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China Life Insurance Company Limited Announces 2017 Interim Results

iPMI Magazine Insurance Company Results and Financials News: 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 2017 (the "Reporting Period") prepared under the International Financial Reporting Standards.

Highlights

  • As at the end of the Reporting Period, the Company's total assets reached RMB2,875,092 million, an increase of 6.6% from the end of 2016. The Company's embedded value was RMB697,520 million, an increase of 7.0% from the end of 2016.
  • During the Reporting Period, the Company's total revenue was RMB396,165 million, an increase of 17.3% year-on-year; the Company's gross written premiums were RMB345,967 million, an increase of 18.3% year-on-year; the value of half year's sales for the six months ended 30 June 2017 was RMB36,895 million, an increase of 31.7% year-on-year. The Company's market share in the first half of 2017 was approximately 19.38%, maintaining the first place in the industry.
  • As at the end of the Reporting Period, the Company's investment assets reached RMB2,595,480 million, an increase of 5.8% from the end of 2016. During the Reporting Period, the gross investment yield was 4.62%, the net investment yield was 4.71%, and the gross investment yield including net share of profit of associates and joint ventures was 4.69%. The comprehensive investment yield taking into account the current net fair value changes of available-for-sale securities recognized in other comprehensive income was 4.58%.
  • During the Reporting Period, net profit attributable to equity holders of the Company was RMB12,242 million, an increase of 17.8% 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 2017 

In the first half of 2017, facing the complicated external environment and fierce market competition, the Company adhered to the value-oriented principle, adopted multiple measures, sped up business development and promoted transformation and upgrade by adhering to the operating guideline of "prioritizing value, strengthening sales force, optimizing business structure, achieving stable growth and safeguarding against risk". During the first half of the year, the Company generally operated in a sound and prudent manner, with its business maintaining a rapid growth and its sales force expanding with better quality. During the Reporting Period, the Company's gross written premiums were RMB345,967 million, an increase of 18.3% year-on-year. The Company's market share was approximately 19.38%, maintaining the first place in the industry. With the investment yield growing steadily, and the business quality and operation results improving further, the Company achieved stable progress with better fundamentals.

Continuous optimization in premium structure. In the first half of 2017, out of the premiums from new policies, first-year regular premiums amounted to RMB77,711 million, an increase of 10.8% year-on-year, and single premiums were RMB61,350 million, a decrease of 10.6% year-on-year. First-year regular premiums with ten years or longer payment duration reached RMB37,042 million, an increase of 9.0% year-on-year. Renewal premiums amounted to RMB180,495 million, an increase of 39.0% year-on-year. The first-year regular business and renewal business became major driving forces, which further reinforced the sustainable development of the Company.

Great improvement in business value. The value of half year's sales of the Company for the six months ended 30 June 2017 was RMB36,895 million, an increase of 31.7% year-on-year. As at 30 June 2017, the embedded value of the Company was RMB697,520 million, an increase of 7.0% from the end of 2016. During the Reporting Period, the number of in-force policies of the Company increased by 2.03% from the end of 2016. The Policy Persistency Rate (14 months and 26 months) reached 91.60% and 85.80%, respectively; and the Surrender Rate was 3.40%, an increase of 0.60 percentage point from the corresponding period of 2016.

Consistent enhancement in investment management. In the first half of 2017, interest income from investment portfolios achieved a stable growth, and the fair value gains/(losses) through profit or loss increased greatly. The Company's gross investment income was RMB56,663 million, an increase of 11.5% year-on-year. Due to the combined impact of an increase in gross investment income, the optimization of business structure and the update on the discount rate assumption for reserves of traditional insurance contracts, net profit attributable to equity holders of the Company during the Reporting Period was RMB12,242 million, an increase of 17.8% year-on-year.

During the Reporting Period, gross written premiums from the life insurance business of the Company amounted to RMB300,859 million, an increase of 18.5% year-on-year. In particular, first-year regular premiums were RMB72,976 million, an increase of 9.1% year-on-year, and the percentage of first-year regular premiums in first-year premiums was 54.33%. Single premiums were RMB61,338 million, a decrease of 10.6% year-on-year, and the percentage of single premiums in first-year premiums was 45.67%, a decrease of 4.96 percentage points year-on-year. Renewal premiums were RMB166,545 million, an increase of 40.6% year-on-year. The Company vigorously promoted the development of its health insurance business, with gross written premiums amounting to RMB37,324 million, an increase of 21.3% year-on-year. Gross written premiums from the accident insurance business amounted to RMB7,784 million, an increase of 0.1% year-on-year.

Exclusive Individual Agent Channel. The exclusive individual agent channel maintained a rapid growth with its business structure maintaining stable and its sales force expanding with quality improving. During the Reporting Period, gross written premiums from the exclusive individual agent channel amounted to RMB227,375 million, an increase of 28.0% year-on-year. In particular, first-year regular premiums from the exclusive individual agent channel increased by 10.2% year-on-year, first-year regular premiums with ten years or longer payment duration increased by 8.0% year-on-year, and 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 82.05% and 53.05%, respectively. Renewal premiums from the exclusive individual agent channel increased by 36.6% year-on-year, which demonstrated the results of business structure adjustment for the exclusive individual agent channel in the recent years. With adherence to the development strategy of improving the quality and expanding the size of its sales force, the Company increased the number of new recruits, and comprehensively upgraded the system for cultivation of new agents and agent managers. While maintaining the steady growth of its sales force, the Company put more efforts in the improvement of their quality. As at the end of the Reporting Period, the number of exclusive individual agents reached 1.578 million, a 5.6% increase from the end of 2016, and the average productive agents on a quarterly basis in the exclusive individual agent channel increased by 39.4% from the end of 2016, which showed a positive trend for the quality of its sales force.

Bancassurance Channel. The bancassurance channel adhered to the two-wheel driven strategy, under which business was conducted through the channels of postal offices and banks as well as the Company's own sales channel. While further reducing the scale of single premium business, the Company strengthened the development of regular premium business to improve the value of the bancassurance channel. During the Reporting Period, single premiums from the bancassurance channel were RMB59,667 million, a decrease of 9.3% year-on-year. First-year regular premiums were RMB13,388 million, an increase of 13.0% year-on-year. First-year regular premiums with ten years or longer payment duration were RMB2,968 million, an increase of 17.9% year-on-year. The percentage of first-year regular premiums with five years or longer payment duration in first-year regular premiums was 52.38%. Renewal premiums were RMB19,419 million, an increase of 61.3% year-on-year. The bancassurance channel kept on expanding the electronic bank sales channels, such as online banking, self-service terminals and mobile banking, etc., to extend its service network, as a result of which the regular premium business operated through the channels of major banks and postal offices achieved a fast growth. As at the end of the Reporting Period, the number of sales representatives in the bancassurance channel reached 261,000, an increase of 11.6% from the end of 2016. The average active insurance planners on a monthly basis in the bancassurance channel increased by 26.5% year-on-year.

Group Insurance Channel. The group insurance channel continuously promoted the diversification of business development and effectively pushed forward the steady development of its various businesses. During the Reporting Period, gross written premiums from the group insurance channel amounted to RMB14,689 million, an increase of 6.1% year-on-year. Short-term insurance premiums from the group insurance channel amounted to RMB11,966 million, an increase of 15.7% year-on-year. As at the end of the Reporting Period, the number of direct sales representatives reached over 92,000, an increase of 8.1% from the end of 2016.

Other Business Channels. During the Reporting Period, gross written premiums from other channels were RMB11,026 million, an increase of 0.4% year-on-year. The Company actively and steadily developed its supplementary major medical insurance business and fundamental medical insurance business, maintaining its leading position in the market. The Company also actively participated in the pilot programs in relation to long-term care insurance, creating a good start for development in this aspect. In particular, the number of new projects for the supplementary major medical insurance business was 11, with the total number of projects accumulating to 261. The number of new projects for the fundamental medical insurance business was 19, and the number of new projects with successful bids for the long-term care insurance business was 3.

In the first half of 2017, the global economy continued to recover and the developed economies were inclined to tighten their monetary policies. The Chinese economy was moving in a positive direction while maintaining stability, with its key indicators performing better than the market expectation. In the context of preventing against risks and deleveraging in the financial industry, the Chinese economy maintained a prudent and moderate monetary policy. The rollout of new financial regulations posed a greater impact on the market expectation. Bond yield continued to increase significantly, A share market fluctuated within a certain range, and the structural differentiation became obvious. The Company seized the opportunity of interest rate hike and increased its allocation in bonds with long duration and non-standard debt-type products. The Company maintained its allocation in equity investment in the open market at a reasonable level and attached great importance to the value of H share allocation. The Company also actively caught up with good investment opportunities, such as infrastructure, supply-side reforms and convertible loans, etc., to broaden the sources of its incomes. As at the end of the Reporting Period, the Company's investment assets reached RMB2,595,480 million, an increase of 5.8% from the end of 2016. The balances of the Company's fixed income investment and equity investment increased along with the continuous expansion of its investment scale. In the first half of 2017, the interest income from investment portfolios grew steadily, the spread income decreased, and the fair value gains/(losses) through profit or loss increased. During the Reporting Period, the Company's gross investment income reached RMB56,663 million, an increase of RMB5,822 million from the corresponding period of 2016 and an increase of 11.5% year-on-year. The gross investment yield was 4.62%, an increase of 0.24 percentage point from the corresponding period of 2016. The net investment income was RMB57,732 million, an increase of RMB3,148 million from the corresponding period of 2016, and the net investment yield was 4.71%, remaining the same level as the corresponding period of 2016. The gross investment yield including net share of profit of associates and joint ventures was 4.69%, an increase of 0.27 percentage point from the corresponding period of 2016. The comprehensive investment yield taking into account the current net fair value changes of available-for-sale securities recognized in other comprehensive income was 4.58%, an increase of 3.05 percentage points from the corresponding period of 2016.

In the first half of 2017, by seizing the opportunity of interest rate hike, the Company increased its allocation in fixed income assets and increased moderately in equity investments. Among the major types of investments, the percentage of investment in bonds changed to 44.28% from 45.63% as at the end of 2016, the percentage of term deposits changed to 18.26% from 21.94% as at the end of 2016, the percentage of investment in stocks and funds (excluding money market funds) increased to 12.71% from 10.05% as at the end of 2016, and the percentage of investment in debt-type financial products increased to 9.39% from 5.38% as at the end of 2016.

Outlook

Looking forward, the Chinese economy is expected to be stable and heading into a positive direction, and the life insurance industry will still be embraced up with a lot of golden opportunities. The fifth meeting of the National Financial Work Conference has illuminated the directions for the development of the Company. China Life, as the mainstay of the insurance market and a major institutional investor of the capital market, will strictly honor its mission of serving the real economy, firmly adhere to the perpetual theme of preventing and dissolving risks, and pay great attention to the key areas during the development of the insurance industry, so as to facilitate the insurance industry to serve as the stable long-term risk management engine, make contributions to the improvement of the national social security system, and better serve the economic and social development.

"Leveraging the golden market opportunities and its own competitiveness offers an advantage for a new start." In the second half of the year, the Company will consolidate the stable fundamentals while making progress step by step so as to make the outstanding achievements. Firstly, the Company will forge ahead for rapid development. It will make more efforts in expanding the sales force while enhancing their quality to bolster their morale and improve their productivity, and push forward the implementation of the development strategy of various businesses in a practical manner. Secondly, the Company will maintain its focus on transformation. By returning to its due role of protecting against risks, the Company will continue to optimize its business structure and enrich its product line and actively develop the policy-sponsored insurance business. The Company will further improve its investment management system with the characteristics of China Life to serve the real economy and achieve reasonable and stable investment income. Thirdly, the Company will be more stringent to guard against risks. It will improve the mechanism on the internal control of risks and operate its businesses in strict compliance with laws so as to maintain the stable development of the Company and the industry. Fourthly, the Company will insist on promoting innovation. It will establish a new generation of integrated business processing system with full efforts, with its key structure, platform, functions and products being put online by the end of the year. It will speed up the research and development of artificial intelligence and its application, and build a high-tech China Life by taking advantage of the information technology to promote the business model transformation and the restructuring of organizational structure.

"Transformation brings about a new development while maintaining stable and sustainable business growth." All employees of China Life will commit to their initial intention to return to the due role of protecting against risks in the insurance industry, bear in mind the responsibilities of "serving customers and rewarding shareholders", and forge ahead with courage and persistent efforts, so as to achieve excellent results persistently.

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