2010 Annual Results. March 23, 2011

Transcription

1 2010 Annual Results March 23, 2011

2 Forward-looking Statements Certain statements contained in this presentation may be viewed as forward-looking statements within the meaning of Section 21E of U.S. Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and 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 any future performance, financial condition or results of operations implied by such forwardlooking statements. Further information regarding these risks, uncertainties and other factors are included in the Company s Annual Report on Form 20-F for the fiscal year ended on December 31, 2009 filed with the U.S. Securities and Exchange Commission, or SEC, on April 29, 2010; and in the Company s other filings with the SEC. The Company does not undertake any obligation 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 the Company undertakes no duty to update such information, except as required under applicable law. Unless otherwise indicated, the Chinese insurance market information set forth in this presentation is based on public information released by CIRC

3 2 Agenda Section I 2010 Highlights Section II Business Review Section III Financial Summary Section IV Investment Performance Section V Embedded Value

4 Section I: 2010 Highlights 3

5 4 Overall Performance Steady and healthy business growth and effective business mix restructuring Stable investment income as a result of proactive investment strategy adjustment Further consolidation of corporate infrastructure and strengthened risk management

6 Results Highlights Change Gross Written Premiums 318, , % Gross Investment Income 64,151 60, % Net profit Attributable to Equity Holders 33,626 32, % Investment Assets 1,336,245 1,172, % Equity Holders Equity 208, , % Weighted Average ROE 16.02% 17.13% ppts EV per Share Yuan Yuan Yuan Note :Gross Investment Income (IFRS) = Investment Income + Net Realized Gains on Financial Assets + Net Fair Value Gains through Income Business Tax and Extra Charges for Investment 5

7 6 Further Enhanced Corporate Infrastructure Continuous efforts for sales force buildup. To stay competitive and effectively manage our sales force, we modified and implemented fundamental policies for individual, group and bancassurance channels, and standardized management was fostered Stronger IT support. Implemented nationwide centralized data management, providing integrated data support to both head office and branches, strengthened sales capabilities with trial launch of E-commerce sales support platform Upgraded customer service. Nation-wide implementation of customer service standards and further improvement of customer relationship management

8 7 Effective Risk Control System Risk Management and Internal Control Structure Audit Committee Board of Directors Risk Control Committee Strengthened Risk Management System Compliance with SOX 404 from 2006 for five consecutive years Internal Control & Risk Management Committee Senior Management 2010 Internal Control Implementation Manual completed with commitment mechanism for internal control standards Supervision Dept Sales Supervision Dept Audit Dept. Internal Control & Risk Management Dept. Branches Internal Control & Risk Management Committee/ Internal Control & Compliance Dept. Sub-branches Supervision Dept. / L&C Position Legal & Compliance Dept Risk precaution and screening rolled out by setting up risk identification, evaluation, and reporting system between headquarters and branches Credit rating classification for individual agents initiated

9 8 Proactively Assuming Social Responsibilities The largest life insurance sales force in China, creating a lot of job opportunities Expanding the New Rural Cooperative Medical Insurance and complementary medical insurance Proactive in assuming social responsibilities with due consideration to both social and corporate interests Breakthrough in New Rural Pension Scheme Offering donations for earthquake relief and sponsoring earthquake orphans

10 9 Strong Brand Recognition Fortune 500 for 8 consecutive years, 118 th in 2010, 8 th among the named 54 Chinese enterprises Enlisted in Global Top 500 Most Valuable Brands for 4 consecutive years, 5th among China s 500 Most Valuable Brands Forbes Global 2000 for 7 consecutive years FT Global Top 500, 41 st in place by market cap Corporate Governance of the Year and 100 Most Profitable Companies by FinanceAsia in 2010 Enlisted three indices of Hang Seng Corporate Sustainability Index Series

11 Outlook Opportunities Challenges China s insurance sector will benefit from continued economic growth, per capita income increase, consumption mix upgrading, urbanization, aging population, and improvement of people s wellbeing in mediumto long-term Improving regulatory regime creates favorable environment Improving investment environment and diversified investment channels help insurers enhance their profitability To maintain economic growth while controlling inflation creates uncertainties on macroeconomic environment and macrocontrol policies, posing challenges to our business development, asset management and risk control Increasing competition exerts pressure for maintaining market leadership while optimizing business mix New bancassurance rules could generate uncertainties towards business development and regular premium growth in bancassurance

12 Section II: Business Review 11

13 12 Overview of Life Insurance Sector Life insurance premiums exhibit a high growth Bancassurance, as one of the key growth drivers, contributes over 50% of total premiums No. 2 Interpretation of Accounting Standards for Business Enterprises steers life insurers to adjust product mix. Premiums from participating products reached a historical high The growth of sales force slowed down due to the deceleration of labor force growth, and lack of competitiveness of insurance agent compensation

14 13 Stable Business Growth Gross Written Premiums Long Term First-year Premiums 275, , , ,277 First Year Regular Premiums Renewal Premiums 52, ,977 39, ,429

15 Effective Adjustments of Business Mix First Year Regular Premiums in Long-term FYP First Year Regular Premiums Breakdown 75% 70% 10 Years or Longer, 34% Less than 5 Years, 38% 25% 30% First Year Regular Premiums Single Premiums Renewal Premiums in GWP 5-9 Years, 28% Accident Premiums in Short-term Premiums 62% 60% 50% 49% 38% 40% 50% 51% Renewal Premiums First-year Premiums Accident Insurance Short-term Health Insurance 14

16 15 Steady Growth in Individual, Group and Short-term Business Individual Business Group Business Short-term Business 302,781 14, ,715 14, , ,422 6,989 7, , , ,076 7,657 First-year Premiums Renewal Premiums Accident Insurance Short-term Health Insurance

17 Stable Policy Persistency Experience In 2010, our surrender rate remained at a low level of 2.31%, successfully warding off abnormal surrender risks Further Decrease in Surrender Rate Long-term Individual Policy Persistency Rate 3.50% 3.00% 3.30% 96% 94% 92% 91.9% 92.5% 93.7% 93.0% 2.54% 90% 2.50% 2.31% 88% 86.4% 86.1% 87.4% 87.6% 2.00% 86% 84% 1.50% % Months 26 Months Note :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 commenced 14/26 months prior to the review month 16

18 Optimizing Key Distribution Channels Agent Force Direct Sales Bancassurance Improving overall agent force quality by enhancing the build-up of agent managers and reducing less productive agents Agent force decreased to 706,000 in 2010 Fast growth of short term business, steady development of corporate annuity business, and participated in government-sponsored business. Direct sales representatives increased by 11.8% YoY to 14,000 Regular premiums grew by 82% YoY, accounting for a higher percentage in total premiums Account managers and financial advisors increased by 4.8% YoY to 44,000 17

19 Business Development Strategies Business Strategy: Continue to focus on regular payment business and increase business value Product Strategy: Focus on traditional and participating products while moderately developing unitlinked, universal and other new investment type products Transforming business model, accelerating business growth, deepening reform, enhancing infrastructure, and operating in compliance with regulations, following China Life s unique development path Market Strategy: Strengthen market leadership and further improve competitiveness in urban markets Distribution Strategy: Individual agents as the key channel while leveraging complementary strength from group and bancassurance channels

20 Section III: Financial Summary 19

21 20 Steady Top-line Growth Net Premiums Earned Total Revenues 275, , , ,290 Investment Income and Realized / Unrealized Gains 48,872 38,890 21,244 15,841 1, Investment Income Net Realized Gains on Financial Assets Net Fair Value Gains through Income

22 21 Effective Cost Control Commissions and Fees Ratio Administrative Expenses Ratio 6.8% 7.1% 5.5% 5.3% Notes: Commissions and fees ratio = Commission and fees / total revenue Administrative expenses ratio = Administrative expenses / total revenue

23 22 Continued Increase in Profitability Net Profit Attributable to Equity Holders Weighted Average ROE EPS RMB Yuan 32,881 33, % 16.02%

24 23 Solid Financial Strength Total Assets Solvency Margin Solvency Adequacy Ratio 1,410,579 1,226, % Equity Holders Equity 212% 211, ,710

25 Section IV: Investment Performance 24

26 25 Increased Investment Assets Total Investment Assets 1,336,245 1,172, , , Note: Investment assets =Cash and Cash Equivalents+ Securities at fair value through income+available-for-sale Securities +Held-to-maturity Securities +Term Deposits +Securities Purchased under Agreements to Resell+Loans + Statutory Deposits

27 26 Stable Investment Income In 2010, in spite of U-shaped volatility of the equity market with 14.31% decline of SSE Composite Index, we have achieved a stable investment performance Gross Investment Income Gross Investment Yield 7.00% 60,921 64, % 5.78% 5.11% 5.00% 31, % 3.48% 3.00% % 2008 Gross Investment Yield(IFRS) = (Investment Income + Net Realized Gains on Financial Assets + Net Fair Value Gains through Income Business Tax and Extra Charges for Investment)/((Initial Investment assets + End term investment assets)/2)

28 Proactively Capturing Investment Opportunities Bond Yield Curve Investment Strategies Interbank Bond Yield Curve 5 Years Corporate Bond Yield Curve 5 Years Corporate Bond Yield Curve 1 Year Interbank Bond Yield Curve 1 Year Corporate Bond Yield Curve 7 Years Interbank Bond Yield Curve 7 Years Corporate Bond Yield Curve 10 Years Interbank Bond Yield Curve 10 Years Source:Wind SSE Composite Index Fixed Income Investment Equity Investment Proactively allocated to negotiated deposits with floating rate and high-yield credit bonds, continued to adjust investment portfolio and improved existing portfolio yield Followed up policies and liquidity changes, seized market timing and structured opportunities, strategically improved investment allocation Alternative Investment Expanded investment channels, invested in 4 floating rate debt plans including Pudong Development, avoided interest hike risk; participated in GDB secondary issuance, built up real estate and PE investment capabilities and actively sought potential investment targets Source:Bloomberg & Wind 27

29 28 Enhanced Asset Allocation December 31, 2010 December 31, 2009 Change (ppts) Fixed-income Securities 45.51% 49.68% Term Deposits 33.05% 29.43% Equities 14.66% 15.31% Cash & Cash Equivalents 3.58% 3.09% Others 3.20% 2.49% +0.71

30 Section V: Embedded Value 29

31 30 EV Breakdown by Components 2010 China Life Embedded Value Breakdown 350, ,000 (29,564) 250, , , , , ,000 50, ,655 0 Adjusted Net Worth In-force Business Value Cost of Solvency Margin Embedded Value

32 31 Growth of EV and Value of One-Year s Sales Embedded Value Value of One Year s Sales 285,229* 298,099 17,713 19, , , , ,655 Adjusted Net Worth In-force Business Value(After cost of solvency margin) *Note:Numbers may not be additive due to rounding.

33 32 Embedded Value Movement Analysis EV Movement from 2009 Year End to 2010 Year End 350, ,000 23,922 19,839 (3) 413 (9,297) (1,937) ( 391) (19,785) , , , , , ,000 50,000 0 EV at Beginning of 2010 Expected Returns Value of One Year's Sales Operating Experience Variance Investment Experience Variance Methodology Market Value Model and Adjustments Assumptions Changes Exchange Gains or Losses Shareholder Dividends Others EV at December 31, 2010

34 Sensitivity Analysis Investment Return and Discount Rate 33 Value of In-force Business after Cost of Solvency Margin Value of One Year s Sales after Cost of Solvency Margin 182,023 22, , , ,126 17,040 18,794 19,839 20, ,022 Investment Yield -10% Risk Adjusted Discount rate=11.5% Base Case Risk Adjusted Discount Rate= 10.5% Investment Yield +10% Investment Yield -10% Risk Adjusted Discount rate=11.5% Base Case Risk Adjusted Discount Rate=10.5% Investment Yield +10%

35 Sensitivity Analysis Operational And Other Assumptions 34 Sensitivity Analysis Results Value of in-force business after Value of one-year s sales after the cost of solvency margin the cost of solvency margin Base case scenario 153,444 19,839 Cost ratio +10% 151,002 18,014 Cost ratio -10% 155,882 21,664 Mortality ratio for non-annuity products + 10%, Mortality ratio for annuity products -10% Mortality ratio for non-annuity products - 10%, Mortality ratio for annuity products + 10% 151,791 19, ,118 19,920 Surrender ratio + 10% 152,080 19,756 Surrender ratio - 10% 154,857 19,916 Morbidity Ratio +10% 151,609 19,756 Morbidity Ratio -10% 155,294 19,922 Claim ratio for short-term insurance + 10% 153,162 19,249 Claim ratio for short-term insurance - 10% 153,725 20,429 Solvency Margin at 150% of Statutory Minimum 139,372 17,865 Projected taxable income is based on the accounting profit calculated in accordance with Provisions on Accounting Treatment of Insurance Contracts 148,722 19,990 EV assumptions applied in ,452 19,809

36 Thank you! 35