period, in return for the periodic payment of premiums. Specified coverage periods generally range from 5 to 30 years or end at specified ages. Premiums are typically at a level amount for the coverage period.
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Participating endowment products
We also offer participating endowment products, which are endowment policies that also provide a participation feature in the form of dividends. Policyholders are entitled to share a portion of the distributable earnings from participating products, as determined by us based on formulas prescribed by the CIRC. Under guidelines issued by the CIRC, the dividends must be no less than 70% of the distributable earnings from participating products.
China Life Xin Fu Yi Sheng Participating Endowment and China Life Fu Lu Shuang Xi Participating Endowment generated the most income of our participating endowment products in 2022. China Life Xin Fu Yi Sheng Participating Endowment generated RMB14,086 million (US$2,042 million) of net premiums in 2022, representing 2.91% of the net premiums of our life insurance business, and China Life Fu Lu Shuang Xi Participating Endowment generated RMB9,379 million (US$1,360 million) of net premiums in 2022, representing 1.94% of the net premiums of our life insurance business. In 2022, the net premiums earned from our participating endowment products decreased by RMB9,477 million (US$1,374 million), or 14.25%, to RMB57,007 million (US$8,265 million) from RMB66,484 million in 2021.
We offer endowment products only to individual customers.
Annuities
Annuities are used for both asset accumulation and asset distribution needs. Annuitants pay premiums into our accounts, and receive payments of benefits during the payoff period as specified in the contracts. We offer both non-participating and participating annuities. For non-participating annuity products, risks associated with the underlying investments are borne entirely by us. A significant portion of our non-participating annuity products imposes charges upon surrender.
Participating annuity products are annuities that provide a participation feature in the form of dividends in addition to the guaranteed annuity benefits. The dividends are determined by us in the same manner as our life insurance policies. Like non-participating annuities, a significant portion of our participating annuity products imposes charges upon surrender.
In our universal group annuities, interest accrued on an annuitant’s deposits is credited to each participating employee’s personal account, or to each participating employee’s personal account and employer’s group account.
Universal Insurance Products
Universal insurance products are insurance policies with flexible premium and sum insured as well as transparency on costs. For each universal insurance policy, we establish a separate account and determine the interest credit rate, mortality and expense charges specifically for the account. The benefits of universal insurance products are linked to the account value of each separate account.
Personal Tax-deferred Pension Insurance Products
In May 2018, the Chinese government permitted trial sales of personal tax-deferred pension insurance products in Shanghai, the Fujian province (including Xiamen) and Suzhou Industrial Park. Since then, we have continued to develop our personal tax-deferred pension insurance business. As of December 31, 2022, our accumulated premium income from personal tax-deferred pension insurance business was approximately RMB62.63 million.
Exclusive Commercial Pension Insurance
In May 2021, the Chinese government permitted trial sales of exclusive commercial pension insurance products in the Zhejiang province (including Ningbo) and Chongqing, and we commenced our exclusive commercial pension insurance business. Since March 2022, trial sales of exclusive commercial pension insurance have been permitted nationwide, and we have actively promoted our sales of exclusive commercial pension insurance business across China. As of December 31, 2022, our accumulated premium income from exclusive commercial pension insurance was approximately RMB638 million.
Marketing and Distribution
Individual
We have historically sold most of our individual life insurance and annuity products to the mass market and will continue to actively serve this market. However, we believe our core individual customer base will evolve as China’s economy develops. We will seek to capitalize on the market opportunities in the growing affluent segment of China’s population by focusing our marketing efforts on large and medium-sized cities with an aim to attract more medium- and high-end customers, as we believe that the demand for life insurance and annuity products in these areas is greater. In addition, we have been implementing a customer segmentation sales approach which targets different customers with different products, with these products in many cases supplemented by our individual accident and health products.
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We distribute our individual life and annuity products nationwide through multiple channels. Our primary distribution system is comprised of approximately 668,300 exclusive agents in approximately 15,000 field offices throughout China. In addition, we are implementing our customer-oriented market segmentation sales initiatives to all exclusive agents nationwide. While continuing to invest in our exclusive agent force, we have also expanded into other distribution channels, primarily non-dedicated agencies located in over 43,000 outlets of commercial banks, to diversify our distribution channels and to achieve higher growth. See “—Distribution Channels”.
Group
We target our group life insurance and annuity products to large institutional customers in China, including branches of foreign companies, which we believe have a greater awareness of and need for group life insurance and annuity products. We have long-term customer relationships with many of China’s largest companies and institutions. We provide large group customers with products having flexible fee and dividend structures, as well as convenient customer service. While continuing to focus on large institutional clients, we also target small- to medium-sized companies to supplement our growth.
We market our group life insurance and annuity products primarily through our direct sales representatives. We also market our group life insurance and annuity products through commercial banks, insurance agency companies and insurance brokerage companies. See “—Distribution Channels”.
Health Insurance
We offer a broad array of health insurance products and services to both individuals and groups, including medical insurance, care insurance, disease insurance and disability income insurance. Our health insurance gross written premiums totaled RMB115,329 million (US$16,721 million) for the year ended December 31, 2022, RMB120,609 million for the year ended December 31, 2021, and RMB115,089 million for the year ended December 31, 2020, constituting 18.75%, 19.51% and 18.80% of our total gross written premiums for those periods. Gross written premiums generated by our health insurance products for 2022 decreased by 4.38% from 2021.
Our health insurance business shares our nationwide life insurance sales force and distribution network of exclusive agents. Our policy review and claim adjustment processes are facilitated through a team of supporting personnel with medical training.
The following table sets forth selected financial and other data regarding our health insurance as of the dates or for the periods indicated. The financial results of both our long-term health insurance and short-term health insurance are reflected in the following table.
| As of or for the year ended December 31, | Compound annual growth rate |
|||||||||||||||||||
| 2020 | 2021 | 2022 | 2022 | (2020-2022) | ||||||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||||||
| (in millions, except as otherwise indicated) | ||||||||||||||||||||
| Gross written premiums |
115,089 | 120,609 | 115,329 | 16,721 | 0.10 | % | ||||||||||||||
| Liabilities of insurance contracts |
195,487 | 228,899 | 265,369 | 38,475 | 16.51 | % | ||||||||||||||
| Liabilities of investment contracts |
16,455 | 17,490 | 18,999 | 2,755 | 7.45 | % | ||||||||||||||
Products
We offer health insurance products to both individuals and groups. We classify our health insurance products as short-term products, having policy terms of less than or up to one year, and long-term products, having policy terms longer than one year. We offer both short-term and long-term defined health benefit plans, medical expense reimbursement plans, care insurance plans and disease-specific plans to individuals and groups.
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Defined health benefit plans
These plans provide a fixed payment based on the number of days of hospitalization resulting from diseases, injuries from accidents or surgical operations. Policyholders either pay premiums in a single payment or on a periodic basis.
Medical expense reimbursement plans
These plans provide for the reimbursement of a portion of the participant’s outpatient or hospitalization treatment fees and expenses. Policyholders pay premiums either in a single payment or on a periodic basis or, for certain group medical expense reimbursement plans, irregularly as determined by the policyholder.
We also provide health care entrusted management services for the basic social medical insurance plans offered by local governments. The entrusted management services include checking and reimbursement of medical expenses and medical service investigations. We do not collect premiums but only charge a specified amount of management fees for these services. As of December 31, 2022, we had carried out more than 500 health care entrusted programs in 33 provinces and cities, providing services to more than 100 million people.
We also commenced our supplementary major medical insurance business in 2013. As part of the Chinese government’s overall medical insurance scheme, supplementary major medical insurance reimburses policyholders for a specified percentage of their high medical expenses caused by major illnesses which are in excess of the maximum amounts covered by the basic social medical insurance and which would otherwise be borne by the individuals. The Chinese government has implemented supplementary major medical insurance programs nationwide in China. Local governments use a portion of the basic medical insurance funds to purchase supplementary major medical insurance services from qualified insurance companies through a government tender. Supplementary major medical insurance offers protection to all the policyholders covered by the basic social medical insurance in the pilot areas. As of December 31, 2022, we had undertaken approximately 200 supplementary major medical insurance programs, providing services to approximately 350 million people.
Care insurance plans
These plans provide individuals who have disabilities covered by the insurance contracts with a fixed allowance and reimbursement of expenses for their daily living and medical care. Premium payments are paid either in a single payment or on a periodic basis.
We commenced our care insurance business in 2015. The Chinese government launched pilot long-term care insurance programs beginning in 2016. Under these programs, local governments in pilot areas raise funds through various channels to provide funds or protection services to people who have life disabilities for their daily living and medical care. Some local governments purchase long-term care insurance services from qualified insurance companies through government tender procedures. As of December 31, 2022, we had undertaken approximately 60 long-term care insurance programs, providing services to over 27 million people.
Disease-specific plans
These plans provide a payment benefit for various diseases. Premium payments for disease-specific plans are paid either in a single payment or on a periodic basis.
Marketing and Distribution
We offer our health insurance products to both individuals and groups primarily through the same distribution channels we use to market our life insurance products. See “—Distribution Channels”.
We market our health insurance products either as primary products, as riders or as supplementary products packaged with our life, annuity or accident insurance products. We conduct extensive health insurance related training programs for our direct sales representatives and our exclusive agents.
Accident Insurance
We are the leading accident insurance provider in the Chinese life insurance sector. Our accident insurance gross written premiums totaled RMB14,219 million (US$2,062 million) for the year ended December 31, 2022, RMB16,407 million for the year ended December 31, 2021, and RMB16,583 million for the year ended December 31, 2020, constituting 2.31%, 2.65%, and 2.71% of our total gross written premiums for those periods. Gross written premiums generated by our accident insurance products for 2022 decreased by 13.34% from 2021.
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The following table sets forth selected financial and other data regarding our accident insurance as of the dates or for the periods indicated. The financial results of both our long-term accident insurance and short-term accident insurance are reflected in the following table.
| As of or for the year ended December 31, | Compound annual growth rate |
|||||||||||||||||||
| 2020 | 2021 | 2022 | 2022 | (2020-2022) | ||||||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||||||
| (in millions, except as otherwise indicated) | ||||||||||||||||||||
| Gross written premiums |
16,583 | 16,407 | 14,219 | 2,062 | (7.40 | %) | ||||||||||||||
| Liabilities of insurance contracts |
10,096 | 10,069 | 9,022 | 1,308 | (5.47 | %) | ||||||||||||||
Products
We offer a broad array of accident insurance products to both individuals and groups.
Individual accident insurance
Individual accident insurance products provide a benefit in the event of death or disability of the insured as a result of an accident and, for certain products, a reimbursement of medical expenses to the insured in connection with an accident. Typically, a death benefit is paid if the insured dies as a result of the accident within 180 days of the accident, and a disability benefit is paid if the insured is disabled, with the benefit depending on the extent of the disability. Certain individual accident insurance products may also provide coverage if the insured receives medical treatment at a medical institution approved by us as a result of an accident. We offer a broad array of individual accident insurance products, such as insurance for students and infants against death and disability resulting from accidental injury and comprehensive coverage against accidental injury. We also offer products to individuals requiring special protection, such as accidental death and disability insurance for commercial air travel passengers and automobile passengers and drivers.
Group accident insurance
We offer a number of group accident insurance products and services to businesses, government agencies and other organizations of various sizes. We also offer group accident products targeted at specific groups, such as small-value group accident injury insurance to low-income people in rural areas.
Marketing and Distribution
We market our individual accident insurance products through our direct sales force and our exclusive agent sales force, as well as intermediaries, such as non-dedicated agencies located at outlets of commercial banks, savings cooperatives and travel agencies and insurance agency and insurance brokerage companies. We market our group accident insurance products primarily through our direct sales representatives and the same intermediaries we use to sell our individual accident products. See “—Distribution Channels”.
We market our accident insurance products either as primary products, as riders or as supplementary products packaged with our life, annuity or health products. Our direct sales representatives market our individual accident products to employees of our institutional customers.
Product Development
In 2022, in line with our general development strategy, we developed and introduced 88 new products, including: 27 long-term insurance products consisting of seven life insurance products, seven annuity products, one accident insurance product and 12 health insurance products; and 61 short-term insurance products consisting of one life insurance product, 42 accident insurance products and 18 health insurance products.
With respect to long-term insurance products, we developed and introduced, among others:
| • | for the individual insurance distribution channel, products including China Life Xinxiang Weilai Endowment Insurance, China Life Xinrui Wenying Annuity Insurance, China Life Xinrui Niannian Pension Annuity Insurance, China Life Zunxiangfu Critical Illness Insurance and China Life Huixiangfu Critical Illness Insurance; and |
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| • | for the bancassurance distribution channel, products including China Life Ruixi Endowment Insurance, China Life Zunyi Rensheng Pension Annuity Insurance and China Life Leying Jinsheng Whole Life Insurance. |
With respect to short-term insurance products, we designed and developed products including, among others, Aiyi Kangrui series and Zhenai Wuyou series, and introduced more products for Hehu series, the Greater Bay series, Rural Revitalization series and Lexue Wuyou series.
Distribution Channels
We believe we have a large distribution force with an extensive geographic reach compared with any of our competitors. Our distribution network reaches almost every county in China. Throughout China, we have approximately 668,300 exclusive agents operating in approximately 15,000 field offices for our individual products and approximately 39,800 direct sales representatives for group products. We have a multi-channel distribution network selling individual and group insurance products through intermediaries, primarily non-dedicated agencies located in over 43,000 outlets of commercial banks as of the end of 2022. Commission rates vary by product, based on such factors as the payment terms and period over which the premiums are paid for the product, as well as CIRC regulations. We support our agents and representatives through training programs, sales materials and information technology systems.
Exclusive agent force
Our exclusive agent force of approximately 668,300 agents is the primary distribution channel for our individual life, annuity, health and accident insurance products.
The following table sets forth information relating to our exclusive agent force as of the dates indicated.
| As of December 31, | ||||||||||||
| 2020 | 2021 | 2022 | ||||||||||
| Number of exclusive agents (approximately) |
1,378,000 | 820,000 | 668,300 | |||||||||
| Number of field offices (approximately) |
16,000 | 15,000 | 15,000 | |||||||||
Our exclusive agent force is among our most valuable assets, allowing us to more effectively control our distribution and build and maintain long-term relationships with our individual customers. The number of our exclusive agents decreased from 820,000 as of the end of 2021 to 668,300 as of the end of 2022. This was primarily due to the impact of the COVID-19 pandemic, which affected the recruitment and training of exclusive agents. Although the number of our exclusive agents decreased in 2022, we continued to improve the quality of our agent force, including strengthening the agent recruitment and management and improving the structure of our sales force. See “Item 3. Key Information—Risk Factors—Risks Relating to Our business—Our growth is dependent on our ability to attract and retain productive agents”. We believe that our customers and prospective customers prefer the personal approach of our exclusive agents and, therefore, we believe our exclusive agent force will continue to serve as our core distribution channel.
We also have developed a special sales force targeting “orphan policies” (policies which were serviced by former exclusive agents who have since left the company) to improve our service for these policies.
We supervise and provide training to our exclusive agents through 5,806 full-time trainers and 92,600 part time trainers. We set product management and customer service standards, and have developed credit rating systems, which we require all of our field offices and agents to meet, and conduct field tests with a view to ensuring quality. We also have an extensive training program.
We compensate our exclusive agent force through a system of commissions and bonuses to reward performance. Our agents are compensated based on a commission rate that generally decreases over the premium period. For short-term insurance products, our exclusive agents are generally compensated with fixed agent fees. We provide group annuities, group commercial supplemental pension insurance, group life and medical insurance for our exclusive agents. We motivate our agents by rewarding them with performance-based bonuses and by organizing sales-related competitions among different field offices and sales units. We also try to increase the loyalty of our exclusive agents through other methods, such as through participation in sales conferences.
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We believe we have the largest exclusive agent sales force in China. We intend to improve the quality and productivity of our individual exclusive agent force and reduce the attrition rate of our agents by taking the following actions:
| • | improving the overall productivity of our exclusive agents by implementing our market segmentation sales approach, managing, supporting and incentivizing the exclusive agents through different levels, and providing standardized sales services to our customers; |
| • | motivating our exclusive agents with an improved performance-based evaluation and income incentive scheme; |
| • | building a more professional exclusive agent force by improving our education and training system and enhancing our training efforts; |
| • | improving the quality of our exclusive agent force and reducing turnover by expanding our recruitment program, strengthening the cultivation, training and support to improve capabilities of our new exclusive agents, and enhancing the integration of training and technologies; |
| • | improving the productivity of our exclusive agent force by strengthening professional operation and standardized management; and |
| • | improving the capabilities of our exclusive agent force for customer service and self and team management by providing effective sales support, including establishing a customer service platform and improving and expanding the China Life E-Home sales support system. |
Group distribution channel
Our group distribution channel is comprised of our direct sales force and intermediaries.
Direct sales force
Our direct sales force, which consists of approximately 39,800 direct sales representatives, is our primary distribution system for our group life insurance and annuities, group accident insurance and group health insurance products, as well as our individual accident insurance and individual short-term health insurance products. As of the end of 2022, the number of our direct sales representatives was 39,800, and, in particular, the number of direct sales representatives with high productivity increased by 7% from the end of 2021. In 2022, we continued to improve the quality of the sales force by dismissing direct sales representatives with lower productivity, and further strengthened and improved our group distribution channel.
We believe maintaining our leading position in the group insurance market depends on a professional and qualified direct sales force. We set product management and customer service standards which we require all of our branch offices and direct sales representatives to meet.
We motivate our direct sales representatives by rewarding them with performance-based bonuses and by organizing sales and services-related competitions among different branch offices and sales units.
Intermediaries
We also offer individual and group products through intermediaries.
We market group products through dedicated insurance agencies and insurance brokerage companies. Dedicated insurance agencies and insurance brokerage companies work with companies primarily to select group insurance providers and group products and services in return for commission fees. Currently, the market of dedicated insurance agencies and insurance brokerage companies in China generally remains underdeveloped. However, we expect that the dedicated insurance agencies and insurance brokerage companies will play a more important role in sales of our group products in the future.
We also sell short-term insurance products through other non-dedicated agencies. Currently, we have non-dedicated agencies operating at outlets of commercial banks, travel agencies and credit cooperatives. We expect non-dedicated agencies to become an increasingly important distribution channel for individual products.
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Bancassurance channel
We have bancassurance arrangements with major commercial banks in China, and currently generate a significant portion of our total sales through bancassurance. Our distribution channels are primarily comprised of non-dedicated agencies located in approximately 43,000 outlets of commercial banks. We have established strategic alliances with many banks. We intend to improve the attractiveness of our products by providing new products and all-around services to each major bank and providing training and integrated systems support to our banking partners.
Other distribution channels
During 2022, we actively participated in various government-sponsored health insurance businesses, including undertaking supplementary major medical insurance programs and health care entrusted programs, and providing supplementary medical insurance and long-term care insurance.
We also continued to improve our Internet-based sales channel and increase the variety of products sold online. We have continued to optimize online services and improve user experience, actively supporting our other distribution channels through our Internet-based distribution channel.
Gross written premiums attributable to each distribution channel
The following table sets forth gross written premiums attributable to each distribution channel, as of the dates indicated.
| For the year ended December 31, | ||||||||||||||||
| 2020 | 2021 | 2022 | 2022 | |||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| (in millions) | ||||||||||||||||
| Exclusive agent force |
511,044 | 509,489 | 492,439 | 71,397 | ||||||||||||
| First-year business of long-term insurance |
99,838 | 82,514 | 81,732 | 11,850 | ||||||||||||
| First-year regular |
99,555 | 82,254 | 81,508 | 11,818 | ||||||||||||
| Single |
283 | 260 | 224 | 32 | ||||||||||||
| Renewal business |
391,272 | 407,973 | 392,849 | 56,958 | ||||||||||||
| Short-term insurance business |
19,934 | 19,002 | 17,858 | 2,589 | ||||||||||||
| Group distribution channel |
28,872 | 29,162 | 27,333 | 3,963 | ||||||||||||
| First-year business of long-term insurance |
2,040 | 1,846 | 1,929 | 280 | ||||||||||||
| First-year regular |
110 | 44 | 37 | 5 | ||||||||||||
| Single |
1,930 | 1,802 | 1,892 | 274 | ||||||||||||
| Renewal business |
1,862 | 1,622 | 1,345 | 195 | ||||||||||||
| Short-term insurance business |
24,970 | 25,694 | 24,059 | 3,488 | ||||||||||||
| Bancassurance channel |
41,240 | 49,326 | 63,415 | 9,194 | ||||||||||||
| First-year business of long-term insurance |
15,757 | 16,123 | 26,821 | 3,889 | ||||||||||||
| First-year regular |
15,748 | 16,110 | 14,879 | 2,157 | ||||||||||||
| Single |
9 | 13 | 11,942 | 1,731 | ||||||||||||
| Renewal business |
25,109 | 32,792 | 36,200 | 5,249 | ||||||||||||
| Short-term insurance business |
374 | 411 | 394 | 57 | ||||||||||||
| Other distribution channels |
31,109 | 30,350 | 32,003 | 4,640 | ||||||||||||
| First-year business of long-term insurance |
188 | 28 | 21 | 3 | ||||||||||||
| First-year regular |
8 | 2 | 2 | — | ||||||||||||
| Single |
180 | 26 | 19 | 3 | ||||||||||||
| Renewal business |
83 | 76 | 29 | 4 | ||||||||||||
| Short-term insurance business |
30,838 | 30,246 | 31,953 | 4,633 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
612,265 | 618,327 | 615,190 | 89,194 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Competition
According to statistical information derived from China Insurance Yearbook and the market share information calculated based on these statistical information, in 2021, the last year for which the market information for each individual insurance company and separate business segments is available, our nearest competitors were Ping An Life, China Pacific Life, New China Life and Taikang Life.
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Table of Contents
| • | In the life insurance market, Ping An Life, China Pacific Life, New China Life, Taikang Life and we collectively represented approximately 48.8% of total life insurance premiums in 2021. We primarily compete based on the nationwide reach of our sales network, our large distribution force and the level of services we provide, as well as our strong brand name. |
| • | In the accident insurance market, Ping An Life, China Pacific Life, New China Life, Taikang Life and we collectively represented approximately 65.8% of total accident premiums in 2021. We primarily compete based on the nationwide reach of our sales network and the level of services we provide and our strong brand name, as well as our cooperative arrangements with other companies and institutions. |
| • | In the health insurance market, Ping An Life, China Pacific Life, New China Life, Taikang Life and we collectively represented approximately 58.4% of total health premiums in 2021. We primarily compete based on the nationwide reach of our sales network, the level of services we provide, our extensive experience in medical insurance service and systems of policy review and claim management, as well as our strong brand name. |
The following table sets forth market share information for the year ended December 31, 2021, the most recent year for which official market information for separate business segments is available, in all segments of the life insurance market in which we do business.
| Life premiums market share |
Accident premiums market share |
Health premiums market share |
Total premiums market share |
|||||||||||||
| China Life |
20.4 | % | 28.3 | % | 17.0 | % | 19.9 | % | ||||||||
| Ping An Life Insurance Company of China, Ltd. (1) |
13.3 | % | 26.2 | % | 18.2 | % | 14.7 | % | ||||||||
| China Pacific Life Insurance Co., Ltd. |
6.1 | % | 7.0 | % | 8.8 | % | 6.7 | % | ||||||||
| New China Life Insurance Co., Ltd |
4.3 | % | 3.2 | % | 8.7 | % | 5.3 | % | ||||||||
| Taikang Life Insurance Co., Ltd . |
4.8 | % | 1.1 | % | 5.7 | % | 5.0 | % | ||||||||
| Others(2) |
51.1 | % | 34.2 | % | 41.6 | % | 48.4 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
100 | % | 100 | % | 100 | % | 100 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | For purposes of this annual report, the statistics for Ping An Life Insurance Company of China, Ltd. do not include those of Ping An Health Insurance Company of China, Ltd. and Ping An Annuity Insurance Company of China, Ltd. |
| (2) | Others include: PICC Life Insurance Company Limited, PICC Health Insurance Company Limited, Taiping Life Insurance Co., Ltd., Taiping Pension Company Limited, Minsheng Life Insurance Co., Ltd., Pacific Health Insurance Co., Ltd., Ping An Annuity Insurance Company of China, Ltd., Ping An Health Insurance Company of China, Ltd., China United Life Insurance Co., Ltd., Sunshine Life Insurance Corporation Limited, Taikang Pension Insurance Co., Ltd., Huatai Life Insurance Co., Ltd., Funde Sino Life Insurance Co., Ltd., Dajia Life Insurance Co., Ltd., Dajia Annuity Insurance Co., Ltd., Hexie Health Insurance Co., Ltd., Union Life Insurance Co., Ltd., Greatwall Life Insurance Co., Ltd., ABC Life Insurance Co., Ltd., Kunlun Health Insurance Co., Ltd., J.K. Life Insurance Corporation Limited, Sinatay Life Insurance Co., Ltd., Yingda Taihe Life Insurance Co., Ltd., Guohua Life Insurance Co., Ltd., Happy Life Insurance Co., Ltd., Aeon Life Insurance Company, Ltd., China Post Life Insurance Company Limited, Lian Life Insurance Company Limited, Sino-Conflux Insurance Company, Qian Hai Life Insurance Co., Ltd., Soochow Life Insurance Co., Ltd., Hong Kang Life Insurance Co., Ltd., Pearl River Life Insurance Co., Ltd., Chasingjixiang Life Insurance Company Limited., Bohai Life Insurance Co., Ltd., Guolian Insurance Co., Ltd., Shanghai Life Insurance Company Limited, Hengqin Life Insurance Co., Ltd., Fosun United Health Insurance Co., Ltd., Hetai Life Insurance Co., Ltd., Huagui Life Insurance Co., Ltd., Trust Mutual Life Insurance Company, Aixin Life Insurance Co., Ltd., China Merchants Life Insurance Company Limited, China Three Gorges Life Insurance Co., Ltd., Beijing Life Insurance Co., Ltd., GuoBao Life Insurance Co., Ltd., Ruihua Health Assurance Corporation, Haibao Life Insurance Co., Ltd., Guofu Life Insurance Co., Ltd., Manulife-Sinochem Life Insurance Co., Ltd., CCB Life Insurance Co., Ltd, Allianz China Life Insurance Co., Ltd., ICBC-AXA Assurance Co., Ltd., BOCOM MSIG Life Insurance Company Limited, Citic-Prudential Life Insurance Company Limited, Generali China Life Insurance Co., Ltd., Sun Life Everbright Life Insurance Co., Ltd., BOB-Cardif Life Insurance Co., Ltd., Founder Meiji Yasuda Life Insurance Co., Ltd., Aviva-COFCO Life Insurance Company Ltd., Aegon THTF Life Insurance Co., Ltd., CIGNA CMB Life Insurance Company Limited, Great Wall Changsheng Life Insurance Co., Ltd., Heng An Standard Life Company Limited, Oldmutual-Guodian Life Insurance Co., Ltd., Sino-US United MetLife Insurance Company Limited, Cathay Lujiazui Life Insurance Company Limited, BOC–Samsung Life Insurance Company Limited, Livit Life Insurance Company Limited, Evergrand Life Assurance Co., Ltd., King Dragon Life Insurance Co., Ltd., HSBC Life Insurance Company Limited, Dingcheng Life Insurance Co., Ltd., Pramerica Fosun Life Insurance Co., Ltd., Sino-Korea Life Insurance Co., Ltd., ERGO China Life Insurance Co., Ltd. and AIA Life Insurance Company Limited. |
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Table of Contents
Source: China Insurance Yearbook 2022
We face competition not only from domestic life insurance companies, but also from non-life insurance companies and foreign-invested life insurers. Property and casualty insurers were allowed to sell accident and short-term health insurance products with regulatory approval starting from January 2003, which we believe will lead to greater competition in the accident and health insurance sectors, especially in the group accident and group health insurance products. In addition, we believe that China’s commitment to accelerate the opening of its insurance sector to foreign investors, including the relaxation on market access requirements applicable to foreign-invested insurance companies and foreign ownership limits in its insurance sector, will further increase competition in China’s life insurance market. Since January 1, 2020, foreign investors have been allowed to own 100% in Chinese life insurers. We believe that the relaxation of the restrictions on foreign-invested insurers will continue to increase the competitive pressures we are facing.
See “Item 3. Key Information—Risk Factors—Risks Relating to the PRC Life Insurance Industry—We expect competition in the Chinese insurance industry to increase, which may materially and adversely affect the growth of our business”.
We also face increasing competition from other financial services providers, primarily licensed mutual fund companies, commercial banks providing personal banking services and operating business of various financial products, trust companies and brokerage houses licensed to manage separate accounts. These financial services providers may be permitted to manage employer-sponsored defined contribution pension plans, which we believe will compete directly with our group annuity products. We also face competition in the sale of our traditional life insurance savings policies, individual participating policies and annuities from financial institutions which offer investment products to the public.
Business Management
Customer Support Management
We seek to provide quality services to our customers and potential customers and to be responsive to their needs, both before and after a sale, through an extensive customer support network. Our customer service network is managed by specialized customer service departments, which are responsible for setting uniform standards and procedures for providing policy-related services to customers, handling inquiries and complaints from customers and training customer services personnel.
We deliver customer services through various channels including customer service centers operating in field offices throughout China, our dedicated customer service line “95519”, official WeChat account, official website and China Life Insurance app. We take advantage of alternative customer services channels, such as online electronic notification, cell phone messages and online smart robots, complementing the customer services provided by our customer service centers and customer contact centers.
Customer service centers
We provide comprehensive insurance service to customers through more than 2,500 customer service centers nationwide. Our customer service centers provide several types of policy-related services to our customers, including policy administration and claims settlement. We apply AI technology to our customer service and use technology products such as Smart Teller Machines, China Life Electronic Counter, Intelligent Appointment and China Life Insurance app, to simplify service process and improve service efficiency. We have uniform service standards for customer service centers nationwide and require our customer service centers to provide these policy related services in accordance with the uniform standards to ensure the high quality of the services we provide.
Customer contact centers
Our customer contact centers allow customers to make product and service inquiries, file suggestions and complaints, report claims, make appointments and apply for conservations through telephone and Internet consulting channels. Our customer contact centers also allow the customers to access online self-services through a smart voice navigation system, an interactive voice response system and intelligent online customer service robots. They also provide follow-up review of policies, notifications and reminder services to customers. With our dedicated customer service line “95519”, our customers can reach us on a “24 hours/7 days” basis. We have also built an integrated financial service ecology. Through our dedicated customer line “95519”, in addition to access to our service, customers are also able to access other financial services provided by CLPCIC, China Life Pension, CGB, AMP and China Life Insurance Overseas.
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Table of Contents
We believe our customer contact centers have become popular with our customers because of the quality of services we provide and our continuous efforts in innovation. We received the award of “Best Customer Contact Center of China” from the Customer Relationship Management Branch of China Computer Users Association for 18 consecutive years, the award of “Customer Satisfaction Award 2022” from the Customer Contact Center Branch of China Information Association, and the award of “World’s Most Innovative Knowledge Enterprise Award 2021” from Teleos, a U.K.-based independent research organization, and the KNOW Network. We also received the “Best Call Centers in the World” award from the International Customer Management Institute in 2007, 2011 and 2015, respectively. We will use new technology and new services to innovate and continue to promote the intelligent and digital transformation and upgrading of our customer contact centers. We seek to ensure that we have a sufficient number of lines and staff to service the increasing use of our customer contact centers.
We have established system-wide standards for our customer contact centers, which we monitor periodically through regular quality monitoring and customer satisfaction surveys on the contact centers.
Notification services
We send notifications through cellphone messages, WeChat public account, emails and our China Life Insurance app to convey such information as business notifications, customer care reminders, value-added service reminders and security verification information.
Internet-based services
Our customers can access our various service guides through our website (www.e-chinalife.com). We also use emails to send messages to our customers throughout China, conveying such information as electronic policies and renewal payment reminders.
Our Internet-based services are offered through our China Life Insurance app and official WeChat account. During 2022, the number of registered users of our online channels increased by 15.85% from 2021, with the number of monthly average active users increasing by 6.81% year-on-year. The online processing rate of policy administration and claims settlement for individual insurance rose to 92.79% and 96.70%, respectively. More than 872 million electronic notification messages were sent. 99.67% of policy loans and 99.99% of the receipt of policies were handled online.
Supplementary services
To allow our customers to benefit from superior service and enhance their service experience, we provide several types of supplementary services while continuing to provide quality basic insurance services.
For example, to meet the demand of different customer groups, we have launched an “online + offline” scenario-based ecological service model to provide value-added services. We held a series of activities such as “China Life Customer Festival”, “Little Painters of China Life”, “China Life 700 Running” and “Enjoy Your Own Life”. In 2022, the number of total customers receiving value-added services increased by 3.72% year-on-year.
Underwriting and Pricing
Our individual and group insurance underwriting involves the evaluation of applications for life, accident and health insurance products by a professional staff of underwriters and actuaries, who determine the type and the amount of risk that we are willing to accept. We have established qualification requirements and review procedures for our underwriting professionals. We employ detailed underwriting policies, guidelines and procedures designed to assist our underwriters to assess and quantify risks before issuing a policy to qualified applicants.
We generally evaluate the risk characteristics of each prospective insured. Requests for coverage are reviewed on their merits, and a policy is not issued unless the particular risk or risk portfolio has been examined and approved for underwriting.
We have different authorization limits and procedures depending on the amount of the claim. We also have authorization limits for personnel depending on their qualifications.
In order to maintain high standards of underwriting quality and consistency, we engage in periodic internal underwriting audits.
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Table of Contents
Individual and group product pricing reflects our insurance underwriting standards. Product pricing on insurance products is based on the expected payout of benefits, calculated through the use of mortality tables, morbidity, expenses and investment returns. Those assumptions and other assumptions for calculating expected profit margin are based on our own experience, third party consultation, the experience of reinsurance companies and published data from other institutions. For more information on the regulation of insurance products, see “—Regulatory and Related Matters—Insurance Company Regulation”.
We primarily offer products denominated in Renminbi.
Claims Management
We manage claims from policyholders through our claims verification staff at our headquarters and branch offices. Typically, upon receiving a claim, a staff person will make a preliminary verification if all materials supporting the claim have been submitted; if so, the claim and its supporting materials will be forwarded to the claim settlement department to confirm liability and to determine whether a claim investigation is needed. Upon confirming the validity of the claim and insurance liability, the amount payable to the insured will be calculated, and the claim will be paid upon completion of approval procedure. Meanwhile, in order to improve the operational efficiency of claims for small-sum medical insurance with low risks, we have built an automatic operation mode to automatically handle the entire process after the acceptance of the claim.
We manage claims management risk through organizational controls and computer systems controls. Our organizational controls include specific limits on authorization for branches at different levels and periodic case inspections by claim management departments at all levels of our organization. We also periodically provide training for our claims verification personnel and conduct appraisals of their performance. Our claims management is strictly processed with computers to streamline claims verification and handling.
Reinsurance
We have entered into various reinsurance agreements with China Life Reinsurance Company Ltd., or China Life Re, formerly known as China Reinsurance Company, for the reinsurance of individual risks and group risks. In general, individual and group risks are primarily reinsured either on a surplus basis, whereby we are reinsured for risks above a specified amount, or on a quota share basis. Under our reinsurance policy, the specified amount above which the risks are reinsured varies among different types of insurance products. In general, our reinsurance agreements with China Life Re do not have a definite term, but may be terminated with respect to new business thereunder by either party on a date agreed by both parties with three to six months’ notice.
We have also entered into reinsurance agreements separately with other reinsurance companies including the Beijing branch of Munich Reinsurance Company, the Beijing Branch of SCOR, the Shanghai branch of Reinsurance Group of America, the Beijing branch of Swiss Reinsurance Company Limited, the Shanghai branch of Hannover Re, the Shanghai branch of General Re Corporation, Qianhai Reinsurance Company Ltd. and PICC Reinsurance Company Limited.
In July 2022, we renewed our catastrophe reinsurance in order to reduce our catastrophe exposure.
These reinsurance agreements spread the risk and reduce the effect on us of potential losses. Under the terms of the reinsurance agreements, the reinsurer agrees to assume liabilities for the ceded business in the event the claim is paid. However, we remain liable to our policyholders if the reinsurer fails to meet the obligations assumed by it.
We also accept external auditing of reinsured business by our reinsurers.
Investments
As of December 31, 2022, we had RMB5,064,991 million (US$734,355 million) of investment assets. As provided by China’s insurance laws and regulations, we may invest insurance premiums and other insurance funds in five categories of investment assets, including liquidity assets, fixed income assets, equity assets, real properties and other financial assets, all as defined by the CBIRC and subject to various limitations. Each category of investment assets is also divided into domestic assets and overseas assets. See “—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”. As of December 31, 2022, we have invested our insurance premiums and other insurance funds in term deposits, debt securities, loans, securities investment funds, stocks, resale agreements, investment properties, investments in associates and joint ventures, equity interests of non-listed enterprises and related financial products.
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Table of Contents
We direct and monitor our investment activities through the application of our strategic asset allocation plan, annual asset allocation plan, investment guidelines and a series of investment management systems, which include: (1) performance goals for the investment fund; (2) specified asset allocations and investment scope based on regulatory provisions, level of indebtedness and market forecasts; (3) specified investment duration and asset-liability matching requirements based on asset-liability matching strategies; (4) specified authorization levels required for approval of significant investment projects; and (5) specified risk management policies and prohibitions. These are subject to review and approval by the board of directors, and, in particular, the strategic asset allocation plan and annual asset allocation plan are subject to review and approval by the board of directors annually. The board of directors may delegate and authorize our management to review and approve investment guidelines and some investment management systems.
Investment proposals typically originate from our investment management department, which is in charge of all of our investment assets except for investment in real properties used by us, which is separately managed by our own-use real property investment management department. Material investment decisions are reviewed and approved by our board of directors or shareholder’s meeting and other investment proposals are reviewed by our president and senior management for final approval.
AMC, the asset management company that we established with CLIC, manages a substantial part of our Renminbi investments and, separately, substantially all of the investments retained by CLIC. See “—Asset Management Business”. IHC, a wholly owned subsidiary of CLIC, also manages our investments in unlisted equity interests, real estate and related financial products and securitization financial products. Other related parties are also entrusted to manage a small amount of our assets. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions”. In addition, as of December 31, 2022, we had also engaged 21 third-party domestic investment managers to manage RMB360,700 million (US$52,297 million) for investment in Chinese public markets, and for offshore public markets, we had US$1,071 million asset which was entrusted to nine offshore third-party investment managers.
The following table summarizes information concerning our investment assets as of December 31, 2020, 2021 and 2022.
| As of December 31,(1) | ||||||||||||||||||||||||
| 2020 | 2021 | 2022 | ||||||||||||||||||||||
| Carrying value |
% of total |
Carrying value |
% of total |
Carrying value |
% of total |
|||||||||||||||||||
| (RMB in millions, except as otherwise indicated) | ||||||||||||||||||||||||
| Cash and cash equivalents |
56,704 | 1.4 | % | 60,459 | 1.3 | % | 127,594 | 2.5 | % | |||||||||||||||
| Term deposits |
545,678 | 13.3 | % | 529,488 | 11.2 | % | 485,567 | 9.6 | % | |||||||||||||||
| Statutory deposits—restricted |
6,333 | 0.2 | % | 6,333 | 0.1 | % | 6,333 | 0.1 | % | |||||||||||||||
| Debt securities, held-to-maturity |
1,189,369 | 29.1 | % | 1,533,753 | 32.5 | % | 1,574,204 | 31.1 | % | |||||||||||||||
| Debt securities, available-for-sale |
580,810 | 14.2 | % | 793,544 | 16.9 | % | 879,443 | 17.3 | % | |||||||||||||||
| Debt securities, securities at fair value through profit or loss |
95,615 | 2.3 | % | 143,057 | 3.0 | % | 191,529 | 3.8 | % | |||||||||||||||
| Debt securities |
1,865,794 | 45.6 | % | 2,470,354 | 52.4 | % | 2,645,176 | 52.2 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Loans |
658,535 | 16.1 | % | 666,087 | 14.1 | % | 596,490 | 11.8 | % | |||||||||||||||
| Equity securities, available for sale |
634,793 | 15.5 | % | 635,743 | 13.4 | % | 858,665 | 17.0 | % | |||||||||||||||
| Equity securities, securities at fair value through profit or loss |
65,955 | 1.6 | % | 63,714 | 1.4 | % | 32,261 | 0.6 | % | |||||||||||||||
| Equity securities |
700,748 | 17.1 | % | 699,457 | 14.8 | % | 890,926 | 17.6 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Derivative financial assets |
— | — | — | — | — | — | ||||||||||||||||||
| Resale agreements |
7,947 | 0.2 | % | 12,915 | 0.3 | % | 38,533 | 0.8 | % | |||||||||||||||
| Investment properties |
14,217 | 0.3 | % | 13,374 | 0.3 | % | 13,193 | 0.3 | % | |||||||||||||||
| Investments in associates and joint ventures |
239,584 | 5.8 | % | 257,953 | 5.5 | % | 261,179 | 5.1 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total investment assets |
4,095,540 | 100.0 | % | 4,716,420 | 100.0 | % | 5,064,991 | 100.0 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Average investment assets balance |
3,834,399 | 4,405,980 | 4,890,706 | |||||||||||||||||||||
| * (1): | China Life (Tianjin) Aged-care and Healthcare Investment Company Limited became a subsidiary of the Company in 2022 as a result of a business combination under common control. The financial data of 2020 and 2021 in this annual report have been restated. See Note 34(f) to our consolidated financial statements included elsewhere in this annual report. |
40
Table of Contents
Risk management
Our primary investment objective is to pursue optimal investment yields while considering macroeconomic factors, risk control and regulatory requirements. We are exposed to five primary sources of investment risk:
| • | interest rate risk, relating to the market price and cash flow variability associated with changes in interest rates; |
| • | credit risk, relating to the uncertainty associated with the continued ability of a given obligor to make timely payments of principal and interest; |
| • | market valuation risk, relating to the changes in market value for our investments, particularly our securities investment fund holdings and shares listed on the Chinese securities exchanges, which are denominated and traded in Renminbi; |
| • | liquidity risk, relating to the lack of liquidity in many of the debt and equity securities markets we invest in, due to contractual restrictions on transfer or the size of our investments in relation to the overall market; and |
| • | currency exchange risk, relating to the impact of changes in the value of the Renminbi against the U.S. dollar and other currencies on the value of our investments. |
Our investment assets are principally comprised of fixed income securities and term deposits, and therefore changes in interest rates have a significant impact on the rate of our investment return. We manage interest rate risk through adjustments to our portfolio mix and terms, and by managing, to the extent possible, the average duration and maturity of our assets and liabilities. However, because of the general lack of long-term fixed income securities in the Chinese financial markets, the duration of some of our assets is lower than our liabilities. We believe that with the development of China’s financial markets, our ability to match our assets to our liabilities will improve. Although we have been approved to enter into interest rate swaps, it is still not an effective means for us to hedge our interest rate risk as the Chinese interest rate swap market is still in the early stages of development.
We believe we have a relatively low credit risk, because we mainly invest in fixed income products with high credit ratings. We monitor our credit risk through in-house fundamental analysis of the Chinese economy and the underlying obligors, transaction structures and risk concentration.
We are subject to market valuation risk, particularly because China’s bond and stock markets are more volatile than developed markets. We manage valuation risk through industry and issuer diversification and asset allocation.
Since substantially all of our investments are made in China, we are exposed to the effect of changes in the Chinese economy and other factors which affect the Chinese banking industry and securities markets.
We are also subject to market liquidity risk for many of the investments we make, due to the size of our investments in relation to the overall market. We manage liquidity risk through selection of liquid assets and through asset diversification. In addition, we view fundraising through repurchase agreements as a way of managing our short-term liquidity risk.
Our ability to manage our investment risks is limited by the investment restrictions placed on us and the lack of sophisticated investment vehicles for risk management in China’s capital markets. The CBIRC allows insurance companies to invest in financial derivative products with the aim to hedge and reduce investment risks. We are considering these alternative ways of investing to further improve our risk management.
Our assets held in foreign currencies are subject to foreign exchange risks resulting from the fluctuations of the value of the Renminbi against the U.S. dollar and other foreign currencies. As we are approved by the CIRC to invest our assets held in foreign currencies in overseas financial markets, the return from overseas investments could, to a certain extent, reduce the foreign exchange risks we are exposed to.
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Table of Contents
For further information on our management of interest rate risk and market valuation risk, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk”.
Investment results
Our investment yields for the years ended December 31, 2022, 2021 and 2020 were 3.94%, 4.98%, and 5.30%, respectively.
The following table sets forth the yields on average assets for each major component of our investment portfolios for the periods indicated.
| As of or for the years ended December 31, | ||||||||||||||||||||||||
| 2020 | 2021 | 2022 | ||||||||||||||||||||||
| Yield (1) | Amount | Yield (1) | Amount | Yield (1) | Amount | |||||||||||||||||||
| (RMB in millions, except as otherwise indicated) | ||||||||||||||||||||||||
| Cash, cash equivalents, statutory deposits and term deposits: |
||||||||||||||||||||||||
| Investment income |
4.3 | % | 25,860 | 4.3 | % | 25,949 | 4.1 | % | 25,161 | |||||||||||||||
| Ending assets: cash and cash equivalents |
56,704 | 60,459 | 127,594 | |||||||||||||||||||||
| Ending assets: statutory deposits—restricted |
6,333 | 6,333 | 6,333 | |||||||||||||||||||||
| Ending assets: term deposits |
545,678 | 529,488 | 485,567 | |||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Ending assets |
608,715 | 596,280 | 619,494 | |||||||||||||||||||||
| Debt securities: |
||||||||||||||||||||||||
| Investment income |
70,934 | 90,400 | 100,136 | |||||||||||||||||||||
| Net realized gains on financial assets |
1,575 | (1,161 | ) | 8,965 | ||||||||||||||||||||
| Net fair value gains through profit or loss |
(583 | ) | 1,069 | (1,613 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Total |
4.2 | % | 71,926 | 4.2 | % | 90,308 | 4.2 | % | 107,488 | |||||||||||||||
| Ending assets |
1,865,794 | 2,470,354 | 2,645,176 | |||||||||||||||||||||
| Loans: |
||||||||||||||||||||||||
| Investment income |
5.0 | % | 31,948 | 5.0 | % | 32,970 | 4.9 | % | 30,915 | |||||||||||||||
| Ending assets |
658,535 | 666,087 | 596,490 | |||||||||||||||||||||
| Equity securities: |
||||||||||||||||||||||||
| Investment income |
24,983 | 28,718 | 29,704 | |||||||||||||||||||||
| Net realized gains on financial assets |
13,008 | 21,505 | 3,742 | |||||||||||||||||||||
| Net fair value gains through profit or loss |
22,997 | 3,470 | (10,956 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Total |
9.3 | % | 60,988 | 7.7 | % | 53,693 | 2.8 | % | 22,490 | |||||||||||||||
| Ending assets |
700,748 | 699,457 | 890,926 | |||||||||||||||||||||
| Resale agreements: |
||||||||||||||||||||||||
| Investment income |
12.4 | % | 772 | 3.4 | % | 350 | 2.8 | % | 713 | |||||||||||||||
| Ending assets |
7,947 | 12,915 | 38,533 | |||||||||||||||||||||
| Investments properties: |
||||||||||||||||||||||||
| Income of investments properties |
(0.4 | %) | (50 | ) | 0.4 | % | 55 | 0.7 | % | 87 | ||||||||||||||
| Ending assets |
14,217 | 13,374 | 13,193 | |||||||||||||||||||||
| Investments in associates and joint ventures: |
||||||||||||||||||||||||
| Net gains on investments of associates and joint ventures |
3.3 | % | 7,666 | 4.2 | % | 10,328 | 0.2 | % | 484 | |||||||||||||||
| Ending assets |
239,584 | 257,953 | 261,179 | |||||||||||||||||||||
| Securities sold under agreements to repurchase: |
||||||||||||||||||||||||
| Interest expense |
(1.3 | %) | (1,565 | ) | (1.9 | %) | (3,523 | ) | (1.4 | %) | (2,689 | ) | ||||||||||||
| Ending liabilities |
122,249 | 239,446 | 148,958 | |||||||||||||||||||||
| Total investments: |
||||||||||||||||||||||||
| Investment income |
154,497 | 178,387 | 186,629 | |||||||||||||||||||||
| Net realized gains on financial assets |
14,583 | 20,344 | 12,707 | |||||||||||||||||||||
| Net fair value gains through profit or loss |
21,900 | 4,943 | (12,156 | ) | ||||||||||||||||||||
| Income of Investments properties |
(50 | ) | 55 | 87 | ||||||||||||||||||||
| Net gains on investments of associates and joint ventures |
7,666 | 10,328 | 484 | |||||||||||||||||||||
| Interest expense of securities sold under agreements to repurchase |
(1,565 | ) | (3,523 | ) | (2,689 | ) | ||||||||||||||||||
| Total |
5.30 | % | 197,031 | 4.98 | % | 210,534 | 3.94 | % | 185,062 | |||||||||||||||
| Ending assets excluding securities sold under agreements to repurchase |
3,973,291 | 4,476,974 | 4,916,033 | |||||||||||||||||||||
42
Table of Contents
| (1) | Yields for 2022, 2021 and 2020 are calculated by dividing the gross investment income for that year by the average of the ending balances of that year and the previous year. |
Term deposits
Term deposits consist principally of term deposits with Chinese commercial banking institutions and represented 9.6% of our total investment assets as of December 31, 2022, 11.2% of our total investment assets as of December 31, 2021, and 13.3% of our total investment assets as of December 31, 2020.
We generally place term deposits with state-owned commercial banks and large joint stock commercial banks. The terms of the term deposits vary. They typically allow us to renegotiate terms with the banks upon prepayment, including the methods for the calculation of accrued interest, if any. We make large term deposits to obtain higher yields than can ordinarily be obtained with regular deposits.
The following table sets forth term deposits by contractual maturity dates, as of the dates indicated.
| As of December 31, | ||||||||||||
| 2020 | 2021 | 2022 | ||||||||||
| Amortized cost |
Amortized cost |
Amortized cost |
||||||||||
| (RMB in millions) | ||||||||||||
| Due in one year or less |
63,090 | 135,301 | 183,832 | |||||||||
| Due after one year and through five years |
480,848 | 394,187 | 301,735 | |||||||||
| Due after five years and through ten years |
1,740 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total term deposits |
545,678 | 529,488 | 485,567 | |||||||||
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|
|
|
|
|
|||||||
The following table sets forth term deposits outstanding to Chinese banking institutions as of the dates indicated.
| As of December 31, | ||||||||||||
| 2020 | 2021 | 2022 | ||||||||||
| Amortized cost |
Amortized cost |
Amortized cost |
||||||||||
| (RMB in millions) | ||||||||||||
| Industrial Commercial Bank of China |
9,092 | 13,174 | 24,261 | |||||||||
| Agriculture Bank of China |
61,060 | 47,523 | 64,526 | |||||||||
| Bank of China |
— | 60 | 41 | |||||||||
| China Construction Bank |
3,500 | 5,070 | 5,047 | |||||||||
| Bank of Communications |
131,150 | 131,688 | 118,725 | |||||||||
| Other banks |
340,876 | 331,973 | 272,967 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total term deposits |
545,678 | 529,488 | 485,567 | |||||||||
|
|
|
|
|
|
|
|||||||
Debt securities
Debt securities in which we are permitted to invest mainly consist of the following categories:
| • | Chinese government bonds; |
| • | government agency bonds (including local government bonds issued and repaid by the MOF as agent, central bank notes, financial bonds issued by Chinese state-owned policy banks and RMB-denominated bonds issued by international development institutions); |
| • | corporate bonds (including financial bonds issued by commercial banks, corporate bonds, convertible corporate bonds, short-term financing bonds and medium-term notes); |
43
Table of Contents
| • | subordinated bonds and debt (including subordinated bonds issued by Chinese state-owned policy banks, subordinated bonds issued by commercial banks, subordinated debt with fixed terms issued by commercial banks and subordinated debt with fixed terms issued by insurance companies); and |
| • | tier 2 capital bonds and perpetual capital bonds (including tier 2 capital bonds and perpetual capital bonds issued by Chinese state-owned policy banks, and tier 2 capital bonds and perpetual capital bonds issued by qualified commercial banks). |
Debt securities represented 52.2% of our total investment assets as of December 31, 2022, 52.4% of our total investment assets as of December 31, 2021, and 45.6% of our total investment assets as of December 31, 2020.
Based on estimated fair value, Chinese government bonds, Chinese government agency bonds, corporate bonds, subordinated bonds and debt and other debt securities comprised 5.4%, 35.6%, 21.4%, 17.7% and 19.8% of our total available-for-sale debt securities as of December 31, 2022, 7.4%, 32.7%, 25.6%, 14.0% and 20.3% of our total available-for-sale debt securities as of December 31, 2021, 8.5%, 29.1%, 23.4%, 14.1% and 24.9% of our total available-for-sale debt securities as of December 31, 2020,. Except for a small number of debt securities, which collectively had a carrying value of RMB181,936 million (US$26,378 million) as of December 31, 2022, most of our debt securities are traded on security exchanges or in the unlisted interbank market in China.
We mainly invest in secured bonds and unsecured bonds rated AA or above by the rating agencies recognized by the CBIRC, such as China Chengxin International Credit Rating Co., Ltd., or Chengxin International, and China Lianhe Credit Rating Co., Ltd., or Lianhe Credit. We also invest in short-term financing bonds rated A-2 or above.
Chengxin International is a member of Moody’s Investors Service Inc., with Moody’s owning 30% equity interest in Chengxin International. Chengxin International created its own rating structures by making reference to the rating structures and experience of Moody’s and Fitch Ratings. AAA is the highest rating. Other approved rating agencies, such as Lianhe Credit, have similar rating structures. Ratings given by these entities are not directly comparable to ratings given by U.S. rating agencies.
The following table sets forth the amortized cost and estimated fair value of debt securities, as of the dates indicated.
| As of December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2021 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amortized cost |
% of total |
Estimated fair value |
% of total |
Amortized cost |
% of total |
Estimated fair value |
% of total |
Amortized cost |
% of total |
Estimated fair value |
% of total |
|||||||||||||||||||||||||||||||||||||
| (RMB in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Debt securities, available-for-sale: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Government bonds |
48,542 | 2.6 | % | 49,256 | 2.6 | % | 55,110 | 2.3 | % | 58,561 | 2.3 | % | 45,244 | 1.8 | % | 47,188 | 1.7 | % | ||||||||||||||||||||||||||||||
| Government agency bonds |
161,503 | 8.8 | % | 169,013 | 8.9 | % | 245,026 | 10.0 | % | 259,753 | 10.0 | % | 299,636 | 11.4 | % | 313,270 | 11.3 | % | ||||||||||||||||||||||||||||||
| Corporate bonds |
133,133 | 7.2 | % | 136,025 | 7.2 | % | 197,856 | 8.1 | % | 203,147 | 7.9 | % | 185,214 | 7.1 | % | 188,563 | 6.8 | % | ||||||||||||||||||||||||||||||
| Subordinated bonds/debt |
81,880 | 4.4 | % | 81,795 | 4.3 | % | 107,204 | 4.4 | % | 111,029 | 4.3 | % | 155,289 | 5.9 | % | 156,024 | 5.6 | % | ||||||||||||||||||||||||||||||
| Others |
141,530 | 7.6 | % | 144,721 | 7.6 | % | 154,793 | 6.4 | % | 161,054 | 6.3 | % | 170,684 | 6.5 | % | 174,398 | 6.3 | % | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total debt securities, available-for-sale |
566,588 | 30.6 | % | 580,810 | 30.6 | % | 759,989 | 31.2 | % | 793,544 | 30.8 | % | 856,067 | 32.7 | % | 879,443 | 31.7 | % | ||||||||||||||||||||||||||||||
|
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|
|||||||||||||||||||||||||
| Debt securities, held to maturity: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Government bonds |
265,198 | 14.3 | % | 275,770 | 14.5 | % | 349,370 | 14.3 | % | 382,413 | 14.9 | % | 378,105 | 14.5 | % | 417,814 | 15.1 | % | ||||||||||||||||||||||||||||||
| Government agency bonds |
617,515 | 33.3 | % | 631,203 | 33.2 | % | 911,451 | 37.4 | % | 969,584 | 37.6 | % | 1,004,162 | 38.3 | % | 1,080,854 | 39.0 | % | ||||||||||||||||||||||||||||||
| Corporate bonds |
201,988 | 10.9 | % | 209,873 | 11.0 | % | 209,627 | 8.6 | % | 219,793 | 8.5 | % | 178,203 | 6.8 | % | 186,145 | 6.7 | % | ||||||||||||||||||||||||||||||
| Subordinated bonds/debt |
104,668 | 5.7 | % | 108,694 | 5.7 | % | 63,305 | 2.6 | % | 66,481 | 2.6 | % | 13,734 | 0.5 | % | 15,993 | 0.6 | % | ||||||||||||||||||||||||||||||
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total debt securities, held to maturity |
1,189,369 | 64.2 | % | 1,225,540 | 64.4 | % | 1,533,753 | 62.9 | % | 1,638,271 | 63.6 | % | 1,574,204 | 60.1 | % | 1,700,806 | 61.4 | % | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Debt securities, securities at fair value through profit or loss |
||||||||||||||||||||||||||||||||||||||||||||||||
| Government bonds |
1,640 | 0.1 | % | 1,638 | 0.1 | % | 1,378 | 0.1 | % | 1,393 | 0.1 | % | 1,802 | 0.1 | % | 1,805 | 0.1 | % | ||||||||||||||||||||||||||||||
| Government agency bonds |
4,417 | 0.2 | % | 4,422 | 0.2 | % | 7,932 | 0.3 | % | 7,989 | 0.3 | % | 9,189 | 0.4 | % | 9,622 | 0.3 | % | ||||||||||||||||||||||||||||||
| Corporate bonds |
86,776 | 4.8 | % | 86,803 | 4.6 | % | 90,241 | 3.7 | % | 90,425 | 3.5 | % | 149,903 | 5.7 | % | 152,347 | 5.5 | % | ||||||||||||||||||||||||||||||
| Others |
2,668 | 0.1 | % | 2,752 | 0.1 | % | 43,120 | 1.8 | % | 43,250 | 1.7 | % | 27,478 | 1.0 | % | 27,755 | 1.0 | % | ||||||||||||||||||||||||||||||
| Total debt securities, securities at fair value through profit or loss |
95,501 | 5.2 | % | 95,615 | 5.0 | % | 142,671 | 5.9 | % | 143,057 | 5.6 | % | 188,372 | 7.2 | % | 191,529 | 6.9 | % | ||||||||||||||||||||||||||||||
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total debt securities |
1,851,458 | 100.0 | % | 1,901,965 | 100.0 | % | 2,436,413 | 100.0 | % | 2,574,872 | 100.0 | % | 2,618,643 | 100.0 | % | 2,771,778 | 100.0 | % | ||||||||||||||||||||||||||||||
|
|
|
|
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|||||||||||||||||||||||||
44
Table of Contents
The following table shows the amortized cost and estimated fair value of debt securities excluding securities at fair value through profit or loss by contractual maturity dates, as of the dates indicated.
| As of December 31, | ||||||||||||||||||||||||
| 2020 | 2021 | 2022 | ||||||||||||||||||||||
| Amortized cost |
Estimated fair value |
Amortized cost |
Estimated fair value |
Amortized cost |
Estimated fair value |
|||||||||||||||||||
| (RMB in millions) | ||||||||||||||||||||||||
| Due in one year or less |
62,234 | 62,610 | 92,239 | 92,519 | 152,367 | 152,802 | ||||||||||||||||||
| Due after one year and through five years |
269,005 | 276,399 | 321,987 | 332,568 | 360,599 | 372,934 | ||||||||||||||||||
| Due after five years and through ten years |
468,612 | 485,178 | 467,064 | 491,974 | 315,984 | 329,710 | ||||||||||||||||||
| Due after ten years |
956,106 | 982,163 | 1,412,452 | 1,514,754 | 1,601,321 | 1,724,803 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total debt securities, excluding those at fair value through profit or loss |
1,755,957 | 1,806,350 | 2,293,742 | 2,431,815 | 2,430,271 | 2,580,249 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
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|
|
|||||||||||||
Our investments in debt securities are subject to strict restrictions under relevant Chinese regulation. See “—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”. We diversify our corporate bonds by industry and issuer to effectively manage and control concentration risks. As of the date of this annual report, we believe that our corporate bond portfolio does not have significant exposure to a single industry or issuer.
Loans
We offer interest-bearing policy loans to our policyholders, who may borrow from us in amounts up to the total cash values of their policies. In general, the loans are secured by the policyholders’ rights under the policies. As of December 31, 2022, the total amount of our policy loans was RMB254,407 million (US$36,886 million), and represented 5.02% of our total investment assets as of that date.
45
Table of Contents
In addition to policy loans, our other loans mainly consist of our investment in debt investment plans and trust schemes. As of and for the year ended December 31, 2022, the total amount of our investment in debt investment plans was RMB98,494 million (US$14,280 million), and we had total investment proceeds from such plans of approximately RMB5,132 million (US$744 million). As of and for the year ended December 31, 2021, the total amount of our investment in debt investment plans was RMB99,134 million, and we had total investment proceeds from such plans of approximately RMB5,055 million. As of and for the year ended December 31, 2020, the total amount of our investment in debt investment plans was RMB84,589 million, and we had total investment proceeds from such plans of approximately RMB4,637 million. As of and for the year ended December 31, 2022, the total amount of our investment in trust schemes was RMB168,313 million (US$24,403 million), and we had total investment proceeds from such schemes of approximately RMB8,604 million (US$1,247 million). As of and for the year ended December 31, 2021, the total amount of our investment in trust schemes was RMB187,838 million, and we had total investment proceeds from such schemes of approximately RMB10,388 million. As of and for the year ended December 31, 2020, the total amount of our investment in trust schemes was RMB215,277 million, and we had total investment proceeds from such schemes of approximately RMB11,718 million.
Securities investment funds
Securities investment funds consist of Chinese domestic investment funds and overseas investment funds that primarily invest in securities. As of December 31, 2022, our investment in securities investment funds was RMB145,341 million (US$21,072 million) and represented 2.87% of our total investment assets as of that date. Our investment in securities investment funds mainly consists of investment in Chinese domestic investment funds.
In recent years, we have mainly invested in “open-end” securities investment funds, in which the number of shares issued by the fund fluctuates and the share value is set by the value of the assets held by the fund. Our investments in securities investment funds are subject to strict restrictions under relevant Chinese regulations. See “—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”. Our holdings in securities investment funds comply with those restrictions.
The following table presents the carrying values of investments in open-end and closed-end securities investment funds as of the dates indicated.
| As of December 31, | ||||||||||||||||||||||||
| 2020 | 2021 | 2022 | ||||||||||||||||||||||
| Carrying value |
% of total |
Carrying value |
% of total |
Carrying value |
% of total |
|||||||||||||||||||
| (RMB in millions, except as otherwise indicated) | ||||||||||||||||||||||||
| Open-end |
114,311 | 100.0 | % | 112,689 | 100 | % | 145,089 | 99.8 | % | |||||||||||||||
| Closed-end |
— | — | — | — | 252 | 0.2 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
114,311 | 100.0 | % | 112,689 | 100 | % | 145,341 | 100.0 | % | |||||||||||||||
|
|
|
|
|
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|
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|||||||||||||
Stocks
Investments in stocks consist of investment in publicly offered and listed equity securities that are denominated and traded in Renminbi and investment in stocks listed on specified overseas stock exchanges that are permitted by the CIRC. Our investments in stocks are subject to strict restrictions under relevant Chinese regulations. See “—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”. As of December 31, 2022, the total amount of our investment in common stocks was RMB432,700 million (US$62,736 million), and represented 8.5% of our total investment assets as of that date. As of December 31, 2021, the total amount of our investment in common stocks was RMB302,090 million, and represented 6.4% of our total investment assets as of that date. As of December 31, 2020, the total amount of our investment in common stocks was RMB350,107 million, and represented 8.5% of our total investment assets as of that date.
Resale agreements
We enter into resale agreements, which consist of securities resell activities in resell markets.
The securities purchased under agreements to resell were RMB38,533 million (US$5,587 million) as of December 31, 2022, RMB12,915 million as of December 31, 2021, and RMB7,947 million as of December 31, 2020.
46
Table of Contents
Equity interests in non-listed enterprises and related financial products
Insurance companies are allowed to invest, directly or indirectly, in equity interests in non-listed enterprises. These investments are categorized either as “direct investments”, for investments by an insurance company in its name, or as “indirect investments”, for investments through equity investment funds and other related financial products sponsored and established by an investment management institution. Our investments in equity interests in non-listed enterprises and related financial products are subject to strict restrictions under relevant Chinese regulations. See “—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”.
We started to make investments in equity interests in non-listed enterprises in 2006. In December 2021, we subscribed for an additional 918,578,836 shares of China Guangfa Bank, or CGB, for approximately RMB8.025 billion. As of the date of this annual report, we hold 9,519,210,262 shares of CGB, and our shareholding in CGB remains at 43.686%. We are still the largest shareholder of CGB. We also indirectly invest in equity interests in non-listed enterprises through private equity investment funds and other related financial products.
The following table presents the carrying values of our major direct investments in equity interests in non-listed enterprises as of the dates indicated.
| As of December 31, | ||||||||||||
| 2020 | 2021 | 2022 | ||||||||||
| Carrying value |
Carrying value |
Carrying value |
||||||||||
| (RMB in millions, except as otherwise indicated) | ||||||||||||
| China Life Property and Casualty Insurance Company Limited |
10,620 | 10,151 | 13,501 | |||||||||
| China Guangfa Bank Co., Ltd. |
79,974 | 86,179 | 98,085 | |||||||||
| Sinopec Sales Co., Ltd. |
10,361 | 10,052 | 10,001 | |||||||||
| Sinopec Sichuan to East China Gas Pipeline Co., Ltd. |
20,676 | 21,438 | 21,569 | |||||||||
| China Power Investment Nuclear Power Co., Ltd. |
8,802 | 9,274 | 9,766 | |||||||||
| Qinghai Huanghe Hydropower Development Co., Ltd. |
9,732 | 10,404 | 9,976 | |||||||||
Asset Management Business
On November 23, 2003, in connection with the restructuring, we established an asset management company, AMC, with CLIC, for the purpose of operating the asset management business more professionally in a separate entity and to better attract and retain qualified investment management professionals. AMC manages our investment assets and, separately, substantially all of those of CLIC. For a description of our investment assets, see “—Investments”.
We own 60% and CLIC owns 40% of AMC. Directors of AMC are appointed by the shareholders at a shareholders’ meeting. As the controlling shareholder, we effectively control the composition of AMC’s board of directors. In 2014, the registered capital of AMC was increased from RMB3 billion to RMB4 billion. The proportionate shareholding between CLIC and us remains unchanged.
As of and for the year ended December 31, 2022, AMC had total assets of RMB18,990 million (US$2,753 million), net assets of RMB15,913 million (US$2,307 million) and net profit of RMB2,717 million (US$394 million).
Property and Casualty Business
In December 2006, we and CLIC established a property and casualty company, CLPCIC, with us owning 40% and CLIC owning the remaining 60%. In 2018, the registered capital of CLPCIC was increased from RMB15 billion to RMB18.8 billion, with us and CLIC contributing RMB1.52 billion and 2.28 billion undistributed profits of CLPCIC, respectively. The proportionate shareholding between CLIC and us remains unchanged. On October 20, 2022, we, CLIC and CLPCIC entered into a capital increase agreement. Pursuant to the agreement, we and CLIC contributed RMB3.6 billion and RMB5.4 billion to CLPCIC, respectively. As a result, the registered capital of CLPCIC has increased from RMB18.8 billion to RMB27.8 billion, with we and CLIC holding 40% and 60%, respectively.
As of and for the year ended December 31, 2022, CLPCIC had total assets of RMB135,690 million (US$19,673 million), net assets of RMB33,757 million (US$4,894 million) and net profit of RMB717 million (US$104 million).
47
Table of Contents
Pension Insurance Business
In January 2007, we, CLIC and AMC established a pension insurance company, China Life Pension, with us owning 55%, CLIC owning 25% and AMC owning the remaining 20%. In January 2015, the registered capital of China Life Pension was increased from RMB2.5 billion to RMB3.4 billion. China Life Pension is currently held 70.74%, 4.41%, 3.53%, 1.33%, and 19.99% by us, CLIC, AMC, China Credit Trust Company Limited and AMP Life Limited, respectively.
China Life Pension has obtained qualifications to serve as investment manager, trustee and account manager of enterprise annuity funds.
As of and for the year ended December 31, 2022, China Life Pension had total assets of RMB9,134 million (US$1,324 million), net assets of RMB6,706 million (US$972 million) and net profit of RMB1,209 million (US$175 million).
Information Technology
Our computer systems provide support for many aspects of our businesses, including product development, sales and marketing, business management, cost control and risk control. We have approximately 2,473 experienced engineers, technicians and specialists providing professional and flexible support for our business operations in various aspects, including the design, research and development and operation of our computer systems.
During 2022, we further proceeded with our digital transformation and the improvement of our technology capabilities. We took the following steps:
| • | Improvement of technology innovation abilities. We completed the transformation of our core business system architecture and successfully built a new proprietary distributed digital base. We achieved a two-fold increase in data processing capacity, a three-fold increase in storage utilization efficiency per unit space and a 266% increase in computing utilization efficiency per unit space. Our actions resulted in cost reduction and efficiency improvement as well as a reduction in emissions. |
| • | Improvement of digital capability. We optimized our data management system by refining data classification control and strengthening data fusion driving force. We were the first Chinese insurance company that was awarded the highest level of data management capability maturity (DCMM) by the China Information Technology Industry Federation and believe we are the leader in data management capability in the Chinese insurance industry. We have implemented enhancement in human-machine collaboration, with the application of intelligent robots increasing by 326% year on year, supporting various business operations such as sales, service, operation and risk control. |
| • | Improvement of digital connectivity. Based on the digital platform and driven by diversified scenarios, we quickly responded to market demands. We expanded an open and shared Internet-based social ecosystem, provided approximately 15,000 standardized service components and carried out more than 400,000 services and activities with cooperative institutions, supporting both online and offline operations and providing customers with a full range of digital services. |
We also continue to attach importance to data security and have implemented projects, including the separation of internal and external networks, cloud desktops, providing different levels of protection fitting to the various application systems, intelligent security monitoring and supervision platforms and anti-intrusion systems. User access information obtained through front office applications is gathered and managed at a back office platform. We have built a security protection system to cover assessment, protection, detection, response, recovery and other aspects of data protection. We have an intelligent visualization system to provide real-time monitoring on cyber-attacks. We also have internal rules on the procedures for reporting and handling material accidents, including cybersecurity incidents, occurring during business operations.
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Trademarks
We conduct our business under the “China Life” brand name (in English and Chinese), the “ball” logos, the “C” mark and other business related slogans and logos. CLIC owns these trademarks and has registered them with the Trademark Office of the SAMR. CLIC has entered into a trademark license agreement with us, under which CLIC has agreed to grant us a royalty-free license to use the “China Life” brand name, the “ball” logos and the “C” mark. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Continuing Related Party Transactions with CLIC”.
Regulatory and Related Matters
Overview
The insurance industry is heavily regulated in the PRC. The applicable laws and regulations governing insurance activities undertaken within the territories of the PRC consist principally of the PRC Insurance Law and rules and regulations promulgated under that law. The CBIRC is the authority authorized by the PRC State Council to regulate and supervise the insurance industry in the PRC. The CBIRC has been the principal regulatory authority over the PRC insurance industry since 2018, when its predecessor, the CIRC, was merged with China’s banking regulator, the CBRC.
The PRC Insurance Law, which provided the initial framework for regulating the PRC insurance industry, was enacted in 1995, and amended on October 28, 2002, February 28, 2009, August 31, 2014 and April 24, 2015. Among other things, the major provisions of the PRC Insurance Law include: (1) licensing of insurance companies and insurance intermediaries, such as agents and brokers; (2) separation of property and casualty business and life insurance business; (3) regulation of market conduct by participants; (4) substantive regulation of insurance products; (5) regulation of the financial condition and performance of insurance companies; and (6) supervisory and enforcement powers of the CBIRC.
The CIRC, the predecessor to the CBIRC, was established in 1998. The CBIRC has extensive supervisory authority over the PRC insurance industry, including: (1) promulgation of regulations applicable to the insurance industry; (2) approval for establishment of insurance companies and their subsidiaries; (3) review of qualifications of senior management of insurance companies; (4) supervision of insurance companies and their solvency and market activities; (5) establishment of investment regulations; (6) approving the policy terms and premium rates for certain insurance products; (7) setting standards for measuring the financial soundness of insurance companies; (8) requiring insurance companies to submit reports concerning their business operations and condition of assets; and (9) ordering the suspension of all or part of an insurance company’s business. Since their establishment, CBIRC and its predecessor CIRC have promulgated a series of regulations indicating a gradual shift in the regulatory approach to a more transparent regulatory process and a convergent movement toward international standards.
On March 10, 2023, China approved an institutional reform plan, which includes the establishment of a new National Financial Regulatory Administration, or NFRA, directly under the State Council. NFRA will be in charge of regulating the PRC financial industry except for the securities sector. The CBIRC will be dismantled with its functions being carried out by NFRA. We will be subject to the supervision and regulation of NFRA once it is established. As of the date of this Annual Report, it remains unclear when such institutional reform plan will be completed.
Insurance Company Regulation
Licensing requirements
An insurance company is required to obtain a license from the CBIRC in order to engage in an insurance business. In general, a license will be granted only if the company can meet prescribed registered capital requirements and other specified requirements, including requirements relating to its form of organization, the qualifications of its senior management and actuarial staff, the adequacy of its information systems and specifications relating to the insurance products to be offered.
The CBIRC may grant a life insurer a license to offer all or part of the following products: accident insurance, term life insurance, whole life insurance, annuities, short-term and long-term health insurance, endowment insurance (for individuals only) and other personal insurance approved by the CBIRC, as well as reinsurance relating to any of the foregoing.
An insurance company may seek approval for establishing branch offices to meet its business needs so long as it meets minimum capital and other requirements. Our headquarters and all of our branch offices have obtained the requisite insurance licenses.
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Minimum capital requirements
The minimum paid-in capital for an insurance company is RMB200 million. For an insurance company whose registered capital is RMB200 million, the minimum incremental capital for each first provincial branch office in a province other than the province where its headquarter is located is RMB20 million. No additional capital will be required when the registered capital has reached RMB500 million, and the insurer’s solvency is sound.
Restriction of ownership in joint stock insurance companies
Any acquisition of shares which results in the acquirer owning 5% or more of the registered capital of a joint stock insurance company, whether or not listed, requires the approval of the CBIRC. A filing with the CBIRC is required with respect to a change of equity interest of less than 5% in an insurance company, unless it is a listed insurance company. Equity interests held by a single shareholder, including its related parties and persons acting in concert, must not exceed one-third of the registered capital of a single insurance company. An exception to the one-third cap applies to insurance companies establishing or investing in other insurance companies for the purposes of innovation and specialization of their business, or consolidating their operations under a single group management. Equity interests held by a single domestic limited partnership must not exceed 5% of the registered capital of a single insurance company. The combined equity interests held by several domestic limited partnerships must not exceed 15% of the registered capital of a single insurance company. Investors are divided into four categories, including financial I shareholders, financial II shareholders, strategic shareholders and controlling shareholders based on their shareholding percentage in the insurance company. Such investors are prohibited from selling their shares for periods varying depending on their classification: five years for a controlling shareholder, three years for a strategic shareholder, two years for a financial II shareholder, and one year for a financial I shareholder.
Fundamental changes
Prior approval must be obtained from the CBIRC before specified fundamental changes relating to a Chinese insurance company may occur. These include: a change of company name, registered capital or address of executive offices of companies or their subsidiaries; an expansion of business scope; an amendment to articles of association; a merger or spin-off; a change in a shareholder whose capital contribution accounts for 5% or more of the total capital of the company or a change in shareholding of 5% or more of the shares of the company; and a termination of a branch office. In addition, certain other changes relating to the insurance company must be reviewed by or filed with the CBIRC.
Regulation of products
Regulation of ordinary personal insurance products. An ordinary personal insurance product is one whose insurance premiums and policy benefits are definite upon issuance of the insurance policy. Beginning from August 5, 2013, the CIRC removed the original 2.50% cap on the guaranteed interest rates of ordinary personal insurance products, and such guaranteed interest rates can be decided by insurance companies at their discretion in accordance with the principle of prudence. Meanwhile, the statutory valuation rates of ordinary personal insurance policies issued on and after August 5, 2013 have been increased from 2.50% to 3.50%. In addition, beginning from August 5, 2013, if the guaranteed interest rate of an ordinary personal insurance product developed by an insurance company is not higher than the maximum valuation rate set by the CBIRC which varies depending on product, the insurance company must file the relevant information of the product with the CBIRC. If such rate is higher than the maximum valuation rate set by the CBIRC, the insurance company is required to obtain the approval of the CBIRC on the product in advance, and during the approval process, the insurance company is not allowed to submit new insurance clauses and premium rates to the CBIRC for approval. On September 2, 2016, the CIRC further required that policy loans provided by an insurer may not exceed 80% of the cash value or account value of the policy. From October 1, 2017, the first payment of survival insurance benefits for the ordinary endowment products and annuity products must occur only after five years since the policy becomes effective and the annual payment or partial payment must not exceed 20% of the paid premiums. Beginning from August 30, 2019, the cap on the valuation rate of premium reserves of ordinary pension annuity products or ordinary long-term annuity products with a term more than ten years issued on and after August 5, 2013 is equal the lower of 3.50% or the guaranteed interest rate. Beginning from January 21, 2020, the caps on predetermined surcharge rates of long-term ordinary life insurance products in each policy year have been lifted, but the average surcharge rate shall not exceed a cap.
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Regulation of participating products. A participating product is one which the policyholder or annuitant is entitled to share in the distributable earnings of the insurer through “policy dividends”. The participation dividend may be in the form of a cash payment or an increase in the insured amount. At least 70% of the distributable earnings is required to be distributed as dividends. In September 2015, the CIRC removed the original 2.50% cap on the guaranteed interest rate of participating products. From October 1, 2015, the guaranteed interest rate is to be decided by insurance companies at their discretion in accordance with the principle of prudence. If the guaranteed interest rate of a participating product developed by an insurance company is not higher than 3.50%, the insurance company must file the specific information of such product with the CBIRC for record. If such rate is higher than 3.50%, the insurance company is required to obtain the approval of the CBIRC for the product. In addition, the valuation rate of unearned premium reserves of participating products equals to either the guaranteed interest rate or 3.00%, whichever is lower. Beginning from September 2, 2016, if the guaranteed interest rate of a life insurance product newly developed by an insurance company is lower than the maximum valuation rate set by the CIRC, which is 3.00% for participating products, the insurance company is only required to file specified information relating to the product with the CBIRC, and if such rates are higher than 3.00%, the insurance company is required to obtain the approval of the CBIRC for such products. From October 1, 2017, the first payment of survival insurance benefits for the participating endowment products and annuity products must occur only after five years since the policy becomes effective and the annual payment or partial payment must not exceed 20% of the paid premiums.
Regulation of universal products. A universal product is one which offers the typical protection of life insurance with investment accounts providing a minimum yield. The premium payments and coverage of universal products are flexible, usually with a minimum guaranteed interest rate, and the investment yields are settled periodically. Beginning from February 16, 2015, the CIRC removed the original 2.50% cap on the minimum guaranteed interest rate of universal products, with the guaranteed interest rate to be decided by insurance companies at their discretion in accordance with the principle of prudence. Meanwhile, the maximum valuation rate of a universal product has been increased from a compound annual rate of 2.50% to a compound annual rate of 3.50%. Beginning from September 2, 2016, the CIRC changed the maximum valuation rate of a universal product from a compound annual rate of 3.50% to a compound annual rate of 3.00%. If the minimum guaranteed interest rate of a universal product developed by an insurance company is not higher than the maximum valuation rate set by the CBIRC (i.e., a compound annual rate of 3.00%), the insurance company must file specified information relating to the product with the CBIRC. If such rate is higher than the maximum valuation rate set by the CBIRC, the insurance company is required to obtain the approval of the CBIRC for the product. Any amendment to the insurance clauses, premium rates, insurance liabilities, types of insurance or pricing methods of universal products must be filed with or approved by the CBIRC. From October 1, 2017, universal products must be designed to allow the flexibility to pay additional premiums from time to time and to adjust the insured amount. Insurance companies may not design the universal products in the form of riders.
Regulation of investment-linked products. An investment-linked product is one which insures the policyholder or annuitant against one or more separate risks and at the same time gives the policyholder or annuitant an interest in one or more separate investment accounts. Insurance companies must complete the establishment of investment accounts before submitting the required information regarding their investment-linked products to the CBIRC for approval or filing. Insurance companies must report on the establishment, change, consolidation, division, close or settlement of the investment accounts to the CBIRC within 10 business days after occurrence of these events. Transactions between a separate investment account and any other account of the insurance company, other than a transfer of cash to establish the investment account, are prohibited, and, investment-linked products must be designed to allow the flexibility to pay additional premiums from time to time and to adjust the insured amount. Insurance companies may not design investment-linked products in the form of riders. Other CIRC regulations govern the sale and disclosure terms of investment-linked products.
Regulation of variable annuity insurance. Variable annuity insurance is a type of insurance where the policy benefits are associated with the price of the investment unit in the linked investment account, and a minimum amount of policy benefits is guaranteed as stipulated in the insurance agreement. Under variable annuity insurance, the insurance company is obliged to pay an annuity or offer an option for the conversion of the insurance proceeds to be annuitized upon maturity. Variable annuity products may not be sold or amended without the prior approval of the CBIRC. Variable annuity products must be sold and disclosed in accordance with the requirements of the CIRC.
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Regulation of pension insurance. A life insurance company or a pension insurance company, as approved by the CIRC, may engage in individual and group pension insurance business. The pension insurance terms and premium rates determined by an insurance company must be filed with or approved by the CBIRC in accordance with its regulatory provisions. Other CIRC regulations govern the sale and disclosure terms of pension insurance, as well as the investments by pension insurance funds.
Regulation of enterprise annuity funds. Subject to the approval of the PRC Ministry of Human Resources and Social Security, insurance companies may serve as the trustee, account manager and investment manager for enterprise annuity funds. China Life Pension has obtained qualifications to serve as investment manager, trustee and account manager of enterprise annuity fund.
Regulation of health insurance. Subject to approval by the CBIRC, life insurance companies may engage in health insurance business. Other insurance companies may, subject to approval by the CBIRC, engage in short-term health insurance business. Insurance companies engaged in health insurance business are required to submit an actuarial report or reserves assessment report for the preceding year in accordance with the relevant provisions of the CIRC. Insurance companies were permitted to sell health insurance products eligible for preferential individual income tax policies in accordance with the CIRC’s relevant requirements in 31 pilot cities, including Beijing, Shanghai, Tianjin and Chongqing beginning in 2016 and, from July 1, 2017, nationwide in China. The health insurance products may be offered to taxpayers who have reached the age of 16 but have not reached the statutory retirement age. The expenses incurred by individuals for purchasing such health insurance products will be deductible from their individual income tax up to RMB2,400 per year or RMB200 per month. Survival benefits paid before the expiry of the policy term of a care insurance product may only be paid under the condition that the care required by the insured is caused by disability in activities of daily living as agreed in the insurance contract. Survival benefits paid before the expiry of the policy term of a disability income insurance product may only be paid under the condition that the loss of working ability of the insured is caused by a disease or an accidental injury as agreed in the insurance contract. On December 1, 2019, the new Measures for the Administration of Health Insurance came into effect, pursuant to which sales of products that are not in compliance with the requirements under the new measure must be ceased before April 1, 2020.
Regulation of short-term accidental injury insurance. Short-term accidental injury insurance is a type of insurance that uses death or disability caused by accidents or physical injuries stipulated in the insurance agreement as a condition for paying insurance proceeds. Short-term accidental injury insurance products must be developed and managed by the headquarters of the insurance company and filed with the CBIRC. Beginning from 2023, insurance companies must submit a business operation report to the CBIRC before March 31 of each year regarding the accident insurance products they offer.
Regulation of foreign exchange denominated insurance. Insurance companies may seek approval from the CBIRC and the SAFE to engage in foreign exchange denominated insurance and reinsurance businesses, allowing them to offer products to non-Chinese policyholders or for non-Chinese beneficiaries, as well as policies covering accidents and illnesses which occur outside China, together with related reinsurance.
Regulation of supplementary major medical insurance. As part of the Chinese government’s overall medical insurance scheme, supplementary major medical insurance reimburses policyholders for a specified percentage of their medical expenses which are in excess of the maximum amounts covered by the basic social medical insurance as long as such medical expenses are caused by the diseases covered by the basic social medical insurance. The supplementary major medical insurance programs have now been launched nationwide in China. Local governments use a portion of the basic medical insurance funds to purchase supplementary major medical insurance service from qualified insurance companies through a government tender. Insurance companies are required to apply to the CBIRC for the qualification to engage in such business. Supplementary major medical insurance products must be filed with the CBIRC.
Regulation of investments
Permitted investments. As a Chinese life insurance company, we are subject to restrictions under the PRC Insurance Law, the Measures for the Administration of the Utilization of Insurance Funds and other related rules and regulations on the asset categories and percentages in which we are permitted to invest. Assets that insurance companies may invest in are classified into five broad categories: current assets, fixed-income assets, equity assets, property assets and other financial assets. The amounts in percentages that may be invested in each asset category and the percentages that correspond to concentration risks for investing in a single item and counter-party are limited to specified amounts, and insurance companies are subject to risk monitoring requirements and early warning mechanisms with respect to liquidity, financing scale and asset classes.
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Asset categories, investment and concentration risk regulatory percentages. Currently, Chinese life insurance companies are allowed to invest their funds in the following asset categories, subject to the satisfaction of conditions prescribed for each form of investment.
| Regulatory Percentage(1) | ||||||||
| Asset Category |
Definition | Specific Items Included | Investment Regulatory Percentage |
Concentration Risk Regulatory Percentage | ||||
| Current assets |
Current assets refer to cash reserves, deposits payable on demand, and highly-liquid assets with shorter terms and less risk of changes in value that can be readily converted into a definite amount of cash. | Domestic items mainly include cash, current deposits, bank call deposits, insurance asset management products on the monetary market, and government bonds, quasi-government bonds and reverse repurchase agreements with residual maturities of one year or less. Overseas items mainly include bank current deposits, monetary market funds, overnight lending, commercial bills, bank bills, negotiable certificates of deposit, reverse repurchase agreements, short-term government bonds, government-backed bonds, bonds of international financial organizations, corporate bonds and convertible bonds with residual maturities of one year or less, as well as other tools or products recognized by the CBIRC in this category. | None. | The total outstanding investments by an insurance company in a single legal person(2) must not exceed 20% of the total assets(3) of the insurance company as at the end of the last quarter (excluding, among others, investments in domestic central government bonds, quasi-government bonds, and equity investments in insurance enterprises with proprietary funds). | ||||
| Fixed-income assets |
Fixed-income assets refer to assets characterized by a definite maturity date and payments of interest and principal according to pre-determined interest rates and payment methods, as well as other assets whose main value is dependent on the changes in the value of the aforesaid assets. | Domestic items mainly include term deposits, negotiated deposits, bond funds, fixed-income insurance asset management products, financial institution (company) bonds, non-financial institution (company) bonds and government bonds and quasi-government bonds with residual maturities of more than one year. Overseas items mainly include term deposits, structured deposits with bank guaranteed commitments, securities investment funds with fixed-income commitments, government bonds, government-backed bonds, bonds of international financial organizations, corporate bonds and convertible bonds with residual maturities of more than one year, as well as other tools or products recognized by the CBIRC in this category. | None. | The book balance of investment by an insurance company in a single fixed-income asset(4) must not exceed 5% of the total assets of the insurance company as at the end of the last quarter, excluding investments in domestic central government bonds, quasi-government bonds and bank deposits.
The total outstanding investment by an insurance company in a single legal person must not exceed 20% of the total assets of the insurance company as at the end of the last quarter (excluding, among others, investments in domestic central government bonds, quasi-government bonds and equity investments in insurance enterprises with proprietary funds). | ||||
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| Regulatory Percentage(1) | ||||||||
| Asset Category |
Definition | Specific Items Included | Investment Regulatory Percentage |
Concentration Risk Regulatory Percentage | ||||
| Equity assets | Equity assets include both listed and unlisted equity assets.
Listed equity assets refer to the ownership certificate representing the equity or other residual income rights of enterprises that are publicly listed and traded on stock exchanges or financial asset markets, as well as other assets whose main value depends on the changes in the value of the aforesaid assets.
Unlisted equity assets refer to the equity or other residual income rights of enterprises that are established and registered but are not publicly listed on exchanges, as well as other assets whose main value depends on the changes in the value of the aforesaid assets. |
Domestic items of listed equity assets mainly include shares(5), equity funds, hybrid funds and equity insurance asset management products. Overseas items of listed equity assets mainly include ordinary shares, preferred shares, global depositary receipts, American depositary receipts and equity securities investment funds, as well as other tools or products recognized by the CBIRC in this category.
Domestic and overseas items of unlisted equity assets mainly include equities of unlisted companies, equity investment funds (including venture capital funds), asset backed securities, insurance private equity funds and other related financial products, as well as other tools or products recognized by the CBIRC in this category. |
The investment regulatory percentage will be determined according to the solvency adequacy ratio, asset and liability management capability, risk status and other indicators of an insurance company, ranging from 10% to 45% of the total assets of the insurance company as at the end of the last quarter. | The book balance of investments by an insurance company in a single equity asset must not exceed 5%(5) of the total assets of the insurance company as at the end of the last quarter, except as otherwise provided for significant equity investments, investments in equities of insurance enterprises with self-owned funds and acquisitions of listed companies and investments in shares of listed commercial banks.
The total outstanding investments by an insurance company in a single legal person must not exceed 20% of the total assets of the insurance company as at the end of the last quarter (excluding, among others, investments in domestic central government bonds, quasi-government bonds, and equity investments in insurance enterprises with proprietary funds). The total number of shares of a single listed company invested by an insurance company shall not exceed 10% of total capital stock of the listed company. | ||||
| Property assets | Property assets refer to purchased or invested land, structures and other land attachments, as well as other assets whose main value depends on the changes in the value of the aforesaid assets. | Domestic items mainly include real estate, infrastructure investment schemes, property investment schemes, property insurance asset management products and other property related financial products. Overseas items mainly include commercial properties, office properties and real estate investment trusts (REITs), as well as other tools or products recognized by the CBIRC in this category. | The total book balance of investments by an insurance company in property assets must not exceed 30%(5) of the total assets of the insurance company as at the end of the last quarter, provided that assets in aggregate not traded in the inter-bank market, stock exchanges and other trading markets approved by the State Council must not exceed 25% of the company’s total assets as at the end of the last quarter. The book balance does not include the properties purchased by the insurance company for its own use. | The book balance of investments by an insurance company in a single property asset must not exceed 5% of the total assets of the insurance company as at the end of the last quarter, excluding properties purchased for its own use.
The total outstanding investments by an insurance company in a single legal person must not exceed 20% of the total assets of the insurance company as at the end of the last quarter (excluding, among others, investments in domestic central government bonds, quasi-government bonds and equity investments in insurance enterprises with proprietary funds). | ||||
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| Regulatory Percentage(1) | ||||||||
| Asset Category |
Definition | Specific Items Included | Investment Regulatory Percentage |
Concentration Risk Regulatory Percentage | ||||
| The book balance of the properties purchased by an insurance company for its own use must not exceed 50% of the net assets of the insurance company as at the end of the last quarter. | ||||||||
| Other financial assets | Other financial assets refer to other kinds of assets that are distinctively different from all the foregoing categories of assets, including in terms of risk-return characteristics, liquidity and other characteristics, and cannot be classified into any of the foregoing categories. | Domestic items mainly include asset management products and asset securitization products of commercial banks or wealth management companies, trust companies, financial asset investment companies, securities companies, securities asset management companies, securities investment fund management companies and other financial institutions, including financial products, collective funds trusts, debt-to-equity investment schemes, credit asset-backed securities, special asset-backed schemes, single asset management schemes and other products recognized by the CBIRC. Overseas items mainly include structured deposits without bank guaranteed commitments, as well as other tools or products recognized by the CBIRC in this category. | The total book balance of investments by an insurance company in other financial assets must not exceed 25% of the total assets of the insurance company as at the end of the last quarter, provided that assets in aggregate not traded in the inter-bank market, stock exchanges and other trading markets approved by the State Council must not exceed 20% of the company’s total assets as at the end of the last quarter. | The book balance of investments by an insurance company in a single other financial asset must not exceed 5% of the total assets of the insurance company as at the end of the last quarter, excluding purchase of insurance asset management products within its group.
The total outstanding investments by an insurance company in a single legal person must not exceed 20% of the total assets of the insurance company as at the end of the last quarter (excluding, among others, investments in domestic central government bonds, quasi-government bonds, and equity investments in insurance enterprises with proprietary funds). | ||||
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| Regulatory Percentage(1) | ||||||||
| Asset Category |
Definition | Specific Items Included | Investment Regulatory Percentage |
Concentration Risk Regulatory Percentage | ||||
| Overseas investment |
An insurance company is allowed to participate in overseas investments in 25 developed markets, 20 emerging markets and Macau in accordance with the relevant requirements of the CBIRC. | As referred to in the investable overseas items listed in each of the above asset categories. | The total outstanding overseas investments by an insurance company must not exceed 15% of the total assets of the insurance company as at the end of the last year. | The total outstanding investments by an insurance company in a single legal person must not exceed 20% of the total assets of the insurance company as at the end of the last quarter (excluding, among others, equity investments in insurance enterprises with proprietary funds).
The balance of an insurance company’s investment in 20 investable emerging markets must not exceed 10% of its total assets as at the end of the last year. | ||||
| (1) | When calculating the regulatory percentages for each asset category, an insurance company is required to combine its domestic and overseas investments in assets of the category on a consolidated basis. |
| (2) | A single legal person refers to a single fund-raising party with legal person status that establishes a direct creditor-debtor or shareholder relationship with an insurance company due to the latter’s investment therein. |
| (3) | Total assets exclude the balance of the funds raised from bond repurchases and the amount of assets under independent accounts (including investment-linked life insurance products, variable annuity products, health care entrusted management products, pension insurance entrusted management products and investment-oriented non-life insurance products without pre-agreed returns). |
| (4) | Single asset investments refer to the investments in a single specific item under any category of investment assets. Where an investment product is issued in several phases, the book balance of the investment in a single asset is the sum of the investments in each phase. |
| (5) | The CBIRC classifies investments in stocks into three categories: (i) ordinary stock investment, which refers to investment in less than 20% of the total share capital of a listed company without control over the company, (ii) material stock investment, which refers to investment in 20% or more of the total share capital of a listed company without control over the company, and (iii) acquisition of a listed company, which refers to becoming the controlling shareholder or actual controller of a listed company or otherwise having control over a listed company. There is no regulatory restriction for ordinary stock investment that does not involve an acquisition in the secondary market of more than 5% of the share capital of a listed company. For ordinary stock investment that involves an acquisition in the secondary market of more than 5% of the share capital of a listed company, information disclosure and reporting after the investment are required. For a material stock investment, filing with the regulatory authorities after the investment is required. For acquisition of a listed company, prior regulatory approval is required. |
Investment risk monitoring percentages. To alleviate the risks associated with liquidity and high volatility of assets, an insurance company must comply with the following investment risk monitoring requirements:
| • | Liquidity monitoring. The total book balance of investments by an insurance company in current assets and government bonds and quasi-government bonds with residual maturities of one year or longer is lower than 5% of the total assets of the insurance company as at the end of the last quarter. |
| • | Financing leverage monitoring. The total outstanding borrowings (including inter-industry lending and bond repurchases) of an insurance company exceed 20% of the total assets of the insurance company as at the end of the last quarter. |
| • | Monitoring of different categories of assets. The total book balance of investments by an insurance company in domestic bonds with a long-term credit rating of AA or lower as rated by domestic credit rating agencies exceeds 10% of the total assets of the insurance company as at the end of the last quarter, or the total book balance of investments in equity assets exceeds 20% of the total assets of the insurance company as at the end of the last quarter, or the total book balance of investments in property assets exceeds 20% of the total assets of the insurance company as at the end of the last quarter, or the total book balance of investments in other financial assets exceeds 15% of the total assets of the insurance company as at the end of the last quarter, or the total book balance of outstanding overseas investments exceeds 10% of the total assets of the insurance company as at the end of the last quarter. |
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| • | The book balance of a single inter-group insurance asset management product purchased by an insurance company exceeds 5% of the total assets of such insurance company as at the end of the last quarter. |
Risk Classification of Insurance Assets. An insurance company must evaluate, at least once every half year, the quality of its insurance assets falling within the categories of fixed-income assets, equity assets and property assets, and divide such assets into five categories based on risk, namely “pass”, “special mention”, “substandard”, “doubtful” and “loss”, with the last three categories collectively referred to as “non-performing assets”. Insurance assets that require risk classification include assets invested by the insurance company other than those subject to fair value measurement and changes to these assets are counted as gains or losses for the period in question or owners’ equity. An insurance company must establish and improve risk classification systems and working processes for its assets and file reports on such systems and processes with the CBIRC. An insurance company must also establish feasible plans for annual asset loss provisions and write-offs, as well as plans for the disposal of non-performing assets based on its actual operations and the quality of its assets. These plans must be approved by its board of directors and be filed with the CBIRC.
Insurance private equity funds. Insurance companies are allowed to establish private equity funds that comply with the requirements of the CBIRC, including growth funds, buyout funds, funds for strategic emerging industries, mezzanine funds, real estate funds, venture capital funds, and funds of funds (FoF) primarily investing in the aforementioned funds. Insurance companies must register the establishment of private equity funds with the CBIRC, and periodically submit quarterly reports, annual reports and other related information to the CBIRC during the term of private equity funds.
Financial derivative products. Apart from the regulations on the five asset categories described above, the CIRC has separately issued a series of rules governing the operation of domestic and overseas trading of derivative products by an insurance company. Financial derivative products are financial contracts whose value is determined by one or more types of underlying assets, indices or certain events. Typical financial derivative products include forwards, futures, options and swaps. Insurance companies may participate in derivatives transactions only for the purpose of hedging or averting risks, and not for the purpose of speculation. Legitimate purposes include hedging or averting risks of current assets and liabilities, or the company as a whole, and hedging the risk of assets scheduled to be bought within the next month, or locking in future transaction prices.
Bank capital replenishment bonds. Insurance companies are allowed to invest in Tier 2 capital bonds and non-fixed term capital bonds issued by banks. Investment in Tier 2 capital bonds and non-fixed term capital bonds are regulated in accordance with requirements on investment in either equity assets or fixed-income assets, depending on how such bonds are categorized by the issuer of such bonds.
“Assets scheduled to be bought”, as used above, refers to assets that an insurance institution has decided to buy after going through its investment decision-making process. If the assets are not bought within one month of the decision date, or the plan was aborted within the aforementioned period, the insurance institution must terminate, liquidate or unwind the relevant derivative upon the expiration of the prescribed period or within five trading days of such decision.
For an insurer carrying out interest rate swaps, the notional principal may not exceed 10% of its fixed-income assets (including bank deposits, bonds and other debt instruments) as of the end of the previous quarter. The notional principal swapped with the same counterparty may not exceed 3% of such counterparty’s fixed-income assets as of the end of the previous quarter.
Solvency requirements
In December 2021, the CBIRC issued the Solvency Regulatory Rules for Insurance Companies (II) and the corresponding notice on implementing the new rules, or C-ROSS II, with the aim of replacing the then-current solvency requirements for Chinese insurance companies, C-ROSS. C-ROSS II continues to adopt the internationally accepted “three-pillar” regulatory system which includes quantitative capital requirements, qualitative regulatory requirements and market discipline mechanisms, and also enhances capital classification requirements and strengthens risk capital measurement. C-ROSS II was officially implemented in the Chinese insurance sector from the preparation of the quarterly solvency report for the first quarter of 2022.
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C-ROSS II adopts the internationally accepted “three-pillar” regulatory system while its regulatory concept, models, methods and parameters are based on Chinese insurance market conditions. The three pillars are:
| • | Pillar I: quantitative capital requirements which aim to prevent quantifiable risks, and include quantifying capital requirements, criteria for assessment and recognition of actual assets and liabilities, capital classification, stress tests and regulatory measures to be imposed on the insurers which fail to meet the quantitative capital requirements. |
| • | Pillar II: qualitative regulatory requirements which aim to prevent unquantifiable risks, and which include an integrated risk rating, requirements on assessment and management of solvency risks by the insurers, liquidity risk management and regulatory inspection and analysis and regulatory measures to be imposed on the insurers which fail to meet the qualitative regulatory requirements. |
| • | Pillar III: market discipline mechanisms which aim to involve, through sufficient information disclosure systems and other means, market players including the public, customers, rating agencies and industry analysts by introducing mechanisms through which they will play an important role in the solvency supervision process. |
Under C-ROSS II, the three indicators to measure the solvency ratio of an insurer include the following:
| • | the core solvency adequacy ratio, which is calculated by dividing the core capital of an insurer by the minimum capital it is required to meet; |
| • | the comprehensive solvency adequacy ratio, which is calculated by dividing the sum of core capital and supplementary capital of an insurer by the minimum capital it is required to meet; and |
| • | an integrated risk rating, which is a comprehensive rating system that the CBIRC uses to evaluate an insurer’s overall solvency based on both quantitative assessments on quantifiable risks in Pillar I and qualitative risk assessments on unquantifiable risks in Pillar II. |
The core solvency adequacy ratio and comprehensive solvency adequacy ratio of an insurer reflect the capital adequacy for quantifiable risks of such insurer, and the integrated risk rating reflects the overall solvency risks of such insurer.
The actual capital of an insurer is admitted assets less admitted liabilities, determined in accordance with relevant rules under C-ROSS II. The actual capital is classified into core capital and supplementary capital, depending on the loss absorbing capacity and features of such capital. The minimum capital of an insurer is the capital that the CBIRC requires it to meet.
Under C-ROSS II, solvency risks are classified into inherent risk and control risk. Inherent risk refers to the risks that are unavoidable in the writing of insurance business. Control risk refers to the risks of failure to identify, evaluate and manage control inherent risk timely due to imperfections in the internal management and control process. Inherent risk includes both quantifiable risks and unquantifiable risks.
Quantifiable risks include the following:
| • | Insurance risk, which includes life insurance risk and non-life insurance risk; |
| • | Market risk, which includes interest rate risk, equity price risk, property price risk, overseas assets price risk and foreign exchange risk; and |
| • | Credit risk, which includes spread risk and default risk. |
Unquantifiable risks include the following:
| • | Operation risk; |
| • | Reputation risk; |
| • | Strategy risk; and |
| • | Liquidity risk. |
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The minimum capital requirement for quantifiable risks is determined using a value at risk approach. The minimum capital requirement for control risk is determined based on solvency aligned risk management requirements and assessment, or SARMRA.
The CBIRC comprehensively evaluates and analyzes the inherent risk and control risk of an insurer and determines an integrated risk rating of solvency risks. Insurers will then be classified into the following four supervision categories:
| • | Category A: an insurer’s solvency adequacy ratio meets the CBIRC requirement, and its risk level is very low for the four unquantifiable risks; |
| • | Category B: an insurer’s solvency adequacy ratio meets the CBIRC requirement, and its risk level is low for the four unquantifiable risks; |
| • | Category C: an insurer’s solvency adequacy ratio does not meet the CBIRC requirement, or an insurer’s solvency adequacy ratio meets the CBIRC requirement but its risk level is high for one or more of the four unquantifiable risks; or |
| • | Category D: an insurer’s solvency adequacy ratio does not meet the CBIRC requirement, or an insurer’s solvency adequacy ratio meets the CBIRC requirement but its risk level is serious for one or more of the four unquantifiable risks. |
The CBIRC applies different regulatory policies to each of the four supervision categories with respect to, among others, market access, product management, use of insurance funds and on-site inspection.
Category B insurer may be subject to a range of regulatory actions by the CBIRC, including, among others, risk alert, supervisory conversation, rectification of identified problems within a specified deadline, special on-site inspection or request to submit and implement plans to prevent insolvency or improve risk management.
If a Category C insurer does not meet the core solvency adequacy ratio or comprehensive solvency adequacy ratio required by the CBIRC, the CBIRC may in such situations take targeted regulatory measures in accordance with applicable laws and regulations, in addition to the regulatory actions for category B. If the risk level of an insurer of category C is high for one or more of the four unquantifiable risks, the CBIRC may take specific regulatory actions that target on the respective issues of each insurer.
For a Category D insurer the CBIRC may, in addition to the regulatory actions for category C, put the insurer into receivership or take other regulatory actions as determined by the CBIRC.
Based on the latest comprehensive rating results regarding the solvency risks of insurers released by the CBIRC for the fourth quarter of 2022, we had been classified as a Category A insurer.
Our core solvency adequacy ratio as of December 31, 2022 was 143.59%, and our comprehensive solvency adequacy ratio as of December 31, 2022 was 206.78%.
Statutory deposits
Insurance companies in China are required to deposit an amount equal to 20% of their registered capital with at least two qualified commercial banks, each of which must, among other things, have net assets of no less than RMB20 billion as of the end of the previous year and have no affiliated relationship with the insurance company. These funds may not be used for any purpose other than to pay off debts during a liquidation proceeding. Insurance companies must choose more than two qualified commercial banks as statutory deposit banks and the statutory deposit period must be for a minimum of one year. In addition, when an insurance company deposits the statutory funds for a business opening or capital increase, renews the deposit upon maturity or transfers the deposit to another bank, changes the nature of the deposit upon maturity or withdraws the deposit before maturity, the insurance company must file with the CBIRC within 10 business days after these funds are duly deposited.
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Statutory insurance fund
Chinese life insurance companies are required to contribute to a statutory insurance fund 0.15% of the premiums for life insurance with guaranteed earnings and 0.05% of the premiums for life insurance without guaranteed benefits; 0.8% of insurance premiums for short-term health insurance and 0.15% of insurance premiums for long-term health insurance; 0.8% of the premiums for non-investment accident insurance, 0.08% of the premiums for investment accident insurance with guaranteed benefits, and 0.05% of premiums for investment accident insurance without guaranteed benefits. Contributions are not required once the balance of the statutory insurance fund of a life insurance company reaches 1% of the company’s total assets.
Statutory reinsurance
Insurance companies are required to reinsure, for any single risk, the excess of the maximum potential liability over an amount equal to 10% of the sum of paid-in capital and capital reserves.
Actuaries
Insurance companies are required to employ actuarial professionals and establish a system for actuarial reporting.
Regulation of corporate governance
Directors and senior management qualification and remuneration management requirements. Directors, supervisors and senior management of an insurance company are subject to qualification requirements implemented by the CBIRC. An insurance company must have at least three independent directors and the number of independent directors shall be no less than one third of the number of all the directors. An insurance company must reasonably determine the remuneration paid to its directors, supervisors and senior management based on the company’s financial conditions, operating results, risk control and other factors. Where an insurance company has inadequate solvency, the CBIRC will place restrictions on the remuneration of its directors, supervisors and senior management in accordance with relevant regulatory rules on solvency. The senior management of an insurance company receive in-office audits once every three years. If any member of the senior management leaves due to a job change, promotion or any other reasons, a departure audit must be conducted.
Risk management. Insurance companies must establish and adopt procedures, organizational structures, systems and measures to identify, evaluate and control the risks involved in its insurance operation. Insurance companies must report to the regulatory authorities in a timely manner any major risks, and submit an annual risk management report to the board of directors. In addition, as required by the CBIRC, where an insurance company carries out by itself or is entrusted to carry out various investment management businesses, it shall have the corresponding investment management capabilities, including credit risk management capability, investment capability in the secondary stock market, equity investment capability, real estate investment management capability, derivatives application management capability, product management capability of debt investment plans and product management capability of equity investment plans. For each investment management capability, an insurance company should designate at least two qualified risk officers. Where an insurance company decides to replace a risk officer, impose disciplinary sanctions on a risk officer, dismiss a risk officer or terminate the employment of a risk officer, the insurance company must replace such risk officer within 10 business days from the date of the decision, and report to the CBIRC and state the reasons for such replacement.
Asset-liability management. On July 24, 2019, the CBIRC released interim measures for the supervision and regulation of insurance asset-liability management. The new interim measures, as well as the other regulatory requirements including the previously issued rules on insurance asset-liability management, set forth a set of specific technical criteria and rules on the quantitative and competency assessments on asset-liability management, as well as requirements on preparing and submitting asset-liability management reports. Under the new interim measures, the CBIRC will adopt differential regulation and supervision standards for insurance companies depending on their respective asset-liability management competency and quantitative assessment scores.
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Compliance management. Insurance companies must prevent, identify, evaluate, report and manage compliance risks by taking measures such as setting up a compliance department, formulating and implementing compliance policies (which are required to be filed with the CBIRC), exercising compliance monitoring and providing compliance trainings, so as to ensure compliance by the company, its staff and sales agents with the relevant laws and regulations, rules of regulatory authorities, industrial self-regulatory rules, internal management systems and codes of ethics. An annual compliance report must be submitted to the CBIRC by April 30 each year. Each insurance company is required by the CBIRC to appoint a compliance officer and establish a compliance management department in its head office. Where the proposed compliance head of an insurance company for whom the insurance company has applied for CBIRC approval of post-holding qualifications also serves in other senior management positions, the insurance company must submit a statement that the proposed compliance head will not also manage a business or financial department during his or her term of office. Beginning from July 1, 2017, the headquarter and provincial branches of an insurance company must each set up a compliance management department. Where the proposed compliance head of an insurance company for whom the insurance company has applied for approval of post-holding qualifications is to be served by a senior management person other than the general manager, the insurance company must submit a statement that the proposed compliance head will not also manage departments that may be in conflict with his or her responsibilities for compliance management, such as those for business, finance, fund use and internal audit during his or her term of office. As of the date of this annual report, we have set up a compliance management department, established compliance standards and appointed a compliance officer whose qualification has been approved by the CBIRC.
Related party transactions. Insurance companies are required to establish a related party transaction control committee to be responsible for managing, reviewing and approving related party transactions and controlling risks. The related party transaction control committee must be composed of at least three directors, with an independent director acting as the person in charge. The related party transaction control committee should focus on the compliance, fairness and necessity of related party transactions. Insurance companies are required to set up a cross-departmental related party transaction management office at the management level to be responsible for identification of related parties, management of related party transactions and other daily affairs. According to applicable CBIRC regulations, related party transactions between an insurance company and any of its related parties are classified as either “material related party transactions” or “ordinary related party transactions”. The term “material related party transactions” refers to any single transaction or a series of transactions within any given year between an insurance company and a single related party in which the trading volume exceeds RMB30 million and accounts for 1% or more of the insurance company’s audited net assets as of the end of the previous year. The term “ordinary related party transactions” refers to all related party transactions other than “material related party transactions”. A material related party transaction must be first reviewed by the related party transaction control committee, and then be approved by the board of directors, by vote of more than two thirds of attending non-affiliated directors, or by shareholders’ meeting. An ordinary related party transaction must be reviewed in accordance with the internal management system and authorization process of the insurance company, and then be filed with or approved by the related party transaction control committee. An insurance company is required to maintain a system to manage related party transactions and file them with the CBIRC. Companies must take effective measures to prevent their shareholders, directors, supervisors, senior management and other related parties from taking advantage of their positions and acting against the interests of the company or the insured through related party transactions. In addition, an insurance company must report to the CBIRC each of its material related party transactions, the execution, renewal or substantive change of any framework transaction agreement, as well as any other transaction as required by the CBIRC.
Internal audit. Insurance companies are required to establish an independent department for internal audit purposes, staffed with sufficient internal audit personnel, establish an audit committee, and designate an audit controller whose appointment and replacement must be filed with the CBIRC. An internal audit report for the preceding year must be submitted to the CBIRC by May 15 of each year and any major risk identified during the internal audit process must be reported to the CBIRC in a timely manner.
Reporting and disclosure requirements. An insurance company must disclose to the public various information regarding its operations and business, including financial and accounting information, information on its insurance liabilities and reserves, risk management, its insurance products, solvency, material related transactions, utilization of funds and major events, as well as other information required by the CBIRC. An insurance company must disclose this information on its website, and by April 30 of each year, an insurance company must also disclose an annual report on its website and in media designated by the CBIRC. In addition, after the occurrence of a material related party transaction or other material events, an insurance company must disclose information about such transactions and events on its website and in media designated by the CBIRC within the time limit required by the CBIRC.
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Internal control assessment. An insurance company must establish an internal control evaluation system. Insurance companies are required to submit to the CBIRC a corporate governance report each year along with other regulatory information, which includes its internal control evaluation result.
Custody of insurance assets. Insurance companies are required to establish and improve mechanisms for the custody of insurance assets, select qualified commercial banks and other professional institutions, place various assets generated by the investment of insurance funds under third-party custody and oversight, and ensure that the revenue and expenditure concerning the use of insurance funds (except for expenditure of daily expenses) are primarily processed through the custody fund accounts.
Regulatory assessment of corporate governance of insurance companies. The CBIRC assesses, evaluates and classifies the corporate governance level and risk status of insurance companies, and conducts categorized regulation according to the assessment results. The regulatory assessment includes the evaluation of leadership of the Chinese Communist Party; governance with respect to shareholders, related-party transactions, the board of directors, the board of supervisors, senior management and stakeholders; internal risk control and market constraint.
Market conduct
Insurance companies are required to take steps to ensure that sales promotional materials used by their sales representatives and agents are objective, true and correct, with no material omissions or misleading information, contain no forecasts of benefits that are not guaranteed under the insurance or annuity product and do not exaggerate the benefits provided under the insurance or annuity product. The sales promotional materials must also highlight in an appropriate fashion any exclusions of coverage or liability in their products, as well as terms providing for policy or annuity surrenders and return of premiums.
Insurance companies which conduct marketing and promotional activities through we-media platforms (such as websites, apps, blogs, microblogs, corporate accounts and WeChat) are required to establish an appropriate management system. The management criteria of such system should be no less strict than the criteria provided in existing regulations in relation to the insurance promotional materials for off-line channels.
Insurance companies are subject to extensive regulation against any anti-competitive behavior or unfair dealing conduct. They may not pay insurance agents, the insured or the beneficiary any rebates or other illegal payments, nor may they pay their agents commissions over and above the industry norm.
Insurance companies are required to establish internal rules and procedures to protect the personal data of policyholders and insureds. Insurance companies are prohibited from illegally obtaining, using or selling of the personal data of policyholders and insureds.
Insurance companies are also required to comply with anti-money laundering regulations and establish internal operational procedures and anti-money laundering internal control systems. No insurance activity can be conducted for the purpose of illegal fundraising.
Regulation of issuance of subordinated debt
Insurance companies that meet a series of qualification tests and are approved by the CBIRC may issue subordinated debt with a fixed term of at least five years to certain qualified Chinese legal persons and foreign investors. The audited net asset value of the issuer must be at least RMB500 million as of the end of the prior year and the total amount of unpaid debt at any given point after the issuance, including both principal and interest, must not exceed the issuer’s net asset value as of the end of the prior year. Proceeds from the issuance of subordinated debt may be recorded as supplementary capital of an issuance company, provided that the total amount that has been recorded as supplementary capital may not exceed 50% of the net assets of an insurance company. Proceeds from the issuance of subordinated debt may not be used to offset daily operating losses of an insurance company. The issuer must comply with certain disclosure obligations both at the time of the issuance and during the term of the debt. The issuer may repay the debt only if its solvency ratio would remain at least 100% after the repayment of both principal and the interest. Qualified insurance groups or holding companies are also allowed to issue subordinated debt in accordance with the relevant requirements.
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Since 2012, publicly listed insurance companies that meet a series of qualification tests and are approved by the CBIRC have also been permitted to issue subordinated convertible bonds. Subordinated convertible bonds refer to bonds issued by an insurance company in accordance with statutory procedures that satisfy the following conditions: the bonds have a maturity of five years or longer; the principal and interest of the bonds shall be repaid and paid after insurance policy liabilities and other general liabilities in the event of bankruptcy liquidation; and the bonds can be converted into shares of the insurance company in accordance with the agreed conditions within a certain period of time. An insurance company must submit an issuance application to the relevant securities regulatory authority within six months after the CBIRC has approved the issuance of subordinated convertible bonds, and an issuer must report the issuance information to the CBIRC within ten working days after completion of the issuance of subordinated convertible bonds.
Regulation of issuance of capital replenishment bonds by insurance companies
Since January 2015, insurance companies including insurance group companies that meet a series of qualification tests and are approved by the CBIRC and PBOC may issue bonds for capital replenishment in the national inter-bank bond market. The capital replenishment bonds issued by an insurance company must have a maturity of at least five years and be repaid after insurance policy liabilities and other general liabilities, but prior to payment related to the equity capital of such insurance company. The audited net asset value of the issuer as of the end of the prior year and its net asset value in the latest quarterly financial statements must be no less than RMB1 billion, and the total amount of its issued capital replenishment bonds and fixed-term subordinated debts pursuant to CBIRC requirements must not exceed 100% of the issuer’s net asset value. The issuer must comply with certain disclosure obligations both at the time of the issuance and during the term of the bonds. The issuer has the right to redeem the capital replenishment bonds after five years of its issuance provided that its solvency ratio is at least 100% after the redemption.
Regulation of establishment of overseas insurance institutions
An insurance company may apply to the CBIRC for approval for the establishment of overseas branches, overseas insurance companies and overseas insurance intermediaries, or the acquisition of overseas insurance companies or intermediaries. In order to submit such an application, an insurance company must have an operating history of no less than two years, total assets of no less than RMB5 billion as at the end of the prior year and foreign exchange funds of no less than US$15 million or its equivalent in other freely convertible currencies as at the end of the preceding year. The applicant insurance company must also comply with applicable solvency, risk management and other requirements as stipulated by the CBIRC.
Compliance with regulatory requirements
Our management confirms that we have complied in all material respects with all applicable regulatory requirements set out above.
Regulation of Foreign-Invested Insurance Companies
China acceded to the WTO on December 11, 2001. As a result of China’s commitments in connection with the accession, the Chinese insurance market is gradually opening up to foreign insurers and insurance-related service providers. The geographic limitation on foreign-invested life insurers, which were permitted to operate only in specified cities, has been lifted since December 11, 2004. Accordingly, foreign-invested life insurers have been permitted to sell individual and group life insurance, health insurance and annuity and other pension-like products since December 11, 2004. Since December 11, 2006, foreign-invested insurance brokers have been permitted to set up wholly owned subsidiaries in China. From January 1, 2020, foreign investors are allowed to own 100% in Chinese life insurers, and the CBIRC also removed the requirements that a foreign insurance company must have engaged in insurance business for more than 30 years and have maintained a representative office in China for at least two years before it can establish a foreign-invested insurance company in China.
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Foreign-invested insurance companies, including Sino-foreign equity joint ventures, wholly foreign-owned insurance companies and branches of foreign insurance companies, are generally regulated in the same manner as domestic insurance companies. Without the approval of the CBIRC, foreign-invested insurance companies may not engage in asset purchases and sales or other transactions with their affiliates, but may engage in outward and inward reinsurance with their affiliates. In addition, where the foreign-invested insurance company is a branch of a foreign insurance company, it is required to notify the CBIRC of fundamental events relating to the foreign insurance company within ten days following the occurrence of the event. Reportable events include: (1) a change of name, senior management or jurisdiction of incorporation of the foreign insurance company, (2) a change in the foreign insurance company’s share capital, (3) a change in any person beneficially owning 10% or more of the foreign insurance company’s shares, (4) a change in business scope, (5) the imposition of administrative sanctions by any applicable regulatory authority, (6) a material loss incurred by the foreign insurance company, (7) a spin-off, merger, dissolution, revocation of corporate franchise or bankruptcy involving the foreign insurance company and (8) other events specified by the CBIRC. If the foreign insurance company is dissolved, or its corporate franchise is revoked or it is declared bankrupt, the Chinese branch of the foreign insurance company will be prohibited from conducting any new business.
The CBIRC delegates certain authorities with respect to foreign-invested insurance companies to its provincial and local branch offices: approving the change of place of business of branches and subsidiaries of foreign-invested insurance companies; approving the establishment of subsidiary agencies of foreign-invested insurance companies below the branch-office level; approving the opening of subsidiary agencies of foreign-invested insurance companies below the branch-office level; and approving the qualification of senior management personnel of subsidiary agencies of foreign-invested insurance companies below the branch-office level.
Regulation of Insurance Asset Management Companies
An insurance asset management company is a limited liability company or joint stock company that manages insurance funds on behalf of others. Insurance asset management companies are regulated by the CBIRC.
Minimum capital requirements
The registered capital of an insurance asset management company may not be lower than RMB100 million or the equivalent amount of other freely convertible currencies.
Business operations
An insurance asset management company may conduct the following businesses: (1) managing insurance funds and assets entrusted to it; (2) managing other funds and assets entrusted to it, including basic pension insurance funds, social security funds, enterprise annuity funds and occupational annuity funds, as well as funds of domestic and overseas qualified investors with adequate risk identification and risk tolerance capabilities; (3) managing and using its own funds in Renminbi or foreign currencies; (4) carrying out businesses with respect to insurance asset management products, asset securitizations and insurance private equity funds; (5) carrying out investment consulting and advice businesses and providing professional services with respect to operation, accounting and risk management relating to asset management businesses; and (6) other businesses approved by the CBIRC or other departments of the State Council.
The investments of the insurance funds by insurance asset management companies are subject to the same requirements and limitations applicable to the investments by the insurance companies themselves. With the regulatory expansion of insurance company investment channels, the investment channels of insurance asset management companies over their own funds have been expanded as well to cover subordinated bonds issued by banks and insurance companies, bank subordinated bonds and stock investments.
Insurance asset management companies are also subject to the governance of regulations which generally apply to the asset management businesses of financial institutions. Starting from April 27, 2018, the asset management businesses of financial institutions are subject to new supervision rules, which apply to the participation of insurance funds in publicly-offered funds, private equity funds, trust schemes, equity investment schemes, debt investment schemes and portfolio insurance asset management products through the asset management products of insurance asset management companies. Since September 1, 2022, insurance asset management companies have been allowed to establish subsidiaries engaging in wealth management, public funds, private funds, real estate, infrastructure or other asset management businesses.
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In connection with funds managed by an insurance asset management company, a custodian is required to be appointed. The custodian must be an independent commercial bank or financial institution satisfying applicable CBIRC requirements.
Shareholding restrictions
At least 50% of the shares of an insurance asset management company must be owned by domestic or foreign group (holding) insurance companies and insurance companies, and at least one of the shareholders of an insurance asset management company must be an insurance company or insurance holding company satisfying specified requirements.
Investment risk control
Both insurance companies and asset management companies must establish structures, arrangements and measures to recognize, assess, manage and control investment risks. Members of senior management may not be responsible for the management of departments in charge of investment decisions, investment transactions and risk controls at the same time. Branches of insurance companies may not manage insurance funds. Insurance asset management companies must fairly treat the assets of different clients and insurance asset management products under its management, keep separate accounts and establish an isolation mechanism to prevent tunneling and potential risk transfer and conflicts of interests. Insurance asset management companies must also designate specialized investment management personnel to independently manage their own funds.
Major emergency response management
An insurance asset management company is required to establish a monitoring and precaution mechanism for major emergencies.
Regulation of Insurance Agencies, Insurance Brokers and Other Intermediaries
Insurance agents are business entities or individuals which or who act on behalf of an insurance company in respect of insurance business within the scope authorized by the insurance company, including licensed insurance agencies and individual insurance agents. Licensed insurance agencies fall into two groups: dedicated agencies and non-dedicated agencies. An insurance company is responsible for the acts of its agents when the acts are within the scope of their agency.
A dedicated agency is a company (and its branches) organized under the PRC law whose principal business is to act as an agent of insurance companies. Dedicated agencies are subject to minimum capital and other requirements, and their business is generally limited to insurance-related activities.
A non-dedicated agency is a business entity whose principal business is other than as an insurance agency. To receive a license, the agency business must have a direct relationship with its principal business, which the CBIRC has interpreted as permitting commercial banks to act as non-dedicated insurance agencies. Sales representatives of insurance companies are prohibited from selling insurance products at commercial bank outlets. The bancassurance management personnel of insurance companies are responsible for providing services (including training and the exchange of documents) to commercial banks and assisting commercial banks to provide related customer services, such as the payment of maturity benefits and handling of renewal fee after selling insurance products.
Prior to August 3, 2015, individual insurance agents, representatives of insurance agencies and insurance brokers were required to obtain qualification certificates issued by the CIRC. Under such CIRC regulations, we were subject to sanctions if we retained exclusive agents without CIRC qualification certificates, and policyholders who bought insurance policies through our unqualified agents were allowed to cancel the policies under some circumstances. On August 3, 2015, the CIRC issued a Notice on the Administration of Insurance Intermediary Personnel, effective on the same day. Under the new regulations, the CIRC canceled the requirements on qualification certificates or practice certificates for individual insurance agents, representatives of insurance agencies and insurance brokers, with the effect that insurance companies are now only required to complete registration for their individual insurance agents in the insurance intermediary regulatory information system maintained by the CIRC. In addition, insurance companies are required to take adequate measures to ensure the good conduct and professional competence of their individual insurance agents, representatives of insurance agencies and insurance brokers.
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All insurance agencies and agents are required to enter into agency agreements that specify the duration of the agency; the amount of the agency fee and the method of payment; the scope of the agency, including the insurance products to be marketed; and other relevant matters. Absent specific CBIRC approval, insurance agents are prohibited from signing insurance and annuity products on behalf of the insurance companies they represent. None of our agents is authorized to sign insurance policies or annuity contracts for us.
Insurance agencies are required to open special accounts for the handling of funds that they hold or collect for the insurance companies they represent. They may not engage in the following activities: dealing with unauthorized insurers or insurance intermediaries, engaging in activities beyond their authorized business scope or geographical area, causing injury to the rights of the insurance companies they represent, spreading rumors or otherwise injuring the reputation of others in the insurance industry, misappropriating the funds of the insurance companies they represent, defrauding insurance customers through false or misleading representations or material omissions, using undue influence to induce insurance customers to purchase insurance, or defrauding the insurance companies they represent through collusion with the insured or the insurance beneficiary. In addition, dedicated insurance agencies are subject to various reporting requirements, including submission of annual financial reports, and are subject to supervision and examination by the CBIRC.
Insurance brokers who represent individuals and companies purchasing insurance and other intermediaries are subject to similar regulatory requirements regarding their activities. Among other things, they are subject to supervision and examination by the CBIRC, and fundamental corporate changes must be approved by the CBIRC. Only companies organized under the PRC company law and meeting requirements set by the CBIRC are authorized to act as insurance brokers. Insurance brokers are required to comply with standards prescribed by the CBIRC. Insurance brokerage agencies must provide training to their brokerage personnel regarding insurance laws and provide education on ethics and other matters.
Regulation of Internet Insurance Businesses
On December 7, 2020, CBIRC issued supervision rules to regulate China’s online insurance sector. Under the new rules, online insurance business is defined as entering into insurance contracts and providing insurance services through an Internet-based platform. The new rules prohibit unlicensed institutions and individuals from engaging in online insurance businesses. Insurance institutions that are permitted to engage in online insurance businesses include traditional insurers, mutual insurers, online insurers, insurance brokers, insurance assessors and insurance agents (including dedicated insurance agencies, bancassurance agencies and Internet companies that have obtained the license to engage in insurance agency business). The new rules provide specific requirements on the management of the Internet-based platforms used for insurance business. The new rules also strengthen the requirements on sale management and information disclosure during the online sales process and the after sales duties and responsibilities of insurance institutions engaging in online insurance business.
Chinese Data Privacy and Cybersecurity Laws
The regulatory environment in China and elsewhere as it relates to the collection, use, transfer, and other processing of data, “important data,” and personal data and other types of information is rapidly evolving and is likely to remain uncertain for the foreseeable future.
The PRC Cyber Security Law, or the CSL, became effective in June 2017 and created China’s first national-level data protection for different types of “network operators,” which may include all organizations in China that provide services over the internet or another information network. The PRC Data Security Law, or the DSL, which took effect in September 2021, provides for a cybersecurity review procedure for “data processors” when their data activities may affect national security and the protection scheme of “important data.” “Data processors” may include all organizations in China that collect, store, use, process, transfer, provide, disclose any data in electronic or other forms. The DSL also sets up a framework that classifies and categorizes data collected and stored in China and regulates its storage and transfer based on the degree of importance of data in economic and social development, as well as the extent of damage caused to national security, public interests or the legitimate rights and interests of individuals and organizations once data are tampered with, destroyed, leaked or illegally obtained or illegally used. Certain categories of network operators and data processors processing certain types of data will also be subject to data localization requirements. The PRC Personal Information Protection Law, or the PIPL, which took effect from November 2021, provides a comprehensive set of data privacy and protection requirements that apply to the processing of personal information. The PIPL also clarifies the definition of personal information and sensitive personal information, the legal basis of personal information processing, the basic requirements of notice and consent and the restrictions of data cross-border transfer.
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Numerous regulations, guidelines and other administrative measures have been or are expected to be adopted under China’s three-pillar data protection regime framework made up of the CSL, the DSL and the PIPL. On December 28, 2021, the Cyberspace Administration of China, or the CAC, together with 12 other government departments of the PRC, jointly promulgated the revised Cybersecurity Review Measures, which became effective on February 15, 2022. The Cybersecurity Review Measures provide that certain network operators that intend to purchase network products and services and network platform operators engaging in data processing activities must be subject to cybersecurity review by a Cybersecurity Review Office, or the CRO, an administrative body within the CAC, if national security will or may be affected. The Cybersecurity Review Measures further require that if a network operator who possesses personal information of more than one million users plans to be listed in foreign countries, it must apply for cybersecurity review from the CRO. The Cybersecurity Review Measures also grant the CRO the discretion to start a cybersecurity review against any entity, if the CAC or any of 12 other government departments consider relevant products and services or data processing activities will or may affect national security. In respect of data cross-border transfer, on July 7, 2022, the CAC released the Measures on Outbound Data Transfer Security Assessments, or the Measures, which took effect on September 1, 2022. The Measures require data processors that transfer “important data” out of China, large personal information processors (those who process over one million individuals’ personal information), data processors which have cumulatively made outbound transfers of personal information of over 100,000 persons or sensitive personal information of over 10,000 persons since January 1 of the preceding year and other network operators to undergo a government security assessment before transferring data out of China. In addition, certain industry-specific laws and regulations affect the collection and transfer of personal data in China. For example, the Notice by the PBOC regarding Issuance of a Financial Industry Standard and Effective Technological Management of Personal Financial Information Protection, which became effective and implemented on February 13, 2020, specifies the security protection requirements for personal financial information in the collection, transmission, storage, use, deletion and destruction. Although these measures have already taken effect, substantial uncertainties still exist with respect to the interpretation and implementation of these measures in practice and how they will affect our business operation.
We routinely receive, collect, generate, store, process, transmit and maintain personal information along with other sensitive data. We may also receive, store, process, generate, control, or otherwise have access to “important data” in our businesses. As such, we are subject to the relevant PRC data security, cyber-security, and privacy and data protection laws, regulations, and standards that apply to the collection, generation, use, retention, protection, disclosure, transfer and other processing of personal information and “important data”. Based on the size of our company, the industry sectors in which we operate, and the fact that we are also listed abroad, we expect to be subject to potentially heightened scrutiny and obligations with regard to cybersecurity, data security, and the protection of personal information once all the relevant regulations and rules have been promulgated. Although some laws, regulations, and standards have already taken effect, substantial uncertainties still exist with respect to the interpretation and implementation of these measures in practice and how they will affect our business operations.
No.2 Interpretation of Accounting Standard for Business Enterprises
On August 7, 2008, the MOF issued the No.2 Interpretation of Accounting Standard for Business Enterprises, requiring listed companies which issue both H shares and A shares to adopt consistent accounting policies to recognize, calculate and report a particular transaction in their H share financial statements and A share financial statements, except for certain differences in relation to the reversal of impairment losses of long-term assets and disclosures in relation to related party transactions.
On January 5, 2009, the CIRC issued the Notification on the Implementation of the No.2 Interpretation of Accounting Standards for Business Enterprises in the Insurance Sector (No.1 [2009] of CIRC), which requires insurance companies to make appropriate changes to their accounting policies that cause differences between onshore and offshore financial statements when preparing their 2009 annual financial statements, such that the same accounting policies and estimates will apply to a particular transaction.
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On December 22, 2009, the MOF issued the Notification on the Promulgation of the Regulations regarding the Accounting Treatment of Insurance Contracts, which regulates issues relating to, among other things, the unbundling of mixed insurance contracts, tests for significant insurance risks and the calculation of reserves for insurance contracts, and requires insurance companies to comply with these requirements beginning with the preparation of their financial statements for the year ended December 31, 2009. The accounting treatment of any transaction item adopted in previous year which differs from those set out in the MOF’s regulations must be retrospectively adjusted, unless any such adjustment is not practicable under the circumstances.
Implementation of VAT
Following the decision of the PRC State Council, the Value Added Tax, or VAT, has applied to the financial and insurance sector since May 1, 2016. Therefore, our primary business has been subject to 6% VAT from May 1, 2016 instead of the 5% business tax, or BT, which previously had applied to our business.
Policy on pre-tax deduction of underwriting and policy acquisition costs
In May 2019, the MOF and SAT issued a policy on pre-tax deduction of underwriting and policy acquisition costs of insurance companies. Under the policy, from January 1, 2019, the underwriting and policy acquisition costs incurred by insurance companies in connection with their operating activities that do not exceed 18% of the balance of total premium income for the year, after deducting surrender payments and other expenses, can be deducted when calculating taxable income, and the portion that exceeds 18% can be carried forward and deducted in following years. The policy applies to the final settlement of enterprise income tax of insurance companies for the 2018 tax year. Therefore, the pre-tax deduction percentage for enterprise income tax on our underwriting and policy acquisition costs has been adjusted to 18% from the previous 10%, which will result in a reduction in our income tax in 2019 and future years.
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C. ORGANIZATIONAL STRUCTURE
The following is our simplified corporate structure as of the date of this annual report:
| (1) | Wholly owned by CLIC |
| (2) | Formerly known as China Life Asset Management (Hong Kong) Company Limited |
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List of Significant Subsidiaries
| Name of Subsidiary |
Jurisdiction of Incorporation |
Proportion of Ownership Interest Owned by China Life | ||
| 中国人寿资产管理有限公司 China Life Asset Management Company Limited |
The People’s Republic of China | 60% (directly) | ||
| 中国人寿富兰克林资产管理有限公司 China Life Franklin Asset Management Company Limited (1) |
Hong Kong | 50%(2) (indirectly through affiliate) | ||
| 中国人寿养老保险股份有限公司 China Life Pension Company Limited |
The People’s Republic of China | 74.27%(3) (directly and indirectly through affiliate) | ||
| 国寿安保基金管理有限公司 China Life AMP Asset Management Co., Ltd. |
The People’s Republic of China | 85.03%(4) (indirectly through affiliate) | ||
| 国寿财富管理有限公司 China Life Wealth Management Company Limited |
The People’s Republic of China | 100%(5) (indirectly through affiliate) | ||
| (1) | Formerly known as China Life Asset Management (Hong Kong) Company Limited. |
| (2) | AMC, which is 60% owned by us, owns 50%. |
| (3) | We own 70.74% and AMC, which is 60% owned by us, owns 3.53%. |
| (4) | AMC, which is 60% owned by us, owns 85.03%. |
| (5) | AMC, which is 60% owned by us, owns 48%, and China Life AMP, which is 85.03% owned by AMC, owns 52%. |
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D. PROPERTY, PLANTS AND EQUIPMENT
As of December 31, 2022, we owned and leased 5,235 and 11,034 properties, respectively, and had 47 properties under construction. Among the 5,235 properties owned by us, 2,492 properties are leased to third parties (including partial leasing) while the remaining properties are mainly occupied by us as office premises. 165 properties are recognized as investment properties.
On December 31, 2021, we entered into a property leasing agreement with China Life Industrial Investment Company Limited. Under this agreement, China Life Industrial Investment Company Limited agreed to lease to us 735 properties owned by it. The agreement expired on December 31, 2022. On December 29, 2022, we entered into a new property leasing agreement with China Life Industrial Investment Company Limited. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions”.
| ITEM 4A. | UNRESOLVED STAFF COMMENTS. |
None.
| ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS. |
You should read the following discussion and analysis in conjunction with the audited consolidated financial statements and accompanying notes included elsewhere in this annual report.
Overview of Our Business
We are the leading life insurance company in China. We provide a broad range of insurance products, including individual and group life insurance, annuity contracts, health insurance and accident insurance products. We had approximately 325 million long-term insurance policies in force as of December 31, 2022, including long-term individual and group life insurance policies, annuity contracts and long-term health insurance policies.
We report our financial results according to the following three principal business segments:
| • | Life insurance, which offers participating and non-participating life insurance and annuities to individuals and groups. |
| • | Health insurance, which offers short-term and long-term health insurance to individuals and groups. The financial results of our supplementary major medical insurance are also reflected in our health insurance business segment. |
| • | Accident insurance, which offers short-term and long-term accident insurance to individuals and groups. |
In addition, we have an “other” reporting segment, in which we primarily report the income and cost of the agency business in respect of transactions with CLIC and other companies, net share of profit of associates and joint ventures, income and expenses of subsidiaries, and unallocated income and expenditure of our company. See Note 5 to our consolidated financial statements included elsewhere in this annual report.
Financial Overview of Our Business
We had total gross written premiums of RMB615,190 million (US$89,194 million) and net profit of RMB33,514 million (US$4,859 million) for the year ended December 31, 2022. Our principal business segments had the following results:
| • | Life insurance had total gross written premiums of RMB485,642 million (US$70,411 million) in 2022. |
| • | Health insurance had total gross written premiums of RMB115,329 million (US$16,721 million) in 2022. |
| • | Accident insurance had total gross written premiums of RMB14,219 million (US$2,062 million) in 2022. |
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Our business has been characterized by stability in our business scale and key performance indicators together with a move towards an optimized business structure, which has resulted in the largest amount of gross written premiums in the Chinese life insurance industry, a 5% increase in premiums from new policies year-on-year, growth of first-year regular premiums for products with regular premiums of ten years or more, the increase in percentage of first-year regular premiums for products with regular premiums of ten years or more in first-year regular premiums and the percentage of renewal premiums in gross written premiums being above 70% during the past five years. At the same time, our business has also been affected by certain unfavorable factors, including the increasing cross-industry competition from companies in other financial industries, and the rapid development of the insurance companies owned or controlled by commercial banks and some other small and medium-sized insurance companies, which have secured an increasing market share, as well as the changing economic and investment environment within China, including slowing economic growth and fluctuations in interest rates.
Factors Affecting Our Results of Operations
Revenues, Expenses and Profitability
We earn our revenues primarily from:
| • | insurance premiums from the sale of life insurance policies and annuity contracts, including participating and non-participating policies and annuity contracts with life contingencies, as well as accident and health insurance products. Net premiums earned accounted for 75.56% of total revenues in 2022. |
| • | investment income and net realized gains on financial assets, net fair value gains through profit or loss. Investment income and net realized gains on financial assets, net fair value gains through profit or loss accounted for 23.27% of total revenues in 2022. |
In addition, following the restructuring, we receive service fees for policy management services we provide to CLIC. AMC also receives asset management fees for asset management services provided to CLIC. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions”.
Our operating expenses primarily include:
| • | insurance benefits provided to our policyholders, accident and health claims and claim adjustment expenses; |
| • | increase in insurance contracts liabilities; |
| • | investment contract benefits; |
| • | policyholder dividends resulting from participation in profits; |
| • | underwriting and policy acquisition costs; and |
| • | administrative and other expenses. |
Our profitability depends principally on our ability to price and manage risk on insurance and annuity products, our ability to maximize the return on investment assets, our ability to attract and retain customers, and our ability to manage expenses. In particular, factors affecting our profitability include:
| • | our ability to design and distribute products and services and to introduce new products which gain market acceptance on a timely basis; |
| • | our ability to price our insurance and investment products at levels that enable us to earn a margin over the costs of providing benefits and the expense of acquiring customers and administering those products; |
| • | our returns on investment assets; |
| • | our mortality and morbidity experience, which affects our insurance reserves; |
| • | our lapse experience, which affects our ability to recover the cost of acquiring new business over the lives of the contracts; |
| • | our cost of administering insurance contracts and providing customer services; |
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| • | our ability to manage liquidity, market and credit risk in our investment portfolio and to manage duration risk in our asset and policy portfolios through asset-liability management; and |
| • | changes in regulations. |
In addition, other factors, such as competition, securities market conditions, taxes and general economic conditions, affect our profitability.
Interest Rates
For our long-term life insurance products including annuity products, we are obligated to pay contractual benefits to our policyholders or the beneficiaries based on a guaranteed interest rate, which is established when the product is priced. These products expose us to the risk that changes in interest rates may change our “spread”, or the difference between the amount of return we are able to earn on our investments and the amount of return we are required to pay under the policies. In August 2013, February 2015 and September 2015, the CIRC removed the 2.50% cap on the guaranteed interest rates for the traditional participating insurance policies, universal life insurance policies, and participating life insurance policies, respectively. From October 1, 2015, the guaranteed interest rates of all long-term life insurance products are to be decided by insurance companies at their discretion in accordance with the principle of prudence, but CBIRC approval is required for products with guaranteed interest rates above the maximum valuation rate set by the CBIRC, which varies by product. If the rates of return on our investments fall below the rates we guarantee, our profitability would be adversely affected. In November 2014, the interest rate on one-year term deposits, a key benchmark rate, was reduced from 3.00% to 2.75%, and in 2015, the interest rate was further reduced five times from 2.75% to 1.50%. This interest rate has remained unchanged since 2015. In December 2021, the one-year loan prime rate, another key benchmark, was reduced from 3.85% to 3.80%, and in 2022, was further reduced two times from 3.80% to 3.65%. If economic conditions change in the future, the Chinese government may adjust the interest rates accordingly. As of December 31, 2022, the average guaranteed rate of return for all of our long-term insurance policies in force was 2.87%, while our investment yields for the years ended December 31, 2022, 2021 and 2020 were 3.94%, 4.98% and 5.30%, respectively. However, if the rates of return on our investments were to fall below the rates we guarantee, our profitability would be materially and adversely affected. If the interest rates were to be increased, but we did not raise the guaranteed rates of our products, sales of some of our products could be adversely impacted.
Interest rates also affect our returns on investment assets, a large proportion of which is held in term deposits and debt securities. In a declining interest rate environment, lower rates may result in an increase in the fair value of debt securities, which could have a positive impact on our investment returns, but may also result in a decline in the interest income from our new investment in fixed assets, which could have an adverse impact on our investment returns. In a rising interest rate environment, higher rates may result in an increase in the interest income from our new investment in fixed assets but also may result in a decline in the fair value of debt securities.
For further information on our exposure to interest rate risk, see “Item 11 Quantitative and Qualitative Disclosure about Market Risk—Interest Rate Risk” and Note 4 to our consolidated financial statements included elsewhere in this annual report.
Investments
As an insurance company, we are permitted to invest in five categories of investment assets, including liquidity assets, fixed income assets, equity assets, real properties and other financial assets. However, we are limited by Chinese laws and regulations in the maximum amount that we may invest in each type of assets. See “Item 4. Information on the Company—Business Overview—Investments” and “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”. Our material concentration risks relate to our investments in bank deposits and Chinese government securities.
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Our investments are subject to risks. Volatility or declines in Chinese and international financial markets may expose us to higher market and credit risks, such as when domestic and international economic conditions differ from market expectations, or when a “Black Swan” event occurs and influences investors’ risk preference. We may also invest in new investment channels, use new investment tools or engage new investment managers, which may expose us to new risks. These factors could affect our investment income and the book value of our investment assets. In addition, as a portion of our investment assets are held in foreign currencies, our investment results may also be subject to foreign exchange gains and losses due to changes in exchange rates. Furthermore, our investments in associates are also affected by the operating conditions, financial risks and volatility in profits of these associates, which, in turn, may affect our profitability. See “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—Our investments are subject to risks”.
Our results can be materially affected by investment impairments. The following table sets forth impairment charges and reversal of impairment charges, which are included in net realized gains on financial assets and net gains on investments of associates and joint ventures, for the years ended December 31, 2020, 2021 and 2022.
| Impairment | For the year ended December 31, | |||||||||||||||
| 2020 | 2021 | 2022 | 2022 | |||||||||||||
| (RMB in millions) | US$ | |||||||||||||||
| Debt securities |
288 | (1,359 | ) | 1,621 | 235 | |||||||||||
| Equity securities |
(11,917 | ) | (21,362 | ) | (19,831 | ) | (2,875 | ) | ||||||||
| Associates and joint ventures |
(707 | ) | — | (3,150 | ) | (457 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
(12,336 | ) | (22,721 | ) | (21,360 | ) | (3,097 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
During the year ended December 31, 2022, we recognized an impairment expense of RMB19,831 million (US$2,875 million) for available-for-sale equity securities for which we determined that objective evidence of impairment existed. During the year ended December 31, 2021, we recognized an impairment expense of RMB21,362 million for available-for-sale equity securities for which we determined that objective evidence of impairment existed. During the year ended December 31, 2020, we recognized an impairment expense of RMB11,917 million for available-for-sale equity securities for which we determined that objective evidence of impairment existed. Our rationale for the impairment is based on a severe or prolonged decline in value. These securities were not impaired due to issuer-specific events such as bankruptcies.
During the year ended December 31, 2022, we recognized a reversal of impairment charges of RMB1,621 million (US$235 million). During the year ended December 31, 2021, we recognized an impairment expense of RMB1,376 million in debt securities with a reversal of impairment charges of RMB17 million. During the year ended December 31, 2020, we recognized an impairment expense of RMB3 million in debt securities with a reversal of impairment charges of RMB291 million.
During the year ended December 31, 2022, we recognized an impairment expense of RMB3,150 million (US$457 million) in associates and joint ventures. During the year ended December 31, 2021, we recognized no impairment expense in associates and joint ventures. During the year ended December 31, 2020, we recognized an impairment expense of RMB707 million in associates and joint ventures.
Available-for-sale securities comprised of the following asset classes as of December 31, 2020, 2021 and 2022.
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| As of December 31, | ||||||||||||||||||||||||
| 2020 | 2021 | 2022 | ||||||||||||||||||||||
| Cost or amortized cost |
Estimated fair value |
Cost or amortized cost |
Estimated fair value |
Cost or amortized cost |
Estimated fair value |
|||||||||||||||||||
| (RMB in millions) | ||||||||||||||||||||||||
| Debt securities |
||||||||||||||||||||||||
| Government bonds |
48,542 | 49,256 | 55,110 | 58,561 | 45,244 | 47,188 | ||||||||||||||||||
| Government agency bonds |
161,503 | 169,013 | 245,026 | 259,753 | 299,636 | 313,270 | ||||||||||||||||||
| Corporate bonds |
133,133 | 136,025 | 197,856 | 203,147 | 185,214 | 188,563 | ||||||||||||||||||
| Subordinated bonds/debt |
81,880 | 81,795 | 107,204 | 111,029 | 155,289 | 156,024 | ||||||||||||||||||
| Other |
141,530 | 144,721 | 154,793 | 161,054 | 170,684 | 174,398 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Subtotal |
566,588 | 580,810 | 759,989 | 793,544 | 856,067 | 879,443 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Equity securities |
||||||||||||||||||||||||
| Funds |
72,691 | 97,476 | 80,918 | 94,895 | 146,718 | 131,897 | ||||||||||||||||||
| Common stocks |
278,512 | 301,249 | 258,239 | 256,441 | 451,932 | 414,148 | ||||||||||||||||||
| Other |
214,059 | 236,068 | 261,136 | 284,407 | 305,385 | 312,620 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Subtotal |
565,262 | 634,793 | 600,293 | 635,743 | 904,035 | 858,665 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
1,131,850 | 1,215,603 | 1,360,282 | 1,429,287 | 1,760,102 | 1,738,108 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The difference between the aggregate cost/amortized cost and the aggregate estimated fair value reflects the amount of the unrealized gains and losses, and provision for impairment losses. As of December 31, 2022, we had gross unrealized gains of RMB60,618 million (US$8,789 million) and gross unrealized losses of RMB63,397 million (US$9,192 million), and made a provision for impairment losses of RMB18,588 million (US$2,695 million). As of December 31, 2021, we had gross unrealized gains of RMB102,195 million and gross unrealized losses of RMB10,485 million, and made a provision for impairment losses of RMB22,705 million. As of December 31, 2020, we had gross unrealized gains of RMB114,895 million and gross unrealized losses of RMB18,528 million, and made a provision for impairment losses of RMB12,614 million. The unrealized losses as of December 31, 2022 related primarily to the unrealized losses of available-for-sale stocks.
The following tables set forth the length of time that each class of available-for-sale securities has continuously been in an unrealized loss position as of December 31, 2022, 2021 and 2020. For the year ended December 31, 2022, the increase of our unrealized losses on equity securities, mainly resulting from the decrease in the price of certain stocks we invested in, constituted a significant component of the movement of the total unrealized losses compared to the prior year. For the year ended December 31, 2021, the decrease of our unrealized losses on equity securities, mainly resulting from the increase in the price of certain stocks we invested in, constituted a significant component of the movement of the total unrealized losses compared to the prior year. For the year ended December 31, 2020, the increase of our unrealized losses on equity securities, mainly resulting from the decline in the price of certain stocks we invested in, constituted a significant component of the movement of the total unrealized losses compared to the prior year.
| As of December 31, 2022 |
0-6 months |
7-12 months |
More than 12 months |
Total | ||||||||||||
| (RMB in millions) | ||||||||||||||||
| Debt securities |
||||||||||||||||
| Unrealized losses |
1,603 | 396 | — | 1,999 | ||||||||||||
| Carrying amounts |
106,027 | 81,451 | — | 187,478 | ||||||||||||
| Unrealized losses as a percentage of carrying amounts |
1.51% | 0.49% | — | 1.07% | ||||||||||||
| Equity securities |
||||||||||||||||
| Unrealized losses |
18,573 | 39,902 | 2,923 | 61,398 | ||||||||||||
| Carrying amounts |
181,595 | 251,278 | 11,433 | 444,306 | ||||||||||||
| Unrealized losses as a percentage of carrying amounts |
10.23% | 15.88% | 25.57% | 13.82% | ||||||||||||
| Total |
||||||||||||||||
| Total unrealized losses |
20,176 | 40,298 | 2,923 | 63,397 | ||||||||||||
| Total carrying amounts |
287,622 | 332,729 | 11,433 | 631,784 | ||||||||||||
| Unrealized losses as a percentage of carrying amounts |
7.01% | 12.11% | 25.57% | 10.03% | ||||||||||||
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| As of December 31, 2021 |
0-6 months |
7-12 months |
More than 12 months |
Total | ||||||||||||
| (RMB in millions) | ||||||||||||||||
| Debt securities |
||||||||||||||||
| Unrealized losses |
71 | — | 44 | 115 | ||||||||||||
| Carrying amounts |
6,230 | — | 8,426 | 14,656 | ||||||||||||
| Unrealized losses as a percentage of carrying amounts |
1.14% | — | 0.52% | 0.78% | ||||||||||||
| Equity securities |
||||||||||||||||
| Unrealized losses |
7,334 | 123 | 2,913 | 10,370 | ||||||||||||
| Carrying amounts |
65,277 | 1,480 | 14,188 | 80,945 | ||||||||||||
| Unrealized losses as a percentage of carrying amounts |
11.24% | 8.31% | 20.53% | 12.81% | ||||||||||||
| Total |
||||||||||||||||
| Total unrealized losses |
7,405 | 123 | 2,957 | 10,485 | ||||||||||||
| Total carrying amounts |
71,507 | 1,480 | 22,614 | 95,601 | ||||||||||||
| Unrealized losses as a percentage of carrying amounts |
10.36% | 8.31% | 13.08% | 10.97% | ||||||||||||
| As of December 31, 2020 |
0-6 months |
7-12 months |
More than 12 months |
Total | ||||||||||||
| (RMB in millions) | ||||||||||||||||
| Debt securities |
||||||||||||||||
| Unrealized losses |
981 | 341 | 277 | 1,599 | ||||||||||||
| Carrying amounts |
82,099 | 18,463 | 7,212 | 107,774 | ||||||||||||
| Unrealized losses as a percentage of carrying amounts |
1.20% | 1.85% | 3.84% | 1.48% | ||||||||||||
| Equity securities |
||||||||||||||||
| Unrealized losses |
10,725 | 5,382 | 822 | 16,929 | ||||||||||||
| Carrying amounts |
90,297 | 36,979 | 5,399 | 132,675 | ||||||||||||
| Unrealized losses as a percentage of carrying amounts |
11.88% | 14.55% | 15.23% | 12.76% | ||||||||||||
| Total |
||||||||||||||||
| Total unrealized losses |
11,706 | 5,723 | 1,099 | 18,528 | ||||||||||||
| Total carrying amounts |
172,396 | 55,442 | 12,611 | 240,449 | ||||||||||||
| Unrealized losses as a percentage of carrying amounts |
6.79% | 10.32% | 8.71% | 7.71% | ||||||||||||
Financial assets other than those accounted for as at fair value through profit or loss are adjusted for impairments.
In evaluating whether a decline in value is an impairment for these financial assets, we consider several factors including, but not limited to, the following:
| • | significant financial difficulty of the issuer or debtor; |
| • | a breach of contract, such as a default or delinquency in payments; |
| • | it becomes probable that the issuer or debtor will enter into bankruptcy or other financial reorganization; and |
| • | the disappearance of an active market for that financial asset because of financial difficulties. |
In evaluating whether a decline in value is impairment for equity securities, we also consider the extent or the duration of the decline. The quantitative factors include the following:
| • | the market price of the equity securities was more than 50% below their cost at the reporting date; |
| • | the market price of the equity securities was more than 20% below their cost for a period of at least six months at the reporting date; and |
| • | the market price of the equity securities was below their cost for a period of more than one year (including one year) at the reporting date. |
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When the decline in value is considered an impairment, held-to-maturity debt securities are written down to their present value of estimated future cash flows discounted at the securities’ effective interest rates, and available-for-sale debt securities and equity securities are written down to their fair value, and the change is recorded in net realized gains on financial assets in the period the impairment is recognized. The impairment loss is reversed through the net profit if in a subsequent period the fair value of a debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognized through net profit. The impairment losses recognized in net profit on equity investments are not reversed. See “—Critical Accounting Policies”.
As of December 31, 2022, our total investment assets were RMB5,064,991 million (US$734,355 million) and the investment yield for the year ended December 31, 2022 was 3.94%. The investment return was primarily affected by the decline in equity markets which led to a year-on-year decrease of return from stock price spread. As of December 31, 2021, our total investment assets were RMB4,716,420 million and the investment yield for the year ended December 31, 2021 was 4.98%. As of December 31, 2020, our total investment assets were RMB4,095,540 million and the investment yield for the year ended December 31, 2020 was 5.30%.
We calculate the investment yields for a given year by dividing the gross investment income for that year by the average of the ending balance of investment assets of that year and the previous year.
Mix of Products
The following table sets forth premium information as of or for the years ended December 31, 2022, 2021 and 2020 by type of product in our life insurance business, health insurance business and accident insurance business.
| As of or for the year ended December 31, |
Compound annual growth rate |
|||||||||||||||||||
| 2020 | 2021 | 2022 | 2022 | (2020-2022) | ||||||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Life insurance business |
||||||||||||||||||||
| Whole life and term life insurance: |
||||||||||||||||||||
| Gross written premiums |
76,421 | 72,424 | 80,569 | 11,681 | 2.68 | % | ||||||||||||||
| Endowment: |
||||||||||||||||||||
| Gross written premiums |
109,275 | 97,791 | 137,467 | 19,931 | 12.16 | % | ||||||||||||||
| Annuities: |
||||||||||||||||||||
| Gross written premiums |
294,897 | 311,096 | 267,606 | 38,799 | (4.74 | %) | ||||||||||||||
| Health insurance business(1) |
||||||||||||||||||||
| Gross written insurance premiums |
115,089 | 120,609 | 115,329 | 16,721 | 0.10 | % | ||||||||||||||
| Accident insurance business(2) |
||||||||||||||||||||
| Gross written insurance premiums |
16,583 | 16,407 | 14,219 | 2,062 | (7.40 | %) | ||||||||||||||
| (1) | Including long-term and short-term health products. |
| (2) | Including long-term and short-term accident products. |
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Under guidelines issued by the CBIRC, we are required to pay to our participating policyholders dividends which are no less than 70% of the distributable earnings on participating products. Participating products tend to present us with less market risk, since we have more flexibility to set the level of dividends and participating products are subject to guaranteed interest rates which are generally lower than those of non-participating products. In addition, changes in interest rates have less of impact on their lapse rates than on those of non-participating policies. Conversely, participating products tend to be less profitable for us than non-participating products, largely because the terms of these contracts effectively commit us to sharing a portion of our earnings from participating products with our policyholders. However, participating products still provide us with attractive profit contributions given the growing level of sales volume they produce.
Products classified as investment contracts also affect our revenues, since only a portion of the payments we received under such products are recorded in our consolidated income statement as policy fees, and the majority of such payments are recorded as investment contracts under financial liabilities on our balance sheet.
We have adjusted our premium structure to focus more on sales of products with regular premiums, especially products with regular premiums for ten years or more, which has reduced the proportion of single written premiums of our total first-year gross written premiums. We believe that this strategy could contribute to a more steady development of our business and enhance the loyalty of our customers and the retention rate of our sales agent force.
Regulation
We operate in a highly regulated industry. Changes in regulation can have a significant impact on our revenues, expenses and profitability. China’s insurance regulatory regime is undergoing significant changes toward a more transparent regulatory process and a convergent movement toward international standards. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters”.
COVID-19 Pandemic
The COVID-19 pandemic and the measures taken by governments around the world to contain its spread has negatively impacted the global economy and created significant volatility in the financial markets. In the insurance market in China, the growth of life insurance premiums slowed due to the pandemic. The recruitment and training of our exclusive agents and other marketing activities were subject to certain restrictions, which has negatively impacted our businesses. Further, the pandemic also created volatility in the capital markets. The value of the investments we hold, the income we receive from such investments, and our ability to adjust our portfolio mix, could be affected if there were further volatility or declines in the stock or bond markets or if market interest rates were to decline. For example, in 2022, China’s interest rates were at a historically low level, which negatively impacted our allocation in fixed-income assets. The domestic equity market experienced a relatively substantial fall as compared to the beginning of the year, which resulted in a decline in our investment income from equity investment in 2022 compared to 2021. See “Item 11 Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Risk”. Furthermore, if a worsening of the COVID-19 pandemic were to result in increased claims for certain insurance products, it could reduce our earnings.
Since December 2022, the Chinese government has modified its COVID-19 control policy, and most of the travel restrictions and quarantine requirements have been lifted. However, the impact of COVID-19 pandemic on us in the future will depend on future developments which are highly unpredictable and beyond our control, such as the frequency, duration and severity of the resurgence of COVID-19 and the emergence of new variants, as well as the measures that may be taken by governments around the world in response to these developments, the impact of the pandemic on the global economy and the measures taken by governments to stimulate the general economy. Therefore, we cannot guarantee that the pandemic will not continue to have an adverse effect on our business and results of operations in the future, which may be material.
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Critical Accounting Policies
We prepared the consolidated financial statements under the historical cost convention, except for financial assets and financial liabilities at fair value through profit or loss, available-for-sale financial assets, insurance contract liabilities and certain property, plant and equipment at deemed cost during restructuring process. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires our management to exercise its judgments in the process of applying our accounting policies. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our businesses and operations. The following sections discuss the accounting policies applied in preparing our consolidated financial statements that we believe are most dependent on the application of these judgments and estimates. However, uncertainty about these judgments and estimates could result in outcomes that require a material adjustment to the carrying amounts of assets and liabilities in the future periods.
Liability for Long-term Insurance Contracts
Long-term insurance contracts include whole life insurance, term life insurance, endowment insurance and annuity policies with significant life contingency risk. Premiums are recognized as revenue when the insurance contracts are recognized and premiums are due from policyholders.
We use the discounted cash flow method to estimate the reserve of long-term insurance contracts. The reserve of long-term insurance contracts consists of a reasonable estimate of liability, a risk margin and a residual margin. The long-term insurance contracts liabilities are calculated using various assumptions, including assumptions on mortality rates, morbidity rates, lapse rates, discount rates and expense assumptions, and based on the following principles:
| • | The reasonable estimate for liability of long-term insurance contracts is the present value of reasonable estimates of future cash outflows less future cash inflows. The expected future cash inflows include cash inflows of future premiums arising from the undertaking of insurance obligations, with consideration of decrement mostly from death and surrenders. The expected future cash outflows are cash outflows incurred to fulfill contractual obligations, consisting of the following: |
| (i) | Guaranteed benefits based on contractual terms, including payments for deaths, disabilities, diseases, survivals, maturities and surrenders; |
| (ii) | Additional non-guaranteed benefits, such as policyholder dividends; and |
| (iii) | Reasonable expenses incurred to manage insurance contracts or to process claims, including maintenance expenses and claim settlement expenses. Future administration expenses are included in the maintenance expense. Expenses are determined based on expense analysis with consideration of future inflation and our expense management control. |
On each reporting date, we review the assumptions for reasonable estimates of liability and risk margins, with consideration of all available information, taking into account our historical experience and expectation of future events. Changes in assumptions are recognized in net profit. Assumptions for the amortization of residual margin are locked in at policy issuance date and are not adjusted at each reporting date. We incorporate the potential impact of future risk factors on our operating results in the determination of assumptions. The sensitivity analysis disclosed in the Note 4.1.3 on page F-36 of this annual report provides a detailed analysis of impact of assumption changes on our operating results.
| • | Margins have been taken into consideration while computing the reserves of insurance contracts, measured separately and recognized in net profit in each period over the life of the contracts. At the inception of the contracts, we do not recognize Day One gain, whereas on the other hand, Day One loss is recognized in profit immediately. |
Margins comprise risk margin and residual margin. Risk margin is the reserve accrued to compensate for the uncertain amount and timing of future cash flows. At the inception of the contract, the residual margin is calculated net of certain acquisition costs, mainly consist of underwriting and policy acquisition costs, by us representing Day One gain and will be amortized over the life of contracts. For insurance contracts of which future returns are affected by investment yields of corresponding investment portfolios, their related residual margins are amortized based on estimated future participating dividends payable to the policyholders. For insurance contracts in which future returns are not affected by investment yields of corresponding investment portfolios, their related residual margins are amortized based on sum assured of outstanding policies. The subsequent measurement of residual margin is independent from the reasonable estimate of future discounted cash flows and risk margin. The assumption changes have no effect on the subsequent measurement of the residual margin.
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| • | We have considered the impact of time value on the reserve calculation for insurance contracts. |
We establish liabilities for long-term insurance contracts based on the following assumptions:
| • | For the insurance contracts of which future insurance benefits are affected by investment yields of corresponding investment portfolios, the discount rate assumption is based on expected investment returns of the asset portfolio backing these liabilities, considering the impact of time value on liabilities. In developing discount rate assumptions, we consider investment experience, current investment portfolio and trend of the relevant yield curve. The assumed discount rates reflect the future economic outlook as well as our investment strategy. The assumed discount rates with risk margin was 4.85% as at December 31, 2020, 2021 and 2022. |
For the insurance contracts of which the future insurance benefits are not affected by the investment yields of the corresponding investment portfolios, the discount rate assumption is based on the “yield curve of reserve computation benchmark for insurance contracts”, published on the “China Bond” website, with consideration of liquidity spreads, taxation and other relevant factors. The assumed spot discount rates with risk margin ranged from 3.09% to 4.80% as at December 31, 2020, from 2.88% to 4.80% as at December 31, 2021, and from 2.68% to 4.80% as at December 31, 2022, respectively.
There is uncertainty relating to the discount rate assumption, which is affected by factors such as future macro-economy, monetary and foreign exchange policies, capital market and availability of investment channels of insurance funds. We determine the discount rate assumption based on the information obtained at the end of each reporting period, including consideration of risk margin.
| • | The mortality and morbidity assumptions are based on the historical mortality and morbidity experience. The assumed mortality rates and morbidity rates vary by age of the insured and contract type. |
We base our mortality assumptions on the China Life Insurance Mortality Table (2010-2013), adjusted where appropriate to reflect our recent historical mortality experience. The main source of uncertainty with life insurance contracts is that epidemics and wide-ranging lifestyle changes could result in deterioration in future mortality experience, thus leading to an inadequate reserve. Similarly, improvements in longevity due to continuing advancements in medical care and social conditions could expose us to longevity risk.
We base our morbidity assumptions for critical illness products on analysis of historical experience and expectations of future developments. There are two main sources of uncertainty. First, wide-ranging lifestyle changes could result in future deterioration in morbidity experience. Second, future development of medical technologies and improved coverage of medical facilities available to the policyholders may bring forward the timing of diagnosing critical illness, which demands earlier payment of the critical illness benefits. Both could ultimately result in an inadequate reserving of liability if current morbidity assumptions do not properly reflect such trends.
Risk margin is considered in our mortality and morbidity assumptions.
| • | The expense assumptions are based on expected unit costs with the consideration of previous expenses study and future trends. Our expense assumptions are affected by certain factors, such as future inflation and market competition which bring uncertainty to these assumptions. We consider risk margin for expense assumptions based on the information obtained at the end of each reporting period. Components of expense assumptions include cost per policy and percentage of premium. Our expense assumptions for each of the past three years were as follows: the percentage of premiums costs of 0.85% to 0.90% of premiums for individual life products and 0.90% for group life products, in each case plus a fixed per-policy expense. |
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| • | The lapse rates and other assumptions are affected by certain factors, such as the future macro economy, availability of financial substitutions and market competition, which bring uncertainty to lapse rates and other assumptions. The lapse rates and other assumptions are determined with reference to creditable past experience, current conditions, future expectations and other information. |
The method used to determine risk margin has been consistently applied. We consider risk margin for each of the discount rate, mortality and morbidity and expense assumptions to compensate for the uncertain amount and timing of future cash flow. When determining risk margin, we consider historical experience, future expectations and other factors. Risk margin is determined by us and does not include any elements imposed by regulators.
We have adopted a consistent process to determine assumptions for the insurance contracts, which are detailed in Note 15 to our consolidated financial statements included elsewhere in this annual report. On each reporting date, we review the assumptions for reasonable estimates of liability and risk margin, with consideration of all available information, and taking into account our historical experience and expectation of future events.
Universal Life Contracts and Unit-linked Contracts
Universal life contracts and unit-linked contracts are unbundled into the following components:
| • | Insurance components; and |
| • | Non-insurance components. |
The insurance components are accounted for as insurance contracts, and the non-insurance components are accounted for as investment contracts, which are stated in the investment contract liabilities.
Investment Contracts
For investment contracts with or without discretionary participating feature, our policy fee income mainly consists of handling fee income and management fee income. Policy fee income net of certain acquisition cost is amortized over the expected life of the contracts by period and recognized in revenue.
Except for unit-linked contracts, of which the liabilities for transferred financial risks are carried at fair value, the liabilities of investment contracts are carried at amortized cost.
Valuation of Investments
We classify our financial assets into the following categories: securities at fair value through profit or loss, held-to-maturity securities, loans and receivables and available-for-sale securities. Management determines the classification of our financial assets at initial recognition, with the classification depending on the purpose for which the assets are acquired. The following are the policies used:
Securities at fair value through profit or loss. This category has two sub-categories: securities held for trading and those designated as at fair value through profit or loss at inception. Securities are classified as held for trading at inception if acquired principally for the purpose of selling in the short-term or if they form part of a portfolio of financial assets in which there is evidence of short term profit-taking. Other financial assets are classified as at fair value through profit or loss if they meet the criteria in IAS 39 and designated as such at inception by us.
Held-to-maturity securities. Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixed maturities that we have the positive intention and ability to hold to maturity and do not meet the definition of loans and receivables nor designated as available-for-sale securities or securities at fair value through profit or loss. These investments are carried at amortized cost.
Loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those that we intend to sell in the short term or held as available-for-sale. Loans and receivables mainly comprise term deposits, loans, securities purchased under agreements to resell, accrued investment income and premium receivables as presented separately in the statement of financial position. These investments are carried at amortized cost.
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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. These investments are carried at fair value.
Impairment of financial assets other than securities at fair value through profit or loss. Financial assets other than those accounted for as at fair value through profit or loss are adjusted for impairments, where there are declines in value that are considered to be impairment. In evaluating whether a decline in value is an impairment for these financial assets, we consider several factors including, but not limited to, the following:
| • | significant financial difficulty of the issuer or debtor; |
| • | a breach of contract, such as a default or delinquency in payments; |
| • | it becomes probable that the issuer or debtor will enter into bankruptcy or other financial reorganization; and |
| • | the disappearance of an active market for that financial asset because of financial difficulties. |
In evaluating whether a decline in value is impairment for equity securities, we also consider the extent or the duration of the decline. The quantitative factors include the following:
| • | the market price of the equity securities was more than 50% below their cost at the reporting date; |
| • | the market price of the equity securities was more than 20% below their cost for a period of at least six months at the reporting date; and |
| • | the market price of the equity securities was below their cost for a period of more than one year (including one year) at the reporting date. |
When the decline in value is considered impairment, held-to-maturity debt securities are written down to their present value of estimated future cash flows discounted at the securities effective interest rates; available-for-sale debt securities and equity securities are written down to their fair value, and the change is recorded in net realized gains on financial assets in the period the impairment is recognized. The impairment loss is reversed through net profit if in a subsequent period the fair value of a debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognized through net profit. The impairment losses recognized in net profit on equity instruments are not reversed through net profit.
As of December 31, 2022, debt securities of RMB253,941 million (US$36,818 million) contained guarantees issued by third parties and, of those, 60.51% were guaranteed by either the Chinese government or a Chinese government controlled financial institution. Of the guarantees issued by government or government controlled financial institutions, 94.99% related to debt securities issued by a government railway infrastructure entity. We monitor the credit worthiness of the third parties which have issued these guarantees using local Chinese credit ratings which are generally only utilized within China.
The methods and assumptions used by us in measuring the fair value of the financial instruments are as follows:
Debt securities. The fair values of debt securities are generally based on current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions, values obtained from current bid prices of comparable investments or valuation techniques when the market is not active.
Equity securities. The fair values of equity securities are generally based on current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions or commonly used market pricing model. Equity securities, for which fair values cannot be measured reliably, are recognized at cost less impairment.
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Securities purchased under agreements to resell, policy loans, term deposits, interest-bearing loans and borrowings, and securities sold under agreements to repurchase. The carrying amounts of these assets in the consolidated statement of financial position approximate fair value. Fair values of other loans are obtained from valuation techniques.
Valuations are generally obtained from third party pricing services for identical or comparable assets, or through the use of valuation methodologies using observable market inputs, or recent quoted market prices. Valuation service providers typically gather, analyze and interpret information related to market transactions and other key valuation model inputs from multiple sources, and, through the use of widely accepted valuation models, provide a theoretical quote on various securities.
We utilize one pricing service for substantially all of our Chinese domestic debt securities. This pricing service provider is the only publicly-recognized pricing service provider in China, and its pricing information is used by the mutual fund industry and almost all companies in China. We utilize international pricing services for our overseas debt securities. These pricing service providers are internationally-recognized, and their pricing information is commonly used by international companies. The prices obtained from the pricing service are non-binding. Our review and testing have shown the prices obtained from our pricing service to be appropriate. As such, during the year ended December 31, 2022, we did not consider it necessary to adjust the prices obtained from our pricing service.
As at December 31, 2022, RMB1,026,781 million of RMB1,341,648 million debt securities with prices obtained from our pricing service were issued by the Chinese government and government controlled organizations. This pricing service utilized a discounted cash flow valuation model using market observable inputs, mainly interest rates, to determine a fair value. There are no other significant market inputs. As such, we have classified these debt securities as Level 2 in the fair value hierarchy.
Management subjects the fair values provided by valuation service providers to a number of validation procedures. These procedures include a review of the valuation models utilized, as well as our own test recalculation of the prices obtained from the pricing service at each reporting date.
We consider a combination of many factors in determining whether we believe a market for a financial instrument is active or inactive. Among these factors include:
| • | whether there has been any trades within past 30 days of the reporting date; |
| • | the volume of the trades within this 30 day period; and |
| • | the degree which the implied yields for a debt security for observed transactions differs from our understanding of the current relevant market rates and information. |
Associates and joint ventures
Associates are entities on which we have significant influence, generally together with a shareholding of between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of such entities but without control or joint control over these decisions.
Joint ventures are joint arrangements whereby the parties have joint control of the arrangement and have rights to the net assets of the joint arrangement. Joint control is the contractually-agreed sharing of control of an arrangement, which exists only when decisions on relevant activities require unanimous consent of the parties sharing control.
We determine at each reporting date whether there is any objective evidence that the investments in associates and joint ventures are impaired. If this is the case, an impairment loss is recognized at the amount of the carrying amount of investment less its recoverable amount. The recoverable amount is the higher of the fair value of investment less costs of disposal and value in use. The impairment of investment in associates and joint ventures is reviewed for possible reversal at each reporting date.
Revenue Recognition
Premiums. Premiums from long-term insurance contracts are recognized as revenue when due from the policyholders.
Premiums from the sale of short-term accident and health insurance contracts are recorded when written and are accreted to earnings on a pro-rata basis over the term of the related policy coverage.
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Policy fee income. The policy fee income for investment contracts mainly consists of handling fee income and management fee income. Policy fee income net of certain acquisition costs is amortized over the expected life of the contracts and recognized as other income.
Investment income. Investment income is comprised of interest income from term deposits, cash and cash equivalents, debt securities, securities purchased under agreements to resell, loans and dividend income from equity securities. Interest income is recorded on an accrual basis using the effective interest rate method. Dividend income is recognized when the right to receive a dividend payment is established.
Deferred taxation
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Substantively enacted tax rates are used in the determination of deferred income tax.
Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the reversal of temporary differences can be recognized.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Recently Issued Accounting Standards
The following standards and amendments were adopted by us for the first time for the financial year beginning on January 1, 2022.
| Standards/Amendments | Content | Effective for annual periods beginning on or after |
||||
| Amendments to IFRS 3 | Update Reference to the Conceptual Framework | |
1 January 2022 |
| ||
| Amendments to IAS 16 | Property, Plant and Equipment: Proceeds before intended use | |
1 January 2022 |
| ||
| Amendments to IAS 37 | Onerous Contracts – Cost of Fulfilling a Contract | |
1 January 2022 |
| ||
| Annual improvements | Annual Improvements to IFRS Standards 2018-2020 Cycle | |
1 January 2022 |
| ||
New accounting standards and amendments that are effective but a temporary exemption is applied by us for the financial year beginning on January 1, 2022:
| Standards/Amendments |
Content |
Effective for annual periods beginning on or after | ||
| IFRS 9 | Financial Instruments | January 1, 2018 |
IFRS 9 – Financial Instruments
In July 2014, the IASB issued the final version of IFRS 9, bringing together all phases of the financial instruments project to replace IAS 39 and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. Based on the current assessment, we expect the adoption of IFRS 9 will have a significant impact on our consolidated financial statements. We have adopted and will continue to adopt the temporary exemption permitted in Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (“IFRS 4 Amendment”) to apply IAS 39 rather than IFRS 9, until the effective date of IFRS 17. Refer to Note 33 to our consolidated financial statements included elsewhere in this annual report for more details.
Classification and measurement
IFRS 9 requires that we classify debt instruments based on the combined effect of application of business models (hold to collect contractual cash flows, hold to collect contractual cash flows and sell financial assets or other business models) and contractual cash flow characteristics (solely payments of principal and interest on the principal amount outstanding or not). Debt instruments not giving rise to cash flows that are solely payments of principal and interest on the principal amount outstanding are to be measured at fair value through profit or loss. Other debt instruments giving rise to cash flows that are solely payments of principal and interest on the principal amount outstanding are to be measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss, based on their respective business models. We analyzed the contractual cash flow characteristics of financial assets as at December 31, 2022 and made relevant disclosures in Note 33 to our consolidated financial statements included elsewhere in this annual report in accordance with the IFRS 4 Amendments.
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Equity instruments would generally be measured at fair value through profit or loss unless we elect to measure at fair value through other comprehensive income for certain equity investments not held for trading. This will result in unrealized gains and losses on equity instruments currently classified as available-for-sale securities being recorded in income going forward. Currently, these unrealized gains and losses are recognized in other comprehensive income. If we elect to record equity investments at fair value through other comprehensive income, gains and losses would never be recognized in income except for the received dividends which do not represent a recovery of part of the investment cost.
We expect the presentation using IFRS 9 to result in an increase in financial assets measured at fair value on January 1, 2023, which will be more exposed to capital market fluctuations.
Impairment
IFRS 9 replaces the “incurred loss” model with the “expected credit loss” model which is designed to include forward-looking information. We believe that the provision for our debt instruments under the “expected credit loss” model would be larger than that under the previous “incurred loss” model.
Hedge accounting
We do not apply the hedge accounting currently, so we expect that the new hedge accounting model under IFRS 9 will have no impact on our consolidated financial statements.
We will adopt IFRS 9 effective on 1 January 2023. In connection with the adoption of IFRS 9, the classification and measurement and impairment requirements will be applied retrospectively by adjusting the opening balance sheet at the date of initial application, with no requirement to restate comparative periods. We do not intend to restate comparative periods.
The following standards and amendments are not yet effective and have not been early adopted by us for the financial year beginning on January 1, 2022.
| Standards/Amendments | Content | Effective for annual periods beginning on or after |
||||
| IFRS 17 | Insurance Contracts | 1 January 2023 | ||||
| Amendments to IAS 12 | Deferred Tax related to Assets and Liabilities arising from a Single Transaction | 1 January 2023 | ||||
| Amendments to IAS 1 and IFRS Practice Statement 2 | Disclosure of Accounting Policies | 1 January 2023 | ||||
| Amendments to IAS 8 | Definition of Accounting Estimates | 1 January 2023 | ||||
| Amendments to IAS 1 | Classification of Liabilities as Current or Non-current | 1 January 2024 | ||||
| Amendments to IAS 1 | Non-current Liabilities with Covenants | 1 January 2024 | ||||
| Amendments to IFRS 16 | Lease Liability in a Sale and Leaseback | 1 January 2024 | ||||
| Amendments to IFRS 10 and IAS 28 Amendments | Sale or Contribution of Assets between an Investor and its Associate or Joint Venture | |
No mandatory effective date yet determined but available for adoption |
| ||
IFRS 17 – Insurance Contracts
In May 2017, the IASB issued IFRS 17 Insurance Contracts, a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure, which replaces IFRS 4 Insurance Contracts. In June 2020, the IASB issued the amendments to IFRS 17, which included a deferral of the effective date of IFRS 17 to annual reporting periods beginning on or after January 1, 2023. Insurers qualifying for the deferral of IFRS 9 can apply both IFRS 17 and IFRS 9 for the first time to annual reporting periods beginning on or after January 1, 2023.
We will adopt IFRS 17 effective on January 1, 2023. The expected principal impact on the shareholders’ equity on January 1, 2023 is due to the changes in IFRS 17 compared to IFRS 4, as follows:
| • | IFRS 17 provides a comprehensive general model for insurance contracts, with measurement is based on the building blocks of discounted, probability-weighted cash flows, a risk adjustment and a contractual service margin representing the unearned profit of the contract. It also provides the variable fee approach for insurance contracts with direct participation features and the premium allocation approach mainly for short-duration contracts; |
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| • | The fulfilment cash flows, which include the expected present value of future cash flows and explicit risk adjustment, are remeasured every reporting period; |
| • | A contractual service margin representing the unearned profitability of the insurance contracts is recognized in profit or loss over the coverage period; |
| • | Certain changes in the fulfilment cash flows relating to future service adjust the carrying amount of the contractual service margin at the end of the reporting period, and thereby will be recognized in profit or loss over the remaining coverage period; |
| • | The discount rate assumption is determined based on observable current market situations that reflect the characteristics of the insurance contract. The effect of changes in discount rates will be reported in either profit or loss or OCI, determined by an accounting policy choice; |
| • | The recognition of insurance revenue and insurance service expenses in the statement of comprehensive income are based on the concept of services provided during the period; |
| • | Amounts that the policyholder will always receive, regardless of whether an insured event happens (non-distinct investment components), are not presented in the statement of comprehensive income, but are recognized directly in the statement of financial position; |
| • | A variable fee approach is adopted for insurance contracts with direct participation features where policyholders share in the returns from underlying items. When applying the variable fee approach, the entity’s share of the fair value changes of the underlying items is included in the contractual service margin; |
| • | An entity may simplify the measurement of a group of insurance contracts using the premium allocation approach only if the entity reasonably expects that such simplification would produce a measurement of the liability for remaining coverage for the group that would not differ materially from the one that would be produced applying the general model or the coverage period of each contract in the group is one year or less at the inception of the group; |
| • | Insurance revenue, insurance service expenses and insurance finance income and expenses are presented separately; and |
| • | Extensive disclosures are required to provide information on the recognized amounts from insurance contracts and the nature and extent of risks arising from these contracts. |
For insurance contracts with accounting treatments that are inconsistent with the provisions of IFRS 17 prior to January 1, 2022, we will adopt a retrospective approach, and modified retrospective approach or fair value approach when full retrospective application is impracticable.
Except for IFRS 17, there are no other new accounting standards, amendments or IFRIC interpretations that are not yet effective but would be expected to have a significant impact on our financial position and performance.
Inflation
According to the National Statistics Bureau of China, China’s overall national inflation rates, as represented by the consumer price index, were approximately 2.0%, 0.9%, 2.5%, 2.9% and 2.1% in 2022, 2021, 2020, 2019 and 2018, respectively. Inflation has not had a significant effect on our business during the past three years.
Foreign Currency Fluctuation
See “Item 3. Key Information—Risk Factors—Risks Relating to the People’s Republic of China—Government control of currency conversion and the fluctuation of the Renminbi may materially and adversely affect our operations and financial results” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Exchange Risk”.
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A. OPERATING RESULTS
Year Ended December 31, 2022 Compared with Year Ended December 31, 2021
China Life (Tianjin) Aged-care and Healthcare Investment Company Limited became a subsidiary of the Company in 2022 as a result of a business combination under common control. The financial data of previous years in this annual report have been restated. See Note 34(f) to our consolidated financial statements included elsewhere in this annual report.
| Total Revenues | For the year ended December 31, | |||||||
| 2021 | 2022 | |||||||
| RMB | RMB | |||||||
| (in millions) | ||||||||
| Net premiums earned |
611,251 | 607,825 | ||||||
| Life insurance business |
480,214 | 484,504 | ||||||
| Health insurance business |
114,549 | 108,791 | ||||||
| Accident insurance business |
16,488 | 14,530 | ||||||
| Investment income |
178,387 | 186,629 | ||||||
| Investment income from securities at fair value through profit or loss |
4,991 | 5,944 | ||||||
| Investment income from available-for-sale securities |
57,297 | 61,013 | ||||||
| Investment income from held-to-maturity securities |
56,830 | 62,883 | ||||||
| Investment income from bank deposits |
25,949 | 25,161 | ||||||
| Investment income from loans |
32,970 | 30,915 | ||||||
| Other investment income |
350 | 713 | ||||||
| Net realized gains on financial assets |
20,344 | 12,707 | ||||||
| Net fair value gains through profit or loss |
4,943 | (12,156 | ) | |||||
| Other income |
10,008 | 9,383 | ||||||
|
|
|
|
|
|||||
| Total |
824,933 | 804,388 | ||||||
|
|
|
|
|
|||||
Net Premiums Earned
Net premiums earned decreased by RMB3,426 million, or 0.6%, to RMB607,825 million in 2022 from RMB611,251 million in 2021.
Life Insurance Business
Net premiums earned from life insurance business increased by RMB4,290 million, or 0.9%, to RMB484,504 million in 2022 from RMB480,214 million in 2021. This was primarily due to the fact that our life insurance business remains stable.
Health Insurance Business
Net premiums earned from health insurance business decreased by RMB5,758 million, or 5.0%, to RMB108,791 million in 2022 from RMB114,549 million in 2021. This was primarily due to the fact that our health insurance business remains stable.
Accident Insurance Business
Net premiums earned from accident insurance business decreased by RMB1,958 million, or 11.9%, to RMB14,530 million in 2022 from RMB16,488 million in 2021. This was primarily due to the adjustment of our business structure.
Investment Income
Investment income increased by RMB8,242 million, or 4.6%, from RMB178,387 million in 2021 to RMB186,629 million in 2022.
Investment Income from Securities at Fair Value through Profit or Loss
Investment income from securities at fair value through profit or loss increased by RMB953 million, or 19.1%, to RMB5,944 million in 2022 from RMB4,991 million in 2021. This was primarily due to an increase in bond’s interest income from securities at fair value through profit or loss.
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Investment Income from Available-for-Sale Securities
Investment income from available-for-sale securities increased by RMB3,716 million, or 6.5%, to RMB61,013 million in 2022 from RMB57,297 million in 2021. This was primarily due to an increase in bond’s interest income from available-for-sale securities investment stocks.
Investment Income from Held-to-Maturity Securities
Investment income from held-to-maturity securities increased by RMB6,053 million, or 10.7%, to RMB62,883 million in 2022 from RMB56,830 million in 2021. This was primarily due to an increase in interest income resulting from the increase in the allocation in government agency bonds.
Investment Income from Bank Deposits
Investment income from bank deposits decreased by RMB788 million, or 3.0%, to RMB25,161 million in 2022 from RMB25,949 million in 2021. This was primarily due to a decrease in interest income from term deposits.
Investment Income from Loans
Investment income from loans decreased by RMB2,055 million, or 6.2%, to RMB30,915 million in 2022 from RMB32,970 million in 2021. This was primarily due to a decrease in interest income from trust schemes and negotiated deposits.
Net Realized Gains on Financial Assets
Net realized gains on financial assets decreased by RMB7,637 million, or 37.5%, to gains of RMB12,707 million in 2022 from gains of RMB20,344 million in 2021. This was primarily due to a decrease in spread income from funds in available-for-sale securities.
Net Fair Value Gains through Profit or Loss
Net fair value gains through profit or loss decreased by RMB17,099 million to losses of RMB12,156 million in 2022 from gains of RMB4,943 million in 2021. This was primarily due to the market value fluctuation of securities at fair value through profit or loss and investment operations.
Other Income
Other income decreased by RMB625 million, or 6.2%, to RMB9,383 million in 2022 from RMB10,008 million in 2021. This was primarily due to a decrease in management fees of pension products of subsidiaries.
| Benefits, Claims and Expenses | For the year ended December 31, | |||||||
| 2021 | 2022 | |||||||
| RMB | RMB | |||||||
| (in millions) | ||||||||
| Insurance benefits and claims expenses |
||||||||
| Life insurance death and other benefits |
121,354 | 119,369 | ||||||
| Accident and health claims and claim adjustment expenses |
55,030 | 51,311 | ||||||
| Increase in insurance contracts liabilities |
442,370 | 461,298 | ||||||
| Investment contracts benefits |
10,628 | 13,340 | ||||||
| Policyholder dividends resulting from participation in profits |
26,511 | 20,685 | ||||||
| Underwriting and policy acquisition costs |
65,744 | 54,777 | ||||||
| Finance costs |
5,598 | 4,863 | ||||||
| Administrative expenses |
40,867 | 39,874 | ||||||
| Statutory insurance fund contribution |
1,253 | 1,314 | ||||||
| Other expenses |
15,566 | 13,994 | ||||||
|
|
|
|
|
|||||
| Total |
784,921 | 780,825 | ||||||
|
|
|
|
|
|||||
| Segment information of insurance benefits and claims expenses |
||||||||
| Life insurance business |
527,863 | 537,331 | ||||||
| Health insurance business |
83,688 | 89,196 | ||||||
| Accident insurance business |
7,203 | 5,451 | ||||||
|
|
|
|
|
|||||
| Total |
618,754 | 631,978 | ||||||
|
|
|
|
|
|||||
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Insurance Benefits and Claims Expenses
Insurance benefits and claims, net of amounts ceded through reinsurance, increased by RMB13,224 million, or 2.1%, to RMB631,978 million in 2022 from RMB618,754 million in 2021.
Life insurance death and other benefits payouts decreased by RMB1,985 million, or 1.6%, to RMB119,369 million in 2022 from RMB121,354 million in 2021. This was primarily due to a decrease in surrenders for certain products. Accident and health claims and claim adjustment expenses decreased by RMB3,719 million, or 6.8%, to RMB51,311 million in 2022 from RMB55,030 million in 2021. This was primarily due to a decrease in the volume of short-term health insurance and accident insurance business. Increase in insurance contracts liabilities increased by RMB18,928 million, or 4.3%, to RMB461,298 million in 2022 from RMB442,370 million in 2021. This was primarily due to the accumulation of insurance liabilities for new insurance businesses and renewal businesses.
Life Insurance Business
Insurance benefits and claims expenses attributable to life insurance business increased by RMB9,468 million, or 1.8%, to RMB537,331 million in 2022 from RMB527,863 million in 2021. This was primarily due to the steady growth of our life insurance business.
Health Insurance Business
Insurance benefits and claims expenses attributable to health insurance business increased by RMB5,508 million, or 6.6%, to RMB89,196 million in 2022 from RMB83,688 million in 2021. This was primarily due to an increase in claims expenses in health insurance business.
Accident Insurance Business
Insurance benefits and claims expenses attributable to accident insurance business decreased by RMB1,752 million, or 24.3%, to RMB5,451 million in 2022 from RMB7,203 million in 2021. This was primarily due to the fluctuation in claims expenses of certain businesses.
Investment Contract Benefits
Investment contract benefits increased by RMB2,712 million, or 25.5%, to RMB13,340 million in 2022 from RMB10,628 million in 2021. This was primarily due to an increase in the scale of universal insurance accounts.
Policyholder Dividends Resulting from Participation in Profits
Policyholder dividends resulting from participation in profits decreased by RMB5,826 million, or 22.0%, to RMB20,685 million in 2022 from RMB26,511 million in 2021. This was primarily due to a decrease in investment yield from the participating accounts.
Underwriting and Policy Acquisition Costs
Underwriting and policy acquisition costs decreased by RMB10,967 million, or 16.7%, to RMB54,777 million in 2022 from RMB65,744 million in 2021. This was primarily due to a decrease in the size of sales force and the adjustment of business structure.
Finance Costs
Finance costs decreased by RMB735 million, or 13.1%, to RMB4,863 million in 2022 from RMB5,598 million in 2021. This was primarily due to a decrease in interest paid for securities sold under agreements to repurchase.
Administrative Expenses
Administrative expenses include employees’ remuneration and other administrative expenses. Administrative expenses decreased by RMB993 million, or 2.4%, to RMB39,874 million in 2022 from RMB40,867 million in 2021. This was primarily due to cost control proactively strengthened by us and reduced expenses caused by the impact of COVID-19.
Other Expenses
Other expenses decreased by RMB1,572 million, or 10.1%, to RMB13,994 million in 2022 from RMB15,566 million in 2021. This was primarily due to a decrease in interest expense to third party investors of a consolidated structured entity.
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| Profit | For the year ended December 31, | |||||||
| 2021 | 2022 | |||||||
| RMB | RMB | |||||||
| (in millions) | ||||||||
| Profit before income tax |
50,340 | 24,047 | ||||||
| Life insurance business |
22,771 | 9,583 | ||||||
| Health insurance business |
8,599 | 8,271 | ||||||
| Accident insurance business |
1,682 | 2,269 | ||||||
| Other businesses |
17,288 | 3,924 | ||||||
| Income tax |
(1,917 | ) | (9,467 | ) | ||||
| Net profit attributable to equity holders of the company |
50,766 | 32,082 | ||||||
Profit before Income Tax
Our profit before income tax decreased by RMB26,293 million, or 52.2%, to RMB24,047million in 2022 from RMB50,340 million in 2021.
Life Insurance Business
Profit before income tax in the life insurance business decreased by RMB13,188 million, or 57.9%, to RMB9,583 million in 2022 from RMB22,771 million in 2021. This was primarily due to the impact of a significant decline in equity markets and a decrease in investment yield.
Health Insurance Business
Profit before income tax in the health insurance business decreased by RMB328 million, or 3.8%, to RMB8,271 million in 2022 from RMB8,599 million in 2021. This was primarily due to the fact that our health insurance business remains stable.
Accident Insurance Business
Profit before income tax in the accident insurance business increased by RMB587 million, or 34.9%, to RMB2,269 million in 2022 from RMB1,682 million in 2021. This was primarily due to the improvement of our business quality.
Other Businesses
Profit before income tax in other businesses decreased by RMB13,364 million, or 77.3%, to RMB3,924 million in 2022 from RMB17,288 million in 2021. This was primarily due to a decrease in profits of certain associates and provisions for impairment.
Income Tax
We pay income tax according to applicable Chinese enterprise income tax regulations and rules. Income tax in 2022 decreased by RMB7,550 million, or 393.8% from RMB1,917 million in 2021. This was primarily due to the combined impact of changes in profit before income tax and non-taxable income.
Net Profit Attributable to Equity Holders of the Company
For the reasons set forth above, net profit attributable to equity holders of the Company decreased by RMB18,684 million, or 36.8%, to RMB32,082 million in 2022 from RMB50,766 million in 2021. This was primarily due to a significant decline in equity markets and a decrease in investment yield.
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| Major Assets | As of December 31, | |||||||
| 2021 | 2022 | |||||||
| RMB | RMB | |||||||
| (in millions) | ||||||||
| Investment assets |
4,716,420 | 5,064,991 | ||||||
| Term deposits |
529,488 | 485,567 | ||||||
| Held-to-maturity securities |
1,533,753 | 1,574,204 | ||||||
| Available-for-sale securities |
1,429,287 | 1,738,108 | ||||||
| Securities at fair value through profit or loss |
206,771 | 223,790 | ||||||
| Securities purchased under agreements to resell |
12,915 | 38,533 | ||||||
| Cash and cash equivalents |
60,459 | 127,594 | ||||||
| Loans |
666,087 | 596,490 | ||||||
| Statutory deposits—restricted |
6,333 | 6,333 | ||||||
| Investment properties |
13,374 | 13,193 | ||||||
| Investment in associates and joint ventures |
257,953 | 261,179 | ||||||
| Other assets |
176,060 | 186,997 | ||||||
|
|
|
|
|
|||||
| Total |
4,892,480 | 5,251,988 | ||||||
|
|
|
|
|
|||||
Investment Assets
Our total investment assets increased by RMB348,571 million, or 7.4%, to RMB5,064,991 million as of December 31, 2022 from RMB4,716,420 million as of December 31, 2021.
Term Deposits
Term deposits decreased by RMB43,921 million, or 8.3%, to RMB485,567 million as of December 31, 2022 from RMB529,488 million as of December 31, 2021. This was primarily due to the maturity of term deposits.
Held-to-Maturity Securities
Held-to-maturity securities increased by RMB40,451 million, or 2.6%, to RMB1,574,204 million as of December 31, 2022 from RMB1,533,753 million as of December 31, 2021.
Available-for-Sale Securities
Available-for-sale securities increased by RMB308,821 million, or 21.6%, to RMB1,738,108 million as of December 31, 2022 from RMB1,429,287 million as of December 31, 2021. This was primarily due to an increase in the allocation of equity assets in available-for-sale securities.
Securities at Fair Value Through Profit or Loss
Securities at fair value through profit or loss increased by RMB17,019 million, or 8.2%, to RMB223,790 million as of December 31, 2022 from RMB206,771 million as December 31, 2021. This was primarily due to an increase in the allocation of debt-type assets in securities at fair value through profit or loss.
Securities Purchased under Agreements to Resell
Securities purchased under agreements to resell increased by RMB25,618 million, or 198.4%, to RMB38,533 million as of December 31, 2022 from RMB12,915 million as of December 31, 2021. This was primarily due to the needs for liquidity management.
Cash and Cash Equivalents
Cash and cash equivalents increased by RMB67,135 million, or 111.0%, to RMB127,594 million as of December 31, 2022 from RMB60,459 million as of December 31, 2021. This was primarily due to the needs for liquidity management.
Investments in associates and joint ventures
Our investments in associates and joint ventures increased by RMB3,226 million, or 1.3%, to RMB261,179 million as of December 31, 2022 from RMB257,953 million as of December 31, 2021. This was primarily due to new investments in associates and joint ventures.
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Loans
Loans decreased by RMB69,597 million, or 10.4%, to RMB596,490 million as of December 31, 2022 from RMB666,087 million as of December 31, 2021. This was primarily due to a decrease in negotiated deposits.
Investment Properties
Investment properties decreased by RMB181 million, or 1.4%, to RMB13,193 million as of December 31, 2022 from RMB13,374million as of December 31, 2021. This was primarily due to change of uses of properties of our subsidiaries.
| Major Liabilities | As of December 31, | |||||||
| 2021 | 2022 | |||||||
| RMB | RMB | |||||||
| (in millions) | ||||||||
| Liabilities |
||||||||
| Insurance contracts |
3,419,899 | 3,880,160 | ||||||
| Investment contracts |
313,594 | 374,749 | ||||||
| Securities sold under agreements to repurchase |
239,446 | 148,958 | ||||||
| Policyholder dividends payable |
124,949 | 96,682 | ||||||
| Annuity and other insurance balances payable |
56,818 | 60,819 | ||||||
| Interest-bearing loans and borrowings |
19,222 | 12,774 | ||||||
| Deferred tax liabilities |
7,481 | 272 | ||||||
| Other liabilities |
223,937 | 232,453 | ||||||
|
|
|
|
|
|||||
| Total |
4,405,346 | 4,806,867 | ||||||
|
|
|
|
|
|||||
Liabilities
Our total liabilities increased by RMB401,521 million, or 9.1%, to RMB4,806,867 million as of December 31, 2022 from RMB4,405,346 million as of December 31, 2021.
Insurance Contracts
Liabilities of insurance contracts increased by RMB460,261 million, or 13.5%, to RMB3,880,160 million as of December 31, 2022 from RMB3,419,899 million as of December 31, 2021. This was primarily due to the accumulation of insurance liabilities from new policies and renewals. As at the date of the statement of financial position, the reserves of our various insurance contracts passed the liability adequacy test.
Investment Contracts
The account balance of investment contracts increased by RMB61,155 million, or 19.5%, to RMB374,749 million as of December 31, 2022 from RMB313,594 million as of December 31, 2021. This was primarily due to an increase in the scale of universal insurance accounts.
Securities Sold under Agreements to Repurchase
Securities sold under agreements to repurchase decreased by RMB90,488 million, or 37.8%, to RMB148,958 million as of December 31, 2022 from RMB239,446 million as of December 31, 2021. This was primarily due to the needs for liquidity management.
Policyholder Dividends Payable
Policyholder dividends payable decreased by RMB28,267 million, or 22.6%, to RMB96,682 million as of December 31, 2022 from RMB124,949 million as of December 31, 2021. This was primarily due to a decrease in investment yield in dividend accounts.
Annuity and Other Insurance Balances Payable
Annuity and other insurance balances payable increased by RMB4,001 million, or 7.0%, to RMB60,819 million as of December 31, 2022 from RMB56,818 million as of December 31, 2021. This was primarily due to an increase in maturities payable and annuity payable.
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Interest-bearing Loans and Borrowings
The carrying value of our borrowings in foreign currency decreased in 2022. This was primarily due to the repayment of certain loans. Interest-bearing loans and other borrowings include a three-year bank loan of EUR330 million with a maturity date on September 8, 2023, and a five-year bank loan of GBP275 million with a maturity date on June 25, 2024. All the above are fixed rate bank loans. Interest-bearing loans and other borrowings also include a five-year bank loan of US$970 million with a maturity date on September 27, 2024, an eighteen-month bank loan of EUR100 million with a maturity date on September 8, 2023 and a 15-year bank loan of RMB519 million with a maturity date of June 15, 2034. All the above are floating rate loans.
Deferred Tax Liabilities
Deferred tax liabilities as of December 31, 2022 were RMB272 million, a decrease of RMB7,209 million, or 96.4%, from RMB7,481 million as of December 31, 2021. This change was primarily due to the change in fair value of financial assets.
Equity Attributable to Equity Holders of the Company
As of December 31, 2022, equity attributable to our equity holders was RMB436,169 million, a decrease of RMB42,892 million, or 9.0%, from RMB479,061 million as of December 31, 2021. This was primarily due to the combined impact of total comprehensive income and profit distribution during 2022.
Year Ended December 31, 2021 Compared with Year Ended December 31, 2020
China Life Insurance Sales Company became a subsidiary of the Company in 2021 as a result of a business combination under common control. The financial data of the years prior to the year ended December 31, 2021 have been restated in our annual report for the year ended December 31, 2021.
China Life (Tianjin) Aged-care and Healthcare Investment Company Limited became a subsidiary of the Company in 2022 as a result of a business combination under common control. The financial data of previous years in this annual report have been restated. See Note 34(f) to our consolidated financial statements included elsewhere in this annual report.
| Total Revenues | For the year ended December 31, | |||||||
| 2020 | 2021 | |||||||
| RMB | RMB | |||||||
| (in millions) | ||||||||
| Net premiums earned |
604,666 | 611,251 | ||||||
| Life insurance business |
479,600 | 480,214 | ||||||
| Health insurance business |
109,091 | 114,549 | ||||||
| Accident insurance business |
15,975 | 16,488 | ||||||
| Investment income |
154,497 | 178,387 | ||||||
| Investment income from securities at fair value through profit or loss |
4,280 | 4,991 | ||||||
| Investment income from available-for-sale securities |
46,880 | 57,297 | ||||||
| Investment income from held-to-maturity securities |
44,757 | 56,830 | ||||||
| Investment income from bank deposits |
25,860 | 25,949 | ||||||
| Investment income from loans |
31,948 | 32,970 | ||||||
| Other investment income |
772 | 350 | ||||||
| Net realized gains on financial assets |
14,583 | 20,344 | ||||||
| Net fair value gains through profit or loss |
21,900 | 4,943 | ||||||
| Other income |
9,403 | 10,008 | ||||||
|
|
|
|
|
|||||
| Total |
805,049 | 824,933 | ||||||
|
|
|
|
|
|||||
Net Premiums Earned
Net premiums earned increased by RMB6,585 million, or 1.1%, to RMB611,251 million in 2021 from RMB604,666 million in 2020.
Life Insurance Business
Net premiums earned from life insurance business increased by RMB614 million, or 0.1%, to RMB480,214 million in 2021 from RMB479,600 million in 2020. This was primarily due to the fact that our life insurance business remains stable.
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Health Insurance Business
Net premiums earned from health insurance business increased by RMB5,458 million, or 5.0%, to RMB114,549 million in 2021 from RMB109,091 million in 2020. This was primarily due to our increased efforts to develop our health insurance business.
Accident Insurance Business
Net premiums earned from accident insurance business increased by RMB513 million, or 3.2%, to RMB16,488 million in 2021 from RMB15,975 million in 2020. This was primarily due to the steady development of our accident insurance business.
Investment Income
Investment income increased by RMB23,890 million, or 15.5%, from RMB154,497 million in 2020 to RMB178,387 million in 2021.
Investment Income from Securities at Fair Value through Profit or Loss
Investment income from securities at fair value through profit or loss increased by RMB711 million, or 16.6%, to RMB4,991 million in 2021 from RMB4,280 million in 2020. This was primarily due to an increase in bond’s interest income from securities at fair value through profit or loss.
Investment Income from Available-for-Sale Securities
Investment income from available-for-sale securities increased by RMB10,417 million, or 22.2%, to RMB57,297 in 2021 from RMB46,880 million in 2020. This was primarily due to an increase in bond’s interest income from available-for-sale securities investment stocks.
Investment Income from Held-to-Maturity Securities
Investment income from held-to-maturity securities increased by RMB12,073 million, or 27.0%, to RMB56,830 million in 2021 from RMB44,757 million in 2020. This was primarily due to an increase in interest income resulting from the increase in the allocation in government agency bonds.
Investment Income from Bank Deposits
Investment income from bank deposits increased by RMB89 million, or 0.3%, to RMB25,949 million in 2021 from RMB25,860 million in 2020. This was primarily due to an increase in interest income from term deposits.
Investment Income from Loans
Investment income from loans increased by RMB1,022 million, or 3.2%, to RMB32,970 million in 2021 from RMB31,948 million in 2020. This was primarily due to an increase in interest income from policy loans
Net Realized Gains on Financial Assets
Net realized gains on financial assets increased by RMB5,761 million, or 39.5%, to gains of RMB20,344 million in 2021 from gains of RMB14,583 million in 2020. This was primarily due to an increase of realized gains from trading activities in available-for-sale securities.
Net Fair Value Gains through Profit or Loss
Net fair value gains through profit or loss decreased by RMB16,957 million, or 77.4%, to gains of RMB4,943 million in 2021 from gains of RMB21,900 million in 2020. This was primarily due to the market value fluctuation of securities at fair value through profit or loss and investment operations.
Other Income
Other income increased by RMB605 million, or 6.4%, to RMB10,008 million in 2021 from RMB9,403 million in 2020. This was primarily due to an increase in income of management service fees received by our subsidiaries.
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| Benefits, Claims and Expenses | For the year ended December 31, | |||||||
| 2020 | 2021 | |||||||
| RMB | RMB | |||||||
| (in millions) | ||||||||
| Insurance benefits and claims expenses |
||||||||
| Life insurance death and other benefits |
113,609 | 121,354 | ||||||
| Accident and health claims and claim adjustment expenses |
52,395 | 55,030 | ||||||
| Increase in insurance contracts liabilities |
414,797 | 442,370 | ||||||
| Investment contracts benefits |
9,846 | 10,628 | ||||||
| Policyholder dividends resulting from participation in profits |
28,279 | 26,511 | ||||||
| Underwriting and policy acquisition costs |
84,361 | 65,744 | ||||||
| Finance costs |
3,747 | 5,598 | ||||||
| Administrative expenses |
37,732 | 40,867 | ||||||
| Statutory insurance fund contribution |
1,229 | 1,253 | ||||||
| Other expenses |
12,280 | 15,566 | ||||||
|
|
|
|
|
|||||
| Total |
758,275 | 784,921 | ||||||
|
|
|
|
|
|||||
| Segment information of insurance benefits and claims expenses |
||||||||
| Life insurance business |
490,994 | 527,863 | ||||||
| Health insurance business |
82,146 | 83,688 | ||||||
| Accident insurance business |
7,661 | 7,203 | ||||||
|
|
|
|
|
|||||
| Total |
580,801 | 618,754 | ||||||
|
|
|
|
|
|||||
Insurance Benefits and Claims Expenses
Insurance benefits and claims, net of amounts ceded through reinsurance, increased by RMB37,953 million, or 6.5%, to RMB618,754 million in 2021 from RMB580,801 million in 2020.
Life insurance death and other benefits payouts increased by RMB7,745 million, or 6.8%, to RMB121,354 million in 2021 from RMB113,609 million in 2020. This was primarily due to the relatively low base of the surrender payment during the corresponding period in 2020. Accident and health claims and claim adjustment expenses increased by RMB2,635 million, or 5.0%, to RMB55,030 million in 2021 from RMB52,395 million in 2020. This was primarily due to an increase in the volume of short-term health insurance and accident insurance business. Increase in insurance contracts liabilities increased by RMB27,573 million, or 6.6%, to RMB442,370 million in 2021 from RMB414,797 million in 2020. This was primarily due to the growth of our insurance business.
Life Insurance Business
Insurance benefits and claims expenses attributable to life insurance business increased by RMB36,869 million, or 7.5%, to RMB527,863 million in 2021 from RMB490,994 million in 2020. This was primarily due to the steady growth of our life insurance business.
Health Insurance Business
Insurance benefits and claims expenses attributable to health insurance business increased by RMB1,542 million, or 1.9%, to RMB83,688 million in 2021 from RMB82,146 million in 2020. This was primarily due to an increase in claims expenses in health insurance business.
Accident Insurance Business
Insurance benefits and claims expenses attributable to accident insurance business decreased by RMB458 million, or 6.0%, to RMB7,203 million in 2021 from RMB7,661 million in 2020. This was primarily due to the fluctuation in claims expenses of certain businesses.
Investment Contract Benefits
Investment contract benefits increased by RMB782 million, or 7.9%, to RMB10,628 million in 2021 from RMB9,846 million in 2020. This was primarily due to an increase in the scale of universal insurance accounts.
Policyholder Dividends Resulting from Participation in Profits
Policyholder dividends resulting from participation in profits decreased by RMB1,768 million, or 6.3%, to RMB26,511 million in 2021 from RMB28,279 million in 2020. This was primarily due to a decrease in investment yield from the participating accounts.
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Underwriting and Policy Acquisition Costs
Underwriting and policy acquisition costs decreased by RMB18,617 million, or 22.1%, to RMB65,744 million in 2021 from RMB84,361 million in 2020. This was primarily due to a decrease in regular premiums from new policies.
Finance Costs
Finance costs increased by RMB1,851 million, or 49.4%, to RMB5,598 million in 2021 from RMB3,747 million in 2020. This was primarily due to an increase in interest paid for securities sold under agreements to repurchase.
Administrative Expenses
Administrative expenses include employees’ remuneration and other administrative expenses. Administrative expenses increased by RMB3,135 million, or 8.3%, to RMB40,867 million in 2021 from RMB37,732 million in 2020. This was primarily due to the expiration of policies on temporary expenses deduction.
Other Expenses
Other expenses increased by RMB3,286 million, or 26.8%, to RMB15,566 million in 2021 from RMB12,280 million in 2020. This was primarily due to an increase in interest expense to third party investors of a consolidated structured entity.
| Profit | For the year ended December 31, | |||||||
| 2020 | 2021 | |||||||
| RMB | RMB | |||||||
| (in millions) | ||||||||
| Profit before income tax |
54,440 | 50,340 | ||||||
| Life insurance business |
28,073 | 22,771 | ||||||
| Health insurance business |
11,611 | 8,599 | ||||||
| Accident insurance business |
572 | 1,682 | ||||||
| Other businesses |
14,184 | 17,288 | ||||||
| Income tax |
3,103 | (1,917 | ) | |||||
| Net profit attributable to equity holders of the company |
50,221 | 50,766 | ||||||
Profit before Income Tax
Our profit before income tax decreased by RMB4,100 million, or 7.5%, to RMB50,340 million in 2021 from RMB54,440 million in 2020.
Life Insurance Business
Profit before income tax in the life insurance business decreased by RMB5,302 million, or 18.9%, to RMB22,771 million in 2021 from RMB28,073 million in 2020. This was primarily due to the combined impact of factors including the change in investment yield and the change in accrued cost of reserve as a result of business accumulation.
Health Insurance Business
Profit before income tax in the health insurance business decreased by RMB3,012 million, or 25.9%, to RMB8,599 million in 2021 from RMB11,611 million in 2020. This was primarily due to an increase in claims expenses of certain insurance businesses.
Accident Insurance Business
Profit before income tax in the accident insurance business increased by RMB1,110 million, or 194.1%, to RMB1,682 million in 2021 from RMB572 million in 2020. This was primarily due to the improvement of our business quality.
Other Businesses
Profit before income tax in other businesses increased by RMB3,104 million, or 21.9%, to RMB17,288 million in 2021 from RMB14,184 million in 2020. This was primarily due to an increase in profits of certain associates.
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Income Tax
We pay income tax according to applicable Chinese enterprise income tax regulations and rules. Income tax in 2021 decreased by RMB5,020 million, or 161.8% from RMB3,103 million in 2020. This was primarily due to the combined impact of income tax payable and deferred income tax.
Net Profit Attributable to Equity Holders of the Company
For the reasons set forth above, net profit attributable to equity holders of the Company increased by RMB545 million, or 1.1%, to RMB50,766 million in 2021 from RMB50,221 million in 2020. This was primarily due to the stable and sound business operations of the Company, satisfactory results in investment, and updated discount rate assumptions for reserves of traditional insurance contracts based on market information as at the date of the statement of financial position.
| Major Assets | As of December 31, | |||||||
| 2020 | 2021 | |||||||
| RMB | RMB | |||||||
| (in millions) | ||||||||
| Investment assets |
4,095,540 | 4,716,420 | ||||||
| Term deposits |
545,678 | 529,488 | ||||||
| Held-to-maturity securities |
1,189,369 | 1,533,753 | ||||||
| Available-for-sale securities |
1,215,603 | 1,429,287 | ||||||
| Securities at fair value through profit or loss |
161,570 | 206,771 | ||||||
| Securities purchased under agreements to resell |
7,947 | 12,915 | ||||||
| Cash and cash equivalents |
56,704 | 60,459 | ||||||
| Loans |
658,535 | 666,087 | ||||||
| Statutory deposits—restricted |
6,333 | 6,333 | ||||||
| Investment properties |
14,217 | 13,374 | ||||||
| Investment in associates and joint ventures |
239,584 | 257,953 | ||||||
| Other assets |
158,004 | 176,060 | ||||||
|
|
|
|
|
|||||
| Total |
4,253,544 | 4,892,480 | ||||||
|
|
|
|
|
|||||
Investment Assets
Our total investment assets increased by RMB620,880 million, or 15.2%, to RMB4,716,420 million as of December 31, 2021 from RMB4,095,540 million as of December 31, 2020.
Term Deposits
Term deposits decreased by RMB16,190 million, or 3.0%, to RMB529,488 million as of December 31, 2021 from RMB545,678 million as of December 31, 2020. This was primarily due to the decrease of the negotiated term deposits.
Held-to-Maturity Securities
Held-to-maturity securities increased by RMB344,384 million, or 29.0%, to RMB1,533,753 million as of December 31, 2021 from RMB1,189,369 million as of December 31, 2020. This was primarily due to an increase in the allocation of government bonds.
Available-for-Sale Securities
Available-for-sale securities increased by RMB213,684 million, or 17.6%, to RMB1,429,287 million as of December 31, 2021 from RMB1,215,603 million as of December 31, 2020. This was primarily due to an increase in the allocation of bonds in available-for-sale securities.
Securities at Fair Value Through Profit or Loss
Securities at fair value through profit or loss increased by RMB45,201 million, or 28.0%, to RMB206,771 million as of December 31, 2021 from RMB161,570 million as December 31, 2020. This was primarily due to an increase in the allocation of debt-type assets in securities at fair value through profit or loss.
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Securities Purchased under Agreements to Resell
Securities purchased under agreements to resell increased by RMB4,968 million, or 62.5%, to RMB12,915 million as of December 31, 2021 from RMB7,947 million as of December 31, 2020. This was primarily due to the needs for liquidity management.
Cash and Cash Equivalents
Cash and cash equivalents increased by RMB3,755 million, or 6.6%, to RMB60,459 million as of December 31, 2021 from RMB56,704 million as of December 31, 2020. This was primarily due to the needs for liquidity management.
Investments in associates and joint ventures
Our investments in associates and joint ventures increased by RMB18,369 million, or 7.7%, to RMB257,953 million as of December 31, 2021 from RMB239,584 million as of December 31, 2020. This was primarily due to new investments in associates and joint ventures and an increase in the equity of associates and joint ventures.
Loans
Loans increased by RMB7,552 million, or 1.1%, to RMB666,087 million as of December 31, 2021 from RMB658,535 million as of December 31, 2020. This was primarily due to an increase in policy loans.
Investment Properties
Investment properties decreased by RMB843 million, or 5.9%, to RMB13,374 million as of December 31, 2021 from RMB14,217 million as of December 31, 2020. This was primarily due to change of uses of properties of our subsidiaries.
| Major Liabilities | As of December 31, | |||||||
| 2020 | 2021 | |||||||
| RMB | RMB | |||||||
| (in millions) | ||||||||
| Liabilities |
||||||||
| Insurance contracts |
2,973,225 | 3,419,899 | ||||||
| Investment contracts |
288,212 | 313,594 | ||||||
| Securities sold under agreements to repurchase |
122,249 | 239,446 | ||||||
| Policyholder dividends payable |
122,510 | 124,949 | ||||||
| Annuity and other insurance balances payable |
55,031 | 56,818 | ||||||
| Interest-bearing loans and borrowings |
19,988 | 19,222 | ||||||
| Deferred tax liabilities |
15,286 | 7,481 | ||||||
| Other liabilities |
199,475 | 223,937 | ||||||
|
|
|
|
|
|||||
| Total |
3,795,976 | 4,405,346 | ||||||
|
|
|
|
|
|||||
Liabilities
Our total liabilities increased by RMB609,370 million, or 16.1%, to RMB4,405,346 million as of December 31, 2021 from RMB3,795,976 million as of December 31, 2020.
Insurance Contracts
Liabilities of insurance contracts increased by RMB446,674 million, or 15.0%, to RMB3,419,899 million as of December 31, 2021 from RMB2,973,225 million as of December 31, 2020. This was primarily due to the accumulation of insurance liabilities from new policies and renewals. As at the date of the statement of financial position, the reserves of our various insurance contracts passed the liability adequacy test.
Investment Contracts
The account balance of investment contracts increased by RMB25,382 million, or 8.8%, to RMB313,594 million as of December 31, 2021 from RMB288,212 million as of December 31, 2020. This was primarily due to an increase in the scale of universal insurance accounts.
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Securities Sold under Agreements to Repurchase
Securities sold under agreements to repurchase increased by RMB117,197 million, or 95.9%, to RMB239,446 million as of December 31, 2021 from RMB122,249 million as of December 31, 2020. This was primarily due to the needs for liquidity management.
Policyholder Dividends Payable
Policyholder dividends payable increased by RMB2,439 million, or 2.0%, to RMB124,949 million as of December 31, 2021 from RMB122,510 million as of December 31, 2020. This was primarily due to the fact that the policyholder dividends newly accrued are greater than the dividends paid out in the current year.
Annuity and Other Insurance Balances Payable
Annuity and other insurance balances payable increased by RMB1,787 million, or 3.2%, to RMB56,818 million as of December 31, 2021 from RMB55,031 million as of December 31, 2020. This was primarily due to an increase in maturities payable.
Interest-bearing Loans and Borrowings
The carrying value of our borrowings in foreign currency decreased in 2021. This was primarily due to the change of foreign exchange rates. Interest-bearing loans and other borrowings include a three-year bank loan of EUR330 million with a maturity date on September 8, 2023, a five-year bank loan of GBP275 million with a maturity date on June 25, 2024, a five-year bank loan of US$860 million with a maturity date on September 16, 2024, and a six-month bank loan of EUR127 million with a maturity date on January 13, 2022, which is automatically renewed upon maturity pursuant to the terms of the agreement, and a six-month bank loan of EUR78 million with a maturity date on January 5, 2022, which is automatically renewed upon maturity pursuant to the terms of the agreement. All the above are fixed rate bank loans. Interest-bearing loans and other borrowings also include a five-year bank loan of US$970 million with a maturity date on September 27, 2024, an eighteen-month bank loan of EUR110 million with a maturity date on March 9, 2022, and a 15-year bank loan of RMB536 million with a maturity date of June 15, 2034. All the above are floating rate loans.
Deferred Tax Liabilities
Deferred tax liabilities as of December 31, 2021 were RMB7,481 million, a decrease of RMB7,805 million, or 51.1%, from RMB15,286 million as of December 31, 2020. This change was primarily due to the change in fair value of financial assets.
Equity Attributable to Equity Holders of the Company
As of December 31, 2021, equity attributable to our equity holders was RMB479,061 million, an increase of RMB28,374 million, or 6.3%, from RMB450,687 million as of December 31, 2020. This was primarily due to the combined impact of total comprehensive income and profit distributions during 2021.
B. LIQUIDITY AND CAPITAL RESOURCES
Liquidity Sources
Our principal cash inflows come from insurance premiums, income from non-insurance contracts, interest income, dividends and bonuses, proceeds from sales and maturity of investment assets and investment income. The primary liquidity risks with respect to these cash inflows are the risk of surrenders by contract holders and policyholders, as well as the risks of default by debtors, interest rate changes and other market volatilities. We closely monitor and manage these risks. See “Item 4. Information on the Company—Business Overview—Investments”.
Our cash and bank deposits provide us with a source of liquidity to meet normal cash outflows. As of December 31, 2022, the amount of cash and cash equivalents was RMB127,594 million. In addition, substantially all of our term deposits with banks allow us to withdraw funds on deposit, subject to a penalty interest charge. As of December 31, 2022, the amount of term deposits was RMB485,567 million.
Our investment portfolio also provides us with a source of liquidity to meet unexpected cash outflows. We are also subject to market liquidity risk due to the large size of our investments in some of the markets in which we invest. In some circumstances, some of our holdings of investment securities may be large enough to have an influence on the market value. These factors may adversely affect our ability to sell these investments at an adequate price, or at all.
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Liquidity Uses
Our principal cash outflows primarily relate to the payables for the liabilities associated with our various life insurance, annuity, accident insurance and health insurance products, operating expenses, income taxes and dividends that may be declared and paid to our shareholders. Cash outflows arising from our insurance activities primarily relate to benefit payments under these insurance products, as well as payments for policy surrenders, policy withdrawals and policy loans.
We believe that our sources of liquidity are sufficient to meet our cash requirements for at least the next 12 months. However, additional cash may be required due to changing business conditions or other future developments, including any investments or acquisitions that we may decide to pursue.
Consolidated Cash Flows
We have established a cash flow testing system and conduct regular tests to monitor the cash inflows and outflows under various changing circumstances and adjust accordingly the asset portfolio to ensure sufficient sources of liquidity.
Net cash flow from operating activities amounted to a net inflow of RMB351,968 million (US$51,031 million) in 2022. Net cash flow from operating activities amounted to a net inflow of RMB286,446 million in 2021. The change was primarily due to an increase in the sale of investment contracts.
Net cash flow from investing activities amounted to a net outflow of RMB164,955 million (US$23,916 million) in 2022. Net cash flow from investing activities amounted to a net outflow of RMB393,839 million in 2021. This change was primarily due to the needs for investment management.
Net cash flow from financing activities amounted to net outflow of RMB120,095 million (US$17,412 million) in 2022. Net cash flow from financing activities amounted to net inflow of RMB111,219 million in 2021. This change was primarily due to the needs for liquidity management.
Our global share offering in December 2003 provided cash proceeds of approximately RMB24,707 million which are held in Hong Kong dollars or U.S dollars. As of the date of this annual report, a part of the cash proceeds from our global offering was invested in fixed-income products denominated in foreign currencies in China, and part of the cash proceeds was invested in securities listed on overseas stock exchanges, multi-asset portfolios and private equity funds. We invested approximately US$433 million, in addition to RMB2,282 million, in China Guangfa Bank in December 2006. We used a total of approximately HK$12 billion for investments in Sino-Ocean Group Holding Limited in 2009, 2010 and 2013. As of December 31, 2022, for offshore public markets, we had US$1,071 million asset which was entrusted to nine offshore third-party investment managers.
Our A share offering in December 2006 provided cash proceeds of approximately RMB27,810 million. As at the end of 2022, the cash proceeds from our A share offering were used to increase our share capital.
Our issuance of Core Tier 2 Capital Securities in July 2015 provided cash proceeds of approximately US$1,274 million. As at the end of 2022, cash proceeds from the issuance of Core Tier 2 Capital Securities were used to replenish our capital and raise our solvency ratio in accordance with applicable laws and approvals by regulatory authorities. We redeemed all of these issued securities on July 3, 2020.
In March 2019, we issued bonds in the principal amount of RMB35 billion in the national inter-bank bond market. The bonds have a 10-year maturity and a fixed coupon rate of 4.28% per annum. We have a conditional right to redeem the bonds on the fifth anniversary of issuance. The proceeds from the issuance of the bonds will be used to replenish our capital so as to enhance our solvency according to applicable laws and approvals from regulatory authorities.
Ratio of Assets and Liabilities
Our ratio of assets and liabilities (total liabilities divided by total assets) as at December 31, 2022, 2021 and 2020 are as follows:
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| As at December 31, 2020 |
As at December 31, 2021 |
As at December 31, 2022 |
||||||||||
| Ratio of assets and liabilities |
89.24 | % | 90.04 | % | 91.52 | % | ||||||
Insurance Solvency Requirements
The core solvency adequacy ratio of an insurer is calculated by dividing the core capital of an insurer by the minimum capital it is required to meet, and the comprehensive solvency adequacy ratio of an insurer is calculated by dividing the sum of core capital and supplementary capital of an insurer by the minimum capital it is required to meet. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Solvency requirements”. The following table shows our solvency as of December 31, 2020, December 31, 2021 and December 31, 2022:
| As of December 31, 2020(1) |
As of December 31, 2021(1) |
As of December 31, 2022(2) |
||||||||||
| (RMB in millions, except percentage data) |
||||||||||||
| Core capital |
1,031,947 | 1,020,756 | 699,688 | |||||||||
| Actual capital |
1,066,939 | 1,055,768 | 1,007,601 | |||||||||
| Minimum capital |
396,749 | 402,341 | 487,290 | |||||||||
| Core solvency ratio |
260.10% | 253.70% | 143.59% | |||||||||
| Comprehensive solvency ratio |
268.92% | 262.41% | 206.78% | |||||||||
| (1) | Data under C-ROSS. |
| (2) | Data under C-ROSS II. |
The decrease in our solvency ratio in 2022 was primarily due to the fluctuation in equity markets, the growth of business, the allocation of investment assets and a decline in the valuation rate of the solvency reserve.
In 2022, the CBIRC conducted a review under the Solvency Aligned Risk Management Requirements and Assessment rules, or SARMRA, on the solvency aligned risk management of some insurers, including ourselves, and we received the highest score among life insurers that were reviewed. The SARMRA score links the risk management capacity of insurers with capital requirements. Pursuant to applicable regulatory requirements, we determine our capital requirements based on the score we received in the 2022 review.
Contractual Obligations and Commitments
The following table sets out our contractual obligations and commitments as of December 31, 2022. Other than as discussed below, we do not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2022.
| Not later than 1 year |
Later than 1 year but not later than 3 years |
Later than 3 years but not later than 5 years |
Later than 5 years |
Total | ||||||||||||||||
| As of December 31, 2022 |
(RMB in millions) | |||||||||||||||||||
| Securities sold under agreements to repurchase |
149,004 | — | — | — | 149,004 | |||||||||||||||
| Bonds payable |
328 | 36,498 | — | — | 36,826 | |||||||||||||||
| Annuity and other insurance balances payable |
60,819 | — | — | — | 60,819 | |||||||||||||||
| Insurance contracts |
(51,224 | ) | (13,060 | ) | 346,182 | 6,164,768 | 6,446,666 | |||||||||||||
| Investment contracts |
32,435 | (48,028 | ) | (117,116 | ) | 1,207,897 | 1,075,188 | |||||||||||||
| Interest bearing loans and borrowings |
3,675 | 9,426 | 97 | 317 | 13,515 | |||||||||||||||
| Lease liabilities |
919 | 790 | 98 | 20 | 1,827 | |||||||||||||||
| Capital commitments |
8,944 | 13,735 | 9,841 | 60,615 | 93,135 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
204,900 | (639 | ) | 239,102 | 7,433,617 | 7,876,980 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
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Capital commitments mainly represent our commitments with respect to the acquisition of property, plant and equipment, and our investments.
The amounts set forth in the table above for insurance contracts and investment contracts in each column represent expected future cash inflows and outflows on policies in force as at December 31, 2022. The estimate is affected by numerous assumptions, including assumptions related to mortality, morbidity, surrenders and other expense assumptions. Many of these estimates are inherently uncertain and the actual experience may differ from our estimates.
The expected net cash outflows for our insurance contracts are negative in the period not later than 1 year and later than 1 year but not later than 3 years in the above table. This is primarily because we have increased our sales of products with regular premiums, which has resulted in an increase in the proportion of insurance contracts that are in premium payment period. As premiums for products with regular premiums are paid by installments during the premium payment period, insurance future cash inflows occur at an earlier stage of the policy term, while benefits payments and other insurance future cash outflows occur gradually throughout the entire policy period. The expected net cash outflows for our investment contracts are negative in the period later than 1 years but not later than 3 years and the period later than 3 years but not later than 5 years in the above table. This is primarily because under the terms of some of our insurance contracts, survival benefits payments under these contracts will be transferred to respective investment contracts during the next one to five years, and accordingly, there is expected to be a large amount of cash inflows for some of our investment contracts during the next one to five years. Furthermore, as the expected future cashflows reported in the table above are not discounted from the date of payment back to December 31, 2022, the sum of the expected future cashflows are different from the amount of corresponding liabilities in our consolidated balance sheet as of December 31, 2022. Policyholder dividends will not become a contractual obligation until the applicable policy anniversary is reached and the dividend amount is credited to the policy benefit liability or paid to the policyholder, and hence are not included in the table above. Reinsurance recoveries have not been taken into account.
Other than as set forth under capital commitments, we had no material, individually or in the aggregate, purchase obligations as of December 31, 2022.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
None.
D. TREND INFORMATION
Please refer to our discussion in each section under “—Overview of Our Business”, “—Factors Affecting Our Results of Operations”, “—Critical Accounting Policies” and “—Operating Results”.
We review assumptions used in establishing reserves for long term insurance contracts and the impact of changes in these assumptions on our profit before income tax. Changes in these assumptions may have a significant impact on our operating results. Changes in these assumptions resulted in a decrease of RMB34,467 million in profit before income tax in 2022, a decrease of RMB38,275 million in profit before income tax in 2021, and a decrease of RMB38,543 million in profit before income tax in 2020. The sensitivity analysis of these assumptions is as follows:
| • | holding all other variables constant, if mortality rates and morbidity rates were to increase or decrease from the current best estimate by 10%, pre-tax profit for the year would have been RMB42,364 million lower or RMB44,114 million higher, respectively. |
| • | holding all other variables constant, if lapse rates were to increase or decrease from the current best estimate by 10%, pre-tax profit for the year would have been RMB1,888 million higher or RMB1,948 million lower, respectively. |
| • | holding all other variables constant, if the discount rates were 50 basis points higher or lower than the current best estimate, pre-tax profit for the year would have been RMB147,880 million higher or RMB167,301 million lower, respectively. |
See also Note 4.1.3 and Note 15 to our consolidated financial statements included elsewhere in this annual report.
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E. CRITIAL ACCOUNTING ESTIMATES
Not applicable.
| ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
A. DIRECTORS AND SENIOR MANAGEMENT
The following table sets forth information regarding our current directors and executive officers. Unless otherwise indicated, their business address is c/o China Life Insurance Company Limited, 16 Financial Street, Xicheng District, Beijing 100033, China.
| Name |
Date of Birth |
Position | ||
| Bai Tao | March 1963 | Chairman of the board of directors and executive director | ||
| Zhao Peng | April 1972 | Executive director and president | ||
| Li Mingguang | July 1969 | Executive director, vice president and chief actuary | ||
| Wang Junhui | July 1971 | Non-executive director | ||
| Lam Chi Kuen | April 1953 | Independent director | ||
| Zhai Haitao | January 1969 | Independent director | ||
| Huang Yiping | March 1964 | Independent director | ||
| Chen Jie | April 1970 | Independent director | ||
| Ruan Qi | July 1966 | Vice president and chief risk officer | ||
| Zhan Zhong | April 1968 | Vice president | ||
| Yang Hong | February 1967 | Vice president | ||
| Zhao Guodong | November 1967 | Assistant to the president and board secretary | ||
| Bai Kai | June 1974 | Assistant to the president | ||
| Xu Chongmiao | October 1969 | Compliance officer | ||
| Liu Fengji | October 1969 | Person in charge of audit | ||
| Hu Jin | November 1971 | Person in charge of finance |
Directors
Mr. Bai Tao has been the chairman of the board of directors of our company since May 2022. He has been the secretary to the party committee of CLIC since January 2022 and the chairman of the board of directors of CLIC since March 2022. From 2016 to 2022, he served as a member of the party committee and the deputy general manager of China Investment Corporation, the deputy secretary to the party committee, the vice chairman of the board of directors, the president and an executive director of The People’s Insurance Company (Group) of China Limited and the chairman of the board of directors and the secretary to the party leadership group of State Development Investment Corp., Ltd. Mr. Bai, a senior economist, graduated from Renmin University of China with a doctoral degree in economics.
Zhao Peng has been an executive director and the president of our company since October 2022. He has been a vice president of CLIC since September 2022. From 2020 to 2022, he served as the vice president of the Agricultural Development Bank of China. From 2017 to 2020, he successively served as an assistant to the president and a vice president of our company, the chief financial officer of CLIC and an executive director of our company. From 2019 to 2021, he also served as a director of each of Sino-Ocean Group Holding Limited and China Life Franklin Asset Management Company Limited. From 2009 to 2017, he successively served as the general manager of the finance and accounting department and the general manager of the finance department of CLIC, as well as the deputy general manager (at the general manager level of the provincial branches), the person in charge and the general manager of our Zhejiang Branch. Mr. Zhao graduated from Hunan College of Finance and Economics, Central University of Finance and Economics and Tsinghua University, with master’s degrees in economics and business administration.
Li Mingguang has been an executive director of our company since August 2019. He has been a vice president of our company since November 2014 and our chief actuary since March 2012. Mr. Li served as our board secretary from June 2017 to February 2023. Mr. Li joined our company in 1996 and subsequently served as deputy division chief, division chief, assistant to the general manager of product development department, responsible actuary of our company and general manager of our actuarial department. Mr. Li graduated from Shanghai Jiao Tong University with a bachelor’s degree in computer science in 1991, Central University of Finance and Economics majoring in monetary banking (actuarial science) with a master’s degree in 1996 and Tsinghua University with an EMBA in 2010. Mr. Li is a fellow of the China Association of Actuaries (FCAA) and a fellow of the Institute and Faculty of Actuaries (FIA).
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He previously was the chief actuary of China Life Pension, the chairman of the first session of the China Actuarial Working Committee and the secretary-general of the first and the second sessions of the China Association of Actuaries. He is currently the vice chairman of the China Association of Actuaries. Mr. Li receives a special government allowance from the State Council.
Wang Junhui has been a non-executive director of our company since August 2019. He has been the chief investment officer of CLIC and president of China Life Asset Management Company Limited since August 2016 and the chairman of China Life AMP Asset Management Co., Ltd. since December 2016, and a director of China United Network Communications Group Co., Ltd. since March 2021. From 2004 to 2016, he served as an assistant to the president and the vice president of China Life Asset Management Company Limited, and the president of China Life Investment Holding Company Limited. From 2002 to 2004, he served as the director of the investment department and an assistant to the general manager of Harvest Fund Management Co., Ltd. Mr. Wang graduated from the School of Computer Science of Beijing University of Technology with a bachelor’s degree in software in 1995, and Chinese Academy of Fiscal Sciences of the Ministry of Finance of the PRC with a doctoral degree in finance in 2008. He is a senior economist.
Lam Chi Kuen has been an independent director of our company since June 2021. He is currently an independent non-executive director of China Cinda Asset Management Co., Ltd. and an independent non-executive director of Luks Group (Vietnam Holdings) Company Limited. Mr. Lam served as an independent non-executive director of China Pacific Insurance (Group) Co., Ltd. from 2013 to 2019. Mr. Lam, a practicing certified public accountant in Hong Kong for approximately 35 years, was a partner and senior consultant of Ernst Young from 1992 to 2013 and has extensive experience in accounting, auditing and financial management. Mr. Lam received a higher diploma in accounting from the Hong Kong Polytechnic College (now the Hong Kong Polytechnic University). Mr. Lam is a member of the Hong Kong Institute of Certified Public Accountants and a senior member of the Association of Chartered Certified Accountants.
Zhai Haitao has been an independent director of our company since October 2021. He is the president and founding partner of Primavera Capital Group, and an independent non-executive director of each of China Everbright Environment Group Limited and China Everbright Water Limited. From 2000 to 2009, Mr. Zhai worked at and held various positions in Goldman Sachs Group, including as the managing director, the chief representative of its Beijing office, the director of the strategic cooperation office between Goldman Sachs Group and Industrial and Commercial Bank of China, and the credit rating consultant of the Ministry of Finance and China Development Bank. From 1995 to 1998, he was the deputy representative of the People’s Bank of China Representative Office for the Americas based in New York. From 1990 to 1995, Mr. Zhai worked at the international department of the People’s Bank of China. Mr. Zhai holds a master’s degree in international affairs from Columbia University, a master’s degree in business administration from New York University and a bachelor’s degree in economics from Peking University.
Huang Yiping has been an independent director of our company since July 2022. Mr. Huang is the associate dean of the national school of development, the Jinguang chair professor of finance and economics, and the director of the institute of digital finance of Peking University. He also serves as the deputy secretary-general to the China Society for Finance and Banking, the chairman of the Professional Committee of FinTech Development and Research of the National Internet Finance Association of China, a member of China Finance 40 Forum (currently the chairman of its academic committee), a member of Chinese Economists 50 Forum, as well as the editor in chief of China Economic Journal, and the deputy editor in chief of Asian Economic Policy Review. Mr. Huang has been an independent director of Ant Group Co., Ltd. since August 2020. He served as a member of the monetary policy committee of The People’s Bank of China from June 2015 to June 2018, the managing director of the emerging market headquarters/the chief economist of Asian emerging markets of Barclays Capital Asia from August 2011 to June 2013, the managing director/the chief economist of the Asia-Pacific region of Citigroup Inc. from May 2000 to February 2009, and a senior lecturer and the director of China’s economic projects of The Australian National University from August 1993 to April 2000. Mr. Huang obtained a master’s degree in economics from Renmin University of China and a doctoral degree in economics from The Australian National University.
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Chen Jie has been an independent director of our company since July 2022. She also serves as the director and a researcher of the commercial law research unit of the Institute of Law, a professor and doctoral tutor of Chinese Academy of Social Sciences. She is a member of the Chinese legal system committee of China Democratic League, as well as the vice chairman of China Business Law Society, an executive director of each of the Institute of Commercial Law and the Institute of Securities Law of China Law Society and a director of the Institute of Insurance Law of China Law Society. Ms. Chen is also a member of the securities and futures expert group of China Securities Regulatory Commission, a member of the appeal review committee of Shenzhen Stock Exchange, an expert member of the shareholding rights committee of the China Securities Small and Medium-sized Investor Protection Center, a member of the expert advisory committee of Beijing Financial Court and an arbitrator of each of Beijing Arbitration Commission/Beijing International Arbitration Center, Shenzhen Court of International Arbitration, China International Economic and Trade Arbitration Commission, Shanghai International Economic and Trade Arbitration Commission and Shanghai Arbitration Commission. Ms. Chen has been an independent director of Deppon Logistics Co., Ltd. since October 2022. Ms. Chen served as an independent director of Central China Land Media Co., Ltd. from December 2010 to April 2017, an independent director of BOMESC Offshore Engineering Company Limited from January 2016 to January 2019, and an independent director of Sino Geophysical Co., Ltd. from November 2015 to November 2021. Ms. Chen obtained a bachelor’s degree in law from East China College of Political Science and Law, a master’s and doctoral degrees in law from Peking University, and a postdoctoral qualification from the Institute of Law of Chinese Academy of Social Sciences.
Supervisors
The following table sets forth information regarding our current supervisors.
| Name |
Date of Birth |
Position | ||
| Cao Weiqing | September 1965 | Chairperson of the board of supervisors | ||
| Niu Kailong | September 1974 | Non-employee representative supervisor | ||
| Wang Xiaoqing | October 1965 | Employee representative supervisor | ||
| Lai Jun | May 1964 | Employee representative supervisor | ||
| Hu Zhijun | July 1971 | Employee representative supervisor |
Cao Weiqing has been the chairperson of the board of supervisors of our company since November 2022. He successively served as the secretary to the discipline inspection committee, the chairperson of the board of supervisors and a vice president of AMC from 2016 to 2022. From 2014 to 2016, he served as the deputy general manager (at the general manager level of the provincial branches) of our Hebei branch, and concurrently served as the secretary to the discipline inspection committee and the chairman of the trade union of our Hebei branch. From 2002 to 2014, he successively served as the deputy general manager of the personnel department of China Life Insurance Company, as well as the deputy general manager and general manager of the strategic planning department and the general manager of the equity management department of CLIC. Mr. Cao graduated from Nankai University with master’s degree in economics. He is a senior economist.
Niu Kailong has been a supervisor of our company since October 2021. He has been the general manager of the strategic planning department (office of deepening reform)/office of the board of directors of CLIC and the president of China Life Institute of Finance since December 2022. From April 2017 to June 2020, he served as the deputy general manager of the strategic planning department of The People’s Insurance Company (Group) of China Limited and a supervisor, the deputy general manager (responsible for daily operations) of the strategic planning department and the deputy general manager (responsible for daily operations) of the strategic planning department/office of the board of directors of PICC Reinsurance Company Limited. From June 2020 to December 2022, he served as the person in charge of the strategy and investment management department of China Life Healthcare Investment Company Limited, the deputy general manager (responsible for daily operations) of the strategic planning department of China Life Insurance (Group) Company and the general manager of the strategic planning department/office of the board of directors (in preparation) of CLIC and the president of China Life Institute of Finance. Mr. Niu graduated from Nankai University with a doctoral degree in finance. He is an associate researcher (social science) and senior economist.
Wang Xiaoqing has been a supervisor of our company since December 2019. She has successively been serving as the deputy general manager and the general manager of the risk management department of our company since April 2018. From May 2016 to April 2018, she served as the secretary to the discipline inspection committee of our Tibet branch. From 2010 to 2016, she successively served as an assistant to the general manager and the deputy general manager of the county insurance management department, and the deputy general manager of the audit department of our company. From 2003 to 2010, she successively served as the deputy division chief of the training division, the deputy division chief of the business inspection division, the division chief of the agent management division, the senior manager of the integrated development division of the individual insurance sales department of our company, and the deputy general manager of No.5 Sales Office in our Beijing branch. Ms. Wang graduated from Nanjing Communication Engineering College in 1988, majoring in radio communication engineering with a bachelor’s degree in engineering.
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Lai Jun has been a supervisor of our company since October 2021. He is the general manager of the human resources department of our company. Mr. Lai joined our company in 1984, and successively served as the deputy general manager and the secretary to the discipline inspection committee of Xinjiang branch of our company, the person in charge, the deputy general manager (responsible for daily operations) and the general manager of Hainan branch, as well as the general manager of Xinjiang branch of our company from 2002 to 2021. He graduated from the Central Party School of the Chinese Communist Party, majoring in economics and management. He is a senior economist.
Hu Zhijun has been a supervisor or our company since July 2022. She is the general manager of the audit department of our company. She served as the general manager of the asset management department of our company from December 2014 to September 2022. She joined our company in 2006 and successively served as an assistant to the general manager and the deputy general manager of our Tianjin branch, and the deputy general manager and the secretary to the discipline inspection committee of our Beijing branch from 2009 to 2014. Prior to joining our company, she worked at China Packing Import Export Tianjin Company and other companies. Ms. Hu graduated from Tianjin Institute of Finance and Economics in 1993, majoring in accounting with a bachelor’s degree in economics, and from Nankai University in 2006, majoring in corporate management with a master’s degree in management. She is admitted as a certified public accountant in the PRC. Ms. Hu, a senior accountant, was awarded the national leading accounting talent by the Ministry of Finance of the PRC in the first session of its assessment and selection, and was selected to be included in the “Financial Talent Pool” of the Ministry of Finance of the PRC.
Senior Management
Zhao Peng, see “—Directors and Senior Management—Directors” for his profile.
Li Mingguang, see “—Directors and Senior Management—Directors” for his profile.
Ruan Qi has been a vice president of our company since April 2018. He has been the chief risk officer of our company since December 2022. He successively served as the general manager (at the general manager level of the provincial branches) of the information technology department and the chief information technology officer of our company from 2016 to 2018. He served as the general manager of China Life Data Center and the general manager (at the general manager level of the provincial branches) of the information technology department of our company from 2014 to 2016, and the deputy general manager and the general manager of the information technology department of our company from 2004 to 2014. He successively served as the deputy division chief of the computer division of our Fujian branch, and the deputy manager (responsible for daily operations) and the manager of the information technology department of our company from 2000 to 2004. Mr. Ruan is a senior engineer. He graduated from Beijing Institute of Posts and Telecommunications in August 1987, majoring in computer science and communications with a bachelor’s degree in engineering; and from Xiamen University with a master’s degree in business administration for senior management (EMBA) in December 2007.
Zhan Zhong has been a vice president of our company since July 2019. He has been a non-executive director of Sino-Ocean Group Holding Limited since September 2021 and the chairman of the board of directors of China Life Insurance Sales Company since November 2022. He was an employee representative supervisor of our company from July 2015 to August 2017. He successively served as the general manager (at the general manager level of the provisional branches) of the individual insurance sales department and the marketing director of our company from 2014 to 2019. Mr. Zhan served as the deputy general manager (responsible for daily operations) and the general manager of our Qinghai branch from 2013 to 2014. From 2009 to 2013, Mr. Zhan successively served as the deputy general manager (responsible for daily operations) and the general manager of the individual insurance sales department of our company. From 2005 to 2009, he successively served as the general manager of the individual insurance sales department of our Guangdong branch and an assistant to the general manager of our Guangdong branch. From 1996 to 2005, he successively served as the director of the marketing department of the Chengdu high-tech sub-branch, and an assistant to the manager and the manager of the marketing department of the Chengdu branch of Zhongbao Life Insurance Company, and the deputy general manager of the Chengdu branch of Taikang Life Insurance Company. Mr. Zhan graduated from Kunming Institute of Technology in July 1989, majoring in industrial electric automation with a bachelor’s degree in engineering.
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Yang Hong has been a vice president of our company since July 2019. She successively served as the general manager of the operation service center and the operations director of our company from 2018 to 2019. Ms. Yang successively served as the deputy general manager (responsible for daily operations) and general manager of the research and development center, the general manager (at the general manager level of the provincial branches) of the business management department and the general manager (at the general manager level of the provincial branches) of the process and operations department of our company from 2011 to 2018. From 2002 to 2011, she successively served as an assistant to the general manager and the deputy general manager of the business management department, and the general manager of the customer service department of our company. Ms. Yang graduated from the Computer Science Department of Jilin University in 1989, majoring in system structure with a bachelor’s degree of science, and from the School of Economics and Management of Tsinghua University in 2013 with a master’s degree in business administration for senior management.
Zhao Guodong has been the board secretary of our company since February 2023 and an assistant to the president of our company since October 2019. During the period from 2016 to 2022, he successively served as the deputy general manager (responsible for daily operations) and the general manager of our Chongqing branch, the general manager of our Hunan branch and the general manager of our Jiangsu branch. From 2007 to 2016, he successively served as the deputy general manager of our Fujian branch and the deputy general manager of our Hunan branch. From 2001 to 2007, he was the deputy general manager of our Changde Branch and the general manager of our Yiyang branch in Hunan. Mr. Zhao graduated from Hunan Computer School majoring in computer software in 1988, and from China Central Radio and TV University majoring in business administration in 2006. He is a senior economist.
Bai Kai has been an assistant to the president of our company since April 2022. Mr. Bai successively served as the deputy general manager, the deputy general manager (responsible for daily operations) and the general manager of our Hubei branch from 2017 to 2022, and the general manager of our Hubei Huanggang branch and the deputy general manager of our Qingdao branch from 2011 to 2017. Mr. Bai graduated from Hubei Provincial Party School, majoring in economics and management, and was a postgraduate.
Xu Chongmiao has been the compliance officer of our company since July 2018. He has been the general manager of the legal and compliance department and the legal officer of our company since September 2014. From 2006 to 2014, he successively served as the deputy general manager of the legal affairs department, the deputy general manager of the legal and compliance department and the legal officer at the general manager level of our company. From 2000 to 2006, he successively served as the deputy division chief of the regulations division of the development and research department and a senior regulations researcher of the legal affairs department of our company. Mr. Xu graduated from Fudan University in August 1991, majoring in economic law with a bachelor’s degree in law, and from Renmin University of China in July 1996 and July 2005, respectively, majoring in economic law with master’s and doctoral degrees in law. Mr. Xu is admitted as a lawyer and certified public accountant in the PRC.
Liu Fengji has been the Person in charge of audit of our company in December 2021. Mr. Liu joined our company in 1992, and successively served as an assistant to the general manager of our Tianjin branch, the deputy general manager of our Ningxia Hui Autonomous Region branch, the person in charge, the deputy general manager (responsible for daily operations) and the general manager of our Qinghai branch, the general manager of our Tianjin branch, the general manager of the audit department and a temporary person in charge of audit of our company from 2011 to 2022. Mr. Liu graduated from Tianjin Institute of Finance and Economics in 1992, majoring in finance (insurance direction) with a bachelor’s degree in economics, and from Nankai University in 2013, majoring in business administration for senior management with a master’s degree in business administration.
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Hu Jin has been the person in charge of finance of our company since February 2023. She served as a temporary person in charge of finance of our company from October 2022 to February 2023. Ms. Hu has been the general manager of the finance department of our company since June 2020. From 2013 to 2020, she successively served as the deputy general manager of the finance department, the deputy general manager of the accounting department, and the general manager of the shared service center (financial sector) of our company. Ms. Hu graduated from Renmin University of China in 1993, majoring in accounting with a bachelor’s degree in economics, and graduated from Renmin University of China in 2006 with a master’s degree in economics. She is a senior accountant. Ms. Hu is a senior accountant with the qualification of the PRC certified public accountant. Ms. Hu was selected into the “Government Talent Pool” of the Ministry of Finance of China in 2020, and has been serving as a member of the working group of financial accounting experts of the Ministry of Finance of China since 2019.
None of our directors, supervisors or members of our senior management was selected as a result of any arrangement or understanding with any major shareholders, customers or suppliers. None of the above directors, supervisors or senior management of our company has any family relationship with any directors, supervisors, senior management and substantial shareholders of our company.
B. COMPENSATION
Compensation of Directors, Supervisors and Officers
Our directors, supervisors and executive officers receive compensation in the form of salaries, bonuses and other benefits-in-kind, including our contribution to the pension plan on behalf of our directors, supervisors and executive officers. As required by PRC regulations, we participate in various defined contribution retirement plans organized by provincial and municipal governments for our employees, including employees who are directors, supervisors and executive officers.
The following table sets forth the amounts of compensation paid to each of our directors and supervisors for the fiscal year ended December 31, 2022. The total compensation package for our executive directors and chairman of the board of supervisors for the year ended December 31, 2022 has not yet been finalized in accordance with regulations of the relevant PRC authorities. The amount of the compensation not provided for is not expected to have a significant impact on our financial statements for the year ended December 31, 2022. We will make further disclosure of the amount of the final compensation when it is determined.
| Name |
Salaries/Fees | Inducement Fees |
Other (1) Benefits |
Compensation for loss of office as director |
Total | |||||||||||||||
| RMB in ten thousands | ||||||||||||||||||||
| Bai Tao(2) |
— | — | — | — | — | |||||||||||||||
| Wang Bin(3) |
— | — | — | — | — | |||||||||||||||
| Su Hengxuan(4) |
— | — | — | — | — | |||||||||||||||
| Zhao Peng(5) |
— | — | — | — | — | |||||||||||||||
| Li Mingguang |
125.30 | — | 43.25 | — | 168.55 | |||||||||||||||
| Huang Xiumei(6) |
93.98 | — | 30.28 | — | 124.26 | |||||||||||||||
| Yuan Changqing(7) |
— | — | — | — | — | |||||||||||||||
| Wang Junhui |
— | — | — | — | — | |||||||||||||||
| Tang Xin(8) |
24.50 | — | 0 | — | 24.50 | |||||||||||||||
| Leung Oi-Sie Elsie(9) |
24.50 | — | 0 | — | 24.50 | |||||||||||||||
| Lam Chi Kuen |
42.00 | — | 0 | — | 42.00 | |||||||||||||||
| Zhai Haitao |
42.00 | — | 0 | — | 42.00 | |||||||||||||||
| Huang Yiping(10) |
17.50 | — | 0 | — | 17.50 | |||||||||||||||
| Chen Jie(11) |
17.50 | — | 0 | — | 17.50 | |||||||||||||||
| Jia Yuzeng(12) |
114.86 | — | 34.81 | — | 149.67 | |||||||||||||||
| Cao Weiqing(13) |
10.44 | — | 3.76 | — | 14.20 | |||||||||||||||
| Niu Kailong |
— | — | — | — | — | |||||||||||||||
| Cao Qingyang(14) |
44.29 | — | 18.22 | — | 62.51 | |||||||||||||||
| Wang Xiaoqing |
71.94 | — | 32.67 | — | 104.61 | |||||||||||||||
| Lai Jun |
80.64 | — | 32.75 | — | 113.39 | |||||||||||||||
| Hu Zhijun(15) |
35.62 | — | 13.03 | — | 48.65 | |||||||||||||||
| Total |
745.07 | — | 208.77 | — | 953.84 | |||||||||||||||
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|
|
|
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| (1) | Include benefits-in-kind, social insurance, housing fund and enterprise annuity to be paid by the employer. |
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| (2) | Appointed as chairman of our board of directors and executive director on May 31, 2022. |
| (3) | Resigned as chairman of our board of directors and executive director on February 23, 2022. |
| (4) | Resigned as president and executive director on August 1, 2022. |
| (5) | Appointed as president on October 18, 2022 and appointed as executive director on October 28, 2022. |
| (6) | Resigned as vice president and person in charge of finance on October 27, 2022 and resigned as executive director on November 1, 2022. |
| (7) | Resigned as non-executive director on June 1, 2022. |
| (8) | Resigned as independent director on March 6, 2022 and ceased to perform duties as independent director on July 13, 2022. |
| (9) | Resigned as independent director on July 18, 2022. |
| (10) | Appointed as independent director on July 13, 2022. |
| (11) | Appointed as independent director on July 13, 2022. |
| (12) | Resigned as chairperson of our board of supervisors on November 4, 2022. |
| (13) | Appointed as chairperson of our board of supervisors on November 4, 2022. |
| (14) | Resigned as supervisor on July 18, 2022. |
| (15) | Appointed as supervisor on July 13, 2022. |
The following table sets forth the amounts of compensation paid to each of our executive officers other than those disclosed in the table above, including vice presidents who are not our directors, our assistant to the president, our chief investment officer, compliance officer and person in charge of audit for the year ended December 31, 2022. The total compensation package for our executive officers for the year ended December 31, 2022 has not yet been finalized in accordance with regulations of the relevant PRC authorities. The amount of the compensation not provided for is not expected to have a significant impact on our financial statements for the year ended December 31, 2022. We will make further disclosure of the amount of the final compensation when it is determined.
| Name |
Salaries/Fees | Inducement Fees |
Other(1) Benefits |
Compensation for loss of office as director |
Total | |||||||||||||||
| RMB in ten thousands | ||||||||||||||||||||
| Ruan Qi(2) |
125.30 | — | 40.38 | — | 165.68 | |||||||||||||||
| Zhan Zhong |
125.30 | — | 42.60 | — | 167.90 | |||||||||||||||
| Yang Hong |
125.30 | — | 40.42 | — | 165.72 | |||||||||||||||
| Zhao Guodong(3) |
81.82 | — | 46.42 | — | 128.24 | |||||||||||||||
| Liu Yuejin(4) |
57.42 | — | 31.18 | — | 88.60 | |||||||||||||||
| Zhang Di(5) |
107.40 | — | 42.69 | — | 150.09 | |||||||||||||||
| Bai Kai(6) |
45.62 | — | 24.06 | — | 69.68 | |||||||||||||||
| Xu Chongmiao |
75.73 | — | 31.06 | — | 106.79 | |||||||||||||||
| Liu Fengji |
54.74 | — | 21.27 | — | 76.01 | |||||||||||||||
| Hu Jin(7) |
— | — | — | — | — | |||||||||||||||
| Total |
798.63 | — | 320.08 | — | 1,118.71 | |||||||||||||||
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|
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Note:
| (1) | Include benefits-in-kind, social insurance, housing fund and enterprise annuity to be paid by the employer. |
| (2) | Appointed as chief risk officer in December 2022. |
| (3) | Appointed as board secretary in February 2023. |
| (4) | Resigned as assistant to the president in September 2022. |
| (5) | Resigned as assistant to the president and chief investment officer in January 2023. |
| (6) | Appointed as assistant to the president in April 2022. |
| (7) | Appointed as person in charge of finance in February 2023. |
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The aggregate amount of compensation we paid to our five highest paid individual employees, including one director who is also our executive officer, and four members of senior management, during the year ended December 31, 2022, was approximately RMB8.18 million (US$1.186 million). The amount of compensation we paid to our highest paid individual employee, during the year ended December 31, 2022, was approximately RMB1.6855 million.
Senior Management Compensation
Our senior management’s compensation consists of four components, including basic salaries, performance-based salaries, fringe benefits and mid to long-term incentive compensation.
We have established a comprehensive performance management system. A performance appraisal method for our officers is used to appraise the performance of the officers annually. Measures for such appraisal include a business performance index based on our budget and targets as approved by our board of directors; a management performance index based on the duties and functions of the office position; and a risk compliance index based on risk management and compliance management of our daily operation, establishing a connection between the achievement of our major business targets and the office performance appraisal.
In accordance with relevant policies of the PRC government, no stock appreciation rights of our company were granted or exercised in 2022. For other details of the stock appreciation rights which were previously granted by us, please refer to Note 31 to our consolidated financial statements included elsewhere in this annual report.
C. BOARD PRACTICES
General
As of the date of this annual report, our board of directors consists of eight members. Our directors are elected to serve a term of three years, which is renewable upon re-election. Our directors are elected at meetings of our shareholders, and, unless they resign at an earlier date, are deceased or removed, will serve three-year terms. The current term for our board of directors began in June 2021. Our directors are not currently entitled to severance benefits other than benefits provided by law upon termination of employment. In the event our Company is acquired, including an acquisition of control by another person, and a director leaves employment or retires following the acquisition, the director may receive severance and other payments upon approval by the shareholders in general meeting.
We have identified various board members as being “independent”, in accordance with Hong Kong laws and regulations. These requirements vary in certain respects from independence requirements under U.S. law. The members of our audit committee are independent as defined by the rules of the Exchange Act which are applicable to us.
The PRC company law requires a joint stock company with limited liability to establish a board of supervisors. Our board of supervisors is responsible for monitoring our financial matters and supervising the actions of our board of directors and our management personnel. Our board of supervisors currently consists of five members. At least one-third of our board of supervisors must be elected by our employees. The remaining members must be elected by our shareholders in a general meeting. One member of our board of supervisors is designated as the chairman. Members of our board of supervisors may not serve as director or member of senior management. The term of office for our supervisors is three years, which is renewable upon re-election. The current term for our board of supervisors began in June 2021.
Board Committees
We have established the following standing committees: an audit committee, a nomination and remuneration committee, a risk management and consumer rights protection committee, a strategy and assets and liabilities management committee, and a connected transactions control committee.
The primary duties of the audit committee are to review and supervise the financial reporting, to assess the effectiveness of our internal control system, to supervise our internal audit system and its implementation and to recommend the engagement or replacement of external auditors. Our audit committee is also responsible for communications between our internal and external auditors and our internal reporting system. Our audit committee is currently comprised of Lam Chi Kuen, Zhai Haitao and Chen Jie. Mr. Lam Chi Kuen serves as the chairman.
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The primary duties of the nomination and remuneration committee are to review the structure of our board of directors, its number of members and composition, to formulate plans for the appointment, succession and appraisal criteria of our directors and senior management, and to formulate training and remuneration policies for our senior management. Our nomination and remuneration committee is currently comprised of Chen Jie, Wang Junhui and Lam Chi Kuen. Ms. Chen Jie serves as the chairman.
The primary duties of the risk management and consumer rights protection committee are to formulate our risk control benchmark system, to establish and improve our risk management and internal control system as well as the system for the management of consumer rights protection, to review our risk preference, risk tolerance and work reports from our senior management and department in charge of consumer rights protection, to formulate our risk management policy and major policy on consumer rights protection, to review the assessment reports with respect to our risk management and internal control, to conduct research on important findings from internal investigations with respect to risk management and internal control and management’s responses to such findings and to coordinate and handle disagreements on risk management and sudden and significant risks or crises, and to supervise and direct our senior management and relevant departments to resolve any issues identified during the rectification process in a timely manner. Our risk management and consumer rights protection committee is currently comprised of Huang Yiping, Li Mingguang, Wang Junhui and Chen Jie. Mr. Huang Yiping serves as the chairman.
The primary duties of the strategy and assets and liabilities management committee are to formulate our long-term development strategies, and to conduct research and to make recommendations on significant matters and policies and systems in respect of the management of assets and liabilities, the management system for insurance fund usage and significant strategic investments. Our strategy and assets and liabilities management committee is currently comprised of Zhai Haitao, Zhao Peng, Wang Junhui and Huang Yiping. Mr. Zhai Haitao serves as the chairman.
The primary duties of the connected transactions control committee are to determine our connected persons, to manage, examine and approve connected transactions, to conduct risk control of connected transactions, with a particular focus on compliance and the fairness and necessity of connected transactions, so as to provide an important basis for the decision-making by the board of directors in respect of the management of connected transactions. Our connected transactions control committee is currently comprised of four independent directors including Chen Jie, Lam Chi Kuen, Zhai Haitao and Huang Yiping. Ms. Chen Jie serves as the chairman.
D. EMPLOYEES
As of December 31, 2020, 2021 and 2022, we had approximately 104,160, 103,262 and 102,238 employees, respectively. The following table sets forth the number of our employees by their functions as of December 31, 2020, 2021 and 2022.
| As of December 31 | ||||||||||||||||||||||||
| 2020 | 2021 | 2022 | ||||||||||||||||||||||
| Number of employees |
% of total |
Number of employees |
% of total |
Number of employees |
% of total |
|||||||||||||||||||
| Management and administrative staff |
19,061 | 18.30 | % | 19,275 | 18.67 | % | 19,547 | 19.12 | % | |||||||||||||||
| Financial and auditing staff |
5,412 | 5.20 | % | 4,696 | 4.55 | % | 4,675 | 4.57 | % | |||||||||||||||
| Sales and sales management staff |
47,301 | 45.41 | % | 46,555 | 45.08 | % | 45,685 | 44.68 | % | |||||||||||||||
| Insurance verification, claims processing and customer service staff |
24,430 | 23.45 | % | 23,829 | 23.08 | % | 23,168 | 22.66 | % | |||||||||||||||
| Other professional and technical staff(1) |
4,212 | 4.05 | % | 5,134 | 4.97 | % | 5,323 | 5.21 | % | |||||||||||||||
| Other |
3,744 | 3.59 | % | 3,773 | 3.65 | % | 3,840 | 3.76 | % | |||||||||||||||
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| Total(2) |
104,160 | 100 | % | 103,262 | 100 | % | 102,238 | 100 | % | |||||||||||||||
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| (1) | Includes actuaries, product development personnel, investment management personnel and information technology specialists. |
| (2) | Includes employees of our subsidiaries. |
As of December 31, 2020, 2021 and 2022, we had approximately 1,378,000, 820,000 and 668,300 exclusive agents, respectively. Although the number of our exclusive agents decreased in 2022, we continued to improve the quality of our agent force, including strengthening the agent recruitment and management and improving the structure of our sales force. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Regulation of Insurance Agencies, Insurance Brokers and Other Intermediaries” and “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—Our growth is dependent on our ability to attract and retain productive agents”.
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None of our employees is subject to collective bargaining agreements governing employment with us. We believe that our employee relations are satisfactory.
E. SHARE OWNERSHIP
As of the date of this annual report, none of our directors, supervisors or senior management is a legal or beneficial owner of any shares of our share capital.
F. DISCLOSURE OF A REGISTRANT’S ACTION TO RECOVER ERRONEOUSLY AWARDED COMPENSATION.
Not applicable.
| ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS. |
A. MAJOR SHAREHOLDERS
The table below sets forth information regarding the ownership of our share capital as of April 7, 2023 by all persons who are known to us to be the beneficial owners of 5% or more of each class of our share capital.
| Title of Class |
Identity of Person or Group |
Amount Owned |
Percentage of Class |
Percentage of Total Share Capital |
||||||||
| A Shares |
China Life Insurance (Group) Company | 19,323,530,000 (Long position) | 92.80 | % | 68.37 | % | ||||||
| H Shares |
FMR LLC (1) | 446,897,273 (Long position) | 6.01 | % | 1.58 | % | ||||||
| BlackRock, Inc (2) | 433,007,395 (Long position) 8,555,620 (Short position) |
|
5.82 0.11 |
% % |
|
1.53 0.03 |
% % | |||||
| Note (1): | FMR LLC was interested in a total of 446,897,273 H shares of the Company in accordance with the provisions of Part XV of the SFO. Of these shares, Fidelity Management Research Company LLC, Fidelity Institutional Asset Management Trust Company and FIAM LLC were interested in 291,178,021 H shares, 34,773,567 H shares and 74,840,923 H shares, respectively. All of these entities are either controlled or indirectly controlled subsidiaries of FMR LLC. Of these 446,897,273 H shares, 6,850 H shares were physically settled listed derivatives. |
| Note (2): | BlackRock, Inc. was interested in a total of 433,007,395 H shares of the Company in accordance with the provisions of Part XV of the SFO. Of these shares, BlackRock Investment Management, LLC, BlackRock Financial Management, Inc., BlackRock Institutional Trust Company, National Association, BlackRock Fund Advisors, BlackRock Japan Co., Ltd., BlackRock Asset Management Canada Limited, BlackRock Investment Management (Australia) Limited, BlackRock Asset Management North Asia Limited, BlackRock (Netherlands) B.V., BlackRock Advisors (UK) Limited, BlackRock Asset Management Ireland Limited, BLACKROCK (Luxembourg) S.A., BlackRock Investment Management (UK) Limited, BlackRock Asset Management Deutschland AG, BlackRock Fund Managers Limited, BlackRock Life Limited, BlackRock (Singapore) Limited, BlackRock Asset Management Schweiz AG and Aperio Group, LLC were interested in 2,467,000 H shares, 7,061,070 H shares, 88,376,588 H shares, 179,916,000 H shares, 10,361,687 H shares, 931,000 H shares, 3,989,000 H shares, 16,995,986 H shares, 16,935,199 H shares, 124,000H shares, 61,149,674 H shares, 439,000 H shares, 9,591,628 H shares, 492,000 H shares, 17,753,797 H shares, 12,616,526 H shares, 1,713,000 H shares, 18,000 H shares and 2,076,240 H shares, respectively. All of these entities are either controlled or indirectly controlled subsidiaries of BlackRock, Inc. Of these 433,007,395 H shares, 123,070 H shares were cash settled unlisted derivatives. |
| BlackRock, Inc. held by way of attribution a short position as defined under Part XV of the SFO in 8,555,620 H shares (0.11%). Of these 8,555,620 H shares, 5,261,000 H shares were cash settled unlisted derivatives. |
Our A shares and H shares generally vote together as a single class, including in the election of directors. Each A share and each H share is entitled to one vote. In addition, in certain matters which affect the rights of the holders of H shares or A shares, the H shares or A shares, as the case may be, are entitled to vote as a separate class.
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CLIC converted and sold 676,470,000 domestic shares in the form of H shares or ADSs in connection with our global offering in December 2003.
Based on the information provided by Deutsche Bank Trust Company Americas, our depositary bank, as of November 11, 2022, the date on which our ADR program was terminated, there were 11,475,521 ADRs representing 57,377,605 H shares, with 45 registered holders. Since certain of the ADSs are held by nominees, the above number may not be representative of the actual number of U.S. beneficial holders of ADSs or number of ADSs beneficially held by U.S. persons.
CLIC, our controlling shareholder, is a wholly state-owned enterprise controlled by the PRC government. See “Item 4. Information on the Company—History and Development of the Company”. None of our major shareholders has voting rights that differ from the voting rights of other shareholders, except that in certain matters which affect the rights of the holders of H shares or A shares, holders of H shares or A shares, as the case may be, are entitled to vote as a separate class. We are not aware of any arrangement which may at a subsequent date result in a change of control of our company.
B. RELATED PARTY TRANSACTIONS
As at the date of this annual report, CLIC owns approximately 68.37% of our issued share capital, a 40% equity interest in AMC, a 60% equity interest in CLPCIC, a 100% equity interest in IHC. CLIC, AMC, CLPCIC and IHC are therefore considered as our connected persons under the HKSE Listing Rules. AMC owns approximately 85.03% equity interest in China Life AMP Asset Management Co., Ltd., or AMP. AMP is therefore also considered as our connected person under the HKSE Listing Rules. Each of AMC and AMP is also a subsidiary of the Company. Chongqing International Trust Inc., or Chongqing Trust, is an associate of CLIC and CLPCIC by virtue of its acting as the trustee of a trust scheme of which CLPCIC is a beneficiary, and is therefore also a connected person of the Company under the HKSE Listing Rules. Each of China Life Capital Investment Company Limited, or China Life Capital, and China Life Industrial Investment Company Limited, or China Life Industrial, is an indirect wholly owned subsidiary and an associate of CLIC, and also a connected person of the Company under the HKSE Listing Rules.
During the reporting period, we entered into the following new related party transactions with these companies:
| • | On December 9, 2022, December 29, 2022 and December 30, 2022, CLIC, IHC and we each entered into a new framework agreement with AMP, respectively; |
| • | On December 28, 2022, we and China Life Capital entered into a new cooperation framework agreement; |
| • | On December 29, 2022, we and China Life Industrial entered into a new property leasing agreement; and |
| • | On December 29, 2022, and January 1, 2023, CLIC and we each entered into a new asset management agreement with AMC, respectively. |
We also continued to carry out certain other continuing related party transactions with CLIC, AMC, IHC, China Life Pension, CLPCIC, China Life Capital, AMP and Chongqing Trust in the reporting period. These transactions constitute connected transactions for us under the HKSE Listing Rules. Details of these transactions are set forth below.
As at the date of this annual report, we own a 43.686% equity interest in CGB and are the largest shareholder of CGB. CGB is considered as our related party under applicable PRC laws and regulations. We continued to carry out continuing related party transactions with CGB in the reporting period. These transactions are not regarded as connected transactions for us under the HKSE Listing Rules. Details of these transactions are set forth below.
As at the date of this annual report, we directly own a 70.74% equity interest in China Life Pension. China Life Pension is not considered as our related party under the HKSE Listing Rules or the SSE Listing Rules. As our subsidiary, China Life Pension also continued to carry out continuing related party transactions with CLIC and AMC in the reporting period. These transactions are regarded as connected transactions for us under the HKSE Listing Rules. Details of these transactions are set forth below.
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Continuing Related Party Transactions with CLIC
During the reporting period, we engaged in continuing related party transactions with CLIC. These transactions are governed by several agreements between CLIC and us, including a restructuring agreement, a policy management agreement, a trademark license agreement and a non-competition agreement. A detailed discussion of these agreements is set forth in Note 34 to our consolidated financial statements included elsewhere in this annual report and under the heading “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” in our annual report on Form 20-F filed with the Securities and Exchange Commission on April 28, 2009.
On December 31, 2021, we and CLIC entered into a policy management agreement for a term of three years ending on December 31, 2024. During its term, this agreement may be terminated by either party by giving to the other party not less than 90 days’ prior written notice. Pursuant to this agreement, we will accept CLIC’s entrustment to provide policy administration services relating to non-transferred policies, and CLIC will pay a service fee to us in cash on an annual basis. The annual cap in respect of the service fee to be paid by CLIC to us under the policy management agreement for each of the three years ending on December 31, 2024 is RMB491 million.
The service fees paid by CLIC to us under the policy management agreement for the year ended on December 31, 2022 were RMB463.21 million (US$67.16 million).
Continuing Related Party Transactions with AMC
Asset Management Agreement between AMC and Us
On July 1, 2020, we and AMC entered into an asset management agreement, pursuant to which AMC agreed to invest and manage assets entrusted to it by us. The agreement expired on December 31, 2022.
On January 1, 2023, we and AMC entered into a new asset management agreement for a term of three years. Pursuant to the new agreement, AMC will invest and manage assets entrusted to it by us, on a discretionary basis, within the scope granted by us and in accordance with our investment guidelines. We will retain the title of the entrusted assets and AMC will be authorized to operate the accounts associated with the entrusted assets for and on behalf of us. We may add to or withdraw from the assets managed by AMC pursuant to the new agreement. We will have the right to formulate, amend and change the investment guidelines and will also have the right to monitor the investment management activities of AMC. In consideration of AMC’s service in respect of investing and managing assets entrusted to it by us under the new agreement, we will pay service fees to AMC, which consist of a fixed investment management service fee and a variable management service fee. The fixed investment management service fee is determined based on the type of investment products and the size of assets under management, and the variable management service fee is determined based on our appraisal of AMC’s investment performance with reference to the standards set out in the investment guidelines. The service fees under the new agreement were determined by us and AMC based on an analysis of the cost of service, market practice, the rate charged by AMC to us in previous years, the rates charged by independent third parties for the provision of similar services, and the size and composition of the assets managed by AMC. The annual caps in respect of the service fees to be paid by us to AMC for the three years ending on December 31, 2025 are RMB4,000 million, RMB5,000 million and RMB6,000 million, respectively.
The service fees paid by us to AMC under the asset management agreement for the year ended on December 31, 2022 were RMB2,871.69 million (US$416.36 million).
Asset Management Agreement between AMC and CLIC
On July 1, 2020, AMC and CLIC entered into an asset management agreement, pursuant to which AMC agreed to invest and manage assets entrusted to it by CLIC. The agreement expired on December 31, 2022.
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On December 29, 2022, CLIC and AMC entered into a new asset management agreement for a term of three years. Pursuant to the new agreement, AMC will invest and manage assets entrusted to it by CLIC, on a discretionary basis, in accordance with the investment guidelines of CLIC. CLIC will retain the title of the entrusted assets and AMC will be authorized to operate the accounts associated with the entrusted assets for and on behalf of CLIC. CLIC may add to or withdraw from the assets managed by AMC pursuant to the new agreement. CLIC will have the right to formulate, amend and change the investment guidelines and will also have the right to monitor the investment management activities of AMC. In consideration of AMC’s services in respect of investing and managing assets entrusted to it by CLIC under the new agreement, CLIC will pay service fees to AMC, which consist of a basic service fee and a variable performance-based management fee. The basic service fee is determined based on the type of investment products and the size of assets under management, and the variable performance-based management fee is determined based on CLIC’s appraisal of AMC’s investment performance with reference to the standards set out in the investment guidelines. The service fees under the new agreement were determined by AMC and CLIC based on an analysis of the cost of service, market practice, the rate charged by AMC to CLIC in previous years, the rates charged by independent third parties for the provision of similar services, and the size and composition of the assets managed by AMC. The annual cap in respect of the service fees to be paid by CLIC to AMC for each of the three years ending on December 31, 2025 is RMB500 million.
The service fees paid by CLIC to AMC under the asset management agreement for the year ended on December 31, 2022 were RMB149.51 million (US$21.68 million).
Continuing Related Party Transactions with IHC
Property Leasing Agreement with IHC
On December 31, 2020, we entered into a property leasing agreement with IHC. This agreement expired on December 31, 2021. IHC has transferred all the properties under this agreement to China Life Industrial, and on December 31, 2021, we entered into a property leasing agreement with China Life Industrial. Under this agreement, China Life Industrial agreed to lease to us 735 properties owned by it. The agreement expired on December 31, 2022.
On December 29, 2022, we entered into a new property leasing agreement with China Life Industrial. Under this agreement, China Life Industrial agreed to lease to us 621 properties owned by it. The annual rent is determined by reference to market rent or, where there is no available comparison, by reference to the costs incurred by China Life Industrial in holding and maintaining the properties, plus a margin of approximately 5%.
The total rent paid by us to China Life Industrial under the property leasing agreement for the year ended on December 31, 2022 was approximately RMB39.28 million (US$5.70 million).
Asset Management Agreement with IHC
On December 27, 2021, we entered into an asset management and operating service agreement with IHC for a term of two years from January 1, 2022. Unless a party serves the other party a written notice for non-renewal prior to 90 working days before the expiry date of the agreement, the agreement will be automatically renewed for one year from the expiry date thereof. Pursuant to the agreement, IHC will invest and manage the assets entrusted to it by us, on a discretionary basis, in accordance with applicable regulatory requirements and our investment guidelines. The entrusted assets under the agreement include: (i) the existing projects already entrusted by us to IHC for investment and management and our interests in which have not been disposed of as of the effective date of the agreement (including equity/real estate direct investments, equity/real estate funds, non-standard financial products and quasi-securitization financial products), and (ii) the new projects entrusted by us to IHC for investment and management in accordance with the agreement (including nonstandard financial products and quasi-securitization financial products). In addition, IHC will also provide operating services to us with respect to the equity/real estate funds invested by us at our own discretion.
In consideration of the investment and management services provided by IHC under the agreement, we will pay IHC the investment management service fee, product management fee, real estate operation management service fee and performance reward. In consideration of the operating services provided by IHC under the agreement, we will pay the entrusted operating fee to IHC. For each of the three years ending on December 31, 2024, the annual cap on the contractual amount of assets newly entrusted by us to IHC for investment and management is RMB65,000 million, and the annual cap on the fees for the investment and management services payable by us to IHC and the entrusted operation fee in relation to the operating services is RMB2,000 million.
For the year ended on December 31, 2022, the contractual amount of assets newly entrusted by us to IHC for investment and management is RMB60,577.00 million (US$8,782.84 million) and the fees paid by us to IHC were RMB637.10 million (US$92.37 million).
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Continuing Related Party Transaction with China Life Pension
On March 22, 2014, we, CLIC and AMC entered into an agreement for the entrustment and management of enterprise annuity funds with China Life Pension. The agreement expired on December 31, 2022.
On December 30, 2022, CLIC entered into a new agreement for the entrustment and management of enterprise annuity funds with China Life Pension. We, AMC, CLPCIC, IHC and China Life Health Industry Investment Company Limited will also, as entrusting parties, participate in the enterprise annuity fund plan under this agreement. Pursuant to the agreement, China Life Pension was entrusted to serve as the trustee and account manager and to provide entrusted management services and account management services for the enterprise annuity funds of CLIC and other entrusting parties. China Life Pension was further entrusted to serve as the investment manager and to provide investment management service for the enterprise annuity funds of CLIC and other entrusting parties. In consideration of the services provided by China Life Pension, CLIC agreed to pay China Life Pension entrusted management fee, account management fees and investment management fee.
Continuing Related Party Transactions with CLPCIC
On February 20, 2021, we entered into an insurance sales framework agreement with CLPCIC for a term of two years from March 8, 2021 to March 7, 2023, which was automatically extended for one year to March 7, 2024 in accordance with the agreement. Under this agreement, CLPCIC continued to entrust us to act as its agent to sell selected insurance products within authorized regions, and agreed to pay us an agency service fee in cash on a monthly basis. The agency service fee will be calculated by the parties at a certain percentage of the insurance premiums actually earned from the insurance agency business. The annual caps in respect of the agency service fees to be paid by CLPCIC to us under the insurance sales framework agreement for the three years ending on December 31, 2023 are RMB3,500 million, RMB3,830 million and RMB4,240 million, respectively.
The service fees paid to us for the year ended on December 31, 2022 were RMB1,513.79 million (US$219.48 million).
Continuing Related Party Transactions with China Life Capital
On December 31, 2019, we and China Life Capital entered into a cooperation framework agreement. Under this agreement, we subscribed as limited partner for the fund products in which insurance funds are permitted for investment (“Fund Products”) and of which China Life Capital or any of its subsidiaries serves as the general partner, and/or Fund Products of which China Life Capital serves as the manager. The agreement expired on December 31, 2022.
On December 28, 2022, we and China Life Capital entered into a new cooperation framework agreement for a term from January 1, 2023 to December 31, 2025.
Under this new agreement, we will subscribe as limited partner for Fund Products of which China Life Capital or any of its subsidiaries serves as the general partner, and/or Fund Products of which China Life Capital serves as the manager. We will enter into specific agreements with the counterparties including China Life Capital (or its subsidiaries) in respect of the subscription of specific Fund Products, and such specific agreements shall be subject to the principles set out in the new agreement. Upon execution of the specific agreements, we will make our capital contribution as required by the payment notice of the general partner. The capital contribution to be made by us will be funded by our internal resources. As the general partner or the manager of the Fund Products, China Life Capital (or its subsidiaries) will provide daily operation, investment management, and consulting services to the Fund Products. The investment scope of the Fund Products includes real estate, warehousing logistics, apartments for long-term lease, urban renewal, infrastructures, new infrastructures, new energy, new industries, digital economy, technological innovation, carbon emission peak, carbon neutrality and other assets in new economy sectors that are in line with national strategies, corporate shareholdings in relation to such underlying assets and asset securitization products in relation to such assets (including, but not limited to, asset-backed securities, real estate investment trusts and quasi-real estate investment trusts). For the three years ending on December 31, 2025, the annual caps for the subscription by us as the limited partner of the Fund Products of which China Life Capital or any of its subsidiaries serves as the general partner are RMB5,000 million, RMB5,000 million and RMB5,000 million, respectively, and the annual caps for the management fee charged by China Life Capital as the general partner or the manager of the Fund Products are RMB500 million, RMB500 million and RMB500 million, respectively.
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For the year ended on December 31, 2022, the subscription by us as limited partner of the Fund Products of which China Life Capital or any of its subsidiaries serves as the general partner were RMB0 million (US$0 million) and the management fee charged by China Life Capital as the general partner or the manager of the Fund Products were RMB143.36 million (US$20.79 million).
Framework Agreements with AMP
Framework Agreement between AMP and Us
On December 31, 2019, we and AMP entered into a framework agreement. Under the agreement, we entered into certain daily transactions with AMP, including subscription and redemption of fund products, sales agency services, asset management for specific clients and other daily transactions permitted by laws and regulations. The agreement expired on December 31, 2022.
On December 30, 2022, we and AMP entered into a new framework agreement for a term from January 1, 2023 to December 31, 2025. Under the new agreement, we and AMP will enter into certain daily transactions, including subscription and redemption of fund products and private asset management. Pricing of the transactions under the new agreement will be determined by the parties through arm’s length negotiations with reference to industry practices. For each of the three years ending on December 31, 2025, the annual cap on the subscription price and corresponding subscription fee for the subscription of fund products is RMB20,000 million; the annual cap on the redemption price and corresponding redemption fee for the redemption of fund products is RMB20,000 million; and the annual cap on management fee payable by us for the private asset management is RMB700 million.
For the year ended on December 31, 2022, the subscription price and corresponding subscription fee for the subscription of fund products was RMB4,945.00 million (US$716.96 million), the redemption price and corresponding redemption fee for the redemption of fund products was RMB5,842.03 million (US$847.01 million), the management fee (including performance-based fee) paid by us for the asset management for specific clients was RMB24.42 million (US$3.54 million) and the fees for other daily transactions were RMB3.28 million (US$0.48 million).
Framework Agreement between AMP and CLIC
On September 6, 2019, CLIC and AMP entered into a framework agreement. Under the agreement, CLIC entered into certain daily transactions with AMP, including subscription and redemption of fund products and private asset management.
On December 9, 2022, CLIC and AMP entered into a new framework agreement for a term from January 1, 2023 to December 31, 2025. Under the new agreement, CLIC will subscribe for or redeem the fund units of the funds managed by AMP (including money market funds, bond funds, equity funds, commingled funds and other types of funds permitted by laws and regulations or regulatory authorities), and pay the relevant fees (mainly including the subscription fee or redemption fee in connection with the subscription or redemption of the funds). Pricing of the transactions concerning the subscription and redemption of fund products under the new agreement will be determined by the parties through arm’s length negotiations with reference to industry practices and the market-oriented principle. For the three years ending on December 31, 2025, the annual caps on the subscription price and corresponding subscription fee for the subscription of fund products are RMB2,000 million, RMB2,000 million and RMB2,000 million, respectively; and the annual caps on the redemption price and corresponding redemption fee for the redemption of fund products are RMB2,000 million, RMB2,000 million and RMB2,000 million, respectively.
For the year ended on December 31, 2022, the subscription price and corresponding subscription fee for the subscription of fund products was RMB0 million (US$0 million), the redemption price and corresponding redemption fee for the redemption of fund products was RMB324.64 million (US$47.07 million) and the management fee paid by CLIC for the private asset management (including a performance-based fee) was RMB0 million (US$0 million).
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Framework Agreement between AMP and CLPCIC
On December 3, 2019, CLPCIC and AMP entered into a framework agreement. Under the agreement, CLPCIC entered into certain daily transactions with AMP, including subscription and redemption of fund products, asset management for specific clients and other daily transactions permitted by laws and regulations. Pricing of the transactions under the agreement will be determined by the parties through arm’s length negotiations with reference to industry practices. For the three years ending on December 31, 2022, the annual caps on the subscription price for the fund products are RMB10,000 million, RMB10,000 million and RMB10,000 million, respectively; the annual caps on the redemption price for the fund products are RMB10,000 million, RMB10,000 million and RMB10,000 million, respectively; the annual caps for the subscription fee for the fund products are RMB100 million, RMB100 million and RMB100 million, respectively; the annual caps for the redemption fee for the fund products are RMB100 million, RMB100 million and RMB100 million, respectively; the annual caps on the management fee (including a performance-based fee) payable by CLPCIC for the asset management for specific clients are RMB100 million, RMB100 million and RMB100 million, respectively; and the annual caps on the fees for other daily transactions are RMB100 million, RMB100 million and RMB100 million, respectively. The agreement expired on December 31, 2022.
For the year ended on December 31, 2022, the subscription price for fund products was RMB0 million (US$0 million), the redemption price for fund products was RMB0 million (US$0 million), the subscription fee for fund products was RMB0 million (US$0 million), the redemption fee for the fund products was RMB0 million (US$0 million), the management fee (including a performance-based fee) paid by CLPCIC for asset management for specific clients was RMB9.66 million (US$1.40 million), and the fees for other daily transactions were RMB0.11 million (US$0.02 million).
Framework Agreement between AMP and IHC
On February 17, 2020, IHC and AMP entered into a framework agreement. Under the agreement, IHC entered into certain daily transactions with AMP, including subscription and redemption of fund products, asset management for specific clients, advisory services and other daily transactions permitted by laws and regulations.
On December 29, 2022, IHC and AMP entered into a new framework agreement for a term from January 1, 2023 to December 31, 2025. Under the new agreement, IHC and its subsidiaries will enter into certain daily transactions with AMP, including subscription and redemption of fund products and private asset management. Pricing of the transactions under the new agreement will be determined by the parties through arm’s length negotiations with reference to industry practices. For each of the three years ending on December 31, 2025, the annual cap on the subscription price and corresponding subscription fee for the subscription of fund products is RMB2,000 million; the annual cap on the redemption price and corresponding redemption fee for the redemption of fund products is RMB2,000 million; and the annual cap on the management fee payable by IHC and its subsidiaries for the private asset management is RMB20 million.
For the year ended on December 31, 2022, the subscription price and corresponding subscription fee for the subscription of fund products was RMB327.44 million (US$47.47 million), the redemption price and corresponding redemption fee for the redemption of fund products was RMB519.35 million (US$75.30 million), the management fee (including a performance-based fee) paid by IHC and its subsidiaries for asset management for specific clients was RMB0 million (US$0 million), the management fee (including performance-based fee) paid by subsidiaries of AMP for the asset management for specific clients was RMB0 million (US$0 million), the advisory fee paid by IHC and its subsidiaries for the advisory services was RMB0 million (US$0 million), the advisory fee paid by AMP and its subsidiaries for the advisory services was RMB0 million (US$0 million), and the fees for other daily transactions were RMB0 million (US$0 million).
Framework Agreement with Chongqing Trust
On December 27, 2019, we entered into a framework agreement with Chongqing Trust. Under the framework agreement, we and Chongqing Trust entered into transactions including subscription and redemption of trust products and other daily transactions permitted by laws and regulations. For each of the three years ending on December 31, 2022, the annual cap on the total amount of subscription and redemption of trust products is RMB30,000 million, the annual cap on the trustee’s remuneration is RMB500 million, and the annual cap on the fees for other daily transactions is RMB100 million. The agreement expired on December 31, 2022.
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For the year ended on December 31, 2022, the total amount of subscription and redemption of trust products was RMB3.90 million (US$0.57 million), the trustee’s remuneration was RMB14.43 million (US$2.09 million), and the fees for other daily transactions were RMB0 million (US$0 million).
Continuing Related Party Transactions with CGB
Insurance Products Cooperation Agreement with CGB
On August 22, 2020, we entered into an insurance products cooperation agreement with CGB. This agreement has a term of two years. Under this agreement, CGB will act as an intermediary to sell such products and will also act on our behalf to receive premiums. In return, we will pay CGB a commission fee for each such product sold by it, calculated and paid on a monthly basis, by multiplying (a) total new premiums received in such month minus the premiums for the policies cancelled during the cooling-off period in such month and (b) a fixed commission rate, which ranges from 0.8% to 38%.
Negotiated Deposit Agreements with CGB
During the reporting period, we engaged in continuing related party transactions with CGB pursuant to several negotiated deposit agreements between CGB and us. A detailed discussion of these agreements is set forth under the heading “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” in our annual report on Form 20-F filed with the Securities and Exchange Commission on April 29, 2021.
Insurance Agency Cooperation Agreement
On December 31, 2022, we entered into an insurance agency cooperation agreement with CGB for a term from January 1, 2023 to December 31, 2025. Under this agreement, CGB will act as an agent to sell our insurance products, and will also act on our behalf to receive premiums and pay insurance benefits. In return, we will pay CGB an agency service fee. The agency service fees for each such product sold by CGB is payable on a monthly basis, and calculated by multiplying (a) total new premiums received in such month minus the premiums for the policies cancelled during the cooling-off period in such month and (b) a fixed commission rate for such product.
Framework Agreement with CGB for Daily Related Party Transactions
On December 26, 2019, we entered into a framework agreement for daily connected transaction with CGB. Pursuant to this framework agreement, we and the subsidiaries controlled by us will, in the ordinary course of business, carry out deposit, financial market and peer, financing, investment and wealth management, co-investment, enterprise annuity, asset management and investment consultation, entrustment, agency and other daily connected transactions with CGB based on normal commercial terms. A detailed discussion of this agreement is set forth in our report on Form 6-K filed with the Securities and Exchange Commission on October 29, 2019. The agreement expired on December 31, 2022.
As at December 31, 2022, the amount of our deposit balance at CGB for deposit related party transactions was RMB57,903.55 million, the interest income arising from these transactions was RMB2,411.01 million and the amount of the balance for financial market and peer related party transactions was RMB0 million. For the year ended on December 31, 2022, the amount of the financing related party transactions with CGB was RMB0 million, the amount of investment and wealth management related party transactions was RMB11,022.33 million, the amount of the co-investment related party transactions was RMB0 million, the scale of entrusted funds under enterprise annuity related party transactions was RMB1,451.69 million, the amount of transaction fees related to enterprise annuity related party transactions (including management fee, entrustment fee, account management fee and performance-based fee) was RMB26.65 million, the amount of transaction fees related to asset management and investment consultation related party transactions (including management fee, service fee and handling fee) was RMB2.62 million, the amount of transaction fees related to entrustment related party transactions (including entrustment fee, service fee and handling fee) was RMB74.79 million, the amount of transaction fees related to agency related party transactions (including agency fee, service fee, handling fee and commissions) was RMB266.08 million and the amount of other daily related party transactions was RMB205.33 million.
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Compliance with HKSE Listing Rules
The asset management agreement between AMC and us, the insurance sales framework agreement between CLPCIC and us, the framework agreement between Chongqing Trust and us and the framework agreement entered into by us and China Life Capital are only subject to reporting, announcement and annual review requirements under the HKSE Listing Rules and are exempt from independent shareholders’ approval requirements. In compliance with applicable HKSE Listing Rules requirements, we made announcements disclosing these transactions on August 22, 2019, December 19, 2019, March 25, 2020, December 17, 2020, October 27, 2022 and December 15, 2022, respectively. The policy management agreement between CLIC and us and the asset management agreement between CLIC and AMC are exempt from reporting, announcement, annual review and independent shareholders’ approval requirements under the HKSE Listing Rules.
The asset management and operating service agreement entered into between IHC and us on December 27, 2021 is subject to reporting, announcement, annual review and independent shareholders’ approval requirements under the HKSE Listing Rules. We made an announcement disclosing this transaction on October 28, 2021 and obtained the approval of the shareholders’ general meeting of our company on December 16, 2021.
The framework agreements entered into by AMP with CLIC, CLPCIC, us and IHC on September 6, 2019, December 3, 2019, December 31, 2019 and February 17, 2020, respectively, are subject to reporting, announcement, annual review and independent shareholders’ approval requirements under the HKSE Listing Rules. In compliance with applicable HKSE Listing Rules requirements, we made an announcement disclosing these transactions on August 22, 2019 and obtained the approval of the shareholders’ general meeting of our company on December 19, 2019. The new framework agreements entered into by AMP with CLIC, IHC and us on December 9, 2022, December 29, 2022 and December 30, 2022, respectively, are only subject to reporting, announcement and annual review requirements under the HKSE Listing Rules and are exempt from independent shareholders’ approval requirements. In compliance with applicable HKSE Listing Rules requirements, we made announcements disclosing these transactions on October 27, 2022.
The remaining related party transactions discussed above, other than the transactions with CGB, are exempt from reporting, announcement and independent shareholders’ approval requirements under the HKSE Listing Rules. The related party transactions with CGB are not regarded as connected transactions for us under the HKSE Listing Rules.
Confirmation of Independent Non-executive Directors:
Our independent non-executive directors have reviewed the above continuing connected transactions that were subject to reporting, announcement, annual review and/or independent shareholders’ approval requirements under the HKSE Listing Rules and confirmed that:
| 1) | the transactions were entered into in the ordinary and usual course of our business; |
| 2) | the transactions were conducted on normal commercial terms; |
| 3) | the transactions were conducted in accordance with the agreements governing those transactions and on the terms that are fair and reasonable and in the interest of the shareholders; and |
| 4) | the amounts of the transactions had not exceeded the relevant annual caps as announced by us. |
C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
| ITEM 8. | FINANCIAL INFORMATION. |
A. CONSOLIDATED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
Our audited consolidated financial statements are set forth beginning on page F-1.
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Legal and Regulatory Proceedings
We are involved in litigation and arbitration proceedings involving our insurance operations on an ongoing basis. In addition, the CBIRC, as well as other PRC governmental agencies, including tax and audit bureaus and the PBOC, from time to time make inquiries and conduct examinations, audits or investigations concerning our compliance with PRC laws and regulations. These litigation, arbitration and administrative proceedings have in the past resulted in damage awards, settlements or administrative sanctions, including fines, which have not been material to us. While we cannot predict the outcome of any pending or future litigation, arbitration, examination or investigation, we do not believe that any pending legal matter will have a material adverse effect on our business, financial condition or results of operations. However, we cannot assure you that any future litigation, arbitration or regulatory proceeding will not have an adverse outcome, which could have a material adverse effect on our operating results or cash flows.
We currently have control procedures in place to monitor our litigation, arbitration and regulatory exposure. We have established a systematic prevention system whereby our management at each corporate level is responsible for compliance with laws, regulations and internal codes of conduct within their individual territories or departments. Our branches at the provincial level are required to report material litigation, arbitration and regulatory matters to our corporate headquarters on a timely basis. We plan to continue to improve our control and compliance policies in the future.
We may penalize or punish our employees or exclusive agents who commit misconduct or fraud, breach the terms of their employment or agency agreements, exceed their authorization limits or fail to follow prescribed procedures in delivering insurance policies and premium payments, in each case having regard to the severity of the offense. Employees or exclusive agents are required to reimburse us for any losses suffered by us resulting from their misconduct or fraud. In serious cases, we may terminate their employment or agency agreements. We report criminal offenses to the PRC authorities and may also bring concurrent civil actions against employees or exclusive agents. We have experienced agent and employee misconduct that has resulted in litigation, arbitration and administrative actions against us and these agents and employees, and in some cases criminal proceedings and convictions against the agent or employee in question. None of these actions has resulted in material losses, damages, fines or other sanctions against us. We cannot assure you, however, that agent or employee misconduct will not lead to a material adverse effect on our business, results of operations or financial condition.
Policy on Dividend Distributions
Our board of directors passed a resolution on March 29, 2023 to propose for approval at the annual general meeting of the declaration of final dividends of RMB0.49 per share, totaling approximately RMB13,850 million (US$2,008 million), for the year ended December 31, 2022. The proposed dividends have not been provided in our consolidated financial statements for the year ended December 31, 2022.
The payment of any dividend by us must be approved by shareholders in a shareholders’ meeting. Our board of directors intends to make its recommendations regarding the declaration of cash dividends to the shareholders in general meeting. The decision to make a recommendation for the payment of any dividend and the amount of the dividend depends on, among other things:
| • | our results of operations and cash flows; |
| • | our financial position; |
| • | statutory solvency requirements as determined under CBIRC rules; |
| • | our shareholders’ interests; |
| • | general business conditions; |
| • | our future prospects; |
| • | statutory and regulatory restrictions on the payment of dividends by us; and |
| • | other factors that our board of directors deems relevant. |
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We will pay dividends out of our after-tax profits only after we have made the following allowances and allocations:
| • | recovery of accumulated losses, if any; |
| • | allocations to the statutory common reserve fund equivalent to 10% of our after-tax profits, as determined under PRC GAAP; |
| • | allocations to the general risks reserve fund equivalent to 10% of our after-tax profits, as determined under PRC GAAP; and |
| • | allocations to a discretionary common reserve fund as approved by the shareholders in a shareholders’ meeting. |
When the statutory common reserve fund reaches and is maintained at or above 50% of our registered capital, as determined under PRC GAAP, no further allocations to this fund will be required.
Under Chinese law, dividends may be paid only out of distributable profits. Any distributable profits that are not distributed in a given year are retained and available for distribution in subsequent years. However, ordinarily we will not pay any dividends in a year in which we do not have any distributable profits.
Payment of dividends by us is also regulated by the PRC insurance law. If we do not meet the minimum solvency margin required by the CBIRC, we may be prohibited from paying dividends. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Solvency requirements”.
We paid dividends of RMB0.40 per share in respect of 2017, RMB0.16 per share in respect of 2018, RMB0.73 per share in respect of 2019 and RMB0.64 per share in respect of 2020. Our board of directors has recommended the declaration of final dividends of RMB0.65 per share in respect of 2021. We expect to continue to pay dividends in line with our financial performance thereafter. We will declare dividends, if any, in Renminbi with respect to the H shares on a per share basis and will pay such dividends in Hong Kong dollars.
B. SIGNIFICANT CHANGES
As of the date of this annual report, there was no significant change since the date of the financial statements filed as part of this annual report that has or is reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
C. EMBEDDED VALUE
Background
China Life prepares financial statements to public investors in accordance with the relevant accounting standards. An alternative measure of the value and profitability of a life insurance company can be provided by the embedded value method. Embedded value is an actuarially determined estimate of the economic value of the life insurance business of an insurance company based on a particular set of assumptions about future experience, excluding the economic value of future new business. In addition, the value of one year’s sales represents an actuarially determined estimate of the economic value arising from new life insurance business issued in one year based on a particular set of assumptions about future experience.
China Life believes that reporting our embedded value and value of one year’s sales provides useful information to investors in two respects. First, the value of our in-force business represents the total amount of shareholders’ interest in distributable earnings, in present value terms, which can be expected to emerge over time, in accordance with the assumptions used. Second, the value of one year’s sales provides an indication of the value created for investors by new business activity based on the assumptions used and hence the potential of the business. However, the information on embedded value and value of one year’s sales should not be viewed as a substitute of financial measures under the relevant accounting basis. Investors should not make investment decisions based solely on embedded value information and the value of one year’s sales.
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.
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Also, the calculation of embedded value and value of one year’s sales involves substantial technical complexity and estimates can vary materially as key assumptions are changed. Therefore, special care is advised when interpreting embedded value results.
The values shown below do not consider the future financial impact of transactions between China Life and CLIC, IHC, AMC, China Life Pension, CLPCIC, etc.
Definitions of Embedded Value and Value of One Year’s Sales
The embedded value of a life insurer is defined as the sum of the adjusted net worth and the value of in-force business allowing for the cost of required capital.
“Adjusted net worth” is equal to the sum of:
| • | Net assets, defined as assets less corresponding policy liabilities and other liabilities valued; and |
| • | Net-of-tax adjustments for relevant differences between the market value and the book value of assets, together with relevant net-of-tax adjustments to certain liabilities. |
The market value of assets can fluctuate significantly over time due to the impact of the prevailing market environment. Hence the adjusted net worth can fluctuate significantly between valuation dates.
The “value of in-force business” and the “value of one year’s sales” are defined here as the discounted value of the projected stream of future shareholders’ interest in distributable earnings for existing in-force business at the valuation date and for one year’s sales in the 12 months immediately preceding the valuation date.
The value of in-force business and the value of one year’s sales have been determined using a traditional deterministic discounted cash flow methodology. This methodology makes implicit allowance for the cost of investment guarantees and policyholder options, asset/ liability mismatch risk, credit risk, the risk of operating experience’s fluctuation and the economic cost of capital through the use of a risk-adjusted discount rate.
Preparation and Review
The embedded value and the value of one year’s sales were prepared by China Life in accordance with the “CAA Standards of Actuarial Practice: Appraisal of Embedded Value” issued by the China Association of Actuaries (“CAA”) in November 2016. Deloitte Consulting (Shanghai) Co., Ltd. performed a review of China Life’s embedded value. The review statement from Deloitte Consulting is contained in the “Independent Actuaries Review Opinion Report on Embedded Value of China Life Insurance Company Limited” section.
Assumptions
Economic assumptions: The calculations are based upon assumed corporate tax rate of 25% for all years. The investment return is assumed to be 5% per annum. 17% grading to 21% (remaining level thereafter) of the investment return is assumed to be exempt from income tax. The investment return and tax exempt assumptions are based on our strategic asset mix and expected future returns. The risk-adjusted discount rate used is 10% per annum.
Other operating assumptions such as mortality, morbidity, lapses and expenses are based on our recent operating experience and expected future outlook.
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Summary of Results
The embedded value as at December 31, 2022, the value of one year’s sales for the 12 months ended December 31, 2022, and the corresponding results as at December 31, 2021 are shown below:
Components of Embedded Value and Value of One Year’s Sales
| RMB million | ||||||||
| ITEM | December 31, 2022 |
December 31, 2021 |
||||||
| A Adjusted Net Worth |
682,694 | 674,317 | ||||||
| B Value of In-Force Business before Cost of Required Capital |
620,053 | 593,137 | ||||||
| C Cost of Required Capital |
(72,227 | ) | (64,446 | ) | ||||
| D Value of In-Force Business after Cost of Required Capital (B + C) |
547,825 | 528,691 | ||||||
| E Embedded Value (A + D) |
1,230,519 | 1,203,008 | ||||||
| F Value of One Year’s Sales before Cost of Required Capital |
43,278 | 50,474 | ||||||
| G Cost of Required Capital |
(7,274 | ) | (5,693 | ) | ||||
| H Value of One Year’s Sales after Cost of Required Capital (F + G) |
36,004 | 44,780 | ||||||
| Including: Value of One Year’s Sales of Individual Agent Business Sector |
33,333 | 42,945 | ||||||
Note: Numbers may not be additive due to rounding.
The new business margin of one year’s sales of individual agent business sector for the 12 months ended December 31, 2022 is shown below:
New Business Margin of One Year’s Sales of Individual Agent Business Sector
| December 31, 2022 | December 31, 2021 | |||||||
| By First Year Premium |
29.1 | % | 41.6 | % | ||||
| By Annual Premium Equivalent |
33.0 | % | 42.2 | % | ||||
Note: First Year Premium is the written premium used for calculation of the value of one year’s sales and Annual Premium Equivalent is calculated as the sum of 100 percent of first year regular premiums and 10 percent of single premiums.
Movement Analysis
The following analysis tracks the movement of the embedded value from the start to the end of the reporting period:
Analysis of Embedded Value Movement in 2022
| RMB million | ||||
| ITEM |
||||
| A Embedded Value at the Start of Year |
1,203,008 | |||
| B Expected Return on Embedded Value |
89,984 | |||
| C Value of New Business in the Period |
36,004 | |||
| D Operating Experience Variance |
583 | |||
| E Investment Experience Variance |
(97,076 | ) | ||
| F Methodology, Model and Assumption Changes |
(2,651 | ) | ||
| G Market Value and Other Adjustments |
16,653 | |||
| H Exchange Gains or Losses |
699 | |||
| I Shareholder Dividend Distribution and Capital Changes |
(18,372 | ) | ||
| J Others |
1,687 | |||
| K Embedded Value as at December 31, 2022 (sum A through J) |
1,230,519 | |||
Notes: Items B through J are explained below:
| B | Reflects expected impact of covered business, and the expected return on investments supporting the 2022 opening net worth. |
| C | Value of one year’s sales for the 12 months ended 31 December 2022. |
| D | Reflects the difference between actual operating experience in 2022 (including mortality, morbidity, lapse, and expenses etc.) and the assumptions. |
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| E | Compares actual with expected investment returns during 2022. |
| F | Reflects the effects of appraisal methodology and model enhancement, and assumption changes. |
| G | Change in the market value adjustment from the beginning of year 2022 to 31 December 2022 and other adjustments. |
| H | Reflects the gains or losses due to changes in exchange rate. |
| I | Reflects dividends distributed to shareholders during 2022. |
| J | Other miscellaneous items. |
Sensitivity Results
Sensitivity tests were performed using a range of alternative assumptions. In each of the sensitivity tests, only the assumption referred to was changed, with all other assumptions remaining unchanged. The results are summarized below:
Sensitivity Results
| RMB million | ||||||||
| Value of In-Force Business after Cost of Required Capital |
Value of One Year’s Sales after Cost of Required Capital |
|||||||
| Base case scenario |
547,825 | 36,004 | ||||||
| 1. Risk discount rate +50bps |
523,130 | 34,228 | ||||||
| 2. Risk discount rate –50bps |
574,291 | 37,915 | ||||||
| 3. Investment return +50bps |
659,047 | 44,510 | ||||||
| 4. Investment return –50bps |
437,094 | 27,524 | ||||||
| 5. 10% increase in expenses |
541,410 | 33,078 | ||||||
| 6. 10% decrease in expenses |
554,241 | 38,929 | ||||||
| 7. 10% increase in mortality rate for non-annuity products and 10% decrease in mortality rate for annuity products |
544,103 | 35,261 | ||||||
| 8. 10% decrease in mortality rate for non-annuity products and 10% increase in mortality rate for annuity products |
551,508 | 36,750 | ||||||
| 9. 10% increase in lapse rates |
547,791 | 35,368 | ||||||
| 10. 10% decrease in lapse rates |
547,872 | 36,677 | ||||||
| 11. 10% increase in morbidity rates |
539,551 | 34,308 | ||||||
| 12. 10% decrease in morbidity rates |
556,253 | 37,701 | ||||||
| 13. Using 2021 EV appraisal assumptions |
548,268 | 35,922 | ||||||
| 14. Allowing for diversification in calculation of VIF |
593,331 | — | ||||||
Independent Actuaries Review Opinion Report on Embedded Value of China Life Insurance Company Limited
China Life Insurance Company Limited (“China Life”) has prepared embedded value results as at December 31, 2022 (“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 retained Deloitte Consulting (Shanghai) Co., Ltd. to review its EV Results. The task is undertaken by Deloitte Actuarial and Insurance Solutions of Deloitte Consulting (Shanghai) Co., Ltd. (“Deloitte Consulting” or “we”).
Scope of Work
Our scope of work covered:
| • | a review of the methodology used to develop the embedded value and value of one year’s sales as at December 31, 2022, in accordance with the “CAA Standards of Actuarial Practice: Appraisal of Embedded Value”, issued by the China Association of Actuaries (“CAA”); |
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| • | a review of the economic and operating assumptions used to develop embedded value and value of one year’s sales as at December 31, 2022; and |
| • | a review of China Life’s EV Results, including embedded value, value of one year’s sales, analysis of embedded value movement from December 31, 2021 to December 31, 2022, and the sensitivity results of value of in-force business and value of one year’s sales. |
Basis of Opinion, Reliance and Limitation
We carried out our review work based on “CAA Standards of Actuarial Practice: Appraisal of Embedded Value”, issued by CAA. In carrying out our review, we have relied on the completeness and accuracy of audited and unaudited data and information provided by China Life.
The determination of embedded value is based on a range of assumptions on future operations and investment performance. The future actual experiences are affected by internal and external factors, many of which are not entirely controlled by China Life. Hence the future actual experiences may deviate from these assumptions.
This report is addressed solely to China Life in accordance with the terms of our engagement letter. 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 statements set forth in this report.
Opinion
Based on the scope of work above, we have concluded that:
| • | The embedded value methodology used by China Life is in line with the “CAA Standards of Actuarial Practice: Appraisal of Embedded Value” issued by CAA. This method is commonly used by life and health insurance companies in China; |
| • | The economic assumptions used by China Life have taken into account the current investment market conditions and the investment strategy of China Life; |
| • | The operating assumptions used by China Life have taken into account the past experience and the expectation of future experience; and |
| • | The embedded value results are consistent with its methodology and assumptions used. The overall result is reasonable. |
For and on behalf of Deloitte Consulting (Shanghai) Co., Ltd.
Eric Lu Yu Jiang
March 29, 2023
| ITEM 9. | THE OFFER AND LISTING. |
A. OFFER AND LISTING DETAILS
In connection with our initial public offering, our American depositary shares, or ADSs, each representing 40 H shares, were listed and commenced trading on New York Stock Exchange on December 17, 2003 under the symbol “LFC”. Our H shares were listed and commenced trading on the Hong Kong Stock Exchange on December 18, 2003 under the stock code “2628”. Prior to these listings, there was no public market for our equity securities. On December 29, 2006, the ratio of ADSs to H shares was reduced from 40 H shares to 15 H shares.
On May 26, 2015, the ratio of ADSs to H shares was further reduced from 15 H shares to 5 H shares.
On August 22, 2022, we filed a Form 25 to delist our ADSs from the New York Stock Exchange. The delisting became effective on September 2, 2022, and our ADR program was terminated on November 11, 2022. Our H shares will continue to be traded on the Hong Kong Stock Exchange. The Hong Kong Stock Exchange is currently the principal trading market for our H shares, which are not listed on any other exchanges in or outside the United States.
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Our A shares were listed and commenced trading on the Shanghai Stock Exchange on January 9, 2007 under the stock code “601628”.
B. PLAN OF DISTRIBUTION
Not Applicable.
C. MARKETS
See “Offer and Listing Details” above.
D. SELLING SHAREHOLDERS
Not Applicable.
E. DILUTION
Not Applicable.
F. EXPENSES OF THE ISSUE
Not Applicable.
| ITEM 10. | ADDITIONAL INFORMATION. |
A. SHARE CAPITAL
Not applicable.
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
The following is a brief summary of certain provisions of our current articles of association, the PRC company law and certain other laws and regulations applicable to us. Such summary is not purported to be complete. For further information, you should refer to the full text of our articles of association and to the texts of applicable laws and regulations.
Objects and Purposes
We are organized under the PRC company law as a joint stock company. We are registered with the Beijing Administration for Market Regulation and our unified social credit registration number is 9110000071092841XX.
Our business scope, set forth in Article 12 of our articles of association, is to engage in life, accident and health insurance businesses; reinsurance business relating to the foregoing; fund investment businesses authorized by laws, regulations or the State Council; agency business, consulting business and provision of services, in each case relating to life insurance; securities investment fund sales business; and other business as approved by the insurance regulatory authority of the PRC.
Sources of Shareholders’ Rights
The primary sources of shareholders’ rights are the PRC company law, our articles of association, relevant CSRC regulations, the Shanghai Stock Exchange Listing Rules, and the Hong Kong Stock Exchange Listing Rules that, among other things, impose certain standards of conduct, fairness and disclosure on us, our directors and CLIC, our controlling shareholder. The PRC company law was enacted in December 1993 and serves as the primary body of law regulating corporate actions of companies organized in the PRC and its directors and shareholders.
Our articles of association have incorporated the provisions set forth in the Special Rules applicable to overseas listed joint stock companies promulgated by the State Council, or Special Rules, the Mandatory Provisions for the Articles of Association of Companies Listed Overseas, or the Mandatory Provisions, adopted in 1994 pursuant to the requirements of the CSRC and the provisions set forth in the Guidelines on the Articles of Association of Listed Companies, or the Guidelines, as amended in 2022 by the CSRC.
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Under the rules of the CSRC, the Special Rules and the Mandatory Provisions were abolished on March 31, 2023. As of the date of this annual report, our articles of association still contain the provisions set forth in the Special Rules and the Mandatory Provisions. We will amend relevant provisions in our articles of association in due course. Upon the listing of the H shares and for so long as the H shares are listed on the Hong Kong Stock Exchange, we are subject to the relevant ordinances, rules and regulations applicable to companies listed on the Hong Kong Stock Exchange, including, among other things, the Hong Kong Stock Exchange Listing Rules, the Securities and Futures Ordinance and the Hong Kong Codes on Takeovers and Mergers and Share Repurchases.
Unless otherwise specified, all rights, obligations and protections discussed below are derived from our articles of association and the PRC company law.
Enforceability of Shareholders’ Rights
Enforceability of our shareholders’ rights may be limited.
Our articles of association provide that, with certain limited exceptions, all disputes or claims based on our articles of association, the PRC company law or other relevant laws or administrative rules, and concerning matters between holders of H shares and holders of A shares, us, or our directors, supervisors, president, vice presidents or other senior officers, must be submitted for arbitration at either the China International Economic and Trade Arbitration Commission or the Hong Kong International Arbitration Center. If an applicant chooses to have the dispute arbitrated at the Hong Kong International Arbitration Center, either party may request that venue be changed to Shenzhen, a city in mainland China near Hong Kong. The governing law for the above-mentioned disputes or claims is Chinese law unless otherwise provided by Chinese law. Any such arbitration will be final and conclusive.
In June 1999, an arrangement was made between the People’s Courts of the PRC and the courts of Hong Kong for mutual enforcement of arbitration rewards rendered in the PRC and Hong Kong according to their respective laws. This arrangement was approved by the Supreme Court of the PRC and the Hong Kong Legislative Council and became effective on February 1, 2000.
There has not been any published report of judicial enforcement in the PRC by H shareholders of their rights under charter documents of PRC joint stock companies or the PRC company law or in the application or interpretation of the PRC or Hong Kong regulatory provisions applicable to PRC joint stock companies.
The PRC company law allows shareholders to sue, on behalf of the corporation, against persons, including corporate officers, directors, who have allegedly wronged the corporation, where the corporation itself has failed to enforce such claim against such persons directly. Class action lawsuits based on violations of securities laws are generally not available. In accordance with the amended PRC Securities Law which came into effect in March 2020, in civil lawsuits based on violations of securities law including making false statements, if the subject matter of the lawsuits is the same and there are a sufficient number of plaintiffs, a representative can be selected to sue on behalf of them.
We are subject to the Hong Kong Exchange Listing Rules, the Hong Kong Securities and Futures Ordinance, or Securities and Futures Ordinance, and the Hong Kong Codes on Takeovers and Mergers and Share Repurchases. However, holders of H shares will not be able to bring actions on the basis of violations of the Hong Kong Stock Exchange Listing Rules and must instead rely on the Hong Kong Stock Exchange to enforce its rules. The Hong Kong Codes on Takeovers and Mergers and Share Repurchases do not have the force of law and are only standards of commercial conduct considered acceptable for takeover and merger transactions and share repurchases in Hong Kong as established by the Securities and Futures Commission of Hong Kong and the securities and futures industry in Hong Kong. The Securities and Futures Ordinance establishes various obligations in relation to disclosure of shareholders’ interests in Hong Kong listed companies, the violation of which is subject to prosecution by the Securities and Futures Commission of Hong Kong.
See “Item 3. Key Information—Risk Factors—Risks Relating to the People’s Republic of China—The laws in China differ from the laws in the United States and may afford less protection to our minority shareholders” and “Item 3. Key Information—Risk Factors—Risks Relating to the People’s Republic of China—You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in the PRC based on U.S. or other foreign laws against us, our management and some of the experts named in the annual report”.
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Dividends
Our board of directors may propose dividend distributions. A distribution of dividends for any fiscal year is subject to shareholders’ approval. Dividends may be distributed in the form of cash or shares or a combination of both. The H shares rank equally with A shares with regard to dividend rights. A distribution of shares must be approved by special resolution of the shareholders’ meeting.
We may only distribute dividends after allowance has been made for:
| • | recovery of accumulated losses, if any; |
| • | allocations to the statutory common reserve fund equivalent to 10% of our after-tax profits; |
| • | allocations to the general risks reserve fund equivalent to 10% of our after-tax profits, as determined under PRC GAAP; and |
| • | allocations to a discretionary common reserve fund as approved by the shareholders in a shareholders’ meeting. |
Under Chinese law, dividends may be paid only out of distributable profits. Any distributable profits that are not distributed in a given year are retained and available for distribution in subsequent years. However, we will ordinarily not pay any dividends in a year when we do not have any distributable profits.
Payment of dividends by us is also regulated by the PRC insurance law. If we do not meet the solvency margin required by the CBIRC, we will be prohibited from paying dividends. See “Item 4. Information on the Company—Business Overview—Regulation and Related Matters—Insurance Company Regulation—Solvency requirements”.
Our articles of association require us to appoint, on behalf of the holders of H shares, a receiving agent that is registered as a trust corporation under the Trustee Ordinance of Hong Kong to receive dividends declared by us in respect of the H shares on behalf of such shareholders. Our articles of association require that cash dividends in respect of H shares be declared in Renminbi and paid by us in Hong Kong dollars. The depositary will convert these proceeds into U.S. dollars and will remit the converted proceeds to holders of our ADSs.
Subject to the requirements under applicable PRC laws and rules of the securities regulatory authorities of the PRC, Hong Kong and United States, we may exercise the power to forfeit unclaimed dividends, provided that such power cannot be exercised until after the expiration of applicable limitation period.
We anticipate that our controlling shareholder, CLIC, may incur future operating losses arising in part from the runoff of policies retained by it in connection with the restructuring. Dividends received from us may become one of CLIC’s principal means of funding these losses. Although we believe that the reserves held by CLIC and other financial resources available to it will fund substantially all of any future operating shortfalls arising out of these policies, which should reduce CLIC’s reliance on dividends from us, subject to the relevant provisions of the PRC company law and our articles of association as described above and in “Item 8. Financial Information—Consolidated Financial Statements and Other Financial Information—Policy on Dividend Distributions”, CLIC may seek to increase the amount of dividends we pay in order to satisfy its cash flow requirements. See “Item 3. Key Information—Risk Factors—Risks Relating to the Restructuring”.
Dividend payments may be subject to Chinese withholding tax. See “—Taxation—The People’s Republic of China—Taxation of Dividends”.
Voting Rights and Shareholders’ Meetings
Our board of directors will convene a shareholders’ annual general meeting once every year within six months from the end of the preceding fiscal year. Our board of directors must convene an interim meeting within two months of the occurrence of any of the following events:
| • | where the number of directors is less than the number stipulated in the PRC company law or two-thirds of the number specified in our articles of association; |
| • | where our unrecovered losses reach one-third of the total amount of our share capital; |
| • | where shareholders, individually or jointly, holding 10% or more of our issued and outstanding voting shares so request in writing; |
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| • | whenever our board of directors deems necessary, or more than half of directors (including at least two independent directors) or our board of supervisors so requests; or |
| • | any other event as maybe provided by applicable laws, rules, regulations or our articles of association. |
When the Company convenes an annual general meeting, written notice must be given no less than 20 working days before the meeting, and when the Company convenes an extraordinary general meeting, written notice must be given no less than 15 days or ten working days (whichever is longer) before the date of the meeting. If the notice period of a shareholders’ general meeting as required by the regulatory requirements and listing rules of the place where the securities of the Company are listed exceeds the period specified above, such provisions shall prevail.
Shareholders at meetings have the power, among other matters, to approve or reject our profit distribution plans, annual budget, financial statements, increases or decreases in share capital, issuances of debentures, mergers, liquidation, any equity-based incentive plan and any amendment to our articles of association. In addition, the rights of a class of shareholders may not be modified or abrogated, unless approved by a special resolution of shareholders at a general shareholders’ meeting and by a special resolution of shareholders of that class of shares at a separate meeting. Our articles of association enumerate various amendments which would be deemed to be a modification or abrogation of the rights of a class of shareholders, including, among others, increasing or decreasing the number of shares of a class disproportionate to increases or decreases of other classes of shares, removing or reducing rights to receive dividends in a particular currency or creating shares with voting or equity rights superior to those of shares of that class. There are no restrictions under PRC law or our articles of association on the ability of investors that are not Chinese residents to hold H shares and exercise voting rights, except that holders of H shares are unable to vote online and the prior approval of the CBIRC is required in respect of any acquisition which results in the acquirer holding more than 5% of the outstanding share capital of our company and the other restrictions set out under “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Restriction of ownership in joint stock insurance companies”.
Each of our ordinary shares, whether it be an A share or an H share, is entitled to one vote on all matters submitted for vote at all shareholders’ meetings, except for meetings of a special class of shareholders where only holders of shares of the affected class are entitled to vote on the basis of one vote per share of the affected class.
Shareholders are entitled to attend and vote at meetings either in person or by proxy. Proxies must be in writing and deposited at our legal address or such other place as is specified in the meeting notice, no less than 24 hours before the time for holding the meeting at which the proxy proposes to vote or the time appointed for the passing of the relevant resolution.
Resolutions on any of the following matters must be approved by more than two-thirds of the voting rights held by shareholders who are present in person or by proxy:
| • | an increase or decrease in our share capital or the issuance of shares, warrants, debentures and other similar securities; |
| • | our division, merger, dissolution or liquidation (shareholders who object to a proposed merger are entitled to demand that either we or the shareholders who approved the merger purchase their shares at a fair price); |
| • | amendments to our articles of association; |
| • | purchase or sale within any single year of any material assets exceeding 30% of our latest audited total assets; |
| • | any equity-based incentive plan; |
| • | removal of any independent director; and |
| • | any other matters as provided under applicable laws or regulations or determined by a majority of shareholders at a general meeting to have a material impact on us and should be approved by two-thirds of the voting rights. |
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An amendment of shareholders’ rights of any class of shares must be approved by more than two-thirds of the voting rights held by holders of shares in the affected class who are present in person or by proxy.
All other actions taken by the shareholders will be approved by a majority of the voting rights held by shareholders who are present in person or by proxy at the shareholders’ meeting.
Any shareholder resolution that is in violation of any laws or regulations of China or the articles of association will be null and void.
The provisions in the rules applicable to Chinese overseas listed companies in respect of voting by a class of shareholders at a shareholders’ meeting were abolished on March 31, 2023. We will amend relevant provisions in our articles of association in due course.
Liquidation Rights
We are organized as a joint stock company with limited liability of indefinite duration, and we must submit our annual report to the SAMR. In the event of our liquidation, the H shares will rank equally with the A shares, and payment of debts out of our remaining assets is required to be made in the order of priority prescribed by applicable laws and regulations or, if no such standards exist, in accordance with such procedures as the liquidation committee that has been appointed either by us or the People’s Courts of China may consider to be fair and reasonable. After payment of debts, we are required to distribute the remaining property to shareholders in proportion to the number of shares they hold.
Information Rights
Our shareholders may, subject to reasonable fees and costs, obtain a copy of our articles of association and inspect and copy all parts of our register of shareholders, personal particulars of the directors, supervisors, president and other senior officers, reports on the state of our share capital, reports showing the aggregate par value, highest and lowest price paid in respect of each class of shares repurchased by us since the end of the last accounting year and the aggregate amount paid by us for this purpose, minutes of shareholders’ general meetings, and counterfoils of company debt securities, resolutions of board meetings, resolutions of board of supervisors.
Our fiscal year is the calendar year ending December 31. We must send to holders of H shares, no more than four months after the end of the relevant financial year, our annual report (including our annual accounts, together with a copy of the auditors’ report thereon). Further, we must publish a preliminary results announcement no later than three months after the end of the relevant fiscal year. The results announcement in respect of the relevant financial year is required to be published on the HKSE’s website no later than the time that is 30 minutes before the earlier of the commencement of the morning trading session or any pre-opening session on the next business day after approval by or on behalf of our board of directors. These and any interim financial statements must be prepared in accordance with HKFRS, IFRS or PRC GAAP in the case of a PRC issuer that has adopted PRC GAAP for the preparation of its annual financial statements. The annual financial statements must be approved by a majority of our shareholders who are present in person or by proxy at the annual general meeting.
The HKSE Listing Rules also require us to send to holders of H shares an interim report no later than three months after the end of the first six months of each fiscal year. Further, we must publish a preliminary results announcement no later than two months after the end of the six-month period. The results announcement in respect of the relevant six-month period is required to be published on the HKSE’s website no later than the time that is 30 minutes before the earlier of the commencement of the morning trading session or any pre-opening session on the next business day after approval by or on behalf of our board of directors.
According to the HKSE Listing Rules, where in the view of the HKSE there is or there is likely to be a false market in our securities, we must, as soon as reasonably practicable after consultation with the HKSE, announce the information necessary to avoid a false market in our securities. In addition, according to the provisions of inside information under the Securities and Futures Ordinance of Hong Kong, we must, as soon as reasonably practicable after any inside information has come to our knowledge, disclose the information to the public. Inside information, in relation to a listed corporation, means specific information that—
| • | is about the corporation, a shareholder or officer of the corporation, or the listed securities of the corporation or their derivatives; and |
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| • | is not generally known to the persons who are accustomed or would be likely to deal in the listed securities of the corporation but would if generally known to them be likely to materially affect the price of the listed securities. |
Depending on the size of the transaction, we may also be required to disclose to the public and our shareholders details of various acquisitions or disposals of assets and other transactions (including transactions with controlling shareholders).
Restrictions on Transferability and the Share Register
Unless otherwise permitted by relevant PRC rules or regulations or approved by relevant PRC authorities, H shares may be traded only among investors who are legal or natural persons resident outside of China, and may not be sold to investors resident within the PRC. There are no restrictions under PRC law or our articles of association on the ability of investors who are not PRC residents to hold H shares. However, under relevant PRC law, a legal person resident outside of China is only allowed to hold not more than 20% of our issued share capital and legal persons resident outside of China are only allowed to hold in aggregate not more than 25% of our issued share capital, unless otherwise approved by competent authorities.
We are required to keep a register of our shareholders comprised of various parts, including one part which is to be maintained in Hong Kong in relation to holders of H shares. Shareholders have the right to inspect and, for a reasonable charge, to copy the share register. No transfers of ordinary shares will be recorded in our share register within thirty days prior to the date of a shareholders’ general meeting or within five days prior to the record date established for the purpose of distributing a dividend.
We have appointed Computershare Hong Kong Investor Services Limited to act as the registrar of our H shares. This registrar maintains our register of holders of H shares and enters transfers of H shares in such register upon the presentation of the documents described above.
Increases in Share Capital
Under our articles of association, issuance of new securities, including ordinary shares, securities convertible into ordinary shares, options, warrants or similar rights to subscribe for any ordinary shares or convertible securities, must be approved by at least two-thirds of the shareholders who attend the shareholders meeting in person or by proxy. In addition, the issuance of A shares or H shares must be approved by two-thirds of the class of domestic shares or H shares, as the case may be, unless the number of shares to be issued shall not exceed 20% of the number of shares of the same class then outstanding in any 12-month period.
Shareholders are not liable to make any further contribution to the share capital other than according to the terms that were agreed upon by the subscriber of the relevant shares at the time of subscription. New issues of shares must also be approved by relevant Chinese authorities.
Decreases in Share Capital and Repurchases
We may reduce our registered share capital only upon obtaining the approval of at least two-thirds of the shareholders who attend the shareholders meeting in person or by proxy and, in certain circumstances, of relevant Chinese authorities. The number of H shares that may be repurchased is subject to the Hong Kong Codes on Takeovers and Mergers and Share Repurchases.
Restrictions on Ownership
Equity interests held by a single shareholder, including its related parties and persons acting in concert, must not exceed one-third of the registered capital of a single insurance company. An exception to the one-third cap applies to insurance companies establishing or investing in other insurance companies for the purposes of innovation and specialization of their business, or consolidating their operations under a single group management. See “Item 4. Information on the Company—Business Overview—Regulation and Related Matters—Insurance Company Regulation—Restriction of ownership in joint stock insurance companies”.
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Restrictions on Large or Controlling Shareholders
Our articles of association define a controlling shareholder as any person who acting alone or in concert with others:
| • | is in a position to elect more than one-half of the board of directors; |
| • | has the power to exercise, or to control the exercise of, 30% or more of our voting rights; |
| • | holds 30% or more of our issued and outstanding shares; or |
| • | has de facto control of us in any other way. |
As of the date of this annual report, CLIC, a wholly state-owned enterprise, is our only controlling shareholder.
Our articles of association provide that, in addition to any obligation imposed by laws and administrative regulations or required by the Hong Kong Stock Exchange Listing Rules, a controlling shareholder shall not exercise its voting rights in a manner prejudicial to the interests of other shareholders:
| • | to relieve a director or supervisor from his or her duty to act honestly in our best interests; |
| • | to approve the appropriation by a director or supervisor, for his or her own benefit or for the benefit of any other person, of our assets in any way, including without limitation opportunities which may be advantageous to us; or |
| • | to approve the appropriation by a director or supervisor, for his or her own benefit or for the benefit of another person, of the individual rights of other shareholders, including without limitation rights to distributions and voting rights (except in accordance with a restructuring of our company which has been approved by the shareholders at a general meeting in accordance with our articles of association). |
Our articles of association also provide that a controlling shareholder or an actual controlling person shall not exploit its affiliated relation in a manner prejudicial to the interest of our company, and shall be liable for any losses suffered by us as a result thereof. The controlling shareholder or actual controlling person shall have fiduciary duties to both our company and our public shareholders. The controlling shareholder shall exercise its rights as a capital contributor of our company in strict compliance with the law. The controlling shareholder shall not cause any damage to the lawful rights and interest of our company and our public shareholders through, among others, any connected transactions, profit distribution, asset restructuring, external investment, fund appropriation and loan guarantee, or impair the interest of our company and our public shareholders through its controlling position.
Board of Directors
Our non-employee directors are elected by our shareholders at shareholders’ general meetings, and employee directors are elected by our employees or other democratic means at the employee representative conference. Directors are elected for a term of three years and may serve consecutive terms if re-elected.
Our articles of association provide that, in exercising their duties and powers, our directors, supervisors and senior officers will act with the care, diligence and skills that are expected of a reasonable person under similar circumstances, observe fiduciary principles and not place themselves in a situation where their interests conflict with the duties they are charged with performing. In addition to these fiduciary duties to our company, each director, supervisor and officer is obligated to each shareholder:
| • | to act honestly in our company’s best interests; |
| • | not to exploit corporate assets for personal gains; and |
| • | not to expropriate the rights of our shareholders. |
If directors, supervisors or officers are found to have misappropriated our company’s assets or misused their position for personal gain, the PRC company law provides that any misappropriated or misused property be returned and any illegal proceeds received by such director, supervisor or officer be confiscated, and allows us to impose punishment on them. In serious cases, criminal liability may also be imposed. According to our articles of association, our shareholders may bring a derivative suit against any director, supervisor or officer who has breached his fiduciary duties. Most disputes between H shareholders and directors, supervisors and officers are required to be resolved by final and binding arbitration.
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Moreover, our articles of association provide that, except as otherwise provided in our articles of association or approved with informed consent at a shareholders’ general meeting, our directors, supervisors and senior officers must not enter into transactions or contracts with us or agree to make corporate loans to any persons or provide guarantees for loans of any shareholder or any other person with corporate assets. In particular, our directors, supervisors and senior officers have obligations to disclose to the board of directors any direct or indirect material interest they may have in any contracts or transactions with us. They may not vote on any contracts, transactions or arrangements in which they have any material interest. Further, we may not make loans or provide guarantees to directors, supervisors or senior officers, unless such loans or guarantees are approved at a shareholders’ meeting or made in the ordinary course of business and to the extent permitted by applicable laws. All decisions relating to the compensation of directors are made at shareholders’ meetings.
There are no provisions under our articles of association or PRC law which relate to:
| • | the retirement or non-retirement of directors under any age limit requirement; |
| • | directors’ borrowing power; or |
| • | number of shares required for directors’ qualification. |
Subject to all relevant laws and administrative regulations, the shareholders may remove any director before the expiration of his or her term of office by a majority vote of the shareholders present in person or by proxy at shareholders’ general meetings. A director, supervisor, president, vice president or other senior officer may be relieved of liability for a specific breach of his or her duties by the consent of shareholders so long as specified conditions are met.
Board of Supervisors
Our board of supervisors consists of five supervisors. At least one-third of our board of supervisors must be employee representatives elected by our employees. The remaining members must be elected by our shareholders in a general meeting. Any appointment or dismissal of the chairperson of the board of supervisors requires the affirmative votes of more than two-thirds of the members of the board of supervisors. Members of the board of supervisors may not serve as director, president, vice president or other senior management of our company. The term of office for our supervisors is three years, which is renewable upon re-election.
The primary duty of the board of supervisors is to monitor our financial matters and management. The board of supervisors’ powers are generally limited to carrying out investigations and reporting to shareholders, the China Securities Regulatory Commission and other relevant governmental authorities having jurisdiction over our affairs and to convening shareholders’ interim meetings. Reasonable expenses incurred by the board of supervisors in carrying out its duties will be paid by us.
Our supervisors owe fiduciary duties to our company and our shareholders. Please see the discussion of the duties and the nature of recourse our shareholders may have against supervisors in breach of these duties in the subsection entitled “—Board of Directors”.
The board of supervisors is accountable, and will report, to the shareholders at the shareholders’ general meetings.
Certain Differences Between PRC Company Law and Delaware Corporate Law
The PRC company law and other laws applicable to us differ in a number of respects from laws generally applicable to United States corporations and their shareholders. The description set forth below includes a summary of certain provisions of the PRC company law and the Guidelines applicable to companies listed both in the PRC and overseas, such as us, which differ from provisions of the corporate law of the State of Delaware.
General
We are a PRC joint stock company, which is a corporate entity organized under the PRC company law. Under the PRC company law, the registered capital of a joint stock company is divided into shares of equal par value. These shares are commonly called domestic ordinary shares. Each share of a joint stock company ranks equally with all other shares in its class as to voting rights and rights to dividends and other distributions. Upon receiving approval from the relevant authorities, a joint stock company may offer its shares for sale to the public and seek to be listed on a stock exchange. The State Council may formulate separate regulations for the issuance of other classes of shares, including H shares. All of our issued shares are fully paid and nonassessable. Holders of H shares may transfer their shares without the approval of other shareholders. Among other things, a joint stock company must have (1) a board of directors of not fewer than five and not more than 19 members, and (2) a board of supervisors of not fewer than three members.
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The shareholders’ meeting of a joint stock company is the highest authority of the company and exercises the powers of the company with respect to significant matters, subject to applicable law and the articles of association of the company. The business of a joint stock company is under the overall management of a board of directors, subject to the PRC company law, other applicable laws and regulations (which in our case include the PRC insurance law and regulations), the company’s articles of association and duly adopted resolutions of its shareholders. The day-to-day operations of a joint stock company are under the direction of its general manager or president, subject to applicable laws and regulations, the company’s articles of association and duly adopted resolutions of the directors and shareholders. In addition, the PRC company law provides for the establishment of a board of supervisors for each joint stock company. The supervisors perform and exercise the functions and powers described below, including examination of the joint stock company’s affairs and monitoring the actions of the directors and officers of the company. The directors, supervisors and officers are not required to hold any qualifying shares in the joint stock company.
A joint stock company may be liquidated involuntarily due to insolvency or voluntarily in accordance with the terms of its articles of association or duly adopted shareholders’ resolutions. The property of a joint stock company remaining after full payment of its liquidation expenses, wages, labor insurance premiums of its employees and statutory compensations, outstanding taxes and debts, is distributed in proportion to the holdings of its shareholders.
Meetings of shareholders
Under PRC law, shareholders are given the power to approve specified matters. See “—Voting Rights and Shareholders’ Meetings”. In addition, the Mandatory Provisions provide that at shareholders’ meetings shareholders are entitled to consider any proposals made by shareholders holding in the aggregate at least 3% of voting power over the company’s shares. These proposals must fall within the scope of powers of the shareholder’s meeting, have a clear agenda and specific matters and comply with laws, administrative regulations and articles of association of the company.
Under Delaware law, the business and affairs of a Delaware corporation are, in general, managed by or under the direction of its board of directors. Only certain fundamental matters regarding the corporation are reserved by statute to be exercised by the shareholders. These matters include, in general, election or removal of directors, retention or dismissal of the corporation’s independent auditors, mergers or other business combinations involving the corporation, amendment of the corporation’s certificate of incorporation and liquidation or dissolution of the corporation.
Shareholders’ approval by written consent
PRC law does not provide shareholders of overseas listed joint stock companies with rights to approve corporate matters by written consent. Under Delaware law, unless otherwise provided in the certificate of incorporation, any action which is required or permitted to be taken at any shareholders’ meeting may be taken without a meeting, subject to various conditions.
Amendments of articles of association
Under PRC law, an amendment of the articles of association must be approved by an affirmative vote of two-thirds of shareholders attending a shareholders’ meeting and only become effective after approval by the CBIRC or other competent regulatory authorities.
Under Delaware law, with certain exceptions, shareholder approvals must be obtained for any amendment to the certificate of incorporation. Board approvals are also required for any amendment to the certificate of incorporation, but no governmental approval is generally required.
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Powers and responsibilities of directors
Under PRC law, the board of directors is responsible for specified actions, including the following functions and powers of a joint stock company:
| • | convening shareholders’ meetings and reporting its work to shareholders at these meetings; |
| • | implementing shareholders’ resolutions; |
| • | determining the company’s business plans and investment proposals; |
| • | formulating the company’s annual financial budgets and final accounts; |
| • | formulating the company’s profit distribution plans and loss recovery plans; |
| • | formulating proposals for the increase or decrease in the company’s registered capital and the issue of debentures; |
| • | formulating major acquisition and disposal plans and plans for the merger, division or dissolution of the company; |
| • | to the extent authorized by the shareholders’ meeting, deciding on such matters as external investments, purchase or sale of assets, assets pledge and connected transactions of the company; |
| • | deciding on the company’s internal management structure and formulating its basic management system; and |
| • | appointing or removing the company’s principal executive officers; appointing and removing other senior officers based on the recommendation of the principal executive officer and deciding on the remuneration of the senior officers. |
Under Delaware law, the business and affairs of a Delaware corporation are managed by or under the direction of its board of directors. Their powers include fixing the remuneration of directors, except as otherwise provided by statute or in the certificate of incorporation or by-laws of the corporation.
Powers and responsibilities of supervisors
Under PRC law, a PRC joint stock company must have a board of supervisors consisting of shareholder representatives and one or more employee representatives. Supervisors attend board meetings as non-voting observers. Directors, officers and company personnel in charge of financial matters may not serve as supervisors. The supervisors perform and exercise the following functions and powers:
| • | examining the company’s financial affairs; |
| • | monitoring compliance with laws, regulations, the articles of association of the company and the shareholders resolutions by the directors and officers of the company; and suggesting removing the directors and officers who violate these laws and regulations; |
| • | requiring corrective action from directors and officers whose actions are contrary to the interests of the company; |
| • | examining the financial information, including financial statements, operation reports and plans for profit distribution, to be submitted by the board of directors to the shareholders’ meetings; and authorizing, in the company’s name, public certified accountants or licensed auditors to assist in the re-examination of such information, should any doubt arise in respect thereof; |
| • | proposing the holding of extraordinary shareholders’ meetings; |
| • | proposing new items to be inserted in the agenda of the shareholders’ meeting; |
| • | bringing lawsuits against directors or members of senior management, if they violate laws, regulations or articles of association of the company; and |
| • | exercising and performing other powers and functions provided for in the company’s articles of association. |
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Delaware law makes no provision for a comparable corporate institution.
Duties of directors, supervisors and officers
Under PRC law, directors, supervisors and officers of a joint stock company are required to comply with relevant laws and regulations and the company’s articles of association. A director, supervisor or officer who contravenes any law, regulation or the company’s articles of association in the performance of his duties shall be personally liable to the company for any loss incurred by the company. Directors, supervisors and officers are required to carry out their duties honestly and diligently, and protect the interests of the company. They are also under a duty of confidentiality to the company and prohibited from divulging confidential information concerning the company, except as permitted by relevant laws and regulations or by a decision of a shareholders’ meeting. They may not use their position and authority in the company to seek personal gain. Directors and officers may not directly or indirectly engage in the same business as the company or in any other business detrimental to the interests of the company, and they are required to forfeit any profits from these activities to the company.
Under Delaware law, the business and affairs of a corporation are managed by or under the direction of its board of directors. In exercising their powers, directors are charged with a fiduciary duty of care to protect the interests of the corporation and a fiduciary duty of loyalty to act in the best interests of its shareholders.
Limitations on transactions with interested directors, supervisors and officers
Under PRC law, directors and officers of a joint stock company may not enter into any contracts or transactions with the company unless permitted by the articles of association or approved by the shareholders. A company may not provide any guarantees to shareholders or any de facto control person of the company unless such guarantees are approved by a majority of shareholders present at the shareholders’ meeting, excluding the shareholder who will be provided such guarantees. Under the Guidelines, a director, supervisor or officer is required to disclose to the board any transaction with the company in which he has a direct or indirect interest or in which there is a material conflict of interest between the company and himself. A director is not entitled to vote or be counted for quorum purposes in any board decision on any such transaction. A company may set aside any interested transaction which did not comply with these requirements, unless the other party to such transaction was honestly unaware of the breach of obligations by the interested director, supervisor or officer. A company may not loan or provide any guarantees to directors, supervisors or officers (including persons related to them), except for the loans made in accordance with employment contracts approved by the shareholders, or unless the company’s business scope allows for the provision of loans and guarantees and such loans or guarantees are made under regular commercial terms.
Under Delaware law, an interested transaction is not voidable if (1) the material facts as to the interested director’s relationship or interests are disclosed or are known to the board of directors and the board in good faith authorizes the transaction by the affirmative vote of a majority of the disinterested directors, (2) such material facts are disclosed or are known to the shareholders entitled to vote on such transaction and the transaction is specifically approved in good faith by vote of the majority of shares entitled to vote thereon or (3) the transaction is fair as to the corporation as of the time it is authorized, approved or ratified. Under Delaware law, the interested director could be held liable for a transaction in which such a director derived an improper personal benefit.
Election and removal of directors
Under PRC law, the term of office of directors of a joint stock company must be specified in the articles of association, but may not exceed three years. Directors may be re-elected. No director may be removed from office without cause by shareholders prior to the expiration of the director’s term. PRC law does not contemplate a classified board of directors.
Under Delaware law, directors of a Delaware corporation can be removed from office with or without cause by the holders of a majority of shares then entitled to vote at an election of directors, provided that except where the certificate of incorporation of the Delaware corporation otherwise provides, a member of a classified board may be removed by shareholders only for cause, and in a corporation with cumulative voting, if less than all of the directors are removed, no director may be removed if the votes cast against the director’s removal is sufficient to elect the director if cumulatively voted at an election of directors. The Court of Chancery may remove a director who has been convicted of a felony or found by a court to have committed a breach of the duty of loyalty in connection with his or her duties to the corporation following application by the corporation or derivatively in the right of the corporation by any shareholder. The court may order the removal only if it determines that the director did not act in good faith in performing the acts resulting in the prior conviction or judgment and that removal is necessary to avoid irreparable harm to the corporation.
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Dividend payments
Under PRC law, proposals for distribution of profits are formulated by the board of directors and submitted for shareholder approval at a shareholders’ meeting. Dividends may be distributed in the form of cash or shares.
Under Delaware law, the board of directors of a Delaware corporation may declare dividends out of distributable earnings and profits without the approval of the shareholders.
Amalgamations and business combinations; appraisal rights
Under PRC law, amalgamations and divisions involving joint stock companies are required to be approved by shareholders voting at a shareholders’ meeting.
Under Delaware law, with certain exceptions, a merger, consolidation or sale of all or substantially all the assets of a corporation must be approved by the board of directors and holders of a majority of the outstanding shares entitled to vote. A shareholder objecting to the merger is entitled to appraisal rights pursuant to which the shareholder may receive cash in the amount of the fair value of the shares held by such shareholder (as determined by a court) in lieu of the consideration the shareholder would otherwise receive in the transaction.
Transactions with significant shareholders
Under Delaware law, a business combination between a Delaware corporation and an interested shareholder which takes place at any time during a period of three years commencing with the date the interested shareholder became an interested shareholder would need prior approval from the board of directors or a supermajority of the shareholders of the corporation, unless the corporation opted out of the relevant Delaware business combination statute. Under Delaware law, an interested shareholder of a corporation is someone who, together with its affiliates and associates, owns more than 15% of the outstanding common shares of the corporation. No such business combination statute or regulation applies to PRC joint stock companies.
Shareholders’ lawsuits
Under PRC law, shareholder(s) individually or in the aggregate holding more than 1% of the total shares in the company for more than 180 consecutive days may initiate shareholders’ lawsuits.
Class actions and derivative actions generally are available to shareholders under Delaware law for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law.
Limitations on liability and indemnification of directors and officers
PRC law does not provide for any specific limitations on liability or indemnification of directors and officers.
Under Delaware law, a corporation may indemnify a current director or officer of the corporation against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in defense of an action, suit or proceeding by reason of such position if (1) the director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and (2) with respect to any criminal action or proceeding, the director or officer had no reasonable cause to believe that his conduct was unlawful. Persons serving at the request of the corporation as directors, officers, employees or agents of another entity such as a subsidiary or an employee stock trust may receive advancement of expenses from the corporation. A corporation may not retroactively impair or eliminate indemnification or advancement rights by amending the corporation’s certificate of incorporation or bylaws after the occurrence of the act or omission that gives rise to indemnification or advancement rights, unless the provision contains, at the time of the act or omission, an explicit authorization of such elimination or limitation.
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Shareholders’ rights of inspection of corporate records
Under PRC law, shareholders are entitled to inspect the articles of association, register of shareholders, corporate bond counter foils, minutes of shareholders’ meetings and board meetings and reports of the financial accounts of the company.
Delaware law permits any shareholder of a Delaware corporation to examine or obtain copies of or extracts from the corporation’s shareholder list and its other books and records for any purpose reasonably related to such person’s interest as a shareholder.
C. MATERIAL CONTRACTS
See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” for certain arrangements we have entered into with CLIC, AMC, IHC, China Life Industrial, China Life Pension, CLPCIC, China Life Capital, AMP, Chongqing Trust and CGB.
D. EXCHANGE CONTROLS
The Renminbi currently is not a freely convertible currency. The SAFE, under the authority of the PBOC, controls the conversion of Renminbi into foreign currency. Until July 20, 2005, the PBOC had been setting and publishing daily a base exchange rate with reference primarily to the supply and demand of Renminbi against the U.S. dollar in the market during the prior day. The PBOC also took into account other factors, such as the general conditions existing in the international foreign exchange markets. From 1994 to July 20, 2005, the official exchange rate for the conversion of Renminbi to U.S. dollars was generally stable. On July 21, 2005, the PRC government introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. Under this system, the PBOC announces the closing price of a foreign currency traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each working day, and makes it the central parity for the trading against the Renminbi on the following working day. On August 11, 2015, the PBOC adjusted the quotation mechanism of the Renminbi central parity to also consider demand and supply in foreign exchange markets and price movements of major currencies, in addition to the closing price on the previous working day. On May 26, 2017, the PBOC introduced the “counter-cyclical factor” into its formula that determines a central parity of the Renminbi against the U.S. dollar. Under the current mechanism, the central parity of the Renminbi against the U.S. dollar is determined based on the closing price, changes in a basket of currencies and the counter-cyclical factor. See “Item 3. Key Information—Risk Factors—Risks Relating to the People’s Republic of China—Government control of currency conversion and the fluctuation of the Renminbi may materially and adversely affect our operations and financial results”.
Although PRC governmental policies were introduced in 1996 to reduce restrictions on the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, usually requires the approval of the SAFE and other relevant authorities. Although experimental policies were introduced in certain pilot areas such as the Shanghai free trade zone to reduce foreign exchange control, restrictions on the convertibility of Renminbi into foreign currency still remain in force in most parts of China. In the event of shortages of foreign currencies, we may be unable to convert sufficient Renminbi into foreign currency to meet our foreign currency obligations or to pay dividends in foreign currency.
Our H shares are traded on the Hong Kong Stock Exchange. There are no limitations on the right of non-resident or foreign owners to remit dividends or capital including capital gains imposed by Hong Kong law.
E. TAXATION
The taxation of income and capital gains of holders of H shares or ADSs is subject to the laws and practices of China and of jurisdictions in which holders of H shares or ADSs are resident or otherwise subject to tax. The following summary of certain relevant taxation provisions is based on current law and practice, is subject to change and does not constitute legal or tax advice. The discussion does not deal with all possible tax consequences relating to an investment in the H shares or ADSs. In particular, the discussion does not address the tax consequences under state, local and other laws, such as non-U.S. federal laws other than the laws of the PRC and Hong Kong. Accordingly, you should consult your own tax adviser regarding the tax consequences of an investment in the H shares and ADSs. The discussion is based upon laws and relevant interpretations in effect as of the date of this annual report, all of which are subject to change.
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The People’s Republic of China
The following is a discussion of the material Chinese tax provisions relating to the ownership and disposition of H shares or ADSs held by the investors as capital assets. This discussion does not address all of the tax considerations that may be relevant to specific investors in light of their particular circumstances or to other investors subject to special treatment under the tax laws of the PRC. This discussion is based on the tax laws of China as in effect as of the date of this annual report, as well as on the Agreement between the United States of America and the People’s Republic of China for the Avoidance of Double Taxation, or the “China-U.S. Tax Treaty”, all of which are subject to change (or changes in interpretation), possibly with retroactive effect.
This discussion does not address any aspects of Chinese taxation other than income taxation, capital taxation, stamp taxation and estate taxation. Prospective investors are urged to consult their tax advisers regarding Chinese and other tax consequences of owning and disposing of H shares.
Taxation of Dividends
Individual investors. According to the PRC Individual Income Tax Law, as amended, dividends paid by Chinese companies are ordinarily subject to a Chinese withholding tax levied at a flat rate of 20%. For a foreign individual who is not a resident of China, the receipt of dividends from a company in China is normally subject to a withholding tax of 20% unless reduced pursuant to an applicable tax treaty. According to a notice issued by the Chinese State Administration of Taxation, or the SAT, on June 28, 2011, if the withholding tax rate under applicable tax treaties is 10% or less, the receipt of dividends will be subject to 10% withholding tax; and if the withholding tax rate under applicable tax treaties is between 10% and 20%, the receipt of dividends will be subject to the actual tax rate as agreed under such tax treaties.
Enterprises. According to the PRC Enterprise Income Tax Law and its implementation rules, effective on January 1, 2008, as well as any amendments from time to time and the Circular on Issues Relating to the Withholding of Enterprise Income Tax for Dividends Distributed by Resident Enterprises in China to Non-resident Enterprises Holding H-shares of the Enterprises, issued by the SAT on November 6, 2008, resident enterprises in China are required to, in distributing dividends for 2008 or any year hereafter to non-resident enterprises holding Overseas Shares including H-shares and ADSs of the enterprises, withhold enterprise income tax for such dividends at a tax rate of 10%. Non-resident enterprises holding H shares of any resident enterprise can, after receiving dividends due to them, apply for preferential tax treatment with competent tax authorities in accordance with tax treaties.
Tax treaties. Investors who do not reside in China and reside in countries that have entered into treaties for the avoidance of double-taxation with China may be entitled to a reduction of the withholding tax imposed on the payment of dividends to our investors who do not reside in China. China currently has treaties for the avoidance of double-taxation with a number of other countries, which include Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the United States.
Under the China-U.S. Tax Treaty, China may tax a dividend paid by us to an Eligible U.S. Holder up to a maximum of 10% of the gross amount of the dividend. For the purposes of this discussion, an “Eligible U.S. Holder” is a U.S. holder that (i) is a resident of the United States for the purposes of the China-U.S. Tax Treaty, (ii) does not maintain a permanent establishment or fixed base in China to which H shares are attributable and through which the beneficial owner carries on or has carried on business (or, in the case of an individual, performs or has performed independent personal services) and (iii) is not otherwise ineligible for benefits under the China-U.S. Tax Treaty with respect to income and gains derived in connection with the H shares.
Taxation of Capital Gains
According to the PRC Enterprise Income Tax Law and its implementation rules (effective on January 1, 2008) as well as any amendments from time to time, capital gains realized by foreign enterprises which have no establishment or residence in China or whose capital gains from China do not relate to their establishment or residence in China, are ordinarily subject to enterprise income tax at the rate of 10% with respect to the gains realized within China, unless reduced pursuant to an applicable tax treaty.
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According to the Announcement on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source issued by the SAT on October 17, 2017, the balance of the income from the transfer of equity less the net value of equity is taxable income. Income from transfer of equity refers to the consideration received by the transferor of equity for transfer of equity, including various cash and non-cash incomes. Net value of equity refers to the taxable base for obtaining such equity. Taxable base is the cost of capital actually paid by the equity transferor when purchasing such equity.
According to the PRC Individual Income Tax Law, as amended, capital gains realized by individuals upon the transfer of shares, including Overseas Shares, are subject to capital gains tax levied at a flat rate of 20%; and relevant tax authorities are authorized to promulgate implementation rules in this regard. To date, the relevant tax authorities have not promulgated any implementation rules on the taxation of capital gains realized by individuals upon the transfer of shares, including Overseas Shares. If the relevant tax authorities promulgate such implementation rules in the future, a 20% tax may be levied on capital gains realized by foreign individuals in accordance with the PRC Individual Income Tax Law, as amended, unless reduced pursuant to an applicable tax treaty. To date, the relevant tax authorities have not collected capital gains tax on the income from the transfer of shares.
Additional Chinese Tax Considerations
Chinese stamp duty. Chinese stamp duty imposed on the transfer of shares of Chinese publicly traded companies under the Provisional Regulations of China Concerning Stamp Duty should not apply to the acquisition and disposal by non-Chinese investors of H shares or ADSs outside of China by virtue of the Provisional Regulations of China Concerning Stamp Duty, which became effective on October 1, 1988 and which provide that Chinese stamp duty is imposed only on documents executed or received within China that are legally binding in China and are protected under Chinese law.
Estate tax. No liability for estate tax under Chinese law will arise from non-Chinese nationals holding H shares.
Investors under the Shanghai-Hong Kong Stock Connect Program. According to the Notice on Tax Policies for the Shanghai-Hong Kong Stock Connect Pilot Program, jointly issued by the MOF, SAT and CSRC which became effective on November 17, 2014, between November 17, 2014 to November 16, 2017, gains realized by Chinese individual investors upon a transfer of H shares through the Shanghai-Hong Kong Stock Connect program were exempted from individual income tax. Gains realized by Chinese enterprise investors upon a transfer of H shares through the Shanghai-Hong Kong Stock Connect program must be included in their gross income and subject to enterprise income tax. For dividends received by Chinese individual investors and securities investment funds from investing in H shares through the Shanghai-Hong Kong Stock Connect program, the Chinese issuer of such H shares must withhold income tax at a tax rate of 20%. Dividends received by Chinese enterprise investors from investing in H shares through the Shanghai-Hong Kong Stock Connect program must be included in their gross income and subject to enterprise income tax, and the Chinese issuer of such H shares will not withhold income tax for the dividends. The enterprise investors in these circumstances must make tax filings by themselves. According to the Notice on Continuation of the Tax Policies for the Shanghai-Hong Kong Stock Connect Pilot Program, which was jointly issued by the MOF, SAT and CSRC and became effective on November 17, 2017, gains realized by Chinese individual investors upon a transfer of H shares through the Shanghai-Hong Kong Stock Connect Program are further exempted from individual income tax for the period from November 17, 2017 to December 4, 2019. According to the Announcement on Continuation of the Individual Income Tax Policies for the Shanghai-Hong Kong Stock Connect Program and Shenzhen-Hong Kong Stock Connect Program and for the Mainland-Hong Kong Mutual Recognition of Fund, which became effective on December 5, 2019, gains realized by Chinese individual investors from a transfer of shares listed on the Hong Kong Stock Exchange through the Shanghai-Hong Kong Stock Connect Program and Shenzhen-Hong Kong Stock Connect Program, as well as from sale and purchase of interest in funds set up in Hong Kong through the mutual fund recognition, are further exempted from individual income tax for the period from December 5, 2019 to December 31, 2022. According to the Announcement on the Extension of Relevant Preferential Individual Income Tax Policies released on January 16, 2023, the preferential individual income tax policies under the Announcement on Continuation of the Individual Income Tax Policies for the Shanghai-Hong Kong Stock Connect Program and Shenzhen-Hong Kong Stock Connect Program and for the Mainland-Hong Kong Mutual Recognition of Fund will continue to be effective for the period from January 1, 2023 to December 31, 2023.
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Hong Kong
The following is a discussion of the material Hong Kong tax provisions relating to the ownership and disposition of H shares or ADSs held by the investors as capital assets. This discussion does not address all of the tax considerations that may be relevant to specific investors in light of their particular circumstances or to investors subject to special treatment under the tax laws of Hong Kong. This discussion is based on the tax laws of Hong Kong as in effect on the date of this annual report, which are subject to change (or changes in interpretation), possibly with retroactive effect. This discussion does not address any aspects of Hong Kong taxation other than income taxation, capital taxation, stamp taxation and estate taxation. Prospective investors are urged to consult their tax advisers regarding Hong Kong and other tax consequences of owning and disposing of H shares.
Tax on Dividends
Under current practice, no tax is payable in Hong Kong in respect of dividends paid by us.
Tax on Gains from Sale
No tax is imposed in Hong Kong in respect of capital gains from the sale of property. However, trading gains from the sale of property by persons carrying on a trade, profession or business in Hong Kong where the gains are derived from or arise in Hong Kong from such trade, profession or business will be chargeable to Hong Kong profits tax, which is imposed at the rate of 16.5% on corporations and at a rate of 15% on unincorporated businesses for the year of assessment 2008/09 onwards. Commencing from the year of assessment 2018/19 (i.e. on or after April 1, 2018), the profits tax rate for the first HK$2,000,000 of profits of corporations will be lowered to 8.25% while the remaining profits will continue to be taxed at the rate of 16.5%; and the profits tax rate for the first HK$2,000,000 of profits of unincorporated businesses will be lowered to 7.5%, while the remaining profits will continue to be taxed at the rate of 15%.
Trading gains from sales of H shares effected on the Hong Kong Stock Exchange will be considered to be derived from or arise in Hong Kong. Liability for Hong Kong profits tax would thus arise in respect of trading gains from sales of H shares effected on the Hong Kong Stock Exchange realized by persons carrying on a business of trading or dealing in securities in Hong Kong.
There will be no liability for Hong Kong profits tax in respect of profits from the sale of ADSs, where purchases and sales of ADSs are effected outside Hong Kong, for example, on the New York Stock Exchange.
Stamp Duty
Hong Kong stamp duty, currently charged at the ad valorem rate of 0.13% on the higher of the consideration for, or the market value of, the H shares, will be payable by the purchaser on every purchase and by the seller on every sale of H shares (in other words, a total of 0.26% is currently payable on a typical sale and purchase transaction involving H shares). In addition, a fixed duty of HK$ 5.00 is currently payable on any instrument of transfer of H shares. If stamp duty is not paid on or before the due date, a penalty of up to ten times the duty payable may be imposed.
The withdrawal of H shares upon the surrender of ADRs, and the issuance of ADRs upon the deposit of H shares, will also attract stamp duty at the rate described above for sale and purchase transactions unless such withdrawal or deposit does not result in a passing of the beneficial interest in the H shares under Hong Kong law. The issuance of the ADRs upon the deposit of H shares issued directly to the depositary of the ADSs, or for the account of the depositary, will not be subject to any stamp duty. No Hong Kong stamp duty is payable upon the transfer of ADSs outside Hong Kong.
Estate Duty
The Revenue (Abolition of Estate Duty) Ordinance 2005 came into effect on February 11, 2006 in Hong Kong. No Hong Kong estate duty is payable and no estate duty clearance papers are needed for an application for a grant of representation in respect of holders of H shares whose deaths occur on or after February 11, 2006.
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United States of America
The following is a discussion of the material United States federal income tax consequences relating to the purchase, ownership and disposition of H shares or ADSs by U.S. Holders (as defined below) that acquire H shares or ADSs for cash and hold them as capital assets. This discussion is based on the Internal Revenue Code of 1986, as amended, or “the Code”, Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion does not address all of the tax considerations that may be relevant to specific U.S. Holders in light of their particular circumstances or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as banks, insurance companies, tax-exempt entities, retirement plans, regulated investment companies, real estate investment trusts, partnerships, dealers in securities, or other U.S. Holders that generally mark their securities to market for U.S. federal income tax purposes, certain former citizens or residents of the United States, persons who have acquired our H shares or ADSs as part of a straddle, hedge, conversion, or other integrated investment, persons who own, directly or by attribution, 10% or more of the combined voting power or value of all classes of stock of China Life or persons that have a “functional currency” other than the U.S. dollar). This discussion does not address any U.S. state or local or any U.S. federal estate, gift or alternative minimum tax considerations.
We have voluntarily delisted our ADSs from the NYSE, which has become effective from September 2, 2022, and have terminated our ADR program, which has become effective from November 11, 2022. We also intend to file Form 15F to deregister our ADSs and the underlying H shares and terminate our reporting obligations under the Exchange Act once the criteria for deregistration have been satisfied. Following the delisting, our ADSs can no longer be regularly traded on an established market in the United States. Our H shares continue to be traded on the HKSE.
As used in this discussion, the term “U.S. Holder” means a beneficial owner of H shares or ADSs that is, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation created or organized in or under the laws of the United States or of any state or political subdivision thereof, or therein, including the District of Columbia or (iii) an estate or trust the income of which is subject to U.S. federal income tax regardless of the source thereof.
If an entity treated as a partnership for U.S. federal income tax purposes invests in H shares or ADSs, the U.S. federal income tax considerations relating to such investment will depend in part upon the status and activities of such entity and the particular partner. Any such entity should consult its own tax advisor regarding the U.S. federal income tax considerations applicable to it and its partners relating to the purchase, ownership and disposition of H shares or ADSs.
Investors are urged to consult their own tax advisers as to the particular tax considerations applicable to them relating to the purchase, ownership and disposition of H shares or ADSs in their individual circumstances, including in relation to the exchange of ADSs for H shares, the applicability of U.S. federal, state and local tax laws, any changes in applicable tax laws and any pending or proposed legislation or regulations.
Taxation of Dividends
Subject to the discussion below under “—Special Rules”, cash distributions with respect to the H shares or ADSs owned by a U.S. Holder will, upon receipt, be includible in the gross income of such U.S. Holder as ordinary dividend income to the extent of our current and accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent that the amount of any such cash distribution exceeds our current and accumulated earnings and profits as so computed, it will be treated first as a non-taxable return of capital to the extent of the U.S. Holder’s adjusted tax basis in such H shares or ADSs and, to the extent the amount of such cash distribution exceeds adjusted tax basis, will be treated as gain from the sale of such H shares or ADSs. Dividends paid by us generally will constitute income from sources outside the United States for foreign tax credit limitation purposes and will not be eligible for the “dividends received” deduction.
Dividends received by individuals from “qualified foreign corporations” are generally subject to a maximum U.S. federal income tax rate of 20%, so long as certain holding period requirements are met. A non-U.S. corporation (other than a passive foreign investment company) generally will be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive income tax treaty with the United States which the Secretary of the Treasury determines is satisfactory for purposes of the relevant provision and which includes an exchange of information program or (ii) with respect to any dividend it pays on stock which is readily tradable on an established securities market in the United States. The Treasury Department has determined that the China-U.S. Tax Treaty as currently in effect meets the requirements described in clause (i) above. However, the ADSs were delisted on September 2, 2022, and are no longer tradable on an established securities market in the United States. Each U.S. Holder that is an individual is urged to consult his or her tax adviser regarding the applicability of this reduced rate to dividends received with respect to the H shares or ADSs in his particular circumstance.
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The U.S. dollar value of any distribution made by us in Hong Kong dollars (or other currency that is not the U.S. dollar, or a “foreign currency”), should be calculated by reference to the exchange rate in effect on the date of receipt of such distribution by Deutsche Bank Trust Company Americas, as depositary, in the case of ADSs, or by the U.S. Holder, in the case of H shares held directly by such U.S. Holder regardless of whether the Hong Kong dollars (or such other foreign currency) so received are converted into U.S. dollars on the date of receipt. If the Hong Kong dollars (or such other foreign currency) so received are converted into U.S. dollars on the date of receipt, such U.S. Holder generally should not recognize foreign currency gain or loss on such conversion. If the Hong Kong dollars (or such other foreign currency) are not converted into U.S. dollars on the date of receipt, such U.S. Holder will have a basis in the Hong Kong dollars (or such other foreign currency) equal to their U.S. dollar value on the date of receipt. Any gain or loss on a subsequent conversion or other disposition of the Hong Kong dollars (or such other foreign currency) generally will be treated as ordinary income or loss from sources within the United States for foreign tax credit limitation purposes.
Subject to certain limitations, the Chinese tax withheld from dividends paid with respect to H shares or ADSs and paid over to China, as described above under “—The People’s Republic of China—Taxation of Dividends”, may be creditable against a U.S. Holder’s U.S. federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 20% U.S. federal income tax rate. A U.S. Holder of H shares or ADSs that does not elect to claim a U.S. foreign tax credit may instead claim a deduction for such withheld tax, but only for a taxable year in which the U.S. Holder elects to do so with respect to all non-U.S. income taxes paid or accrued in such taxable year. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and U.S. Holders are urged to consult their own U.S. tax advisers with respect to foreign tax credit considerations in their individual circumstances.
Sale or other Disposition of H Shares or ADSs
Subject to the discussion below under “—Special Rules”, a U.S. Holder generally will recognize gain or loss for U.S. federal income tax purposes upon a sale or other disposition of H shares or ADSs that it owns in an amount equal to the difference, if any, between the amount realized from the sale or disposition and such U.S. Holder’s adjusted tax basis in such H shares or ADSs. The gain or loss generally will be a capital gain or loss and will be long-term capital gain (taxable at a reduced rate for individuals) or loss if, on the date of sale or disposition, such H shares or ADSs were held by the U.S. Holder for more than one year and will generally be U.S. source gain or loss. The claim of a deduction in respect of a capital loss may be subject to limitations.
A U.S. Holder that receives Hong Kong dollars (or other foreign currency) from the sale or disposition generally will realize an amount equal to the U.S. dollar value of the Hong Kong dollars (or such other foreign currency) on the settlement date of the sale or disposition if (i) the U.S. Holder is a cash basis or electing accrual basis taxpayer and our H shares, or ADSs, as the case may be, are treated as being “traded on an established securities market” for this purpose or (ii) the settlement date is the date of the sale or disposition. If the Hong Kong dollars (or such other foreign currency) so received are converted into U.S. dollars on the settlement date, the U.S. Holder should not recognize foreign currency gain or loss on the conversion. If the Hong Kong dollars (or such other foreign currency) so received are not converted into U.S. dollars on the settlement date, the U.S. Holder will have a basis in the Hong Kong dollars (or such other foreign currency) equal to the U.S. dollar value on the settlement date. Any gain or loss on a subsequent conversion or other disposition of the Hong Kong dollars (or such other foreign currency) generally will be treated as ordinary income or loss from sources within the United States for foreign tax credit limitation purposes. A U.S. Holder should consult its own tax adviser regarding the U.S. federal income tax consequences of receiving Hong Kong dollars (or other currency) from a sale or disposition of the H shares or ADSs in cases not described in this paragraph.
A U.S. Holder that is a non-resident enterprise may be subject to Chinese tax on the gain realized upon the sale or other disposition of H shares or ADSs. See “—The People’s Republic of China—Taxation of Capital Gains” above. Holders should consult their own tax advisers concerning their ability to credit such Chinese taxes against their U.S. federal income tax liability in their particular situation.
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Special Rules
Related Person Insurance Income. Certain adverse U.S. income and tax reporting rules may apply to U.S. shareholders who, directly or indirectly, own stock of a non-U.S. corporation that earns “related person insurance income” (“RPII”), if 25% or more of the non-U.S. corporation’s direct or indirect shareholders are U.S. persons. RPII is generally defined as insurance income derived from the insurance (or reinsurance) of insureds who are U.S. shareholders in the non-U.S. corporation or who are related to such U.S. shareholders. If applicable, these rules would require U.S. Holders to include in taxable income each year their pro rata share of any RPII incurred by us for the year, regardless of whether such income is distributed, and also to file IRS Form 5471, disclosing certain information regarding their direct or indirect ownership of China Life. Special rules apply for purposes of determining each U.S. shareholder’s pro rata share of any RPII. For organizations that are otherwise exempt from U.S. federal income tax under section 501(a) of the Code, any such income would constitute “unrelated business taxable income”. These rules could also apply to convert some or all of the gain recognized from the sale or disposition of H shares or ADSs from capital gain to ordinary income and to require such gain to be reported on IRS Form 5471.
Under a statutory exception, these rules do not apply if less than 20% of the non-U.S. corporation’s insurance income is RPII or if less than 25% of the non-U.S. corporation’s stock is owned by U.S. shareholders. Because CLIC holds approximately 68.37% of our share capital, and because we do not offer or intend to offer our products and services in the United States, it is highly unlikely that the RPII rules will apply. If more of our shares are sold to the public in the future, it is possible that such rules could apply at a later date.
Passive Foreign Investment Company. In general, a non-U.S. corporation will be a PFIC if 75% or more of its gross income constitutes “passive income” or 50% or more of its assets produce “passive income” or are held for the production of “passive income”. In determining whether we are a PFIC, we will be treated as if we directly owned our proportionate share of the assets and received our proportionate share of the income of any other corporation in which we own 25% or more of the shares by value.
For the purpose of determining whether a non-U.S. corporation is a PFIC, “passive income” is defined to include income of the kind which would be foreign personal holding company income under section 954(c) of the Code, and generally includes interest, dividends, annuities and other investment income. Passive income does not include interest income or dividends received from controlled subsidiaries or certain other related persons, to the extent properly allocable to income of such related person that is not passive income. The PFIC provisions, as modified by the TCJA, specifically exclude from the definition of “passive income” any income “derived in the active conduct of an insurance business by a qualifying insurance corporation” (the “active insurance business exception”). The active insurance business exception is intended to ensure that income derived by a bona fide insurance company is not treated as passive income. A non-U.S. corporation is a qualifying insurance corporation if it would be subject to tax as an insurance company if it were a domestic corporation and (i) loss and loss adjustment expenses and certain reserves, or “applicable insurance liabilities”, constitute more than 25% of the non-U.S. corporation’s gross assets for the relevant year or (ii) a U.S. Holder makes an election to apply an alternative facts and circumstances test that applies only in certain runoff-related or ratings-related circumstances involving the insurance business. The PFIC provisions also exclude from the definition of “passive income” any income derived in the active conduct of a banking trade or business.
The IRS released final and proposed Treasury regulations regarding the application of the PFIC rules to insurance companies in December 2020. The proposed Treasury regulations are not yet in force but are proposed to be effective for taxable years of U.S. Holders beginning on or after the date that final regulations are issued. The proposed Treasury regulations provide that a company is engaged in the active conduct of an insurance business only if it satisfies a factual requirements test or a “bright-line” test providing that the active conduct requirement is met if the insurance company’s “active conduct percentage” is at least 50%. The factual requirements test requires a company’s officers and employees to carry out substantial managerial and operational activities on a regular and continuous basis with respect to underwriting, investment, contract and claim management and sales activities, and perform virtually all of the active decision-making functions relevant to its underwriting functions. In general, a company’s active conduct percentage is determined by dividing the company’s aggregate expenses for certain insurance-related services of its officers and employees (excluding investment activities) by the company’s aggregate expenses for such insurance-related services, including those paid to unaffiliated persons (excluding investment activities). Activities of officers and employees of certain affiliates may be considered for both the factual requirements test and the “bright-line” test. The proposed regulations would also expand the circumstances in which a shareholder of a non-U.S. corporation is treated as owning shares of a subsidiary that is treated as a PFIC even if the corporation is not treated as a PFIC. We cannot assure you that we will not be treated as a PFIC as a result of the finalization of these regulations. We make various simplifying assumptions to estimate the asset composition and value of our subsidiaries in order to apply the PFIC tests to the income and assets of our 25% or greater owned subsidiaries. Based on our analysis of our assets and income, which takes into account these assumptions, we believe that we were not classified as a PFIC in 2022. However, there is no assurance that the IRS will not take a contrary position and assert that we are a PFIC. Furthermore, an actual determination of PFIC status is inherently factual in nature and cannot be made until the close of each applicable tax year and, accordingly, no assurances can be given that we will not become a PFIC at some point in the future.
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In general, a U.S. shareholder of a PFIC is subject to a special tax and an interest charge at the time of the sale of (or receipt of an “excess distribution” with respect to) its shares in the PFIC. In general, a shareholder is treated as having received an “excess distribution” if the amount of the distribution was more than 125% of the average distribution with respect to its shares during the three preceding taxable years (or shorter period during which the taxpayer held the shares). The special tax is computed by assuming that the excess distribution or, in the case of a sale, the gain with respect to the shares was earned in equal portions throughout the holder’s period of ownership. The portion allocable to each year prior to the year of sale is taxed at the maximum marginal tax rate applicable for each such period. The interest charge is determined based on the applicable rate imposed on underpayments of U.S. federal income tax for the period. The special tax and the interest charge generally will not apply to a U.S. shareholder that validly makes a “qualified electing fund” election under section 1295 of the Code with respect to the shares of the PFIC. We do not intend to comply with the requirements necessary to permit a U.S. Holder to make such an election with respect to H shares or ADSs.
The above results may also be avoided if a “mark-to-market” election is available and a U.S. Holder validly makes such an election. If the election is made, such U.S. Holder generally will be required to take into account the difference, if any, between the fair market value of, and its adjusted tax basis in, its H shares or ADSs at the end of each taxable year as ordinary income or ordinary loss (to the extent of any net mark-to-market gain previously included in income), and to make corresponding adjustments to the tax basis of such H shares or ADSs. In addition, any gain from a sale or other disposition of H shares or ADSs will be treated as ordinary income, and any loss will be treated as ordinary loss (to the extent of any net mark-to-market gain previously included in income). A mark-to-market election is available to a U.S. Holder only if our H shares or ADSs are considered “marketable stock” for these purposes. Generally, stock will be considered marketable stock if it is “regularly traded” on a “qualified exchange” within the meaning of applicable U.S. Treasury regulations. A class of stock is regularly traded during any calendar year during which such class of stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. A non-U.S. securities exchange will constitute a qualified exchange if it is regulated or supervised by a governmental authority of the country in which the market is located and meets certain trading, listing, financial disclosure and other requirements set forth in the Treasury regulations. We do not know whether our H shares or ADSs will be treated as marketable stock for these purposes. Our ADSs were delisted on September 2, 2022, and as a result are no longer treated as marketable stock for these purposes.
If we are a PFIC in any taxable year during which a U.S. Holder owns H Shares or ADSs, such U.S. Holder (i) may also suffer adverse tax consequences under the PFIC rules described above with respect to any other PFIC in which we have a direct or indirect equity interest and (ii) generally will be required to file annually a statement with its U.S. federal income tax returns. U.S. Holders should consult their own tax advisers regarding the U.S. federal income tax consequences of a direct or indirect investment in a PFIC.
Medicare Taxes
Certain U.S. Holders that are individuals, estates or trusts are subject to an additional tax at the rate of 3.8% on all or a portion of their “net investment income”, which may include all or a portion of their income arising from a distribution with respect to an H Share and gain upon the sale, exchange or other disposition of such H Share.
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Information Reporting and Backup Withholding
Under certain circumstances, information reporting and/or backup withholding may apply to U.S. Holders with respect to payments made on or proceeds from the sale, exchange or other disposition of H Shares, unless an applicable exemption is satisfied. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the IRS.
Reportable Transactions
U.S. Holders that participate in “reportable transactions” (as defined in the Treasury regulations) must attach to their federal income tax returns a disclosure statement on Form 8886. We urge U.S. Holders to consult their own tax advisers as to the possible obligation to file Form 8886 with respect to the ownership or disposition of any Hong Kong dollars (or other foreign currency) received as a dividend or as proceeds from the sale of H shares or any other aspect of the purchase, ownership or disposition of H shares.
Disclosure Requirements for Specified Foreign Financial Assets
Individual U.S. Holders (and certain U.S. entities to the extent specified in future IRS guidance) who, during any taxable year, hold any interest in any “specified foreign financial asset” generally will be required to file with their U.S. federal income tax returns Form 8938, setting forth certain information with respect to such asset, if the aggregate value of all such assets exceeds the applicable reporting threshold. “Specified foreign financial asset” generally includes any financial account maintained with a non-U.S. financial institution and may also include H Shares if they are not held in an account maintained with a U.S. financial institution. Substantial penalties may be imposed for a failure to comply. U.S. Holders should consult their own tax advisers as to the possible application to them of these filing requirements.
F. DIVIDENDS AND PAYING AGENTS
Not applicable.
G. STATEMENT BY EXPERTS
Not applicable.
H. DOCUMENTS ON DISPLAY
You may read and copy documents referred to in this annual report on Form 20-F that have been filed with the U.S. Securities and Exchange Commission, or SEC, at its public reference room located at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information regarding the registrations that file electronically with the SEC.
The SEC allows us to “incorporate by reference” the information we filed with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report on Form 20-F.
I. SUBSIDIARY INFORMATION
Not applicable.
| ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Our exposure to financial market risks relates primarily to changes in interest rates, equity prices and exchange rates.
The following discussions and tables, which constitute “forward-looking statements” that involve risks and uncertainties, summarize our market-sensitive financial instruments including fair value and maturity. Such discussions address market risk only and do not present other risks which we face in the normal course of business.
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For further information on our management of market risk, including the objectives and general strategies of risk management, see “Item 4 Information on the Company—Business Overview—Investments—Risk Management” and Note 4 to our consolidated financial statements included elsewhere in this annual report.
Interest Rate Risk
Our profitability is affected by changes in interest rates. Interest rates are highly sensitive to many factors, including economic growth rate, inflation, governmental monetary and tax policies, domestic and international economic and political conditions, financial regulatory requirements and other factors beyond our control. If interest rates were to increase in the future, surrenders and withdrawals of life insurance and annuity policies and contracts may increase as policy holders may seek other investments with higher perceived returns. This process may result in cash outflows requiring that we sell investment assets at a time when the prices of those assets are adversely affected by the increase in market interest rates, which may result in realized investment losses. However, if interest rates were to decline in the future, the income we realize from our investments may decrease, affecting our profitability. In addition, as instruments in our investment portfolio mature, we might have to reinvest the funds we receive in investments bearing low interest rates, which may also affect our profitability.
For the years ended December 31, 2022, 2021 and 2020, our investment yield was 3.94%, 4.98%, and 5.30%, respectively. Investment contracts are generally priced with guaranteed interest rates. Dividends on participating policies are required to be at least 70% of distributable earnings attributable to such policies.
The following tables set forth selected assets and liabilities with exposure to interest rates as of December 31, 2022, 2021 and 2020.
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| Expected Maturity Date | ||||||||||||||||||||||||||||||||
| As of December 31, 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | Fair value |
||||||||||||||||||||||||
| (RMB in millions, except as otherwise stated) | ||||||||||||||||||||||||||||||||
| Assets |
||||||||||||||||||||||||||||||||
| Held-to-maturity and available-for-sale debt securities |
||||||||||||||||||||||||||||||||
| Fixed rate bonds |
||||||||||||||||||||||||||||||||
| in RMB |
131,599 | 49,525 | 70,911 | 86,298 | 90,401 | 1,831,238 | 2,259,972 | 2,383,013 | ||||||||||||||||||||||||
| Average interest rate |
3.58 | % | 4.75 | % | 3.92 | % | 3.68 | % | 4.39 | % | 3.90 | % | 3.91 | % | ||||||||||||||||||
| in US$ |
6,419 | 67 | 189 | 35 | 7 | 181 | 6,898 | 6,884 | ||||||||||||||||||||||||
| Average interest rate |
0.45 | % | 5.12 | % | 4.01 | % | 4.23 | % | 4.18 | % | 4.50 | % | 0.73 | % | ||||||||||||||||||
| Variable rate bonds |
||||||||||||||||||||||||||||||||
| in RMB |
36 | 77 | 202 | 3,896 | 1,411 | 6,757 | 12,379 | 15,954 | ||||||||||||||||||||||||
| Average interest rate |
6.20 | % | 5.18 | % | 4.08 | % | 3.75 | % | 3.46 | % | 3.93 | % | 3.84 | % | ||||||||||||||||||
| Term deposits |
||||||||||||||||||||||||||||||||
| in RMB |
181,656 | 161,325 | 46,670 | 13,100 | 80,640 | — | 483,391 | 483,391 | ||||||||||||||||||||||||
| Average interest rate |
4.82 | % | 4.63 | % | 4.06 | % | 3.94 | % | 3.71 | % | — | 4.48 | % | |||||||||||||||||||
| in US$ |
2,176 | — | — | — | — | — | 2,176 | 2,176 | ||||||||||||||||||||||||
| Average interest rate |
0.95 | % | — | — | — | — | — | 0.95 | % | |||||||||||||||||||||||
| Liabilities |
||||||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase |
148,958 | — | — | — | — | — | 148,958 | 148,958 | ||||||||||||||||||||||||
| Average interest rate |
0.15 | % | — | — | — | — | — | 0.15 | % | |||||||||||||||||||||||
| Interest-bearing loans and other borrowings |
||||||||||||||||||||||||||||||||
| in British pound |
— | 2,307 | — | — | — | — | 2,307 | 2,307 | ||||||||||||||||||||||||
| Average interest rate |
— | 2.41 | % | — | — | — | — | 2.41 | % | |||||||||||||||||||||||
| in US$ |
— | 6,756 | — | — | — | — | 6,756 | 6,756 | ||||||||||||||||||||||||
| Average interest rate |
— | 2.83 | % | — | — | — | — | 2.83 | % | |||||||||||||||||||||||
| in Euro |
3,192 | — | — | — | — | — | 3,192 | 3,192 | ||||||||||||||||||||||||
| Average interest rate |
3.10 | % | — | — | — | — | — | 3.10 | % | |||||||||||||||||||||||
| Investment contracts |
7,505 | 2,518 | 1,602 | 1,682 | 1,423 | 360,019 | 374,749 | 357,760 | ||||||||||||||||||||||||
| Average guaranteed interest rate |
2.24 | % | 2.15 | % | 2.20 | % | 2.16 | % | 2.22 | % | 2.42 | % | 2.42 | % | ||||||||||||||||||
| Long-term insurance contracts |
84,415 | 14,172 | 27,081 | 37,283 | 40,042 | 3,637,919 | 3,840,912 | |||||||||||||||||||||||||
| Average guaranteed interest rate |
2.77 | % | 2.54 | % | 3.23 | % | 3.29 | % | 3.15 | % | 2.92 | % | 2.93 | % | ||||||||||||||||||
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| Expected Maturity Date | ||||||||||||||||||||||||||||||||
| As of December 31, 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | Fair value |
||||||||||||||||||||||||
| (RMB in millions, except as otherwise stated) | ||||||||||||||||||||||||||||||||
| Assets |
||||||||||||||||||||||||||||||||
| Held-to-maturity and available-for-sale debt securities |
||||||||||||||||||||||||||||||||
| Fixed rate bonds |
||||||||||||||||||||||||||||||||
| in RMB |
128,772 | 59,603 | 63,889 | 87,647 | 117,530 | 1,668,106 | 2,125,547 | 2,231,364 | ||||||||||||||||||||||||
| Average interest rate |
4.78 | % | 4.82 | % | 4.50 | % | 3.95 | % | 3.79 | % | 3.95 | % | 4.04 | % | ||||||||||||||||||
| in US$ |
4,695 | — | 39 | — | 36 | 57 | 4,827 | 4,837 | ||||||||||||||||||||||||
| Average interest rate |
0.29 | % | — | 5.51 | % | — | 4.39 | % | 3.29 | % | 0.40 | % | ||||||||||||||||||||
| Variable rate bonds |
||||||||||||||||||||||||||||||||
| in RMB |
2,543 | 9,512 | 3,060 | 2,219 | 8,070 | 10,465 | 35,869 | 34,560 | ||||||||||||||||||||||||
| Average interest rate |
4.79 | % | 4.99 | % | 4.96 | % | 4.38 | % | 3.85 | % | 4.05 | % | 4.41 | % | ||||||||||||||||||
| Term deposits |
||||||||||||||||||||||||||||||||
| in RMB |
127,516 | 178,287 | 164,700 | 38,100 | 13,100 | — | 521,703 | 521,703 | ||||||||||||||||||||||||
| Average interest rate |
4.32 | % | 4.91 | % | 4.64 | % | 4.27 | % | 3.94 | % | — | 4.61 | % | |||||||||||||||||||
| in US$ |
7,785 | — | — | — | — | — | 7,785 | 7,785 | ||||||||||||||||||||||||
| Average interest rate |
0.95 | % | — | — | — | — | — | 0.95 | % | |||||||||||||||||||||||
| Liabilities |
||||||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase |
239,446 | — | — | — | — | — | 239,446 | 239,446 | ||||||||||||||||||||||||
| Average interest rate |
0.14 | % | — | — | — | — | — | 0.14 | % | |||||||||||||||||||||||
| Interest-bearing loans and other borrowings |
||||||||||||||||||||||||||||||||
| in British pound |
— | — | — | 2,366 | — | — | 2,366 | 2,366 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | 2.57 | % | — | — | 2.57 | % | |||||||||||||||||||||||
| in US$ |
— | — | — | 11,668 | — | — | 11,668 | 11,668 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | 2.21 | % | — | — | 2.21 | % | |||||||||||||||||||||||
| in Euro |
4,652 | — | — | — | — | — | 4,652 | 4,652 | ||||||||||||||||||||||||
| Average interest rate |
2.65 | % | — | — | — | — | — | 2.65 | % | |||||||||||||||||||||||
| Investment contracts |
3,322 | 1,800 | 1,579 | 1,343 | 1,414 | 304,136 | 313,594 | 299,727 | ||||||||||||||||||||||||
| Average guaranteed interest rate |
2.00 | % | 2.28 | % | 1.90 | % | 2.13 | % | 2.09 | % | 2.41 | % | 2.40 | % | ||||||||||||||||||
| Long-term insurance contracts |
80,557 | 15,908 | 14,336 | 30,640 | 36,939 | 3,201,223 | 3,379,603 | |||||||||||||||||||||||||
| Average guaranteed interest rate |
2.73 | % | 2.50 | % | 2.54 | % | 3.12 | % | 3.29 | % | 2.87 | % | 2.87 | % | ||||||||||||||||||
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| Expected Maturity Date | ||||||||||||||||||||||||||||||||
| As of December 31, 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | Total | Fair value |
||||||||||||||||||||||||
| (RMB in millions, except as otherwise stated) | ||||||||||||||||||||||||||||||||
| Assets |
||||||||||||||||||||||||||||||||
| Held-to-maturity and available-for-sale debt securities |
||||||||||||||||||||||||||||||||
| Fixed rate bonds |
||||||||||||||||||||||||||||||||
| in RMB |
56,203 | 81,903 | 58,418 | 37,050 | 55,351 | 1,311,235 | 1,600,160 | 1,636,069 | ||||||||||||||||||||||||
| Average interest rate |
3.05 | % | 3.28 | % | 3.61 | % | 3.42 | % | 3.28 | % | 3.78 | % | 3.70 | % | ||||||||||||||||||
| in US$ |
3,655 | — | 6 | 33 | 38 | 103 | 3,835 | 3,857 | ||||||||||||||||||||||||
| Average interest rate |
0.60 | % | — | 5.97 | % | 5.63 | % | 5.22 | % | 4.82 | % | 0.81 | % | |||||||||||||||||||
| Variable rate bonds |
||||||||||||||||||||||||||||||||
| in RMB |
353 | 175 | 454 | 92 | 126 | 20,263 | 21,463 | 21,703 | ||||||||||||||||||||||||
| Average interest rate |
3.35 | % | 3.13 | % | 3.89 | % | 3.87 | % | 4.51 | % | 4.08 | % | 4.05 | % | ||||||||||||||||||
| Term deposits |
||||||||||||||||||||||||||||||||
| in RMB |
55,100 | 111,661 | 178,287 | 152,800 | 38,100 | 1,740 | 537,688 | 537,688 | ||||||||||||||||||||||||
| Average interest rate |
3.74 | % | 4.47 | % | 4.90 | % | 4.69 | % | 4.27 | % | 4.60 | % | 4.59 | % | ||||||||||||||||||
| in US$ |
7,990 | — | — | — | — | — | 7,990 | 7,990 | ||||||||||||||||||||||||
| Average interest rate |
2.06 | % | — | — | — | — | — | 2.06 | % | |||||||||||||||||||||||
| Liabilities |
||||||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase |
122,249 | — | — | — | — | — | 122,249 | 122,249 | ||||||||||||||||||||||||
| Average interest rate |
0.93 | % | — | — | — | — | — | 0.93 | % | |||||||||||||||||||||||
| Interest-bearing loans and other borrowings |
||||||||||||||||||||||||||||||||
| in British pound |
— | — | — | 2,444 | — | — | 2,444 | 2,444 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | 3.08 | % | — | — | 3.08 | % | |||||||||||||||||||||||
| in US$ |
— | — | — | 11,940 | — | — | 11,940 | 11,940 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | 2.63 | % | — | — | 2.63 | % | |||||||||||||||||||||||
| in Euro |
5,172 | — | — | — | — | — | 5,172 | 5,172 | ||||||||||||||||||||||||
| Average interest rate |
1.17 | % | — | — | — | — | — | 1.17 | % | |||||||||||||||||||||||
| Investment contracts |
3,430 | 1,041 | 1,500 | 1,598 | 1,296 | 279,347 | 288,212 | 276,521 | ||||||||||||||||||||||||
| Average guaranteed interest rate |
1.97 | % | 2.26 | % | 2.27 | % | 1.89 | % | 2.13 | % | 2.41 | % | 2.39 | % | ||||||||||||||||||
| Long-term insurance contracts |
75,978 | 21,253 | 15,885 | 16,928 | 30,316 | 2,776,173 | 2,936,533 | |||||||||||||||||||||||||
| Average guaranteed interest rate |
2.71 | % | 2.51 | % | 2.50 | % | 2.52 | % | 3.12 | % | 2.81 | % | 2.81 | % | ||||||||||||||||||
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Equity Price Risk
Our investments in securities investment funds or equity securities expose us to changes in equity prices. We manage this risk on an integrated basis with other risks through our asset-liability management strategies. We also manage equity price risk through industry and issuer diversification and asset allocation techniques.
The following table sets forth our exposure to equity securities as of December 31, 2022, 2021 and 2020.
| As of December 31, | ||||||||||||||||||||||||
| 2020 | 2021 | 2022 | ||||||||||||||||||||||
| Carrying amount |
Fair value |
Carrying amount |
Fair value |
Carrying amount |
Fair value |
|||||||||||||||||||
| (RMB in millions) | ||||||||||||||||||||||||
| Equity securities |
700,748 | 700,748 | 699,457 | 699,457 | 890,926 | 890,926 | ||||||||||||||||||
| Securities at fair value through profit or loss |
65,955 | 65,955 | 63,714 | 63,714 | 32,261 | 32,261 | ||||||||||||||||||
| Available-for-sale |
634,793 | 634,793 | 635,743 | 635,743 | 858,665 | 858,665 | ||||||||||||||||||
A hypothetical 10% decline in the December 31, 2022, 2021 and 2020 value of the securities at fair value through profit or loss equity securities would result in an unrealized loss charged to the income statement of approximately RMB3,226 million, RMB6,371 million and RMB6,596 million, respectively.
A hypothetical 10% decline in the December 31, 2022, 2021 and 2020 value of the available-for-sale equity securities would result in an unrealized loss charged to the income statement of approximately RMB85,867 million, RMB63,574 million and RMB63,479 million, respectively.
The selection of a 10% immediate change in the value of equity securities should not be construed as a prediction by us of future market events but rather as an illustration of the potential impact of such an event.
Foreign Exchange Risk
Our exposure to fluctuations in foreign currency exchange rates against RMB results primarily from our foreign currency-denominated assets and loans. Our debts and capital expenditures are predominantly denominated in RMB, and the principal currencies which create foreign currency exchange rate risk in our deposits are the U.S. dollar and Hong Kong dollar. The principal currencies which expose us to foreign currency exchange risk in our loans are the U.S. dollar, British pound and Euro. Our borrowings in foreign currencies include a three-year bank loan of EUR330 million with a maturity date on September 8, 2023, and a five-year bank loan of GBP275 million with a maturity date on June 25, 2024, , both of which are fixed rate bank loans, and a five-year bank loan of US$970 million with a maturity date on September 27, 2024, and an eighteen-month bank loan of EUR100 million with a maturity date on September 8, 2023, both of which are floating rate bank loans. We recorded RMB69 million (US$10 million) in foreign exchange losses for the year ended December 31, 2022, resulting mainly from the change in foreign exchange rates applicable to our assets and liabilities held in foreign currencies. Future movements in the exchange rate of RMB against the U.S. dollar and other foreign currencies may adversely affect our results of operations and financial condition.
The following tables set forth assets denominated in currencies other than RMB as of December 31, 2022, 2021 and 2020.
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| Expected Maturity Date | ||||||||||||||||||||||||||||||||
| As of December 31, 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | Fair value |
||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Debt securities |
||||||||||||||||||||||||||||||||
| in US$ |
6,638 | 133 | 190 | 35 | 9 | 189 | 7,194 | 7,180 | ||||||||||||||||||||||||
| Average interest rate |
0.46 | % | 3.70 | % | 3.98 | % | 4.23 | % | 3.10 | % | 4.35 | % | 0.73 | % | ||||||||||||||||||
| Other |
— | — | — | 1 | 2 | 15 | 18 | 18 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | 3.90 | % | 1.86 | % | 0.79 | % | 1.10 | % | |||||||||||||||||||||
| Term deposits |
||||||||||||||||||||||||||||||||
| in US$ |
2,176 | — | — | — | — | — | 2,176 | 2,176 | ||||||||||||||||||||||||
| Average interest rate |
0.95 | % | — | — | — | — | — | 0.95 | % | |||||||||||||||||||||||
| Loans |
||||||||||||||||||||||||||||||||
| in US$ |
— | — | — | — | 656 | 622 | 1,278 | 1,351 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | 4.00 | % | 4.25 | % | 4.12 | % | ||||||||||||||||||||||
| Cash and cash equivalents |
||||||||||||||||||||||||||||||||
| in US$ |
2,849 | — | — | — | — | — | 2,849 | 2,849 | ||||||||||||||||||||||||
| Average interest rate |
0.01 | % | — | — | — | — | — | 0.01 | % | |||||||||||||||||||||||
| in HK$ |
62 | — | — | — | — | — | 62 | 62 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| in British pound |
208 | — | — | — | — | — | 208 | 208 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| in Euro |
136 | — | — | — | — | — | 136 | 136 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| Other |
7 | — | — | — | — | — | 7 | 7 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| Liabilities |
||||||||||||||||||||||||||||||||
| Interest-bearing loans and other borrowings |
||||||||||||||||||||||||||||||||
| in British pound |
— | 2,307 | — | — | — | — | 2,307 | 2,307 | ||||||||||||||||||||||||
| Average interest rate |
— | 2.41 | % | — | — | — | — | 2.41 | % | |||||||||||||||||||||||
| in US$ |
— | 6,756 | — | — | — | — | 6,756 | 6,756 | ||||||||||||||||||||||||
| Average interest rate |
— | 2.83 | % | — | — | — | — | 2.83 | % | |||||||||||||||||||||||
| in Euro |
3,192 | — | — | — | — | — | 3,192 | 3,192 | ||||||||||||||||||||||||
| Average interest rate |
3.10 | % | — | — | — | — | — | 3.10 | % | |||||||||||||||||||||||
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| Expected Maturity Date | ||||||||||||||||||||||||||||||||
| As of December 31, 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | Fair value |
||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Debt securities |
||||||||||||||||||||||||||||||||
| in US$ |
4,809 | 27 | 41 | 13 | 43 | 100 | 5,033 | 5,043 | ||||||||||||||||||||||||
| Average interest rate |
0.29 | % | 3.23 | % | 5.26 | % | 3.22 | % | 3.86 | % | 3.32 | % | 0.44 | % | ||||||||||||||||||
| Other |
— | 56 | — | — | — | 34 | 90 | 90 | ||||||||||||||||||||||||
| Average interest rate |
— | 0.26 | % | — | — | — | 0.50 | % | 0.35 | % | ||||||||||||||||||||||
| Term deposits |
||||||||||||||||||||||||||||||||
| in US$ |
7,785 | — | — | — | — | — | 7, 785 | 7,785 | ||||||||||||||||||||||||
| Average interest rate |
0.95 | % | — | — | — | — | — | 0.95 | % | |||||||||||||||||||||||
| Loans |
||||||||||||||||||||||||||||||||
| in US$ |
— | — | — | — | — | 1,292 | 1,292 | 1,363 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | 4.12 | % | 4.12 | % | |||||||||||||||||||||||
| Cash and cash equivalents |
||||||||||||||||||||||||||||||||
| in US$ |
1,920 | — | — | — | — | — | 1,920 | 1,920 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| in HK$ |
198 | — | — | — | — | — | 198 | 198 | ||||||||||||||||||||||||
| Average interest rate |
0.03 | % | — | — | — | — | — | 0.03 | % | |||||||||||||||||||||||
| in British pound |
289 | — | — | — | — | — | 289 | 289 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| in Euro |
56 | — | — | — | — | — | 56 | 56 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| Other |
3 | — | — | — | — | — | 3 | 3 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| Liabilities |
||||||||||||||||||||||||||||||||
| Interest-bearing loans and other borrowings |
||||||||||||||||||||||||||||||||
| in British pound |
— | — | — | 2,366 | — | — | 2,366 | 2,366 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | 2.57 | % | — | — | 2.57 | % | |||||||||||||||||||||||
| in US$ |
— | — | — | 11,668 | — | — | 11,668 | 11,668 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | 2.21 | % | — | — | 2.21 | % | |||||||||||||||||||||||
| in Euro |
4,652 | — | — | — | — | — | 4,652 | 4,652 | ||||||||||||||||||||||||
| Average interest rate |
2.65 | % | — | — | — | — | — | 2.65 | % | |||||||||||||||||||||||
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| Expected Maturity Date | ||||||||||||||||||||||||||||||||
| As of December 31, 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | Total | Fair value |
||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Debt securities |
||||||||||||||||||||||||||||||||
| in US$ |
3,804 | — | 31 | 33 | 75 | 189 | 4,132 | 4,154 | ||||||||||||||||||||||||
| Average interest rate |
0.58 | % | — | 4.67 | % | 5.63 | % | 4.12 | % | 4.44 | % | 0.89 | % | |||||||||||||||||||
| Other |
— | 1 | — | — | 2 | 39 | 42 | 42 | ||||||||||||||||||||||||
| Average interest rate |
— | 2.76 | % | — | — | 0.11 | % | 1.12 | % | 1.13 | % | |||||||||||||||||||||
| Term deposits |
||||||||||||||||||||||||||||||||
| in US$ |
7,990 | — | — | — | — | — | 7,990 | 7,990 | ||||||||||||||||||||||||
| Average interest rate |
2.06 | % | — | — | — | — | — | 2.06 | % | |||||||||||||||||||||||
| Loans |
||||||||||||||||||||||||||||||||
| in US$ |
— | — | — | — | — | 1,445 | 1,445 | 1,586 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | 4.12 | % | 4.12 | % | |||||||||||||||||||||||
| Cash and cash equivalents |
||||||||||||||||||||||||||||||||
| in US$ |
598 | — | — | — | — | — | 598 | 598 | ||||||||||||||||||||||||
| Average interest rate |
0.07 | % | — | — | — | — | — | 0.07 | % | |||||||||||||||||||||||
| in HK$ |
1,297 | — | — | — | — | — | 1,297 | 1,297 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| in British pound |
358 | — | — | — | — | — | 358 | 358 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| in Euro |
140 | — | — | — | — | — | 140 | 140 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| Other |
7 | — | — | — | — | — | 7 | 7 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| Liabilities |
||||||||||||||||||||||||||||||||
| Interest-bearing loans and other borrowings |
||||||||||||||||||||||||||||||||
| in British pound |
— | — | — | 2,444 | — | — | 2,444 | 2,444 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | 3.08 | % | — | — | 3.08 | % | |||||||||||||||||||||||
| in US$ |
— | — | — | 11,940 | — | — | 11,940 | 11,940 | ||||||||||||||||||||||||
| Average interest rate |
— | — | — | 2.63 | % | — | — | 2.63 | % | |||||||||||||||||||||||
| in Euro |
5,172 | — | — | — | — | — | 5,172 | 5,172 | ||||||||||||||||||||||||
| Average interest rate |
1.17 | % | — | — | — | — | — | 1.17 | % | |||||||||||||||||||||||
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| ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES. |
A. DEBT SECURITIES
Not applicable.
B. WARRANTS AND RIGHTS
Not applicable.
C. OTHER SECURITIES
Not applicable.
D. AMERICAN DEPOSITARY SHARES
On August 22, 2022, we filed a Form 25 to delist our ADSs from the New York Stock Exchange. The delisting became effective on September 2, 2022, and our ADR program was terminated on November 11, 2022.
The table below sets forth all fees and charges that a holder of our ADRs may have to pay to the depositary bank of our ADR program, either directly or indirectly.
| Category |
Depositary Actions |
Associated Fee | ||
| (a) Depositing or substituting the underlying shares | Each person to whom ADRs are issued against deposits of shares, including deposits and issuances in respect of: share distributions, rights, merger exchange of securities or any other transaction or event or other distribution affecting the ADSs or the deposited securities |
US$5.00 for each 100 ADSs (or portion thereof) evidenced by the new ADRs delivered | ||
| (b) Receiving or distributing dividends (c) Selling or exercising rights |
Distribution of dividends | US$0.02 or less per ADS | ||
| Distribution or sale of securities, the fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities | US$5.00 for each 100 ADSs (or portion thereof) | |||
| (d) Withdrawing an underlying security | Acceptance of ADRs surrendered for withdrawal of deposited securities | US$5.00 for each 100 ADSs (or portion thereof) evidenced by the ADRs surrendered | ||
| (e) Transferring, splitting or grouping receipts (f) Expenses of the depositary |
Transfers, splitting, combining or grouping of depositary receipts | US$1.50 per ADS | ||
| Expenses incurred on behalf of ADR holders in connection with: compliance with foreign exchange control regulations or any law or regulation relating to foreign investment; the depositary’s or its custodian’s compliance with applicable law, rule or regulation; stock transfer or other taxes and other governmental charges; cable, telex, facsimile transmission and delivery; expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars (which are paid out of such foreign currency); and any other charge payable by depositary or its agents. |
Expenses payable at the sole discretion of the depositary by billing ADR holders or by deducting charges from one or more cash dividends or other cash distributions. | |||
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Deutsche Bank Trust Company Americas, or Deutsche Bank, served as the depositary bank of our ADR program from January 4, 2010 to November 11, 2022. Deutsche Bank agreed to reimburse certain reasonable company expenses related to our ADR program and incurred by us in connection with our ADR program. The table below sets forth the amounts reimbursed from January 1, 2022 to November 11, 2022.
| Category of Expenses |
Amount Reimbursed from January 1, 2022 to November 11, 2022 |
|||
| NYSE listing fees |
US$ | 74,000.00 | ||
| Legal fees |
US$ | 1,430.00 | ||
| Investor relations(1) |
US$ | 79,506.75 | ||
| Broker reimbursements(2) |
US$ | 69,496.60 | ||
| Total |
US$ | 224,433.35 | ||
| (1) | Includes expenses related to announcement of results, ADR training programs, non-deal roadshows and investor relations activities. |
| (2) | Broker reimbursements are fees payable to Broadridge and other service providers for the distribution of hard copy material to beneficial ADR holders holding in the Depositary Trust Company. Corporate material includes information related to shareholders’ meetings and related voting instruction cards. These fees are SEC approved. |
PART II
| ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES. |
None.
| ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS. |
A. MATERIAL MODIFICATION TO THE RIGHTS OF SECURITY HOLDERS
See “Item 10. Additional Information—Memorandum and Articles of Association”.
B. USE OF PROCEEDS
The following use of proceeds information relates to our registration statement on Form F-1 (File No. 333-110615), filed by us in connection with our initial public offering of H shares in the United States. In connection with the registration of the H shares, a registration statement on Form F-6 (File No.333-110622) was also filed for ADSs representing such H shares. Each of these two registration statements was declared effective by the SEC on December 11, 2003. Our H shares commenced trading on the Hong Kong Stock Exchange on December 18, 2003 and the ADSs on the New York Stock Exchange on December 17, 2003. On August 22, 2022, we filed a Form 25 to delist our ADSs from the New York Stock Exchange. The delisting became effective on September 2, 2022, and our ADR program was terminated on November 11, 2022.
The net proceeds from the initial public offering of our shares, after deduction of fees and expenses, amounted to approximately RMB24,707 million and were held in either H.K. dollars or U.S. dollars. As of the date of this annual report, a part of the cash proceeds from our global offering was invested in fixed-income products denominated in foreign currencies in China, and part of the cash proceeds was invested in securities listed on overseas stock exchanges, multi-asset portfolios and private equity funds. We invested approximately US$433 million, in addition to 2,282 million in Renminbi, in China Guangfa Bank in December 2006. We used approximately HK$12 billion for investments in Sino-Ocean Group Holding Limited in 2009, 2010 and 2013. As of December 31, 2022, for offshore public markets, we had US$1,071 million asset which was entrusted to nine offshore third-party investment managers.
| ITEM 15. | CONTROLS AND PROCEDURES. |
Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, we have carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our person in charge of finance, of the effectiveness of our disclosure controls and procedures as of December 31, 2022, the end of the period covered by this annual report. Based on that evaluation, our chief executive officer and our person in charge of finance concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2022.
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Management’s Annual Report on Internal Control over Financial Reporting
Management of China Life Insurance Company Limited (together with its consolidated subsidiaries, the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with applicable generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:
| • | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets and liabilities of the Company; |
| • | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with the applicable generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
| • | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013 framework). Based on this assessment, management determined that the Company’s internal control over financial reporting was effective as of December 31, 2022.
The Company’s internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers Zhong Tian LLP, an independent registered public accounting firm, as stated in their report which is on pages from F-2 to F-6 of this annual report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022.
Attestation Report of the Registered Public Accounting Firm
See the attestation report included in our consolidated financial statements included elsewhere in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the year ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Our board of directors has determined that Mr. Lam Chi Kuen qualifies as an audit committee financial expert as defined in Item 16A of Form 20-F. Mr. Lam Chi Kuen is “independent” in accordance with the applicable requirements of Rule 10A-3 of the Securities Exchange Act of 1934. Mr. Lam was appointed as an independent non-executive director and a member of the audit committee of our Company in June 2021. For Mr. Lam’s biographical information, see “Item 6. Directors, Senior Management and Employees”.
| ITEM 16B. | CODE OF ETHICS. |
At the board of directors meeting held on August 25, 2022, we adopted an amended code of business conduct and ethics that applies to our directors, supervisors and other senior officers of our company (including our chief executive officer and person in charge of finance). The amendments we made are mainly to comply with the latest CBIRC requirements and rules of Insurance Association of China. We have filed the amended code of business conduct and ethics as Exhibit 11.1 to this annual report, and a copy of which will be provided to any person free of charge upon written request to Yinghui Li, China Life Insurance Company Limited at 16 Financial Street, Xicheng District, Beijing 100033, China.
| ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
The following table sets forth the aggregate audit fees, audit-related fees, tax fees and all other fees paid to our principal accountants for the fiscal years of 2022 and 2021.
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| Audit Fees(1) | Audit-Related Fees | Tax Fees | All Other Fees(2) | |||||||||||||
| (RMB in millions) | ||||||||||||||||
| 2022 |
50 | 1 | — | 1 | ||||||||||||
| 2021 |
45 | 2 | — | 1 | ||||||||||||
| (1) | Audit fees include fees billed for professional services rendered for audits of the consolidated financial statements and review of interim financial statements of China Life and fees billed for performing agreed-upon procedures. On June 30, 2021, we appointed PricewaterhouseCoopers Zhong Tian LLP as our independent registered certified public accountant for the fiscal year of 2021, and approved not to re-appoint Ernst Young Hua Ming LLP on the same day. PricewaterhouseCoopers Zhong Tian LLP provided services for audits of our consolidated financial statements for the fiscal year of 2022 and review of our interim financial statements for the six months ended June 30, 2022 and performing agreed-upon procedures. The fees for 2022 set forth in the table above are fees paid by us to PricewaterhouseCoopers Zhong Tian LLP for the fiscal year of 2022. |
| (2) | All other fees include fees billed for advisory services which do not affect the independence of our principal accountants. |
According to our current internal rules, before our principal accountants are engaged by us to render audit or non-audit services, the engagement must be approved by our audit committee.
| ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES. |
Not applicable.
| ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS. |
As of December 31, 2022, China Life and its subsidiaries had not purchased, sold or redeemed any of China Life’s shares.
| ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT. |
Not applicable.
| ITEM 16G. | CORPORATE GOVERNANCE |
Not applicable.
| ITEM 16H. | MINE SAFETY DISCLOSURE. |
Not applicable.
| ITEM 16I. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. |
For the fiscal years ended December 31, 2021 and 2022, PricewaterhouseCoopers Zhong Tian LLP served as our principal accountant, and issued audit reports on our consolidated financial statements.
On December 16, 2021, the PCAOB issued a report on its determinations that it was unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong because of positions taken by PRC authorities in those jurisdictions (“PCAOB-Identified Firm”). PricewaterhouseCoopers Zhong Tian LLP is an independent public accounting firm registered with the PCAOB that is headquarted in mainland China, and was therefore a PCAOB-Identified Firm under the PCAOB 2021 determinations. As a result, in May 2022, we were conclusively listed by the SEC as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021.
On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file this annual report on Form 20-F.
Chinese governmental entities, through their wholly-owned entity CLIC, indirectly hold and exercise the rights of ownership of 68.37% of our equity stake as of April 14, 2023. In addition, some other entities directly or indirectly controlled by the PRC government also hold our shares through purchase in public market or strategic investment, with their shares tradable in public markets. To our knowledge, each of these entities held no more than 3% of our equity as of December 31, 2022. Chinese governmental entities have a controlling financial interest with respect to us.
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The following list sets forth our current directors who are members of the Chinese Communist Party as of April 14, 2023.
| Name |
Position in the Chinese Communist Party | |
| Bai Tao | Secretary to the Party Committee of China Life Insurance (Group) Company | |
| Zhao Peng | Member of the Party Committee of China Life Insurance (Group) Company and Secretary to our Party Committee | |
| Li Mingguang | Member of our Party Committee | |
| Wang Junhui | Secretary to the Party Committee of China Life Asset Management Company Limited | |
Our articles of association contain the following provisions regarding the Chinese Communist Party:
| Articles |
Provisions | |
| 9 | The Company shall establish an organization of the Communist Party of China in accordance with the relevant requirements of the Constitution of the Communist Party of China and the Company Law. The Party Committee shall play the core leadership role, providing direction, managing the overall situation and ensuring implementation. The Company shall also establish the working organs of the Party, which shall be equipped with sufficient staff to deal with Party affairs and provided with sufficient funds to operate the Party organization. | |
| 50 | The Company shall establish the committee of the Communist Party of China Life Insurance Company Limited (the “Party Committee”). The Party Committee shall consist of one secretary, one deputy secretary and several other members. The Chairman of the Board of Directors shall serve as the secretary to the Party Committee. If, however, the Chairman of the Board of Directors mainly works at the shareholder entity, the president may also serve as the secretary to the Party Committee. One (1) deputy secretary shall be designated to assist the secretary in carrying out the Party building work. Eligible members of the Party Committee may take seats in the Board of Directors, the Board of Supervisors and the senior management through legal procedures, while eligible members of the Board of Directors, the Board of Supervisors and the senior management may take seats in the Party Committee in accordance with relevant rules and procedures. A discipline inspection committee shall also be established in accordance with relevant requirements. | |
| 51 | The Party Committee shall perform the following duties in accordance with the internal rules and regulations of the Party, such as the Constitution of the Communist Party of China:
(1) To ensure and supervise the Company’s implementation of guidelines and policies of the Party and the State, and implement major strategic decisions of the Central Committee of the Party and the State Council, as well as important work arrangements of the Party organizations of higher levels; | |
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| (2) To strengthen its leadership and gate keeping role in the process of selection and appointment of personnel, focus on standards, procedures, inspection, recommendation and supervision, and adhere to the principle of the Party supervising the performance of officials while ensuring the lawful selection by the Board of Directors of the senior management and the lawful exercise of the power of the senior management in the employment of personnel;
(3) To research and discuss the reform, development and stability of the Company, major operational and management issues and major issues concerning employees’ interests, and provide comments and suggestions; to support the shareholders’ general meeting, the Board of Directors, the Board of Supervisors and the senior management in performing their duties in accordance with law, and support the employee representative meeting in carrying out its work;
(4) To undertake the main responsibility of comprehensive and strict Party management; to lead the Company’s ideological and political work, united front work, spiritual civilization construction, corporate culture cultivation, as well as the work of groups such as the labor union and the Communist Youth League; to lead the construction of the Party’s working style and its clean and honest administration, and support the discipline inspection committee in earnestly performing its supervisory responsibilities;
(5) To strengthen the Company’s grassroots Party organizations and their team building, give full play to the role of the Party branches as strongholds and to the role of the Party members as pioneers and fine examples, and unite and lead officials and employees to devote themselves into the reform and development of the Company; and
(6) To handle other important matters within the scope of duties of the Party Committee. | ||
| 146 | The opinions of the Party Committee of the Company shall be heard before the Board of Directors decides on material issues of the Company. | |
PART III
| ITEM 17. | FINANCIAL STATEMENTS. |
We have elected to provide the financial statements and related information specified in Item 18 in lieu of Item 17.
| ITEM 18. | FINANCIAL STATEMENTS. |
See Index to Consolidated Financial Statements for a list of all financial statements filed as part of this annual report.
| ITEM 19. | EXHIBITS. |
(a) See Item 18 for a list of the financial statements filed as part of this annual report.
(b) Exhibits to this annual report.
161
Table of Contents
EXHIBIT INDEX
| (1) | Incorporated by reference to the Registration Statement on Form F-1 (File No. 333-110615), filed with the Commission on December 9, 2003. |
| (2) | Incorporated by reference to the Registration Statement on Form F-6 (File No. 333-164005), filed with the Commission on January 4, 2010. |
| (3) | Incorporated by reference to the Post-Effective Amendment No. 1 to Form F-6 (File No. 333-164005), filed with the Commission on January 27, 2015. |
162
Table of Contents
| (4) | Incorporated by reference to the Post-Effective Amendment No. 2 to Form F-6 (File No. 333-164005), filed with the Commission on May 1, 2015. |
| (5) | Incorporated by reference to the Annual Report on Form 20-F for the fiscal year ended December 31, 2020, filed with the Commission on April 29, 2021. |
| (6) | Incorporated by reference to the Annual Report on Form 20-F for the fiscal year ended December 31, 2021, filed with the Commission on April 29, 2022. |
163
Table of Contents
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| China Life Insurance Company Limited | ||||||
| By: | /s/ Zhao Peng | |||||
| Name: Zhao Peng | ||||||
| Title: President and Executive Director | ||||||
| Date: April 21, 2023 | ||||||
Table of Contents
| Pages | ||||
| F2 – F6 | ||||
| F7 | ||||
| F8 – F9 | ||||
| F10 – F11 | ||||
| F12 | ||||
| F13 – F14 | ||||
| F15 – F104 | ||||
Notes |
As at 31 December 2022 RMB million |
As at 31 December 2021 RMB million (Restated Note 34(f) (i) ) |
||||||||||
| ASSETS |
||||||||||||
| Property, plant and equipment |
6 |
|||||||||||
| Right-of-use |
7 |
|||||||||||
| Investment properties |
8 |
|||||||||||
| Investments in associates and joint ventures |
9 |
|||||||||||
| Held-to-maturity |
10.1 |
|||||||||||
| Loans |
10.2 |
|||||||||||
| Term deposits |
10.3 |
|||||||||||
| Statutory deposits - restricted |
10.4 |
|||||||||||
| Available-for-sale |
10.5 |
|||||||||||
| Securities at fair value through profit or loss |
10.6 |
|||||||||||
| Securities purchased under agreements to resell |
10.7 |
|||||||||||
| Accrued investment income |
10.8 |
|||||||||||
| Premiums receivable |
12 |
|||||||||||
| Reinsurance assets |
13 |
|||||||||||
| Other assets |
14 |
|||||||||||
| Deferred tax assets |
29 |
|||||||||||
| Cash and cash equivalents |
||||||||||||
| |
|
|
|
|||||||||
| Total assets |
||||||||||||
| |
|
|
|
|||||||||
Notes |
As at 31 December 2022 RMB million |
As at 31 December 2021 RMB million (Restated Note 34(f) (i) ) |
||||||||||
| LIABILITIES AND EQUITY |
||||||||||||
| Liabilities |
||||||||||||
| Insurance contracts |
15 |
|||||||||||
| Investment contracts |
16 |
|||||||||||
| Policyholder dividends payable |
||||||||||||
| Interest-bearing loans and borrowings |
17 |
|||||||||||
| Lease liabilities |
||||||||||||
| Bonds payable |
18 |
|||||||||||
| Financial liabilities at fair value through profit or loss |
||||||||||||
| Securities sold under agreements to repurchase |
19 |
|||||||||||
| Annuity and other insurance balances payable |
||||||||||||
| Premiums received in advance |
||||||||||||
| Other liabilities |
20 |
|||||||||||
| Deferred tax liabilities |
29 |
|||||||||||
| Current income tax liabilities |
||||||||||||
| Statutory insurance fund |
21 |
|||||||||||
| |
|
|
|
|||||||||
| Total liabilities |
||||||||||||
| |
|
|
|
|||||||||
| Equity |
||||||||||||
| Share capital |
35 |
|||||||||||
| Reserves |
36 |
|||||||||||
| Retained earnings |
||||||||||||
| |
|
|
|
|||||||||
| Attributable to equity holders of the Company |
||||||||||||
| |
|
|
|
|||||||||
| Non-controlling interests |
||||||||||||
| |
|
|
|
|||||||||
| Total equity |
||||||||||||
| |
|
|
|
|||||||||
| Total liabilities and equity |
||||||||||||
| |
|
|
|
|||||||||
Notes |
2022 RMB million |
2021 RMB million (Restated Note 34(f) (i) ) |
2020 RMB million (Restated Note 34(f) (i) ) |
|||||||||||||
REVENUES |
||||||||||||||||
Gross written premiums |
5 |
|||||||||||||||
Less: premiums ceded to reinsurers |
( |
) | ( |
) | ( |
) | ||||||||||
Net written premiums |
||||||||||||||||
Net change in unearned premium reserves |
( |
) | ||||||||||||||
Net premiums earned |
||||||||||||||||
Investment income |
22 |
|||||||||||||||
Net realised gains on financial assets |
23 |
|||||||||||||||
Net fair value gains through profit or loss |
24 |
( |
) | |||||||||||||
Other income |
||||||||||||||||
Total revenues |
||||||||||||||||
BENEFITS, CLAIMS AND EXPENSES |
||||||||||||||||
Insurance benefits and claims expenses |
||||||||||||||||
Life insurance death and other benefits |
25 |
( |
) | ( |
) | ( |
) | |||||||||
Accident and health claims and claim adjustment expenses |
25 |
( |
) | ( |
) | ( |
) | |||||||||
Increase in insurance contract liabilities |
25 |
( |
) | ( |
) | ( |
) | |||||||||
Investment contract benefits |
26 |
( |
) | ( |
) | ( |
) | |||||||||
Policyholder dividends resulting from participation in profits |
( |
) | ( |
) | ( |
) | ||||||||||
Underwriting and policy acquisition costs |
( |
) | ( |
) | ( |
) | ||||||||||
Finance costs |
27 |
( |
) | ( |
) | ( |
) | |||||||||
Administrative expenses |
( |
) | ( |
) | ( |
) | ||||||||||
Statutory insurance fund contribution |
21 |
( |
) | ( |
) | ( |
) | |||||||||
Other expenses |
( |
) | ( |
) | ( |
) | ||||||||||
Total benefits, claims and expenses |
( |
) | ( |
) | ( |
) | ||||||||||
Net gains on investments of associates and joint ventures (Including: share of profit of associates and joint ventures of RMB |
9 |
|||||||||||||||
Profit before income tax |
28 |
|||||||||||||||
Income tax |
29 |
( |
) | |||||||||||||
Net profit |
||||||||||||||||
Attributable to: |
||||||||||||||||
- Equity holders of the Company |
||||||||||||||||
- Non-controlling interests |
||||||||||||||||
Basic and diluted earnings per share |
30 |
RMB |
RMB |
RMB |
||||||||||||
Notes |
2022 RMB million |
2021 RMB million (Restated Note 34(f) (i) ) |
2020 RMB million (Restated Note 34(f) (i) ) |
|||||||||||||
Other comprehensive income |
||||||||||||||||
Other comprehensive income that may be reclassified to profit or loss in subsequent periods: |
||||||||||||||||
Fair value gains/(losses) on available-for-sale |
( |
) | ||||||||||||||
Amount transferred to net profit from other comprehensive income |
( |
) | ( |
) | ( |
) | ||||||||||
Portion of fair value changes on available-for-sale |
( |
) | ( |
) | ||||||||||||
Share of other comprehensive income of associates and joint ventures under the equity method |
( |
) | ||||||||||||||
Exchange differences on translating foreign operations |
( |
) | ( |
) | ||||||||||||
Income tax relating to components of other comprehensive income |
( |
) | ||||||||||||||
Other comprehensive income that may be reclassified to profit or loss in subsequent periods |
( |
) | ( |
) | ||||||||||||
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods: |
||||||||||||||||
Share of other comprehensive income of associates and joint ventures under the equity method |
( |
) | ( |
) | ||||||||||||
Other comprehensive income for the year, net of tax |
( |
) | ( |
) | ||||||||||||
Total comprehensive income for the year, net of tax |
( |
) | ||||||||||||||
Attributable to: |
||||||||||||||||
- Equity holders of the Company |
( |
) | ||||||||||||||
- Non-controlling interests |
||||||||||||||||
Attributable to equity holders of the Company |
Non- controlling interests |
Total |
||||||||||||||||||||||
Share capital RMB million |
Other equity instruments RMB million |
Reserves RMB million |
Retained earnings RMB million |
RMB million |
RMB million |
|||||||||||||||||||
| (Note 35) | (Note 36) | |||||||||||||||||||||||
| As at 1 January 2020 |
||||||||||||||||||||||||
| (Restated Note 34(f) (i) ) |
||||||||||||||||||||||||
| Net profit |
— | — | — | |||||||||||||||||||||
| Other comprehensive income |
— | — | — | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total comprehensive income |
— | — | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Transactions with owners |
||||||||||||||||||||||||
| Appropriation to reserves (Note 36) |
— | — | ( |
) | — | — | ||||||||||||||||||
| Dividends declared (Note 32) |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
| Dividends to non-controlling interests |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
| Others |
— | ( |
) | ( |
) | — | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total transactions with owners |
— | ( |
) | ( |
) | ( |
) | |||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| As at 31 December 2020 |
||||||||||||||||||||||||
| (Restated Note 34(f) (i) ) |
— | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| As at 1 January 2021 (Restated Note 34(f) (i) ) |
— | |||||||||||||||||||||||
| Net profit |
— | — | — | |||||||||||||||||||||
| Other comprehensive income |
— | — | ( |
) | — | ( |
) | |||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total comprehensive income |
— | — | ( |
) | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Transactions with owners |
||||||||||||||||||||||||
| Appropriation to reserves (Note 36) |
— | — | ( |
) | — | — | ||||||||||||||||||
| Dividends declared (Note 32) |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
| Dividends to non-controlling interests |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
| Reserves to retained earnings (Note 36) |
— | — | ( |
) | — | — | ||||||||||||||||||
| Others |
— | — | — | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total transactions with owners |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| As at 31 December 2021 |
||||||||||||||||||||||||
| (Restated Note 34(f) (i) ) |
— | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| As at 1 January 2022 |
||||||||||||||||||||||||
| (Restated Note 34(f) (i) ) |
— | |||||||||||||||||||||||
| Net profit |
— | — | — | |||||||||||||||||||||
| Other comprehensive income |
— | — | ( |
) | — | ( |
) | ( |
) | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total comprehensive income |
— | — | ( |
) | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Transactions with owners |
||||||||||||||||||||||||
| Appropriation to reserves (Note 36) |
— | — | ( |
) | — | — | ||||||||||||||||||
| Dividends declared (Note 32) |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
| Dividends to non-controlling interests |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
| Reserves to retained earnings (Note 36) |
— | — | ( |
) | — | — | ||||||||||||||||||
| Others |
— | — | ( |
) | — | — | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total transactions with owners |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| As at 31 December 2022 |
— | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
2022 RMB million |
2021 RMB million (Restated Note 34(f) (i) ) |
2020 RMB million (Restated Note 34(f) (i) ) |
||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||||||
| Profit before income tax |
||||||||||||
| Adjustments for: |
||||||||||||
| Investment income |
( |
) | ( |
) | ( |
) | ||||||
| Net realised and unrealised gains on financial assets |
( |
) | ( |
) | ( |
) | ||||||
| Insurance contracts |
||||||||||||
| Depreciation and amortisation |
||||||||||||
| Foreign exchange losses/(gains) |
( |
) | ( |
) | ||||||||
| Net gains on investments of associates and joint ventures |
( |
) | ( |
) | ( |
) | ||||||
| Changes in operating assets and liabilities: |
||||||||||||
| Increase in securities at fair value through profit or loss, net |
( |
) | ( |
) | ( |
) | ||||||
| Financial liabilities 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 |
||||||||||||
| |
|
|
|
|
|
|||||||
| Net cash inflow/(outflow) from operating activities |
||||||||||||
| |
|
|
|
|
|
|||||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||||||
| Disposals and maturities: |
||||||||||||
| Disposals of debt investments |
||||||||||||
| Maturities of debt investments |
||||||||||||
| Disposals of equity investments |
||||||||||||
| Disposals of property, plant and equipment |
||||||||||||
| Disposals of subsidiaries |
||||||||||||
| Purchases: |
||||||||||||
| Debt investments |
( |
) | ( |
) | ( |
) | ||||||
| Equity investments and subsidiaries |
( |
) | ( |
) | ( |
) | ||||||
| Property, plant and equipment |
( |
) | ( |
) | ( |
) | ||||||
| Investments in associates and joint ventures |
( |
) | ( |
) | ( |
) | ||||||
| Decrease/(Increase) in term deposits, net |
( |
) | ||||||||||
| Increase in securities purchased under agreements to resell, net |
( |
) | ( |
) | ( |
) | ||||||
| Interest received |
||||||||||||
| Dividends received |
||||||||||||
| Increase in policy loans, net |
( |
) | ( |
) | ( |
) | ||||||
| |
|
|
|
|
|
|||||||
| Net cash inflow/(outflow) from investing activities |
( |
) | ( |
) | ( |
) | ||||||
| |
|
|
|
|
|
|||||||
2022 RMB million |
2021 RMB million (Restated Note 34(f) (i) ) |
2020 RMB million (Restated Note 34(f) (i) ) |
||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||||||
| Increase/(Decrease) in securities sold under agreements to repurchase, net |
( |
) | ||||||||||
| Interest paid |
( |
) | ( |
) | ( |
) | ||||||
| Repayment of borrowings |
( |
) | ( |
) | ( |
) | ||||||
| Dividends paid to equity holders of the Company |
( |
) | ( |
) | ( |
) | ||||||
| Dividends paid to non-controlling interests |
( |
) | ( |
) | ( |
) | ||||||
| Cash received from borrowings |
||||||||||||
| Payment of lease liabilities |
( |
) | ( |
) | ( |
) | ||||||
| Cash paid for redemption of other equity instruments |
— | — | ( |
) | ||||||||
| Capital injected into subsidiaries by non-controlling interests |
||||||||||||
| Cash received related to other financing activities |
— | — | ||||||||||
| Cash paid related to other financing activities |
— | ( |
) | ( |
) | |||||||
| |
|
|
|
|
|
|||||||
| Net cash inflow/(outflow) from financing activities |
( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|||||||
| Foreign exchange gains/(losses) on cash and cash equivalents |
( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|||||||
| Net increase in cash and cash equivalents |
||||||||||||
| |
|
|
|
|
|
|||||||
| Cash and cash equivalents |
||||||||||||
| Beginning of the year |
||||||||||||
| |
|
|
|
|
|
|||||||
| End of the year |
||||||||||||
| |
|
|
|
|
|
|||||||
| Analysis of balances of cash and cash equivalents |
||||||||||||
| Cash at banks and in hand |
||||||||||||
| Short-term bank deposits |
||||||||||||
| |
|
|
|
|
|
|||||||
1 |
ORGANISATION AND PRINCIPAL ACTIVITIES |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
2.1 |
Basis of preparation |
2.1.1 |
New accounting standards and amendments adopted by the Group for the first time for the financial year beginning on 1 January 2022 |
| Standards/Amendments |
Content |
Effective for annual periods beginning on or after | ||
| Amendments to IFRS 3 | Update Reference to the Conceptual Framework |
1 January 2022 | ||
| Amendments to IAS 16 | Property, Plant and Equipment: Proceeds before intended use |
1 January 2022 | ||
| Amendments to IAS 37 | Onerous Contracts – Cost of Fulfilling a Contract |
1 January 2022 | ||
| Annual improvements | Annual Improvements to IFRS Standards 2018-2020 Cycle |
1 January 2022 |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.1 |
Basis of preparation (continued) |
2.1.2 |
New accounting standards and amendments that are effective for the financial year ended 31 December 2022 but temporary exemption is applied by the Group |
| Standards/Amendments |
Content |
Effective for annual periods beginning on or after | ||
| IFRS 9 | Financial Instruments |
1 January 2018 |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.1 |
Basis of preparation (continued) |
2.1.3 |
New accounting standards and amendments that are not yet effective and have not been early adopted by the Group for the financial year beginning on 1 January 2022 |
| Standards/Amendments |
Content |
Effective for annual periods beginning on or after | ||
IFRS 17 |
Insurance Contracts |
1 January 2023 | ||
| Amendments to IAS 12 |
Deferred Tax related to Assets and Liabilities arising from a Single Transaction |
1 January 2023 | ||
| Amendments to IAS 1 and IFRS Practice Statement 2 |
Disclosure of Accounting Policies |
1 January 2023 | ||
| Amendments to IAS 8 |
Definition of Accounting Estimates |
1 January 2023 | ||
| Amendments to IAS 1 |
Classification of Liabilities as Current or Non-current |
1 January 2024 | ||
| Amendments to IAS 1 |
Non-current Liabilities with Covenants |
1 January 2024 | ||
| Amendments to IFRS 16 |
Lease Liability in a Sale and Leaseback |
1 January 2024 | ||
| Amendments to IFRS 10 and IAS 28 Amendments |
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture |
No mandatory effective date yet determined but available for adoption |
• |
It provides a comprehensive general model for insurance contracts, and the measurement is based on the building blocks of discounted, probability-weighted cash flows, a risk adjustment and a contractual service margin representing the unearned profit of the contract. It also provides the variable fee approach for insurance contracts with direct participation features and the premium allocation approach mainly for short-duration; |
• |
The fulfilment cash flows include the expected present value of future cash flows and explicit risk adjustment, remeasured every reporting period; |
• |
A contractual service margin represents the unearned profitability of the insurance contracts and is recognised in profit or loss over the coverage period; |
• |
Certain changes in the fulfilment cash flows relating to future service adjusts the carrying amount of the contractual service margin at the end of the reporting period, and thereby will be recognised in profit or loss over the remaining coverage period; |
• |
The discount rate assumption is determined based on observable current market situation that reflect the characteristics of the insurance contract. The effect of changes in discount rates will be reported in either profit or loss or OCI, determined by an accounting policy choice; |
• |
The recognition of insurance revenue and insurance service expenses in the statement of comprehensive income based on the concept of services provided during the period; |
• |
Amounts that the entity will repay to policyholders, regardless of whether an insured event occurs (non-distinct investment components) are not presented in the statement of comprehensive income, but are recognised directly in the statement of financial position; |
• |
Variable fee approach should be adopted for insurance contracts with direct participation features where policyholders share in the returns from underlying items. When applying the variable fee approach, the entity’s share of the fair value changes of the underlying items is included in the CSM; |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.1 |
Basis of preparation (continued) |
2.1.3 |
New accounting standards and amendments that are not yet effective and have not been early adopted by the Group for the financial year beginning on 1 January 2022 (continued) |
• |
An entity may simplify the measurement of a group of insurance contracts using the premium allocation approach if and only if the entity reasonably expects that such simplification would produce a measurement of the liability for remaining coverage for the group that would not differ materially from the one that would be produced applying the general model or the coverage period of each contract in the group is one year or less at the inception of the group; |
• |
Insurance revenue, insurance service expenses and insurance finance income and expenses are presented separately; |
• |
Extensive disclosures to provide information on the recognised amounts from insurance contracts and the nature and extent of risks arising from these contracts. |
2.2 |
Consolidation |
| • | power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee); |
| • | exposure, or rights, to variable returns from its involvement with the investee; and |
| • | the ability to use its power over the investee to affect its returns. |
| • | the contractual arrangement with the other vote holders of the investee; |
| • | rights arising from other contractual arrangements; and |
| • | the Group’s voting rights and potential voting rights. |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.2 |
Consolidation (continued) |
| • | derecognises the assets (including goodwill) and liabilities of the subsidiary; |
| • | derecognises the carrying amount of any non-controlling interests; |
| • | derecognises the cumulative translation differences recorded in equity; |
| • | recognises the fair value of the consideration received; |
| • | recognises the fair value of any investment retained; |
| • | recognises any surplus or deficit in profit or loss; and |
| • | reclassifies the Group’s share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as if the Group had directly disposed of the related assets or liabilities. |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.2 |
Consolidation (continued) |
2.3 |
Associates and joint ventures |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.4 |
Segment reporting |
2.5 |
Foreign currency translation |
2.6 |
Property, plant and equipment |
Estimated useful lives | ||
| Buildings | ||
| Office equipment, furniture and fixtures | ||
| Motor vehicles | ||
| Leasehold improvements | Over the shorter of the remaining term of the lease and the useful lives |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.7 |
Leases |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.7 |
Leases (continued) |
As a lessee (continued) |
2.8 |
Investment properties |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.9 |
Financial assets |
2.9.a |
Classification |
| (i) | Securities at fair value through profit or loss |
| (ii) | Held-to-maturity |
| (iii) | Loans and receivables |
| (iv) | Available-for-sale |
2.9.b |
Recognition and measurement |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.9 |
Financial assets (continued) |
2.9.b |
Recognition and measurement (continued) |
2.9.c |
Impairment of financial assets other than securities at fair value through profit or loss |
| • | significant financial difficulty of the issuer or debtor; |
| • | a breach of contract, such as a default or delinquency in payments; |
| • | it becomes probable that the issuer or debtor will enter into bankruptcy or other financial reorganisation; and |
| • | the disappearance of an active market for that financial asset because of financial difficulties. |
| • | the market price of the equity securities was more than 50% below their cost at the reporting date; |
| • | the market price of the equity securities was more than 20% below their cost for a period of at least six months at the reporting date; and |
| • | the market price of the equity securities was below their cost for a period of more than one year (including one year) at the reporting date. |
2.10 |
Fair value measurement |
| • | in the principal market for the asset or liability, or |
| • | in the absence of a principal market, in the most advantageous market for the asset or liability. |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.10 |
Fair value measurement (continued) |
2.11 |
Cash and cash equivalents |
2.12 |
Insurance contracts and investment contracts |
2.12.1 |
Classification |
2.12.2 |
Insurance contracts |
2.12.2.a |
Recognition and measurement |
| (i) | Short-term insurance contracts |
| (ii) | Long-term insurance contracts |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.12 |
Insurance contracts and investment contracts (continued) |
2.12.2 |
Insurance contracts (continued) |
2.12.2.a |
Recognition and measurement (continued) |
| (ii) | Long-term insurance contracts (continued) |
| (a) | The reasonable estimate of liability for long-term insurance contracts is the present value of reasonable estimates of future cash outflows less future cash inflows. The expected future cash inflows include cash inflows of future premiums arising from the undertaking of insurance obligations, with consideration of decrement mostly from death and surrenders. The expected future cash outflows are cash outflows incurred to fulfil contractual obligations, consisting of the following: |
| • | guaranteed benefits based on contractual terms, including payments for deaths, disabilities, diseases, survivals, maturities and surrenders; |
| • | additional non-guaranteed benefits, such as policyholder dividends; and |
| • | reasonable expenses incurred to manage insurance contracts or to process claims, including maintenance expenses and claim settlement expenses. Future administration expenses are included in the maintenance expenses. Expenses are determined based on expense analysis with consideration of future inflation and the Group’s expense management control. |
| (b) | Margin has been taken into consideration while computing the reserve of insurance contracts, measured separately and recognised in net profit in each period over the life of the contracts. At the inception of the contracts, the Group does not recognise Day 1 gain, whereas on the other hand, Day 1 loss is recognised in net profit immediately. |
| (c) | The Group has considered the impact of time value on the reserve calculation for insurance contracts. |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.12 |
Insurance contracts and investment contracts (continued) |
2.12.2 |
Insurance contracts (continued) |
2.12.2.a |
Recognition and measurement (continued) |
| (iii) | Universal life contracts and unit-linked contracts |
| • | insurance components |
| • | non-insurance components |
2.12.2.b |
Liability adequacy test |
2.12.2.c |
Reinsurance contracts held |
2.12.3 |
Investment contracts |
2.12.4 |
DPF in long-term insurance contracts and investment contracts |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.13 |
Financial liabilities at fair value through profit or loss |
2.14 |
Securities sold under agreements to repurchase |
2.15 |
Bonds payable |
2.16 |
Derivative instruments |
2.17 |
Employee benefits |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.17 |
Employee benefits (continued) |
2.18 |
Share capital |
2.19 |
Revenue recognition |
2.20 |
Finance costs |
2.21 |
Current and deferred income taxation |
2 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
2.21 |
Current and deferred income taxation (continued) |
2.22 |
Provisions and contingencies |
2.23 |
Dividend distribution |
3 |
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS |
3 |
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued) |
3.1 |
Estimates of future benefit payments and premiums arising from long-term insurance contracts |
3.2 |
Financial instruments |
| • | debt securities: fair values are generally based upon current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions, values obtained from current bid prices of comparable investments or valuation techniques when the market is not active. |
| • | equity securities: fair values are generally based upon current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions or commonly used market pricing models. Equity securities, for which fair values cannot be measured reliably, are recognised at cost less impairment. |
| • | securities purchased under agreements to resell, policy loans, term deposits, interest-bearing loans and borrowings, and securities sold under agreements to repurchase: the carrying amounts of these assets in the consolidated statement of financial position approximate fair value. |
| • | fair values of other loans are obtained from valuation techniques. |
3.3 |
Impairment of investments in associates and joint ventures |
3 |
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued) |
3.4 |
Income tax |
3.5 |
Determination of control over investee |
4 |
RISK MANAGEMENT |
4.1 |
Insurance risk |
4.1.1 |
Types of insurance risks |
4 |
RISK MANAGEMENT (continued) |
4.1 |
Insurance risk (continued) |
4.1.2 |
Concentration of insurance risks |
Product name |
For the year ended 31 December |
|||||||||||||||
2022 |
2021 | |||||||||||||||
RMB million |
% |
RMB million | % | |||||||||||||
| Premiums of long-term insurance contracts |
||||||||||||||||
| Xin Xiang Zhi Zun Annuity (Celebration Version) (a) |
% | % | ||||||||||||||
| Kang Ning Whole Life (b) |
% | % | ||||||||||||||
| Fu Lu Shuang Xi Participating Endowment (c) |
% | % | ||||||||||||||
| Xin Ru Yi Annuity(Platinum Version) (d) |
% | % | ||||||||||||||
| Hong Ying Participating Endowment (e) |
% | % | ||||||||||||||
| Others(f) |
% | % | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
% | % | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Insurance benefits of long-term insurance contracts |
||||||||||||||||
| Xin Xiang Zhi Zun Annuity (Celebration Version) (a) |
% | % | ||||||||||||||
| Kang Ning Whole Life (b) |
% | % | ||||||||||||||
| Fu Lu Shuang Xi Participating Endowment (c) |
% | % | ||||||||||||||
| Xin Ru Yi Annuity(Platinum Version) (d) |
% | % | ||||||||||||||
| Hong Ying Participating Endowment (e) |
% | % | ||||||||||||||
| Others(f) |
% | % | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
% | % | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
As at 31 December 2022 |
As at 31 December 2021 | |||||||||||||||
RMB million |
% |
RMB million | % | |||||||||||||
| Liabilities of long-term insurance contracts |
||||||||||||||||
| Xin Xiang Zhi Zun Annuity (Celebration Version) (a) |
% | % | ||||||||||||||
| Kang Ning Whole Life (b) |
% | % | ||||||||||||||
| Fu Lu Shuang Xi Participating Endowment (c) |
% | % | ||||||||||||||
| Xin Ru Yi Annuity(Platinum Version) (d) |
% | % | ||||||||||||||
| Hong Ying Participating Endowment (e) |
% | % | ||||||||||||||
| Others(f) |
% | % | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
% | % | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
4 |
RISK MANAGEMENT (continued) |
4.1 |
Insurance risk (continued) |
4.1.2 |
Concentration of insurance risks (continued) |
| (a) | From the first effective date after the fifth policy years to the expiration period, if the policyholders live to the annual corresponding effective date, the annuity payment shall be paid at |
| (b) | |
| (c) | This product is applicable to healthy policyholders between Starting from the effective date of the insurance contract, the survival benefit is paid every two policy years on the corresponding date at |
4 |
RISK MANAGEMENT (continued) |
4.1 |
Insurance risk (continued) |
4.1.2 |
Concentration of insurance risks (continued) |
| (d) | Xin Ru Yi Annuity (Platinum Version) is an annuity-type insurance contract with annual premium payment method and three types of premium payment periods: 28 days70 years, the first annuity payment will be made at |
| (e) | Maturity benefit of a single premium policy is paid at the basic sum insured, while that of a regular premium policy is paid at the basic sum insured multiplied by the number of years of the premium payments. Disease death benefit incurred within the first policy year is paid at the premium received (without interest). Disease death benefit incurred after the first policy year is paid at the basic sum insured for a single premium policy or the basic sum insured multiplied by the number of years of premium payments for a regular premium policy. When accidents occurred during taking a train, a ship or a flight period, death benefit is paid at the basic sum multiplied by |
| (f) | Others consist of various long-term insurance contracts with no significant concentration. |
4.1.3 |
Sensitivity analysis |
4 |
RISK MANAGEMENT (continued) |
4.1 |
Insurance risk (continued) |
4.1.3 |
Sensitivity analysis (continued) |
Estimated claims expenses |
Short-term insurance contracts (accident year) |
|||||||||||||||||||||||
| 2018 | 2019 | 2020 | 2021 | 2022 |
Total | |||||||||||||||||||
| RMB Million | ||||||||||||||||||||||||
| Year end |
||||||||||||||||||||||||
| 1 year later |
||||||||||||||||||||||||
| 2 years later |
||||||||||||||||||||||||
| 3 years later |
||||||||||||||||||||||||
| 4 years later |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Estimated accumulated claims expenses |
||||||||||||||||||||||||
| Accumulated claims expenses paid |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Unpaid claims expenses |
— | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
4 |
RISK MANAGEMENT (continued) |
4.1 |
Insurance risk (continued) |
4.1.3 |
Sensitivity analysis (continued) |
Estimated claims expenses |
Short-term insurance contracts (accident year) |
|||||||||||||||||||||||
| 2018 | 2019 | 2020 | 2021 | 2022 |
Total |
|||||||||||||||||||
| RMB Million | ||||||||||||||||||||||||
| Year end |
||||||||||||||||||||||||
| 1 year later |
||||||||||||||||||||||||
| 2 years later |
||||||||||||||||||||||||
| 3 years later |
||||||||||||||||||||||||
| 4 years later |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Estimated accumulated claims expenses |
||||||||||||||||||||||||
| Accumulated claims expenses paid |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Unpaid claims expenses |
— | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
4.2 |
Financial risk |
4 |
RISK MANAGEMENT (continued) |
4.2 |
Financial risk (continued) |
4.2.1 |
Market risk |
(i) |
Interest rate risk |
(ii) |
Price risk |
(iii) |
Currency risk |
4 |
RISK MANAGEMENT (continued) |
4.2 |
Financial risk (continued) |
4.2.1 |
Market risk (continued) |
(iii) |
Currency risk (continued) |
As at 31 December 2022 |
US dollar |
HK dollar |
GB pound |
EUR |
Others |
Total |
||||||||||||||||||
Financial assets |
||||||||||||||||||||||||
Equity securities |
||||||||||||||||||||||||
- Available-for-sale |
— |
— |
— |
|||||||||||||||||||||
- Securities at fair value through profit or loss |
||||||||||||||||||||||||
Debt securities |
||||||||||||||||||||||||
- Held-to-maturity |
— |
— |
— |
— |
||||||||||||||||||||
- Loans |
— |
— |
— |
— |
||||||||||||||||||||
- Available-for-sale |
— |
— |
— |
— |
||||||||||||||||||||
- Securities at fair value through profit or loss |
— |
|||||||||||||||||||||||
Term deposits |
— |
— |
— |
— |
||||||||||||||||||||
Cash and cash equivalents |
||||||||||||||||||||||||
Total |
||||||||||||||||||||||||
Financial liabilities |
||||||||||||||||||||||||
Interest-bearing loans and other borrowings |
— |
— |
||||||||||||||||||||||
Total |
— |
— |
||||||||||||||||||||||
As at 31 December 2021 |
US dollar |
HK dollar |
GB pound |
EUR |
Others |
Total |
||||||||||||||||||
Financial assets |
||||||||||||||||||||||||
Equity securities |
||||||||||||||||||||||||
- Available-for-sale |
— |
— |
— |
|||||||||||||||||||||
- Securities at fair value through profit or loss |
||||||||||||||||||||||||
Debt securities |
||||||||||||||||||||||||
- Held-to-maturity |
— |
— |
— |
— |
||||||||||||||||||||
- Loans |
— |
— |
— |
— |
||||||||||||||||||||
- Available-for-sale |
— |
— |
— |
— |
||||||||||||||||||||
- Securities at fair value through profit or loss |
— |
|||||||||||||||||||||||
Term deposits |
— |
— |
— |
— |
||||||||||||||||||||
Cash and cash equivalents |
||||||||||||||||||||||||
Total |
||||||||||||||||||||||||
Financial liabilities |
||||||||||||||||||||||||
Interest-bearing loans and other borrowings |
— |
— |
||||||||||||||||||||||
Total |
— |
— |
||||||||||||||||||||||
4 |
RISK MANAGEMENT (continued) |
4.2 |
Financial risk (continued) |
4.2.1 |
Market risk (continued) |
(iii) |
Currency risk (continued) |
4.2.2 |
Credit risk |
4 |
RISK MANAGEMENT (continued) |
4.2 |
Financial risk (continued) |
4.2.2 |
Credit risk (continued) |
4 |
RISK MANAGEMENT (continued) |
4.2 |
Financial risk (continued) |
4.2.3 |
Liquidity risk |
Contractual and expected cash flows (undiscounted) |
||||||||||||||||||||||||
As at 31 December 2022 |
Carrying value |
Without maturity |
Not later than 1 year |
Later than 1 year but not later than 3 years |
Later than 3 years but not later than 5 years |
Later than 5 years |
||||||||||||||||||
RMB Million |
||||||||||||||||||||||||
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 equivalents |
— | — | — | — | ||||||||||||||||||||
Subtotal |
||||||||||||||||||||||||
Financial and insurance liabilities |
||||||||||||||||||||||||
Expected cash outflows |
||||||||||||||||||||||||
Insurance contracts |
— | ( |
) | ( |
) | |||||||||||||||||||
Investment contracts |
— | ( |
) | ( |
) | |||||||||||||||||||
Contractual cash outflows |
||||||||||||||||||||||||
Securities sold under agreements to repurchase |
— | ( |
) | — | — | — | ||||||||||||||||||
Financial liabilities at fair value through profit or loss |
( |
) | — | — | — | — | ||||||||||||||||||
Annuity and other insurance balances payable |
— | ( |
) | — | — | — | ||||||||||||||||||
Interest-bearing loans and other borrowings |
— | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||
Bonds payable |
— | ( |
) | ( |
) | — | — | |||||||||||||||||
Lease liabilities |
— | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||
Subtotal |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Net cash inflow/(outflow) |
( |
) | ||||||||||||||||||||||
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 2021 |
Carrying value |
Without maturity |
Not later than 1 year |
Later than 1 year but not later than 3 years |
Later than 3 years but not later than 5 years |
Later than 5 years |
||||||||||||||||||
| RMB Million | ||||||||||||||||||||||||
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 equivalents |
— | — | — | — | ||||||||||||||||||||
Subtotal |
||||||||||||||||||||||||
Financial and insurance liabilities |
||||||||||||||||||||||||
Expected cash outflows |
||||||||||||||||||||||||
Insurance contracts |
— | ( |
) | ( |
) | |||||||||||||||||||
Investment contracts |
— | ( |
) | ( |
) | |||||||||||||||||||
Contractual cash outflows |
||||||||||||||||||||||||
Securities sold under agreements to repurchase |
— | ( |
) | — | — | — | ||||||||||||||||||
Financial liabilities at fair value through profit or loss |
( |
) | — | — | — | — | ||||||||||||||||||
Annuity and other insurance balances payable |
— | ( |
) | — | — | — | ||||||||||||||||||
Interest-bearing loans and other borrowings |
— | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||
Bonds payable |
— | ( |
) | ( |
) | — | — | |||||||||||||||||
Lease liabilities |
— | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||
Subtotal |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Net cash inflow/(outflow) |
( |
) | ||||||||||||||||||||||
4 |
RISK MANAGEMENT (continued) |
4.2 |
Financial risk (continued) |
4.2.3 |
Liquidity risk (continued) |
4.2.4 |
Capital management |
As at 31 December 2022 RMB million |
As at 31 December 2021 note RMB million |
|||||||
| Core capital |
||||||||
| Actual capital |
||||||||
| Minimum capital |
||||||||
| Core solvency ratio |
% | % | ||||||
| Comprehensive solvency ratio |
% | % | ||||||
| (i) | Category A: solvency ratios meet the requirements, and the operational risk, strategic risk, reputational risk and liquidity risk are very low; |
| (ii) | Category B: solvency ratios meet the requirements, and the operational risk, strategic risk, reputational risk and liquidity risk are low; |
| (iii) | Category C: solvency ratios do not meet the requirements or solvency ratios meet the requirements but one or several risks in operation, strategy, reputation and liquidity are high; |
| (iv) | Category D: solvency ratios do not meet the requirements or solvency ratios meet the requirements but one or several risks in operation, strategy, reputation and liquidity are severe. |
4 |
RISK MANAGEMENT (continued) |
4.3 |
Disclosures about interest in unconsolidated structured entities |
(i) |
The unconsolidated structured entities that the Group has interest in |
As at 31 December 2022 |
Unconsolidated structured entities |
|||||||||||||||
Size RMB Million |
Carrying amount of assets RMB Million |
Maximum exposure RMB Million |
Interest held by the Group |
|||||||||||||
| Funds managed by affiliated entities |
Investment income and service fee |
|||||||||||||||
| Funds managed by third parties |
Note 1 | |||||||||||||||
| Trust schemes managed by affiliated entities |
||||||||||||||||
| Trust schemes managed by third parties |
Note 1 | |||||||||||||||
| Debt investment schemes managed by affiliated entities |
||||||||||||||||
| Debt investment schemes managed by third parties |
Note 1 | |||||||||||||||
| Others managed by affiliated entities Note 2 |
||||||||||||||||
| Others managed by third parties Note 2 |
Note 1 | |||||||||||||||
4 |
RISK MANAGEMENT (continued) |
4.3 |
Disclosures about interest in unconsolidated structured entities (continued) |
(i) |
The unconsolidated structured entities that the Group has interest in (continued) |
As at 31 December 2021 |
Unconsolidated structured entities |
|||||||||||||||
Size RMB Million |
Carrying amount of assets RMB Million |
Maximum exposure RMB Million |
Interest held by the Group |
|||||||||||||
| Funds managed by affiliated entities |
| |||||||||||||||
| Funds managed by third parties |
Note 1 | |||||||||||||||
| Trust schemes managed by affiliated entities |
||||||||||||||||
| Trust schemes managed by third parties |
Note 1 | |||||||||||||||
| Debt investment schemes managed by affiliated entities |
| |||||||||||||||
| Debt investment schemes managed by third parties |
Note 1 | |||||||||||||||
| Others managed by affiliated entities Note 2 |
| |||||||||||||||
| Others managed by third parties Note 2 |
Note 1 | |||||||||||||||
| Note 1: | Funds, trust schemes, debt investment schemes and others managed by third parties were sponsored by third party financial institutions and the information related to size of these structured entities were not publicly available. |
| Note 2: | Others included wealth management products, special asset management schemes, and asset-backed plans, etc. |
(ii) |
The unconsolidated structure d entities that the Group has sponsored but does not have interest in |
4 |
RISK MANAGEMENT (continued) |
4.4 |
Fair value hierarchy |
4 |
RISK MANAGEMENT (continued) |
4.4 |
Fair value hierarchy (continued) |
Fair value measurement using |
Total |
|||||||||||||||
| Quoted prices in active markets |
Significant observable inputs |
Significant unobservable inputs |
||||||||||||||
Level 1 |
Level 2 |
Level 3 |
||||||||||||||
RMB million |
RMB million |
RMB million |
RMB million |
|||||||||||||
| Assets measured at fair value |
||||||||||||||||
| Available-for-sale |
||||||||||||||||
| - Equity securities |
||||||||||||||||
| Funds |
— | — | ||||||||||||||
| Common stocks |
— | |||||||||||||||
| Preferred stocks |
— | — | ||||||||||||||
| Others |
||||||||||||||||
| - Debt securities |
||||||||||||||||
| Government bonds |
— | |||||||||||||||
| Government agency bonds |
— | |||||||||||||||
| Corporate bonds |
— | |||||||||||||||
| Subordinated bonds |
— | |||||||||||||||
| Others |
— | |||||||||||||||
| Securities at fair value through profit or loss |
||||||||||||||||
| - Equity securities |
||||||||||||||||
| Funds |
— | |||||||||||||||
| Common stocks |
— | |||||||||||||||
| Others |
— | |||||||||||||||
| - Debt securities |
||||||||||||||||
| Government bonds |
— | |||||||||||||||
| Government agency bonds |
— | |||||||||||||||
| Corporate bonds |
||||||||||||||||
| Others |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Liabilities measured at fair value |
||||||||||||||||
| Financial liabilities at fair value through profit or loss |
( |
) | — | — | ( |
) | ||||||||||
| Investment contracts at fair value through profit or loss |
( |
) | — | — | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
( |
) | — | — | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
4 |
RISK MANAGEMENT (continued) |
4.4 |
Fair value hierarchy (continued) |
Available-for-sale securities |
Securities at fair value through profit or loss |
Total |
||||||||||||||
| Debt securities |
Equity securities |
Debt securities |
||||||||||||||
RMB million |
RMB million |
RMB million |
RMB million |
|||||||||||||
| Opening balance |
||||||||||||||||
| Purchases |
||||||||||||||||
| Transferred out of Level 3 |
( |
) | — | — | ( |
) | ||||||||||
| Total gains/(losses) recorded in profit or loss |
— | ( |
) | ( |
) | |||||||||||
| Total gains/(losses) recorded in other comprehensive income |
( |
) | ( |
) | — | ( |
) | |||||||||
| Disposals or exercises |
( |
) | ( |
) | — | ( |
) | |||||||||
| Maturity |
( |
) | — | ( |
) | ( |
) | |||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Closing balance |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
4 |
RISK MANAGEMENT (continued) |
4.4 |
Fair value hierarchy (continued) |
| Fair value measurement using | Total | |||||||||||||||
Quoted prices in active markets |
Significant observable inputs |
Significant unobservable inputs |
||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||
| RMB million | RMB million | RMB million | RMB million | |||||||||||||
Assets measured at fair value |
||||||||||||||||
Available-for-sale |
||||||||||||||||
- Equity securities |
||||||||||||||||
Funds |
— | — | ||||||||||||||
Common stocks |
— | |||||||||||||||
Preferred stocks |
— | — | ||||||||||||||
Others |
||||||||||||||||
- Debt securities |
||||||||||||||||
Government bonds |
— | |||||||||||||||
Government agency bonds |
— | |||||||||||||||
Corporate bonds |
— | |||||||||||||||
Subordinated bonds |
— | |||||||||||||||
Others |
— | |||||||||||||||
Securities at fair value through profit or loss |
||||||||||||||||
- Equity securities |
||||||||||||||||
Funds |
— | |||||||||||||||
Common stocks |
— | |||||||||||||||
Others |
— | |||||||||||||||
- Debt securities |
||||||||||||||||
Government bonds |
— | |||||||||||||||
Government agency bonds |
— | |||||||||||||||
Corporate bonds |
||||||||||||||||
Others |
— | |||||||||||||||
Total |
||||||||||||||||
Liabilities measured at fair value |
||||||||||||||||
Financial liabilities at fair value through profit or loss |
( |
) | — | — | ( |
) | ||||||||||
Investment contracts at fair value through profit or loss |
( |
) | — | — | ( |
) | ||||||||||
Total |
( |
) | — | — | ( |
) | ||||||||||
4 |
RISK MANAGEMENT (continued) |
4.4 |
Fair value hierarchy (continued) |
Available-for-sale securities |
Securities at fair value through profit or loss |
Total | ||||||||||||||
Debt securities |
Equity securities |
Debt securities |
||||||||||||||
| RMB million | RMB million | RMB million | RMB million | |||||||||||||
Opening balance |
||||||||||||||||
Purchases |
— | |||||||||||||||
Transfer into Level 3 |
— | — | ||||||||||||||
Total gains/(losses) recorded in other comprehensive income |
( |
) | — | |||||||||||||
Disposals or exercises |
— | ( |
) | — | ( |
) | ||||||||||
Maturity |
( |
) | — | — | ( |
) | ||||||||||
Closing balance |
||||||||||||||||
4 |
RISK MANAGEMENT (continued) |
4.4 |
Fair value hierarchy (continued) |
Fair value |
Valuation techniques |
Significant unobservable inputs |
Range |
Relationships between fair value and unobservable inputs | ||||||
Equity securities |
31 December 2022: 31 December 2021: |
31 December 2022: 31 December 2021: |
||||||||
31 December 2022: 31 December 2021: |
N/A | |||||||||
31 December 2022: 31 December 2021: |
31 December 2022: 31 December 2021: |
|||||||||
Debt securities |
31 December 2022: 31 December 2021: |
31 December 2022: 31 December 2021: |
5 |
SEGMENT INFORMATION |
5.1 |
Operating segments |
(i) |
Life insurance business (Life) |
(ii) |
Health insurance business (Health) |
(iii) |
Accident insurance business (Accident) |
(iv) |
Other businesses (Others) |
5.2 |
Allocation basis of income and expenses |
5.3 |
Allocation basis of assets and liabilities |
5 |
SEGMENT INFORMATION (continued) |
For the year ended 31 December 2022 |
||||||||||||||||||||||||
Life |
Health |
Accident |
Others |
Elimination |
Total |
|||||||||||||||||||
RMB million |
||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||
Gross written premiums |
— | — | ||||||||||||||||||||||
- Term life |
— | — | — | — | ||||||||||||||||||||
- Whole life |
— | — | — | — | ||||||||||||||||||||
- Endowment |
— | — | — | — | ||||||||||||||||||||
- Annuity |
— | — | — | — | ||||||||||||||||||||
Net premiums earned |
— | — | ||||||||||||||||||||||
Investment income |
— | |||||||||||||||||||||||
Net realised gains on financial assets |
— | |||||||||||||||||||||||
Net fair value gains through profit or loss |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||
Other income |
— | ( |
) | |||||||||||||||||||||
Including: inter-segment revenue |
— | — | — | ( |
) | — | ||||||||||||||||||
Segment 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 contract liabilities |
( |
) | ( |
) | ( |
) | — | — | ( |
) | ||||||||||||||
Investment contract benefits |
( |
) | ( |
) | — | — | — | ( |
) | |||||||||||||||
Policyholder dividends resulting from participation in profits |
( |
) | ( |
) | — | — | — | ( |
) | |||||||||||||||
Underwriting and policy acquisition costs |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||
Finance costs |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||
Administrative expenses |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||
Statutory insurance fund contribution |
( |
) | ( |
) | ( |
) | — | — | ( |
) | ||||||||||||||
Other expenses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
Including: inter-segment expenses |
( |
) | ( |
) | ( |
) | — | — | ||||||||||||||||
Segment benefits, claims and expenses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
Net gains on investments of associates and joint ventures |
— | — | — | — | ||||||||||||||||||||
Including: share of profit of associates and joint ventures |
— | — | — | — | ||||||||||||||||||||
Segment results |
— | |||||||||||||||||||||||
Income tax |
||||||||||||||||||||||||
Net profit |
||||||||||||||||||||||||
Attributable to |
||||||||||||||||||||||||
- Equity holders of the Company |
||||||||||||||||||||||||
- Non-controlling interests |
||||||||||||||||||||||||
Other comprehensive income attributable to equity holders of the Company |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||
Depreciation and amortisation |
— | |||||||||||||||||||||||
5 |
SEGMENT INFORMATION (continued) |
As at 31 December 2022 |
||||||||||||||||||||||||
Life |
Health |
Accident |
Others |
Elimination |
Total |
|||||||||||||||||||
RMB million |
||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||
Financial assets |
— | |||||||||||||||||||||||
Others |
— | |||||||||||||||||||||||
Segment assets |
— | |||||||||||||||||||||||
Unallocated |
||||||||||||||||||||||||
Property, plant and equipment |
||||||||||||||||||||||||
Others |
||||||||||||||||||||||||
Total |
||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Insurance contracts |
— | — | ||||||||||||||||||||||
Investment contracts |
— | — | — | |||||||||||||||||||||
Securities sold under agreements to repurchase |
— | |||||||||||||||||||||||
Others |
— | |||||||||||||||||||||||
Segment liabilities |
— | |||||||||||||||||||||||
Unallocated |
||||||||||||||||||||||||
Others |
||||||||||||||||||||||||
Total |
||||||||||||||||||||||||
5 |
SEGMENT INFORMATION (continued) |
For the year ended 31 December 2021 |
||||||||||||||||||||||||
Life |
Health |
Accident |
Others |
Elimination |
Total |
|||||||||||||||||||
RMB million |
||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||
Gross written premiums |
— | — | ||||||||||||||||||||||
- Term life |
— | — | — | — | ||||||||||||||||||||
- Whole life |
— | — | — | — | ||||||||||||||||||||
- Endowment |
— | — | — | — | ||||||||||||||||||||
- Annuity |
— | — | — | — | ||||||||||||||||||||
Net premiums earned |
— | — | ||||||||||||||||||||||
Investment income |
— | |||||||||||||||||||||||
Net realised gains on financial assets |
— | |||||||||||||||||||||||
Net fair value gains through profit or loss |
— | |||||||||||||||||||||||
Other income |
— | ( |
) | |||||||||||||||||||||
Including: inter-segment revenue |
— | — | — | ( |
) | — | ||||||||||||||||||
Segment 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 contract liabilities |
( |
) | ( |
) | ( |
) | — | — | ( |
) | ||||||||||||||
Investment contract benefits |
( |
) | ( |
) | — | — | — | ( |
) | |||||||||||||||
Policyholder dividends resulting from participation in profits |
( |
) | ( |
) | — | — | — | ( |
) | |||||||||||||||
Underwriting and policy acquisition costs |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||
Finance costs |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||
Administrative expenses |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||
Statutory insurance fund contribution |
( |
) | ( |
) | ( |
) | — | — | ( |
) | ||||||||||||||
Other expenses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
Including: inter-segment expenses |
( |
) | ( |
) | ( |
) | — | — | ||||||||||||||||
Segment benefits, claims and expenses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
Net gains on investments of associates and joint ventures |
— | — | — | — | ||||||||||||||||||||
Including: share of profit of associates and joint ventures |
— | — | — | — | ||||||||||||||||||||
Segment results |
— | |||||||||||||||||||||||
Income tax |
||||||||||||||||||||||||
Net profit |
||||||||||||||||||||||||
Attributable to |
||||||||||||||||||||||||
- Equity holders of the Company |
||||||||||||||||||||||||
- Non-controlling interests |
||||||||||||||||||||||||
Other comprehensive income attributable to equity holders of the Company |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||||
Depreciation and amortisation |
— | |||||||||||||||||||||||
5 |
SEGMENT INFORMATION (continued) |
As at 31 December 2021 |
||||||||||||||||||||||||
Life |
Health |
Accident |
Others |
Elimination |
Total |
|||||||||||||||||||
RMB million |
||||||||||||||||||||||||
| Assets |
||||||||||||||||||||||||
| Financial assets |
— | |||||||||||||||||||||||
| Others |
— | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment assets |
— | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Unallocated |
||||||||||||||||||||||||
| Property, plant and equipment |
||||||||||||||||||||||||
| Others |
||||||||||||||||||||||||
| |
|
|||||||||||||||||||||||
| Total |
||||||||||||||||||||||||
| |
|
|||||||||||||||||||||||
| Liabilities |
||||||||||||||||||||||||
| Insurance contracts |
— | — | ||||||||||||||||||||||
| Investment contracts |
— | — | — | |||||||||||||||||||||
| Securities sold under agreements to repurchase |
— | |||||||||||||||||||||||
| Others |
— | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Segment liabilities |
— | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Unallocated |
||||||||||||||||||||||||
| Others |
||||||||||||||||||||||||
| |
|
|||||||||||||||||||||||
| Total |
||||||||||||||||||||||||
| |
|
|||||||||||||||||||||||
5 |
SEGMENT INFORMATION (continued) |
For the year ended 31 December 2020 |
||||||||||||||||||||||||
Life |
Health |
Accident |
Others |
Elimination |
Total |
|||||||||||||||||||
RMB million |
||||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||
| Gross written premiums |
— | — | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| - Term life |
— | — | — | — | ||||||||||||||||||||
| - Whole life |
— | — | — | — | ||||||||||||||||||||
| - Endowment |
— | — | — | — | ||||||||||||||||||||
| - Annuity |
— | — | — | — | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net premiums earned |
— | — | ||||||||||||||||||||||
| Investment income |
— | |||||||||||||||||||||||
| Net realised gains on financial assets |
— | |||||||||||||||||||||||
| Net fair value gains through profit or loss |
— | |||||||||||||||||||||||
| Other income |
— | ( |
) | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Including: inter-segment revenue |
— | — | — | ( |
) | — | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment 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 contract liabilities |
( |
) | ( |
) | ( |
) | — | — | ( |
) | ||||||||||||||
| Investment contract benefits |
( |
) | ( |
) | — | — | — | ( |
) | |||||||||||||||
| Policyholder dividends resulting from participation in profits |
( |
) | ( |
) | — | — | — | ( |
) | |||||||||||||||
| Underwriting and policy acquisition costs |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||
| Finance costs |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||
| Administrative expenses |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||
| Statutory insurance fund contribution |
( |
) | ( |
) | ( |
) | — | — | ( |
) | ||||||||||||||
| Other expenses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Including: inter-segment expenses |
( |
) | ( |
) | ( |
) | — | — | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment benefits, claims and expenses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net gains on investments of associates and joint ventures |
— | — | — | — | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Including: share of profit of associates and joint ventures |
— | — | — | — | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment results |
— | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income tax |
( |
) | ||||||||||||||||||||||
| |
|
|||||||||||||||||||||||
| Net profit |
||||||||||||||||||||||||
| |
|
|||||||||||||||||||||||
| Attributable to |
||||||||||||||||||||||||
| - Equity holders of the Company |
||||||||||||||||||||||||
| - Non-controlling interests |
||||||||||||||||||||||||
| Other comprehensive income attributable to equity holders of the Company |
— | |||||||||||||||||||||||
| Depreciation and amortisation |
— | |||||||||||||||||||||||
5 |
SEGMENT INFORMATION (continued) |
As at 31 December 2020 |
||||||||||||||||||||||||
Life |
Health |
Accident |
Others |
Elimination |
Total |
|||||||||||||||||||
RMB million |
||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||
Financial assets |
— | |||||||||||||||||||||||
Others |
— | |||||||||||||||||||||||
Segment assets |
— | |||||||||||||||||||||||
Unallocated |
||||||||||||||||||||||||
Property, plant and equipment |
||||||||||||||||||||||||
Others |
||||||||||||||||||||||||
Total |
||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Insurance contracts |
— | — | ||||||||||||||||||||||
Investment contracts |
— | — | — | |||||||||||||||||||||
Securities sold under agreements to repurchase |
— | |||||||||||||||||||||||
Others |
— | |||||||||||||||||||||||
Segment liabilities |
— | |||||||||||||||||||||||
Unallocated |
||||||||||||||||||||||||
Others |
||||||||||||||||||||||||
Total |
||||||||||||||||||||||||
6 |
PROPERTY, PLANT AND EQUIPMENT |
Buildings |
Office equipment, furniture and fixtures |
Motor vehicles |
Assets under construction |
Leasehold improvements |
Total |
|||||||||||||||||||
RMB million |
||||||||||||||||||||||||
Cost |
||||||||||||||||||||||||
As at 1 January 2022 |
||||||||||||||||||||||||
Transfers upon completion |
— | ( |
) | ( |
) | |||||||||||||||||||
Additions |
— | |||||||||||||||||||||||
Transfers into investment properties |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Disposals |
( |
) | ( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||||
As at 31 December 2022 |
||||||||||||||||||||||||
Accumulated depreciation |
||||||||||||||||||||||||
As at 1 January 2022 |
( |
) | ( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||||
Charge for the year |
( |
) | ( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||||
Disposals |
— | |||||||||||||||||||||||
As at 31 December 2022 |
( |
) | ( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||||
Impairment |
||||||||||||||||||||||||
As at 1 January 2022 |
( |
) | — | — | ( |
) | — | ( |
) | |||||||||||||||
Charge for the year |
— | — | — | — | — | — | ||||||||||||||||||
Disposals |
— | — | — | — | — | — | ||||||||||||||||||
As at 31 December 2022 |
( |
) | — | — | ( |
) | — | ( |
) | |||||||||||||||
Net book value |
||||||||||||||||||||||||
As at 1 January 2022 |
||||||||||||||||||||||||
As at 31 December 2022 |
||||||||||||||||||||||||
6 |
PROPERTY, PLANT AND EQUIPMENT (continued) |
| Buildings | Office equipment, furniture and fixtures |
Motor vehicles |
Assets under construction |
Leasehold improvements |
Total | |||||||||||||||||||
| RMB million | ||||||||||||||||||||||||
Cost |
||||||||||||||||||||||||
As at 1 January 2021 |
||||||||||||||||||||||||
Transfers upon completion |
— | — | ( |
) | ( |
) | ||||||||||||||||||
Additions |
— | |||||||||||||||||||||||
Transfers into investment properties |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Disposals |
( |
) | ( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||||
As at 31 December 2021 |
||||||||||||||||||||||||
Accumulated depreciation |
||||||||||||||||||||||||
As at 1 January 2021 |
( |
) | ( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||||
Charge for the year |
( |
) | ( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||||
Disposals |
— | |||||||||||||||||||||||
As at 31 December 2021 |
( |
) | ( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||||
Impairment |
||||||||||||||||||||||||
As at 1 January 2021 |
( |
) | — | — | ( |
) | — | ( |
) | |||||||||||||||
Charge for the year |
— | — | — | — | — | — | ||||||||||||||||||
Disposals |
— | — | — | — | — | — | ||||||||||||||||||
As at 31 December 2021 |
( |
) | — | — | ( |
) | — | ( |
) | |||||||||||||||
Net book value |
||||||||||||||||||||||||
As at 1 January 2021 |
||||||||||||||||||||||||
As at 31 December 2021 |
||||||||||||||||||||||||
7 |
LEASES |
(a) |
Right-of-use |
Buildings |
Others |
Total |
||||||||||
RMB million |
||||||||||||
Cost |
||||||||||||
As at 1 January 2022 |
||||||||||||
Additions |
||||||||||||
Deductions |
( |
) | — | ( |
) | |||||||
As at 31 December 2022 |
||||||||||||
Accumulated depreciation |
||||||||||||
As at 1 January 2022 |
( |
) | ( |
) | ( |
) | ||||||
Charge for the year |
( |
) | ( |
) | ( |
) | ||||||
Deductions |
— | |||||||||||
As at 31 December 2022 |
( |
) | ( |
) | ( |
) | ||||||
Impairment |
||||||||||||
As at 1 January 2022 |
— | — | — | |||||||||
As at 31 December 2022 |
— | — | — | |||||||||
Net book value |
||||||||||||
As at 1 January 2022 |
||||||||||||
As at 31 December 2022 |
||||||||||||
7 |
LEASES (continued) |
(a) |
Right-of-use |
| Buildings | Others | Total | ||||||||||
| RMB million | ||||||||||||
Cost |
||||||||||||
As at 1 January 2021 |
||||||||||||
Additions |
||||||||||||
Deductions |
( |
) | ( |
) | ( |
) | ||||||
As at 31 December 2021 |
||||||||||||
Accumulated depreciation |
||||||||||||
As at 1 January 2021 |
( |
) | ( |
) | ( |
) | ||||||
Charge for the year |
( |
) | ( |
) | ( |
) | ||||||
Deductions |
||||||||||||
As at 31 December 2021 |
( |
) | ( |
) | ( |
) | ||||||
Impairment |
||||||||||||
As at 1 January 2021 |
— | — | — | |||||||||
As at 31 December 2021 |
— | — | — | |||||||||
Net book value |
||||||||||||
As at 1 January 2021 |
||||||||||||
As at 31 December 2021 |
||||||||||||
(b) |
The amounts recognised in profit or loss in relation to leases are as follows: |
As at 31 December 2022 RMB million |
As at 31 December 2021 RMB million |
|||||||
Interest on lease liabilities |
||||||||
Depreciation charge of right-of-use |
||||||||
Expense relating to short-term leases |
||||||||
Expense relating to leases of low-value assets(except for short-term lease liabilities) |
— | |||||||
Total |
||||||||
8 |
INVESTMENT PROPERTIES |
Buildings RMB million |
||||
Cost |
||||
As at 1 January 2022 |
||||
Additions |
||||
Deductions |
( |
) | ||
As at 31 December 2022 |
||||
Accumulated depreciation |
||||
As at 1 January 2022 |
( |
) | ||
Additions |
( |
) | ||
Deductions |
||||
As at 31 December 2022 |
( |
) | ||
Net book value |
||||
As at 1 January 2022 |
||||
As at 31 December 2022 |
||||
Fair value |
||||
As at 1 January 2022 |
||||
As at 31 December 2022 |
||||
| Buildings RMB million |
||||
Cost |
||||
As at 1 January 2021 |
||||
Additions |
( |
) | ||
As at 31 December 2021 |
||||
Accumulated depreciation |
||||
As at 1 January 2021 |
( |
) | ||
Additions |
( |
) | ||
As at 31 December 2021 |
( |
) | ||
Net book value |
||||
As at 1 January 2021 |
||||
As at 31 December 2021 |
||||
Fair value |
||||
As at 1 January 2021 |
||||
As at 31 December 2021 |
||||
8 |
INVESTMENT PROPERTIES (continued) |
9 |
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES |
2022 |
2021 | |||||||
RMB million |
RMB million | |||||||
As at 1 January |
||||||||
Change of the cost |
||||||||
Share of profit or loss |
||||||||
Dividends declared |
( |
) | ( |
) | ||||
Other equity movements |
( |
) | ||||||
Impairment |
( |
) | — | |||||
As at 31 December |
||||||||
9 |
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (continued) |
| Movement | ||||||||||||||||||||||||||||||||||||||||||
| Accounting method |
Cost | As at 31 December 2021 |
Change of the cost |
Share of profit or loss |
Declared dividends |
Other equity movements |
Provision of impairment |
As at 31 December 2022 |
Percentage of equity interest |
Accumulated amount of impairment |
||||||||||||||||||||||||||||||||
RMB Million |
RMB Million | |||||||||||||||||||||||||||||||||||||||||
Associates |
||||||||||||||||||||||||||||||||||||||||||
China Guangfa Bank Co., Ltd. (“CGB”) (i) |
( |
) | ( |
) | — | % | — | |||||||||||||||||||||||||||||||||||
Sino-Ocean Group Holding Limited (“Sino-Ocean”) (ii) |
— | ( |
) | ( |
) | ( |
) | ( |
) | % | ( |
) | ||||||||||||||||||||||||||||||
China Life Property Casualty Insurance Company Limited (“CLPC”) |
( |
) | ( |
) | — | % | — | |||||||||||||||||||||||||||||||||||
COFCO Futures Company Limited (“COFCO Futures”) |
— | ( |
) | — | % | — | ||||||||||||||||||||||||||||||||||||
China Pipe Group Sichuan to East China Gas Pipeline Co., Ltd. (“Pipeline Company”) |
— | ( |
) | — | % | — | ||||||||||||||||||||||||||||||||||||
China United Network Communications Limited (“China Unicom”) (iii) |
— | ( |
) | ( |
) | — | % | — | ||||||||||||||||||||||||||||||||||
Others (iv) |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||
Subtotal |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
Joint ventures |
||||||||||||||||||||||||||||||||||||||||||
Joy City Commercial Property Fund L.P. (“Joy City”) |
— | ( |
) | ( |
) | — | % | — | ||||||||||||||||||||||||||||||||||
Mapleleaf Century Limited (“MCL”) |
— | — | ( |
) | — | % | — | |||||||||||||||||||||||||||||||||||
Others (iv) |
( |
) | — | — | ||||||||||||||||||||||||||||||||||||||
Subtotal |
( |
) | ( |
) | — | — | ||||||||||||||||||||||||||||||||||||
Total |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||||||||||||
9 |
INVESTMENT IN ASSOCIATES AND JOINT VENTURES (continued) |
| (i) | The 2021 final dividend of RMB |
| (ii) | The 2021 final dividend of HKD |
| (iii) | The 2021 final dividend of RMB |
| (iv) | The Group invested in real estate, industrial logistics assets and other industries through these enterprises. |
| (v) | There is no significant restriction for the Group to dispose of its associates and joint ventures. |
Name |
Place of incorporation |
Percentage of equity interest held |
||||
Associates |
||||||
CGB |
% | |||||
Sino-Ocean |
% | |||||
CLPC |
% | |||||
COFCO Futures |
% | |||||
Pipeline Company |
% | |||||
China Unicom |
% | |||||
Joint ventures |
||||||
Joy City |
% | |||||
MCL |
% | |||||
Name |
Place of incorporation |
Percentage of equity interest held | ||||
Associates |
||||||
CGB |
% | |||||
Sino-Ocean |
% | |||||
CLPC |
% | |||||
COFCO Futures |
% | |||||
Pipeline Company |
% | |||||
China Unicom |
% | |||||
Joint ventures |
||||||
Joy City |
% | |||||
MCL |
% | |||||
9 |
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (continued) |
CGB |
Sino-Ocean |
CLPC |
COFCO Futures |
Pipeline Company |
China Unicom |
Joy City |
MCL |
|||||||||||||||||||||||||
RMB million |
RMB million |
RMB million |
RMB million |
RMB million |
RMB million |
RMB million |
RMB million |
|||||||||||||||||||||||||
Total assets |
||||||||||||||||||||||||||||||||
Total liabilities |
||||||||||||||||||||||||||||||||
Total equity |
||||||||||||||||||||||||||||||||
Total equity attributable to equity holders of the associates and joint ventures |
||||||||||||||||||||||||||||||||
Total adjustments (i) |
( |
) | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||
Total equity attributable to equity holders of the associates and joint ventures after adjustments |
||||||||||||||||||||||||||||||||
Proportion of the Group’s ownership |
% | % | % | % | % | % | % | % | ||||||||||||||||||||||||
Gross carrying value of the investments |
||||||||||||||||||||||||||||||||
Impairment |
— | ( |
) | — | — | — | — | — | — | |||||||||||||||||||||||
Net carrying value of the investments |
||||||||||||||||||||||||||||||||
Total revenues |
( |
) | ||||||||||||||||||||||||||||||
Net profit/(loss) |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Other comprehensive income |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||||
Total comprehensive income |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
9 |
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (continued) |
| CGB | Sino-Ocean |
CLPC | COFCO Futures | Pipeline Company | China Unicom | Joy City | MCL | |||||||||||||||||||||||||
| RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | |||||||||||||||||||||||||
Total assets |
||||||||||||||||||||||||||||||||
Total liabilities |
||||||||||||||||||||||||||||||||
Total equity |
||||||||||||||||||||||||||||||||
Total equity attributable to equity holders of the associates and joint ventures |
||||||||||||||||||||||||||||||||
Total adjustments (i) |
( |
) | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||
Total equity attributable to equity holders of the associates and joint ventures after adjustments |
||||||||||||||||||||||||||||||||
Proportion of the Group’s ownership |
% | % | % | % | % | % | % | % | ||||||||||||||||||||||||
Gross carrying value of the investments |
||||||||||||||||||||||||||||||||
Impairment |
— | ( |
) | — | — | — | — | — | — | |||||||||||||||||||||||
Net carrying value of the investments |
||||||||||||||||||||||||||||||||
Total revenues |
||||||||||||||||||||||||||||||||
Net profit/(loss) |
||||||||||||||||||||||||||||||||
Other comprehensive income |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||||
Total comprehensive income |
( |
) | ||||||||||||||||||||||||||||||
| (i) | Including adjustments for the difference of accounting policies, fair value and others. |
10 |
FINANCIAL ASSETS |
10.1 |
Held-to-maturity |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
| Debt securities |
||||||||
| Government bonds |
||||||||
| Government agency bonds |
||||||||
| Corporate bonds |
||||||||
| Subordinated bonds |
||||||||
| |
|
|
|
|||||
| Total |
||||||||
| |
|
|
|
|||||
| Debt securities |
||||||||
| Listed in Mainland, PRC |
||||||||
| Listed in Hong Kong, PRC |
||||||||
| Listed overseas |
||||||||
| Unlisted (i) |
||||||||
| |
|
|
|
|||||
| Total |
||||||||
| |
|
|
|
|||||
| (i) | Unlisted debt securities are those traded on the Chinese interbank market. |
Debt securities - fair value hierarchy |
As at 31 December 2022 |
As at 31 December 2021 |
||||||||||||||||||||||
| Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | |||||||||||||||||||
| RMB million |
RMB million |
RMB million |
RMB million |
RMB million |
RMB million |
|||||||||||||||||||
| Government bonds |
||||||||||||||||||||||||
| Government agency bonds |
||||||||||||||||||||||||
| Corporate bonds |
||||||||||||||||||||||||
| Subordinated bonds |
— | — | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Debt securities - Contractual maturity schedule |
As at 31 December 2022 |
As at 31 December 2021 |
||||||
RMB million |
RMB million | |||||||
| Maturing: |
||||||||
| Within one year |
||||||||
| After one year but within five years |
||||||||
| After five years but within ten years |
||||||||
| After ten years |
||||||||
| |
|
|
|
|||||
| Total |
||||||||
| |
|
|
|
|||||
10 |
FINANCIAL ASSETS (continued) |
10.2 |
Loans |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
| Policy loans (i) |
||||||||
| Other loans |
||||||||
| |
|
|
|
|||||
| Total |
||||||||
| |
|
|
|
|||||
| Impairment |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net value |
||||||||
| |
|
|
|
|||||
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
| Maturing: |
||||||||
| Within one year |
||||||||
| After one year but within five years |
||||||||
| After five years but within ten years |
||||||||
| After ten years |
||||||||
| |
|
|
|
|||||
| Total |
||||||||
| |
|
|
|
|||||
| Impairment |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net value |
||||||||
| |
|
|
|
|||||
| (i) | As at 31 December 2022, maturities of policy loans are within 6 months (as at 31 December 2021: same), and their fair values approximated to their carrying amounts. |
10.3 |
Term deposits |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
| Maturing: |
||||||||
| Within one year |
||||||||
| After one year but within five years |
||||||||
| |
|
|
|
|||||
| Total |
||||||||
| |
|
|
|
|||||
10 |
FINANCIAL ASSETS (continued) |
10.4 |
Statutory deposits - restricted |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
Contractual maturity schedule: |
||||||||
Within one year |
||||||||
After one year but within five years |
||||||||
Total |
||||||||
10.5 |
Available-for-sale |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
Available-for-sale |
||||||||
Debt securities |
||||||||
Government bonds |
||||||||
Government agency bonds |
||||||||
Corporate bonds |
||||||||
Subordinated bonds |
||||||||
Others (i) |
||||||||
Subtotal |
||||||||
Equity securities |
||||||||
Funds |
||||||||
Common stocks |
||||||||
Preferred stocks |
||||||||
Others (i) |
||||||||
Subtotal |
||||||||
Available-for-sale |
||||||||
Equity securities |
||||||||
Others (i) |
||||||||
Total |
||||||||
| (i) | Other available-for-sale |
10 |
FINANCIAL ASSETS (continued) |
10.5 |
Available-for-sale |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
Debt securities |
||||||||
Listed in Mainland, PRC |
||||||||
Listed in Hong Kong, PRC |
— | |||||||
Listed overseas |
— | |||||||
Unlisted |
||||||||
Subtotal |
||||||||
Equity securities |
||||||||
Listed in Mainland, PRC |
||||||||
Listed in Hong Kong, PRC |
||||||||
Listed overseas |
||||||||
Unlisted |
||||||||
Subtotal |
||||||||
Total |
||||||||
Debt securities - Contractual maturity schedule |
As at 31 December 2022 |
As at 31 December 2021 |
||||||
RMB million |
RMB million | |||||||
Maturing: |
||||||||
Within one year |
||||||||
After one year but within five years |
||||||||
After five years but within ten years |
||||||||
After ten years |
||||||||
Total |
||||||||
10 |
FINANCIAL ASSETS (continued) |
10.6 |
Securities at fair value through profit or loss |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
| Debt securities |
||||||||
| Government bonds |
||||||||
| Government agency bonds |
||||||||
| Corporate bonds |
||||||||
| Others (i) |
||||||||
| |
|
|
|
|||||
| Subtotal |
||||||||
| |
|
|
|
|||||
| Equity securities |
||||||||
| Funds |
||||||||
| Common stocks |
||||||||
| Others |
||||||||
| |
|
|
|
|||||
| Subtotal |
||||||||
| |
|
|
|
|||||
| Total |
||||||||
| |
|
|
|
|||||
| Debt securities |
||||||||
| Listed in Mainland, PRC |
||||||||
| Listed in Hong Kong, PRC |
||||||||
| Listed overseas |
||||||||
| Unlisted |
||||||||
| |
|
|
|
|||||
| Subtotal |
||||||||
| |
|
|
|
|||||
| Equity securities |
||||||||
| Listed in Mainland, PRC |
||||||||
| Listed in Hong Kong, PRC |
||||||||
| Listed overseas |
||||||||
| Unlisted |
||||||||
| Subtotal |
||||||||
| |
|
|
|
|||||
| Total |
||||||||
| |
|
|
|
|||||
| (i) | Other debt securities at fair value through profit or loss mainly include interbank negotiable certificates of deposit. |
10 |
FINANCIAL ASSETS (continued) |
10.7 |
Securities purchased under agreements to resell |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
| Maturing: |
||||||||
| Within 30 days |
||||||||
| Above 30 days |
||||||||
| |
|
|
|
|||||
| Total |
||||||||
| |
|
|
|
|||||
10.8 |
Accrued investment income |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
| Bank deposits |
||||||||
| Debt securities |
||||||||
| Others |
||||||||
| |
|
|
|
|||||
| Total |
||||||||
| |
|
|
|
|||||
| Current |
||||||||
| Non-current |
||||||||
| |
|
|
|
|||||
| Total |
||||||||
| |
|
|
|
|||||
11 |
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES |
| Carrying value | Estimated fair value (i) | |||||||||||||||
As at 31 December 2022 |
As at 31 December 2021 |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||||||||
RMB million |
RMB million |
RMB million |
RMB million |
|||||||||||||
Held-to-maturity |
||||||||||||||||
Loans (iii) |
||||||||||||||||
Term deposits |
||||||||||||||||
Statutory deposits - restricted |
||||||||||||||||
Available-for-sale |
||||||||||||||||
Securities at fair value through profit or loss |
||||||||||||||||
Securities purchased under agreements to resell |
||||||||||||||||
Cash and cash equivalents |
||||||||||||||||
Investment contracts (iii) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Financial liabilities at fair value through profit or loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Securities sold under agreements to repurchase |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Bonds payable |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Interest-bearing loans and borrowings |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| (i) | The estimates and judgements to determine the fair value of financial assets are described in Note 3.2. |
| (ii) | The fair value of held-to-maturity |
| (iii) | Investment contracts at fair value through profit or loss have quoted prices in active markets, and therefore, their fair value was classified as Level 1. |
12 |
PREMIUMS RECEIVABLE |
13 |
REINSURANCE ASSETS |
As at 31 December 2022 RMB million |
As at 31 December 2021 RMB million |
|||||||
| Long-term insurance contracts ceded (Note 15) | ||||||||
| Due from reinsurance companies | ||||||||
| Ceded unearned premiums (Note 15) | ||||||||
| Claims recoverable from reinsurers (Note 15) | ||||||||
| Total | ||||||||
| Current | ||||||||
Non-current |
||||||||
| Total | ||||||||
14 |
OTHER ASSETS |
As at 31 December 2022 RMB million |
As at 31 December 2021 RMB million |
|||||||
| Land use rights(i) | ||||||||
| Disbursements | ||||||||
| Automated policy loans | ||||||||
| Investments receivable and prepaid | ||||||||
| Due from related parties | ||||||||
| Tax prepaid | ||||||||
| Prepayments to constructors | ||||||||
| Others | ||||||||
| Total | ||||||||
| Current | ||||||||
Non-current |
||||||||
| Total | ||||||||
| (i) | The Group’s right-of-use right-of-use |
15 |
INSURANCE CONTRACTS |
(a) |
Process used to decide on assumptions |
| (i) | For the insurance contracts of which future insurance benefits are affected by investment yields of the corresponding investment portfolios, the discount rate assumption is based on expected investment returns of the asset portfolio backing these liabilities, considering the impacts of time value on reserves. |
Discount rate assumptions |
||||
| As at 31 December 2022 |
% | |||
| As at 31 December 2021 |
% | |||
Discount rate assumptions |
||||
| As at 31 December 2022 |
||||
| As at 31 December 2021 |
||||
| (ii) | The mortality and morbidity assumptions are based on the Group’s historical mortality and morbidity experience. The assumed mortality rates and morbidity rates vary with the age of the insured and contract type. |
15 |
INSURANCE CONTRACTS (continued) |
(a) |
Process used to decide on assumptions (continued) |
| (iii) | Expense assumptions are based on expected unit costs with the consideration of previous expense studies and future trends. Expense assumptions are affected by certain factors such as future inflation and market competition which bring uncertainty to these assumptions. The Group determines expense assumptions based on information available at the end of each reporting period and risk margin. |
Individual Life |
Group Life |
|||||||||||||||
RMB Per Policy |
% of Premium |
RMB Per Policy |
% of Premium |
|||||||||||||
| As at 31 December 2022 |
% | |||||||||||||||
| As at 31 December 2021 |
% | |||||||||||||||
| (iv) | The lapse rates are affected by certain factors, such as future macro-economy, availability of financial substitutions, and market competition, which bring uncertainty to these assumptions. The lapse rates and other assumptions are determined with reference to creditable past experience, current conditions and future expectations. |
| (v) | The Group applies a consistent method to determine risk margin. The Group considers risk margin for the discount rate, mortality and morbidity and expense assumptions to compensate for the uncertain amount and timing of future cash flows. When determining risk margin, the Group considers historical experience, future expectations and other factors. The Group determines the risk margin level by itself as the regulations have not imposed any specific requirement on it. |
| (vi) | The policy dividend assumption has uncertainty and is affected by factors such as the expected investment returns, the Group’s dividend policy, and the reasonable expectations of policyholders. The Group is obliged to pay 70% or a higher percentage as agreed in the insurance policy of the cumulative distributable income to the participating insurance policyholders. |
(b) |
Net liabilities of insurance contracts |
As at 31 December 2022 RMB million |
As at 31 December 2021 RMB million |
|||||||
| 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 13) |
( |
) | ( |
) | ||||
| Short-term insurance contracts |
||||||||
| - Claims and claim adjustment expenses (Note 13) |
( |
) | ( |
) | ||||
| - Unearned premiums (Note 13) |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Total, ceded |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net |
||||||||
| Long-term insurance contracts |
||||||||
| Short-term insurance contracts |
||||||||
| - Claims and claim adjustment expenses |
||||||||
| - Unearned premiums |
||||||||
| |
|
|
|
|||||
| Total, net |
||||||||
| |
|
|
|
|||||
15 |
INSURANCE CONTRACTS (continued) |
(c) |
Movements in liabilities of short-term insurance contracts |
2022 RMB million |
2021 RMB million |
|||||||
Notified claims |
||||||||
Incurred but not reported |
||||||||
Total as at 1 January - Gross |
||||||||
Cash paid for claims settled |
||||||||
- Cash paid for current year claims |
( |
) | ( |
) | ||||
- Cash paid for prior year claims |
( |
) | ( |
) | ||||
Claims incurred |
||||||||
- 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 |
||||||||
2022 |
2021 | |||||||||||||||||||||||
RMB million |
RMB million | |||||||||||||||||||||||
Gross |
Ceded |
Net |
Gross | Ceded | Net | |||||||||||||||||||
As at 1 January |
( |
) | ( |
) | ||||||||||||||||||||
Increase |
( |
) | ( |
) | ||||||||||||||||||||
Release |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
As at 31 December |
( |
) | ( |
) | ||||||||||||||||||||
15 |
INSURANCE CONTRACTS (continued) |
(d) |
Movements in liabilities of long-term insurance contracts |
2022 RMB million |
2021 RMB million |
|||||||
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 |
||||||||
As at 31 December |
||||||||
| (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) | For the year ended 31 December 2022, the change in other assumptions was mainly caused by the change in morbidity rate assumptions of certain products, which increased insurance contract liabilities by RMB |
16 |
INVESTMENT CONTRACTS |
As at 31 December 2022 RMB million |
As at 31 December 2021 RMB million |
|||||||
Investment contracts with discretionary participating features (“DPF”) at amortised cost |
||||||||
Investment contracts without DPF |
||||||||
- At amortised cost |
||||||||
- At fair value through profit or loss |
||||||||
Total |
||||||||
2022 RMB million |
2021 RMB million |
|||||||
As at 1 January |
||||||||
Deposits received |
||||||||
Deposits withdrawn, payments on death and other benefits |
( |
) | ( |
) | ||||
Policy fees deducted from account balances |
( |
) | ( |
) | ||||
Interest credited |
||||||||
As at 31 December |
||||||||
17 |
INTEREST-BEARING LOANS AND BORROWINGS |
Maturity date |
Interest rate |
As at 31 December 2022 RMB million |
As at 31 December 2021 RMB million |
|||||||||||||
Credit loans |
— | |||||||||||||||
Guaranteed loans |
— | |||||||||||||||
Guaranteed loans |
— | |||||||||||||||
Guaranteed loans |
|
Within 12 months, Over 12 months, |
|
— | ||||||||||||
Guaranteed loans |
||||||||||||||||
Credit loans |
||||||||||||||||
Credit loans |
— | |||||||||||||||
Credit loans |
||||||||||||||||
Mortgages loans |
||||||||||||||||
Mortgages loans |
||||||||||||||||
Mortgages loans |
||||||||||||||||
Total |
||||||||||||||||
| (i) |
| (ii) |
| (iii) |
| (iv) | The adjustment date is 1 January of each year. |
18 |
BONDS PAYABLE |
| Issue date | Maturity date | Interest rate p.a. | As at 31 December 2022 RMB million |
As at 31 December 2021 RMB million |
||||||||||||
| % | ||||||||||||||||
Total |
||||||||||||||||
19 |
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE |
As at 31 December 2022 RMB million |
As at 31 December 2021 RMB million |
|||||||
Interbank market |
||||||||
Stock exchange market |
||||||||
Total |
||||||||
Maturing: |
||||||||
Within 30 days |
||||||||
More than 30 days within 90 days |
— | |||||||
Total |
||||||||
20 |
OTHER LIABILITIES |
As at 31 December 2022 RMB million |
As at 31 December 2021 RMB million |
|||||||
Payable to the third-party holders of consolidated structured entities |
||||||||
Interest payable to policyholders |
||||||||
Salary and welfare payable |
||||||||
Brokerage and commission payable |
||||||||
Payable to constructors |
||||||||
Agency deposits |
||||||||
Interest payable of debt instruments |
||||||||
Tax payable |
||||||||
Stock appreciation rights (Note 31) |
||||||||
Others |
||||||||
Total |
||||||||
Current |
||||||||
Non-current |
||||||||
Total |
||||||||
21 |
STATUTORY INSURANCE FUND |
22 |
INVESTMENT INCOME |
For the year ended 31 December |
||||||||||||
2022 |
2021 | 2020 | ||||||||||
RMB million |
RMB million | RMB million | ||||||||||
Debt securities |
||||||||||||
- held-to-maturity |
||||||||||||
- available-for-sale |
||||||||||||
- at fair value through profit or loss |
||||||||||||
Equity securities |
||||||||||||
- available-for-sale |
||||||||||||
- at fair value through profit or loss |
||||||||||||
Bank deposits |
||||||||||||
Loans |
||||||||||||
Securities purchased under agreements to resell |
||||||||||||
Total |
||||||||||||
23 |
NET REALIS E D GAINS ON FINANCIAL ASSETS |
For the year ended 31 December |
||||||||||||
2022 |
2021 | 2020 | ||||||||||
RMB million |
RMB million | RMB million | ||||||||||
Debt securities |
||||||||||||
Realised gains (i) |
||||||||||||
Impairment (ii) |
( |
) | ||||||||||
Subtotal |
( |
) | ||||||||||
Equity securities |
||||||||||||
Realised gains (i) |
||||||||||||
Impairment (ii) |
( |
) | ( |
) | ( |
) | ||||||
Subtotal |
||||||||||||
Total |
||||||||||||
| (i) | Realised gains were generated mainly from available-for-sale |
| (ii) | During the year ended 31 December 2022, the Group recognised an impairment charge of RMB available-for-sale available-for-sale available-for-sale available-for-sale an impairment reversal of RMB |
24 |
NET FAIR VALUE GAINS THROUGH PROFIT OR LOSS |
For the year ended 31 December |
||||||||||||
2022 |
2021 | 2020 | ||||||||||
RMB million |
RMB million | RMB million | ||||||||||
Debt securities |
( |
) | ( |
) | ||||||||
Equity securities |
( |
) | ||||||||||
Stock appreciation rights |
( |
) | ||||||||||
Financial liabilities at fair value through profit or loss |
( |
) | ||||||||||
Derivative financial instruments |
— | — | ( |
) | ||||||||
Total |
( |
) | ||||||||||
25 |
INSURANCE BENEFITS AND CLAIMS EXPENSES |
Gross |
Ceded |
Net |
||||||||||
RMB million |
RMB million |
RMB million |
||||||||||
For the year ended 31 December 2022 |
||||||||||||
Life insurance death and other benefits |
( |
) | ||||||||||
Accident and health claims and claim adjustment expenses |
( |
) | ||||||||||
Increase in insurance contract liabilities |
||||||||||||
Total |
( |
) | ||||||||||
For the year ended 31 December 2021 |
||||||||||||
Life insurance death and other benefits |
( |
) | ||||||||||
Accident and health claims and claim adjustment expenses |
( |
) | ||||||||||
Increase in insurance contract liabilities |
( |
) | ||||||||||
Total |
( |
) | ||||||||||
For the year ended 31 December 2020 |
||||||||||||
Life insurance death and other benefits |
( |
) | ||||||||||
Accident and health claims and claim adjustment expenses |
( |
) | ||||||||||
Increase in insurance contract liabilities |
( |
) | ||||||||||
Total |
( |
) | ||||||||||
26 |
INVESTMENT CONTRACT BENEFITS |
27 |
FINANCE COSTS |
For the year ended 31 December |
||||||||||||
2022 |
2021 | 2020 | ||||||||||
RMB million |
RMB million | RMB million | ||||||||||
Interest expenses for securities sold under agreements to repurchase |
||||||||||||
Interest expenses for bonds payable |
||||||||||||
Interest expenses for interest-bearing loans and borrowings |
||||||||||||
Interest on lease liabilities |
||||||||||||
Total |
||||||||||||
28 |
PROFIT BEFORE INCOME TAX |
For the year ended 31 December |
||||||||||||
2022 |
2021 | 2020 | ||||||||||
RMB million |
RMB million | RMB million | ||||||||||
Employee salaries and welfare costs |
||||||||||||
Housing benefits |
||||||||||||
Contribution to the defined contribution pension plan |
||||||||||||
Depreciation and amortisation |
||||||||||||
Foreign exchange gains/(losses) |
( |
) | ( |
) | ||||||||
Remuneration in respect of audit services provided by auditors |
||||||||||||
29 |
TAXATION |
(a) |
The amount of taxation charged to net profit represents: |
For the year ended 31 December |
||||||||||||
2022 |
2021 | 2020 | ||||||||||
RMB million |
RMB million | RMB million | ||||||||||
Current taxation - Enterprise income tax |
||||||||||||
Deferred taxation |
( |
) | ( |
) | ( |
) | ||||||
Total tax charges |
( |
) | ( |
) | ||||||||
(b) |
The reconciliation between the Group’s effective tax rate and the statutory tax rate of % in the PRC (2021: same, 2020: same) is as follows: |
For the year ended 31 December |
||||||||||||
2022 |
2021 | 2020 | ||||||||||
RMB million |
RMB million | RMB million | ||||||||||
Profit before income tax |
||||||||||||
Tax computed at the statutory tax rate |
||||||||||||
Adjustment on current income tax of previous period |
( |
) | ( |
) | ( |
) | ||||||
Non-taxable income (i) |
( |
) | ( |
) | ( |
) | ||||||
Expenses not deductible for tax purposes (i) |
||||||||||||
Unused tax losses |
||||||||||||
Others |
( |
) | ||||||||||
Income tax at the effective tax rate |
( |
) | ( |
) | ||||||||
29 |
TAXATION (continued) |
( b) |
The reconciliation between the Group’s effective tax rate and the statutory tax rate of in the PRC (2021: same, 2020: same) is as follows (continued): |
| (i) | Non-taxable income mainly includes interest income from government bonds, dividend income from applicable equity securities, etc. Expenses not deductible for tax purposes mainly include donations and other expenses that do not meet the criteria for deduction according to the relevant tax regulations. |
(c) |
As at 31 December 2022 and 31 December 2021, the amounts of deferred tax assets and liabilities are as follows: |
As at 31 |
As at 31 | |||||||
December 2022 |
December 2021 | |||||||
RMB million |
RMB million | |||||||
Deferred tax assets |
||||||||
Deferred tax liabilities |
( |
) | ( |
) | ||||
Net deferred tax assets |
||||||||
Net deferred tax liabilities |
( |
) | ( |
) | ||||
Insurance |
Investments |
Others |
Total |
|||||||||||||
RMB million |
RMB million |
RMB million |
RMB million |
|||||||||||||
| (i) | (ii) | (iii) | ||||||||||||||
As at 1 January 2021 |
( |
) | ( |
) | ||||||||||||
(Charged)/Credited to net profit |
||||||||||||||||
(Charged)/Credited to other comprehensive income |
||||||||||||||||
- Available-for-sale |
— | — | ||||||||||||||
- Portion of fair value changes on available-for-sale |
— | — | ||||||||||||||
- Others |
— | ( |
) | — | ( |
) | ||||||||||
As at 31 December 2021 |
( |
) | ( |
) | ||||||||||||
As at 1 January 2022 |
( |
) | ( |
) | ||||||||||||
(Charged)/Credited to net profit |
||||||||||||||||
(Charged)/Credited to other comprehensive income |
||||||||||||||||
- Available-for-sale |
— | — | ||||||||||||||
- Portion of fair value changes on available-for-sale |
( |
) | — | — | ( |
) | ||||||||||
- Others |
— | — | ||||||||||||||
As at 31 December 2022 |
||||||||||||||||
29 |
TAXATION (continued) |
(c) |
As at 31 December 2022 and 31 December 2021, the amounts of deferred tax assets and liabilities are as follows (continued): |
| (i) | The deferred tax liabilities arising from the insurance category are mainly related to the change of long-term insurance contract liabilities at 31 December 2008 as a result of the first time adoption of IFRSs in 2009 and the temporary differences of short-term insurance contract liabilities and policyholder dividends payable. |
| (ii) | The deferred tax arising from the investments category is mainly related to the temporary differences of unrealised gains/(losses) on available-for-sale |
| (iii) | The deferred tax arising from the others category is mainly related to deductible losses available for use in future years, and the temporary differences of employee salaries and welfare costs payable. |
(d) |
The analysis of net deferred tax assets and deferred tax liabilities is as follows: |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
| Deferred tax assets: |
||||||||
| - deferred tax assets to be recovered after 12 months |
||||||||
| - deferred tax assets to be recovered within 12 months |
||||||||
| |
|
|
|
|||||
| Subtotal |
||||||||
| |
|
|
|
|||||
| Deferred tax liabilities: |
||||||||
| - deferred tax liabilities to be settled after 12 months |
( |
) | ( |
) | ||||
| - deferred tax liabilities to be settled within 12 months |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Subtotal |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net deferred tax assets/(liabilities) |
( |
) | ||||||
| |
|
|
|
|||||
30 |
EARNINGS PER SHARE |
31 |
STOCK APPRECIATION RIGHTS |
32 |
DIVIDENDS |
33 |
DISCLOSURES ABOUT THE TEMPORARY EXEMPTION FROM IFRS 9 |
(a) |
The tables below present the fair value of the following groups of financial assets(i) under IFRS 9 as at 31 December 2022 and 31 December 2021 and fair value changes for the year ended 31 December 2022 and 31 December 2021: |
For the year ended 31 December |
||||||||
2022 |
2021 | |||||||
RMB million |
RMB million | |||||||
Held for trading financial assets |
||||||||
Financial assets that are managed and whose performance are evaluated on a fair value basis |
— | — | ||||||
Other financial assets |
||||||||
- Financial assets with contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (“SPPI”) |
||||||||
- Financial assets with contractual terms that do not give rise to SPPI |
||||||||
Total |
||||||||
Fair value changes for the year ended 31 December |
||||||||
2022 |
2021 | |||||||
RMB million |
RMB million | |||||||
Held for trading financial assets |
( |
) | ||||||
Financial assets that are managed and whose performance are evaluated on a fair value basis |
— | — | ||||||
Other financial assets |
||||||||
- Financial assets with contractual terms that give rise to SPPI |
||||||||
- Financial assets with contractual terms that do not give rise to SPPI |
( |
) | ||||||
Total |
( |
) | ||||||
| (i) | Only including securities at fair value through profit or loss, loans (excluding policy loans), available-for-sale held-to-maturity |
33 |
DISCLOSURES ABOUT THE TEMPORARY EXEMPTION FROM IFRS 9 (continued) |
(b) |
The table below presents the credit risk exposure (ii) for aforementioned financial assets with contractual terms that give rise to SPPI: |
Carrying amount (iv) |
Carrying amount (iv) |
|||||||
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB Million |
RMB Million |
|||||||
Domestic |
||||||||
Rating not required (iii) |
||||||||
AAA |
||||||||
AA+ |
||||||||
AA |
||||||||
AA- |
||||||||
Subtotal |
||||||||
Overseas |
||||||||
A+ |
||||||||
A |
||||||||
A- |
||||||||
BBB+ |
||||||||
BBB |
— | |||||||
BBB- |
— | |||||||
BB |
— | |||||||
Subtotal |
||||||||
Total |
||||||||
(c) |
The table below presents financial assets without low credit risk for aforementioned financial assets with contractual terms that give rise to SPPI: |
| As at 31 December 2022 | ||||||||
Carrying amount (iv) |
Fair value |
|||||||
RMB Million |
RMB Million |
|||||||
Domestic |
||||||||
Overseas |
||||||||
Total |
||||||||
| As at 31 December 2021 | ||||||||
Carrying amount (iv) |
Fair value | |||||||
| RMB Million | RMB Million | |||||||
Domestic |
||||||||
Total |
||||||||
| (ii) | Credit risk ratings for domestic assets are provided by domestic qualified external rating agencies and credit risk ratings for overseas assets are provided by overseas qualified external rating agencies. |
| (iii) |
| (iv) |
34 |
SIGNIFICANT RELATED PARTY TRANSACTIONS |
(a) |
Related parties with control relationship |
| Name |
Location of registration |
Principal business |
Relationship with the Company |
Nature of ownership |
Legal representative | |||||
and ultimate holding company |
(b) |
Subsidiaries |
(c) |
Associates and joint ventures |
(d) |
Other related parties |
| Significant related parties |
Relationship with the Company | |
| China Life Real Estate Co., Limited (“CLRE”) |
| |
| China Life Insurance (Overseas) Company Limited (“CL Overseas”) |
| |
| China Life Investment Management Company Limited (Formerly known as “China Life Investment Holding Company Limited”)(“CLI”) |
| |
| China Life Ecommerce Company Limited (“CL Ecommerce”) |
| |
| China Life Healthcare Investment company limited (“CLHI”) |
| |
| China Life Enterprise Annuity Fund (“EAP”) |
|
34 |
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) |
(e) |
Registered capital of related parties with control relationship and changes during the year |
| Name of related party |
As at 31 December 2021 million |
Increase million |
Decrease million |
As at 31 December 2022 million |
||||||||||||
| CLIC |
RMB |
— | — | RMB |
||||||||||||
| AMC |
RMB |
— | — | RMB |
||||||||||||
| China Life Pension Company Limited (“Pension Company”) |
RMB |
— | — | RMB |
||||||||||||
| China Life (Suzhou) Pension and Retirement Investment Company Limited (“Suzhou Pension Company”) |
RMB |
— | — | RMB |
||||||||||||
| CL AMP |
RMB |
— | — | RMB |
||||||||||||
| CL Wealth |
RMB |
— | — | RMB |
||||||||||||
| Shanghai Rui Chong Investment Co., Limited (“Rui Chong Company”) |
RMB |
— | — | RMB |
||||||||||||
| China Life (Beijing) Health Management Co., Limited (“CL Health”) |
RMB |
— | — | RMB |
||||||||||||
| China Life Franklin (Shenzhen) Equity Investment Fund Management Co., Limited (“Franklin Shenzhen Company”) |
USD |
RMB |
— | RMB |
||||||||||||
| Xi’an Shengyi Jingsheng Real Estate Co., Ltd. (“Shengyi Jingsheng”) |
RMB |
— | RMB |
RMB |
||||||||||||
| Dalian Hope Building Company Ltd. (“Hope Building”) |
RMB |
— | — | RMB |
||||||||||||
| China Life Insurance Sales Company Limited (“CL Sales”) |
|
|
RMB |
|
|
|
— |
|
|
|
— |
|
|
|
RMB |
|
| China Life (Hangzhou) Company Limited (“CL Hangzhou”) |
|
|
RMB |
|
|
|
— |
|
|
|
— |
|
|
|
RMB |
|
| China Life Jiayuan (Xiamen) Health Management Company Limited (“CL Jiayuan”) |
|
|
RMB |
|
|
|
— |
|
|
|
— |
|
|
|
RMB |
|
| China Life (Tianjin) Pension Health Investment Company Limited (“CL Tianjin Health”) |
|
|
RMB |
|
|
|
— |
|
|
|
— |
|
|
|
RMB |
|
(f) |
Percentages of holding of related parties with control relationship and changes during the year |
As at 31 December 2021 |
As at 31 December 2022 | |||||||||||||||||||
| Shareholder |
Amount million |
Percentage of holding |
Increase million |
Decrease million |
Amount million |
Percentage of holding | ||||||||||||||
| CLIC |
RMB |
— |
— |
RMB |
||||||||||||||||
As at 31 December 2021 |
As at 31 December 2022 | |||||||||||||||||||
| Subsidiaries |
Amount million |
Percentage of holding |
Increase million |
Decrease million |
Amount million |
Percentage of holding | ||||||||||||||
| AMC | RMB |
— | — | RMB |
||||||||||||||||
| Pension Company | RMB |
and indirectly |
— | — | RMB |
and indirectly | ||||||||||||||
| China Life Franklin Asset Management Company Limited (“AMC HK”) |
HKD |
— | — | HKD |
||||||||||||||||
| Suzhou Pension Company |
RMB |
— | — | RMB |
||||||||||||||||
| CL AMP |
RMB |
— | — | RMB |
||||||||||||||||
| CL Wealth |
RMB |
— | — | RMB |
||||||||||||||||
| Golden Phoenix Tree Limited |
— | — | — | — | ||||||||||||||||
34 |
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) |
(f) |
Percentages of holding of related parties with control relationship and changes during the year (continued) |
As at 31 December 2021 |
As at 31 December 2022 | |||||||||||||||||||
Subsidiaries (continued) |
Amount million |
Percentage of holding |
Increase million |
Decrease million |
Amount million |
Percentage of holding | ||||||||||||||
King Phoenix Tree Limited |
— | — | — | — | ||||||||||||||||
Rui Chong Company |
RMB |
— | — | RMB |
||||||||||||||||
New Aldgate Limited |
RMB |
— | — | RMB |
||||||||||||||||
Glorious Fortune Forever Limited |
— | — | — | — | ||||||||||||||||
CL Hotel Investor, L.P. |
RMB |
— | — | RMB |
||||||||||||||||
Golden Bamboo Limited |
RMB |
RMB |
— | RMB |
||||||||||||||||
Sunny Bamboo Limited |
RMB |
RMB |
— | RMB |
||||||||||||||||
Fortune Bamboo Limited |
RMB |
— | — | RMB |
||||||||||||||||
China Century Core Fund Limited |
USD |
— | — | USD |
||||||||||||||||
CL Health |
RMB |
— | — | RMB |
||||||||||||||||
Franklin Shenzhen Company |
USD |
RMB |
— | RMB |
||||||||||||||||
Guo Yang Guo Sheng |
RMB |
— | — | RMB |
||||||||||||||||
New Capital Wisdom Limited |
— | — | — | — | ||||||||||||||||
New Fortune Wisdom Limited |
— | — | — | — | ||||||||||||||||
Wisdom Forever Limited Partnership |
USD |
— | — | USD |
||||||||||||||||
Shanghai Yuan Shu Yuan Jiu Investment Management Partnership (Limited Partnership) (“Yuan Shu Yuan Jiu”) |
RMB |
— | RMB |
RMB |
||||||||||||||||
Shanghai Yuan Shu Yuan Pin Investment Management Partnership (Limited Partnership) (“Yuan Shu Yuan Pin”) |
RMB |
— | RMB |
RMB |
||||||||||||||||
Shanghai Wansheng Industry Partnership (Limited Partnership) (“Shanghai Wansheng”) |
RMB |
RMB |
— | RMB |
||||||||||||||||
Ningbo Meishan Bonded Port Area Bai Ning Investment Partnership (Limited Partnership) (“Bai Ning”) |
RMB |
— | — | RMB |
||||||||||||||||
Hope Building |
RMB |
— | — | RMB |
||||||||||||||||
Wuhu Yuanxiang Tianfu Investment Management Partnership (Limited Partnership) (“Yuanxiang Tianfu”) |
RMB |
— | RMB |
RMB |
||||||||||||||||
34 |
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) |
(f) |
Percentages of holding of related parties with control relationship and changes during the year (continued) |
| As at 31 December 2021 | As at 31 December 2022 | |||||||||||
Subsidiaries (continued) |
Amount million |
Percentage of holding |
Increase million |
Decrease million |
Amount million |
Percentage of holding | ||||||
Wuhu Yuanxiang Tianyi Investment Management Partnership (Limited Partnership) (“Yuanxiang Tianyi”) |
RMB |
— | RMB |
RMB |
||||||||
Shengyi Jingsheng |
RMB |
— | — | RMB |
||||||||
CBRE Global Investors U.S. Investments I, LLC (“CG Investments”) |
RMB |
— | — | RMB |
||||||||
China Life Guangde(Tianjin) Equity Investment Fund Partnership (Limited Partnership) (“CL Guang De”) |
RMB |
RMB |
— | RMB |
||||||||
Beijing China Life Pension Industry Investment Fund (Limited Partnership) (“CL Pension Industry”) |
RMB |
RMB |
— | RMB |
||||||||
China Life Qihang Phase I (Tianjin) Equity Investment Fund Partnership (Limited Partnership) (“China Life Qihang Fund l”) |
RMB |
RMB |
— | RMB |
||||||||
China Life Xing Wan (Tianjin) Enterprise Management Partnership (Limited Partnership)(“CL Xing wan”) |
RMB |
— | RMB |
RMB |
||||||||
CL Sales |
— | — | — | — | ||||||||
CL Hangzhou |
RMB |
— | — | RMB |
||||||||
CL Jiayuan |
RMB |
— | — | RMB |
||||||||
CL Tianjin Health (i) |
— | — | RMB |
— | RMB |
|||||||
| (i) | On 8 December 2022, CL Pension Industry injected capital of RMB million to CL Tianjin Health, a wholly owned subsidiary of CLIC, and acquired % of the shareholders’ equity. Both parties are under common control by CLIC which is not transitory before and after the combination. Therefore, this is a business combination under common control. The financial statements of the Group were restated based on the financial statements as at 31 December 2021 obtained from the merged party on the combination date. |
34 |
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) |
(g) |
Transactions with significant related parties |
For the year ended 31 December |
||||||||||
2022 |
2021 | |||||||||
Notes |
RMB million |
RMB million |
||||||||
Transactions with CLIC and its subsidiaries |
||||||||||
CLIC |
||||||||||
Distribution of dividends from the Company and AMC to CLIC |
||||||||||
Policy management fee received from CLIC |
(i) (vii) | |||||||||
Asset management fee received from CLIC |
(ii.a) | |||||||||
CLPC |
||||||||||
Capital increase (Note 9) |
— | |||||||||
Agency fee received from CLPC |
(iii) (vii) | |||||||||
Rental and a service fee received from CLPC |
||||||||||
Dividends from CLPC (Note 9) |
||||||||||
Asset management fee received from CLPC |
(ii.c) | |||||||||
CLI |
||||||||||
Payment of asset management fee to CLI |
(ii.d) (vii) | |||||||||
CLHI |
||||||||||
Payment of operation management service fee to CLHI |
(vi) | |||||||||
CL Overseas |
||||||||||
Asset management fee received from CL Overseas |
(ii.b) | |||||||||
Transactions with associates and joint ventures |
||||||||||
CGB |
||||||||||
Capital increase (Note 9) |
— | |||||||||
Interest received from CGB |
||||||||||
Dividends from CGB (Note 9) |
||||||||||
Commission expenses charged by CGB |
(iv) | |||||||||
Insurance premium received from CGB |
||||||||||
Rental fee received from CGB |
||||||||||
Sino-Ocean |
||||||||||
Dividends from Sino-Ocean (Note 9) |
||||||||||
Interest of corporate bonds received from Sino-Ocean |
||||||||||
Transaction between other associates and joint ventures and the Group |
||||||||||
Dividends from other associates and joint ventures (Note 9) |
||||||||||
Transaction between EAP and the Group |
||||||||||
Contribution to EAP |
||||||||||
Transactions between other subsidiaries and the Company |
||||||||||
Payment of an asset management fee |
||||||||||
Payment of an asset management fee to AMC |
(ii.e) (vii) | |||||||||
Payment of an asset management fee to AMC HK |
(ii.f) | |||||||||
Payment of an asset management fee to Pension Company |
||||||||||
Dividends from subsidiaries |
||||||||||
Dividends from AMC |
||||||||||
Dividends from Pension Company |
||||||||||
Dividends from the other subsidiaries |
||||||||||
34 |
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) |
(g) |
Transactions with significant related parties (continued) |
For the year ended 31 December |
||||||||||
2022 |
2021 | |||||||||
Notes |
RMB million |
RMB million |
||||||||
Agency fee received |
||||||||||
Agency fee received from Pension Company for entrusted sales of annuity funds and other businesses |
(v) | |||||||||
Rental received |
||||||||||
Rental received from Pension Company |
||||||||||
Capital increase in subsidiaries (Note 34(f)) |
||||||||||
Capital contribution to CL Pension Industry |
||||||||||
Capital contribution to Golden Bamboo Limited |
— | |||||||||
Capital contribution to China Life Qihang Fund I |
||||||||||
Capital contribution to CL Guang De |
||||||||||
Capital contribution to Sunny Bamboo Limited |
— | |||||||||
Capital contribution to Shanghai Wansheng |
||||||||||
Capital reduction of subsidiaries (Note 34(f)) |
||||||||||
Capital contribution to Yuanxiang Tianfu |
— | |||||||||
Capital contribution to Yuanxiang Tianyi |
— | |||||||||
Capital contribution to Yuanshu Yuanpin |
— | |||||||||
Capital contribution to Yuanshu Yuanjiu |
— | |||||||||
Transactions between the consolidated structured entities and the Company |
||||||||||
Distribution of profits from the consolidated structured entities to the Company |
||||||||||
| (i) | On 31 December 2021, the Company and CLIC renewed an insurance agency agreement, non-transferable policies. |
| (ii.a) | In December 2018, CLIC renewed an asset management agreement with AMC, entrusting AMC to manage and make investments for its insurance funds. The agreement is non-standard products) at the beginning and the end of any given month by the rate of non-standard products are based on the contractual agreed rate, without paying for an extra management fee. At the end of each year, CLIC assessed the investment performance of the assets managed by AMC, compared the actual results against benchmark returns and made adjustment to the basic service fee. |
| (ii.b) | In 2018, CL Overseas renewed an investment management agreement with AMC HK, |
34 |
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) |
(g) |
Transactions with significant related parties (continued) |
| (ii.c) | On 10 February 2021, CLPC renewed an agreement for the management of insurance funds with AMC, entrusting AMC to manage and make investments for its insurance funds, |
| (ii.d) | On 27 December 2021, the Company and CLI renewed an operation and management agreement of alternative investment of insurance funds, non-standard financial products and securitised financial products under the instructions of the annual guidelines. The Company paid CLI an asset management fee, product management fee and a performance related bonus based on the agreement. non-fixed-income projects based on the annual evaluation results on CLI’s performance. |
| (ii.e) | On 28 December 2018, the Company and AMC renewed the agreement for the management of insurance funds, 1 January 2019 to 31 December 2021. |
| (ii.f) | On 29 December 2021, the Company and AMC HK renewed the management agreement of insurance funds investment, which is |
| (iii) | On 31 January 2018, CLPC and the Company signed an insurance agency framework agreement, whereby CLPC entrusted the Company to act as an agent to sell designated PC insurance products in certain authorised jurisdictions. The agency fee was determined based on cost (tax included) plus a margin. The agreement is effective for 7 March 2023 |
34 |
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) |
(g) |
Transactions with significant related parties (continued) |
| (iv) | On 19 October 2018, the Company and CGB renewed an insurance agency agreement to distribute insurance products. All individual insurance products suitable for distribution through bancassurance channels are included in the agreement. CGB provides agency services, including the sale of insurance products, collecting premiums and paying benefits. The Company paid the agency commission by multiplying the net amount of total premiums received from the sale of each category individual insurance products after deducting the surrender premiums in the hesitation period, by the responding fixed commission rate. The commission rates for various insurance products sold by CGB are agreed based on arm’s length transactions. The commissions are payable on a monthly basis. The agreement was effective from the signing date to 16 August 2020. On 22 August 2020, the Company and CGB renewed an insurance agency agreement to distribute insurance products, On 19 August 2022, the Company and CGB signed an insurance part-time agency business cooperation agreement, effective from the signing date to 31 December 2022. |
| (v) | On 29 December 2021, the Company and Pension Company renewed an entrusted sales service agreement for pension business acted by life business. The agreement is |
| (vi) | On 31 December 2021, the Company and CLHI renewed an aged-care projects management service agreement, 1 January 2022 to 31 December 2022 |
| (vii) | These transactions constitute continuing connected transactions which are subject to reporting and announcement requirements but are exempt from independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. The Company has complied with the disclosure requirements in accordance with Chapter 14A of the Listing Rules. |
34 |
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) |
(h) |
Amounts due from/to significant related parties |
As at 31 December 2022 |
As at 31 December 2021 | |||||||
RMB million |
RMB million | |||||||
| The resulting balances due from and to significant related parties of the Group |
||||||||
| Amount due from CLIC |
||||||||
| Amount due from CL Overseas |
||||||||
| Amount due from CLPC |
||||||||
| Amount due to CLPC |
( |
) | ( |
) | ||||
| Amount due from CLI |
||||||||
| Amount due to CLI |
( |
) | ( |
) | ||||
| Amount due from CLRE |
||||||||
| Amount due to CLHI |
( |
) | ( |
) | ||||
| Amount deposited with CGB |
||||||||
| Wealth management products and other financial instruments of CGB |
||||||||
| Amount due from CGB |
||||||||
| Amount due to CGB |
( |
) | ( |
) | ||||
| Debt securities of Sino-Ocean |
||||||||
| Amount due from Sino-Ocean |
||||||||
| Amount due from CL Ecommerce |
||||||||
| Amount due to CL Ecommerce |
( |
) | ( |
) | ||||
| The resulting balances due from and to subsidiaries of the Company |
||||||||
| Amount due from CL Hotel Investors ,L.P. |
— | |||||||
| Amount due to AMC |
( |
) | ( |
) | ||||
| Amount due to AMC HK |
( |
) | ( |
) | ||||
| Amount due from Pension Company |
||||||||
| Amount due to Pension Company |
( |
) | ( |
) | ||||
| Amount due from Rui Chong Company |
||||||||
| (i) | Key management personnel compensation |
For the year ended 31 December |
||||||||
| 2022 | 2021 | |||||||
| RMB million | RMB million | |||||||
| Salaries and other benefits |
||||||||
| |
|
|
|
|||||
34 |
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) |
(j) |
Transactions with state-owned enterprises |
35 |
SHARE CAPITAL |
As at 31 December 2022 |
As at 31 December 2021 | |||||||||||||||
No. of shares |
RMB million |
No. of shares | RMB million | |||||||||||||
| Registered, authorised, issued and fully paid |
||||||||||||||||
| Ordinary shares of RMB1 each |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
As at 31 December 2022 |
||||||||
No. of shares |
RMB million |
|||||||
| Owned by CLIC (i) |
||||||||
| Owned by other equity holders |
||||||||
| |
|
|
|
|||||
| Including: domestic listed |
||||||||
| overseas listed (ii) |
||||||||
| |
|
|
|
|||||
| Total |
||||||||
| |
|
|
|
|||||
| (i) | All shares owned by CLIC are domestic listed shares. |
| (ii) | Overseas listed shares are traded on the Stock Exchange of Hong Kong Limited and the New York Stock Exchange. |
36 |
RESERVES |
| Share premium |
Other reserves |
Unrealised gains/ (losses) from available- for-sale securities |
Other comprehensive income reclassifiable to profit or loss under the equity method |
Statutory reserve fund |
Discretionary reserve fund |
General reserve |
Exchange differences on translating foreign operations |
Other comprehensive income non-reclassifiable to profit or loss under the equity method |
Total |
|||||||||||||||||||||||||||||||
| RMB million |
RMB million |
RMB million |
RMB million |
RMB million |
RMB million |
RMB million |
RMB million |
RMB million |
RMB million |
|||||||||||||||||||||||||||||||
| |
|
|
|
(a) | (b) | (c) | |
|
|
|||||||||||||||||||||||||||||||
| As at 1 January 2020 |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income for the year |
— | — | — | — | — | ( |
) | |||||||||||||||||||||||||||||||||
| Appropriation to reserves |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Others |
— | ( |
) | — | — | — | — | — | — | — | ( |
) | ||||||||||||||||||||||||||||
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| As at 31 December 2020 |
( |
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| As at 1 January 2021 |
( |
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| Other comprehensive income for the year |
— | — | ( |
) | — | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Appropriation to reserves |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive income to retained earnings |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Others |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
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| As at 31 December 2021 |
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| As at 1 January 2022 |
( |
) | ||||||||||||||||||||||||||||||||||||||
| Other comprehensive income for the year |
— | — | ( |
) | ( |
) | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Appropriation to reserves |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive income to retained earnings |
— | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Others |
— | ( |
) | — | — | — | — | — | — | — | ( |
) | ||||||||||||||||||||||||||||
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| As at 31 December 2022 |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
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| (a) | Pursuant to the relevant PRC laws, the Company appropriated |
| (b) | Approved at the Annual General Meeting in 29 June 2022, the Company appropriated RMB |
| (c) | Pursuant to “Financial Standards of Financial Enterprises - Implementation Guide” issued by the Ministry of Finance of the PRC on 30 March 2007, for the year ended 31 December 2022, the Company appropriated |
37 |
NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS |
Interest-bearing loans and borrowings |
Bonds payable |
Lease liabilities |
Securities sold under agreements to repurchase |
Other liability-payable to the third-party holders of consolidated structured entities |
Other liability- interest payable related to financing activities |
Total |
||||||||||||||||||||||
| RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | ||||||||||||||||||||||
| At 1 January 2020 |
||||||||||||||||||||||||||||
| Changes from financing cash flows |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Foreign exchange movement |
( |
) | — | — | — | — | — | ( |
) | |||||||||||||||||||
| Changes arising from losing control of consolidated structured entities |
— | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||
| New leases |
— | — | — | — | — | |||||||||||||||||||||||
| Interest expense |
— | — | — | |||||||||||||||||||||||||
| Others |
— | — | ( |
) | — | — | — | ( |
) | |||||||||||||||||||
| At 31 December 2020 |
||||||||||||||||||||||||||||
| At 1 January 2021 |
||||||||||||||||||||||||||||
| Changes from financing cash flows |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Foreign exchange movement |
( |
) | — | — | — | — | — | ( |
) | |||||||||||||||||||
| Changes arising from losing control of consolidated structured entities |
— | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||
| New leases |
— | — | — | — | — | |||||||||||||||||||||||
| Interest expense |
— | — | — | |||||||||||||||||||||||||
| Others |
— | — | ( |
) | — | — | ||||||||||||||||||||||
| |
|
|
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| At 31 December 2021 |
||||||||||||||||||||||||||||
| |
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37 |
NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (continued) |
| Changes in liabilities arising from financing activities (continued) |
Interest-bearing loans and borrowings |
Bonds payable |
Lease liabilities |
Securities sold under agreements to repurchase |
Other liability-payable to the third-party holders of consolidated structured entities |
Other liability- interest payable related to financing activities |
Total |
||||||||||||||||||||||
| RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | ||||||||||||||||||||||
| At 1 January 2022 |
||||||||||||||||||||||||||||
| Changes from financing cash flows |
( |
) | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||
| Foreign exchange movement |
— | — | — | — | — | |||||||||||||||||||||||
| Changes arising from losing control of consolidated structured entities |
— | — | — | — | — | — | ||||||||||||||||||||||
| New leases |
— | — | — | — | — | |||||||||||||||||||||||
| Interest expense |
— | — | — | |||||||||||||||||||||||||
| Others |
— | — | ( |
) | — | — | ||||||||||||||||||||||
| |
|
|
|
|
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|
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|
|||||||||||||||
| At 31 December 2022 |
||||||||||||||||||||||||||||
| |
|
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|||||||||||||||
38 |
PROVISIONS AND CONTINGENCIES |
The following is a summary of the significant contingent liabilities: |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
Pending lawsuits |
||||||||
39 |
COMMITMENTS |
(a) |
Capital commitments |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
Contracted, but not provided for |
||||||||
Investments |
||||||||
Property, plant and equipment |
||||||||
Total |
||||||||
(b) |
Operating lease commitments |
As at 31 December 2022 |
As at 31 December 2021 |
|||||||
RMB million |
RMB million | |||||||
Not later than one year |
||||||||
Later than one year but not later than five years |
||||||||
Later than five years |
||||||||
Total |
||||||||