ANNOUNCEMENT RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

Transcription

1 The Stock Exchange of Hong Kong Limited takes no responsibilities for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss however arising from or in reliance upon the whole or any part of the contents of this announcement. (Incorporated in Hong Kong with limited liability) (Stock Code: 966) ANNOUNCEMENT RENEWAL OF CONTINUING CONNECTED TRANSACTIONS Reference is made to the announcement of the Company dated 11 January 2006 and the circular of the Company dated 27 January 2006 in relation to, inter alia, the continuing connected transactions contemplated under the Continuing Connected Transactions Agreements. The Continuing Connected Transaction Agreements will expire on 31 December On 23 December 2008, the Group and the CIHC Group entered into the Supplemental Agreements to renew the terms of the Continuing Connected Transaction Agreements for three years from 1 January 2009 to 31 December As at the date of this announcement, CIHC is a substantial shareholder indirectly holding an approximate 54.38% interest in the Company. CIHC and its associates are connected persons of the Company and thus the Continuing Connected Transactions constitute continuing connected transactions of the Company. Since the applicable percentage ratios are, on an annual basis, more than 0.1% but less than 2.5%, the Continuing Connected Transactions are only subject to reporting and announcement requirements and are exempt from the independent shareholders approval requirement under Chapter 14A of the Listing Rules. I. BACKGROUND Reference is made to the announcement of the Company dated 11 January 2006 and the circular of the Company dated 27 January 2006 in relation to, inter alia, the continuing connected transactions contemplated under the Continuing Connected Transactions Agreements. The Continuing Connected Transaction Agreements will expire on 31 December On 23 December 2008, the Group and the CIHC Group entered into the Supplemental Agreements to renew the Continuing Connected Transactions Agreements for a term of three years from 1 January 2009 to 31 December

2 II. THE CONTINUING CONNECTED TRANSACTIONS A. The Reinsurance Transactions Date On 23 December 2008, CIRe and CIHC entered into a supplemental agreement to renew the term of the Reinsurance Agreement for three years from 1 January 2009 to 31 December Transaction Nature Pursuant to the Reinsurance Agreement, CIRe agrees, and CIHC agrees to procure its subsidiaries, to enter into various reinsurance contracts with members of the CIHC Group. Pursuant to the said reinsurance contracts, CIRe acts as reinsurer and accepts risks in return for premium from such members of the CIHC Group. The Reinsurance Transactions consist of both treaty and facultative business and the range of risks covered includes all lines of general reinsurance risks and certain classes of long term reinsurance risks on both a proportional and non-proportional basis. Terms CIRe will enter into the reinsurance contracts on the same basis as it accepts reinsurance business from other independent customers, and the terms and conditions of the reinsurance contracts, in which other independent third party reinsurers may also participate, will be negotiated on an arm s length basis and will be entered into on normal commercial terms. Under the reinsurance contracts, the Group will receive the agreed premiums on a quarterly basis or such other basis as may be agreed by the parties to the reinsurance contracts and pay commission to the CIHC Group on a quarterly basis or such other basis as may be agreed by the parties to the reinsurance contracts. The premiums to be received by the Group and the commission payable to the CIHC Group will be settled on a net basis. B. The Investment Management Services On 23 December 2008, CIGAML and CIHC entered into a supplemental agreement to renew the term of the Master Investment Management Services Agreement for three years from 1 January 2009 to 31 December Transaction Nature Pursuant to the Master Investment Management Agreement, CIGAML agrees, and CIHC agrees to procure its subsidiaries, to enter into various investment management agreements with the CIHC Group. Pursuant to the investment management agreements, CIGAML provides investment advice and investment management services to relevant members of the CIHC Group in managing the Trust Fund. 2

3 Terms CIGAML will receive from the CIHC Group management fees, performance bonus fees and other fees for its investment management services per annum for each investment management agreement (together, the Management Fees ) in cash and such Management Fees will be calculated on the basis of (a) a certain percentage, to be fixed by reference to market standards, of the net asset value of the Trust Fund; and/or (b) a performance bonus fee representing a certain percentage, to be fixed by reference to market standards, of the amount of net investment return at the end of the relevant calendar year in excess of an amount equivalent to a certain percentage of the daily average balance of the settler s subscription monies or the increase in the net asset value of the relevant Trust Fund managed by CIGAML; and/or (c) such other bases as may be agreed by the parties to the investment management agreement. C. Payment of Training Fees On 23 December 2008, the Company and CIHC entered into a supplemental agreement to renew the term of the Training Services Agreement for three years from 1 January 2009 to 31 December Transaction Nature The training department of the CIHC Group will provide training services to directors, employees, agents and sales representatives of members of the Group. Such training services include the provision of training to staff, training materials and information and organization of training-related seminars and activities on basic insurance knowledge, risk management, presentation skills, and other areas. Terms The Group will pay training fees to CIHC in respect of the training services provided (the Training Fees ) in cash. At the commencement of each financial year, CIHC will notify the Group on the projected amount of Training Fees payable by the Group by reference to the planned training activities to be conducted in that financial year and the proportion to be shared by the Group. Prior to 31 March of each financial year, the Group shall pay to CIHC the Training Fees in advance (the Advance Payment ). At the end of the relevant financial year, if the Advance Payment is insufficient to cover the actual Training Fees incurred during that financial year, the Group will pay the shortfall within 90 days from the end of the respective financial year. On the other hand, if the Advance Payment is more than the actual Training Fees incurred, the surplus will, at the discretion of CIHC, be refunded to the Company or be brought forward to the next financial year as part of the Advance Payment for the next financial year. The Training Fees to be charged by the CIHC Group will be based on the number of persons from the Group who receive the training services as a proportion to the total number of persons who receive the training services and/or other reasonable bases as may be determined by the Company and CIHC. 3

4 III. HISTORICAL FIGURES According to the audited consolidated accounts of the Group for the two financial years ended 31 December 2007 and the unaudited consolidated management accounts of the Group for the nine months ended 30 September 2008, the aggregate amounts under the Continuing Connected Transactions Agreements are as follows: Reinsurance Transactions For the financial For the financial For the nine year ended year ended months ended 31 December December September 2008 HK$ 000 HK$ 000 HK$ 000 The gross premium income ceded by the CIHC Group and underwritten by CIRe 173, , ,573 The commission expenses paid by the Group 61,119 72,946 74,072 Investment Management Services The Management Fees received by the Group 7,237 17,837 6,401 Training Fees The Training Fees paid by the Group to CIHC 4,120 4,780 4,415 IV. ANNUAL CAPS The annual caps for the Continuing Connected Transactions are as follows: Reinsurance Transactions For the year ending 31 December HK$ 000 HK$ 000 HK$ 000 The gross premium income to be ceded by the CIHC Group and underwritten by CIRe 300, , ,000 The commission expenses to be paid by the Group 100, , ,000 Investment Management Services The Management Fees to be received by the Group 30,500 35,100 40,300 Training Fees The Training Fees to be paid by the Group to CIHC 16,000 16,000 16,000 4

5 V. BASIS FOR THE ANNUAL CAPS The Annual Caps are determined based on the following: (a) (b) (c) (d) (e) the historical value of the transactions under the Continuing Connected Transactions Agreements; the projected value of new business that are likely to be procured; in relation to the Reinsurance Transactions, the rapid expansion of the PRC insurance markets, the rapid business growth and development of the CIHC Group and the CIHC Group s intention to develop its business in other parts of Asia which will bring more potential business opportunities to the Group to engage in reinsurance business through the CIHC Group; in relation to the Investment Management Services, the expected increase in asset size of the Trust Fund to be managed by the Group and the expected increase in performance fees, which in turn varies depending on the actual performance of the equity markets; and in relation to the Training Services, the projected increase of the number of directors, employees, agents and sales representatives of the members of the Group who will receive the training services, the substantial increase in staff members and agencies by organic growth and the acquisition of a new subsidiary and the significant appreciation of the Renminbi in the past few years. The number of directors, employees, agents and sales representatives of the members of the Group has increased steadily during the period from 2005 to VI. REASONS FOR AND BENEFITS OF ENTERING INTO THE CONTINUING CONNECTED TRANSACTIONS The CIHC Group is mainly engaged in insurance underwriting activities, both in general and life insurance businesses, in the PRC, Hong Kong, Macau, various Asian countries and other parts of the world. It is beneficial for the Group to enter into the Reinsurance Transactions with the CIHC Group, as the geographic and product focuses of the CIHC Group complement the core reinsurance business lines of the Group. With regard to the Investment Management Services, the funds of the CIHC Group managed by CIGAML constitute a substantial portion of the total funds that it manages. Such services enable CIGAML to generate a steady flow of income continuously. The growth in assets under the management of CIGAML will enhance and bolster its efforts to participate in the fast growing PRC funds management industry. The Training Services will enable the Group to participate in a comprehensive training package organized by the CIHC Group at reasonable costs. The systematic training provided by the CIHC Group will enable the Group to remain knowledgeable and up-to-date with the prevailing rules and regulations, and current best practices in management, sales and marketing. The Directors (including the non-executive Directors) consider that the Continuing Connected Transactions have been and will be conducted in the ordinary and usual course of business of the Group and on an arm s length basis, on normal commercial terms or on terms no less favourable than those available from or to independent third parties (as the case may be), and the terms thereof and the Annual Caps are fair and reasonable and in the interests of the shareholders of the Company as a whole. 5

6 VII. LISTING RULES REQUIREMENTS As at the date of this announcement, CIHC is a substantial shareholder indirectly holding an approximate 54.38% interest in the Company. CIHC and its associates are connected persons of the Company and thus the Continuing Connected Transactions constitute continuing connected transactions of the Company. Since the applicable percentage ratios are, on an annual basis, more than 0.1% but less than 2.5%, the Continuing Connected Transactions are only subject to reporting and announcement requirements and are exempt from the independent shareholders approval requirement under Chapter 14A of the Listing Rules. VIII. GENERAL The principal activity of the Company is investment holding. The principal activities of the Group are the underwriting of all classes of global reinsurance business, direct life insurance business in the PRC and direct property and casualty insurance business in the PRC. The Group also carries on operations in asset management, insurance intermediation and pensions, and to support its insurance activities, holds money market, fixed income, equity and property investments. The principal activities of the CIHC Group are insurance underwriting and securities broking, and the holding of various investments. IX. DEFINITION In this announcement, the following expressions have the meanings set out below unless the context requires otherwise: Annual Caps associate(s) Board CIGAML CIHC CIHC Group CIRe the annual caps of the Continuing Connected Transactions for the three years ending 31 December 2011 has the meaning ascribed to it under the Listing Rules the board of Directors China Insurance Group Assets Management Limited ( ), a company incorporated in Hong Kong with limited liability and wholly-owned by the Company China Insurance (Holdings) Company, Limited ( ( ) ), a joint stock limited company established in the PRC and the ultimate holding company of the Company, which is interested indirectly in an approximate 54.38% interest in the Company as at the date of this announcement CIHC and its subsidiaries from time to time China International Reinsurance Company Limited, a company incorporated in Hong Kong with limited liability and wholly-owned by the Company 6

7 Company Continuing Connected Transactions Continuing Connected Transactions Agreements Director(s) Group HK$ Investment Management Services Listing Rules Master Investment Management Agreement Reinsurance Agreement Reinsurance Transactions Stock Exchange Supplemental Agreements Training Services China Insurance International Holdings Company Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the main board of the Stock Exchange the continuing connected transactions between the Group and the CIHC Group pursuant to the Continuing Connected Transactions Agreements as supplemented by the Supplemental Agreements collectively the Reinsurance Agreement, the Master Investment Management Agreement and the Training Services Agreement director(s) of the Company the Company together with its subsidiaries Hong Kong dollars, the lawful currency of Hong Kong the investment advice and investment management services provided by CIGAML to CIHC Group, as more particularly set out under the paragraph headed The Investment Management Services under the section headed The Continuing Connected Transactions of this announcement the Rules Governing the Listing of Securities on the Stock Exchange the agreement dated 11 January 2006 entered into between CIGAML and CIHC in relation to the Investment Management Services the agreement dated 11 January 2006 entered into between CIRe and CIHC in relation to the Reinsurance Transactions the continuing connected transactions between CIRe and the CIHC Group, as more particularly set out under the paragraph headed The Reinsurance Transactions under the section headed The Continuing Connected Transactions of this announcement The Stock Exchange of Hong Kong Limited collectively the supplemental agreement to the Reinsurance Agreement dated 23 December 2008 entered into between CIRe and CIHC, the supplemental agreement to the Master Investment Management Agreement dated 23 December 2008 entered into between CIGAML and CIHC, the supplemental agreement to the Training Services Agreement dated 23 December 2008 entered into between the Company and CIHC the training services provided by the CIHC Group to directors, employees, agents and sales representatives of members of the Group, as more particularly set out under the paragraph headed Payment of Training Fees under the section headed The Continuing Connected Transactions of this announcement 7

8 Training Services Agreement Trust Fund the agreement dated 11 January 2006 entered into between the Company and CIHC in relation to the Training Services the investment fund of various trusts of which members of the CIHC Group are the trustees % per cent Hong Kong, 23 December 2008 By Order of the Board China Insurance International Holdings Company Limited Ng Yu Lam Kenneth Executive Director and Chief Executive Officer As at the date of this announcement, the Board is comprised of 10 Directors, of which Mr. LIN Fan, Mr. SONG Shuguang, Mr. XIE Yiqun, Mr. NG Yu Lam Kenneth, Mr. SHEN Koping Michael and Mr. LAU Siu Mun Sammy are executive Directors, Mr. ZHENG Changyong is a non-executive Director, and Dr. WU Jiesi, Mr. CHE Shujian and Mr. LAU Wai Kit are independent non-executive Directors. 8