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As Of Filer Filing As/For/On Docs:Pgs Issuer Agent 5/02/06 China Life Insurance Co Ltd 6-K 5/02/06 1:309 RR Donnelley/FA
Document/Exhibit Description Pages Size 1: 6-K Report of a Foreign Private Issuer HTML 1,605K
| Form 6-K |
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
China Life Insurance Company Limited
(Translation of registrant’s 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-
On May 2, 2006, China Life Insurance Company Limited published its annual report as required under the rules of the Hong Kong Stock Exchange for the year ended December 31, 2005, a copy of which is attached as Exhibit 99.1 hereto.
EXHIBIT LIST
| Exhibit | Description | |
| 99.1 | Annual Report, dated April 18, 2006 |
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/ Wu Yan | |||||||
| (Signature) | ||||||||
| May 2, 2006 | Name: | Wu Yan | ||||||
| Title: | Director and President | |||||||
Exhibit 99.1
CORPORATE INFORMATION
Company Name
China Life Insurance Company Limited
Directors Executive Directors Yang Chao
Non-executive Directors
Miao Fuchun
Shi Guoqing
Independent non-executive Directors
Long Yongtu Chau Tak Hay Sun Shuyi
Cai Rang
Ma Yongwei Supervisors Xia Zhihua
Wu Weimin Jia Yuzeng Ren Hongbin Tian Hui
Company Secretaries
Zheng Yong
Heng Kwoo Seng Qualified Accountant Yang Zheng
Authorized Representatives
Zheng Yong Registered Office China Life Tower
16 Chaowai Avenue, Chaoyang District
Beijing 100020, China
Tel: 86(10) 8565 9999
Fax: 86(10) 8525 2232
Place of business in Hong Kong
18th Floor, C.L.I. Building
313 Hennessy Road, Wanchai
Hong Kong
Tel: (852) 2881 1226/2545 8111
Fax: (852) 2577 2293/2544 4395
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 Queen’s Road East
Hong Kong Depositary JPMorgan Chase Bank
4 New York Plaza, New York
New York 10004
Places of listing
H Share: The Stock Exchange of Hong Kong Limited
Stock code: 2628
American depositary shares The New York Stock Exchange Stock code: LFC
Principal bankers
Industrial and Commercial Bank of China
55 Fuxingmennei Street
Xicheng District
Beijing 100032
China
Agricultural Bank of China
A23 Fuxing Street Xicheng District Beijing 100037
China
Bank of China
1 Fuxingmennei Street
Xicheng District
Beijing 100818
China
China Construction Bank
25 Jinrong Street Xicheng District Beijing 100032
China
Bank of Communications
188 Yin Cheng Zhong Lu
Shanghai 200120
China
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Focusing on people Caring for life
Creating value Serving society
China Life Insurance Company Limited (the “Company” or “China Life” or “We”) was registered in Beijing, China on June 30, 2003 according to the Company Law of the People’s Republic of China. The Company was successfully listed on the New York Stock Exchange and the Hong Kong Stock Exchange on December 17 and 18, 2003, respectively. The Company is the largest life insurance company in China’s life insurance market (for the purpose of this annual report, “China’s life insurance market” refers to the life insurance market in the People’s Republic of China, excluding the Hong Kong Special Administrative Region, Macau Special Administrative Region, and Taiwan). Our distribution network, comprised of exclusive agents, direct sales representatives, and dedicated and non-dedicated agencies, is the most extensive one in China.
Our products and services include individual life insurance, group life insurance, accident and health insurance. The Company is China’s largest life insurance company, a leading provider of annuity products and life insurance for both individuals and groups, and a leading provider of accident and health insurance. As of December 31, 2005, we had over 70 million individual and group life policies and annuities, and long-term health insurance policies in force. We also provide both individual and group accident and short-term health insurance policies. Through its controlling shareholding in China Life Insurance Assets Management Co., Ltd. (“AMC”), the Company is the largest insurance asset management company, and one of the largest institutional investors in China.
2 China Life Insurance Company Limited Annual Report 2005
Summary
According to the requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, we set out below a financial summary of the Group (“the Group” refers to the Company and its subsidiaries) for the past three years since its listing in 2003.
Unless otherwise stated, all the financial data of the Group set out in this annual report is prepared in accordance with Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards (“HKFRS”).
Year ended December 31
| RMB million (except earnings per share)
|
2005 | 2004
(Note 2)
|
2003
(Note 2)
|
2003
| |||||
| Total revenues |
98,212 | 76,806 | 78,883 | 60,442 | |||||
| Net profit (Note 1) |
9,306 | 7,171 | (4,252 | ) | 5,857 | ||||
| Basic and diluted earnings per share
|
0.35
|
0.27
|
(0.21 | )
|
0.29
| ||||
Note 1: Net profit refers to Net profit attributable to shareholders of the Company.
Note 2: Due to the adoption of new or revised standards of HKFRS, adjustments were made where applicable.
As at December 31
| RMB million
|
2005 | 2004
|
2003
| |||
| Investment assets (Note 1) |
494,356 | 374,890 | 279,248 | |||
| Total assets |
559,219 | 433,671 | 328,720 | |||
| Total shareholders equity
|
80,378
|
66,530
|
62,436
| |||
| 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: Due to the adoption of new or revised standards of HKFRS, adjustments were made where applicable.
China Life Insurance Company Limited Annual Report 2005 3
Statement
|
Yang Chao Chairman of the Board of Directors |
“to establish the Company as a world-class life insurance company with advanced corporate governance, a well-established management system, stringent internal controls, leading technologies, a first-class team, superior service and an outstanding brand.” |
Dear Shareholders,
I am pleased to present to you the Group’s (“the Group” refers to the Company and its subsidiaries) operating results for the financial year ended December 31, 2005.
In 2005, the Company achieved remarkable results in its restructuring and development. With changes to the Board of Directors and the Management, the Company further improved its corporate structure and enhanced its standard of corporate governance. As a core member of China Life group, the Company integrated the group’s development strategy of “transforming itself into a major international financial and insurance group with rational resources allocation, clear strategic advantages, strong core businesses, and appropriately diversified operations characterizing by high embedded value, strong core competitiveness and high sustainability in development” into its business goal, which is “to establish itself as a first class international life insurance company with advanced corporate governance, well established management system, stringent internal control, leading technologies, first class team, superior service and outstanding brand”. With this in mind, the Company is dedicated to the creation of shareholders value. In 2005, through maintaining its operational strategy in a proactive and stable manner, the Company sustained steady growth in its business and further improved its business structure. The profit rose alongside with the increase in return on investments and our internal management continuously improved. We maintained our leading market position and our influence on society was at large strengthened.
The Company is a core member of China Life group, which ranked 212th among “Fortune 500” announced by Fortune in 2005. In February 2006, in a major internet election campaign “2005 Financial Entities in China” conducted by Hexun Network, the Company was elected as “The Most Reliable Life Insurer”. The Company ranked 297th among Forbes’ “The Global 2000” announced in April 2006, and ranked seventh among the companies based in China (including Hong Kong, Macau and Taiwan). In April 2006, the Company was named “The 2005 Leader in Insurance industry” in the “2005 Chinese Service Industry Leaders Awards” organised by a number of market research institutes including the Horizon Research Consultancy Group.
4 China Life Insurance Company Limited Annual Report 2005
In 2005, the Group achieved record high performance in total asset, total revenue and net profit. As at December 31, 2005, the Company’s embedded value was RMB113,954 million, and the solvency level was approximately 2.73 times the minimum regulatory requirement. As at March 31, 2006, the Company’s total market capitalisation was HKD262,294 million.
Achieving Rapid Growth and Maintaining Market Leading Position
For the year ended December 31, 2005, the Group’s total revenues was RMB98,212 million, an increase of 27.87% from 2004. Gross written premiums and policy fees reached RMB81,022 million, an increase of 22.28% from 2004. The Group’s net profit attributable to shareholders of the Company reached RMB9,306 million, an increase of 29.77% from 2004.
In accordance with the data released by the China Insurance Regulatory Commission (“CIRC”), the Company’s market share in 2005 was 44.07%, maintaining its leading position in the life insurance market in China.
Optimizing Business Structure and Steady Increase in Embedded Value
In 2005, the Group continued its direction in comprehensive budgetary management and leverage on expense management to promote business restructuring. For the year ended December 31, 2005, the gross written premiums were RMB74,939 million, representing a 22.72% increase from 2004. The first year regular gross written premium accounted for 90.72% of the first-year gross written premiums of long term traditional insurance contracts.
As at December 31, 2005, the Company’s embedded value was RMB113,954 million, an increase of 26.51% from 2004. The value of new business for the year ended December 31, 2005 was RMB7,489 million, an increase of 15.14% from 2004. Embedded value is an actuarially determined estimate of the economic value of life insurance business of an insurance company based on a particular set of assumptions about future experience, excluding the economic value of future new business. The value of one year’s sales provides an indication of the value being created for investors by new business activity and hence the potential of the business.
Improving Assets Composition and Increasing Return on Investment
In 2005, the Company revised its investment strategies pursuant to the stable and prudent principles and changes in the capital market. By increasing the proportion in fixed income investments, such as bonds with longer maturity and decreasing the proportion in term deposits, we extended the duration of assets, and optimized assets structure and the matching of assets and liabilities. Meanwhile, return on investment increased effectively.
In 2005, the Group’s investment yield was 3.86% (investment assets included financial assets and cash and cash equivalents but excluded accrued investment income), an increase of 37 basis points from 2004.
Strengthening Cost Control and Strong Financial Position
Under the precondition of ensuring business development, the Company further strengthened control over comprehensive budgetary management and endeavoured to control costs. Our consolidated cost control ratio was 17.2%, a decrease of 1.4 percentage points from 2004.
As at December 31, 2005, the Group’s total assets was RMB559,219 million and the total shareholders’ equity was RMB80,378 million. The Company’s solvency level was approximately 2.73 times the minimum regulatory requirement. A strong financial position and an adequate solvency level provided the Company with powerful support in sustaining rapid development of its businesses.
China Life Insurance Company Limited Annual Report 2005 5
Chairman’s
Statement
Expanding Sales Channels and Enhancing Service Standards
We possess the largest sales team in China’s life insurance industry and the most extensive distribution network, covering almost all county level administrative regions, except the Tibet Autonomous Region. Our three major distribution channels are individual agents, direct sales team and intermediaries such as banks and post offices. As at December 31, 2005, we had 640,000 individual agents, approximately 12,000 direct sales staffs, and a network of more than 89,000 cooperating bank branches and post offices. In 2005, the Company further consolidated its edge in sales by continuously expanding its sales channels and scope of cooperation, as well as strengthening the management and training of its sales staff.
In 2005, the Company continued to devote efforts to improving underwriting and claims management as well as customer service standards. We formulated and revised a series of systems and management regulations. Business process was adjusted and optimized. Control over operation risks was strengthened and service methods were improved and increased. Our centralized service platform “95519” Call Center was granted the “2005 Award of the Best Performing Call Center in China” by the Professional Committee for the Promotion and Alliance of Customer Relationship Management by Informationalization under the Ministry of Information Industry, and was the only life insurance company receiving such award in China. It was also the second consecutive year the Company was granted this award.
Enhancing Internal Control and Corporate Governance
In order to meet the regulatory requirements in the jurisdictions where the Company is listed in a more effective manner, the Company adjusted and enriched the composition of the Board of Directors and Board Committees, which further emphasized the function of independent directors. Pursuant to the provisions of the Code on Corporate Governance Practices (the “Code”), Appendix 14 to the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited, the roles of Chairman and President were segregated with separate functions.
The Company always places emphasis on internal control and risk management. Our supervisory and control system for internal control and risk management is comprised of the Board of Directors, the Audit Committee and Risk Management Committee under the Board of Directors, the Supervisory Committee, the Internal Control and Risk Management Committee under the Management, and the executive and supervisory departments, which consist of the Company’s internal control and compliance department, legal affairs department and internal auditing department. Since our listing, we have placed emphasis on the supervision and management of three types of risks, namely finance, investment and operation risks, and keep on improving our information disclosure system. The Company has been allocating sufficient resources to optimize internal control systems at its branches and is preparing itself towards compliance with Sarbanes-Oxley Act Section 404.
Final Dividend
The Board of Directors recommended the payment of a final dividend at RMB0.05 per share for the year ended December 31, 2005 to the shareholders of the Company.
6 China Life Insurance Company Limited Annual Report 2005
Class Action in the United States
Between March 16, 2004 and May 14, 2004, nine putative class action lawsuits were filed in the United States District Court for the Southern District of New York against the Company and certain of its officers and directors. These lawsuits were brought on behalf of a class of purchasers of the publicly traded securities of the Company and allege 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 “Exchange Act Claims”, and Sections 11 and 15 of the Securities Act of 1933 by, among other things, omitting to disclose in the prospectus filed in connection with the Company’s December 2003 initial public offering of its stock that the National Audit Office of China was conducting an audit of the predecessor of the Company’s parent, China Life Insurance Company. The Court ordered that the nine actions be consolidated and restyled In re China Life Insurance Company Limited Securities Litigation, No. 04 CV 2112 (TPG), and that a consolidated amended complaint be filed. Plaintiffs filed a consolidated amended complaint on January 19, 2005, which named the Company, Wang Xianzhang, Miao Fuchun and Wu Yan as defendants, and asserts only Exchange Act Claims. Defendants jointly moved to dismiss the consolidated amended complaint on March 21, 2005. Plaintiffs then further amended their complaint. Defendants moved to dismiss the second amended complaint on November 18, 2005. That motion has been fully briefed and is pending before the Court.
2006 Outlook
In 2006, with the socio-economic development and expansion of investment channels for insurance funds, the Company will meet more opportunities. With the increasingly keen competition in the life insurance market and the uncertainties of the capital market, the Company will also face more challenges. By implementing a proactive and balanced development strategy, we will further improve our corporate governance practices and business management, strengthen cost control and risks management. By integrating its sales resources, the Company will establish and improve its efficient distribution and supporting system, and continue to maintain its leading market position. The Company will also further adjust its business structure, optimize its asset structure, strengthen cost control and sustain the growth in profitability.
Finally, I would like to take this opportunity to extend my heartfelt gratitude to our staff for their hard work and dedication. I would also like to express my sincere thanks for the support of our shareholders, as well as for the close cooperation of the Board of Directors, the Supervisory Committee and our Management. Meanwhile, the Board would express gratitude to Mr. Wang Xiangzhang who has resigned as Chairman, Mr. Miao Fuchun who has resigned as vice-president and re-designated from an executive director to a non-executive director, Mr. Fan Yingjun who has resigned as independent non-executive director and Mr. Li Liangwen who has resigned as vice-president, for their contributions to the Company when they were in office.
Yang Chao
Chairman
Beijing, China
China Life Insurance Company Limited Annual Report 2005 7
Focusing on people,
Caring for Life
8 China Life Insurance Company Limited Annual Report 2005
China Life Insurance Company Limited Annual Report 2005 9
Review
Gross Written Premiums and Deposits
For the year ended December 31
| 2005 RMB million |
2004 RMB million | |||
| Individual life insurance |
||||
| Gross written premiums |
63,205 | 50,113 | ||
| First-year gross written premiums |
19,574 | 19,900 | ||
| Single gross written premiums |
1,085 | 2,526 | ||
| First-year regular gross written premiums |
18,489 | 17,374 | ||
| Renewal gross written premiums |
43,631 | 30,213 | ||
| Deposits |
62,483 | 66,981 | ||
| First-year deposits |
49,144 | 54,662 | ||
| Single deposits |
46,061 | 52,343 | ||
| First-year regular deposits |
3,083 | 2,319 | ||
| Renewal deposits |
13,339 | 12,319 | ||
| Group life insurance |
||||
| Gross written premiums |
867 | 344 | ||
| First-year gross written premiums |
851 | 295 | ||
| Single gross written premiums |
811 | 261 | ||
| First-year regular gross written premiums |
40 | 34 | ||
| Renewal gross written premiums |
16 | 49 | ||
| Deposits |
23,463 | 21,756 | ||
| First-year deposits |
23,452 | 21,738 | ||
| Single deposits |
23,401 | 21,726 | ||
| First-year regular deposits |
51 | 12 | ||
| Renewal deposits |
11 | 18 | ||
| Accident and health insurance |
||||
| Gross written premium |
10,867 | 10,606 | ||
| Short-term accident insurance |
||||
| Gross written premiums |
5,135 | 4,977 | ||
| Short-term health insurance |
||||
| Gross written premiums |
5,732 | 5,629 | ||
| Total gross written premiums |
74,939 | 61,063 | ||
| Total deposits |
85,946 | 88,737 | ||
10 China Life Insurance Company Limited Annual Report 2005
| 1. | Business Overview |
The Company continued to pursue business restructuring in 2005, and endeavored to achieve a proactive and balanced development. The Group’s gross written premiums and policy fees for the year ended December 31, 2005 (the “Reporting Period”) were RMB81,022 million, representing an increase of 22.28% from 2004. Net profit attributable to shareholders of the Company for 2005 reached RMB9,306 million, an increase of 29.77% from 2004.
In accordance with the data released by CIRC, the Company’s market share in 2005 was 44.07%, and continued to maintain its leading position in the life insurance market in China.
In 2005, the Company continued its direction in comprehensive budgetary management and leverage on expense management to promote business restructuring. During the Reporting Period the gross written premiums were RMB74,939 million, representing a 22.72% increase from 2004. The first-year gross written premiums of long-term traditional insurance contracts were RMB20,425 million, representing an increase of 1.14% from 2004. The first-year regular gross written premiums were RMB18,529 million, representing an increase of 6.44% from 2004 and accounting for 90.72% of the first-year gross written premiums of long-term traditional insurance contracts.
In 2005, one-year new business value increased by 15.14% from 2004. This was mainly attributable to the growth in new business for regular premiums and traditional insurance contracts.
The Company offers individual and group life insurance, accident and health insurance and services. It has more than 70 million individual and group life policies, annuity contracts and long-term health insurance policies in force as at December 31, 2005.
| (1) | Individual Life Insurance business |
During the Reporting Period, the Company’s gross written premiums and policy fees attributable to individual life insurance business were RMB68,888 million, representing 85.02% of the gross written premiums and policy fees for the reporting period and an increase of RMB13,979 million, or 25.46%, over RMB54,909 million in 2004.
The gross written premiums attributable to individual life insurance business were RMB63,205 million, representing an increase of RMB13,092 million, or 26.12%, over RMB50,113 million in 2004. The first-year gross written premiums attributable to individual life insurance business were RMB19,574 million, which accounted for 30.97% of the gross written premiums attributable to individual life insurance business. The first-year regular gross written premiums attributable to individual life insurance business were RMB18,489 million, which accounted for 94.46% of the first-year gross written premiums attributable to individual life insurance business.
The Company sells both participating and non-participating life insurance products. The gross written premiums attributable to individual life insurance participating products and non-participating products during the Reporting Period were RMB31,017 million and RMB32,188 million respectively.
China Life Insurance Company Limited Annual Report 2005 11
Business
Review
| (2) | Group Life Insurance business |
During the Reporting Period, the Company’s gross written premiums and policy fees attributable to group life insurance business were RMB1,267 million, representing 1.56% of the gross written premiums and policy fees for the reporting period and an increase of RMB525 million, or 70.75%, over RMB742 million in 2004.
The Company offers both participating and non-participating group life insurance products.
| (3) | Accident and Health Insurance business |
During the Reporting Period, the Company’s gross written premiums attributable to accident and health insurance business (both of which comprise short term products) were RMB10,867 million, representing an increase of RMB261 million, or 2.46%, over RMB10,606 million in 2004. In particular, the gross written premiums attributable to accident insurance business amounted to RMB5,135 million, accounting for 6.34% of the gross written premiums and policy fees for the reporting period, while the gross written premiums attributable to health insurance business were RMB5,732 million, representing 7.08% of the gross written premiums and policy fees for the year.
| 2. | Distribution Channels |
The Company has the largest and most extensive distribution force and network in the life insurance sector in China, covering almost every county level administrative region in China, except the Tibet Autonomous Region. Exclusive agents, direct sales force and intermediaries comprising mainly commercial banks and post offices are the three major distribution channels of the Company. In 2005, the company’s distribution channels were further expanded and consolidated.
| Distribution channel | 2005 | 2004 | ||
| Exclusive agents |
640,000 | 668,000 | ||
| Direct sales force |
12,000 | 12,000 | ||
| Intermediaries |
89,000 | 87,000 | ||
| (1) | Exclusive agents |
Exclusive agents (including those who are not yet qualified as agents) is the Company’s primary distribution channel for individual life, individual accident and individual health insurance products. In 2005, the number of the Company’s exclusive agents basically remained stable. As at December 31, 2005, the Company retained nearly 640,000 agents at its over 12,000 field offices, and the percentage of certificate holders for exclusive agents was 79.2%, representing an increase of 7.2 percentage points over the 72% in 2004.
The Company retains designated supervisors to manage exclusive agents and hires full-time trainers to offer training to them. In 2005, the company continued to promote the Chartered Insurance Agency Management (“CIAM”) qualification certification program, and introduced International Award for Productivity (“IAP”) and International Quality Award (“IQA”) from Life Insurance Marketing and Research Association (“LIMRA”) to advocate outstanding performance in operation and excellence in quality. Such initiatives further facilitated team managements for the agents, improved sales productivity and quality of service, and created remarkable reputation for the team brand.
12 China Life Insurance Company Limited Annual Report 2005
The effect of “Jin Ding Project”, which aimed to improve overall sales performance and to promote the innovation of exclusive agents in marketing and management practices, was first reflected, with improvements with respect to the professional standards and sales performances of the exclusive agents sales force.
| (2) | Direct sales force |
The Company’s direct sales force is the primary distribution channel for its group life insurance and annuities, group accident and health insurance products. As at December 31, 2005, the number of the Company’s direct sales force was approximately 12,000, which remained steady and was basically same as that in 2004. In 2005, by organizing the First Group Insurance Sales Elite Summit and the Group Insurance Sales Elite Club Inauguration Conference, the Company managed to inspire the direct sales force and promote business development. The training system for the direct sales force was also improved. In addition, the Company continued to strengthen the building of key account managers team, so as to enhance the service standards for major customers.
| (3) | Intermediaries |
The Company also provides a variety of individual and group life insurance products through intermediaries. This distribution channel is largely made up of commercial bank branches, post offices, credit cooperatives, as well as professional insurance agencies and insurance brokers. The Company has established bancassurance business relationships with branches of major commercial banks and post offices. As at December 31, 2005, the Company had cooperated with more than 89,000 bank branches and post offices with 13,000 customer relationship managers, for which there were growth from those in 2004.
| 3. | Business Management |
In 2005, the Company continued to devote efforts to improving underwriting and claims management as well as customer service standards. Certain systems and management regulations were formulated and revised. Business process was adjusted and optimized. Business management was strengthened and standardized with focus on internal control and quality supervision.
| (1) | Underwriting and claims management |
The Company managed its underwriting and claims management operations and exercised risk control by setting down authorization limits on its branch offices and implementing a hierarchy-based system of underwriters and claims inspectors. In 2005, with respect to underwriting management, the Company introduced the world leading reinsurers’ underwriting assessing system. With respect to claims management, more efforts were devoted to investigation of claims so as to prevent insurance fraud. The implementation of these measures continuously increased the service awareness and professional qualities of the Company’s underwriting and claims officers. Efficiency and quality in business processing were further optimized. Underwriting and claims management were further standardized.
China Life Insurance Company Limited Annual Report 2005 13
Business
Review
| (2) | Customer service |
The Company mainly provides customer service through its customer service teams at different branches and field offices throughout China and with the support of an advanced call center. In 2005, the Company’s customer service system was further optimized by increasing service methods and improving service quality. Our centralized service platform “95519” Call Center was granted the “Award of the Best Performing Call Centre in China 2005” by the Professional Committee for the Promotion and Alliance of Customer Relationship Management by Informationalization under the Ministry of Information Industry, and was the only life insurance company receiving such award in China. It was also the second consecutive year the Company was granted this award.
| 4. | Financial Management |
In 2005, the Company continued its direction in comprehensive budgetary management and leverage on expense management to promote business restructuring. Endeavors were devoted to realize the synergy from business development, business restructuring and growth in profitability by capitalizing on the core function of financial management in operation management. Under the premises of facilitating business development, the Company further strengthened cost control and continued to conduct centralized procurement in bulk. Our consolidated cost control ratio in 2005 was 17.2%, a decrease of 1.4 percentage points from 2004. Funding management was strengthened with control over funding risk. Funding transfer limits was measured on the basis of daily average balance so as to increase the concentration of funding and the efficiency of asset management.
| 5. | Actuarial Management |
The Company’s actuarial work focused on liability valuation, product profitability assessment, cash flow analysis, actuarial risk control and experience analysis, preparation for various actuarial reports, assistance in formulating investment strategies, assistance in formulating reinsurance strategies. All the work mentioned above is to support the Company’s sustainable solid growth in an effective manner. In 2005, the Company terminated or modified certain products with greater risks and poorer profitability based on their profitability and risk assessment. In 2005, the Company achieved further progress in the research on mortality, expenses and morbidity. The Company was involved in the compilation of “China Life Insurance Mortality Table (2000-2003)” and provided more than 50% of historical information.
| 6. | Product Development |
The Company’s Product Development Committee, which is comprised of members from the Management, heads of various core business departments and professionals of the Company, is responsible for formulating product development plans and strategies for the Company. It sets down the direction of product development and engages in the discussion, studies and resolution of serious issues in the product development process. In 2005, in accordance with the change in market demand, the Company developed new products such as “Jin Xin”, “Care For Your Whole Life”, “Group Immediate Annuity”, and modified some other products. Our product line was enriched.
As at December 31, 2005, the average pricing rate of the Company’s product was 2.23%.
14 China Life Insurance Company Limited Annual Report 2005
| 7. | Investments Management |
In 2005, the Company appropriately adjusted the basis for investment through revising its “Investment Guideline” and renewed the Agreement for Entrustment of Investment with AMC. According to the change in macro- economy, capital market and money market, the proportion of investment in bond, especially in long-term bond, was increased. A prudent strategy was adopted towards equity investment. The composition of foreign exchange assets was adjusted so as to increase the investment yield. At the same time, pursuant to the matching of assets and liabilities, and complying with the principles of safety and steadiness, more control was exercised over duration matching management and risk control.
In February 2005, the Company was permitted to invest directly in the equity market in China. At the same time, the Company’s application for the qualification to deploy insurance foreign exchange funds overseas is pending for the approval by regulators. Moreover, pursuant to special approval, the Company acquired USD 250 million shares in the initial public offering of China Construction Bank Corporation (stock code: 0939) as financial investment. As at December 31, 2005, the Group held RMB494,356 million in investment assets. The Group’s investment yield was 3.86%, an increase of 37 basis points from 2004.
As at December 31, 2005, the investment portfolio of the Group was as follows:
| RMB million | ||
| Debt Securities |
255,554 | |
| Held-to-maturity securities |
146,297 | |
| Available-for-sale securities |
96,425 | |
| Financial assets at fair value through income |
12,832 | |
| Equity Securities |
39,548 | |
| Available-for-sale securities |
26,261 | |
| Financial assets at fair value through income |
13,287 | |
| Term deposits |
164,869 | |
| Statutory deposits-restricted |
5,353 | |
| Policy loans |
981 | |
| Cash and cash equivalents |
28,051 |
Debt securities
Debt securities investment includes government bonds, government agency bonds, corporate bonds and subordinated bonds/debts above specific standards, represented 51.69% of the Group’s total investment assets as at December 31, 2005, an increase of 11.62 percentage points from 2004.
Equity Securities
Equity securities investment consists of Chinese domestic investment fund that was invested in securities and investment directly invested in equity market. Such investment represented 8.00% of the Group’s total investment assets as at December 31, 2005, an increase of 3.39 percentage points from 2004.
Term deposits
Term deposits primarily held by commercial banks in China, represented 33.35% of the Group’s total investment assets as at December 31, 2005, a decrease of 13.46 percentage points from 2004.
China Life Insurance Company Limited Annual Report 2005 15
Business
Review
| 8. | IT Infrastructure |
In 2005, the Company continued to consolidate the establishment and promotion of its core operating system (CCOS, China Life Core Operating System). The implementation of CBPS8 version of business processing system was commenced in full force at the branch level for operation. Development of Health and Accident Insurance System and Corporate Annuity System were duly initiated.
Additional efforts were devoted by the Company to data concentration. The establishment of operation maintenance platform was improved so as to gradually establish a standardized operation maintenance system. In order to gradually build up a flexible IT infrastructure framework, infrastructure facilities, network and security elements were enhanced.
In 2005, the Company strengthened its cooperation with international reputable IT entities, and entered into an IT Strategic Cooperation Agreement with Microsoft for the formation of strategic partnership relationship. Construction of the Company’s value-added data service platform continued so as to enhance the standard of operation and management decisions supporting.
| 9. | Internal Control and Risk Management |
The Company’s supervisory and control system for internal control and risk management is comprised of the Board of Directors, the Audit Committee and Risk Management Committee under the Board of Directors, the Supervisory Committee, the Internal Control and Risk Management Committee under the Management, and the executive and supervisory departments, which consist of the Company’s internal control and compliance department (newly established in January 2006, based on the former risk management department), legal affairs department and internal auditing department.
In 2005, the Company improved its supervision and management on investment risks. Examinations on investment assets were regularly conducted and risk analysis reports were compiled accordingly. Moreover, the Company proactively introduced international leading computer-assisted management system to enhance the management of investment assets and liabilities matching, and to implement the dynamic supervision and control.
In 2005, the internal audit system that has been vertically led and unitarily managed was further improved. At the same time, the Company revised and formulated a series of internal audit systems and working guidelines, namely “Internal Control – Audit Regulations”, “Projects Audit Regulations”, “Internal Control – Ratings Measures”. In 2005, various internal audit work in different forms commenced with reference to the Company’s key risk aspects and control mechanisms. Supervision and examination on the reform and improvement issues of branches were strengthened.