Commission File Number 001-31914
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
September 12, 2007
China Life Insurance Company Limited
(Translation of registrants name into English)
16 Chaowai Avenue
Chaoyang District
Beijing 100020, China
Tel: (86-10) 8565-9999
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F:
Form 20-F ..X Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes ..... No ..X..
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-
Commission File Number 001-31914
On September 9, 2007, China Life Insurance Company Limited published its interim report as required by The Stock Exchange of Hong Kong Limited for the six months ended June 30, 2007, a copy of which is attached as Exhibit 99.1 hereto.
EXHIBIT LIST
Exhibit | Description | |
99.1 | Hong Kong interim report for the six months ended June 30, 2007 |
Commission File Number 001-31914
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
China Life Insurance Company Limited | ||||
(Registrant) | ||||
By: | /s/ Wan Feng | |||
(Signature) | ||||
September 12, 2007 | Name: | Wan Feng | ||
Title: | Vice President and Executive Director Acting Chief Executive Officer |
EXHIBIT 99.1
Commission File Number 001-31914
Corporate Information
Company Name: China Life Insurance Company Limited
DIRECTORS Executive Directors Yang Chao Wan Feng
Non-executive Directors Shi Guoqing Zhuang Zuojin
Independent Non-executive Directors Long Yongtu Sun Shuyi Ma Yongwei Chau Tak Hay Cai Rang Ngai Wai Fung
SUPERVISORS Xia Zhihua Wu Weimin Qing Ge Yang Hong Tian Hui
COMPANY SECRETARY Heng Kwoo Seng
AUTHORIZED REPRESENTATIVES Wan Feng Heng Kwoo Seng |
REGISTERED OFFICE China Life Tower 16 Chaowai Avenue, Chaoyang District Beijing 100020, China Tel: 86 (10) 8565 9999 Fax: 86 (10) 8525 2232 Website: www.e-chinalife.com
PLACE OF BUSINESS IN HONG KONG 25th Floor, C.L.I. Building 313 Hennessy Road, Wanchai Hong Kong Tel: (852) 2919 2628 Fax: (852) 2919 2638
AUDITORS PricewaterhouseCoopers
LEGAL ADVISERS King & Wood Allen & Overy Debevoise & Plimpton LLP
H SHARE REGISTRAR AND TRANSFER OFFICE Computershare Hong Kong Investor Services Limited Room 1712-1716, 17th Floor Hopewell Centre 183 Queens Road East Hong Kong
DEPOSITARY JPMorgan Chase Bank 4 New York Plaza, New York New York 10004 |
Commission File Number 001-31914
Contents | ||
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Commission File Number 001-31914
Unless otherwise stated, all the financial data of the Group (refers to the Company and its subsidiaries) set out in this report is prepared in accordance with Hong Kong Financial Reporting Standards (HKFRS).
Six months ended 30 June (unaudited)
RMB million (except basic and diluted earnings per share) | ||||
2007 | 2006 | |||
Total revenues |
101,429 | 72,665 | ||
Net profit[Note] |
23,289 | 8,966 | ||
Basic and diluted earnings per share (RMB)
|
0.82
|
0.33
|
Note: | Net profit refers to net profit attributable to shareholders of the Company. |
(Unaudited as at 30 June 2007)
RMB million | ||||
As at 30 June 2007 |
As at 31 December 2006 | |||
Total assets |
849,804 | 764,395 | ||
Investment assets[Note 1] |
766,325 | 686,804 | ||
Total shareholders equity[Note 2]
|
167,493
|
139,665
|
Note 1: | Investment assets include debt securities, equity securities, term deposits, statutory deposits-restricted, policy loans, securities purchased under agreements to resell and cash and cash equivalents. |
Note 2: | Total shareholders equity refers to shareholders equity attributable to shareholders of the Company. |
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Commission File Number 001-31914
In the first half of 2007, the Company significantly enhanced its execution capabilities, captured opportunities arising from the markets and the listing of its A Shares, and actively responded to new challenges, thereby seeking to make itself an enterprise characterized by learning and innovative, optimizing resources and growing with added value by making use of the opportunities brought about by the promulgation of State Councils Some opinions on the reform and development of the insurance industry. The Company aims at developing the China Life group as a top international financial insurance group, with an objective of developing the Company into a first class international life insurance company with strong capitalization, advanced corporate governance, well-established management system, stringent internal control, leading technologies, first-class team, quality services, outstanding brands and harmonious and balanced mode of development. The Company maintained a steady growth in its business and achieved a significant increase in its investment income. Our three major sales channels remained stable while pursuing balanced growth in the urban and rural markets. China Life also further optimized its business structure and service quality, devoted significant efforts to serving our harmonious society, and actively explored rural insurance business to further expand its coverage in rural insurance market. With further enhancements in capital, business income, assets quality, profitability, management effectiveness and corporate image, China Life significantly strengthened its overall advantages in the market. The Company is at its best development stage ever in its history.
China Life is a core member of the China Life group which ranked 192nd among Fortune 500 announced by Fortune in 2007, and also ranked seventh in the Top 100 China Listed Companies announced by the magazine in July 2007. In the first half of 2007, the influence of the brand of China Life has continued to increase and its popularity in international market has further been boosted. It was not only named one of the Worlds Top 500 Brand in 2007 jointly by the World Brand Organization and the US-China Economic Trade & Investment General Chamber of Commerce, but also won the Chinas Top 10 Valuable Brands awarded by the World Brand Laboratory. In addition, China Life was awarded the great prize of the Most Favourable Enterprise Brand of Consumers in China 2007 in the election of the Most Favourable Enterprise Brand of consumers in China in 2007 and was the only insurance enterprise brand that was granted award.
REVIEW OF THE FIRST HALF YEAR 2007
STEADY BUSINESS GROWTH, CONTINUOUS OPTIMIZATION OF BUSINESS STRUCTURE
For the six months ended 30 June 2007, total revenues of the Group (including the Company and its subsidiaries) were RMB101,429 million, an increase of 39.6% compared with the corresponding period of 2006. Among them, gross written premiums and policy fees reached RMB63,753 million, up 16.8% from the corresponding period of 2006.
According to the data released by the China Insurance Regulatory Commission, China Life continued to maintain its leading position in the life insurance market in China (for the purpose of this report, China refers to the Peoples Republic of China, excluding the Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan), with a market share, based on PRC GAAP, of 46.86% in the first half of 2007, representing an increase of 1.59 percentage point from the year of 2006.
While steadily growing its business, China Life stepped up its efforts to adjust its business structure. For the six months ended 30 June 2007, the Companys first-year regular gross written premiums amounted to RMB16,173 million, an increase of 23.9% from the corresponding period of 2006. First-year regular gross written premiums accounted for 93.3% of the first-year gross written premiums of long term traditional insurance contracts.
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Commission File Number 001-31914
Chairmans Statement
INCREASE IN INVESTMENT INCOME, IMPROVEMENT OF EARNING ABILITY
China Life is one of the largest institutional investors in Chinas capital markets. As at 30 June 2007, the Groups investment assets were RMB766,325 million, an increase of 28.8% from 30 June 2006, and an increase of 11.6% from the end of 2006.
More efforts were devoted by the Company to optimize its investment portfolio and improve asset allocation. During the first half of 2007, by capitalizing on favourable conditions in the PRCs stock markets, the Company further increased the proportion of investment in equity assets, resulting in a substantial increase in investment income. The Company continued to seize strategic investment opportunities. It participated in the private placement of China Minsheng Banking Corp. Ltd. by contributing RMB5,448 million.
For the six months ended 30 June 2007, the Groups net investment yield1 was 3.36%, an increase of 1.24 percentage points from the corresponding period of 2006. The total investment yield2 was 5.19%, an increase of 1.90 percentage points from the corresponding period of 2006.
In the first half of 2007, net profit attributable to shareholders of the Company was RMB23,289 million, an increase of 159.7% from the corresponding period of 2006. As at 30 June 2007, total shareholders equity of the Company was RMB167,493 million, up 19.9% from the end of 2006.
As at 30 June 2007, the Companys solvency ratio was 4.40 times the minimum regulatory requirement. In the first half of 2007, our consolidated cost ratio was 15.3%, which basically maintained at a stable level as compared with the corresponding period of 2006.
STABLE SALES CHANNELS, ENHANCED SERVICE QUALITY
Currently, China Life has the most extensive distribution network in Chinas insurance industry, comprising over 650,000 exclusive agents, 12,000 group insurance sales force, over 90,000 intermediary sale agencies, spreading over in commercial bank, postal savings, cooperative saving institutions and with over 20,000 customers managers as at 30 June 2007. Sales channel for individual insurances, which is a core sales channel of the Company, maintained a stable development. 97.5% of our exclusive agents now hold valid licenses, which is an increase of about 18 percentage points from the corresponding period in 2006, and an increase of 3.5 percentage points from the end of 2006. The Company continued to strive to integrate sales channel resources and share customer information. A special business department has been created to strengthen execution of an integrated sales strategy and consolidate sales resources. Our Tibetan branch was formally opened for business on 28 May 2007, which means that the sale agencies of the Company have spread to all provinces and autonomous regions of China.
1 |
The net investment yield = net investment income/((investment assets at the beginning of the period securities sold under agreements to repurchase at the beginning of the period + investment assets at the end of the period securities sold under agreements to repurchase at the end of the period)/2) |
2 |
The total investment yield = (net investment income + net realized gains on financial assets + net fair value gains on assets at fair value through income (held-for-trading))/((investment assets at the beginning of the period securities sold under agreements to repurchase at the beginning of the period + investment assets at the end of the period securities sold under agreements to repurchase at the end of the period)/2) |
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Commission File Number 001-31914
Chairmans Statement
During the first half of 2007, the Company initiated a series of customer service activities with the theme Creation of Harmonious Life with China Life across China. More than 25,000 activities were organized and with more than 55 million customers participated. Through these activities, the service standards were improved and the brand image of China Life was further enhanced. The Company has decided to make 16 June of every year as China Life Customer Day.
The Company improves the segmentation and professional management of customer services and upgrades the divergence management standard through the promotion of the China Life 1+N service brand and the strengthening of VIP customer service management. China Life is committed to further enhancing its customer service quality through the establishment of a well-developed customer service system that is customer-centered and reflects the corporate culture of China Life.
During the first half of 2007, the Company paid a total amount of about RMB 40 billion of maturity benefits, with the number of payment cases amounting to over 2 million. This shows the strength and high service efficiency of the Company.
CORPORATE GOVERNANCE ENHANCED, RISK MANAGEMENT STRENGTHENED
During the first half of 2007 the Company seriously commenced activities for special projects relating to corporate governance and completed a self-review on corporate governance according to the requirements of the China Securities Regulatory Commission. The self-review report and reform program were approved by the board of directors on 12 June 2007 and subsequently made public after being successfully approved by regulatory authorities.
The Company has conducted compliance works in accordance with Sarbanes-Oxley Act Section 404 and other securities legislation in the United States throughout the Company since December 2004 which covered the Company, its subsidiary, China Life Insurance Asset Management Company Limited, and external actuary consultant. We have been through the two stages of project management and routinization of management. They continuously passed the test of management and defect rectification tests. During the first half of 2007, the Company completed a self assessment on internal control over financial reporting as at 31 December 2006 and confirmed such internal control was effective. The Company had also received from our registered independent auditors unqualified opinions on the above managements assessment of the effectiveness of internal control over financial reporting and on the effectiveness of our internal control over financial reporting as at 31 December 2006. During the first half of 2007, China Life formulated the Guiding Opinions on Further Strengthening the Work of Internal Control and released it for implementation. It further improved the establishment of its internal control system and stepped up its efforts in internal control, with a focus remaining on the compliance with Section 404. The Company will continue to strengthen its internal control system to ensure sustainable and healthy development of its business.
TAKING UP OF SOCIAL RESPONSIBILITIES, CARE FOR SHAREHOLDERS INTERESTS
As the largest life insurer in China, the Company is committed to conscientiously performing its corporate social responsibilities. During the first half of 2007, the Company continued to develop its policy-oriented business such as promoting the New Village Cooperative Medical Scheme. By leveraging on the features of commercial insurance in the comprehensive village medical scheme, the Company serviced in the drug and medical system reform. As of the end of June 2007, there were 11 branches of the Company in 82 counties (cities and areas) that had participated in the New Village Cooperative Medical Scheme locally, 34 more regions than the end of 2006, which represented more than three fourth of the total number of regions that had participated in the New Village Cooperative Medical Scheme by the insurance industry in China. As at 30 June 2007, the New Village Cooperative Medical Scheme has reached 24.08 million participants, an increase of 6.68 million participants compared to the end of 2006.
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Commission File Number 001-31914
Chairmans Statement
The Company also introduced new products targeting at rural market, such as China Life New Industrial Life Insurance, China Life Villagers with Land Expropriated and Requisitioned Group Annuities (Class A), China Life Villagers with Land Expropriated and Requisitioned Group Annuities (Class B) (Participating). The Company further developed China Life Accident and Disability Insurance focusing on workers from rural areas, so as to actively pursue the rural insurance business and facilitate construction of new rural areas for building a harmonious society.
On 16 June 2007, upon the contribution of RMB 50 million, the Company officially established the China Life Charitable Fund. The fund donated RMB 10 million, and launched, together with China Red Cross, a large-scale charity activity called the Healthy New Village Project. At the same time, the China Life Program for Rural Medical Services and Poverty Assistance was launched. In addition, the Company also supported the construction of 18 China Life Long March Primary Schools. The Company strives for the combination of business benefits and social responsibilities, promote the interests of its shareholders, customers and staff, and to maximize economic benefits, corporate image and investment return for the Company through its active participation of social and charity activities.
For the outstanding contributions with respect to corporate social responsibilities, China Life was awarded the highest honour Red Cross Badge by China Red Cross Foundation. At the same time, the Company was awarded by organizations such as the Shanghai Securities News as the Most Responsible Listed Company in China.
As the sole financial enterprise of China that is currently listed in Shanghai, Hong Kong and New York, China Life has been committed to maximizing value for shareholders. In May 2007, the Company organized the first Corporate Day in Guangxi for global investors and analysts, which increased the transparency of the Company, allowed the investors and analysts around the world to improve their understandings of the Companys operation and boosted their confidence in China Life. In July 2007, the Company held a Presentation on an Analysis of the Valuation of Life Insurers in Beijing and introduced to more than 100 fund managers and analysts from 49 fund houses in China about the methods adopted internationally for analyzing and evaluating the valuation of life insurance companies. This presentation activity had achieved good results. Through the organization of the above activities, the Company further strengthened its communications with investors.
DIVIDEND
Pursuant to the resolution passed at the meeting of the Board on 27 August 2007, the Company will not declare any interim dividend for the six months ended 30 June 2007.
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Commission File Number 001-31914
Chairmans Statement
Outlook
In the second half of 2007, adjustments of Chinas macro-economic policies, volatilities in the capital markets, intense competition in the life insurance market, and changes in the regulatory policy of the industry (including reform on pricing of life insurance products) may affect the future operation of the Company.
As a leading life insurance company in China and one of the largest institutional investors in Chinas capital markets, the Company will pursue its great objective of making China Life Group as a top international financial insurance group. It will further implement its development strategies of strengthening core businesses and appropriate diversification into related areas, and develop traditional and participating products as its priority, suitably develop some new business such as unit-linked and universal insurance products, continue to emphasis on long term regular business, focus on optimizing its business structure, continue to emphasis on exclusive agents force, explore group insurance channel and bank insurance channel, continue to emphasis on combination of overall development strategy and local market competitive tactics, realize the fast, coordinated and continued business development of the Company. The Company will continue to leverage the advantages of having the largest client base and most extensive distribution channels and service networks in the country. While proactively adapting to the changing demands of clients, more effort will be devoted to business growth and improvement of business structure, with a view to maintaining a rapid pace of business development. China Life will further enhance its investment management capability to improve its profitability, as well as to strengthen its internal controls, risk management and staff building-up. We shall strive to develop the Company into a first class international life insurance company, to create better value for our shareholders.
Yang Chao
Chairman
Beijing, China
27 August 2007
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Commission File Number 001-31914
Management Discussion and Analysis
For the six months ended 30 June 2007 and 2006, the Companys gross written premiums and deposits were as follows:
Unaudited | RMB million | |||
For the six months ended 30 June | ||||
2007 | 2006 | |||
Individual Life Insurance |
||||
Gross written premiums |
52,242 | 43,909 | ||
First-year gross written premiums |
16,725 | 13,408 | ||
Single gross written premiums |
624 | 390 | ||
First-year regular gross written premiums |
16,101 | 13,018 | ||
Renewal gross written premiums |
35,517 | 30,501 | ||
Deposits |
47,969 | 46,053 | ||
First-year deposits |
41,853 | 37,936 | ||
Single deposits |
39,876 | 36,191 | ||
First-year regular deposits |
1,977 | 1,745 | ||
Renewal deposits |
6,116 | 8,117 | ||
Group life insurance |
||||
Gross written premiums |
626 | 807 | ||
First-year gross written premiums |
612 | 798 | ||
Single gross written premiums |
540 | 759 | ||
First-year regular gross written premiums |
72 | 39 | ||
Renewal gross written premiums |
14 | 9 | ||
Deposits |
15,735 | 14,946 | ||
First-year deposits |
15,732 | 14,933 | ||
Single deposits |
15,727 | 14,923 | ||
First-year regular deposits |
5 | 10 | ||
Renewal deposits |
3 | 13 | ||
Accident and health insurance |
||||
Gross written premiums |
5,986 | 5,525 | ||
Short-term accident insurance |
||||
Gross written premiums |
2,810 | 2,672 | ||
Short-term health insurance |
||||
Gross written premiums |
3,176 | 2,853 | ||
Total gross written premiums |
58,854 | 50,241 | ||
Total deposits |
63,704 | 60,999 | ||
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Commission File Number 001-31914
Management Discussion and Analysis
As at 30 June 2007 and 31 December 2006, the investment assets of the Group were as follows:
RMB million | ||||
Unaudited |
Audited | |||
As at 30 June 2007 |
As at 31 December 2006 | |||
Debt securities |
397,218 | 357,898 | ||
Held-to-maturity securities |
186,486 | 176,559 | ||
Available-for-sale securities |
196,238 | 176,868 | ||
At fair value through income (held-for-trading) |
14,494 | 4,471 | ||
Equity securities |
128,049 | 95,493 | ||
Available-for-sale securities |
105,222 | 62,595 | ||
At fair value through income (held-for-trading) |
22,827 | 32,898 | ||
Term deposits |
172,126 | 175,476 | ||
Statutory deposits-restricted |
5,473 | 5,353 | ||
Policy loans |
3,678 | 2,371 | ||
Securities purchased under agreements to resell |
2,047 | | ||
Cash and cash equivalents |
57,734 | 50,213 | ||
Total |
766,325 | 686,804 | ||
SUMMARY
For the six months ended 30 June 2007, the Groups total revenues were RMB101,429 million as compared with RMB72,665 million for the corresponding period in 2006, representing an increase of 39.6%. Net profit attributable to shareholders of the Company for the six months ended 30 June 2007 amounted to RMB23,289 million, as compared with RMB8,966 million for the corresponding period in 2006, representing an increase of 159.7%. The increase in our total revenues was mainly attributable to the increase in gross written premiums and policy fees, as well as the substantial increase in investment income.
For the six months ended 30 June 2007, the basic and diluted earnings per share was RMB0.82, which increased about RMB0.49 from RMB0.33 as compared to the corresponding period in 2006.
During the first half of 2007, the development of the Companys business in urban and rural areas has resulted in further optimization of business structure. In order to meet the demands of changing markets, the Company strengthen its efforts in developing new products and upgrading existing products. The Company launched a new product China Life New Industrial Life Insurance in three pilot provinces for the rural market and has achieved satisfactory results. In the second half of this year, efforts will be devoted to expand the sales of this product to more areas.
On 12 June 2007, the Company convened the seventh meeting of the second session of the Board, where the resolution for the award of the third batch of stock appreciation rights was considered and approved in the meeting. At present, the stock appreciation rights scheme implemented by the Company is a motivation scheme targeting at the senior management officers and key employees based on the price of the Companys H shares. The stock appreciation rights do not involve any issue of new shares and have no dilution impact on shareholding structure of the Company.
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Commission File Number 001-31914
Management Discussion and Analysis
Pursuant to paragraph 40(2) of Appendix 16 of Rules (the Listing Rules) Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (Hong Kong Stock Exchange), apart from those disclosed in this report, the Company confirmed that the matters as referred to in paragraph 32 of Appendix 16 regarding the Company have not changed materially from those disclosed in our annual report for 2006.
SIX MONTHS ENDED 30 JUNE 2007 COMPARED WITH SIX MONTHS ENDED JUNE 2006
Total Revenues
For the six months ended 30 June 2007, gross written premiums and policy fees were RMB63,753 million, as compared with RMB54,580 million for the corresponding period in 2006, representing an increase of 16.8%. The increase was mainly attributable to the growth in individual life insurance business.
For the six months ended 30 June 2007, the Groups net investment income was RMB24,071 million, as compared with RMB11,341 million for the corresponding period in 2006, representing an increase of 112.2%. Such increase was mainly attributable to the growth in total investment assets, equity weightings adjustments made to optimize the investment portfolio and the generally favourable performance of the A Share market in China during the first half of 2007.
For the six months ended 30 June 2007, net realised gains on financial assets were RMB2,262 million (six months ended 30 June 2006: net realised gains on financial assets RMB497 million). Net fair value gains on assets at fair value through income (held-for-trading) were RMB10,842 million (six months ended 30 June 2006: net fair value gains at fair value through income (held-for-trading) were RMB5,758 million). Such result was mainly attributable to the generally favorable performance of the A Share market in China during the first half of 2007.
Benefits, claims and expenses
For the six months ended 30 June 2007, the Groups total benefits, claims and expenses were RMB76,918 million, as compared with RMB61,355 million for the corresponding period in 2006, which were increased by 25.4%. The increase was mainly attributable to the growth of our insurance business, payment arising from maturity of some products and increase of dividend payments to policyholders.
For the six months ended 30 June 2007, our consolidated cost ratio was 15.3%, which represents a stable result as compared with the corresponding period in 2006.
Income tax
For the six months ended 30 June 2007, the Groups income tax expenses were RMB1,420 million (in the corresponding period of 2006: RMB2,299 million). The effective tax rate of the Group reduced from 20.3% in the first half of 2006 to 5.7% in the first half of 2007. The decline was mainly attributable to a reduction of the enterprise income tax rate applicable to the Group from 33% to 25% with effect from 1 January 2008. Regarding the deferred tax assets or liabilities that were recognised on the date of promulgation of the new income tax law and expected to be settled after 1 January 2008, the Group made an adjustment to their book value using the applicable tax rate of 25%, resulting in a substantial reversal of deferred tax liabilities and a reduction of income tax expenses for the six months ended 30 June 2007.
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Commission File Number 001-31914
Management Discussion and Analysis
Net profit
For the six months ended 30 June 2007, net profit attributable to shareholders of the Company was RMB23,289 million, as compared with RMB8,966 million in the corresponding period of 2006, which was increased by 159.7%. The increase in net profit attributable to shareholders of the Company was mainly attributable to substantial increase in investment return, business growth, the continuing optimization of the structure of insurance business, reduction of enterprise income tax rate, and strengthened cost management.
Liquidity and capital resources
Sources of Liquidity
The Companys principal cash inflows come from insurance premiums, deposits, proceeds from sales and maturity of financial assets, investment income and financing. The primary risks over liquidity with respect to these cash inflows are the risk of early withdrawals by contract holders and policyholders, the risks of default by debtors, as well as volatilities in interest rate and capital market and other risks. The Company will closely monitor and manage these risks.
Additional sources of liquidity to meet unexpected cash outflows are available from cash and our investment assets. As at 30 June 2007, the amount of cash and cash equivalents of the Group was RMB57, 734 million (RMB50,213 million as at 31 December 2006). As at 30 June 2007, the amount of term deposits of the Group was RMB172, 126 million (RMB175,476 million as at 31 December 2006).
Our investment portfolio may also provide us with a source of liquidity to meet unexpected cash outflows. As at 30 June 2007, the investments in debt securities (excluding held-to-maturity securities) had a fair value of RMB210,732 million (RMB181,339 million as at 31 December 2006). As at 30 June 2007, investment in equity securities had a fair value of RMB128,049 million (RMB95,493 million as at 31 December 2006).
Uses of Liquidity
The Companys principal cash outflows primarily relate to the benefits and claims associated with our various life insurance, annuity and accident and health insurance products, dividend and interest payments on our insurance policies and annuity contracts, operating expenses, income taxes and dividends that may be declared and payable to the Companys shareholders.
The Company believes that its sources of liquidity are sufficient to meet its current cash requirements.
CLASS ACTION
The Company and certain of its past directors (the defendants) have been named in nine putative class action lawsuits filed in the United States District Court for the Southern District of New York between 16 March 2004 and 14 May 2004. The lawsuits have been ordered to be consolidated and restyled In re China Life Insurance Company Limited Securities Litigation, NO.04 CV 2112 (TPG). Plaintiffs filed a consolidated amended complaint on 19 January 2005, which names the Company, Wang Xianzhang (past director), Miao Fuchun (past director) and Wu Yan (past director) as defendants. The consolidated amended compliant alleges that the defendants named therein violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The Company has engaged U.S. counsel to contest vigorously on the lawsuits. The defendants jointly moved to dismiss the consolidated amended complaint on 21 March 2005. Plaintiffs then further amended their complaint. Defendants moved to dismiss the second amended compliant on 18 November 2005. That motion has been fully briefed and is pending before the Court.
11
Commission File Number 001-31914
REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION
TO THE BOARD OF DIRECTORS OF CHINA LIFE INSURANCE COMPANY LIMITED
(incorporated in the Peoples Republic of China with limited liability)
INTRODUCTION
We have reviewed the interim financial information set out on pages 13 to 39, which comprises the condensed consolidated balance sheet of China Life Insurance Company Limited (the Company) and its subsidiaries as at 30 June 2007 and the related condensed consolidated income statement, statement of changes in equity and cash flow statement for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting. Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
SCOPE OF REVIEW
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 27 August 2007
12
Commission File Number 001-31914
Condensed Consolidated Balance Sheet
As at 30 June 2007
Unaudited As at 30 June 2007 |
Audited As at 31 December 2006 |
|||||||||
Note | RMB million | RMB million | ||||||||
ASSETS |
||||||||||
Property, plant and equipment |
15,263 | 14,565 | ||||||||
Deferred policy acquisition costs |
39,593 | 39,230 | ||||||||
Investments in associates |
6,391 | 6,071 | ||||||||
Financial assets |
||||||||||
Debt securities |
397,218 | 357,898 | ||||||||
held-to-maturity securities |
4.1 | 186,486 | 176,559 | |||||||
available-for-sale securities |
4.2 | 196,238 | 176,868 | |||||||
at fair value through income (held-for-trading) |
4.3 | 14,494 | 4,471 | |||||||
Equity securities |
128,049 | 95,493 | ||||||||
available-for-sale securities |
4.2 | 105,222 | 62,595 | |||||||
at fair value through income (held-for-trading) |
4.3 | 22,827 | 32,898 | |||||||
Term deposits |
4.5 | 172,126 | 175,476 | |||||||
Statutory deposits-restricted |
5,473 | 5,353 | ||||||||
Policy loans |
3,678 | 2,371 | ||||||||
Securities purchased under agreements to resell |
2,047 | | ||||||||
Accrued investment income |
9,784 | 8,461 | ||||||||
Premiums receivables |
8,949 | 6,066 | ||||||||
Reinsurance assets |
1,023 | 986 | ||||||||
Other assets |
2,476 | 2,212 | ||||||||
Cash and cash equivalents |
57,734 | 50,213 | ||||||||
Total assets |
849,804 | 764,395 | ||||||||
The notes on pages 18 to 39 form an integral part of these condensed consolidated financial statements.
13
Commission File Number 001-31914
Condensed Consolidated Balance Sheet
As at 30 June 2007
Unaudited As at 30 June 2007 |
Audited As at 31 December 2006 | |||||
Note | RMB million | RMB million | ||||
LIABILITIES AND EQUITY |
||||||
Liabilities |
||||||
Insurance contracts |
||||||
Short-term insurance contracts |
||||||
reserves for claims and claim adjustment expenses |
2,311 | 2,498 | ||||
unearned premium reserves |
5,636 | 5,346 | ||||
Long-term traditional insurance contracts |
6.2 | 200,031 | 172,875 | |||
Long-term investment type insurance contracts |
6.3 | 282,261 | 282,672 | |||
Deferred income |
46,331 | 41,371 | ||||
Financial liabilities |
||||||
Investment contracts |
||||||
with Discretionary Participation Feature (DPF) |
7 | 49,727 | 45,998 | |||
without DPF |
7 | 2,555 | 2,614 | |||
Securities sold under agreements to repurchase |
11,069 | 8,227 | ||||
Annuity and other insurance balances payable |
12,559 | 8,891 | ||||
Premiums received in advance |
1,187 | 2,329 | ||||
Policyholder dividends payable |
35,450 | 26,057 | ||||
Other liabilities |
9,558 | 5,333 | ||||
Current income tax liabilities |
4,326 | 843 | ||||
Deferred tax liabilities |
12 | 18,339 | 19,022 | |||
Statutory insurance fund |
139 | 114 | ||||
Total liabilities |
681,479 | 624,190 | ||||
Contingencies and commitments |
17,18 | | | |||
Shareholders equity |
||||||
Share capital |
16 | 28,265 | 28,265 | |||
Reserves |
86,824 | 77,368 | ||||
Retained earnings |
52,404 | 34,032 | ||||
Total shareholders equity |
167,493 | 139,665 | ||||
Minority interest |
832 | 540 | ||||
Total equity |
168,325 | 140,205 | ||||
Total liabilities and equity |
849,804 | 764,395 | ||||
Approved and authorized for issue by the Board of Directors on 27 August 2007
Yang Chao |
Wan Feng | |
Director |
Director |
The notes on pages 18 to 39 form an integral part of these condensed consolidated financial statements.
14
Commission File Number 001-31914
Condensed Consolidated Income Statement
For the six months ended 30 June 2007
Unaudited | ||||||||
For the six months ended 30 June | ||||||||
2007 | 2006 | |||||||
Note | RMB million | RMB million | ||||||
REVENUES |
||||||||
Gross written premiums and policy fees |
63,753 | 54,580 | ||||||
Less: premiums ceded to reinsurers |
(35 | ) | (43 | ) | ||||
Net written premiums and policy fees |
63,718 | 54,537 | ||||||
Net change in unearned premium reserves |
(301 | ) | (289 | ) | ||||
Net premiums earned and policy fees |
63,417 | 54,248 | ||||||
Net investment income |
8 | 24,071 | 11,341 | |||||
Net realised gains on financial assets |
9 | 2,262 | 497 | |||||
Net fair value gains on assets at fair value through income (held-for-trading) |
10 | 10,842 | 5,758 | |||||
Other income |
837 | 821 | ||||||
Total revenues |
101,429 | 72,665 | ||||||
BENEFITS, CLAIMS AND EXPENSES |
||||||||
Insurance benefits and claims |
||||||||
Life insurance death and other benefits |
(8,504 | ) | (4,120 | ) | ||||
Accident and health claims and claim adjustment expenses |
(2,988 | ) | (3,193 | ) | ||||
Increase in long-term traditional insurance contracts liabilities |
(27,170 | ) | (26,741 | ) | ||||
Interest credited to long-term investment type insurance contracts |
(3,530 | ) | (3,073 | ) | ||||
Interest credited to investment contracts |
(650 | ) | (592 | ) | ||||
Increase in deferred income |
(4,454 | ) | (7,007 | ) | ||||
Policyholder dividends resulting from participation in profits |
(13,386 | ) | (5,398 | ) | ||||
Amortisation of deferred policy acquisition costs |
(9,466 | ) | (6,071 | ) | ||||
Underwriting and policy acquisition costs |
(1,468 | ) | (1,265 | ) | ||||
Administrative expenses |
(4,550 | ) | (3,542 | ) | ||||
Other operating expenses |
(648 | ) | (263 | ) | ||||
Statutory insurance fund |
(104 | ) | (90 | ) | ||||
Total benefits, claims and expenses |
(76,918 | ) | (61,355 | ) | ||||
Share of results of associates |
321 | | ||||||
Net profit before income tax expenses |
11 | 24,832 | 11,310 | |||||
Income tax expenses |
12 | (1,420 | ) | (2,299 | ) | |||
Net profit |
23,412 | 9,011 | ||||||
Attributable to: |
||||||||
shareholders of the Company |
23,289 | 8,966 | ||||||
minority interest |
123 | 45 | ||||||
Basic and diluted earnings per share |
13 | RMB 0.82 | RMB 0.33 | |||||
Dividends approved and declared during the period |
14 | 3,957 | 1,338 | |||||
The notes on pages 18 to 39 form an integral part of these condensed consolidated financial statements.
15
Commission File Number 001-31914
Condensed Consolidated Statement of Changes In Equity
For the six months ended 30 June 2007
Unaudited |
|||||||||||||
Attributable to shareholders |
Minority interest |
Total | |||||||||||
Share capital RMB million |
Reserves RMB million |
Retained earnings RMB million |
RMB million | RMB million | |||||||||
As at 1 January 2007 |
28,265 | 77,368 | 34,032 | 540 | 140,205 | ||||||||
Net profit |
| | 23,289 | 123 | 23,412 | ||||||||
Dividends approved and declared |
| | (3,957 | ) | | (3,957 | ) | ||||||
Appropriation to reserve fund |
| 960 | (960 | ) | | | |||||||
Unrealised gains/(losses), net of tax |
| 8,496 | | (7 | ) | 8,489 | |||||||
Capital contribution |
| | | 179 | 179 | ||||||||
Others |
| | | (3 | ) | (3 | ) | ||||||
As at 30 June 2007 |
28,265 | 86,824 | 52,404 | 832 | 168,325 | ||||||||
As at 1 January 2006 |
26,765 | 37,225 | 16,388 | 431 | 80,809 | ||||||||
Net profit |
| | 8,966 | 45 | 9,011 | ||||||||
Dividends approved and declared |
| | (1,338 | ) | | (1,338 | ) | ||||||
Dividends to minority interests |
| | | (8 | ) | (8 | ) | ||||||
Unrealised gains, net of tax |
| 3,560 | | 10 | 3,570 | ||||||||
As at 30 June 2006 |
26,765 | 40,785 | 24,016 | 478 | 92,044 | ||||||||
The notes on pages 18 to 39 form an integral part of these condensed consolidated financial statements.
16
Commission File Number 001-31914
Condensed Consolidated Cash Flow Statement
For the six months ended 30 June 2007
Unaudited For the six months |
||||||
2007 | 2006 | |||||
RMB million | RMB million | |||||
Net cash inflow from operating activities |
59,508 | 36,193 | ||||
Net cash outflow from investing activities |
(57,857 | ) | (74,471 | ) | ||
Net cash inflow from financing activities |
6,070 | 53,336 | ||||
Net increase in cash and cash equivalents |
7,721 | 15,058 | ||||
Cash and cash equivalents |
||||||
Beginning of period at 1 January |
50,213 | 28,051 | ||||
Foreign currency losses on cash and cash equivalents |
(200 | ) | (135 | ) | ||
End of period at 30 June |
57,734 | 42,974 | ||||
Analysis of balances of cash and cash equivalents |
||||||
Cash at bank and in hand |
49,607 | 26,795 | ||||
Short-term bank deposits |
8,127 | 16,179 | ||||
Cash and cash equivalents |
57,734 | 42,974 | ||||
The notes on pages 18 to 39 form an integral part of these condensed consolidated financial statements.
17
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
1 | ORGANIZATION AND PRINCIPAL ACTIVITIES |
China Life Insurance Company Limited (the Company) was established in the Peoples Republic of China (China or PRC) on 30 June 2003 as a joint stock company with limited liability as part of a group restructuring of China Life Insurance (Group) Company (formerly China Life Insurance Company) (CLIC) and its subsidiaries (the Restructuring). The Company and its subsidiaries, are hereinafter collectively referred to as the Group. The Groups principal activity is the writing of life insurance business, providing life, annuities, accident and health insurance products in China.
The Company is a limited liability company incorporated and located in China. The address of its registered office is: 16 Chaowai Avenue, Chaoyang District, Beijing, PRC. The Company was listed on the Stock Exchange of Hong Kong, the New York Stock Exchange and the Shanghai Stock Exchange.
These condensed consolidated financial statements are presented in millions of RenMinBi (RMB million) unless otherwise stated. These condensed consolidated financial statements have been approved for issue by the board of directors on 27 August 2007.
2 | BASIS OF PREPARATION AND ACCOUNTING POLICIES |
These unaudited condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard (HKAS) 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants.
These condensed consolidated financial statements should be read in conjunction with the 2006 annual financial statements.
The accounting policies and methods of computation used in the preparation of these condensed consolidated financial statements are consistent with those used in the annual financial statements for the year ended 31 December 2006.
18
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
3 | SEGMENT INFORMATION |
3.1 | Business segments |
The Group has the following main business segments:
(i) | Individual life insurance business |
Individual life insurance business relates primarily to the sale of insurance contracts and investment contracts to individuals and comprises participating and non-participating business. Participating life insurance business relates primarily to the sale of participating contracts, which provides the policyholder with a participation in the profits arising from the invested assets relating to the policy and mortality gains. Non-participating insurance business relates primarily to non-participating life insurance and annuity products, which provides guaranteed benefits to the insured without a participation in the profits.
(ii) | Group life insurance business |
Group life insurance business relates primarily to the sale of insurance contracts and investment contracts to group entities and comprises participating and non-participating business as described above.
(iii) | Accident and health insurance business |
Accident and health insurance business relates primarily to the sale of accident and health insurance and accident only products.
(iv) | Corporate and other |
Corporate and other business relates primarily to income and expenses in respect of the provision of the services to CLIC, as described in note 15, share of results of associates and unallocated income taxes.
3.2 | Basis of allocating net investment income, realised and unrealised gains or losses and administrative and other operating expenses |
Net investment income, net realised gains or losses on financial assets, net fair value gains or losses on assets at fair value through income (held-for-trading) and foreign exchange losses within other operating expenses are allocated among segments in proportion to each respective segments average statutory policyholder reserve and claims provision at the beginning and end of the period. Administrative and other operating expenses are allocated among segments in proportion to the unit cost of products in the respective segments.
19
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
3 | SEGMENT INFORMATION (CONTINUED) |
For the six months ended 30 June 2007 | |||||||||||||||
Individual life |
Group life | Accident & Health (RMB million) |
Corporate & other |
Total | |||||||||||
Revenues |
|||||||||||||||
Gross written premiums and policy fees |
56,687 | 1,080 | 5,986 | | 63,753 | ||||||||||
Gross written premiums |
52,242 | 626 | 5,986 | | |||||||||||
Term Life |
83 | 8 | | | |||||||||||
Whole Life |
16,029 | 516 | | | |||||||||||
Endowment |
24,271 | | | | |||||||||||
Annuity |
11,859 | 102 | | | |||||||||||
Policy fees |
4,445 | 454 | | | |||||||||||
Net premiums earned and policy fees |
56,681 | 1,080 | 5,656 | | 63,417 | ||||||||||
Net investment income |
21,595 | 2,125 | 351 | | 24,071 | ||||||||||
Net realised gains on financial assets |
2,029 | 200 | 33 | | 2,262 | ||||||||||
Net fair value gains on assets at fair value through income (held-for-trading) |
9,727 | 957 | 158 | | 10,842 | ||||||||||
Other income |
| | | 837 | 837 | ||||||||||
Segment revenues |
90,032 | 4,362 | 6,198 | 837 | 101,429 | ||||||||||
Benefits, claims and expenses |
|||||||||||||||
Insurance benefits and claims |
|||||||||||||||
Life insurance death and other benefits |
(7,860 | ) | (644 | ) | | | (8,504 | ) | |||||||
Accident and health claims and claim adjustment expenses |
| | (2,988 | ) | | (2,988 | ) | ||||||||
Increase in long-term traditional insurance contracts liabilities |
(27,087 | ) | (83 | ) | | | (27,170 | ) | |||||||
Interest credited to long-term investment type insurance contracts |
(3,520 | ) | (10 | ) | | | (3,530 | ) | |||||||
Interest credited to investment contracts |
| (650 | ) | | | (650 | ) | ||||||||
Increase in deferred income |
(4,415 | ) | (39 | ) | | | (4,454 | ) | |||||||
Policyholder dividends resulting from participation in profits |
(11,744 | ) | (1,642 | ) | | | (13,386 | ) | |||||||
Amortization of deferred policy acquisition costs |
(8,665 | ) | (202 | ) | (599 | ) | | (9,466 | ) | ||||||
Underwriting and policy acquisition costs |
(1,268 | ) | (44 | ) | (156 | ) | | (1,468 | ) | ||||||
Administrative expenses |
(2,562 | ) | (287 | ) | (822 | ) | (879 | ) | (4,550 | ) | |||||
Other operating expenses |
(514 | ) | (55 | ) | (43 | ) | (36 | ) | (648 | ) | |||||
Statutory insurance fund |
(90 | ) | | (14 | ) | | (104 | ) | |||||||
Segment benefits, claims and expenses |
(67,725 | ) | (3,656 | ) | (4,622 | ) | (915 | ) | (76,918 | ) | |||||
Share of results of associates |
| | | 321 | 321 | ||||||||||
Segment results |
22,307 | 706 | 1,576 | 243 | 24,832 | ||||||||||
Income tax expenses |
| | | (1,420 | ) | (1,420 | ) | ||||||||
Net profit/(loss) |
22,307 | 706 | 1,576 | (1,177 | ) | 23,412 | |||||||||
Attributable to: |
|||||||||||||||
shareholders of the Company |
22,307 | 706 | 1,576 | (1,300 | ) | 23,289 | |||||||||
minority interest |
| | | 123 | 123 | ||||||||||
Unrealised gains/(loss) included in shareholders equity |
7,623 | 750 | 124 | (1 | ) | 8,496 | |||||||||
20
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
3 | SEGMENT INFORMATION (CONTINUED) |
For the six months ended 30 June 2006 | |||||||||||||||
Individual life |
Group life | Accident & Health (RMB million) |
Corporate & other |
Total | |||||||||||
Revenues |
|||||||||||||||
Gross written premiums and policy fees |
47,958 | 1,097 | 5,525 | | 54,580 | ||||||||||
Gross written premiums |
43,909 | 807 | 5,525 | | |||||||||||
Term Life |
83 | 13 | | | |||||||||||
Whole Life |
13,990 | 781 | | | |||||||||||
Endowment |
26,793 | | | | |||||||||||
Annuity |
3,043 | 13 | | | |||||||||||
Policy fees |
4,049 | 290 | | | |||||||||||
Net premiums earned and policy fees |
47,923 | 1,097 | 5,228 | | 54,248 | ||||||||||
Net investment income |
10,042 | 1,180 | 119 | | 11,341 | ||||||||||
Net realised gains on financial assets |
440 | 52 | 5 | | 497 | ||||||||||
Net fair value gains on assets at fair value through income (held-for-trading) |
5,098 | 599 | 61 | | 5,758 | ||||||||||
Other income |
| | | 821 | 821 | ||||||||||
Segment revenues |
63,503 | 2,928 | 5,413 | 821 | 72,665 | ||||||||||
Benefits, claims and expenses |
|||||||||||||||
Insurance benefits and claims |
|||||||||||||||
Life insurance death and other benefits |
(4,027 | ) | (93 | ) | | | (4,120 | ) | |||||||
Accident and health claims and claim adjustment expenses |
| | (3,193 | ) | | (3,193 | ) | ||||||||
Increase in long-term traditional insurance contracts liabilities |
(26,320 | ) | (421 | ) | | | (26,741 | ) | |||||||
Interest credited to long-term investment type insurance contracts |
(3,058 | ) | (15 | ) | | | (3,073 | ) | |||||||
Interest credited to investment contracts |
| (592 | ) | | | (592 | ) | ||||||||
Increase in deferred income |
(6,935 | ) | (72 | ) | | | (7,007 | ) | |||||||
Policyholder dividends resulting from participation in profits |
(5,045 | ) | (353 | ) | | | (5,398 | ) | |||||||
Amortization of deferred policy acquisition costs |
(5,277 | ) | (342 | ) | (452 | ) | | (6,071 | ) | ||||||
Underwriting and policy acquisition costs |
(1,131 | ) | (24 | ) | (110 | ) | | (1,265 | ) | ||||||
Administrative expenses |
(2,003 | ) | (202 | ) | (680 | ) | (657 | ) | (3,542 | ) | |||||
Other operating expenses |
(180 | ) | (22 | ) | (1 | ) | (60 | ) | (263 | ) | |||||
Statutory insurance fund |
(80 | ) | (1 | ) | (9 | ) | | (90 | ) | ||||||
Segment benefits, claims and expenses |
(54,056 | ) | (2,137 | ) | (4,445 | ) | (717 | ) | (61,355 | ) | |||||
Segment results |
9,447 | 791 | 968 | 104 | 11,310 | ||||||||||
Income tax expenses |
| | | (2,299 | ) | (2,299 | ) | ||||||||
Net profit/(loss) |
9,447 | 791 | 968 | (2,195 | ) | 9,011 | |||||||||
Attributable to: |
|||||||||||||||
shareholders of the Company |
9,447 | 791 | 968 | (2,240 | ) | 8,966 | |||||||||
minority interest |
| | | 45 | 45 | ||||||||||
Unrealised gains included in shareholders equity |
3,153 | 370 | 37 | | 3,560 | ||||||||||
21
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
4 | FINANCIAL ASSETS |
4.1 | Held-to-maturity securities |
Amortised cost RMB million |
Gross unrealised gains RMB million |
Gross unrealised losses RMB million |
Estimated fair value RMB million | ||||||
As at 30 June 2007 |
|||||||||
Debt Securities |
|||||||||
Government bonds |
95,006 | 2,005 | (303 | ) | 96,708 | ||||
Government agency bonds |
63,855 | 929 | (3,660 | ) | 61,124 | ||||
Corporate bonds |
3,257 | 224 | (5 | ) | 3,476 | ||||
Subordinated bonds/debts |
24,368 | 298 | | 24,666 | |||||
Total |
186,486 | 3,456 | (3,968 | ) | 185,974 | ||||
As at 31 December 2006 |
|||||||||
Debt Securities |
|||||||||
Government bonds |
94,999 | 7,791 | (26 | ) | 102,764 | ||||
Government agency bonds |
53,935 | 2,642 | (244 | ) | 56,333 | ||||
Corporate bonds |
3,257 | 296 | | 3,553 | |||||
Subordinated bonds/debts |
24,368 | 1,282 | (8 | ) | 25,642 | ||||
Total |
176,559 | 12,011 | (278 | ) | 188,292 | ||||
Contractual maturity schedule | Amortised cost | Estimated fair value | |||||||
As at 30 June 2007 RMB million |
As at 31 December 2006 RMB million |
As at 30 June 2007 RMB million |
As at 31 December 2006 RMB million | ||||||
Maturing: |
|||||||||
Within one year |
4,785 | 2,974 | 4,821 | 3,008 | |||||
After one year but within five years |
50,933 | 51,483 | 52,112 | 54,345 | |||||
After five years but within ten years |
35,947 | 37,295 | 36,728 | 40,279 | |||||
After ten years |
94,821 | 84,807 | 92,313 | 90,660 | |||||
Total |
186,486 | 176,559 | 185,974 | 188,292 | |||||
22
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
4 | FINANCIAL ASSETS (CONTINUED) |
4.2 | Available-for-sale securities |
Amortised cost/Cost RMB million |
Gross unrealised gains RMB million |
Gross unrealised losses RMB million |
Estimated fair value RMB million | ||||||
As at 30 June 2007 |
|||||||||
Debt securities |
|||||||||
Government bonds |
60,523 | 77 | (2,126 | ) | 58,474 | ||||
Government agency bonds |
105,491 | 149 | (8,168 | ) | 97,472 | ||||
Corporate bonds |
31,917 | 114 | (1,092 | ) | 30,939 | ||||
Subordinated bonds/debts |
9,467 | 9 | (123 | ) | 9,353 | ||||
Subtotal |
207,398 | 349 | (11,509 | ) | 196,238 | ||||
Equity securities |
|||||||||
Funds |
23,074 | 20,067 | (20 | ) | 43,121 | ||||
Common stocks |
31,895 | 30,397 | (191 | ) | 62,101 | ||||
Subtotal |
54,969 | 50,464 | (211 | ) | 105,222 | ||||
Total |
262,367 | 50,813 | (11,720 | ) | 301,460 | ||||
|
Debt securities | As at 30 June 2007 | |||
-contractual maturity schedule | Amortised cost RMB million |
Estimated fair value RMB million | ||
Maturing: |
||||
Within one year |
2,008 | 2,026 | ||
After one year but within five years |
23,217 | 22,754 | ||
After five years but within ten years |
58,279 | 56,100 | ||
After ten years |
123,894 | 115,358 | ||
Total |
207,398 | 196,238 | ||
|
23
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
4 | FINANCIAL ASSETS (CONTINUED) |
4.2 | Available-for-sale securities (continued) |
Amortised cost/Cost RMB million |
Gross unrealised gains RMB million |
Gross unrealised losses RMB million |
Estimated fair value RMB million | ||||||
As at 31 December 2006 |
|||||||||
Debt securities |
|||||||||
Government bonds |
60,058 | 863 | (569 | ) | 60,352 | ||||
Government agency bonds |
78,300 | 664 | (243 | ) | 78,721 | ||||
Corporate bonds |
31,001 | 238 | (487 | ) | 30,752 | ||||
Subordinated bonds/debts |
7,068 | 12 | (37 | ) | 7,043 | ||||
Subtotal |
176,427 | 1,777 | (1,336 | ) | 176,868 | ||||
Equity securities |
|||||||||
Funds |
20,535 | 12,437 | (103 | ) | 32,869 | ||||
Common stocks |
15,876 | 13,882 | (33 | ) | 29,725 | ||||
Warrants |
| 1 | | 1 | |||||
Subtotal |
36,411 | 26,320 | (136 | ) | 62,595 | ||||
Total |
212,838 | 28,097 | (1,472 | ) | 239,463 | ||||
|
Debt securities -contractual maturity schedule |
As at 31 December 2006 | |||
Amortised cost RMB million |
Estimated fair value RMB million | |||
Maturing: |
||||
Within one year |
4,544 | 4,561 | ||
After one year but within five years |
26,664 | 27,016 | ||
After five years but within ten years |
60,261 | 59,995 | ||
After ten years |
84,958 | 85,296 | ||
Total |
176,427 | 176,868 | ||
|
24
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
4 | FINANCIAL ASSETS (CONTINUED) |
4.3 | Financial assets at fair value through income (held-for-trading) |
As at 30 June 2007 RMB million |
As at 31 December 2006 RMB million | |||
Debt securities |
||||
Government bonds |
629 | 148 | ||
Government agency bonds |
12,197 | 1,915 | ||
Corporate bonds |
1,346 | 2,083 | ||
Subordinated bonds/debts |
322 | 325 | ||
Subtotal |
14,494 | 4,471 | ||
Equity securities Funds |
12,355 | 12,382 | ||
Common stocks |
10,458 | 20,460 | ||
Warrants |
14 | 56 | ||
Subtotal |
22,827 | 32,898 | ||
Total |
37,321 | 37,369 | ||
|
25
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
4 | FINANCIAL ASSETS (CONTINUED) |
4.4 | Listed and unlisted investments at carrying value |
As at 30 June 2007 RMB million |
As at 31 December 2006 RMB million | |||
Listed debt securities in PRC |
||||
Government bonds |
57,046 | 64,562 | ||
Corporate bonds |
6,048 | 6,839 | ||
Subtotal |
63,094 | 71,401 | ||
Unlisted debt securities in PRC |
||||
Government bonds |
97,063 | 90,937 | ||
Government agency bonds |
173,524 | 134,571 | ||
Corporate bonds |
29,494 | 29,253 | ||
Subordinated bonds/debts |
34,043 | 31,736 | ||
Subtotal |
334,124 | 286,497 | ||
Listed equity securities in PRC |
||||
Common stocks |
||||
listed in HK, PRC |
6,939 | 6,884 | ||
listed in mainland, PRC |
65,618 | 43,301 | ||
Funds listed in mainland, PRC |
14,140 | 12,861 | ||
Warrants listed in mainland, PRC |
14 | 57 | ||
Subtotal |
86,711 | 63,103 | ||
Unlisted equity securities in PRC |
||||
Funds |
41,336 | 32,390 | ||
Common Stocks |
2 | | ||
Subtotal |
41,338 | 32,390 | ||
Total |
525,267 | 453,391 | ||
|
As at 30 June 2007, the amount of unlisted debt securities, contracted in the over-the-counter market, is RMB 313,949 million (31 December 2006: RMB260,289 million).
26
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
4 | FINANCIAL ASSETS (CONTINUED) |
4.5 | Term deposits |
As at 30 June 2007 RMB million |
As at 31 December 2006 | |||
Maturing: |
||||
Within one year |
43,500 | 57,930 | ||
After one year but within five years |
122,900 | 111,901 | ||
After five years but within ten years |
3,556 | 3,421 | ||
After ten years |
2,170 | 2,224 | ||
Total |
172,126 | 175,476 | ||
Included in term deposits are structured deposits of RMB4,531 million (31 December 2006: RMB4,646 million). The interest rate on these deposits fluctuates based on changes in interest rate indexes. The Group uses structured deposits primarily to enhance the returns on investments. Structured deposits are stated at amortised cost.
5 | FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES |
The estimates and judgments to determine the fair value of financial assets and liabilities are described in Note 3.3 and Note 10 of 2006 annual financial statements, respectively.
The table below presents the estimated fair value and carrying value of financial assets and liabilities.
Estimated fair value | ||||||
As at 30 June 2007 RMB million |
As at 31 December 2006 RMB million |
|||||
Debt securities |
396,706 | 369,631 | ||||
Equity securities |
128,049 | 95,493 | ||||
Term deposits (excluding structured deposits) |
167,595 | 170,830 | ||||
Structured deposits |
4,347 | 4,419 | ||||
Statutory deposits restricted |
5,473 | 5,353 | ||||
Securities purchased under agreements to resell |
2,047 | | ||||
Policy loans |
3,678 | 2,371 | ||||
Cash and cash equivalents |
57,734 | 50,213 | ||||
Long-term investment type insurance contracts |
(276,110 | ) | (276,241 | ) | ||
Investment contracts with DPF |
(42,866 | ) | (39,575 | ) | ||
Investment contracts without DPF |
(2,408 | ) | (2,459 | ) | ||
Securities sold under agreements to repurchase |
(11,069 | ) | (8,227 | ) |
27
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
5 | FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (CONTINUED) |
Carrying value | ||||||
As at 30 June 2007 RMB million |
As at 31 December 2006 RMB million |
|||||
Debt securities |
397,218 | 357,898 | ||||
Equity securities |
128,049 | 95,493 | ||||
Term deposits (excluding structured deposits) |
167,595 | 170,830 | ||||
Structured deposits |
4,531 | 4,646 | ||||
Statutory deposits restricted |
5,473 | 5,353 | ||||
Securities purchased under agreements to resell |
2,047 | | ||||
Policy loans |
3,678 | 2,371 | ||||
Cash and cash equivalents |
57,734 | 50,213 | ||||
Long-term investment type insurance contracts |
(282,261 | ) | (282,672 | ) | ||
Investment contracts with DPF |
(49,727 | ) | (45,998 | ) | ||
Investment contracts without DPF |
(2,555 | ) | (2,614 | ) | ||
Securities sold under agreements to repurchase |
(11,069 | ) | (8,227 | ) | ||
The Group issues contracts that transfer insurance risk or financial risk or both. The Groups activities also expose it to a variety of financial risks. The management of insurance and financial risk are described in Note 4 of 2006 annual financial statements.
6 | INSURANCE CONTRACTS |
The assumptions used in the preparation of these condensed consolidated financial statements are disclosed in the notes to 2006 annual financial statements. The Group generally, when preparing interim financial statements, utilised the assumptions of prior year for the new business acquired. The major assumptions adopted in the development of liabilities arising from long-term insurance contracts are:
6.1 | Process used to decide on assumptions |
(i) | Investment return assumptions are based on estimates of future yields on the Groups investments. In determining interest rate assumptions, the Group considers past investment experience, the current and future mix of its investment portfolio and trends in yields. The assumed rate of investment return in future years reflect increased investment in higher yielding securities, including corporate bonds, subordinated bonds/debts, longer duration debt securities and equity securities. The assumed rate of investment return and provision for adverse deviation used are as follows: |
Year of policy issue | Interest rate assumptions |
Provision for adverse deviation | ||
Prior to 2003 |
3.80%-5.00% | 0.25%-0.50% | ||
2003 |
3.65%-5.00% | 0.25%-0.50% | ||
2004 |
3.70%-5.17% | 0.25%-0.50% | ||
2005 |
4.00%-5.20% | 0.25%-0.50% | ||
2006 |
4.60%-5.40% | 0.25%-0.60% | ||
Six months ended 30 June 2007 |
4.60%-5.40% | 0.30%-0.60% | ||
28
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
6 | INSURANCE CONTRACTS (CONTINUED) |
6.1 | Process used to decide on assumptions (continued) |
(ii) | Estimates are made for mortality and morbidity rates in each of the years that the Group is exposed to risk. The assumed mortality rates and morbidity rates, varying by age of the insured and contract type, are based upon expected experience at date of contract issue plus, where applicable, a margin for adverse deviation. |
The Group bases its mortality assumptions on China Life Insurance Mortality Table (1990-1993) and China Life Insurance Mortality Table (2000-2003), adjusted where appropriate to reflect the Groups recent historical mortality experience. Appropriate but not excessively prudent allowance is made for future mortality improvement on contracts that insure the risk of longevity, such as annuities. The main source of uncertainty with life insurance contracts is that epidemics such as Avian Flu, AIDS, SARS and wide- ranging lifestyle changes could result in deterioration in future mortality experience, thus leading to an inadequate liability. Similarly, continuing advancements in medical care and social conditions could result in improvements in longevity that exceed those allowed for in the estimates used to determine the liability for contracts where the Group is exposed to longevity risk.
The Group bases its morbidity assumptions for critical illness products on Taiwanese experience in the critical illness market, as the best proxy for the Chinas market adjusted where appropriate to reflect the Groups recent historical and projected future experience. There are two main sources of uncertainty. First, wide-ranging lifestyle changes could result in future deterioration in morbidity experience. Second, future development of medical technologies and improved coverage of medical facilities available to policyholders may bring forward the timing of diagnosing critical illness, which demands earlier payment of the critical illness benefits. Both could ultimately result in an inadequate liability if current morbidity assumptions do not properly reflect such secular trends.
(iii) | The assumption for policy administration expenses has been based on expected unit costs plus, where applicable, a margin for adverse deviation. Unit costs have been based on an analysis of actual experience. The unit cost factors are expressed on both a per-policy and a percent-of-premium basis, as follows: |
Individual Life | Group Life | |||||||
Year of policy issue | RMB Per Policy | % of Premium | RMB Per Policy | % of Premium | ||||
Prior to 2003 |
15.0 | 2.00% | 15.0 | 2.00% | ||||
2003 |
12.5 | 1.75% | 12.5 | 1.75% | ||||
2004 |
10.0 17.5 | 1.65%-2.55% | 17.5 | 1.65% | ||||
2005 |
14.5 19.5 | 1.50%-1.80% | 4.0 | 1.30% | ||||
2006 |
15.0 22.0 | 1.60%-1.85% | 6.5 | 1.50% | ||||
Six months ended 30 June 2007 |
15.0 22.0 | 1.60%-1.85% | 6.5 | 1.50% | ||||
29
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
6 | INSURANCE CONTRACTS (CONTINUED) |
6.2 | Movements in liabilities for long-term traditional insurance contracts |
The table below presents movement in the liabilities of long-term traditional insurance contracts:
2007 RMB million |
2006 RMB million |
|||||
As at 1 January |
172,875 | 124,656 | ||||
Valuation premium |
33,672 | 28,888 | ||||
Liabilities released for death or other termination and related expenses |
(10,842 | ) | (5,710 | ) | ||
Accretion of interest |
3,881 | 2,580 | ||||
Other movements |
445 | 1,252 | ||||
As at 30 June |
200,031 | 151,666 | ||||
6.3 | Movements in liabilities of long-term investment type insurance contracts |
The table below presents movement in the liabilities of long-term investment type insurance contracts:
2007 RMB million |
2006 RMB million |
|||||
As at 1 January |
282,672 | 237,001 | ||||
Deposits received |
47,996 | 46,418 | ||||
Deposits withdrawn |
(47,483 | ) | (8,713 | ) | ||
Fees deducted from account balances |
(4,454 | ) | (4,068 | ) | ||
Interest credited |
3,530 | 3,073 | ||||
As at 30 June |
282,261 | 273,711 | ||||
7 | LIABILITIES OF INVESTMENT CONTRACTS |
The table below presents movement of investment contracts:
2007 RMB million |
2006 RMB million |
|||||
As at 1 January |
48,612 | 44,102 | ||||
Deposits received |
15,708 | 14,682 | ||||
Deposits withdrawn |
(12,243 | ) | (9,803 | ) | ||
Policy fees deducted from account balances |
(445 | ) | (271 | ) | ||
Interest credited |
650 | 592 | ||||
As at 30 June |
52,282 | 49,302 | ||||
|
30
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
8 | NET INVESTMENT INCOME |
For the six months ended 30 June |
||||||
2007 RMB million |
2006 RMB million |
|||||
Debt securities |
7,608 | 5,546 | ||||
Term deposits and cash and cash equivalents |
4,459 | 4,033 | ||||
Equity securities |
12,127 | 1,862 | ||||
Policy loans |
76 | 22 | ||||
Securities purchased under agreements to resell |
87 | 3 | ||||
Subtotal |
24,357 | 11,466 | ||||
Securities sold under agreements to repurchase |
(181 | ) | (88 | ) | ||
Investment expenses |
(105 | ) | (37 | ) | ||
Total |
24,071 | 11,341 | ||||
|
9 | NET REALISED GAINS ON FINANCIAL ASSETS |
For the six months ended 30 June |
||||||
2007 RMB million |
2006 RMB million |
|||||
Debt securities |
||||||
Gross realised gains |
324 | 2 | ||||
Gross realised losses |
(7 | ) | (6 | ) | ||
Impairments |
(2,248 | ) | | |||
Subtotal |
(1,931 | ) | (4 | ) | ||
Equity securities |
||||||
Gross realised gains |
4,358 | 501 | ||||
Gross realised losses |
(165 | ) | | |||
Subtotal |
4,193 | 501 | ||||
Total |
2,262 | 497 | ||||
|
31
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
10 | NET FAIR VALUE GAINS ON ASSETS AT FAIR VALUE THROUGH INCOME (HELD-FOR-TRADING) |
For the six months ended 30 June | ||||
2007 RMB million |
2006 RMB million | |||
Debt securities |
300 | 154 | ||
Equity securities |
10,542 | 5,604 | ||
Total |
10,842 | 5,758 | ||
11 | NET PROFIT BEFORE INCOME TAX EXPENSES |
Net profit before income tax expenses is stated after charging the following:
For the six months ended 30 June | ||||
2007 RMB million |
2006 RMB million | |||
Salary and welfare |
1,896 | 1,703 | ||
Housing benefits |
126 | 140 | ||
Contribution to the defined contribution pension plan |
217 | 203 | ||
Depreciation |
495 | 415 | ||
Loss on disposal of property, plant and equipment |
| 1 | ||
Exchange loss |
390 | 208 | ||
12 | TAXATION |
(a) | The amount of taxation charged to the condensed consolidated income statement represents: |
For the six months ended 30 June | |||||
2007 RMB million |
2006 RMB million | ||||
Current taxation enterprises income tax |
4,435 | 965 | |||
Deferred taxation |
(3,015 | ) | 1,334 | ||
Taxation charges |
1,420 | 2,299 | |||
32
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
12 | TAXATION (CONTINUED) |
(b) | The reconciliation between the Groups effective tax rate and the statutory tax rate of 33% in the PRC is as follows: |
For the six months ended 30 June |
||||||||
2007 | 2006 | |||||||
RMB million | RMB million | |||||||
Net profit before income tax expenses |
24,832 | 11,310 | ||||||
Tax computed at the statutory tax rate of 33% |
8,195 | 3,732 | ||||||
Non-taxable income |
(i) | (3,719 | ) | (1,449 | ) | |||
Additional tax liability from expenses not deductible for tax purposes |
(i) | 72 | 16 | |||||
Effect on change in statutory tax rate |
(ii) | (3,128 | ) | | ||||
Income taxes at effective tax rate |
1,420 | 2,299 | ||||||
(i) | Non-taxable income includes mainly interest income from government bonds and fund distribution. Expenses not deductible for tax purposes include mainly salary, commission, brokerage and donation expenses in excess of deductible amounts as allowed by relevant tax regulations. |
(ii) | On 16 March 2007, the National Peoples Congress approved the Corporate Income Tax Law of the Peoples Republic of China (the new CIT Law). The new CIT Law reduces the domestic corporate income tax rate from 33% to 25% with effect from 1 January 2008. |
(c) | As at 30 June 2007, deferred income taxation is calculated in full on temporary differences under the liability method using a principal taxation rate of 25% except for those which are estimated to be settled by 31 December 2007 using a tax rate of 33%. |
The movement on the deferred income tax liabilities account is as follows:
2007 | 2006 | ||||
RMB million | RMB million | ||||
As at 1 January |
19,022 | 7,982 | |||
Deferred taxation charged to income statement |
(3,015 | ) | 1,334 | ||
Deferred taxation charged to equity |
2,332 | 1,759 | |||
As at 30 June |
18,339 | 11,075 | |||
13 | EARNINGS PER SHARE |
There is no difference between basic and diluted earnings per share. The basic and diluted earnings per share for the six months ended 30 June 2007 are based on the weighted average number of 28,264,705,000 ordinary shares (for the six months ended 30 June 2006: 26,764,705,000).
33
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
14 | DIVIDENDS |
A dividend in respect of 2006 of RMB0.14 per ordinary share, amounting to a total dividend of RMB3,957 million, was approved and declared at the Annual General Meeting in June 2007.
15 | SIGNIFICANT RELATED PARTY TRANSACTIONS |
(a) | Related parties |
Related parties are those parties which have the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. The table set forth below summarises the names of significant related parties and nature of relationship with the Company as at 30 June 2007:
Significant related party | Relationship with the Company | |
China Life Insurance (Group) Company (CLIC) |
The ultimate holding company | |
China Life Insurance Asset Management Company Limited (AMC) |
A subsidiary of the Company | |
Guangdong Development Bank (GDB) |
An associate of the Company | |
Beijing Zhongbaoxin Real Estate Development Co., Limited (Zhongbaoxin) |
A subsidiary of a subsidiary of the ultimate holding company
|
(b) | Transactions with AMC, GDB, CLIC and its subsidiaries |
The following table summarises significant transactions carried out by the Group with AMC, GDB, CLIC and its subsidiaries for the six months ended 30 June 2007.
Note | For the six months ended 30 June | |||||
2007 | 2006 | |||||
RMB million | RMB million | |||||
Transaction with CLIC and its subsidiaries |
||||||
Policy management fee income earned from CLIC |
(i) | 698 | 743 | |||
Asset management fee earned from CLIC |
(ii) | 49 | 39 | |||
Rewards from CLIC for non-transferred policies |
(iii) | 70 | | |||
Property leasing expense charged by CLIC |
(iv) | 33 | 84 | |||
Rentals, deposits and project payments to Zhongbaoxin |
(v) | 1 | 2 | |||
Purchase of property, plant and equipment from CLIC |
488 | | ||||
Transaction with AMC |
||||||
Asset Management fee expense charged by AMC |
(ii) | 161 | 131 | |||
Transaction with GDB |
||||||
Brokerage fee charged by GDB |
(vi) | 1 | | |||
Interest income earned from GDB
|
37
|
|
34
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
15 | SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED) |
(b) | Transactions with AMC, GDB, CLIC and its subsidiaries (continued) |
Notes:
(i) | As part of the restructuring, CLIC transferred its entire branch services network to the Company. CLIC and the Company have entered into an agreement to engage the Company to provide policy administration services to CLIC relating to the non-transferred policies. The Company, as a service provider, does not acquire any rights or assume any obligations as an insurer under the non-transferred policies. In consideration of the services provided under the agreement, CLIC will pay the Company a service fee based on the estimated cost of providing the services, to which a profit margin is added. The service fee is equal to, for each semi-annual payment period, the sum of (1) the number of non-transferred policies in force that were within their policy term as at the last day of the period, multiplied by RMB8.00 per policy and (2) 2.50% of the actual premiums and deposits in respect of such policies collected during the period. The policy management fee income is included in other income in condensed consolidated income statement. |
(ii) | CLIC and the AMC have entered into an agreement, whereby CLIC agreed to pay the AMC a service fee at the rate of 0.05% per annum. The service fee is calculated and payable on a monthly basis, by multiplying the average of balance of book value of the assets under management (after deducting the funds obtained and interests accrued from repurchase transactions) at the beginning and at the end of any given month by the rate of 0.05%, divided by 12. Such rate was determined with reference to the applicable management fee rate pre-determined for each specified category of assets managed by the AMC to arrive at a comprehensive service fee rate. |
The Company and the AMC have entered into a separate agreement, whereby the Company agreed to pay the AMC a fixed service fee and a variable service fee. The fixed service fee is payable monthly and is calculated with reference to the net asset value of the assets in each specified category managed by the AMC and the applicable management fee rates pre-determined by the parties on an arms length basis. The variable service fee equals to 10% of the fixed service fee per annum payable annually. The service fees were determined by the Company and the AMC based on an analysis of the cost of service, market practice and the size and composition of the asset pool to be managed.
Although the description of the service fee rates under the two agreements are different, the ultimate comprehensive service fee rate calculated under each of these two agreements is basically the same.
The asset management fee charged to the Company by AMC is eliminated through the condensed consolidated income statement.
(iii) | The Company assisted CLIC to mitigate business risk arising from non-transferred policies, and received a fee income of RMB70 million from CLIC as the reward for such non-transferrable policies for the six months ended 30 June 2007. |
(iv) | The Company has entered into a property leasing agreement with CLIC, pursuant to which CLIC agreed to lease to the Company some of its owned and leased buildings. The annual rent payable by the Company to CLIC in relation to the CLIC owned properties is determined by reference to market rent or, the costs incurred by CLIC in holding and maintaining the properties, plus a margin of approximately 5%. The annual rent payable by the Company to CLIC in relation to the CLIC leased properties is determined by reference to the rent payable under the head lease plus the actual costs incurred by CLIC arising in connection with the subletting of the properties. The Company has directly paid the relevant rental expenses raised from CLIC leased properties to the third-party instead of CLIC. |
(v) | The Group made certain project payments to third parties through Zhongbaoxin and paid other miscellaneous expenditures mainly comprised of rentals and deposits to Zhongbaoxin. |
(vi) | On 29 April, 2007, the Company and GDB entered into a five year individual bank insurance agency agreement. All insurance products suitable for delivery through bank channel are involved in the agreement. GDB will provide services, including selling insurance products, receiving premiums, paying benefits. The company has agreed to pay commission fees as follows: 1) A monthly service fee, calculated on a monthly basis, by multiplying total premium received and a fixed commission rate. 2) A monthly commission fee, calculated on a monthly basis, by multiplying number of policy being handled and fixed commission rate which is not more than RMB 1 per policy, where GDB handles premiums receipts and benefits payments. |
35
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
15 | SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED) |
(c) | Amounts due from/to GDB, CLIC and its subsidiaries |
The following table summarises the resulting balance due from and to GDB, CLIC and its subsidiaries. The balance is non-interest bearing, unsecured and has no fixed repayment terms except for the deposits in GDB.
As at 30 June 2007 |
As at 31 December 2006 RMB million |
|||||
Amount due from CLIC |
715 | 996 | ||||
Amount due to CLIC |
(49 | ) | (3 | ) | ||
Dividends due to CLIC |
(2,705 | ) | | |||
Amount deposited with GDB |
3,722 | | ||||
Amount due from Zhongbaoxin |
1 | 1 |
(d) | Key management compensation |
For the six months ended 30 June | ||||
2007 RMB million |
2006 RMB million | |||
Salaries and other short-term employee benefits |
14 | 6 | ||
Termination benefits |
| | ||
Post-employment benefits |
| | ||
Other long-term benefits |
| | ||
Share-based payments |
| 5 | ||
Total |
14 | 11 | ||
36
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
15 | SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED) |
(e) | Transactions with state-owned enterprises |
Under HKAS 24, business transactions between state-owned enterprises controlled by the PRC government are within the scope of related party transactions. CLIC, the ultimate holding company of the Group, is a state-owned enterprise. The Groups key business and therefore the business transactions with other state-owned enterprises are primarily related to insurance and investment activities. The related party transactions with other state- owned enterprises were conducted in the ordinary course of business. Due to the complex ownership structure, the PRC government may hold indirect interests in many companies. Some of these interests may, in themselves or when combined with other indirect interests, be controlling interests which may not be known to the Group. Nevertheless, the Group believes that the following captures the material related parties.
As at 30 June 2007, more than 85% (as at 31 December 2006: more than 70%) of bank deposits were with state-owned banks; approximately 98% (as at 31 December 2006: approximately 95%) of the issuers of corporate bonds and subordinated bonds/debts held by the Group were state-owned enterprises. For the six months ended 30 June 2007, more than 60% (for the six months ended 30 June 2006: approximately 60%) of the group insurance business of the Group were with state-owned enterprises; approximately 84% (for the six months ended 30 June 2006: approximately 90%) of bank assurance brokerage charges of RMB1,351 million (for the six months ended 30 June 2006: RMB1,199 million) were paid to state-owned banks and post office; almost all of the reinsurance agreements of the Group are entered into with a state-owned reinsurance company; more than 85% (for the six months ended 30 June 2006: more than 65%) of bank deposit interest income were from state-owned banks.
16 | SHARE CAPITAL |
As at 30 June 2007 | As at 31 December 2006 | |||||||
No. of shares | RMB million | No. of shares | RMB million | |||||
Registered, issued and fully paid Ordinary shares of RMB1 each |
28,264,705,000 | 28,265 | 28,264,705,000 | 28,265 |
37
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
17 | CONTINGENCIES |
The following is a summary of the significant contingent liabilities:
As at 30 June 2007 RMB million |
As at 31 December 2006 RMB million | ||||||
Pending lawsuits |
(b | ) | 54 | 54 |
(a) | The Company and certain of its past directors (the defendants) have been named in nine putative class action lawsuits filed in the United States District Court for the Southern District of New York between 16 March 2004 and 14 May 2004. The lawsuits have been ordered to be consolidated and restyled In re China Life Insurance Company Limited Securities Litigation, NO.04 CV 2112 (TPG). Plaintiffs filed a consolidated amended complaint on 19 January 2005, which names the Company, Wang Xianzhang (past director), Miao Fuchun (past director) and Wu Yan (past director) as defendants. The consolidated amended compliant alleges that the defendants named therein violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The Company has engaged U.S. counsel to contest vigorously on the lawsuits. The defendants jointly moved to dismiss the consolidated amended complaint on 21 March, 2005. Plaintiffs then further amended their complaint. Defendants moved to dismiss the second amended compliant on 18 November 2005. That motion has been fully briefed and is pending before the Court. The likelihood of an unfavourable outcome is still uncertain. No provision has been made with respect to these lawsuits. |
(b) | The Group has been named in a number of lawsuits arising in the ordinary course of business. Provision has been made for the probable losses to the Group on those claims when management can reasonably estimate the outcome of the lawsuits taking into account the legal advice. No provision has been made for pending lawsuits when the outcome of the lawsuits cannot be reasonably estimated or management believes a loss is not probable. |
38
Commission File Number 001-31914
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2007
18 | COMMITMENTS |
(a) | Capital commitments |
(i) | Capital commitments for property, plant and equipment |
As at 30 June 2007 RMB million |
As at 31 December 2006 RMB million | |||
Contracted but not provided for |
183 | 990 |
(ii) | Capital commitments to invest in Bohai Venture Capital Fund |
The Group committed to contribute RMB500 million to Bohai Venture Capital Fund and RMB5 million to Bohai Venture Capital Fund Management Company of which RMB52 million had been paid as at 30 June 2007. The remaining RMB453 million will be paid when called.
(b) | Operating lease commitments |
The future minimum lease payments under non-cancelable operating leases are as follows:
As at 30 June 2007 RMB million |
As at 31 December 2006 RMB million | |||
Land and buildings |
||||
Not later than one year |
181 | 242 | ||
Later than one year but not later than five years |
254 | 386 | ||
Later than five years |
24 | 50 | ||
Total |
459 | 678 | ||
The operating lease payments charged to the condensed consolidated income statement for the six months ended 30 June 2007 was RMB189 million (for the six months ended 30 June 2006: RMB187 million).
39
Commission File Number 001-31914
Supplementary Information For ADR Holders
RECONCILIATION OF HKFRS AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP)
The consolidated financial statements of the Group have been prepared in accordance with HKFRS. There are no material differences between HKFRS and US GAAP that had an effect on net profit for the six months periods ended 30 June 2007 and 2006 and shareholders equity as at 30 June 2007 and 31 December 2006.
40
Commission File Number 001-31914
DISCLOSURE OF DIRECTORS AND SUPERVISORS INTERESTS IN SHARES
As at 30 June, 2007, save as disclosed below, none of the Directors, Supervisors or chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the SFO)) that were recorded in the register of the Company required to be kept pursuant to Section 352 of the SFO or which had to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, Appendix 10 to the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange (the Listing Rules).
Name of company | Name of director |
Capacity | Nature of interests |
Type of Shares |
Number of Shares held |
Percentage of the respective type of Shares |
Percentage of the total number of Shares in issue | |||||||
China Life Insurance Company Limited |
Ngai Wai Fung | Beneficial owner |
Personal | H Shares | 2,000(L) | 0.000026877 | 0.000007076 | |||||||
The letter L denotes a long position. |
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Commission File Number 001-31914
Other Information
INTEREST OF SUBSTANTIAL SHAREHOLDERS OF THE COMPANY
So far as is known to any directors and chief executive of the Company, as at 30 June 2007, the following persons (other than the directors, supervisors and chief executive of the Company) had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO, or as otherwise notified to the Company and the Hong Kong Stock Exchange:
Name of Substantial Shareholder |
Capacity | Type of Shares |
Number of Shares held |
Percentage of the respective type of Shares |
Percentage of the total number of Shares in issue | ||||||
China Life Insurance (Group) Company |
Beneficial owner |
Domestic Shares |
19,323,530,000 | (L) | 92.8 | 68.4 | |||||
Lee Shau Kee (1) |
Founder of discretionary trusts & interest of controlled corporations |
H Shares | 428,358,620 | (L) | 5.76 | 1.52 | |||||
Leeworld (Cayman) Limited (1) |
Trustee |
H Shares | 428,358,620 | (L) | 5.76 | 1.52 | |||||
Leesons (Cayman) Limited (1) |
Trustee |
H Shares | 428,358,620 | (L) | 5.76 | 1.52 | |||||
Lee Financial (Cayman) Limited (1) |
Interest of controlled corporations |
H Shares | 428,358,620 | (L) | 5.76 | 1.52 | |||||
Shau Kee Financial Enterprises |
Interest of controlled |
H Shares | 428,358,620 | (L) | 5.76 | 1.52 | |||||
Limited (1) |
corporations |
||||||||||
Richbo Investment Limited (1) |
Beneficial owner |
H Shares | 428,358,620 | (L) | 5.76 | 1.52 | |||||
Citigroup Inc. (2) |
Interest of corporation controlled by Citigroup Inc.,person having asecurity interest inshares, custodian/approved lendingagent |
H Shares | 378,410,192 | (L) | 5.09 | 1.34 | |||||
163,491,483 | (S) | 2.20 | 0.58 | ||||||||
24,514,000 | (P) | 0.33 | 0.09 | ||||||||
Deutsche Bank Aktiengesellschaft (3) |
Beneficial owner, investment manager and person having a security interest in shares |
H Shares | 779,785,361 | (L) | 10.48 | 2.76 | |||||
799,651,491 | (S) | 10.75 | 2.83 | ||||||||
JPMorgan Chase & Co. (4) |
Beneficial owner, investment manager and custodian corporation/ approved lending agent |
H Shares | 546,423,668 | (L) | 7.34 | 1.93 | |||||
447,063,370 | (S) | 6.01 | 1.58 | ||||||||
184,201,160 | (P) | 2.48 | 0.65 | ||||||||
KBC Group N.V. (5) |
Interest of corporation controlled by KBC Group N.V. |
H Shares | 669,725,133 | (L) | 9.00 | 2.37 | |||||
890,894,837 | (S) | 11.97 | 3.15 | ||||||||
Societe Generale |
Beneficial owner and investment manager |
H Shares | 443,936,184 | (L) | 5.96 | 1.57 | |||||
515,675,894 | (S) | 6.93 | 1.82 | ||||||||
UBS AG (6) |
Beneficial owner, person having a security interest in shares and interest of corporation controlled by UBS AG |
H Shares | 448,303,077 | (L) | 6.02 | 1.59 | |||||
309,765,831 | (S) | 4.16 | 1.10 | ||||||||
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Commission File Number 001-31914
Other Information
The letter L denotes a long position. The letter S denotes a short position. The letter P denotes interest in a lending pool.
Note (1): | These references to 428,358,620 H Shares relate to the same block of shares in the Company. |
These 428,358,620 H shares were held by Richbo Investment Limited (Richbo), an indirect wholly-owned subsidiary of Shau Kee Financial Enterprises Limited (Shau Kee Financial). Lee Financial (Cayman) Limited (Lee Financial) as trustee of a unit trust (the Unit Trust) owned all the issued shares of Shau Kee Financial. Leeworld (Cayman) Limited (Leeworld) and Leesons (Cayman) Limited (Leesons), as trustees of respective discretionary trusts, held units in the Unit Trust. Mr. Lee Shau Kee owned the entire issued share capital of Lee Financial, Leeworld and Leesons. Accordingly, Mr. Lee Shau Kee, Lee Financial, Leeworld, Leesons, Shau Kee Financial and Richbo were taken to have an interest in these 428,358,620 H shares.
Note (2): | Citigroup Inc. was interested in a total of 378,410,192 H shares in accordance with the provisions of Part XV, SFO. of these shares, Citigroup Global Markets Financial Products LLC, Citigroup Global Markets Inc., Citicorp Trust Bank, Citibank N.A., and Citigroup Global Markets Ltd were interested in 208,235,734 H shares, 1,663,830 H shares, 30,000 H shares, 62,282,213 H shares and 106,198,415 H shares respectively. All of these entities are either controlled or indirectly controlled subsidiaries of Citigroup Inc. |
Included in the 378,410,192 H shares are 24,514,000 H shares (0.33%) which are held in the lending pool, as defined under Section 5(4) of the Securities and Futures (Disclosure of Interests Securities Borrowing and Lending) Rules.
In addition, Citigroup Inc. held by way of attribution a short position as defined under Part XV, SFO in 163,491,483 H shares (2.20%).
Note (3): | Deutsche Bank Aktiengesellschaft was interested in a total of 779,785,361 H shares in accordance with the provisions of Part XV, SFO. Of these shares, Deutsche Asset Management (Asia) Limited, Deutsche Asset Management International GmbH, Deutsche Asset Management Investmentgesellschaft mbH, DWS Investment GmbH, DWS Investment S.A. Luxemburg, Deutsche Bank AG Frankfurt, Deutsche Vermogensbildungsgesellschaft mit beschrankter Haftung, Deutsche Bank (Suisse) S.A., Deutsche Bank AG Singapore Branch and Deutsche Bank Securities Inc. were interested in 19,869,000 H shares, 1,355,000 H shares, 179,490 H shares, 4,000,000 H shares, 10,000,000 H shares, 25,500 H shares, 247,000 H shares, 55,000 H shares, 152,000 H shares and 3,990 H shares respectively. All of these entities are either controlled or indirectly controlled subsidiaries of Deutsche Bank Aktiengesellschaft. |
Deutsche Bank Aktiengesellschaft held by way of attribution a short position as defined under Part XV, SFO in 799,651,491 H shares (10.75%).
Note (4): | JPMorgan Chase & Co. was interested in a total of 546,423,668 H shares in accordance with the provisions of Part XV, SFO. Of these shares, JPMorgan Chase Bank, N.A., J.P. Morgan Investment Management Inc., JPMorgan Asset Management (UK) Limited, JF Asset Management (Singapore) Limited Co Reg #:197601586K, JF Asset Management Limited, JF International Management Inc., JPMorgan Asset Management (Canada) Inc., J.P. Morgan Securities Ltd., J.P. Morgan Whitefriars Inc., JPMorgan Asset Management (Japan) Limited and J.P. Morgan International Bank Limited were interested in 185,067,160 H shares, 8,968,612 H shares, 8,804,409 H shares, 16,258,000 H shares, 195,063,000 H shares, 1,437,000 H shares, 265,000 H shares, 9,833,000 H shares, 111,965,487 H shares, 8,730,000 H shares and 32,000 H shares respectively. All of these entities are either controlled or indirectly controlled subsidiaries of JPMorgan Chase & Co. |
Included in the 546,423,668 H shares are 184,201,160 H shares (2.48%) which are held in the lending pool, as defined under Section 5(4) of the Securities and Futures (Disclosure of Interests Securities Borrowing and Lending) Rules.
In addition, JPMorgan Chase & Co. held by way of attribution a short position as defined under Part XV, SFO in 447,063,370 H shares (6.01%).
Note (5): | KBC Group N.V. was interested in a total of 669,725,133 H shares in long position and 890,894,837 H shares in short position in accordance with the provisions of Part XV, SFO. These H shares interests were held by KBC Investments Hong Kong, a wholly- owned subsidiary of KBC Bank N.V. KBC Group N.V. is the indirect controlling shareholder of KBC Bank N.V. |
Note (6): | UBS AG was interested in a total of 448,303,077 H shares in accordance with the provisions of Part XV, SFO. of these shares, UBS Fund Management (Switzerland) AG, UBS Fund Services (Luxembourg) SA, UBS Global Asset Management (Americas) Inc., UBS Global Asset Management (Australia) Inc., UBS Global Asset Management (Canada) Inc., UBS Global Asset Management (Hong Kong) Ltd., UBS Global Asset Management (Japan) Ltd, UBS Global Asset Management (Singapore) Ltd, UBS Global Asset Management (UK) Limited, UBS Securities LLC and UBS Bank (Canada) were interested in 4,321,000 H shares, 368,000 H shares, 2,010,000 H shares, 65,000 H shares, 315,000 H shares, 11,327,500 H shares, 2,788,000 H shares, 12,035,000 H shares, 5,343,000 H shares, 24,615,670 and 150,000 H shares respectively. All of these entities are either controlled or indirectly controlled subsidiaries of UBS AG. |
In addition, UBS AG held by way of attribution a short position as defined under Part XV, SFO in 309,765,831 H shares (4.16%).
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Commission File Number 001-31914
Other Information
Save as disclosed above, the directors and chief executive of the Company are not aware that there is any person who, as at 30 June, 2007, had an interest or short positions in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept under section 336 of the SFO, or as otherwise notified to the Company and the Hong Kong Stock Exchange.
PURCHASE, SALES OR REDEMPTION OF THE COMPANYS SHARES
For the six months ended 30 June 2007, the Company and its subsidiaries have not purchased, sold or redeemed any of the Companys shares.
COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS
BY DIRECTORS AND SUPERVISORS OF THE COMPANY
After making specific inquiries to all the directors and supervisors of the Company, they have confirmed that they had complied with the Model Code for Securities Transactions by Directors of Listed Issuers (Model Code) as set out in Appendix 10 of the Listing Rules between the period of 1 January 2007 and 30 June 2007. The Board has established guidelines on no less exacting terms than the Model Code for directors and supervisors of the Company in respect of their dealings in the securities of the Company.
REVIEW BY AUDIT COMMITTEE
The Audit Committee together with external auditors engaged by the Company has reviewed the unaudited condensed consolidated financial statements of the Group for the six months ended 30 June 2007.
COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES OF THE LISTING RULES
The Company has implemented a full set of corporate governance practices, and strongly believes that through fostering sound corporate governance, the Company can further enhance its transparency and accountability. This also helps the Company to achieve its goals and enable the Company to operate in a more regulated manner and boost the confidence of investors.
For the six months ended 30 June 2007, the Company complied with all the code provisions under the Code on Corporate Governance Practices as set out in Appendix 14 of the Listing Rules.
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