2012 Annual ResultsMarch 28, 2012 Hong Kong ● Beijing
- 2 -Forward-looking StatementsCertain statements contained in this presentation may be viewed as “forward-lookingstatements” within the meaning of Section 27A of U.S. Securities Act and Section 21E of U.S.Securities Exchange Act of 1934, as amended. Such forward-looking statements involve knownand unknown risks, uncertainties and other factors, which may cause the actual performance,financial condition or results of operations of the Company to be materially different from anyfuture performance, financial condition or results of operations implied by such forward-looking statements. Further information regarding these risks, uncertainties and other factorsis included in the Company’s Annual Report on Form 20-F for the fiscal year ended December31, 2011 filed with the U.S. Securities and Exchange Commission, or SEC, on April 26, 2012;and in the Company’s other filings with the SEC. The Company does not undertake anyobligation to update any forward-looking statement, except as required under applicable law.All information provided in this presentation is as of the date of this presentation, and theCompany undertakes no duty to update such information, except as required under applicablelaw.Unless otherwise indicated, the Chinese insurance market information set forth in thispresentation is based on public information released by CIRC.
2012 Business Development Overview- 5 -In 2012, the Chinese economy slowed down and the capital marketremained weak. The Company faced unprecedented challenges in bothunderwriting and investment businesses amid a significant growthdeceleration of the life insurance industry. Guided by the keynote of“tackling difficulties, making steady progress and striving for expansion”,the Company continued to strengthen its market leading position andachieved the following results: Adapted to the complicated environment and achieved steady businessgrowth Focused on both business scale and value and attained steady growth innew business value Product innovation and technological application effectively drovebusiness development Maintained stable size of agent force while improving overall quality
Vigorously implement the “Innovation driving developmentstrategy ” , continue adhering to the keynote of “tackling difficulties,making steady progress and striving for expansion”, equallyemphasize both scale and value to ensure market leadership andsustainable development.The Company’s Current Development Strategy- 6 - Propel business development and maintain steady growth of new business value Adhere to business mix adjustment to promote business growth mode change Foster product and service innovation to raise core competiveness Apply modern technology to improve operational management Proactively participate in policy-driven business to fulfill corporate socialresponsibilities
Outlook for 2013- 7 -Opportunities• Social and individual wealthaccumulation will set a solidfoundation for future developmentof insurance industry.• Further urbanization andpopulation aging will cause furtherincrease in demand for insurance.• Improvements in multi-level socialsecurity system will wideninsurance business scope andfacilitate development modechange• Investment channel expansion willhelp improve investment yields andasset-liability matching.Challenges• Economic growth is slowing downand the insurance industry isencountering challenges inmaintaining growth.• Bank wealth management productscontinue to exert pressure on thebancassurance channel, resulting inpressing needs for developmentmode change.• Labour cost keeps rising, and agentforce faces recruitment challenges.• The industry is facing pressuresfrom increasing surrender andmaturity payments.
Section II: Business review
Development of the Life Insurance Industry in 2012956,000995,7892011 2012Industry Gross WrittenPremiums- 9 -Overview of life insurance sector:The life insurance industry’s growth ratedropped noticeably due to complex macro-economic environment, sluggish capital marketand competition from wealth managementproducts offered by banks. As new business decreased, the growth oftotal premiums was driven by renewalpremiums Individual agent channel premiumscontinued to grow with the help of renewalpremiums, while new premiums throughbancassurance channel decreasedsignificantly Individual agent recruitment continued toencounter difficulties The development of new sales channelsacceleratedRMB mn
15,802 16,4322011 201248,104 45,53599,61780,5762011 2012First-year Regular Premiums Single PremiumsShort-term Premiums154,729180,1992011 2012Steady Growth in Premium IncomeGross Written Premiums- 10 -Long-term First-year PremiumsRenewal Premiums318,252 322,7422011 2012RMB mnRMB mnRMB mn147,721126,111RMB mn
Business Structure ImprovementLong-term FYPFirst-year Regular PremiumsLong-term PremiumsShort-term Premiums33% 36%67% 64%2011 2012First-year Regular Premiums Single Premiums48%34%12%25%40% 41%2011 2012Less than 5 years 5-9 years 10 years and longer51% 59%49% 41%2011 2012Renewal Premiums Long-term FYP55% 58%45% 42%2011 2012Short-term Accident Short-term Health- 11 -
Steady Increase of Business Value- 12 -Value of One Year’s SalesRMB mnIn-force Business Value20,19920,8342011 2012125,282153,444182,588209,088050,000100,000150,000200,000250,0002009 2010 2011 2012Note:: Both value of one year’s sales and in-force business value are after cost of solvency marginRMB mn
7.1%4.0%-1.9%8.7%1.3%Individual, Group and Short-term Business- 13 -IndividualBusiness2012305,841Change2011GroupBusiness469Short-termBusiness16,432Short-termHealth6,905 7,036Short-termAccident9,527 8,766302,01243815,802RMB mn
Surrender Rate and Persistency RateSurrender Rate Long-term Individual PolicyPersistency Rate- 14 -2.79% 2.72%2011 201293.0% 92.5%91.0%87.6% 86.9%88.5%72%77%82%87%92%2010 2011 201214 Months 26 MonthsNote :Surrender rate = Surrender amount during the year / (reserves for long-term health insurance and life insurance liabilities at the beginning of the period ＋premiums from life insurance and long-term health insurance during the year)Policy persistency rate = in-force policies within the review month that are commenced 14/26 months prior to the review month / policies that are commenced14/26 months prior to the review month
38,750 37,762121,838141,9992011 2012New Business Renewal PremiumsIndividual Agent Channel Business development： Individual agent business achieved solid development，and business mix further improved With clear product strategy, traditional protection business grew significantly Sales Force Development：Sales team remained stable, total number: 693,000- 15 -Agent Channel GWP50.5%55.7%23.7%26.5%5%15%25%35%45%55%2011 2012Share in Gross Written Premiums Share in New Business160,588179,761Agent Channel Share inGWP & New Business2.5%16.5%Note: In 2012, the Companys channel premium breakdown was presented based on the separate groups of sales personnels belonging toexclusive individual agent team, direct sales representatives, bancassurance sales team, and other distribution channels respectively, with thecorresponding data for 2011 adjusted accordingly.RMB mn
112,33091,58032,03337,2832011 2012New Business Renewal Premiums96,97478,15115,29913,3732011 2012Single Premiums First-year Regular PremiumsBancassurance Channel Business development: Affected by bank wealth management products as well as industryregulation, bancassurance channel’s new business decreased, renewal premiumscontinuously increased Sales Force Development : the total number of account managers and financial advisorsreached 46,223, up by 1,712 than last year end.- 16 -Bancassurance FYP144,363128,863Bancassurance GWP18.5%16.4%19.4%12.6%RMB mn RMB mn
298232194 3242011 2012New Business Renewal Premiums10,039 10,8042,7702,7582011 2012Short-term Business Long-term BusinessDirect Sales and other Channels Direct Sales Channel ： Short-term business achieved good growth with furtherimproved business mix and consolidated market leadership. Number of direct salesrepresentatives was 16,000 Other Channels: Speeded up the layout of new channels, especially telemarketingchannel, and completed construction of 23 telemarketing centers. In 2012, telemarketingchannel achieved excellent business mix, conducive to its sustainable development- 17 -12,80913,562Direct Sales Channel GWP Other Channels* GWP4925567.6%0.4%22.1%67.0%Note: Other channels mainly refer to telemarketing channelRMB mn RMB mn
Operational Management Enhanced by New Technologies- 18 -The promotion of E-China Life mobile marketing systemfacilitated business developmentUpgraded counter service lifted customer satisfactionremarkablyFully launched telephone underwriting service topromote business developmentInitiated pilot CRM program to promote sales
2013 Development Focuses- 19 -Continue to followthe keynote of“tackling difficulties,making steadyprogress andstriving forexpansion”, equallyemphasize scale andvalue, and leverageinnovations to seekbreakthroughs, andpromote sustainableand healthydevelopment.Focus on first-year business developmentMake efforts to enhance business valueStrive to promote product innovationEffectively enhance service capabilitiesProactively explore new business areas
Section III: Financial Summary
60,7221,705(12,913)33773,2434,167(31,043)(313)Investment IncomeNet Realized Gainson Financial Assets Impairment LossesNet fair value gainsthrough profit orloss2011 2012RevenuesNet Premiums Earned Total RevenuesInvestment Income & Realized/UnrealizedGains and Impairment LossesRMB mn RMB mnRMB mn318,276 322,1262011 2012370,899 371,4852011 2012- 21 -
Cost ControlUnderwriting and PolicyAcquisition Cost RatioAdministrative Expenses Ratio7.4% 7.5%2011 20125.8%6.3%2011 2012Notes：Underwriting and Policy Acquisition Cost Ratio= Underwriting and policy acquisition costs/ total revenueAdministrative expenses ratio = Administrative expenses / total revenue- 22 -
Equity Holders’ EquityRMB mn- 24 -191,530221,08511,06124,995050,000100,000150,000200,000250,0002011.12.31 EquityAttributable to EquityHolders of the CompanyNet Profit Attributable toEquity Holders of theCompanyOther ComprehensiveIncomeDividends 2012.12.31 EquityAttributable to EquityHolders of the Company（6,501）
Solvency RatioSolvency RatioIn 2012, the companyssolvency ratio improveddue to the increase incomprehensive income.Meanwhile, the companygrasped marketopportunity and issuedRMB 38 billionsubordinated term debt,which further raisedsolvency ratio.- 25 -170.12%235.58%2011.12.31 2012.12.31
Section IV: Investment Performance
1,494,9691,790,8382011.12.31 2012.12.31Investment Assets and PortfolioInvestment AssetsRMB mn- 27 -Investment Portfolio44.6% 46.2%34.8% 35.8%12.2% 9.2%3.7% 3.9%4.7% 4.9%2011.12.31 2012.12.31Debt Securities Term DepositsEquity Securities Cash & Cash EquivalentsOthersNote: Investment assets ＝Cash and Cash Equivalents+ Securities at fair value through income+Available-for-sale Securities ＋Held-to-maturity Securities +TermDeposits +Securities Purchased under Agreements to Resell＋Loans + Statutory Deposits
Investment Yields- 28 -Gross Investment YieldNet Investment Yield4.28%4.44%2011 20123.51%2.79%2011 2012ComprehensiveInvestment Yield1.57%4.97%2011 2012Notes: Net investment yield = (Investment income-Business tax and extra charges for investment)/((Investment assets at the beginning of the period +Investment assets at the end of the period)/2)Gross investment yield = (Investment income + Net realized gains/(losses) and impairment on financial assets + Net fair value gains/(losses) throughprofit or loss - Business tax and extra charges for investment)/ ((Investment assets at the beginning of the period + Investment assets at the end of theperiod)/2)Comprehensive investment yield = (Investment income + Net realized gains/(losses) and impairment on financial assets + net fair valuegains/(losses) through profit or loss + current net fair value changes of available-for-sale securities recognized in other comprehensive income -business tax and extra charges for investment) / ((investment assets at the beginning of the period + investment assets at the end of the period) / 2)
Alternative Investments In 2012, the Company seized the opportunity to invest RMB11.74 billion in new infrastructural debt plans and real estateplans. Cumulated invested amount reached RMB 40.53billion, accounting for 2.3% of investment assetsDebt Investment PlanEquity Investment- 29 - The Company made unlisted equity investment in COFCOFutures with a 35% stake, the first direct equity investmentsince its deregulation in 2010. The Company also investedRMB 600 million in the private equity fund - CITICIndustrial Fund IIIAlternative channels can help to facilitate the Companys strategic financial investment,enhance net investment returns, share in the capital appreciation from Chinas economicdevelopment, industry upgrades, and company public listings, and diversify the sourcesof returns
Section V: Embedded Value
Embedded Value Breakdown by Components2012.12.31128,507337,596245,134050,000100,000150,000200,000250,000300,000350,000400,000Adjusted Net Worth In-force Business Value Cost of Solvency Margin Embedded Value- 31 -（36,046）Note：Numbers may not be additive due to rounding.RMB mn
20,19920,8342011 2012110,266128,507182,588209,0882011.12.31 2012.12.31In-force Business Value(After cost of solvency margin)Adjusted Net WorthGrowth of EV and Value of New BusinessValue of One Year’s SalesEmbedded Value337,596292,854- 32 -RMB mn RMB mnNote：Numbers may not be additive due to rounding.
Embedded Value Movement AnalysisEV Movement from 2011 year end to 31, December 2012- 33 -292,854337,59630,21520,8349,676 304（879）（1,905）（6,954） （49）（6,501）050,000100,000150,000200,000250,000300,000350,000400,000EV atBeginning of2012ExpectedReturnsValue of OneYears SalesOperatingExperienceVarianceInvestmentExperienceVarienceMethodologyModel andAssumptionChangesMarket ValueTax and OtherAdjustmentsExchangeGains orLossesShareholderDividendsOthers EV atDecember31,2012Note：Numbers may not be additive due to rounding.RMB mn
Appendixes: Sensitivity Analysis–Investment Return andDiscount RateValue of One Year’s Sales after Cost ofSolvency MarginValue of In-force Business after Cost ofSolvency Margin- 35 -209,088( 35,154)( 10,296)11,05835,401InvestmentReturn -10%Risk Discountrate=11.5%Base CaseScenarioRisk Discountrate=10.5%InvestmentReturn +10%20,834( 2,758)( 1,089)1,1682,785InvestmentReturn -10%Risk Discountrate=11.5%Base CaseScenarioRisk Discountrate=10.5%InvestmentReturn +10%RMB mn RMB mnNote：Numbers may not be additive due to rounding.
Sensitivity Analysis-Operational and other AssumptionsSensitivity Analysis Results (after the cost of solvency margin)- 36 -Claim Ratio for Short TermBusiness+/-10%Morbidity Rates+/-10%Lapse Rates+/-10%Mortality Rate for Non-Annuity Products +/-10%,Mortality Rate for AnnuityProducts -/+10%Expenses+/-10%Base Case ScenarioValue of In-force Business Value of One Year’s Sales-1,760-87-177-117-5961,76088177118596-2,000 -1,000 0 1,000 2,000-2,609-1,903-1,267-2,053-2812,6091,9341,3112,073281-3,000 -2,000 -1,000 0 1,000 2,000 3,000209,088 20,834Note：Numbers may not be additive due to rounding.RMB mn
Sensitivity Analysis Results –other AssumptionsSensitivity Analysis Results- 37 -Value of In-forceBusiness after the cost ofsolvency marginValue of One Year’sSales after the cost ofsolvency marginBase Case Scenario 209,088 20,834Solvency Margin at 150% ofStatutory Minimum200,097 19,154Taxable income based on theaccounting profit in accordanceto “the Provisions on theAccounting Treatment Relatedto Insurance Contracts” underone possible scenario211,901 20,191Using 2011 EV assumptions 209,383 21,068RMB mn
Awards in 2012“2012 China Fortune 500”ranking 10th“2012 Annual Corporate Disclosure Award”China Life has been selected in “Forbes Global 2000” for nineconsecutive years, ranking 65th in 2012.“Top 50 Most Valuable Brands in China ” in 2013, ranking 7th.- 38 -
Fulfilling Corporate Social ResponsibilitiesSponsoring orphans Continued sponsorship for Wenchuan Earthquake, YushuEarthquake and Zhouqu mudslide orphans, and held the“Fourth China Life Summer Camp”.Funding for schoolbuilding Funded the building of three more China Life primary schools inShangri-La County, Diqing Tibetan Autonomous Prefecture ofYunnan Province, Ziyang City of Sichuan Province, and LiangpingCounty of Chongqing city.Caring for women’shealth Donation was made to related foundations to provide women inimpoverished areas with “Screening for Two GynecologicalCancers” and protection against major diseases.- 39 - Donation was made to the Beijing Municipal Public SecuritySupport Foundation for impoverished families of police officersAidingimpoverishedfamiliesNote：These charitable undertakings were operated by China Life Foundation.