China Life Insurance Co. Ltd. Class A · SSE:601628
China Life Insurance Co. Ltd. Class A — FY2016 Earnings Presentation
41 slides from China Life Insurance Co. Ltd. Class A's earnings presentation, Mar 24, 2017
Slide 1: 2016 Annual Results
2016 Annual Results 24 March 2017 Hong Kong | Beijing
Slide 2: Forward-looking Statement
Forward-looking Statement Certain statements contained in this presentation may be viewed as “forward-looking statements” as defined by 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 known and unknown ri
Slide 3: Management Team
Management Team Hong Kong Beijing LIN Dairen LI Mingguang ZHAO Lijun President Vice President Vice President & Chief Actuary XU Haifeng XIAO Jianyou ZHENG Yong RUAN Qi Vice President Vice President Board Secretary Chief Information Technology Officer 3
Slide 4: Agenda
Agenda 1 Business & Operations 2 Financials & Investments 3 Embedded Value 4 4
Slide 5: Business & Operations
Business & Operations LIN Dairen, President
Slide 6: 2016 Operational Highlights
2016 Operational Highlights Rapid growth in insurance business, Gross written premiums leapt to a new height Breakthrough in premium restructuring, Value of one year’s sales increased significantly Enhancement in scale and quality of sales force, Core competencies were further strengthened Capitaliz
Slide 7: 2016 Results Highlights
2016 Results Highlights Figures Growth Highlights Performance Indicators (RMB bn) Rates Rapid insurance business Gross Written Premiums 430.50 18.3% growth Long-term First-year Premiums 166.94 19.3% Optimized premium First-year Regular Premiums 93.95 51.8% structure 10-year-or-longer FYRP 51.38 59.0
Slide 8: Rapid Increase in Insurance Business
Rapid Increase in Insurance Business Long-term First-year Premiums Both first-year premiums and renewal RMB mn +19.3% premiums were the growth drivers for 166,936 gross written premiums 139,976 Gross Written Premiums 93,945 61,900 ▲ +51.8% RMB mn +18.3% 78,076 72,991 ▼ -6.5% 430,498 40,060 2015 20
Slide 9: Historic Breakthrough in Premium Restructuring
Historic Breakthrough in Premium Restructuring FYRP and 10-year-or-longer FYRP Long-term FYRP Exceeded Single Premiums Doubled over Two Years for the First Time RMB mn FYRP +101.7% 44.2% 43.7% 10-year-or-longer FYRP +99.4% 55.8% 56.3% +51.8% 93,945 2015 2016 Single Premiums Regular Premiums Growth R
Slide 10: Strong Growth in Value of One Year's Sales
Strong Growth in Value of One Year’s Sales Value of One Year’s Sales by Channels RMB mn 60,000 +56.4% 49,311 375 50,000 2,610 40,000 371 31,528 30,000 2,306 46,326 20,000 ▲ +60.6% 28,851 10,000 0 2015 2016 Agent Channel Bancassurance Channel Group Channel Note: Value of one year’s sales is after the
Slide 11: Significant Growth in Agent Channel
Significant Growth in Agent Channel In 2016, the agent channel achieved significant business growth, optimized premium structure, expanded and enhanced agent force, and realized market leadership. Agent Channel GWP Agent Channel FYRP RMB mn RMB mn +24.9% +57.0% 282,136 74,530 225,957 47,479 46,337
Slide 12: Optimized Business Structure of Bancassurance Channel
Optimized Business Structure of Bancassurance Channel In 2016, the bancassurance channel accelerated development of regular premiums business, constantly optimized business structure and improved business value contribution. Growth of 10-year-or-longer FYRP was higher than that of FYRP, and growth
Slide 13: Fast Development of Group Channel
Fast Development of Group Channel In 2016, the group channel continued to promote diversified business development and proactively grew regular premiums business, resulting in fast growth in various lines of business. Short-term Business Structure of Group Group Channel GWP Channel RMB mn +23.9% 2
Slide 14: Enhanced Scale and Quality of Sales Force
Enhanced Scale and Quality of Sales Force Agent Channel Number of agent reached 1.495 million Average age and academic qualification structure of the team were further optimized. Quarterly average productive agents grew 67.1% year-on-year Bancasuurance Channel Sales force reached 234,000 Bot
Slide 15: Continuous Improvement in Surrender Rate and Persistency Rate
Continuous Improvement in Surrender Rate and Persistency Rate Surrender Rate Persistency Rate 92% -2.01pps 90.0% 90.2% 5.55% 90% 88% 86% 3.54% 85.5% 85.9% 84% 82% 80% 78% 76% 2015.12.31 2016.12.31 2015 2016 14 Months 26 Months Note: Surrender Rate = Surrender payment/(Liability of long-term insuranc
Slide 16: All-round Initiation of Insurance and Banking Coordination
All-round Initiation of Insurance and Banking Coordination Text Synergy Seen between Banking and China Life - China Guangfa Bank Insurance Businesses Debit Card and Credit Card CGB Bancassurance Business Regular Premiums RMB mn +367% 334 75 2015 2016 16
Slide 17: Operating Environment in 2017
Operating Environment in 2017 In 2017, instability and uncertainty Strengthened supervision by the In recent years, the Company has within and without China has insurance regulator will promote maintained strategy consistency, increased significantly, with the business restructuring, good optimized
Slide 18: Strategy and Operation Principles Consistency
Strategy and Operation Principles Consistency Establish the “value first” concept, regarding value growth as a primary focus Prioritizing of business development. Value serves as a major basis for resource Value allocation. Increase the weighting of value-based indicators in performance assessment S
Slide 19: Major Tasks in 2017
Major Tasks in 2017 Promoting Implementing a Sales Transformation “Three-pronged Strategy” Accelerate regular premium business, in particular Promote development of the core individual agent 10-year-or-longer regular premiums with the aim channel to enhance value Focus on market competition in
Slide 20: Financials & Investments
Financials & Investments ZHAO Lijun, Vice President
Slide 21: Steady Growth in Revenue
Steady Growth in Revenue Net Premiums Earned Total Revenues RMB mn RMB mn +17.6% +6.6% 426,230 540,781 362,301 507,449 2015 2016 Investment Income & Realized/Unrealized Gains and Impairment Losses RMB mn Net Fair Value Net Realized Gains/(Losses) Investment Gains on Impairment through Profit or Inco
Slide 22: Continued Optimization of Costs Structure
Continued Optimization of Costs Structure Underwriting and Policy Acquisition Percentage of Administrative Expenses Administrative Expenses Ratio Costs Ratio 43.57% 5.9% 9.6% 5.4% 37.98% 7.0% 2015 2016 2015 2016 2015 2016 Notes: Underwriting and Policy Acquisition Costs Ratio = Underwriting and poli
Slide 23: Pressure on Profitability
Pressure on Profitability 2016 2015 Change Net Profit Attributable to Equity Holders of the Company 19,127 34,699 -44.9% ▼ (RMB mn) Weighted Average ROE 6.16% 11.56% -5.40pps ▼ EPS 0.66 1.22 -0.56 ▼ (RMB: Yuan) 23
Slide 24: Slight Decrease in Equity Holders' Equity
Slight Decrease in Equity Holders’ Equity Equity Holders’ Equity RMB mn 400,000 350,000 322,492 19,127 33 303,621 300,000 (25,774) (12,257) 250,000 200,000 150,000 100,000 50,000 0 2015 Equity Attributable Net Profit Attributable to Othe Comprehensive Other Equity Dividends 2016 Equity Attributable
Slide 25: Sufficient Solvency
Sufficient Solvency Core Solvency Ratio (31 December) Comprehensive Solvency Ratio (31 December) 359.02% 324.10% 297.16% 280.34% 2015 2016 2015 2016 Note: Solvency ratio data of 2015 was unaudited. 25
Slide 26: Prudent Investment Assets Allocations
Prudent Investment Assets Allocations Investment Assets 31 December 2016 31 December 20151 (RMB mn) Amount Percentage Change (%) Amount Percentage Fixed-maturity Investments 1,920,125 78.27% 0.58 % 1,777,180 77.69% Term Deposit 538,325 21.94% -2.65 % 562,622 24.59% Bonds 1,119,388 45.63% 2.08 % 996,
Slide 27: Investment Yields Confronted Challenges
Investment Yields Confronted Challenges Comprehensive Net Investment Yield Gross Investment Yield Investment Yield 6.39% 7.38% 4.61% 4.45% 4.56% 2.43% 2015 2016 2015 2016 2015 2016 Note: Net investment income include interest income from debt investments, interest income from deposits, dividend and
Slide 28: Diversified and Decentralized Investment Layout
Diversified and Decentralized Investment Layout In 2016, the Company continued to optimize its investment management system. The diversified entrusted management structure became more mature, the scale of third-party entrustment continued to expand, development of the alternative investment platfo
Slide 29: Prudent Investment Strategy & Credit Risk Control
Prudent Investment Strategy & Credit Risk Control Non-standard Non-standard The Company has always upheld a Credit Bonds1 Assets Assets prudent investment strategy to strictly safeguard against credit risks As of end of 2016, over 92% of credit bonds had a AAA credit rating, while > 92% > 97% >
Slide 30: Embedded Value
Embedded Value LI Mingguang, Vice President & Chief Acturary
Slide 31: Components of Embedded Value
Components of Embedded Value Components of Embedded Value (31 December 2016) RMB mn 800,000 700,000 600,000 (29,787) 500,000 332,317 400,000 652,057 300,000 200,000 349,528 100,000 0 Adjusted Net Worth Value of In-force Cost of Required Capital Embedded Value Business(before cost of required capital
Slide 32: Embedded Value and Value of One Year's Sales
Embedded Value and Value of One Year’s Sales Value of One Year’s Sales Doubled Embedded Value over past Two Years RMB mn RMB mn +16.4% +112.1% 652,057 +56.4% 560,277 49,311 302,530 ▲ +3.8% 291,549 31,528 23,253 349,528 268,729 ▲ +30.1% 2015.12.31 2016.12.31 2014 2015 2016 Value of In-force Business
Slide 33: Embedded Value Movement Analysis
Embedded Value Movement Analysis Embedded Value Movement of 2016 RMB mn 48,116 651 49,311 585 52,168 (13,973) (12,257) (1,792) (31,029) 652,057 560,277 EV at the Expected Value of One Operating Investment Methodology, Market Value, Exchange Shareholder Others EV at 31 beginning Returns Year's Sales
Slide 34: China Life
Om CHINA LIFE
Slide 35: Appendix
Appendix 35 35
Slide 36: Honors and Awards in 2016
Honors and Awards in 2016 China Life Insurance (Group) Company, with China Life Insurance Company Limited as a core subsidiary, has made the list of Fortune Global 500 for 14 consecutive years, ranking the 54th in 2016. China Life ranked 4th in “China’s Top 500 Most Valuable Brands 2016 (13th)” with
Slide 37: Success for you, Success by you
Corporate Social Responsibilities China Life’s corporate culture and social responsibility concept: “Success for you, Success by you” Leverages the Company’s Participates in public Integrates social responsibilities advantages in business, welfare programs in a into customer services and extensive n
Slide 38: Sensitivity Analysis – Restatement of 2015 Results
Sensitivity Analysis – Restatement of 2015 Results Sensitivity Analysis Restatement of 2015 RMB mn Results Adjusted Net Worth 355,613 Value of In-force Business 269,939 (after cost of required capital) Value of One Year’s Sales 31,912 (after cost of required capital) 38
Slide 39: Sensitivity Analysis – Investment Return and Risk Discount Rate
Sensitivity Analysis – Investment Return and Risk Discount Rate Value of In-force Business Value of One Year’s Sales (after cost of required capital) (after cost of required capital) RMB mn RMB mn 51,218 8,434 14,025 302,530 2,402 49,311 (13,055) (2,241) (50,969) (8,412) Investment Risk Base Risk In
Slide 40: Sensitivity Analysis – Operational Assumptions
Sensitivity Analysis – Operational Assumptions Sensitivity Analysis Results – Value of In-force Business (after cost of required capital) RMB mn Base 302,530 Morbidity Rates +/-10% -4,179 4,215 Lapse Rates +/-10% -1,000 911 Mortality Rates for Non-Annuity Products +/-10% Mortality Rates for Annuity
Slide 41: Sensitivity Analysis – Operational Assumptions (cont'd)
Sensitivity Analysis – Operational Assumptions (cont’d) Sensitivity Analysis Results – Value of One Year’s Sales (after cost of required capital) RMB mn Base 49,311 Morbidity Rates +/-10% -926 927 Lapse Rates +/-10% -970 940 Mortality Rates for Non-Annuity Products +/-10% Mortality Rates for Annuity
China Life Insurance Company — FY2016 Earnings Presentation on 6ix