08/23/2020 | 06:28am EDT

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中國太平洋保險(集團)股份有限公司

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

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

(Stock Code02601)

ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

Chairman’s statement

The year 2020 has shaped up to be one that is extraordinary and particularly challenging. With the unexpected outbreak of COVID-19, the whole of China mobilised manpower and resources to combat the pandemic. In the face of growing uncertainties in domestic and overseas economic environments, increasing risks and challenges, and normalisation of the pandemic prevention and control effort, we took matters into our own stride, maintained consistency in strategies, and continued to work hard and make progress.

We achieved a milestone in the history of our development. In the first half of 2020, we issued and listed global depositary receipts (GDRs) on the LSE, making us the first insurer simultaneously listed in Shanghai, Hong Kong and London. Our history over the past 30 years is

compelling evidence of the importance of corporate governance as the bedrock of the development of a business enterprise. It is because of the effectiveness of our governance mechanisms that CPIC has been able to persist in high-quality development, forestall systemic risks, and contribute to national initiatives, China’s real economy as well as the welfare of the Chinese people. And we will not stop there. The recent GDR issuance is another important step to enhance our corporate governance. It raised capital and, more importantly, it pooled talent. In particular, with the participation of high-quality investors such as Swiss Re, we further optimised our ownership structure, which laid a sound foundation for continuous enhancement of corporate governance. Recently, with the election of new directors, the new board of directors has become more diversified, international and professional, which, in turn, will add impetus to the implementation of Transformation 2.0 and long-term development of the Company.

We delivered steady growth of business results. The board closely tracked the status of KPIs and led a broad-basedeffort to promote business development. In the first half of the year, we achieved further growth of comprehensive strength, while maintaining an overall healthy momentum in the core business segments.

  • The property and casualty insurance business reported rapid top-line growth, with continued enhancement of underwriting profitability.
  • Our life insurance operation met challenges head-on, stepped up on-line management of the agency force, and continued to push for its restructuring and upgrading focusing on the 3 core segments. During the reporting period, we achieved steady growth of the life insurance residual margin, with improvement in new business value (NBV) margin of the individual customer business.
  • As for asset management, we persisted in the optimisation of Strategic Asset Allocation (SAA) based on profiles of liabilities, while enhancing infrastructural management, improving mechanisms of outsourcing management and performance evaluation, and pushing forward the building of mid-end systems, with steady investment performance in the first half of 2020.

We pressed ahead with transformation.

  • Breakthroughs in innovations of systems and mechanisms. We vigorously promoted the establishment of a market-based, long-termincentive system, with recent on-the-groundprogress in the core business segments of our life and property and casualty operations.

The new structure combines a performance-based pay system, which focuses on value contribution, and a dynamic mechanism to « enlarge the pie » of compensation package. At the same time, given the long-term nature of the insurance business, there are also mechanisms of « lock-ups », « deferred payment » and « claw-backs ». The new scheme covers the key positions of the headquarters of the life and property and casualty subsidiaries, and is more skewed towards the front-line of their branch offices, so as to strike a balance between providing incentives for growth and quality. We believe that the implementation of the new mechanisms will stimulate organisational vitality and improve talent retention, paving the way for sustainable development.

  • Further progress of digital empowerment. The data centre in Luojing of Shanghai was proceeding according to plan, with the completion of « CPIC Cloud » and « 3 Data Centres in 2 Locations ». We continued to optimise the distributional framework of the core business systems, fostering seconds-level response capabilities. We also started comprehensive strategic co-operation with leading technology firms and renowned academies, put in place a mode of co-operation for the technology ecosystem, with steady progress in the capacity- building of data processing and AI mid-end output. We formulated a draft plan for the establishment of CPIC Fintech, in a bid to enhance our technology capabilities in an all- around way through marketisation of technology.
  • Reaping more benefits from increased intra-Group synergy. We launched a new management system for cross-sellbusiness and intra-Groupcollaboration, integrated customer data, improved tools support and continued to promote the integrated customer- oriented operational model with our own characteristics. In the first half of 2020, business from intra-Groupcollaboration grew rapidly, underpinned by unified customer resources at Group level. Of this, cross-sellpremiums, such as health and automobile insurance cross- sold by life insurance agents amounted to RMB9.95 billion, a growth of 20.9%; the number of customers with 2 insurance policies or above reached 27.29 million, up 6.3%; affiliates under the Group jointly developed more than 400 strategic accounts, which covered 84% of governments at provincial or municipal level.
  • Deepening of integrated risk management. We improved the standards, performance evaluation and personnel management systems of risk management, while launching pilot programmes of integrated risk management at grass-rootlevels. We pushed forward the integration of risk management and internal auditing which went downstream to sub-keybranches, so as to enhance the risk management effectiveness at grass-rootlevels. We

initiated the re-engineering of key processes at Group headquarters in a bid to streamline procedures, improve efficiency and strengthen service capabilities. We promoted the sharing of financial resources, deepened centralised management of fund payments and receipts, unified fund management so as to maximise benefits from centralisation.

We promoted the branding of « CPIC Service » in an all-around way. Since the outbreak of the pandemic, we stood side by side with our compatriots and fully participated in the combat against the pandemic. As an insurance company, we provided insurance cover to mitigate disruption to the economy and people’s welfare, while facilitating resumption of businesses and work. We provided comprehensive solutions in the form of funding and risk protection, which targeted the key supply chain and most vulnerable communities and enterprises, supporting firms in key sectors and SMEs in their effort to resume normal business. CPIC employees have been seen at the forefront of the fight against the pandemic, around the pavilions of the China International Import Expo, and at the scene of disaster relief in flood-strickenareas of Southern China, reinforcing a brand image of « Responsible, Smart and Caring » of « CPIC Service ».

We continued to deepen targeted poverty reduction mechanisms. As of the end of the first half of 2020, our poverty alleviation programmes covered 6.414 million registered impoverished people nationwide, and provided a total of RMB2.73 trillion in sum assured to poverty-strickenareas. The « Fang Pin Bao » programme was up and running in over 500 districts and counties of 25 provinces, providing cover against poverty with sum assured of RMB5.96 trillion, benefiting 90 million vulnerable people. We paired up with 2 rural townships and 3 rural villages and succeeded in lifting them out of poverty 9 months earlier than planned. The Rainbow On-lineCharity Platform, stepped up product promotion via live streaming, and delivered nearly 60% increase in turnover dedicated to poverty alleviation. The mode of « shopping and donating to those in need » helps to pool resources and get more people on board in the poverty relief effort.

Thirty years is the prime time of one’s life. As a business enterprise, we will soon celebrate our 30th anniversary, and that means more foresight and even better plan to prepare us for long-term growth opportunities. Recently, we completed a new 3-YearDevelopment Programme of the Group and the Development Programme of Health-relatedBusiness. The former outlines the vision and objectives of the Group between 2020 and 2022, and sets out the 3 development paths, namely, the improvement of product and service supply, the focus on long-term capacity-buildingand long-termincentive systems and the establishment of an integrated risk control system. The latter revisits and revamps the strategic plan for deployment along the health value chain, with a vision of becoming a leading domestic provider of

comprehensive health-related services via capacity-building in products, services, operation and risk management. In the retirement business, we are half way through the implementation of original plans. The « CPIC Home » retirement communities are up and running in various locations across China. Given China’s economic development and demographic shift, the health and retirement sector is becoming increasingly important. The COVID-19 pandemic further raised people’s awareness of public health. Going forward, we will seize opportunities and vigorously deploy along the health and retirement value chain, in a bid to promote the model of « insurance products + health management » and « insurance products + elderly care ».

The quest for great achievements always starts with the first step. The COVID-19pandemic is still spreading globally, triggering an economic slow-down.A new development pattern of « dual circulation » is beginning to take shape in China, with domestic circulation at the core supplemented by international circulation. As for China’s insurance industry, the life insurance market is still facing big challenges, while on the property and casualty insurance side, the comprehensive reform of automobile insurance is expected to be launched soon, with the severity and frequency of natural disasters in 2020 rarely seen before. All these lead to increasing uncertainties in our business operation. But a complex market environment is all the more reason for rationality and consistency in strategies.

In the second half of the year, we will persist in high quality development, while striking a balance between stability of business performance and the acceleration of transformation.

  • On the liability side, we will accelerate the shift of growth drivers of property and casualty insurance, pro-actively adapt to the comprehensive reform of automobile insurance, and translate the achievements of previous transformation into our competitive edge. We will also step up the restructuring of the life insurance agency force, upgrade the customer- oriented operational model, and foster new growth engines via service and digital empowerment.
  • On the asset management side, in a complex economic environment, it is essential to adhere to the principle of long-term, prudent and value investing, further enhance investment research capabilities, step up post-investment management, strengthen co- ordination of assets and liabilities and continue to improve capabilities in risk prevention and mitigation.
  • It is equally important to foster long-term development capabilities in key areas. One is the deepening of long-term incentive systems so as to inject vitality into the organisation; another priority is marketisation of technological innovation. We will emulate leading

insurance companies and renowned Internet firms, and accelerate market-based reform of systems and institutions so that technology can be a more powerful enabler of business development; there is also the building of a platform for health management services by pooling premium resources, both in-house and third-party, and promoting the sharing of core capabilities.

Looking ahead, under the leadership of the board of directors, we will stiffen the sinews, meet challenges head-on, and work relentlessly toward the vision of « being the best in customer

experience, business quality and risk control capabilities, with industry leadership in healthy and steady development« .

Review and analysis of operating results

Business overview

I. Key businesses

We are a leading integrated insurance group in China, and the first insurer simultaneously listed in Shanghai, Hong Kong and London. We provide, through our subsidiaries and along the insurance value chain, a broad range of risk protection solutions, wealth management and asset management services.

In particular, we provide life/health insurance products & services through CPIC Life, property and casualty insurance products & services through CPIC P/C and Anxin Agricultural, and specialised health insurance products & health management services through CPIC Allianz Health. We manage insurance funds, including third-party assets, through our investment arm, CPIC AMC. We conduct pension fund management business and other related asset management business via Changjiang Pension. We also engage in mutual fund management business through CPIC Fund.

In the first half of 2020, China’s insurance market realised a premium income of RMB2,718.624 billion, up 6.5% from the same period of 2019. Of this, premium from life/health insurance companies amounted to RMB1,996.877 billion, a growth of 6.0%, and that from property and casualty insurance companies amounted to RMB721.747 billion, up 7.6%. Measured by direct business premiums, CPIC Life and CPIC P/C are both China’s 3rd largest insurers for life and property and casualty insurance, respectively.

II. Core competitiveness

We are a leading integrated insurance group in China, and the first insurer simultaneously listed in Shanghai, Hong Kong and London, ranking 193rd among Fortune Global 500 released in 2020. On the back of vigorous effort in transformation and competitive insurance expertise, we can capitalise on the growth potential of China’s insurance market.

Focus

We persist in the focus on insurance, and have obtained a full range of insurance-related licences covering life insurance, property and casualty insurance, pension, health insurance, agricultural insurance and asset management. With balanced development of business segments along the insurance value chain, we have fostered top-notch core competitiveness in the insurance business. Our life/health insurance business, with the agency channel as the key driver of both

volume and value growth, centres on protection, pursues product innovation and strives to drive sustainable value growth. The property and casualty insurance persists in business quality control, promotes the shift of growth drivers, with continuous improvement in underwriting profitability. As for investment, we put in place the system of asset liability management (ALM), adhere to prudent, value and long-term investing, and enhance mechanisms to curb cost of liabilities, with sustained improvement in industry-leadingliability-based SAA capabilities. In the first half of the year, in the face of the COVID-19 pandemic, we pro-actively enhanced professional capacity-building, stepped up the on-line operation of the agency force, innovated products and services to seize opportunities arising from the resumption of work and business, and achieved steady business development.

Prudence

We are committed to protection as the central insurance value proposition, and pursue a path of high-quality development with a business philosophy centring on prudence and sustainability. We boast a professional and competent board of directors, an experienced management team and a group-centralised platform of management, with sound corporate governance featuring a clear definition of responsibilities, checks and balances and well-coordinated mechanisms. Through the recent GDR issuance, we raised capital and attracted talent, further optimised shareholding structure, which paved the way for continued improvement in corporate governance and an even more diversified, international and professional board of directors. We established an industry leading system for risk management and internal control, which ensures healthy and sustainable development of the Company.

Dynamism

We persist in customer orientation and forge ahead with transformation in a bid to foster capabilities for sustainable development. In response to trends and dynamics of the industry, we pro-actively invest in emerging business segments such as health care and elderly care, with progress in the new « products + services » model. We use technology to empower the insurance business, seeking to enhance customer experience, operational efficiency and risk management, and facilitate transformation. We boost synergy across various business segments based on customer data mining, so as to boost value creation.

Responsibility

Committed to our responsibility to society, customers and shareholders, we vigorously participate in national initiatives, serve the needs of the real economy, promote the brand image

of « CPIC Service » as one that is « Responsible, Smart and Caring », contributing to a better life of the Chinese people. At the same time, we strive to generate sound returns and give back to our shareholders so that they can benefit from the growth of the Company.

Performance overview

We focused on the core business of insurance, deepened the customer-oriented Strategic Transformation, pursued high quality development and delivered solid business results and sustained increase in overall strength in the reporting period.

I. Performance highlights

During the reporting period, Group operating incomenote 1 amounted to RMB235.481 billion, of which, gross written premiums (GWPs) reached RMB216.597 billion, a growth of 4.2% compared with the same period of 2019. Group net profitnote 2 reached RMB14.239 billion, down by 12.0%, with net operating profitnotes 2, 3 (OPAT) of RMB17.428 billion, a growth of 28.1%. Group embedded value amounted to RMB430.420 billion, an increase of 8.7% from the end of 2019. Of this, value of in-force businessnote 4 reached RMB198.247 billion, up 5.7%. Life insurance business delivered RMB11.228 billion in NBV, down by 24.8% compared with the same period of 2019, with an NBV margin of 37.0%, down by 2.0pt. Property and casualty insurance businessnote 5 recorded a combined ratio of 98.4%, down by 0.2pt. Annualised growth rate of Group investments’ net asset value fell by 0.6pt to 5.3%. As of the end of the reporting period, Group total number of customers amounted to 140.65 million, an increase of 2.09 million from the end of 2019.

Life business NBV growth under pressure, with steady growth of residual margin.

  • CPIC Life realised RMB11.228 billion in NBV, down by 24.8%, with an NBV margin of 37.0%, down by 2.0pt. Given the focus on business quality, the NBV margin of the individual customer business stood at 56.5%, up 6.8pt from the same period of 2019.
  • The residual margin of life insurance amounted to RMB347.056 billion, a growth of 5.3% from the end of 2019.
  • CPIC Life realised a 5.9% growth of renewal business, driving a GWP growth of 0.1%,

reaching RMB138.586 billion.

Improved combined ratio of property and casualty businessnote 5, with rapid top-line growth.

  • The control of expenses was intensified in property and casualty insurance business, and

recorded a combined ratio of 98.4%, down by 0.2pt. Of this, loss ratio stood at 59.9%, up 0.6pt, and expense ratio fell to 38.5%, down by 0.8pt.

  • GWPs amounted to RMB77.748 billion, an increase of 12.4%. Of this, non-auto business grew by 29.1% and accounted for 38.2% of total property and casualty insurance GWPs, up 4.9pt.
  • Automobile insurance enhanced renewal business management and pushed for a shift of growth drivers. Emerging business lines including agricultural and liability insurance experienced rapid development. Of this, agricultural business realised RMB6.274 billion in

direct business premiumsnote 6, with a fast increase in market share.

Persisted in asset allocation stretching across economic cycles and based on profiles of liabilities, with largely stable investment results.

  • The share of fixed income investments stood at 79.5%, down by 0.9pt from the end of 2019; that of equity investments 15.5%, down by 0.2pt, and of this, core equity investmentsnote 7 accounted for 8.3% of total investment assets, the same as that at the end of 2019.
  • With continued effort to extend asset duration, enhance investment research capabilities and the Tactical Asset Allocation (TAA) process, Group annualised growth rate of investments’ net asset value reached 5.3%, down by 0.6pt from the same period of 2019. Annualised total investment yield was 4.8%, the same as that for the first half of 2019, with annualised net investment yield of 4.4%, down by 0.2pt.
  • Group assets under management (AuM) amounted to RMB2,306.305 billion, an increase of 12.9% from the end of 2019. Of this, third-party AuM amounted to RMB753.439 billion, an increase of 20.8%.

Notes:

  1. Based on PRC GAAP.
  2. Attributable to shareholders of the parent.
  3. OPAT is based on net profit on the financial statements, while excluding certain P/L items with short-term volatility an material one-off items which management does not consider to be part of the Company’s day-to-day business operation.
  4. Based on the Group’s share of CPIC Life’s value of in-force business after solvency.
  5. Consolidated data of CPIC P/C, Anxin Agricultural and CPIC HK.
  6. Based on direct business premiums, excluding premium from reinsurance assumed, with consolidation of CPIC P/C and Anxin Agricultural.
  7. Stocks and equity funds included.

II. Key performance indicators

Unit: RMB million

As at 30 June 2020/for

As at 31 December

Indicators

the period between

2019/for the period

Changes (%)

January and June in

between January and

2020

June in 2019

Key value indicators

Group embedded value

430,420

395,987

8.7

Value of in-force businessnote 1

198,247

187,585

5.7

Group net assetsnote 2

196,798

178,427

10.3

NBV of CPIC Life

11,228

14,927

(24.8)

NBV margin of CPIC Life (%)

37.0

39.0

(2.0pt)

Combined ratio of CPIC P/C (%)

98.3

98.6

(0.3pt)

Annualised growth rate of investments’ net asset value (%)

5.3

5.9

(0.6pt)

Key operating indicators

GWPs

216,597

207,809

4.2

CPIC Life

138,586

138,428

0.1

CPIC P/C

76,672

68,247

12.3

Group number of customers (‘000)note 3

140,646

138,558

1.5

Average number of insurance policies per customer

2.02

1.95

3.6

Monthly average agent number (‘000)

766

796

(3.8)

Monthly average first-year commission per agent (RMB)

857

1,247

(31.3)

Surrender rate of CPIC Life (%)

0.5

0.5

Annualised total investment yield (%)

4.8

4.8

Annualised net investment yield (%)

4.4

4.6

(0.2pt)

Third-party AuM

753,439

623,815

20.8

CPIC AMC

269,597

194,766

38.4

Changjiang Pension

442,217

395,277

11.9

Key financial indicators

Net profit attributable to shareholders of the parent

14,239

16,183

(12.0)

CPIC Life

10,147

12,259

(17.2)

CPIC P/C

3,176

3,350

(5.2)

Basic earnings per share (RMB)note 2

1.57

1.79

(12.3)

Net assets per share (RMB)note 2

20.55

19.69

4.4

Comprehensive solvency margin ratio (%)

CPIC Group

289

295

(6pt)

CPIC Life

242

257

(15pt)

CPIC P/C

275

293

(18pt)

Notes:

  1. Based on the Group’s share of CPIC Life’s value of in-force business after solvency.
  2. Attributable to shareholders of the parent.
  3. The Group number of customers refers to the number of applicants and insureds who hold at least one insurance policy within the insurance period issued by one or any of CPIC subsidiaries as at the end of the reporting period. In the event that the applicants and insureds are the same person, they shall be deemed as one customer.

Life/health insurance business

Due to the impact of COVID-19 pandemic, NBV growth was under pressure. CPIC Life stepped up on-line business operation, promoted the restructuring of the agency force, explored the new development mode of « products + services » in a bid to foster new growth drivers. CPIC Allianz Health boosted product and service innovations, deepened Group strategy of synergic development, and recorded rapid business growth.

I. CPIC Life

(I) Business analysis

In the first half of 2020, driven by renewal business growth, CPIC Life reported RMB138.586 billion in GWPs, a growth of 0.1% compared with the same period of 2019. Due to the decline of new business premiums, the NBV fell by 24.8% to RMB11.228 billion. As a result of decreased share of first year premiums (FYPs) from individual customer business, the NBV margin fell by 2.0pt to 37.0%. Given the focus on business quality, the NBV margin of the individual customer business stood at 56.5%, up 6.8pt.

1. Analysis by channels

Unit: RMB million

For 6 months ended 30 June 2020

2020

2019

Changes (%)

Individual customers

130,707

132,398

(1.3)

Agency channel

126,389

126,979

(0.5)

New policies

19,065

26,305

(27.5)

Regular premium business

14,741

22,800

(35.3)

Renewed policies

107,324

100,674

6.6

Other channelsnote

4,318

5,419

(20.3)

Group clients

7,879

6,030

30.7

Total GWPs

138,586

138,428

0.1

Note: Other channels include bancassurance and telemarketing & internet sales, etc.

(1) Business from individual customers

For the reporting period, CPIC Life realised RMB130.707 billion in GWPs from individual customers, down by 1.3%. Of this, new policies from the agency channel amounted to RMB19.065 billion, down by 27.5%, and renewal business RMB107.324 billion, an increase of 6.6%. GWPs from the agency channel accounted for 91.2% of total GWPs, a decrease of 0.5pt from the first half of 2019.

The COVID-19 pandemic was a major disruption to the traditional operational mode of the agency channel, such as off-line marketing, recruitment and basic management activity. To address these challenges, CPIC Life took a host of measures to promote the upgrading of the agency force, such as accelerating on-line operation, improving agent recruitment, enhancing agent training, and increasing technological applications. During the reporting period, monthly average number of agents reached 766,000. Of this, monthly average number of active and high- performing agents reached 207,000 and 121,000, accounting for 27.0% and 15.8% respectively of the total number of agents, with month-on-month recovery in the second quarter. At the same time, CPIC Life vigorously explored the new model of « products + health management » and « products + elderly care » via the health management service of « CPIC Blue Passports », the deposit of human immune cells under the « Life Bank » programme, and retirement communities of « CPIC Home » to help with the acquisition of high-end customers. As of the end of the reporting period, « CPIC Home » had extended over 10,000 certificates of admission into its retirement communities.

Going forward, CPIC Life will persist in customer orientation and high-quality development, « do the right thing » and pursue sustainable value growth. We will intensify efforts to upgrade the agency force, diversify service offerings and promote digital empowerment. To be specific, we will step up the restructuring of the sales force focusing on the core manpower, ultra-high performing agents and new generation agents; vigorously push forward the model of « products + services » as part of the effort to foster the brand name of « CPIC Service »; step up digital

empowerment and the on-line and off-line integration to strengthen capabilities in customer acquisition and up-sell.

For 6 months ended 30 June

2020

2019

Changes (%)

Monthly average agent number (‘000)

766

796

(3.8)

Monthly average FYP per agent (RMB)

4,183

5,887

(28.9)

Monthly average first-year commission per agent (RMB)

857

1,247

(31.3)

Average number of new long-term life insurance policies per agent per month

1.83

1.54

18.8

(2) Business from group clients

In pursuit of high-quality development, CPIC Life focused on the core customer segments, effectively controlled expenses and risks through business and service innovations, and delivered improved profitability as evidenced by lower direct cost ratio and combined ratio. During the reporting period, the business segment realised RMB7.879 billion in GWPs, up 30.7%. CPIC Life vigorously contributed to China’s social health insurance system by engaging in government-sponsored business such as critical illness programmes, third-party administration of social insurance, long-term care and supplementary medical insurance, which, during the reporting period, covered over 115 million people, cumulatively responded to nearly 14 million service requests, and paid out a total of RMB16 billion in claims. There was cumulatively a total of 36 managed care programmes, covering 32 million people under the social security system in 31 municipalities/prefectures of 12 provinces.

2. Analysis by product types

CPIC Life focus on both traditional and participating products. For the reporting period, traditional business generated RMB55.370 billion in GWPs, up 14.0%. Of this, long-term health insurance contributed RMB28.491 billion, up 2.8%. Participating business delivered RMB70.234 billion in GWPs, down by 11.1%, due to switch of products.

Unit: RMB million

For 6 months ended 30 June

2020

2019

Changes (%)

GWPs

138,586

138,428

0.1

Traditional

55,370

48,573

14.0

Long-term health

28,491

27,717

2.8

Participating

70,234

79,015

(11.1)

Universal

49

52

(5.8)

Tax-deferred pension

38

38

Short-term accident and health

12,895

10,750

20.0

3. Policy persistency ratio

For 6 months ended 30 June

2020

2019

Changes

Individual life insurance customer 13-month persistency ratio (%)note 1

86.9

91.7

(4.8pt)

Individual life insurance customer 25-month persistency ratio (%)note 2

86.7

90.5

(3.8pt)

Notes:

  1. 13-monthpersistency ratio: premiums from in-force policies 13 months after their issuance as a percentage of premiums from policies which entered into force during the same period.
  2. 25-monthpersistency ratio: premiums from in-force policies 25 months after their issuance as a percentage of premiums from policies which entered into force during the same period.

The policy persistency of CPIC Life maintained an overall healthy level, with the 13-month and 25-month persistency ratios at 86.9% and 86.7% respectively.

4. Top 10 regions for GWPs

The GWPs of CPIC Life mainly came from economically developed regions or populous areas.

Unit: RMB million

For 6 months ended 30 June

2020

2019

Changes (%)

GWPs

138,586

138,428

0.1

Henan

16,193

16,354

(1.0)

Jiangsu

14,215

14,321

(0.7)

Shandong

11,776

11,631

1.2

Zhejiang

10,038

10,293

(2.5)

Hebei

8,738

8,713

0.3

Guangdong

7,486

7,646

(2.1)

Heilongjiang

6,009

5,969

0.7

Hubei

6,001

5,845

2.7

Shanxi

5,614

5,849

(4.0)

Sichuan

4,460

4,401

1.3

Subtotal

90,530

91,022

(0.5)

Others

48,056

47,406

1.4

(II) Financial analysis

Unit: RMB million

For 6 months ended 30 June

2020

2019

Changes (%)

Net premiums earned

130,489

132,811

(1.7)

Investment incomenote

33,137

28,760

15.2

Other operating income

1,231

1,156

6.5

Total income

164,857

162,727

1.3

Net policyholders’ benefits and claims

(130,183)

(123,752)

5.2

Finance costs

(1,141)

(1,244)

(8.3)

Interest credited to investment contracts

(1,902)

(1,659)

14.6

Other operating and administrative expenses

(20,016)

(25,524)

(21.6)

Total benefits, claims and expenses

(153,242)

(152,179)

0.7

Profit before tax

11,615

10,548

10.1

Income tax

(1,468)

1,711

(185.8)

Net profit

10,147

12,259

(17.2)

Note: Investment income includes investment income and share of profit / (loss) in equity accounted investees on financial statements.

Investment income for the reporting period was RMB33.137 billion, up 15.2%, mainly because of increase in gains from securities trading and interest income on bond investments.

Net policyholders’ benefits and claims amounted to RMB130.183 billion, up 5.2%, largely due to growth of changes in long-term life insurance contract liabilities.

Unit: RMB million

For 6 months ended 30 June

2020

2019

Changes (%)

Net policyholders’ benefits and claims

130,183

123,752

5.2

Life insurance death and other benefits paid

31,096

31,822

(2.3)

Claims incurred

3,958

3,721

6.4

Changes in long-term life insurance contract liabilities

88,807

82,382

7.8

Policyholder dividends

6,322

5,827

8.5

Other operating and administrative expenses for the reporting period amounted to RMB20.016 billion, down by 21.6%.

Income tax for the reporting period was RMB1.468 billion, up by 185.8%, mainly due to adjustment of tax deductible policies on commission and brokerage expenses of insurance companies. The income tax expense booked for 2018 was adjusted in 2019, resulting in a low base in 2019, hence the sharp increase in the first half of 2020. Excluding the above-mentioned factor, income tax for the reporting period would have decreased by 14.7% from the same period

of 2019.

As a result, CPIC Life recorded a net profit of RMB10.147 billion, down by 17.2%.

II. CPIC Allianz Health

In the first half of 2020, CPIC Allianz Health vigorously adapted to the COVID-19 pandemic, leveraged its strengths as a specialised provider of health insurance and management services, and strived to provide high-quality service to Group customers via on-line and off-line channels, doing its share to promote the branding of « Responsible, Smart and Caring » of CPIC Service. In the meantime, despite the adverse impact of the pandemic, it continued to deepen the strategy of boosting development via increased intra-Group synergy, and reported rapid business growth. For the reporting period, it realised RMB4.022 billion in GWPs and health management fee income, a growth of 52.7%, and net profit of RMB23 million.

The company seized the window of opportunity of China’s health insurance market, continuously fostered core competitiveness of health insurance companies. In product development, it supported CPIC Life in its effort to improve the product line-up, drive business development and enhance customer experience, achieving a 57.6% growth of life insurance collaboration business in the first half of 2020; it focused on the transformation in personal lines business of property and casualty insurance, accelerated product upgrading, optimised service allocation, fuelling a 40.6% fast growth of the individual health insurance business of CPIC P/C in the reporting period. The health subsidiary continued to diversify its product offerings and explored product innovation of single illnesses. In respect of operational risk control, it continuously enhanced service quality in insurance application, claims handling, business renewals and customer service, in a bid to enhance customer experience. As for health management, the company stepped up deployment along the health-related value chain by means of partnerships and collaboration, boosted the integration of health management and health insurance so as to promote the development of health insurance business; it diversified the model of « products + services », put in place mechanisms of « insurance + health management » to support customer acquisition and up-sell and customer value generation.

Property and casualty insurance

In the first half of 2020, CPIC P/Cnote introduced effective steps to mitigate the impact of COVID- 19 pandemic, persisted in business quality control, achieved continued improvement in underwriting profitability and rapid premium growth. The capability of customer acquisition

and retention was enhanced in automobile insurance to promote the shift of growth drivers, with further improvement in the combined ratio; non-auto business maintained underwriting profitability, with rapid development of emerging business lines including agricultural and liability insurance.

Note: References to CPIC P/C in this report do not include Anxin Agricultural.

I. CPIC P/C

(I) Business analysis

During the reporting period, in the face of the pandemic, CPIC P/C focused on disease control and prevention on the one hand and the resumption of business on the other. It innovated products and services to help with the resumption of work and business to mitigate the impact of the pandemic. At the same time, CPIC P/C vigorously promoted the branding of CPIC Service, enhanced customer acquisition and retention and deepened risk management to pursue high quality development. It reported GWPs of RMB76.672 billion, up 12.3%, with a combined ratio of 98.3%, a decrease of 0.3pt from the same period of 2019. Of this, the loss ratio stood at 59.7%, up 0.5pt, and the expense ratio reached 38.6%, down by 0.8pt.

1. Analysis by lines of business

Unit: RMB million

For 6 months ended 30 June

2020

2019

Changes (%)

GWPs

76,672

68,247

12.3

Automobile insurance

47,962

46,133

4.0

Compulsory automobile insurance

11,515

10,784

6.8

Commercial automobile insurance

36,447

35,349

3.1

Non-automobile insurance

28,710

22,114

29.8

Agricultural insurance

5,721

3,796

50.7

Liability insurance

4,840

3,609

34.1

Health insurance

4,828

2,724

77.2

Commercial property insurance

3,553

3,441

3.3

Others

9,768

8,544

14.3

(1) Automobile insurance

In the first half of 2020, CPIC P/C proactively adapted to challenges such as the slow-down of new vehicle sales and the impact of COVID-19 pandemic, continued to enhance customer acquisition and retention, promoted on-line business operation in an all-around way, accelerated on-line and off-line integration, enhanced risk selection and achieved high-quality development of automobile insurance business.

For the reporting period, CPIC P/C reported GWPs of RMB47.962 billion from automobile business, a growth of 4.0%, with a combined ratio of 97.8%, down by 0.6pt from the first half of 2019. Of this, the loss ratio stood at 59.6%, down by 0.3pt and the expense ratio decreased by 0.3pt to 38.2%.

Going forward, the company will continue to ensure compliance in its business operation, pro- actively adapt to the comprehensive reform of automobile insurance, continuously enhance capabilities in customer acquisition and retention, step up on-line operation, deepen intraGroup synergy, enhance risk selection and pricing, intensify claims management and claims cost control in a bid to drive high-quality development of automobile business.

(2) Non-automobile insurance

For the reporting period, CPIC P/C made great efforts to mitigate the impact of COVID-19, supported China’s national strategies, the real economy and people’s welfare. It accelerated the

development of emerging business lines, continued to enhance business quality control, and recorded GWPs of RMB28.710 billion, up 29.8%, with a combined ratio of 99.7%, up 0.2pt, staying relatively stable. Of the major business lines, commercial property insurance and liability insurance reported further improvement in the combined ratio, with accident insurance recording great improvement in underwriting profitability. Emerging lines such as agricultural and liability insurance continued to grow rapidly.

Out of the above, agricultural insurance stepped up innovations in products, services and technology, and continuously improved services for farmers and rural areas. During the outbreak of COVID-19, it developed an innovative insurance solution insuring against the disruption to the supply of farm produce in large and medium-sized cities, which played an important role in ensuring food supply. In the first half of 2020, the business line delivered RMB5.721 billion in GWPs, up 50.7%.

Guarantee insurance focused on personal lines business and business of using guarantee insurance as a substitute for security deposit, continued to enhance the risk control systems and anti-fraud and credit risk management capabilities, with business risks under control.

Going forward, we will continue to accelerate the development of emerging lines, optimise business mix, step up product and service innovations, and push for an all-around upgrading of the customer-oriented operational capabilities. At the same time, we will strengthen business quality control, establish risk control systems for emerging business, increase digital empowerment, improve technology-driven risk management capabilities based on smart risk control and digital operational platforms, so as to drive healthy and rapid development of the business.

(3) Key financials of major business lines

Unit: RMB million

For 6 months ended 30 June

Name of insurance

GWPs

Amounts

Claims

Reserves

Underwriting

Combined

insured

profit

ratio (%)

Automobile insurance

47,962

15,217,920

24,958

65,319

945

97.8

Agricultural insurance

5,721

187,745

2,223

4,636

5

99.8

Liability insurance

4,840

19,637,353

1,391

6,445

267

89.5

Health insurance

4,828

157,493,231

1,825

4,657

(345)

111.7

Commercial property insurance

3,553

9,145,638

1,247

5,212

59

96.7

2. Top 10 regions for GWPs

CPIC P/C implemented differentiated regional development strategies as per requirements of the Group concerning the 3 Strategic Areas, while considering factors like market potential and local market competitive landscape.

Unit: RMB million

For 6 months ended 30 June

2020

2019

Changes (%)

GWPs

76,672

68,247

12.3

Guangdong

8,600

7,324

17.4

Jiangsu

8,362

7,563

10.6

Zhejiang

6,760

6,543

3.3

Shanghai

5,220

4,960

5.2

Shandong

4,368

3,883

12.5

Beijing

3,575

3,446

3.7

Hebei

2,992

2,518

18.8

Henan

2,888

2,397

20.5

Hunan

2,785

2,368

17.6

Sichuan

2,684

2,453

9.4

Subtotal

48,234

43,455

11.0

Others

28,438

24,792

14.7

(II) Financial analysis

Unit: RMB million

For 6 months ended 30 June

2020

2019

Changes (%)

Net premiums earned

59,304

50,563

17.3

Investment incomenote

3,432

2,440

40.7

Other operating income

173

118

46.6

Total income

62,909

53,121

18.4

Claims incurred

(35,276)

(29,853)

18.2

Finance costs

(281)

(416)

(32.5)

Other operating and administrative expenses

(23,104)

(20,186)

14.5

Total benefits, claims and expenses

(58,661)

(50,455)

16.3

Profit before tax

4,248

2,666

59.3

Income tax

(1,072)

684

(256.7)

Net profit

3,176

3,350

(5.2)

Note: Investment income includes investment income and share of profit / (loss) in equity accounted investees on financial statements.

Investment income for the reporting period amounted to RMB3.432 billion, up by 40.7%, mainly attributable to higher gains from securities trading.

Other operating and administrative expenses amounted to RMB23.104 billion, up by 14.5%.

This, coupled with the impact of adjustment of policies on deductibles for corporate income tax in the first half of 2019, resulted in a net profit of RMB3.176 billion, a decrease of 5.2% from the same period of 2019.

II. Anxin Agricultural

In the first half of 2020, committed to the high-quality development objectives, Anxin Agricultural continued to cement its branding as a top-notch provider of agricultural insurance, underpinned by innovation and transformation, deepening of integration, empowerment of technology and compliance in business operation. It delivered RMB902 million in GWPs, up 13.5%. Of this, agricultural insurance reported GWPs of RMB598 million, a growth of 10.9%, with a combined ratio of 107.7%, up 15.1pt, due to the impact of a higher loss ratio. It reported net profit of RMB26 million, down by 50.0%.

III. CPIC HK

We conduct overseas business via CPIC HK, a wholly-owned subsidiary. As at 30 June 2020, its total assets stood at RMB1.343 billion, with net assets of RMB552 million. GWPs for the reporting period amounted to RMB277 million, with a combined ratio of 92.4%, and a net profit of RMB12 million.

Asset management

We persist in long-term, value and prudent investing and support the core insurance business with outstanding ALM capabilities. Within the SAA framework, we continued to extend the duration of assets, while seizing market opportunities and dynamically adjusting the procedures of TAA. As a result, we delivered solid investment performance, with Group AuM on steady increase.

I. Group AuM

As of the end of the first half of 2020, Group AuM totalled RMB2,306.305 billion, rising 12.9% from the end of 2019. Of this, Group in-house investment assets amounted to RMB1,552.866 billion, a growth of 9.4%, and third-party AuM RMB753.439billion, an increase of 20.8%, with a fee income of RMB1.059 billion, up 51.3% from the same period of 2019.

Unit: RMB million

30 June 2020 31 December 2019

Changes (%)

Group AuM

2,306,305

2,043,078

12.9

Group in-house investment assets

1,552,866

1,419,263

9.4

Third-party AuM

753,439

623,815

20.8

CPIC AMC

269,597

194,766

38.4

Changjiang Pension

442,217

395,277

11.9

II. Group in-house investment assets

During the reporting period, in the face of the formidable challenges of COVID-19 and complex domestic and international environment, China demonstrated solidarity and pushed forward disease prevention and control and social and economic development in a coordinated manner. On the capital markets, interest rates fell sharply and then experienced a V-shaped rebound; the equity market rallied amid steady progress of pandemic control and resumption of business and work, with the ChiNext market rallying even more.

With the guidance of SAA, we conducted TAA with flexibility, seized market opportunities and achieved solid investment results. In fixed income investments, given expectations of lower interest rates, we seized tactical opportunities and increased allocation into T-bonds and local government bonds at a time of interest rate rebound to extend asset duration. We also increased investments in high-qualitynon-public financing instruments to the extent that the liquidity risk is under control. Given possible deterioration of defaults on the fixed income market, we maintained prudence in credit risk exposure.

(I) Consolidated investment portfolios

unit: RMB million

30 June 2020

Share (%)

Share change from

Changes (%)

the end of 2019 (pt)

Group investment assets (total)

1,552,866

100.0

9.4

By investment category

Fixed income investments

1,233,918

79.5

(0.9)

8.1

– Debt securities

613,802

39.5

(3.1)

1.4

– Term deposits

177,168

11.4

1.0

19.9

– Debt investment plans

176,761

11.4

0.7

16.7

– Wealth management productsnote 1

167,452

10.8

0.9

18.5

– Preferred shares

32,000

2.1

(0.2)

– Other fixed income investmentsnote 2

66,735

4.3

(0.2)

4.1

Equity investments

241,293

15.5

(0.2)

8.6

– Equity funds

30,210

1.9

14.4

– Bond funds

17,738

1.1

(0.2)

(2.4)

– Stocks

98,545

6.4

8.8

– Wealth management productsnote 1

1,475

0.1

102.3

– Preferred shares

13,763

0.9

(0.1)

1.0

– Other equity investmentsnote 3

79,562

5.1

0.1

9.6

Investment properties

8,121

0.5

(0.1)

(2.0)

Cash, cash equivalents and others

69,534

4.5

1.2

47.7

By investment purpose

Financial assets at fair value through profit or loss

10,490

0.7

0.4

112.7

Available-for-sale financial assets

526,093

33.9

(2.2)

2.8

Held-to-maturity financial assets

303,424

19.5

(1.3)

2.8

Interests in associates

10,305

0.7

(2.4)

Investment in joint ventures

9,883

0.6

(0.1)

Loans and other investmentsnote 4

692,671

44.6

3.2

18.0

Notes:

  1. Wealth management products include wealth management products issued by commercial banks, collective trust plans by trust firms, special asset management plans by securities firms and credit assets backed securities by banking institutions, etc.
  2. Other fixed income investments include restricted statutory deposits and policy loans, etc.
  3. Other equity investments include unlisted equities, etc.
  4. Loans and other investments include term deposits, cash and short-term time deposits, securities purchased under agreements to resell, policy loans, restricted statutory deposits, investments classified as loans and receivables, and investment properties, etc.

1. By investment category

As of the end of the reporting period, the share of debt securities was 39.5%, a drop of 3.1pt

from the end of 2019. Out of the above, treasury bonds, local government bonds and financial bonds issued by policy banks made up 16.4% of total investment assets, up 0.2pt from the end of 2019, with an average duration of 15.3 years, extended by 0.1 years versus the end of 2019. Moreover, 99.8% of enterprise bonds and financial bonds issued by non-policy banks had an issuer/debt rating of AA/A-1 or above. Out of these, the share of AAA reached 93.7%. We put in place and dynamically enhanced independent internal credit-rating teams and credit risk management systems covering the entire debt securities investment process, namely, before, during and after the investment. In the selection of new securities, we looked at the internal credit-rating of both the debt and debt issuer, identified the credit risk based on our internal credit-rating system and the input from in-house credit analysts, while considering other factors such as macroeconomic conditions, market environment and external credit-ratings in order to make a well-informed investment decision. At the same time, to assess the credit risk of the stock of bond holdings, we followed a uniform and standardised set of regulations and procedures, combining both regular and unscheduled follow-up tracking post the investment. Our corporate/enterprise bond holdings spread over a wide range of sectors with good diversification effect; the debt issuers all boasted sound financial strength, with the overall credit risk under control.

The share of equity investments stood at 15.5%, down by 0.2pt from the end of 2019. Of this, stocks and equity funds accounted for 8.3% of total investment assets, the same as that as of the end of 2019. On the back of market strategy research and in compliance of disciplined TAA processes, we pro-actively seized tactical opportunities on the equity market and realised solid investment performance with an average neutral allocation, supporting the core business of insurance.

As of the end of the reporting period, non-public financing instruments (NPFIs) totalled RMB349.478 billion, accounting for 22.5% of total investment assets, rising 1.6pt from the end of 2019. While ensuring full compliance with regulatory requirements and internal risk control policies, we persisted in prudent management as is inherently required of insurance companies, stayed highly selective about debt issuers and projects and strived to serve the needs of China’s real economy. The underlying projects spread across sectors like infrastructure, non-bank financial institutions, communications & transport and real estate, and were geographically concentrated in China’s prosperous areas such as Beijing, Shanghai, Guangdong and Jiangsu.

Overall, the credit risk of our NPFI holdings is in the comfort zone. All NPFIs had external credit- ratings, and of these, the share of AAA reached 94.7%, and that of AA+ and above 99.9%. 51.8%

of NPFIs were exempt from debt issuer external credit-ratings, with the rest secured with credit- enhancing measures such as guarantee or pledge of collateral.

Mix and distribution of yields of non-public financing instruments

Sectors

Share of

Nominal

Average

Average remaining

investments (%)

yield (%)

duration (year)

duration (year)

Infrastructural

35.6

5.4

7.2

5.4

Non-bank financial institutions

17.2

5.0

5.4

3.9

Communications & transport

16.3

5.4

6.6

4.3

Real estate

15.5

4.8

7.6

6.4

Energy and manufacturing

8.1

5.1

6.5

4.1

Others

7.3

5.9

8.2

5.8

Total

100.0

5.2

6.9

5.0

Note: Non-public financing instruments include wealth management products issued by commercial banks, debt investment schemes, collective trust plans by trust firms, special asset management plans by securities firms and credit assets backed securities by banking institutions, etc.

2. By investment purpose

By investment purpose, our in-house investment assets are mainly in three categories, namely, available-for-sale (AFS) financial assets, held-to-maturity (HTM) financial assets as well as loans and other investments. Of this, financial assets at fair value through profit or loss increased by 112.7% from the end of 2019, mainly because of increased allocation in unlisted equities. AFS financial assets increased by 2.8%, mainly as a result of increased investments in stocks and funds. HTM financial assets grew by 2.8% from the end of 2019, mainly due to increased investments in government bonds. Loan and other investments rose by 18.0%, largely attributable to increased allocation in debt investment plans and term deposits.

(II) Group consolidated investment income

For the reporting period, net investment income totalled RMB32.663 billion, up 10.0%. This stemmed mainly from increased interest income on fixed income investments. Annualised net investment yield reached 4.4%, down by 0.2pt compared with the same period of 2019.

Total investment income amounted to RMB38.429 billion, up 17.8%, mainly attributable to increase in realised gains and interest income on fixed income investments, with annualised total investment yield at 4.8%, the same as that for the first half of 2019.

Annualised growth rate of investments’ net asset value fell by 0.6pt to 5.3%, as a result of decrease in net of fair value changes of AFS assets.

Unit: RMB million

For 6 months ended 30 June

2020

2019

Changes (%)

Interest income from fixed income investments

29,091

26,670

9.1

Dividend income from equity investments

3,188

2,639

20.8

Rental income from investment properties

384

382

0.5

Net investment income

32,663

29,691

10.0

Realised gains

8,106

2,522

221.4

Unrealised (losses) / gains

(414)

898

(146.1)

Charge of impairment losses on investment assets

(2,484)

(1,077)

130.6

Other incomenote 1

558

577

(3.3)

Total investment income

38,429

32,611

17.8

Net investment yield (annualised) (%)note 2

4.4

4.6

(0.2pt)

Total investment yield (annualised) (%)note 2

4.8

4.8

Growth rate of investments’ net asset value (annualised) (%)notes 2,3

5.3

5.9

(0.6pt)

Notes:

  1. Other income includes interest income on cash and short-term time deposits, securities purchased under agreements to resell, share of profit / (loss) in equity accounted investees, and investment income through the step acquisition of a subsidiary, etc.
  2. The impact of securities sold under agreements to repurchase was considered in the calculation of net investment yield. Average investment assets as the denominator in the calculation of net / total investment yield and growth rate of investments’ net asset value are computed based on the Modified Dietz method.
  3. Growth rate of investments’ net asset value = total investment yield + net of fair value changes of AFS booked as other comprehensive income / (loss) / average investment assets.
  1. Total investment yield on a consolidated basis

Unit: %

For 6 months ended 30 June

2020

2019

Changes

Total investment yield (annualised)

4.8

4.8

Fixed income investmentsnote

4.9

5.1

(0.2pt)

Equity investmentsnote

4.1

3.1

1.0pt

Investment propertiesnote

9.6

9.1

0.5pt

Cash, cash equivalents and othersnote

0.7

0.9

(0.2pt)

Note: The impact of securities sold under agreements to repurchase was not considered.

  1. Third-partyAuM
    (I) CPIC AMC

In the first half of 2020, CPIC AMC adhered to prudent business development strategies, effectively adapted to the adverse impact of COVID-19, faithfully implemented regulatory requirements and supported economic development in an all-around way. As of the end of the reporting period, its third-party AuM amounted to RMB269.597 billion, an increase of 38.4% from the end of 2019.

During the reporting period, the company intensified its support for the fight against the pandemic. It contacted, at the earliest possible time, 7 owners of partnership projects, which had planned to invest a total of over RMB10 billion in Hubei Province, and given the extraordinary circumstances, opened a green channel to fast-track work process so that funds could be channelled to local firms at the forefront of the combat against the pandemic. At the same time, it seized opportunities arising from the national economy, looked closely for high- quality assets, and steadily promoted the development of alternative investment business through co-operation with target clients such as large State-owned Enterprises (SOEs) under the central and local governments or in major cities. For the first half of 2020, it registered a total of 10 alternative investment products involving an amount of RMB33.1 billion, maintaining its industry leadership.

Under the guidelines of « market-based,product-driven development », the company faithfully implemented new rules on asset management, and steadily promoted the business of asset management products. In the first half of 2020, based on a full review of its target client mix and insights into customer needs, it conducted effective communication with key institutional clients, particularly banks and insurance companies, and successfully marketed its strategies and products. As of the end of the reporting period, the subsidiary reported RMB208.6 billion in third-party asset management products and AuM combined, an increase of 62.8% from the end of 2019.

(II) Changjiang Pension

In the first half of 2020, Changjiang Pension coordinated pandemic control and prevention and business development, took a host of steps to support the resumption of business and work, continued to deepen its presence in the 3 pillars of old-age provision, pro-actively increased investments in human resources and technology, strived to provide « Responsible, Smart and Caring » service, and achieved high-quality development. As at 30 June 2020, its third-party assets under trustee management amounted to RMB182.049 billion, up 22.6% from the end of 2019; third-party assets under investment management reached RMB442.217 billion, an increase of 11.9%.

In the first pillar, it continued with steady management of the social security pension fund and was entrusted multiple times with additional funds, with the investment performance leading among comparable portfolios. As for the second pillar, the company initiated the trustee and investment management of 26 occupational annuity schemes, with industry-leading performance so far in the year; it continued to deepen its presence in enterprise annuity business, and was selected as manager of a number of large enterprise annuity plans in public tendering; it focused on the marketing of the « Shengshi Ruyi » collective group retirement product to serve the needs of hybrid ownership and pay structure reform of SOEs. In the third pillar, Changjiang Pension pro-actively adapted to the changing market environment, and continued to deliver solid investment performance for the tax-deferred pension schemes; in the light of regulatory requirements and new rules on asset management, it focused on the development of long-duration individual retirement plans based on net asset value, which cumulatively served nearly 20 million individual customers; it dynamically improved the product line-up for institutional clients; in the first half of 2020, the company registered RMB20.8 billion in debt investment plans, ranking the 3rd in the industry, with firm steps to promote innovation and transformation of the alternative business.

Analysis of specific items

I. Items concerning fair value accounting

Unit: RMB million

30 June 2020

31 December 2019

Changes

Impact of fair value

changes on profitsnote

Financial assets at fair value through profit or loss

10,490

4,931

5,559

(414)

Available-for-sale financial assets

526,093

511,822

14,271

(2,220)

Total

536,583

516,753

19,830

(2,634)

Note: Impact on profits of change of fair value for AFS financial assets refers to charges for impairment losses.

II. Solvency

We calculate and disclose our core capital, actual capital, minimum required capital and solvency margin ratio in accordance with requirements by CBIRC. The solvency margin ratio of domestic insurance companies in the PRC shall meet certain prescribed levels as stipulated by CBIRC.

Unit: RMB million

30 June

31 December

Reasons of change

2020

2019

CPIC Group

Profit for the period, capital injection, profit

Core capital

485,527

453,838

distribution to shareholders, and change of fair

value of investment assets

Profit for the period, capital injection, profit

Actual capital

495,527

463,838

distribution to shareholders, and change of fair

value of investment assets

Minimum required capital

171,167

157,481

Growth of insurance business and changes to

asset allocation

Core solvency margin ratio (%)

284

288

Comprehensive solvency margin ratio (%)

289

295

CPIC Life

Profit for the period, profit distribution to the

Core capital

366,003

357,883

shareholders, and change of fair value of

investment assets

Profit for the period, profit distribution to the

Actual capital

366,003

357,883

shareholders, and change of fair value of

investment assets

Minimum required capital

150,960

139,354

Growth of insurance business and changes to

asset allocation

Core solvency margin ratio (%)

242

257

Comprehensive solvency margin ratio (%)

242

257

CPIC P/C

Profit for the period, profit distribution to the

Core capital

40,872

38,900

shareholders, and change of fair value of

investment assets

Profit for the period, profit distribution to the

Actual capital

50,872

48,900

shareholders, and change of fair value of

investment assets

Minimum required capital

18,484

16,713

Growth of insurance business and changes to

asset allocation

Core solvency margin ratio (%)

221

233

Comprehensive solvency margin ratio (%)

275

293

CPIC Allianz Health

Core capital

1,142

Actual capital

1,142

Minimum required capital

919

Core solvency margin ratio (%)

124

Comprehensive solvency margin ratio (%)

124

1,084

Profit for the period, change of fair value of

investment assets

1,084

Profit for the period, change of fair value of

investment assets

702 Growth of insurance business and changes to asset allocation

155

155

Anxin Agricultural

Profit for the period, profit distribution to the

Core capital1,7251,684 shareholders, and change of fair value of investment assets

Actual capital

1,725

Minimum required capital

629

Core solvency margin ratio (%)

274

Comprehensive solvency margin ratio (%)

274

Profit for the period, profit distribution to the

1,684 shareholders, and change of fair value of investment assets

557 Growth of insurance business and changes to asset allocation

303

303

Please refer to the summaries of solvency reports published on the websites of SSE (www.sse.com.cn), SEHK (www.hkexnews.hk), LSE (www.londonstockechange.com) and the Company (www.cpic.com.cn) for more information about the solvency of CPIC Group and its main insurance subsidiaries.

III. Sensitivity analysis of price risk

The following table shows the sensitivity analysis of price risk, i.e. the pre-tax impactnote 1 of fair value changes of all equity assetsnote 2 in the case of a 10% change in stock prices as at the end of the reporting period on our profit before tax and shareholders’ equity (assuming the fair value of equity assetsnote 2 moves in proportion to stock prices), other variables being equal.

Unit: RMB million

From January to June 2020 / 30 June 2020

Market value

Impact on profit before tax

Impact on equity

+10%

22

7,791

-10%

(22)

(7,791)

Notes:

  1. After policyholder participation.
  2. Equity assets do not include bond funds, money market funds, wealth management products, preferred shares and other equity investments, etc.

IV. Insurance contract liabilities

Insurance contract liabilities include unearned premium reserves, claim reserves, and long-term life insurance contract liabilities. All three are applicable in life insurance business, while only the first two are applicable in property and casualty insurance.

As at 30 June 2020, insurance contract liabilities of CPIC Life amounted to RMB1,071.691 billion, representing an increase of 10.2% from the end of 2019. Those of CPIC P/C amounted to RMB107.069 billion, an increase of 14.3%. The rise was mainly caused by business expansion and accumulation of insurance liabilities.

We also test the adequacy of reserves at the balance sheet date. If the testing shows that reserves set aside for each type of insurance contracts are sufficient, there is no need for additional provisions; if not, then additional reserves are required.

Unit: RMB million

30 June 2020

31 December 2019

Changes (%)

CPIC Life

Unearned premium reserves

8,063

4,500

79.2

Claim reserves

5,117

4,472

14.4

Long-term life insurance contract liabilities

1,058,511

963,540

9.9

CPIC P/C

Unearned premium reserves

64,542

56,643

13.9

Claim reserves

42,527

37,026

14.9

V. Investment contract liabilities

Investment contract liabilities mainly cover the non-insurance portion of insurance contracts, and those contracts which failed to pass the testing of significant insurance risk.

Unit: RMB million

31 December

Increase for the period

Decrease for the period

30 June

2019

Deposits

Interest

Others

Deposits

Fees

2020

received

credited

withdrawn

deducted

Investment contract liabilities

75,506

9,603

1,902

472

(3,651)

(80)

83,752

VI. Reinsurance business

In the first half of 2020, premiums ceded to reinsurers are shown below:

Unit: RMB million

For 6 months ended 30 June

2020

2019

Changes (%)

CPIC Life

5,105

3,110

64.1

Traditional

1,742

949

83.6

Long-term health

1,373

630

117.9

Participating

213

131

62.6

Universal

27

39

(30.8)

Tax-deferred pension

/

Short-term accident and health

3,123

1,991

56.9

CPIC P/C

11,218

9,523

17.8

Automobile

3,207

3,103

3.4

Non-automobile

8,011

6,420

24.8

In the first half of 2020, premiums from reinsurance assumed are set out below:

Unit: RMB million

For 6 months ended 30 June

2020

2019

Changes (%)

CPIC Life

Traditional

238

/

Long-term health

1

/

Participating

/

Universal

/

Tax-deferred pension

/

Short-term accident and health

/

CPIC P/C

607

430

41.2

Automobile

/

Non-automobile

607

430

41.2

As at the end of the first half of 2020, assets under reinsurance are set out below:

Unit: RMB million

30 June 2020

31 December 2019

Changes (%)

CPIC Life

Reinsurers’ share of insurance contract liabilities

Unearned premiums

1,639

1,067

53.6

Claim reserves

257

246

4.5

Long-term life insurance contract liabilities

12,867

12,340

4.3

CPIC P/C

Reinsurers’ share of insurance contract liabilities

Unearned premiums

8,032

6,283

27.8

Claim reserves

7,015

6,117

14.7

We determine retained insured amounts and reinsurance ratio according to insurance regulations and our business development needs. To lower the concentration risk of reinsurance, we also entered into reinsurance agreements with various leading international reinsurance companies. The criteria for the selection of reinsurance companies include their financial strength, service level, insurance clauses, claims settlement efficiency and price. In general, only domestic reinsurance companies with proven records or international reinsurance

companies of ratings of A- or above would qualify as our reinsurance partners. Besides China Reinsurance (Group) Corporation and its subsidiaries, i.e., China Life Reinsurance Company Ltd., and China Property & Casualty Reinsurance Company Ltd., our reinsurance partners also include international giants like Swiss Reinsurance Company (瑞 士 再 保 險 公 司) and Munich Reinsurance Company (慕尼黑再保險公司).

VII. Main subsidiaries & associates and equity participation

Unit: RMB million

Company

Main business scope

Registered

Group

Total

Net

Net

capital

shareholdingnote2

assets

assets

profit

Property indemnity

insurance; liability

insurance; credit and

guarantee insurance;

China Pacific

short-term health and

accident insurance;

Property

reinsurance of the above

19,470

98.5%

191,724

41,557

3,176

Insurance Co.,

said insurance; insurance

Ltd.

funds investment as

approved by relevant

laws and regulations;

other business as

approved by CBIRC.

Personal lines insurance

including life insurance,

health insurance,

accident insurance, etc.

denominated in RMB or

foreign currencies;

reinsurance of the above

said insurance; statutory

life/health insurance;

agency and business

relationships with

China Pacific

domestic and overseas

insurers and

Life Insurance

8,420

98.3%

1,397,179

80,262

10,147

organisations, loss

Co., Ltd.

adjustment, claims and

other business entrusted

from overseas insurance

organisations; insurance

funds investment as

prescribed by Insurance

Law of the PRC and

relevant laws and

regulations; international

insurance activities as

approved; other business

as approved by CBIRC.

Changjiang

Group pension and

3,000

61.1%

4,999

3,476

258

Pension

annuity business;

Insurance Co.,

individual pension and

Ltd.

annuity business; short-

term health insurance;

accident insurance;

reinsurance of the

aforementioned

business; outsourced

money management

business denominated in

RMB or foreign

currencies for the

purpose of elderly

provisions; pension

insurance asset

management business;

advisory business

pertaining to asset

management; insurance

fund management as

allowed by the PRC laws

and regulations; other

business as approved by

CBIRC.

Asset management of

capital and insurance

funds; outsourcing of

Pacific Asset

fund management;

advisory services relating

Management

2,100

99.7%

4,078

3,371

241

to asset management;

Co., Ltd.

other asset management

business as allowed by

the PRC laws and

regulations.

Health and accident

insurance denominated

in RMB yuan or foreign

currencies; health

insurance sponsored by

the government or

CPIC Allianz

supplementary to state

Health

medical insurance

1,700

77.1%

9,981

1,234

23

Insurance Co.,

policies; reinsurance of

Ltd.

the above said insurance;

health insurance-related

advisory and agency

business; insurance funds

investment as approved

by relevant laws and

regulations; other

business as approved by

CBIRC.

Agricultural insurance;

property indemnity

insurance; liability

insurance; statutory

liability insurance; credit

Anxin

and guarantee insurance;

Agricultural

short-term health

700

51.3%

4,208

1,524

26

Insurance Co.,

insurance and accident

Ltd.

insurance; property

insurance relating to rural

areas and farmers;

reinsurance of the above

said insurance; insurance

agency business.

Fund management

CPIC Fund

business; the launch of

mutual funds and other

Management

150

50.8%

643

536

37

business as approved by

Co., Ltd.

competent authorities of

the PRC.

Notes:

  1. Figures for companies in the table are on an unconsolidated basis. For other information pertaining to the Company’s main subsidiaries, associates or invested entities, please refer to Review and analysis of operating results of this report, and Scope of Consolidation, Interests in Associates, Investment in Joint Ventures as Notes to the Interim Condensed Consolidated Financial Information.
  2. Figures for Group shareholding include direct and indirect shareholdings.

VIII. Seizure, attachment, and freeze of major assets or their pledge as collateral

The Company’s assets are mainly financial assets. The repurchase of bonds forms part of the Company’s day-to-day securities investment activities, and as of the end of the reporting period, no abnormality was detected.

IX. Gearing ratio

30 June 2020

31 December 2019

Changes

Gearing ratio (%)

88.3

88.3

Note: Gearing ratio = ( total liabilities + non-controlling interests) / total assets.

Outlook

I. Market environment and business plan

China’s development is facing increasing risks and challenges. A new development pattern of « dual circulation » is taking shape in China, with domestic circulation at the core and supplemented by international circulation. From a long-term perspective, rising per capita income, population ageing, urbanisation, economic restructuring, shift of government roles and the cut of tax and administrative fees will continue to drive sustainable development of China’s insurance industry. The COVID-19 pandemic as a major public health crisis promises to further raise public awareness of and stimulate demand for insurance and health care service, and China remains one of the most dynamic and fastest-growing insurance markets of the world. Traditional domestic insurance companies are accelerating transformation; foreign players are increasing presence in China; Internet insurance firms and specialised insurance intermediaries are thriving. All of them will stimulate dynamic development of the insurance market.

Going forward, with a vision of « achieving leadership in healthy and stable development of the insurance industry », and the targets of « being the best in customer experience, business mix and risk control capabilities », the Company will deepen Transformation 2.0 in the 5 keys areas of talent, digitalisation, intra-Group synergy, governance and deployment, introduce long-term incentive systems, promote marketisation of technological innovation, establish a comprehensive platform of health-related business, enhance the professionalism of investment management, and achieve the modernisation of corporate governance, so as to foster core competitiveness for the future. Meanwhile, it will also promote the branding of « CPIC Service », vigorously serve national strategies, support the real economy, improve the welfare of the Chinese people, ensure the prevention of major risks, and achieve more success in high-quality development.

II. Major risks and mitigating measures

Firstly, in terms of macroeconomic environment, the global spread of COVID-19, escalation of trade frictions and rising anti-globalisation sentiment severely disrupted the world industry chain and business models, with increasing uncertainties in short-term economic growth. At the same time, normalisation of resumption of business and work will run in tandem with the control and prevention of the pandemic. As China’s economic growth slows down, rising credit defaults, the pressure on long-termrisk-free interest rates and deterioration of liquidity risk may materially impact insurance and asset management business.

Secondly, in terms of industry development, China’s insurance market is also slowing down, coupled with a shift of the development model, and accumulation of risks over the years which have begun to surface. The regulator will continue to intensify its efforts to mitigate risks, tackle irregularities and tighten the overall regulation. New actuarial rules on life/health insurance, amendments to regulations on health insurance, and the launch of comprehensive reform of automobile insurance will compel the industry to enhance capacity-building and professionalism. The COVID-19 pandemic will stimulate digital transformation of the industry, reshape its business model, posing challenges to traditional insurance companies, which rely more on off-line operation. Insurance player will face more intense competitions as a result of increased opening-up of the industry and technological development.

Thirdly, in respect of its business operation, the Company is facing a relatively high risk of large claims arising from severe natural catastrophes and accidents caused by human error, with emerging risks starting to have potential impact on the stability of its business performance. Its GDR issuance and the execution of internationalisation strategy will require full compliance in domestic and overseas jurisdictions and even more professionalism in corporate governance and investment capabilities.

To cope with these risks, we will persist in compliance in business operation, stay focused on the core business of insurance and press ahead with Transformation 2.0. In particular, in light of the Transformation objectives, we will step up research into and analysis of macroeconomic trends, accelerate digital empowerment to improve on-line capabilities, dynamically enhance capabilities in risk assessment and product pricing; improve ALM and counter-party credit risk management in an all-around way, strengthen investment research capabilities and the matching of assets and liabilities; continuously optimise mechanisms for risk identification, assessment, early warning and mitigation, as well as programmes of cumulative risk exposure control and reinsurance so as to forestall major risks and ensure stable business operation and healthy solvency levels.

Change in accounting estimates

When measuring the insurance contract reserves, the Group determines actuarial assumptions such as discount rate, mortality and morbidity, surrender rates, expense assumptions and policy dividend assumptions based on information currently available as at the balance sheet date.

As at 30 June 2020, the Group used information currently available to determine the above assumptions. Mainly due to change of the benchmark yield curve of discount rate for life and long-term health insurance reserves, life and long-term health insurance reserves after reinsurance increased by approximately RMB4,236 million as at 30 June 2020 and profit before tax decreased by approximately RMB4,236 million for the 6 months ended 30 June 2020.

Embedded value

Summary of Embedded Value and Value of Half Year’s Sales

The table below shows the Group Embedded Value of CPIC Group as at 30 June 2020, and the value of half year’s sales of CPIC Life in the 6 months to 30 June 2020 at a risk discount rate of 11%.

Unit: RMB million

Valuation Date

30 June 2020

31 December 2019

Group Adjusted Net Worth

232,174

208,402

Adjusted Net Worth of CPIC Life

115,450

114,677

Value of In Force Business of CPIC Life Before Cost of Required Capital Held

213,804

203,392

Cost of Required Capital Held for CPIC Life

(12,113)

(12,548)

Value of In Force Business of CPIC Life After Cost of Required Capital Held

201,691

190,844

CPIC Group’s Equity Interest in CPIC Life

98.29%

98.29%

Value of In Force Business of CPIC Life After Cost of Required Capital Held

198,247

187,585

attributable to the shareholders of CPIC Group

Group Embedded Value

430,420

395,987

CPIC Life Embedded Value

317,141

305,521

Valuation Date

30 June 2020

30 June 2019

Value of Half Year’s Sales of CPIC Life Before Cost of Required Capital Held

12,674

18,011

Cost of Required Capital Held

(1,447)

(3,084)

Value of Half Year’s Sales of CPIC Life After Cost of Required Capital Held

11,228

14,927

Notes:

  1. Figures may not be additive due to rounding.
  2. Results in column « 30 June 2019 » are those reported in the 2019 interim report.

3. Results in column « 31 December 2019 » are those reported in the 2019 annual report.

The Group Adjusted Net Worth represents the shareholder net equity of the Company based on the China Accounting Standards, inclusive of adjustments of the value of certain assets to market value and adjusted for the relevant differences, such as difference between China Accounting Standards reserves and policy liabilities valued under « Appraisal of Embedded Value » standard published by the CAA. It should be noted that the Group Adjusted Net Worth incorporates the shareholder net equity of the Company as a whole (including CPIC Life and other operations of the Company), and the value of in force business and the value of half year’s sales are of CPIC Life only. The Group Embedded Value also does not include the value of in force business that is attributable to minority shareholders of CPIC Life.

New Business Volumes and Value of Half Year’s Sales

The table below shows the volume of new business sold in terms of first year annual premium and value of half year’s sales of CPIC Life after cost of required capital held at a risk discount rate of 11% for year 2020.

Unit: RMB million

First Year Annual Premium (FYAP) in the

Value of Half Year’s Sales After Cost of

First Half of Year

Required Capital Held

2020

2019

2020

2019

Total

30,316

38,238

11,228

14,927

Of which: Traditional

12,035

16,987

9,596

12,405

Participating

4,566

7,821

1,106

1,913

Implementation of profit distribution during the reporting period

The Company distributed a cash dividend of RMB1.20 per share (tax included) in accordance with the « Resolution on Profit Distribution Plan for the Year of 2019 » approved at the 2019 Annual General Meeting. The implementation of this distribution plan has been completed in June 2020.

Profit distribution

The Company did not propose to distribute any profit, nor did it transfer any capital reserves to share capital for the first half of 2020.

Compliance of the Corporate Governance Code

During the reporting period, save as disclosed below, the Company has complied with all the code provisions and substantially all of the recommended best practices of the Corporate Governance Code, as well as the latest revisions of the Corporate Governance Code including but not limited to improving the transparency and accountability of the board and board member election, and advocating the diversity of board members.

Code Provision A.2.1 of the Corporate Governance Code provides that the roles of the chairman and chief executive shall be separate and should not be performed by the same individual. A resolution in relation to the appointment of Mr. FU Fan as the president of the Company has been considered and approved at the 22nd session of the 8th Board, and his appointment qualification has been approved by CBIRC in March 2020. The Board has designated Mr. KONG Qingwei, Chairman of the Board, as the temporary person-in-charge to act on behalf of the president prior to the tenure of office of Mr. FU Fan. After considering the principles under Code Provision A.2.1 of the Corporate Governance Code and examining the Company’s management structure, the Board is of the view that such temporary arrangement is able to provide the Company with effective management and, at the same time, protect the shareholders’ rights to the greatest extent. Currently, Mr. KONG Qingwei serves as Chairman of the Board, and Mr. FU Fan serves as President of the Company.

Completion of the issuance and listing of GDRs

Upon the approval of CBIRC, domestic and foreign securities regulators and stock exchanges, the GDRs issued by the Company were listed on the LSE on 22 June 2020 (London time) (Stock Name: China Pacific Insurance (Group) Co., Ltd.; Trading Symbol: CPIC). Newly issued PRC domestic A shares of the Company are used as the underlying securities of the GDRs, with each GDR representing 5 A shares of the Company. After the listing of the A shares issued upon the exercise of over-allotment option on the SSE on 9 July 2020 (Beijing time), 111,268,291 GDRs were issued by the Company in total, and the total share capital of the Company changed to 9,620,341,455 shares. The issue price was USD17.60 per GDR, and the gross proceeds raised from the issuance of GDRs were USD1,965.4 million.

44

Purchase, redemption or sale of the Company’s listed securities

During the reporting period, neither the Company nor its subsidiaries purchased, sold or redeemed any listed securities of the Company.

Review of accounts

The audit committee of the Company has reviewed the principal accounting policies of the Company and the unaudited financial statements for the six months ended 30 June 2020 in the presence of internal and external auditors.

Publication of results on the websites of SEHK and the Company

The interim report of the Company for the 6 months ended 30 June 2020 will be dispatched to shareholders of the Company and will be published on the websites of SEHK (www.hkexnews.hk) and the Company (www.cpic.com.cn) in due course.

DEFINITIONS

« The Company », « the Group »,

China Pacific Insurance (Group) Co., Ltd.

« CPIC » or « CPIC Group »

« CPIC Life »

China Pacific Life Insurance Co., Ltd., a subsidiary of China Pacific Insurance (Group) Co., Ltd.

« CPIC P/C »

China Pacific Property Insurance Co., Ltd., a subsidiary of China Pacific Insurance (Group)

Co., Ltd.

« CPIC AMC »

Pacific Asset Management Co., Ltd., a subsidiary of China Pacific Insurance (Group) Co., Ltd.

« CPIC HK »

China Pacific Insurance Co., (H.K.) Limited, a wholly-owned subsidiary of China Pacific

Insurance (Group) Co., Ltd.

« Changjiang Pension »

Changjiang Pension Insurance Co., Ltd., a subsidiary of China Pacific Insurance (Group) Co.,

Ltd.

« Anxin Agricultural »

Anxin Agricultural Insurance Co., Ltd., a subsidiary of China Pacific Insurance (Group) Co.,

Ltd.

« CPIC Fund »

CPIC Fund Management Co., Ltd., a subsidiary of China Pacific Insurance (Group) Co., Ltd.

45

« CPIC Allianz Health »

CPIC Allianz Health Insurance Co., Ltd., a subsidiary of China Pacific Insurance (Group) Co.,

Ltd.

« CBIRC »

China Banking and Insurance Regulatory Commission

« SSE »

Shanghai Stock Exchange

« SEHK »

The Stock Exchange of Hong Kong Limited

« LSE »

London Stock Exchange

« PRC GAAP »

China Accounting Standards for Business Enterprises issued by Ministry of Finance of the

People’s Republic of China, and the application guide, interpretation and other related

regulations issued afterwards

« Corporate Governance Code »

Corporate Governance Code as set out in Appendix 14 to the Rules Governing the Listing of

Securities on The Stock Exchange of Hong Kong Limited

« RMB »

Renminbi

« pt »

Percentage point

By Order of the Board

China Pacific Insurance (Group) Co., Ltd.

KONG Qingwei

Chairman

Hong Kong, 23 August 2020

As at the date of this announcement, the Executive Directors of the Company are Mr. KONG Qingwei and Mr. FU Fan; the Non-executive Directors of the Company are Ms. LIANG Hong, Ms. LU Qiaoling, Mr. John Robert DACEY, Mr. HUANG Dinan, Mr. WANG Tayu, Mr. WU Junhao, Mr. ZHOU Donghui and Mr. CHEN Ran; and the Independent Non-executive Directors of the Company are Ms. LAM Tyng Yhi, Elizabeth, Ms. LIU Xiaodan, Mr. WOO Ka Biu, Jackson, Mr. CHEN Jizhong and Mr. JIANG Xuping.

  • Note: The appointment qualifications of Ms. LIANG Hong, Ms. LU Qiaoling, Mr. John Robert DACEY, Mr. ZHOU Donghui, Mr. CHEN Ran, Ms. LIU Xiaodan and Mr. WOO Ka Biu, Jackson are subject to the approval of China Banking and Insurance Regulatory Commission.

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION

FOR THE PERIOD ENDED 30 JUNE 2020

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION

FOR THE PERIOD ENDED 30 JUNE 2020

CONTENTS

Pages

REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION

1

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Interim condensed consolidated income statement

2

Interim condensed consolidated statement of comprehensive income

3

Interim condensed consolidated balance sheet

4 -5

Interim condensed consolidated statement of changes in equity

6 – 7

Interim condensed consolidated cash flow statement

8

Notes to the Interim condensed consolidated financial information

9 – 56

REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION TO THE BOARD OF DIRECTORS OF CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

(Incorporated in the People’s Republic of China with limited liability)

Introduction

We have reviewed the interim financial information set out on pages 2 to 56, which comprises the interim condensed consolidated balance sheet of China Pacific Insurance (Group) Co., Ltd. (the « Company ») and its subsidiaries (together, the « Group ») as at 30 June 2020 and the interim condensed consolidated income statement, the interim condensed consolidated statement of comprehensive income, the interim condensed consolidated statement of changes in equity and the interim condensed consolidated cash flow statement for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 « Interim Financial Reporting » issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with Hong Kong Accounting Standard 34 « Interim Financial Reporting ». Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of Review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, « Review of Interim Financial Information Performed by the Independent Auditor of the Entity » issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information of the Group is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 « Interim Financial Reporting ».

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 21 August 2020

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

Group

Six months ended 30 June

Notes

2020

2019

Gross written premiums

6(a)

Less: Premiums ceded to reinsurers

6(b)

Net written premiums

6(c)

Net change in unearned premium reserves

Net premiums earned

Investment income

7

Other operating income

Other income

Total income

Net policyholders’ benefits and claims:

Life insurance death and other benefits paid

8

Claims incurred

8

Changes in long-term life insurance contract

liabilities

8

Policyholder dividends

8

Finance costs

Interest credited to investment contracts

Other operating and administrative expenses

Total benefits, claims and expenses

Share of profit in equity accounted investees

Profit before tax

9

Income tax

10

Net profit for the period

Attributable to:

Shareholders of the parent

Non-controlling interests

Basic earnings per share

11

Diluted earnings per share

11

(unaudited)

(unaudited)

216,597

207,809

(13,822)

(11,211)

202,775

196,598

(10,005)

(11,113)

192,770

185,485

37,766

31,952

2,176

1,695

39,942

33,647

232,712

219,132

(31,096)

(31,824)

(40,366)

(34,321)

(88,911)

(82,509)

(6,322)

(5,827)

(1,531)

(1,780)

(1,902)

(1,659)

(45,233)

(47,004)

(215,361)

(204,924)

279

277

17,630

14,485

(3,039)

2,041

14,591

16,526

14,239

16,183

352

343

14,591

16,526

RMB 1.57

RMB 1.79

RMB 1.57

RMB 1.79

The accompanying notes form an integral part of these consolidated financial statements.

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended 30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

Group

Six months ended 30 June

Notes

2020

2019

(unaudited)

(unaudited)

Net profit for the period

14,591

16,526

Other comprehensive income/(loss)

Exchange differences on translation of foreign

operations

11

3

Available-for-sale financial assets

3,417

7,899

Income tax relating to these items

(894)

(1,954)

Other comprehensive income to be reclassified to

2,534

5,948

profit or loss in subsequent period

Other comprehensive income for the period

12

2,534

5,948

Total comprehensive income for the period

17,125

22,474

Attributable to:

Shareholders of the parent

16,706

22,012

Non-controlling interests

419

462

17,125

22,474

The accompanying notes form an integral part of these consolidated financial statements.

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEET 30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

Group

Notes

30 June 2020

31 December 2019

(unaudited)

(audited)

ASSETS

Goodwill

1,357

1,357

Property and equipment

18,745

19,365

Right-of-use assets

4,831

4,810

Investment properties

8,121

8,283

Other intangible assets

2,784

2,972

Interests in associates

13

10,305

10,563

Investment in joint ventures

14

9,883

9,879

Held-to-maturity financial assets

15

303,424

295,247

Investments classified as loans and receivables

16

375,957

324,013

Restricted statutory deposits

6,658

6,658

Term deposits

17

177,168

147,756

Available-for-sale financial assets

18

526,093

511,822

Financial assets at fair value through profit or loss

19

10,490

4,931

Securities purchased under agreements to resell

28,608

28,045

Policy loans

59,307

57,194

Interest receivables

17,308

19,493

Reinsurance assets

20

28,823

25,560

Deferred income tax assets

21

1,127

860

Insurance receivables

41,484

23,256

Other assets

22

16,140

11,397

Cash and short-term time deposits

23

36,852

14,872

Total assets

1,685,465

1,528,333

The accompanying notes form an integral part of these consolidated financial statements.

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEET (continued) 30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

Group

Notes

30 June 2020

31 December 2019

(unaudited)

(audited)

EQUITY AND LIABILITIES

Equity

Issued capital

24

9,576

9,062

Reserves

25

113,291

98,763

Retained profits

25

73,931

70,602

Equity attributable to shareholders of the parent

196,798

178,427

Non-controlling interests

4,892

4,893

Total equity

201,690

183,320

Liabilities

Insurance contract liabilities

26

1,181,122

1,068,021

Investment contract liabilities

27

83,752

75,506

Policyholders’ deposits

70

70

Bonds payable

28

9,990

9,988

Securities sold under agreements to repurchase

100,224

78,366

Lease liabilities

3,478

3,668

Deferred income tax liabilities

21

3,169

2,911

Income tax payable

2,527

549

Premium received in advance

7,414

21,000

Policyholder dividend payable

24,112

25,447

Payables to reinsurers

8,896

4,543

Other liabilities

59,021

54,944

Total liabilities

1,483,775

1,345,013

Total equity and liabilities

1,685,465

1,528,333

KONG Qingwei

FU Fan

Director

Director

The accompanying notes form an integral part of these consolidated financial statements.

5

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

Group

For the six months ended 30 June 2020 (unaudited)

Attributable to shareholders of the parent

Reserves

Available-

for-sale

investment

Issued

Capital

Surplus

General

revaluation

Foreign currency

Retained

Non-controlling

Total

capital

reserves

reserves

reserves

reserves

translation reserves

profits

Subtotal

interests

equity

At 1 January 2020

9,062

66,650

4,835

14,329

12,952

(3)

70,602

178,427

4,893

183,320

Total comprehensive income

2,456

11

14,239

16,706

419

17,125

Dividend declared 1

(10,874)

(10,874)

(10,874)

Capital contribution by shareholders

(Note 1)

514

12,040

12,554

12,554

De-registration of subsidiaries

(15)

(15)

(15)

Appropriations to general reserves

36

(36)

Dividends paid to non-controlling

(420)

(420)

shareholders

At 30 June 2020

9,576

78,675

4,835

14,365

15,408

8

73,931

196,798

4,892

201,690

1 Dividend declared represents the final dividend on ordinary shares declared for the year ended 31 December 2019, amounting to RMB 10,874 million (RMB 1.20 per share).

The accompanying notes form an integral part of these consolidated financial statements.

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) For the six months ended 30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

Group

At 1 January 2019

Total comprehensive income Dividend declared 1 Appropriations to general reserves Dividends paid to non-controlling

shareholders

At 30 June 2019

For the six months ended 30 June 2019 (unaudited)

Attributable to shareholders of the parent

Reserves

Available-

for-sale

investment

Issued

Capital

Surplus

General

revaluation

Foreign currency

Retained

Non-controlling

Total

capital

reserves

reserves

reserves

reserves

translation reserves

profits

Subtotal

interests

equity

9,062

66,635

4,835

11,642

2,808

(16)

54,610

149,576

4,472

154,048

5,826

3

16,183

22,012

462

22,474

(9,062)

(9,062)

(9,062)

27

(27)

(381)

(381)

9,062

66,635

4,835

11,669

8,634

(13)

61,704

162,526

4,553

167,079

1 Dividend declared represents the final dividend on ordinary shares declared for the year ended 31 December 2018, amounting to RMB 9,062 million (RMB 1.00 per share).

The accompanying notes form an integral part of these consolidated financial statements.

7

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

Group

Six months ended 30 June

Notes

2020

2019

(unaudited)

(unaudited)

OPERATING ACTIVITIES

Cash generated from operating activities

29

69,249

68,864

Income tax paid

(1,964)

(4,059)

Net cash inflows from operating activities

67,285

64,805

INVESTING ACTIVITIES

Purchases of property and equipment, intangible assets and

other assets

(1,045)

(1,127)

Proceeds from disposal of property and equipment,

intangible assets and other assets

6

36

Purchases of investments, net

(102,207)

(104,405)

Acquisition of subsidiaries and other business entities, net

(9)

(2,442)

Proceeds from disposal of subsidiaries and other business

entities, net

318

3

Interest received

32,000

29,098

Dividends received from investments

2,667

2,391

Other cash paid related to investing activities

(9)

Net cash outflows from investing activities

(68,279)

(76,446)

FINANCING ACTIVITIES

Securities sold under agreements to repurchase, net

22,020

14,345

Proceeds from the issue of asset-backed securities

3,600

4,540

Proceeds from the issue of share capital

12,831

Repayment of borrowings

(2,290)

(4,000)

Interest paid

(1,200)

(1,453)

Dividends paid

(11,285)

(313)

Principal elements of lease payments

(695)

(672)

Cash received/(paid) related to NCI of consolidated

structured entities

479

(204)

Other cash (paid)/received related to financing activities

(4)

329

Net cash inflows from financing activities

23,456

12,572

Effects of exchange rate changes on cash and cash

12

10

equivalents

Net increase in cash and cash equivalents

22,474

941

Cash and cash equivalents at the beginning of period

42,546

38,121

Cash and cash equivalents at the end of period

65,020

39,062

Analysis of balances of cash and cash equivalents

Cash at banks and on hand

32,426

18,713

Time deposits with original maturity of no more than three

months

3,073

2,224

Other monetary assets

913

1,219

Investments with original maturity of no more than three

28,608

16,906

months

Cash and cash equivalents at the end of period

65,020

39,062

The accompanying notes form an integral part of these consolidated financial statements.

8

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION 30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

  1. CORPORATE INFORMATION
    China Pacific Insurance (Group) Co., Ltd.(the « Company ») was established in Shanghai, the
    People’s Republic of China (the « PRC ») in May 1991, under the original name of China Pacific Insurance Co., Ltd. Pursuant to the approval of the State Council of the PRC and Circular [2001] No. 239 issued by the former China Insurance Regulatory Commission (the « CIRC »), the Company was restructured as a joint stock limited company in October 2001 with an issued capital of RMB 2,006.39 million. The Company increased its issued capital to RMB 6,700 million through issuing new shares to its then existing shareholders and new shareholders in 2002 and 2007.
    In December 2007, the Company conducted a public offering of 1,000 million A shares in the PRC. Upon the completion of the A share offering, the issued capital was increased to RMB 7,700 million. The Company’s A shares are listed on the Shanghai Stock Exchange and trading of its A shares commenced on 25 December 2007.
    In December 2009, the Company conducted a global offering of overseas listed foreign shares (« H shares »). Upon the completion of the H share offering, the issued capital was increased to RMB
    8,600 million. The Company’s H shares are listed on the Hong Kong Stock Exchange and trading of its H shares commenced on 23 December 2009.
    In November 2012, the Company conducted a non-public offering of 462 million H shares. Upon completion of the H share offering, the issued capital was increased to RMB 9,062 million, which was approved by the CIRC in December 2012.
    In June 2020, the Company issued 102,873,300 Global Depositary Receipts (« GDRs ») on the London Stock Exchange (the « LSE ») and listed on the LSE, with each GDR representing five A shares of the Company. Upon the completion of the GDR listing, the Company’s issued capital was increased to approximately RMB 9,576 million (before the over-allotment option was exercised). The over-allotment option described in the Prospectus of GDR was partially exercised in July 2020, as detailed in Note 36.
    The authorised business scope of the Company includes investing in insurance enterprises, supervising and managing domestic and overseas reinsurance businesses of subsidiaries and utilizing funds, participating in global insurance activities upon approval. The principal activities of the Company and its subsidiaries (the « Group » or « CPIC Group ») are property and casualty businesses, life insurance businesses, pension and annuity businesses, as well as asset management, etc.
  2. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES

2.1 Basis of preparation

This interim condensed consolidated financial information for the six months ended 30 June 2020 has been prepared in accordance with Hong Kong Accounting Standard 34 « Interim Financial Reporting » issued by the Hong Kong Institute of Certified Public Accountants (the « HKICPA »), as part of the Hong Kong Financial Reporting Standards (« HKFRSs »).

This interim condensed consolidated financial information does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the

Group’s annual financial statements for the year ended 31 December 2019.

9

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

2. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES (continued)

2.1 Basis of preparation (continued)

  1. Changes in accounting policy and disclosures
    The accounting policies adopted in the preparation of the interim condensed consolidated financial information are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2019, except for the adoption of amended or improved standards and interpretations as of 1 January 2020 as described below. The adoption of these revised HKFRSs currently has had no significant impact on these consolidated financial statements.

Amendments to HKAS 1

and HKAS 8

Definition of Material

Amendments to HKFRS 3

Definition of a Business

Amendments to HKFRS 9,

HKAS 39 and HKFRS 7

Interest Rate Benchmark Reform

The Group has not early adopted any other standard, interpretation or amendment that was issued but is not yet effective.

  1. New and revised standards not yet adopted
    All HKFRSs that remain in effect which are relevant to the Group have been applied except HKFRS 9, as the Group qualifies for a temporary exemption from HKFRS 9 which was illuminated in HKFRS 4 Amendments.
    The Group has not applied the following key new and revised HKFRSs that have been issued but are not yet effective, in these consolidated financial statements:

HKFRS 17

Insurance Contracts2

Amendments to HKFRS 16

Covid-19-related Rent Concessions1

Amendments to HKAS 1

Classification of Liabilities as Current or Non-current3

Amendments to HKFRS 3

Reference to the Conceptual Framework3

Amendments to HKAS 37

Onerous Contracts – Cost of Fulfilling a Contract3

Annual improvements to HKFRS standards 2018-2020

Amendments to HKFRSs

Cycle3

  1. Effective for annual periods beginning on or after 1 June 2020
  2. Effective for annual periods beginning on or after 1 January 2021
  3. Effective for annual periods beginning on or after 1 January 2022

None of these HKFRSs is expected to have a significant effect on the consolidated financial statements of the Group, except for the following as set out below:

10

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

2. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES (continued)

2.1 Basis of preparation (continued)

  1. New and revised standards not yet adopted (continued)
    HKFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of HKFRS 9 was issued in July 2014. It replaces the guidance in HKAS 39 that relates to the classification and measurement of financial instruments. HKFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income (« OCI ») and fair value through profit or loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI which are not recycled to profit or loss. There is now a new expected credit losses model that replaces the incurred loss impairment model used in HKAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. HKFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under HKAS 39. The standard is effective for accounting periods beginning on 1 January 2018. The Group is eligible to and has elected to apply the temporary option to defer the effective date of HKFRS 9 under the amendments to HKFRS 4 ‘Insurance contracts’. The impact of the adoption of HKFRS 9 on the Group’s consolidated financial statements will, to a large extent, have to take into account the interaction with the issued insurance contracts standard. The Group will not adopt the HKFRS 9 until 1 January 2021 (please note below that the International Accounting Standards Board (« IASB ») issued the amendments to IFRS 4 and
    IFRS 17 to defer the effective date of IFRS 17 to 1 January 2023 and the temporary exemption from IFRS 9 will be extended as well) and the Group makes additional disclosures as below:
    The Group is defined as an insurer with its activities predominantly connected with insurance, with the percentage of the total carrying amounts of its liabilities connected with insurance relative to the total carrying amounts of all its liabilities greater than 90%.
    Financial assets meet SPPI are relevant financial assets of which the contractual cash flows generated on a specific date are solely payments of principal and interest on the principal amount.

11

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

2. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES (continued)

2.1 Basis of preparation (continued)

  1. New and revised standards not yet adopted (continued)
    Additional disclosures of financial assets listed in financial assets at fair value through profit or loss, available-for-sale financial assets, held-to-maturity financial assets, investments classified as loans and receivables are as follows:

Six months ended

As at 30 June 2020

30 June 2020

Fair value

Change in the fair value

Financial assets held for trading (A)

3,886

(136)

Financial assets managed and whose

performance evaluated on a fair value

basis (B)

6,603

(278)

Financial assets other than A or B

–Financial assets meet SPPI (C)

979,244

5,880

–Financial assets not meet SPPI

250,995

3,066

Total

1,240,728

8,532

Credit risk rating grades of financial assets meet SPPI (C)

As at 30 June 2020

Carrying amount

Domestic

Exempt from ratingNote

254,881

AAA

659,499

A-1

70

AA+

36,566

AA

1,000

Not rated

1,815

Overseas

A-(inclusive) or above

229

BBB+

343

BBB

36

BBB-

15

BB+(inclusive) or below

122

Total

954,576

Note: « Exempt from rating », a domestic rating grade, is to describe a rating grade above « AAA ». It mainly includes government bonds and policy financial bonds.

12

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

2. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES (continued)

2.1 Basis of preparation (continued)

  1. New and revised standards not yet adopted (continued)

As at 30 June 2020

Financial assets not have low credit risk

Carrying amount

Fair value

Domestic

2,815

2,815

Overseas

122

123

Total

2,937

2,938

Except for the above assets, other financial assets other than cash held by the Group, including securities purchased under agreements to resell, policy loans, term deposits, restricted statutory deposits, etc., are financial assets which meet the SPPI conditions. The carrying amounts are close to their fair value.

HKFRS 17 was issued in May 2017 and will replace the current HKFRS 4 Insurance Contracts. It applies to the measurement of insurance contracts issued, all reinsurance contracts and investment contracts with discretionary participating features. It requires a current measurement model where estimates are re-measured each reporting period. Contracts are measured using the building blocks of:

  • discounted probability-weighted cash flows
  • an explicit risk adjustment, and
  • a contractual service margin (« CSM ») representing the unearned profit of the contract which is recognised as revenue over the coverage period.

The standard is currently mandatorily effective for annual periods beginning on or after 1 January 2021 and earlier application is permitted. On 25 June 2020, the IASB issued the amendments to IFRS 4 and IFRS 17, the effective date of IFRS 17 will be deferred to annual reporting periods beginning on or after 1 January 2023, and the temporary exemption from IFRS 9 will be extended to enable the implementation of both IFRS 9 and IFRS 17 at the same time. The deferral for HKFRS 17 to 1 January 2023 is yet to be endorsed by the Financial Reporting Standards Committee of the HKICPA. The impact is expected to be significant, and the Group is in the process of assessing the impact of adoption of HKFRS 17.

There are no other HKFRSs or HK (IFRIC) interpretations that are not yet effective that would be expected to have a material impact on the Group.

13

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

3. CHANGE IN ACCOUNTING ESTIMATES

When measuring the insurance contract reserves, the Group determines actuarial assumptions such as discount rate, mortality and morbidity, surrender rates, expense assumptions and policy dividend assumptions based on information currently available as at the balance sheet date.

As at 30 June 2020, the Group used information currently available to determine the above assumptions. Mainly due to change of the benchmark yield curve of discount rate for life and long- term health insurance reserves, life and long-term health insurance reserves after reinsurance increased by approximately RMB 4,236 million as at 30 June 2020 and profit before tax decreased by approximately RMB 4,236 million for the six months ended 30 June 2020.

4. SEGMENT INFORMATION

The Group presents segment information based on its major operating segments.

For management purpose, the Group is organised into business units based on their products and services. Different operating segments provide products and services with different risks and rewards.

The Group’s operating segments are listed as follows:

  • The life and health insurance segment (including China Pacific Life Insurance Co.,Ltd. (« CPIC Life ») and CPIC Allianz Health Insurance Co.,Ltd. (« CPIC Allianz Health »)) offers a wide range of RMB life and health insurance;
  • The property and casualty insurance segment (including Mainland China segment and Hong Kong segment) provides a wide range of RMB and foreign-currency property and casualty insurance;
  • Other businesses segment mainly provides corporation management and assets management services, etc.

Intersegment sales and transfers are measured based on the actual transaction price.

More than 99% of the Group’s revenue is derived from its operations in Mainland China. More than 99% of the Group’s assets are located in Mainland China.

For the six months ended 30 June 2020, gross written premiums from transactions with the top five external customers amounted to 0.7% (for the six months ended 30 June 2019: 0.6%) of the Group’s total gross written premiums.

14

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

4. SEGMENT INFORMATION (continued)

Segment income statement for the six months ended 30 June 2020:

Life and

health

Property and

Corporate

Elimina-

insurance

casualty insurance

and others

tions

Total

Mainland

Hong Elimina- Sub-total

China

Kong

tions

Gross written premiums

139,515

77,547

277

(76)

77,748

(666)

216,597

Less: Premiums ceded to reinsurers

(3,146)

(11,331)

(103)

92

(11,342)

666

(13,822)

Net written premiums

136,369

66,216

174

16

66,406

202,775

Net change in unearned premium

(3,670)

(6,389)

(39)

1

(6,427)

92

(10,005)

reserves

Net premiums earned

132,699

59,827

135

17

59,979

92

192,770

Investment income

32,986

3,464

17

3,481

20,622

(19,323)

37,766

Other operating income

1,267

176

1

177

2,755

(2,023)

2,176

Other income

34,253

3,640

18

3,658

23,377

(21,346)

39,942

Segment income

166,952

63,467

153

17

63,637

23,377

(21,254)

232,712

Net policyholders’ benefits and

claims:

Life insurance death and other

benefits paid

(31,096)

(31,096)

Claims incurred

(4,596)

(35,697)

(69)

(35,766)

(4)

(40,366)

Changes in long-term life

insurance contract liabilities

(88,807)

(104)

(88,911)

Policyholder dividends

(6,322)

(6,322)

Finance costs

(1,143)

(284)

(284)

(48)

(56)

(1,531)

Interest credited to investment

contracts

(1,902)

(1,902)

Other operating and administrative

(21,177)

(23,254)

(63)

(23,317)

(2,742)

2,003

(45,233)

expenses

Segment benefits, claims and

(155,043)

(59,235)

(132)

(59,367)

(2,790)

1,839

(215,361)

expenses

Segment results

11,909

4,232

21

17

4,270

20,587

(19,415)

17,351

Share of profit/(loss) in equity

286

8

8

(17)

2

279

accounted investees

Profit before tax

12,195

4,240

21

17

4,278

20,570

(19,413)

17,630

Income tax

(1,477)

(1,059)

(9)

(1,068)

(256)

(238)

(3,039)

Net profit for the period

10,718

3,181

12

17

3,210

20,314

(19,651)

14,591

15

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

4. SEGMENT INFORMATION (continued)

Segment income statement for the six months ended 30 June 2019:

Life and

health

Property and

Corporate

Elimina-

insurance

casualty insurance

and others

tions

Total

Mainland

Hong Elimina- Sub-total

China

Kong

tions

Gross written premiums

139,096

69,037

198

(77)

69,158

(445)

207,809

Less: Premiums ceded to reinsurers

(1,999)

(9,645)

(92)

80

(9,657)

445

(11,211)

Net written premiums

137,097

59,392

106

3

59,501

196,598

Net change in unearned premium

(3,038)

(8,312)

23

(8,289)

214

(11,113)

reserves

Net premiums earned

134,059

51,080

129

3

51,212

214

185,485

Investment income

28,439

2,441

17

2,458

16,733

(15,678)

31,952

Other operating income

1,176

120

1

121

2,248

(1,850)

1,695

Other income

29,615

2,561

18

2,579

18,981

(17,528)

33,647

Segment income

163,674

53,641

147

3

53,791

18,981

(17,314)

219,132

Net policyholders’ benefits and

claims:

Life insurance death and other

benefits paid

(31,824)

(31,824)

Claims incurred

(4,096)

(30,203)

(79)

(30,282)

57

(34,321)

Changes in long-term life

insurance contract liabilities

(82,384)

(125)

(82,509)

Policyholder dividends

(5,827)

(5,827)

Finance costs

(1,244)

(417)

(417)

(55)

(64)

(1,780)

Interest credited to investment

contracts

(1,659)

(1,659)

Other operating and administrative

(26,116)

(20,328)

(44)

(20,372)

(2,370)

1,854

(47,004)

expenses

Segment benefits, claims and

(153,150)

(50,948)

(123)

(51,071)

(2,425)

1,722

(204,924)

expenses

Segment results

10,524

2,693

24

3

2,720

16,556

(15,592)

14,208

Share of profit/(loss) in equity

380

(4)

(4)

(7)

(92)

277

accounted investees

Profit before tax

10,904

2,689

24

3

2,716

16,549

(15,684)

14,485

Income tax

1,711

684

(3)

681

(176)

(175)

2,041

Net profit for the period

12,615

3,373

21

3

3,397

16,373

(15,859)

16,526

The segment assets as at 30 June 2020 and 31 December 2019 are as following:

Life

Property and

Elimina-

insurance

casualty insurance

Others

tions

Total

Mainland

Hong

Elimina-

China

Kong

tions

Sub-total

30 June 2020 (Unaudited)

1,369,990

195,263

1,343

(152)

196,454

141,231

(22,210)

1,685,465

31 December 2019 (Audited)

1,272,861

168,757

1,225

(161)

169,821

102,806

(17,155)

1,528,333

16

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued) 30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

5. SCOPE OF CONSOLIDATION

  1. Particulars of the Company’s incorporated subsidiaries as at 30 June 2020 are as follows:

Percentage of

Registered capital

Issued capital

Percentage of

voting rights

Place of

(RMB thousand,

(RMB thousand,

equity attributable

attributable

Business scope and

incorporation/

Place of

unless otherwise

unless otherwise

to the

to the

Name

Type of legal entity

principal activities

registration

operations

specified)

specified)

Company(%)

Company(%) Note

Direct

Indirect

China Pacific Property Insurance Co., Ltd.

Limited company

Property and casualty

Shanghai

The PRC

19,470,000

19,470,000

98.50

98.50

(« CPIC Property »)

insurance

CPIC Life

Limited company

Life and health

Shanghai

The PRC

8,420,000

8,420,000

98.29

98.29

insurance

Pacific Asset Management Co., Ltd. (« CPIC

Limited company Investment management

Shanghai

Shanghai

2,100,000

2,100,000

80.00

19.67

100.00

Asset Management »)

China Pacific Insurance Co., (H.K.) Ltd.

Limited company

Property and casualty

Hong Kong

Hong Kong

HK$250,000

HK$250,000

100.00

100.00

insurance

thousand

thousand

Shanghai Pacific Insurance Real Estate Co.,

Limited company

Real estate

Shanghai

Shanghai

115,000

115,000

100.00

100.00

Ltd.

Changjiang Pension Insurance Co., Ltd.

Limited company

Pension business and

Shanghai

Shanghai

3,000,000

3,000,000

61.10

62.16

(« Changjiang Pension »)

investment management

CPIC Investment Management (H.K.)

Limited company Investment management

Hong Kong

Hong Kong

HK$50,000

HK$50,000

49.00

50.83

100.00

Company Limited

thousand

thousand

(« CPIC Investment (H.K.) »)

City Island Developments Limited (« City

Limited company

Investment holding

The British

The British

US$50,000

US$1,000

98.29

100.00

Island »)

Virgin Islands

Virgin Islands

Great Winwick Limited *

Limited company

Investment holding

The British

The British

US$50,000

US$100

98.29

100.00

Virgin Islands

Virgin Islands

Great Winwick (Hong Kong) Limited *

Limited company

Investment holding

Hong Kong

Hong Kong

HK$10,000

HK$1

98.29

100.00

Newscott Investments Limited *

Limited company

Investment holding

The British

The British

US$50,000

US$100

98.29

100.00

Virgin Islands

Virgin Islands

17

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued) 30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

5. SCOPE OF CONSOLIDATION (continued)

  1. Particulars of the Company’s incorporated subsidiaries as at 30 June 2020 are as follows (continued):

Percentage of

Percentage of

Registered capital

Issued capital

equity

voting rights

Place of

(RMB thousand,

(RMB thousand,

attributable

attributable

Business scope and

incorporation/

Place of

unless otherwise

unless otherwise

to the

to the

Name

Type of legal entity

principal activities

registration

operations

specified)

specified)

Company(%)

Company(%) Note

Direct

Indirect

Newscott (Hong Kong) Investments

Limited company

Investment holding

Hong Kong

Hong Kong

HK$10,000

HK$1

98.29

100.00

Limited *

Shanghai Xinhui Real Estate

Limited company

Real estate

Shanghai

Shanghai

US$15,600

US$15,600

98.29

100.00

Development Co., Ltd. *

thousand

thousand

Shanghai Hehui Real Estate

Limited company

Real estate

Shanghai

Shanghai

US$46,330

US$46,330

98.29

100.00

Development Co., Ltd. *

thousand

thousand

Pacific Insurance Online Services

Limited company

Consulting services, etc.

Shandong

The PRC

200,000

200,000

100.00

100.00

Technology Co., Ltd.

« CPIC Online Services »

Tianjin Trophy Real Estate Co., Ltd.

Limited company

Real estate

Tianjin

Tianjin

353,690

353,690

98.29

100.00

« Tianjin Trophy »

Pacific Insurance Senior Living

Limited company

Senior living properties

Shanghai

Shanghai

3,000,000

3,000,000

98.29

100.00

Investment Management Co., Ltd.

investment and

(« CPIC Senior Living Investment »)

management, etc.

CPIC Allianz Health

Limited company

Health insurance

Shanghai

Shanghai

1,700,000

1,700,000

77.05

77.05

Anxin Agricultural Insurance Co., Ltd.

Limited company

Property and casualty

Shanghai

Shanghai

700,000

700,000

51.35

52.13

(« Anxin »)

insurance

Pacific Medical & Healthcare

Limited company

Medical consulting

Shanghai

Shanghai

500,000

500,000

98.29

100.00

Management Co., Ltd. (« Pacific

services, etc.

Medical & Healthcare »)

Pacific Insurance Agency Co., Ltd.

Limited company

Insurance agency

Shanghai

Shanghai

50,000

50,000

100.00

100.00

(« Pacific Insurance Agency »)

CPIC Fund Management Co., Ltd.

Limited company

Fund management

Shanghai

Shanghai

150,000

150,000

50.83

51.00

(« CPIC Funds »)

18

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued) 30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

5. SCOPE OF CONSOLIDATION (continued)

  1. Particulars of the Company’s incorporated subsidiaries as at 30 June 2020 are as follows (continued):

Percentage of

Percentage of

Registered capital

Issued capital

equity

voting rights

Place of

(RMB thousand,

(RMB thousand,

attributable

attributable

Business scope and

incorporation/

Place of

unless otherwise

unless otherwise

to the

to the

Name

Type of legal entity

principal activities

registration

operations

specified)

specified)

Company(%)

Company(%)

Note

Direct

Indirect

CPIC Senior Living Development

Limited company

Senior living properties

Chengdu

Chengdu

1,000,000

510,000

98.29

100.00

(Chengdu) Co., Ltd. (« Chengdu Project

investment and

Company »)

management, etc.

CPIC Senior Living Development

Limited company

Senior living properties

Hangzhou

Hangzhou

1,200,000

530,000

98.29

100.00

(1)

(Hangzhou) Co., Ltd. (« Hangzhou

investment and

Project Company »)

management, etc.

CPIC Senior Living Development

Limited company

Senior living properties

Xiamen

Xiamen

900,000

290,000

98.29

100.00

(2)

(Xiamen) Co., Ltd. (« Xiamen Project

investment and

Company »)

management, etc.

Pacific Care Home (Chengdu) Senior

Limited company

Seniors and disabled

Chengdu

Chengdu

60,000

98.29

100.00

(3)

Living Service Co., Ltd. (« Pacific Care

care, etc.

Home at Chengdu »)

* Subsidiaries of City Island.

19

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

5. SCOPE OF CONSOLIDATION (continued)

  1. Particulars of the Company’s incorporated subsidiaries as at 30 June 2020 are as follows (continued):
  1. Hangzhou Project Company
    Hangzhou Project Company, a wholly-owned subsidiary set up by CPIC Life, has obtained the business license of legal entity with the unified social credit code of 91330185MA2GMQ5J3E on 31 May 2019. The registered capital is RMB 1,200 million. CPIC Life made the capital contribution of RMB 350 million and RMB 180 million in 2019 and 2020, respectively. CPIC Life has made the capital contribution of RMB 530 million as at 30 June 2020.
  2. Xiamen Project Company
    Xiamen Project Company, a wholly-owned subsidiary set up by CPIC Life, has obtained the business license of legal entity with the unified social credit code of 91350200MA33L83Y9L on 6 March 2020. The registered capital is RMB 900 million. CPIC Life has made the capital contribution of RMB 290 million as at 30 June 2020.
  3. Pacific Care Home at Chengdu
    Pacific Care Home at Chengdu, a wholly-owned subsidiary set up by CPIC Senior Living Investment, has obtained the business license of legal entity with the unified social credit code of 91510115MA64FB601H on 18 May 2020. The registered capital is RMB 60 million. CPIC Senior Living Investment has not yet made the capital contribution as at 30 June 2020.
  1. As at 30 June 2020, entities no longer included in the Group’s scope of consolidation:
  1. Ningbo Fenghua Xikou Garden Hotel Co., Ltd. (the « Xikou Garden Hotel »), a subsidiary of CPIC Life, was registered in Ningbo with a paid-in capital of RMB 27.28 million. Xikou Garden Hotel completed the liquidation and de-registration procedures in 2020.
  2. Taiji (Shanghai) Information Technology Co., Ltd. (the « Taiji Information Technology »), the CPIC Online Services’s subsidiary, was registered in Shanghai with a paid-in capital of RMB 15 million. Taiji Information Technology completed the liquidation and de-registration procedures in 2020.

20

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued) 30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

5. SCOPE OF CONSOLIDATION (continued)

  1. As at 30 June 2020, consolidated structured entities material to the Group are as follows:

Collective

Product Scale

Holding by the

(Units in RMB

Name

Group (%)

thousand)

Nature of business

Pacific-China Venture Capital Fund Equity

100.00

6,120,000

Investing in China Venture Capital Co., Ltd. through equity investment plan.

Investment Plan

CPIC Zengfu Annually Open Pure Type

100.00

5,009,999

Investing in financial instruments with high liquidity including national bonds, government bond,

Launching Securities Investment Fund

local treasury bonds, financial bonds, enterprise bonds,

corporate bonds, Central Bank bills, medium term notes, short-term commercial paper, super

short-term commercial paper, SME private debt, asset-backed security, subordinated debt, the

debt part of the convertible bonds, bonds repo, bank deposits (including agreement deposits,

notice deposits and term deposits), NCDs, money market instrument, treasury bond futures and

other financial instruments that laws and regulations or the China Securities Regulatory

Commission (the « CSRC’) allow funds to invest (yet subject to related regulations of the CSRC).

CPIC Zengyu Annually Open Pure Type

100.00

5,009,999

Investing in financial instruments with high liquidity including national bonds, government bond,

Launching Securities Investment Fund

local treasury bonds, financial bonds, enterprise bonds,

corporate bonds, Central Bank bills, medium term notes, short-term commercial paper, super

short-term commercial paper, SME private debt, asset-backed security, subordinated debt, the

debt part of the convertible bonds, bonds repo, bank deposits (including agreement deposits,

notice deposits and term deposits), NCDs, money market instrument, treasury bond futures and

other financial instruments that laws and regulations or the CSRC allow funds to invest (yet

subject to related regulations of the CSRC).

Pacific-Jiangsu Communications Holding Co.,

100.00

4,000,000

Investing in Taizhou Yangtze River Highway Bridge Project operated by Jiangsu

Ltd. Debt Investment Plan (Phase I)

Communications Holding Co., Ltd. through debt investment plan.

Pacific-China Nonferrous Metal Mining (Group)

53.91

2,430,000

Investing in projects operated by CNMC’s subsidiaries through debt investment plan.

Co.,Ltd. (« CNMC ») Debt Investment Plan

(Phase I)

Note: CPIC Asset Management, CPIC Funds and Changjiang Pension are the asset managers of the consolidated structured entities.

21

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

6. NET WRITTEN PREMIUMS

(a)

Gross written premiums

Six months ended 30 June

2020

2019

Long-term life insurance premiums

125,692

127,678

Short-term life insurance premiums

13,157

10,973

Property and casualty insurance premiums

77,748

69,158

216,597

207,809

(b)

Premiums ceded to reinsurers

Six months ended 30 June

2020

2019

Long-term life insurance premiums ceded to reinsurers

(1,982)

(1,119)

Short-term life insurance premiums ceded to reinsurers

(1,164)

(879)

Property and casualty insurance premiums ceded to reinsurers

(10,676)

(9,213)

(13,822)

(11,211)

  1. Net written premiums

Six months ended 30 June

2020

2019

Net written premiums

202,775

196,598

7.

INVESTMENT INCOME

Six months ended 30 June

2020

2019

Interest and dividend income (a)

32,542

29,609

Realised gains (b)

8,122

2,522

Unrealised (losses) /gains (c)

(414)

898

Charge of impairment losses on financial assets

(2,484)

(1,077)

37,766

31,952

22

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

7. INVESTMENT INCOME (continued)

(a)

Interest and dividend income

Six months ended 30 June

2020

2019

Financial assets at fair value through profit or loss

– Fixed maturity investments

34

48

– Funds

3

6

– Stocks

6

12

– Other equity investments

2

25

45

91

Held-to-maturity financial assets

– Fixed maturity investments

7,023

6,608

Loans and receivables

– Fixed maturity investments

15,782

13,809

Available-for-sale financial assets

– Fixed maturity investments

6,486

6,455

– Funds

610

494

– Stocks

1,504

1,328

– Other equity investments

1,092

824

9,692

9,101

32,542

29,609

(b)

Realised gains

Six months ended 30 June

2020

2019

Financial assets at fair value through profit or loss

– Fixed maturity investments

97

55

– Funds

(9)

(6)

– Stocks

(5)

(170)

– Other equity investments

4

(126)

– Derivative instruments

(2)

87

(249)

Available-for-sale financial assets

– Fixed maturity investments

307

30

– Funds

728

240

– Stocks

6,602

2,483

– Other equity investments

382

18

8,019

2,771

Others

16

8,122

2,522

23

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

7. INVESTMENT INCOME (continued)

(c)

Unrealised (losses)/gains

Six months ended 30 June

2020

2019

Financial assets at fair value through profit or loss

– Fixed maturity investments

(126)

45

– Funds

12

373

– Derivative instruments

(1)

– Stocks

(22)

510

– Wealth management products and other equity

(278)

(29)

investments

(414)

898

8. NET POLICYHOLDERS’ BENEFITS AND CLAIMS

Six months ended 30 June 2020

Gross

Ceded

Net

Life insurance death and other benefits paid

32,076

(980)

31,096

Claims incurred

– Short-term life insurance

4,642

(452)

4,190

– Property and casualty insurance

40,849

(4,673)

36,176

Changes in long-term life insurance contract liabilities

89,440

(529)

88,911

Policyholder dividends

6,322

6,322

173,329

(6,634)

166,695

Six months ended 30 June 2019

Gross

Ceded

Net

Life insurance death and other benefits paid

32,590

(766)

31,824

Claims incurred

– Short-term life insurance

4,218

(364)

3,854

– Property and casualty insurance

34,873

(4,406)

30,467

Changes in long-term life insurance contract liabilities

82,609

(100)

82,509

Policyholder dividends

5,827

5,827

160,117

(5,636)

154,481

24

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

9. PROFIT BEFORE TAX

The Group’s profit before tax is arrived at after charging/(crediting):

Six months ended 30 June

2020

2019

Employee benefit expense (including directors’ and

supervisors’ emoluments)

11,127

11,248

Auditors’ remuneration

16

15

Short-term and low-value leases payments

76

171

Depreciation of property and equipment

898

820

Depreciation of investment properties

164

158

Depreciation of right-of-use assets

757

596

Amortisation of other intangible assets

376

267

Amortisation of other assets

10

5

Gains on disposal of items of property and equipment,

intangible assets and other long-term assets

(1)

(1)

Charge of impairment loss on insurance receivables and

other assets

354

431

Charge of impairment loss on financial assets (Note 7)

2,484

1,077

Foreign exchange (income)/loss, net

(25)

75

10. INCOME TAX

  1. Income tax

Current income tax

Deferred income tax (Note 21)

Six months ended 30 June

20202019

3,942

(2,087)

(903)

46

3,039

(2,041)

  1. Tax recorded in other comprehensive income

Six months ended 30 June

20202019

Deferred income tax (Note 21)

894

1,954

25

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

10. INCOME TAX (continued)

  1. Reconciliation of tax expense
    Current income tax has been provided at the rate of 25% on the assessable profits arising in Mainland China. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries/jurisdictions in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.
    A reconciliation of the tax expense applicable to profit before tax using the statutory income tax rate of 25% to the tax expense at the Group’s effective tax rate is as follows:

Six months ended 30 June

2020

2019

Profit before tax

17,630

14,485

Tax computed at the statutory tax rate

4,408

3,621

Adjustments to income tax in respect of previous periods

(124)

(4,887)

Income not subject to tax

(1,594)

(1,099)

Expenses not deductible for tax

167

135

Others

182

189

Tax expense at the Group’s effective rate

3,039

(2,041)

Pursuant to the Announcement on the Pre-tax Deduction Policy for the Commission and Brokerage Expenses of Insurance Enterprises issued by the Ministry of Finance and the State Administration of Taxation in May 2019 (Notice of the Ministry of Finance and the State Administration of Taxation No.72, 2019), the deductible commissions rate is increased to 18%, with allowing any excess amount to be carried forward to future years. The commission rate is calculated as insurance business related commission and brokerage expenses over the current year total premium income less surrenders. This announcement is effective for the 2018 annual income tax filing for insurance companies.

26

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

11. EARNINGS PER SHARE

  1. Basic earnings per share

Basic earnings per share was calculated by dividing the net profit of the current period attributable to shareholders of the parent by the weighted average number of ordinary shares in issue during the six-month period ended 30 June 2020.

Consolidated net profit for the period attributable to shareholders of the parent

Weighted average number of ordinary shares in issue (million)

Basic earnings per share

Six months ended 30 June

20202019

14,23916,183

9,0859,062

The weighted average number of ordinary shares in issue has been adjusted to reflect the impact of the issuance of 102,873,300 GDRs in June 2020, representing 514,366,500 A shares of the Company (Note 1).

  1. Diluted earnings per share
    Diluted earnings per share was calculated by dividing the net profit of the current period attributable to the shareholders of the parent by the adjusted weighted average number of ordinary shares based on assuming full exercise of the over-allotment option as below. According to the over-allotment option arrangement under the issuance of GDRs, the stabilising manager may require the Company to additionally issue no more than 10,287,300 GDRs, representing 51,436,500 A shares, by exercising the over-allotment option.

Consolidated net profit for the period attributable to shareholders of the parent

Weighted average number of ordinary shares in issue (million)

Adjustment for:

Assumed vesting of the over-allotment option

Weighted average number of ordinary shares for diluted earnings per share

Diluted earnings per share

Six months ended 30 June

20202019

14,239

16,183

9,085

9,062

9,085

9,062

RMB 1.57

RMB 1.79

The Company had no dilutive potential ordinary shares as at 31 December 2019.

27

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

12.

OTHER COMPREHENSIVE INCOME/(LOSS)

Six months ended 30 June

2020

2019

Exchange differences on translation of foreign operations

11

3

Available-for-sale financial assets

Gains arising during the period

11,987

14,084

Reclassification adjustments for losses included in profit or

loss

(8,019)

(2,771)

Fair value change on available-for-sale financial assets

attributable to policyholders

(2,771)

(4,491)

Impairment charges reclassified to the income statement

2,220

1,077

3,417

7,899

Income tax relating to these items

(894)

(1,954)

2,523

5,945

Other comprehensive income

2,534

5,948

13. INTERESTS IN ASSOCIATES

30 June 2020

At 1

At 30

Historical

January

Increase

Share of

Dividend

June

cost

2020

/(Decrease)

profit

declared

2020

Shanghai Juche Information

Technology Co., Ltd.

(« Juche »)

3

9

1

10

Zhongdao Automobile Rescue

Industry Co., Ltd.

(« Zhongdao »)

17

34

2

36

Shanghai Proton and Heavy Ion

Hospital (« Zhizhong

Hospital »)

100

66

(4)

62

Shanghai Dedao Co., Ltd.

(« Dedao »)

5

1

1

Shanghai Xingongying

Information Technology Co.,

Ltd. (« Xingongying »)

81

58

(2)

56

Shanghai Heji Business

Management LLP. (« Heji »)

200

477

(300)

4

(5)

176

Changjiang Pension – China

National Chemical

Corporation Infrastructure

Debt Investment Plan

(« CHEMCHINA Debt

Investment Plan »)

2,160

2,164

58

(58)

2,164

28

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

13. INTERESTS IN ASSOCIATES (continued)

30 June 2020

At 1

At 30

Historical

January

Increase

Share of

Dividend

June

cost

2020

/(Decrease)

profit

declared

2020

Changjiang Pension – Sichuan

Railway Xugu Highway

Investment Infrastructure

Debt Investment Plan

(« Sichuan Railway

Investment Plan »)

250

250

7

(7)

250

Ningbo Zhilin Investment

Management LLP. (« Ningbo

Zhilin »)

2,416

2,514

125

(61)

2,578

Changjiang Pension – Yunnan

Energy Investment

Infrastructure Debt

Investment Plan (« Yunnan

Energy Investment Plan »)

3,610

3,617

110

(111)

3,616

Beijing More Health Technology

Group CO.,Ltd. (« Beijing

Miaoyijia »)

413

387

(19)

368

Jiaxing Yishang Equity

Investment LLP. (« Jiaxing

Yishang »)

474

486

8

494

Lianren Digital Health

Technology Co., Ltd.

(« Lianren Digital Health »)

500

500

(15)

485

Zhejiang Xin’an Shuzhi

Technology Co., Ltd.

(« Xin’an Technology »)

9

9

9

10,238

10,563

(291)

275

(242)

10,305

On 8 May 2020, the shareholders of Xingongying changed and its total registered capital increased from RMB 3.106 million to RMB 3.112 million. After this change, CPIC Property’s shareholding in Xingongying became 6.27%, and CPIC Online Services’s shareholding in Xingongying became 0.67% respectively.

On 14 April 2020, additional capital contributions from another shareholder of Jiaxing Yishang increased the paid-in capital of Jiaxing Yishang from RMB 500 million to RMB 500.501 million. After this capital injection, CPIC Life’s shareholding in Jiaxing Yishang is diluted to 94.72%.

Pursuant to the Notice of Shanghai Heji Business Management Limited Liability Partnership’s payment to limited partners for the distribution of proceeds during the second phase of the project, Heji returned the paid-in capital of CPIC Property of RMB 300 million in March 2020, the total paid-in capital of Heji became RMB 202 million. CPIC Property’s shareholding in Heji decreased from 99.60% to 99.01%.

29

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

13. INTERESTS IN ASSOCIATES (continued)

On 7 May 2020, Pacific Medical & Healthcare, a subsidiary of CPIC Life, entered into an investment cooperation agreement of Xin’an Technology with Quzhou Financial Holdings Group Co., Ltd. and some other investment companies. Pacific Medical & Healthcare purchased 9% shares of Xin’an Technology with a consideration of RMB 6.7086 million and then subscribed additional shares of Xin’an Technology proportionally with a consideration of RMB 2.25 million. On 23 June 2020, Xin’an Technology completed the relevant industrial and commercial modification registration and the total registered capital increased to RMB 13.354 million.

Nature of investment in associates as at 30 June 2020:

Percentage of

Registered

Paid-up

Place of

ownership interest

Percentage

capital

capital

of voting

(RMB

(RMB

Name

incorporation

Direct

Indirect

power

thousand)

thousand)

Principal activity

Juche

Shanghai

37.42%

37.80%

5,882

5,882

Internet

Zhongdao

Shanghai

26.37%

26.67%

63,000

58,000

Road rescue

Oncology, medical

laboratory, clinical fluid,

Zhizhong Hospital

Shanghai

15.41%

20.00%

500,000

500,000

etc.

Computer information

technology, technical

development in the field

of automotive software

Dedao

Shanghai

25.00%

25.00%

20,000

20,000

technology, etc.

Technical development in

the field of computer

information technology,

Xingongying(1)

Shanghai

6.85%

6.94%

3,112

3,112

technical consulting, etc.

Information

Transmission, Software,

and information

Beijing Miaoyijia

Beijing

19.66%

20.00%

75,009

69,190

technology services

Lianren Digital

Information technology

Health

Shanghai

24.57%

25.00%

2,000,000

2,000,000

services

Xin’an

Network technology

Technology(2)

Quzhou

8.85%

9.00%

13,354

13,354

development services

Business management,

industrial investment,

investment management,

assets management,

Heji(3)

Shanghai

97.53%

N/A

202,000

consulting, etc.

CHEMCHINA

Debt

Investment

Plan (4)

N/A

70.55%

N/A

3,000,000

Debt investment plan

Sichuan Railway

Investment

Plan(5)

N/A

38.17%

N/A

600,000

Debt investment plan

Investment management,

Ningbo Zhilin(6)

Ningbo

88.46%

N/A

2,684,798

assets management

Yunnan Energy

Investment

Plan (7)

N/A

92.94%

N/A

3,800,000

Debt investment plan

Jiaxing Yishang(8)

Jiaxing

93.10%

N/A

500,501

Equity Investment

30

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

13. INTERESTS IN ASSOCIATES (continued)

Nature of investment in associates as at 30 June 2020 (continued): Note:

  1. According to the articles of association of Xingongying, CPIC Property has significant influence over Xingongying by accrediting a director to the company. Therefore, Xingongying is accounted under equity method.
  2. According to the articles of association of Xin’an Technology, Pacific Medical & Healthcare has significant influence over Xin’an Technology by accrediting a director to the company. Therefore, Xin’an Technology is accounted under equity method.
  3. CPIC Property holds over 50% shares of Heji. Since CPIC Group cannot direct the relevant activities of Heji according to the partnership agreement of Heji, Heji is accounted under equity method.
  4. CPIC Life and Changjiang Pension hold over 50% shares of CHEMCHINA Debt Investment Plan. Since CPIC Group cannot direct the relevant activities of CHEMCHINA Debt Investment Plan according to the Agreement of Investment Plan, CHEMCHINA Debt Investment Plan is accounted under equity method.
  5. CPIC Life and Changjiang Pension hold shares of Sichuan Railway Investment Plan. Changjiang Pension is the issuer and manager of Sichuan Railway Investment Plan. Since CPIC Group has significant influence over Sichuan Railway Investment Plan, Sichuan Railway Investment Plan is accounted under equity method.
  6. CPIC Life holds over 50% shares of Ningbo Zhilin. Since CPIC Group cannot direct the relevant activities of Ningbo Zhilin according to the partnership agreement of Ningbo Zhilin, Ningbo Zhilin is accounted under equity method.
  7. CPIC Life and Changjiang Pension hold over 50% shares of Yunnan Energy Investment Plan. Since CPIC Group cannot direct the relevant activities of Yunnan Energy Investment Plan according to the Agreement of Investment Plan, Yunnan Energy Investment Plan is accounted under equity method.
  8. CPIC Life holds over 50% shares of Jiaxing Yishang. Since CPIC Group cannot direct the relevant activities of Jiaxing Yishang according to the partnership agreement of Jiaxing Yishang, Jiaxing Yishang is accounted under equity method.

Summarised financial information for principal associates:

30 June 2020/Six months ended 30 June 2020

Total assets

Total liabilities

Total revenue

Net profit

Ningbo Zhilin

2,921

26

60

53

CHEMCHINA Debt

Investment Plan

3,007

2

88

81

Yunnan Energy

3,809

2

119

116

Investment Plan

31

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

13. INTERESTS IN ASSOCIATES (continued) Summarised financial information for other associates:

Six months ended 30

Six months ended 30

June 2020

June 2019

Net loss for the period

(158)

(92)

Other comprehensive income for the period

Total comprehensive loss for the period

(158)

(92)

Total comprehensive (loss) /income attributable to the

(18)

4

Group

Carrying amount of the Group’s interest

1,947

1,787

14.

INVESTMENT IN JOINT VENTURES

30 June 2020

31 December 2019

Share of net assets

Shanghai Ruiyongjing Real Estate Development

Co., Ltd. (« Ruiyongjing Real Estate »)

9,834

9,834

Others

49

45

9,883

9,879

Particulars of the joint venture as at 30 June 2020 are as follow:

Percentage of

Percentage

Registered

Paid-up

Place of

ownership interest

of voting

capital

capital

Principal

Name

incorporation

Direct

Indirect

power

(RMB thousand)

(RMB thousand)

activity

Shanghai

Binjiang-

Xiangrui

Investment and

Construction

Co., Ltd.

(« Binjiang-

Xiangrui »)

Shanghai

35.16%

35.70%

150,000

30,000

Real estate

Taiyi (Shanghai)

Information

Used car

Technology

information

Co., Ltd.

Shanghai

48.00%

48.00%

10,000

10,000

service platform

Technical

Hangzhou Dayu

development,

Internet

technical service

Technology

and technical

Co., Ltd.

Hangzhou

20.25%

20.25%

13,333

13,333

consulting

Network

Aizhu (Shanghai)

technology,

Information

technical

Technology

consulting and

Co., Ltd.

Shanghai

35.00%

35.00%

10,000

6,950

technical service

32

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

14. INVESTMENT IN JOINT VENTURES (continued)

Particulars of the joint venture as at 30 June 2020 are as follow (continued):

Percentage of

Percentage

Registered

Paid-up

Place of

ownership interest

of voting

capital

capital

Principal

Name

incorporation

Direct

Indirect

power

(RMB thousand)

(RMB thousand)

activity

Pacific Euler

Hermes

Insurance Sales

Co., Ltd.

Shanghai

50.24%

50.00%

50,000

50,000

Insurance sales

Shanghai

Third party

Dabaoguisheng

operation

Information

services of

Technology

insurance

Co., Ltd.

Shanghai

33.42%

34.00%

100,000

22,200

industry

Ruiyongjing Real

Estate (1)

Shanghai

68.80%

57.14%

14,050,000

14,050,000

Real estate

Pacific Orpea

(Shanghai)

Senior Care

Operation and

Management

management of

Co., Ltd.

pension industry,

(« Pacific

technical

Orpea ») (2)

Shanghai

55.04%

60.00%

10,000

10,000

consulting

Note:

  1. CPIC Life holds over 50% of the ownership interest of Ruiyongjing Real Estate. Since CPIC Group cannot direct the relevant activities of Ruiyongjing Real Estate according to the Articles of Association of Ruiyongjing Real Estate, Ruiyongjing Real Estate is accounted under equity method.
  2. CPIC Senior Living Investment holds over 50% of the ownership interest of Pacific Orpea. Since CPIC Group cannot direct the relevant activities of Pacific Orpea according to the Articles of Association of Pacific Orpea, Pacific Orpea is accounted under equity method.

The main financial information of the Group’s joint ventures:

Six months ended 30 June

2020

2019

(RMB thousand)

(RMB thousand)

The joint ventures’ net profit/(loss)

7,445

(6,109)

As at 30 June 2020, the Group’s investment in joint ventures had no impairment.

Commitments related to investment in joint ventures are mentioned in Note 31.

33

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

15. HELD-TO-MATURITY FINANCIAL ASSETS

Held-to-maturity financial assets are stated at amortised cost and comprise the following:

30 June 2020

31 December 2019

Listed

Debt investments

– Government bonds

1,310

749

– Finance bonds

5,697

5,725

– Corporate bonds

8,671

9,308

Sub-total

15,678

15,782

Unlisted

Debt investments

– Government bonds

129,366

108,981

– Finance bonds

91,399

94,551

– Corporate bonds

67,119

75,980

Sub-total

287,884

279,512

Less: Impairment provisions

(138)

(47)

Net Value

303,424

295,247

16. INVESTMENTS CLASSIFIED AS LOANS AND RECEIVABLES

30 June 2020

31 December 2019

Debt investments

– Finance bonds

2,000

2,000

– Debt investment plans

176,758

151,446

– Wealth management products

164,752

138,528

– Preferred shares

32,000

32,000

– Loans

770

236

Sub-total

376,280

324,210

Less: Impairment provisions

(323)

(197)

Net Value

375,957

324,013

34

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

16. INVESTMENTS CLASSIFIED AS LOANS AND RECEIVABLES (continued)

As at 30 June 2020, CPIC Asset Management, a subsidiary of the Company, had 86 existing debt investment plans issued by it with a total value of RMB 124.283 billion. Of these, the existing amounts of investments classified as loans and receivables with a book value of approximately RMB 61.529 billion were recognised on the Group’s consolidated financial statement (As at 31 December 2019, CPIC Asset Management, a subsidiary of the Company, had 81 existing debt investment plans issued by it with a total value of RMB 117.469 billion. Of these, the existing amounts of investments classified as loans and receivables with a book value of approximately RMB 54.941 billion were recognised on the Group’s consolidated financial statement). As at 30 June 2020, Changjiang Pension, a subsidiary of the Company, had 60 existing debt investment plans issued by it with a total value of RMB 102.872 billion. Of these, the existing amounts of investments classified as loans and receivables with a book value of approximately RMB 35.281 billion were recognised on the Group’s consolidated financial statement (As at 31 December 2019, Changjiang Pension, a subsidiary of the Company, had 57 existing debt investment plans issued by it with a total value of RMB 101.912 billion. Of these, the existing amounts of investments classified as loans and receivables with a book value of approximately RMB 34.816 billion were recognised on the Group’s consolidated financial statement). Meanwhile, as at 30 June 2020, the Group also had investments in debt investment plans classified as loans and receivables launched by other insurance asset management companies with a book value of approximately RMB 79.948 billion (As at 31 December 2019: approximately RMB 61.689 billion). The amount of debt investment plans guaranteed by a third party or by pledge that invested by the Group is about RMB 128.812 billion. For debt investment plans launched by CPIC Asset Management and Changjiang Pension and invested by the Group, the Group did not provide any guarantees or financial support. The Group’s maximum exposure to loss in the debt investment plans is limited to their carrying amounts.

17.

TERM DEPOSITS

Maturity Period

30 June 2020 31 December 2019

Within 3 months (including 3 months)

583

21,997

3 months to 1 year (including 1 year)

7,795

2,939

1 to 2 years (including 2 years)

11,290

15,800

2 to 3 years (including 3 years)

78,030

16,470

3 to 4 years (including 4 years)

55,470

41,080

4 to 5 years (including 5 years)

24,000

48,770

Over 5 years

700

Total

177,168

147,756

35

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

18. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Available-for-sale financial assets are stated at fair value and comprise the following:

30 June 2020

31 December 2019

Listed

Equity investments

– Stocks

98,389

90,373

– Funds

6,209

8,056

Debt investments

– Government bonds

7,901

7,476

– Finance bonds

5,327

5,389

– Corporate bonds

63,822

64,302

Sub-total

181,648

175,596

Unlisted

Equity investments

– Funds

45,363

40,369

– Wealth management products

1,327

452

– Other equity investments

52,936

51,554

– Preferred shares

13,763

13,621

Debt investments

– Government bonds

78,023

72,170

– Finance bonds

32,602

36,294

– Corporate bonds

117,422

118,781

– Wealth management products

3,009

2,985

Sub-total

344,445

336,226

Total

526,093

511,822

19. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

30 June 2020

31 December 2019

Listed

Equity investments

– Stocks

156

237

– Funds

94

88

Debt investments

– Government bonds

40

11

– Finance bonds

461

253

– Corporate bonds

2,244

2,558

Sub-total

2,995

3,147

Unlisted

Equity investments

– Funds

356

232

– Wealth management products

148

277

– Other equity investments

6,438

595

Debt investments

– Corporate bonds

536

666

– Wealth management products

14

11

– Debt Investment plans

3

3

Sub-total

7,495

1,784

Total

10,490

4,931

36

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

19. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)

Financial assets at fair value through profit or loss include financial assets designated upon initial recognition as at fair value through profit or loss as at 30 June 2020 amounted to RMB 6,603 million (31 December 2019: RMB 886 million). The rest are trading assets, with no material limitation in realisation.

20. REINSURANCE ASSETS

30 June 2020 31 December 2019

Reinsurers’ share of insurance contracts (Note 26)

28,823

25,560

21. DEFERRED INCOME TAX ASSETS AND LIABILITIES

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes, if any, to be levied by the same tax authority and the same taxable entity.

30 June 2020

31 December 2019

Net deferred income tax (liabilities)/assets, at beginning of

period

(2,051)

1,211

Recognised in profit or loss (Note 10(a))

903

121

Recognised in other comprehensive income (Note 10(b))

(894)

(3,383)

Net deferred income tax liabilities, at end of period

(2,042)

(2,051)

Net deferred income tax liabilities

(2,042)

(2,051)

Represented by:

Deferred income tax assets

1,127

860

Deferred income tax liabilities

(3,169)

(2,911)

22.

OTHER ASSETS

30 June 2020

31 December 2019

Receivable for securities

6,973

3,963

Due from a related-party (1)

1,614

1,614

Receivables from external parties

1,328

1,042

Due from agents

329

276

Co-insurance receivable

107

123

Others

5,789

4,379

16,140

11,397

  1. As at 30 June 2020, the payments made by the Group on behalf of Binjiang-Xiangrui for the purchase of land and related tax expenses amounted to approximately RMB 1,614 million (31 December 2019: RMB 1,614 million ).

37

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

23.

CASH AND SHORT-TERM TIME DEPOSITS

30 June 2020 31 December 2019

Cash at banks and on hand

32,866

13,530

Time deposits with original maturity of no more than three

months

3,073

358

Other monetary assets

913

984

36,852

14,872

The Group’s bank balances denominated in RMB amounted to RMB 22,527 million as at 30 June 2020 (31 December 2019: RMB 13,416 million ). Under PRC’s foreign exchange regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business after obtaining approval from foreign exchange regulatory authorities.

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term time deposit rates. The bank balances and deposits are deposited with creditworthy banks with no recent history of default. The carrying amounts of the cash and short-term time deposits approximate their fair values.

As at 30 June 2020, RMB 888 million in the Group’s other monetary assets are restricted to meet the regulation requirement of the minimum settlement deposits (31 December 2019: RMB 959 million ).

As at 30 June 2020, RMB 440 million in the Group’s cash and short-term time deposits balance were restricted for special-purpose use (31 December 2019: RMB 371 million ).

24.

ISSUED CAPITAL

30 June 2020 31 December 2019

Number of shares issued and fully paid at RMB1 each (million)

9,576

9,062

(Note 1)

38

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

25. RESERVES AND RETAINED PROFITS

The amounts of the Group’s reserves and the movements therein during the year are presented in the consolidated statement of changes in equity.

  1. Capital reserves
    Capital reserves mainly represents share premiums from issuance of shares and the deemed disposal of an equity interest in CPIC Life to certain foreign investors in December 2005, and the subsequent repurchase of the said interest in the same subsidiary by the Company in April 2007.
    In June 2020, the Company issued 102,873,300 GDRs and listed on the LSE (Note 1).
  2. Surplus reserves
    Surplus reserves consist of the statutory surplus reserves and the discretionary surplus reserves.
    1. Statutory surplus reserves (the « SSR »)

According to the PRC Company Law and the Articles of Association of the Company and its subsidiaries in the PRC, the Company and its subsidiaries are required to set aside 10% of their net profit (after offsetting the accumulated losses incurred in previous years) determined under the Accounting Standard for Business Enterprises – Basic Standard, the specific accounting standards and other relevant regulations issued by the Ministry of Finance on 15 February 2006 and in subsequent periods (« PRC GAAP »), to the SSR until the balance reaches 50% of the respective registered capital.

Subject to the approval of shareholders, the SSR may be used to offset the accumulated losses, if any, and may also be converted into capital, provided that the balance of the SSR after such capitalisation is not less than 25% of the registered capital.

(ii) Discretionary surplus reserves (the « DSR »)

After making necessary appropriations to the SSR, the Company and its subsidiaries in the PRC may also appropriate a portion of their net profit to the DSR upon the approval of the shareholders in general meetings.

Subject to the approval of the shareholders, the DSR may be used to offset accumulated losses, if any, and may be converted into capital.

Of the Group’s retained profits in the consolidated financial statements, RMB 15,035 million as at 30 June 2020 (31 December 2019: RMB 12,576 million) represents the Company’s share of its subsidiaries’ surplus reserve fund.

According to the resolution of the 10th meeting of the 6th Board of Directors of CPIC Property on 20 April 2020, CPIC Property proposed to appropriate RMB 2.5 billion of discretionary surplus reserve from retained profits. The proposal was approved by the general meeting of shareholders of CPIC Property on 8 May 2020.

39

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

25. RESERVES AND RETAINED PROFITS (continued)

  1. General reserves
    In accordance with the relevant regulations, general reserves should be set aside to cover catastrophic or other losses as incurred by companies operating in the insurance, banking, trust, securities, futures, fund management, leasing and financial guarantee businesses, etc. Based on the applicable PRC financial regulations, the Company’s insurance subsidiaries would need to make appropriations for such reserve based on their respective year-end net profits determined in accordance with PRC GAAP in their annual financial statements. The Company’s subsidiaries operating in fund management should make appropriation for such reserve based on asset management product management fees. Such reserve is not available for profit distribution or transfer as capital injection.
    Of the Group’s reserves, RMB 14,365 million as at 30 June 2020 (31 December 2019: RMB 14,329 million) represents the Company’s share of its subsidiaries’ general reserves.
  2. Other reserves
    The investment revaluation reserve records the fair value changes of available-for-sale financial assets. The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of the subsidiaries incorporated outside Mainland China.
  3. Distributable profits
    According to the Articles of Association of the Company, the amount of retained profits available for distribution of the Company should be the lower of the amount determined under PRC GAAP and the amount determined under HKFRSs, or PRC GAAP where the overseas listing place permits. Pursuant to the resolution of the 24th meeting of the 8th Board of Directors of the Company held on 20 March 2020, a final dividend of approximately RMB 10,874 million (equivalent to RMB 1.2 per share (including tax)) was proposed after the appropriation of statutory surplus reserves. The profit distribution plan was approved by the general meeting of shareholders of the Company on 12 May 2020.

40

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

26. INSURANCE CONTRACT LIABILITIES

30 June 2020

Reinsurers’ share

Insurance

of insurance

contract

contract liabilities

liabilities

(Note 20)

Net

Long-term life insurance contracts

1,058,372

(12,863)

1,045,509

Short-term life insurance contracts

– Unearned premiums

8,255

(446)

7,809

– Claim reserves

5,296

(887)

4,409

13,551

(1,333)

12,218

Property and casualty insurance contracts

– Unearned premiums

65,585

(7,797)

57,788

– Claim reserves

43,614

(6,830)

36,784

109,199

(14,627)

94,572

1,181,122

(28,823)

1,152,299

Incurred but not reported claim reserves

10,881

(1,790)

9,091

31 December 2019

Reinsurers’ share

Insurance

of insurance

contract

contract liabilities

liabilities

(Note 20)

Net

Long-term life insurance contracts

963,542

(12,334)

951,208

Short-term life insurance contracts

– Unearned premiums

4,608

(317)

4,291

– Claim reserves

4,587

(687)

3,900

9,195

(1,004)

8,191

Property and casualty insurance contracts

– Unearned premiums

57,367

(6,068)

51,299

– Claim reserves

37,917

(6,154)

31,763

95,284

(12,222)

83,062

1,068,021

(25,560)

1,042,461

Incurred but not reported claim reserves

9,276

(1,469)

7,807

41

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

26. INSURANCE CONTRACT LIABILITIES (continued) Claim development tables

The following tables reflect the cumulative incurred claims, including both claims notified and IBNR for each successive accident year at each balance sheet date, together with cumulative payments to date.

Gross property and casualty insurance claim reserves:

Property and casualty insurance (Accident year)

For six

months

ended 30

2016

2017

2018

2019

June 2020

Total

Estimate of ultimate claim cost as of:

End of current year/period

57,960

59,974

64,450

71,637

36,843

One year later

57,071

57,147

64,051

71,631

Two years later

55,725

55,300

63,954

Three years later

55,167

55,092

Four years later

55,081

Current estimate of cumulative claims

55,081

55,092

63,954

71,631

36,843

282,601

Cumulative payments to date

(53,937)

(52,755)

(59,128)

(58,772)

(17,678)

(242,270)

Liability in respect of prior years,

unallocated loss adjustment

expenses, assumed business,

3,283

discount and risk adjustment margin

Total gross claim reserves included in

43,614

the consolidated balance sheet

Net property and casualty insurance claim reserves:

Property and casualty insurance (Accident year)

For six

months

ended 30

2016

2017

2018

2019

June 2020

Total

Estimate of ultimate claim cost as of:

End of current year/period

50,934

52,415

56,073

62,405

32,606

One year later

50,251

50,539

55,809

62,299

Two years later

49,406

48,720

55,673

Three years later

48,841

48,509

Four years later

48,717

Current estimate of cumulative claims

48,717

48,509

55,673

62,299

32,606

247,804

Cumulative payments to date

(47,885)

(46,646)

(51,992)

(51,613)

(15,808)

(213,944)

Liability in respect of prior years,

unallocated loss adjustment

expenses, assumed business,

2,924

discount and risk adjustment margin

Total net claim reserves included in the

36,784

consolidated balance sheet

42

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

27. INVESTMENT CONTRACT LIABILITIES

At 1 January 2019

62,255

Deposits received

17,028

Deposits withdrawn

(8,058)

Fees deducted

(224)

Interest credited

3,005

Others

1,500

At 31 December 2019

75,506

Deposits received

9,603

Deposits withdrawn

(3,651)

Fees deducted

(80)

Interest credited

1,902

Others

472

At 30 June 2020

83,752

28. BONDS PAYABLE

On 23 March 2018, CPIC Property issued a 10-year capital replenishment bond with a total face value of RMB 5 billion in the interbank market. CPIC Property has a conditional option to redeem the bond at the end of the fifth interest-bearing year. The capital replenishment bond pays interests at an initial coupon rate of 5.10% per annum. If CPIC Property does not exercise the early redemption option, the annual coupon rate for the next five years would increase to 6.10%.

On 27 July 2018, CPIC Property issued a 10-year capital replenishment bond with a total face value of RMB 5 billion in the interbank market. CPIC Property has a conditional option to redeem the bond at the end of the fifth interest-bearing year. The capital replenishment bond pays interests at an initial coupon rate of 4.99% per annum. If CPIC Property does not exercise the early redemption option, the annual coupon rate for the next five years would increase to 5.99%.

Premium

31 December 2019

Issuance

amortisation

Redemption

30 June 2020

CPIC Property

9,988

2

9,990

43

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

29. NOTE TO CONSOLIDATED CASH FLOW STATEMENT

Reconciliation from profit before tax to cash generated from operating activities:

Six months ended 30 June

2020

2019

Profit before tax

17,630

14,485

Investment income

(37,766)

(31,952)

Foreign currency (income)/loss

(25)

75

Finance costs

1,176

1,429

Charge of impairment losses on insurance receivables and other

assets, net

354

431

Depreciation of property and equipment

898

820

Depreciation of investment properties

164

158

Depreciation of right-of-use assets

757

596

Amortisation of other intangible assets

376

267

Amortisation of other assets

10

5

Gain on disposal of items of property and equipment, intangible

(1)

(1)

assets and other long-term assets, net

(16,427)

(13,687)

Increase in reinsurance assets

(3,263)

(2,426)

Increase in insurance receivables

(18,228)

(14,742)

(Increase)/Decrease in other assets

(4,743)

1,128

Increase in insurance contract liabilities

107,704

97,797

Increase in other operating liabilities

4,206

794

Cash generated from operating activities

69,249

68,864

30. RELATED PARTY TRANSACTIONS

In addition to those disclosed elsewhere in the financial statements, the Group had the following major transactions with related parties:

  1. Sale of insurance contracts

Shareholders who individually own more than 5% of voting rights of the Company and the shareholders’ parent company

Six months ended 30 June

20202019

1

The Group’s above related party transactions were entered into based on normal commercial terms during the normal course of insurance business.

(c) Fund subscription and redemption transactions

Hwabao WP Fund Management Co., Ltd.

  1. Dividends paid
    Shareholders who individually own more than 5% of voting rights of the Company

Six months ended 30 June

20202019

1,030191

Six months ended 30 June

20202019

4,5713,182

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

30. RELATED PARTY TRANSACTIONS (continued)

  1. Compensation of key management personnel

Six months ended 30 June

20202019

Salaries, allowances and other short-term benefits

9

10

  1. The Group had the following major transactions with the joint venture:

Six months ended 30 June

2020

2019

Rental fees for leasing office buildings of Binjiang-

Xiangrui

37

Payments made on behalf of Binjiang-Xiangrui for the

9

purchase of land, construction fees and etc.

Total major transactions with the joint venture

37

9

The receivable due from Binjiang-Xiangrui is interest free with no determined maturity date.

  1. Transactions with other government-related entities in the PRC
    The Group mainly operates in an economic environment predominated by enterprises that are controlled, jointly controlled or significantly influenced by the PRC government through its authorities, affiliates or other organisations (collectively « government-related entities »). The
    Company is also a government-related entity.
    For the six months ended 30 June 2019 and the six months ended 30 June 2020, the Group had certain transactions with some government-related entities primarily related to insurance, investment and other activities (including, but not limited to, issuing insurance policies, provision of asset management or other services, and the sale, purchase, issuance and redemption of bonds or equity instruments).
    Management considers that those transactions with other government-related entities are activities conducted in the ordinary course of business, and that the dealings of the Group have not been significantly or unduly affected by the fact that the Group and those government-related entities are controlled, jointly controlled or significantly influenced by the PRC government. The Group has also established pricing policies for products and services and such pricing policies do not depend on whether or not the customers are government-related entities.

45

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

31. COMMITMENTS

  1. Capital commitments
    The Group had the following capital commitments at the balance sheet date:

30 June 2020

31 December 2019

Contracted, but not provided for

(1)(2)(3)(4)(5)

4,602

3,485

Authorised, but not contracted for

(1)(2)(3)(5)

6,207

3,115

10,809

6,600

As at 30 June 2020, major projects with capital commitments are as follows:

  1. The Company resolved to establish IT Backup Centre and Customer Support Centre in Chengdu High-tech Zone and the expected total capital expenditure is approximately RMB 2,000 million. As at 30 June 2020, the cumulative amount incurred by the Company amounted to RMB 1,718 million. Of the balance, RMB 23 million was disclosed as a capital commitment contracted but not provided for and RMB 259 million was disclosed as a capital commitment authorised but not contracted for.
  2. CPIC Property and a third party bade for the use right of the land located at Huangpu District, Shanghai. And in February 2013, two parties set up a project company named Binjiang-Xiangrui as the owner of the land use right to this parcel of land and construction development subject. Total investment of this project approximated RMB 2,090 million. As at 30 June 2020, the cumulative amount incurred by CPIC Property amounted to RMB 1,626 million. Of the balance, RMB 109 million was disclosed as a capital commitment contracted but not provided for and RMB 355 million was disclosed as a capital commitment authorised but not contracted for.
  3. CPIC Life and other two parties joined together to bid for the use right of the land located at Huangpu District, Shanghai. All parties set up a project company named Ruiyongjing Real Estate as the owner of the land use right to this parcel of land and construction development subject. The estimated total investment of the project is approximately RMB 19,500 million. The registered capital of the joint venture is RMB 14,050 million, of which CPIC Life shall make a contribution of RMB 9,835 million, representing 70% of the registered capital. In addition, CPIC Life will provide shareholder’s loans to the joint venture, which are estimated to be approximately RMB 5,450 million. The total amount of the above two contributions to be made by CPIC Life is estimated to be RMB 15,285 million. As at 30 June 2020, the cumulative amount incurred by CPIC Life amounted to RMB 10,605 million. Of the balance, RMB 2,230 million was disclosed as a capital commitment contracted but not provided for and RMB 2,450 million was disclosed as a capital commitment authorised but not contracted for.
  4. CPIC Life and a third party jointly established Jiaxing Yishang. The total investment of this project approximated RMB 950 million. As at 30 June 2020, the cumulative amount incurred by the CPIC Life amounted to RMB 474 million. Of the balance, RMB 476 million was disclosed as a capital commitment contracted but not provided for.

46

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

31. COMMITMENTS (continued)

  1. Capital commitments (continued)
    1. CPIC Life obtained the use rights of three parcels of land respectively located at Wenjiang District, in Chengdu, Sichuan, at Lin’an District, in Hangzhou, Zhejiang, and at Jimei District, in Xiamen, Fujian, and set up three project companies named Chengdu Project Company, Hangzhou Project Company, and Xiamen Project Company accordingly as the owners of the land use rights to the parcels of land and construction development subjects for the construction project « CPIC Home ». The estimated total investment of the three projects is approximately RMB 5,501 million. As at 30 June 2020, the cumulative amount incurred amounted to RMB 1,153 million. Of the balance, RMB 1,280 million was disclosed as a capital commitment contracted but not provided for and RMB 3,068 million was disclosed as a capital commitment authorised but not contracted for.
  2. Operating lease rental receivables
    The Group leases its investment properties under various rental agreements. Future minimum lease receivables under non-cancellable operating leases are as follows:

30 June 2020

31 December 2019

Within 1 year (including 1 year)

851

886

1 to 2 years (including 2 years)

670

577

2 to 3 years (including 3 years)

375

385

3 to 5 years (including 5 years)

360

235

More than 5 years

228

86

2,484

2,169

47

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

  1. CONTINGENT LIABILITIES
    In light of the nature of the insurance business, the Group makes estimates for contingencies and legal proceedings in the ordinary course of business, both in the capacity as plaintiff or defendant in litigation and as claimant or respondent in arbitration proceedings. Legal proceedings mostly involve claims on the Group’s insurance policies. Provisions have been made for the probable losses to the Group, including those claims where directors can reasonably estimate the outcome of the litigations taking into account legal advice, if any. No provision is made for contingencies and legal proceedings when the outcome cannot be reasonably estimated or the probability of loss is extremely low.
    In addition to the legal proceedings of the above natures, as at 30 June 2020, the Group was the defendant in certain pending litigations. Provisions were made for the possible losses based on best estimate by the directors and the Group would only be contingently liable for any claim that is in excess of what had been provided. No provision was made for contingencies and legal proceedings when the outcome cannot be reasonably estimated or the probability of loss is extremely low.
  2. MATURITY PROFILE OF FINANCIAL INSTRUMENTS
    The tables below summarise the maturity profiles of the financial assets and financial liabilities of the Group based on remaining undiscounted cash flows, and insurance contract liabilities of the Group based on the estimated timing of the net cash outflows.

As at 30 June 2020

On

Within 1

1 to 5

Over 5

demand

year

years

years

Undated

Total

Assets:

Held-to-maturity financial assets

23,015

99,232

432,515

554,762

Investments classified as loans and

43,676

257,135

187,637

488,448

receivables

Restricted statutory deposits

714

6,442

7,156

Term deposits

17,823

183,849

201,672

Available-for-sale financial assets

249

32,248

160,442

279,532

201,357

673,828

Financial assets at fair value

61

391

2,422

7,083

799

10,756

through profit or loss

Securities purchased under

28,623

28,623

agreements to resell

Insurance receivables

8,772

23,468

9,417

847

42,504

Cash and short-term time deposits

33,778

3,077

36,855

Others

2,689

72,551

1,616

76,856

Total

45,549

245,586

720,555

907,614

202,156

2,121,460

Liabilities:

Insurance contract liabilities

138,788

57,464

984,870

1,181,122

Investment contract liabilities

9,811

27,592

107,773

145,176

Policyholders’ deposits

70

70

Bonds payable

505

2,226

11,762

14,493

Securities sold under agreements to

100,333

100,333

repurchase

Lease liabilities

1,341

2,153

300

3,794

Others

48,865

30,621

1,496

105

81,087

Total

48,865

281,469

90,931

1,104,810

1,526,075

48

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

33. MATURITY PROFILE OF FINANCIAL INSTRUMENTS (continued)

As at 31 December 2019

On

Within 1

1 to 5

Over 5

demand

year

years

years

Undated

Total

Assets:

Held-to-maturity financial assets

29,029

96,981

404,187

530,197

Investments classified as loans and

62,932

188,337

165,689

416,958

receivables

Restricted statutory deposits

807

7,030

7,837

Term deposits

35,021

137,314

700

173,035

Available-for-sale financial assets

263

33,753

167,461

284,590

183,261

669,328

Financial assets at fair value

63

231

2,452

1,621

879

5,246

through profit or loss

Securities purchased under

28,061

28,061

agreements to resell

Insurance receivables

4,194

11,236

7,867

649

23,946

Cash and short-term time deposits

14,514

358

14,872

Others

1,887

66,420

1,623

69,930

Total

20,921

267,848

609,065

857,436

184,140

1,939,410

Liabilities:

Insurance contract liabilities

124,370

63,037

880,614

1,068,021

Investment contract liabilities

8,566

24,484

101,810

134,860

Policyholders’ deposits

70

70

Bonds payable

505

2,176

12,064

14,745

Securities sold under agreements to

78,503

78,503

repurchase

Lease liabilities

1,341

2,369

358

4,068

Others

49,483

21,612

1,964

111

73,170

Total

49,483

234,967

94,030

994,957

1,373,437

34. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Fair value estimates are made at a specific point in time based on relevant market information and information about financial instruments. When an active market exists, such as an authorised securities exchange, the market value is the best reflection of the fair values of financial instruments. For financial instruments where there is no active market, fair value is determined using valuation techniques.

The Group’s financial assets mainly include cash and short-term time deposits, financial assets at fair value through profit or loss, securities purchased under agreements to resell, policy loans, term deposits, available-for-sale financial assets, held-to-maturity financial assets, investments classified as loans and receivables, restricted statutory deposits, etc.

The Group’s financial liabilities mainly include securities sold under agreements to repurchase, policyholders’ deposits, investment contract liabilities and bonds payable, etc.

49

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

34. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (continued) Fair value of financial assets and liabilities not carried at fair value

The following table summarises the carrying values and estimated fair values of held-to-maturity financial assets, investments classified as loans and receivables, and bonds payable whose fair values are not presented in the consolidated balance sheet.

As at 30 June 2020

Carrying

amount

Fair values

Financial assets:

Held-to-maturity financial assets

303,424

328,099

Investments classified as loans and receivables

375,957

376,046

Financial liabilities:

Bonds payable

9,990

11,008

As at 31 December 2019

Carrying

amount

Fair values

Financial assets:

Held-to-maturity financial assets

295,247

317,317

Investments classified as loans and receivables

324,013

324,104

Financial liabilities:

Bonds payable

9,988

10,703

As permitted by HKFRS 7, the Group has not disclosed fair values for certain investment contract liabilities with discretionary participation features (« DPF ») because fair values or fair value ranges for the DPF cannot be reliably estimated. There is no active market for these instruments which will be settled with policyholders in the normal course of business.

The carrying amounts of other financial assets and financial liabilities approximate their fair values.

50

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

35. FAIR VALUE MEASUREMENT

Determination of fair value and fair value hierarchy

All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorised within the fair value hierarchy. The fair value hierarchy prioritises the inputs to valuation techniques used to measure fair value into three broad levels. The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

The levels of the fair value hierarchy are as follows:

  1. Fair value is based on quoted prices (unadjusted) in active markets for identical assets or liabilities (« Level 1 »);
  2. Fair value is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) (« Level 2 »); and
  3. Fair value is based on inputs for the asset or liability that are not based on observable market data (unobservable inputs) (« Level 3 »).

The level of fair value calculation is determined by the lowest level input with material significant in the overall calculation. As such, the significance of the input should be considered from an overall perspective in the calculation of fair value.

For Level 2 financial instruments, valuations are generally obtained from third party pricing services for identical or comparable assets, or through the use of valuation methodologies using observable market inputs, or recent quoted market prices. Valuation service providers typically gather, analyse and interpret information related to market transactions and other key valuation model inputs from multiple sources, and through the use of widely accepted internal valuation models, provide a theoretical quote on various securities. Debt securities traded among Chinese interbank market are classified as Level 2 when they are valued at recent quoted price from Chinese interbank market or from valuation service providers. Substantially most financial instruments classified within Level 2 of the fair value hierarchy of the Group are debt investments denominated in RMB. Fair value of debt investments denominated in RMB is determined based upon the valuation results by the China Central Depositary & Clearing Co., Ltd. All significant inputs are observable in the market.

For Level 3 financial instruments, prices are determined using valuation methodologies such as discounted cash flow models and other similar techniques. Determinations to classify fair value measures within Level 3 of the valuation hierarchy are generally based on the significance of the unobservable factors to the overall fair value measurement, and valuation methodologies such as discounted cash flow models and other similar techniques. The Group’s valuation team may choose to apply internally developed valuation method to the assets or liabilities being measured, determine the main inputs for valuation, and analyse the change of the valuation and report it to management. Key inputs involved in internal valuation services are not based on observable market data. They reflect assumptions made by management based on judgements and experiences.

51

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

35. FAIR VALUE MEASUREMENT (continued)

Determination of fair value and fair value hierarchy (continued)

For assets and liabilities that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities:

As at 30 June 2020

Level 1

Level 2

Level 3

Total fair value

Assets measured at fair value

Financial assets at fair value through profit

or loss

– Stocks

122

34

156

– Funds

366

84

450

– Bonds

2,614

667

3,281

– Others

148

6,455

6,603

3,102

933

6,455

10,490

Available-for-sale financial assets

– Stocks

93,621

4,768

98,389

– Funds

32,602

18,970

51,572

– Bonds

25,491

277,418

2,188

305,097

– Others

6,773

64,262

71,035

151,714

307,929

66,450

526,093

Assets for which fair values are

disclosed

Held-to-maturity financial assets (Note 34)

6,833

321,266

328,099

Investments classified as loans and

receivables (Note 34)

2,139

373,907

376,046

Investment properties

11,647

11,647

Liabilities for which fair values are

disclosed

Bonds payable (Note 34)

11,008

11,008

52

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

35. FAIR VALUE MEASUREMENT (continued)

Determination of fair value and fair value hierarchy (continued)

As at 31 December 2019

Level 1

Level 2

Level 3

Total fair value

Assets measured at fair value

Financial assets at fair value through profit

or loss

– Stocks

196

41

237

– Funds

230

90

320

– Bonds

2,572

916

3,488

– Others

277

609

886

2,998

1,324

609

4,931

Available-for-sale financial assets

– Stocks

84,308

6,065

90,373

– Funds

31,104

17,321

48,425

– Bonds

22,112

280,326

1,974

304,412

– Others

5,810

62,802

68,612

137,524

309,522

64,776

511,822

Assets for which fair values are

disclosed

Held-to-maturity financial assets (Note 34)

7,948

309,114

255

317,317

Investments classified as loans and

receivables (Note 34)

2,141

321,963

324,104

Investment properties

11,887

11,887

Liabilities for which fair values are

disclosed

Bonds payable (Note 34)

10,703

10,703

For the six months ended 30 June 2020, due to changes in availability of quoted prices (unadjusted) in active markets, the Group transferred certain bonds between Level 1 and Level 2. For the six months ended 30 June 2020, the Group transferred the bonds with a carrying amount of RMB 8,040 million from Level 1 to Level 2 and RMB 8,495 million from Level 2 to Level 1.

In 2019, due to changes in availability of quoted prices (unadjusted) in active markets, the Group transferred certain bonds between Level 1 and Level 2. In 2019, the Group transferred the bonds with a carrying amount of RMB 7,113 million from Level 1 to Level 2 and RMB 6,286 million from Level 2 to Level 1.

53

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

35. FAIR VALUE MEASUREMENT (continued)

Determination of fair value and fair value hierarchy (continued)

Reconciliation of recurring fair value measurements categorised within Level 3 of the fair value hierarchy:

Financial assets at fair value through profit or loss

  • Wealth management products
  • Debt Investment plans
  • Other equity investments

Available-for-sale financial assets

  • Preferred shares
  • Other equity investments
  • Finance Bonds

Financial assets at fair value through profit or loss

  • Wealth management products
  • Debt Investment plans
  • Other equity investments

Available-for-sale financial assets

  • Preferred shares
  • Other equity investments
  • Finance Bonds

As at 30 June 2020

Beginning

Increase

Decrease

Transferred

Net unrealised

Net unrealised gain

End of

of period

to Level 3

loss recognised

recognised in other

period

in profit or loss

comprehensive

income

11

3

14

3

3

595

6,120

(277)

6,438

13,621

142

13,763

49,181

5,788

(7,270)

(69)

2,869

50,499

1,974

246

(32)

2,188

As at 31 December 2019

Beginning

Increase

Decrease

Transferred

Net unrealised

Net unrealised gain

End of

of year

to Level 3

loss recognised

recognised in other

year

in profit or loss

comprehensive

income

5

6

11

2

1

3

581

14

595

7,765

5,725

131

13,621

37,330

9,057

(8)

2,802

49,181

1,974

1,974

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

  1. FAIR VALUE MEASUREMENT (continued) Valuation techniques
    The fair value of the unquoted debt investments is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities, with appropriate adjustment where applicable.
    The fair value of the unquoted equity investments has been determined using valuation techniques such as discounted cash flow method, comparison method of listed companies, recent transaction prices of the same or similar instruments etc., with appropriate adjustments have been made where applicable, for example, for lack of liquidity using option pricing models. The valuation requires management to use major assumptions and parameters as unobservable inputs to the model. The major assumptions include estimated time period prior to the listing of the unquoted equity instruments, and the major parameters include discount rate from 4.00% to 7.74%, etc.
    The fair value of investment properties is determined using discounted cash flow method with unobservable inputs including estimated rental value per square meters per month and discount rate, etc. This method involves the projection of a series of cash flows from valuation date to economic life maturity date. To this projected cash flow series, a market-derived discount rate is applied to establish the present value of the income stream associated with the asset.
  2. POST BALANCE SHEET EVENTS
    In July 2020, the UBS AG London Branch (as the stabilizing manager) partially exercised the over-allotment option as agreed in the Prospectus dated 12 June 2020 issued by the Company, which required the Company to issue an additional 8,794,991 shares of GDRs with USD17.60 per share, the number of corresponding new underlying A shares is 43,974,955. The above A shares were listed on the Shanghai Stock Exchange on 9 July 2020 (Beijing time), after which the issued capital of the Company was increased to approximately RMB 9,620 million, and the change in registered capital is still in process.
    Pursuant to the resolution of the CPIC Life’s 5th meeting of investment decision-making committee held in 2020, CPIC Life proposed to invest RMB 339 million to set up the Pacific
    Care Home Development (Nanjing) Co., Ltd. (« Nanjing Project Company »). Nanjing Project Company is a wholly-owned subsidiary of CPIC Life with the registered capital of RMB 220 million. As at the date of the approval of these financial statements, CPIC Life has made the capital contribution of RMB 59 million.
    Pursuant to the approval of the management of CPIC Senior Living Investment, a subsidiary of the Company, CPIC Senior Living Investment intends to invest RMB 310 million to set up the
    CPIC (Dali) Nursing Home Co., Ltd. (« Dali Nursing Home »). The registered capital of Dali
    Nursing Home is RMB 608 million, of which 51% is subscribed by CPIC Senior Living Investment and the amount of capital is RMB 310 million. As at the date of the approval of these financial statements, CPIC Senior Living Investment has made the capital contribution of RMB 80 million.

55

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

30 June 2020

(All amounts expressed in RMB million unless otherwise specified)

  1. POST BALANCE SHEET EVENTS (continued)
    Pursuant to the resolution of the CPIC Life’s 9th meeting of investment decision-making committee held in 2020, CPIC Life proposed to invest RMB 379 million to set up the CPIC (Shanghai) Senior Care Development Co., Ltd. (« Shanghai Senior Care Project Company »). Shanghai Senior Care Project Company is a wholly-owned subsidiary of CPIC Life with the registered capital of RMB 250 million. As at the date of the approval of these financial statements, CPIC Life has not yet made the capital contribution.
    The COVID-19 pandemic outbroke and continued to spread in China and around the world since early 2020. The COVID-19 pandemic has brought uncertainty to business operations and the overall economy in China and most parts of the world. The financial statements have reflected the known impact of the COVID-19 pandemic on the financial position as at 30 June 2020 and on the operating results and cash flows for the six months ended 30 June 2020 of the Group. Since the beginning of the second quarter, although China’s economic and social operation has gradually got back on track despite prevention and control measures applied, it remains largely uncertain how things will develop with the global pandemic of the COVID-19. As a result of the foregoing, the Group’s operating results and financial condition could be adversely affected. The Group will pay close attention to the development of the COVID-19 pandemic and evaluate its impact on the financial position and operating results of the Group.
    The Group does not have other significant post balance sheet events.
  2. APPROVAL OF THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
    The interim condensed consolidated financial information have been approved for issue by the
    Company’s directors on 21 August 2020.

56

Disclaimer

China Pacific Insurance (Group) Co. Ltd. published this content on 23 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 August 2020 10:27:21 UTC

All news about CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

Sales 2020 335 B
48 409 M
48 409 M
Net income 2020 26 981 M
3 900 M
3 900 M
Net cash 2020 179 B
25 939 M
25 939 M
P/E ratio 2020 11,0x
Yield 2020 3,82%
Capitalization 221 B
31 925 M
31 930 M
EV / Sales 2020 0,12x
EV / Sales 2021 0,06x
Nbr of Employees 111 247
Free-Float 69,3%

Chart CHINA PACIFIC INSURANCE (GROUP) CO., LTD.



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China Pacific Insurance (Group) Co., Ltd. Technical Analysis Chart | MarketScreener

Technical analysis trends CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

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Income Statement Evolution

Consensus




Sell



Buy

Mean consensus OUTPERFORM
Number of Analysts 22
Average target price
34,46 CNY
Last Close Price
32,27 CNY
Spread / Highest target 71,6%
Spread / Average Target 6,79%
Spread / Lowest Target -28,7%




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