China Life Insurance : 2018 Third Quarter Report (PDF)

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CHINA LIFE INSURANCE COMPANY LIMITED

(A joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 2628)

2018 THIRD QUARTER REPORT

This announcement is made by China Life Insurance Company Limited (the "Company") pursuant to the inside information provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and Rules 13.09(2) and 13.10B of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The financial data of the Company for the third quarter of 2018 have been prepared in accordance with the China Accounting Standards for Business Enterprises and are unaudited. Net profit attributable to equity holders of the Company and equity attributable to equity holders of the Company in the consolidated financial statements have no difference from the relevant data under the International Financial Reporting Standards.

1. Important Notice

• 1.1 The Company's Board of Directors, the Board of Supervisors, its Directors, Supervisors and Senior Management warrant that the information in this quarterly report is true, accurate and complete and contains no false representations, misleading statements or material omissions, and jointly and severally accept full legal responsibility.

• 1.2 On 25 October 2018, the 2018 Third Quarter Report of the Company was considered and approved at the sixth meeting of the sixth session of the Board of the Company. Of the twelve Directors of the Company, nine attended the Board Meeting. Executive Directors Lin Dairen, Xu Hengping and Xu Haifeng, Non-executive Directors Liu Huimin and Su Hengxuan, and Independent Non-executive Directors Chang Tso Tung Stephen, Robinson Drake Pike, Tang Xin and Leung Oi-Sie Elsie attended the meeting. Chairman and Executive Director Yang Mingsheng could not attend the meeting due to other business, and gave written authorization to Executive Director Lin Dairen to act as his proxy to attend, vote and chair the meeting. Non-executive Directors Yuan Changqing and Yin Zhaojun could not attend the meeting due to other business, and gave written authorization to Non-executive Directors Su Hengxuan and Liu Huimin, respectively, to act as proxies to attend and vote at the meeting.

• 1.3 The Company's 2018 third quarter financial report is unaudited.

• 1.4 Mr. Yang Mingsheng, Chairman of the Company, Mr. Zhao Lijun, Vice President in charge of accounting affairs, Mr. Li Mingguang, Chief Actuary and Ms. Hu Jin, Head of the Accounting Department, confirm that the financial reports in this 2018 third quarter report are true, accurate and complete.

2. The Company's Basic Information

2.1 Major financial data

(Currency: RMB)

As at 30 September 2018	As at 31 December 2017	Increase/(decrease) compared to 31 December 2017
Total assets (million)	3,116,499	2,897,591	7.6%
Total equity holders' equity (million)	330,385	320,933	2.9%
Ordinary share holders' equity per share (RMB per share)	11.41	11.08	3.0%
For the nine months ended 30 September 2018	For the nine months ended 30 September 2017	Increase/(decrease) compared to the same period of 2017
Net cash flows from operating activities (million)	76,433	179,789	-57.5%
Net cash flows from operating activities per share (RMB per share)	2.70	6.36	-57.5%
For the nine months ended 30 September 2018	For the nine months ended 30 September 2017	Increase/(decrease) compared to the same period of 2017
Operating income (million)	540,967	547,665	-1.2%
Net profit attributable to equity holders of the Company (million)	19,869	26,825	-25.9%
Net profit attributable to equity holders of the Company after deducting non-recurring items (million)	20,049	26,902	-25.5%
Earnings per share (basic and diluted) (RMB per share)	0.69	0.94	-26.2%
Basic earnings per share after deducting non-recurring items (RMB per share)	0.70	0.94	-25.7%
Weighted average ROE (%)	6.13	8.68	A decrease of 2.55 percentage points
Weighted average ROE after deducting non-recurring items (%)	6.18	8.70	A decrease of 2.52 percentage points

Note:

In calculating the percentage changes of "Ordinary share holders' equity per share", "Net cash flows from operating activities per share", "Earnings per share (basic and diluted)" and "Basic earnings per share after deducting non-recurring items", the tail differences of the basic figures have been taken into account.

In the first three quarters of 2018, facing the complicated and severe external environment, the Company adhered to its strategic consistency and tactical flexibility, and steadily pushed forward various tasks according to the requirements for high-quality development. Firstly, the Company firmly remained a market-leading position, and renewal premiums became stronger driving force for the business development. In the first three quarters of 2018, the Company achieved revenues from insurance business1 of RMB468,534 million, an increase of 4.1% year-on-year, maintaining its leading position in the market. In particular, the Company recorded renewal premiums of RMB316,285 million, an increase of 28.7% year-on-year, which demonstrated the strong driving force of the renewal business. Secondly, the Company promoted the product diversification strategy in great depth, and its business structure was constantly optimized. The percentage of premiums from the top five insurance categories in long-term first-year premiums decreased by 17.4 percentage points year-on-year, and the long-term protection-oriented business developed at a faster speed. As at 30 September 2018, the surrender rate was 4.45%. Thirdly, the sales force remained stable in its size with enhanced quality, and the sales transformation began to take effect. As at 30 September 2018, the scale of the Company's sales force reached 1.83 million, which was basically flat as compared to the end of June 2018. In particular, the number of exclusive individual agents in the exclusive individual agent channel reached 1.455 million, an increase of 14,000 agents from the end of June 2018. Meanwhile, the average agents on a monthly basis for the sale of protection-oriented products increased by 49.7% year-on-year, with the quality of the sales force improved. Fourthly, the allocation in fixed income assets was satisfactory but equity investment income was under pressure. As at 30 September 2018, the Company's investment assets were RMB2,787,721 million. In the third quarter of 2018, the Company continued to seize the opportunity of the interest rate hike and increased its investment in fixed income assets with long duration. The Company also consistently optimized the structure of its equity assets allocation. However, the equity assets income of the Company in the open market declined significantly due to the impact of the prolonged downturn in the domestic stock market. In the first three quarters of 2018, gross investment yield2 was 3.32%, a decrease of 1.80 percentage points year-on-year; net investment yield3 was 4.60%, a decrease of 0.39 percentage point year-on-year. As affected by the continuous decline of the capital market, net profit attributable to equity holders of the Company was RMB19,869 million, a decrease of 25.9% year-on-year.

Finally, the Company's comprehensive strengths were enhanced. As at 30 September 2018, the Company's total assets reached RMB3,116,499 million, an increase of 7.6% as compared to the end of 2017, ranking first in the industry. Both of the Company's core solvency ratio and comprehensive solvency ratio reached 262.17%.

• 1 Revenues from insurance business is consistent with Premium Income in the attached income statement.

• 2 Gross investment yield = {[(Gross investment income - Interest paid for financial assets sold under agreements to repurchase)/((Investment assets at the beginning of the period - Financial assets sold under agreements to repurchase at the beginning the period - Derivative financial liabilities at the beginning of the period + Investment assets at the end of the period - Financial assets sold under agreements to repurchase at the end of the period -

  Derivative financial liabilities at the end of the period)/2)]/273}×365

• 3 Net investment yield = {[(Net investment income - Interest paid for financial assets sold under agreements to repurchase)/((Investment assets at the beginning of the period - Financial assets sold under agreements to repurchase at the beginning of the period + Investment assets at the end of the period - Financial assets sold under agreements to repurchase at the end of the period)/2]/273}×365

For the next stage, the Company will focus on its annual targets and take proactive actions to fulfill the overall tasks for the year 2018, by sticking to the general keynote of "making steady progress" and the requirements for high-quality development, and adhering to the operating guideline of "prioritizing value, strengthening sales force, optimizing business structure, achieving stable growth and safeguarding against risks". Moreover, the Company will develop scientific plans for the year 2019, and forge ahead with courage and persistent efforts for the purpose of achieving satisfactory results.

Non-recurring Items and Amounts

RMB million

Non-recurring items	For the Reporting Period (from July to September)	For the nine months ended 30 September 2018
Gains/(losses) on disposal of non-current assets	11	14
Government subsidies recognized in current gains/(losses)	16	33
Net non-recurring items other than those mentioned above	(112)	(284)
Effect of income tax	21	59
Attributable to non-controlling interests	1	(2)
Total	(63)	(180)

Note:

As an insurance company, investment (utilization of insurance funds) is one of the major businesses of the Company. Therefore, the non-recurring items do not include fair value gains/(losses) from financial assets at fair value through profit or loss and financial liabilities at fair value through profit or loss, as well as investment income from the disposal of financial assets at fair value through profit or loss and financial liabilities at fair value through profit or loss and available-for-sale financial assets.

2.2 Total number of shareholders and the particulars of top ten shareholders as at the end of the reporting period

The total number of shareholders as at the end of the Reporting Period	Number of holders of A Shares: 135,112
	Number of holders of H Shares: 28,015
Particulars of the top ten shareholders Unit: Share
Name of shareholders	Nature of shareholder	Percentage of shareholding	Total number of shares	Number of shares subject to selling restrictions	Number of shares pledged or frozen
China Life Insurance (Group) Company	State-owned legal person	68.37%	19,323,530,000	-	-
HKSCC Nominees Limited	Overseas legal person	25.90%	7,321,787,185	-	-
China Securities Finance Corporation Limited	State-owned legal person	2.56%	723,712,461	-	-
Central Huijin Asset Management Limited	State-owned legal person	0.42%	119,719,900	-	-
Hong Kong Securities Clearing Company Limited	Overseas legal person	0.10%	29,277,307	-	-
China International Television Corporation	State-owned legal person	0.07%	18,452,300	-	-
China Universal Asset Management Co., Ltd - Industrial and Commercial Bank of China Limited - China Universal - Tianfu Bull No. 53 Asset Management Plan	Other	0.05%	15,015,845	-	-
Industrial and Commercial Bank of China Limited - SSE 50 Exchange Traded Securities Investment Fund	Other	0.05%	14,601,652	-	-
China National Nuclear Corporation	State-owned legal person	0.04%	12,400,000	-	-
National Social Security Fund Portfolio 407	State-owned legal person	0.03%	9,449,731	-	-
Details of shareholders	1. HKSCC Nominees Limited is a company that holds shares on behalf of the clients of the Hong Kong stock brokers and other participants of the CCASS system. The relevant regulations of The Stock Exchange of Hong Kong Limited do not require such persons to declare whether their shareholdings are pledged or frozen. Hence, HKSCC Nominees Limited is unable to calculate or provide the number of shares that are pledged or frozen. 2. China International Television Corporation and China National Nuclear Corporation became the top 10 shareholders of the Company through the strategic placement during the initial public offering of A Shares of the Company in December 2006. The trading restriction period of the shares from the strategic placement was from 9 January 2007 to 9 January 2008. 3. Industrial and Commercial Bank of China Limited - SSE 50 Exchange Traded Index Securities Investment Fund has Industrial and Commercial Bank of China Limited as their fund depositary. China Universal Asset Management Co., Ltd - Industrial and Commercial Bank of China Limited - China Universal - Tianfu Bull No.53 Asset Management Plan has Industrial and Commercial Bank of China Limited as its asset trustee. Save as above, the Company was not aware of any connected relationship and concerted parties as defined by the "Measures for the Administration of the Takeover of Listed Companies" among the top ten shareholders of the Company.

2.3 Total number of preference share holders, top ten preference share holders, and the particulars of top ten preference share holders with no selling restrictions as at the end of the reporting period

½

Applicable

√

Not applicable

3. Significant Events

3.1 Particulars of and reasons for changes in major accounting items and financial indicators of the

Company

√

Applicable

½

Not applicable