China Life Insurance Company Limited Announces 2018 Interim Results (H Shares)

HONG KONG, Aug. 23, 2018 /PRNewswire/ -- China Life Insurance Company Limited (SSE: 601628, SEHK: 2628, NYSE: LFC) announces the unaudited consolidated results of the Company (China Life Insurance Company Limited and its subsidiaries) for the six months ended 30 June 2018 (the "Reporting Period") prepared under the International Financial Reporting Standards today.

Highlights

• As at the end of the Reporting Period, the Company's total assets reached RMB3,043,178 million, an increase of 5.0% from the end of 2017. The Company's embedded value was RMB769,225 million, an increase of 4.8% from the end of 2017.
• During the Reporting Period, the Company's total revenue was RMB401,690 million, an increase of 1.4% year-on-year; the Company's gross written premiums were RMB360,482 million, an increase of 4.2% year-on-year; the value of half year's sales for the six months ended 30 June 2018 was RMB28,166 million, a decrease of 23.7% year-on-year. The Company's market share in the first half of 2018 was approximately 22%, remaining the first place in the industry.
• As at the end of the Reporting Period, the Company's investment assets reached RMB2,709,971 million, an increase of 4.6% from the end of 2017. During the Reporting Period, the gross investment yield was 3.70%, the net investment yield was 4.64%, and the gross investment yield including net share of profit of associates and joint ventures was 3.78%. The comprehensive investment yield taking into account the current net fair value changes of available-for-sale securities recognized in other comprehensive income was 3.52%.
• During the Reporting Period, net profit attributable to equity holders of the Company was RMB16,423 million, an increase of 34.2% year-on-year.
• The Company will not declare an interim dividend of ordinary shares for the Reporting Period.

Business Overview of the First Half of 2018 

In the first half of 2018, the macro environment was complicated and volatile, with the market competition increasingly intensified and the transformation and upgrade of the industry deepened. Due to the combined effect of multiple factors, the life insurance industry developed under pressure. The Company, by firmly holding the fundamental requirements of high-quality development, with its strategic consistency and tactical flexibility, pushed forward the five major tasks of "transforming sales management model, adjusting business structure, revitalizing and taking lead in large- and medium-sized cities, building technology-driven China Life and preventing and controlling risks". During the first half of 2018, the Company generally operated in a sound and stable manner, with its business development pursuing an active and prudent strategy and its sales force maintaining stable in both quantity and quality. Its business value and profitability were consistently enhanced, technological capability became prominent, service capability was constantly improved, and risk prevention and control was implemented in an effective manner. During the Reporting Period, on the basis of a significant reduction of single premiums of RMB51,247 million, the Company's gross written premiums amounted to RMB360,482 million, an increase of 4.2% year-on-year. The Company's market share was approximately 22%, an increase of 2.3 percentage points from the end of 2017, remaining the first place in the industry.

During the Reporting Period, the Company significantly reduced single premiums to further improve the structure of premium payments. The first-year regular business and renewal business became major driving forces which substantially reinforced the sustainable development of the Company. First-year regular premiums amounted to RMB81,712 million (a year-on-year increase of 5.1%) which accounted for 89.00% of the long-term first-year premiums (a year-on-year increase of 33.12 percentage points). Single premiums were RMB10,103 million (a year-on-year decrease of 83.5%) which accounted for 11.00% of long-term first-year premiums (a year-on-year decrease of 33.12 percentage points). Renewal premiums amounted to RMB235,161 million (a year-on-year increase of 30.3%) which accounted for 65.24% of the gross written premiums (a year-on-year increase of 13.07 percentage points).

During the Reporting Period, net profit attributable to equity holders of the Company was RMB16,423 million, an increase of 34.2% year-on-year. As at 30 June 2018, the embedded value of the Company was RMB769,225 million, an increase of 4.8% from the end of 2017. The value of half year's sales was RMB28,166 million, a decrease of 23.7% year-on-year. The number of in-force policies of long-term insurance of the Company was 275 million, an increase of 2.6% from the end of 2017. The Policy Persistency Rates (14 months and 26 months) reached 92.30% and 86.80% (year-on-year increases of 0.7 and 1.0 percentage point), respectively.

During the Reporting Period, gross written premiums from the life insurance business of the Company amounted to RMB304,341 million (a year-on-year increase of 1.2%) which accounted for 84.43% of gross written premiums (a year-on-year decrease of 2.53 percentage points). In particular, first-year regular premiums were RMB76,918 million, an increase of 5.4% year-on-year, and the percentage of first-year regular premiums in first-year premiums was 88.40%, an increase of 34.07 percentage points year-on-year. Single premiums from the life insurance business were RMB10,089 million (a year-on-year decrease of 83.6%) which accounted for 11.60% of first-year premiums (a year-on-year decrease of 34.07 percentage points). Renewal premiums from the life insurance business were RMB217,334 million (a year-on-year increase of 30.5%) which accounted for 71.41% of gross written premiums from the life insurance business (a year-on-year increase of 16.05 percentage points). Gross written premiums from the health insurance business amounted to RMB48,090 million ( a year-on-year increase of 28.8%) which accounted for 13.34% of gross written premiums of the Company (a year-on-year increase of 2.55 percentage points). Gross written premiums from the accident insurance business amounted to RMB8,051 million (a year-on-year increase of 3.4%) which accounted for 2.23% of gross written premiums of the Company (a year-on-year decrease of 0.02 percentage point).

In the first half of 2018, under significant changes in the external situation, the Company maintained strategic consistency and tactical flexibility, actively adjusted business structure and sped up the development of first-year regular business and short-term insurance business. As a result, the business of the exclusive individual agent channel grew rapidly, the value contributed by bancassurance channel increased constantly, the development of group insurance channel became more diversified, and other business channels showed a sound development momentum.

Exclusive Individual Agent Channel.  During the Reporting Period, with emphasis on business value, the exclusive individual agent channel made efforts on sales model transformation and upgrade, and strengthened the coordinated development among business, sales force and day-to-day management, so as to achieve continuous fast growth. During the Reporting Period, gross written premiums from the exclusive individual agent channel amounted to RMB272,233 million, an increase of 19.7% year-on-year. First-year regular premiums from the exclusive individual agent channel were RMB61,442 million which accounted for 99.80% of long-term first-year premiums (a year-on-year increase of 0.04 percentage point). In particular, the percentages of first-year regular premiums with five years or longer payment duration and first-year regular premiums with ten years or longer payment duration in first-year regular premiums were 51.65% and 32.60%, respectively. Renewal premiums increased by 28.3% year-on-year, and renewal business exerted prominent effects on premiums growth of the channel. In the first half of 2018, the sales force of the exclusive individual agent channel maintained a stable quality, notwithstanding the higher standards of selection and management. The Company continued to improve the quality and expand the size of its sales force on the one hand, and further raised the criteria for recruitment on the other hand, especially reinforced the recruitment of younger sales agents with high competence, improved the structure of sales team, strengthened management and dismissed agents with unsatisfactory performance. As at the end of the Reporting Period, the number of exclusive individual agents was 1.441 million. Although average productive agents on a quarterly basis reduced slightly by 5.6% from the end of 2017 due to the decline in the total number of sales force, the overall scale remained stable. The Company also accelerated new agents development and agent managers cultivation in order to enhance efficiency in management, and the sales force for long-term protection-oriented insurance products increased by 31% year-on-year, showing a remarkable result of returning to the protection function of insurance.

Bancassurance Channel.  In the first half of 2018, the bancassurance channel put more efforts in its business structural adjustment, vigoriously reduced single premiums, strengthened the development of regular premium business, constantly improved the quality of sales force, and the value contribution of the bancassurance channel increased consistently. During the Reporting Period, single premiums substantially reduced to RMB8,638 million from RMB59,667 million of the first half of 2017, a decrease of 85.5% year-on-year. Due to such effect, gross written premiums from the bancassurance channel were RMB55,998 million, a decrease of 39.7% year-on-year. First-year regular premiums were RMB18,819 million (a year-on-year increase of 40.6%) which accounted for 68.54% of long-term first-year business (a year-on-year increase of 50.21 percentage points). Renewal premiums were RMB27,974 million (a year-on-year increase of 44.1%) which accounted for 49.96% of the gross written premiums from this channel (a year-on-year increase of 29.05 percentage points). The value of half year's sales of bancassurance channel increased  by 31.0% year-on-year, which contributed 13.80% to total new business value (a year-on-year increase of 5.76 percentage points). As at the end of the Reporting Period, the number of sales representatives in the bancassurance channel reached 302,000. In particular, the average active insurance planners for long-term business on a monthly basis in the bancassurance channel increased by 29% year-on-year.

Group Insurance Channel.  In the first half of 2018, the group insurance channel further pushed forward the diversified business development and strengthened structural optimization, which brought out the stable development of various businesses. During the Reporting Period, gross written premiums from the group insurance channel were RMB14,986 million, an increase of 2.0% year-on-year. Short-term insurance premiums from the group insurance channel were RMB11,744 million, a decrease of 1.9% year-on-year due to the effect of external policies and structural adjustment. The Company constantly promoted the tax-advantaged health insurance business, and successfully launched the pilot program of tax deferred pension insurance business. As at the end of the Reporting Period, the number of direct sales representatives reached 97,000.

Other Business Channels.  During the Reporting Period, gross written premiums from other channels were RMB17,265 million, a rapid growth of 56.6% year-on-year. The Company actively developed the policy-oriented medical insurance businesses, such as supplementary major medical expenses insurance business, long-term care insurance business and basic medical insurance administration entrusted by the local governments, realizing a rapid growth and maintaining its leading position in the market. In the first half of 2018, the Company won the bids for 33 projects, including supplementary major medical expenses insurance projects which were open for re-bidding upon maturity and new projects in blank markets; the Company obtained 23 new projects for basic medical insurance administration, which covered an additional population of 7.15 million; and the Company won the bids for 8 new projects for the pilot long-term care insurance business, which covered an additional population of 3.24 million. The Company also actively carried out online sales, with the premiums and number of policies from internet sales increasing rapidly from the corresponding period of 2017.

Since 2018, the global economy has continued to recover and move in a positive direction but factors such as trade friction and geopolitics have caused greater volatility of the global market. The Chinese economy maintained a stable growth, with the structural deleveraging continuously promoted. The monetary policy remained prudent and moderate. The interest rate of the bond market fluctuated downward and the credit risk intensified; the stock market suffered a significant decline with greater volatility. In the first half of 2018, the Company seized the opportunity of interest rate hike and increased its allocation in fixed income assets with long duration to optimize the asset-liability matching. The Company maintained equity investment position in the open market at a reasonable level, selected high-quality debt-type financial products and strictly controlled credit risk. As at the end of the Reporting Period, the Company's investment assets reached RMB2,709,971 million, an increase of 4.6% from the end of 2017.

As at the end of the Reporting Period, among the major types of investments, the percentage of investment in bonds changed to 47.23% from 45.86% as at the end of 2017, the percentage of term deposits changed to 16.58% from 17.34% as at the end of 2017, the percentage of investment in stocks and funds (excluding money market funds) changed to 10.21% from 10.33% as at the end of 2017, and the percentage of investment in debt-type financial products increased to 11.71% from 11.65% as at the end of 2017.

The balances of the Company's fixed income investment and equity investment increased along with the continuous expansion of its investment assets. In the first half of 2018, the interest income from investment portfolios grew steadily. Due to the effect of a significant decline in the A Share market, the gross investment income decreased by 13.9% from the corresponding period of 2017. During the Reporting Period, the Company's net investment income was RMB60,693 million, an increase of RMB2,961 million from the corresponding period of 2017, a year-on-year increase of 5.1%. In particular, the yield to maturity of new fixed income investments increased significantly compared to the existing allocation, however, due to a decrease in dividends from funds, the net investment yield was 4.64%, a decrease of 0.07 percentage point from the corresponding period of 2017. Affected by the significant decrease in the A Share market, the gross investment income was RMB48,801 million, a decrease of RMB7,862 million from the corresponding period of 2017, and the gross investment yield was 3.70%, a decrease of 0.92 percentage point from the corresponding period of 2017. The gross investment yield including net share of profit of associates and joint ventures was 3.78%, a decrease of 0.91 percentage point from the corresponding period of 2017. The comprehensive investment yield taking into account the current net fair value changes of available-for-sale securities recognized in other comprehensive income was 3.52%, a decrease of 1.06 percentage points from the corresponding period of 2017.

Outlook

In the first half of 2018, despite severe external environment, the Company forged ahead to overcome obstacles and spared no efforts for further business development. As a result, our business developed in a sound and stable manner. For the next step, the Company will stick to the general keynote of making progress while maintaining stability, with strategic consistency and tactical flexibility, further focus on value, and make efforts to enhance business value and achieve better operating results, so as to facilitate the Company's progress in all aspects with high-quality development.

The Company shall adhere to the "due role of insurance in protection" to enhance our business capability in creating value.  With new business value growth as guidance, the Company shall implement the strategy of diversified products, further accelerate the development of protection-oriented business, actively expand the "Integrated Age-care and Inclusive Healthcare Service" sector so as to satisfy the demands for health and aged-care services of general consumers.

The Company shall carry out the transformation of sales model in great depth to enhance our sales force capability in creating value.  The Company shall put more efforts in the transformation of sales model, strengthen the construction of sales force, reinforce the day-to-day management, further enhance the integration between sales, education and training, and strive to improve the quality of sales force, with an aim to increase its productivity and income level.

The Company shall strengthen the management of assets and liabilities to enhance our investment capability in creating value.  The Company shall strike a balance between the long-term strategic allocation and the short-term objective of investment income.  Based on the characteristics of liabilities and with reference to risk preference, the Company shall take advantage of market cycles to optimize allocations, and strengthen the capability of investment in a bid to maintain the stability of investment income level in long run.

The Company shall implement a digital strategy in all aspects to enhance our technological capability in creating value.  By capitalizing on our digital platform, the Company shall strive to create the "Internet +" ecological system that is fully integrated with external related industries to achieve a win-win situation, and fully optimize the digital system of customer services to provide a powerful platform, resources and support for sales representatives and offer a whole-length digital journey for customers with all channels and full value.

The Company shall constantly improve the construction of the internal control system to enhance our risk control capability in creating value.  In order to adapt to the development of risk management and control under a new regulatory regime, the Company shall consistently carry out the construction of the internal control system in great depth, put more efforts in enhancing our risk control capability and standards, and integrate compliance requirements into the entire process of business management, so as to stand firm on our risk bottom line.

The Company is well positioned to embark on a journey filled up with opportunities. 2018 marks the beginning of the high-quality development of China Life. Marching towards the high-quality development is a road that has been rarely traversed. The Company shall go ahead with courage and persistent efforts in a fast and stable manner so as to reward customers, shareholders and the society with better products, excellent services and more sustainable value.

About China Life Insurance Company Limited

China Life Insurance Company Limited is a life insurance company established in Beijing, China on 30 June 2003 according to the "Company Law of People's Republic of China" and the "Insurance Law of the People's Republic of China". The Company was successfully listed on the New York Stock Exchange, the Hong Kong Stock Exchange and the Shanghai Stock Exchange on 17 and 18 December 2003, and 9 January 2007, respectively. The Company's registered capital is RMB28,264,705,000.

The Company is a leading life insurance company in China and possesses an extensive distribution network comprising exclusive agents, direct sales representatives, and dedicated and non-dedicated agencies. The Company is one of the largest institutional investors in China, and one of the largest insurance asset management companies in China through its controlling shareholding in China Life Asset Management Company Limited. The Company also has controlling shareholding in China Life Pension Company Limited.

Our products and services include individual life insurance, group life insurance, and accident and health insurance. The Company is a leading provider of individual and group life insurance, annuity products and accident and health insurance in China. As at 30 June 2018, the Company had approximately 275 million long-term individual and group life insurance policies, annuity contracts, and long-term health insurance policies in force. The Company also provides both individual and group accident and short-term health insurance policies and services.

Forward-looking statements

Certain statements contained in this press release may be viewed as "forward-looking statements" within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the 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 forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in the Company's Annual Report on Form 20-F for the fiscal year ended 31 December 2017 filed with the U.S. Securities and Exchange Commission, or SEC, on 25 April 2018 and in the Company's other filings with the SEC. You should not place undue reliance on these forward-looking statements. All information provided in this press release is as of the date of this press release, unless otherwise stated, and we undertake no duty to update such information, except as required under applicable law. Unless otherwise indicated, the Chinese insurance market information set forth in this press release is based on public information released by the China Banking and Insurance Regulatory Commission.

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