China Life Insurance Company Limited Announces 2020 Interim Results (H Shares)

Rhea-AI Summary

China Life Insurance Company Limited (LFC) reported its unaudited consolidated results for the first half of 2020, highlighting a total revenue increase of 12.5% to RMB504,431 million and gross written premiums of RMB427,367 million, up 13.1% year-on-year. The company's total assets reached RMB3,966,033 million, a 6.4% increase. However, net profit attributable to equity holders dropped 18.8% year-on-year to RMB30,535 million, and no interim dividend will be declared. The company's embedded value grew by 7.8% to RMB1,015,856 million, reflecting stability amid challenges posed by the COVID-19 pandemic.

Positive

• Total revenue reached RMB504,431 million, a year-on-year increase of 12.5%.
• Gross written premiums increased to RMB427,367 million, up 13.1% year-on-year.
• Total assets grew by 6.4% to RMB3,966,033 million.
• Embedded value rose by 7.8% to RMB1,015,856 million.
• First-year regular premiums increased to RMB94,170 million, up 13.3% year-on-year.

Negative

• Net profit attributable to equity holders decreased by 18.8% to RMB30,535 million.
• No interim dividend will be declared for the Reporting Period.

HONG KONG, Aug. 26, 2020 /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 2020 (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 RMB3,966,033 million, an increase of 6.4% from the end of 2019. The Company's embedded value was RMB1,015,856 million, an increase of 7.8% from the end of 2019. During the Reporting Period, the Company's total revenue was RMB504,431 million, an increase of 12.5% year on year; the Company's gross written premiums were RMB427,367 million, an increase of 13.1% year on year, maintaining the leading position in the industry; the value of half year's sales for the six months ended 30 June 2020 was RMB36,889 million, an increase of 6.7% year on year. As at the end of the Reporting Period, the Company's investment assets reached RMB3,781,024 million, an increase of 5.8% from the end of 2019. During the Reporting Period, the gross investment yield was 5.34%, the net investment yield was 4.29%. The comprehensive investment yield taking into account the current net fair value changes of available-for-sale securities recognized in other comprehensive income was 5.40%. During the Reporting Period, net profit attributable to equity holders of the Company was RMB30,535 million, a decrease of 18.8% 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 2020 

2020 is the crucial year when the strategic deployment of China Life Revitalization advanced to a critical stage of breakthrough. In the first half of the year, facing various challenges from the COVID-19 pandemic and economic downturn, the Company pursued the fundamental requirements of high-quality development, adhered to the strategic core of "centering on customers and basic operational units, focusing on business value and individual agent business sector" ("Dual Centers and Dual Focuses"), and concentrated on the operational guideline of "prioritizing business value, strengthening sales force, achieving stable growth, upgrading technology, optimizing customer services and guarding against risks". The Company proceeded well with both the pandemic control and business development, and realized a stable growth of its core business, a continuous optimization of its business structure and a steady increase in its new business value. The Company accelerated optimization and adjustments in asset-liability management, technological innovation, operations and services, risk management and control, and withstood the tests by the pandemic. With steady and healthy development of the Company's businesses in various aspects, its leading industry position was consolidated.

During the Reporting Period, the Company's gross written premiums amounted to RMB427,367 million, an increase of 13.1% year on year. As at the end of the Reporting Period, the embedded value of the Company reached RMB1,015,856 million, an increase of 7.8% from the end of 2019. The value of half year's sales was RMB36,889 million, an increase of 6.7% year on year. During the Reporting Period, the Company continued to enhance the asset-liability management, and its gross investment income reached RMB96,134 million, an increase of 8.1% from the corresponding period of 2019. Due to the combined impact of the update of discount rate assumptions for reserves of traditional insurance contracts, the adjustment of the pre-tax deduction policy of underwriting and policy acquisition costs adopted in the corresponding period of 2019 and the change in gross investment income, net profit attributable to equity holders of the Company was RMB30,535 million, a decrease of 18.8% year on year. As at the end of the Reporting Period, the core solvency ratio and the comprehensive solvency ratio were 258.24% and 267.31%, respectively.

During the Reporting Period, the Company maintained its strategic focus, concentrated on developing long-term regular business and achieved a continuous increase in its new business value. First-year regular premiums amounted to RMB94,170 million (a year-on-year increase of 13.3%), which accounted for 99.03% in long-term first-year premiums, increasing by 0.24 percentage point year on year. In particular, first-year regular premiums with a payment duration of ten years or longer were RMB39,502 million, an increase of 3.7% year on year. The Company adhered to the diversified product strategy and vigorously developed protection-oriented businesses. Out of the top ten insurance products by the first-year regular premiums, six were protection-oriented products. The percentage of premiums from designated protection-oriented products in the first-year regular premiums rose by 3.4 percentage points year on year, with an increase in both the number of protection-oriented insurance policies and average premiums per policy. The value of half year's sales was RMB36,889 million, an increase of 6.7% year on year. As at the end of the Reporting Period, the embedded value of the Company reached RMB1,015,856 million, increasing by 7.8% from the end of 2019. The number of long-term in-force policies was 312 million, an increase of 3.0% from the end of 2019. During the Reporting Period, the surrender rate was 0.61%, a decrease of 0.82 percentage point year on year.

During the Reporting Period, the Company continued to enhance the asset-liability management and flexibly adjusted its investment allocation strategy, so as to actively address the pressure from both assets and liabilities. By closely following the market changes while flexibly adjusting the pace of asset allocation and investment tactics, the Company achieved a gross investment income of RMB96,134 million, an increase of 8.1% year on year. Due to the combined impact of the update of discount rate assumptions for reserves of traditional insurance contracts, the adjustment of the pre-tax deduction policy of underwriting and policy acquisition costs adopted in the corresponding period of 2019 and the change in gross investment income, net profit attributable to equity holders of the Company was RMB30,535 million, decreasing by 18.8% year on year.

In the first half of 2020, guided by the strategic deployment of "China Life Revitalization", the Company further implemented the "Dingxin Project" to effectively strengthen capacity in various fields and boost high-quality development. In terms of sales management, the Company greatly pushed forward the development system of "Yi Ti Duo Yuan", accelerated integration of two sales teams of the individual agent business sector, promoted standardized management of basic operational units, and further consolidated the foundation of sales management. The Company also advanced the transformation and upgrade in the diversified business sector. The bancassurance channel refocused on business transformation, and the group and health insurance channel emphasized specialization and capability building. In terms of investment management, the Company improved the investment management system with a market-oriented approach, coordinated asset allocation and entrusted investment management at account level, and bolstered its investment capability through research of asset classes and optimization of investment strategies. In terms of operations and services, the Company continued to improve refined management, enhanced the entire Internet-based and intelligent operational process, increased operational efficiency through integration, and built a mechanism for continuous tracking and optimization of its customer experiences. In terms of technology support, the Company rebuilt the technical product development team according to the principle of flattening, greatly increasing the vitality and responsiveness of the team. In terms of risk control, the Company strengthened the informationization and intellectualization of risk management, and delved into a centralized risk management model to enhance the efficiency in risk management and control, and firmly held onto the bottom line of risks.

Insurance Business

During the Reporting Period, gross written premiums from the life insurance business of the Company amounted to RMB346,137 million, a year-on-year increase of 12.6%. Gross written premiums from the health insurance business amounted to RMB72,264 million, a year-on-year increase of 15.8%. Gross written premiums from the accident insurance business amounted to RMB8,966 million, a year-on-year increase of 10.7%.

In the first half of 2020, the Company focused on business value growth, and sped up transformation and upgrade. After the organizational restructuring of "Yi Ti Duo Yuan", the individual agent business sector achieved a significant result in business value creation and the core business indicators saw a steady growth despite the unfavourable market conditions. The diversified business sector focused on business transformation and its positioning was clearly defined. As at the end of the Reporting Period, the Company's total sales force reached approximately 1.8 million, which remained stable with its quality being improved. The sales management was further transformed and upgraded.

Individual agent business sector

In the first half of the year, the individual agent business sector adhered to the priority of business value and the return to protection type of business, deepened transformation and upgrade of its sales management, and realized the continuous growth of both business value and scale despite the unfavourable market conditions. During the Reporting Period, gross written premiums from the sector amounted to RMB356,075 million, an increase of 10.1% year on year. First-year regular premiums were RMB82,239 million, an increase of 10.7% year on year. In particular, first-year regular premiums with a payment duration of ten years or longer were RMB39,389 million (a year-on-year increase of 6.4%), which accounted for 47.90% in the first-year regular premiums. The designated protection-oriented business grew rapidly, with an increase in both the number of protection-oriented insurance policies and average premiums per policy. Renewal premiums amounted to RMB263,363 million, an increase of 9.5% year on year. In the first half of the year, the capability of the individual agent business sector in value creation was prominent. The value of half year's sales of the sector was RMB36,559 million, accounting for 99.11% of the value of half year's sales as a whole. New business margin of half year's sales of the sector reached 39.3%, which remained stable compared to the corresponding period of 2019.

In the first half of the year, the general agent team and upsales team of the individual agent business sector developed in a coordinated manner. The Company implemented the new Agent Management and Compensation System, through which the benefits from system upgrading were released, major day-to-day sales force management indicators were steadily improved, and the quality of the sales force enhanced with a stable size. As at the end of the Reporting Period, the number of agents of the individual agent business sector was 1.69 million, including 1,007,000 agents from the general agent team and 683,000 agents from the upsales team, and the monthly average productive agents increased by 40.4% year on year.

Diversified business sector

The transformation and upgrade under "Dingxin Project" was carried out in the diversified business sector in great depth. By concentrating on the development philosophy of "professional operation, enhancement of quality and efficiency, transformation and innovation, and legal compliance", the diversified business sector coordinated well with the individual agent business sector, and focused on the development of bancassurance, group insurance and health insurance. During the Reporting Period, gross written premiums from the diversified business sector amounted to RMB71,292 million, an increase of 30.6% year on year.

Bancassurance Channel. The bancassurance channel repositioned to focus on bank agency business, with equal emphasis on business scale and value, and kicked off the business transformation smoothly. During the Reporting Period, gross written premiums from the channel amounted to RMB28,542 million, an increase of 70.4% year on year. First-year regular premiums were RMB11,867 million, an increase of 43.9% year on year. Renewal premiums amounted to RMB16,464 million (a year-on-year increase of 99.3%), accounting for 57.68% of the gross written premiums from the channel (a year-on-year increase of 8.34 percentage points). The bancassurance channel constantly strengthened sales team management, and the quality of the sales force was improved steadily. As at the end of the Reporting Period, the number of bancassurance channel account managers was 31,000 and the quarterly average active managers increased substantially.

Group Insurance Channel. The group insurance channel continued to deepen diversified development and improve business profitability, strengthened the expansion of key businesses, and achieved steady development. During the Reporting Period, gross written premiums from the channel were RMB16,500 million, a decrease of 1.8% year on year. Short-term insurance premiums from the channel were RMB14,390 million, an increase of 3.0% year on year. As at the end of the Reporting Period, the number of direct sales representatives was 53,000. In particular, the number of high-performance personnels increased by 15.9% from the end of 2019.

Other Channels. In the first half of 2020, gross written premiums from other channels reached RMB26,250 million, an increase of 24.8% year on year. The Company actively developed government-sponsored health insurance businesses, including supplementary major medical expenses insurance, supplementary medical insurance and long-term care insurance, and led the market consistently. As at the end of the Reporting Period, the Company carried out over 220 supplementary major medical expenses insurance programs, providing services to nearly 400 million people in 31 branches at the provincial level. It also provided supplementary medical insurance in 17 branches at the provincial level, serving more than 33 million people, undertook over 600 health protection entrusted programs, covering more than 100 million people, and offered long-term care insurance protection to more than 15 million people.

In the first half of the year, there were greater development opportunities for the online insurance business due to the impact of the COVID-19 pandemic, and a rapid growth was seen in the online sales business. The Company continued to diversify its online insurance product mix, offered various types of online insurance products during the pandemic, and consistently improved internet application functions such as China Life Insurance APP and China Life e-Store. A sales framework for the Company's online insurance business was established, with the integration of online and offline sales as the core, and direct sales on official website and sales by external platforms as supplement. The Company constantly reinforced its online insurance operations to provide more convenient, efficient and diversified online services to its customers.

The Company actively consolidated internal and external ecological resources, steadily pushed forward its coordinated business development with other subsidiaries of China Life Insurance (Group) Company, and expanded the market and customer base under the strategy of "One Customer, One-stop Service". In the first half of 2020, premiums from property insurance cross-sold by the Company increased by 24.6% year on year, whereas new bids of enterprise annuity funds and pension security products of Pension Company cross-sold by the Company grew by 22.1% year on year. Meanwhile, the Company entrusted China Guangfa Bank Co., Ltd. ("CGB") to sell bancassurance products, with first-year regular premiums for the first half of 2020 increasing by 18.7% year on year. The number of new debit cards and credit cards jointly issued by the Company and CGB during the first half of the year exceeded 500,000, thus fostering a sound environment for achieving coordinated development, positive interaction and mutual benefits.

Investment Business

In the first half of 2020, due to the impact of the pandemic, the global economy experienced a notable downturn, with the trend of deglobalization being intensified. Despite a significant decline in China's economic growth, recovery was seen in the second quarter of the year. The interest rate of the domestic bond market rebounded after a rapid decline, and the volatility of the stock market escalated. The Company continued to enhance the asset-liability management, closely followed market movement, and flexibly adjusted its investment tactics. In respect of fixed income investment, the Company seized the opportunity of market fluctuation during the significant downturn of interest rate, timely adjusted allocation to government bonds with long duration, and controlled interest rate risk while maintaining the asset duration. In respect of open market equity investment, the Company adhered to its established allocation strategy and arrangement under the complicated market environment and continued to adjust internal asset structure, thus stabilizing its investment yield. As at the end of the Reporting Period, the Company's investment assets reached RMB3,781,024 million, an increase of 5.8% from the end of 2019.

As at the end of the Reporting Period, among the major types of investments, the percentage of investment in bonds changed to 38.53% from 39.48% as at the end of 2019, the percentage of term deposits changed to 14.18% from 14.98% as at the end of 2019, the percentage of investment in debt-type financial products changed to 11.34% from 11.62% as at the end of 2019, and the percentage of investment in stocks and funds (excluding money market funds) changed to 10.66% from 11.00 % as at the end of 2019.

The Company's debt-type financial products mainly concentrated on the sectors such as transportation, public utilities and energy, and the financing entities were primarily large central-owned enterprises and state-owned enterprises. As at the end of the Reporting Period, over 99% of the debt-type financial products were rated AAA or above by the external rating institutions. In general, the quality of the Company's debt-type investment assets was in good condition and the debt risks were well controlled.

In the first half of 2020, the Company's net investment income was RMB77,391 million, an increase of RMB5,361 million from the corresponding period of 2019, rising by 7.4% year on year. Due to the effect of a significant decline in interest rate and the delay in dividend payment from some listed stocks in the portfolio, the net investment yield was 4.29%, down by 37 basic points from the corresponding period of 2019. By grasping market opportunities, the Company optimized the structure of investment mix and portfolio strategy in its equity investment, rebalanced tactical allocations as appropriate, and controlled risk exposure in a prudent manner to maintain the stability of investment income. The gross investment income of the Company reached RMB96,134 million, an increase of RMB7,211 million from the corresponding period of 2019. The gross investment yield was 5.34%, down by 44 basic points from the corresponding period of 2019. The comprehensive investment yield taking into account the current net fair value changes of available-for-sale securities recognized in other comprehensive income was 5.40%, down by 285 basic points from the corresponding period of 2019.

Outlook

The year of 2020 is a crucial year for us to make breakthroughs for "China Life Revitalization". Despite instabilities and uncertainties in the external environment, we will remain steadfast to our strategic deployment of "China Life Revitalization", seize the new development opportunities of the industry, properly carry out the regular pandemic control, enhance business value, and improve the quality of our business and sales force. We will deepen reform and innovation and carry out the "Dingxin Project" with great efforts, speed up digital transformation to reinforce technological and service empowerment, strengthen asset-liability management, attach great importance to the prevention and mitigation of major financial risk, and enhance our comprehensive governance capability.

We are setting sail to lead the trend and working hard to open the door of the opportunity. On the journey of building a world-class life insurance company, we will stick to our original aspiration and forge ahead, with a view to rewarding the shareholders and people from all walks of life with satisfactory operating performance.

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 the 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 becomes 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 2020, the Company had approximately 312 million long-term individual and group life insurance policies, annuity contracts, and long-term health insurance policies in force. We also provide 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" as defined by Section 27A of the U.S. Securities Act of 1933 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 mean that the actual performance, financial condition or results of operations of the Company could 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 2019 filed with the U.S. Securities and Exchange Commission, or SEC, on 29 April 2020; and in the Company's other filings with the SEC. You should not place undue reliance on these forward-looking statements. Unless otherwise stated, all information provided in this press release is as of the date of this press release, 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 press release is based on public information released by China Banking and Insurance Regulatory Commission.

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SOURCE China Life Insurance Company Limited

FAQ

What were the revenue figures for China Life Insurance Company Limited (LFC) in H1 2020?

China Life Insurance Company Limited reported total revenue of RMB504,431 million for the first half of 2020, representing a 12.5% increase year-on-year.

How did the gross written premiums perform for LFC in the first half of 2020?

LFC's gross written premiums amounted to RMB427,367 million, reflecting a 13.1% year-on-year increase.

What is the current embedded value of LFC as of June 30, 2020?

As of June 30, 2020, the embedded value of China Life Insurance Company Limited stood at RMB1,015,856 million, representing a 7.8% increase from the end of 2019.

Did LFC declare an interim dividend for the first half of 2020?

No, China Life Insurance Company Limited will not declare an interim dividend of ordinary shares for the Reporting Period.

What was the net profit for LFC in the first half of 2020?

The net profit attributable to equity holders for China Life Insurance Company Limited decreased by 18.8% to RMB30,535 million for the first half of 2020.