The minimum capital of a life insurance company is the sum of its minimum capital for its short-term business (policies having a term of one year or less from the date of issuance) and the minimum capital for its long-term business (policies having a term of more than one year from the date of issuance). The standard for calculation of the minimum capital was further revised by the CIRC in January 2010.

The minimum capital for a life insurance company’s short-term business is the higher of:

18% of the portion of net premiums received in the most recent fiscal year net of business tax and other surcharges which is not in excess of RMB 100 million, plus 16% of the portion which is in excess of RMB 100 million; and

	•		18% of the portion of net premium received in the most recent fiscal year net of business tax and other surcharges which is not in excess of RMB 100 million, plus 16% of the portion which are in excess of RMB 100 million; and

	•		26% of the portion of the average annual claims payments during the most recent three fiscal years which is not in excess of RMB 70 million, plus 23% of the portion which is in excess of RMB 70 million.

The minimum capital for its long-term business is the sum of:

4% of the period-end reserves for insurance risks after unbundling of mixed insurance contracts;

	•		~~4% of the period-end reserves for insurance risks after unbundling of mixed insurance contracts;~~

	•		4% of the period-end reserves for insurance contracts;

	•		~~1% of the liabilities for other risks after unbundling of investment-linked insurance contracts;~~

	•		~~4% of the liabilities for other risks after unbundling of other mixed insurance contracts;~~

	•		~~4% of the liabilities for insurance policies which do not pass the tests for significant insurance risks;~~

	•		~~0.1% of the total sums at risk under term life policies, the coverage period of which expires within three years;~~

	•		~~0.15% of the total sums at risk under term life policies, the coverage period of which expires within three to five years;~~

	•		~~0.3% of the total sums at risk under term life policies, the coverage period of which will not expire within five years;~~

	•		~~0.3% of the total sums at risk under whole life policies; and~~

	•		~~0.3% of the sums at risk of all other insurance and annuity products with a coverage period longer than one year.~~

1% of the liabilities for other risks after unbundling of investment-linked insurance contracts;

4% of the liabilities for other risks after unbundling of other mixed insurance contracts;

4% of the liabilities for insurance policies which do not pass the tests for significant insurance risks;

0.1% of the total sums at risk under term life policies, the coverage period of which expires within three years;

0.15% of the total sums at risk under term life policies, the coverage period of which expires within three to five years;

0.3% of the total sums at risk under term life policies, the coverage period of which will not expire within five years;

0.3% of the total sums at risk under whole life policies; and

0.3% of the total sums at risk of all other insurance and annuity products with a coverage period longer than one year.

An insurance company with a solvency ratio below 100% may be subject to a range of regulatory actions by the CIRC. The CIRC may in such situations require the insurance company to, among other things, raise additional share capital, limit paying dividends on its shares, limit the remuneration and expense accounts of its directors and senior management, restrict its advertising activities, restrict the establishment of branch offices and business operations, cease any new business development, transfer its insurance business to others or seek reinsurance of its insurance obligations, sell its assets or restrict the acquisition of fixed assets, limit the channels for using its capital, change its management team or put the insurer into receivership.

If the solvency ratio is between 100% and 150%, the CIRC may require an insurance company to submit and implement a plan on the prevention of inadequate solvency. Where there is any significant insolvency risk in an insurance company with a solvency ratio between 100% and 150% or higher than 150%, the CIRC may require the insurance company to take corrective actions or take other regulatory actions as the CIRC deems necessary.

Insurance companies are required to calculate and report annually and quarterly to the CIRC their solvency level. In addition, an insurance company must submit a report to the CIRC within five working days after becoming aware ~~that it is insolvent.~~

of the inadequacy of its solvency ratio, and must formulate a solvency ratio compliance program, take measures to return its solvency ratio to an adequate level, and submit the compliance program to the CIRC.

As of December 31, ~~2010,~~2012, our solvency ratio was approximately ~~211.99%~~235.58%.

Statutory deposits

Insurance companies in China are required to deposit an amount equal to 20% of their registered capital with ~~no more than three~~at least two qualified commercial banks, each of which must, among other things, have ~~registered capital~~net assets of no less than RMB ~~4,000 million~~20 billion as of the end of the previous year and have no affiliated relationship with the insurance company. These funds may not be used for any purpose other than to pay off debts during a liquidation proceeding.

Statutory insurance fund

Chinese life insurance companies are required to contribute to a statutory insurance fund 0.15% of ~~their premiums and accumulated policyholder deposits from~~the business income for life ~~policies~~insurance with guaranteed ~~benefits,~~earnings and 0.05% of ~~their premiums and accumulated policyholder deposits from~~the business income for life ~~policies~~insurance without guaranteed ~~benefits,~~benefits; 0.8% of insurance premiums for short-term health insurance and 0.15% of insurance premiums for long-term health insurance; 0.8% of premiums ~~from short-term health policies, 0.15% of premiums from long-term health policies, 0.8% of premiums from~~for non-investment accident insurance, ~~contracts,~~ 0.08% of ~~their accumulated policyholder deposits from~~the business income for investment accident ~~investment contracts~~insurance with guaranteed benefits, and 0.05% of ~~their accumulated policyholder deposits from~~the business income for investment accident ~~investment contracts~~insurance without guaranteed benefits. Contributions are not required once the ~~total amount contributed in~~balance of the statutory insurance fund of a life insurance company reaches 1% of the ~~insurance~~ company’s total assets.

Statutory reserves

In addition to the statutory deposit and the statutory insurance fund, insurance companies are required to provide for the ~~following~~ statutory reserves in accordance with regulations established by the ~~CIRC: unearned premium reserves and reserves for claims and claim adjustment expense.~~CIRC. These reserves are recorded as liabilities for purposes of determining an insurance company’s actual solvency in accordance with regulatory rules.

Statutory reinsurance

Insurance companies are required to reinsure, for any single risk, the excess of the maximum potential liability over an amount equal to 10% of the sum of paid-in capital and capital reserves.

Actuaries

Insurance companies are required to appoint one or more actuarial professionals, certified by the CIRC, and must establish a system for actuarial reporting.

Regulation of corporate governance

Directors and senior management qualification and remuneration management requirements.Directors, supervisors and senior management of an insurance company are subject to qualification requirements implemented by the CIRC.

In addition, the cash benefits, subsidies and allowances that an insurance company pays to its directors, supervisors and senior management annually must not exceed 10% of their respective base remuneration. Where an insurance company has inadequate solvency, the CIRC will place restrictions on the remuneration of its directors, supervisors and senior management in accordance with relevant regulatory rules on solvency. The senior management of an insurance company receive in-office audits once every three years. If any member of the senior management leaves due to a job change, promotion or any other reasons, a departure audit must be conducted.

Risk management.Insurance companies must establish and adopt procedures, organizational structures, systems and measures to identify, evaluate and control the risks involved in its insurance operation. Insurance companies must report to the CIRC in a timely manner any major risks, and include in its annual report an annual risk evaluation report reviewed by the board of directors.

Compliance management.Insurance companies must prevent, identify, evaluate, report and manage compliance risks by taking measures such as setting up a compliance department, formulating and implementing compliance policies (which are required to be filed with the CIRC), exercising compliance monitoring and providing compliance trainings, so as to ensure compliance by the company, its staff and sales agents with the relevant laws and regulations, rules of regulatory authorities, industrial self-regulatory rules, internal management systems and codes of ethics. An annual compliance report must be submitted to the CIRC by April 30 each year. Each insurance company is required by the CIRC to appoint a compliance officer and establish a compliance management department in its head office. As of the date of this annual report, we have set up a compliance management department, established compliance standards and appointed a compliance officer whose qualification has been approved by the CIRC.

Related party ~~transactions management.~~transactions.~~Related~~ According to applicable CIRC regulations, related party transactions between an insurance company and any of its related parties are classified as either “material related party transactions” or “ordinary related party transactions”. The term “material related party transactions” refers to any single transaction between an insurance company and a related party in which the trading volume accounts for 1% or more of the insurance company’s net assets as of the end of the previous year and has a value of more than RMB 5 million, or transactions between an insurance company and a related party in which the accumulative trading volume within one fiscal year accounts for 10% or more of the insurance company’s net assets as of the end of the previous year and has a value of more than RMB 50 million. The term “ordinary related party transactions” refers to all related party transactions other than “material related party transactions”. A material related party transaction is subject to approval by the insurer’s board of directors or shareholders, while an ordinary related party transaction must be reviewed in accordance with the internal authorization process of the insurance company. An insurance company is required to maintain a system to manage related party transactions and file them with the CIRC. Companies must take effective measures to prevent their shareholders, directors, supervisors, senior management and other related parties from taking advantage of their positions and acting against the interests of the company or the insured through related party transactions.

Internal audit.Insurance companies are required to establish an independent department for internal audit purposes, staffed with sufficient internal audit personnel (the number of full-time internal audit personnel generally must not be less than 5‰ of the total number of the company’s employees), establish an audit committee, and designate an audit controller whose appointment and replacement must be filed with the CIRC. An internal audit report must be submitted to the CIRC by April 30 of each year and any major risk identified during the internal audit process must be reported to the CIRC in a timely manner.

Reporting and disclosure requirements.An insurance company must submit to the CIRC an operating report, an actuarial report, its financial statements, a solvency report and a compliance report, each prepared in accordance with applicable rules. By April 30 of each year, an insurance company must disclose on its website and a newspaper designated by the CIRC an annual report including, among other things, financial statements and solvency data for the previous year. In addition, within 10 business days after the occurrence of a material related party transaction or other material events, an insurance company must disclose information about such transactions and events on its website.

Internal control assessment.In January 2006, the CIRC issued tentative rules on internal control assessment of life insurance companies to facilitate and supervise the companies and improve their awareness of, and strengthen their controls over, matters such as corporate governance in management, internal controls and regulatory compliance in operations and risk management. Life insurance companies are required submit to the CIRC an internal control assessment form and an annual internal control assessment report each year. The CIRC assesses the internal control of life insurance companies at least every three years, covering at least one third of all life insurance companies each year. In August 2010, the CIRC issued new rules governing internal control of insurance companies. Under the new rules, an insurance company must establish an internal control evaluation system, and by April 30 of each year, ~~an insurance company must~~ submit to the CIRC an evaluation report on its internal control.

Market conduct

Insurance companies are required to take steps to ensure that sales promotional materials used by their sales representatives and agents are objective, true and correct, with no material omissions or misleading information, contain no forecasts of benefits that are not guaranteed under the insurance or annuity product and do not exaggerate the benefits provided under the insurance or annuity product. The sales promotional materials must also highlight in an appropriate fashion any exclusions of coverage or liability in their products, as well as terms providing for policy or annuity surrenders and return of premiums. If any insurance policy or consulting service is provided through telephone sales, requisite office space, staff, facilities and adequate supervising must be furnished. In addition, the telephone sale must be conducted directly by the insurance company, and the terms and rates of the premiums of the insurance policy and geographic business area must be submitted to the CIRC for approval.

Insurance companies are subject to extensive regulation against any anti-competitive behavior or unfair dealing conduct. They may not pay insurance agents, the insured or the beneficiary any rebates or other illegal payments, nor may they pay their agents commissions over and above the industry norm.

Insurance companies are required to establish internal rules and procedures to protect the personal data of policyholders and insureds. Insurance companies are prohibited from illegal obtaining, using or selling of the personal data of policyholders and insureds.

Insurance companies are also required to comply with anti-money laundering regulations and establish internal operational procedures and anti-money laundering control systems. No insurance activity can be conducted for the purpose of illegal fundraising.

Regulation of issuance of subordinated debt

Beginning in September 2004, insurance companies that meet a series of qualification tests and are approved by the CIRC may issue subordinated debt with a fixed term of at least five years to certain qualified Chinese legal persons and foreign investors. The audited net asset value of the issuer must be at least RMB 500 million as of the end of the prior year and the total amount of unpaid ~~debts~~debt at any given point after the issuance, including both principal and interest, must not exceed the issuer’s net asset value as of the end of the prior year. Proceeds from the issuance of subordinated debt may be recorded as supplementary capital of an issuance company, provided that the total amount that has been recorded as supplementary capital may not exceed 50% of the net assets of an insurance company. Proceeds from the issuance of subordinated debt may not be used to offset daily operating losses of an insurance company. The issuer must comply with certain disclosure obligations both at the time of the issuance and during the term of the ~~debts.~~debt. The issuer may repay the ~~debts~~debt only if its solvency ratio would remain at least 100% after the repayment of both principal and the interest.

Beginning in May 2012, publicly listed insurance companies that meet a series of qualification tests and are approved by the CIRC may issue subordinated convertible bonds. Subordinated convertible bonds refer to bonds issued by an insurance company in accordance with statutory procedures that satisfy the following conditions: the bonds have a maturity of five years or longer; the principal and interest of the bonds shall be repaid and paid after insurance policy liabilities and other general liabilities in the event of bankruptcy liquidation; and the bonds can be converted into shares of the insurance company in accordance with the agreed conditions within a certain period of time. An insurance company must submit an issuance application to the relevant securities regulatory authority within six months after the CIRC has approved the issuance of subordinated convertible bonds. An issuer must report the issuance information to the CIRC within ten working days after completion of the issuance of subordinated convertible bonds.

Regulation of establishment of overseas insurance institutions

An insurance company may apply to the CIRC for approval for the establishment of overseas branches, overseas insurance companies and overseas insurance intermediaries, or the acquisition of overseas insurance companies or intermediaries. In order to submit such an application, an insurance company must have an operating history of no less than two years, total assets of no less than RMB 5 billion as at the end of the prior year and foreign exchange funds of no less than US$ 15 million or its equivalent in other freely convertible currencies as at the end of the preceding year. The applicant insurance company must also comply with applicable solvency, risk management and other requirements as stipulated by the CIRC.

Compliance with regulatory requirements

Our management confirms that we have complied in all material respects with all applicable regulatory requirements set out above.

Regulation of Foreign-Invested Insurance Companies

China acceded to the WTO on December 11, 2001. As a result of China’s commitments in connection with the accession, the Chinese insurance market is gradually opening up to foreign insurers and insurance-related service providers. A foreign life insurer with total assets of no less than US$5,000 million and 30 years of industry experience in any WTO member country, and which has had a representative office for two years in China, is permitted to form a life insurance joint venture with a domestic partner of its choice. Foreign life insurers may own up to one-half of the joint venture. In addition, the geographic limitation on foreign life insurers, which were permitted to operate only in specified cities, has been lifted since December 11, 2004. Accordingly, foreign life insurers have been permitted to provide group life insurance, health insurance and annuity and other pension-like products since December 11, 2004. In addition, since December 11, 2006, foreign insurance brokers have been permitted to set up wholly owned subsidiaries in China.

Foreign-invested insurance companies, including Sino-foreign equity joint ventures, wholly foreign-owned insurance companies and branches of foreign insurance companies, are generally regulated in the same manner as domestic insurance companies. Foreign-invested insurance companies may not, without the approval of the CIRC, engage in transactions with their affiliates, including reinsurance transactions and purchases and sales of assets. In addition, where the foreign-invested insurance company is a branch of a foreign insurance company, it is required to notify the CIRC of fundamental events relating to the foreign insurance company within ten days following the occurrence of the event. Reportable events include: (1) a change of name, senior management or jurisdiction of incorporation of the foreign insurance company, (2) a change in the foreign insurance company’s share capital, (3) a change in any person beneficially owning 10% or more of the foreign insurance company’s shares, (4) a change in business scope, (5) the imposition of administrative sanctions by any applicable regulatory authority, (6) a material loss incurred by the foreign insurance company, (7) a spin-off, merger, dissolution, revocation of corporate franchise or bankruptcy involving the foreign insurance company and (8) other events specified by the CIRC. If the foreign insurance company is dissolved, or its corporate franchise is revoked or it is declared bankrupt, the Chinese branch of the foreign insurance company will be prohibited from conducting any new business.

Beginning in June 2012, the CIRC has delegated certain authorities with respect to foreign-invested insurance companies to its provincial and local branch offices: approving the change of place of business of branches and subsidiaries of foreign-invested insurance companies; approving the establishment of subsidiary agencies of foreign-invested insurance companies below the branch-office level; approving the opening of subsidiary agencies of foreign-invested insurance companies below the branch-office level; and approving the qualification of senior management personnel of subsidiary agencies of foreign-invested insurance companies below the branch-office level.

Regulation of Insurance Asset Management Companies

An insurance asset management company is a limited liability company or joint stock company that manages insurance funds on behalf of others. Insurance asset management companies are regulated by the CIRC.

Minimum capital requirements

The registered capital of an insurance asset management company may not be lower than RMB 100 million or the ~~greater~~equivalent amount of ~~(1) RMB 30 million; and (2) 0.1% of the insurance funds it manages, provided that the minimum capital is not required to exceed RMB 500 million.~~

other freely convertible currencies.

Business operations

An insurance asset management company may conduct the following businesses: (1) managing ~~and operating~~funds in Renminbi or other foreign currencies entrusted to it, including insurance funds, ~~entrusted by its shareholders;~~funds of pension, annuity and housing provident institutions, as well as funds of other qualified investors that are capable of identifying and undertaking corresponding risks; (2) ~~managing and operating insurance funds entrusted by another insurance company controlled by its shareholders; (3)~~ managing and operating its own insurance ~~funds;~~funds in Renminbi or foreign currencies; (3) as trustee, carrying out asset management business appointed by and on behalf of the trustor, or developing asset management products for the interest of the beneficiary or for specific purposes and carrying out asset management business; (4) applying to relevant financial regulatory authorities to carry out publicly-raised asset management business in accordance with the law, provided that relevant conditions are met; and (5) other businesses ~~otherwise~~ approved by the CIRC or other departments of the State Council.

The investments of the insurance funds by insurance asset management companies are subject to the same requirements and limitations applicable to the investments by the insurance companies themselves. With the regulatory expansion of insurance company investment powers, the investment powers of insurance asset management companies over their own funds have been expanded as well to cover subordinated bonds issued by banks and insurance companies and bank subordinated bonds.

In connection with the funds being managed by an insurance asset management company, a custodian is required to be appointed. The custodian must be an independent commercial bank or financial institution satisfying applicable CIRC requirements.

Shareholding restrictions

At least 75% of the shares of an insurance asset management company must be owned by domestic insurance companies, and at least one of the shareholders of an insurance asset management company must be an insurance company or insurance holding company satisfying specified requirements.

Investment risk control

Both insurance companies and asset management companies must establish structures, arrangements and measures to recognize, assess, manage and control investment risks. Members of senior management may not be responsible for the management of departments in charge of investment decisions, investment transactions and risk controls at the same time. Branches of insurance companies may not manage insurance funds. Insurance asset management companies must arrange for separate investment managers to manage their own funds and the insurance funds from other insurance companies, as well as insurance funds from an insurance company that are of a different nature.

Major emergency response management

An insurance asset management company is required to establish a monitoring and precaution mechanism for major emergencies.

Regulation of Insurance Agencies, Insurance Brokers and Other Intermediaries

Insurance agents are business entities or individuals which or who act on behalf of an insurance company in respect of insurance matters. An insurance company is prohibited from using any agent not licensed by the CIRC to market its insurance products, and is responsible for the acts of its agents when the acts are within the scope of their agency. Licensed insurance agencies fall into three groups: dedicated agencies, non-dedicated agencies and individual agents.

A dedicated agency is a company organized under the PRC company law whose principal business is to act as an agent of insurance companies. Dedicated agencies are subject to minimum capital and other requirements, and their business is generally limited to insurance-related activities.

A non-dedicated agency is a business entity whose principal business is other than as an insurance agency. To receive a license, the agency business must have a direct relationship with its principal business, which the CIRC has interpreted as permitting commercial banks and banking operations of post offices to act as non-dedicated insurance agencies.

Only employees of commercial banks who hold CIRC qualification certificates are permitted to sell insurance products at the outlets of commercial banks or banking operations of post offices. Sales representatives of insurance companies are prohibited from selling insurance products at the outlets of commercial banks or banking operations of post offices.

An individual agent is an individual acting as agent for an insurer. To receive a license from the CIRC, the individual is required to hold a CIRC qualification certificate issued by the CIRC. In addition, the individual must not have committed any criminal offense or violation of any financial or insurance law or ~~regulation and must be engaged in the insurance agency business full time.~~regulation. An individual insurance agent is permitted to act on behalf of only one ~~life~~ insurance company.

Approximately 99.8% of our individual agents hold a CIRC qualification certificate. In May 2004, the CIRC issued a circular requiring insurance companies to take effective measures in carrying out the qualification certification requirement. Furthermore, no insurance company may issue a company certificate to any person, identifying that person as its sales representative, if the person does not have a CIRC qualification certificate. Under the circular, we are also required to take appropriate measures to improve both the participation of our agents taking the qualification examination and their success rate, and to report to the CIRC on a quarterly basis the percentage of our agents holding a CIRC qualification certificate. In April 2006, the CIRC issued regulations on the administration of individual agents, effective from July 1, 2006, in order to further strengthen the administration of individual agents. Under these regulations, insurance companies that retain individual agents without CIRC qualification certificates to engage in insurance sales activities will be warned and fined up to RMB 30,000, and the responsible members of senior management and other responsible personnel of such insurance companies will also be warned and fined up to RMB 10,000. In serious circumstances, the CIRC may order the insurance companies to remove the responsible members of senior management and other responsible personnel from office and reject any application for establishing branch offices by such insurance companies. At the end of 2007, the CIRC further required that no insurance company can enter into any agency agreement with an individual agent who is not holding a qualification certificate or engage the agent in any insurance sale activities. We are working with our agents who are not yet CIRC-qualified to obtain the CIRC qualification certificate.

Pursuant to the regulatory rules on insurance sales personnel issued by the CIRC on January 6, 2012 and effective from July 1, 2013, insurance sales personnel who sell insurance products for insurance companies are defined as insurance sale personnel employed by insurance companies and those employed by insurance agencies. Insurance sales personnel are required to pass a qualification examination organized by the CIRC and obtain a qualification certificate, and to obtain a practicing license from the employing insurance company or agency before practicing. Qualification requirements for insurance sales personnel will be further enhanced, including raising the minimum degree requirement from junior high school to college. The above CIRC regulations on the administration of insurance agents issued in April 2006 will be superseded when these new rules enter into force on July 1, 2013.

All insurance agencies and agents are required to enter into agency agreements that specify the duration of the agency; the amount of the agency fee and the method of payment; the scope of the agency, including the insurance products to be marketed; and other relevant matters. Absent specific CIRC approval, insurance agents are prohibited from signing insurance and annuity products on behalf of the insurance companies they represent. None of our agents is authorized to sign insurance policies or annuity contracts for us.

Insurance agencies are required to open special accounts for the handling of funds that they hold or collect for the insurance companies they represent. They may not engage in the following activities: dealing with unauthorized insurers or insurance intermediaries, engaging in activities beyond their authorized business scope or geographical area, causing injury to the rights of the insurance companies they represent, spreading rumors or otherwise injuring the reputation of others in the insurance industry, misappropriating the funds of the insurance companies they represent, defrauding insurance customers through false or misleading representations or material omissions, using undue influence to induce insurance customers to purchase insurance, or defrauding the insurance companies they represent through collusion with the insured or the insurance beneficiary. In addition, dedicated insurance agencies are subject to various reporting requirements, including submission of annual financial reports, and are subject to supervision and examination by the CIRC.

Insurance brokers ~~which~~who represent individuals and companies purchasing insurance and other intermediaries are subject to similar regulatory requirements regarding their activities. Among other things, they are subject to supervision and examination by the CIRC, and fundamental corporate changes must be approved by the CIRC. Only companies organized under the PRC company law and meeting ~~the~~ requirements set by the CIRC are authorized to act as insurance brokers.

Insurance brokers are required to comply with qualification standards prescribed by the CIRC, and must have obtained a qualification certificate issued by the CIRC and a practicing license from the employing insurance brokerage before practicing.

No.2 Interpretation of Accounting Standard for Business Enterprises

On August 7, 2008, the MOF issued the ~~No.2~~No. 2 Interpretation of Accounting Standard for Business Enterprises, requiring listed companies which issue both H shares and A shares to adopt consistent accounting policies to recognize, calculate and report a particular transaction in their H share financial statements and A share financial statements, except for certain differences in relation to the reversal of impairment losses of long-term assets and disclosures in relation to related party transactions.

On January 5, 2009, the CIRC issued the Notification on the Implementation of the ~~No.2~~No. 2 Interpretation of Accounting Standards for Business Enterprises in the Insurance Sector ~~(No.1~~(No. 1 [2009] of CIRC), which requires insurance companies to make appropriate changes to their accounting policies that cause differences between onshore and offshore financial statements when preparing their 2009 annual financial statements, such that the same accounting policies and estimates will apply to a particular transaction.

On December 22, 2009, the MOF issued the Notification on the Promulgation of the Regulations regarding the Accounting Treatment of Insurance Contracts, which regulates issues relating to, among other things, the unbundling of mixed insurance contracts, tests for significant insurance risks and the calculation of reserves for insurance contracts, and requires insurance companies to comply with these requirements beginning with the preparation of their financial statements for the year ended December 31, 2009. ~~For~~The accounting ~~treatments~~treatment of any ~~transactions and items~~transaction item adopted in previous ~~years~~year which ~~differ~~differs from those set out in the MOF’s regulations ~~they should~~must be retrospectively adjusted, unless any such adjustment is not practicable under the circumstances.

~~Audit by the PRC National Audit Office~~

In 2010, the National Audit Office of the People’s Republic of China, or the NAO, conducted a routine audit on the assets, liabilities and profits and losses of CLIC and its subsidiaries (including China Life) and certain of its branch offices for the year of 2009. On January 31, 2011, the NAO released on its website the audit results. We believe that the issues identified in the audit have no material impact on our overall operating results, financial statements and internal control over financial reporting.

C. ORGANIZATIONAL STRUCTURE

List of Significant Subsidiaries


Name of Subsidiary
~~(1)~~ Jurisdiction of Incorporation	~~Wholly owned~~ Proportion of Ownership Interest Owned by ~~CLIC~~ChinaLife

~~(2)~~ China Life Asset Management Company Limited	The People’s Republic of China	60% (directly)

China Life Franklin Asset Management Company Limited⁽¹⁾	Hong Kong	50%⁽²⁾ (indirectly through affiliate)

China Life Pension Company Limited⁽²⁾	The People’s Republic of China	92.2%⁽³⁾ (directly and indirectly through affiliate)

(1)	Formerly known as China Life Asset Management (Hong Kong) Company Limited

~~List of Significant Subsidiaries~~


		~~Proportion of Ownership Interest~~
~~Name of Subsidiary~~	~~Jurisdiction of Incorporation~~	~~Owned by China Life~~

~~China Life Asset Management~~ ~~Company Limited~~	~~The People’s Republic of China~~	~~60%~~ ~~(directly)~~

~~China Life Franklin Asset~~ ~~Management Company Limited~~⁽¹⁾	~~Hong Kong~~	~~50%~~⁽²⁾ ~~(indirectly through affiliate)~~

~~China Life Pension Company~~ ~~Limited~~⁽²⁾	~~The People’s Republic of China~~	~~92.2%~~⁽³⁾ ~~(directly and indirectly through~~ ~~affiliate)~~


~~(1)~~		~~Formerly known as China Life Asset Management (Hong Kong) Company Limited~~

~~(2)~~		AMC, which is 60% owned by us, owns 50%

(3)

We own 87.4% and AMC, which is 60% owned by us, owns 4.8%

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D. PROPERTY, PLANTS AND EQUIPMENT
As of December 31, ~~2010,~~2012, we owned and leased ~~3,549~~5,964 and ~~13,967~~13,914 properties, respectively, and had ~~121~~230 properties under construction. Among the ~~3,549~~5,964 properties owned by us, ~~1,175~~2,117 properties are leased to ~~independent~~ third parties (including partial leasing) while the remaining properties are mainly occupied by us as office premises.
On ~~February 22, 2010,~~December 31, 2012, we entered into a new property leasing agreement with China Life Investment Holding Company ~~Limited under substantially the same terms as the previous property leasing agreement which expired on December 31, 2009.~~Limited. Under ~~the new~~this property leasing agreement, which will expire on December 31, ~~2012,~~2014, China Life Investment Holding Company Limited agreed to lease to us ~~2,182~~2,126 properties owned by it. The annual rent is determined by reference to market rent or, where there is no available comparison, by reference to the costs incurred by China Life Investment Holding Company Limited in holding and maintaining the properties, plus a margin of approximately 5%.
ITEM 4A. UNRESOLVED STAFF COMMENTS.
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.
You should read the following discussion and analysis in conjunction with the audited consolidated financial statements and accompanying notes included elsewhere in this annual report.

Overview of Our Business
We are the leading life insurance company in China. We provide a broad range of insurance products, including individual life insurance, group life insurance, accident insurance and health insurance products. We had nearly ~~129~~149 million individual and group life insurance policies, annuity contracts and long-term health insurance policies in force as of December 31, ~~2010.~~2012. We also offer accident and short-term health insurance policies to individuals and groups.
We report our financial results according to the following three principal business segments:
• Individual life insurance, which offers participating and non-participating life insurance and annuities to individuals. The financial results of our individual long-term health and long-term accident insurance business are also reflected in our individual life insurance business segment. Our individual life insurance business comprises long-term products, including long-term health and long-term accident insurance products, meaning products having a term of more than one year at the date of their issuance.
• Group life insurance, which offers participating and non-participating life insurance and annuities products to companies and institutions. The financial results of our group long-term health and long-term accident insurance business are also reflected in our group life insurance business segment. Our group life insurance business comprises long-term products.
• Short-term insurance, which offers short-term accident insurance and health insurance to individuals and groups. Our short-term insurance businesses comprise short-term products, meaning products having a term of one year or less at the date of their execution.

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In addition, AMC manages our investment assets and, separately, substantially all of those of CLIC, pursuant to two asset management agreements, one with us and one with CLIC. See “Item 4. Information on the Company—Business Overview—Asset Management Business”. CLPCIC engages in property and casualty insurance business. See “Item 4. Information on the Company—Business Overview—Property and Casualty Business”. China Life Pension engages in pension insurance business. See “Item 4. Information on the Company—Business Overview—Pension Insurance Business”.

Financial Overview of Our Business
We had total gross written premiums of RMB ~~318,229~~322,742 million (US$~~48,217~~51,804 million) and net profit attributed to our equity holders of RMB ~~33,811~~11,272 million (US$~~5,123~~1,809 million) for the year ended December 31, ~~2010.~~2012. Our principal business segments had the following results:
• Individual life insurancehad total gross written premiums of RMB ~~302,781~~305,841 million (US$~~45,876~~49,091 million) in ~~2010.~~2012.
• Group life insurancehad total gross written premiums of RMB ~~473~~469 million (US$7275 million) in ~~2010.~~2012.
• Short-term insurancehad total gross written premiums of RMB ~~14,975~~16,432 million (US$~~2,269~~2,638 million) in ~~2010.~~2012.
Our business ~~and the business of CLIC~~ has been characterized by ~~rapid~~ growth of premium income over the past several years, ~~particularly due to increased sales~~together with a move towards an improved business structure which has been evidenced by an increase in renewal premiums and an increase in the percentage of ~~participating products.~~
first-year regular premiums for products with regular premiums of ten years or more in first-year regular premiums. At the same time, our business was also affected by certain unfavorable factors, including the continued weakness of the Chinese capital markets and the effect of changes in bancassurance regulations, which impacted our individual premiums.
Factors Affecting Our Results of Operations
Revenues, Expenses and Profitability
We earn our revenues primarily from:
insurance premiums from the sale of life insurance policies and annuity contracts, including participating and non-participating policies and annuity contracts with life contingencies, as well as accident and health insurance products. Net premiums earned accounted for 86.7% of total revenues in 2012.
• insurance premiums from the sale of life insurance policies and annuity contracts, including participating and non-participating policies and annuity contracts with life contingencies, as well as accident and health insurance products. Net premiums earned accounted for 82.4% of total revenues in 2010.
• investment income and realized and, in some cases, unrealized gains and losses from our investment assets. Investment income and net realized and unrealized gains and losses accounted for 16.8% of total revenues in 2010.
investment income and realized and, in some cases, unrealized gains and losses from our investment assets. Investment income and net realized and unrealized gains and losses accounted for 12.4% of total revenues in 2012.
In addition, following the restructuring, we receive service fees for policy management services we provide to CLIC. AMC also receives asset management fees for asset management services provided to CLIC. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions”.
79
Our operating expenses primarily include:
insurance benefits provided to our policyholders, accident and health claims and claim adjustment expenses;
increase in insurance contracts liabilities;

investment contract benefits;
72
policyholder dividends resulting from participation in profits;
underwriting and policy acquisition costs; and
administrative and other expenses.
• ~~increase in insurance contracts liabilities;~~
• ~~investment contract benefits;~~
• ~~policyholder dividends resulting from participation in profits;~~
• ~~underwriting and policy acquisition costs; and~~
• ~~administrative and other expenses.~~
In addition, we pay rent to China Life Investment Holding Company Limited on the properties we lease from it.
Our profitability depends principally on our ability to price and manage risk on insurance and annuity products, our ability to maximize the return on investment assets, our ability to attract and retain customers, and our ability to manage expenses. In particular, factors affecting our profitability include:
our ability to design and distribute products and services and to introduce new products which gain market acceptance on a timely basis;
• ~~our ability to design and distribute products and services and to introduce new products which gain market acceptance on a timely basis;~~
• our ability to price our insurance and investment products at levels that enable us to earn a margin over the costs of providing benefits and the expense of acquiring customers and administering those products;
• ~~our returns on investment assets;~~
• ~~our mortality and morbidity experience;~~
• ~~our lapse experience, which affects our ability to recover the cost of acquiring new business over the lives of the contracts;~~
• ~~our cost of administering insurance contracts and providing customer services;~~
• ~~our ability to manage liquidity and credit risk in our investment portfolio and to manage duration risk in our asset and policy portfolios through asset-liability management; and~~
• ~~changes in regulations.~~
our returns on investment assets;
our mortality and morbidity experience;
our lapse experience, which affects our ability to recover the cost of acquiring new business over the lives of the contracts;
our cost of administering insurance contracts and providing customer services;
our ability to manage liquidity, price and credit risk in our investment portfolio and to manage duration risk in our asset and policy portfolios through asset-liability management; and
changes in regulations.
In addition, other factors, such as competition, ~~taxes,~~ securities market conditions, taxes and general economic conditions, affect our profitability.
80
Interest Rates
For many of our long-term life insurance and annuity products, we are obligated to pay a minimum interest or crediting rate to our policyholders or annuitants. These products expose us to the risk that changes in interest rates may reduce our “spread”, or the difference between the rate of return we are able to earn on our investments intended to support our insurance obligations and the amounts that we are required to pay under the policies. The minimum rate we pay is established when the product is priced, subject to a cap set by the CIRC and which may be adjusted from time to time. Currently, the CIRC cap is 2.50%. If the rates of return on our investments fall below the minimum rates we guarantee, our profitability would be adversely affected. From the beginning of the year
73
~~2010~~ 2012 to the date of this annual report, the PBOC ~~increased~~reduced the interest rates ~~four times. The~~two times in an effort to bolster the Chinese economy, reducing interest rate on one-year term deposits ~~was raised~~ from ~~2.25%~~3.50% to ~~3.25%~~3.00%. If economic conditions improve in the future, the Chinese government may adjust the interest rates accordingly. If the interest rates were to be increased, ~~further,~~ but the CIRC did not raise the cap on the rate we may pay on our products, sales of some of our products, including our non-participating products, could be adversely impacted. An increase in guaranteed rates caused by a rise in the CIRC cap may lead to an increase in surrenders and withdrawals of our existing products which offer rates lower than the new rates.
Interest rates also affect our returns on investment assets, a large proportion of which is held in negotiated bank deposits and debt securities. In a declining interest rate environment, interest rate changes expose us to reinvestment risks. In a rising interest rate environment, higher rates may yield greater interest income but also may generate unrealized capital losses for debt securities designated as trading, causing us to incur realized capital losses for securities we reinvest or requiring us to take an impairment if the market value of debt securities declines for an extended period.
Sustained levels of high or low interest rates also may affect the relative popularity of our various products. For example, the ~~recent~~ popularity of our participating endowment products is partially driven by the protracted comparatively low interest rate environment in China during the past several years and the 2.50% cap set by the CIRC on the guaranteed rates of return we may apply. The investment nature of the product, including the enhanced yield by means of dividends, has proven to be attractive to China’s insurance buyers.
Investments
As an insurance company, we have been permitted to invest in bank deposits, debt securities, stocks, Chinese securities investment funds, real property and related financial products, infrastructure debt investment plans, equity interests of non-listed enterprises and related financial products, financial derivative products, securitized financial products, overseas investments and other investment channels as approved by the State Council, all subject to various limitations. However, we are limited by Chinese law and regulations in the ~~types of assets in which~~maximum amount that we may invest policyholder ~~funds.~~funds in each type of assets. See “Item 4. Information on the Company—Business Overview—Investments” and “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Regulation of investments”. We currently are prohibited from investing in other types of assets without the CIRC’s approval. However, we understand that the CIRC is considering further easing these restrictions in the future. If the CIRC does so, this may permit us to invest in additional asset classes. Our only material concentration risk relates to our investments in Chinese government securities.
The limitations on the ~~types~~maximum amount that we may invest in each type of ~~investments we are permitted to make affect~~asset affects the investment returns we are able to generate and ~~subject~~subjects us to various risks that we would not, or to a lesser extent, be subject to if we were ~~able~~not subject to ~~invest in a wider array of investments.~~those limitations. In particular, the limited availability of long-duration investment assets in the markets in which we invest has resulted in the duration of our assets being shorter than that of our ~~liabilities. We~~liabilities.We believe that with the gradual easing of the investment restrictions imposed on insurance companies in China, such as the permission to invest in real property and equity interests of non-listed enterprises, our ability to match the duration of our assets to that of our liabilities will improve. We also seek to reduce the risk of duration mismatch by focusing on product offerings whose maturity profiles are in line with the duration of investments available to us in the prevailing investment environment.
81
Our results can be materially affected by investment impairments. The following table sets forth impairment charges, which are included in net realized ~~gains~~gains/(losses) and ~~losses,~~impairment on financial assets, for the years ended December 31, ~~2008, 2009~~2012, 2011 and 2010.

For the year ended
December 31,
2008 2009 2010
(RMB in millions)
Debt securities 2,023 200 76
Equity securities (15,744 ) (2,350 ) (1,771 )

Total
(13,721 ) (2,150 ) (1,695 )

   For the year ended
December 31,
   2010 2011 2012
   (RMB in millions)
Debt securities
   76    11    51
Equity securities
   (1,771 ) (12,924 ) (31,094 )


Total
   (1,695 ) (12,913 ) (31,043 )


74
During the year ended December 31, ~~2008,~~2012, we recognized impairment expense of RMB ~~15,744~~31,094 million of ~~available for sale~~available-for-sale equity securities for which we determined that objective evidence of impairment existed. ~~The value of certain debt securities increased in 2008.~~ During the year ended December 31, 2008, RMB 2,023 million of previously recognized impairment losses relating to certain available for sale debt securities decreased. This decrease related objectively to certain events occurring after the impairment was recognized and as such the previously recognized impairment loss was reversed.
~~During the year ended December 31, 2009,~~2011, we recognized impairment expense of RMB ~~2,350~~12,924 million of ~~available for sale~~available-for-sale equity securities for which we determined that objective evidence of impairment existed. Given the current market conditions, we believe that these securities may not recover in value in the near term and thus recorded the other-than-temporary impairment. These securities were not impaired due to company-specific events such as bankruptcies. During the year ended December 31, 2009, RMB 200 million of previously recognized impairment losses relating to certain available for sale debt securities entrusted to Min Fa Securities Co., Ltd., or Min Fa, decreased. As of December 31, 2008, we held RMB 400 million available for sale debt securities entrusted to Min Fa, which had been impaired entirely due to Min Fa’s bankruptcy. During Min Fa’s bankruptcy proceedings, we were granted certain shares listed on PRC stock changes with total fair value of RMB 200 million as of 31 December 2009 as a first distribution and accordingly RMB 200 million of the previously recognized impairment losses was reversed.
During the year ended December 31, 2010, we recognized impairment expense of RMB 1,771 million of ~~available for sale~~available-for-sale equity securities for which we determined that objective evidence of impairment existed. ~~Given the current market conditions, we believe that these securities may not recover~~Our rationale for an other-than-temporary impairment is based on a severe or prolonged decline in ~~value in the near term and thus recorded the other-than-temporary impairment.~~value. These securities were not impaired due to company-specific events such as bankruptcies.
During the year ended December 31, 2012, RMB 51 million of previously recognized impairment losses in debt securities was reversed. During the year ended December 31, 2011, RMB 11 million of previously recognized impairment losses in debt securities was reversed. During the year ended December 31, 2010, RMB 76 million of previously recognized impairment losses in debt securities was reversed.
Available-for-sale securities comprised of the following asset classes as of December 31, ~~2008, 2009~~2012, 2011 and 2010.

As of December 31,
2008 2009 2010
Cost or Cost or Cost or
amortized Estimated amortized Estimated amortized Estimated
cost fair value cost fair value cost fair value
(RMB in millions)

Debt securities

Government bonds 73,130 80,006 50,623 51,996 57,727 57,871
Government agency bonds 180,135 191,121 167,312 165,231 145,522 145,538
Corporate bonds 64,388 67,505 103,603 102,553 127,225 125,423
Subordinated bonds/debt 17,265 17,588 21,198 21,045 26,541 25,620

Subtotal
334,918 356,220 342,736 340,825 357,015 354,452

Equity securities

Funds 32,313 29,890 62,818 75,798 89,835 95,754
Common stocks 38,132 38,829 72,740 100,876 92,695 97,915

Subtotal
70,445 68,719 135,558 176,674 182,530 193,669

Total
405,363 424,939 478,294 517,499 539,545 548,121

   As of December 31,
   2010    2011    2012
      Cost or
amortized
cost    Estimated
fair value    Cost or
amortized
cost    Estimated
fair value    Cost or
amortized
cost    Estimated
fair value
   (RMB in millions)
Debt securities

Government bonds
   57,727       57,871       57,969       60,325       42,004       42,946
Government agency bonds
   145,522       145,538       146,810       148,539       139,861       135,870
Corporate bonds
   127,225       125,423       128,467       125,407       142,401       139,286
Subordinated bonds/debt
   26,541       25,620       51,042       49,256       30,821       31,488












Subtotal
   357,015       354,452       384,287       383,527       355,087       349,590












Equity securities

Funds
   89,461       95,380       108,159       84,767       65,864       57,019
Common stocks
   92,695       97,915       110,719       93,384       95,429       96,361
Other
   374       374       1,312       1,270       3,614       3,446
Subtotal
   182,530       193,669       220,190       179,421       164,907       156,826












Total
   539,545       548,121       604,477       562,948       519,994       506,416












75
82
We had gross unrealized gains of RMB 21,859 million and gross unrealized losses of RMB 12,061 million as of December 31, 2012. We had gross unrealized gains of RMB 15,314 million and gross unrealized losses of RMB 41,256 million as of December 31, 2011. We had gross unrealized gains of RMB 24,692 million and gross unrealized losses of RMB 16,115 million as of December 31, 2010. We had gross unrealized gains of RMB 47,179 million and gross unrealized losses of RMB 9,157 million as of December 31, 2009. We had gross unrealized gains of RMB 31,854 million and gross unrealized losses of RMB 12,278 million as of December 31, 2008. The ~~total~~ unrealized losses as of December 31, ~~2010, 2009 and 2008 were 3.0%, 1.8% and 2.9%~~2012 related primarily to the continued weakness of ~~total available-for-sale securities.~~the Chinese capital market. The SSE Index, a major stock exchange index in China, was at 2,269 points on December 31, 2012, which represented only a 3% increase from December 30, 2011. The decrease of unrealized losses from 2011 related primarily to a significant increase in impairment losses, resulting from the continued weakness of the Chinese capital market. The unrealized losses as of December 31, 2011 related primarily to the continued weakness of the Chinese capital markets in 2011. The SSE Index was at 2,199 points on December 30, 2011, which represented a 22% decrease from December 31, 2010. The unrealized losses of December 31, 2010 related primarily to unfavorable market conditions and the decrease of the market value of debt securities resulting from the increase of interest rates. The SSE Index ~~a major stock exchange index in China,~~ was at 2,808 points on December 31, 2010, which ~~was~~represented a 14% decrease from ~~2009. The unrealized losses as of~~ December 31, 2009 related primarily to the decrease of the market value of debt securities resulting from unfavorable market conditions. The SSE Index was at 3,277 points on December 31, 2009, which was a 80% increase from 2008. This resulted in a significant decrease in total unrealized losses of investment in equity securities. The unrealized losses as of December 31, 2008 related primarily to the sharp fall of the capital markets that year. We made substantially all of the revaluation adjustments on the basis of quoted market prices as of the relevant balance sheet dates.
2009.
The following tables set forth the length of time that each class of available-for-sale securities has continuously been in an unrealized loss position as of December 31, ~~2010, 2009~~2012, 2011 and ~~2008.~~

0-6 7-12 More than 12
As of December 31, 2010 months months months Total
(RMB in millions)

Debt securities

Unrealized losses 4,818 310 3,337 8,465
Carrying amounts 151,936 3,857 36,120 191,913
Unrealized losses as a percentage of carrying amounts 3.17 % 8.03 % 9.24 % 4.41 %

Equity securities

Unrealized losses 3,643 4,003 — 7,646
Carrying amounts 52,058 14,632 — 66,690
Unrealized losses as a percentage of carrying amounts 7.00 % 27.36 % — 11.47 %

Total

Total unrealized losses 8,461 4,313 3,337 16,111
Total carrying amounts 203,994 18,489 36,120 258,604
Unrealized losses as a percentage of carrying amounts 4.15 % 23.33 % 9.24 % 6.23 %

0-6 7-12 More than 12
As of December 31, 2009 months months months Total
(RMB in millions)

Debt securities

Unrealized losses (1,649 ) (5,106 ) (1,634 ) (8,389 )
Carrying amounts 84,785 79,207 16,397 180,389
Unrealized losses as a percentage of carrying amounts 1.95 % 6.45 % 9.96 % 4.65 %

Equity securities

Unrealized losses (776 ) (4 ) — (780 )
Carrying amounts 13,350 104 — 13,454
Unrealized losses as a percentage of carrying amounts 5.81 % 3.63 % — 5.80 %

Total

Total unrealized losses (2,425 ) (5,110 ) (1,634 ) (9,169 )
Total carrying amounts 98,135 79,311 16,397 193,843
Unrealized losses as a percentage of carrying amounts 2.47 % 6.44 % 9.96 % 4.73 %
2010.
As of December 31, 2012
   0-6
months 7-12
months More than 12
months Total
   (RMB in millions)
Debt securities

Unrealized losses
   2,150    644    7,002    9,796
Carrying amounts
   128,425    17,930    83,477    229,832
Unrealized losses as a percentage of carrying amounts
   1.67 % 3.59 % 8.39 % 4.26 %
Equity securities

Unrealized losses
   1,751    514    —      2,265
Carrying amounts
   12,738    9,165    —      21,903
Unrealized losses as a percentage of carrying amounts
   13.74 % 5.61 % —      10.34 %
Total

Total unrealized losses
   3,901    1,158    7,002    12,061
Total carrying amounts
   141,163    27,095    83,477    251,735
Unrealized losses as a percentage of carrying amounts
   2.76 % 4.28 % 8.39 % 4.79 %

76
83
As of December 31, 2011
   0-6
months 7-12
months More than 12
months Total
   (RMB in millions)
Debt securities

Unrealized losses
   947    687    6,973    8,607
Carrying amounts
   19,044    24,114    120,169    163,327
Unrealized losses as a percentage of carrying amounts
   4.97 % 2.85 % 5.80 % 5.27 %
Equity securities

Unrealized losses
   17,891    14,759    —      32,649
Carrying amounts
   78,060    43,158    —      121,218
Unrealized losses as a percentage of carrying amounts
   22.92 % 34.20 % —      26.93 %
Total

Total unrealized losses
   18,837    15,446    6,973    41,256
Total carrying amounts
   97,104    67,273    120,169    284,546
Unrealized losses as a percentage of carrying amounts
   19.40 % 22.96 % 5.80 % 14.50 %
As of December 31, 2010
   0-6
months 7-12
months More than 12
months Total
   (RMB in millions)
Debt securities

Unrealized losses
   4,818    310    3,337    8,465
Carrying amounts
   151,936    3,857    36,120    191,913
Unrealized losses as a percentage of carrying amounts
   3.17 % 8.03 % 9.24 % 4.41 %
Equity securities

Unrealized losses
   3,643    4,003    —      7,646
Carrying amounts
   52,058    14,632    —      66,690
Unrealized losses as a percentage of carrying amounts
   7.00 % 27.36 % —      11.47 %
Total

Total unrealized losses
   8,461    4,313    3,337    16,111
Total carrying amounts
   203,994    18,489    36,120    258,604
Unrealized losses as a percentage of carrying amounts
   4.15 % 23.33 % 9.24 % 6.23 %

0-6 7-12 More than 12
As of December 31, 2008 months months months Total
(RMB in millions)

Debt securities

Unrealized losses (748 ) (33 ) (60 ) (841 )
Carrying amounts 21,627 2,414 3,236 27,277
Unrealized losses as a percentage of carrying amounts 3.46 % 1.37 % 1.85 % 3.08 %

Equity securities

Unrealized losses (5,943 ) (5,205 ) — (11,148 )
Carrying amounts 25,230 10,897 — 36,127
Unrealized losses as a percentage of carrying amounts 23.56 % 47.77 % — 30.86 %

Total

Total unrealized losses (6,691 ) (5,238 ) (60 ) (11,989 )
Total carrying amounts 46,857 13,311 3,236 63,404
Unrealized losses as a percentage of carrying amounts 14.28 % 39.35 % 1.85 % 18.91 %
Financial assets other than those accounted for as at fair value through ~~income~~profit or loss are adjusted for impairments, where these are declines in value that are considered to be other than temporary.
Our rationale for an other-than-temporary impairment is based on a severe or prolonged decline in value. We determine a severe or prolonged decline after considering both quantitative and qualitative factors.
The qualitative factors include specific information on the financial status and performance of the investee, including but not limited to:
loss of major contracts;
• ~~loss of major contracts;~~
• breach of debt covenants; and
• ~~bankruptcy.~~
bankruptcy.
The quantitative factors include the following:
• The market price of the equity securities was more than 50% below its cost at the balance sheet date;
• ~~The market price of the equity securities was more than 20% below its cost for a period of at least six months at the balance sheet date; and~~
• ~~The market price of the equity securities was below its cost for a period of more than one year.~~

The market price of the equity securities was more than 20% below its cost for a period of at least six months at the balance sheet date; and
77
The market price of the equity securities was below its cost for a period of more than one year.
84
Should we conclude that an unrealized loss is other-than-temporary, relevant financial assets are written down to their net realized value and charge is recorded in “Net realized gains/(losses) and impairment on financial assets” in the period the impairment is recognized. The impairment loss is reversed through the net profit if in a subsequent period the fair value of a debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognized through net profit. The impairment losses recognized in net profit on equity investments are not reversed. See “—Critical Accounting Policies”.
As of December 31, 2012, our total investment assets were RMB 1,790,838 million (US$287,449 million) and the investment yield for the year ended December 31, 2012 was 2.79%. The investment yield primarily reflected the increase in impairment losses resulting from the continued weakness of the Chinese capital markets. In response to this market weakness, we made adjustments to the investment portfolio by decreasing the proportion of investments in equity securities and increasing the proportion of fixed-income assets. As of December 31, 2011, our total investment assets were RMB 1,494,969 million and the investment yield for the year ended December 31, 2011 was 3.51%. The investment yield primarily reflected the increase in the interest income and the increase in impairment losses resulting from the continued weakness of the Chinese capital markets. In response to this market weakness, we made adjustments to the investment portfolio by decreasing the proportion of investments in equity securities and increasing the proportion of fixed-income assets. As of December 31, 2010, our total investment assets were RMB 1,336,245 million ~~(US$202,461 million)~~ and the investment yield for the year ended December 31, 2010 was 5.11%. The investment yield primarily reflected the volatility of the stock markets and unfavorable debt securities markets. We ~~have~~ made relevant adjustments to the investment portfolio by increasing the proportion of investments in fixed-income assets, including negotiated deposits, corporate bonds and subordinated bonds and adjusting the proportion of equity investments ~~according~~in response to market conditions. As of December 31, 2009, our total investment assets were RMB 1,172,145 million and the investment yield for the year ended December 31, 2009 was 5.78%. The investment yield primarily reflected the sharp improvement in the equity securities markets and the fall of the debt securities markets in 2009.
We have made relevant adjustments to the investment portfolio by increasing the proportion of investments in equity securities and decreasing the proportion of investments in debt securities. As of December 31, 2008, our total investment assets were RMB 937,403 million and the investment yield for the year ended December 31, 2008 was 3.48%. The investment yield primarily reflected the high valuation of the investment assets at the beginning of year 2008, the global financial crisis and the sharp fall of the capital market. We have made relevant adjustments to the investment portfolio by decreasing the proportion of investments in equity securities and increasing the proportion of fixed-income assets.
~~For 2008, 2009 and 2010, we calculated~~calculate the investment yields for a given year by dividing the investment income for that year by the average of the ending balance of investment assets of that year and the previous year.
Mix of Products
The following table sets forth ~~for the transferred and new policies,~~ premium information as of or
for the years ended December 31, ~~2008 2009~~2012, 2011 and 2010 by type of product in our individual life
insurance business, group life insurance business and accident and health insurance business.

As of or for the year ended Annual
December 31, growth rate
2008 2009 2010 2010 (2008-2010)
RMB RMB RMB US$
Individual life insurance business⁽¹⁾

Whole life and term life insurance:

Gross written premiums 35,729 38,665 39,747 6,022 5.5 %

Endowment:

Gross written premiums 188,099 184,841 220,505 33,410 8.3 %

Annuities:

Gross written premiums 28,302 38,209 42,529 6,444 22.6 %

Group life insurance business⁽¹⁾

Whole life and term life insurance:

Gross written premiums 299 172 452 68 23.0 %

   As of or for the year ended
December 31,    Annual
growth rate
   2010    2011    2012    2012    (2010-2012)
   RMB    RMB    RMB    US$
Individual life insurance business⁽¹⁾

Whole life and term life insurance:

Gross written premiums
   39,747       40,233       40,210       6,454       0.58 %
Endowment:

Gross written premiums
   220,505       221,925       227,770       36,560       1.63 %
Annuities:

Gross written premiums
   42,529       39,854       37,861       6,077       (5.65 )%
Group life insurance business⁽¹⁾

Whole life and term life insurance:

Gross written premiums
   452       418       466       75       1.54 %
Annuities:

Gross written premiums
   21       20       3       0.5       (62.20 )%
Short-term insurance business⁽²⁾

Accident gross written insurance premiums
   7,657       8,766       9,527       1,529       11.54 %
Health gross written insurance premiums
   7,318       7,036       6,905       1,108       (2.86 )%
78

As of or for the year ended Annual
December 31, growth rate
2008 2009 2010 2010 (2008-2010)
RMB RMB RMB US$
Annuities:

Gross written premiums 41 18 21 3 (28.4 )%

Short-term insurance business⁽²⁾

Accident gross written insurance premiums 6,221 7,076 7,657 1,160 10.9 %
Health gross written insurance premiums 6,965 6,989 7,318 1,109 2.5 %
(1) Including long-term health and accident products.
(2) Including short-term health and accident products.
85
Pursuant to guidelines issued by the CIRC, we are required to pay to our participating policyholders dividends which are no less than 70% of the distributable investment earnings and mortality gains on participating products. Participating products tend to present us with less market risk, since we have more flexibility to set the level of dividends and because participating products are subject to guaranteed rates which are generally lower than those of non-participating products. In addition, changes in interest rates have less of an impact on their lapse rates than on those of non-participating policies. Conversely, participating products tend to be less profitable for us than non-participating products, largely because the terms of these contracts effectively commit us to sharing a portion of our earnings from participating products with our policyholders. Pursuant to guidelines issued by the CIRC, we are required to pay to our participating policyholders dividends which are no less than 70% of the distributable investment earnings and mortality gains on participating products. However, participating products still provide us with attractive profit contributions given the growing level of sales volume they produce.
Products classified as investment contracts also affect our revenues, since only a portion of the payments we ~~receive~~received under ~~them~~such products are recorded in our consolidated income statement as policy fees, ~~while~~and the majority of ~~the~~such payments are recorded as deposits under financial liabilities on our balance sheet. Although deposits are a measure of business volume and contribute to our profitability, they are not reflected in our revenues.
Another factor affecting our revenue is the fact that a substantial amount of the premiums we receive on many individual and group life insurance products are made in single payments, rather than over the course of the policy. We believe that the popularity of single premium products is in line with purchasing patterns and demand in China. We have, however, adjusted our premium structure to focus more on sales of products with regular premiums, especially products with regular premiums for ten years or more, which has reduced the proportion of single written premiums of our total first-year gross written premiums. We believe that ~~such~~this strategy could contribute to a more steady development of our business and enhance the retention rate of our customers and sales agent force.
Regulation
We operate in a highly regulated industry. Changes in regulation can have a significant impact on our revenues, expenses and profitability. China’s insurance regulatory regime is undergoing significant changes toward a more transparent regulatory process and a convergent movement toward international standards. Among other things, recent changes to permitted investment channels for insurance companies have impacted our investment portfolio and returns. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters”.

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Critical Accounting Policies
We prepared the consolidated financial statements under the historical cost convention, as modified by financial assets and financial liabilities at fair value through profit or loss, available-for-sale financial assets, insurance contract liabilities and certain property, plant and equipment at deemed ~~cost.~~cost during restructuring process. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires our management to exercise its judgment in the process of applying our accounting policies. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our businesses and operations. The following sections discuss the accounting policies applied in preparing our financial statements that we believe are most dependent on the application of these judgments and estimates.
Reserves for Long-term Insurance Contracts
Long-term insurance contracts include whole life and term life insurance, endowment insurance and annuities policies with significant life contingency risk. Premiums are recognized as revenue when due from policyholders.
We use the discounted cash flow method to estimate the liabilities for ~~long term~~long-term insurance contracts. The reserve of long-term insurance contracts consists of a reasonable estimate of liability, a risk margin and a residual margin. The long-term insurance contracts liabilities are calculated using various assumptions, including assumptions on mortality rates, morbidity rates, lapse rates, discount rates and expenses assumptions, and based on the following principles:
The reasonable estimate of liability for long-term insurance contracts is the present value of reasonable estimates of future cash outflows less future cash inflows. The expected future cash inflows include cash inflows of future premiums arising from the undertaking of insurance obligations, with consideration of decrement mostly from death and surrenders. The expected future cash outflows are cash outflows incurred to fulfill contractual obligations, consisting of the following:
(i) The guaranteed benefits based on contractual terms, including payments for deaths, disabilities, diseases, survivals, maturities and surrenders.
(ii) Additional non-guaranteed benefits, such as policyholder dividends.
(iii) Reasonable expenses incurred to manage insurance contracts or to process claims, including maintenance expenses and claim settlement expenses. Future administration expenses are included in the maintenance expense. Expenses are determined based on expense analysis with consideration of ~~estimate of~~ future inflation and ~~the likely impact of~~ our ~~cost~~expense management.
On each reporting date, we review the assumptions for reasonable estimates of liability and risk margins, with consideration of all available information, and taking into account our historical experience and expectation of future events. Changes in assumptions are recognized in net profit. Assumptions for residual margin are locked in at policy issuance and are not adjusted at each reporting date. We consider the potential impact of future risk factors on our operating results and incorporates such potential impact in the determination of assumptions. The sensitivity analysis disclosed in the note 4.1.3 on page F-29 in the 2010 Form 20-F provides a detailed analysis of impact of assumption changes on our operating results.
On each reporting date, we review the assumptions for reasonable estimates of liability and risk margins, with consideration of all available information, and taking into account our historical experience and expectation of future events. Changes in assumptions are recognized in net profit. Assumptions for residual margin are locked in at policy issuance and are not adjusted at each reporting date. We consider the potential impact of future risk factors on our operating results and incorporates such potential impact in the determination of assumptions. The sensitivity analysis disclosed in theNote 4.1.3 on page F-32 of this annual report provides a detailed analysis of impact of assumption changes on our operating results.

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Margin has been taken into consideration while computing the reserve of insurance contracts, measured separately and recognized in the net profit in each period over the life of the contracts. At the inception of the contracts, we do not recognize Day 1 gain, whereas on the other hand, Day 1 loss is recognized in net profit immediately.
Margin comprises of risk margin and a residual margin. Risk margin is the reserve accrued to compensate for the uncertain amount and timing of future cash flows. At the inception of the contract, the residual margin is calculated net of certain acquisition costs, which mainly consist of underwriting and policy acquisition costs, by us representing Day 1 gain and will be amortized over the life of contracts. For insurance contracts in which future returns are affected by investment yields of corresponding investment portfolios, their related residual margins are amortized based on estimated future participating dividends payable to the policyholders. For insurance contracts in which future returns are not affected by investment yields of corresponding investment portfolios, their related residual margins are amortized based on sum assured of outstanding policies. The subsequent measurement of residual margin is independent from the best estimate of future discounted cash flows and risk margin. The assumption changes have no effect on the subsequent measurement of residual margin.
We have considered the impact of time value on the reserve calculation for insurance contracts.
• Margin has been taken into consideration while computing the reserve of insurance contracts, measured separately and recognized in the net profit in each period over the life of the contracts. At the inception of the contracts, we do not recognize Day 1 gain, whereas on the other hand, Day 1 loss is recognized as incurred.
Margin consists of a risk margin and a residual margin. Risk margin is the reserve accrued to compensate for the uncertain amount and timing of future cash flows. At the inception of the contract, the residual margin is calculated net of certain acquisition costs by us so that not to recognize any Day 1 gain. The residual margin is amortized over the life of the contracts. The subsequent measurement of residual margin is independent from the best estimate of future discounted cash flows and risk margin. The assumption changes have no effect on the subsequent measurement of residual margin.
• ~~We have considered the impact of time value on the reserve calculation for insurance contracts.~~
We establish liabilities for long-term traditional insurance contracts based on the following assumptions:
For the insurance contracts of which future returns are affected by the investment yields of corresponding investment portfolios, investment return assumptions are applied as discount rates to assess the time value impacts on reserve computation. In developing discount rate assumptions, we consider investment experience, current investment portfolio and trend of the yield curve. The discount rate reflects the future economic outlook as well as our investment strategy. The assumed discount rate with risk margin ranged from 4.58% to 5.00% as at December 31, 2010, ranged from 4.50% to 5.00% as at December 31, 2011 and ranged from 4.80% to 5.00% as at December 31, 2012.
For the insurance contracts of which the future returns are not affected by the investment yields of the corresponding investment portfolios, we use a discount rate assumption to assess the time value impacts based on the “yield curve of reserve computation benchmark for insurance contracts”, published on “China Bond” website, with consideration including liquidity spreads, taxation impacts and other relevant factors. The assumed discount rate with risk margin ranged from 2.61% to 5.66% as at December 31, 2010, ranged from 2.65% to 5.66% as at December 31, 2011 and ranged from 3.12% to 5.61% as at December 31, 2012.
The discount rate assumption is affected by certain factors, such as future macro-economy, fiscal policies, capital market and availability of investment channels of our insurance funds. We determine the discount rate assumption based on the information obtained at the end of each reporting period, including consideration of risk margin.
• For the insurance contracts of which future returns are affected by the investment yields of corresponding investment portfolios, investment return assumptions are applied as discount rates to assess the time value impacts on reserve computation. In developing discount rate assumptions, we consider investment experience, current investment portfolio and trend of the yield curve. The discount rate reflects the future economic outlook as well as our investment strategy. The assumed discount rate with risk margin ranges from 3.50% to 5.00% as at December 31, 2008, ranges from 4.40% to 5.00% as at December 31, 2009 and ranges from 4.58% to 5.00% as at December 31, 2010.
For the insurance contracts of which the future returns are not affected by the investment yields of the corresponding investment portfolios, we use discount rate assumption to assess the time value impacts based on the “yield curve of reserve computation benchmark for insurance contracts”, published on “China Bond” website, with the consideration includes the liquidity spreads, taxation impacts and other relevant factors. The assumed discount rate with risk margin ranges from 2.81% to 4.95% as at December 31, 2008, ranges from 2.69% to 5.32% as at December 31, 2009 and ranges from 2.61% to 5.66% as at December 31, 2010.
The discount rate assumption is affected by certain factors, such as future macro-economy, fiscal policies, capital market results and availability of investment channels of our insurance funds. We determine discount rate assumption based on the information obtained at the end of each reporting period including consideration of risk margin.
• ~~The mortality and morbidity assumptions are based on the historical mortality and morbidity experience. The assumed mortality rates and morbidity rates vary by age of the insured and contract type.~~
We base our mortality assumptions on China Life Insurance Mortality Table (2000-2003), adjusted where appropriate to reflect our recent historical mortality experience. The main source of uncertainty with life insurance contracts is that epidemics and wide-ranging lifestyle changes could result in deterioration in future mortality experience, thus leading to an inadequate liability. Similarly, continuing advancements in medical care and social conditions could result in improvements in longevity that exceed those allowed for in the estimates used to determine the liability for contracts where we are exposed to longevity risk.
The mortality and morbidity assumptions are based on the historical mortality and morbidity experience. The assumed mortality rates and morbidity rates vary by age of the insured and contract type.
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We base our mortality assumptions on China Life Insurance Mortality Table (2000-2003), adjusted where appropriate to reflect our recent historical mortality experience. The main source of uncertainty with life insurance contracts is that epidemics and wide-ranging lifestyle changes could result in deterioration in future mortality experience, thus leading to an inadequate liability. Similarly, continuing advancements in medical care and social conditions could result in improvements in longevity that exceed those allowed for in the estimates used to determine the liability for contracts where we are exposed to longevity risk.
We base our morbidity assumptions for critical illness products on analysis of historical experience and expectations of future developments. There are two main sources of uncertainty. First, wide-ranging lifestyle changes could result in future deterioration in morbidity experience. Second, future development of medical technologies and improved coverage of medical facilities available to policyholders may bring forward the timing of diagnosing critical illness, which demands earlier payment of the critical illness benefits. Both could ultimately result in an inadequate reserving of liability if current morbidity assumptions do not properly reflect such secular trends.
Risk margin is considered in our mortality and morbidity assumptions.
The expense assumption is based on expected unit costs with the consideration of risk margin. Our expense assumption is affected by actual experience and certain factors, such as inflation, market competition and other factors based on the information obtained at the end of each reporting period. Components of expense assumptions include cost per policy and percentage of premium. We have estimated the percentage of premiums costs to be 0.90% to 1.00% of premiums for individual life products and 0.86% for group life products for as at December 31, 2010; 0.85% to 0.90% of premiums for individual life products and 0.90% for group life products for as at December 31, 2011 and 0.85% to 0.90% of premiums for individual life products and 0.90% for group life products for as at December 31, 2012, in each case plus a fixed per-policy expense.

The lapse rates and other assumptions are affected by certain factors, such as future marco-economy, availability of financial substitutions and market competition, which bring uncertainty to lapse rates and other assumptions. The lapse rates and other assumptions are determined with reference to creditable past experience, current conditions, future expectations and other information obtained at the end of each reporting period.
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The method used to determine risk margin has been consistently applied. We consider risk margin for each of the discount rate, mortality and morbidity and expense assumptions to compensate for the uncertain amount and timing of future cash flow. When determining risk margin, we consider historical experience, future expectations and other factors. Risk margin is determined by us and does not include any elements imposed by regulators.
We base our morbidity assumptions for critical illness products on analysis of historical experience and expectations of future developments. There are two main sources of uncertainty. First, wide-ranging lifestyle changes could result in future deterioration in morbidity experience. Second, future development of medical technologies and improved coverage of medical facilities available to policyholders may bring forward the timing of diagnosing critical illness, which demands earlier payment of the critical illness benefits. Both could ultimately result in an inadequate reserving of liability if current morbidity assumptions do not properly reflect such secular trends.
~~Risk margin is considered in our mortality and morbidity assumptions.~~
• The expense assumption has been based on expected unit costs with the consideration of risk margin. Our expense assumption is effected by actual experience and certain factors, such as inflation, market competition and other factors. Components of expense assumptions include cost per policy and percentage of premium. We have estimated the percentage of premiums costs to be 1.59% to 1.74% of premiums for individual life products and 1.54% for group life products for as at December 31, 2008; 1.05% to 1.17% of premiums for individual life products and 1.01% for group life products for as at December 31, 2009; and 0.90% to 1.00% of premiums for individual life products and 0.86% for group life products for as at December 31, 2010, in each case plus a fixed per-policy expense.
• The lapse rates and other assumptions are effected by certain factors, such as future marco-economic trends, availability of financial substitutions, market competition and other factors, which bring uncertainty to lapse rates and other assumptions. The lapse rates and other assumptions are determined with reference to past experience where creditable, current conditions, future expectations and other information obtained at the end of each reporting period.
We adopted a consistent process ~~used~~ to determine assumptions for the insurance contracts, which are detailed ~~in Note~~inNote 13 to our Consolidated Financial Statements included elsewhere in this annual report.
Universal Life Contracts and Unit-linked Contracts
Universal life contracts and unit-linked contracts are unbundled into the following components:
Insurance components; and
• ~~Insurance components; and~~
• Non-insurance components.
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The insurance components are accounted for as insurance contracts and follow the existing reserves calculation methodology as allowed under IFRS 4 for insurance contracts, and the non-insurance components are accounted for as investment contracts, which are recognized in the investment ~~contracts liabilities.~~
contracts.
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Investment Contracts
Revenue from investment contracts with or without discretionary participating features is recognized as policy fee income, which consists of various ~~charges~~fee income including, among others, policy fees, handling fees and management fees, during the period. ~~Excess charges over~~Policy fee income net of certain acquisition cost are deferred as unearned revenue and amortized over the expected life of the contracts.
Except for unit-linked contracts, of which the liabilities are carried at fair value, the liabilities of investment contracts with or without discretionary participating features are carried at amortized cost.
Valuation of Investments
Debt securities that we have the ability and positive intent to hold to maturity are classified as held-to-maturity. These investments are carried at amortized cost. Debt securities and equity securities that we purchase with the intention to resell in the short term are classified as securities at fair value through ~~income.~~profit or loss. Debt securities and equity securities other than those classified as held-to-maturity or securities at fair value through ~~income~~profit or loss are classified as available-for-sale securities. We regularly review the carrying value of our investments. If there is objective evidence of impairment, the carrying value is reduced through a charge to income statement. The following are the policies used:
Securities at fair value through ~~income.~~profit or loss.This category has two sub-categories: securities held for trading and those designated at fair value through ~~income~~profit or loss at inception. Securities are classified as held for trading at inception if acquired principally for the purpose of selling in the short-term or if ~~it forms~~they form part of a portfolio of financial assets in which there is evidence of short term profit-taking. Other financial assets are classified as at fair value through ~~income~~profit or loss if they meet certain criteria and designated as such at inception by us.
Held-to-maturity securities.Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixed maturities ~~other than those that meet the definition of loans and receivables~~ that we have the positive intention and ability to hold to maturity and do not meet the definition of loans and receivables nor designated as available-for-sale securities or securities at fair value through ~~income.~~
profit or loss.
Available-for-sale securities.Available-for-sale securities are non-derivative financial assets that are either designated in this category or not classified in either of the other categories.
Securities other than those accounted for as at fair value through ~~income~~profit or loss are adjusted for impairments, where there are declines in value that are considered to be an impairment. In evaluating whether a decline in value is an impairment for debt securities and equity securities, we consider several factors including, but not limited to, the following: (a) significant financial difficulty of the issuer or debtor; (b) a breach of contract, such as a default or delinquency in payments; (c) it becomes probable that the issuer or debtor will enter bankruptcy or other financial reorganization; and (d) the disappearance of an active market for that financial asset because of financial difficulties. In evaluating whether a decline in value is impairment for equity securities, we also consider the extent or the duration of the decline. When the decline in value is considered impairment, held-to-maturity debt securities are written down to their present value of estimated future cash flows discounted at the securities effective interest rates; available-for-sale debt securities and equity securities are written down to their fair value, and the change is recorded in “Net realized gains/(losses) and impairment on financial assets” in the period the impairment is recognized. The impairment loss is reversed through the net profit if in a subsequent period the fair value of a debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognized through the net profit. The impairment losses recognized in net profit on equity instruments are not reversed through the net profit.

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As of December 31, ~~2010,~~2012, debt securities of RMB ~~109,620~~157,558 million contain guarantees issued by third parties and, of those, ~~65.8%~~66.8% were guaranteed by either the Chinese government or a Chinese government controlled financial institution. Of the guarantees issued by government or government controlled financial institutions, ~~63.1%~~78.2% relates to a guarantee issued by a Chinese government ministry for debt securities issued by a government railway infrastructure ~~entity. We~~entity.We monitor the credit worthiness of the third parties which have issued these guarantees using local Chinese credit ratings which are generally only utilized within China.
The fair value of the financial assets and liabilities is determined as follows:
Debt securities.The fair values of debt securities are generally based on current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions, values obtained from current bid prices of comparable investments or valuation techniques when the market is not active.
Equity securities.The fair values of equity securities are generally based on current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions or commonly used market pricing model. Equity securities, for which fair values cannot be measured reliably, are recognized at cost less impairment.
Term deposits, ~~(excluding structured deposits),~~ loans and securities purchased or sold under agreements to resell or repurchase.The carrying amounts of these assets in the statement of financial position approximate fair values.
~~Structured deposits~~. As the market for structured deposits is not active, we establish fair value by using discounted cash flow analysis and option pricing models as the valuation technique. We use the U.S. dollar swap rate, the benchmark rate, to determine the fair value of 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, analyze 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.
We utilize one pricing service for all of our debt securities. This pricing service provider is the only publicly-recognized pricing service provider in China, and its pricing information is used by the mutual fund industry and almost all companies in China. The prices obtained from the pricing service are non-binding. Our review and testing have shown the prices obtained from our pricing service to be appropriate. As such, during the year ended December 31, ~~2010,~~2012, we did not consider it necessary to adjust the prices obtained from our pricing service.
As at December 31, ~~2010,~~2012, RMB ~~433,492~~203,092 million of RMB ~~506,530~~203,239 million debt securities with prices obtained from our pricing service were issued by the Chinese government and government controlled organizations. This pricing service utilized a discounted cash flow valuation model using market observable inputs, ~~(interest rates)~~mainly interest rates, to determine a fair value. There are no other significant market inputs. As such, we have classified these debt securities as Level 2 in the fair value hierarchy.
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Management subjects the fair values provided by valuation service providers to a number of validation procedures. These procedures include a review of the valuation models utilized and the results of these models, as well as our own test recalculation of the prices obtained from the pricing service at each reporting date.
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We consider a combination of many factors in determining whether we believe a market for a financial instrument is active or inactive. Among these factors include:
whether there has been any trades within past 30 days of the reporting date;
• ~~whether there has been any trades within past 30 days of the reporting date;~~
• the volume of the trades within this 30 day period; and
• ~~the degree which the implied yields for a debt security for observed transactions differs from our understanding of the current relevant market rates and information.~~
the degree which the implied yields for a debt security for observed transactions differs from our understanding of the current relevant market rates and information.
Revenue Recognition
Premiums.Premiums from long-term life insurance contracts are recognized as revenue when due from the policyholders.
Premiums from the sale of short-term accident and health insurance contracts are recorded when written and are accreted to earnings on a pro-rata basis over the term of the related policy coverage. ~~Contracts for which the period of risk differs significantly from the contract period recognize premiums over the period of risk in proportion to the amount of insurance protection provided.~~

Policy fee income.Revenue from investment contracts is recognized as policy fee income, which consists of various ~~charges~~fee income (including policy fees, handling fees and management fees) over the period during which service is provided. Excess ~~charges~~fee income over certain acquisition costs ~~are~~is deferred as unearned revenue and amortized over the expected life of the contracts. Policy fee income is presented as other income.
Investment income.Investment income is comprised of interest income from term deposits, cash and cash equivalents, debt securities, securities purchased under agreements to resell, loans and dividend income from equity securities. Interest income is recorded on an accrual basis using the effective interest rate method. Dividend income is recognized when the right to receive a dividend payment is established.
Deferred taxation
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Substantively enacted tax rates are used in the determination of deferred income tax.
Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be recognized.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
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Recently Issued Accounting Standards
The following revised ~~standards are~~amendment is mandatory for the first time for the financial year beginning ~~January 1, 2010.~~
• IFRS 3 (Revised), ‘Business combinations’, and consequential amendments to IAS 27, ‘Consolidated and separate financial statements’, IAS 28, ‘Investments in associates’, and IAS 31, ‘Interests in joint ventures’, are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after July 1, 2009. The revised standard continues to apply the acquisition method to business combinations, with some significant changes, such as the recognition and measurement of the identifiable assets acquired, the liabilities assumed, the non-controlling interest in the acquiree and the acquisition-related costs.
• IAS 27 (Revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognized in profit or loss.
~~We adopted these revised standards~~ on January 1, ~~2010 and they did not have any material impacts~~2012.
IAS 12 Amendment Deferred Tax: Recovery of Underlying Assets
IFRS 7 Amendment Disclosures: Transfers of Financial Assets
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The adoption of IAS 12 Amendment has no impact on our operating results, financial position ~~and~~or comprehensive income.

The adoption of IFRS 7 Amendment has no material impact on our annual financial information.
Inflation
According to the National Statistics Bureau of China, ~~Statistical Bureau,~~ China’s overall national inflation rates, as represented by the general consumer price index, were approximately 2.6%, 5.4%, 3.3%, (0.7%), and 5.9%~~, 4.8% and 1.5%~~ in 2012, 2011, 2010, 2009 ~~2008, 2007~~ and ~~2006,~~2008, respectively. Inflation has not had a significant effect on our business during the past two years.

Foreign Currency Fluctuation
See “Item 3. Key Information—Risk Factors—Risks Relating to the People’s Republic of China—Government control of currency conversion and the fluctuation of the Renminbi may materially and adversely affect our operations and financial results” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Exchange Risk”.
A. OPERATING RESULTS
Year Ended December 31, ~~2010~~2012 Compared with Year Ended December 31, ~~2009~~

For the year ended December 31,
2009 2010
Total Revenues RMB RMB
(in millions)
Net premiums earned 275,077 318,088
Individual life insurance business 261,694 302,753
Group life insurance business 189 468
Short-term insurance business 13,194 14,867
Investment income 38,890 48,872
Investment income from securities at fair value through income 335 126
Investment income from available-for-sale securities 16,688 20,173
Investment income from held-to-maturity securities 9,882 10,538
Investment income from term deposits 10,805 16,363
Investment income from loans 1,172 1,583
Other investment income 8 89
Net realized gains/(losses) on financial assets 21,244 15,841
Net fair value gains/(losses) through income 1,449 280
Other income 2,630 2,757
Total
339,290 385,838
2011

Total Revenues    For the year ended December 31,
   2011 2012
   RMB RMB
   (in millions)
Net premiums earned
   318,276    322,126
Individual life insurance business
   301,986    305,732
Group life insurance business
   434    465
Short-term insurance business
   15,856    15,929
Investment income
   60,722    73,243
Investment income from securities at fair value through profit or loss
   486    1,567
Investment income from available-for-sale securities
   21,811    20,992
Investment income from held-to-maturity securities
   10,691    15,194
Investment income from bank deposits
   24,978    30,512
Investment income from loans
   2,658    4,339
Other investment income
   98    639
Net realized gains and impairment on financial assets
   (11,208 ) (26,876 )
Net fair value gains/(losses) through profit or loss
   337    (313 )
Other income
   2,772    3,305
Total
   370,899    371,485
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Net Premiums Earned
Net premiums earned increased by RMB ~~43,011~~3,850 million, or ~~15.6%~~1.2%, to RMB ~~318,088~~322,126 million in ~~2010~~2012 from RMB ~~275,077~~318,276 million in ~~2009.~~
2011.
Individual Life Insurance Business
Net premiums earned from ~~the~~ individual life insurance business increased by RMB ~~41,059~~3,746 million, or ~~15.7%~~1.2%, to RMB ~~302,753~~305,732 million in ~~2010~~2012 from RMB ~~261,694~~301,986 million in ~~2009.~~2011. This was primarily due to ~~the~~an increase in ~~first-year~~renewal premiums resulting from the strategy of focusing more on selling regular payment duration products that has been consistently adopted by us for several years. First-year regular premiums ~~and renewal premiums. The first-year regular~~decreased by RMB 2,642 million, or 5.5%, from 2011. Renewal premiums increased by RMB ~~12,447~~25,462 million, or ~~31.3%. The renewal premiums increased by RMB 22,548 million, or 21.4%.~~
16.5%, from 2011.
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Group Life Insurance Business
Net premiums earned from ~~the~~ group life insurance business increased by RMB ~~279~~31 million, or ~~147.6%~~7.1%, to RMB ~~468~~465 million in ~~2010~~2012 from RMB ~~189~~434 million in ~~2009.~~2011. This was primarily due to ~~a considerable~~an increase in premiums earned from group term life insurance ~~products and whole life insurance~~ products.
Short-term Insurance Business
Net premiums earned from short-term insurance business increased by RMB ~~1,673~~73 million, or ~~12.7%~~0.5%, to RMB ~~14,867~~15,929 million in ~~2010~~2012 from RMB ~~13,194~~15,856 million in ~~2009.~~2011. This was primarily due to an increase in premiums earned from accident insurance products resulting from our focus on the adjustment of our business structure and increased efforts onfor the development of ~~short-term~~ accident insurance business.
Investment Income
Investment income increased by RMB ~~9,982~~12,521 million, or ~~25.7%~~20.6%, to RMB ~~48,872~~73,243 million in ~~2010~~2012 from RMB ~~38,890~~60,722 million in ~~2009.~~
2011.
Investment Income from Securities at Fair Value through ~~Income~~Profit or Loss
Investment income from securities at fair value through profit or loss increased by RMB 1,081 million, or 222.4%, to RMB 1,567 million in 2012 from RMB 486 million in 2011. This was primarily due to an increase in interest income resulting from our increased allocation in securities at fair value through profit or loss in light of market conditions.
Investment Income from Available-for-Sale Securities
Investment income from available-for-sale securities decreased by RMB ~~209~~819 million, or ~~62.4%~~3.8%, to RMB ~~126~~20,992 million in ~~2010~~2012 from RMB ~~335~~21,811 million in ~~2009.~~2011. This was primarily due to a decrease in ~~interest income from debt securities at fair value through income.~~
the volume of available-for-sale securities.
Investment Income from ~~Available-for-Sale~~Held-to-Maturity Securities
Investment income from ~~available-for-sale~~held-to-maturity securities increased by RMB ~~3,485~~4,503 million, or ~~20.9%~~42.1%, to RMB ~~20,173~~15,194 million in ~~2010~~2012 from RMB ~~16,688~~10,691 million in ~~2009.~~2011. This was primarily due to an increase in ~~dividends~~the volume of held-to-maturity securities resulting from ~~available-for-sale securities investment funds and an increase~~our increased allocation in ~~interests income from available-for-sale debt~~held-to-maturity securities.
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Investment Income from ~~Held-to-Maturity Securities~~Bank Deposits
Investment income from held-to-maturity securities increased by RMB 656 million, or 6.6%, to RMB 10,538 million in 2010 from RMB 9,882 million in 2009. This was primarily due to the increased volume of our investment in debt securities.
~~Investment Income from Term Deposits~~
~~Investment income from term~~bank deposits increased by RMB ~~5,558~~5,534 million, or ~~51.4%~~22.2%, to RMB ~~16,363~~30,512 million in ~~2010~~2012 from RMB ~~10,805~~24,978 million in ~~2009.~~2011. This was primarily due to the increased volume of deposits ~~and an increase~~attributable to our increased allocation in ~~the floating~~deposits by taking advantage of favorable market opportunities when interest rates ~~of deposits.~~
were relatively high.
94
Investment Income from Loans
Investment income from loans increased by RMB ~~411~~1,681 million, or ~~35.1%~~63.2%, to RMB ~~1,583~~4,339 million in ~~2010~~2012 from RMB ~~1,172~~2,658 million in ~~2009. This was primarily due to the increased volume of policy loans business.~~
~~Net Realized Gains/(Losses) on Financial Assets~~
Net realized gains/(losses) on financial assets decreased by RMB 5,403 million, or 25.4% to RMB 15,841 million in 2010 from RMB 21,244 million in 2009. This was primarily due to a decrease in income from the purchases and sales of available for sale debt securities and stocks resulting from the volatility of the capital markets.
~~Net Fair Value Gains/(Losses) Through Income~~
Our net fair value gains/(losses) through income decreased by RMB 1,169 million, or 80.7%, to RMB 279 million in 2010 from RMB 1,449 million in 2009. This was primarily due to a decrease in unrealized profits from stocks and funds at fair value through income resulting from the volatility of the capital markets.
~~Other Income~~
~~Other income increased by RMB 127 million, or 4.8%, to RMB 2,757 million in 2010 from RMB 2,630 million in 2009.~~2011. This was primarily due to an increase in ~~income~~the volume of policy loans resulting from ~~asset management fees~~an increase in demand for policy loans, as well as a continued increase in the volume of debt investment plans attributable to our increased efforts for investment in debt investment plans by taking advantage of the ~~AMC.~~

For the year ended December 31,
2009 2010
Benefits, Claims and Expenses RMB RMB
(in millions)
Insurance benefits and claims
Life insurance death and other benefits 74,858 71,237
Accident and health claims and claim adjustment expenses 7,808 8,740
Increase in insurance contracts liabilities 154,372 199,655
Investment contracts benefits 2,142 1,950
Policyholder dividends resulting from participation in profits 14,487 13,224
Underwriting and policy acquisition costs 22,936 27,256
Administrative expenses 18,719 20,285
Other operating expenses 2,390 3,655
Statutory insurance fund contribution 537 599
Total
298,249 346,601

Segment information of insurance benefits and claims
Individual life insurance business 228,968 270,341
Group life insurance business 262 551
Short-term insurance business 7,808 8,740
Total
237,038 279,632
market opportunities.
Net Realized Gains and Impairment on Financial Assets
Net realized gains and impairment on financial assets decreased by RMB 15,668 million, or 139.8%, to losses of RMB 26,876 million in 2012 from losses of RMB 11,208 million in 2011. This was primarily due to a significant increase in impairment losses of equity securities which meet the conditions for recognizing impairment losses, resulting from the continued weakness of the Chinese capital markets.
Net Fair Value Gains/(Losses) through Profit or Loss
Our net fair value gains/(losses) through profit or loss decreased by RMB 650 million, or 192.9%, to losses of RMB 313 million in 2012 from gains of RMB 337 million in 2011. This was primarily due to the fluctuation in the value of financial instruments at fair value through profit or loss.
Other Income
Other income increased by RMB 533 million, or 19.2%, to RMB 3,305 million in 2012 from RMB 2,772 million in 2011. This was primarily due to our increased efforts in developing intermediary business and expanding sources of income.

Benefits, Claims and Expenses    For the year ended December 31,
   2011    2012
   RMB    RMB
   (in millions)
Insurance benefits and claims

Life insurance death and other benefits
   101,349       107,674
Accident and health claims and claim adjustment expenses
   7,789       7,898
Increase in insurance contracts liabilities
   181,579       184,990
Investment contracts benefits
   2,031       2,032
Policyholder dividends resulting from participation in profits
   6,125       3,435
Underwriting and policy acquisition costs
   27,434       27,754
Finance costs
   873       2,575
Administrative expenses
   21,549       23,283
Other operating expenses
   3,275       3,304
Statutory insurance fund contribution
   595       609
Total
   352,599       363,554
Segment information of insurance benefits and claims

Individual life insurance business
   282,575       292,312
Group life insurance business
   353       352
Short-term insurance business
   7,789       7,898
Total
   290,717       300,562
88
Insurance Benefits and Claims
Insurance benefits and claims, net of amounts ceded through reinsurance, increased by ~~41,373~~RMB 9,845 million, or ~~18.1%~~3.4%, to RMB ~~270,341~~300,562 million in ~~2010~~2012 from RMB ~~228,968~~290,717 million in ~~2009.~~
2011.
95
Life insurance death and other benefits payouts ~~decreased~~increased by RMB ~~3,621~~6,325 million, or ~~4.8%~~6.2%, to RMB ~~71,237~~107,674 million in ~~2010~~2012 from RMB ~~74,858~~101,349 million in ~~2009.~~2011. This was primarily due to ~~a decrease~~an increase in ~~maturity payouts. Maturity payouts decreased by RMB 6,939 million, or 14.8%, compared with that in 2009.~~surrender payments. Accident and health claims and claim adjustment expenses increased by ~~932~~ RMB 109 million, or ~~11.9%~~1.4%, to RMB ~~8,740~~7,898 million in ~~2010~~2012 from RMB ~~7,808~~7,789 million in ~~2009.~~2011. This was primarily due to an increase in accident insurance claims payment resulting from the increase in business ~~volume and the accumulation of insurance liabilities.~~volume. Increase in insurance contracts liabilities increased by RMB ~~45,283~~3,411 million, or ~~29.3%~~1.9%, to RMB ~~199,655~~184,990 million in ~~2010~~2012 from RMB ~~154,372~~181,579 million in ~~2009.~~2011. This was primarily due to a RMB ~~41,349~~11,169 million increase in ~~premium income from insurance contracts~~the accretion of interest and ~~an increase in interests accredited to insurance contract liabilities, but offset in part by~~net of a RMB ~~10,687~~8,082 million increase in the release of liabilities. The release of liabilities mainly consists of ~~payments for~~release due to death or other termination and related expenses, release of residual margin and change of reserves for claims and claim adjustment expenses). In addition, increase in insurance contract liabilities increased by RMB 1,703 million from 2009 due to changes in assumptions. Risk margin is recalculated based on updated assumptions at the reporting date, with the resulting changes being recognized in the income statement.
expenses.
Individual Life Insurance Business
Insurance benefits and claims attributable to individual life insurance business increased by RMB ~~41,373~~9,737 million, or ~~18.1%~~3.4%, to RMB ~~270,341~~292,312 million in ~~2010~~2012 from RMB ~~228,968~~282,575 million in ~~2009.~~2011. This was primarily due to an increase in ~~business volume~~surrender payments and ~~the accumulation of~~an increase in increase in insurance contracts liabilities.
Group Life Insurance Business
Insurance benefits and claims attributable to group life insurance business decreased by RMB 1 million, or 0.3%, to RMB 352 million in 2012 from RMB 353 million in 2011. This was primarily due to the combined effects of an increase in claims and benefits resulting from business growth and a decrease in surrender payments.
Short-term Insurance Business
Insurance benefits and claims attributable to short-term insurance business increased by RMB ~~289~~109 million, or ~~110.3%~~1.4%, to RMB ~~551~~7,898 million in ~~2010~~2012 from RMB ~~262~~7,789 million in ~~2009.~~2011. This was primarily due to an increase in accident insurance claims ~~payments~~payment resulting from anthe increase in ~~the volume of one-year term insurance products.~~
business volume.
~~Short-term Insurance Business~~Investment Contract Benefits
~~Insurance~~
Investment contract benefits ~~and claims attributable to the short-term insurance business~~ increased by RMB ~~932~~1 million ~~or 11.9%,~~ to RMB ~~8,740~~2,032 million in ~~2010~~2012 from RMB ~~7,808~~2,031 million in ~~2009.~~2011. This was primarily due to ~~an increase in business volume.~~
the steady account volume of investment contracts.
89
~~Investment Contract Benefits~~
Investment contract benefits decreased by RMB 192 million, or 9.0%, to RMB 1,950 million in 2010 from RMB 2,142 million in 2009. This was primarily due to a decrease in investment yield resulting from the volatility of the capital market.
Policyholder Dividends Resulting from Participation in Profits
Policyholder dividends resulting from participation in profits decreased by RMB ~~1,263~~2,690 million, or ~~8.7%~~43.9%, to RMB ~~13,224~~3,435 million in ~~2010~~2012 from RMB ~~14,487~~6,125 million in ~~2009.~~2011. This was primarily due to a decrease in investment ~~yield~~yields for participating products.
Underwriting and Policy Acquisition Costs
Underwriting and policy acquisition costs increased by RMB ~~4,320~~320 million, or ~~18.8%~~1.2%, to RMB ~~27,256~~27,754 million in ~~2010~~2012 from RMB ~~22,936~~27,434 million in ~~2009.~~2011. This was primarily due to our proactive adoption of measures to strengthen cost control while promoting a healthy development of our business, ~~development~~as a result of which the increase in underwriting and ~~adjustment~~policy acquisition costs was in proportion to the growth of ~~business structure.~~
business.
96
Finance Costs
Finance costs increased by RMB 1,702 million or 195.0%, to RMB 2,575 million in 2012 from RMB 873 million in 2011. This was primarily due to an increase in interest payments for subordinated term debts.
Administrative Expenses
Administrative expenses include employees’ remuneration and other administrative expenses. Administrative expenses increased by RMB ~~1,566~~1,734 million, or ~~8.4%~~8.0%, to RMB ~~20,285~~23,283 million in ~~2010~~2012 from RMB ~~18,719~~21,549 million in ~~2009.~~2011. This was primarily due to the ~~increase in business volume.~~
fact that we increased our costs on team building to enhance our ability for sustainable development.
Other Operating Expenses
Other operating expenses, which primarily consist of foreign exchange losses and business tax and surcharge expenses, ~~for non-core business,~~ increased by RMB ~~1,265~~29 million, or ~~52.9%~~0.9%, to RMB ~~3,655~~3,304 million in ~~2010~~2012 from RMB ~~2,390~~3,275 million in ~~2009.~~2011. This was primarily due to an increase in ~~foreign exchange losses, interest payments for accumulated dividends~~business tax and ~~interest payments for securities sold under agreements to repurchase~~.

For the year ended December 31,
2009 2010
Profit RMB RMB
(in millions)
Profit before income tax 41,745 41,008
Individual life insurance business 39,769 37,690
Group life insurance business 467 740
Short-term insurance business 420 385
Other business 1,089 2,193
Income tax 8,709 7,197
Net profit attributable to equity holders of the company 32,881 33,626
surcharges expenses.
Profit    For the year ended December 31,
   2011    2012
   RMB    RMB
   (in millions)
Profit before income tax
   20,513       10,968
Individual life insurance business
   17,967       7,450
Group life insurance business
   57       (216 )
Short-term insurance business
   502       191
Other business
   1,987       3,543
Income tax
   2,022       (304 )
Net profit attributable to equity holders of the company
   18,331       11,061
Profit before Income Tax
Our profit before income tax decreased by RMB ~~737~~9,545 million, or ~~1.8%~~46.5%, to RMB ~~41,008~~10,968 million in ~~2010~~2012 from RMB ~~41,745~~20,513 million in ~~2009.~~
2011.
90
Individual Life Insurance Business
Profit before income tax in the individual life insurance business decreased by RMB ~~2,079~~10,517 million, or ~~5.2%~~58.5%, to RMB ~~37,690~~7,450 million in ~~2010~~2012 from RMB ~~39,769~~17,967 million in ~~2009.~~2011. This was primarily due to anthe decline in investment yield and the increase in ~~underwriting cost.~~
impairment losses resulting from the continued weakness of the Chinese capital markets.
Group Life Insurance Business
Profit before income tax in the group life insurance business ~~increased~~decreased by RMB 273 million, or ~~58.5%~~478.9%, to a loss of RMB ~~740~~216 million in ~~2010~~2012 from a profit before income tax of RMB ~~467~~57 million in ~~2009.~~2011. This was primarily due to ~~a favorable adjustment~~the decline in investment yield and the increase in impairment losses resulting from the continued weakness of ~~group insurance business structure.~~
the Chinese capital markets.
97
Short-term Insurance Business
Profit before income tax in the short-term insurance business decreased by RMB 35311 million, or ~~8.3%~~62.0%, to RMB 191 million in 2012 from RMB ~~385~~502 million in ~~2010 from RMB 420 million in 2009.~~2011. This was primarily due to ~~increased market competition~~the decline in investment yield and anthe increase in ~~claims payments.~~
impairment losses resulting from the continued weakness of the Chinese capital markets.
Income Tax
We pay income tax according to applicable Chinese enterprise income tax regulations and rules. Income tax decreased by RMB ~~1,512~~2,326 million, or ~~17.4%~~115.0%, to RMB ~~7,197~~(304) million in ~~2010~~2012 from RMB ~~8,709~~2,022 million in ~~2009.~~2011. This was primarily due to ~~an increase~~the combined effect of a decrease in ~~non-taxable income. Our effective tax rate for 2010 was 17.55%.~~
taxable income and the impact of the deferred tax.
Net Profit Attributable to Equity Holders of the Company
For the reasons set forth above, net profit attributable to equity holders of the Company ~~increased~~decreased by RMB ~~745~~7,270 million, or ~~2.3%~~39.7%, to RMB ~~33,626~~11,061 million in ~~2010~~2012 from RMB ~~32,881~~18,331 million in ~~2009.~~2011. This was primarily due to ~~our steady business development, optimization~~the decline in investment yield and the increase in impairment losses resulting from the continued weakness of ~~our business structure and appropriate allocation of our investment assets.~~

As of December 31,
2009 2010
Major Assets RMB RMB
(in millions)
Investment assets 1,172,145 1,336,245
Term deposits 344,983 441,585
Held-to-maturity securities 235,099 246,227
Available-for-sale securities 517,499 548,121
Securities at fair value through income 9,133 9,762
Cash and cash equivalents 36,197 47,854
Loans 23,081 36,543
Statutory deposits-restricted 6,153 6,153
Other assets 54,112 74,334
Total
1,226,257 1,410,579
the Chinese capital markets.
Major Assets    As of December 31,
   2011    2012
   RMB    RMB
   (in millions)
Investment assets
   1,494,969       1,790,838
Term deposits
   520,793       641,080
Held-to-maturity securities
   261,933       452,389
Available-for-sale securities
   562,948       506,416
Securities at fair value through profit or loss
   23,683       34,035
Securities purchased under agreements to resell
   2,370       894
Cash and cash equivalents
   55,985       69,452
Loans
   61,104       80,419
Statutory deposits-restricted
   6,153       6,153
Other assets
   88,938       108,078
Total
   1,583,907       1,898,916
Investment Assets
Our total investment assets increased by RMB ~~164,100~~295,869 million, or ~~14.0%~~19.8%, to RMB ~~1,336,245~~1,790,838 million in ~~2010~~2012 from RMB ~~1,172,145~~1,494,969 million in ~~2009.~~
2011.
91
Term Deposits
Term deposits increased by RMB ~~96,602~~120,287 million, or ~~28.0%~~23.1%, to RMB ~~441,585~~641,080 million in ~~2010~~2012 from RMB ~~344,983~~520,793 million in ~~2009.~~2011. This was primarily due to our increased ~~efforts for investment~~allocation in ~~negotiated~~term deposits ~~with floating~~by taking advantage of favorable market opportunities when interest ~~rates.~~
rates were relatively high.
Held-to-Maturity ~~Investments~~Securities
Held-to-maturity ~~investments~~securities increased by RMB ~~11,128~~190,456 million, or ~~4.7%~~72.7%, to RMB ~~246,227~~452,389 million in ~~2010~~2012 from RMB ~~235,099~~261,933 million in ~~2009.~~2011. This was primarily due to ~~an increase~~the fact that we reduced fluctuation of the book value of our investments in ~~the volume of~~debt securities and increased our allocation in held-to-maturity ~~debt~~ securities.
98
Available-for-Sale Securities
Available-for-sale assets ~~increased~~decreased by RMB ~~30,622~~56,532 million, or ~~5.9%~~10.0%, to RMB ~~548,121~~506,416 million in ~~2010~~2012 from RMB ~~517,499~~562,948 million in ~~2009.~~2011. This was primarily due to ~~an increase~~the fact that we actively adjusted our allocation structure in light of market conditions, reduced fluctuation of the book value of our investment assets, and decreased the volume of available-for-sale ~~funds and debt~~ securities.
Securities at Fair Value Through ~~Income~~Profit or Loss
Securities at fair value through ~~income~~profit or loss increased by RMB ~~629~~10,352 million, or ~~6.9%~~43.7%, to RMB ~~9,762~~34,035 million in ~~2010~~2012 from RMB ~~9,133~~23,683 million in ~~2009.~~2011. This was primarily due to the fact that we adopted a more proactive and flexible investment approach in light of market conditions and increased the volume of ~~debt~~ securities at fair value through ~~income.~~
profit or loss accordingly.
Cash and Cash Equivalents
Cash and cash equivalents increased by RMB ~~11,657~~13,467 million, or ~~32.2%~~24.1%, to RMB ~~47,854~~69,452 million in ~~2010~~2012 from RMB ~~36,197~~55,985 million in ~~2009.~~2011. This was primarily due to the ~~demand of~~need for investment assets allocation and liquidity management.
Loans
Loans increased by RMB ~~13,462~~19,315 million, or ~~58.3%~~31.6%, to RMB ~~36,543~~80,419 million in ~~2010~~2012 from RMB ~~23,081~~61,104 million in ~~2009.~~2011. This was primarily due to an increase in the demand for policy loans, as well as our increased efforts for investment in debt investment plans by taking advantage of ~~policy loans.~~

As of December 31,
2009 2010
Major Liabilities RMB RMB
(in millions)
Liabilities 1,013,481 1,200,104
Liabilities of insurance contracts 818,164 1,018,135
Investment contracts 67,326 70,171
Securities sold under agreements to repurchase 33,553 23,065
Policyholder dividends payable 54,587 52,828
Annuity and other insurance balances payable 5,721 8,275
Deferred tax liabilities 16,361 11,776
Other liabilities 17,769 15,854
the market opportunities.
Major Liabilities    As of December 31,
   2011    2012
   RMB    RMB
   (in millions)
Liabilities

Insurance contracts
   1,199,373       1,384,537
Investment contracts
   69,797       66,639
Securities sold under agreements to repurchase
   13,000       68,499
Policyholder dividends payable
   46,368       44,240
Annuity and other insurance balances payable
   11,954       16,890
Bonds payable
   29,990       67,981
Deferred tax liabilities
   1,454       7,834
Other liabilities
   18,583       19,195
Total
   1,390,519       1,675,815
Liabilities
Our total liabilities increased by RMB ~~186,623~~285,296 million, or ~~18.4%~~20.5%, to RMB ~~1,013,481~~1,675,815 million in ~~2010~~2012 from RMB ~~1,200,104~~1,390,519 million in ~~2009.~~
2011.
92
Liabilities of Insurance Contracts
Liabilities of insurance contracts increased by RMB ~~199,971~~185,164 million, or ~~24.4%~~15.4%, to RMB ~~1,018,135~~1,384,537 million in ~~2010~~2012 from RMB ~~818,164~~1,199,373 million in ~~2009.~~2011. This was primarily due to ~~an increase in~~new insurance business ~~volume~~ and the accumulation of insurance ~~liabilities.~~liabilities from renewal business. As at the balance sheet date, our reserves for insurance contracts ~~satisfied~~passed liability adequacy ~~test.~~
testing.
99
Investment Contracts
~~Investment Contracts increased~~
The account balance of investment contracts decreased by RMB ~~2,845~~3,158 million, or ~~4.2%~~4.5%, to RMB ~~70,171~~66,639 million in ~~2010~~2012 from RMB ~~67,326~~69,797 million in ~~2009.~~2011. This was primarily due to ~~an increase~~the fact that certain group annuity customers transferred their funds to their accounts of enterprise annuity, which resulted in ~~business volume.~~
a decrease in the account volume of group annuity products specified in investment contracts.
Securities ~~sold~~Sold under ~~agreements~~Agreements to ~~repurchase~~Repurchase
Securities sold under agreements to repurchase ~~decreased~~increased by RMB ~~10,488~~55,499 million, or ~~31.3%~~426.9%, to RMB ~~23,065~~68,499 million in ~~2010~~2012 from RMB ~~33,553~~13,000 million in ~~2009.~~2011. This was primarily due to the need for liquidity ~~management demand.~~
management.
Policyholder Dividends Payable
Policyholder dividends payable decreased by RMB ~~1,759~~2,128 million, or ~~3.2%~~4.6%, to RMB ~~52,828~~44,240 million in ~~2010~~2012 from RMB ~~54,587~~46,368 million in ~~2009.~~2011. This was primarily due to a decrease in ~~unrealized profit of available-for-sale securities and our payment of policy dividends.~~
investment yields for participating products.
Annuity and Other Insurance Balances Payable
Annuity and other insurance balances payable increased by RMB ~~2,554~~4,936 million, or ~~44.6%~~41.3%, to RMB ~~8,275~~16,890 million in ~~2010~~2012 from RMB ~~5,721~~11,954 million in ~~2009.~~2011. This was primarily due to the accumulation of insurance liabilities.
~~Deferred Tax Liabilities~~Bonds Payable
~~Deferred tax liabilities decreased~~
Bonds payable increased by RMB ~~4,585~~37,991 million, or ~~28.0%~~126.7%, to RMB ~~11,776~~67,981 million in ~~2010~~2012 from ~~16,361~~29,990 million in ~~2009.~~2011. This was primarily due to ~~a decrease~~the issuance of subordinated term debt by us in ~~unrealized profit~~2012.
Deferred Tax Liabilities
Deferred tax liabilities increased by RMB 6,380 million, or 438.8%, to RMB 7,834 million in 2012 from 1,454 million in 2011. This was primarily due to an increase in the fair value of available-for-sale securities.
Equity Attributable to Equity Holders of the Company
As of December 31, ~~2010,~~2012, equity attributable to equity holders of the Company was RMB ~~208,710~~221,085 million and ~~decreased~~increased by RMB ~~2,362~~29,555 million, or ~~1.1%~~15.4%, from RMB ~~211,072~~191,530 million as of December 31, ~~2009.~~2011. This ~~was primarily due to a decrease of the fair value of available-for-sale securities resulting from the volatility of the capital markets and distribution of dividends to equity holders last year.~~
93
~~Year Ended December 31, 2009 Compared with Year Ended December 31, 2008~~

For the year ended December 31,
2008 2009
Total Revenues RMB RMB
(in millions)
Net premiums earned 265,177 275,077
Individual life insurance business 252,133 261,694
Group life insurance business 339 189
Short-term insurance business 12,725 13,194
Investment income 44,946 38,890
Investment income from securities at fair value through income 902 335
Investment income from available-for-sale securities 22,636 16,688
Investment income from held-to-maturity securities 9,245 9,882
Investment income from term deposits 11,378 10,805
Investment income from loans 696 1,172
Net realized gains/(losses) on financial assets (5,964 ) 21,244
Debt securities 2,445 3,346
Equity securities (8,409 ) 17,898
Net fair value gains/(losses) through income (7,194 ) 1,449
Debt securities 300 (277 )
Equity securities (7,494 ) 1,726
Other income 3,420 2,630
Total
300,385 339,290
~~Net Premiums Earned~~
~~Net premiums earned increased by RMB 9,900 million, or 3.7%, to RMB 275,077 million in 2009 from RMB 265,177 million in 2008. This increase~~ was primarily due to an increase in ~~insurance business volume.~~
the fair value of available-for-sale securities and the influence of the net profit during the fiscal year 2012.
100
Year Ended December 31, 2011 Compared with Year Ended December 31, 2010
Total Revenues    For the year ended December 31,
   2010    2011
   RMB    RMB
   (in millions)
Net premiums earned
   318,088       318,276
Individual life insurance business
   302,753       301,986
Group life insurance business
   468       434
Short-term insurance business
   14,867       15,856
Investment income
   48,872       60,722
Investment income from securities at fair value through profit or loss
   126       486
Investment income from available-for-sale securities
   20,173       21,811
Investment income from held-to-maturity securities
   10,538       10,691
Investment income from bank deposits
   16,363       24,978
Investment income from loans
   1,583       2,658
Other investment income
   89       98
Net realized gains and impairment on financial assets
   15,841       (11,208 )
Net fair value gains through profit or loss
   280       337
Other income
   2,757       2,772
Total
   385,838       370,899
Net Premiums Earned
Net premiums earned increased by RMB 188 million, or 0.06%, to RMB 318,276 million in 2011 from RMB 318,088 million in 2010.
Individual Life Insurance Business
Net premiums earned from the individual life insurance business ~~increased~~decreased by RMB ~~9,581~~767 million, or ~~3.8%~~0.3%, to RMB ~~261,694~~301,986 million in ~~2009~~2011 from RMB ~~252,113~~302,753 million in ~~2008. This increase was primarily due to~~2010. Our individual life insurance products are mainly distributed through exclusive individual agent channel and bancassurance channel. Although sales through the exclusive agent channel increased, sales through bancassurance business were affected by the adjustment of ~~our business structure to focus more on~~regulatory policies, which prohibited sales by insurance company sales representatives at commercial banks and banking operations of ~~products with regular premiums,~~post offices, which resulted in a ~~more steady increase of our~~decrease in first-year premiums and ~~renewal premiums.~~
in net premiums earned from individual life insurance business. First-year regular premiums decreased by RMB 4,053 million, or 7.8%. Renewal premiums increased by RMB 26,753 million, or 20.9%.
Group Life Insurance Business
Net premiums earned from the group life insurance business decreased by RMB ~~150~~34 million, or ~~44.2%~~7.3%, to RMB ~~189~~434 million in ~~2009~~2011 from RMB ~~339~~468 million in ~~2008.~~2010. This ~~decrease~~ was primarily due to the adjustment of our operation strategies with respect to group life insurance business, ~~development strategies~~pursuant to ~~focus more on development of risk-type products and to reduce the proportion~~which we reduced our sales of group ~~annuity~~whole life insurance products.
Short-term Insurance Business
Net premiums earned from short-term insurance business increased by RMB ~~469~~989 million, or ~~3.7%~~6.7%, to RMB ~~13,194~~15,856 million in ~~2009~~2011 from RMB ~~12,725~~14,867 million in 2008. Net premiums earned from the accident insurance business increased by RMB 864 million, or 14.3%, to RMB 6,886 million in 2009 from RMB 6,022 million in 2008 and net premiums earned from the health insurance business decreased by RMB 395 million, or 5.9%, to RMB 6,308 million in 2009 from RMB 6,703 million in 2008. These increases were2010. This was primarily due to our increased ~~development~~ efforts for the development of our accident insurance business by the implementation of policies on business performance evaluation and ~~health insurance business.~~
costs.
Investment Income
Investment income ~~decreased~~increased by RMB ~~6,056~~11,850 million, or ~~13.5%~~24.2%, to RMB ~~38,890~~60,722 million in ~~2009~~2011 from RMB ~~44,946~~48,872 million in ~~2008. The investment yield for the year ended December 31, 2009 was 5.78%, a 2.30 percentage point increase from the investment yield of 3.48% for the year ended December 31, 2008.~~
2010.

94
101
Investment Income from Securities at Fair Value through ~~Income~~Profit or Loss
Investment income from securities at fair value through ~~income decreased~~profit or loss increased by RMB ~~567~~360 million, or ~~62.9%~~285.7%, to RMB ~~335~~486 million in ~~2009~~2011 from RMB ~~902~~126 million in ~~2008. This was primarily due to a decrease in the total volume of securities at fair value through income and a decrease of dividends from securities investment funds.~~
~~Investment Income from Available-for-Sale Securities~~
Investment income from available-for-sale securities decreased by RMB 5,948 million, or 26.3%, to RMB 16,688 million in 2009 from RMB 22,636 million in 2008. This was primarily due to a decrease of dividends from securities investment funds.
~~Investment Income from Held-to-Maturity Securities~~
Investment income from held-to-maturity securities increased by RMB 637 million, or 6.9%, to RMB 9,882 million in 2009 from RMB 9,245 million in 2008. This was primarily due to an increase in interest income resulting from favorable structural adjustments of our investments in debt securities.
~~Investment Income from Term Deposits~~
Investment income from term deposits decreased by RMB 573 million, or 5.0%, to RMB 10,805 million in 2009 from RMB 11,378 million in 2008. This was primarily due to a decrease in interest income from deposits resulting from a decline in interest rates.
~~Investment Income from Loans~~
~~Investment income from loans increased by RMB 476 million, or 68.4%, to RMB 1,172 million in 2009 from RMB 696 million in 2008.~~2010. This was primarily due to an increase in interest income from debt securities at fair value through profit or loss resulting from the combined effects of the increased volume of these investments and an increase in interest rates.
Investment Income from Available-for-Sale Securities
Investment income from available-for-sale securities increased by RMB 1,638 million, or 8.1%, to RMB 21,811 million in 2011 from RMB 20,173 million in 2010. This was primarily due to an increase in interest income from available-for-sale debt securities.
Investment Income from Held-to-Maturity Securities
Investment income from held-to-maturity securities increased by RMB 153 million, or 1.5%, to RMB 10,691 million in 2011 from RMB 10,538 million in 2010. This was primarily due to the increased volume of our investments in ~~bonds~~held-to-maturity securities and an increase in interest rates.
Investment Income from Bank Deposits
Investment income from bank deposits increased by RMB 8,615 million, or 52.6%, to RMB 24,978 million in 2011 from RMB 16,363 million in 2010. This was primarily due to the increased volume of deposits attributable to our increased allocation in deposits and an increase in interest rates on deposits.
Investment Income from Loans
Investment income from loans increased by RMB 1,075 million, or 67.9%, to RMB 2,658 million in 2011 from RMB 1,583 million in 2010. This was primarily due to the increased volume of policy loans and debt investment ~~programs.~~
plans, as well as an increase in interest rates.
Net Realized ~~Gains/(Losses)~~Gains and Impairment on Financial Assets
Net realized ~~gains/(losses)~~gains and impairment on financial assets decreased by RMB 27,049 million to losses of RMB 11,208 million in 2011 from gains of RMB 15,841 million in 2010. This was primarily due to an increase in impairment losses of available-for-sale securities resulting from the continued weakness of the Chinese capital markets.
Net Fair Value Gains through Profit or Loss
Our net fair value gains through profit or loss increased by RMB ~~27,208 million to RMB 21,244 million in 2009 from RMB (5,964) million in 2008.~~
~~Debt Securities~~
~~Net realized gains/(losses) on financial assets from debt securities increased by RMB 901~~57 million, or ~~36.9%~~20.4%, to RMB ~~3,346~~337 million in ~~2009~~2011 from RMB ~~2,445~~280 million in ~~2008.~~2010. This was primarily due to an increase in income from the ~~purchase and sale~~buy-sale price differential in the trading of ~~debt securities resulting from our adjustment of debt investment strategies by taking advantage of market opportunities.~~
funds at fair value through profit or loss.
102
~~Equity Securities~~Other Income
~~Net realized gains/(losses) on financial assets from equity securities~~
Other income increased by RMB ~~26,307~~15 million, or 0.5%, to RMB ~~17,898~~2,772 million in ~~2009~~2011 from RMB ~~(8,409)~~2,757 million in ~~2008.~~2010. This was primarily due to an increase in ~~income~~commission fees earned from ~~the purchase and sale of stocks and fund interests by taking advantage of favorable stock market conditions and a decrease in assets impairment.~~
CLPCIC.

Benefits, Claims and Expenses    For the year ended December 31,
   2010    2011
   RMB    RMB
   (in millions)
Insurance benefits and claims

Life insurance death and other benefits
   71,237       101,349
Accident and health claims and claim adjustment expenses
   8,740       7,789
Increase in insurance contracts liabilities
   199,655       181,579
Investment contracts benefits
   1,950       2,031
Policyholder dividends resulting from participation in profits
   13,224       6,125
Underwriting and policy acquisition costs
   27,256       27,434
Finance costs
   304       873
Administrative expenses
   20,285       21,549
Other operating expenses
   3,351       3,275
Statutory insurance fund contribution
   599       595
Total
   346,601       352,599
Segment information of insurance benefits and claims

Individual life insurance business
   270,341       282,575
Group life insurance business
   551       353
Short-term insurance business
   8,740       7,789
Total
   279,632       290,717
95
~~Net Fair Value Gains/(Losses)Through Income~~
We reflect net fair value gains/(losses) through income in current year income. Our net fair value gains/(losses) through income increased by RMB 8,643 million to RMB 1,449 million in 2009 from RMB (7,194) million in 2008.
~~Debt Securities~~
Net fair value gains/(losses) through income from debt securities decreased by RMB 577 million, or 192.3%, to RMB (277) million in 2009 from RMB 300 million in 2008. This was primarily due to a decrease of the market value of debt securities (held-for—trading) resulting from unfavorable market conditions.
~~Equity Securities~~
Net fair value gains/(losses) through income from equity securities increased by RMB 9,220 million to RMB 1,726 million in 2009 from RMB (7,494) million in 2008. This was primarily due to an increase of unrealized profits from stocks and fund interests resulting from favorable market conditions.
~~Other Income~~
Other income decreased by RMB 790 million, or 23.1%, to RMB 2,630 million in 2009 from RMB 3,420 million in 2008. This was primarily due to a decrease in policy fee income from investment contracts.

For the year ended December 31,
2008 2009
Benefits, Claims and Expenses RMB RMB
(in millions)
Insurance benefits and claims 231,949 237,038
Individual life insurance business 223,805 228,968
Group life insurance business 503 262
Short-term insurance business 7,641 7,808
Investment contract benefits 1,931 2,142
Policy dividends resulting from participation in profits 1,671 14,487
Underwriting and policy acquisition costs 24,200 22,936
Administrative expenses 16,652 18,719
Other operating expenses 3,409 2,390
Insurance Benefits and Claims
Insurance benefits and claims, net of amounts ceded through reinsurance, increased by RMB ~~5,089~~12,234 million, or ~~2.2%~~4.5%, to RMB ~~237,038~~282,575 million in ~~2009~~2011 from RMB ~~231,949~~270,341 million in ~~2008.~~
2010.
Life insurance death and other benefits payouts increased by RMB 30,112 million, or 42.3%, to RMB 101,349 million in 2011 from RMB 71,237 million in 2010. This was primarily due to an increase in maturity payouts. Maturity payouts increased by RMB 18,480 million, or 50.7%, compared with that in 2010. Accident and health claims and claim adjustment expenses decreased by RMB ~~14,801~~951 million, or ~~16.5%~~10.9%, to RMB ~~74,858~~7,789 million in ~~2009~~2011 from RMB ~~89,659~~8,740 million in ~~2008.~~2010. This was primarily due to improvements in the business structure of short-term insurance and enhanced business quality control. Increase in insurance contracts liabilities decreased by RMB 18,076 million, or 9.1%, to RMB 181,579 million in 2011 from RMB 199,655 million in 2010. This was primarily due to a RMB 804 million decrease in premium income from insurance contracts and a RMB 36,030 million increase in the release of liabilities. The release of liabilities mainly consists of release of reserves due to payments for maturity, death and lapse.
Individual Life Insurance Business
Insurance benefits and claims attributable to individual life insurance business increased by RMB 12,234 million, or 4.5%, to RMB 282,575 million in 2011 from RMB 270,341 million in 2010. This was primarily due to an increase in benefits payments and a decrease in insurance contracts liabilities.
Group Life Insurance Business
Insurance benefits and claims attributable to group life insurance business decreased by RMB 198 million, or 35.9%, to RMB 353 million in 2011 from RMB 551 million in 2010. This was primarily due to a decrease in ~~maturity payouts. Maturity payouts~~“increase in insurance contracts liabilities”.
Short-term Insurance Business
Insurance benefits and claims attributable to the short-term insurance business decreased by RMB ~~14,474~~951 million, or ~~24.7%, compared with that in 2008. Accident and health claims and claim adjustment expenses increased by RMB 167 million, or 2.2%~~10.9%, to RMB ~~7,808~~7,789 million in ~~2009~~2011 from RMB ~~7,641~~8,740 million in ~~2008.~~2010. This was primarily due to ~~growth in~~the optimization of short-term insurance ~~business. Increase in insurance contracts liabilities~~business structure and the enhancement of business quality control.
103
Investment Contract Benefits
Investment contract benefits increased by RMB ~~19,723~~81 million, or ~~14.6%~~4.2%, to RMB ~~154,372~~2,031 million in ~~2009~~2011 from RMB ~~134,649~~1,950 million in ~~2008.~~2010. This was primarily due to a RMB 9,435 million increase in premium income reflecting accumulation of insurance liabilities for future obligations and a RMB 12,809 million decrease in the release of liabilities reflecting lower insurance benefit payouts. In addition, changes in assumptions also reduced increase in insurance contract liabilities by RMB 4,365 million. Risk margin is recalculated based on updated assumptions at the reporting date, with changes are recognized in net profit.
96
~~Individual Life Insurance Business~~
~~Insurance benefits and claims for the individual life insurance business increased by RMB 5,163 million, or 2.3%, to RMB 228,968 million in 2009 from RMB 223,805 million in 2008. This increase~~ was primarily due to an increase in ~~business volume and the accumulation of insurance liabilities.~~
~~Group Life Insurance Business~~
Insurance benefits and claims for the group life insurance business decreased by RMB 241 million, or 47.9%, to RMB 262 million in 2009 from RMB 503 million in 2008. This decrease was primarily due to the adjustment of our mix of products to reduce the business volume of group annuity products, which in turn resulted in a decrease of insurance benefits and claims for group annuity products.
~~Short-term Insurance Business~~
Insurance benefits and claims for the short-term insurance business increased by RMB 167 million, or 2.2%, to RMB 7,808 million in 2009 from RMB 7,641 million in 2008. This increase was primarily due to an increase in business volume.
~~Investment Contract Benefits~~
Investment contract benefits increased by RMB 211 million, or 10.9%, to RMB 2,142 million in 2009 from RMB 1,931 million in 2008. This increase was primarily due to an increase in average account balances resulting from the increased volume of investment contracts issued.
interest payments.
Policyholder Dividends Resulting from Participation in Profits
Policyholder dividends resulting from participation in profits decreased by RMB 7,099 million, or 53.7%, to RMB 6,125 million in 2011 from RMB 13,224 million in 2010. This was primarily due to a decrease in investment yields for participating products.
Underwriting and Policy Acquisition Costs
Underwriting and policy acquisition costs increased by RMB ~~12,816~~178 million, or ~~767.0%~~0.7%, to RMB ~~14,487~~27,434 million in ~~2009~~2011 from RMB ~~1,671~~27,256 million in ~~2008.~~2010. This increase was generally in proportion to the growth of our business and was also affected by the adjustment of our business structure.
Finance Costs
Finance costs increased by 187.2% from 2010. This was primarily due to an increase in ~~the investment yield~~interest payments for ~~participating products.~~
~~Underwriting~~securities sold under agreements to repurchase and ~~Policy Acquisition Costs~~
~~Underwriting and policy acquisition costs decreased~~for subordinated term debt issued by RMB 1,264 million, or 5.2%, to RMB 22,936 million in 2009 from RMB 24,200 million in 2008. This decrease was primarily due to the adjustment of our product structure and improvement of our sales approach. Underwriting and policy acquisition costs were approximately 8.3% and 9.1% of net premiums earned in 2009 and 2008, respectively.
us.
Administrative Expenses
Administrative expenses include employees’ remuneration and other administrative expenses. Administrative expenses increased by RMB ~~2,067~~1,264 million, or ~~12.4%~~6.2%, to RMB ~~18,719~~21,549 million in ~~2009~~2011 from RMB ~~16,652~~20,285 million in ~~2008.~~2010. This was primarily due to an increase ~~primarily reflected business development~~in operation and ~~increased~~management costs resulting from certain factors including inflation, increasing market ~~competition.~~
competition and rising labor costs.
97
Other Operating Expenses
Other operating expenses, which primarily consist of foreign exchange losses and expenses for non-core business, decreased by RMB ~~1,019~~76 million, or ~~29.9%~~2.3%, to RMB ~~2,390~~3,275 million in ~~2009~~2011 from RMB ~~3,409~~3,351 million in ~~2008.~~2010. This ~~decrease~~was primarily ~~reflected~~due to a decrease in ~~foreign exchange losses resulting from a relatively stable interest rate~~.

For the year ended December 31,
2008 2009
Profit RMB RMB
(in millions)
Profit before income tax 19,959 41,745
Individual life insurance business 19,075 39,769
Group life insurance business 81 467
Short-term insurance business 596 420
Income tax 685 8,709
Net profit attributable to equity holders of the company 19,137 32,881
business tax and surcharges expenses.
Profit    For the year ended December 31,
   2010    2011
   RMB    RMB
   (in millions)
Profit before income tax
   41,008       20,513
Individual life insurance business
   37,690       17,967
Group life insurance business
   740       57
Short-term insurance business
   385       502
Other business
   2,193       1,987
Income tax
   7,197       2,022
Net profit attributable to equity holders of the company
   33,626       18,331
104
Profit before Income Tax
Our profit before income tax ~~increased~~decreased by RMB ~~21,786~~20,495 million, or ~~109.2%~~50.0%, to RMB ~~41,745~~20,513 million in ~~2009~~2011 from RMB ~~19,959~~41,008 million in ~~2008.~~
2010.
Individual Life Insurance Business
Profit before income tax in the individual life insurance business ~~increased~~decreased by RMB ~~20,694~~19,723 million, or ~~108.5%~~52.3%, to RMB ~~39,769~~17,697 million in ~~2009~~2011 from RMB ~~19,075~~37,690 million in ~~2008.~~2010. This was primarily due to anthe impact on individual life insurance segment caused by the decrease in investment income and the increase in ~~investment yields~~impairment losses resulting from ~~favorable~~the continued weakness of the Chinese capital ~~market conditions.~~
markets.
Group Life Insurance Business
Profit before income tax in the group life insurance business ~~increased~~decreased by RMB ~~386~~683 million, or ~~476.5%~~92.3%, to RMB ~~467~~57 million in ~~2009~~2011 from RMB 81740 million in ~~2008.~~2010. This was primarily due to the ~~adjustment of our business strategies to focus more~~impact on ~~sales of risk-type~~group life insurance ~~products which are more profitable~~segment caused by the decrease in investment income and an increase in ~~investment yields~~impairment losses resulting from ~~favorable~~the continued weakness of the Chinese capital ~~market conditions.~~
markets.
Short-term Insurance Business
Profit before income tax in short-term insurance business ~~decreased~~increased by RMB ~~176~~117 million, or ~~29.5%~~30.4%, to RMB 502 million in 2011 from RMB ~~420~~385 million in ~~2009 from RMB 596 million in 2008.~~2010. This was primarily due to ~~increased market competition.~~
the optimization of short-term insurance business structure and a decrease in claims payments.
Income Tax
We pay income tax according to applicable Chinese enterprise income tax regulations and rules. Income tax ~~including current and deferred taxations, increased~~decreased by RMB ~~8,024~~5,175 million, or ~~1,171.4%~~71.9%, to RMB ~~8,709~~2,022 million in ~~2009~~2011 from RMB ~~685~~7,197 million in ~~2008.~~2010. This ~~increase was primarily due to an increase in profit before income tax, a decrease in non-taxable income and an increase in additional tax liability from expenses not deductible for tax purposes.~~
Non-taxable income mainly includes interest income from government bonds and distribution from securities investment funds. The non-taxable income decreased by RMB 1,897 million, or 41.9%, to RMB 2,627 million in 2009 from RMB 4,524 million in 2008.
98
Expenses not deductible for tax purposes mainly include commissions, brokerage and donation expenses in excess of deductible amounts as allowed by relevant tax regulations. Expenses not deductible for tax purposes increased by RMB 324 million, or 165.3%, to RMB 520 million in 2009 from RMB 196 million in 2008.
~~Our effective tax rate for 2009 was 20.86%, which increased by 14.8 percentage points from an effective tax rate for 2008 of 6.1%. The increase~~ was primarily due to a decrease in ~~non-taxable~~taxable income and ~~an increase in additional~~the impact of deferred tax. Our effective tax ~~liability from expenses not deductible~~rate for ~~tax purposes.~~
2011 was 9.86%.
Net Profit Attributable to Equity Holders of the Company
For the reasons set forth above, net profit attributable to equity holders of the Company ~~increased~~decreased by RMB ~~13,744~~15,295 million, or ~~71.8%~~45.5%, to RMB ~~32,881~~18,331 million in ~~2009~~2011 from RMB ~~19,137~~33,626 million in ~~2008.~~2010. This ~~increase~~ was primarily due to a decrease in realized gains on equity securities and an increase in ~~investment yield~~impairment losses resulting from ~~favorable~~the continued weakness of the Chinese capital ~~market conditions.~~

As of December 31,
2008 2009
Major Assets RMB RMB
(in millions)
Investment assets 937,403 1,172,145
Term deposits 228,272 344,983
Held-maturity investments 211,929 235,099
Available-for-sale securities 424,939 517,499
Securities at fair value through income 14,099 9,133
Cash and cash equivalents 34,085 36,197
Loans 17,926 23,081
markets.
Major Assets    As of December 31,
   2010    2011
   RMB    RMB
   (in millions)
Investment assets
   1,336,245       1,494,969
Term deposits
   441,585       520,793
Held-to-maturity securities
   246,227       261,933
Available-for-sale securities
   548,121       562,948
Securities at fair value through profit or loss
   9,762       23,683
Securities purchased under agreements to resell
   —         2,370
Cash and cash equivalents
   47,854       55,985
Loans
   36,543       61,104
Statutory deposits-restricted
   6,153       6,153
Other assets
   74,334       88,938
Total
   1,410,579       1,583,907
105
Investment Assets
Our total investment assets increased by RMB ~~234,742~~158,724 million, or ~~25.0%~~11.9%, to RMB ~~1,172,145~~1,494,969 million in ~~2009~~2011 from RMB ~~937,403~~1,336,245 million in ~~2008.~~
2010.
Term Deposits
Term deposits increased by RMB ~~116,711~~79,208 million, or ~~51.1%~~17.9%, to RMB ~~344,983~~520,793 million in ~~2009~~2011 from RMB ~~228,272~~441,585 million in ~~2008.~~2010. This ~~increase~~ was primarily due to our increased efforts for investment in negotiated deposits ~~with floating~~by taking advantage of market opportunities of deposits offering high interest rates.
Held-to-Maturity ~~Investments~~Securities
Held-to-maturity ~~investments~~securities increased by RMB ~~23,170~~15,706 million, or ~~10.9%~~6.4%, to RMB ~~235,099~~261,933 million in ~~2009~~2011 from RMB ~~211,929~~246,227 million in ~~2008.~~2010. This was primarily due to an increase in ~~our total~~the volume of investment assets.
Available-for-Sale Securities
Available-for-sale assets increased by RMB ~~92,560~~14,827 million, or ~~21.8%~~2.7%, to RMB ~~517,499~~562,948 million in ~~2009~~2011 from RMB ~~424,939~~548,121 million in ~~2008.~~2010. This was primarily due to an increase in ~~our total investment assets.~~
the volume of available-for-sale debt securities, which was partially offset by the decrease in fair value of equity securities.
99
Securities at Fair Value Through ~~Income~~Profit or Loss
Securities at fair value through ~~income~~profit or loss increased by RMB 13,921 million, or 142.6%, to RMB 23,683 million in 2011 from RMB 9,762 million in 2010. This was primarily due to the increased volume of debt securities at fair value through profit or loss.
Cash and Cash Equivalents
Cash and cash equivalents increased by RMB 8,131 million, or 17.0%, to RMB 55,985 million in 2011 from RMB 47,854 million in 2010. This was primarily due to the needs for investment assets allocation and liquidity management.
Loans
Loans increased by RMB 24,561 million, or 67.2%, to RMB 61,104 million in 2011 from RMB 36,543 million in 2010. This was primarily due to an increase in the demand for policy loans, as well as our increased efforts for investment in debt investment plans by taking advantage of market opportunities of investments offering high interest rates.
Major Liabilities    As of December 31,
   2010    2011
   RMB    RMB
   (in millions)
Liabilities

Insurance contracts
   1,018,135       1,199,373
Investment contracts
   70,171       69,797
Securities sold under agreements to repurchase
   23,065       13,000
Policyholder dividends payable
   52,828       46,368
Annuity and other insurance balances payable
   8,275       11,954
Bonds payable
   —         29,990
Deferred tax liabilities
   11,776       1,454
Other liabilities
   15,854       18,583
Total
   1,200,104       1,390,519
106
Liabilities
Our total liabilities increased by RMB 190,415 million, or 15.9%, to RMB 1,390,519 million in 2011 from RMB 1,200,104 million in 2010.
Liabilities of Insurance Contracts
Liabilities of insurance contracts increased by RMB 181,238 million, or 17.8%, to RMB 1,199,373 million in 2011 from RMB 1,018,135 million in 2010. This was primarily due to new insurance business and the accumulation of insurance liabilities. As at the balance sheet date, our reserves for insurance contracts passed applicable liability adequacy tests.
Investment Contracts
Account balance of investment contracts decreased by RMB ~~4,966~~374 million, or ~~35.2%~~0.5%, to RMB ~~9,133~~69,797 million in ~~2009~~2011 from RMB ~~14,099~~70,171 million in ~~2008.~~2010. This was primarily due to a decrease in the account volume of ~~held-for-trading fund interests.~~
universal insurance products.
~~Cash and Cash Equivalents~~Securities Sold under Agreements to Repurchase
~~Cash and cash equivalents increased~~
Securities sold under agreements to repurchase decreased by RMB ~~2,112~~10,065 million, or ~~6.2%~~43.6%, to RMB ~~36,197~~13,000 million in ~~2009~~2011 from RMB ~~34,085~~23,065 million in 2008. This was primarily due to an increase in the total investment assets offset in part by the decrease of the proportion of cash and cash equivalents in the total investment assets resulting from our substantially increased investment in negotiated deposits.
~~Loans~~
~~Loans increased by RMB 5,155 million, or 28.8%, to RMB 23,081 million in 2009 from RMB 17,926 million in 2008.~~2010. This was primarily due to the ~~increased demand~~needs for ~~policy loans.~~

As of December 31,
2008 2009
Major Liabilities RMB RMB
(in millions)
Liabilities 812,622 1,013,000
Liabilities of insurance contracts 662,865 818,164
Financial liabilities 76,453 100,879
Policyholder dividends payable 43,178 54,587
Annuity and other insurance balance payable 4,980 5,721
Deferred tax liabilities 10,344 16,361
liquidity management.
~~Liabilities~~Policyholder Dividends Payable
~~Our total liabilities increased~~
Policyholder dividends payable decreased by RMB ~~200,859~~6,460 million, or ~~24.7%~~12.2%, to RMB ~~1,013 billion~~46,368 million in ~~2009~~2011 from RMB ~~812,622~~52,828 million in ~~2008.~~
~~Liabilities of Insurance Contracts~~
~~Liabilities of insurance contracts increased by RMB 155,299 million, or 23.4%, to RMB 818,164 million in 2009 from RMB 662,865 million in 2008.~~2010. This was primarily due to ~~an increase in business volume and the accumulation of insurance liabilities.~~
~~Financial Liabilities~~
Financial liabilities increased by RMB 24,426 million, or 31.9%, to RMB 100,879 million in 2009 from RMB 76,453 million in 2008. This was primarily due to an increase in securities sold under agreements to repurchase.
~~Policyholder Dividends Payable~~
~~Policyholder dividends payable increased by RMB 11,409 million, or 26.4%, to RMB 54,587 million in 2009 from RMB 43,178 million in 2008. This was primarily due to an increase~~a decrease in investment ~~yield~~yields for participating ~~products and an increase in unrealized profit of financial assets (available for sale).~~
products.
~~100~~
Annuity and Other Insurance Balances Payable
Annuity and other insurance balances payable increased by RMB ~~741~~3,679 million, or ~~14.9%~~44.5%, to RMB ~~5,721~~11,954 million in ~~2009~~2011 from RMB ~~4,980~~8,275 million in ~~2008. This was primarily due to the accumulation of insurance liabilities.~~
~~Deferred Tax Liabilities~~
~~Deferred tax liabilities increased by RMB 6,017 million, or 58.2%, to RMB 16,361 million in 2009 from 10,344 million in 2008.~~2010. This was primarily due to an increase in ~~unrealized profit~~maturity benefits payable.
Bonds Payable
The change in the amount of bonds payable was primarily due to the issuance of subordinated term debt by us in 2011.
107
Deferred Tax Liabilities
Deferred tax liabilities decreased by RMB 10,322 million, or 87.7%, to RMB 1,454 million in 2011 from ~~financial assets (available for sale).~~
11,776 million in 2010. This was primarily due to a decrease in the fair value of available-for-sale securities.
Equity Attributable to Equity Holders of the Company
As of December 31, ~~2009,~~2011, equity attributable to equity holders of the Company was RMB ~~211,072~~191,530 million and ~~increased~~decreased by RMB ~~37,125~~17,180 million, or ~~21.3%~~8.2%, from RMB ~~173,947~~208,710 million as of December 31, ~~2008.~~2010. This ~~increase~~ was primarily due to ~~an increase~~a decrease in ~~business volume~~the fair value of available-for-sale securities resulting from the continued weakness of the Chinese capital markets, and ~~investment yields.~~
the distribution of dividends to equity holders last year.
B. LIQUIDITY AND CAPITAL RESOURCES
Liquidity Sources
Our principal cash inflows come from insurance premiums, deposits from investment contracts, proceeds from sales and maturity of financial assets and investment income. The primary liquidity concerns with respect to these cash inflows are the ~~risk~~risks of early withdrawals by contract holders and policyholders, as well as the risks of default by debtors, interest rate changes and other market volatilities. We closely monitor and manage these risks. See “Item 4. Information on the Company—Business Overview—Investments”.
~~Additional sources~~
Our cash and bank deposits provide us with a source of liquidity to meet ~~unexpected~~normal cash ~~outflows are available from our investment portfolio.~~outflows. As of December 31, ~~2010,~~2012, the amount of cash and cash equivalents was RMB ~~47,854~~69,452 million. In addition, substantially all of our term deposits with banks allow us to withdraw funds on deposit, subject to a penalty interest charge. As of December 31, ~~2010,~~2012, the amount of term deposits was RMB ~~441,585~~641,080 million. ~~As of December 31, 2010, investments in debt securities had a fair value of RMB 606,269 million.~~
Our investment portfolio also provides us with a source of liquidity to meet unexpected cash outflows. As of December 31, ~~2010,~~2012, investments in debt securities had a fair value of RMB 826,574 million and investments in equity securities had a fair value of RMB ~~195,918 million and investments in debt securities had a fair value of RMB 606,269~~164,742 million. However, the PRC securities market is still at an early stage of development, and we are subject to market liquidity risk because the market capitalization and trading volumes of the public exchanges are relatively lower than those in more developed financial markets. We are also subject to market liquidity risk due to the large size of our investments in some of the markets in which we invest. From time to time, some of our ~~positions in our~~holdings of investment securities may be large enough to have an influence on the market value. These factors may limit our ability to sell these investments at an adequate price, or at all.

Liquidity Uses
Our principal cash outflows primarily relate to the liabilities associated with our various life insurance, annuity and accident and health insurance products, dividends and interest payments on our insurance policies and annuity contracts, operating expenses, income taxes and dividends that may be declared and payable to our shareholders. ~~Liabilities~~Cash outflows arising from our insurance activities primarily relate to benefit payments under these insurance products, as well as payments for policy surrenders, policy withdrawals and policy loans.
We believe that our sources of liquidity are sufficient to meet our current cash requirements.

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Consolidated Cash Flows
We have established a cash flow testing system and conduct regular tests to monitor the cash inflows and outflows under various changing circumstances and adjust accordingly the asset portfolio to ensure sufficient sources of liquidity.
~~The following sets forth information regarding consolidated cash flows for the periods indicated.~~
Net cash inflow from operating activities was RMB ~~178,600~~132,182 million in ~~2010, an increase~~2012, a decrease of RMB ~~28,900~~1,771 million, or 1.3%, from RMB ~~149,700~~133,953 million in ~~2009.~~2011. This ~~increase~~decrease was primarily due to an increase in ~~written premiums and a decrease in claims payments.~~
insurance benefits.
Net cash outflow from investing activities was RMB ~~135,937~~203,804 million in ~~2010, a decrease~~2012, an increase of RMB ~~27,814~~70,213 million, or 52.6%, from RMB ~~163,751~~133,591 million in ~~2009.~~2011. This ~~decrease~~increase was primarily due to the demand of investment management.
Net cash ~~outflow used in~~inflow from financing activities was RMB ~~30,681~~85,089 million in ~~2010, a change~~2012, an increase of RMB ~~46,848~~77,098 million from net cash inflow of RMB ~~16,167~~7,991 million in ~~2009.~~2011. This ~~change~~increase was primarily due to ~~an increase in distributions of cash dividends in 2010 and~~ the demand of liquidity management.
Our global share offering in December 2003 provided cash proceeds of approximately RMB 24,707 million (US$3,062 million). As of the date of this annual report, a substantial part of the cash proceeds from our global offering was held in bank deposit accounts denominated in foreign currencies in China, part of the cash proceeds was invested in stocks listed on overseas stock exchanges, and part of the cash proceeds was invested in debt securities denominated in foreign currencies. We gradually converted approximately US$300 million of the cash proceeds into Renminbi to reduce foreign exchange risks. We invested approximately US$433 million, in addition to RMB 2,282 million, in Guangdong Development Bank in December 2006. We used approximately HK$~~5.8~~ 9 billion for investments in Sino-Ocean Land Holdings Limited ~~during its target offering~~ in ~~2009.~~
2009 and 2010.
Our A share offering in December 2006 provided cash proceeds of approximately RMB 27,810 million. As at the end of ~~2010,~~2012, the cash proceeds from our A share offering were used to increase our share capital.

Our issuance of subordinated term debt in June and November 2012 provided cash proceeds of approximately RMB 37,990 million. As at the end of 2012, cash proceeds from the issuance of subordinated term debt were used to replenish our supplementary capital and raise our solvency ratio in accordance with applicable laws and approvals by regulatory authorities.
Ratio of Assets and Liabilities
Our ratio of assets and liabilities (total liabilities divided by total assets) as at December 31, ~~2008,~~2012, December 31, ~~2009~~2011 and December 31, 2010 are as follows:

As at December 31, 2008 As at December 31, 2009 As at December 31, 2010

Ratio of assets and liabilities 82.29 % 82.65 % 85.08 %
   As at December 31, 2010 As at December 31, 2011 As at December 31, 2012
Ratio of assets and liabilities
   85.08 % 87.79 % 88.25 %

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Insurance Solvency Requirements
The solvency ratio of an insurance company is a measure of capital adequacy, which is calculated by dividing the actual capital of the company (which is its admissible assets less admissible liabilities, determined in accordance with relevant CIRC rules) by the minimum capital it is required to meet. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Solvency requirements”. The following table shows our solvency ratio as of December 31, ~~2008, 2009~~2012, 2011 and 2010:

As of December 31, 2008 As of December 31, 2009 As of December 31, 2010
(RMB in millions,
except percentage data)
Actual capital 124,561 147,119 123,769
Minimum capital 40,154 48,459 58,385
Solvency ratio 310.21 % 303.59 % 211.99 %
~~The decrease~~
   As of December 31, 2010 As of December 31, 2011 As of December 31, 2012
   (RMB in millions,
except percentage data)
Actual capital
   123,769    113,685    176,024
Minimum capital
   58,385    66,826    74,718
Solvency ratio
   211.99 % 170.12 % 235.58 %
Benefiting from the increase in our comprehensive income in 2012, our solvency ratio increased to some extent. Meanwhile, we successfully issued subordinated term debt of RMB 38 billion by actively taking advantage of favorable opportunities, thereby further raising our solvency ratio. We closely monitor changes in our solvency ~~ratio~~ratio.
We issued subordinated term debt of RMB 28 billion and RMB 10 billion in June and November 2012, respectively, by taking advantage of favorable market opportunities, which effectively improved our solvency ratio. The subordinated term debt was ~~primarily due~~issued to ~~an increase~~qualified investors who meet applicable regulatory requirements, with a maturity term of ten years. With respect to the subordinated term debt of RMB 28 billion issued in June 2012, the ~~minimum capital requirement resulting from our business development, payment of dividends in 2010 and~~coupon rate per annum for the ~~volatility~~first five years is 4.70%. We have the right to redeem at par value at the end of the ~~capital markets~~fifth year. If we do not exercise the redemption right, the coupon rate per annum will be 6.70% for the second five years. With respect to the subordinated term debt of RMB 10 billion issued in ~~2010.~~
November 2012, the coupon rate per annum for the first five years is 4.58%. We have the right to redeem at par value at the end of the fifth year. If we do not exercise the redemption right, the coupon rate per annum will be 6.58% for the second five years.
Contractual Obligations and Commitments
The following table sets out our contractual obligations and commitments as of December 31, ~~2010.~~

Later
than 3
Not Later than years but
later 1 year but not later Later
than not later than 5 than
As of December 31, 2010 1 year than 3 years years 5 years Total
(RMB in millions)
Securities sold under agreements to repurchase 23,065 — — — 23,065
Annuity and other insurance balances payable 8,275 — — — 8,275
Insurance contracts (12,805 ) 59,027 98,822 1,679,736 1,824,780
Investment contracts 15,566 18,495 14,320 47,219 95,600
Off balance sheet operating leases 338 365 88 42 833
Capital commitments 4,847 235 — — 5,082
Total
39,286 78,122 113,230 1,726,997 1,957,635
2012.
      Not
later
than
1 year    Later than
1 year but
not later
than 3 years    Later
than 3
years but
not later
than 5
years    Later
than
5 years    Total
As of December 31, 2012
   (RMB in millions)

Securities sold under agreements to repurchase
   68,499       —         —         —         68,499
Bonds payable
   2,077       6,848       73,198       —         82,123
Annuity and other insurance balances payable
   16,890       —         —         —         16,890
Insurance contracts
   30,970       70,702       192,336       2,062,150       2,356,158
Investment contracts
   16,053       18,294       11,325       45,846       91,518
Off balance sheet operating leases
   394       385       92       17       888
Capital commitments
   6,596       5,420       15       29       12,060
Total
   141,479       101,649       276,966       2,108,042       2,628,136
Capital commitments mainly represent our commitments with respect to the acquisition of property, plant and equipment.
The amounts set forth in the table above for insurance contracts and investment contracts in each column are the cash flows representing expected future benefit payments on policies in force as at December 31, ~~2010,~~2012, relating to premiums received through December 31, ~~2010.~~2012. No consideration is given to future premiums payments and the cash flows resulting therefrom, even though in the case for traditional insurance policies and certain investment contracts, the receipt of such premiums is necessary for the policies to remain in full force. The estimate is affected by numerous assumptions (depending on the product type), including assumptions related to mortality, morbidity, lapses, withdrawals, credited rates, loss ratio, claim adjustment expenses and other assumptions which affect our estimates of future payments. Many of these assumptions are inherently uncertain and outside our control. Accordingly, the actual experience may differ from our estimates.

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Furthermore, as the benefit payments reported in the table above are not discounted from the date of payment back to December 31, ~~2010~~2012 and do not reflect the impact of future premiums, the sum of these payment amounts are different from the amount of corresponding liabilities in our consolidated balance sheet as of December 31, ~~2010.~~2012. Policyholder dividends will not become a contractual obligation until the applicable policy anniversary is reached and the dividend amount is credited to the policy benefit liability or paid to the policyholder, and hence are not included in the table above. Reinsurance recoveries have not been taken into account.
Other than as set forth under capital commitments, we had no material, individually or in the aggregate, purchase obligations as of December 31, ~~2010.~~
2012.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
None.
D. TREND INFORMATION
Please refer to our discussion in each section under “—Overview of Our Business”, “—Factors Affecting Our Results of Operations”, “—Critical Accounting Policies” and “—Operating Results”.
We review assumptions used in establishing reserves for long term insurance contracts and the impact of changes in these assumptions on our net profit. Changes in these assumptions might have a significant impact on our operating results. The changes in these assumptions resulted in an increase of RMB ~~6.4 billion~~318 million in profit before income tax in ~~2010, an increase~~2012, a decrease of RMB ~~8.1 billion~~3,268 million in profit before income tax in ~~2009~~2011 and an increase of RMB ~~3.7 billion~~6,382 million in profit before income tax in ~~2008.~~2010. The sensitivity analysis of these assumptions is as follows:
•holding all other variables constant, if mortality rates and morbidity rates increase or ~~decease~~decrease from current best estimates by 10%, pre-tax profit for the year would have been RMB ~~9,993~~11,319 million or RMB ~~10,435~~11,901 million lower or higher.
•holding all other variables constant, if lapse rates increase or ~~decease~~decrease from current best estimates by 10%, pre-tax profit for the year would have been RMB ~~5,862~~5,683 million or RMB ~~6,221~~6,022 million lower or higher.
•holding all other variables constant, if the discount rates are 50 basis points higher or lower than current best estimates, pre-tax profit for the year would have been RMB ~~26,858~~37,263 million or RMB ~~31,084~~42,574 million higher or lower.
See ~~also Note~~alsoNote 4.1.3 and Note ~~13(c)~~13 to our consolidated financial statements included elsewhere in this annual report.
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E. OFF-BALANCE SHEET ARRANGEMENTS
As of December 31, ~~2010, we had not entered into any~~2012, there were no off-balance sheet ~~arrangements.~~
arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
See “—Liquidity and Capital Resources—Contractual Obligations and Commitments”.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT
The following table sets forth information regarding our current directors and executive officers. Unless otherwise indicated, their business address is c/o China Life Insurance Company Limited, 16 Financial Street, Xicheng District, Beijing 100033, China.
Name
   Age
~~Name~~ ~~Age~~
Position
Yang ~~Chao~~Mingsheng    61 57    Chairman of the board of directors and executive director
Wan Feng    52 54    President and executive director
Lin Dairen    52 54    Vice President and executive director
Liu Yingqi    53 54    Vice President, executive director and secretary of the board of directors
Miao Jianmin    46 48    Non-executive director
~~Shi Guoqing~~Zhang Xiangxian    59 57    Non-executive director
~~Zhuang Zuojin~~Wang Sidong    59 51    Non-executive ~~director~~
~~Ma Yongwei~~ 69 ~~Independent~~ director
Sun Changji    69 70    Independent director
Bruce Douglas Moore    62 63    Independent director
Anthony Francis Neoh    6566    Independent director
Tang Jianbang 66    Independent director
Liu Jiade    48 50    Vice president
Zhou Ying    57 59    Vice president
Su Hengxuan    48 50    Vice president
Miao Ping    53 54    Vice president
~~Shao Hwei-Chung~~ 57 ~~Chief actuary~~
Xu Hengping    52 54    Chief operating officer
Li Mingguang 43 Chief actuary
Directors
Yang ~~Chao~~Mingshenghas been our chairman and executive director since ~~July 2005,~~May 2012. He has been the ~~president~~chairman of CLIC since ~~May 2005 and~~March 2012. Mr. Yang has many years of experience in the financial industry. He served as vice chairman of ~~CLPCIC since December 2006. Between May 2005~~the CIRC from 2007 to 2012, and ~~January 2006,~~worked for the Agricultural Bank of China from 1980 to 2007, where he held various positions such as vice president of the Shenyang branch, head of the industrial credit department and president of the Tianjin branch. He was ~~our president. Between 2000~~appointed as vice president of the Agricultural Bank of China in 1997 and ~~2005, Mr. Yang~~ was then promoted to president of the ~~chairman and general manager~~Agricultural Bank of ~~both~~ China ~~Insurance (Holdings) Company Limited and China Insurance H.K. (Holding) Company Limited. Mr. Yang graduated from Shanghai International Studies University and Middlesex University~~ in ~~the United Kingdom, majored in English and business administration, and obtained a Master’s degree in business administration.~~2003. Mr. Yang, a senior economist, ~~has more than 30 years~~graduated from the Faculty of ~~experience~~Finance of Nankai University with a master’s degree in the insurance and banking industries, and was awarded a special allowance by the State Council. He is currently the vice president of National Association of Financial Market Institutional Investors, the chairman of the Chairmanship of China Federation of Industrial Economics, a member of Shanghai International Financial Center Construction Advisory Committee, a member of Association for Relations Across the Taiwan Straits and the vice president of China Silver Industry Association.
economics, majoring in monetary banking.
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Wan Fenghas been our president since September 2007. He is also a vice president of CLIC, a director of AMC, a director of CLPCIC, a director of China Life Pension and a director of ~~GDB.~~CGB. He has been an executive director of our company since June 2006. Prior to serving as our president, he served as a vice president of our company since 2003. ~~Mr. Wan has been in charge of our daily operations and management as authorized by board resolution since January 31, 2007.~~ Mr. Wan received a BA degree in economics from Jilin College of Finance and Trade, a MBA from Open University of Hong Kong, and a doctorate in finance from Nankai University in Tianjin. ~~Mr. Wan, a senior economist,~~Having worked in the Jilin Branch of People’s Insurance Company of China, the Hong Kong branch of Taiping Life Insurance Company and the Shenzhen and Hong Kong branches of our company, he has 29accumulated over 30 years of experience in the life insurance ~~industry and has previously worked at our Jilin branch, Shenzhen branch, Hong Kong branch and Hong Kong Taiping Life Insurance Company. He~~industry. Mr. Wan, a senior economist, was awarded a special allowance by the State Council. He is currently the director of China Life ~~Charity~~ Foundation, the deputy director of China Association of Actuaries, a deputy director of Insurance Association of China, an executive director of Insurance Institute of China and a director of China Insurance Guarantee Fund Committee.
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Lin Dairenhas been an executive director of our company since October 27, 2008. Mr. Lin has served as a vice president of our company since 2003, and as the executive director and president of China Life Pension ~~from~~since November 2006. Mr. Lin graduated in 1982 with a bachelor’s degree in medicine from Shandong Province Changwei Medical Institute. Mr. Lin, a senior economist, was awarded special allowance by the State Council. He has 2931 years of experience in the life insurance industry and has accumulated extensive experience in insurance business operations and management. He is currently the executive director of the Insurance Institute of China, the executive director of the Labor Institute of China and the executive director of Peking University China Center for Insurance and Social Security Research.
Liu Yingqihas been an executive director of our company since October 27, 2008. Ms. Liu was the chairperson of our board of supervisors between August 2003 and January 2006. Ms. Liu has served as a vice president of our company since January 2006, and as the Secretary of our board of directors since May 30, 2008. Ms. Liu has been a director of China Life Pension since November 2006. ~~Between August 2003 and January 2006, Ms. Liu was the chairperson of our board of supervisors.~~ Ms. Liu graduated with a BA in economics from Anhui University in 1982. Ms. Liu, a senior economist, has ~~extensive experience in operation and management and~~ over 2426 years of experience in ~~the operation~~operations and management of the life insurance ~~businesses~~business and in insurance administration. She is currently a director of the Insurance Institute of China.
Miao Jianminhas been a non-executive director of our company since October 27, 2008. Mr. Miao has been a vice president of CLIC since December 2005. Currently he also serves as the chairman of both AMC and China Life Franklin Asset Management Company Limited, the Chinese alternate representative of ABAC (APEC Business Advisory Council), the executive director of the Insurance Association of China, and the director of China Finance 40 ~~Forum and a member of the expert panel for the planning of the PBOC’s “12~~^th ~~Five-year Program for Development and Reform of the Financial Industry”.~~Forum. He was awarded a special allowance by the State Council. ~~He is~~In 2009, he was named one of the ~~state-level candidates~~“State-level Candidates for the New Century Talents ~~Projects of 2009~~Projects” and one of the “60 people in China Insurance Industry in the 60-year History of New China”. Mr. Miao graduated from the post-graduate division of the PBOC with a major in money and ~~banking.~~banking in 1989. He studied in the insurance faculty of Central University of Finance and Economics from 1982 to 1986. Mr. Miao is a senior economist.
~~Shi Guoqing~~Zhang Xiangxianhas been a non-executive director of our company since ~~2004. Mr. Shi is~~July 2012. He became the secretary of Commission for Disciplinary Inspection of CLIC in October 2006. He also aserved as the vice president and compliance officer of CLIC from August 2003, and the chairman of China Life Insurance (Overseas) Co., Ltd., director of Beijing Oriental Plaza Company Limited, director of Hong Kong Huiyen Holding Company Limited, director of China World Trade Center Limited, director of China World Trade Center Company Limited, director of China World Trade Investments Limited, chairman of Shanghai PICC Tower Limited, and director of Shanghai Lujiazui Finance & Trade Zone United Development Co., Ltd.2008. Mr. ~~Shi graduated from Foreign Trade and Business College of Beijing in 1976. Mr. Shi, a senior economist,~~Zhang has ~~over 30~~many years of experience in the insurance industry and ~~has accumulated extensive experience~~held various positions from 1993 to 2006, including, the director of the promotion division of the general office and deputy general manager of the general office of the People’s Insurance Company of China, the office director of the CIRC, the deputy office director (in charge) of the Shenzhen office of the CIRC, and the director of the administrative department of representative agencies of the CIRC. Mr. Zhang is a senior editor and obtained a master’s degree in ~~the operation~~business administration for senior management from Zhongnan University of Economics and ~~management of insurance businesses.~~
Law.
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~~Zhuang Zuojin~~Wang Sidonghas been a non-executive director of our company since ~~June 2006, and has served as a~~July 2012. He became the vice president of CLIC, ~~from August 2003~~the chairman of IHC and ~~a director of AMC from June 2004. She has acted as~~ a director of China Life ~~Franklin Asset Management~~Pension in June 2004. Mr. Wang worked for the Ministry of Foreign Economic Relations and Trade, the Xinhua News Agency Hong Kong Branch, and the Hong Kong Chinese Enterprises Association. He served as deputy director of the general office of China Life Insurance Company, ~~Limited~~deputy general manager of its Zhejiang branch and deputy director of the shares reform office of China Life Insurance Company from ~~May 2006. Ms. Zhuang~~2000. Mr. Wang was the director of the general office of CLIC in 2003. Mr. Wang graduated from ~~Correspondence College~~Shandong University with a bachelor’s degree of ~~CCP School, majored~~arts, majoring in ~~economics~~Chinese language and management and studied probability and statistics (major in insurance actuary) in Zhejiang University from September 1998 to January 2000. Ms. Zhuang, a senior accountant, has worked in the insurance industry for over 30 years, and has accumulated extensive experience in the operation and management of insurance businesses. She is currently the vice president of Financial Accounting Society of China.
literature.
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~~Ma Yongwei~~has been an independent director of our company since 2006. Mr. Ma has been a member of the Standing Committee of National Committee of Chinese People’s Political Consultative Conference since 2003. He was the chairman of the CIRC from 1998 to 2002. From 1996 to 1998, he served as the chairman and president of former China Insurance Group Company, from 1994 to 1996 as the chairman and president of former People’s Insurance Company of China and from 1984 to 1994 served as the governor of Agricultural Bank of China. Mr. Ma graduated from finance department of Liaoning Finance and Economic University in 1966. Mr. Ma, a researcher, has over 38 years of experience in the banking industry and the insurance industry.
Sun Changjihas been an independent director of our company since May 2009. From January 1968, Mr. Sun worked in Sichuan Oriental Turbine Factory, serving as a section head, workshop director, deputy factory manager and factory manager. In July 1991, he was appointed as the deputy director-general of the production department of the Ministry of Machinery Industry of China, and he became the vice minister of the Ministry of Machinery Industry of China in April 1993. In April 1998, he became the first deputy director-general of the State Administration of Machinery Industry of China (deputy ministerial level). He became the deputy party secretary and vice president (deputy ministerial level) of Bank of China in January 1999. From September 1999 to August 2001, he served concurrently as the president of China Orient Asset Management Corporation. He became the vice chairman of Bank of China in November 2000, the vice chairman of Bank of China (Hong Kong) Limited in September 2001 and the secretary of commission for disciplinary inspection of Bank of China in June 2003 concurrently. ~~From~~Since August 2004, he has served ~~primarily~~ as the vice chairman of Bank of China (Hong Kong) Limited, and served as the vice chairman of China Machinery Industry Federation concurrently. Mr. Sun, now a researcher-level senior engineer, graduated from Tsinghua University in September 1966.

Bruce Douglas Moorehas been an independent director of our company since May 2009. From 2002 to 2007, Mr. Moore was partner-in-charge of Asian actuarial services for Ernst & ~~Young. He was~~Young, based in ~~Beijing for this job. He had~~Beijing. Previously, he served in actuarial leadership roles with Ernst & Young in New York and Tokyo. From 1995 to 2000, he was the head of international actuarial services in New York with Ernst & Young. In 2000, Mr. Moore worked with Ernst & Young in Beijing and was in charge of the business in Asian markets (including Japan). In 2001, he was responsible for Japan actuarial services in Tokyo. InSince 2002, he was responsible for ~~Asian~~ actuarial services in the Asian market (excluding ~~Japan actuarial services)~~Japan) in ~~Beijing.~~Ernst & Young’s Beijing office. From 1982 to 1995, he worked in various senior financial management roles at Prudential Life Insurance (U.S.). Mr. Moore graduated from Brown University in 1971, with a major in applied mathematics. Mr. Moore is an FSA, FCAS, MAAA and CFA. Mr. Moore has over 3536 years of experience serving the insurance industry as an executive or a consultant.
Anthony Francis Neohhas been an independent director of our company since June 2010. Mr. Neoh currently serves as a member of the International Consultation Committee of the CSRC. Prior to that, he served as a chief advisor to the CSRC, a member of the Basic Law Committee of the Hong Kong Special Administrative Region under the Standing Committee of the National People’s Congress of China and Chairman of the Hong Kong Securities and Futures Commission. From 1996 to 1998, he was the chairman of the Technical Committee of the International Organization of Securities Commissions. He was appointed as Queen’s Counsel (now known as Senior Counsel) in Hong Kong in 1990. Mr. Neoh graduated from the University of London with an honours degree in Law in 1976. He is a barrister of England and Wales and admitted to the State Bar of California. In 2003, he was conferred the degree of Doctor of Laws, honoris causa by the Chinese University of Hong Kong. He was elected as Honorary Fellow of the Hong Kong Securities Institute and Academician of the International Euro-Asian Academy of Sciences in 2009. Mr. Neoh was a non-executive director of Global Digital Creations Holdings Limited from November 2002 to December 2005, and an independent non-executive director of the Link Management Limited and manager of the Link Real Estate Investment Trust, from September 2004 to March 2006. Since August 2004, he has been serving as an independent non-executive director of Bank of China ~~Limited, and since November 2004, he~~ Limited.
114
Tang Jianbanghas been ~~serving as~~ an independent ~~non-executive~~ director of our company since July 2012. He has many years of experience in the financial services sector. He successively served as the deputy director, deputy head and head of the information computer department of Agricultural Bank of China, ~~Shenhua Energy Co Limited.~~
headquarters from November 1983 to March 1996. He was the general manager of the international business department of Agricultural Bank of China in March 1996, the assistant president and general manager of the international business department of its headquarters in June 1998, the assistant president and concurrently the president of Agricultural Bank of China, Hong Kong branch, in October 1999, and the vice president of Agricultural Bank of China in October 2000. He retired in April 2008. From May 2008 to May 2012, Mr. Tang served as the chairman of the supervisory committee of ABC-CA Fund Management Co., Ltd. Mr. Tang obtained a master’s degree in computer science and engineering from Tsinghua University in 1981 and a doctorate degree in science and management engineering from Beijing University of Aeronautics and Astronautics in 2000.
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Supervisors
~~Supervisors~~
The following table sets forth information regarding our current supervisors.
Name
   Age
~~Name~~ ~~Age~~
Position
Xia Zhihua    55 58    Chairperson of board of supervisors
Shi Xiangming    5253    Supervisor
Luo Zhongmin 62    Supervisor
Yang ~~Hong~~Cuilian    44 48    Employee representative supervisor
~~Wang Xu~~Li Xuejun    44 42    Employee representative supervisor
~~Tian Hui~~ 59 ~~Supervisor~~
Xia Zhihuahas been ~~a supervisor of our company since January 2006 and~~ the chairperson of our board of supervisors since March 2006. Ms. Xia served as the State Council’s representative in ~~CLIC,~~the Supervisory Committee of important state-owned financial institutions, designated supervisor of ~~bureau level~~assistant bureau-level grade official ~~and office director of the board of supervisors of China Export & Credit Insurance Corporation~~ from ~~August 2003~~July 2000 to ~~December 2005. Ms. Xia had 16 years work experience in the State Ministry of Finance relating to economic~~October 2001, and ~~financial management and 6 years of working experience as~~ the State Council’s representative in the board of supervisors of important state-owned ~~important~~ financial ~~institutions.~~institutions, designated supervisor of bureau-level grade official from October 2001 to December 2005. She was a deputy director of National Debt and Finance Bureau of the Ministry of Finance from July 1998 to June 2000, and a deputy director of National Debt Bureau of the Ministry of Finance from July 1997 to June 1998. Ms. Xia graduated from Xiamen University, majoring in politics and economics at the department of economics, and majoring in world economics at ~~Xiamen University in 1982 and received a BA degree in politics and economics. She graduated from department~~the college of economics ~~at Xiamen University in~~from February 1978 to November 1984, and received a MAbachelor’s degree and a master’s degree in ~~world~~ economics.
Ms. Xia is also the executive director of China Institution of Internal Audit, and received the qualification of Certified Internal Auditor (CIA).
Shi Xiangminghas been a supervisor of our company since May 2009 and the general manager of the supervisory department of our company since September 2008. Mr. Shi served as the deputy general manager of the human resources department and the office director of our company from September 2003 to September 2008. From March 2002 to August 2003, Mr. Shi served as the deputy general manager of our supervisory department of China Life Insurance Company. Mr. Shi graduated from the chemistry school of the first branch college of Beijing University, and received a bachelor’s degree in science.
~~Yang Hong~~Luo Zhongminhas been a supervisor of our company since ~~October 2006~~July 2012. Mr. Luo has many years of experience in the insurance sector and is ~~currently~~familiar with the insurance market and insurance regulatory matters. He joined the People’s Insurance Company of China, Gansu branch, in 1988 and subsequently served as the deputy general manager ~~(in charge)~~of the provincial branch. He served as the director of Hunan Insurance Regulatory Bureau in 2001 and the chairman of the Insurance Institute of China from 2008 to November 2011. Mr. Luo, a senior economist, graduated from Gansu Finance and Trade College with a college diploma in business and economic management.
115
Yang Cuilian has been a supervisor of our ~~research and development center. From~~company since July ~~2003 to January 2011,~~2012. Ms. Yang has been serving as the general manager of the group business department of our company since January 2011. Ms. Yang joined our company in July 1984. She successively served as ~~assistant general manager,~~ deputy general manager of ~~our~~the Jiangxi branch, general manager of the Pingxiang branch, manager of the group sales department of Jiangxi branch, and manager of the business management department ~~and general manager~~ of ~~our customer service department.~~the Jiangxi branch. Ms. Yang, a senior economist, graduated from Party School of the Central Committee of C.P.C., majoring in ~~the computer department of Jilin University~~economic management with a bachelor’s degree.
~~Wang Xu~~Li Xuejunhas been a supervisor of our company since ~~May 2009 and~~July 2012. Mr. Li has been serving as the ~~office director~~general manager of the training department of our company since ~~April 2009.~~January 2011. Mr. Li joined our company in November 1997. He successively served as ~~the deputy office director in charge,~~ deputy general manager of the ~~group life insurance sales~~training department ~~and deputy chief, chief and deputy~~of our company (in charge), assistant general manager of the ~~health insurance~~Shanghai branch, general manager of the Shanghai Songjiang sub-branch, and general manager of the human resource department of ~~our company~~the Shanghai branch. Mr. Li worked for Shanghai Finance College (now known as Shanghai Finance University) from ~~January 1999~~July 1994 to ~~April 2009. He also served as~~October 1997. Mr. Li, a ~~doctor-in-charge of~~senior economist, graduated from the ~~orthopedics~~ department of ~~China Aerospace~~insurance at Central ~~Hospital from 1989 to 1999. Mr. Wang graduated from Suzhou Medical Institute~~Finance College (now known as Central University of Finance and Economics) in 1994, majoring in international insurance with a bachelor’s degree in ~~medicine in 1989 and obtained a financial MBA degree from Chinese University of Hong Kong in 2004. Mr. Wang is an associate senior doctor.~~
economics.
~~108~~
~~Tian Hui~~has been a supervisor of our company since June 2004. He is currently the director and party secretary of China Coal International Engineering Research Institute. He was the director and party secretary of China Coal International Engineering Research Institute from June 2006 to April 2008 and director and deputy party secretary of China Coal International Engineering Research Institute from 2000 to 2006. Mr. Tian obtained a bachelor’s degree from Fuxin Minery School and a doctor’s degree from China University of Mining & Technology Beijing respectively. Mr. Tian is a professor-level senior engineer and a master of China construction design, and was awarded a special allowance by the State Council.
Senior Management
Wan Feng, see “—Directors and Senior Management—Directors” for his profile.
Lin Dairen, see “—Directors and Senior Management—Directors” for his profile.
Liu Yingqi, see “—Directors and Senior Management—Directors” for her profile.
Liu Jiadehas been a vice president of our company since 2003 and a director of AMC from June 2004. Mr. Liu has served as a director of China Life Franklin Asset Management Company Limited since May 2006, and as a director of ~~GDB~~CGB since December 2006. He became the vice director of the finance bureau of the Ministry of Finance ~~since~~in 2000. Mr. Liu is a graduate of Central Finance College in 1984 (now Central University of Finance and Economics), with a bachelor’s degree in public finance. He is currently a director of the Insurance Institute of China and a member of the State Ministry of Finance Accounting Informationization Committee.
Zhou Yinghas been a vice president of our company since August 2008 and served as the secretary of our commission for disciplinary inspection since November 2006. Mr. Zhou served as ~~the~~a designated supervisor and a director of the Fifth Office ~~(at deputy bureau level)~~ and as a designated supervisor ~~at (deputy bureau level)~~ in Beijing State-owned Enterprise Supervisory Committee from May 2004 to November 2006. Mr. Zhou graduated from Dongbei University of ~~Science~~Finance and ~~Technology of China~~Economics with a ~~MBA.~~
Ph.D. in economics.
Su Hengxuanhas been a vice president of our company since August 2008. Mr. Su served as assistant to president of our Company from January 2006 to July 2008. Mr. Su has acted as a director of CLPCIC since November 2006 and a director of Insurance Professional College since December 2006. He was the general manager of our individual life insurance business department from 2003 to 2006. Mr. Su graduated from Banking School, Henan Province in 1983, ~~and~~ graduated from Wuhan University in 1998 with a bachelor’s degree in insurance and finance, majored in ~~insurance.~~insurance, and graduated from the school of management of University of Science and Technology of China in July 2011 with a Ph.D degree in management, majoring in management science and engineering. Mr. Su, a senior economist, has over 2830 years of experience in the Chinese life insurance industry and insurance management. He is currently the chairman of the Insurance Marketing Association of the Insurance Association of ~~China.~~
China and a member of Financial Planning Standards Board China Advisory Panel.
116
Miao Pinghas been a vice president of our company since December 2009. He ~~served as~~became the general manager of our Jiangsu branch ~~from~~in September 2006. Mr. Miao ~~served as~~became the general manager of our Jiangxi branch ~~from~~in September 2004 and as a deputy general manager of our Jiangsu branch ~~from~~in April 2002. Mr. Miao graduated from the Correspondence College of Yangzhou University in 1996, ~~majored~~majoring in economics and management. Mr. Miao, a senior economist, has over 30 years of experience in the operation of life insurance business and the management of insurance business.
~~Hwei-Chung Shao~~has been our chief actuary since March 2007. Prior to that, Ms. Shao was a senior deputy president and chief actuary of subsidiaries of the Prudential Financial Group of the United States, and has accumulated extensive working experience in insurance companies. She acted as the president and senior officer of many actuary societies, and obtained the qualifications of CFA (Chartered Financial Consultant), CERA (Chartered Enterprise Risk Analyst), CEBS (Certified Employee Benefit Specialist), CHFC (Chartered Financial Consultant), CLU (Chartered Life Underwriter), MAAA (Member of the American Academy of Actuaries), FSA (Fellow of the Society of Actuaries), etc. Ms. Shao obtained a bachelor’s degree from National Chengchi University in Taiwan and a master’s degree from the University of Iowa, U.S. She is currently a member of Society of Actuaries of Greater China.
~~109~~
Xu Hengpinghas been the chief operating officer of our company since August 2010. Mr. Xu served as the general manager of our Fujian branch since April 2007. Mr. Su served as the deputy general manager of our Fujian branch since December 2002 and assistant to the general manager of our Fujian branch since September ~~1998.~~1998, and director of personal insurance division of our Fujian branch since July 1996. Mr. Xu once served as general manager of the sales department and general manager of the Longyan branch of Fuzhou Life Insurance Company Limited. Mr. Xu graduated ~~in 2004 with a major in finance~~ from Hunan University ~~Network College. Mr. Xu~~in 2004, majoring in finance. Mr.Xu, a senior economist, has over 3032 years of experience in ~~Chinese~~ life insurance ~~management industry.~~management.
Li Mingguanghas been our chief actuary since March 2012. Mr. Li joined our company in 1996 and subsequently served as deputy director, director, assistant to the general manager of product development department, person in charge of actuarial matters of our company and general manager of our actuarial department. Mr. Li graduated from Shanghai Jiao Tong University with a bachelor’s degree in computer science in 1991, Central University of Finance and Economics with a master’s degree in actuarial science in 1996 and Tsinghua University with an EMBA in 2010. He also studied at the University of Pennsylvania in the United States in 2011. Mr. Li is a fellow of the China Association of Actuaries (FCAA) and a fellow of the Institute and Faculty of Actuaries (FIA). He was the chairman of the first session of the China Actuarial Work Committee and the secretary-general of the first session of the China Association of Actuaries. He is currently the secretary-general of the China Association of Actuaries and a ~~senior economist.~~
guest director of the board of directors of the Insurance Institute of China.
B. COMPENSATION
Compensation of Directors, Supervisors and Officers
Our directors, supervisors and executive officers receive compensation in the form of salaries, bonuses and other benefits-in-kind, including our contribution to the pension plan on behalf of our directors, supervisors and executive officers. As required by PRC regulations, we participate in various defined contribution retirement plans organized by provincial and municipal governments for our employees, including employees who are directors, supervisors and executive officers.
117
The following table sets forth the amounts of ~~compensations~~compensation paid to each of our directors and supervisors for the fiscal year ended December 31, ~~2010. The~~2012.The total compensation package for our chairman of the board of directors, executive directors and chairman of the board of supervisors ~~and executive directors~~ for the year ended December 31, ~~2010~~2012 has not yet been finalized in accordance with regulations of the relevant PRC authorities. The amount of the compensation not provided for is not expected to have a significant impact on our financial statements for the year ended December 31, ~~2010. We~~2012.We will make further disclosure of the amount of the final compensation when it is determined.

Compensation
for loss of
Inducement Other⁽¹⁾ office as
Name Salaries/Fees Fees Benefits director Total
In RMB
Yang Chao 774,600 — 385,900 — 1,160,500
Wan Feng 734,400 — 361,200 — 1,095,600
Lin Dairen 693,600 — 341,500 — 1,035,100
Liu Yingqi 693,600 — 359,900 — 1,053,500
Miao Jianmin — — — — —
Shi Guoqing — — — — —
Zhuang Zuojin — — — — —
Sun Shuyi⁽²⁾
— — — — —
Ma Yongwei — — — — —
Sun Changji — — — — —
Bruce Douglas Moore 320,000 — — — 320,000
Anthony Francais Neoh 175,000 — — — 175,000
Xia Zhihua 693,600 — 341,800 — 1,035,400
Shi Xiangming 587,800 — 291,900 — 879,700
Yang Hong 562,200 — 289,800 — 852,000
Wang Xu 562,200 — 272,500 — 834,700
Tian Hui 150,000 — — — 150,000

Total
5,947,000 — 2,644,500 — 8,591,500

Name
   Salaries/Fees    Inducement
Fees    Other ⁽¹⁾
Benefits    Compensation for
loss of office as
director    Total
   RMB in ten thousands
Yuan Li⁽²⁾
   10.69       —         5.27       —         15.96
Yang Mingsheng⁽³⁾
   32.06       —         25.01       —         57.07
Wan Feng
   38.48       —         32.66       —         71.14
Lin Dairen
   38.05       —         32.31       —         70.36
Liu Yingqi
   38.05       —         32.31       —         70.36
Miao Jianmin
   —         —         —         —         —
Shi Guoqing⁽⁴⁾
   —         —         —         —         —
Zhuang Zuojin⁽⁴⁾
   —         —         —         —         —
Zhang Xiangxian⁽⁵⁾
   —         —         —         —         —
Wang Sidong⁽⁵⁾
   —         —         —         —         —
Ma Yongwei⁽⁶⁾
   —         —         —         —         —
Sun Changji
   —         —         —         —         —
Bruce Douglas Moore
   32.00       —         —         —         32.00
Anthony Francais Neoh
   30.00       —         —         —         30.00
Tang Jianbang⁽⁷⁾
   —         —         —         —         —
Xia Zhihua
   38.05       —         32.31       —         70.36
Shi Xiangming
   58.98       —         30.56       —         89.54
Yang Hong⁽⁸⁾
   32.90       —         13.81       —         46.71
Wang Xu⁽⁸⁾
   32.90       —         16.59       —         49.49
Tian Hui⁽⁸⁾
   8.75       —         —         —         8.75
Yang Cuilian⁽⁹⁾
   28.20       —         16.67       —         44.87
Li Xuejun⁽⁹⁾
   28.20       —         16.22       —         44.42
Luo Zhongmin⁽⁹⁾
   7.50       —         —         —         7.50
Total
   454.81       —         253.72       —         708.53










⁽¹⁾
Include benefits-in-kind, social insurance, ~~and~~ housing fund and enterprise annuity to be paid by the ~~employer.~~employer.
⁽²⁾
Resigned as ~~the~~chairman and executive director on May 22, 2012.
⁽³⁾
Appointed as chairman and executive director on May 22, 2012.
⁽⁴⁾
Retired as non-executive director due to age on May 22, 2012.
⁽⁵⁾
Appointed as non-executive director on July 10, 2012.
⁽⁶⁾
Resigned as independent director on ~~June 30, 2010.~~July 10, 2012.
⁽⁷⁾
Appointed as independent director on July 10, 2012.
⁽⁸⁾
Resigned as supervisor on July 10, 2012.
⁽⁹⁾
Appointed as supervisor on July 10, 2012.

~~110~~
118
The following table sets forth the amounts of compensation paid to each of our executive officers other than those disclosed in the table above, including vice presidents and assistant to our president who are not our directors and our chief operating officer, chief actuary and chairman of the communist party disciplinary commission, for the year ended December 31, ~~2010.~~2012. The total compensation package for our executive officers for the year ended December 31, ~~2010~~2012 has not yet been finalized in accordance with regulations of the relevant PRC authorities. The amount of the compensation not provided for is not expected to have a significant impact on our financial statements for the year ended December 31, ~~2010.~~2012. We will make further disclosure of the amount of the final compensation when it is determined.
The HKSE Listing Rules do not require the disclosure of compensation of senior management on an individual basis. The following information was disclosed by us in our A share annual report for the fiscal year ended December 31, 2010.
Name

~~Name~~ Total

In RMB in ten
thousands

Liu Jiade
   ~~1,054,400~~70.36
Zhou Ying
   ~~1,035,100~~70.36
Su Hengxuan
   ~~1,047,800~~70.36
Miao Ping
   ~~1,021,000~~70.30
~~Hwei-Chung Shao~~
Xu Hengping
   ~~3,381,800~~65.33
~~Xu Hengping~~
Li Mingguang⁽¹⁾
   ~~421,700~~76.83
Hwei-Chung Shao⁽²⁾
   71.02
Total
   ~~7,961,800~~494.56

⁽¹⁾
Appointed as our chief actuary in March 2012.
⁽²⁾
Was our chief actuary before the expiration of her employment contract with us in February 2012.
The aggregate amount of compensation we paid to our five highest paid individual employees, including ~~three~~two directors, one supervisor and two senior management members during the year ended December 31, ~~2010,~~2012, was approximately RMB ~~7,745,800~~3.79 million (US$~~1,173,606)~~0.61 million). The amount of compensation we paid to our highest paid individual employee, during the year ended December 31, ~~2010~~2012 was approximately RMB ~~3,381,800~~0.90 million (US$~~512,394)~~0.14 million).

Senior Management Compensation
Our senior management’s compensation consists of four components, including basic salaries, performance-based salaries, fringe benefits and mid to long-term incentive compensation.
We have set up a comprehensive performance management system. A performance appraisal method for officers of our headquarters is used to appraise the performance of the officers annually based on the achievement of ~~insurance contract objectives.~~objectives set forth in their employment contracts. Measures for such appraisal include a quantitative index for business performance as well as a qualitative index for management performance. Specifically, the business performance index includes our major business ~~indices,~~objectives, establishing a connection between the achievement of our major business targets and the officers’ performance appraisal.
In accordance with relevant policies of the PRC government, no stock appreciation rights of our company were granted or exercised in ~~2010.~~
2012. For other details of ~~senior management compensation,~~the stock appreciation rights which were previously granted by us, please refer to ~~“Item 6. Directors, Senior Management and Employees—Compensation—Senior Management Compensation System”~~Note 28 to our consolidated financial statements included elsewhere in ~~our~~this annual ~~report on Form 20-F for the fiscal year ended December 31, 2007, as filed on April 25, 2008.~~
report.
~~111~~
C. BOARD PRACTICES
General
Our board of directors consists of eleven members. Our directors are elected to serve a term of three years, which is renewable upon re-election. Our directors are elected at meetings of our shareholders, and, unless they resign at an earlier date, are deceased or removed, will serve three-year terms. The current term offor our ~~current~~ board of directors ~~started~~began in ~~May 2009 and will expire in May~~July 2012. Our directors are not currently entitled to severance benefits other than benefits provided by law upon termination of employment. In the event our Company is acquired, including an acquisition of control by another person, and a director leaves employment or retires following the acquisition, the director may receive severance and other payments upon approval by the shareholders in general meeting.
119
We have identified various board members as being “independent”, in accordance with Hong Kong laws and regulations. These requirements vary in certain respects from independence requirements under U.S. law. The members of our audit committee are independent as defined by the rules of the Securities and Exchange Act and the New York Stock Exchange which are applicable to us.
The PRC company law requires a joint stock company with limited liability to establish a board of supervisors. Our board of supervisors is responsible for monitoring our financial matters and supervising the actions of our board of directors and our management personnel. Our board of supervisors consists of five members. One-third of our board of supervisors must be elected by our employees. The remaining members must be elected by our shareholders in a general meeting. One member of our board of supervisors is designated as the chairman. Members of our board of supervisors may not serve as director or member of senior management. The term of office for our supervisors is three years, which is renewable upon ~~re-election.~~
re-election.The current term for our board of supervisors began in July 2012.
Board Committees
We have established standing audit, nomination and remuneration, risk management and strategy and investment decision committees.
The primary duties of the audit committee are to review and supervise the financial reporting process, to assess the effectiveness of our internal control system, to supervise our internal audit system and its implementation and to implement and recommend the engagement or replacement of external auditors. Our audit committee is also responsible for communications between our internal and external auditors and our internal reporting system. Our audit committee is currently comprised of Bruce Douglas Moore, Sun Changji and ~~Ma Yongwei.~~Tang Jianbang. Mr. Bruce Douglas Moore serves as the chairman.
The primary duties of the nomination and remuneration committee are to review the structure and components of our board of directors, to formulate the appointment and successors to our board of directors and senior management, to review and recommend the nomination of our directors and senior officers, as well as to ~~formulate~~propose to our board of directors the ~~training and~~ remuneration policy for our directors, supervisors and senior management. Our nomination and remuneration committee is currently comprised of Sun Changji, Bruce Douglas Moore and Miao Jianmin. Mr. Sun Changji serves as the chairman.
The primary duties of the risk management committee are to formulate our risk control benchmark system, to assist the management in ~~managing~~establishing and improving our internal control system, to formulate our operational risk management policy, to review the assessment reports with respect to our operational risks and ~~external risks.~~internal control, and to coordinate and handle sudden and significant risks or crises. Our risk management committee is currently comprised of Anthony Francis Neoh, ~~Zhuang Zuojin~~Zhang Xiangxian and Liu Yingqi. Mr. Anthony Francis Neoh serves as the chairman.
The primary duties of the strategy and investment decision committee are to formulate our ~~overall~~long-term development strategies and significant investment and financing plans, to propose significant projects of capital operation and ~~investment decision-making procedures.~~assets management, and to conduct research and make recommendations on other important matters that affect our development. Our strategy and investment decision committee is currently comprised of ~~Ma Yongwei,~~Tang Jianbang, Wan Feng, ~~Shi Guoqing,~~Wang Sidong, Lin Dairen and Anthony Francis Neoh. Mr. ~~Ma Yongwei~~Tang Jianbang serves as the chairman.

~~112~~
120
D. EMPLOYEES
As of December 31, ~~2008, 2009~~2010, 2011 and ~~2010,~~2012, we had approximately ~~102,000, 104,500~~103,220, 100,319 and ~~103,220~~99,271 employees, respectively. The following table sets forth the number of our employees by their functions as of December 31, ~~2010.~~

As of December 31
2008 2009 2010
Number % Number % Number %
of of of of of of
employees total employees total employees total
Management and administrative staff 20,250 19.81 % 21,450 20.52 % 19,793 19.18 %
Financial and auditing staff 7,663 7.50 % 7,967 7.62 % 7,432 7.20 %
Sales and marketing staff⁽¹⁾
25,473 24.92 % 26,320 25.18 % 26,298 25.48 %
Underwriters, claim specialists and customer service staff 38,797 37.96 % 39,329 37.54 % 37,670 36.49 %
Other professional and technical staff⁽²⁾
3,680 3.60 % 3,800 3.64 % 3,837 3.72 %
Other 6,378 6.24 % 5,759 5.51 % 8,190 7.93 %

Total
102,241 100 % 104,535 100 % 103,220 100 %

2010, 2011 and 2012.
   As of December 31
   2010 2011 2012

Number
of
employees

%
of
total

Number
of
employees

%
of
total

Number
of
employees

%
of
total

Management and administrative staff
   19,793       19.18 % 20,880       20.81 % 23,444       23.62 %
Financial and auditing staff
   7,432       7.20 % 6,874       6.85 % 7,034       7.09 %
Sales and marketing staff⁽¹⁾
   26,298       25.48 % 28,480       28.39 % 31,115       31.34 %
Underwriters, claim specialists and customer service staff
   37,670       36.49 % 32,853       32.75 % 32,511       32.75 %
Other professional and technical staff⁽²⁾
   3,837       3.72 % 3,750       3.74 % 3,747       3.77 %
Other
   8,190       7.93 % 7,482       7.46 % 1,420       1.43 %








Total
   103,220       100 % 100,319       100 % 99,271       100 %








(1) Includes direct sales representatives.
(2) Includes actuaries, product development personnel, investment management personnel and information technology specialists.
As of December 31, ~~2008, 2009~~2010, 2011 and ~~2010,~~2012, we had approximately ~~716,000, 777,000~~706,000, 685,000 and ~~706,000~~693,000 exclusive agents, respectively. ~~The decrease~~During 2012, we have attracted some new qualified agents. At the same time, we have continued carrying out performance reviews in ~~the number of our exclusive agents from 2009 to 2010 was primarily due~~2012, which have led to the ~~strengthened performance review conducted by us in 2010, as a result~~departure of ~~which~~ a number of exclusive agents with lower ~~productivity level left.~~
productivity.
None of our employees is subject to collective bargaining agreements governing employment with us. We believe that our employee relations are satisfactory.
E. SHARE OWNERSHIP
As of the date of this annual report, none of our directors, supervisors or senior managers is a legal or beneficial owner of any shares of our share capital.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.
A. MAJOR SHAREHOLDERS
The table below sets forth information regarding the ownership of our share capital as of April 10, ~~2011~~2013 by all persons who are known to us to be the beneficial owners of 5% or more of each class of our share capital.

Percentage of Percentage of Total
Title of Class Identity of Person or Group Amount Owned Class Share Capital

A Shares China Life Insurance (Group) Company 19,323,530,000 (Long position) 92.80 % 68.37 %

Title of Class

Identity of Person or Group

Amount Owned
   Percentage
of Class Percentage of
Total Share
Capital
A Shares
   China Life Insurance (Group) Company    19,323,530,000 (Long position)    92.80 % 68.37 %
H Shares
   BlackRock, Inc⁽¹⁾
586,111,916 (Long position)
96,154,653 (Short position)


7.87
1.29
%
%

2.07
0.34
%
%
H Shares
   JPMorgan Chase & Co.⁽²⁾
378,635,366 (Long position)
59,830,852 (Short position)
275,363,277 (Lending pool)


5.09
0.80
3.70
%
%
%

1.34
0.21
0.97
%
%
%

~~113~~
121
Note (1): BlackRock, Inc. was interested in a total of 586,111,916 H shares in accordance with the provisions of Part XV, SFO. Of these shares, BlackRock Investment Management, LLC., BlackRock Financial Management, Inc., BlackRock Institutional Trust Company, N.A., BlackRock Fund Advisors, BlackRock Advisors, LLC., BlackRock Asset Management Canada Limited, BlackRock Japan Co. Ltd., BlackRock Asset Management Australia Limited, BlackRock Asset Management North Asia Limited, BlackRock (Netherlands) B.V., BlackRock International Limited, Blackrock Advisors (UK) Limited, BlackRock Asset Management Ireland Limited, BlackRock (Luxembourg) S.A., BlackRock Fund Managers Limited and BlackRock Asset Management Deutschland AG were interested in 6,874,032 H shares, 579,237,884 H shares, 91,451,051 H shares, 226,917,045 H shares, 2,992,000 H shares, 3,320,570 H shares, 95,000 H shares, 475,000 H shares, 95,284,047 H shares, 106,000 H shares, 7,918,700 H shares, 68,427,413 H shares, 64,990,058 H shares, 10,175,000 H shares, 1,226,000 H shares and 1,035,000 H shares respectively. All of these entities are either controlled or indirectly controlled subsidiaries of BlackRock, Inc.
BlackRock, Inc. held by way of attribution a short position as defined under Part XV, SFO in 96,154,653 H shares (1.29%).
Note (2): JPMorgan Chase & Co. was interested in a total of 378,635,366 H shares in accordance with the provisions of Part XV, SFO. Of these shares, JPMorgan Chase Bank, N.A., J.P. Morgan Investment Management Inc., JF Asset Management Limited, JPMorgan Asset Management (Taiwan) Limited, JPMorgan Asset Management (UK) Limited, J.P. Morgan Whitefriars Inc., J.P. Morgan Securities plc and J.P. Morgan Clearing Corp were interested in 275,363,277 H shares, 129,000 H shares, 499,000 H shares, 167,000 H shares, 298,000 H shares, 79,821,924 H shares, 21,561,190 H shares and 795,975 H shares respectively. All of these entities are either controlled or indirectly controlled subsidiaries of JPMorgan Chase & Co.
Included in the 378,635,366 H shares are 275,363,277 H shares (3.70%) which are held in the “lending pool”, as defined under Section 5(4) of the Securities and Futures (Disclosure of Interests – Securities Borrowing and Lending) Rules.
In addition, JPMorgan Chase & Co. held by way of attribution a “short position” as defined under Part XV, SFO in 59,830,852 H shares (0.80%).
Our A shares and H shares generally vote together as a single class, including in the election of directors. Each A share and each H share is entitled to one vote. In addition, in certain matters which affect the rights of the holders of H shares or A shares, the H shares or A shares, as the case may be, are entitled to vote as a separate class.
CLIC converted and sold 676,470,000 domestic shares in the form of H shares or ADSs in connection with our global offering in December 2003.
Based on the information provided by Deutsche Bank Trust Company Americas, ~~the~~our depositary bank, as of December 31, ~~2010~~2012 and April 10, ~~2011,~~2013, there were, respectively, ~~19,346,962~~12,706,438 ADRs representing ~~290,204,430~~190,596,570 H shares, with 2770 registered holders, and ~~19,258,271~~11,340,735 ADRs representing ~~288,874,065~~170,111,025 H shares, with 2870 registered holders. Since certain of the ADSs are held by nominees, the above number may not be representative of the actual number of U.S. beneficial holders of ADSs or number of ADSs beneficially held by U.S. persons.
CLIC, our controlling shareholder, is a wholly state-owned enterprise controlled by the PRC government. See “Item 4. Information on the Company—History and Development of the Company”. None of our major shareholders has voting rights that differ from the voting rights of other shareholders, except that in certain matters which affect the rights of the holders of H shares or A shares, holders of H shares or A shares, as the case may be, are entitled to vote as a separate class. We are not aware of any arrangement which may at a subsequent date result in a change of control of our company.
B. RELATED PARTY TRANSACTIONS
As at the date of this annual report, CLIC owns approximately 68.37% of our issued share capital, a 40% equity interest in AMC, a direct 6% equity interest in China Life Pension and an indirect approximately 4.8% equity interest in China Life Pension through AMC, a 60% equity interest in CLPCIC and a 100% equity interest in China Life Investment Holding Company Limited, or IHC. CLIC, AMC, China Life Pension, CLPCIC and IHC are therefore considered as our connected persons under the HKSE Listing Rules. AMC is also a subsidiary of the Company. On ~~February 22, 2010,~~December 27, 2012, we entered into a new asset management agreement with AMC. On March 8, 2012, we entered into a new insurance sales framework agreement with CLPCIC. On June 27, 2012, we entered into a property purchase framework agreement with IHC. On December 31, 2012, we entered into a new property leasing agreement with IHC. Since July 2011, AMC and IHC participated in the investment and development of a parcel of state-owned land. On ~~December 30, 2010,~~April 15, 2013, we entered into a ~~new asset management~~partnership agreement with ~~AMC.~~CLIC, CLPCIC and another two parties in relation to the formation of a partnership. We also continued to carry out certain other continuing related party transactions with CLIC, AMC, China Life Pension, CLPCIC and IHC in the reporting period. These transactions constitute connected transactions for us under the HKSE Listing Rules. Details of these transactions ~~with CLIC, AMC and IHC~~ are set forth below.
122
As at the date of this annual report, we own a 20% equity interest in China Guangfa Bank, or CGB, which was previously known as Guangdong Development ~~Bank, or GDB. We~~Bank. In 2012, we entered into ~~three~~four new agreements with CGB, including a new insurance products cooperation agreement, a new strategic cooperation agreement and two negotiated deposit ~~agreements with GDB in July 2010, December 2010 and February 2011, respectively. In December 2010, we made capital injection of RMB 2,999 million to GDB.~~agreements. We also continued to carry out continuing related party transactions with ~~GDB~~CGB in the reporting period. On March 22, 2013, we entered into an asset management agreement with IHC. These transactions are not regarded as connected transactions for us under the HKSE Listing Rules. Details of ~~the~~these transactions ~~with GDB~~ are set forth below.

Continuing Related Party Transactions with CLIC
During the reporting period, we engaged in continuing related party transactions with CLIC. These transactions are governed by several agreements between CLIC and us, including a restructuring agreement, a policy management agreement, a trademark license agreement and a non-competition agreement. A detailed discussion of these agreements is set forth ~~in Note 28~~inNote 30 to our consolidated financial statements included elsewhere in this annual report and under the heading “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” in our annual report on Form 20-F filed with the Securities and Exchange Commission on April 28, 2009.
~~114~~
~~Under~~Our policy management agreement with CLIC expired on December 31, 2011. On December 15, 2011, we and CLIC signed a confirmation letter to renew the ~~non-competition~~policy management agreement ~~between CLIC and us, CLIC agreed to dispose~~under the same terms for a term of ~~all of its 51% interest in China Life-CMG Life Assurance Company Ltd. to third parties or eliminate any competition between China Life-CMG Life Assurance Company Ltd. and us within~~ three years ending on December 31, 2014. The service fees paid by CLIC to us under the policy management agreement for the year ended on December 31, 2012 was RMB 1,063 million. The annual cap in respect of ~~our listing~~the service fees to be paid by CLIC to us under this agreement for each of the three years ending on ~~the HKSE. China Life-CMG Life Assurance Company Ltd. was a sino-foreign joint venture of CLIC and CMG, an Australian insurance company. The joint venture~~December 31, 2014 is registered in Shanghai, China and is engaged in the business of life insurance and related reinsurance in Shanghai. On January 27, 2010, the transfer of CLIC’s equity interest in this joint venture to Bank of Communications Co., Ltd. was completed.
RMB 1,188 million.
Continuing Related Party Transactions with AMC
During the reporting period, we engaged in continuing related party transactions with AMC under an asset management agreement between AMC and us. The asset management agreement expired on December 31, ~~2010.~~2012. On December ~~30, 2010,~~27, 2012, we entered into a new asset management agreement with AMC on substantially the same terms for a ~~one-year~~two-year term expiring on December 31, ~~2011.~~2014. Subject to ~~the~~compliance with HKSE Listing Rules, ~~the~~this new agreement will be automatically renewed for ~~a successive one-year term,~~one more year after its expiration unless terminated by either party ~~give~~by giving to the other party ~~no less than~~a written notice within 90 days prior ~~written notice~~ to ~~terminate the agreement at the expiration of the then current term.~~its expiration. A detailed discussion of the material terms of the asset management agreement between AMC and us is set forth ~~in Note 28~~inNote 30 to our consolidated financial statements included elsewhere in this annual report and under the heading “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” in our annual report on Form 20-F filed with the Securities and Exchange Commission on April 28, 2009. The service fees paid by us to AMC under the asset management agreement for the year ended December 31, 2012 was RMB 761 million. The annual cap in respect of the service fees to be paid by us to AMC under the asset management agreement for the ~~year~~three years ending on December 31, ~~2011~~2015 is RMB ~~900~~1,200 million. The annual cap has been determined by reference to historical figures, the size and composition of the assets managed and to be managed by AMC, and the inherent volatility of the capital markets.
123
During the reporting period, CLIC engaged in continuing related party transactions with AMC under an asset management agreement between AMC and CLIC, which ~~will be~~was effective until December 31, ~~2011.~~2014. A detailed discussion of this agreement is set forth ~~in Note 28~~inNote 30 to our consolidated financial statements included elsewhere in this annual report and under the heading “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” in our annual report on Form 20-F filed with the Securities and Exchange Commission on April 28, 2009. The service fees paid by CLIC to AMC under the asset management agreement for the year ended on December 31, 2012 was RMB 133 million. The annual ~~cap~~caps in respect of the service fees to be paid by CLIC to AMC under the asset management agreement for each of the ~~year~~three years ending on December 31, ~~2011 is~~2014 are RMB 300 ~~million.~~million, RMB 310 million and RMB 320 million, respectively. The annual cap has been determined by reference to historical figures, the size and composition of the assets managed and to be managed by AMC, and the inherent volatility of the capital market.

Continuing Related Party Transaction with IHC
~~We have entered into~~
During the reporting period, we engaged in continuing related party transactions with IHC under a property leasing agreement between IHC and us. The property leasing agreement expired on December 31, 2012. On December 31, 2012, we entered into a new property leasing agreement with ~~CLIC~~IHC under substantially the same terms for a two-year term expiring on ~~September 30, 2003, pursuant to which CLIC~~December 31, 2014. Under the new property leasing agreement, IHC agreed to lease to us ~~(1) 833 buildings~~2,126 properties owned by ~~CLIC, its subsidiaries and affiliates, which we refer~~it. The annual rent is determined by reference to ~~as the CLIC owned properties, and (2) 1,764 buildings that CLIC~~market rent or, where there is ~~entitled to sublet, which we refer to as the CLIC leased properties.~~
We renewed the agreement under substantially the same terms on December 23, 2005 and January 4, 2007 and amended the agreement on January 8, 2008. Under the renewed and amended agreement, which expired on December 31, 2009, CLIC agreed to lease to us 2,011 CLIC owned properties and 85 CLIC leased properties. CLIC transferred all of its rights and obligations in the CLIC owned properties and CLIC leased properties to IHC on June 30, 2008, and IHC was substituted for CLIC as a partyno available comparison, by reference to the ~~property leasing agreement.~~
costs incurred by IHC in holding and maintaining the properties, plus a margin of approximately 5%.
~~115~~
A detailed discussion of the terms of this agreement is set forth ~~in Note 28~~inNote 30 to our consolidated financial statements included elsewhere in this annual report and under the heading “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” in our annual report on Form 20-F filed with the Securities and Exchange Commission on April 28, 2009.
On February 22, 2010, we entered into a new property leasing agreement with IHC under substantially the same terms as the previous property leasing agreement which expired on December 31, 2009. Under the new property leasing agreement, which will expire on December 31, 2012, IHC agreed to lease to us 2,182 properties owned by it. The annual rent is determined by reference to market rent or, where there is no available comparison, by reference to the costs incurred by IHC in holding and maintaining the properties, plus a margin of approximately 5%.

Continuing Related Party Transaction with China Life Pension
On July 27, 2009, we, CLIC and AMC entered into an entrustment of enterprise annuity funds and account management agreement with China Life Pension. The agreement ~~will last~~expired on December 1, 2012. On February 26, 2013, we, CLIC and AMC entered into a memorandum of understanding, which became effective retroactively on December 2, 2012, with China Life Pension to renew the agreement for ~~three years starting from the date~~a successive one-year term ending on ~~which the entrusted funds are transferred to a special entrustment account.~~
December 1, 2013.
Under the agreement, China Life Pension was entrusted to serve as the trustee and account manager and to provide entrusted management services and account management services for the enterprise annuity funds of the Company, CLIC and AMC. Pursuant to the memorandum of understanding, China Life Pension was further entrusted to serve as the investment manager and to provide investment management service for the enterprise annuity funds of the Company, CLIC and AMC. In consideration of the services provided by China Life Pension, ~~under this agreement,~~ we, CLIC and AMC agreed to pay China Life Pension entrusted management fees, ~~and~~ account management ~~fees.~~
~~Capital Injection to AMC~~
~~On February 9, 2009, we entered into a capital injection agreement with CLIC~~fees and AMC, pursuant to which we injected RMB 1,200 million and CLIC injected RMB 800 million into AMC. After the capital injection, the registered capital of AMC was increased from RMB 1,000 million to RMB 3,000 million. The proportionate shareholding between CLIC and us remained unchanged. On April 17, 2009, the capital injection was approved by the CIRC.
investment management fees.
124
Continuing Related Party Transactions with ~~GDB~~
CLPCIC
On November 18, 2008, we entered into an insurance sales framework agreement with CLPCIC for a three-year term ended on November 17, 2011. On March 8, 2012, we entered into a new insurance sales framework agreement with CLPCIC under substantially the same terms as the previous insurance sales framework agreement. This new agreement will last for two years and will be automatically renewed for one more year after its expiration unless terminated by either party by giving to the other party a written notice within 30 days prior to its expiration. The parties recognized the rights and obligations incurred from November 18, 2011 to March 7, 2012 based on the terms and conditions of the agreement entered into in 2008. Pursuant to this new insurance sales framework agreement, CLPCIC entrusted us to act as its agent to sell certain specified insurance products within the authorized regions, and agreed to pay us service fees in consideration of the services provided. The service fees will be determined by reference to the cost incurred by us plus a marginal profit and market practice. The service fees paid to us for the year ended December 31, 2012 was RMB 648 million. The annual caps in respect of the service fees to be paid by CLPCLIC to us for the two years ending December 31, 2014 have been revised to be RMB 1,250 million and RMB 1,950 million, respectively.
Property Transfer Framework Agreement with IHC
On June 27, 2012, we entered into a property transfer framework agreement with IHC for a term of three years. Pursuant to the framework agreement, we proposed to acquire from IHC certain properties for use by our branches as office premises, which consist of 1,198 properties with a total gross floor area of approximately 803,424.09 square meters. The properties will be transferred in batches pursuant to the standalone agreement to be entered into for each transfer. The purchase price for each property will be valued and determined by qualified intermediaries agreed upon by the parties with reference to prevailing market price. The total consideration for the property purchase is expected to be no more than RMB1,700 million. The parties are obligated to cooperate with each other to complete the transfer of title and deliver the properties if the standalone property transfer agreements in respect of such properties are signed prior to the expiration of the framework agreement. The parties can not transfer any properties under the framework agreement if the standalone property transfer agreements in respect of such properties are not signed prior to the expiration of the framework agreement.
Asset Management Agreement with IHC
On March 22, 2013, we entered into an asset management agreement with IHC, pursuant to which IHC agreed to invest, operate and manage the assets entrusted to it by us for investment in real property, equity interests of unlisted companies and related financial products on a discretionary basis, subject to the investment guidelines and instructions given by us.
The agreement will become effective conditional upon IHC’s obtaining CIRC certification of its capacity in equity investment and real property investment, and will be in effect until December 31, 2013. Subject to the compliance with the listing rules of the stock exchanges on which our shares are listed and traded, the agreement will be automatically renewed for a successive one-year term, unless either party gives the other party no later than 90 days prior written notice to terminate the agreement at the expiration of the then current term.
Under the agreement, we retain the title of the entrusted assets and IHC is authorized to manage the entrusted assets for and on our behalf. We may add to or withdraw from the assets managed by IHC pursuant to the agreement. All investment losses relating to the assets managed by IHC pursuant to the agreement will be borne by us, except for losses and liabilities arising from IHC’s misconduct. We have the right to establish, and amend from time to time, the investment guidelines which set forth the requirements relating to the assets under IHC’s management pursuant to the agreement, including, among others, investment scope, products and percentages, risk control and target of investment return. We also have the right to monitor the investment management activities of IHC.
In addition to manage the assets entrusted to it by us pursuant to the agreement, IHC is permitted to invest its own assets and provide investment management services to third parties. IHC agreed to inform us in the event that it, in its professional judgment, believes that there is a conflict in the activities on behalf of itself and others. IHC has discretion to take such actions and measures which in its professional judgment are fair, reasonable and necessary to resolve any such conflict.
125
In consideration of the services provided by IHC under the agreement, we agreed to pay IHC a basic service fee and a performance fee. The basic service fee is paid on a quarterly basis, calculated by reference to the total assets which are entrusted to IHC and are invested during each year and a fixed management fee rate of 0.6%. The performance fee is paid on an annual basis, calculated by reference to the target of investment return set forth in the investment guidelines for each year, the total assets which are entrusted to IHC and are invested during such year and the comprehensive rate of investment return on such assets for such year. IHC agreed to pay us a penalty for underperformance if it fails to meet the target of investment return set forth in the investment guidelines. The penalties for underperformance are paid on annual basis, calculated by reference to the target of investment return set forth in the investment guidelines for each year, the total assets which are entrusted to IHC and are invested during such year and the comprehensive rate of investment return on such assets for such year, but in no case will exceed 0.3% of the total assets which are entrusted to IHC and are invested during such year.
The annual cap in respect of the service fees to be paid by us to IHC is RMB 150 million for the year ending December 31, 2013, and RMB 250 million for the year ending December 31, 2014.
AMC’s Participation in Investment and Development of Land
On July 1, 2011, AMC, IHC, Beijing Wanyang Shiji Chuangye Investment Management Limited, or Beijing Wanyang, and Beijing Vantone Real Estate Co., Ltd., or Beijing Vantone, entered into a joint bidding agreement with respect to a parcel of state-owned construction land located at the Beijing central business district of Chaoyang district. Under this agreement, a consortium was formed by the four companies to participate in the bid for the land. The parties to the consortium agreed to form a project company to implement the development and construction of the land if the bid was successful and to be jointly and severally liable for the consortium’s bidding activities. After the consortium successfully won the bid, the consortium signed a state-owned construction land use right transfer agreement with Beijing Municipal Bureau of Land and Resources on August 31, 2011. The land is approximately 7,840 square meters, and the land transfer price is RMB2,656,280,000. Subsequently, the consortium formed China Life Yuantong Property Company Limited, or China Life Yuantong, as the project company and signed a supplemental agreement with Beijing Municipal Bureau of Land and Resources to change the transferee under the land transfer agreement to China Life Yuantong. China Life Yuantong has a registered capital of RMB600,000,000, with AMC, IHC, Beijing Wanyang and Beijing Vantone owning 19%, 51%, 29% and 1% of its equity interest, respectively.
In May 2012, Beijing Vantone transferred its 1% equity interest in China Life Yuantong to Beijing Wanyang, and Beijing Wanyang transferred 20% equity interests of China Life Yuantong to IHC. As a result, AMC, IHC and Beijing Wanyang own 19%, 71% and 10% equity interest in China Life Yuantong, respectively.
In May 2012, AMC, IHC and Beijing Wanyang increased their capital contribution to China Life Yuantong in proportion to their equity holdings in China Life Yuantong. As a result, the total capital contribution from AMC to China Life Yuantong was increased to RMB 475 million and the registered capital of China Life Yuantong was increased to RMB 2,500 million.
Formation of Partnership
On April 15, 2013, we entered into a partnership agreement with CLIC, CLPCIC, Suzhou International Development Venture Capital Holding Co., Ltd., or SIDVC, and Soochow Securities Co., Ltd., or Soochow Securities, pursuant to which SIDVC, as general partner, and CLIC, CLPCIC, Soochow Securities and us, as limited partners, agreed to form China Life (Suzhou) Urban Development Industry Investment Enterprise (Limited Partnership), or the Partnership. The business scope of the Partnership includes the investment in urban infrastructure facilities construction, the investment in urban development industry, and the related investment management consulting services.
Pursuant to the partnership agreement, the total capital to be contributed by all partners of the Partnership to it will be RMB 10 billion, of which RMB 5 billon will be contributed by us. SIDVC will be responsible for the executive function and investment operations of the Partnership and bear unlimited joint and several liabilities for the debts of the Partnership. The limited partners of the Partnership, including us, will be liable to the debts of the Partnership up to the amount of their respective capital contributions to the Partnership.
The Partnership will have a term of 12 years from the date on which its business license is issued.
126
Continuing Related Party Transactions with CGB
During the reporting period, we engaged in continuing related party transactions with ~~GDB.~~CGB. These transactions are governed by several agreements between ~~GDB~~CGB and us, including a strategic cooperation agreement, negotiated deposit agreements and individual bancassurance product cooperation ~~agreements. A~~agreements.A detailed discussion of these agreements is set forth ~~in Note 28~~inNote 30 to our consolidated financial statements included elsewhere in this annual report and under the heading “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” in our annual ~~report~~reports on Form 20-F filed with the Securities and Exchange Commission on April 28, ~~2009.~~
2009, April 29, 2010, April 26, 2011 and April 26, 2012, respectively. The strategic cooperation agreement expired on March 19, 2012 and the individual bancassurance product cooperation agreements expired on April 29, 2012.
On July 20, 2012, we entered into a new strategic cooperation agreement with CGB, pursuant to which we agreed to cooperate with CGB in various areas, including, among others, insurance business, bank cards business, deposit and funds, assets custody, e-commerce, client resources sharing, information technology, product development and brand promotion. With regard to cooperation in the insurance business, CGB undertook to provide bancassurance and corporate group insurance business services on our behalf. Subject to relevant laws and regulations, we undertook to offer our insurance products to CGB under certain preferential terms, while CGB agreed to purchase our products in priority under the same terms and conditions. The term of this agreement is three years.
On April 19, 2012, we entered into a new insurance products cooperation agreement with CGB, pursuant to which CGB will sell our individual insurance products suitable for sale through banks, as jointly selected by CGB and us. Under this agreement, CGB will act as an intermediary to sell such products and will also act on our behalf to receive premiums and pay insurance benefits. In return, we will pay CGB a commission fee for each such product sold by it, calculated and paid on a monthly basis, by multiplying (a) total new premiums received in such month minus the premiums for the policies cancelled during the cooling-off period in such month and (b) a fixed commission rate, which ranges from 1.8% to 25%. This agreement has a term of three years. Upon expiration of the three-year term, this agreement will be automatically renewed for successive one-year terms, provided that CGB and we have respectively obtained any required internal approvals.
New Negotiated Deposit Agreements with ~~GDB~~
WeCGB
During the reporting period, we entered into ~~three~~two new negotiated deposit agreements with ~~GDB~~CGB in ~~July 2010, December 2010 and February 2011, respectively.~~October 2012. Under ~~the agreement entered into in July 2010,~~these agreements, we agreed to deposit in ~~GDB~~CGB a total of RMB 32.1 billion (US$~~455~~0.3 million) for a term of 61 months. The annual interest rate applicable to our deposits will be a floating interest rate linked to the interest rate on one-year term deposits announced by the PBOC. Under the agreement entered into in December 2010, we agreed to deposit in GDB a total of RMB 1.5 billion (US$227 million) for a term of 61 months. The annual interest rate applicable to our deposits will be calculated according to a fixed interest rate. Under the agreement entered into in February 2011, we agreed to deposit in GDB a total of RMB 2.5 billion (US$379 million) for a term of 64 months. The annual interest rate applicable to our deposits will be fixed at ~~5.5%~~5.1% per annum.
~~116~~
~~Capital Injection to GDB~~
On March 20, 2010, our board of directors approved the capital injection of RMB 2,999 million into GDB. In July 2010, the capital injection was approved by the CIRC and China Banking Regulatory Commission, respectively. This transaction was completed in December 2010. After the capital injection, the registered capital of GDB was increased from RMB 11,979 million to RMB 15,402 million. We hold 3,080,479,452 shares in GDB, which accounted for 20% of GDB’s outstanding shares. Our proportionate shareholding in GDB remained unchanged.
Compliance with HKSE Listing Rules
The policy management agreement between CLIC and us, the asset management agreement between CLIC and AMC, the asset management agreement between AMC and us and the ~~asset management~~insurance sales framework agreement between ~~CLIC~~CLPCIC and ~~AMC~~us are only subject to reporting, announcement and annual review requirements under the HKSE Listing Rules and are exempt from independent shareholders’ approval requirements. In compliance with applicable HKSE Listing Rules requirements, we made announcements disclosing these transactions on December ~~30, 2008,~~15, 2011, December ~~30, 2010~~29, 2011, December 27, 2012 and March 8, 2012, respectively. We also made an announcement disclosing the revision of annual caps for the two years ending December ~~22, 2009, respectively.~~
31, 2014 in respect of the insurance sales framework agreement between CLPCIC and us on January 4, 2013.
The ~~transaction under the capital injection~~property purchase framework agreement ~~among CLIC, AMC~~between IHC and us is subject to reporting and announcement requirements only under the HKSE Listing Rules and is exempt from independent shareholders’ approval. In compliance with applicable HKSE Listing Rules requirements, we made an announcement disclosing this transaction on June 27, 2012.
127
The series of arrangements entered into by AMC with IHC, Beijing Wanyang and Beijing Vantone in relation to the investment and development of land is subject to reporting and announcement requirements only under the HKSE Listing Rules and is exempt from independent shareholders’ approval. In compliance with applicable HKSE Listing Rules requirements, we made an announcement disclosing this transaction on February ~~9, 2009.~~
17, 2012.
The partnership agreement entered into by CLIC, CLPCIC, Soochow Securities, SIDVC and us in relation to the formation of China Life (Suzhou) Urban Development Industry Investment Enterprise (Limited Partnership) is subject to reporting and announcement requirements only under the HKSE Listing Rules and is exempt from independent shareholders’ approval. In compliance with applicable HKSE Listing Rules requirements, we made an announcement disclosing this transaction on April 15, 2013.
The remaining related party transactions discussed above, other than the transactions with ~~GDB,~~CGB, are exempt from reporting, announcement and independent shareholders’ approval requirements under the HKSE Listing Rules. The continuing related party transactions with ~~GDB~~CGB are not regarded as connected transactions for us under the HKSE Listing Rules.

Figures for the year ended December 31, ~~2010~~
2012
The aggregate value of each of the transactions contemplated under the policy management agreement, the asset management agreements, ~~and~~ the property leasing agreement and the insurance sales framework agreement for the year ended December 31, ~~2010~~2012 is set out below:
Transactions
The aggregate value for
the year ended
December 31, 2012
~~The aggregate value for~~
~~the year ended~~
~~Transactions~~ ~~December 31, 2010~~
(RMB in millions)
1.      Policy management agreement between CLIC and us
~~1,154~~1,063
2.      Asset management agreement

(a)    between CLIC and AMC
~~123~~133
(b)    between AMC and us
~~659~~761
3.      Property leasing agreement between IHC and us
63
~~3. Property leasing~~
4.      Insurance sales framework agreement between CLPCIC and us
67648
~~117~~
Confirmation of Independent Non-executive Directors:
Our independent non-executive directors have reviewed the policy management agreement between CLIC and us, the asset management agreement between CLIC and AMC, the asset management agreement between AMC and us and the ~~asset management~~insurance sales framework agreement between ~~CLIC~~CLPCIC and ~~AMC~~us which were subject to reporting, announcement and annual review requirements under the HKSE Listing Rules and confirmed that:
1) the transactions were entered into in the ordinary and usual course of our business;
2) the transactions were conducted either on normal commercial terms or on terms that are fair and reasonable so far as our independent shareholders are concerned;
3) the transactions were entered into in accordance with the agreements governing those transactions; and
4) the amounts of the transactions had not exceeded the relevant annual caps as announced by us.
128
C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
ITEM 8. FINANCIAL INFORMATION.
A. CONSOLIDATED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
Our audited consolidated financial statements are set forth beginning on page F-1.

Legal and Regulatory Proceedings
We are involved in litigation and arbitration proceedings involving our insurance operations on an ongoing basis. In addition, the CIRC, as well as other PRC governmental agencies, including tax, commerce and industrial administration and audit bureaus, from time to time make inquiries and conduct examinations, audits or investigations concerning our compliance with PRC laws and regulations. These litigation, arbitration and administrative proceedings have in the past resulted in damage awards, settlements or administrative sanctions, including fines, which have not been material to us. While we cannot predict the outcome of any pending or future litigation, arbitration, examination or investigation, we do not believe that any pending legal matter will have a material adverse effect on our business, financial condition or results of operations. However, we cannot assure you that any future litigation, arbitration or regulatory proceeding will not have an adverse outcome, which could have a material adverse effect on our operating results or cash flows.
We currently have control procedures in place to monitor our litigation, arbitration and regulatory exposure. We have established a systematic prevention system whereby our management at each corporate level is responsible for compliance with laws, regulations and internal codes of conduct within their individual territories or departments. Our branches at the provincial level are required to report material litigation, arbitration and regulatory matters to our corporate headquarters on a timely basis. We plan to continue to improve our control and compliance policies in the future.

~~118~~
129
We may penalize our employees or individual agents who commit misconduct or fraud, breach the terms of their employment or agency agreements, exceed their authorization limits or fail to follow prescribed procedures in delivering insurance policies and premium payments, in each case having regard to the severity of the offense. Employees or individual agents are required to reimburse us for any losses suffered by us resulting from their misconduct or fraud. In serious cases, we may terminate their employment or agency agreements. We report criminal offenses to the PRC authorities and may also bring concurrent civil actions against employees or individual agents. We have experienced agent and employee misconduct that has resulted in litigation, arbitration and administrative actions against us and these agents and employees, and in some cases criminal proceedings and convictions against the agent or employee in question. None of these actions has resulted in material losses, damages, fines or other sanctions against us. We cannot assure you, however, that agent or employee misconduct will not lead to a material adverse effect on our business, results of operations or financial condition.

Policy on Dividend Distributions
Our board of directors has passed a resolution on March ~~22, 2011~~27, 2013 to propose for approval at the annual general meeting of the declaration of final dividends of RMB ~~0.40~~0.14 per share, totaling approximately RMB ~~11,306~~3,957 million (US$~~1,713~~635 million), for the year ended December 31, ~~2010.~~2012. The proposed dividends have not been provided ~~for~~ in our consolidated financial statements for the year ended December 31, ~~2010.~~
2012.
The payment of any dividend by us must be approved by shareholders in a shareholders’ meeting. Our board of directors intends to make its recommendations regarding the declaration of cash dividends to the shareholders in general meeting. The decision to make a recommendation for the payment of any dividend and the amount of the dividend ~~for the years following 2010~~ will depend on:
our results of operations and cash flows;
our financial position;
statutory solvency requirements as determined under PRC GAAP with reference to CIRC rules;
our shareholders’ interests;
general business conditions;
our future prospects;
statutory and regulatory restrictions on the payment of dividends by us; and
other factors that our board of directors deems relevant.
130
We will pay dividends out of our after-tax profits only after we have made the following allowances and allocations:
recovery of accumulated losses, if any;
allocations to the statutory common reserve fund equivalent to 10% of our after-tax income, as determined under PRC GAAP; and
allocations to a discretionary common reserve fund as approved by the shareholders in a shareholders’ meeting.
~~119~~
When the statutory common reserve fund reaches and is maintained at or above 50% of our registered capital, as determined under PRC GAAP, no further allocations to this fund will be required.
Under Chinese law, dividends may be paid only out of distributable profits. Distributable profits generally means the lesser of our after-tax profits as determined under PRC GAAP and IFRS, less any recovery of accumulated losses and allocations to statutory funds that we are required to make, subject to further regulatory restrictions. There is no difference between after-tax profits as determined under PRC GAAP and IFRS. Any distributable profits that are not distributed in a given year are retained and available for distribution in subsequent years. However, ordinarily we will not pay any dividends in a year in which we do not have any distributable profits.
Payment of dividends by us is also regulated by the PRC insurance law. If we do not meet the minimum solvency margin required by the CIRC, we may be prohibited from paying dividends. See “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Solvency requirements”.
We paid dividends of RMB 0.05 per share in respect of 2005, RMB 0.14 per share in respect of 2006, RMB 0.42 per share in respect of 2007, RMB 0.23 per share in respect of 2008, ~~and~~ RMB 0.70 per share in respect ~~2009.~~2009, RMB 0.40 per share in respect of 2010 and RMB 0.23 per share in respect of 2011. Our board of directors has recommended the declaration of final dividends of RMB ~~0.40~~0.14 per share in respect of ~~2010.~~2012. We expect to continue to pay dividends in line with our financial performance thereafter. We will declare dividends, if any, in Renminbi with respect to the H shares on a per share basis and will pay such dividends in Hong Kong dollars.
B. SIGNIFICANT CHANGES
We are not aware of any significant ~~charges~~changes since the date of the consolidated financial statements included in this annual report.
C. EMBEDDED VALUE

Background
China Life prepares financial statements to public investors in accordance with the relevant accounting standards. An alternative measure of the value and profitability of a life insurance company can be provided by the embedded value method. Embedded value is an actuarially determined estimate of the economic value of the life insurance business of an insurance company based on a particular set of assumptions about future experience, excluding the economic value of future new business. In addition, the value of one year’s sales represents an actuarially determined estimate of the economic value arising from new life insurance business issued in one ~~year.~~
year based on a particular set of assumptions about future experience.
131
China Life believes that reporting our embedded value and value of one year’s sales provides useful information to investors in two respects. First, the value of our in-force business represents the total amount of distributable earnings, in present value terms, which can be expected to emerge over time, in accordance with the assumptions used. Second, the value of one year’s sales provides an indication of the value created for investors by new business activity based on the assumptions used and hence the potential of the business. However, the information on embedded value and value of one year’s sales should not be viewed as a substitute of financial measures under the relevant accounting ~~bases.~~basis. Investors should not make investment decisions based solely on embedded value information and the value of one year’s sales.
~~120~~
It is important to note that actuarial standards with respect to the calculation of embedded value are still evolving. There is still no universal standard which defines the form, calculation methodology or presentation format of the embedded value of an insurance company. Hence, differences in definition, methodology, assumptions, accounting basis and disclosures may cause inconsistency when comparing the results of different companies.
Also, the calculation of embedded value ~~calculation~~and the value of one year’s sales involves substantial technical complexity and estimates can vary materially as key assumptions are changed. Therefore, special care is advised when interpreting embedded value results.
The values shown below do not consider the future financial ~~effect~~impact of ~~the policy management agreement~~transactions between ~~CLIC and China Life, the non-competition agreement between CLIC and China Life, the trademark license agreement between CLIC and~~ China Life and ~~the property leasing agreement between~~CLIC, IHC, ~~and China Life, nor the future financial impact of transactions of China Life with~~ AMC, China Life Pension, and CLPCIC,.
etc.
Definitions of Embedded Value and Value of One Year’s Sales
The embedded value of a life insurer is defined as the sum of the adjusted net worth and the value of in-force business allowing for the cost of capital supporting a company’s desired solvency margin.
“Adjusted net worth” is equal to the sum of:
Net assets, defined as assets less PRC solvency policy reserves and other liabilities; and
Net-of-tax adjustments for relevant differences between the market value and the book value of assets, together with relevant net-of-tax adjustments to certain liabilities.
The market value of assets can fluctuate significantly over time due to the impact of the prevailing market environment. Hence the adjusted net worth can fluctuate significantly between valuation dates.
The “value of in-force business” and the “value of one year’s sales” are defined here as the discounted value of the projected stream of future after-tax distributable profits for existing in-force business at the valuation date and for one year’s sales in the 12 months immediately preceding the valuation date. Distributable profits arise after allowance for PRC solvency reserves and solvency margins at the required regulatory minimum level.
The value of in-force business and the value of one year’s sales have been determined using a traditional deterministic discounted cash flow methodology. This methodology makes implicit allowance for the cost of investment guarantees and policyholder options, asset/liability mismatch risk, credit risk, the risk of operating experience’s fluctuation and the economic cost of capital through the use of a risk-adjusted discount rate.

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Preparation and Review
The embedded value and the value of one year’s sales were prepared by China Life in accordance with “Life Insurance Embedded Value Reporting Guidelines” issued by the CIRC. Towers Watson, an international firm of consultants, performed a review of ~~our~~China Life’s embedded ~~value.~~value and value of one year’s sales. The review statement from Towers Watson is contained in the “Towers Watson’s ~~Review Opinion Report~~review opinion report on ~~Embedded Value”~~embedded value” section.
~~121~~
On 15 May 2012, the MOF and the SAT issued the “Notice on Corporate Income Tax Deduction of Reserves for Insurance Companies” (Cai Shui [2012] No. 45), requiring the taxation basis to be based on accounting profits. Based on the above regulation, in preparing the 2012 embedded value report, the adjusted net worth has reflected the tax treatment in accordance with accounting profits. When calculating the value of in-force business and value of one year’s sales, as there is uncertainty in the accounting liability assumptions in future valuation periods (such as valuation interest rates), correspondingly, numerous scenarios could be possible as to future accounting profits. Consequently, we have adopted the profits based on the solvency liability in projecting future tax payable in the base scenario. We also disclose the value of in-force business and value of one year’s sales calculated using tax payable based on the accounting profits in accordance to the “Provisions on the Accounting Treatment Related to Insurance Contracts” under one possible scenario in the table 3 of “Sensitivity Results”.
Assumptions
~~Assumptions~~
Economic assumptions:
The calculations are based upon assumed corporate tax rate of 25% for all years. The investment returns are assumed to be ~~4.85%~~5.1% in ~~2010~~2012 and grading to ~~5.35% in 2012, rising to~~ 5.5% in ~~2013~~2016 (remaining level thereafter). ~~An average of~~ 15% from ~~2010~~2012 to ~~2016,~~2015, and ~~13 %~~grading to 17% in 2017 (remaining level thereafter) of the investment return is assumed to be exempt from income tax. These investment return and tax exempt assumptions are based on our strategic asset mix and expected future returns. The risk-adjusted discount rate used is 11%.
Other operating assumptions such as mortality, morbidity, lapses and expenses are based on our recent operating experience and expected future outlook.

Summary of Results
The embedded value as at 31 December ~~31, 2010~~2012 and the value of one year’s sales for the 12 months to 31 December ~~31, 2010,~~2012, and their corresponding results in ~~2009~~2011 are shown ~~below.~~
below:
Table 1
Components of Embedded Value and Value of One Year’s Sales

RMB million
ITEM 2010 2009

A Adjusted Net Worth 144,655 159,948
B Value of In-Force Business before Cost of Solvency Margin 183,008 149,387
C Cost of Solvency Margin (29,564 ) (24,106 )
D Value of In-Force Business after Cost of Solvency Margin (B+C) 153,444 125,282
E Embedded Value (A + D)
298,099 285,229
F Value of One Year’s Sales before Cost of Solvency Margin 23,726 21,352
G Cost of Solvency Margin (3,887 ) (3,638 )
H Value of One Year’s Sales after Cost of Solvency Margin (F+G)
19,839 17,713

RMB million
ITEM

December 31, 2012

December 31, 2011
A
   Adjusted Net Worth    128,507    110,266
B
   Value of In-Force Business before Cost of Solvency Margin    245,134    215,608
C
   Cost of Solvency Margin    (36,046)    (33,020)
D
   Value of In-Force Business after Cost of Solvency Margin (B+C)    209,088    182,588
E
   Embedded Value (A + D)    337,596    292,854
F
   Value of One Year’s Sales before Cost of Solvency Margin    24,129    23,756
G
   Cost of Solvency Margin    (3,295)    (3,557)
H
   Value of One Year’s Sales after Cost of Solvency Margin (F+G)    20,834    20,199
Notes:
1)
~~Notes:~~1) Numbers may not be additive due to rounding.

2) Taxable ~~income is~~incomes in embedded value and the value of one year’s sales are based on ~~distributable~~ earnings calculated using solvency reserves.

~~122~~
133
Movement Analysis
The following analysis tracks the movement of the embedded value from the start to the end of ~~2010.~~
2012.
Table 2
Analysis of Embedded Value Movement
in 2012
ITEM

~~ITEM~~ RMB million

A    Embedded Value at Start of Year    ~~285,229~~292,854
B    Expected Return on Embedded Value    ~~23,922~~30,215
C    Value of New Business in the Period    ~~19,839~~20,834
D    Operating Experience Variance    (3879 )
E    Investment Experience Variance    ~~(9,297~~9,676 )
F    Methodology, Model and Assumption Changes    ~~413~~(1,905 )
G    Market Value and Other Adjustment    (~~1,937~~6,954 )
H    Exchange Gains or Losses    (~~391~~49 )
I    Shareholder Dividend Distribution    (~~19,785~~6,501 )
J    Other    ~~109~~304
K
   Embedded Value as at December 31, ~~Dec 2010~~2012 (sum A through J)    ~~298,099~~337,596
Notes:
1)
~~Notes:~~1) Numbers may not be additive due to rounding.

2)             2) Items B through J are explained below:
B    Reflects unwinding of the opening value of in-force business and value of new business sales in ~~2010~~2012 plus the expected return on investments supporting the ~~2010~~2012 opening net worth.
C    Value of new business sales in ~~2010.~~2012.
D    Reflects the difference between actual experience in ~~2010~~2012 (including lapse, mortality, morbidity, and expense, etc.) and the assumptions.
E    Compares actual with expected investment returns during ~~2010.~~2012.
F    Reflects the effect of projection method, model enhancements and assumption changes.
G    Change in the market value adjustment from the beginning of ~~2010~~year 2012 to ~~the end of 2010,~~31 December 2012, tax adjustment and other related adjustments.
H    Reflect the gains or losses due to ~~change~~changes in exchange rate.
I    Reflects dividends distributed to shareholders during ~~2010.~~2012.
J    Other miscellaneous items.

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Sensitivity Results
~~Sensitivity Testing~~
Sensitivity testing was performed using a range of alternative assumptions. In each of the sensitivity tests, only the assumption referred to was changed, with all other assumptions remaining unchanged. The results are summarized ~~below.~~
below:
Table 3

RMB million
VALUE OF VALUE OF
IN-FORCE ONE YEAR’S
BUSINESS SALES
AFTER COST AFTER
OF COST OF
SOLVENCY SOLVENCY
Sensitivity Results MARGIN MARGIN

Base case scenario 153,444 19,839
1.Risk discount rate of 11.5%
145,375 18,794
2.Risk discount rate of 10.5%
162,126 20,959
3.10% increase in investment return
182,023 22,667
4.10% decrease in investment return
125,022 17,040
5.10% increase in expenses
151,002 18,014
6.10% decrease in expenses
155,882 21,664
7.10% increase in mortality rate for non-annuity products and 10% decrease in mortality rate for annuity products
151,791 19,757
8.10% decrease in mortality rate for non-annuity products and 10% increase in mortality rate for annuity products
155,118 19,920
9.10% increase in lapse rates
152,080 19,756
10.10% decrease in lapse rates
154,857 19,916
11.10% increase in morbidity rates
151,609 19,756
12.10% decrease in morbidity rates
155,294 19,922
13.10% increase in claim ratio of short term business
153,162 19,249
14.10% decrease in claim ratio of short term business
153,725 20,429
15.Solvency margin at 150% of statutory minimum
139,372 17,865
16.Using 2009 EV assumptions
153,452 19,809
17.Taxable income based on accounting profit in accordance to “the Provisions on the Accounting Treatment Related to Insurance Contracts”
148,722 19,990

Adjusted Net Worth
Base Case Scenario 144,655
18.Taxable income based on accounting profit in accordance to “the Provisions on the Accounting Treatment Related to Insurance Contracts”
137,155
~~Note:~~ ~~Taxable income is based on distributable earnings calculated using solvency reserves for Scenarios 1 to 16.~~
Sensitivity Results

RMB million
Value of in-force business
after cost of solvency
margin Value of one year’s sales
after cost of solvency
margin
Base case scenario
209,088    20,834
1.      Risk discount rate of 11.5%
198,792    19,745
2.      Risk discount rate of 10.5%
220,146    22,002
3.      10% increase in investment return
244,490    23,618
4.      10% decrease in investment return
173,935    18,076
5.      10% increase in expenses
206,480    19,073
6.      10% decrease in expenses
211,697    22,594
7.      10% increase in mortality rate for non-annuity products and 10% decrease in mortality rate for annuity products
207,185    20,746
8.      10% decrease in mortality rate for non-annuity products and 10% increase in mortality rate for annuity products
211,023    20,921
9.      10% increase in lapse rates
207,821    20,656
10.    10% decrease in lapse rates
210,399    21,011
11.    10% increase in morbidity rates
207,035    20,716
12.    10% decrease in morbidity rates
211,161    20,952
13.    10% increase in claim ratio of short term business
208,808    20,238
14.    10% decrease in claim ratio of short term business
209,369    21,429
15.    Solvency margin at 150% of statutory minimum
200,097    19,154
16.    Using 2011 EV assumptions
209,383    21,068
17.    Taxable income based on the accounting profit in accordance to the “Provisions on the Accounting Treatment Related to Insurance Contracts” under one possible scenario
211,901    20,191
Note: Taxable income is based on earnings calculated using solvency reserves for Scenarios 1 to 16.
Towers Wastson’s Review Opinion Report on Embedded Value
To The Directors of China Life Insurance Company Limited
China Life Insurance Company Limited (“China Life”) has prepared embedded value results for the financial year ended 31 December ~~2010~~2012 (“EV Results”). The disclosure of these EV Results, together with a description of the methodology and assumptions that have been used, are shown in the Embedded Value section.
China Life has engaged Towers Watson ~~Pennsylvania Inc., trading as Towers Watson~~Management Consulting (Shenzhen) Co. Ltd. Beijing Branch (“Towers Watson”) to review its EV Results. This report is addressed solely to China Life in accordance with the terms of our engagement letter, and sets out the scope of our work and our conclusions. To the fullest extent permitted by applicable law, we do not accept or assume any responsibility, duty of care or liability to anyone other than China Life for or in connection with our review work, the opinions we have formed, or for any statement set forth in this report.
135
Scope of work
Our scope of work covered:
a review of the methodology used to develop the embedded value and value of one year’s sales as at 31 December ~~2010,~~2012, in the light of the requirements of the “Life Insurance Embedded Value Reporting Guidelines” issued by the China Insurance Regulatory Commission (“CIRC”) in September 2005;
a review of the economic and operating assumptions used to develop the embedded value and value of one year’s sales as at 31 December ~~2010;~~2012;
a review of the results of China Life’s calculation of the EV Results.
In carrying out our review, we have relied on the accuracy of audited and unaudited data and information provided by China Life.
~~124~~
Opinion
Based on the scope of work above, we have concluded that:
the embedded value methodology used by China Life is consistent with the requirements of the “Life Insurance Embedded Value Reporting Guidelines” issued by the CIRC. The methodology applied by China Life is a common methodology used to determine embedded values of life insurance companies in China at the current time;
the economic assumptions used by China Life are internally consistent, have been set with regard to current economic conditions, and have made allowance for the company’s current and expected future asset mix and investment strategy;
the operating assumptions used by China Life have been set with appropriate regard to past, current and expected future experience;
no changes have been assumed to the treatment of tax, but some sensitivity results relating to tax have been shown by China Life; and
the EV Results have been prepared, in all material respects, in accordance with the methodology and assumptions set out in the Embedded Value section.
For and on behalf of Towers Watson
Adrian Liu FIAA, FCAA
14th March 2013
~~For and on behalf of Towers Watson~~
~~Adrian Liu FIAA, FCAA~~
~~15th March 2011~~
ITEM 9. THE OFFER AND LISTING.
In connection with our initial public offering, our American depositary shares, or ADSs, each representing 40 H shares, were listed and commenced trading on New York Stock Exchange on December 17, 2003 under the symbol “LFC”. Our H shares were listed and commenced trading on the Hong Kong Stock Exchange on December 18, 2003 under the stock code “2628”. Prior to these listings, there was no public market for our equity securities. The New York Stock Exchange and the Hong Kong Stock Exchange are the principal trading markets for our ADSs and H shares, which are not listed on any other exchanges in or outside the United States.
136
On December 29, 2006, the ratio of ADSs to H shares was reduced from 40 H shares to 15 H shares. Our A shares were listed and commenced trading on the Shanghai Stock Exchange on January 9, 2007 under the stock code “601628”.
The high and low closing sale prices of the H shares on the HKSE, the ADSs on the NYSE and the A shares on the SSE for the periods indicated are as follows⁽¹⁾:

Price per H Share Price per ADS⁽²⁾ Price per A share
(HK$) (US$) (RMB)
High Low High Low High Low
Annual

2006 27.2000 7.0500 52.18 13.76 — —
2007 52.0000 19.2600 106.56 36.70 75.0800 ⁽³⁾ 32.0400 ⁽³⁾
2008 39.8500 16.7000 76.75 33.57 58.9700 18.1500
2009 41.0000 19.9000 79.86 38.34 33.1800 18.6700
2010 39.3000 29.7000 76.14 57.36 31.4200 20.9000
Quarterly

First Quarter, 2009 26.4500 19.9000 51.56 38.34 24.0300 18.6700
Second Quarter, 2009 30.5000 25.4500 59.39 50.10 27.7500 22.6200
Third Quarter, 2009 36.1500 28.6000 70.09 54.83 34.0100 25.1000
Fourth Quarter, 2009 41.0000 32.8000 79.86 63.16 33.1800 28.3800
First Quarter, 2010 39.3000 32.6000 76.14 62.50 31.4200 26.6900
Second Quarter, 2010 38.2000 32.5500 74.79 62.68 28.4700 22.7300
Third Quarter, 2010 35.2000 29.7000 68.45 57.36 25.3300 20.9000
Fourth Quarter, 2010 36.6000 31.1000 70.50 59.78 27.8800 21.0400
First Quarter, 2011 32.6000 28.0000 62.93 53.66 22.3200 �� 20.7900
Monthly

October 2010 36.3500 31.1000 70.35 59.78 27.8800 22.4400
November 2010 36.6000 33.3000 70.50 63.83 26.8400 22.2900
December 2010 33.7500 31.1500 65.62 60.73 23.5400 21.0400
January 2011 32.6000 30.3000 62.93 58.29 21.9200 20.7900
February 2011 30.4000 28.6500 58.72 55.81 22.2100 21.0200
March 2011 30.6500 28.0000 58.85 53.66 22.3200 20.8800
April 2011 (through April 15, 2010) 30.4500 29.4500 58.43 56.84 22.1800 21.3300

   Price per H Share
(HK$)    Price per ADS ⁽²⁾
(US$)    Price per A share
(RMB)
   High    Low    High    Low    High    Low
Annual

2008
   39.8500       16.7000       76.75       33.57       58.9700       18.1500
2009
   41.0000       19.9000       79.86       38.34       33.1800       18.6700
2010
   39.3000       29.7000       76.14       57.36       31.4200       20.9000
2011
   32.6000       17.2400       62.93       33.52       22.3200       14.8100
2012
   25.3000       17.0600       49.69       33.47       21.4000       15.8700
Quarterly

First Quarter, 2011
   32.6000       28.0000       62.93       53.66       22.3200       20.7900
Second Quarter, 2011
   30.4500       24.6000       58.43       47.98       21.8000       17.8400
Third Quarter, 2011
   27.7500       17.6600       52.87       34.40       19.1200       14.9100
Fourth Quarter, 2011
   23.1500       17.2400       44.72       33.52       18.3900       14.8100
First Quarter, 2012
   24.3000       18.8000       47.04       36.18       19.3300       16.0700
Second Quarter, 2012
   21.3700       17.0600       40.99       33.47       18.9700       16.1500
Third Quarter, 2012
   22.9500       19.9600       44.62       39.22       20.0000       16.5600
Fourth Quarter, 2012
   25.3000       22.0500       49.69       42.80       21.4000       17.0800
First Quarter, 2013
   27.2000       20.1000       52.62       39.42       21.9200       17.0400
Monthly

October 2012
   23.4000       22.2000       45.62       43.01       19.0700       17.3600
November 2012
   23.9500       22.0500       46.44       42.80       18.5400       17.0800
December 2012
   25.3000       22.5000       49.69       43.65       21.4000       17.8000
January 2013
   27.2000       25.3000       52.62       49.91       21.9200       19.9100
February 2013
   25.9000       22.6000       50.26       44.07       21.4700       18.2800
March 2013
   23.3000       20.1000       45.41       39.42       18.3600       17.0400
April 2013 (through April 19, 2013)
   20.9500       19.2600       40.72       37.66       17.6700       17.0400
(1) Source: Yahoo! Finance (http://finance.yahoo.com).
(2) Each ADS ~~represented 40 H shares until December 29, 2006 when the ratio was altered such that each ADS represented~~represents 15 H shares. ~~The market quotations shown in the table above have been restated for all periods to reflect the current ratio of 15 H shares per ADS.~~
~~(3)~~ ~~From the date of listing: January 9, 2007.~~

~~125~~
ITEM 10. ADDITIONAL INFORMATION.
A. SHARE CAPITAL
Not applicable.
B. ARTICLES OF ASSOCIATION
The following is a brief summary of certain provisions of our current articles of association, the PRC company law and certain other laws and regulations applicable to us. Such summary is not purported to be complete. For further information, you should refer to the full text of our articles of association and to the texts of applicable laws and regulations.

137
Objects and Purposes
We are organized under the PRC company law as a joint stock company. We are registered with the SAIC in Beijing, China and our business license carries the registration number 100000000037965.
Our business scope, set forth in Article 10 of our articles of association, is to engage in life, accident and health insurance businesses; reinsurance business relating to the foregoing; fund investment businesses authorized by laws, regulations or the State Council; and agency business, consulting business and provision of services, in each case relating to life insurance.

Sources of Shareholders’ Rights
The primary sources of shareholders’ rights are the PRC company law, our articles of association, Special Rules applicable to overseas listed joint stock companies promulgated by the State Council, or Special Rules, relevant CSRC regulations, the Shanghai Stock Exchange Listing Rules, and the Hong Kong Stock Exchange Listing Rules that, among other things, impose certain standards of conduct, fairness and disclosure on us, our directors and CLIC, our controlling shareholder. The PRC company law was enacted in December 1993 and serves as the primary body of law regulating corporate actions of companies organized in the PRC and its directors and shareholders.
~~126~~
Our articles of association have incorporated the provisions set forth in the Mandatory Provisions for the Articles of Association of Companies Listed Overseas, or the Mandatory Provisions, adopted in 1994 pursuant to the requirements of the CSRC and the provisions set forth in the Guidelines on the Articles of Association of Listed Companies, or the Guidelines, as amended in 2006 by the CSRC. Any amendment to the relevant mandatory provisions will only become effective after approval by the relevant governmental departments authorized by the State Council and the CSRC. The Hong Kong Stock Exchange Listing Rules require a number of provisions in addition to the Mandatory Provisions to be included in our articles of association.
According to the HKSE Listing Rules, we may not amend certain provisions of our articles of association that have been mandated by the Hong Kong Stock Exchange. These provisions include, among others:
varying the rights of existing classes of shares;
voting rights;
our power to purchase our own shares;
rights of minority shareholders; and
liquidation procedures.
In addition, upon the listing of the H shares and for so long as the H shares are listed on the Hong Kong Stock Exchange, we are subject to the relevant ordinances, rules and regulations applicable to companies listed on the Hong Kong Stock Exchange, including, among other things, the Hong Kong Stock Exchange Listing Rules, the Securities and Futures Ordinance and the Hong Kong Codes on Takeovers and Mergers and Share Repurchases.
Unless otherwise specified, all rights, obligations and protections discussed below are derived from our articles of association and the PRC company law.

138
Enforceability of Shareholders’ Rights
Enforceability of our shareholders’ rights may be limited.
In accordance with the rules applicable to Chinese overseas listed companies, our articles of association provide that, with certain limited exceptions, all disputes or claims based on our articles of association, the PRC company law or other relevant laws or administrative rules, and concerning matters between holders of H shares and holders of A shares, us, or our directors, supervisors, president, vice presidents or other senior officers, must be submitted for arbitration at either the China International Economic and Trade Arbitration Commission or the Hong Kong International Arbitration Center. If an applicant chooses to have the dispute arbitrated at the Hong Kong International Arbitration Center, either party may request that venue be changed to Shenzhen, a city in mainland China near Hong Kong. The governing law for the above-mentioned disputes or claims is Chinese law unless otherwise provided by Chinese law. Any such arbitration will be final and conclusive.
~~127~~
In June 1999, an arrangement was made between the People’s Courts of the PRC and the courts of Hong Kong for mutual enforcement of arbitration rewards rendered in the PRC and Hong Kong according to their respective laws. This arrangement was approved by the Supreme Court of the PRC and the Hong Kong Legislative Council and became effective on February 1, 2000.
There has not been any published report of judicial enforcement in the PRC by H shareholders of their rights under charter documents of PRC joint stock companies or the PRC company law or in the application or interpretation of the PRC or Hong Kong regulatory provisions applicable to PRC joint stock companies.
The PRC company law allows shareholders to sue, on behalf of the corporation, against persons, including corporate officers, directors, who have allegedly wronged the corporation, where the corporation itself has failed to enforce such claim against such persons directly. Class action lawsuits based on violations of securities laws are generally not available.
We are subject to the Hong Kong Exchange Listing Rules, the Hong Kong Securities and Futures Ordinance, or Securities and Futures Ordinance, and the Hong Kong Codes on Takeovers and Mergers and Share Repurchases. However, holders of H shares will not be able to bring actions on the basis of violations of the Hong Kong Stock Exchange Listing Rules and must instead rely on the Hong Kong Stock Exchange to enforce its rules. The Hong Kong Codes on Takeovers and Mergers and Share Repurchases do not have the force of law and are only standards of commercial conduct considered acceptable for takeover and merger transactions and share repurchases in Hong Kong as established by the Securities and Futures Commission of Hong Kong and the securities and futures industry in Hong Kong. The Securities and Futures Ordinance establishes various obligations in relation to disclosure of shareholders’ interests in Hong Kong listed companies, the violation of which is subject to prosecution by the Securities and Futures Commission of Hong Kong.
See “Item 3. Key Information—Risk Factors—Risks Relating to the People’s Republic of China—The laws in China differ from the laws in the United States and may afford less protection to our minority shareholders” and “Item 3. Key Information—Risk Factors—Risks Relating to the People’s Republic of China—You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in the PRC based on U.S. or other foreign laws against us, our management and some of the experts named in the annual report”.

139
Dividends
Our board of directors may propose dividend ~~distributions at any time.~~distributions. A distribution of dividends for any fiscal year is subject to shareholders’ approval. Dividends may be distributed in the form of cash or shares. The H shares ~~will~~ rank equally with A shares with regard to dividend rights. A distribution of shares must be approved by special resolution of the ~~shareholders.~~
shareholders’meeting.
We may only distribute dividends after allowance has been made for:
recovery of accumulated losses, if any;
allocations to the statutory common reserve fund equivalent to 10% of our after-tax income; and
allocations to a discretionary common reserve fund as approved by the shareholders in a shareholders’ meeting.
~~128~~
Under Chinese law, dividends may be paid only out of distributable profits. Distributable profits generally means the lesser of our after-tax profits as determined under PRC GAAP and IFRS, less any recovery of accumulated losses and allocations to statutory funds that we are required to make, subject to further regulatory restrictions. There is no difference between after-tax profits as determined under PRC GAAP and IFRS. Any distributable profits that are not distributed in a given year are retained and available for distribution in subsequent years. However, we will ordinarily not pay any dividends in a year when we do not have any distributable profits.
Payment of dividends by us is also regulated by the PRC insurance law. If we do not meet the solvency margin required by the CIRC, we will be prohibited from paying dividends. See “Item 4. Information on the Company—Business Overview—Regulation and Related Matters—Insurance Company Regulation—Solvency requirements”.
Our articles of association require us to appoint, on behalf of the holders of H shares, a receiving agent that is registered as a trust corporation under the Trustee Ordinance of Hong Kong to receive dividends declared by us in respect of the H shares on behalf of such shareholders. Our articles of association require that cash dividends in respect of H shares be declared in Renminbi and paid by us in Hong Kong dollars. The depositary will convert these proceeds into U.S. dollars and will remit the converted proceeds to holders of our ADSs.
We anticipate that our controlling shareholder, CLIC, may incur future operating losses arising in part from the runoff of policies retained by it in connection with the restructuring. Dividends received from us may become one of CLIC’s principal means of funding these losses. Although we believe that the reserves held by CLIC and other financial resources available to it will fund substantially all of any future operating shortfalls arising out of these policies, which should reduce CLIC’s reliance on dividends from us, subject to the relevant provisions of the PRC company law and our articles of association as described above and in “Item 8. Financial Information—Consolidated Financial Statements and Other Financial Information—Policy on Dividend Distributions”, CLIC may seek to increase the amount of dividends we pay in order to satisfy its cash flow requirements. See “Item 3. Key Information—Risk Factors—Risks Relating to the Restructuring”.
Dividend payments may be subject to Chinese withholding tax. See “—Taxation—The People’s Republic of China—Taxation of Dividends”.

140
Voting Rights and Shareholders’ Meetings
Our board of directors will convene a shareholders’ annual general meeting once every year within six months from the end of the preceding fiscal year. Our board of directors must convene an interim meeting within two months of the occurrence of any of the following events:
where the number of directors is less than the number stipulated in the PRC company law or two-thirds of the number specified in our articles of association;
where our unrecovered losses reach one-third of the total amount of our share capital;
where shareholders, individually or jointly, holding 10% or more of our issued and outstanding voting shares so request in writing;
whenever our board of directors deems necessary, or more than half of directors (including at least two independent directors) or our board of supervisors so requests; or
any other event as maybe provided by applicable laws, rules, regulations or our articles of association.
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All shareholders’ meetings must be convened by our board of directors by written notice given to shareholders no less than 45 days before the meeting. Shareholders holding at least one-half of our total voting shares will constitute a quorum for a shareholders’ meeting. If a quorum is not reached, we are required to notify our shareholders within five days by public announcement of the agenda, the date and the venue of the adjourned meeting. After the notice, we may conduct the shareholders’ meeting. The accidental omission by us to give notice of a meeting to, or the non-receipt of notice of a meeting by, a shareholder will not invalidate the proceedings at that shareholders’ meeting.
Shareholders at meetings have the power, among other matters, to approve or reject our profit distribution plans, annual budget, financial statements, increases or decreases in share capital, issuances of debentures, mergers, liquidation, any equity-based incentive plan and any amendment to our articles of association. In addition, the rights of a class of shareholders may not be modified or abrogated, unless approved by a special resolution of shareholders at a general shareholders’ meeting and by a special resolution of shareholders of that class of shares at a separate meeting. Our articles of association enumerate various amendments which would be deemed to be a modification or abrogation of the rights of a class of shareholders, including, among others, increasing or decreasing the number of shares of a class disproportionate to increases or decreases of other classes of shares, removing or reducing rights to receive dividends in a particular currency or creating shares with voting or equity rights superior to those of shares of that class. There are no restrictions under PRC law or our articles of association on the ability of investors that are not Chinese residents to hold H shares and exercise voting rights, except that holders of H shares are unable to vote online and the prior approval of the CIRC is required in respect of any acquisition which results in the acquirer holding more than 5% of the outstanding share capital of our company and the other restrictions set out under “Item 4. Information on the Company—Business Overview—Regulatory and Related Matters—Insurance Company Regulation—Restriction of ownership in joint stock insurance companies”.
Each of our ordinary shares, whether it be an A share or an H share, is entitled to one vote on all matters submitted for vote at all shareholders’ meetings, except for meetings of a special class of shareholders where only holders of shares of the affected class are entitled to vote on the basis of one vote per share of the affected class.
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Shareholders are entitled to attend and vote at meetings either in person or by proxy. Proxies must be in writing and deposited at our legal address or such other place as is specified in the meeting notice, no less than 24 hours before the time for holding the meeting at which the proxy proposes to vote or the time appointed for the passing of the relevant resolution.
Resolutions on any of the following matters must be approved by more than two-thirds of the voting rights held by shareholders who are present in person or by proxy:
an increase or decrease in our share capital or the issuance of shares, warrants, debentures and other similar securities;
our division, merger, dissolution or liquidation (shareholders who object to a proposed merger are entitled to demand that either we or the shareholders who approved the merger purchase their shares at a fair price);
amendments to our articles of association;

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purchase or sale within any single year of any material assets exceeding 30% of our latest audited total assets;
any equity-based incentive plan; and
any other matters as provided under applicable laws or regulations or determined by a majority of shareholders at a general meeting to have a material impact on us and should be approved by two-thirds of the voting rights.
An amendment of shareholders’ rights of any class of shares must be approved by more than two-thirds of the voting rights held by holders of shares in the affected class who are present in person or by proxy.
All other actions taken by the shareholders will be approved by a majority of the voting rights held by shareholders who are present in person or by proxy at the shareholders’ meeting.
Any shareholder resolution that is in violation of any laws or regulations of China or the articles of association will be null and void.

Liquidation Rights
We are organized as a joint stock company with limited liability of indefinite duration, but must pass the annual inspection with the SAIC. In the event of our liquidation, the H shares will rank equally with the A shares, and payment of debts out of our remaining assets ~~shall~~is required to be made in the order of priority prescribed by applicable laws and regulations or, if no such standards exist, in accordance with such procedures as the liquidation committee that has been appointed either by us or the People’s Courts of China may consider to be fair and reasonable. After payment of debts, we ~~shall~~are required to distribute the remaining property to shareholders in proportion to the number of shares they hold.

Information Rights
Our shareholders may, subject to reasonable fees and costs, obtain a copy of our articles of association and inspect and copy all parts of our register of shareholders, personal particulars of the directors, supervisors, president and other senior officers, reports on the state of our share capital, reports showing the aggregate par value, highest and lowest price paid in respect of each class of shares repurchased by us since the end of the last accounting year and the aggregate amount paid by us for this purpose, minutes of shareholders’ general meetings, and counterfoils of company debt securities, resolutions of board meetings, resolutions of board of supervisors.
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Our fiscal year is the calendar year ending December 31. We must send to holders of H shares, ~~no less than 21 days before the date of the shareholders’ annual general meeting and~~ no more than four months after the end of the relevant financial year, our annual report (including our annual accounts, together with a copy of the auditors’ report thereon). Further, we must publish a preliminary results announcement no later than three months after the end of the relevant fiscal year. The results announcement in respect of the relevant financial year is required to be published on the HKSE’s website no later than the time that is 30 minutes before the earlier of the commencement of the morning trading session or any pre-opening session on the next business day after approval by or on behalf of our board of directors. ~~For annual accounting periods ending on or after December 31, 2010, we must publish such results no later than three months after the end of relevant fiscal year.~~ These and any interim financial statements must be prepared in accordance with HKFRS, IFRS or PRC GAAP in the case of a PRC issuer that has adopted PRC GAAP for the preparation of its annual financial statements. The annual financial statements must be approved by a majority of our shareholders who are present in person or by proxy at the annual general meeting.
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The ~~Hong Kong Stock Exchange~~HKSE Listing Rules also require us to send to holders of H shares an interim report no later than three months after the end of the first six months of each fiscal year. Further, we must publish a preliminary results announcement no later than two months after the end of the six-month period. The results announcement in respect of the relevant six-month period is required to be published on the HKSE’s website no later than the time that is 30 minutes before the earlier of the commencement of the morning trading session or any pre-opening session on the next business day after approval by or on behalf of our board of directors. ~~For half-year accounting periods ending on or after June 30, 2010, we must publish such results no later than two months after the end of the six-month period.~~
According to the HKSE Listing Rules, where in the view of the HKSE there is or there is likely to be a false market in our securities, we ~~are required to keep the Hong Kong Stock Exchange, our shareholders and other holders of our listed securities informed~~must, as soon as reasonably practicable ~~of any~~after consultation with the HKSE, announce the information ~~relating to us and our subsidiaries, including information on any major new developments that is not public information, which:~~
is necessary to ~~enable them and the public to appraise the position of us and our subsidiaries; or~~
~~is necessary to~~ avoid ~~the establishment of~~ a false market in our ~~securities;~~securities. In addition, according to the provisions of inside information under the Securities and Futures Ordinance of Hong Kong, we must, as soon as reasonably practicable after any inside information has come to our knowledge, disclose the information to the public. Inside information, in relation to a listed corporation, means specific information that—
(a) is about—
(i) the corporation;
(ii) a shareholder or officer of the corporation; or
(iii) the listed securities of the corporation or their derivatives; and
(b) is not generally known to the persons who are accustomed or
~~might reasonably~~ would be ~~expected~~likely to ~~affect~~deal in the listed securities of the corporation but would if generally known to them be likely to materially ~~market activity in, and~~affect the price of ~~our~~the listed securities.
~~We are~~ Depending on the size of the transaction, we may also be required to disclose to our shareholders details of various acquisitions or disposals of assets and other transactions (including transactions with controlling shareholders).

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Restrictions on Transferability and the Share Register
Unless otherwise permitted by relevant PRC rules or regulations or approved by relevant PRC authorities, H shares may be traded only among investors who are legal or natural persons resident outside of China, and may not be sold to investors resident within the PRC. There are no restrictions under PRC law or our articles of association on the ability of investors who are not PRC residents to hold H shares. However, under relevant PRC law, a legal person resident outside of China is only allowed to hold not more than ~~10%~~20% of our issued share capital and legal persons resident outside of China are only allowed to hold in aggregate not more than 25% of our issued share ~~capital.~~
capital, unless otherwise approved by competent authorities.
We are required to keep a register of our shareholders ~~which shall be~~ comprised of various parts, including one part which is to be maintained in Hong Kong in relation to holders of H shares. Shareholders have the right to inspect and, for a reasonable charge, to copy the share register. No transfers of ordinary shares will be recorded in our share register within thirty days prior to the date of a shareholders’ general meeting or within five days prior to the record date established for the purpose of distributing a dividend.
We have appointed Computershare Hong Kong Investor Services Limited to act as the registrar of our H shares. This registrar maintains our register of holders of H shares and enters transfers of H shares in such register upon the presentation of the documents described above.
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Increases in Share Capital
Under our articles of association, issuance of new securities, including ordinary shares, securities convertible into ordinary shares, options, warrants or similar rights to subscribe for any ordinary shares or convertible securities, must be approved by at least two-thirds of the shareholders who attend the shareholders meeting in person or by proxy. In addition, the issuance of A shares or H shares must be approved by two-thirds of the class of domestic shares or H shares, as the case may be, unless the number of shares to be issued shall not exceed 20% of the number of shares of the same class then outstanding in any 12-month period.
A special resolution was passed at the shareholders’ annual general meeting held on May 25, 2009 to authorize our board of directors to issue additional shares, and amend the articles of association accordingly, in a nominal amount of no more than 20% of each of the aggregate nominal amount of our domestic shares and H shares in issue as at the date of such resolution, by the conclusion of next shareholders’ annual general meeting, or the expiration of the 12-month period following the passing of this resolution, or the date on which the resolution is otherwise revised or revoked by a special resolution of our shareholders, whichever is the earliest. ~~Our board of directors has no immediate plan to issue any new shares.~~
Shareholders are not liable to make any further contribution to the share capital other than according to the terms that were agreed upon by the subscriber of the relevant shares at the time of subscription. New issues of shares must also be approved by relevant Chinese authorities.

Decreases in Share Capital and Repurchases
We may reduce our registered share capital only upon obtaining the approval of at least two-thirds of the shareholders who attend the shareholders meeting in person or by proxy and, in certain circumstances, of relevant Chinese authorities. The number of H shares that may be repurchased is subject to the Hong Kong Codes on Takeovers and Mergers and Share Repurchases.

Restrictions on Ownership
No individual legal entity or other organization (including any associated party thereof) that invests in an insurance company, other than an insurance holding company or an insurance company approved by the CIRC, may hold in excess of 20% of the shares in the insurance company. See “Item 4. Information on the Company—Business Overview—Regulation and Related Matters—Insurance Company Regulation—Restriction of ownership in joint stock insurance companies”.

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Restrictions on Large or Controlling Shareholders
Our articles of association define a controlling shareholder as any person who acting alone or in concert with others:
is in a position to elect more than one-half of the board of directors;
has the power to exercise, or to control the exercise of, 30% or more of our voting rights;
holds 30% or more of our issued and outstanding shares; or
~~has de facto control of us in any other way.~~
�� • has de facto control of us in any other way.
As of the date of this annual report, CLIC, a wholly state-owned enterprise, is our only controlling shareholder.
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Our articles of association provide that, in addition to any obligation imposed by laws and administrative regulations or required by the Hong Kong Stock Exchange Listing Rules, a controlling shareholder shall not exercise its voting rights in a manner prejudicial to the interests of other shareholders:
to relieve a director or supervisor from his or her duty to act honestly in our best interests;
to approve the appropriation by a director or supervisor, for his or her own benefit or for the benefit of any other person, of our assets in any way, including without limitation opportunities which may be advantageous to us; or
to approve the appropriation by a director or supervisor, for his or her own benefit or for the benefit of another person, of the individual rights of other shareholders, including without limitation rights to distributions and voting rights (except in accordance with a restructuring of our company which has been ~~submitted for approval~~approved by the shareholders at a general meeting in accordance with our articles of association).
Our articles of association also provide that a controlling shareholder or an actual controlling person shall not exploit its affiliated relation in a manner prejudicial to the interest of our company, and shall be liable for any losses suffered by us as a result thereof. The controlling shareholder or actual controlling person shall have fiduciary duties to both our company and our public shareholders. The controlling shareholder shall exercise its rights as a capital contributor of our company in strict compliance with the law. The controlling shareholder shall not cause any damage to the lawful rights and interest of our company and our public shareholders through, among others, any connected transactions, profit distribution, asset restructuring, external investment, fund appropriation and loan guarantee, or impair the interest of our company and our public shareholders through its controlling position.

Board of Directors
Our non-employee directors are elected by our shareholders at shareholders’ general meetings, and employee directors are elected by our employees or other democratic means at the employee representative conference. Directors are elected for a term of three years and may serve consecutive terms if re-elected.
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Article 23 of Special Regulations on the Overseas Offering and Listing of Shares by Joint Stock Limited Companies provides that directors, supervisors, and senior officers of a company owe duties of honesty, care and diligence to their company.
Our articles of association provide that, in exercising their duties and powers, our directors, supervisors and senior officers will act with the care, diligence and skills that are expected of a reasonable person under similar circumstances, observe fiduciary principles and not place themselves in a situation where their interests conflict with the duties they are charged with performing. In addition to these fiduciary duties to our company, each director, supervisor and officer is obligated to each shareholder:
to act honestly in our company’s best interests;
not to exploit corporate assets for personal gains; and
not to expropriate the rights of our shareholders.
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If directors, supervisors or officers are found to have misappropriated our company’s assets or misused their position for personal gain, the PRC company law provides that any misappropriated or misused property be returned and any illegal proceeds received by such director, supervisor or officer be confiscated, and allows us to impose punishment on them. In serious cases, criminal liability may also be imposed. According to our articles of association, our shareholders may bring a derivative suit against any director, supervisor or officer who has breached his fiduciary duties. Most disputes between H shareholders and directors, supervisors and officers are required to be resolved by final and binding arbitration.
Moreover, our articles of association provide that our directors, supervisors and senior officers must not enter into transactions or contracts with us or agree to make corporate loans to any persons or provide guarantees for loans of any shareholder or any other person with corporate assets. In particular, our directors, supervisors and senior officers have obligations to disclose to the board of directors any direct or indirect material interest they may have in any contracts or transactions with us. They may not vote on any contracts, transactions or arrangements in which they have any material interest. Further, we may not make loans or provide guarantees to directors, supervisors or senior officers, unless such loans or guarantees are approved at a shareholders’ meeting or made in the ordinary course of business and to the extent permitted by applicable laws. All decisions relating to the compensation of directors are made at shareholders’ meetings.
There are no provisions under our articles of association or PRC law which relate to:
the retirement or non-retirement of directors under any age limit requirement;
directors’ borrowing power; or
number of shares required for directors’ qualification.
Subject to all relevant laws and administrative regulations, the shareholders may remove any director before the expiration of his or her term of office by a majority vote of the shareholders present in person or by proxy at shareholders’ general meetings. A director, supervisor, president, vice president or other senior officer may be relieved of liability for a specific breach of his or her duties by the consent of shareholders so long as specified conditions are met.

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Board of Supervisors
Our board of supervisors consists of five supervisors. At least one-third of our board of supervisors must be employee representatives elected by our employees. The remaining members must be elected by our shareholders in a general meeting. One member of our board of supervisors is designated as the chairman. Members of the board of supervisors may not serve as director, president, vice president or other senior management of our company. The term of office for our supervisors is three years, which is renewable upon re-election.
The primary duty of the board of supervisors is to monitor our financial matters and management. The board of supervisors’ powers are generally limited to carrying out investigations and reporting to shareholders, the China Securities Regulatory Commission and other relevant governmental authorities having jurisdiction over our affairs and to convening shareholders’ interim meetings. Reasonable expenses incurred by the board of supervisors in carrying out its duties will be paid by us.
Our supervisors owe fiduciary duties to our company and our shareholders. Please see the discussion of the duties and the nature of recourse our shareholders may have against supervisors in breach of these duties in the subsection entitled “—Board of Directors”.
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The board of supervisors is accountable, and will report, to the shareholders at the shareholders’ general meetings.

Certain Differences Between PRC Company Law and Delaware Corporate Law
The PRC company law and other laws applicable to us differ in a number of respects from laws generally applicable to United States corporations and their shareholders. The description set forth below includes a summary of certain provisions of the PRC company law, Special Rules, Mandatory Provisions and the Guidelines applicable to companies listed both in the PRC and overseas, such as us, which differ from provisions of the corporate law of the State of Delaware.
General
We are a PRC joint stock company, which is a corporate entity organized under the PRC company law. Under the PRC company law, the registered capital of a joint stock company is divided into shares of equal par value. These shares are commonly called domestic ordinary shares. Each share of a joint stock company ranks equally with all other shares in its class as to voting rights (except for specified class voting rights) and rights to dividends and other distributions. Upon receiving approval from the relevant authorities, a joint stock company may offer its shares for sale to the public and seek to be listed on a stock exchange. The State Council may formulate separate regulations for the issuance of other classes of shares, including H shares. All of our issued shares are fully paid and nonassessable. Holders of H shares may transfer their shares without the approval of other shareholders. Among other things, a joint stock company must have (1) minimum paid-in capital of no less than RMB 5 million, (2) a board of directors of not fewer than five and not more than 19 members, and (3) a board of supervisors of not fewer than three members.
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The shareholders’ meeting of a joint stock company is the highest authority of the company and exercises the powers of the company with respect to significant matters, subject to applicable law and the articles of association of the company. The business of a joint stock company is under the overall management of a board of directors, subject to the PRC company law, other applicable laws and regulations (which in our case include the PRC insurance law and regulations), the company’s articles of association and duly adopted resolutions of its shareholders. The day-to-day operations of a joint stock company are under the direction of its general manager or president, subject to applicable laws and regulations, the company’s articles of association and duly adopted resolutions of the directors and shareholders. In addition, the PRC company law provides for the establishment of a board of supervisors for each joint stock company. The supervisors perform and exercise the functions and powers described below, including examination of the joint stock company’s affairs and monitoring the actions of the directors and officers of the company. The directors, supervisors and officers are not required to hold any qualifying shares in the joint stock company.
A joint stock company may be liquidated involuntarily due to insolvency or voluntarily in accordance with the terms of its articles of association or duly adopted shareholders’ resolutions. The property of a joint stock company remaining after full payment of its liquidation expenses, wages, labor insurance premiums of its employees and statutory compensations, outstanding taxes and debts, is distributed in proportion to the holdings of its shareholders.
Meetings of shareholders
Under PRC law, shareholders are given the power to approve specified matters. See “—Voting Rights and Shareholders’ Meetings”. In addition, the Mandatory Provisions provide that at shareholders’ meetings shareholders are entitled to consider any proposals made by shareholders holding in the aggregate at least 3% of voting power over the company’s shares.
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Under Delaware law, the business and affairs of a Delaware corporation are, in general, managed by or under the direction of its board of directors. Only certain fundamental matters regarding the corporation are reserved by statute to be exercised by the shareholders. These matters include, in general, election or removal of directors, retention or dismissal of the corporation’s independent auditors, mergers or other business combinations involving the corporation, amendment of the corporation’s certificate of incorporation and liquidation or dissolution of the corporation.
Shareholders’ approval by written consent
PRC law does not provide shareholders of overseas listed joint stock companies with rights to approve corporate matters by written consent. Under Delaware law, unless otherwise provided in the certificate of incorporation, any action which is required or permitted to be taken at any shareholders’ meeting may be taken without a meeting, subject to various conditions.
Amendments of articles of association
Under PRC law, an amendment of the articles of association must be approved by an affirmative vote of two-thirds of shareholders attending a shareholders’ meeting. Under the Mandatory Provisions, proposed amendment to the articles is required to be approved by the board of directors, as well as the shareholders. Amendments with respect to the Mandatory Provisions only become effective after approval by the relevant governmental department authorized by the State Council and the China Securities Regulatory Commission.
Under Delaware law, board as well as shareholder approvals are required for any amendment to the certificate of incorporation, but no governmental approval is generally required.
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Powers and responsibilities of directors
Under PRC law, the board of directors is responsible for specified actions, including the following functions and powers of a joint stock company:
convening shareholders’ meetings and reporting its work to shareholders at these meetings;
implementing shareholders’ resolutions;
determining the company’s business plans and investment proposals;
formulating the company’s annual financial budgets and final accounts;
formulating the company’s profit distribution plans and loss recovery plans;
formulating proposals for the increase or decrease in the company’s registered capital and the issue of debentures;
formulating major acquisition and disposal plans and plans for the merger, division or dissolution of the company;

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to the extent authorized by the shareholders’ meeting, deciding on such matters as external investments, purchase or sale of assets, assets pledge and connected transactions of the company;
deciding on the company’s internal management structure and formulating its basic management system; and
appointing or removing the company’s principal executive officers; appointing and removing other senior officers based on the recommendation of the principal executive officer and deciding on the remuneration of the senior officers.
In addition, the Mandatory Provisions provide that the board has the authority to formulate any proposal to amend the articles of association and to exercise any other power conferred by a decision of the shareholders’ meeting.
Under Delaware law, the business and affairs of a Delaware corporation are managed by or under the direction of its board of directors. Their powers include fixing the remuneration of directors, except as otherwise provided by statute or in the certificate of incorporation or by-laws of the corporation.
Powers and responsibilities of supervisors
Under PRC law, a PRC joint stock company must have a board of supervisors consisting of shareholder representatives and one or more employee representatives. Supervisors attend board meetings as non-voting observers. Directors, officers and company personnel in charge of financial matters may not serve as supervisors. The supervisors perform and exercise the following functions and powers:
examining the company’s financial affairs;
monitoring compliance with laws, regulations, the articles of association of the company and the shareholders resolutions by the directors and officers of the company; and suggesting removing the directors and officers who violate these laws and regulations;
requiring corrective action from directors and officers whose actions are contrary to the interests of the company;
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examining the financial information, including financial statements, operation reports and plans for profit distribution, to be submitted by the board of directors to the shareholders’ meetings; and authorizing, in the company’s name, public certified accountants or licensed auditors to assist in the re-examination of such information, should any doubt arise in respect thereof;
proposing the holding of extraordinary shareholders’ meetings;
proposing new items to be inserted in the agenda of the shareholders’ ~~meeting.~~meeting;
bringing lawsuits against directors or members of senior management, if they violate laws, regulations or articles of association of the company; and
exercising and performing other powers and functions provided for in the company’s articles of association.
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In addition, the Mandatory Provisions provide that supervisors of overseas listed joint stock companies are entitled to retain auditors in the name of the company to examine any financial or business reports or profit distribution proposals to be submitted by the directors to a meeting of the shareholders which the supervisors consider questionable, and negotiate or take legal action against any director or the directors in the name of the company. The fees and expenses of attorneys and other professionals incurred by the supervisors in connection with the discharge of their duties are to be paid by the company.
Delaware law makes no provision for a comparable corporate institution.
Duties of directors, supervisors and officers
Under PRC law, directors, supervisors and officers of a joint stock company are required to comply with relevant laws and regulations and the company’s articles of association. A director, supervisor or officer who contravenes any law, regulation or the company’s articles of association in the performance of his duties shall be personally liable to the company for any loss incurred by the company. Directors, supervisors and officers are required to carry out their duties honestly and diligently, and protect the interests of the company. They are also under a duty of confidentiality to the company and prohibited from divulging confidential information concerning the company, except as permitted by relevant laws and regulations or by a decision of a shareholders’ meeting. They may not use their position and authority in the company to seek personal gain. Directors and officers may not directly or indirectly engage in the same business as the company or in any other business detrimental to the interests of the company, and they are required to forfeit any profits from these activities to the company.
Under Delaware law, the business and affairs of a corporation are managed by or under the direction of its board of directors. In exercising their powers, directors are charged with a fiduciary duty of care to protect the interests of the corporation and a fiduciary duty of loyalty to act in the best interests of its shareholders.
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Limitations on transactions with interested directors, supervisors and officers
Under PRC law, directors and officers of a joint stock company may not enter into any contracts or transactions with the company unless permitted by the articles of association or approved by the shareholders. A company may not provide any guarantees to shareholders or any de facto control person of the company unless such guarantees are approved by a majority of shareholders present at the shareholders’ meeting, excluding the shareholder who will be provided such guarantees. Under the Mandatory Provisions, a director, supervisor or officer is required to disclose to the board any transaction with the company in which he has a direct or indirect interest or in which there is a material conflict of interest between the company and himself. A director is not entitled to vote or be counted for quorum purposes in any board decision on any such transaction. A company may set aside any interested transaction which did not comply with these requirements, unless the other party to such transaction was honestly unaware of the breach of obligations by the interested director, supervisor or officer. A company may not loan or provide any guarantees to directors, supervisors or officers (including persons related to them), except for the loans made in accordance with employment contracts approved by the shareholders, or unless the company’s business scope allows for the provision of loans and guarantees and such loans or guarantees are made under regular commercial terms.
Under Delaware law, an interested transaction is not voidable if (1) the material facts as to the interested director’s relationship or interests are disclosed or are known to the board of directors and the board in good faith authorizes the transaction by the affirmative vote of a majority of the disinterested directors, (2) such material facts are disclosed or are known to the shareholders entitled to vote on such transaction and the transaction is specifically approved in good faith by vote of the majority of shares entitled to vote thereon or (3) the transaction is fair as to the corporation as of the time it is authorized, approved or ratified. Under Delaware law, the interested director could be held liable for a transaction in which such a director derived an improper personal benefit.
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Election and removal of directors
Under PRC law, the term of office of directors of a joint stock company must be specified in the articles of association, but may not exceed three years. Directors may be re-elected. No director may be removed from office without cause by shareholders prior to the expiration of the director’s term. PRC law does not contemplate a classified board of directors.
Under Delaware law, directors of a Delaware corporation can be removed from office with or without cause by the holders of a majority of shares then entitled to vote at an election of directors, provided that except where the certificate of incorporation of the Delaware corporation otherwise provides, a member of a classified board may be removed by shareholders only for cause, and in a corporation with cumulative voting, if less than all of the directors are removed, no director may be removed if the votes cast against the director’s removal is sufficient to elect the director if cumulatively voted at an election of directors. The Court of Chancery may remove a director who has been convicted of a felony or found by a court to have committed a breach of the duty of loyalty in connection with his or her duties to the corporation following application by the corporation or derivatively in the right of the corporation by any shareholder. The court may order the removal only if it determines that the director did not act in good faith in performing the acts resulting in the prior conviction or judgment and that removal is necessary to avoid irreparable harm to the corporation.
Dividend payments
Under PRC law, proposals for distribution of profits are formulated by the board of directors and submitted for shareholder approval at a shareholders’ meeting. Dividends may be distributed in the form of cash or shares.
Under Delaware law, the board of directors of a Delaware corporation may declare dividends out of distributable earnings and profits without the approval of the shareholders.
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Amalgamations and business combinations; appraisal rights
Under PRC law, amalgamations and divisions involving joint stock companies are required to be approved by shareholders voting at a shareholders’ meeting. The Mandatory Provisions require an amalgamation or division involving the company to be approved by an affirmative vote of two-thirds of the votes present at the shareholders’ meeting called to consider the transaction. Any opposing shareholder may request the company or the consenting shareholders to purchase its shares at a fair price. In addition, a sale of fixed assets having a value exceeding ~~one-third~~33% of the total fixed assets of the company requires the approval of at least one third of shareholders at the meeting where a quorum presents.
Under Delaware law, with certain exceptions, a merger, consolidation or sale of all or substantially all the assets of a corporation must be approved by the board of directors and holders of a majority of the outstanding shares entitled to vote. A shareholder objecting to the merger is entitled to appraisal rights pursuant to which the shareholder may receive cash in the amount of the fair value of the shares held by such shareholder (as determined by a court) in lieu of the consideration the shareholder would otherwise receive in the transaction.
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Transactions with significant shareholders
Under Delaware law, a business combination between a Delaware corporation and an interested shareholder which takes place at any time during a period of three years commencing with the date the interested shareholder became an interested shareholder would need prior approval from the board of directors or a supermajority of the shareholders of the corporation, unless the corporation opted out of the relevant Delaware business combination statute. Under Delaware law, an interested shareholder of a corporation is someone who, together with its affiliates and associates, owns more than 15% of the outstanding common shares of the corporation. No such business combination statute or regulation applies to PRC joint stock companies.
Shareholders’ lawsuits
The PRC law provides that most disputes involving an H shareholder are to be resolved by final and binding arbitration.
Class actions and derivative actions generally are available to shareholders under Delaware law for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law.
Limitations on liability and indemnification of directors and officers
PRC law does not provide for any specific limitations on liability or indemnification of directors and officers.
Under Delaware law, a corporation may indemnify a current director or officer of the corporation against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in defense of an action, suit or proceeding by reason of such position if (1) the director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and (2) with respect to any criminal action or proceeding, the director or officer had no reasonable cause to believe that his conduct was unlawful. Persons serving at the request of the corporation as directors, officers, employees or agents of another entity such as a subsidiary or an employee stock trust may receive advancement of expenses from the ~~corporation.~~
corporation.A corporation may not retroactively impair or eliminate indemnification or advancement rights by amending the corporation’s certificate of incorporation or bylaws after the occurrence of the act or omission that gives rise to indemnification or advancement rights, unless the provision contains, at the time of the act or omission, an explicit authorization of such elimination or limitation.
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Shareholders’ rights of inspection of corporate records
Under PRC law, shareholders are entitled to inspect the articles of association, register of shareholders, corporate bond counter foils, minutes of shareholders’ meetings and board meetings and reports of the financial accounts of the company. In addition, the Mandatory Provisions provide that, after paying reasonable fees, shareholders are entitled to inspect the company’s shareholder list, certain personal information on the directors, supervisors and officers, the company’s capital position and certain information regarding share repurchases conducted by the company during the most recent fiscal year.
Delaware law permits any shareholder of a Delaware corporation to examine or obtain copies of or extracts from the corporation’s shareholder list and its other books and records for any purpose reasonably related to such person’s interest as a shareholder.
C. MATERIAL CONTRACTS
See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” for certain arrangements we have entered into with CLIC, AMC, China Life Pension, CLPCIC, IHC and ~~GDB.~~
CGB.
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D. EXCHANGE CONTROLS
The Renminbi currently is not a freely convertible currency. The SAFE, under the authority of the PBOC, controls the conversion of Renminbi into foreign currency. Until July 20, 2005, the PBOC had been setting and publishing daily a base exchange rate with reference primarily to the supply and demand of Renminbi against the U.S. dollar in the market during the prior day. The PBOC also took into account other factors, such as the general conditions existing in the international foreign exchange markets. From 1994 to July 20, 2005, the official exchange rate for the conversion of Renminbi to U.S. dollars was generally stable. On July 21, 2005, the PRC government introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. On the same day, the value of the Renminbi appreciated by 2.0% against the U.S. dollar. Since then, the PRC government has made, and may in the future make, further adjustments to the exchange rate system. The PBOC announces the closing price of a foreign currency traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each working day, and makes it the central parity for the trading against the Renminbi on the following working day.
Although PRC governmental policies were introduced in 1996 to reduce restrictions on the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the SAFE and other relevant authorities.
In the event of shortages of foreign currencies, we may be unable to convert sufficient Renminbi into foreign currency to meet our foreign currency obligations or to pay dividends in foreign currency.
Our H shares are traded on the Hong Kong Stock Exchange. There are no limitations on the right of non-resident or foreign owners to remit dividends or capital including capital gains imposed by Hong Kong law.
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E. TAXATION
The taxation of income and capital gains of holders of H shares or ADSs is subject to the laws and practices of China and of jurisdictions in which holders of H shares or ADSs are resident or otherwise subject to tax. The following summary of certain relevant taxation provisions is based on current law and practice, is subject to change and does not constitute legal or tax advice. The discussion does not deal with all possible tax consequences relating to an investment in the H shares or ADSs. In particular, the discussion does not address the tax consequences under state, local and other laws, such as non-U.S. federal laws other than the laws of the PRC and Hong Kong. Accordingly, you should consult your own tax adviser regarding the tax consequences of an investment in the H shares and ADSs. The discussion is based upon laws and relevant interpretations in effect as of the date of this annual report, all of which are subject to change.

The People’s Republic of China
The following is a discussion of the material Chinese tax provisions relating to the ownership and disposition of H shares or ADSs held by the investors as capital assets. This discussion does not address all of the tax considerations that may be relevant to specific investors in light of their particular circumstances or to other investors subject to special treatment under the tax laws of the PRC. This discussion is based on the tax laws of China as in effect as of the date of this annual report, as well as on the Agreement between the United States of America and the People’s Republic of China for the Avoidance of Double Taxation, or the Treaty, all of which are subject to change (or changes in interpretation), possibly with retroactive effect.
This discussion does not address any aspects of Chinese taxation other than income taxation, capital taxation, stamp taxation and estate taxation. Prospective investors are urged to consult their tax advisers regarding Chinese and other tax consequences of owning and disposing of H shares.
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Taxation of Dividends
Individual investors. According to the PRC Individual Income Tax Law, as amended, dividends paid by Chinese companies are ordinarily subject to a Chinese withholding tax levied at a flat rate of 20%. For a foreign individual who is not a resident of China, the receipt of dividends from a company in China is normally subject to a withholding tax of 20% unless reduced pursuant to an applicable tax treaty. ~~However,~~According to a notice issued by the Chinese State Administration of Taxation, or the SAT, ~~issued,~~ on ~~July 26, 1994, a Letter~~June 28, 2011, if the withholding tax rate under applicable tax treaties is 10% or less, the receipt of ~~the Chinese State Administration of Taxation Concerning the Taxation of Dividends Received by Foreign Individuals Holding Shares of Chinese Listed Companies, or the Tax Letter, which states that~~ dividends ~~paid by a Chinese company to individuals with respect to shares listed on an overseas stock exchange, or Overseas Shares, such as H shares, are temporarily not~~will be subject to ~~Chinese~~10% withholding ~~tax. In~~tax; and if the ~~event that this Tax Letter is withdrawn, a 20% tax may be withheld on dividends in accordance with the PRC Individual Income Tax Law, as amended. The~~ withholding tax ~~may be reduced pursuant to an~~rate under applicable tax ~~treaty. To date,~~treaties is between 10% and 20%, the ~~relevant~~receipt of dividends will be subject to the actual tax ~~authorities have not collected withholding~~rate as agreed under such tax ~~from dividend payments on the shares exempted under the Tax Letter.~~
treaties.
Enterprises.According to the PRC Enterprise Income Tax Law and its implementation rules, effective on January 1, 2008, and the Circular on Issues Relating to the Withholding of Enterprise Income Tax for Dividends Distributed by Resident Enterprises in China to Non-resident Enterprises Holding ~~H shares~~H-shares of the Enterprises, issued by the SAT on November 6, 2008, resident enterprises in China are required to, in distributing dividends for 2008 or any year hereafter to non-resident enterprises holding Overseas Shares including ~~H shares~~H-shares and ADSs of the enterprises, withhold enterprise income tax for such dividends at a tax rate of 10%. Non-resident enterprises holding ~~H shares~~H-shares of any resident enterprise can, after receiving dividends due to them, apply for preferential tax treatment with competent tax authorities in accordance with tax treaties.
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Tax treaties.Investors who do not reside in China and reside in countries that have entered into treaties for the avoidance of double-taxation with China may be entitled to a reduction of the withholding tax imposed on the payment of dividends to our investors who do not reside in China. China currently has treaties for the avoidance of double-taxation with a number of other countries, which include Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the United States.
Under the treaty between China and the United States, the China-US Treaty, China may tax a dividend paid by us to an Eligible U.S. Holder up to a maximum of 10% of the gross amount of the dividend. It is arguable that under the China-US Treaty, China may only tax gains from the sale or disposition by an Eligible U.S. Holder of H shares representing an interest in us of 25% or more, but this position is uncertain and the Chinese authorities may take a different position. For the purposes of this discussion, an “Eligible U.S. Holder” is a U.S. holder that (i) is a resident of the United States for the purposes of the China-US Treaty, (ii) does not maintain a permanent establishment or fixed base in China to which H shares are attributable and through which the beneficial owner carries on or has carried on business (or, in the case of an individual, performs or has performed independent personal services) and (iii) is not otherwise ineligible for benefits under the China-US Treaty with respect to income and gains derived in connection with the H shares.
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Taxation of Capital Gains
According to the PRC Enterprise Income Tax Law and its implementation rules, effective on January 1, 2008, capital gains realized by foreign enterprises which have no establishment or residence in China or whose capital gains from China do not relate to their establishment or residence in China, are ordinarily subject to enterprise income tax at the rate of 10% with respect to the gains realized within China, unless reduced pursuant to an applicable tax treaty.
According to the Interim Administrative Measures on the Source Withholding of Income Tax of Non-resident Enterprise issued by the SAT on January 9, 2009, where both parties to an equity transfer transaction are non-resident enterprises and where the transfer occurs outside of China, the non-resident enterprise receiving income shall pay taxes to the tax authority in the locality of the resident enterprise whose equity was transferred, either directly or by a representative. The resident enterprise whose equity was transferred shall assist the tax authority with the collection of taxes from the non-resident enterprise.
According to the PRC Individual Income Tax Law, as amended, capital gains realized by individuals upon the transfer of shares, including Overseas Shares, are subject to capital gains tax levied at a flat rate of 20%; and relevant tax authorities are authorized to promulgate implementation rules in this regard. To date, the relevant tax authorities have not promulgated any implementation rules on the taxation of capital gains realized by individuals upon the transfer of shares, including Overseas Shares. ~~On March 30, 1998,~~If the ~~MOF and~~relevant tax authorities promulgate such implementation rules in the SAT issued a Notice Concerning the Continued Exemption of Individual Income Taxes Levied on Income from the Transfer of Shares, or the Tax Notice, which states that capital gains realized by individuals upon the transfer of shares are temporarily not subject to capital gains tax. In the event that this Tax Notice is withdrawn,future, a 20% tax may be levied on capital gains realized by foreign individuals in accordance with the PRC Individual Income Tax Law, as amended, unless reduced pursuant to an applicable tax treaty. To date, the relevant tax authorities have not collected capital gains tax on the income from the transfer of ~~shares exempted under the Tax Notice.~~
shares.
Additional Chinese Tax Considerations
Chinese stamp duty.Chinese stamp duty imposed on the transfer of shares of Chinese publicly traded companies under the Provisional Regulations of China Concerning Stamp Duty should not apply to the acquisition and disposal by non-Chinese investors of H shares or ADSs outside of China by virtue of the Provisional Regulations of China Concerning Stamp Duty, which became effective on October 1, 1988 and which provide that Chinese stamp duty is imposed only on documents executed or received within China that are legally binding in China and are protected under Chinese law.
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Estate tax.No liability for estate tax under Chinese law will arise from non-Chinese nationals holding H shares.
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Hong Kong
The following is a discussion of the material Hong Kong tax provisions relating to the ownership and disposition of H shares or ADSs held by the investors as capital assets. This discussion does not address all of the tax considerations that may be relevant to specific investors in light of their particular circumstances or to investors subject to special treatment under the tax laws of Hong Kong. This discussion is based on the tax laws of Hong Kong as in effect on the date of this annual report, which are subject to change (or changes in interpretation), possibly with retroactive effect. This discussion does not address any aspects of Hong Kong taxation other than income taxation, capital taxation, stamp taxation and estate taxation. Prospective investors are urged to consult their tax advisers regarding Hong Kong and other tax consequences of owning and disposing of H shares.
Tax Treaties
There is no relevant tax treaty in effect between Hong Kong and the United States.
Tax on Dividends
Under current practice, no tax is payable in Hong Kong in respect of dividends paid by us.
Tax on Gains from Sale
No tax is imposed in Hong Kong in respect of capital gains from the sale of property. However, trading gains from the sale of property by persons carrying on a trade, profession or business in Hong Kong where the gains are derived from or arise in Hong Kong from such trade, profession or business will be chargeable to Hong Kong profits tax, which is currently imposed at the rate of 16.5% on corporations and at a maximum rate of 15% on individuals. Certain categories of taxpayers are likely to be regarded as deriving trading gains rather than capital gains (for example, financial institutions, insurance companies and securities dealers) unless these taxpayers could prove that the investment securities are held for long-term investment purpose.
Trading gains from sales of H shares effected on the Hong Kong Stock Exchange will be considered to be derived from or arise in Hong Kong. Liability for Hong Kong profits tax would thus arise in respect of trading gains from sales of H shares effected on the Hong Kong Stock Exchange realized by persons carrying on a business of trading or dealing in securities in Hong Kong.
There will be no liability for Hong Kong profits tax in respect of profits from the sale of ADSs, where purchases and sales of ADSs are effected outside Hong Kong, for example, on the New York Stock Exchange.
Stamp Duty
Hong Kong stamp duty, currently charged at thead valoremrate of 0.1% on the higher of the consideration for, or the market value of, the H shares, will be payable by the purchaser on every purchase and by the seller on every sale of H shares (in other words, a total of 0.2% is currently payable on a typical sale and purchase transaction involving H shares). In addition, a fixed duty of HK$5.00 is currently payable on any instrument of transfer of H shares. Where one of the parties to a transfer is resident outside Hong Kong and does not pay thead valorem duty due by it, the duty not paid will be assessed on the instrument of transfer (if any) and will be payable by the transferee. If stamp duty is not paid on or before the due date, a penalty of up to ten times the duty payable may be imposed.

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The withdrawal of H shares upon the surrender of ADRs, and the issuance of ADRs upon the deposit of H shares, will also attract stamp duty at the rate described above for sale and purchase transactions unless such withdrawal or deposit does not result in a passing of the beneficial interest in the H shares under Hong Kong law, in which case only a fixed duty of HK$5.00 is payable on the transfer. The issuance of the ADRs upon the deposit of H shares issued directly to the depositary of the ADSs, or for the account of the depositary, will not be subject to any stamp duty. No Hong Kong stamp duty is payable upon the transfer of ADSs outside Hong Kong.
Estate Duty
The Revenue (Abolition of Estate Duty) Ordinance 2005 came into effect on February 11, 2006 in Hong Kong. No Hong Kong estate duty is payable and no estate duty clearance papers are needed for an application for a grant of representation in respect of holders of H shares whose deaths occur on or after February 11, 2006.

United States of America
The following is a discussion of the material United States federal income tax consequences relating to the purchase, ownership and disposition of H shares or ADSs by U.S. Holders (as defined below) that acquire the shares or ADSs for cash and hold them as capital assets. This discussion is based on the Internal Revenue Code of 1986, as amended, or “the Code”, Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion does not address all of the tax considerations that may be relevant to specific U.S. Holders in light of their particular circumstances or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as banks, insurance companies, tax-exempt entities, retirement plans, regulated investment companies, partnerships, dealers in securities, brokers, U.S. expatriates, persons who have acquired our H shares or ADSs as part of a straddle, hedge, conversion, or other integrated investment, persons who own, directly or by attribution, 10% or more of the combined voting power of all classes of stock of China Life or persons that have a “functional currency” other than the U.S. dollar). This discussion does not address any U.S. state or local or any U.S. federal estate, gift or alternative minimum tax considerations.
As used in this discussion, the term “U.S. Holder” means a beneficial owner of H shares or ADSs that is, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation created or organized in or under the laws of the United States or of any state or political subdivision thereof or therein, including the District of Columbia or (iii) an estate or trust the income of which is subject to U.S. federal income tax regardless of the source thereof.
Investors are urged to consult their own tax advisers as to the particular tax considerations applicable to them relating to the purchase, ownership and disposition of H shares or ADSs in their individual circumstances, including the applicability of U.S. federal, state and local tax laws, any changes in applicable tax laws and any pending or proposed legislation or regulations.
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Taxation of Dividends
Subject to the discussion below under “—Special Rules”, cash distributions with respect to the H shares or ADSs owned by a U.S. Holder will, upon receipt, be includible in the gross income of such U.S. Holder as ordinary dividend income to the extent of our current and accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent that the amount of any such cash distribution exceeds our current and accumulated earnings and profits as so computed, it will be treated first as a non-taxable return of capital to the extent of the U.S. Holder’s adjusted tax basis in such H shares or ADSs and, to the extent the amount of such cash distribution exceeds adjusted tax basis, will be treated as gain from the sale of such H shares or ADSs. Dividends paid by us generally will constitute income from sources outside the United States for foreign tax credit limitation purposes and will not be eligible for the “dividends received” deduction.
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Dividends received by individuals during taxable years beginning on or before December 31, 2012 from “qualified foreign corporations” are generally subject to a maximum U.S. federal income tax rate of 15%, so long as certain holding period requirements are met. Dividends received by individuals during taxable years beginning after December 31, 2012 from “qualified foreign corporations” are generally subject to a maximum U.S. federal income tax rate of 20%, so long as certain holding period requirements are met. A non-U.S. corporation (other than a passive foreign investment company) generally will be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive income tax treaty with the United States which the Secretary of the Treasury determines is satisfactory for purposes of the relevant provision and which includes an exchange of information program or (ii) with respect to any dividend it pays on stock which is readily tradable on an established securities market in the United States. The Treasury Department has determined that the U.S.-China income tax treaty as currently in effect meets the requirements described in clause (i) above. In addition, the ADSs are readily tradable on the New York Stock Exchange, an established securities market in the United States. Each U.S. Holder that is an individual is urged to consult his or her tax adviser regarding the applicability of this reduced rate to dividends received with respect to the H shares or ADSs in his particular circumstance.
The U.S. dollar value of any distribution made by us in Hong Kong dollars (or other currency that is not the U.S. dollar, or a “foreign currency”), should be calculated by reference to the exchange rate in effect on the date of receipt of such distribution by Deutsche Bank Trust Company Americas, as depositary, in the case of ADSs, or by the U.S. Holder, in the case of H shares held directly by such U.S. Holder regardless of whether the Hong Kong dollars (or such other foreign currency) so received are converted into U.S. dollars on the date of receipt. If the Hong Kong dollars (or such other foreign currency) so received are converted into U.S. dollars on the date of receipt, such U.S. Holder generally should not recognize foreign currency gain or loss on such conversion. If the Hong Kong dollars (or such other foreign currency) are not converted into U.S. dollars on the date of receipt, such U.S. Holder will have a basis in the Hong Kong dollars (or such other foreign currency) equal to their U.S. dollar value on the date of receipt. Any gain or loss on a subsequent conversion or other disposition of the Hong Kong dollars (or such other foreign currency) generally will be treated as ordinary income or loss from sources within the United States for foreign tax credit limitation purposes.
As
Subject to certain limitations, the Chinese tax withheld from dividends paid with respect to H shares or ADSs and paid over to China, as described above under “—The People’s Republic of China—Taxation of ~~Dividends”, under current practice, Chinese withholding~~Dividends,” may be creditable against a U.S. Holder’s U.S. federal income tax ~~is not collected from dividends paid~~liability. Special rules apply in determining the foreign tax credit limitation with respect to ~~overseas shares; such~~dividends that are subject to the maximum 15% or 20%, U.S. federal income tax rate, as ~~H shares and ADSs, to a recipient who is an individual who is not a resident of China. If~~ the case may be. A U.S. Holder ~~is a non-resident enterprise, or if in the future, Chinese withholding tax were to be collected from dividends paid to non-resident individuals on~~of H shares or ADSs ~~such~~that does not elect to claim a U.S. ~~Holders~~foreign tax credit may ~~be entitled, at its option, to either~~instead claim a deduction orfor such withheld tax, but only for a ~~tax credit for~~taxable year in which the ~~amount~~U.S. Holder elects to do so with respect to all non-U.S. income taxes paid or ~~withheld. There are significant and complex limitations that apply to foreign tax credits.~~accrued in such taxable year. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and U.S. Holders are urged to consult their own U.S. tax advisers with respect to foreign tax credit considerations in their individual circumstances.
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Sale or other Disposition of H Shares or ADSs
Subject to the discussion below under “—Special Rules”, a U.S. Holder generally will recognize gain or loss for U.S. federal income tax purposes upon a sale or other disposition of H shares or ADSs that it owns in an amount equal to the difference between the amount realized from the sale or disposition and the U.S. Holder’s adjusted tax basis in such H shares or ADSs. The gain or loss generally will be a capital gain or loss and will be long-term capital gain (taxable at a reduced rate for individuals) or loss if, on the date of sale or disposition, such H shares or ADSs were held by the U.S. Holder for more than one year and will generally be U.S. source gain or loss. The claim of a deduction in respect of a capital loss may be subject to limitations.
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A U.S. Holder that receives Hong Kong dollars (or other foreign currency) from the sale or disposition generally will realize an amount equal to the U.S. dollar value of the Hong Kong dollars (or such other foreign currency) on the settlement date of the sale or disposition if (i) the U.S. Holder is a cash basis or electing accrual basis taxpayer and our H shares or ADSs, as the case may be, are treated as being “traded on an established securities market” for this purpose or (ii) the settlement date is the date of the sale or disposition. If the Hong Kong dollars (or such other foreign currency) so received are converted into U.S. dollars on the settlement date, the U.S. Holder should not recognize foreign currency gain or loss on the conversion. If the Hong Kong dollars (or such other foreign currency) so received are not converted into U.S. dollars on the settlement date, the U.S. Holder will have a basis in the Hong Kong dollars (or such other foreign currency) equal to the U.S. dollar value on the settlement date. Any gain or loss on a subsequent conversion or other disposition of the Hong Kong dollars (or such other foreign currency) generally will be treated as ordinary income or loss from sources within the United States for foreign tax credit limitation purposes. A U.S. Holder should consult its own tax adviser regarding the U.S. federal income tax consequences of receiving Hong Kong dollars (or other currency) from a sale or disposition of the H shares or ADSs in cases not described in this paragraph.
A U.S. Holder that is a non-resident enterprise may be subject to Chinese tax on the gain realized upon the sale or other disposition of H shares or ADS. See ~~“Item 10. Additional Information—Taxation—~~“—The People’s Republic of China—Taxation of Capital Gains” above. Holders should consult their own tax advisers concerning their ability to credit such Chinese taxes against their U.S. federal income tax liability in their particular situation.
Special Rules
Related Person Insurance Income. Certain adverse U.S. income and tax reporting rules may apply to U.S. shareholders who, directly or indirectly, own stock of a non-U.S. corporation that earns “related person insurance income” (“RPII”), if 25% or more of the non-U.S. corporation’s direct or indirect shareholders are U.S. persons. RPII is generally defined as insurance income derived from the insurance (or reinsurance) of insureds who are U.S. shareholders in the non-U.S. corporation or who are related to such U.S. shareholders. If applicable, these rules would require U.S. Holders to include in taxable income each year their pro rata share of any RPII incurred by us for the year, regardless of whether such income is distributed, and also to file I.R.S. Form 5471, disclosing certain information regarding their direct or indirect ownership of China Life. Special rules apply for purposes of determining each U.S. shareholder’s pro rata share of any RPII. For organizations that are otherwise exempt from U.S. federal income tax under section 501(a) of the Code, any such income would constitute “unrelated business taxable income”. These rules could also apply to convert some or all of the gain recognized from the sale or disposition of H shares or ADSs from capital gain to ordinary income and to require such gain to be reported on I.R.S. Form 5471.
Under a statutory exception, these rules do not apply if less than 20% of the non-U.S. corporation’s insurance income is RPII or if less than 25% of the non-U.S. corporation’s stock is owned by U.S. shareholders. Because CLIC holds approximately 68.37% of our share capital, and because we do not offer or intend to offer our products and services in the United States, it is highly unlikely that the RPII rules will apply. If more of our shares are sold to the public in the future, it is possible that such rules could apply at a later date.

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Passive Foreign Investment Company. In general, a non-U.S. corporation will be a passive foreign investment company, or a “PFIC”, if 75% or more of its gross income constitutes “passive income” or 50% or more of its assets produce “passive income” or are held for the production of “passive income”.
For the purpose of determining whether a non-U.S. corporation is a PFIC, “passive income” is defined to include income of the kind which would be foreign personal holding company income under section 954(c) of the Code, and generally includes interest, dividends, annuities and other investment income. Passive income does not include interest income or dividends received from controlled subsidiaries or certain other related persons, to the extent properly allocable to income of such related person that is not passive income. In addition, the PFIC provisions specifically exclude from the definition of “passive income” any income “derived in the active conduct of an insurance business by a corporation which is predominantly engaged in an insurance business and which would be subject to tax under subchapter L if it were a domestic corporation”. This exception is intended to ensure that income derived by a bona fide insurance company is not treated as passive income. Thus, to the extent that income is attributable to financial reserves in excess of the reasonable needs of the insurance business, it may be treated as passive income.
We believe that we were in ~~2010,~~2012, and we anticipate that we will continue to be, predominantly engaged in an insurance business and we believe that we did not in ~~2010,~~2012, and will not, have financial reserves in excess of the reasonable needs of our insurance business. As a result, our income derived and assets held in the active conduct of our insurance business should not be passive income and passive assets, and we do not expect to be classified as a PFIC for any tax year. However, there is little guidance on the circumstances under which a non-U.S. company will be treated as predominantly engaged in an insurance business for purposes of determining PFIC status. Accordingly, there is no assurance that the U.S. Internal Revenue Service will not take a contrary position and assert that we are a PFIC. Furthermore, an actual determination of PFIC status is inherently factual in nature and cannot be made until the close of each applicable tax year and, accordingly, no assurances can be given that we will not become a PFIC at some point in the future.
In general, a U.S. shareholder of a PFIC is subject to a special tax and an interest charge at the time of the sale of (or receipt of an “excess distribution” with respect to) its shares in the PFIC. In general, a shareholder is treated as having received an “excess distribution” if the amount of the distribution was more than 125% of the average distribution with respect to its shares during the three preceding taxable years (or shorter period during which the taxpayer held the shares). The special tax is computed by assuming that the excess distribution or, in the case of a sale, the gain with respect to the shares was earned in equal portions throughout the holder’s period of ownership. The portion allocable to each year prior to the year of sale is taxed at the maximum marginal tax rate applicable for each such period. The interest charge is determined based on the applicable rate imposed on underpayments of U.S. federal income tax for the period. The special tax and the interest charge generally will not apply to a U.S. shareholder that validly makes a “qualified electing fund” election under section 1295 of the Code with respect to the shares of the PFIC. We do not intend to comply with the requirements necessary to permit a U.S. Holder to make such an election with respect to H shares or ADSs.
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The above results may also be avoided if a “mark-to-market” election is available and a U.S. Holder validly makes such an election. If the election is made, such U.S. Holder generally will be required to take into account the difference, if any, between the fair market value of, and its adjusted tax basis in, its H shares or ADSs at the end of each taxable year as ordinary income or ordinary loss (to the extent of any net mark-to-market gain previously included in income), and to make corresponding adjustments to the tax basis of such H shares or ADSs. In addition, any gain from a sale or other disposition of H shares or ADSs will be treated as ordinary income, and any loss will be treated as ordinary loss (to the extent of any net mark-to-market gain previously included in income). A
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mark-to-market election is available to a U.S. Holder only if our H shares or ADSs are considered “marketable stock” for these purposes. Generally, stock will be considered marketable stock if it is “regularly traded” on a “qualified exchange” within the meaning of applicable U.S. Treasury regulations. A class of stock is regularly traded during any calendar year during which such class of stock is traded, other than inde minimisquantities, on at least 15 days during each calendar quarter. A non-U.S. securities exchange will constitute a qualified exchange if it is regulated or supervised by a governmental authority of the country in which the market is located and meets certain trading, listing, financial disclosure and other requirements set forth in the Treasury Regulations. We do not know whether our H shares or ADSs will be treated as marketable stock for these purposes.
If we are a PFIC in any taxable year during which a U.S. Holder owns H Shares or ADSs, such U.S. Holder (i) may also suffer adverse tax consequences under the PFIC rules described above with respect to any other PFIC in which we have a direct or indirect equity interest and (ii) generally will be required to file annually a statement with its U.S. federal income tax returns. U.S. Holders should consult their own tax advisers regarding the U.S. federal income tax consequences of a direct or indirect investment in a PFIC.
Medicare Taxes
Certain U.S. Holders that are individuals, estates or trusts are subject to an additional tax at the rate of 3.8% on all or a portion of their “net investment income”, which may include all or a portion of their income arising from a distribution with respect to an ADS or an H Share and gain upon the sale, exchange or other disposition of such ADS or H Share.
Information Reporting and Backup Withholding
Under certain circumstances, information reporting and/or backup withholding may apply to U.S. Holders with respect to payments made on or proceeds from the sale, exchange or other disposition of ADSs or H Shares, unless an applicable exemption is satisfied. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the IRS.
Reportable Transactions
U.S. Holders that participate in “reportable transactions” (as defined in Treasury Regulations) must attach to their federal income tax returns a disclosure statement on Form 8886. We urge U.S. Holders to consult their own tax advisers as to the possible obligation to file Form 8886 with respect to the ownership or disposition of any Hong Kong dollars (or other foreign currency) received as a dividend or as proceeds from the sale of H shares or ADSs, or any other aspect of the purchase, ownership or disposition of H shares or ADSs.
161
Disclosure Requirements for Specified Foreign Financial Assets
Individual U.S. Holders (and certain U.S. entities to the extent specified in future IRS guidance) who, during any taxable year, hold any interest in any “specified foreign financial asset” generally will be required to file with their U.S. federal income tax returns ~~a statement~~Form 8938, setting forth certain information with respect to such asset, if the aggregate value of all such assets exceeds ~~$50,000.~~the applicable reporting threshold. “Specified foreign financial asset” generally includes any financial account maintained with a non-U.S. financial institution and may also include H Shares or ADSs if they are not held in an account maintained with a U.S. financial institution. Substantial penalties may be imposed for a failure to comply. U.S. Holders should consult their own tax advisers as to the possible application to them of ~~this~~ new filing ~~requirement.~~
requirements.
F. DIVIDENDS AND PAYING AGENTS
Not applicable.
G. STATEMENT BY EXPERTS
Not applicable.
H. DOCUMENTS ON DISPLAY
You may read and copy documents referred to in this annual report on Form 20-F that have been filed with the U.S. Securities and Exchange Commission, or SEC, at its public reference room located at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. The SEC also maintains a website athttp://www.sec.gov that contains reports, proxy statements and other information regarding the registrations that file electronically with the SEC.
~~150~~
The SEC allows us to “incorporate by reference” the information we filed with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report on Form 20-F.
I. SUBSIDIARY INFORMATION
Not applicable.
~~ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.~~
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our exposure to financial market risks relates primarily to changes in interest rates, equity prices and exchange rates.
The following discussions and tables, which constitute “forward-looking statements” that involve risks and uncertainties, summarize our market-sensitive financial instruments including fair value and maturity. Such discussions address market risk only and do not present other risks which we face in the normal course of business.

162
Interest Rate Risk
Our profitability is affected by changes in interest rates. ~~Although the PBOC increased four times the benchmark deposit rate from the beginning of the year of 2010 to the date of this annual report, we~~We are currently experiencing a comparatively low interest rate environment in general. The PBOC reduced the benchmark deposit rate two times from the beginning of the year 2012 to the date of this annual report. If interest rates were to decline further ~~increase~~ in the future, the income we realize from our investments may decline, affecting our profitability. In addition, as instruments in our investment portfolio mature, we might have to reinvest the funds we receive in investments bearing a lower interest rate. However, if interest rates were to increase, surrenders and withdrawals of insurance and annuity policies and contracts may increase as policyholders seek other investments with higher perceived returns. This process may result in cash outflows requiring that we sell investment assets at a time when the prices of those assets are adversely affected by the increase in market interest rates, which may result in realized investment losses. In addition, if interest rates were to increase, but the CIRC did not raise the cap set by the CIRC on the rates we guarantee, sales of some of our products, including our non-participating investment type products, could be adversely affected. If interest rates were to decline, the income we realize from our investments may decline, affecting our profitability. In addition, as instruments in our investment portfolio mature, we might have to reinvest the funds we receive in investments bearing a lower interest rate.
For the years ended December 31, 2012, 2011 and 2010, ~~2009 and 2008, the~~our investment yield was ~~5.11%~~2.79%, ~~5.78%~~3.51% and ~~3.48%,~~5.11% respectively. Investment contracts are generally priced with guaranteed interest rates, subject to a cap on guaranteed rates set by the CIRC, which is currently 2.50%. Dividends on participating policies are required to be at least 70% of distributable earnings attributable to such policies.

~~151~~
163
The following tables set forth selected assets and liabilities with exposure to interest rates as of December 31, ~~2010, 2009~~2012, 2011 and ~~2008.~~

Expected Maturity Date
Fair
As of December 31, 2010 2011 2012 2013 2014 2015 Thereafter Total value
(RMB in millions, except as otherwise stated)
Assets

Held-to-maturity and available-for-sale debt securities

Fixed rate bonds

in RMB 20,987 5,590 7,163 20,803 24,384 508,579 587,505 585,507
Average interest rate 4.72 % 4.76 % 4.57 % 4.75 % 4.58 % 4.37 % 4.41 %

in US$ — — — — — — — —
Average interest rate — — — — — — —

in HK$ — — — — — — — —
Average interest rate — — — — — — —

Variable rate bonds

in RMB 1,708 765 2,101 3,044 255 3,288 11,160 11,235
Average interest rate 5.43 % 5.20 % 5.24 % 5.67 % 5.98 % 4.68 % 5.23 %

in US$ — — — — — — — —
Average interest rate — — — — — — —

Term deposits (excluding structured deposits)

in RMB 19,235 36,400 78,367 58,850 164,300 81,400 438,552 438,552
Average interest rate 4.36 % 4.20 % 4.35 % 4.14 % 4.38 % 4.46 % 4.34 %

in US$ — — — — — — — —
Average interest rate — — — — — — —

Structured deposits⁽¹⁾

in US$ — — — — — — — —
Average interest rate — — — — — — —

Liabilities

Securities sold under agreements to repurchase 23,065 — — — — — 23,065 23,065
Average interest rate 6.02 % — — — — — 6.02 %

Investment contracts 2,359 918 1,349 2,536 800 62,209 70,171 69,432
Average interest rate 1.80 % 1.51 % 1.29 % 2.50 % 2.49 % 2.34 % 2.29 %
2010.
   Expected Maturity Date
As of December 31, 2012    2013 2014 2015 2016 2017 Thereafter Total Fair
value
   (RMB in millions, except as otherwise stated)
Assets

Held-to-maturity and available-for-sale debt securities

Fixed rate bonds

in RMB
   3,940    15,263    22,780    19,390    63,071    665,209    789,653    788,098
Average interest rate
   4.78 % 4.84 % 4.57 % 3.90 % 4.79 % 4.55 % 4.56 %
in US$
   —      —      —      266    —      —      266    266
Average interest rate
   —      —      —      10.25 % —      —      10.25 %
in HK$
   —      —      6    —      —      30    36    39
Average interest rate
   —      —      5.38 % —      —      6.12 % 5.99 %
Variable rate bonds

in RMB
   2,035    3,638    483    1,140    —      2,842    10,138    10,166
Average interest rate
   5.21 % 5.58 % 5.57 % 5.00 % —      4.36 % 5.10 %
in US$
   1,886    —      —      —      —      —      1,886    1,886
Average interest rate
   1.59 % —      —      —      —      —      1.59 %
Term deposits

in RMB
   82,367    58,850    164,300    151,600    173,685    600    631,402    631,402
Average interest rate
   4.49 % 4.39 % 4.57 % 5.25 % 5.26 % 5.25 % 4.89 %
in US$
   9,678    —      —      —      —      —      9,678    9,678
Average interest rate
   1.81 % —      —      —      —      —      1.81 %
Liabilities

Securities sold under agreements to repurchase
   68,499    —      —      —      —      —      68,499    68,499
Average interest rate
   4.45 % —      —      —      —      —      4.45 %
Investment contracts
   1,760    5,509    1,260    591    599    56,920    66,639    65,074
Average interest rate
   1.69 % 1.94 % 1.22 % 2.54 % 2.55 % 2.58 % 2.48 %

~~152~~
164
   Expected Maturity Date
As of December 31, 2011
   2012 2013 2014 2015 2016 Thereafter Total Fair
value
   (RMB in millions, except as otherwise stated)
Assets

Held-to-maturity and available-for-sale debt securities

Fixed rate bonds

in RMB
   5,250    5,070    17,304    21,326    18,301    564,831    632,082    634,519
Average interest rate
   4.76 % 4.68 % 4.76 % 4.55 % 3.82 % 4.44 % 4.44 %
in US$
   —      —      —      —      175    —      175    175
Average interest rate
   —      —      —      —      10.25 % —      10.25 %
in HK$
   —      —      —      6    —      30    36    33
Average interest rate
   —      —      —      5.38 % —      6.12 % 5.99 %
Variable rate bonds

in RMB
   369    2,025    3,568    445    1,262    3,608    11,277    11,295
Average interest rate
   5.53 % 5.29 % 5.62 % 5.79 % 5.15 % 4.76 % 5.24 %
in US$
   —      1,890    —      —      —      —      1,890    1,890
Average interest rate
   —      0.76 % —      —      —      —      0.76 %
Term deposits

in RMB
   39,400    78,367    58,850    164,300    151,600    22,800    515,317    515,317
Average interest rate
   4.89 % 5.02 % 4.89 % 4.96 % 5.46 % 5.26 % 5.12 %
in US$
   5,476    —      —      —      —      —      5,476    5,476
Average interest rate
   6.85 % —      —      —      —      —      6.85 %
Liabilities

Securities sold under agreements to repurchase
   13,000    —      —      —      —      —      13,000    13,000
Average interest rate
   5.39 % —      —      —      —      —      5.39 %
Investment contracts
   2,413    1,139    4,564    723    688    60,270    69,797    68,580
Average interest rate
   1.98 % 1.44 % 1.92 % 2.57 % 2.57 % 2.65 % 2.56 %

Expected Maturity Date
Fair
As of December 31, 2009 2010 2011 2012 2013 2014 Thereafter Total value
(RMB in millions, except as otherwise stated)
Assets

Held-to-maturity and available-for-sale debt securities

Fixed rate bonds

in RMB 4,206 32,650 5,521 7,824 20,552 480,981 551,734 550,128
Average interest rate 3.68 % 4.57 % 4.74 % 4.66 % 4.75 % 4.36 % 4.39 %

in US$ — — — — — — — —
Average interest rate — — — — — — —

in HK$ — — — — — 7 7 7
Average interest rate — — — — — 5.38 % 5.38 %

Variable rate bonds

in RMB 3,784 1,746 1,008 5,073 3,219 8,362 23,192 23,546
Average interest rate 4.76 % 5.33 % 5.10 % 4.98 % 5.62 % 4.68 % 4.96 %

in US$ 854 — — 2,048 — — 2,902 2,902
Average interest rate 0.99 % — — 1.41 % — — 1.29 %

Term deposits (excluding structured deposits)

in RMB 77,580 19,200 36,400 78,367 58,850 64,500 337,897 337,897
Average interest rate 2.69 % 4.34 % 3.78 % 4.06 % 3.64 % 3.76 % 3.60 %

in US$ 6,813 — — — — — 6,813 6,813
Average interest rate 3.18 % — — — — — 3.18 %

Structured deposits⁽¹⁾

in US$ — — 273 — — — 273 272
Average interest rate — — 0.95 % — — — 0.95 %

Liabilities

Securities sold under agreements to repurchase 33,553 — — — — — 33,553 33,553
Average interest rate 1.84 % — — — — — 1.84 %

Investment contracts 2,035 1,043 1,118 657 2,144 60,329 67,326 66,184
Average interest rate 2.02 % 1.34 % 1.39 % 2.50 % 2.50 % 2.35 % 2.32 %

~~153~~
165
   Expected Maturity Date
As of December 31, 2010
   2011 2012 2013 2014 2015 Thereafter Total Fair
value
   (RMB in millions, except as otherwise stated)
Assets

Held-to-maturity and available-for-sale debt securities

Fixed rate bonds

in RMB
   20,987    5,590    7,163    20,803    24,384    508,579    587,505    585,507
Average interest rate
   4.72 % 4.76 % 4.57 % 4.75 % 4.58 % 4.37 % 4.41 %
in US$
   —      —      —      —      —      —      —      —
Average interest rate
   —      —      —      —      —      —      —
in HK$
   —      —      —      —      —      —      —      —
Average interest rate
   —      —      —      —      —      —      —
Variable rate bonds

in RMB
   1,708    765    2,101    3,044    255    3,288    11,160    11,235
Average interest rate
   5.43 % 5.20 % 5.24 % 5.67 % 5.98 % 4.68 % 5.23 %
in US$
   —      —      —      —      —      —      —      —
Average interest rate
   —      —      —      —      —      —      —
Term deposits

in RMB
   19,235    36,400    78,367    58,850    164,300    81,400    438,552    438,552
Average interest rate
   4.36 % 4.20 % 4.35 % 4.14 % 4.38 % 4.46 % 4.34 %
in US$
   —      —      —      —      —      —      —      —
Average interest rate
   —      —      —      —      —      —      —
Liabilities

Securities sold under agreements to repurchase
   23,065    —      —      —      —      —      23,065    23,065
Average interest rate
   6.02 % —      —      —      —      —      6.02 %
Investment contracts
   2,359    918    1,349    2,536    800    62,209    70,171    69,432
Average interest rate
   1.80 % 1.51 % 1.29 % 2.50 % 2.49 % 2.34 % 2.29 %

Expected Maturity Date
Fair
As of December 31, 2008 2009 2010 2011 2012 2013 Thereafter Total value
(RMB in millions, except as otherwise stated)
Assets

Held-to-maturity and available-for-sale debt securities

Fixed rate bonds

in RMB 28,157 3,202 52,559 8,386 17,379 405,956 515,638 553,271
Average interest rate 4.23 % 4.50 % 4.57 % 4.33 % 4.59 % 4.34 % 4.37 %

in US$ — — — — — — — —
Average interest rate — — — — — — —
��
Variable rate bonds

in RMB 3,600 3,845 1,861 1,216 6,557 11,224 28,303 28,641
Average interest rate 6.06 % 4.94 % 4.86 % 5.04 % 4.87 % 4.90 % 5.05 %

in US$ — 854 — — 2,050 — 2,905 2,905
Average interest rate — 3.15 % — — 3.49 % — 3.39 %

Term deposits (excluding structured deposits)

in RMB 59,700 18,080 19,200 39,400 78,367 5,699 220,446 220,446
Average interest rate 3.95 % 4.13 % 4.34 % 3.79 % 4.06 % 3.97 % 4.01 %

in US$ 4,921 — — — — — 4,921 4,921
Average interest rate 6.00 % — — — — — 6.00 %

Structured deposits⁽¹⁾

in US$ — — — 273 — 2,632 2,905 2,887
Average interest rate — — — 3.65 % — 8.09 % 7.67 %

Liabilities

Securities sold under agreements to repurchase 11,390 — — — — — 11,390 11,390
Average interest rate 1.14 % — — — — — 1.14 %

Investment contracts 2,258 947 1,088 783 1,274 46,879 53,229 51,212
Average interest rate 2.31 % 2.15 % 1.58 % 2.50 % 2.50 % 2.47 % 2.44 %
~~(1)~~ ~~assuming the interest rates are within the specified ranges and the deposits are not terminated earlier by the banks.~~
166
Equity Price Risk
Our investments in securities investment funds or equity securities expose us to changes in equity prices. We manage this risk on an integrated basis with other risks through our asset-liability management strategies. We also manage equity price risk through industry and issuer diversification and asset allocation techniques.
~~154~~
The following table sets forth our exposure to equity securities as of December 31, ~~2010, 2009~~2012, 2011 and ~~2008.~~

As of December 31,
2008 2009 2010
(RMB in millions) Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value
Equity securities 75,082 75,082 179,416 179,416 195,918 195,918
Securities at fair value through income (held for trading) 6,363 6,363 2,742 2,742 2,249 2,249
Available-for-sale 68,719 68,719 176,674 176,674 193,669 193,669
2010.
   As of December 31,
   2010    2011    2012
   Carrying amount    Fair value    Carrying amount    Fair value    Carrying amount    Fair value
(RMB in millions)
Equity securities
   195,918       195,918       181,880       181,880       164,742       164,742
Securities at fair value through profit or loss (held for trading)
   2,249       2,249       2,459       2,459       7,916       7,916
Available-for-sale
   193,669       193,669       179,421       179,421       156,826       156,826
A hypothetical 10% decline in the December 31, ~~2008, 2009~~2012, 2011 and 2010 value of the securities at fair value through profit or loss equity securities would result in a charge to the income statement of approximately RMB 792 million, RMB 246 million and RMB 225 million, respectively.
A hypothetical 10% decline in the December 31, 2012, 2011 and 2010 value of the available-for-sale equity securities would result in an unrealized loss of approximately RMB ~~6,823~~15,683 million, RMB ~~17,548~~17,942 million and RMB 19,367 million, respectively.
A hypothetical 10% decline in the December 31, 2008, 2009 and 2010 value of the securities at fair value through income equity securities would result in a charge to the income statement of approximately RMB 636 million and RMB 271 million and RMB 225 million, respectively.
The selection of a 10% immediate change in the value of equity securities should not be construed as a prediction by us of future market events but rather as an illustration of the potential impact of such an event.

Foreign Exchange Risk
Our exposure to fluctuations in foreign currency exchange rates against RMB results primarily from our holdings in non-RMB denominated ~~structured deposits and~~ term deposits. Our debts and capital expenditures are predominantly in RMB and the principal currencies which create foreign currency exchange rate risk in our deposits are the U.S. dollar ~~Japanese yen~~ and Hong Kong dollar. We recorded RMB ~~392~~49 million (US$598 million) foreign exchange losses for the year ended December 31, ~~2010,~~2012, resulting from our assets held in foreign currencies, which were affected by the appreciation of the Renminbi. Future movements in the exchange rate of RMB against the U.S. dollar and other foreign currencies may adversely affect our results of operations and financial condition.
167
The following tables set forth assets denominated in currencies other than RMB as of December 31, ~~2010, 2009~~2012, 2011 and ~~2008.~~

Expected Maturity Date
Fair
As of December 31, 2010 2011 2012 2013 2014 2015 Thereafter Total value
(in millions)
Debt securities

in US$ — — 300 — — — 300 300
Average interest rate — — 1.11 % — — — 1.11 %

in HK$ — — — — 8 23 31 31
Average interest rate — — — — 5.38 % 5.94 % 5.79 %

Term deposits (excluding structured deposits)

in US$ 33 — — — — — 33 33
Average interest rate 3.26 % — — — — — 3.26 %

2010.
   Expected Maturity Date
As of December 31, 2012    2013 2014    2015 2016 2017    Thereafter Total Fair
value
   (in millions)
Debt securities

in US$
   300    —         —      42    —         —      342    342
Average interest rate
   1.59 % —         —      10.25 % —         —      2.66 %
in HK$
   —      —         8    —      —         36    44    49
Average interest rate
   —      —         5.38 % —      —         6.12 % 5.99 %
Term deposits

in US$
   1,540    —         —      —      —         —      1,540    1,540
Average interest rate
   1.81 % —         —      —      —         —      1.81 %
Cash and Cash equivalents

in US$
   40    —         —      —      —         —      40    40
Average interest rate
   0.05 % —         —      —      —         —      0.05 %
in HK$
   3,319    —         —      —      —         —      3,319    3,319
Average interest rate
   0.01 % —         —      —      —         —      0.01 %

~~155~~
168
   Expected Maturity Date
As of December 31, 2011    2012 2013 2014    2015 2016 Thereafter Total Fair
value
   (in millions)
Debt securities

in US$
   —      300    —         —      28    —      328    328
Average interest rate
   —      0.76 % —         —      10.25 % —      1.87 %
in HK$
   —      —      —         8    —      36    44    41
Average interest rate
   —      —      —         5.38 % —      6.12 % 5.99 %
Term deposits

in US$
   869    —      —         —      —      —      869    869
Average interest rate
   6.85 % —      —         —      —      —      6.85 %
Cash and Cash equivalents

in US$
   6    —      —         —      —      —      6    6
Average interest rate
   0.10 % —      —         —      —      —      0.10 %
in HK$
   291    —      —         —      —      —      291    291
Average interest rate
   0.02 % —      —         —      —      —      0.02 %

Expected Maturity Date
Fair
As of December 31, 2010 2011 2012 2013 2014 2015 Thereafter Total value
(in millions)
Structured deposits⁽¹⁾

in US$ — — — — — — — —
Average interest rate — — — — — — —

Cash and Cash equivalents

in US$ 1 — — — — — 1 1
Average interest rate 0.00 % — — — — — 0.00 %

in HK$ 230 — — — — — 230 230
Average interest rate 0.00 % — — — — — 0.00 %

~~156~~
169
   Expected Maturity Date
As of December 31, 2010    2011 2012    2013 2014    2015 Thereafter Total Fair
value
   (in millions)
Debt securities

in US$
   —      —         300    —         —      —      300    300
Average interest rate
   —      —         1.11 % —         —      —      1.11 %
in HK$
   —      —         —      —         8    23    31    31
Average interest rate
   —      —         —      —         5.38 % 5.94 % 5.79 %
Term deposits

in US$
   33    —         —      —         —      —      33    33
Average interest rate
   3.26 % —         —      —         —      —      3.26 %
Cash and Cash equivalents

in US$
   1    —         —      —         —      —      1    1
Average interest rate
   0.00 % —         —      —         —      —      0.00 %
in HK$
   230    —         —      —         —      —      230    230
Average interest rate
   0.00 % —         —      —         —      —      0.00 %

Expected Maturity Date
Fair
As of December 31, 2009 2010 2011 2012 2013 2014 Thereafter Total value
(in millions)
Debt securities

in US$ — 125 — — 300 — 425 425
Average interest rate — 3.15 % — — 3.49 % — 3.39 %

in HK$ — — — — — 8 8 8
Average interest rate — — — — — 5.38 % 5.38 %

Term deposits (excluding structured deposits)

in US$ 998 — — — — — 998 998
Average interest rate 3.18 % — — — — — 3.18 %

Structured deposits⁽¹⁾

in US$ — — 40 — — — 40 40
Average interest rate — — 0.95 % — — — 0.95 %

Cash and Cash equivalents

in US$ 5 — — — — — 5 5
Average interest rate 1.95 % — — — — — 1.95 %

in HK$ 341 — — — — — 341 341
Average interest rate 0.00 % — — — — — 0.00 %
~~(1)~~ ~~assuming the interest rates are within the specified range and the deposits are not terminated earlier by the banks.~~

~~157~~
170

Expected Maturity Date
Fair
As of December 31, 2008 2009 2010 2011 2012 2013 Thereafter Total value
(in millions)
Debt securities

in US$ — 125 — — 300 — 425 425
Average interest rate — 3.15 % — — 3.49 % — 3.39 %

Term deposits (excluding structured deposits)

in US$ 720 — — — — — 720 720
Average interest rate 6.00 % — — — — — 6.00 %

Structured deposits⁽¹⁾

in US$ — — — 40 — 385 425 425
Average interest rate — — — 3.65 % — 8.09 % 7.67 %

Cash and Cash equivalents

in US$ 1,205 — — — — — 1,205 1,205
Average interest rate 3.57 % — — — — — 3.57 %

in HK$ 579 — — — — — 579 579
Average interest rate 0.10 % — — — — — 0.10 %
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.
A. DEBT SECURITIES
Not applicable.
B. WARRANTS AND RIGHTS
Not applicable.
C. OTHER SECURITIES
Not applicable.
D. AMERICAN DEPOSITARY SHARES
The table below sets forth all fees and charges that a holder of our ADRs may have to pay to the depositary bank of our ADR program, either directly or indirectly.

~~158~~
Category

Depositary Actions

Associated Fee
~~Category~~
(a) Depositing or substituting the underlying shares
~~Depositary Actions~~ ~~Associated Fee~~
~~(a) Depositing or~~
~~substituting the~~
~~underlying shares~~
Each person to whom ADRs are issued against deposits of shares, including deposits and issuances in respect of:

•
Ÿ        share distributions, rights, merger

•
Ÿ        exchange of securities or any other transaction or event or other distribution affecting the ADSs or the deposited securities
   US$5.00 for each 100 ADSs (or portion thereof) evidenced by the new ADRs delivered
(b) Receiving or
distributing
dividends
Distribution of dividends    US$0.02 or less per ADS
(c) Selling or
exercising rights
Distribution or sale of securities, the fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities    US$5.00 for each 100 ADSs (or portion thereof)
(d) Withdrawing an
underlying security
Acceptance of ADRs surrendered for withdrawal of deposited securities    US$5.00 for each 100 ADSs (or portion thereof) evidenced by the ADRs surrendered
(e) Transferring,
splitting or
grouping receipts
Transfers, combining or grouping of depositary receipts    US$1.50 per ADS
(f) Expenses of the depositary

Expenses incurred on behalf of ADR holders in connection with:

•
Ÿ        compliance with foreign exchange control regulations or any law or regulation relating to foreign investment;

•
Ÿ        the depositary’s or its custodian’s compliance with applicable law, rule or regulation;

•
Ÿ        stock transfer or other taxes and other governmental charges;

•
Ÿ        cable, telex, facsimile transmission and delivery;

•
Ÿ        expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars (which are paid out of such foreign currency); and

•
Ÿ        any other charge payable by depositary or its agents.
   Expenses payable at the sole discretion of the depositary by billing ADR holders or by deducting charges from one or more cash dividends or other cash distributions.
171
Deutsche Bank Trust Company Americas, or Deutsche Bank, has served as the depositary bank of our ADR program since January 4, 2010. Deutsche Bank has agreed to reimburse certain reasonable company expenses related to our ADR program and incurred by us in connection with our ADR program. The table below sets forth the amounts reimbursed from January ~~4, 2010~~1, 2012 to April 10, ~~2011.~~
2013.
Category of Expenses
Amount Reimbursed from January 1, 2012
to April 10, 2013

~~Category of Expenses~~ ~~Amount Reimbursed~~
~~from January 4, 2010 to~~
~~April 10, 2011~~
NYSE listing fees
US$ ~~38,000.00~~80,000.00
Legal fees
US$ ~~409,620.55~~323,385.37
Investor relations(1)
US$ ~~1,369,933.05~~1,716,556.45
Broker reimbursements(2)
US$ ~~71,440.20~~
~~Total~~
~~US$~~ ~~1,888,993.80~~
90,000.80
⁽¹⁾
Total
US$ 2,209,942.62
⁽¹⁾
Includes expenses related to announcement of results, ADR training programs, non-deal roadshows and investor relations activities.
⁽²⁾
Broker reimbursements are fees payable to Broadridge and other service providers for the distribution of hard copy material to beneficial ADR holders holding in the Depositary Trust Company. Corporate material includes information related to shareholders’ meetings and related voting instruction cards. These fees are SEC approved.
~~159~~
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.
A. MATERIAL MODIFICATION TO THE RIGHTS OF SECURITY HOLDERS
See “Item 10. Additional Information—Articles of Association”.
B. USE OF PROCEEDS
The following use of proceeds information relates to our registration statement on Form F-1 (File No. 333-110615), filed by us in connection with our initial public offering of H shares in the United States. In connection with the registration of the H shares, a registration statement on Form F-6 (File No.333-110622) was also filed for ADSs representing such H shares. Each of these two registration statements was declared effective by the SEC on December 11, 2003. Our H shares commenced trading on the Hong Kong Stock Exchange on December 18, 2003 and the ADSs on the New York Stock Exchange on December 17, 2003.
The net proceeds from the initial public offering of our shares, after deduction of fees and expenses, amounted to RMB 24,707 million and were held in either H.K. dollars or U.S. dollars. As of the date of this annual report, a substantial part of the cash proceeds from our global offering was held in bank deposit accounts denominated in foreign currencies in China, part of the cash proceeds was invested in stocks listed on overseas stock exchanges, and part of the cash proceeds was invested in debt securities denominated in foreign currencies. We gradually converted approximately US$300 million of the cash proceeds into Renminbi to reduce foreign exchange risks. We invested approximately US$433 million, in addition to 2,282 billion in Renminbi, in Guangdong Development Bank in December 2006. We used approximately HK$~~5.8~~9 billion for investments in Sino-Ocean Land Holdings Limited ~~during its target offering~~ in ~~2009.~~
2009 and 2010.
172
ITEM 15. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, we have carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the effectiveness of our disclosure controls and procedures as of December 31, ~~2010,~~2012, the end of the period covered by this annual report. Based on that evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, ~~2010.~~
2012.
~~160~~
Management’s Report on Internal Control Over Financial Reporting
Management of China Life Insurance Company Limited (together with its consolidated subsidiaries, the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with applicable generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets and liabilities of the Company;
• ~~pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets and liabilities of the Company;~~
• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with the applicable generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with the applicable generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2010.~~2012. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework. Based on this assessment, management determined that the Company’s internal control over financial reporting was effective as of December 31, ~~2010.~~
2012.
The Company’s internal control over financial reporting as of December 31, ~~2010~~2012 has been audited by PricewaterhouseCoopers, an independent registered public accounting firm, as stated in their report which is on page ~~F-2~~F-3 of this annual report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2010.~~
2012.
173
Changes in Internal Control over Financial Reporting
There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the year ended December 31, ~~2010~~2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT.
Our board of directors has determined that Mr. Bruce Douglas Moore qualifies as an audit committee financial expert as defined in Item 16A of Form 20-F. Mr. Moore is “independent” in accordance with the applicable requirements of Rule 10A-3 of the Securities Exchange Act of 1934. Mr. Moore was appointed as an independent non-executive director and a member of the audit committee of our ~~company~~Company in ~~June~~May 2009. For Mr. Moore’s biographical information, see “Item 6. Directors, Senior Management and Employees”.
ITEM 16B. CODE OF ETHICS.
At the board of directors meeting held on June 29, 2004, we adopted a code of business conduct and ethics that applies to our chief executive officer, chief financial officer, controller and other senior officers of our company. We have filed the adopted code of business conduct and ethics as an exhibit to our annual report on Form 20-F for the fiscal year ended December 31, 2004, as filed on May 27, 2005.

~~161~~
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table sets forth the aggregate audit fees, audit-related fees, tax fees and all other fees paid to our principal accountants for the fiscal years of ~~2010~~2012 and ~~2009.~~

Audit Fees⁽¹⁾ Audit-Related Fees Tax Fees All Other Fees
(RMB in millions)
2010 63.90 — — —
2009 69.50 — — —
2011.
   Audit Fees⁽¹⁾    Audit-Related Fees    Tax Fees    All Other Fees
   (RMB in millions)
2012
   63.90       —         —         —
2011
   64.25       —         —         —
(1) Audit fees include fees billed for professional services rendered for audits of the consolidated financial statements, review of interim financial statements, statutory audits of China Life.
According to our current internal rules, before our principal accountants are engaged by us to render audit or non-audit services, the engagement must be approved by our audit committee.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
As of December 31, ~~2010,~~2012, China Life and its subsidiaries had not purchased, sold or redeemed any of China Life’s shares.
174
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.
~~Not applicable.~~
On December 21, 2012, our board of directors resolved, as recommended by our audit committee, to propose to appoint Ernst & Young as the Company’s independent registered certified public accountant. At the first extraordinary general meeting of the Company held on February 19, 2013, the shareholders of the Company approved the appointment of Ernst & Young as the Company’s independent registered certified public accountant effective for the fiscal year ending December 31, 2013. PricewaterhouseCoopers was responsible for the audit work of the Company for the fiscal year ended December 31, 2012. We reported the change in our independent registered certified public accountant on Form 6-K filed with the SEC on February 19, 2013. The change was made due to relevant PRC rules issued by the MOF limiting the term of service of audit firms continuously engaged by a PRC financial institution.
The reports of PricewaterhouseCoopers on our consolidated financial statements for the past two fiscal years contain no adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles.
During the two most recent fiscal years, there have been no disagreements with PricewaterhouseCoopers on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of PricewaterhouseCoopers, would have caused it to make reference thereto in their reports on the consolidated financial statements for such years.
During the two most recent fiscal years, there have been no reportable events requiring disclosure pursuant to Item 16F(a)(1)(v) of Form 20-F.
We provided a copy of the above disclosure under this Item 16F to PricewaterhouseCoopers and requested that PricewaterhouseCoopers furnish a letter addressed to the SEC stating whether it agrees with the above statements, and if not, stating the respects in which it does not agree. A copy of the letter from PricewaterhouseCoopers addressed to the SEC, dated April 26, 2013, is filed as Exhibit 15.1.
During the two most recent fiscal years, neither we nor anyone on our behalf consulted Ernst & Young regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on our financial statements, or (ii) any matter that was either the subject of a disagreement with Ernst & Young or a reportable event. Also, during the two most recent fiscal years, we have not obtained any written report or oral advice that Ernst & Young concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue.
As used herein, the term “reportable event” means any of the items listed in paragraphs (a)(1)(v)(A)-(D) of Item 16F of Form 20-F, and the term “disagreement” shall be interpreted in accordance with Item 16F(a)(1)(iv) of Form 20-F and related instructions to Item 16-F of Form 20-F.
ITEM 16G. CORPORATE GOVERNANCE.
As a Chinese company with H shares, ADSs and A shares publicly traded on the HKSE, the NYSE and the SSE, respectively, we must comply with the corporate governance standards provided by PRC company law and other laws, as well as the securities laws and regulations in Hong Kong, United States and the listing requirements of the HKSE, the NYSE and the SSE that are applicable to us. The description set forth below includes, for purpose of Section 303A.11 of the NYSE Listed Company Manual, a summary of the significant ways in which our corporate governance practices differ from those followed by U.S. domestic companies under NYSE rules.

175
Board Independence
We identify our independent non-executive directors in accordance with the qualifications provided by relevant PRC and Hong Kong regulations, which prohibit independent directors from having, among other things, specified interests in our securities or business, relationships with the management and financial dependence on us. These tests vary in certain respects with those set forth under Section 303A.02 of the NYSE Listed Company Manual.
~~162~~
Section 303A.02 of the NYSE Listed Company Manual also requires the board of directors to affirmatively determine that the director has no material relationship with the company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). Under the HKSE Listing Rules, each independent non-executive director must provide an annual confirmation of his independence to the listed company. Under the Tentative Guidelines on Corporate Governance of Insurance Companies issued by the CIRC in 2006 (the “Chinese Insurance Company Corporate Governance Guidelines”), each independent director must make a public announcement of the director’s independence and commitment to duties.
Section 303A.01 of the NYSE Listed Company Manual provides that a U.S. domestic issuer must have a majority of independent directors, unless more than 50% of such issuer’s voting power for the election of directors is controlled by an individual, a group or another company (a “controlled company”). Because more than 60% of our voting power is controlled by CLIC, we, as with controlled U.S. domestic companies, would not be required to comply with this independent board requirement. As of the date of this annual report, our board of directors comprised eleven directors, including four executive directors, three non-executive directors and four independent non-executive directors.
Section 303A.03 of the NYSE Listed Company Manual requires a U.S. domestic company to have its non-management directors meet at regularly scheduled executive sessions without management and hold an executive session including only independent directors at least once a year, or hold regular executive sessions of independent directors. ~~We are not~~Under the HKSE corporate governance rules effective since April 1, 2012, the chairman of our board of directors is required ~~by PRC or Hong Kong laws or requirements on mandatory basis~~ to ~~hold,~~have a meeting with non-executive directors (including independent non-executive directors) only at least once a year. On October 26, 2012, the chairman of our board convened a meeting of non-executive directors to discuss the operational management and ~~did not hold, such sessions in~~development reform of the ~~year of 2010.~~
Company.
Nominating/Corporate Governance Committee and Compensation Committee
Under Section 303A.04 of the NYSE Listed Company Manual, a U.S. domestic company must have a nominating/corporate governance committee composed entirely of independent directors with a written charter that addresses certain specified responsibilities, unless it is a “controlled company”. Section 303A.05 of the NYSE Listed Company Manual requires a U.S. domestic company to have a compensation committee composed entirely of independent directors with a written charter that addresses certain specified duties, unless it is a “controlled company”. We, as with controlled U.S. domestic companies, are not required under NYSE rules to have such a nominating/corporate governance committee or compensation committee. We have established a nominating and remuneration committee in accordance with the HKSE Listing Rules, comprised of a majority of independent non-executive directors as construed under those ~~rules. The nominating~~rules.The primary duties of the nomination and remuneration committee ~~is mainly responsible for~~are to review the structure and components of our board of directors, to formulate the appointment and successors to our board of directors and senior management, to review and ~~recommendation of~~recommend the nomination of our directors and senior officers, as well as ~~the formulation~~to propose to our board of ~~training and~~directors the remuneration policy for our directors, supervisors and senior management. The Chinese Insurance Company Corporate Governance Guidelines require that nominating and remuneration committees of Chinese insurance companies be comprised entirely of non-executive directors with the independent directors as the Chairmen. In ~~the year of 2010,~~2012, our nominating and remuneration committee comprised two independent non-executive directors and one non-executive director with one of the independent non-executive directors serving as the Chairman. We have complied with the composition requirements of the nomination and remuneration committee as prescribed under the Chinese Insurance Company Corporate Governance Guidelines.

176
Audit Committee
The NYSE rules set forth two levels of audit committee standards for U.S. domestic companies and foreign private ~~issuers. As~~issuers.As a foreign private issuer, we are required to comply with the audit committee requirements under Section 303A.06 of the NYSE Listed Company Manual, such as audit committee independence and certain functions and powers, but are not subject to the additional qualifications, independence, function and other requirements for U.S. domestic companies provided under Section 303A.07 of the NYSE Listed Company Manual.
~~163~~
We have established an audit committee in accordance with the requirements of Section 303A.06 of the NYSE Listed Company Manual, the HKSE Listing Rules and the Chinese Insurance Company Corporate Governance ~~Guidelines. In the year of 2010,~~Guidelines.In 2012, our audit committee comprised three independent non-executive directors with one of them serving as the ~~Chairman. The~~Chairman.The primary duties of the audit committee are to review and supervise the financial reporting process, to assess the effectiveness of our internal control system, to supervise our internal audit system and its implementation and to implement and recommend the engagement or replacement of external auditors. Our audit committee is also responsible for communications between our internal and external ~~auditors.~~
auditors and our internal reporting system.
Corporate Governance Guidelines
Under Section 303A.09 of the NYSE Listed Company Manual, a U.S. domestic company must adopt and disclose corporate governance guidelines that address specified key subjects. We are not required by Chinese or Hong Kong laws or requirements to, and currently do not, have such corporate governance guidelines. However, we address several of the key subjects required by the NYSE Listed Company Manual to be included in the corporate governance guidelines in our articles of association, Rules of Procedures for Board of Directors, Rules of Internal Control and other internal corporate documents.
In addition, under the HKSE Listing Rules, we are expected to comply with, but may choose to deviate from, the provisions of the Code on Corporate Governance Practices in the HKSE Listing Rules, which sets out the principles of good corporate governance for issuers. However, we are required to disclose the reasons for deviation, if any, in our interim and annual reports.
We are required by the ~~China Securities Regulatory Commission (“CSRC”)~~CSRC to disclose in our annual report filed with the CSRC our actual corporate governance practice as compared with CSRC’s rules on corporate governance of listed companies. Under such rules, we are required to disclose the differences between our actual practices and the requirements under such rules, if any. Accordingly, we have disclosed in our annual report for the year of ~~2010~~2012 filed with the CSRC that we had established ~~comparatively proper~~a corporate governance structure with well-defined duties and ~~sound corporate governance~~responsibilities strictly in accordance with the PRC Company Law and PRC Securities Law as well as relevant rules and regulations, and that ~~there were no significant differences between~~ our actual corporate governance practices ~~and relevant provisions~~are generally in compliance with the applicable regulatory rules and requirements ~~under CSRC’s rules.~~
of the jurisdictions where we are listed.
177
Code of Business Conduct and Ethics
Section 303A.10 of the NYSE Listed Company Manual requires U.S. domestic companies to adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. We have adopted a Code of Business Conduct and Ethics for Directors and Senior Officers and Code of Conduct for Employees. We have disclosed the Code of Business Conduct and Ethics for Directors and Senior Officers in our annual report under Form 20-F for fiscal year ended December 31, 2004 and are required to disclose in the annual report under Form 20-F any waivers of the code for directors or executive officers. In addition, according to the HKSE Listing Rules, all of our directors must comply with the Model Code for Securities Transactions by Directors of Listed Companies that sets forth the required standards with which the directors of a listed company must comply in securities transactions of the listed company. Under the Listing Rules of the Shanghai Stock Exchange, any of the directors, supervisors or senior management of the listed company ~~shall~~may not transfer any shares of such company held by him/her within one year of the listing of the company or six months after leaving the company. During his/her tenure at the company, he/she ~~shall~~must file with the Shanghai Stock Exchange for record in advance any proposed transaction in the shares of the company in accordance with the relevant rules and regulations. In case of changes in shareholdings in the company, he/she shall report the changes on a timely basis to the company, which must then make relevant announcements on the website of the Shanghai Stock Exchange.
~~164~~
Certification Requirements
Under Section 303A.12(a) of the NYSE Listed Company Manual, each U.S. domestic company Chief Executive Officer must certify to the NYSE each year that he or she is not aware of any violation by the listed company of NYSE corporate governance listing standards. There are no similar requirements under PRC or Hong Kong laws or requirements.
ITEM 16H. MINE SAFETY DISCLOSURE.
Not applicable.
PART III
ITEM 17. FINANCIAL STATEMENTS.
We have elected to provide the financial statements and related information specified in Item 18 in lieu of Item 17.
ITEM 18. FINANCIAL STATEMENTS.
See Index to Consolidated Financial Statements for a list of all financial statements filed as part of this annual report.
ITEM 19. EXHIBITS.
(a) See Item 18 for a list of the financial statements filed as part of this annual report.
(b) Exhibits to this annual report.

~~165~~
178
EXHIBIT INDEX
No.

~~No.~~
Description of Exhibit
1.1    Amended and Restated Articles of Association of the Registrant
2.1
Form of H share certificate⁽¹⁾
2.2
Form of Deposit Agreement, including the Form of American Depositary Receipt⁽²⁾
4.1
Restructuring Agreement⁽¹⁾
4.2
Trademark License Agreement⁽¹⁾
4.3
Policy Management Agreement⁽⁴⁾
4.4    Non-Competition Agreement⁽¹⁾
4.5    Asset Management Agreement Between China Life Insurance Company Limited and China Life Investment Holding Company Limited
~~4.4~~
4.6    Asset Management Agreement between China Life Insurance Company Limited and China Life Asset Management Company Limited
4.7
~~4.5~~
Asset Management Agreement between China Life Insurance (Group) Company and China Life Asset Management Company Limited⁽⁵⁾⁽⁶⁾
~~4.6~~
~~Property Leasing Agreement~~⁽⁶⁾
~~4.7~~
~~Non-Competition Agreement~~⁽¹⁾
4.8
~~Confirmation Letter to Renew Policy Management~~Property Leasing Agreement⁽⁵⁾
4.9
~~Agreement for Assignment of Rights and Obligations under~~ Property ~~Leasing~~Transfer Framework Agreement⁽⁵⁾
4.10
~~Capital Injection Agreement among China Life Insurance Company Limited, China Life Insurance (Group) Company and China Life Asset Management Company Limited~~⁽⁵⁾
~~4.11~~
Entrustment and Account Management Agreement for Corporate Annuity Fund⁽⁶⁾⁽⁵⁾
4.11    Memorandum to Renew Entrustment and Account Management Agreement for Corporate Annuity Fund
4.12    Insurance Sales Framework Agreement between China Life Insurance Company Limited and China Life Property and Casualty Insurance Company Limited⁽⁶⁾
8.1    List of subsidiaries of the Registrant
11.1
Code of Business Conduct and Ethics⁽³⁾
12.1    Certification pursuant to Rule 13a-14(a)
12.2    Certification pursuant to Rule 13a-14(a)
13.1    Certification pursuant to Rule 13a-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code
15.1    Letter from PricewaterhouseCoopers
(1) Incorporated by reference to the Registration Statement on Form F-1 (File No. 333-110615), filed with the Commission on December 9, 2003.
(2) Incorporated by reference to the Registration Statement on Form F-6 (File No. 333-164005), filed with the Commission on January 4, 2010.
(3) Incorporated by reference to the Annual Report on Form 20-F for the fiscal year ended December 31, 2004, filed with the Commission on May 27, 2005.
(4) Incorporated by reference to the Annual Report on Form 20-F for the fiscal year ended December 31, 2005, filed with the Commission on May 30, 2006.
(5) ~~Incorporated by reference to the Annual Report on Form 20-F for the fiscal year ended December 31, 2008, filed with the Commission on April 28, 2009.~~
~~(6)~~ Incorporated by reference to the Annual Report on Form 20-F for the fiscal year ended December 31, 2009, filed with the Commission on April 29, 2010.
(6) Incorporated by reference to the Annual Report on Form 20-F for the fiscal year ended December 31, 2011, filed with the Commission on April 26, 2012.

~~166~~
179
SIGNATURES
~~SIGNATURES~~
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
China Life Insurance Company Limited
By:

~~By:~~
/s/ Wan Feng

Name:
Wan Feng
Title:
President and Executive Director
Date: April 26, ~~2011~~
2013
CHINA LIFE INSURANCE COMPANY LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Historical Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
~~F-2~~
   F-3
Consolidated Statement of Financial Position as of December 31, ~~2010~~2012 and ~~2009~~2011
~~F-3~~
   F-4
Consolidated Statement of Comprehensive Income for the years ended December 31, ~~2010, 2009~~2012, 2011 and ~~2008~~2010
~~F-5~~
   F-6
Consolidated Statement of Changes in Equity for the years ended December 31, ~~2010, 2009~~2012, 2011 and ~~2008~~2010
~~F-7~~
   F-8
Consolidated Statement of Cash Flow for the years ended December 31, ~~2010, 2009~~2012, 2011 and ~~2008~~2010
~~F-10~~
   F-11
Notes to the Consolidated Financial Statements
   ~~F-12~~ F-13

F-1
CHINA LIFE INSURANCE COMPANY LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
Report of Independent Registered Public Accounting Firm
To the Board of Directors and ~~Equity Holders~~Shareholders of
China Life Insurance Company Limited
In our opinion, the accompanying consolidated statements of financial position and the related consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flow present fairly, in all material respects, the financial position of China Life Insurance Company Limited and its subsidiaries ~~(hereinafter — “the~~(hereinafter—“the Group”) at December 31, ~~2010~~2012 and December 31, ~~2009,~~2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2010~~2012 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2010,~~2012, based on criteria established in Internal ~~Control —~~ Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Group’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 15 of the ~~2010~~2012 Annual Report to ~~equity holders.~~shareholders. Our responsibility is to express opinions on these financial statements and on the Group’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers
Hong Kong, 27 March ~~22, 2011~~
2013
PricewaterhouseCoopers, 22/F, Prince’s Building, Central, Hong Kong
T: +852 2289 8888, F:+852 2810 9888, www.pwchk.com

~~F-2~~
F-3
CHINA LIFE INSURANCE COMPANY LIMITED
Consolidated Statement of Financial Position
As at 31 December ~~2010~~

As at 31 As at 31
December December
2010 2009
Note RMB million RMB million

ASSETS

Property, plant and equipment 6 18,946 17,467
Investments in associates 7 20,892 8,470
Held-to-maturity securities 8.1 246,227 235,099
Loans 8.2 36,543 23,081
Term deposits 8.3 441,585 344,983
Statutory deposits — restricted 8.4 6,153 6,153
Available-for-sale securities 8.5 548,121 517,499
Securities at fair value through income 8.6 9,762 9,133
Accrued investment income 8.7 18,193 14,208
Premiums receivable 10 7,274 6,818
Reinsurance assets 11 830 832
Other assets 12 8,199 6,317
Cash and cash equivalents 47,854 36,197

Total assets
1,410,579 1,226,257

2012
   Note    As at 31
December
2012
RMB million    As at 31
December
2011
RMB million
ASSETS

Property, plant and equipment
   6    22,335       20,231
Investments in associates
   7    28,991       24,448
Held-to-maturity securities
   8.1    452,389       261,933
Loans
   8.2    80,419       61,104
Term deposits
   8.3    641,080       520,793
Statutory deposits-restricted
   8.4    6,153       6,153
Available-for-sale securities
   8.5    506,416       562,948
Securities at fair value through profit or loss
   8.6    34,035       23,683
Securities purchased under agreements to resell
   8.7    894       2,370
Accrued investment income
   8.8    28,926       22,946
Premiums receivable
   10    8,738       8,253
Reinsurance assets
   11    948       878
Other assets
   12    18,140       12,182
Cash and cash equivalents
      69,452       55,985




Total assets
      1,898,916       1,583,907




The notes on pages ~~F-12~~F-13 to ~~F-77~~F-84 form an.an integral part of these consolidated financial statements.
~~F-3~~
F-4
CHINA LIFE INSURANCE COMPANY LIMITED
Consolidated Statement of Financial Position
As at 31 December ~~2010~~

As at 31 As at 31
December December
2010 2009
Note RMB million RMB million

LIABILITIES AND EQUITY

Liabilities

Insurance contracts 13 1,018,135 818,164
Investment contracts 14 70,171 67,326
Securities sold under agreements to repurchase 15 23,065 33,553
Policyholder dividends payable 52,828 54,587
Annuity and other insurance balances payable 8,275 5,721
Premiums received in advance 1,880 1,804
Other liabilities 16 13,746 11,978
Deferred tax liabilities 24 11,776 16,361
Current income tax liabilities 34 3,850
Statutory insurance fund 17 194 137

Total liabilities
1,200,104 1,013,481

Equity

Share capital 30 28,265 28,265
Reserves 31 100,512 102,787
Retained earnings 79,933 80,020

Attributable to equity holders of the Company
208,710 211,072

Non-controlling interests
1,765 1,704

Total equity
210,475 212,776

Total liabilities and equity
1,410,579 1,226,257

2012
   Note    As at 31
December
2012
RMB million    As at 31
December
2011
RMB million
LIABILITIES AND EQUITY

Liabilities

Insurance contracts
   13    1,384,537       1,199,373
Investment contracts
   14    66,639       69,797
Policyholder dividends payable
      44,240       46,368
Bonds payable
   15    67,981       29,990
Securities sold under agreements to repurchase
   16    68,499       13,000
Annuity and other insurance balances payable
      16,890       11,954
Premiums received in advance
      2,576       3,719
Other liabilities
   17    16,435       13,968
Deferred tax liabilities
   26    7,834       1,454
Current income tax liabilities
      22       750
Statutory insurance fund
   18    162       146




Total liabilities
      1,675,815       1,390,519




Equity

Share capital
   31    28,265       28,265
Reserves
   32    112,428       83,371
Retained earnings
      80,392       79,894




Attributable to equity holders of the Company
      221,085       191,530




Non-controlling interests
      2,016       1,858




Total equity
      223,101       193,388




Total liabilities and equity
      1,898,916       1,583,907




Approved and authorized for issue by the Board of Directors on 2227 March ~~2011~~
2013
The notes on pages ~~F-12~~F-13 to ~~F-77~~F-84 form an integral part of these consolidated financial statements.

~~F-4~~
F-5
CHINA LIFE INSURANCE COMPANY LIMITED
Consolidated Statement of Comprehensive Income
For the year ended 31 December ~~2010~~

2010 2009 2008
RMB RMB RMB
Note million million million

REVENUES

Gross written premiums 318,229 275,970 265,656
Less: premiums ceded to reinsurers (177 ) (158 ) (156 )

Net written premiums 318,052 275,812 265,500
Net change in unearned premium reserves 36 (735 ) (323 )

Net premiums earned
318,088 275,077 265,177

Investment income 18 48,872 38,890 44,946
Net realised gains on financial assets 19 15,841 21,244 (5,964 )

Net fair value gains through income 20 280 1,449 (7,194 )
Other income 2,757 2,630 3,420

Total revenues
385,838 339,290 300,385

BENEFITS, CLAIMS AND EXPENSES

Insurance benefits and claims expenses
Life insurance death and other benefits 21 (71,237 ) (74,858 ) (89,659 )
Accident and health claims and claim adjustment expenses 21 (8,740 ) (7,808 ) (7,641 )
Increase in insurance contracts liabilities 21 (199,655 ) (154,372 ) (134,649 )
Investment contract benefits 22 (1,950 ) (2,142 ) (1,931 )
Policyholder dividends resulting from participation in profits (13,224 ) (14,487 ) (1,671 )
Underwriting and policy acquisition costs (27,256 ) (22,936 ) (24,200 )
Administrative expenses (20,285 ) (18,719 ) (16,652 )
Other operating expenses (3,655 ) (2,390 ) (3,409 )
Statutory insurance fund contribution 17 (599 ) (537 ) (558 )

Total benefits, claims and expenses
(346,601 ) (298,249 ) (280,370 )

Share of results of associates 7 1,771 704 (56 )
Profit before income tax
23 41,008 41,745 19,959
Income tax 24 (7,197 ) (8,709 ) (685 )

Net profit
33,811 33,036 19,274

Attributable to:
- equity holders of the Company 33,626 32,881 19,137
- non-controlling interests 185 155 137

Basic and diluted earnings per share
26 RMB 1.19 RMB 1.16 RMB 0.68

2012
   Note    2012
RMB million 2011
RMB million 2010
RMB million
REVENUES

Gross written premiums
      322,742    318,252    318,229
Less: premiums ceded to reinsurers
      (384 ) (232 ) (177 )


Net written premiums
      322,358    318,020    318,052
Net change in unearned premium reserves
      (232 ) 256    36
Net premiums earned
      322,126    318,276    318,088


Investment income
   19    73,243    60,722    48,872
Net realised gains and impairment on financial assets
   20    (26,876 ) (11,208 ) 15,841
Net fair value (losses)/gains through profit or loss
   21    (313 ) 337    280
Other income
      3,305    2,772    2,757


Total revenues
      371,485    370,899    385,838


BENEFITS, CLAIMS AND EXPENSES

Insurance benefits and claims expenses

Life insurance death and other benefits
   22    (107,674 ) (101,349 ) (71,237 )
Accident and health claims and claim adjustment expenses
   22    (7,898 ) (7,789 ) (8,740 )
Increase in insurance contracts liabilities
   22    (184,990 ) (181,579 ) (199,655 )
Investment contract benefits
   23    (2,032 ) (2,031 ) (1,950 )
Policyholder dividends resulting from participation in profits
      (3,435 ) (6,125 ) (13,224 )
Underwriting and policy acquisition costs
      (27,754 ) (27,434 ) (27,256 )
Finance costs
   24    (2,575 ) (873 ) (304 )
Administrative expenses
      (23,283 ) (21,549 ) (20,285 )
Other operating expenses
      (3,304 ) (3,275 ) (3,351 )
Statutory insurance fund contribution
   18    (609 ) (595 ) (599 )


Total benefits, claims and expenses
      (363,554 ) (352,599 ) (346,601 )


Share of profit of associates
   7    3,037    2,213    1,771


Profit before income tax
   25    10,968    20,513    41,008
Income tax
   26    304    (2,022 ) (7,197 )


Net profit
      11,272    18,491    33,811


Attributable to:

- equity holders of the Company
      11,061    18,331    33,626
- non-controlling interests
      211    160    185


Basic and diluted earnings per share
   27    RMB0.39    RMB0.65    RMB1.19


The notes on pages ~~F-12~~F-13 to ~~F-77~~F-84 form an integral part of these consolidated financial statements.
~~F-5~~
F-6
CHINA LIFE INSURANCE COMPANY LIMITED
Consolidated Statement of Comprehensive Income (continued)
For the year ended 31 December ~~2010~~

2010 2009 2008
Note RMB million RMB million RMB million

Other comprehensive income/(loss)

Fair value (losses)/gains on available-for-sale securities (13,666 ) 39,470 (61,622 )
Amount transferred to net profit from other comprehensive income (15,763 ) (21,040 ) 4,878
Portion of fair value (losses)/gains on available-for-sale securities allocated to participating policyholders 7,983 (3,999 ) 11,702
Share of other comprehensive loss of associates (131 ) (70 ) 291
Others (1 ) — (3 )
Income tax relating to components of other comprehensive income/(loss) 24 5,362 (3,607 ) 11,260

Other comprehensive (loss)/income for the year
(16,216 ) 10,754 (33,494 )

Total comprehensive income for the year
17,595 43,790 (14,220 )

Attributable to:
- equity holders of the Company 17,423 43,626 (14,316 )
- non-controlling interests 172 164 96

2012
   Note    2012
RMB million 2011
RMB million 2010
RMB million
Other comprehensive income

Fair value gains/(losses) on available-for-sale securities
      8,864    (45,576 ) (13,666 )
Amount transferred to net profit from other comprehensive income
      26,876    11,054    (15,763 )
Portion of fair value (losses)/ gains on available-for-sale securities attributable to participating policyholders
      (2,635 ) 2,521    7,983
Share of other comprehensive income of associates
      167    (201 ) (131 )
Others
      —      (1 ) (1 )
Income tax relating to components of other comprehensive income
   26    (8,265 ) 7,989    5,362


Other comprehensive income for the year
      25,007    (24,214 ) (16,216 )


Total comprehensive income for the year
      36,279    (5,723 ) 17,595


Attributable to:

- equity holders of the Company
      36,056    (5,874 ) 17,423
- non-controlling interests
      223    151    172


The notes on pages ~~F-12~~F-13 to ~~F-77~~F-84 form an integral part of these consolidated financial ~~statements~~
statements.

~~F-6~~
F-7
CHINA LIFE INSURANCE COMPANY LIMITED
Consolidated Statement of Changes in Equity
For the year ended 31 December ~~2010~~

Attributable to equity holders
of the Company Non-
Retained controlling
Share capital Reserves earnings interests Total
RMB million RMB million RMB million RMB million RMB million
(Note 29) (Note 30)

As at 1 January 2008
28,265 111,276 60,593 876 201,010

Net profit — — 19,137 137 19,274

Other comprehensive loss for the year — (33,453 ) — (41 ) (33,494 )

Total comprehensive income/(loss)
— (33,453 ) 19,137 96 (14,220 )

Transactions with owners

Capital contribution — — — 45 45
Appropriation to reserve — 6,624 (6,624 ) — —
Dividends paid — — (11,871 ) — (11,871 )
Dividends to minority interests — — (93 ) (93 )

Total transactions with owners
— 6,624 (18,495 ) (48 ) (11,919 )

As at 31 December 2008
28,265 84,447 61,235 924 174,871

2012

   Attributable to equity holders
   of the Company
   Share
capital
RMB million    Reserves
RMB million Retained
earnings
RMB million Non-
controlling
interests
RMB million Total
RMB million
   (Note 31)    (Note 32)
As at 1 January 2010
   28,265       102,787    80,020    1,704    212,776
Net profit
   —         —      33,626    185    33,811
Other comprehensive income
   —         (16,203 ) —      (13 ) (16,216 )




Total comprehensive income
   —         (16,203 ) 33,626    172    17,595




Transactions with owners

Appropriation to reserve (Note 32)
   —         13,928    (13,928 ) —      —
Dividends paid
   —         —      (19,785 ) —      (19,785 )
Dividends to non-controlling interests
   —         —      —      (111 ) (111 )




Total transactions with equity holders
   —         13,928    (33,713 ) (111 ) (19,896 )




As at 31 December 2010
   28,265       100,512    79,933    1,765    210,475




~~F-7~~
~~CHINA LIFE INSURANCE COMPANY LIMITED~~
~~Consolidated Statement of Changes in Equity~~
~~For the year ended 31 December 2010~~

Attributable to equity holders
of the Company Non-
Retained controlling
Share capital Reserves earnings interests Total
RMB million RMB million RMB million RMB million RMB million
(Note 30) (Note 31)

As at 1 January 2009
28,265 84,447 61,235 924 174,871

Net profit — — 32,881 155 33,036

Other comprehensive income for the year — 10,745 — 9 10,754

Total comprehensive income
— 10,745 32,881 164 43,790

Transactions with owners

Capital contribution — — — 720 720
Appropriation to reserve (Note 31) — 7,595 (7,595 ) — —
Dividends paid — — (6,501 ) — (6,501 )
Dividends to non-controlling interests — — — (104 ) (104 )

Total transactions with owners
— 7,595 (14,096 ) 616 (5,885 )

As at 31 December 2009
28,265 102,787 80,020 1,704 212,776

~~F-8~~
~~CHINA LIFE INSURANCE COMPANY LIMITED~~
~~Consolidated Statement of Changes in Equity~~
~~For the year ended 31 December 2010~~

Attributable to equity holders
of the Company Non-
Retained controlling
Share capital Reserves earnings interests Total
RMB million RMB million RMB million RMB million RMB million
(Note 30) (Note 31)

As at 1 January 2010
28,265 102,787 80,020 1,704 212,776

Net profit — — 33,626 185 33,811

Other comprehensive income for the year — (16,203 ) — (13 ) (16,216 )

Total comprehensive income
— (16,203 ) 33,626 172 17,595

Appropriation to reserve (Note 31) — 13,928 (13,928 ) — —
Dividends paid — — (19,785 ) — (19,785 )
Dividends to non-controlling interests — — — (111 ) (111 )

Total transactions with owners
— 13,928 (33,713 ) (111 ) (19,896 )

As at 31 December 2010
28,265 100,512 79,933 1,765 210,475

The notes on pages ~~F-12~~F-13 to ~~F-77~~F-84 form an integral part of these consolidated financial statements.

~~F-9~~
F-8
CHINA LIFE INSURANCE COMPANY LIMITED
Consolidated Statement of ~~Cash Flow~~
Changes in Equity
For the year ended 31 December ~~2010~~

2010 2009 2008
RMB million RMB million RMB million

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before income tax: 41,008 41,745 19,959

Adjustments for:
Investment income (48,872 ) (38,890 ) (44,946 )
Net realised and unrealised gains on financial assets (16,121 ) (22,693 ) 13,158
Insurance contracts 199,978 155,252 135,284
Depreciation and amortisation 1,802 1,560 1,363
Amortisation of premiums and discounts (5 ) 10 (156 )
Loss on foreign exchange 392 28 907
Share of results of associates (1,771 ) (704 ) —
Changes in operating assets and liabilities:
Securities at fair value through income (809 ) 6,435 3,977
Receivables and payables 13,056 9,917 4,484
Income tax paid (10,236 ) (3,995 ) (8,583 )
Interest received 135 291 101
Dividends received 43 40 529

Net cash inflow from operating activities
178,600 149,700 126,077

CASH FLOWS FROM INVESTING ACTIVITIES

Sales and maturities:
Sales of debt securities 38,245 95,197 19,594
Maturities of debt securities 8,199 25,730 4,187
Sales of equity securities 133,111 101,112 59,855
Property, plant and equipment 240 420 247
Purchases:
Debt securities (74,324 ) (148,559 ) (119,989 )
Equity securities (171,379 ) (149,523 ) (49,480 )
Property, plant and equipment (4,849 ) (3,261 ) (2,950 )
Additional capital contribution to associates (2,999 ) — (1,200 )
Increase in term deposits, net (96,602 ) (116,711 ) (60,095 )
Decrease in securities purchased under agreements to resell, net 89 8 5,142
Interest received 38,873 34,139 30,378
Dividends received 5,321 3,159 9,563
Increase in policy loan, net (10,146 ) (5,155 ) —
Other 284 (307 ) (11,162 )

Net cash outflow from investing activities
(135,937 ) (163,751 ) (115,910 )

2012
   Attributable to equity holders of the
Company
   Share
capital
RMB million    Reserves
RMB million Retained
earnings
RMB million Non-controlling
interests
RMB��million Total
RMB million
   (Note 31)    (Note 32)
As at 1 January 2011
   28,265       100,512    79,933    1,765    210,475
Net profit
   —         —      18,331    160    18,491
Other comprehensive income
   —         (24,205 ) —      (9 ) (24,214 )




Total comprehensive income
   —         (24,205 ) 18,331    151    (5,723 )




Transactions with owners

Appropriation to reserve (Note 32)
   —         7,064    (7,064 ) —      —
Dividends paid
   —         —      (11,306 ) —      (11,306 )
Dividends to non-controlling interests
   —         —      —      (58 ) (58 )




Total transactions with equity holders
   —         7,064    (18,370 ) (58 ) (11,364 )




As at 31 December 2011
   28,265       83,371    79,894    1,858    193,388




The notes on pages ~~F-12~~F-13 to ~~F-77~~F-84 form an integral part of these consolidated financial statements.

~~F-10~~
F-9
CHINA LIFE INSURANCE COMPANY LIMITED
Consolidated Statement of ~~Cash Flow~~
Changes in Equity
For the year ended 31 December ~~2010~~

2010 2009 2008
RMB million RMB million RMB million

CASH FLOWS FROM FINANCING ACTIVITIES

(Decrease)/increase in investment in securities sold under agreements to repurchase, net (10,488 ) 22,163 11,290
Interest paid (297 ) (111 ) (437 )
Contribution from non-controlling interests — 720 —
Dividends paid to the Company’s equity holders (19,785 ) (6,501 ) (11,871 )
Dividends paid to non-controlling interests (111 ) (104 ) (93 )

Net cash (outflow)/ inflow from financing activities
(30,681 ) 16,167 (1,111 )

Foreign currency losses on cash and cash equivalents
(325 ) (4 ) (288 )

Net increase in cash and cash equivalents
11,657 2,112 8,768

Cash and cash equivalents Beginning of year
36,197 34,085 25,317

End of year
47,854 36,197 34,085

Analysis of balance of cash and cash equivalents

Cash at bank and in hand 45,143 23,640 20,841
Short-term bank deposits 2,711 12,557 13,244
2012
   Attributable to equity holders
   of the Company
   Share
capital
RMB million    Reserves
RMB million    Retained
earnings
RMB million Non-controlling
interests
RMB million Total
RMB million
   (Note 31)    (Note 32)
As at 1 January 2012
   28,265       83,371       79,894    1,858    193,388
Net profit
   —         —         11,061    211    11,272
Other comprehensive income
   —         24,995       —      12    25,007






Total comprehensive income
   —         24,995       11,061    223    36,279






Transactions with owners

Appropriation to reserve (Note 32)
   —         4,062       (4,062 ) —      —
Dividends paid
   —         —         (6,501 ) —      (6,501 )
Dividends to non-controlling interests
   —         —         —      (65 ) (65 )






Total transactions with equity holders

—

   4,062       (10,563 ) (65 ) (6,566 )






As at 31 December 2012
   28,265       112,428       80,392    2,016    223,101






The notes on pages ~~F-12~~F-13 to ~~F-77~~F-84 form an integral part of these consolidated financial statements.

~~F-11~~
F-10
CHINA LIFE INSURANCE COMPANY LIMITED
Consolidated Statement of Cash Flows
For the year ended 31 December 2012
   2012 2011 2010
   RMB million RMB million RMB million
CASH FLOWS FROM OPERATING ACTIVITIES

Profit before income tax:
   10,968    20,513    41,008
Adjustments for:

Investment income
   (73,243 ) (60,722 ) (48,872 )
Net realised and unrealised gains and impairment on financial assets
   27,189    10,871    (16,121 )
Insurance contracts
   185,106    181,184    199,978
Depreciation and amortisation
   1,949    1,909    1,802
Amortisation of premiums and discounts
   —      1    (5 )
Loss on foreign exchange
   49    547    392
Share of profit of associates
   (3,037 ) (2,213 ) (1,771 )
Changes in operating assets and liabilities:

Securities at fair value through profit or loss
   (10,152 ) (14,196 ) (809 )
Receivables and payables
   (4,434 ) (925 ) 13,056
Income tax paid
   (3,675 ) (3,456 ) (10,236 )
Interest received—Securities at fair value through profit or loss
   833    404    135
Dividends received—Securities at fair value through profit or loss
   629    36    43


Net cash inflow from operating activities
   132,182    133,953    178,600


CASH FLOWS FROM INVESTING ACTIVITIES

Sales and maturities:

Sales of debt securities
   51,281    32,676    38,245
Maturities of debt securities
   5,277    24,530    8,199
Sales of equity securities
   105,519    98,639    133,111
Property, plant and equipment
   218    258    240
Purchases:

Debt securities
   (228,296 ) (116,000 ) (74,324 )
Equity securities
   (70,557 ) (132,294 ) (171,379 )
Property, plant and equipment
   (5,293 ) (5,108 ) (4,849 )
Additional capital contribution to associates
   (1,339 ) (1,600 ) (2,999 )
Increase in term deposits, net
   (120,287 ) (79,208 ) (96,602 )
Increase/(decrease) in securities purchased under agreements to resell, net
   1,476    (2,370 ) 89
Interest received
   61,410    49,976    38,873
Dividends received
   4,768    4,874    5,321
Increase in policy loan, net
   (7,572 ) (8,344 ) (10,146 )
Other
   (409 ) 380    284


Net cash outflow from investing activities
   (203,804 ) (133,591 ) (135,937 )


The notes on pages F-13 to F-84 form an integral part of these consolidated financial statements.
F-11
CHINA LIFE INSURANCE COMPANY LIMITED
Consolidated Statement of Cash Flows
For the year ended 31 December 2012
   2012 2011 2010
   RMB million RMB million RMB million
CASH FLOWS FROM FINANCING ACTIVITIES

Increase/(decrease) in securities sold under agreements to repurchase, net
   55,499    (10,065 ) (10,488 )
Interest paid
   (1,832 ) (570 ) (297 )
Dividends paid to the Company’s equity holders
   (6,501 ) (11,306 ) (19,785 )
Dividends paid to non-controlling interests
   (65 ) (58 ) (111 )
Proceeds from issuance of subordinated debt
   37,988    29,990    —


Net cash inflow/(outflow) from financing activities
   85,089    7,991    (30,681 )


Foreign currency losses on cash and cash equivalents
   —      (222 ) (325 )
Net increase in cash and cash equivalents
   13,467    8,131    11,657
Cash and cash equivalents

Beginning of year
   55,985    47,854    36,197


End of year
   69,452    55,985    47,854


Analysis of balance of cash and cash equivalents

Cash at bank and in hand
   69,448    52,001    45,143
Short-term bank deposits
   4    3,984    2,711
The notes on pages F-13 to F-84 form an integral part of these consolidated financial statements.
F-12
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
1
ORGANIZATION AND PRINCIPAL ACTIVITIES
China Life Insurance Company Limited (the “Company”) was established in the People’s Republic of China (“China” or “PRC”) on 30 June 2003 as a joint stock company with limited liability as part of a group restructuring of China Life Insurance (Group) Company ~~(formerly~~( “CLIC” , formerly China Life Insurance Company) ~~(“CLIC”)~~ and its subsidiaries (the “Restructuring”). The Company and its subsidiaries are hereinafter collectively referred to as the “Group”. The Group’s principal activity is the writing of life insurance business, providing life, annuities, accident and health insurance products in China.
The Company is a ~~limited liability~~joint stock company incorporated ~~and located~~ in ~~China.~~PRC with limited liability. The address of its registered office is: 16 Financial Street, Xicheng District, Beijing, PRC. The Company is listed on the New York Stock Exchange, the Stock Exchange of Hong Kong ~~the New York Stock Exchange~~Limited, and the Shanghai Stock Exchange.
These consolidated financial statements are presented in millions of Renminbi (“RMB million”) unless otherwise stated. These consolidated financial statements have been approved for issue by the Board of Directors on 2227 March ~~2011.~~
2013.
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1 ~~The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented.~~
~~2.1~~
Basis of preparation
The Group adopted International Financial Reporting Standards (“IFRS”) in 2009. The Group prepared these consolidated financial statements in accordance with IFRS, its amendments and interpretations issued by the International Accounting Standards Board (“IASB”). These consolidated financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and the requirements of the Hong Kong Company’s Ordinance. The Group prepared the consolidated financial statements under the historical cost convention, as modified by financial assets and financial liabilities at fair value through profit or loss, available-for-sale securities, insurance contract liabilities and certain property, plant and equipment at deemed cost as part of the Restructuring process. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3.
2.1.1 Standards, amendments and interpretations issued by the International Accounting Standards Board (“IASB”). These consolidated financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange Limited and the requirements of the Hong Kong Company’s Ordinance. The Group prepared the consolidated financial statements under the historical cost convention, as modified by financial assets and financial liabilities at fair value through income, available-for-sale secutities, insurance contract liabilities and certain property, plant and equipment at deemed cost. The preparation of financial statementseffective in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3.2012
The following revised amendment is mandatory for the first time for the financial year beginning on 1 January 2012.
~~2.1.1~~
~~Changes in accounting policy and disclosures~~
~~(a)~~
Amendment

~~New and amended standards adopted by the Group~~
Content    ~~The following revised standards are mandatory~~
Effective for ~~the first time for the financial year beginning 1 January 2010.~~
• IFRS 3 (Revised), ‘Business combinations’, and consequential amendments to IAS 27, ‘Consolidated and separate financial statements’, IAS 28, ‘Investments in associates’, and IAS 31, ‘Interests in joint ventures’, are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual ~~reporting~~ period
beginning on or after 1 July 2009. The revised standard continues to apply the acquisition method to business combinations, with some significant changes, such as the recognition and measurement of the identifiable assets acquired, the liabilities assumed, the non-controlling interest in the acquire and the acquisition-related costs.

IAS 12 Amendment
~~IAS 27 (Revised) requires the effects~~
Deferred Tax: Recovery of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss.Underlying Assets
1 January 2012
IFRS 7 Amendment
Disclosures: Transfers of Financial Assets
1 July 2011
The ~~Group adopted these revised standards~~adoption of IAS 12 Amendment has no impact on ~~1 January 2010 and they did not have any~~the operating results, financial position or comprehensive income of the Group.
The adoption of IFRS 7 Amendment has no material ~~impacts~~impact on the Group’s annual financial ~~position and comprehensive income.~~
information.

~~F-12~~
F-13
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1
Basis of preparation (continued)
~~2.1.1~~2.1.2
~~Changes in accounting policy and disclosures (continued)~~
~~(b)~~
~~New and revised standards,~~Standards, amendments and interpretations ~~mandatory for~~that are not yet effective and have not been early adopted by the ~~first time for the financial year beginning 1 January 2010 but not currently relevant to the~~ Group
in 2012
The standards, amendments and interpretations noted below are relevant to the Group but are not yet effective and have not been early adopted by the Group in 2012.
~~The following standards and amendments to existing standards have been published and are mandatory~~            Standard/Amendment Content
Effective for ~~the Group’s accounting periods~~ annual period
beginning on or after ~~1 January 2010 or later periods but not currently relevant to the Group’s operation.~~

IAS 1 Amendment

~~Standard/Amendment~~ ~~Applicable for financial years~~
~~/Interpretation~~ ~~Content~~ ~~beginning on/after~~
~~IFRIC 17~~ ~~Distribution~~
Presentation of ~~non-cash assets to owners~~Financial Statements: Other Comprehensive Income
   1 July ~~2009~~2012
~~IFRIC 18~~ ~~Transfers of assets from customers~~
IAS 19 Amendment
   ~~1 July 2009~~
~~IFRIC 9~~ ~~Reassessment of embedded derivatives~~ ~~1 July 2009~~
~~IFRIC 16~~ ~~Hedges of a net investment in a foreign operation~~ ~~1 July 2009~~
~~IAS 39~~ ~~Eligible hedge items~~ ~~1 July 2009~~
~~IAS 1 (Amendment)~~ ~~Presentation of financial statements~~
Employee Benefits
   1 January ~~2010~~2013
~~IAS 17 (Amendment)~~ ~~Leases~~
IAS 32 Amendment
Financial Instruments: Presentation
   1 January ~~2010~~2014
~~IAS 36 (Amendment)~~ ~~Impairment of assets~~
IFRS 7 Amendment
Disclosure: Offsetting Financial Assets and Financial Liabilities
   1 January ~~2010~~2013
~~IFRS 2 (Amendments)~~ ~~Group cash-settled share-based payment transactions~~
IFRS 9, IFRS 9 Amendments and IFRS 7 Amendment
Financial Instruments and Financial Instruments: Disclosures
   1 January ~~2010~~2015
~~IFRS 5 (Amendment)~~ ~~Non-current assets held for sale and discontinued operations~~
IFRS 10
Consolidated Financial Statements
   1 ~~July 2009~~January 2013
IFRS 11
Joint Arrangements
1 January 2013
IFRS 12
Disclosure of Interests in Other Entities
1 January 2013
IAS 27 Revised
Separate Financial Statements
1 January 2013
IAS 28 Revised
Investments in Associates and Joint Ventures
1 January 2013
IFRS10, IFRS11, IFRS12 Amendments
Transition Guidance
1 January 2013
IFRS 13
Fair Value Measurement
1 January 2013
IAS 1 Amendment requires to separate items presented in other comprehensive income into two groups based on whether or not they may be recycled to profit or loss in the future.
IAS 19 Amendment makes changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. The most significant change is that actuarial gains and losses will be recognised in other comprehensive income rather than operating expenses.
IAS 32 Amendment provides additional application guidance to clarify some of the requirements for offsetting financial assets and financial liabilities on the statement of financial position.
IFRS 7 Disclosure: Offsetting Financial Assets and Financial Liabilities is also amended to require disclosures to include information that will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity’s recognised financial assets and recognised financial liabilities, on the entity’s financial position.
IFRS 9 and IFRS 9 Amendments replaced those parts of IAS 39 relating to the classification, measurement and de-recognition of financial assets and liabilities with key changes mainly related to the classification and measurement of financial assets and certain types of financial liabilities. Together with the amendments to IFRS 9, IFRS 7—Financial Instruments: Disclosures is also amended to require additional disclosures on transition from IAS 39 to IFRS 9.

~~F-13~~
F-14
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
22.1
~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~
~~2.1~~
Basis of preparation (continued)
~~2.1.1~~2.1.2
~~Changes in accounting policy and disclosures (continued)~~
~~(c)~~
~~New standards,~~
Standards, amendments and interpretations ~~have been issued but~~that are not yet effective ~~for the financial year beginning 1 January 2010.~~
• ~~IFRS 9~~ and IFRS 9 (Amendment), ‘Financial instruments’, issued in November 2009 and October 2010 respectively. This standard is the first step in the process to replace IAS 39, ‘Financial instruments: recognition and measurement’. IFRS 9 and IFRS 9 (Amendment) introduce new requirements for classifying, measuring and derecognizing financial assets and financial liabilities and are likely to affect the group’s accounting for its financial assets. The standard ishave not ~~applicable until 1 January 2013 but is available for early adoption. The Group is in the process of making an assessment of the impact of the standard and is considering the timing of adoption.~~
• Revised IAS 24 (Revised), ‘Related party disclosures’, issued in November 2009. It supersedes IAS 24, ‘Related party disclosures’, issued in 2003. IAS 24 (revised) is mandatory for periods beginning on or after 1 January 2011. The Group early adopted IAS 24 Related Party Disclosures (Revised) since 2009. The adoption of IAS 24 Related Party Disclosures (Revised) only affected disclosure and did not have any impact on the Group’s financial position and comprehensive income.
• ‘Classification of rights issues’ (Amendment to IAS 32), issued in October 2009. The amendment applies to annual periods beginning on or after 1 February 2010. Earlier application is permitted. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8 ‘Accounting policies, changes in accounting estimates and errors’. The Group will apply the amended standard from 1 January 2011. The Group will make an assessment of the impact of the standard when applicable.
• IFRIC — Int 19, ‘Extinguishing financial liabilities with equity instruments’, effective for annual periods beginning on or after 1 July 2010. The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). It requires a gain or loss to be recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished. The Group will apply the interpretation from 1 January 2011. It is not expected to have any impact on the Group’s financial position and comprehensive income.
• ‘Prepayments of a minimum funding requirement’ (Amendments to IFRIC — Int 14). The amendments correct an unintended consequence of IFRIC — Int 14, ‘IAS 19 — The limit on a defined benefit asset, minimum funding requirements and their interaction’. Without the amendments, entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions. This was not intended when IFRIC — Int 14 was issued, and the amendments correct this. The amendments are effective for annual periods beginning 1 January 2011. Earlier application is permitted. The amendments should be applied retrospectively to the earliest comparative period presented. The Group will apply these amendments for the financial reporting period commencing on 1 January 2011. It is not expected to have any impact on the Group’s financial position and comprehensive income.
• ‘Improvements to IFRS 2009’ and ‘Annual Improvements 2010’ were issued in April 2009 and May 2010 respectively, containing numerous technical and conforming amendments to IFRS, which the IASB consider non-urgent but necessary. These amendments comprise amendments that result in accounting changes for presentation, recognition or measurement purposes as well as terminology or editorial amendments related to a variety of individual IFRS standards. Apart from the early adoption of the amendments to IFRS 1 and IFRS 7 from ‘Annual Improvements 2010’, no other amendments effective for annual periods after 1 January 2010 wasbeen early adopted by the Group ~~and no material changes to accounting policies were made~~ in ~~2010 or are expected in 2011 as a result of these amendments.~~2012 (continued)
The five standards (IFRS 10, IFRS 11, IFRS 12, IAS 27 Revised and IAS 28 Revised) establish new guidance for consolidation and joint arrangements and principally address:
A revised definition of control for the purposes of determining which arrangements should be consolidated;

~~F-14~~A reduction in the types of joint arrangements to two: joint operations and joint ventures, and classification based on rights and obligations rather than legal structure;
Elimination of the policy choice of proportionate consolidation for joint ventures; and
New requirements to disclose significant judgements and assumptions in determining whether an entity controls, jointly controls or significantly influences its interests in other entities.
IFRS10, IFRS11, IFRS12 Amendments provide additional transition relief to IFRS 10, IFRS 11 and IFRS 12, limiting the requirement to provide adjusted comparative information to only the preceding comparative period. For disclosures related to unconsolidated structured entities, the amendments will remove the requirement to present comparative information for periods before IFRS 12 is first applied.
IFRS 13 defines and sets out in a single IFRS a framework for measuring fair value, and requires disclosures about fair value measurement.
The Group is considering the impact of these new standards and amendments on the consolidated and separate financial statements of the Group and the Company respectively.
In addition, “Annual Improvements 2011” was issued in May 2012. These annual improvements process was established to make non-urgent but necessary amendments to IFRSs. The amendments in “Annual Improvements 2011” are effective for annual periods beginning on or after 1 January 2013. No amendment was early adopted by the Group and no material changes to accounting policies are expected as a result of these improvements.
F-15
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
~~2.2~~2
~~Consolidation~~
~~Subsidiaries~~
The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to 31 December. Subsidiaries are those entities in which the Company controls more than one half of the voting power; has the power to govern the financial and operating policies; to appoint or remove the majority of the members of the Board of Directors; or to cast majority votes at the meetings of the Board of Directors.
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
The investments in subsidiaries are accounted for in the company only statement of financial position at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the company on the basis of dividend and receivable.
The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provided evidence of impairment of the assets transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
~~Transactions with non-controlling interests~~
The Group treats transactions with non-controlling interests as transactions with equity holders of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2 Consolidation
Subsidiaries
The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to 31 December. Subsidiaries are those entities in which the Company controls more than one half of the voting power; has the power to govern the financial and operating policies; to appoint or remove the majority of the members of the Board of Directors; or to cast majority votes at the meetings of the Board of Directors.
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
The investments in subsidiaries are accounted for in the company only statement of financial position at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.
The excess of the aggregate of the consideration transferred, the fair value of any non-controlling interest in the acquiree, and the fair value of any previous equity interest in the acquiree at the acquisition date over the fair value of the net identifiable assets acquired and liabilities assumed is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. If there is any indication that goodwill is impaired, recoverable amount is estimated and the difference between carrying amount and recoverable amount is recognised as an impairment charge. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the assets transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Transactions with non-controlling interests
The Group treats transactions with non-controlling interests that does not result in loss of controls as transactions with equity holders of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss as appropriate.

~~F-15~~
F-16
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2
Consolidation (continue)
Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.
The Group’s share of its associates’ post-acquisition profit or loss is recognized in net profit, and its share of post-acquisition movements in other comprehensive income is recognized in consolidated statement of comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses unless it has obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Associates’ accounting policies have been changed where necessary to ensure consistency with the policies adopted by the Group.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of acquired associate at the date of acquisition. Goodwill on acquisitions of associates is included in investments in associates and is tested annually for impairment as part of the overall balance. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity take into consideration the carrying amount of goodwill relating to the entity sold.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, an impairment loss is recognised for the amount by which the investment’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the investment’s fair value less costs to dispose and value in use. The impairment of investment in the associate is reviewed for possible reversal at each reporting date.
The investment in associates is stated at cost less impairment in the company only statement of financial position. The results of associates are accounted for by the Company on the basis of dividends received and receivable.
~~2.2~~2.3
~~Consolidation (continued)~~
~~Associates~~
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for by the equity method of accounting and are initially recognized at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.
The Group’s share of its associates’ post-acquisition profit or loss is recognized in the net profit, and its share of post-acquisition movements in reserves is recognized in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses unless it has obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Associates’ accounting policies have been changed where necessary to ensure consistency with the policies adopted by the Group.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of acquired associate at the date of acquisition. Goodwill on acquisitions of associates is included in investments in associates and is tested annually for impairment as part of the overall balance. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity take into consideration the carrying amount of goodwill relating to the entity sold.
The investment in associates is stated at cost less impairment in the company only statement of financial position. The results of associates are accounted for by the Company on the basis of dividends received and receivable.
~~2.3~~
Segment reporting
The Group’s operating segments are presented in a manner consistent with the internal management reporting provided to the president office for deciding how to allocate resources and for assessing performance.
Operating segment refers to the segment within the Group that satisfies the following conditions: i) the segment generates income and incurs costs from daily operating activities; ii) management evaluate the operating results of the segment to make resource allocation decision and to evaluate the business performance; and iii) the Group can obtain relevant financial information of the segment, including financial condition, operating results, cash flows and other financial performance indicators.
2.4 The Group’s operating segments are presented in a manner consistent with the internal management reporting provided to the president office for deciding how to allocate resources and for assessing performance.
Operating segment refers to the segment within the Group that satisfies following conditions: i) the segment generates income and incurs costs from daily operating activities; ii) management evaluate the operating results of the segment to make resource allocation decision and to evaluate the business performance; iii) the Group can obtain relevant financial information of the segment, including financial condition, operating results, cash flow and other financial performance indicators.
~~2.4~~
Foreign currency translation
The functional currencies of the Group’s operations are RMB. Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange ruling at the end of the reporting period. Exchange differences arising in these cases are recognized in the net profit.
Except for China Life Franklin Asset Management Company Limited, the functional currency of the Group is RMB. The presentation currency of Consolidate Statement of the Group is RMB. Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange ruling at the end of the reporting period. Exchange differences arising in these cases are recognized in net profit.

~~F-16~~
F-17
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.5
Property, plant and equipment
Property, plant and equipment are stated at historical costs less accumulated depreciations and any accumulated impairment losses, except for those acquired prior to 30 June 2003, which are stated at deemed cost less accumulated depreciations and any accumulated impairment losses.
The historical costs of property, plant and equipment comprise its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use. The cost of a major renovation is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group.
Assets under construction represent buildings and fixtures under construction and are stated at costs or deemed costs. Costs include construction and acquisition costs. No provision for depreciation is made on assets under construction until such time as the relevant assets are completed and ready for use.
~~Depreciation~~
~~Depreciation is computed on a straight-line basis to write down the cost of each asset to its residual value over its estimated useful life as follows:~~
Property, plant and equipment are stated at historical costs less accumulated depreciation and any accumulated impairment losses, except for those acquired prior to 30 June 2003, which are stated at deemed cost less accumulated depreciation and any accumulated impairment losses.
The historical costs of property, plant and equipment comprise its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use. The cost of a major renovation is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group.
Assets under construction represent buildings and fixtures under construction and are stated at costs. Costs include construction and acquisition costs. No provision for depreciation is made on assets under construction until such time as the relevant assets are completed and ready for use.
Depreciation
Depreciation is computed on a straight-line basis to write down the cost of each asset to its residual value over its estimated useful life as follows:
   Estimated useful life

Buildings
15 to 35 years
Office equipment, furniture and fixtures
5 to 10 years
Motor vehicles
4 to 8 years
Leasehold improvements

Over the lesser of the remaining term of
the lease or the useful life
The useful life and depreciation method is reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items of property, plant and equipment.
Impairment and gains or losses on sales
Property, plant and equipment are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized in ~~the~~ net profit for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset’s net selling price and value in use.
The gain or loss on disposal of a property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognized in ~~the~~ net profit.

~~F-17~~
F-18
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.6
Financial assets
~~2.6.a~~
~~Classification~~
The Group classifies its financial assets into the following categories: held-to-maturity securities, securities at fair value through income, available-for-sale securities and loans and receivables. Management determines the classification of its financial assets at initial recognition and depend on the purpose for which the assets are acquired. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those that the Group intends to sell in the short term or held as available for sale. Loans and receivables mainly comprise term deposits, loans, securities purchased under agreements to resell, accrued investment income and receivables arising from the insurance contracts as presented separately in the statement of financial position. The Group’s investments in securities are mainly in the below three categories:
2.6.a
Classification
The Group classifies its financial assets into the following categories: held-to-maturity securities, securities at fair value through profit or loss, available-for-sale securities and loans and receivables. Management determines the classification of its financial assets at initial recognition which depends on the purpose for which the assets are acquired. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those that the Group intends to sell in the short term or held as available-for-sale. Loans and receivables mainly comprise term deposits, loans, securities purchased under agreements to resell, accrued investment income and receivables arising from the insurance contracts as presented separately in the statement of financial position. The Group’s investments in securities are mainly in the below three categories:
(i)
Held-to-maturity securities
Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixed maturities other than those that meet the definition of loans and receivables that the Group has the positive intention and ability to hold to maturity and do not meet the definition of loans and receivables nor designated as available-for-sale securities or securities at fair value through income.
Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group has the positive intention and ability to hold to maturity and do not meet the definition of loans and receivables nor designated as available-for-sale securities or securities at fair value through profit or loss.
(ii)
Securities at fair value through ~~income~~profit or loss
This category has two sub-categories: securities held for trading and those designated at fair value through income at inception. Securities are classified as held for trading at inception if acquired principally for the purpose of selling in the short term or if they form part of a portfolio of financial assets in which there is evidence of short term profit-taking. The Group may classify other financial assets as at fair value through income if they meet certain criteria and designated as such at inception.
This category has two sub-categories: securities held for trading and those designated at fair value through profit or loss at inception. Securities are classified as held for trading at inception if acquired principally for the purpose of selling in the short term or if they form part of a portfolio of financial assets in which there is evidence of short term profit-taking. The Group may classify other financial assets as at fair value through profit or loss if they meet certain criteria and designated as such at inception.
(iii)
Available-for-sale securities
~~Available-for-sale securities are non-derivative financial assets that are either designated in this category or not classified in either of the other categories.~~
Available-for-sale securities are non-derivative financial assets that are either designated in this category or not classified in any of the other categories.
2.6.b
Recognition and measurement
Purchases and sales of investments are recognized on trade date, when the Group commits to purchase or sell assets. Investments are initially recognized at fair value plus, in the case of all financial assets not carried at fair value through income, transaction costs that are directly attributable to their acquisition. Investments are derecognized when the rights to receive cash flows from the investments have expired or when they have been transferred and the Group has also transferred substantially all risks and rewards of ownership.
Available-for-sale securities and securities at fair value through income are carried at fair value. Held-to-maturity securities are carried at amortised cost using the effective interest method. Investment gains and losses on sales of securities are determined principally by specific identification. Realised and unrealised gains and losses arising from changes in the fair value of the “securities at fair value through income” category, and the change of available-for-sale debt securities’ fair value due to foreign exchange impact on the amortized cost are included in the net profit in the period in which they arise. The remaining unrealised gains and losses arising from changes in the fair value of available for sale debt securities and unrealised gains and losses arising from changes in the fair value of available for sale equity securities are recognized in other comprehensive income. When securities classified as available-for-sale securities are sold or impaired, the accumulated fair value adjustments are included in the net profit as realised gains or losses on financial assets.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active, the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and option pricing models.
Purchase and sale of investments are recognized on trade date, when the Group commits to purchase or sell assets. Investments are initially recognized at fair value plus, in the case of all financial assets not carried at fair value through profit or loss, transaction costs that are directly attributable to their acquisition. Investments are derecognized when the rights to receive cash flows from the investments have expired or when they have been transferred and the Group has also transferred substantially all risks and rewards of ownership.
Available-for-sale securities and securities at fair value through profit or loss are carried at fair value. Held-to-maturity securities are carried at amortised cost using the effective interest method. Investment gains and losses on sales of securities are determined principally by specific identification. Realised and unrealised gains or losses arising from changes in the fair value of the securities at fair value through profit or loss category, and the change of fair value of available-for-sale debt securities due to foreign exchange impact on the amortized cost are included in net profit in the period in which they arise. The remaining unrealised gains or losses arising from changes in the fair value of available-for-sale debt securities and unrealised gains or losses arising from changes in the fair value of available-for-sale equity securities are recognized in other comprehensive income. When securities classified as available-for-sale securities are sold or impaired, the accumulated fair value adjustments are included in net profit as realised gains or losses and impairment on financial assets.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active, the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and option pricing models.

~~F-18~~
F-19
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.6
Financial assets (continued)
2.6.b
Recognition and measurement (continued)
~~2.6.c~~
~~Term deposits~~
~~Term deposits primarily represent traditional bank deposits which have fixed maturity date and are stated at amortised cost.~~
~~2.6.d~~
~~Loans~~
~~Loans originated by the Group are carried at amortised cost, net of allowance for impairment.~~
~~2.6.e~~
~~Securities purchased under agreements to resell~~
Term deposits primarily represent traditional bank deposits which have fixed maturity date and are stated at amortised cost.
Loans are carried at amortised cost, net of allowance for impairment.
The Group purchases securities under agreements to resell substantially identical securities. These agreements are classified as secured loans and are recorded at amortised cost, i.e. their cost plus accrued interest at the end of the reporting period, which approximates fair value. The amounts advanced under these agreements are reflected as assets in the consolidated statement of financial position. The Group does not take physical possession of securities purchased under agreements to resell. Sale or transfer of the securities is not permitted by the respective clearing house on which they are registered while the loan is outstanding. In the event of default by the counterparty to repay the loan, the Group has the right to the underlying securities held by the clearing house.
2.6.c
Impairment of financial position. The Group does not take physical possession of securities purchased under agreements to resell. Sales or transfers of the securities are not permitted by the respective clearing house on which they are registered while the loan is outstanding. In the event of default by the counterparty to repay the loan, the Group has the right to the underlying securities held by the clearing house.
~~2.6.f~~
~~Impairment of securities~~assets other than securities at fair value through ~~income~~
Securities other than those accounted for as at fair value through income are adjusted for impairments, where there are declines in value that are considered to be an impairment. In evaluating whether a decline in value is an impairment for debt securities and equity securities, the Group considers several factors including, but not limited to.profit or loss
Financial assets other than those accounted for as at fair value through profit or loss are adjusted for impairment, where there are declines in value that are considered to be an impairment. In evaluating whether a decline in value is an impairment for these financial assets, the Group considers several factors including, but not limited to:
Significant financial difficulty of the issuer or debtor;
A breach of contract, such as a default or delinquency in payments;
It becomes probable that the issuer or debtor will enter into bankruptcy or other financial reorganisation;
The disappearance of an active market for that financial asset because of financial difficulties;
In evaluating whether a decline in value is impairment for equity securities, the Group also considers the extent or the duration of the decline. The quantitative factors include the followings:
The market price of the equity securities was more than 50% below its cost at the balance sheet date;
The market price of the equity securities was more than 20% below its cost for a period of at least six months at the balance sheet date; and
The market price of the equity securities was below its cost for a period of more than one year.
When the decline in value is considered impairment, held-to-maturity debt securities are written down to their present value of estimated future cash flows discounted at the securities effective interest rates; available-for-sale debt securities and equity securities are written down to their fair value, and the change is recorded in net realised gains/( losses) and impairment on financial assets in the period the impairment is recognized. The impairment loss is reversed through net profit if in a subsequent period the fair value of a debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognized through net profit. The impairment losses recognised in net profit on equity instruments are not reversed through net profit.
2.7 • ~~Significant financial difficulty of the issuer or debtor;~~
• ~~A breach of contract, such as a default or delinquency in payments;~~
• ~~It becomes probable that the issuer or debtor will enter into bankruptcy or other financial reorganisation;~~
• ~~The disappearance of an active market for that financial asset because of financial difficulties;~~
In evaluating whether a decline in value is impairment for equity securities, the Group also considers the extent or the duration of the decline. When the decline in value is considered impairment, Held-to-maturity debt securities are written down to their present value of estimated future cash flows discounted at the securities effective interest rates; Available-for-sale debt securities and equity securities are written down to their fair value, and the change is recorded in “Net realised gains/(losses) on financial assets” in the period the impairment is recognized. The impairment loss is reversed through the net profit if in a subsequent period the fair value of a debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognized through the net profit. The impairment losses recognised in net profit on equity instruments are not reversed through the net profit.
~~2.7~~
Cash and cash equivalents
Cash amounts represent cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments with original maturities of 90 days or less, whose carrying value approximates fair value.
Cash amounts represent cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments with original maturities of 90 days or less, whose carrying value approximates fair value.

~~F-19~~
F-20
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8
Insurance contracts and investment contracts
2.8.1
Classification
~~2.8.1~~
~~Classification~~

The Group issues contracts that transfer insurance risk or financial risk or both. The contracts issued by the Group are classified as insurance contracts and investment contacts. Insurance contracts are those contracts that transfer significant insurance risk. They may also transfer financial risk. Investment contracts are those contracts that transfer financial risk without significant insurance risk. A number of insurance and investment contracts contain a discretionary participating ~~features~~feature (“DPF”). This feature entitles the policyholders to receive additional benefits or bonuses that are, at least in part, ~~discretionary to~~at discretion of the Group.
2.8.2
Insurance contracts
2.8.2.a
Recognition and measurement
(i)
Short-term insurance contracts
Premiums from the sale of short duration accident and health insurance products are recorded when written and are accreted to earnings on a pro-rata basis over the term of the related policy coverage. Reserves for short duration insurance products consist of unearned premium reserve and expected claims and claim adjustment expenses reserve. Actual claims and claim adjustment expenses are charged to the net profit as incurred.
~~The unearned premium reserve represents the portion of the premiums written net of certain acquisition costs relating to the unexpired terms of coverage.~~
Reserves for claims and claim adjustment expenses consist of the reserves for reported and unreported claims and reserves for claim expenses with respect to insured events. In developing these reserves, the Group considered the nature and distribution of the risks, claims cost development, and experiences in deriving the best estimated amount and the applicable margins. The methods used for reported claims include average cost per claim method, chain ladder method, etc. The Group calculated the reserves for claim expenses based on the best estimates of the future payments for claim expenses.
Premiums from the sale of short duration accident and health insurance products are recorded when written and are accreted to earnings on a pro-rata basis over the term of the related policy coverage. Reserves for short duration insurance products consist of unearned premium reserve and expected claims and claim adjustment expenses reserve. Actual claims and claim adjustment expenses are charged to net profit as incurred.
The unearned premium reserve represents the portion of the premiums written net of certain acquisition costs relating to the unexpired terms of coverage.
Reserves for claims and claim adjustment expenses consist of the reserves for reported and unreported claims and reserves for claim expenses with respect to insured events. In developing these reserves, the Group considered the nature and distribution of the risks, claims cost development, and experiences in deriving the best estimated amount and the applicable margins. The methods used for reported claims include average cost per claim method, chain ladder method, etc. The Group calculated the reserves for claim expenses based on the best estimates of the future payments for claim expenses.
(ii)
Long-term insurance contracts
Long-term insurance contracts include whole life and term life insurance, endowment insurance and annuities policies with significant life contingency risk. Premiums are recognized as revenue when due from policyholders.
The Company uses the discounted cash flow method to estimate the liabilities for long-term insurance contracts. The reserve of long-term insurance contracts consists of a reasonable estimate of liability, a risk margin and a residual margin. The long-term insurance contracts liabilities are calculated using various assumptions, including assumptions on mortality rates, morbidity rates, lapse rates, discount rates, and expenses assumption, and based on the following principles:
Long-term insurance contracts include whole life and term life insurance, endowment insurance and annuities policies with significant life contingency risk. Premiums are recognized as revenue when due from policyholders.
The Company uses the discounted cash flow method to estimate the liabilities for long-term insurance contracts. The reserve of long-term insurance contracts consists of a reasonable estimate of liability, a risk margin and a residual margin. The long-term insurance contracts liabilities are calculated using various assumptions, including assumptions on mortality rates, morbidity rates, lapse rates, discount rates, and expenses assumption, and based on the following principles:
(a)
The reasonable estimate of liability for long-term insurance contracts is the present value of reasonable estimates of future cash outflows less future cash inflows. The expected future cash inflows include cash inflows of future premiums arising from the undertaking of insurance obligations, with consideration of decrement mostly from death and surrenders. The expected future cash outflows are cash outflows incurred to fulfil contractual obligations, consisting of the following:
The guaranteed benefits based on contractual terms, including payments for deaths, disabilities, diseases, survivals, maturities and surrenders;
• ~~The guaranteed benefits based on contractual terms, including payments for deaths, disabilities, diseases, survivals, maturities and surrenders.~~
• ~~Additional non-guaranteed benefits, such as policyholder dividends.~~
• Reasonable expenses incurred to manage insurance contracts or to process claims, including maintenance expenses and claim settlement expenses. Future administration expenses are included in the maintenance expenses. Expenses are determined based on expense analysis with consideration of estimate of future inflation and the likely impact of Company’s expense management.
Additional non-guaranteed benefits, such as policyholder dividends;
Reasonable expenses incurred to manage insurance contracts or to process claims, including maintenance expenses and claim settlement expenses. Future administration expenses are included in the maintenance expenses. Expenses are determined based on expense analysis with consideration of future inflation and the Company’s expense management control.

~~F-20~~
F-21
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8.2
Insurance contracts (continued)
2.8.2.a
Recognition and measurement (continued)
(ii)
Long-term insurance contracts (continued)
On each reporting date, the Company reviews the assumptions for reasonable estimates of liability and risk margins, with consideration of all available information, and taking into account the Company’s historical experience and expectation of future events. Changes in assumptions are recognized in net profit. Assumptions for residual margin are locked in at policy issuance and are not adjusted at each reporting date.
~~Various assumptions for the estimates will be reviewed at the end of each reporting period and any changes will be recognized in the net profit.~~
On each reporting date, the Company reviews the assumptions for reasonable estimates of liability and risk margins, with consideration of all available information, and taking into account the Company’s historical experience and expectation of future events. Changes in assumptions are recognized in net profit. Assumptions for residual margin are locked in at policy issuance and are not adjusted at each reporting date.
(b)
Margin has been taken into consideration while computing the reserve of insurance contracts, measured separately and recognized in ~~the~~ net profit in each period over the life of the contracts. At the inception of the contracts, the Group ~~doesn’t~~does not recognize Day 1 gain, whereas on the other hand, Day 1 loss is recognized in ~~the~~ net profit ~~as incurred.~~immediately.
Margin comprises of risk margin and residual margin. Risk margin is the reserve accrued to compensate for the uncertain amount and timing of future cash flows. At the inception of the contract, the residual margin is calculated net of certain acquisition costs by the Group representing Day 1 gain and will be amortized over the life of the contracts. The subsequent measurement of residual margin is independent from best estimate of future discounted cash flows and risk margin. The assumption changes have no effect on the subsequent measurement of residual margin.
Margin comprises of risk margin and residual margin. Risk margin is the reserve accrued to compensate for the uncertain amount and timing of future cash flows. At the inception of the contract, the residual margin is calculated net of certain acquisition costs, mainly consist of underwriting and policy acquisition costs, by the Group representing Day 1 gain and will be amortized over the life of the contracts. For insurance contracts of which future returns are affected by investment yields of corresponding investment portfolios, their related residual margins are amortized based on estimated future participating dividends payable to policyholders. For insurance contracts of which future returns are not affected by investment yields of corresponding investment portfolios, their related residual margins are amortized based on sum assured of outstanding policies. The subsequent measurement of residual margin is independent from best estimate of future discounted cash flows and risk margin. The assumption changes have no effect on the subsequent measurement of residual margin.
(c)
The Group has considered the impact of time value on the reserve calculation for insurance contracts.
(iii)
Universal life contracts and unit-linked contracts
~~Universal life contracts and unit-linked contracts are unbundled into the following components:~~
Universal life contracts and unit-linked contracts are unbundled into the following components:
Insurance components
• ~~Insurance components~~
• ~~Non-insurance components~~
Non-insurance components
The insurance components are accounted for as insurance contracts; and the non-insurance components are accounted for as investment contracts (Note 2.8.3), which are stated in the investment contracts liabilities.
~~2.8.2.b~~
~~Liability adequacy test~~
The Group assesses the adequacy of insurance contract reserves using the current estimate of future cash flow with available information at the end of each reporting period. If that assessment shows that the carrying amount of its insurance liabilities (less related intangible assets, if applicable) is inadequate in the light of the estimated future cash flows, the insurance contract reserves will be adjusted accordingly, and any changes of the insurance contract liabilities will be recognized in the net profit.
~~2.8.2.c~~
~~Reinsurance contracts held~~
Contracts with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classification requirements for insurance contracts are classified as reinsurance contracts held. Contracts with reinsurers that do not meet these classification requirements are classified as financial assets. Insurance contracts entered into by the Group under which the contract holder is another insurer (inwards reinsurance) are included with insurance contracts.
The benefits to which the Group is entitled under its reinsurance contracts held are recognized as reinsurance assets. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts and are recognized as an expense when due.

~~F-21~~
F-22
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
~~2.8~~2.8.2
Insurance contracts ~~and investment contracts~~ (continued)
2.8.2.b
Liability adequacy test
The Group assesses the adequacy of insurance contract reserves using the current estimate of future cash flows with available information at the end of each reporting period. If that assessment shows that the carrying amount of its insurance liabilities (less related intangible assets, if applicable) is inadequate in the light of the estimated future cash flows, the insurance contract reserves will be adjusted accordingly, and any changes of the insurance contract liabilities will be recognized in net profit.
2.8.2.c
Reinsurance contracts held
Contracts with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classification requirements for insurance contracts are classified as reinsurance contracts held. Contracts with reinsurers that do not meet these classification requirements are classified as financial assets. Insurance contracts entered into by the Group under which the contract holder is another insurer (inwards reinsurance) are included with insurance contracts.
The benefits to which the Group is entitled under its reinsurance contracts held are recognized as reinsurance assets. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts and are recognized as an expense when due.
The Group assesses its reinsurance assets for impairment as at the end of reporting period. If there is objective evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognizes that impairment loss in net profit.
F-23
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8.3 The Group assesses its reinsurance assets for impairment as at the end of reporting period. If there is objective evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognizes that impairment loss in the net profit.
~~2.8.3~~
Investment contracts
Revenue from investment contracts with or without DPF is recognized as policy fee income, which consists of various fee income (policy fees, handling fees and management fees, etc.) during the period. Policy fee income net of certain acquisition cost are deferred as unearned revenue and amortized over the expected life of the contracts.
Except for unit-linked contracts, of which the liabilities are carried at fair value, the liabilities of investment contracts are carried at amortised cost.
2.8.4 Revenue from investment contracts with or without DPF is recognized as policy fee income, which consists of various charges (policy fees, handling fees and management fees, etc.) during the period. Excess charges over certain acquisition cost are deferred as unearned revenue and amortized over the expected life of the contracts.
~~Except for unit-linked contracts, of which the liabilities are carried at fair value, the liabilities of investment contracts are carried at amortised cost.~~
~~2.8.4~~
DPF in long-term insurance contracts and investment contracts
DPF is contained in certain long-term insurance contracts and investment contracts. These contracts are collectively called participating contracts. The Group is obligated to pay to the policyholders of participating contracts as a group higher of 70% of accumulated surplus available and the rate specified in the contracts. The accumulated surplus available mainly arises from net investment income and gains and losses arising from the assets supporting these contracts. To the extent unrealised gains or losses from available-for-sale securities are attributable to policyholders, shadow adjustments are recognized in other comprehensive income. The surplus owed to policyholders is recognized as policyholder dividend payable whether it is declared or not. The amount and timing of distribution to individual policyholders of participating contracts are subject to future declarations by the Group.
2.9 DPF is contained in certain long-term insurance contracts and investment contracts. These contracts are collectively called participating contracts. The Group is obligated to pay to the policyholders of participating contracts as a group higher of 70% of accumulated surplus available and the rate specified in the contracts. The accumulated surplus available mainly arises from net investment income and gains and losses arising from the assets supporting these contracts. To the extent unrealised gains or losses from available-for-sale securities affect the surplus owed to policyholders, shadow adjustments are recognized in other comprehensive income. The surplus owed to policyholders is recognized as policyholder dividend payable whether they are declare or not. The amount and timing of distribution to individual policyholders of participating contracts are subject to future declarations by the Group.
~~2.9~~
~~Securities sold with agreements to repurchase~~
Securities sold under agreements to repurchase which are classified as secured borrowings, generally mature within 180 days from the transaction date. The Group may be required to provide additional collateral based on the fair value of the underlying securities. Securities sold under agreements to repurchase are recorded at amortised cost, i.e. their cost plus accrued interest at the end of the reporting period. It is the Group’s policy to maintain effective control over securities sold under agreements to repurchase which includes maintaining physical possession of the securities. Accordingly, such securities continue to be carried on the consolidated statement of financial position.
~~2.10~~
~~Derivative instruments~~
Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value. The resulting gain or loss of derivative financial instruments is recognized in net profit. Fair values are obtained from quoted market prices in active markets, taking into consideration recent market transactions or valuation techniques, including discounted cash flow models and options pricing models, as appropriate. The best evidence of the fair value of a derivative at initial recognition is the transaction price (i.e. the fair value of the consideration given or received) unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique whose variables include only data from observable markets. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.
Embedded derivatives that are not closely related to their host contracts and meet the definition of a derivative are separated and fair valued through profit or loss. The Group does not separately measure embedded derivatives that meet the definition of an insurance contract or embedded derivatives that are closely relate to host insurance contracts including embedded options to surrender insurance contracts for a fixed amount (or an amount based on a fixed amount and an interest rate).
The Group retains substantially all the risk and rewards of ownership of securities sold under agreements to repurchase which generally mature within 180 days from the transaction date. Therefore securities sold under agreements to repurchase are classified as secured borrowings. The Group may be required to provide additional collateral based on the fair value of the underlying securities. Securities sold under agreements to repurchase are recorded at amortised cost, i.e. their cost plus accrued interest at the end of the reporting period. It is the Group’s policy to maintain effective control over securities sold under agreements to repurchase which includes maintaining physical possession of the securities. Accordingly, such securities continue to be carried on the consolidated statement of financial position.
2.10
Bonds payable
Bonds payable primarily include subordinated debts. Subordinated debts are initially recognized at fair value and subsequently measured at amortized cost using the effective interest rate method. Amortized cost is calculated by taking into account any discount or premium at acquisition and transaction costs.

~~F-22~~F-24
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.11
Derivative instruments
Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value. The resulting gain or loss of derivative financial instruments is recognized in net profit. Fair values are obtained from quoted market prices in active market, taking into consideration of recent market transactions or valuation techniques, including discounted cash flow models and options pricing models, as appropriate. The best evidence of the fair value of a derivative at initial recognition is the transaction price (i.e. the fair value of the consideration given or received) unless the fair value of that instrument is evidenced by comparison with other observable market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique whose variables include only observable markets data. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.
Embedded derivatives that are not closely related to their host contracts and meet the definition of a derivative are separated and fair valued through profit or loss. The Group does not separately measure embedded derivatives that meet the definition of an insurance contract or embedded derivatives that are closely relate to host insurance contracts including embedded options to surrender insurance contracts for a fixed amount (or an amount based on a fixed amount and an interest rate).
~~2.11~~2.12
Employee benefits
Pension benefits
Full-time employees of the Group are covered by various government-sponsored pension plans under which the employees are entitled to a monthly pension based on certain formulae. These government agencies are responsible for the pension liability to these employees upon retirement. The Group contributes on a monthly basis to these pension plans. In addition to the government-sponsored pension plans, the Group established an employee annuity fund pursuant to the relevant laws and regulations in the PRC, whereby the Group are required to contribute to the schemes at fixed rates of the employees’ salary costs. Contributions to these plans are expensed as incurred. Under these plans, the Group has no legal or constructive obligation for retirement benefit beyond the contributions made.
Housing benefits
All full-time employees of the Group are entitled to participate in various government-sponsored housing funds. The Group contributes on a monthly basis to these funds based on certain percentages of the salaries of the employees. The Group’s liability in respect of these funds is limited to the contributions payable in each year.
Stock appreciation rights
Compensation under the stock appreciation rights is measured based on the fair value of the liabilities incurred and is expensed over the vesting period. Valuation techniques including option pricing models are used to estimate fair value of relevant liabilities. The liability is re-measured at the end of each reporting period to its fair value until settlement. Fair value changes in the vesting period is included in administrative expenses and changes after vesting period is included in net fair value gains/(losses) through profit or loss in net profit. The related liability is included in other liabilities.
2.13
~~Pension benefits~~
The full-time employees of the Group are covered by various government-sponsored pension plans under which the employees are entitled to a monthly pension based on certain formulas. These government agencies are responsible for the pension liability to these retired employees. The Group contributes on a monthly basis to these pension plans. In addition to the government-sponsored pension plans, the Group established an employee annuity plan pursuant to the relevant laws and regulations in the PRC, whereby the Group are required to contribute to the schemes at fixed rates of the employees’ salary costs. Contributions to these plans are expensed as incurred. Under these plans, the Group has no legal or constructive obligation for retirement benefit beyond the contributions made.
~~Housing benefits~~
All full-time employees of the Group are entitled to participate in various government-sponsored housing funds. The Group contributes on a monthly basis to these funds based on certain percentages of the salaries of the employees. The Group’s liability in respect of these funds is limited to the contributions payable in each year.
~~Stock appreciation rights~~
Compensation under the stock appreciation rights is measured based on the fair value of the liabilities incurred and is expensed over the vesting period. Valuation techniques including option pricing models are used to estimate fair value of relevant liabilities. The liability is re-measured at the end of each reporting period to its fair value until settlement. Fair value changes in the vesting period is included in administrative expenses and changes after vesting period is included in net fair value gains/(losses) through income in the consolidated statement of comprehensive income. The related liability is included in other liabilities.
~~2.12~~
Share capital
Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds.
~~2.13~~
~~Revenue recognition~~
~~Turnover of the Group represents the total revenues which include the following:~~
~~Premiums~~
~~Premiums from long-term insurance contracts are recognized as revenue when due from the policyholders.~~
Premiums from the sale of short duration accident and health insurance products are recorded when written and are accreted to earnings on a pro-rata basis over the term of the related policy coverage. Contracts for which the period of risk differs significantly from the contract period recognize premiums over the period of risk in proportion to the amount of insurance protection provided.
~~Policy fee income~~
Revenue from investment contracts is recognized as policy fee income, which consists of various charges (policy fees, handling fees and management fees, etc.) over period service is provided. Excess charges over certain acquisition costs are deferred as unearned revenue and amortized over the expected life of the contracts. Policy fee income is recognised in revenue as part of other income.
~~Investment income~~
Investment income is comprised of interest income from term deposits, cash and cash equivalents, debt securities, securities purchased under agreements to resell, loans, and dividend income from equity securities. Interest income is recorded on an accrual basis using the effective interest rate method. Dividend income is recognized when the right to receive dividend payment is established.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction, net of tax, from the proceeds.

~~F-23~~
F-25
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.14
Revenue recognition
Turnover of the Group represents the total revenues which include the following:
Premiums
Premiums from long-term insurance contracts are recognized as revenue when due from the policyholders.
Premiums from the sale of short duration accident and health insurance products are recorded when written and are accreted to earnings on a pro-rata basis over the term of the related policy coverage.
Policy fee income
Revenue from investment contracts is recognized as policy fee income, which consists of various fee income (policy fees, handling fees and management fees, etc.) over period service is provided. Policy fee income net of certain acquisition costs is deferred as unearned revenue and amortized over the expected life of the contracts. Policy fee income is recognised in revenue as part of other income.
Investment income
Investment income is comprised of interest income from term deposits, cash and cash equivalents, debt securities, securities purchased under agreements to resell, loans, and dividend income from equity securities. Interest income is recorded on an accrual basis using the effective interest rate method. Dividend income is recognized when the right to receive dividend payment is established.
~~2.14~~2.15
Finance costs
Interest expenses for bonds payable and securities sold under agreements to repurchase are recognized within finance costs in net profit using effective interest rate method.
2.16
Current and deferred income taxation
Tax expense for the period comprises current and deferred tax. Tax is recognized in net profit, except to the extent that it relates to items recognized directly in other comprehensive income where the tax is recognized in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the jurisdictions where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken with respect to situations in which applicable tax regulation is subject to interpretation.
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Substantively enacted tax rates are used in the determination of deferred income tax.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be recognized.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
2.17 The tax expense for the period comprises current and deferred tax. Tax is recognized in the net profit, except to the extent that it relates to items recognized directly in other comprehensive income where the tax is recognized in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the jurisdictions where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken with respect to situations in which applicable tax regulation is subject to interpretation.
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Substantively enacted tax rates are used in the determination of deferred income tax.
~~Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be recognized.~~
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
~~2.15~~
Operating leases
Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Payments under operating leases are charged to the net profit on a straight-line basis over the lease periods.
~~2.16~~
~~Provisions and Contingencies~~
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognized because it is not probable that outflow of resources will be required or the amount of obligation cannot be measured reliably.
A contingent liability is not recognized in the statement of financial position but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that outflow is probable and can be reliably measured, it will then be recognized as a provision.
~~2.17~~
~~Dividend distribution~~
Dividend distribution to the Company’s equity holders is recognized as a liability in the Group’s financial statements in the year in which the dividends are approved by the Company’s equity holders.
Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Payments under operating leases are charged to net profit on a straight-line basis over the lease periods.

~~F-24~~
F-26
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
32
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.18
Provisions and Contingencies
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognized because it is not probable that outflow of resources will be required or the amount of obligation cannot be measured reliably.
A contingent liability is not recognized in the statement of financial position but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that outflow is probable and can be reliably measured, it will then be recognized as a provision.
2.19
Dividend distribution
Dividend distribution to the Company’s equity holders is recognized as a liability in the Group’s financial statements in the year in which the dividends are approved by the Company’s equity holders.
F-27
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
3 CRITICAL ACCOUNTING ESTIMATES AND ~~JUDGMENTS IN APPLYING ACCOUNTING POLICIES~~JUDGEMENTS
The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group exercises significant judgement in making appropriate assumptions.
Areas susceptible to changes in critical estimates and judgements, which affect the carrying value of assets and liabilities, are set out below. It is possible that actual results may be different from the estimates and judgements referred to below.
3.1 The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group exercises significant judgement in making appropriate assumptions.
Areas susceptible to changes in critical estimates and judgements, which affect the carrying value of assets and liabilities, are set out below. It is possible that actual results may be different from the estimates and judgements referred to below.
~~3.1~~
Estimate of future benefit payments and premiums arising from long-term insurance contracts
The determination of the liabilities under long-term insurance contracts is based on estimates of future benefit payments, premiums and relevant expenses made by the Group, and the margins. Assumptions about mortality rates, morbidity rates, lapse rates, discount rates, and expenses assumption are made based on the most recent historical analysis and current and future economic conditions. The liability uncertainty arising from uncertain future benefit payments, premiums and relevant expenses, is reflected in the risk margin.
The residual margin relating to the long-term insurance contracts is amortized over the expected life of the contracts, based on the assumptions (mortality rates, morbidity rates, lapse rates, discount rates, and expenses assumption) that are determined at inception of the contracts and remain unchanged for the duration of the contracts.
The judgements exercised in the valuation of insurance contract liabilities (including contracts with DPF) affect the amounts recognised in the consolidated financial statements as insurance contract benefits and insurance contract liabilities.
~~The various assumptions are described in Note 13.~~
~~3.2~~
~~Investments~~
The Group’s principal investments are debt securities, equity securities, term deposits and loans. The critical estimates and judgments are those associated with the recognition of impairment and the determination of fair value.
~~The Group considers a wide range of factors in the impairment assessment as described in Note 2.6.f.~~
Fair value is defined as the amount at which the financial assets and liabilities could be exchanged in a current transaction between knowledgeable willing parties in an arm’s length transaction, rather than in a forced or liquidation sale. The methods and assumptions used by the Group in estimating the fair value of the financial assets are as follows:
The determination of the liabilities under long-term insurance contracts is based on estimates of future benefit payments, premiums and relevant expenses made by the Group, and the margins. Assumptions about mortality rates, morbidity rates, lapse rates, discount rates, and expenses assumption are made based on the most recent historical analysis and current and future economic conditions. The liability uncertainty arising from uncertain future benefit payments, premiums and relevant expenses, is reflected in the risk margin.
The residual margin relating to the long-term insurance contracts is amortized over the expected life of the contracts, based on the assumptions (mortality rates, morbidity rates, lapse rates, discount rates, and expenses assumption) that are determined at inception of the contracts and remain unchanged for the duration of the contracts.
The judgements exercised in the valuation of insurance contract liabilities (including contracts with DPF) affect the amounts recognised in the consolidated financial statements as insurance contract benefits and insurance contract liabilities.
The impact of the various assumptions and their changes is described in Note 13.
3.2 • Debt securities: fair values are generally based upon current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions, values obtained from current bid prices of comparable investments or valuation techniques when the market is not active.
• Equity securities: fair values are generally based upon current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions or commonly used market pricing model. Equity securities, for which fair values cannot be measured reliably, are recognized at cost less impairment.
• Term deposits (excluding structured deposits), loans and securities purchased or sold under agreements to resell or repurchase: the carrying amounts of these assets in the statement of financial position approximate fair value.
• Structured deposits: the market for structured deposits is not active and the Group establishes fair value by using discounted cash flow analysis and option pricing models as the valuation technique. The Group uses the US dollar swap rate (the benchmark rate) to determine the fair value of financial instruments.
Investments
The Group’s principal investments are debt securities, equity securities, term deposits and loans. The critical estimates and judgments are those associated with the recognition of impairment and the determination of fair value.
The Group considers a wide range of factors in the impairment assessment as described in Note 2.6.c.
Fair value is defined as the amount at which the financial assets and liabilities could be exchanged in a current transaction between knowledgeable willing parties in an arm’s length transaction, rather than in a forced or liquidation sale. The methods and assumptions used by the Group in estimating the fair value of investments are as follows:
Debt securities: fair values are generally based upon current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions, values obtained from current bid prices of comparable investments or valuation techniques when the market is not active.
Equity securities: fair values are generally based upon current bid prices. Where current bid prices are not readily available, fair values are estimated using either prices observed in recent transactions or commonly used market pricing model. Equity securities, for which fair values cannot be measured reliably, are recognized at cost less impairment.
Term deposits and loans: the carrying amounts of these assets in the statement of financial position approximate fair value.
The valuation methodology of various investments is described in Note 4.3.

~~F-25~~
F-28
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
~~3.3~~3
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued)
3.3
Income tax
The Group is subject to income tax in numerous jurisdictions. During the normal course of business, certain transaction and activity for which the ultimate tax determination is uncertain. The Group needs to exercise significant judgment when determining the income tax. If the final settlement result of the tax matters are different from the amount booked, these differences will impact the final income tax expense and deferred tax for the period.
4 The Group is subjected to income tax in various localities. During the normal course of business, certain transaction and activity for which the ultimate tax determination is uncertain. The Group needs to exercise significant judgment when determining the income tax. If the final settlement result of the tax matters are different from the amount booked, these differences will impact the final income tax expense and deferred tax for the period.
4
Risk Management
Risk management is carried out by the Risk Management Committee under policies approved by the Board of Directors.
The Group issues contracts that transfer insurance risk or financial risk or both. This section summarises these risks and the way the Group manages them.
4.1 ~~Risk management is carried out by the Risk Management Committee under policies approved by the Board of Directors.~~
~~The Group issues contracts that transfer insurance risk or financial risk or both. This section summarises these risks and the way the Group manages them.~~
~~4.1~~
Insurance risk
4.1.1
Types ~~of Insurance risks~~
The risk under any one insurance contract is the possibility that an insured event occurs and there is uncertainty about the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable. For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This occurs when the frequency or severity of claims and benefits exceeds the estimates. Insurance events are random and the actual number of claims and the amount of benefits paid will vary each year from estimates established using statistical techniques.
Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The Group has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome. The Group manages insurance risk through underwriting strategy, reinsurance arrangements and claims handling.
The risk under any one insurance contract is the possibility that an insured event occurs and there is uncertainty about the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable. For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This occurs when the frequency or severity of claims and benefits exceeds the estimates. Insurance events are random and the actual number of claims and the amount of benefits paid will vary each year from estimates established using statistical techniques.
Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The Group has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population to reduce the variability of the expected outcome. The Group manages insurance risk through underwriting strategy, reinsurance arrangements and claims handling.
The Group manages insurance risks through two types of reinsurance agreements, ceding on a quota share basis or a surplus basis, to cover insurance liability risk. The products reinsured include: life insurance, accident and health insurance or death, disability, accident, illness and assistance in terms of product category or function, respectively. These reinsurances agreements spread insured risk to a certain extent and reduce the effect of potential losses to the Group. However, the Group’s direct insurance liabilities to the policyholder are not eliminated because of credit risk associated with the failure of reinsurance companies to fulfil their responsibilities.
4.1.2 The Group manages insurance risks through two types of reinsurance agreements, ceding on a quota share basis or a surplus basis, to cover insurance liability risk. The products reinsured include: life insurance, accident and health insurance or death, disability, accident, illness and assistance in terms of product category or function respectively. These reinsurances agreements spread insured risk to a certain extent and reduce the effect of potential losses to the Group. However, the Group’s direct insurance liabilities to the policyholder are not eliminated because of credit risk associated with the failure of reinsurance companies to fulfil their responsibilities.
~~4.1.2~~
Concentration of insurance risks
The Group offers life insurance, annuity, accident and health insurance products. All operations of the Group are located in the PRC. There are no significant differences among the regions where the Group underwrites insurance contracts.
The Group offers life insurance, annuity, accident and health insurance products. All operations of the Group are located in the PRC. There are no significant differences among the regions where the Group underwrites insurance contracts.

~~F-26~~
F-29
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
4
Risk Management (continued)
4.1
~~MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)~~
~~4.1~~
Insurance risk (continued)
4.1.2
Concentration of insurance risks (continued)
~~The table below presents the Group’s major products of long-term insurance contracts:~~
The table below presents the Group’s major products of long-term insurance contracts:
   2012 2011
Product name
   RMB million    % RMB million    %
Premiums of long-term insurance contracts

Hong Ying Participating Endowment (a)
   49,397       16.13 % 56,000       18.52 %
Hong Tai Participating Endowment (b)
   34,020       11.11 % 58,432       19.32 %
Kang Ning Whole Life (c)
   26,640       8.70 % 27,696       9.16 %
Mei Man Yi Sheng Participating Endowment (d)
   20,972       6.85 % 23,932       7.91 %
Hong Feng Participating Endowment (e)
   3,129       1.02 % 6,096       2.02 %
Others (f)
   172,152       56.19 % 130,294       43.07 %






Total
   306,310       100.00 % 302,450       100.00 %






Insurance benefits expenses of long-term insurance contracts

Hong Ying Participating Endowment (a)
   317       0.47 % 168       0.26 %
Hong Tai Participating Endowment (b)
   124       0.19 % 35       0.05 %
Kang Ning Whole Life (c)
   3,165       4.73 % 2,987       4.61 %
Mei Man Yi Sheng Participating Endowment (d)
   2,778       4.15 % 2,875       4.43 %
Hong Feng Participating Endowment (e)
   42,182       63.00 % 40,856       63.02 %
Others (f)
   18,391       27.46 % 17,914       27.63 %






Total
   66,957       100.00 % 64,835       100.00 %






2010 2009
Product name RMB million % RMB million %
Premiums

Hong Ying Endowment (a) 68,612 22.63 % — 0.00 %
Hong Fu Endowment (b) 44,320 14.61 % 54,919 20.97 %
Hong Feng Endowment (c) 29,868 9.85 % 59,229 22.61 %
Kang Ning Whole Life (d) 28,853 9.51 % 30,151 11.51 %
Hong Tai Endowment (2003) (e) 7,419 2.45 % 11,300 4.31 %
Others (f) 124,182 40.95 % 106,306 40.60 %

Total
303,254 100.00 % 261,905 100.00 %

Insurance benefits expenses

Hong Ying Endowment (a) 27 0.06 % — 0.00 %
Hong Fu Endowment (b) 146 0.32 % 36 0.07 %
Hong Feng Endowment (c) 28,869 63.39 % 464 0.90 %
Kang Ning Whole Life (d) 2,879 6.32 % 2,772 5.38 %
Hong Tai Endowment (2003) (e) 1,980 4.35 % 29,173 56.59 %
Others (f) 11,640 25.56 % 19,111 37.06 %

Total
45,541 100.00 % 51,556 100.00 %

Liabilities of long-term insurance contracts

Hong Ying Endowment (a) 62,538 6.20 % — 0.00 %
Hong Fu Endowment (b) 100,375 9.95 % 58,369 7.21 %
Hong Feng Endowment (c) 260,896 25.85 % 265,270 32.78 %
Kang Ning Whole Life (d) 104,800 10.39 % 85,260 10.54 %
Hong Tai Endowment (2003) (e) 31,479 3.12 % 28,757 3.55 %
Others (f) 448,808 44.49 % 371,567 45.92 %

Total
1,008,896 100.00 % 809,223 100.00 %

   As at 31 December 2012 As at 31 December 2011
   RMB million    % RMB million    %
Liabilities of long-term insurance contracts

Hong Ying Participating Endowment (a)
   158,752       11.54 % 113,038       9.5 %
Hong Tai Participating Endowment (b)
   86,195       6.27 % 54,300       4.56 %
Kang Ning Whole Life (c)
   149,034       10.83 % 127,258       10.69 %
Mei Man Yi Sheng Participating Endowment (d)
   98,651       7.17 % 80,768       6.78 %
Hong Feng Participating Endowment (e)
   174,634       12.70 % 218,519       18.36 %
Others (f)
   708,238       51.49 % 596,603       50.11 %






Total
   1,375,504       100.00 % 1,190,486       100.00 %






(a)
Hong Ying is long-term individual participating endowment insurance contract with options for single premium ~~term~~or regular premium of ~~single,~~ 3 years, 5 years ~~and~~or 10 years, designed for healthy policyholders of age between ~~30 days~~30-day-old and ~~70 years old.~~70-year-old. Maturity benefit for ~~lump sum~~single premium is paid at 100% of basic sum insured. Maturity benefit for regular premium is paid at basic sum insured multiplied by number of year of premium payments. Disease Death benefit incurred within ~~one~~first year ~~after contract effective date~~ is paid at premium received (without interest). Disease death ~~benefits~~benefit incurred ~~exceed~~after one year ~~after contract effective date are~~is paid at basic sum insured ~~and~~or basic sum insured multiplied by number of year of premium payments for ~~lump sum~~single premium and regular premium, respectively. For accident death occurs on train, ship or flight, accident death benefit is paid at 300% of basic sum insured ~~and~~or 300% of basic sum insured multiplied by number of year of premium payments for ~~lump sum~~single premium and regular premium, respectively. For accident death not on train, ship and flight, accident death benefit is paid at 200% of basic sum insured ~~and~~or 200% of basic sum insured multiplied by number of year of premium payments for ~~lump sum~~single premium and regular premium, respectively.
F-30
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
4
RISK MANAGEMENT (continued)
4.1
Insurance risk (continued)
4.1.2
Concentration of insurance risks (continued)

(b)
Hong FuTai is long-term individual participating endowment insurance contract with options for single premium ~~term~~or regular premium of ~~single and 3 year,~~10 years, designed for healthy policyholders of age between ~~30 days~~30-day-old and 6075-year-old. Insured period can be 5 years, ~~old.~~6 years or 10 years. Maturity benefit for ~~lump sum~~single premium is paid at 100% of basic sum insured. Maturity benefit for regular premium is paid at basic sum insured multiplied by number of year of premium payments. Disease Death benefit incurred within ~~one~~first year ~~after contract effective date~~ is paid at premium received (without interest). ~~Disease~~All other death benefits incurred ~~exceed one year after contract effective date~~ are paid at basic sum insured ~~and~~or basic sum insured multiplied by number of year of premium payments for ~~lump sum~~single premium and regular premium, respectively. ~~Accident~~
(c)
Kang Ning Whole Life is long-term individual whole life insurance contract with options for single premium or regular premium of 10 years or 20 years. Its maximum critical illness benefit is paid at 200% of basic sum insured. Both death and disability benefit isare paid at 300% of basic sum insured less any paid critical illness benefit.
(d)
Mei Man Yi Sheng is long-term individual participating endowment insurance contract with options for regular premium of 3 years, 5 years, 8 years or 12 years, designed for healthy policyholders of age between 30-day-old and ~~300%~~60-year-old. The insured can be benefited up to age of 75. Annuity is paid at 1% of basic sum insured multiplied by number of year of premium ~~payments for lump~~payments. Maturity benefit is paid at basic sum insured multiplied by number of year of premium ~~and regular~~payments. Disease Death benefit incurred within first 2 years is paid at premium ~~respectively.~~received (without interest). Accident death or disease death after first 2 years is paid at 110% of basic sum insured multiplied by number of year of premium payments.
~~F-27~~
~~CHINA LIFE INSURANCE COMPANY LIMITED~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEAR ENDED 31 DECEMBER 2010~~
4
~~MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)~~
~~4.1~~(e)
~~Insurance risk (continued)~~
~~4.1.2~~
~~Concentration of insurance risks (continued)~~
~~(c)~~
Hong Feng is long-term individual participating endowment insurance contract with ~~options for premium term of single.~~single premium. Insured period can be 5 years or 10 years. The ~~insured~~policy holder can be benefited up to age of 65. Maturity benefit is paid at 100% of basic sum insured. Disease Death benefit incurred within ~~one~~first year ~~after contract effective date~~ is paid at premium received (without interest). Disease death benefit incurred ~~exceed~~after one year ~~after contract effective date~~ is paid at basic sum insured. Accident death benefit is paid at 300% of basic sum insured.

~~(d)~~ Kang Ning Whole Life is long-term individual whole life insurance contract with options for premium term of single, 10 years or 20 years. Its critical illness benefit accounts for 200% of basic sum insured. Both death and disability benefit are paid at 300% of basic sum insured less any paid critical illness benefit.
~~(e)~~ Hong Tai (2003) is long-term individual endowment insurance contract with options for premium term of single and 5 years, 10 years, 15 years and 20 years, designed for healthy policyholders of age between 30 days and 60 years old. Maturity benefit for lump sum premium is paid at 100% of basic sum insured. Maturity benefit for regular premium is paid at basic sum insured multiplied by number of year of premium payments. Disease death benefit incurred within one year after contract effective date is paid at premium received (without interest). Disease death benefits incurred exceed one year after contract effective date are paid at basic sum insured and basic sum insured multiplied by number of year of premium payments for lump sum premium and regular premium respectively.
(f)
Others consist of various long-term insurance contracts with no significant concentration.
~~4.1.3~~
~~Sensitivity Analysis~~
~~Sensitive analysis of long-term insurance contracts~~
Liabilities for long-term insurance contracts and liabilities unbundled from universal life insurance contracts and unit-linked insurance contracts with insurance risk are calculated based on the assumptions on mortality rates, morbidity rates, lapse rates and discount rates. Changes in insurance contract reserve assumptions reflect the Company’s actual operating results and changes in its expectation of future events. The Company considers the potential impact of future risk factors on its operating results and incorporates such potential impact in the determination of assumptions,
Holding all other variables constant, if mortality rates and morbidity rates were to increase or decrease from current best estimate by 10%, pre-tax profit for the year would have been RMB 9,993 million or RMB 10,435 million (2009: RMB 8,899 million or RMB 9,290 million) lower or higher, respectively.
Holding all other variables constant, if lapse rates were to increase or decrease from current best estimate by 10%, pre-tax profit for the year would have been RMB 5,862 million or RMB 6,221 million (2009: RMB 5,426 million or RMB 5,802 million) lower or higher, respectively.
Holding all other variables constant, if the discount rates were 50 basis points higher or lower than current best estimate, pre-tax profit for the year would have been RMB 26,858 million or RMB 31,084 million (2009: RMB 23,429 million or RMB 27,157 million) higher or lower, respectively.
~~Sensitive analysis of short-term insurance contracts~~
The assumptions of reserves for claims and claim adjustment expenses may be affected by other variables such as claims payment of short term insurance contracts, which may result in the synchronous changes to reserves for claims and claim adjustment expenses.
Holding all other variables constant, if loss ratios are 100 basis points higher or lower than current assumption, pre-tax profit is expected to be RMB 149 million lower or higher, respectively (2009: RMB 132 million). Management believes that the 100 basis points deviation used in the sensitivity analysis represents a deviation in the expected level of claims that could be reasonably expected for this type of business.

~~F-28~~
F-31
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
4
RISK MANAGEMENT (continued)
4.1
~~MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)~~
~~4.1~~
Insurance risk (continued)
4.1.3
Sensitivity Analysis
Sensitivity analysis of long-term insurance contracts
Liabilities for long-term insurance contracts and liabilities unbundled from universal life insurance contracts and unit-linked insurance contracts with insurance risk are calculated based on the assumptions on mortality rates, morbidity rates, lapse rates and discount rates. Changes in insurance contract reserve assumptions reflect the Company’s actual operating results and changes in its expectation of future events. The Company considers the potential impact of future risk factors on its operating results and incorporates such potential impact in the determination of assumptions.
Holding all other variables constant, if mortality rates and morbidity rates were to increase or decrease from current best estimate by 10%, pre-tax profit for the year would have been RMB11,319 million or RMB11,901 million (2011: RMB10,462 million or RMB10,976 million) lower or higher, respectively.
Holding all other variables constant, if lapse rates were to increase or decrease from current best estimate by 10%, pre-tax profit for the year would have been RMB5,683 million or RMB6,022 million (2011: RMB5,896 million or RMB6,249 million) lower or higher, respectively.
Holding all other variables constant, if the discount rates were 50 basis points higher or lower than current best estimate, pre-tax profit for the year would have been RMB37,263 million or RMB42,574 million (2011: RMB29,124million or RMB33,545 million) higher or lower, respectively.
Sensitivity analysis of short-term insurance contracts
The assumptions of reserves for claims and claim adjustment expenses may be affected by other variables such as claims payment of short term insurance contracts, which may result in the synchronous changes to reserves for claims and claim adjustment expenses.
Holding all other variables constant, if claim ratios are 100 basis points higher or lower than current assumption, pre-tax profit is expected to be RMB159 million lower or higher, respectively (2011: RMB159 million).
F-32
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
4
RISK MANAGEMENT (continued)
4.1
Insurance risk (continued)
4.1.3
Sensitivity Analysis (continued)
~~The following table indicates the claim development for short-term insurance contracts without taking account of reinsurance impacts:~~
The following table indicates the claim development for short-term insurance contracts without taking into account reinsurance impacts:
Estimated claims expenses
   Short-term insurance contracts (accident year)
   2008 2009 2010 2011 2012 Total
Current year
   7,725    8,102    8,826    8,002    8,056
1 year later
   7,591    8,291    8,967    8,279
2 years later
   7,411    8,063    8,640
3 years later
   7,411    8,063
4 years later
   7,411


Estimated accumulated claims expenses
   7,411    8,063    8,640    8,279    8,056    40,449


Accumulated claims expenses paid
   (7,411 ) (8,063 ) (8,640 ) (7,830 ) (5,427 ) (37,371 )


Unpaid claims expenses
   —      —      —      449    2,629    3,078


Short-term insurance contracts (accident year)
Estimated claims expenses 2006 2007 2008 2009 2010 Total

Current year 6,771 7,082 7,725 8,102 8,826
1 year later 6,074 6,891 7,591 8,291
2 years later 6,168 6,990 7,411
3 years later 6,168 6,990
4 years later 6,168

Estimated claims expenses 6,168 6,990 7,411 8,291 8,826 37,686

Accumulated claims expenses paid (6,168 ) (6,990 ) (7,411 ) (7,854 ) (5,959 ) (34,382 )

Unpaid claims expenses — — — 437 2,867 3,304

The following table indicates the claim development for short-term insurance contracts taking account of reinsurance impacts:

Short-term insurance contracts (accident year)
Estimated claims expenses 2006 2007 2008 2009 2010 Total

Current year 6,703 7,036 7,671 8,018 8,741
1 year later 6,013 6,847 7,538 8,205
2 years later 6,106 6,945 7,360
3 years later 6,106 6,945
4 years later 6,106

Estimated accumulated claims 6,106 6,945 7,360 8,205 8,741 37,357

Accumulated claims expenses paid (6,106 ) (6,945 ) (7,360 ) (7,772 ) (5,902 ) (34,085 )

Unpaid claims expenses — — — 433 2,839 3,272

~~4.2~~
~~Financial risk~~
The Group’s activities are exposed to a variety of financial risks. The key financial risk is that proceeds from the sale of financial assets will not be sufficient to fund obligations arising from the Group’s insurance and investment contracts. The most important components of financial risk are market risk, credit risk and liquidity risk.
The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Risk management is carried out by a designated department under policies approved by management. The responsible department identifies, evaluates and manages financial risks in close cooperation with the Group’s operating units. The Group provides written principles for overall risk management, as well as written policies covering specific areas, such as managing market risk, credit risk, and liquidity risk.
Estimated claims expenses
   Short-term insurance contracts (accident year)
   2008 2009 2010 2011 2012 Total
Current year
   7,671    8,018    8,741    7,889    7,916
1 year later
   7,538    8,205    8,879    8,161
2 years later
   7,360    7,979    8,557
3 years later
   7,360    7,979
4 years later
   7,360


Estimated accumulated claims expenses
   7,360    7,979    8,557    8,161    7,916    39,973


Accumulated claims expenses paid
   (7,360 ) (7,979 ) (8,557 ) (7,720 ) (5,333 ) (36,949 )


Unpaid claims expenses
   —      —      —      441    2,583    3,024


4.2
Financial risk
~~F-29~~The Group’s activities are exposed to a variety of financial risks. The key financial risk is that proceeds from the sale of financial assets will not be sufficient to fund obligations arising from the Group’s insurance and investment contracts. The most important components of financial risk are market risk, credit risk and liquidity risk.
The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Risk management is carried out by a designated department under policies approved by management. The responsible department identifies, evaluates and manages financial risks in close cooperation with the Group’s operating units. The Group provides written principles for overall risk management, as well as written policies covering specific areas, such as managing market risk, credit risk, and liquidity risk.
F-33
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
4
RISK MANAGEMENT (continued)
4.2
~~MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)~~
~~4.2~~
Financial risk (continued)
The Group manages financial risk by holding an appropriately diversified investment portfolio as permitted by laws and regulations designed to reduce the risk of concentration in any one specific industry or issuer. The structure of the investment portfolio held by the Group is disclosed in Note 8 to the consolidated financial statements.
The sensitivity analyses below are based on a change in an assumption while holding all other assumptions constant. In practice this is unlikely to occur, and changes in some of the assumptions may be correlated, such as change in interest rate and change in market price.
4.2.1 The Group manages financial risk by holding an appropriately diversified investment portfolio as permitted by laws and regulations designed to reduce the risk of concentration in any one specific industry or issuer. The structure of the investment portfolio held by the Group is disclosed in Note 8 to the consolidated financial statements.
The sensitivity analyses below are based on a change in an assumption while holding all other assumptions constant. In practice this is unlikely to occur, and changes in some of the assumptions may be correlated (for example, change in interest rate and change in market price).
~~4.2.1~~
Market risk
(i)
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Group’s financial assets are principally comprised of term deposits and debt securities. Changes in the level of interest rates could have a significant impact on the Group’s overall investment return. Many of the Group’s insurance policies offer guaranteed returns to policyholders. These guarantees expose the Group to interest rate risk.
~~The Group manages interest rate risk through adjustments to portfolio structure and duration, and, to the extent possible, by monitoring the mean duration of its assets and liabilities.~~
The sensitivity analysis for interest rate risk illustrates how changes in interest income and the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates at the end of the reporting period.
At 31 December 2010, if market interest rates were 50 basis points higher or lower with all other variables held constant, pre-tax profit for the year would have been RMB 1,066 million (2009: RMB 823 million) higher or lower, respectively, mainly as a result of higher or lower interest income on floating rate cash and cash equivalents, term deposits, statutory deposits-restricted and debt securities and the fair value losses or gains on debt securities assets at fair value through income, net of portion attributable to participating policyholders. Pre-tax available-for sale reserve in equity would have been RMB 8,771 million (2009: RMB 7,583 million) lower or higher respectively as a result of a decrease or increase in the fair value of available-for-sale securities, net of portion attributable to participating policyholders.
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Group’s financial assets are principally comprised of term deposits and debt securities. Changes in the level of interest rates could have a significant impact on the Group’s overall investment return. Many of the Group’s insurance policies offer guaranteed returns to policyholders. These guarantees expose the Group to interest rate risk.
The Group manages interest rate risk through adjustments to portfolio structure and duration, and, to the extent possible, by monitoring the mean duration of its assets and liabilities.
The sensitivity analysis for interest rate risk illustrates how changes in interest income and the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates at the end of the reporting period.
At 31 December 2012, if market interest rates were 50 basis points higher or lower with all other variables held constant, pre-tax profit for the year would have been RMB1,844 million (2011: RMB1,712 million) higher or lower, respectively, mainly as a result of higher or lower interest income on floating rate cash and cash equivalents, term deposits, statutory deposits-restricted and debt securities and the fair value losses or gains on debt securities assets at fair value through profit or loss. Pre-tax available-for-sale reserve in equity would have been RMB10,291 million (2011: RMB16,995 million) lower or RMB7,238 million (2011: RMB16,995 million) higher respectively, as a result of a decrease or increase in the fair value of available-for-sale securities.

~~F-30~~
F-34
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
4
RISK MANAGEMENT (continued)
4.2
~~MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)~~
~~4.2~~
Financial risk (continued)
4.2.1
Market risk (continued)
(ii)
Price risk
Price risk arises mainly from the volatility of prices of equity securities held by the Group. Prices of equity securities are determined by market forces. The Group is subject to increased price risk largely because China’s stock markets are relatively volatile.
The Group manages price risk by holding an appropriately diversified investment portfolio as permitted by laws and regulations designed to reduce the risk of concentration in any one specific industry or issuer.
At 31 December 2012, if all the Group’s equity securities’ prices had increased or decreased by 10% with all other variables held constant, pre-tax profit for the year would have been RMB792 million (2011: RMB124 million) higher or lower, respectively, mainly as a result of an increase or decrease in fair value of equity securities excluding available-for-sale securities. Pre-tax available-for-sale reserve in equity would have been RMB9,568 million (2011: RMB17,942 million) higher or RMB13,047 million (2011: RMB17,942 million) lower, respectively, as a result of an increase or decrease in fair value of available-for-sale equity securities. If prices decreased to the extent that the impairment criteria were met, a portion of such decrease of the available-for-sale equity securities would reduce pre-tax profit through impairment.
(iii) Price risk arises mainly from the volatility of prices of equity securities held by the Group. Prices of equity securities are determined by market forces. The Group is subject to increased price risk largely because China’s stock markets are relatively volatile.
The Group manages price risk by holding an appropriately diversified investment portfolio as permitted by laws and regulations designed to reduce the risk of concentration in any one specific industry or issuer.
At 31 December 2010, if all the Group’s equity securities’ prices had increased or decreased by 10% with all other variables held constant, pre-tax profit for the year would have been RMB113 million (2009: RMB 127 million) higher or lower, respectively, mainly as a result of an increase or decrease in fair value of equity securities excluding available-for-sale securities, net of portion attributable to participating policyholders. Pre-tax available-for-sale reserve in equity would have been RMB 11,942 million higher or lower (2009: RMB 11,470 million) as a result of an increase or decrease in fair value of available-for-sale equity securities, net of portion attributable to participating policyholders.
~~(iii)~~
Currency risk
Currency risk is volatility of fair value or future cash flows of financial instruments resulting from changes in foreign currency exchange rates. The Group operates principally in the PRC except for limited exposure to foreign exchange rate risk arising primarily with respect to structured deposits, debt securities and common stocks denominated in US dollar or HK dollar.
~~The Group holds shares traded on the HK stock market, which are traded in HK dollars. Investment income from H share holdings partially compensates adverse impact of appreciation of Renminbi.~~
~~The following table summarizes financial assets denominated in currencies other than RMB as at 31 December 2010 and 2009, expressed in RMB equivalent:~~
Currency risk is volatility of fair value or future cash flows of financial instruments resulting from changes in foreign currency exchange rates. The Group is exposed to foreign exchange rate risk arising primarily with respect to financial assets denominated in US dollar or HK dollar.
The following table summarizes financial assets denominated in currencies other than RMB as at 31 December 2012 and 2011, expressed in RMB equivalent:

As at 31 December 2010 US dollars HK dollars Total

As at 31 December 2012
   US dollar    HK dollar    Total
Equity securities
- Available-for-sale securities — 5,845 5,845    —         2,757       2,757
Debt securities
- Held-to-maturity securities 1,987 6 1,993    1,886       36       1,922
- Available-for-sale securities — 20 20    266       —         266
Term deposits (excluding structured deposits) 33 — 33
Structured deposits — — —
Term deposits
   9,678       —         9,678
Cash and cash equivalents 8,855 1,458 10,313    251       2,691       2,942







Total
10,875 7,329 18,204    12,081       5,484       17,565






~~F-31~~
F-35
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
4
RISK MANAGEMENT (continued)
4.2
~~MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)~~
~~4.2~~
Financial risk (continued)
4.2.1
Market risk (continued)
(iii)
Currency risk (continued)
As at 31 December 2011
   US dollar    HK dollar    Total
Equity securities

- Available-for-sale securities
   —          4,783       4,783
Debt securities

- Held-to-maturity securities
   1,890       36       1,926
- Available-for-sale securities
   175       —          175
Term deposits
   5,476       —          5,476
Cash and cash equivalents
   4,108       237       4,345






Total
   11,649       5,056       16,705






As at 31 December 2009 US dollars HK dollars Total

Equity securities
- Available-for-sale securities — 13,570 13,570
Debt securities
- Held-to-maturity securities 2,048 7 2,055
- Available-for-sale securities 854 — 854
Term deposits (excluding structured deposits) 6,814 — 6,814
Structured deposits 273 — 273
Cash and cash equivalents 1,911 1,538 3,449

Total
11,900 15,115 27,015

As at 31 December 2012, if RMB had strengthened or weakened by 10% against US dollar and HK dollar with all other variables held constant, pre-tax profit for the year would have been RMB1,481 million (2011: RMB1,192 million) lower or higher, respectively, mainly as a result of foreign exchange losses or gains on translation of US dollar and HK dollar denominated financial assets other than the available-for-sale equity securities included in the table above. The actual exchange loss in year 2012 was RMB49 million (2011: RMB547 million).
4.2.2 Monetary assets are exposed to currency risk whereas    non-monetary assets, such as equity securities, are exposed to price risk. As at 31 December 2010, if RMB had strengthened or weakened by 10% against US dollars and HK dollar with all other variables held constant, pre-tax profit for the year would have been RMB 1,236 million (2009: RMB 1,345 million) lower or higher, respectively, mainly as a result of foreign exchange losses or gains on translation of US dollar and HK dollar denominated financial assets other than the equity securities included in the table above. The actual exchange loss in year 2010 is RMB 392 million.
~~4.2.2~~
Credit risk
Credit risk is the risk that one party to a financial transaction or the issuer of a financial instrument will fail to discharge an obligation and cause another party to incur a financial loss. Because the Group is limited in the types of investments as permitted by China Insurance Regulatory Commission (“CIRC”) and a significant portion of the portfolio is in government bonds, government agency bonds and term deposits with the state-owned commercial banks, the Group’s overall exposure to credit risk is relatively low.
Credit risk is controlled by the application of credit approvals, limits and monitoring procedures. The Group manages credit risk through in-house fundamental analysis of the Chinese economy and the underlying obligors and transaction structures. Where appropriate, the Group obtains collateral in the form of rights to cash, securities, property and equipment.
~~Credit risk exposure~~
The carrying amount of financial assets included on the consolidated statement of financial position represents the maximum credit risk exposure without taking account of any collateral held or other credit enhancements attached. The Group has no credit risk exposure relating to off balance sheet items as at 31 December 2010 and 2009.
~~Collateral and other credit enhancements~~
Securities purchased under agreements to resell are pledged by counterpart’s debt securities or term deposits of which the Group could take the ownership should the owner of the collateral default. Policy loans and premium receivables are collateralized by their policies’ cash value according to the terms and conditions of policy loan contracts and policy contracts respectively signed by the Group together with policyholders.
Credit risk is the risk that one party to a financial transaction or the issuer of a financial instrument will fail to discharge its obligation and cause another party to incur a financial loss. Because the Group’s investment portfolio is restricted to the types of investments as permitted by China Insurance Regulatory Commission (“CIRC”) and a significant portion of the portfolio is in government bonds, government agency bonds and term deposits with the state-owned commercial banks, the Group’s overall exposure to credit risk is relatively low.
Credit risk is controlled by the application of credit approvals, limits and monitoring procedures. The Group manages credit risk through in-house research and analysis of the Chinese economy and the underlying obligors and transaction structures. Where appropriate, the Group obtains collateral in the form of rights to cash, securities, property and equipment.
Credit risk exposure
The carrying amount of financial assets included on the consolidated statement of financial position represents the maximum credit risk exposure without taking account of any collateral held or other credit enhancements attached. The Group has no credit risk exposure relating to off balance sheet items as at 31 December 2012 and 2011.
Collateral and other credit enhancements
Securities purchased under agreements to resell are pledged by counterpart’s debt securities or term deposits of which the Group could take the ownership should the owner of the collateral default. Policy loans and premium receivables are collateralized by their policies’ cash value according to the terms and conditions of policy loan contracts and policy contracts, respectively.

~~F-32~~
F-36
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
4
RISK MANAGEMENT (continued)
4.2
~~MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)~~
~~4.2~~
Financial risk (continued)
4.2.2
Credit risk (continued)
~~Credit quality~~
The Group’s debt securities investment includes government bonds, government agency bonds, corporate bonds and subordinated bonds or debts, and most of the debt securities are guaranteed by either the Chinese government or a Chinese government controlled financial institution. As at 31 December 2010, 100% (as at 31 December 2009: 100%) of the corporate bonds held by the Group have credit rating of AA/A-2 or above. As at 31 December 2010, 99.1% (as at 31 December 2009: 99.5%) of the subordinated bonds or debts held by the Group either have credit rating of AA/A-2 or above, or were issued by national commercial banks. The bond or debt’s credit rating is assigned by a qualified appraisal institution in the PRC at the time of its issuance.
As at 31 December 2010, 100% (as at 31 December 2009: 100%) of the Group’s bank deposits are with the four largest state-owned commercial banks, other national commercial banks and China Securities Depository and Clearing Corporation Limited (CSDCC) in the PRC, and almost all of the reinsurance agreements of the Group are with a state-owned reinsurance company. The Group believes these commercial banks, CSDCC and the reinsurance company have a high credit quality. As a result, the Group concludes credit risk associated with term deposits and accrued investment income thereof, statutory deposits-restricted, cash equivalents and reinsurance assets will not cause material impact on the Group’s consolidated financial statements as at 31 December 2010 and 2009.
The credit risk associated with securities purchased under agreements to resell, policy loans and premium receivables will not cause a material impact on the Group’s consolidated financial statements taking into consideration of their collateral held and maturity term of no more than one year as at 31 December 2010 and 2009.

~~F-33~~Credit quality
The Group’s debt securities investment includes government bonds, government agency bonds, corporate bonds and subordinated bonds or debts, and most of the debt securities are guaranteed by either the Chinese government or Chinese government controlled financial institutions. As at 31 December 2012, 99.9% (as at 31 December 2011: 99.8%) of the corporate bonds held by the Group had credit rating of AA/A-2 or above. As at 31 December 2012, 99.7% (as at 31 December 2011: 99.6% ) of the subordinated bonds or debts held by the Group either have credit rating of AA/A-2 or above, or were issued by national commercial banks. The bond or debt’s credit rating is assigned by a qualified appraisal institution in the PRC at the time of its issuance and updated at each reporting date.
As at 31 December 2012, 99.8% (as at 31 December 2011: 99.8%) of the Group’s bank deposits are with the four largest state-owned commercial banks, other national commercial banks and China Securities Depository and Clearing Corporation Limited (CSDCC) in the PRC. The Group’s debt investment plans, presented as other loans, are supported by fiscal income in budget of Central Government or third party guarantee. The Group believes these commercial banks and CSDCC have a high credit quality. As a result, the Group concludes credit risk associated with term deposits and accrued investment income thereof, statutory deposits-restricted, and cash equivalents will not cause material impact on the Group’s consolidated financial statements as at 31 December 2012 and 2011.
The credit risk associated with securities purchased under agreements to resell, policy loans and premium receivables will not cause a material impact on the Group’s consolidated financial statements taking into consideration of their collateral held and maturity term of no more than one year as at 31 December 2012 and 2011.
F-37
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
4
RISK MANAGEMENT (continued)
4.2
~~MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)~~
~~4.2~~
Financial risk (continued)
4.2.3
Liquidity risk
~~Liquidity risk is the risk that the Group will not have access to sufficient funds to meet its liabilities as they become due.~~
~~In the normal course of business, the Group attempts to match the maturity of financial assets to the maturity of insurance and financial liabilities.~~
~~The following tables set forth the contractual and expected undiscounted cash flows for financial assets, insurance and financial liabilities:~~
Liquidity risk is the risk that the Group is unable to obtain funds at a reasonable funding cost when required to meet a repayment obligation and fund its asset portfolio within a certain time.
In the normal course of business, the Group attempts to match the maturity of financial assets to the maturity of insurance and financial liabilities.
The following tables set forth the contractual and expected undiscounted cash flows for financial assets, insurance and financial liabilities:

Contractual and expected cash flows          Contractual and expected cash flows
(undiscounted)
(undiscounted)
Not Later than 1 Later than 3
later year but not years but not Later
Carrying Without than 1 later than 3 later than 5 than 5
As at 31 December 2010 amount maturity year years years years

As at 31 December 2012
   Carrying
amount    Without
maturity    Not later
than 1
year    Later than 1
year but not
later than 3
years    Later than 3
years but
not
later than 5
years    Later
Than 5
years
Financial assets


Contractual cash inflows/(outflows)

Contractual cash inflows

Equity securities 195,899 195,899 — — — —    164,748       164,748       —         —         —         —
Debt securities 608,142 — 42,602 68,533 97,955 733,144    828,075       —         45,520       116,994       161,960       1,007,416
Loans 36,543 — 24,754 1,602 3,330 13,689    80,419       —         42,174       8,237       12,713       32,487
Term deposits 441,585 — 30,097 152,241 246,050 85,383    641,080       —         107,139       273,690       351,527       603
Statutory deposits-restricted 6,153 — 522 5,913 214 —    6,153       —         4,167       419       2,181       —
Securities purchased under agreements to resell
   894       —         894       —         —         —
Accrued investment income 18,193 — 17,537 656 — —    28,926       —         28,926       —         —         —
Premiums receivable 7,274 — 7,274 — — —    8,738       —         8,738       —         —         —
Cash and cash equivalent 47,839 — 47,839 — — —    69,434       —         69,434       —         —         —












Subtotal
   1,828,467       164,748       306,992       399,340       528,381       1,040,506












Financial and insurance liabilities

Expected cash outflows

Insurance contracts
   1,384,537       —         30,970       70,702       192,336       2,062,150
Investment contracts
   66,604       —         16,053       18,294       11,325       45,846
Contractual cash outflows

Securities sold under agreements to repurchase
   68,499       —         68,499       —         —         —
Annuity and other insurance balances payable
   16,890       —         16,890       —         —         —
Bonds payable
   67,981       —         2,077       6,848       73,198       —












Subtotal
1,361,628 195,899 170,625 228,945 347,549 832,216    1,604,511       —         134,489       95,844       276,859       2,107,996












Financial and insurance liabilities

Expected cash outflows/(inflows)

Insurance contracts 1,018,135 — (12,805 ) 59,027 98,822 1,679,736
Investment contracts 70,087 — 15,566 18,495 14,320 47,219

Contractual cash outflows/(inflows)

Securities sold under agreements to repurchase 23,065 — 23,065 — — —
Annuity and other insurance balances payable 8,275 — 8,275 — — —

Subtotal
1,119,562 — 34,101 77,522 113,142 1,726,955

Net cash inflows/(outflows)
242,066 195,899 136,524 151,423 234,407 (894,739 )    223,956       164,748       172,503       303,496       251,522       (1,067,490 )












~~F-34~~
F-38
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
44.
RISK MANAGEMENT (continued)
4.2
~~MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)~~
~~4.2~~
Financial risk (continued)
4.2.3
Liquidity risk (continued)
   Carrying
amount    Without
maturity    Contractual and expected cash flows
(undiscounted)
As at 31 December 2011
         No later
than 1
year Later than 1
year but not
later than 3
years    Later than 3
years but
not
later than 5
years    Later
than 5
years
Financial assets

Contractual cash inflows

Equity securities
   181,869       181,869       —      —         —         —
Debt securities
   666,652       —         36,819    89,304       103,078       821,211
Loans
   61,104       —         34,056    3,653       9,623       26,278
Term deposits
   520,793       —         59,279    181,522       341,592       23,506
Statutory deposits-restricted
   6,153       —         2,026    4,202       324       —
Securities purchased under agreements to resell
   2,370       —         2,370    —         —         —
Accrued investment income
   22,946       —         22,946    —         —         —
Premiums receivable
   8,253       —         8,253    —         —         —
Cash and cash equivalent
   55,971       —         55,971    —         —         —










Subtotal
   1,526,111       181,869       221,720    278,681       454,617       870,995










Financial and insurance liabilities

Expected cash outflows/(inflows)

Insurance contracts
   1,199,373       —         (29,343 ) 74,813       162,936       1,912,073
Investment contracts
   69,740       —         15,652    18,800       11,909       47,107
Contractual cash outflows/(inflows)

Securities sold under agreements to repurchase
   13,000       —         13,000    —         —         —
Annuity and other insurance balances payable
   11,954       —         11,954    —         —         —
Bonds Payable
   29,990       —         1,347    3,300       33,300       —










Subtotal
   1,324,057       —         12,610    96,913       208,145       1,959,180










Net cash inflows/(outflows)
   202,054       181,869       209,110    181,768       246,472       (1,088,185 )










Contractual and expected cash flows
(undiscounted)
Not Later than 1 Later than 3
later year but not years but not Later
Carrying Without than 1 later than 3 later than 5 than 5
As at 31 December 2009 amount maturity year years years years

Financial assets

Contractual cash inflows/(outflows)

Equity securities 179,390 179,390 — — — —
Debt securities 582,285 — 27,803 91,257 85,720 686,923
Loans 23,081 — 14,448 1,234 1,234 12,746
Term deposits 344,983 — 91,552 79,100 149,936 65,405
Statutory deposits-restricted 6,153 — 191 2,319 4,406 —
Accrued investment income 14,208 — 14,208 — — —
Premiums receivable 6,818 — 6,818 — — —
Cash and cash equivalent 36,176 — 36,176 — — —

Subtotal
1,193,094 179,390 191,196 173,910 241,296 765,074

Financial and insurance liabilities

Expected cash outflows/(inflows)

Insurance contracts 818,164 — (7,558 ) 34,103 118,673 1,335,276
Investment contracts 67,274 — 18,386 20,121 13,595 34,352

Contractual cash outflows/(inflows)

Securities sold under agreements to repurchase 33,553 — 33,553 — — —
Annuity and other insurance balances payable 5,721 — 5,721 — — —

Subtotal
924,712 — 50,102 54,224 132,268 1,369,628

Net cash inflows/(outflows)
268,382 179,390 141,094 119,686 109,028 (604,554 )

The amounts set forth in the tables above for insurance and investment contracts in each column are the cash flows representing expected future benefit payments taking into consideration of future premiums payments or deposits from policyholders. The excess cash inflow from matured financial assets will be reinvested to cover any future liquidity exposures. The estimate is subject to assumptions related to mortality, morbidity, investment return, loss ratio, expenses assumption and other assumptions. Actual experience may differ from estimates.
The liquidity analysis above does not include policy holder dividends payable amounting to ~~RMB 52,828~~RMB44,240 million as at 31 December ~~2010 (2009: RMB 54,587~~2012 (2011: RMB46,368 million). At 31 December ~~2010,~~2012, declared dividends of ~~RMB 31,785~~RMB34,081 million ~~(2009: RMB 23,833~~(2011: RMB37,451 million) included in policyholder dividends payable have a maturity not later than one year. For the remaining policyholder dividends payable, the amount and timing of the cash flows are indeterminate due to the uncertainty of future experiences including investment returns and are subject to future declarations by the Group.
F-39
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
4
RISK MANAGEMENT (continued)
4.2
Financial risk (continued)
4.2.3
Liquidity risk (continued)
Although all investment contracts ~~(with~~with DPF, ~~and~~insurance contracts without ~~DPF)~~DPF and universal life insurance contracts contain contractual options to surrender that can be exercised immediately by all policyholders at ~~once,~~any time, the Group’s expected cash flows as shown in the above tables are based on past experience and future expectations. ~~The other maturity analysis is conducted on the assumption that~~Should these contracts were surrendered ~~immediately. This~~immediately, it would cause a cash outflow of ~~RMB 50,434~~RMB47,601 million, ~~RMB 3,639~~RMB6,961 million and ~~RMB 15,456~~RMB11,520 million, respectively for the period ended 31 December ~~2010 (2009: RMB 50,365~~2012 (2011: RMB51,678 million, ~~RMB 1,482~~RMB4,342 million and ~~RMB 14,891~~RMB13,191 million, respectively), payable within one year.

~~F-35~~
~~CHINA LIFE INSURANCE COMPANY LIMITED~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEAR ENDED 31 DECEMBER 2010~~
44.2.4
~~MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)~~
~~4.2~~
~~Financial risk (continued)~~
~~4.2.4~~
Capital management
The Group’s objectives when managing capital, which is actual capital, calculated as the difference between admitted assets (defined by CIRC) and the admitted liabilities (defined by CIRC), are to comply with the insurance capital requirements required by the CIRC to meet the minimum capital and safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for equity holders and benefits for other stakeholders.
The Group is also subject to other local capital requirements, such as statutory deposits-restricted requirement, statutory reserve fund requirement and discretionary reserve fund requirement, discussed in detail under Note 8.4 and Note 31, respectively.
The Group ensures its continuous and full compliance with the regulations mainly through monitoring its quarterly and annual solvency margin, as well as the solvency margin based on Dynamic Solvency Testing. The Group has complied with all the local capital requirements during the year ended, 31 December 2010.
~~The table below summarises the solvency ratio of the Company, the actual capital held against the minimum required capital:~~
The Group’s objectives when managing capital, which is actual capital, calculated as the difference between admitted assets (defined by CIRC) and the admitted liabilities (defined by CIRC), are to comply with the insurance capital requirements required by the CIRC to meet the minimum capital and safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for equity holders and benefits for other stakeholders. In 2012, the Group issued subordinated debt to replenish the Company’s supplementary capital and raise the solvency ratio according to applicable law and approvals from regulatory authorities.
The Group is also subject to other local capital requirements, such as statutory deposits-restricted requirement, statutory reserve fund requirement, general reserve requirement and statutory insurance fund requirement discussed in detail under Note 8.4, Note 32 and Note 18 respectively.
The Group ensures its continuous and full compliance with the regulations mainly through monitoring its quarterly and annual solvency ratio, as well as the solvency ratio based on dynamic solvency testing.
The table below summarises the solvency ratio of the Company, the actual capital held against the minimum required capital:

As at 31
December 2012

As at 31
December 2011

   RMB million RMB million
Actual capital
   176,024    113,685
Minimum capital
   74,718    66,826
Solvency ratio
   236 % 170 %

As at 31 As at 31
December 2010 December 2009
RMB million RMB million

Actual capital 123,769 147,119
Minimum capital 58,385 48,459
Solvency ratio 212 % 304 %
According to “Solvency Regulations of Insurance Companies”, the solvency ratio is computed by dividing the actual capital by the minimum capital. CIRC closely monitors those insurance companies with solvency ratio less than 100% and may, depending on the individual circumstances, undertakes certain regulatory measures, including but not limited to restriction of payment of dividends. Insurance companies with solvency ratio between 100% and 150% will be required to submit and implement plans preventing capital deterioration to an inadequate level. Insurance companies with solvency ratio above 100% but significant solvency risk identified would be required to take necessary rectifying actions.

~~F-36~~
F-40
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
4
RISK MANAGEMENT (continued)
4.3
~~MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)~~
~~4.3~~
Fair value hierarchy
~~Level 1 fair value is based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can obtain at the measurement date.~~
Level 2 fair value is based on valuation technique using significant inputs, other than Level 1 quoted price, that are observable for the asset being measured, either directly or indirectly, for substantially the full term of the asset through corroboration with observable market data. Observable inputs generally used to measure the fair value of securities classified as Level 2 include quoted market prices for similar assets in active markets; quoted market prices in markets that are not active for identical or similar assets and other market observable inputs. This level includes the debt securities for which quotations are available from pricing services providers. Fair value provided by pricing services providers are subject to a number of validation procedures by management. These procedures include a review of the valuation models utilized and the results of these models, and as well as the recalculation of prices obtained from pricing services at the end of each reporting period.
Under certain conditions, the Group may not received price from independent third party pricing services. In this instance, the Group may choose to apply internally developed values to the assets being measured. In such cases, the valuations are generally classified as Level 3. 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.
At 31 December 2010, investments classified as Level 1 comprise approximately 42.33% of financial assets measured at fair value on a recurring basis. Fair value measurements classified as Level 1 include certain debt securities, equity securities that are traded in an active exchange market or inter-bank market. The Group considers a combination of certain factors to determine whether a market for a financial instrument is active, including the occurrence of trades within the specific period, the respective trading volume, and the degree which the implied yields for a debt security for observed transactions differs from the Group’s understanding of the current relevant market rates and information.
At 31 December 2010, investments classified as Level 2 comprise approximately 57.37% of financial assets measured at fair value on a recurring basis. They primarily include certain debt securities and equity securities. 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, analyze 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.
At 31 December 2010, investments classified as Level 3 comprise approximately 0.30% of financial assets measured at fair value on a recurring basis. They primarily include subordinated debts, certain corporate and government agency bonds and certain equity securities. 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.
For the years ended 31 December 2010 and 2009, most of these prices obtained from the pricing services are for debt securities issued by the Chinese government and government controlled organizations. These pricing services utilize a discounted cash flow valuation model using market observable inputs, mainly interest rates, to determine a fair value. These debt securities are classified as Level 2.
Level 1 fair value is based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can obtain at the measurement date.
Level 2 fair value is based on valuation technique using significant inputs, other than Level 1 quoted price, that are observable for the asset being measured, either directly or indirectly, for substantially the full term of the asset through corroboration with observable market data. Observable inputs generally used to measure the fair value of securities classified as Level 2 include quoted market prices for similar assets in active markets; quoted market prices in markets that are not active for identical or similar assets and other market observable inputs. This level includes the debt securities for which quotations are available from pricing services providers. Fair value provided by pricing services providers are subject to a number of validation procedures by management. These procedures include a review of the valuation models utilized and the results of these models, and as well as the recalculation of prices obtained from pricing services at the end of each reporting period.
Under certain conditions, the Group may not receive price from independent third party pricing services. In this instance, the Group may choose to apply internally developed values to the assets being measured. In such cases, the valuations are generally classified as Level 3. 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.
At 31 December 2012, investments classified as Level 1 comprise approximately 37.01% of financial assets measured at fair value. Fair value measurements classified as Level 1 include certain debt securities, equity securities that are traded in an active exchange market or inter-bank market and open-ended funds. The Group considers a combination of certain factors to determine whether a market for a financial instrument is active, including the occurrence of trades within the specific period, the respective trading volume, and the degree which the implied yields for a debt security for observed transactions differs from the Group’s understanding of the current relevant market rates and information. Trading prices from Chinese interbank market are determined by both trading counterparties and can be observed publicly. The Company adopted this price of the debt securities traded on Chinese interbank market at balance sheet date as their fair market value and classified the investments as Level 1. Open-ended funds also have active markets. Fund companies publish the net asset value of these funds on their websites on each trading date. Investors subscribe for and redeem units of these funds in accordance with the fund net asset value published by the fund companies on each trading date. The Company adopted the unadjusted net asset value of the funds at balance sheet dates as their fair market value and classified the investments as Level 1.
At 31 December 2012, investments classified as Level 2 comprise approximately 62.24% of financial assets measured at fair value on a recurring basis. They primarily include certain debt securities and equity securities. 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, analyze 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 are classified as Level 2 when they are valued at recent quoted price from Chinese interbank market or from valuation service providers.
At 31 December 2012, investments classified as Level 3 comprise approximately 0.75% of financial assets measured at fair value on a recurring basis. They primarily include subordinated debts, certain corporate and government agency bonds and certain equity securities. 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.

~~F-37~~
F-41
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
4
RISK MANAGEMENT (continued)
4.3
~~MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)~~
~~4.3~~
Fair value hierarchy (continued)
~~For the accounting policies regarding the determination of the fair values of financial assets and financial liabilities, see Note 3.2.~~
~~The following table presents the Group’s assets and liabilities measured at fair value at 31 December 2010:~~
For the years ended 31 December 2012 and 2011, most of these prices obtained from the pricing services are for debt securities issued by the Chinese government and government controlled organizations. These pricing services utilize a discounted cash flow valuation model using market observable inputs, mainly interest rates, to determine a fair value.
For the accounting policies regarding the determination of fair values of financial assets and financial liabilities, see Note 3.2.
The following table presents the Group’s financial assets and liabilities measured at fair value at 31 December 2012:
   Level 1 Level 2    Level 3    Total balance
   RMB million RMB million    RMB million    RMB million
Financial assets

Available-for-sale securities

–Equity securities
   150,874    2,303       3,649       156,826
–Debt securities
   28,218    321,071       301       349,590
Securities at fair value through profit or loss

–Equity securities
   7,798    33       85       7,916
–Debt securities
   13,144    12,975       —         26,119






Total assets
   200,034    336,382       4,035       540,451






Financial liabilities

Investment contracts at fair value through profit or loss
   (35 ) —         —         (35 )






Total liabilities
   (35 ) —         —         (35 )






Level 1 Level 2 Level 3 Total balance

Assets

Available-for-sale securities
–Equity securities 189,600 2,685 1,384 193,669
–Debt securities 39,141 315,010 301 354,452
Securities at fair value through income
–Equity securities 2,249 — — 2,249
–Debt securities 5,182 2,331 — 7,513

Total assets
236,172 320,026 1,685 557,883

Liabilities

Investment contracts at fair value through income (84 ) — — (84 )

Total liabilities
(84 ) — — (84 )

The following table presents the changes in Level 3 instruments for the year ended 31 December ~~2010:~~
2012:

Securities at
fair value
Available-for-sale Securities through income
Debt Equity Equity Total
securities securities securities assets

Opening balance 301 1,238 — 1,539
Total gains or losses recognized in
– Profit or loss — — — —
– Other comprehensive income/(loss) — 1 — 1
Transfer into Level 3 — 17 — 17
Purchases — 128 — 128
Settlements — — — —

Closing balance 301 1,384 — 1,685

Total gains or losses for 2010 included in income for assets and liabilities held at 31 December 2010 — — — —

   Available-for-sale Securities Securities at fair
value through
profit or loss
Total
assets


Debt
securities

Equity
securities

Equity
securities

   RMB million    RMB million RMB million    RMB million
Opening balance
   301       2,437    —         2,738
Purchases
   —         1,234    —         1,234
Transfer into Level 3
   —         65    78       143
Fair value changes recognised in equity
   —         77    —         77
Fair value changes recognised in profit
   —         (164 ) 7       (157 )






Closing balance
   301       3,649    85       4,035






~~F-38~~
F-42
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
4
RISK MANAGEMENT (continued)
4.3
~~MANAGEMENT OF INSURANCE AND FINANCIAL RISK (continued)~~
~~4.3~~
Fair value hierarchy (continued)
~~The following table presents the Group’s assets and liabilities measured at fair value at 31 December 2009:~~
The following table presents the Group’s financial assets and liabilities measured at fair value at 31 December 2011:
   Level 1 Level 2    Level 3    Total balance
   RMB million RMB million    RMB million    RMB million
Financial assets

Available-for-sale securities

–Equity securities
   174,987    1,997       2,437       179,421
–Debt securities
   30,465    352,761       301       383,527
Securities at fair value through profit or loss

–Equity securities
   2,459    —         —         2,459
–Debt securities
   8,687    12,537       —         21,224






Total assets
   216,598    367,295       2,738       586,631






Financial liabilities

Investment contracts at fair value through profit or loss
   (57 ) —         —         (57 )






Total liabilities
   (57 ) —         —         (57 )






Level 1 Level 2 Level 3 Total balance

Assets

Available-for-sale securities
–Equity securities 172,383 3,053 1,238 176,674
–Debt securities 42,308 298,216 301 340,825
Securities at fair value through income
–Equity securities 2,704 38 — 2,742
–Debt securities 2,628 3,763 — 6,391

Total assets
220,023 305,070 1,539 526,632

Liabilities

Investment contracts at fair value through income (52 ) — — (52 )

Total liabilities
(52 ) — — (52 )

The following table presents the changes in Level 3 instruments for the year ended 31 December ~~2009:~~2011:
   Available-for-sale Securities
   Debt
securities    Equity
securities Total
assets
   RMB million    RMB million RMB million
Opening balance
   301       1,384    1,685
Purchases
   —         1,011    1,011
Transferred into Level 3
   —         50    50
Fair value changes recognised in equity
   —         (8 ) (8 )




Closing balance
   301       2,437    2,738




Securities at
fair value
Available-for-sale Securities through income
Debt Equity Equity Total
securities securities securities assets

Opening balance 385 1,007 15 1,407
Total gains or losses recognized in
– Profit or loss 3 — 15 18
– Other comprehensive income/(loss) (3 ) 127 — 124
Transfer out of Level 3 — (617 ) (30 ) (647 )
Purchases — 721 — 721
Sales — — — —
Issues — — — —
Settlements (84 ) — — (84 )

Closing balance 301 1,238 — 1,539

Total gains or losses for 2009 included in income for assets and liabilities held at 31 December 2009 — — — —

In ~~2010~~2012 and ~~2009,~~2011, the instruments valued under Level 3 above did not have material impact to the profit of the Group ~~transferred certain debt~~ and ~~equity securities~~there have been no significant transfers between Level 1 ~~Level 2~~ and Level ~~3 due to changes in availability of market observable inputs.~~
2.

~~F-39~~
F-43
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
5
SEGMENT INFORMATION
5.1
Operating segments
~~The Group operates in four operating segments:~~
The Group operates in four operating segments:
(i)
Individual life insurance business (Individual life)
Individual life insurance business relates primarily to the sale of long-term life insurance contracts and universal life contracts which are mainly term life, whole life, endowment and annuity products, to individuals and assumed individual reinsurance contracts.
Individual life insurance business relates primarily to the sale of long-term life insurance contracts and universal life contracts which are mainly term life, whole life, endowment and annuity products, to individuals and assumed individual reinsurance contracts.
(ii)
Group life insurance business (Group life)
~~Group life insurance business relates primarily to the sale of insurance contracts and investment contracts, which are mainly term life, whole life and annuity products, to group entities.~~
Group life insurance business relates primarily to the sale of insurance contracts and investment contracts, which are mainly term life, whole life and annuity products, to group entities.
(iii)
Short-term insurance business (Short-term)
~~Short-term insurance business relates primarily to the sale of short-term insurance contracts, which are mainly the short-term accident and health insurance contracts.~~
Short-term insurance business relates primarily to the sale of short-term insurance contracts, which are mainly the short-term accident and health insurance contracts.
(iv)
Other business (Other)
Other business relates primarily to income (Note 30) and allocated cost of insurance agency business in respect of the provision of services to CLIC, share of results of associates, income and expenses of subsidiaries, unallocated income and expenditure of the Group.
5.2 ~~Corporate and other business (Corporate and other)~~
Corporate and other business relates primarily to income and allocated costs of insurance agency business in respect of the provision of services to CLIC, as described in Note 29, share of results of associates, income and expenses of subsidiaries, unallocated income and expenditure of the Group.
~~5.2~~
Allocation basis of income and expenses
Investment income, net realised gains/(losses) and impairment on financial assets, net fair value gains/(losses) through profit or loss and foreign exchange losses within other operating expenses are allocated among segments in proportion to each respective segment’s average liabilities of insurance contracts and investment contracts at the beginning and end of the year. Administrative expenses and certain other operating expenses are allocated among segments in proportion to the unit cost of respective products in the different segments. Except for amounts arising from investment contracts which can be allocated to the corresponding segments above, other income and other operating expenses are presented in the “Other” segment directly. Income tax is not allocated.
5.3 Investment income, net realised gains or losses on financial assets, net fair value gains or losses through income and foreign exchange losses within other operating expenses are allocated among segments in proportion to each respective segment’s average liabilities of insurance contracts and investment contracts at the beginning and end of the year. Administrative expenses and certain other operating expenses are allocated among segments in proportion to the unit cost of respective products in the different segments. Except for those arising from investment contracts which can be allocated to the corresponding segments above, other income and other operating expenses are presented in the “Corporate & Other” segment directly. Income tax is not allocated.
~~5.3~~
Allocation basis of assets and liabilities
Financial assets and securities sold under agreements to repurchase are allocated among segments in proportion to each respective segment’s average liabilities of insurance contracts and investment contracts at the beginning and end of the year. Insurance liabilities are presented under the respective segments. The remaining assets and liabilities are not allocated.
Financial assets and securities sold under agreements to repurchase are allocated among segments in proportion to each respective segment’s average liabilities of insurance contracts and investment contracts at the beginning and end of the year. Insurance liabilities are presented under the respective segments. The remaining assets and liabilities are not allocated.

~~F-40~~
F-44
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
5
SEGMENT INFORMATION (continued)

For the year ended 31 December 2010
Individual Group Short- Corporate
life life term & other Elimination Total    For the year ended 31 December 2012
(RMB million)
Individual
life

Group
life

Short
-term
Other Elimination Total
   (RMB million)
Revenues

Gross written premiums 302,781 473 14,975 — — 318,229    305,841    469    16,432    —      —      322,742


- Term Life 1,964 287 — — —    2,616    413    —      —      —
- Whole Life 37,783 165 — — —    37,594    53    —      —      —
- Endowment 220,505 — — — —    227,770    —      —      —      —
- Annuity 42,529 21 — — —    37,861    3    —      —      —


Net premiums earned 302,753 468 14,867 — — 318,088    305,732    465    15,929    —      —      322,126
Investment income 45,535 2,691 448 198 — 48,872    69,407    3,043    481    312    —      73,243
Net realised gains on financial assets 14,738 871 145 87 — 15,841
Net fair value gains through income 247 14 2 17 — 280
Net realised gains and impairment on financial assets
   (25,466 ) (1,116 ) (169 ) (125 ) —      (26,876 )
Net fair value gains/(losses) through profit or loss
   (304 ) (13 ) (2 ) 6    —      (313 )
Other income 614 244 — 2,583 (684 ) 2,757    402    343    —       3,356    (796 ) 3,305


Including: inter-segment revenue — — — 684 (684 ) —    —       —       —       796    (796 ) —


Segment revenues
363,887 4,288 15,462 2,885 (684 ) 385,838    349,771    2,722    16,239    3,549    (796 ) 371,485


Benefits, claims and expenses

Insurance benefits and claims
Insurance benefits and claims expenses

Life insurance death and other benefits (70,872 ) (365 ) — — — (71,237 )    (107,340 ) (334 ) —      —      —      (107,674 )
Accident and health claims and claim adjustment expenses — — (8,740 ) — — (8,740 )    —      —      (7,898 ) —      —      (7,898 )
Increase in insurance contracts liabilities (199,469 ) (186 ) — — — (199,655 )    (184,972 ) (18 ) —      —      —      (184,990 )
Investment contract benefits (1,264 ) (686 ) — — — (1,950 )    (500 ) (1,532 ) —      —      —      (2,032 )
Policyholder dividends resulting from participation in profits (12,277 ) (947 ) — — — (13,224 )    (3,357 ) (78 ) —      —      —      (3,435 )
Underwriting and policy acquisition costs (24,182 ) (88 ) (2,794 ) (192 ) — (27,256 )    (23,568 ) (103 ) (3,470 ) (613 ) —      (27,754 )
Finance costs
   (2,447 ) (107 ) (17 ) (4 ) —      (2,575 )
Administrative expenses (14,927 ) (429 ) (2,952 ) (1,977 ) — (20,285 )    (16,865 ) (618 ) (3,956 ) (1,844 ) —      (23,283 )
Other operating expenses (2,717 ) (833 ) (495 ) (294 ) 684 (3,655 )    (2,795 ) (130 ) (593 ) (582 ) 796    (3,304 )


Including: Inter-segment expenses (640 ) (38 ) (6 ) — 684 —    (758 ) (33 ) (5 ) —      796    —


Statutory insurance fund contribution (489 ) (14 ) (96 ) — — (599 )    (477 ) (18 ) (114 ) —      —      (609 )


Segment benefits, claims and expenses
(326,197 ) (3,548 ) (15,077 ) (2,463 ) 684 (346,601 )    (342,321 ) (2,938 ) (16,048 ) (3,043 ) 796    (363,554 )


Share of results of associates — — — 1,771 — 1,771

Share of profit of associates
   —      —      —      3,037    —      3,037


Segment results
37,690 740 385 2,193 — 41,008    7,450    (216 ) 191    3,543    —      10,968


Income tax
   304


Net profit
   11,272


Attributable to
- equity holders of the Company 33,626    11,061
- non-controlling interests 185    211
Unrealised gains from available-for-sale securities included in equity holders’ equity
   23,731    1,040    165    59    —      24,995
Depreciation and amortisation
   1,480    54    355    60    —      1,949


Unrealised losses from Available-for-sale securities included in equity holder’s equity
(15,088 ) (892 ) (148 ) (75 ) — (16,203 )

Depreciation and amortisation
1,418 40 283 61 — 1,802

~~F-41~~
F-45
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
5
SEGMENT INFORMATION (continued)

As at 31 December 2010
Individual Group Short- Corporate
life life term & other Elimination Total    As at 31 December 2012
(RMB million)
Individual
life

Group
life
   Short -
term    Other    Elimination    Total
   (RMB million)
Assets


Financial assets (including cash and cash equivalents) 1,263,081 73,241 12,185 5,931 — 1,354,438    1,728,469       73,986       11,710       5,599       —         1,819,764
Other 719 — 89 20,892 — 21,700    758       —         155       28,991       —         29,904












Segment assets
1,263,800 73,241 12,274 26,823 — 1,376,138    1,729,227       73,986       11,865       34,590       —         1,849,668













Unallocated

Property, plant and equipment 18,946                   22,335
Other 15,495                   26,913


Total
1,410,579                   1,898,916


Liabilities


Insurance contracts 1,008,201 695 9,239 — — 1,018,135    1,374,777       727       9,033       —         —         1,384,537
Investment contracts 15,664 54,507 — — — 70,171    11,646       54,993       —         —         —         66,639
Securities sold under agreements to repurchase 21,199 1,253 208 405 — 23,065    65,191       2,856       452       —         —         68,499
Other 331 223 — — — 554    64,913       3,107       449       —         —         68,469












Segment liabilities
1,045,395 56,678 9,447 405 — 1,111,925    1,516,527       61,683       9,934       —         —         1,588,144













Unallocated

Other 88,179                   87,671


Total
1,200,104                   1,675,815


~~F-42~~
F-46
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
5
SEGMENT INFORMATION (continued)

For the year ended 31 December 2009
Individual Group Short- Corporate
life life term & other Elimination Total    For the year ended 31 December 2011
(RMB million)
Individual
life

Group
life

Short
-term
Other Elimination Total
   (RMB million)
Revenues

Gross written premiums 261,715 190 14,065 — — 275,970    302,012    438    15,802    —      —      318,252


- Term Life 805 112 — — —    2,299    333    —      —      —
- Whole Life 37,860 60 — — —    37,934    85    —      —      —
- Endowment 184,841 — — — —    221,925    —      —      —      —
- Annuity 38,209 18 — — —    39,854    20    —      —      —


Net premiums earned 261,694 189 13,194 — — 275,077    301,986    434    15,856    —      —      318,276
Investment income 35,693 2,614 408 175 — 38,890    57,080    2,893    460    289    —      60,722
Net realised gains on financial assets 19,522 1,430 222 70 — 21,244
Net fair value gains through income 1,330 97 16 6 — 1,449
Net realised gains and impairment on financial assets
   (10,404 ) (527 ) (86 ) (191 ) —      (11,208 )
Net fair value gains/(losses) through profit or loss
   319    16    3    (1 ) —      337
Other income 283 331 — 2,586 (570 ) 2,630    477    163    —      2,901    (769 ) 2,772


Including: inter-segment revenue — — — 570 (570 ) —    —      —      —      769    (769 ) —


Segment revenues
318,522 4,661 13,840 2,837 (570 ) 339,290    349,458    2,979    16,233    2,998    (769 ) 370,899


Benefits, claims and expenses

Insurance benefits and claims
Insurance benefits and claims expenses

Life insurance death and other benefits (74,416 ) (442 ) — — — (74,858 )    (101,010 ) (339 ) —      —      —      (101,349 )
Accident and health claims and claim adjustment expenses — — (7,808 ) — — (7,808 )    —      —      (7,789 ) —      —      (7,789 )
Increase in insurance contracts liabilities (154,552 ) 180 — — — (154,372 )    (181,565 ) (14 ) —      —      —      (181,579 )
Investment contract benefits (560 ) (1,582 ) — — — (2,142 )    (574 ) (1,457 ) —      —      —      (2,031 )
Policyholder dividends resulting from participation in profits (13,181 ) (1,306 ) — — — (14,487 )    (5,780 ) (345 ) —      —      —      (6,125 )
Underwriting and policy acquisition costs (20,881 ) (113 ) (1,877 ) (65 ) — (22,936 )    (23,723 ) (81 ) (3,275 ) (355 ) —      (27,434 )
Finance costs
   (818 ) (41 ) (7 ) (7 ) —      (873 )
Administrative expenses (13,057 ) (779 ) (3,236 ) (1,647 ) — (18,719 )    (14,961 ) (522 ) (3,989 ) (2,077 ) —      (21,549 )
Other operating expenses (1,702 ) (131 ) (387 ) (740 ) 570 (2,390 )    (2,604 ) (107 ) (548 ) (785 ) 769    (3,275 )


Including: Inter-segment expenses (504 ) (37 ) (6 ) (23 ) 570 —    (726 ) (37 ) (6 ) —      769    —


Statutory insurance fund contribution (404 ) (21 ) (112 ) (537 )    (456 ) (16 ) (123 ) —      —      (595 )


Segment benefits, claims and expenses
(278,753 ) (4,194 ) (13,420 ) (2,452 ) 570 (298,249 )    (331,491 ) (2,922 ) (15,731 ) (3,224 ) 769    (352,599 )


Share of results of associates — — — 704 — 704

Share of profit of associates
   —      —      —      2,213    —      2,213


Segment results
39,769 467 420 1,089 — 41,745    17,967    57    502    1,987    —      20,513


Income tax
   (2,022 )


Net profit
   18,491


Attributable to
- equity holders of the Company 32,881    18,331
- non-controlling interests 155    160
Unrealised losses from available-for-sale securities included in equity holders’ equity
   (22,800 ) (1,154 ) (186 ) (65 ) —      (24,205 )
Depreciation and amortisation
   1,409    49    380    71    —      1,909


Unrealised gains/(losses) from Available-for-sale securities included in equity holder’s equity
9,953 729 113 (50 ) — 10,745

Depreciation and amortisation
1,169 69 289 33 — 1,560

~~F-43~~
F-47
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
5
SEGMENT INFORMATION (continued)

As at 31 December 2009
Individual Group Short- Corporate
life life term & other Elimination Total    As at 31 December 2011
(RMB million)
Individual
life

Group
life

Short
-term
   Other    Elimination    Total
   (RMB million)
Assets


Financial assets (including cash and cash equivalents) 1,089,127 78,752 12,250 6,224 — 1,186,353    1,430,528       70,759       11,399       5,229       —         1,517,915
Other 701 — 114 8,470 — 9,285    730       —         121       24,448       —         25,299












Segment assets
1,089,828 78,752 12,364 14,694 — 1,195,638    1,431,258       70,759       11,520       29,677       —         1,543,214













Unallocated

Property, plant and equipment 17,467                   20,231
Other 13,152                   20,462


Total
1,226,257                   1,583,907


Liabilities


Insurance contracts 808,591 632 8,941 — — 818,164    1,189,777       709       8,887       —         —         1,199,373
Investment contracts 14,579 52,747 — — — 67,326    13,349       56,448       —         —         —         69,797
Securities sold under agreements to repurchase 30,250 2,215 345 743 — 33,553    12,279       621       100       —         —         13,000
Other 120 436 — — — 556    28,650       1,677       230       —         —         30,557












Segment liabilities
853,540 56,030 9,286 743 — 919,599    1,244,055       59,455       9,217       —         —         1,312,727













Unallocated

Other 93,882                   77,792


Total
1,013,481                   1,390,519


~~F-44~~
F-48
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
5
SEGMENT INFORMATION (continued)

For the year ended 31 December 2008
Individual Group Short- Corporate
life life term & other Elimination Total    For the year ended 31 December 2010
(RMB million)
Individual
life

Group
life
Short-
term Other Elimination Total
   (RMB million)
Revenues

Gross written premiums 252,130 340 13,186 — — 265,656    302,781    473    14,975    —      —      318,229


- Term Life 308 25 — — —    1,964    287    —      —      —
- Whole Life 35,421 274 — — —    37,783    165    —      —      —
- Endowment 188,099 — — — —    220,505    —      —      —      —
- Annuity 28,302 41 — — —    42,529    21    —      —      —


Net premiums earned 252,113 339 12,725 — 265,177    302,753    468    14,867    —      —      318,088
Investment income 40,407 3,699 524 316 — 44,946    45,535    2,691    448    198    —      48,872
Net realised losses on financial assets (5,355 ) (490 ) (69 ) (50 ) — (5,964 )
Net fair value losses on assets at fair value through income (6,382 ) (584 ) (83 ) (145 ) — (7,194 )
Net realised gains on financial assets
   14,738    871    145    87    —      15,841
Net fair value gains through profit or loss
   247    14    2    17    —      280
Other income 605 683 2,513 (381 ) 3,420    614    244    —      2,583    (684 ) 2,757


including: inter-segment revenue — — — 381 (381 ) —

Including: inter-segment revenue
   —      —      —      684    (684 ) —


Segment revenues
281,388 3,647 13,097 2,634 (381 ) 300,385    363,887    4,288    15,462    2,885    (684 ) 385,838



Benefits, claims and expenses

Insurance benefits and claims
Life insurance death and other benefits (88,507 ) (1,152 ) — — — (89,659 )    (70,872 ) (365 ) —      —      —      (71,237 )
Accident and health claims and claim adjustment expenses — — (7,641 ) — — (7,641 )    —      —      (8,740 ) —      —      (8,740 )
Increase in insurance contracts liabilities (135,298 ) 649 — — — (134,649 )    (199,469 ) (186 ) —      —      —      (199,655 )
Investment contract benefits (224 ) (1,707 ) — — — (1,931 )    (1,264 ) (686 ) —      —      —      (1,950 )
Policyholder dividends resulting from participation in profits (1,589 ) (82 ) — — — (1,671 )    (12,277 ) (947 ) —      —      —      (13,224 )
Underwriting and policy acquisition costs (22,127 ) (212 ) (1,848 ) (13 ) — (24,200 )    (24,182 ) (88 ) (2,794 ) (192 ) —      (27,256 )
Finance costs
   (277 ) (17 ) (3 ) (7 ) —      (304 )
Administrative expenses (11,347 ) (761 ) (2,614 ) (1,930 ) — (16,652 )    (14,927 ) (429 ) (2,952 ) (1,977 ) —      (20,285 )
Other operating expenses (2,826 ) (273 ) (263 ) (428 ) 381 (3,409 )    (2,440 ) (816 ) (492 ) (287 ) 684    (3,351 )


including: Inter-segment expenses (212 ) (19 ) (3 ) (147 ) 381 —
Including: Inter-segment expenses
   (640 ) (38 ) (6 ) —      684    —


Statutory insurance fund (395 ) (28 ) (135 ) — — (558 )

Statutory insurance fund contribution
   (489 ) (14 ) (96 ) —      —      (599 )


Segment benefits, claims and expenses
(262,313 ) (3,566 ) (12,501 ) (2,371 ) 381 (280,370 )    (326,197 ) (3,548 ) (15,077 ) (2,463 ) 684    (346,601 )


Share of results of associates — — — (56 ) — (56 )

Share of profit of associates
   —      —      —      1,771    —      1,771


Segment results
19,075 81 596 207 — 19,959    37,690    740    385    2,193    —      41,008


Income tax
   (7,197 )


Net profit
   33,811


Attributable to
- equity holders of the Company 19,137    33,626
- minority interests 137
Unrealised gains/(losses) included in equity holder’s equity
(30,457 ) (2,788 ) (395 ) 188 — (33,452 )

- non-controlling interests
   185
Unrealised losses from available-for-sale securities included in equity holder’s equity
   (15,088 ) (892 ) (148 ) (75 ) —      (16,203 )
Depreciation and amortisation
1,014 68 248 28 — 1,358    1,418    40    283    61    —      1,802

~~F-45~~
F-49
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
6
PROPERTY, PLANT AND EQUIPMENT

2010
Office
equipment Assets
furniture and Motor under Leasehold
Buildings fixtures vehicles construction improvements Total    2012
(RMB Million)    Buildings
Office
equipment
furniture and
fixtures

Motor
vehicles

Assets
under
construction

Leasehold
improvements
Total
   (RMB Million)
Cost

As at 1 January 2010 14,072 4,635 1,846 3,536 792 24,881
As at 1 January 2012
   18,722    5,739    1,639    3,082    936    30,118
Transfers upon completion 2,975 104 — (3,147 ) 68 —    551    15    —      (732 ) 166    —
Additions 484 871 194 2,030 20 3,599    47    914    186    2,812    4    3,963
Disposals (60 ) (251 ) (231 ) (339 ) (16 ) (897 )    (73 ) (386 ) (294 ) (36 ) (26 ) (815 )


As at 31 December 2010
17,471 5,359 1,809 2,080 864 27,583

As at 31 December 2012
   19,247    6,282    1,531    5,126    1,080    33,266


Accumulated depreciation

As at 1 January 2010 (3,276 ) (2,587 ) (1,149 ) — (372 ) (7,384 )
As at 1 January 2012
   (4,570 ) (3,632 ) (1,042 ) —      (617 ) (9,861 )
Charge for the year (627 ) (680 ) (179 ) — (141 ) (1,627 )    (729 ) (696 ) (156 ) —      (141 ) (1,722 )
Disposals 8 188 191 — 17 404    34    355    266    —      22    677


As at 31 December 2010
(3,895 ) (3,079 ) (1,137 ) — (496 ) (8,607 )
As at 31 December 2012
   (5,265 ) (3,973 ) (932 ) —      (736 ) (10,906 )


Impairment

As at 1 January 2010 (30 ) — — — — (30 )
Impairment

As at 1 January 2012
   (26 ) —      —      —      —      (26 )
Charge for the year — — — — — —    —      —      —      —      —      —
Disposals — — — — — —    1    —      —      —      —      1


As at 31 December 2010
(30 ) — — — — (30 )

As at 31 December 2012
   (25 ) —      —      —      —      (25 )


Net book value

As at 1 January 2010 10,766 2,048 697 3,536 420 17,467
As at 1 January 2012
   14,126    2,107    597    3,082    319    20,231


As at 31 December 2010
13,546 2,280 672 2,080 368 18,946
As at 31 December 2012
   13,957    2,309    599    5,126    344    22,335


~~F-46~~
F-50
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
6
PROPERTY,PLANT AND EQUIPMENT (Continued)

2009
Office
equipment
furniture and Motor Assets under Leasehold
Buildings fixtures vehicles construction improvements Total    2011
(RMB Million)    Buildings
Office
equipment
furniture and
fixtures
Motor
vehicles
Assets under
construction

Leasehold
improvements
Total
   (RMB Million)
Cost

As at 1 January 2009 13,397 4,092 1,853 3,024 691 23,057
As at 1 January 2011
   17,471    5,359    1,809    2,080    864    27,583
Transfers upon completion 560 6 — (607 ) 41 —    1,233    3    —      (1,322 ) 86    —
Additions 190 750 157 1,520 78 2,695    72    574    126    3,251    13    4,036
Disposals (75 ) (213 ) (164 ) (401 ) (18 ) (871 )    (54 ) (197 ) (296 ) (927 ) (27 ) (1,501 )


As at 31 December 2009
14,072 4,635 1,846 3,536 792 24,881

As at 31 December 2011
   18,722    5,739    1,639    3,082    936    30,118


Accumulated depreciation

As at 1 January 2009 (2,789 ) (2,157 ) (1,116 ) — (243 ) (6,305 )
As at 1 January 2011
   (3,895 ) (3,079 ) (1,137 ) —      (496 ) (8,607 )
Charge for the year (502 ) (598 ) (175 ) — (139 ) (1,414 )    (684 ) (727 ) (169 ) —      (146 ) (1,726 )
Disposals 15 168 142 — 10 335    9    174    264    —      25    472


As at 31 December 2009
(3,276 ) (2,587 ) (1,149 ) — (372 ) (7,384 )

As at 31 December 2011
   (4,570 ) (3,632 ) (1,042 ) —      (617 ) (9,861 )


Impairment

As at 1 January 2009 (32 ) — — — — (32 )
As at 1 January 2011
   (30 ) —      —      —      —      (30 )
Charge for the year (1 ) — — — — (1 )    (1 ) —      —      —      —      (1 )
Disposals 3 — — — — 3    5    —      —      —      —      5


As at 31 December 2009
(30 ) — — — — (30 )

As at 31 December 2011
   (26 ) —      —      —      —      (26 )


Net book value

As at 1 January 2009 10,576 1,935 737 3,024 448 16,720
As at 1 January 2011
   13,546    2,280    672    2,080    368    18,946


As at 31 December 2009
10,766 2,048 697 3,536 420 17,467
As at 31 December 2011
   14,126    2,107    597    3,082    319    20,231


~~F-47~~
F-51
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
7
INVESTMENTS IN ASSOCIATES
   2012
RMB million 2011
RMB million
As at 1 January
   24,448    20,892
Investment in associates (i)
   1,339    1,600
Scrip dividend from associates (ii)
   182    91
Share of profit
   3,037    2,213
Other equity movements
   167    (201 )
Dividend received
   (182 ) (147 )


As at 31 December
   28,991    24,448


2010 2009
RMB million RMB million

As at 1 January
8,470 7,891
Additional capital contribution to associates (i) (iii) 5,777 —
Transfer in associates (ii) 5,123 —
Share of results 1,771 704
Other equity movements (131 ) (70 )
Dividend received (118 ) (55 )

As at 31 December
20,892 8,470

(i)
On 26 December 2012, the Company purchased 35% of shares of COFCO Futures Co., Ltd. (“COFCO Futures”) at the total cost of RMB1,339 million.
(ii)
A dividend payable in cash with a scrip dividend alternative in respect of the 2011 final dividend of HKD0.1 per ordinary share was approved and declared by Sino-Ocean Land Holdings Limited (“Sino-Ocean”) at the Annual General Meeting on 11 May 2012. Sino-Ocean issued a circular on HKExnews website and announced a Scrip Dividend Scheme on 22 May 2012, under which each shareholder may elect to receive the 2011 final dividend in cash or in scrip shares. The Company elected the scrip shares option and received scrip shares amounted to RMB113 million on 28 June 2012 with a corresponding increase in the carry value of investments in associates.
A dividend payable in cash with a scrip dividend alternative in respect of the 2012 interim dividend of HKD0.06 per ordinary share was approved and declared by Sino-Ocean at Board Meeting on 16 August 2012. Sino-Ocean issued a circular on HKExnews website and announced a Scrip Dividend Scheme on 12 September 2012, under which each shareholder may elect to receive the 2012 interim dividend in cash or in scrip shares. The Company elected the scrip shares option and received scrip shares amounted to RMB69 million on 17 October 2012 with a corresponding increased in the carry value of investments in associates.
The Group’s investments in associates are unlisted except for Sino-Ocean which is listed in Hong Kong. As at 31 December ~~2010,~~2012, the stock price of Sino-Ocean ~~is HK $5.19~~was HKD5.79 per share. The Group’s share of associates’ assets and liabilities as at 31 December ~~2010~~2012 and revenue and ~~profit/(loss)~~profit after tax for the year ~~then~~ ended are as followings:
~~Assets and liabilities of associates~~

Country of Interest
Name incorporation held Assets Liabilities
RMB million RMB million

Guangdong Development Bank (“GDB”) PRC 20 % 165,979 154,356
China Life Property & Casualty Insurance Company Limited (“CLP&C”) PRC 40 % 6,042 4,870
Sino-Ocean Land Holdings Limited (“Sino-Ocean”) (ii)(iii) Hong Kong 24.07 % 22,409 14,312

Total as at 31 December 2010
194,429 173,547

GDB PRC 20 % 136,344 128,859
CLP&C PRC 40 % 4,855 3,876
China Life Insurance Brokers (“CIB”) PRC 49 % 6 —

Total as at 31 December 2009
141,205 132,735

~~Revenues and profit/(loss) after tax of associates~~

Profit /(loss)
Name Revenue after tax
RMB million RMB million

GDB 4,392 1,237
CLP&C 3,558 245
Sino-Ocean 3,303 289

Total for the year ended 31 December 2010
11,252 1,771

GDB 3,023 673
CLP&C 2,946 32
CIB — (1 )

Total for the year ended 31 December 2009
5,969 704

~~F-48~~
F-52
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
7
INVESTMENTS IN ASSOCIATES (continued)
~~(i)~~ In July 2010, the Group injected additional capital of RMB 2,999 million in cash, at a price of RMB 4.38 per share to GDB, representing shares offered to all existing owners of GDB on a pro-rata basis. The Group holds 3.08 billion shares of GDB and its interest in GDB remains at 20% of GDB’s registered capital.
~~(ii)~~ On December 27, 2009, the Group purchased 934 million shares of Sino-Ocean at the total cost of HKD 5,819 million. As a result of this acquisition, the Group held 16.57% of the total outstanding shares of Sino-Ocean as at 31 December 2009.
On January 12, 2010, the Group exchanged certain of its Hong Kong listed equity investments at their market value on the transaction date of RMB 2,784 million for additional 423 million shares of Sino-Ocean. As a result of this acquisition, the Group held 24.08% equity interest of Sino-ocean and recognized it as an associate. In 2010, the ESOP (Employee Stock Option Plan) of Sino-Ocean was partially exercised. As at December 31 2010, the Company’s ownership in Sino-Ocean was diluted to 24.07%.
Share of assets and liabilities of associates
Name
   Country of
incorporation    Interest
held Assets
RMB million    Liabilities
RMB million
China Guangfa Bank (“CGB”)
   PRC       20.00 % 236,676       220,924
China Life Property & Casualty Insurance Company Limited (“CLP&C”)
   PRC       40.00 % 12,129       9,182
Sino-Ocean
   Hong Kong, PRC       24.85 % 30,387       21,435
COFCO Futures
   PRC       35.00 % 2,996       1,656




Total as at 31 December 2012
      282,188       253,197




CGB
   PRC       20.00 % 186,843       173,255
CLP&C
   PRC       40.00 % 8,962       6,370
Sino-Ocean
   Hong Kong, PRC       24.45 % 25,757       17,489




Total as at 31 December 2011
      221,562       197,114




Share of revenue and profit after tax of associates
Name
   Revenue
RMB million    Profit after tax
RMB million
CGB
   6,221       2,244
CLP&C
   7,981       150
Sino-Ocean
   7,122       642
COFCO Futures
   5       1




Total for the year ended 31 December 2012
   21,329       3,037




CGB
   5,635       1,917
CLP&C
   5,282       168
Sino-Ocean
   4,865       128




Total for the year ended 31 December 2011
   15,782       2,213




~~F-49~~
F-53
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
8
FINANCIAL ASSETS
8.1
Held-to-maturity securities
   As at
31 December 2012
RMB million    As at
31 December 2011
RMB million
Debt securities

Government bonds
   96,097       87,451
Government agency bonds
   111,759       89,631
Corporate bonds
   83,084       6,437
Subordinated bonds/debts
   161,449       78,414




Total
   452,389       261,933




Debt securities

Listed in mainland, PRC
   41,927       34,006
Listed in Hong Kong, PRC
   12       12
Listed in Singapore
   18       18
Unlisted
   410,432       227,897




Total
   452,389       261,933




The estimated fair value of listed held-to-maturity securities was RMB43,313 million as at 31 December 2012 (31 December 2011: RMB35,842 million).
Unlisted debt securities include those traded on Chinese interbank market and those not publicly traded.

As at 31 December 2010 As at 31 December 2009
RMB million RMB million

Debt securities
Government bonds 105,006 103,980
Government agency bonds 90,230 84,619
Corporate bonds 3,138 3,139
Subordinated bonds/debts 47,853 43,361

Total
246,227 235,099

Debt securities
Listed in mainland, PRC 15,785 17,872
Unlisted 230,442 217,227

Total
246,227 235,099

~~The estimated fair value of listed held-to-maturity securities was RMB 16,250 million as at 31 December 2010 (31 December 2009: RMB 18,683 million).~~
~~The unlisted debt securities refer to debt securities not traded on stock exchanges and include both debt securities traded on the interbank market in China and debt securities not publicly traded.~~

Debt securities As at 31 December 2010 As at 31 December 2009
- Contractual maturity schedule RMB million RMB million

Maturing
Within one year 18,891 5,937
After one year but within five years 25,696 34,903
After five years but within ten years 47,897 43,792
After ten years 153,743 150,467

Total
246,227 235,099

~~8.2~~
~~Loans~~

As at 31 December 2010 As at 31 December 2009
RMB million RMB million

Policy loans 23,977 13,831
Other loans 12,566 9,250

Total
36,543 23,081

As at 31 December 2010 As at 31 December 2009
RMB million RMB million

Maturing
Debt securities
- Contractual maturity schedule
   As at
31 December 2012
RMB million    As at
31 December 2011
RMB million
Maturing:

Within one year 23,977 13,831    2,234       1,428
After one year but within five years 1,770 —    55,079       25,324
After five years but within ten years 10,796 1,200    91,426       52,080
After ten years — 8,050    303,650       183,101




Total
36,543 23,081    452,389       261,933




8.2
Loans
~~F-50~~
   As at
31 December 2012
RMB million    As at
31 December 2011
RMB million
Policy loans
   39,893       32,321
Other loans(i)
   40,526       28,783




Total
   80,419 ��    61,104




   As at
31 December 2012
RMB million    As at
31 December 2011
RMB million
Maturing:

Within one year
   39,893       32,321
After one year but within five years
   10,036       6,270
After five years but within ten years
   30,490       22,513




Total
   80,419       61,104




(i)
Other loans are debt investment plans.
F-54
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
8
FINANCIAL ASSETS (continued)
8.3
Term deposits

As at 31 December 2010 As at 31 December 2009
RMB million RMB million

Maturing
Within one year 19,268 84,393
After one year but within five years 340,917 196,090
After five years but within ten years 81,400 64,500

Total
441,585 344,983

~~8.4~~
~~Statutory deposits-restricted~~

As at 31 December 2010 As at 31 December 2009
RMB million RMB million

Contractual maturity schedule
Within one year 400 100
After one year but within five years 5,753 6,053

Total
6,153 6,153

Insurance companies in China are required to deposit an amount equal to 20% of their registered capital with banks designated by CIRC. These funds may not be used for any purpose, other than to pay off debts during a liquidation proceeding.

As at 31
December 2012

As at 31
December 2011

   RMB million    RMB million
Maturing:

Within one year
   92,045       44,876
After one year but within five years
   548,435       453,117
After five years but within ten years
   600       22,800




Total
   641,080       520,793




8.4
Statutory deposits-restricted
~~F-51~~

As at 31
December 2012

As at 31
December 2011

   RMB million    RMB million
Contractual maturity schedule

Within one year
   3,933       1,820
After one year but within five years
   2,220       4,333




Total
   6,153       6,153




Insurance companies in China are required to deposit an amount equal to 20% of their registered capital with banks in conformity with regulations of CIRC. These funds may not be used for any purpose, other than to pay off debts during liquidation proceedings.
F-55
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
8
FINANCIAL ASSETS (continued)
8.5
Available-for-sale securities

As at 31
December 2012

As at 31
December 2011

   RMB million    RMB million
Debt securities

Government bonds
   42,946       60,325
Government agency bonds
   135,870       148,539
Corporate bonds
   139,286       125,407
Subordinated bonds/debts
   31,488       49,256




Subtotal
   349,590       383,527




Equity securities

Funds
   57,019       84,767
Common stocks
   96,361       93,384
Other
   3,446       1,270




Subtotal
   156,826       179,421




Total
   506,416       562,948




Debt securities

Listed in mainland, PRC
   34,844       31,642
Listed in Singapore
   266       175
Unlisted
   314,480       351,710




Subtotal
   349,590       383,527




Equity securities

Listed in mainland, PRC
   102,379       97,633
Listed in Hong Kong, PRC
   2,757       4,783
Unlisted
   51,690       77,005




Subtotal
   156,826       179,421




Total
   506,416       562,948




Unlisted equity securities include those not traded on stock exchanges, which are mainly open-ended funds.
Unlisted debt securities include those traded on Chinese interbank market and those not publicly traded.

As at 31 December 2010 As at 31 December 2009
RMB million RMB million

Debt securities

Government bonds 57,871 51,996
Government agency bonds 145,538 165,231
Corporate bonds 125,423 102,553
Subordinated bonds/debts 25,620 21,045

Subtotal
354,452 340,825

Equity securities

Funds 95,754 75,798
Common stocks 97,915 100,876

Subtotal
193,669 176,674

Total
548,121 517,499

Debt securities

Listed in mainland, PRC 29,618 28,086
Listed in Hong Kong, PRC 13 —
Unlisted 324,821 312,739

Subtotal
354,452 340,825

Equity securities

Listed in mainland, PRC 104,100 97,803
Listed in Hong Kong, PRC 5,845 13,570
Unlisted 83,724 65,301

Subtotal
193,669 176,674

Total
548,121 517,499

~~The unlisted securities refer to equtiy securities not traded on stock exchanges and include both debt securities traded on the interbank market in China and debt securities not publicly traded.~~
Debt securities
As at 31
December 2012

As at 31
December 2011

- contractual maturity schedule
   RMB million    RMB million
Maturing:

Within one year
   5,627       4,191
After one year but within five years
   70,959       46,199
After five years but within ten years
   137,962       138,659
After ten years
   135,042       194,478




Total
   349,590       383,527




~~F-52~~
F-56
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
8
FINANCIAL ASSETS (continued)
~~8.5~~8.6
~~Available-for-sale securities(continued)~~
Securities at fair value through profit or loss
   As at
31 December 2012    As at
31 December 2011
   RMB million    RMB million
Debt securities

Government bonds
   1,697       589
Government agency bonds
   6,291       4,285
Corporate bonds
   18,131       16,350




Subtotal
   26,119       21,224




Equity securities

Funds
   2,188       290
Common stocks
   5,728       2,169




Subtotal
   7,916       2,459




Total
   34,035       23,683




Debt securities

Listed in mainland, PRC
   5,501       5,830
Unlisted
   20,618       15,394




Subtotal
   26,119       21,224




Equity securities

Listed in mainland, PRC
   6,096       2,279
Unlisted
   1,820       180




Subtotal
   7,916       2,459




Total
   34,035       23,683




Unlisted equity securities include those not traded on stock exchanges, which are mainly open-ended funds.
Unlisted debt securities include those traded on Chinese interbank market and those not publicly traded.
8.7 Securities purchased under agreements to resell

Group debt securities As at 31 December 2010 As at 31 December 2009
- contractual maturity schedule RMB million RMB million

Maturing
Within one year 3,804 2,912
After one year but within five years 40,401 45,607
After five years but within ten years 129,977 123,719
After ten years 180,270 168,587

Total
354,452 340,825

   As at
31 December 2012    As at
31 December 2011
   RMB million    RMB million
Maturing:

Within thirty days
   894       1,572
After 30 days but within 90 days
   —         798




Total
   894       2,370




~~F-53~~
F-57
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
88.8
~~FINANCIAL ASSETS (continued)~~
~~8.6~~
~~Securities at fair value through~~Accrued investment income

As at 31 December 2010 As at 31 December 2009
RMB million RMB million

Debt securities
Government bonds 883 2,438
Government agency bonds 1,915 3,549
Corporate bonds 4,715 404

Subtotal
7,513 6,391

Equity securities
Funds 575 569
Common stocks 1,665 2,162
Warrants 9 11

Subtotal
2,249 2,742

Total
9,762 9,133

Debt securities

Listed in mainland, PRC 3,497 672
Unlisted 4,016 5,719

Subtotal
7,513 6,391

Equity securities

Listed in mainland, PRC 1,697 2,201
Unlisted 552 541

Subtotal
2,249 2,742

Total
9,762 9,133

~~The unlisted securities refer to equity securities not traded on stock exchanges and include both debt securities traded on the interbank market in China and debt securities not publicly traded.~~

As at 31
December 2012

As at 31
December 2011

   RMB million    RMB million
Bank deposits
   16,478       12,985
Debt securities
   11,642       9,394
Others
   806       567




Total
   28,926       22,946




Current
   28,926       22,946
Non-current
   —         —




Total
   28,926       22,946




~~F-54~~
F-58
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
89
~~FINANCIAL ASSETS (continued)~~
~~8.7~~
~~Accrued investment income~~

As at 31 December 2010 As at 31 December 2009
RMB million RMB million

Bank deposits 9,537 5,987
Debt securities 8,363 8,030
Others 293 191

Total
18,193 14,208

Current 18,193 14,208
Non-current — —

Total
18,193 14,208

~~F-55~~
~~CHINA LIFE INSURANCE COMPANY LIMITED~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEAR ENDED 31 DECEMBER 2010~~
9
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The table below presents the carrying value and estimated fair value of major financial assets and liabilities:
   Carrying value Estimated fair value(i)
   As at 31
December
2012 As at 31
December
2011 As at 31
December
2012 As at 31
December
2011
   RMB million RMB million RMB million RMB million
Held-to-maturity securities
   452,389    261,933    450,865    264,385
Loans
   80,419    61,104    80,419    61,104
Term deposits
   641,080    520,793    641,080    520,793
Statutory deposits-restricted
   6,153    6,153    6,153    6,153
Available-for-sale securities
   506,416    562,948    506,416    562,948
Securities at fair value through profit or loss
   34,035    23,683    34,035    23,683
Securities purchased under agreement to resell
   894    2,370    894    2,370
Cash and cash equivalents
   69,452    55,985    69,452    55,985
Investment contracts (ii)
   (66,639 ) (69,797 ) (65,074 ) (68,580 )
Securities sold under agreements to repurchase
   (68,499 ) (13,000 ) (68,499 ) (13,000 )
Bonds payable
   (67,981 ) (29,990 ) (68,000 ) (30,000 )
~~The table below presents the carrying value and estimated fair value of major financial assets and liabilities:~~

Carrying value Estimated fair value
As at 31 As at 31 As at 31 As at 31
December December December December
2010 2009 2010 2009
RMB million RMB million RMB million RMB million

Held-to-maturity securities 246,227 235,099 244,304 235,668
Loans 36,543 23,081 36,543 23,081
Term deposits (excluding structured deposits) 441,585 344,710 441,585 344,710
Structured deposits — 273 — 272
Statutory deposits-restricted 6,153 6,153 6,153 6,153
Available-for-sale securities 548,121 517,499 548,121 517,499
Securities at fair value through income 9,762 9,133 9,762 9,133
Cash and cash equivalents 47,854 36,197 47,854 36,197
Investment contracts (ii) (70,171 ) (67,326 ) (69,432 ) (66,184 )
Securities sold under agreements to repurchase (23,065 ) (33,553 ) (23,065 ) (33,553 )
(i)
The estimates and ~~judgments~~judgements to determine the fair value of financial assets are described in Note 3.2.
(ii)
The fair value of investment contracts are determined by using valuation techniques, with consideration of the present value of expected cash flows arising from contracts using a risk-adjusted discount rate, allowing for risk free rate available on valuation date, ~~the own~~ credit risk and risk margin associated with the future cash flows.
10
PREMIUMS RECEIVABLE
As at 31 December 2012, the carrying value of premiums receivable within one year is RMB8,735 million (As at 31 December 2011: RMB8,253 million).
11 ~~The aging of premiums receivable is within 12 months.~~REINSURANCE ASSETS
11
~~REINSURANCE ASSETS~~

As at 31 December 2010 As at 31 December 2009
RMB million RMB million    As at
31 December 2012    As at
31 December 2011
   RMB million    RMB million
Long-term insurance contracts ceded (Note 13) 719 701    758       730
Due from reinsurance companies 22 17    35       27
Ceded unearned premiums (Note 13) 57 83    101       76
Claims recoverable from reinsurers (Note 13) 32 31    54       45




Total
830 832    948       878





Current 111 131    190       148
Non-current 719 701    758       730




Total
830 832    948       878




~~F-56~~
F-59
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
12
OTHER ASSETS

As at 31 December 2010 As at 31 December 2009
RMB million RMB million
   As at 31
December 2012
RMB million    As at 31
December 2011
RMB million
Land use rights 3,609 3,279    6,330       6,381
Due from CLIC (Note 29(f)) 598 646
Advances 219 302
Due from CLIC (Note 30(f))
   560       596
Automated policy loan
   1,787       1,450
Tax refundable
   6,563       2,182
Others 3,773 2,090    2,900       1,573




Total
8,199 6,317    18,140       12,182





Current 4,573 2,471    11,794       5,788
Non-current 3,626 3,846    6,346       6,394




Total
8,199 6,317    18,140       12,182




~~F-57~~
F-60
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
13
INSURANCE CONTRACTS
(a) Process used to decide on assumptions
(i) For the insurance contracts of which future returns are affected by ~~the~~ investment yields of corresponding investment portfolios, investment return assumptions are applied as discount rates to assess the time value impacts on reserve computation.
In developing discount rate assumptions, the Group considers investment experience, current investment portfolio and trend of the relevant yield ~~curve.~~curves. The discount ~~rate reflects~~rates reflect the future economic outlook as well as the company’s investment strategy. The assumed discount ~~rate~~rates with risk margin for the past two ~~year~~years are as follows:
   Discount rate assumptions
As at 31 December ~~2010~~2012
   ~~4.58%~~4.80%~~~5.00~~ %5.00%
As at 31 December ~~2009~~2011
   ~~4.40%~~4.50%~~~5.00~~ %5.00%
For the insurance contracts of which the future returns are not affected by ~~the~~ investment yields of the corresponding investment portfolios, the Group ~~use~~uses discount rate assumption to assess the time value impacts based on the ~~“yield~~“Yield curve of reserve computation benchmark for insurance contracts”, published on the “China Bond” website, with consideration ~~includes the~~including liquidity spreads, taxation impacts and other relevant factors. The assumed discount ~~rate~~rates with risk margin for the past two years are as follows:
   Discount rate assumptions
As at 31 December ~~2010~~2012
   ~~2.61%~~3.12%~~~5.66~~ %5.61%
As at 31 December ~~2009~~2011
   ~~2.69%~~2.65%~~~5.32~~ %5.66%
The discount rate assumption is affected by ~~certain~~ factors such as future macro-economy, fiscal policies, capital market and availability of investment channel of insurance funds. The Group determines discount rate assumption based on the information obtained at the end of each reporting period including consideration of risk margin.
(ii) The mortality and morbidity assumptions are based on the Group’s historical mortality and morbidity experience. The assumed mortality rates and morbidity rates ~~are varying~~vary by age of the insured and contract type.
The Group bases its mortality assumptions on China Life Insurance Mortality Table (2000-2003), adjusted where appropriate to reflect the Group’s recent historical mortality experience. The main source of uncertainty with life insurance contracts is that epidemics and wide-ranging lifestyle changes could result in deterioration in future mortality experience, thus leading to an inadequate reserving of liability. Similarly, continuing advancements in medical care and social conditions could result in improvements in longevity that exceed those allowed for in the estimates used to determine the liability for contracts where the Group is exposed to longevity risk.
The Group bases its morbidity assumptions for critical illness products on analysis of historical experience and expectations of future developments. There are two main sources of uncertainty. First, wide-ranging lifestyle changes could result in future deterioration in morbidity experience. Second, future development of medical technologies and improved coverage of medical facilities available to policyholders may bring forward the timing of diagnosing critical illness, which demands earlier payment of the critical illness benefits. Both could ultimately result in an inadequate reserving of liability if current morbidity assumptions do not properly reflect such ~~secular~~ trends.
Risk margin is considered in the Group’s mortality and morbidity assumptions.

~~F-58~~
F-61
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
13
INSURANCE CONTRACTS (continued)

(a) Process used to decide on assumptions (continued)
(iii) Expense assumptions are based on expected unit costs with the consideration of risk margin. Such assumptions are affected by actual experience and a number of other factors including inflation and market competition based on information obtained at the end of each reporting period. Components of expense assumptions include cost per policy and percentage of premium as follows:
   Individual Life Group Life
   RMB Per Policy    % of Premium RMB Per Policy    % of Premium
As at 31 December 2012
   37.0~45.0    0.85%~0.90% 14.0       0.90 %
As at 31 December 2011
   37.0~45.0    0.85%~0.90% 14.0       0.90 %

Individual Life Group Life
RMB Per Policy % of Premium RMB Per Policy % of Premium

As at 31 December 2010 30.4~44.6 0.90%~1.00% 13.1 0.86 %
As at 31 December 2009 26.3~38.5 1.05%~1.17% 11.3 1.01 %
(iv) The lapse rates and other assumptions are affected by certain factors, such as future macro-economy, availability of financial substitutions, and market competition, which brings uncertainty to these assumptions. The lapse rates and other assumptions are determined with reference to creditable past experience, ~~where creditable,~~ current conditions, future expectations and other information obtained at the end of each reporting period.
The method used to determine risk margin has been consistently applied. The Company considers risk margin for each of the discount rate, mortality and morbidity and expense assumptions to compensate for the uncertain amount and timing of future cash flow. When determining risk margin, the Company considers historical experience, future expectations and other factors. Risk margin is determined by the Company and does not include any elements imposed by regulators.
(v) The Group adopted consistent process used to decide on assumptions for the insurance contracts disclosed in this note. On each reporting date, the Company reviews the assumptions for reasonable estimates of liability and risk margins, with consideration of all available information, and taking into account the Company’s historical experience and expectation of future events.
~~(b) Net liabilities of insurance contracts~~

As at 31 December 2010 As at 31 December 2009
RMB million RMB million

Gross

Long-term insurance contracts 1,008,896 809,223
Short term insurance contracts
- claims and claim adjustment expenses 3,304 2,944
- unearned premiums 5,935 5,997

Total, gross
1,018,135 818,164

Recoverable from reinsurers

Long-term insurance contracts (Note 11) (719 ) (701 )
Short-term insurance contracts
- claims and claim adjustment expenses (Note 11) (32 ) (31 )
- unearned premiums (Note 11) (57 ) (83 )

Total, ceded
(808 ) (815 )

Net

Long-term insurance contracts 1,008,177 808,522
Short-term insurance contracts
- claims and claim adjustment expenses 3,272 2,913
- unearned premiums 5,878 5,914

Total, net
1,017,327 817,349

~~F-59~~
F-62
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~2012
(b) Net liabilities of insurance contracts
   As at 31
December 2012
RMB million As at 31
December 2011
RMB million
Gross

Long-term insurance contracts
   1,375,504    1,190,486
Short-term insurance contracts

- claims and claim adjustment expenses
   3,078    3,189
- unearned premiums
   5,955    5,698


Total, gross
   1,384,537    1,199,373


Recoverable from reinsurers

Long-term insurance contracts (Note 11)
   (758 ) (730 )
Short-term insurance contracts

- claims and claim adjustment expenses (Note 11)
   (54 ) (45 )
- unearned premiums (Note 11)
   (101 ) (76 )


Total, ceded
   (913 ) (851 )


Net

Long-term insurance contracts
   1,374,746    1,189,756
Short-term insurance contracts

- claims and claim adjustment expenses
   3,024    3,144
- unearned premiums
   5,854    5,622


Total, net
   1,383,624    1,198,522


F-63
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
13
INSURANCE CONTRACTS (continued)

(c) Movements in liabilities of short-term insurance contracts
The table below presents movements in claims and claim adjustment expenses reserve:
   2012
RMB million 2011
RMB million
- Notified claims
   354    326
- Incurred but not reported
   2,835    2,978


Total as at 1 January—Gross
   3,189    3,304


Cash paid for claims settled in year

- Cash paid for current year claims
   (5,427 ) (5,436 )
- Cash paid for prior year claims
   (2,691 ) (2,594 )
Claims incurred in year

- Claims arising in current year
   8,056    8,002
- Claims arising in prior years
   (49 ) (87 )


Total as at 31 December—Gross
   3,078    3,189


- Notified claims
   202    354
- Incurred but not reported
   2,876    2,835


Total as at 31 December —Gross
   3,078    3,189


2010 2009
RMB million RMB million

- Notified claims 228 352
- Incurred but not reported 2,716 2,428

Total as at 1 January — Gross
2,944 2,780

Cash paid for claims settled in year
- Cash paid for current year claims (5,959 ) (5,478 )
- Cash paid for prior year claims (2,516 ) (2,274 )
Claims incurred in year
- Claims arising in current year 8,826 7,951
- Claims arising in prior year 9 (35 )

Total as at 31 December — Gross
3,304 2,944

- Notified claims 326 228
- Incurred but not reported 2,978 2,716

Total as at 31 December — Gross
3,304 2,944

The table below presents movements in unearned premium reserves:
   Gross 2012
RMB million
Ceded Net Gross 2011
RMB million
Ceded Net
As at 1 January
   5,698    (76 ) 5,622    5,935    (57 ) 5,878
Increase
   5,955    (101 ) 5,854    5,698    (76 ) 5,622
Release
   (5,698 ) 76    (5,622 ) (5,935 ) 57    (5,878 )


As at 31 December
   5,955    (101 ) 5,854    5,698    (76 ) 5,622


2010 2009
RMB million RMB million
Gross Ceded Net Gross Ceded Net

As at 1 January
5,997 (83 ) 5,914 5,237 (58 ) 5,179
Increase 5,935 (57 ) 5,878 5,997 (83 ) 5,914
Release (5,997 ) 83 (5,914 ) (5,237 ) 58 (5,179 )

As at 31 December
5,935 (57 ) 5,878 5,997 (83 ) 5,914

F-64
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
13
INSURANCE CONTRACTS (continued)
(d) Movements in liabilities of long-term insurance contracts
The table below presents movements in the liabilities of long-term insurance contracts:
   2012
RMB million 2011
RMB million
As at 1 January
   1,190,486    1,008,896
Premiums
   306,309    302,450
Release of liabilities (i)
   (182,271 ) (174,189 )
Accretion of interest
   58,259    47,090
Change in assumptions

-Change in discount rates
   (548 ) 4,100
-Change in other assumptions (ii)
   230    (832 )
Other movements
   3,039    2,971


As at 31 December
   1,375,504    1,190,486


2010 2009
RMB million RMB million

As at 1 January 809,223 654,848

Premiums 303,254 261,905
Release of liabilities (i) (138,159 ) (127,472 )
Accretion of interest 38,298 26,834
Change in assumptions (6,382 ) (8,085 )
Other movements 2,662 1,193

As at 31 December
1,008,896 809,223

(i)
The release of liabilities mainly consists of ~~payments for~~release due to death or other termination and related expenses, release of residual margin and change of reserves for claims and claim adjustment expenses.
(ii)
During the year ended 31 December 2012, change in other assumptions is mainly caused by change in mortality assumptions of certain products, which increased insurance liability by RMB229 million. This change reflected the Group’s most recent historical mortality experience and future expectations as at reporting date. No significant changes made to other assumptions. During the year ended 31 December 2011, change in other assumptions is mainly caused by change in lapse rates assumptions of certain products, which decreased insurance liability by RMB848 million. This change reflected the Group’s most recent creditable past experience and future expectations as at reporting date. No significant changes made to other assumptions.

~~F-60~~
F-65
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
14
INVESTMENT CONTRACTS
   As at 31
December 2012
RMB million    As at 31
December 2011
RMB million
Investment contracts with DPF at amortised cost
   47,977       52,072
Investment contracts without DPF

- At amortised cost
   18,627       17,668
- Designated as at fair value through profit or loss
   35       57




Total
   66,639       69,797




As at 31 As at 31
December 2010 December 2009
RMB million RMB million

Investment contracts with DPF 50,839 50,219
Investment contracts without DPF
- At amortised cost 19,248 17,055
- Designated as at fair value through income 84 52

Total
70,171 67,326

The table below presents movements of investment contracts with ~~DPF~~
DPF:

2010 2009
RMB million RMB million

As at 1 January
50,219 51,676

Deposits received 9,459 10,061
Deposits withdrawn and paid on death and other benefits (9,990 ) (12,488 )
Policy fees deducted from account balances (95 ) (221 )
Interest credited 1,246 1,191

As at 31 December
50,839 50,219

15
~~SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE~~

As at 31 As at 31
December 2010 December 2009
RMB million RMB million

Maturing:
Within thirty days 23,065 25,326
After thirty but within ninety days — 8,227

Total
23,065 33,553

~~Carrying values of debt securities pledged as collateral representing available-for-sale investments are as follows~~

As at 31 As at 31
December 2010 December 2009
RMB million RMB million

Debt securities pledged 24,377 34,306

Total
24,377 34,306

   2012
RMB million 2011
RMB million
As at 1 January
   52,072    50,839
Deposits received
   6,424    6,981
Deposits withdrawn, payments on death and other benefits
   (11,868 ) (7,089 )
Policy fees deducted from account balances
   (30 ) (59 )
Interest credited
   1,379    1,400


As at 31 December
   47,977    52,072


15 Bonds payable
~~F-61~~As at 31 December 2012, all bonds payable were with total carrying value of RMB67,981 million (as of 31 December 2011: RMB29,990 million) and the par value of RMB68,000 million (as of 31 December 2011: RMB30,000 million).

As at 31
December 2012

As at 31
December 2011

      Par Value
Issue date
   Maturity date    Annual Interest rate RMB million    RMB million
26 October 2011
   26 October 2021    5.50 % 30,000       30,000
29 June 2012
   29 June 2022    4.70 % 28,000       —
5 November 2012
   5 November 2022    4.58 % 10,000       —




Total
      68,000       30,000




The Company issued 3 subordinated debts with maturity term of 10 years to qualified investors who met the relevant regulatory requirements. The coupon rates per annum for the first 5 years are 5.50%, 4.70%, 4.58% issued on 26 October 2011, 29 June 2012 and 5 November 2012, respectively. The Company has the right to call the subordinated debts at par at the end of the fifth year since issuance. If the Company does not exercise the call option, the coupon rate per annum for the remaining 5 years will be 7.50%, 6.70% and 6.58% issuance on 26 October 2011, 29 June 2012 and 5 November 2012, respectively.
Subordinated debts are measured at amortized cost as described in Note 2.10.
F-66
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
16 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
   As at 31
December 2012
RMB million    As at 31
December 2011
RMB million
Interbank market
   68,499       11,500
Stock Exchange market
   —         1,500
Total
   68,499       13,000
Maturing:

Within thirty days
   64,499       13,000
After thirty but within ninety days
   —         —
After ninety days
   4,000       —




Total
   68,499       13,000




As of 31 December 2012, bonds with carrying value of RMB70,515 million (as of 31 December 2011: RMB13,305 million) were pledged as collateral for securities sold under agreements to repurchase resulted from repurchase transactions entered into by the Group in the inter-bank market.
For debt repurchase transactions through stock exchange, the Group and the Company is required to deposit certain exchange-traded bonds into a collateral pool with fair value converted at a standard rate pursuant to stock exchange’s regulation which should be no less than the balance of related repurchase transaction. As of 31 December 2011, the carrying value of securities deposited in the collateral pool was RMB1,569 million. The collateral is restricted from trading during the period of the repurchase transaction.
F-67
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
17
OTHER LIABILITIES
   As at 31
December 2012
RMB million    As at 31
December 2011
RMB million
Salary and welfare payable
   4,035       4,207
Interest payable to policyholder
   3,492       2,523
Commission and brokerage payable
   2,459       1,871
Interest payable of subordinated debts
   1,044       303
Stock appreciation rights (Note 28)
   841       569
Payable to constructors
   761       449
Agent deposits
   686       666
Tax payable
   403       393
Others
   2,714       2,987




Total
   16,435       13,968




Current
   16,435       13,968
Non-current
   —      �� —




Total
   16,435       13,968




As at 31 December 2010 As at 31 December 2009
RMB million RMB million

Salary and staff welfare payable 3,780 2,892
Commission and brokerage payable 1,944 1,320
Agent deposits 656 659
Tax payable 378 356
Payable to constructors 372 317
Stock appreciation rights (Note 27) 1,192 1,555
Others 5,424 4,879

Total
13,746 11,978

Current 13,746 11,978
Non-current — —

Total
13,746 11,978

1718
STATUTORY INSURANCE FUND
As required by CIRC Order [2008] No. 2, “Measures for Administration of Statutory Insurance Fund”, all insurance companies have to pay statutory insurance fund contribution to the CIRC from 1 January 2009. The Group is subject to statutory insurance fund contribution, (i) at 0.15% and 0.05% of premiums and accumulated policyholder deposits from life policies with guaranteed benefits and life policies without guaranteed benefits, respectively. (ii) at 0.8% and 0.15% of premiums from short-term health policies and long-term health policies, respectively. (iii) at 0.8% of premiums from accident insurance contracts, at 0.08% and 0.05% of accumulated policyholder deposits from accident investment contracts with guaranteed benefits and without guaranteed benefits, respectively. When the accumulated statutory insurance fund contributions reach 1% of the Group’s total assets, no additional contribution to the statutory insurance fund is required.
19 As required by CIRC Order [2008] No. 2, all insurance companies have to pay statutory insurance fund contribution to the CIRC from 1 January 2009. The Group is subject to statutory insurance fund contribution, (i) at 0.15% and 0.05% of premiums and accumulated policyholder deposits from life policies with guaranteed benefits and life policies without guaranteed benefits, respectively. (ii) at 0.8% and 0.15% of premiums from short-term health policies and long-term health policies, respectively. (iii) at 0.8% of premiums from accident insurance contracts, at 0.08% and 0.05% of accumulated policyholder deposits from accident investment contracts with guaranteed benefits and without guaranteed benefits, respectively. When the accumulated statutory insurance fund contributions reach 1% of the Group’s total assets, no additional contribution to the statutory insurance fund is required.INVESTMENT INCOME
   For the year ended 31 December
   2012
RMB million    2011
RMB million    2010
RMB million
Debt securities

– held-to-maturity securities
   15,194       10,691       10,538
– available-for-sale securities
   16,219       16,935       14,962
– at fair value through profit or loss
   911       449       86
Equity securities

– available-for-sale securities
   4,773       4,876       5,211
– at fair value through profit or loss
   656       37       40
Bank deposits
   30,512       24,978       16,363
Loans
   4,339       2,658       1,583
Securities purchased under agreements to resell
   633       98       89
Others
   6       —         —






Total
   73,243       60,722       48,872






18
~~INVESTMENT INCOME~~

For the year ended 31 December
2010 2009 2008
RMB million RMB million RMB million

Debt securities
– held-to-maturity securities 10,538 9,882 9,245
– available-for-sale securities 14,962 13,580 13,074
– at fair value through income 86 297 371
Equity securities
– available-for-sale securities 5,211 3,108 9,563
– at fair value through income 40 38 530
Bank deposits 16,363 10,805 11,378
Loans 1,583 1,172 696
Securities purchased under agreements to resell 89 8 89

Total
48,872 38,890 44,946

Included in investment income is interest income of ~~RMB 43,621~~RMB67,814 million ~~(2009: RMB 35,744~~(2011: RMB55,809 million, ~~2008: RMB 34,853~~2010: RMB43,621 million). All interest is accrued using the effective interest method.
The investment income from listed debt and equity securities and unlisted debt and equity securities for the year ended 31 December ~~2010 are RMB 4,797~~2012 were RMB6,009 million and ~~RMB 26,038~~RMB31,744 million, respectively ~~(2009: RMB 3,422~~(2011: RMB5,105 million and ~~RMB 23,483~~RMB27,883 million, ~~2008: RMB 10,103~~2010: RMB4,797 million and ~~RMB 23,483~~RMB26,038 million).

~~F-62~~
F-68
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
1920
NET REALISED GAINS AND IMPAIRMENT ON FINANCIAL ASSETS
   For the year ended 31 December
   2012
RMB million 2011
RMB million 2010
RMB million
Debt securities

Net realised gains
   1,192    433    508
Reversal of impairment
   51    11    76


Subtotal
   1,243    444    584


Equity securities

Net realised gains
   2,975    1,272    17,028
Impairment
   (31,094 ) (12,924 ) (1,771 )


Subtotal
   (28,119 ) (11,652 ) 15,257


Total
   (26,876 ) (11,208 ) 15,841


For the year ended 31 December
2010 2009 2008
RMB million RMB million RMB million

Debt securities
Net realised gains 508 3,146 422
Reversal of impairment 76 200 2,023

Subtotal
584 3,346 2,445

Equity securities
Net realised gains 17,028 20,248 7,335
Impairment (1,771 ) (2,350 ) (15,744 )

Subtotal
15,257 17,898 (8,409 )

Total
15,841 21,244 (5,964 )

Net realised gains on financial assets are from available-for-sale securities.
During the year ended 31 December 2012, the Group recognized impairment charge of RMB14,950 million (2011: RMB4,133 million, 2010: RMB259 million) of available-for-sale funds, RMB15,980 million (2011: RMB8,791 million, 2010: RMB1,512 million) of available-for-sale common stocks and RMB164 million (2011: Nil, 2010: Nil) of other available-for-sale securities, for which the Group determined that objective evidence of impairment existed.
21 ~~Net realised gains on financial assets are from available-for-sale securities.~~
During the year ended 31 December 2010, the Group recognized impairment expense of RMB 1,771 million (2009: RMB 2,350 million, 2008: RMB 15,744 million) of available-for-sale securities for which the Group determined that objective evidence of impairment existed.
20
NET FAIR VALUE (LOSSES) / GAINS THROUGH ~~INCOME~~
PROFIT OR LOSS

For the year ended 31 December
2010 2009 2008
RMB million RMB million RMB million    For the year ended 31 December
   2012
RMB million 2011
RMB million 2010
RMB million
Debt securities 403 (250 ) 300    47    (405 ) 403
Equity securities (486 ) 1,726 (7,494 )    (88 ) 134    (486 )
Stock appreciation rights 363 (27 ) —    (272 ) 608    363


Total
280 1,449 (7,194 )    (313 ) 337    280


~~F-63~~
F-69
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2122
INSURANCE BENEFITS AND CLAIMS EXPENSES
   Gross
RMB million    Ceded
RMB million Net
RMB
million
For the year ended 31 December 2012

Life insurance death and other benefits
   107,688       (14 ) 107,674
Accident and health claims and claim adjustment expenses
   8,011       (113 ) 7,898
Increase in insurance contracts liabilities
   185,018       (28 ) 184,990




Total insurance benefits and claims expenses
   300,717       (155 ) 300,562




For the year ended 31 December 2011

Life insurance death and other benefits
   101,362       (13 ) 101,349
Accident and health claims and claim adjustment expenses
   7,903       (114 ) 7,789
Increase in insurance contracts liabilities
   181,590       (11 ) 181,579




Total insurance benefits and claims expenses
   290,855       (138 ) 290,717




For the year ended 31 December 2010

Life insurance death and other benefits
   71,255       (18 ) 71,237
Accident and health claims and claim adjustment expenses
   8,835       (95 ) 8,740
Increase in insurance contracts liabilities
   199,673       (18 ) 199,655




Total insurance benefits and claims expenses
   279,763       (131 ) 279,632




Gross Ceded Net
RMB million RMB million RMB million

For the year ended 31 December 2010

Life insurance death and other benefits 71,255 (18 ) 71,237
Accident and health claims and claim adjustment expenses 8,835 (95 ) 8,740
Increase in insurance contracts liabilities 199,673 (18 ) 199,655

Total insurance benefits and claims expenses
279,763 (131 ) 279,632

For the year ended 31 December 2009

Life insurance death and other benefits 74,876 (18 ) 74,858
Accident and health claims and claim adjustment expenses 7,909 (101 ) 7,808
Increase in insurance contracts liabilities 154,374 (2 ) 154,372

Total insurance benefits and claims expenses
237,159 (121 ) 237,038

For the year ended 31 December 2008

Life insurance death and other benefits 89,677 (18 ) 89,659
Accident and health claims and claim adjustment expenses 7,703 (62 ) 7,641
Increase in insurance contracts liabilities 134,690 (41 ) 134,649

Total insurance benefits and claims expenses
232,070 (121 ) 231,949

2223
INVESTMENT CONTRACT BENEFITS
Benefits of investment contract are mainly the interest credited to investment contracts and universal life contracts.
24 ~~Benefits of investment contract are mainly the interest credited to investment contracts and universal life contracts.~~FINANCE COSTS
   For the year ended 31 December
   2012
RMB million    2011
RMB million    2010
RMB million
Interest expenses for bonds payable
   2,394       303       —
Interest expenses for securities sold under agreements to repurchase
   181       570       304






Total finance costs
   2,575       873       304






2325
PROFIT BEFORE INCOME TAX
Profit before income tax is stated after charging the following:
~~Profit before income tax is stated after charging the following:~~

For the year ended 31 December
2010 2009 2008
RMB million RMB million RMB million    For the year ended 31 December
   2012
RMB million    2011
RMB million    2010
RMB million
Employee salary and welfare cost 8,240 7,773 5,089    9,699       8,416       8,240
Housing benefits 507 472 336    643       552       507
Contribution to the defined contribution pension plan 1,344 1,182 873    1,743       1,555       1,344
Depreciation and amortisation 1,802 1,560 1,358    1,949       1,909       1,802
Interest expenses on securities sold under the agreements to repurchase 304 111 438
Exchange loss 392 28 907    49       547       392
Auditor’s remuneration 65 71 64

Auditors’ remuneration
   65       65       65

~~F-64~~
F-70
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2426
TAXATION
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 relate to the same fiscal authority.
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 relate to the same fiscal authority.
(a)
The amount of taxation charged to ~~the~~ net profit ~~represents~~represents:
   For the year ended 31 December
   2012
RMB million 2011
RMB million 2010
RMB million
Current taxation – Enterprise income tax
   1,581    4,355    6,420
Deferred taxation
   (1,885 ) (2,333 ) 777


Taxation charges
   (304 ) 2,022    7,197


2010 2009 2008
RMB million RMB million RMB million

Current taxation — Enterprise income tax 6,420 6,299 2,078
Deferred taxation 777 2,410 (1,393 )

Taxation charges 7,197 8,709 685

(b)
The reconciliation between the Group’s effective tax rate and the statutory tax rate of 25% in the PRC (for the year ended 31 December ~~2009:~~2011 and 2010: 25%) is as follows:
   For the year ended 31 December
   2012
RMB million 2011
RMB million 2010
RMB million
Profit before income tax
   10,968    20,513    41,008
Tax computed at the statutory tax rate
   2,742    5,128    10,252
Non-taxable income
   (i ) (3,462 ) (3,511 ) (3,413 )
Additional tax liability from expenses not deductible for tax purposes
   (i ) 364    325    317
Unused tax losses
   49    57    41
Other
   3    23    —


Income tax at effective tax rate
   (304 ) 2,022    7,197


2010 2009 2008
RMB million RMB million RMB million

Profit before income tax 41,008 41,745 19,959

Tax computed at the statutory tax rate 10,252 10,436 4,990
Non-taxable income (i ) (3,413 ) (2,627 ) (4,524 )
Additional tax liability from expenses not deductible for tax purposes (i ) 317 520 196
Unused tax losses 41 25 23
Other — 355 —

Income taxes at effective tax rate 7,197 8,709 685

(i)
Non-taxable income mainly includes interest income from government bonds and ~~fund.~~funds. Expenses not deductible for tax purposes mainly include commission, brokerage and donation expenses that do not meet the criteria for deduction ~~set by~~according to the relevant tax regulations.

~~F-65~~
F-71
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2426
TAXATION (continued)
(c)
As at 31 December ~~2010,~~2012, deferred income ~~taxation~~tax was calculated in full on temporary differences under the liability method using a principal ~~taxation~~tax rate of 25%. The movements in deferred tax assets and liabilities during the year are as follows:
Deferred tax assets / (liabilities)
   Insurance Investment Others
   RMB
million
(i) RMB
million
(ii) RMB
million
(iii) Total
RMB
million
As at 1 January 2011
   (11,131 ) (1,502 ) 857    (11,776 )
(Charged) / credited to net profit
   (505 ) 2,740    98    2,333
(Charged) / credited to other comprehensive income

- Available-for-sale securities
   —      8,619    —      8,619
- Portion of fair value gains on available-for-sale securities allocated to participating policyholders
   (630 ) —      —      (630 )


As at 31 December 2011
   (12,266 ) 9,857    955    (1,454 )


As at 1 January 2012
   (12,266 ) 9,857    955    (1,454 )
(Charged) / credited to net profit
   (180 ) 2,128    (63 ) 1,885
(Charged) / credited to other comprehensive income

- Available-for-sale securities
   —      (8,924 ) —      (8,924 )
- Portion of fair value losses on available-for-sale securities allocated to participating policyholders
   659    —      —      659


As at 31 December 2012
   (11,787 ) 3,061    892    (7,834 )


~~Deferred tax~~

Insurance Investment Others Total
RMB RMB RMB RMB
million million million million
(i) (ii) (iii)

As at 1 January 2009 (9,452 ) (1,473 ) 581 (10,344 )
(Charged) / credited to net profit (79 ) (2,404 ) 73 (2,410 )
(Charged) / credited to other comprehensive income
- Available-for-sale securities — (4,607 ) — (4,607 )
- Portion of fair value gains on available-for-sale securities allocated to participating policyholders 1,000 — — 1,000

Subtotal 1,000 (4,607 ) — (3,607 )

As at 31 December 2009
(8,531 ) (8,484 ) 654 (16,361 )

As at 1 January 2010 (8,531 ) (8,484 ) 654 (16,361 )
(Charged) / credited to net profit (604 ) (376 ) 203 (777 )
(Charged) / credited to other comprehensive income
- Available-for-sale securities — 7,358 — 7,358
- Portion of fair value losses on available-for-sale securities allocated to participating policyholders (1,996 ) — — (1,996 )

Subtotal (1,996 ) 7,358 — 5,362

As at 31 December 2010
(11,131 ) (1,502 ) 857 (11,776 )

(i)
The deferred tax arising from the insurance category is mainly related to the change of long-term insurance contracts liabilities at 31 December 2008 as a result of the first time adoption of IFRS in 2009 and the temporary difference of short duration insurance contracts liabilities and policyholder dividend ~~payables;~~payables.

(ii)
The deferred tax arising from the investment category is mainly related to the temporary difference of unrealised gains/(losses) of available-for-sale securities and securities at fair value through ~~income;~~profit or loss.

(iii)
The deferred tax arising from the other category is mainly related to the temporary difference of employee salary and welfare cost payables.

~~F-66~~
F-72
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2426
TAXATION (continued)
(d)
The analysis of deferred tax assets and deferred tax liabilities is as follows:

As at 31 As at 31
December 2010 December 2009
RMB million RMB million
As at 31
December 2012

As at 31
December 2011

   RMB million RMB million
Deferred tax assets:
- deferred tax assets to be recovered after more than 12 months 3,217 6,063    6,729    10,306
- deferred tax assets to be recovered within 12 months 617 592    1,342    1,595


Subtotal
3,834 6,655    8,071    11,901



Deferred tax liabilities:
- deferred tax liabilities to be settled after more than 12 months (15,262 ) (22,668 )    (15,555 ) (13,105 )
- deferred tax liabilities to be settled within 12 months (348 ) (348 )    (350 ) (250 )


Subtotal
(15,610 ) (23,016 )    (15,905 ) (13,355 )


Total net deferred tax liabilities
   (7,834 ) (1,454 )


Total net deferred income tax liabilities
(11,776 ) (16,361 )

27
EARNINGS PER SHARE
~~F-67~~There is no difference between basic and diluted earnings per share. The basic and diluted earnings per share for the year ended 31 December 2012 are based on the weighted average number of 28,264,705,000 ordinary shares (for the year ended 31 December 2011 and 2010: 28,264,705,000 ordinary shares).
F-73
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2528
~~EARNINGS PER SHARE~~
There is no difference between basic and diluted earnings per share. The basic and diluted earnings per share for the year ended 31 December 2010 are based on the weighted average number of 28,264,705,000 ordinary shares (for the year ended 31 December 2009: 28,264,705,000).
26
STOCK APPRECIATION RIGHTS
The Board of Directors of the Company approved, on 5 January 2006, an award of stock appreciation rights of 4.05 million units and on 21 August 2006, another award of stock appreciation rights of 53.22 million units to eligible employees. The exercise prices of the two awards were HKD5.33 and HKD6.83, respectively, the average closing price of shares in the five trading days prior to 1 July 2005 and 1 January 2006, the dates for vesting and exercise price setting purposes of this award. The exercise prices of stock appreciation rights were the average closing price of the shares in the five trading days prior to the date of the award. Upon the exercise of stock appreciation rights, exercising recipients will receive payments in RMB, subject to any withholding tax, equal to the number of stock appreciation rights exercised times the difference between the exercise price and market price of the H shares at the time of exercise.
Stock appreciation rights have been awarded in units, with each unit representing the value of one H share. No shares of common stock will be issued under the stock appreciation rights plan. According to the Company’s plan, all stock appreciation rights will have an exercise period of five years from date of award and will not be exercisable before the fourth anniversary of the date of award unless specified market or other conditions have been met. On 26 February 2010, the Board of Directors of the Company extended the exercise period of all stock appreciation rights subject to government policy.
All the stock appreciation rights awarded were fully vested as at 31 December 2012. As at 31 December 2012, there were 55.01 million units outstanding and exercisable (as at 31 December 2011: 55.01 million). As at 31 December 2012, the amount of intrinsic value for the vested stock appreciation rights is RMB828 million (as at 31 December 2011: RMB556 million).
The fair value of the stock appreciation rights is estimated on the date of valuation at each reporting date using lattice-based option valuation models based on expected volatility from 60% to 70%, an expected dividend yield of no higher than 0.5% and risk-free interest rate from 0.2% to 0.3%.
The Company recognized a loss of RMB272 million in the net fair value (losses)/gains through profit or loss in the consolidated comprehensive income representing the fair value change of the rights during the year ended 31 December 2012 (2011 fair value gain: RMB608 million, 2010 fair value gain: RMB363 million). No reversed cost due to be abstentions of the stock appreciation rights during the year ended 31 December 2012 (2011: RMB15 million, 2010: Nil). RMB828 million and RMB13 million were included in salary and staff welfare payable included under Other Liabilities for the units not exercised and exercised but not paid as at 31 December 2012 (as at 31 December 2011, RMB556 million and RMB13 million), respectively. No unrecognized compensation cost due to the stock appreciation rights as at 31 December 2012 and 2011.
29 The Board of Directors of the Company approved, on 5 January 2006, an award of stock appreciation rights of 4.05 million units and on 21 August 2006, another award of stock appreciation rights of 53.22 million units to eligible employees. The exercise prices of the two awards were HK$5.33 and HK$6.83, respectively, the average closing price of shares in the five trading days prior to 1 July 2005 and 1 January 2006, the dates for vesting and exercise price setting purposes of this award. The exercise price of stock appreciation rights was the average closing price of the shares in the five trading days prior to the date of the award. Upon the exercise of stock appreciation rights, exercising recipients will receive payments in RMB, subject to any withholding tax, equal to the number of stock appreciation rights exercised times the difference between the exercise price and market price of the H shares at the time of exercise.
Stock appreciation rights have been awarded in units, with each unit representing the value of one H share. No shares of common stock will be issued under the stock appreciation rights plan. According to the Company’s plan, all stock appreciation rights will have an exercise period of five years from date of award and will not be exercisable before the fourth anniversary of the date of award unless specified market or other conditions have been met. On 26th February 2010, the Board of Directors of the Company extended the exercise period of all stock appreciation rights and the exercise period will depend on the government policy.
No stock appreciation right was exercised, forfeited or expired in 2010. As at 31 December 2010, there are 55.71 million units outstanding (as at 31 December 2009: 55.71 million) and 55.71 million units exercisable (as at 31 December 2009: 55.71 million). As at 31 December 2010, the amount of intrinsic value for the vested stock appreciation rights is RMB 1,185 million (as at 31 December 2009: RMB 1,551 million).
The fair value of the stock appreciation rights is estimated on the date of valuation using lattice-based option valuation models based on expected volatility from 60% to 70%, an expected dividend yield of no higher than 0.5% and risk-free interest rate from 0.2% to 0.3%.
All the stock appreciation rights awarded were fully vested as at 31 December 2010. The Company recognized a gain of RMB 363 million in the fair value gain in the consolidated comprehensive income representing the fair value change of the rights for the year ended 31 December 2010. For the year ended 31 December 2009, the Company charged compensation cost of RMB 839 million representing the fair value change of the rights before they are fully vested. RMB 1,179 million and RMB 13 million were included in salary and staff welfare payable included under Other Liabilities for the units not exercised and exercised but not paid as at 31 December 2010 (as at 31 December 2009, RMB 1,542 million and RMB 13 million respectively). No unrecognized compensation cost due to the stock appreciation rights as at 31 December 2010.
DIVIDENDS
27
~~DIVIDENDS~~
Pursuant to the equity holders’ approval at the Annual General Meeting in April 2010, a final dividend of RMB 0.70 per ordinary share totalling RMB 19,785 million in respect of the year ended 31 December 2009 was declared and was paid in 2010. These dividends have been recorded in the consolidated financial statements for the year ended 31 December 2010.
Pursuant to a resolution passed at the meeting of the Board of Directors on 22 March 2011, a final dividend of RMB 0.40 per ordinary share totalling approximately RMB 11,306 million for the year ended 31 December 2010 was proposed for equity holders’ approval at the Annual General Meeting. The dividend has not been provided in the consolidated financial statements for the year ended 31 December 2010.
Pursuant to the equity holders’ approval at the Annual General Meeting in May 2012, a final dividend of RMB0.23 per ordinary share totalling RMB6,501 million in respect of the year ended 31 December 2011 was declared and was paid in 2012. These dividends have been recorded in the consolidated financial statements for the year ended 31 December 2012.
Pursuant to the equity holders’ approval at the Annual General Meeting in June 2011, a final dividend of RMB 0.40 per ordinary share totalling RMB 11,306 million in respect of the year ended 31 December 2010 was declared and was paid in 2011. These dividends have been recorded in the consolidated financial statements for the year ended 31 December 2011.
Pursuant to the equity holders’ approval at the Annual General Meeting in April 2010, a final dividend of RMB 0.70 per ordinary share totalling RMB 19,785 million in respect of the year ended 31 December 2009 was declared and was paid in 2010. These dividends have been recorded in the consolidated financial statements for the year ended 31 December 2010.
Pursuant to a resolution passed at the meeting of the Board of Directors on 27 March 2013, a final dividend of RMB0.14 per ordinary share totalling approximately RMB3,957 million for the year ended 31 December 2012 was proposed for equity holders’ approval at the Annual General Meeting. The dividend has not been recorded in the consolidated financial statements for the year ended 31 December 2012.

~~F-68~~
F-74
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2830
SIGNIFICANT RELATED PARTY TRANSACTIONS
(a)
Related parties
The table set forth below summarises the names of significant related parties and nature of relationship with the Company as at 31 December 2012:
~~(a)~~
Significant related parties

~~Related parties~~
Related parties are those parties which have the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. The table set forth below summarises the names of significant related parties and nature of relationship with the Company as at 31 December 2010:
~~Significant related party~~
Relationship with the Company
CLIC

~~CLIC~~
The ultimate holding company
China Life Asset Management Company Limited (“AMC”)

A subsidiary of the Company
China Life Pension Company Limited (“Pension Company”)

A subsidiary of the Company
Sino-Ocean

An associate of the Company
~~GDB~~
CGB

An associate of the Company
CLP&C

An associate of the Company ~~and under common control of the ultimate holding company~~
China Life Real Estate ~~Co.,~~Company Limited (“CLRE”)
   ~~A subsidiary~~
Under common control of ~~a subsidiary of the ultimate holding company~~CLIC
China Life Insurance (Overseas) ~~Co.,~~Company Limited (“China Life Overseas”)

Under common control of ~~the ultimate holding company~~CLIC
China Life Franklin Asset Management ~~Co,~~Company Limited (“AMC HK”)
   ~~A subsidiary of a~~
An indirect subsidiary of the Company
China Life Investment Holding Company Limited (“IHC”)

Under common control of ~~the ultimate holding company~~CLIC
China Life Enterprise Annuity Fund (“EAP”)

A pension fund ~~operated for the benefit of employees in~~jointly set up by the Company and ~~AMC~~others.
~~(b)~~
China Life Yuantong Property Company Limited (“China Life Yuantong”)

~~Information~~
Under common control of ~~the parent company is as follows:~~
CLIC
(b)
Related parties with control relationship
Information of the parent company is as follows:
Name

Location of
registration

Principal business

Relationship
~~Legal~~
~~Location of~~ with
the company
   Nature of ~~Represent~~
~~Name~~ ~~registration~~ ~~Principal business~~ ~~company~~
economic    ~~ative~~Legal
Representative
CLIC

Beijing, China

~~CLIC~~ ~~Beijing, China~~ ~~Life,~~
Insurance services including receipt of premiums and payment of benefits in respect of the in-force life, health, ~~and~~ accident ~~insurance~~ and other types of personal insurance business, and ~~reinsurance. Funds~~the reinsurance business; holding or investing in domestic and overseas insurance companies or other financial insurance institutions; funds management business permitted by national laws and regulations or approved by State Council of the People’s Republic of ~~China. Provision of various types of personal insurance services, consulting and agency services. Other~~China; other business approved by ~~CIRC and other~~insurance regulatory ~~department~~agencies.

Immediate and ultimate holding company

State
owned
   ~~Chao~~
Yang
~~Refer to Note 34 for basic and related information of subsidiaries.~~

Mingsheng

~~F-69~~
F-75
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2830
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(c)
Registered capital of related parties with control relationship and changes during the year

As at 31 December As at 31 December
2009 Increase Decrease 2010
Name of related party RMB million RMB million RMB million RMB million

CLIC 4,600 — — 4,600
AMC 3,000 — — 3,000
Pension Company 2,500 — — 2,500
HK AMC HK dollar 60 million — — HK dollar 60 million
~~(d)~~

As at 31 December
2011
Increase Decrease
As at 31 December
2012
Name of related party million million million million
CLIC
RMB4,600 —   —   RMB4,600
AMC
RMB3,000 —   —   RMB3,000
Pension Company
RMB2,500 —   —   RMB2,500
AMC HK
HK dollar 60 —   —   HK dollar 60
(d)
Percentage of holding of related parties with control relationship and changes during the year

As at 31 December 2009 As at 31 December 2010
Amount Percentage of Increase Decrease Amount Percentage of
Equity holder RMB million holding RMB million RMB million RMB million holding

CLIC (i) 19,324 68.40 % — — 19,324 68.40 %

As at 31 December 2009 As at 31 December 2010
Amount Percentage of Increase Decrease Amount Percentage of
Subsidiaries RMB million holding RMB million RMB million RMB million holding

AMC (ii) 1,680 60.00% directly — — 1,680 60.00% directly
Pension Company(ii) 2,305 92.20% directly and indirectly — — 2,305 92.20% directly and indiretly
AMC HK (ii) HK dollar 30 million 50.00% indirectly — — HK dollar 30 million 50.00% indirectly
~~(i)~~ ~~CLIC holds 68.40% of the Company’s registered capital and has the power to control the Company.~~
~~(ii)~~ ~~They are subsidiaries and have been controlled by the Company.~~
   As at 31 December 2011       As at 31 December 2012
Equity holder
   Amount
million    Percentage
of holding Increase
million    Decrease
million    Amount
million    Percentage
of holding
CLIC
   RMB19,324       68.37 % —         —         RMB19,324       68.37 %
   As at 31 December 2011       As at 31 December 2012
Subsidiaries
   Amount
million    Percentage
of holding Increase
million    Decrease
million    Amount
million    Percentage
of holding
AMC
   RMB1,680

60.00%
directly


—         —         RMB1,680

60.00%
directly


Pension Company
   RMB2,305

92.20% directly
and indirectly


—         —         RMB2,305

92.20%
directly
and
indirectly




AMC HK
   HK dollar 30

50.00%
indirectly


—         —         HK dollar 30

50.00%
indirectly



~~F-70~~
F-76
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2830
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(e)
Transactions with significant related parties
~~The following table summarises significant transactions carried out by the Group with its significant related parties for the year ended 31 December 2010.~~
The following table summarises significant transactions carried out by the Group with its significant related parties.

For the year ended 31 December
2010 2009 2008    For the year ended 31 December
Note RMB million RMB million RMB million    Note 2012    2011    2010
   RMB million    RMB million    RMB million
Transactions with CLIC and its subsidiaries

Policy management fee income earned from CLIC (i) 1,154 1,193 1,298    (i) 1,063       1,112       1,154
Asset management fee earned from CLIC (ii) 123 112 243    (ii.a) 133       129       123
Additional capital contribution to AMC from CLIC — 720 —
Dividends to CLIC 13,526 4,444 8,116    4,444       7,729       13,526
Dividends to CLIC from AMC 111 104 93    65       58       111
Awards on recovery of non-performing assets and others earned from CLIC
   —         14       —
Retired personnel management fee earned from CLIC
   2       2       —
Asset management fee earned from China Life Overseas (ii) 27 15 15    (ii.d) 20       17       27
Asset management fee earned from CLP&C (ii) 5 3 2    (ii.c) 12       23       5
Property insurance payments to CLP&C 44 37 29    58       51       44
Claim payment and others to the Company from CLP&C 38 41 46    19       14       38
Brokerage fee from CLP&C (iii) 216 129 79    (iii) 648       405       216
Rentals and policy management fee income earned from CLP&C 23 36 —
Additional capital contribution to CLP&C (Note 7)
   —         1,600       —
Brokerage fee payment to CLP&C
   16       —         —
Rentals and service fee income earned from CLP&C
   28       22       23
Rentals, project payments and others to CLRE (iv) 14 8 18    (iv) 38       26       14
Property leasing expense charged by IHC (v) 67 64 33    (v) 63       66       67
Asset management fee earned from IHC 6 7 21    5       6       6
Services fee and other income earned from IHC 14 30 —
Asset purchase payments to Chengdu Insurance Institution — 19 —
Transaction with GDB

Additional capital contribution to GDB 2,999 — —
Interest income earned from GDB 376 309 361
Brokerage fee charged by GDB (vi) 16 20 25
Interest income earned from GDB of additional capital contribution 13 — —
Dividends from GDB — 55 —
Service fee and other income earned from IHC
   14       34       14
PP&E purchase payment to IHC
   61       2       —
Property leasing fee earned from IHC
   23       8       —
Prepayment to China Life Yuantong
   —         167       —
Additional capital contribution to China Life Yuantong
   (viii) 361       —          —
Transaction with CGB

Interest income earned from CGB
   733       690       376
Brokerage fee charged by CGB
   (vi) 9       9       16
Additional capital contribution to CGB
   —         —         2,999
Interest income earned from CGB of additional capital contribution
   —         —         13
Premium earned from CGB
   2       5       —
Transaction with Sino-Ocean

Dividends from Sino-Ocean 118 — —
Subordinated debts purchased from Sino-Ocean
   —         260       —
Scrip dividends from Sino-Ocean (Note 7)
   182       91       —
Cash dividends from Sino-Ocean
   —         56       118
Interest earned from subordinated debts
   26       13       —
Project management fee paid to Sino-Ocean
   61       4       —
Transaction with EAP

Payment to EAP 210 298 —    261       235       210
Transaction with AMC

Asset management fee expense charged to the Company by AMC (ii) 659 540 362    (ii.b) 761       692       659
Dividends to the Company 167 156 140    97       87       167
Payments of insurance policies by AMC to the Company 1 1 1    1       1       1
Brokerage fee to the Company — 5 1
Additional capital contribution to AMC — 1,080 —
Project consulting fee paid to AMC
   3       3       —
Transaction with Pension Company

Expenses paid on behalf of Pension Company 134 86 79
Promote fee of Annuity to the Company 8 — —
Brokerage fee to the Company (vii) 7 3 1
Investment brokerage fee charged by the Company 5 2 —
Rental and disbursement from Pension Company
   104       97       134
Brokerage fee from pension company
   (vii) 7       6       7
Annuity promotion fee from pension company
   18       32       8
Investment brokerage fee from pension company
   2       36       5
IT services fee income earned from Pension Company 2 2 —    3       2       2
Surcharge on building sold to Pension Company — 244 —
Business promotion income from Pension Company
   2       3       —
Transaction with AMC HK

Investment management fee expense charged to the Company by AMC HK (ii) 8 8 7
Investment management fee charged to the Company by AMC HK
   (ii.e) 8       9       8

~~F-71~~
F-77
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2830
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(e)
Transactions with significant related parties (continued)
~~Note:~~
~~(i)~~ As part of the restructuring, CLIC transferred its entire branch services network to the Company. CLIC and the Company entered into an agreement on 24 December 2005 to engage the Company to provide policy administration services to CLIC relating to the non-transferred policies. The Company, as a service provider, does not acquire any rights or assume any obligations as an insurer under the non-transferred policies. In consideration of the services provided under the agreement, CLIC will pay the Company a policy management fee based on the estimated cost of providing the services, to which a profit margin is added. The policy management fee is equal to, for each semi-annual payment period, the sum of (1) the number of non-transferred policies in force that were within their policy term as at the last day of the period, multiplied by RMB8.00 per policy and (2) 2.50% of the actual premiums and deposits in respect of such policies collected during the period. The agreement would be automatically renewed for a three year term subject to compliance with the Stock Exchange regulations unless a written notice of non renewal is issued by the Company or the Group 180 days prior to the expiration of the contract or the renewed term. The Company and the Group could modify term of policy management fee based on the current market terms when renewing the contract. Otherwise, the original fee term would apply. On 30 December 2008, the Company and CLIC signed a renewal agreement to extend the contract signed on 24 December 2005 to 31 December 2011, with all the terms unchanged. The policy management fee income is included in other income in consolidated statement of comprehensive income.
~~(ii)~~ In December 2005, CLIC and AMC entered into an agreement, whereby CLIC agreed to pay the AMC a service fee at the rate of 0.05% per annum. The service fee was calculated and payable on a monthly basis, by multiplying the average of book value of the assets under management (after deducting the funds obtained and interests accrued from repurchase transactions) at the beginning and at the end of any given month by the rate of 0.05%, divided by 12. Such rate was determined with reference to the applicable management fee rate pre-determined for each specified category of assets managed by the AMC to arrive at a comprehensive service fee rate. On 30 December 2008, CLIC and AMC signed a renewal agreement, which extended the expiry date of the original agreement to 31 December 2011. The service fee is calculated in the same way of original agreement and could be adjusted according to the performance.
In December 2005, the Company and the AMC have entered into a separate agreement, whereby the Company agreed to pay the AMC a fixed service fee and a variable service fee. The fixed service fee is payable monthly and is calculated with reference to the net asset value of the assets in each specified category managed by the AMC and the applicable management fee rates pre-determined by the parties on an arm’s length basis. The variable service fee equals to 10% of the fixed service fee per annum payable annually. The service fees were determined by the Company and the AMC based on an analysis of the cost of service, market practice and the size and composition of the asset pool to be managed. On 30 December 2008, the Company and AMC signed a renewal agreement, which extended the expiry date of the original agreement to 31 December 2010. The variable service fee was changed to 20% of the fixed service fee per annum payable annually and could be adjusted according to the performance.
In March 2007, CLP&C and the AMC entered into an agreement, whereby CLP&C agreed to pay the AMC a fixed service fee and a variable service fee. The agreement expired in December 2008. In 2009, CLP&C and the AMC signed a new agreement, with effective period to 31 December 2010. The agreement is subject to an automatic renewal for one year if there was no objection by both parities upon expiring. According to the agreement, the fixed service fee is calculated and payable on a monthly basis, by multiplying the average of book value of the assets under management at the beginning and at the end of any given month by the rate of 0.05%, divided by 12. The variable service fee is calculated based on investment performance.
In September 2007, China Life Overseas and the AMC HK entered into an agreement, whereby China Life Overseas agreed to pay AMC HK a management service fee at a rate calculated based on actual net investment return yield. In December 2009, China Life Overseas and the AMC HK signed a renewal agreement, which extended the expiry date of the original agreement to 31 December 2010.

~~F-72~~Note:
(i) On 15 December 2011, CLIC and the Company entered into a renewal agreement, with effective period to 31 December 2014, to engage the Company to provide policy administration services to CLIC relating to the non-transferred policies. The Company, as a service provider, does not acquire any rights or assume any obligations as an insurer under the non-transferred policies. In consideration of the services provided under the agreement, CLIC will pay the Company a policy management fee based on the estimated cost of providing the services, to which a profit margin is added. The policy management fee is equal to, for each semi-annual payment period, the sum of (1) the number of non-transferred policies in force that were within their policy term as at the last day of the period, multiplied by RMB8.00 per policy and (2) 2.50% of the actual premiums and deposits in respect of such policies collected during the period. The policy management fee income is included in other income in consolidated statement of comprehensive income.
(ii.a) On 29 December 2011, CLIC and AMC entered into a renewal agreement, with effective period to 31 December 2014, whereby CLIC agreed to pay the AMC a service fee at the rate of 0.05% per annum. The service fee was calculated and payable on a monthly basis, by multiplying the average of book value of the assets under management (after deducting the funds obtained and interests accrued from repurchase transactions) at the beginning and at the end of any given month by the rate of 0.05%, divided by 12. The service fee could be adjusted according to the performance.
(ii.b) On 30 December 2010, the Company and the AMC entered into an agreement, with effective period to 31 December 2011. The agreement was subject to an automatic renewal for one year if there was no objection by both parties upon expiry. The Company agreed to pay the AMC a fixed service fee and a performance fee. The annual fixed service fee is calculated with reference to the net asset value of the total invested assets by the rate of 0.05% per annum and is payable monthly. The performance fee is charged at 20% of the fixed service fee per annum subject to performance assessment and is payable annually. The service fees were determined by the Company and the AMC based on an analysis of the cost of service, market practice and the size and composition of the asset pool to be managed. On 31 December 2011, the agreement automatically renewed for one year with effective period to 31 December 2012. Asset management fees charged to the Company by AMC is eliminated in the consolidated statement of comprehensive income.
(ii.c) In 2012, CLP&C and the AMC signed an agreement, with effective period to 31 December 2013. The agreement is subject to an automatic renewal for one year if there was no objection by both parties upon expiry. According to the agreement, the fixed service fee is calculated and payable on a monthly basis, by multiplying the average of book value of the assets under management at the beginning and at the end of any given month by the rate of 0.05%, divided by 12. The variable service fee is calculated based on investment performance.
(ii.d) In 2012, China Life Overseas and the AMC HK entered into an agreement whereby China Life Overseas and AMC HK set a benchmark for annual net investment return yield and China Life Overseas agreed to pay AMC HK a management service fee at a rate calculated based on actual annual net investment return yield. This agreement was in effect from 1 January 2012 to 31 December 2012.
F-78
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2830
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(e)
Transactions with significant related parties (continued)
~~Note: (continued)~~
In 2009, Pension Company and AMC signed an agreement with effective period to 31 December 2009. The agreement was subject to an automatic renewal for one year if there was no objection by both parties upon expiring. According to the agreement, the fixed service fee is calculated and payable on a monthly basis, by multiplying the average of book value of the assets under management at the beginning and at the end of any given month by the rate of 0.05%, divided by 12. There is a performance portion based on 10% of the excess return which is payable annually.
In September 2009, the Company and AMC HK renewed the agreement of Offshore Investment Management Service Agreement. In accordance with the agreement, the Company agreed to pay AMC HK asset management fee calculated and collected based the annual investment instruction and related terms and conditions. In accordance with the 2009 annual instruction and related terms and conditions, asset management fees were calculated at a fixed rate of 0.45% of portfolio asset value and a performance element of 2% of portfolio returns for assets managed on a discretionary basis, together with a fixed rate of 0.05% of portfolio asset value for assets managed on a non-discretionary basis. In accordance with the 2010 annual instruction and related terms and conditions, asset management fees were calculated at a fixed rate of 0.4% of portfolio asset value and a performance element capped at 0.15% of portfolio asset value for assets managed on a discretionary basis. Management fees on assets managed on a non-discretionary basis maintained unchanged at 0.05% of portfolio asset value for 2010. Management fees at fixed rates are calculated based on the portfolio asset value at the end of each month based on the monthly report provided by AMC HK and payable quarterly. Performance elements are calculated and payable on an annual basis.
~~Asset management fees charged to the Company and Pension Company by AMC and AMC HK is eliminated in the Consolidated Statement of Comprehensive Income.~~
~~(iii)~~ In November 2008, the Company and CLP&C entered into an agreement, whereby CLP&C entrusted the Company to act as an agent to sell selected insurance products in jurisdiction. The service fee is determined according to cost (tax included) added marginal profit. The agreement term is two year, and the agreement was subject to an automatic renewal for one year if there was no objection by both parties upon expiring.
~~(iv)~~ ~~The Group made certain project payments to third parties through CLRE and paid other miscellaneous expenditure mainly comprised rentals and deposits to CLRE.~~
~~(v)~~ On 22 February 2010, the Company entered into a property leasing agreement with IHC, pursuant to which IHC agreed to lease to the Company certain of its owned and leased buildings. Annual rental payable by the Company to IHC in relation to the IHC owned properties is determined by reference to market rent or, the costs incurred by IHC in holding and maintaining the properties, plus a margin of approximately 5%. The rental was paid on a semi annual basis. Rental of buildings subleased by IHC was paid directly by the Company to the owner. The agreement expires on 31 December 2012.

~~F-73~~Note: (continued)
(ii.e) In September 2011, the Company and AMC HK renewed the agreement of Offshore Investment Management Service Agreement. In accordance with the agreement, the Company agreed to pay AMC HK asset management fee calculated and collected based the annual investment instruction and related terms and conditions. In accordance with the 2012 annual instruction and related terms and conditions, asset management fees were calculated at a fixed rate of 0.4% of portfolio asset value and a performance element capped at 0.15% of portfolio asset value for assets managed on a discretionary basis. Management fees on assets managed on a non-discretionary basis is calculated at 0.05% of portfolio asset value for 2012. Management fees at fixed rates are calculated based on the portfolio asset value at the end of each month based on the monthly report provided by AMC HK and payable quarterly. Performance elements are calculated and payable on an annual basis. In accordance with the 2012 annual instruction, the calculation and payment of asset management fees remain the same as 2011. Asset management fees charged to the Company by AMC HK are eliminated in the consolidated statement of comprehensive income.
(ii.f) On 1 January 2011, Pension Company and AMC signed an agreement with effective period to 31 December 2011. The agreement was subject to an automatic renewal for one year if there was no objection by both parties upon expiry. According to the agreement, the fixed service fee is calculated and payable on a monthly basis, by multiplying the average of book value of the assets under management at the beginning and at the end of any given month by the rate of 0.05%, divided by 12. There is a performance portion based on 10% of the excess return which is payable annually. On 1 January 2012, the agreement automatically renewed for one year to 31 December 2012. Asset management fees charged to Pension Company by AMC are eliminated in the consolidated statement of comprehensive income.
(iii) In November 2008, the Company and CLP&C entered into a 2-year agreement, whereby CLP&C entrusted the Company to act as an agent to sell selected insurance products in certain jurisdictions. The service fee is determined according to cost (tax included) plus a margin. The agreement was subject to an automatic renewal for one year if there was no objection by both parties upon expiry. On 8 March 2012, the Company and CLP&C entered into a new 2-year agreement, which was subject to an automatic renewal for one year if there was no objection by both parties upon expiry with all the original terms remaining the same. The parties also agreed that the agreement signed in 2008 remains effective until 2012 agreement becomes effective.
(iv) The Group made certain project payments to CLRE and paid other miscellaneous expenditure mainly comprised rentals and deposits to CLRE.
(v) On 22 February 2010, the Company and IHC entered into a property leasing agreement with effective period to 31 December 2012, pursuant to which IHC agreed to lease to the Company certain of its owned and leased buildings. Annual rental payable by the Company to IHC in relation to the IHC owned properties is determined by reference to market rent or, the costs incurred by IHC in holding and maintaining the properties, plus a margin of approximately 5%. The rental was paid on a semi-annual basis.
F-79
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2830
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(e)
Transactions with significant related parties (continued)
~~Note: (continued)~~
~~(vi)~~ On 29 April 2007, the Company and GDB entered into an individual bank insurance agency agreement. All insurance products suitable for distribution through bank network are included in the agreement. GDB will provide services, including selling of insurance products, receiving premiums and paying benefits. The Company has agreed to pay commission fees as follows: 1) A monthly service fee, calculated on a monthly basis, by multiplying total premium received at a fixed commission rate; or 2) A monthly commission fee, calculated on a monthly basis, by multiplying the number of policy being handled at fixed commission rate which is not more than RMB1 per policy, where GDB handles premiums receipts and benefits payments. The agreement has a term of five years.
~~(vii)~~ In November 2007, the Company and Pension Company entered into an agreement, whereby Pension Company entrusted the Company to distribute enterprise annuity funds and provide customer service. The service fee is calculated at a rate of 80%. The agreement term was one year and subject to an automatic renewal for one year. On 30 December 2010, the Company and Pension Company signed a renewal agreement, The agreement term was one year, and the agreement was subject to an automatic renewal for one year if there was no objection by both parties upon expiring.
Note: (continued)
(vi) On 19 April 2012, the Company and CGB entered into an individual bank insurance agency agreement. All insurance products suitable for distribution through banking network are included in the agreement. CGB will provide services, including selling of insurance products, receiving premiums and paying benefits. The Company has agreed to pay commission fees as follows: 1) A monthly commission fee, calculated on a monthly basis, by multiplying total premium of policy sold at a fixed commission rate; or 2) A monthly commission fee, calculated on a monthly basis, by multiplying the number of policy being handled at fixed commission rate which is not more than RMB1 per policy, where CGB handles premiums receipts and benefits payments. The agreement has a term of three years and is subject to an automatic renewal for one year.
(vii) In December 2011, the Company and Pension Company entered into an enterprise annuity funds distribution and customer service agency agreement, whereby Pension Company entrusted the Company to distribute enterprise annuity funds and provide customer service. The service fee is calculated at 50% to 80% of the first year management fee according to the terms of insurance contracts. The agreement term was one year and subject to an automatic renewal for one year if there was no objection by both parties upon expiry. The terms and conditions of the agreement remain unchanged.
(viii) At the 23rd meeting of the third session of the Board Committee held on 9 May 2012, AMC made additional capital contribution of RMB361 million to China Life Yuantong in proportion to its equity holding ratio of 19%. As a result, the total capital contribution from AMC to China Life Yuantong is increased to RMB475 million.
(f)
Amounts due from / to significant related parties
The following table summarises the resulting balance due from and to significant related parties. The balance is non-interest bearing, unsecured and has no fixed repayment terms except for the deposits in GDB.
The following table summarises the resulting balance due from and to significant related parties. The balance is non-interest bearing, unsecured and has no fixed repayment terms except for the deposits in CGB and subordinated debts issued by Sino-Ocean.

As at 31 December 2010 As at 31 December 2009    As at 31 December 2012 As at 31 December 2011
RMB million RMB million    RMB million RMB million
The Group
The resulting balance due from and to significant related parties of the Group

Amount due from CLIC (Note 12) 598 646    560    596
Amount due to CLIC (1 ) —    (5 ) (1 )
Amount due from China Life Overseas 22 15    11    5
Amount due from CLP&C 37 22    65    51
Amount due to CLP&C (4 ) (2 )    (2 ) (1 )
Amount deposited with GDB 11,667 7,098
Amount due from IHC 17 34    16    15
Amount due to IHC (33 ) (64 )    (8 ) (8 )
The Company
Amount due from China Life Yuantong
   —      167
Amount due from CLRE
   1    1
Amount due to CLRE
   (4 ) —
Amount deposited with CGB
   14,701    16,000
Amount due from CGB
   218    311
Amount due to CGB
   (1 ) —
Held Subordinated debts of Sino—Ocean
   266    260
The resulting balance due from and to subsidiaries of the Company

Amount due from Pension Company 91 56    50    75
Amount due to Pension Company (3 ) —    (2 ) (2 )
Amount due to AMC (62 ) (43 )    (68 ) (59 )
Amount due to AMC HK (2 ) (1 )    (2 ) (4 )

~~F-74~~
F-80
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
2830
SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)
(g)
Key management compensation
   For the year ended 31 December
   2012    2011    2010
   RMB million    RMB million    RMB million
Salaries and other benefits
   12       25       20






For the year ended 31 December
2010 2009 2008
RMB million RMB million RMB million

Salaries and other benefits 17 23 24

The total compensation package for the Company’s key management for the year ended 31 December 2012 has not yet been finalised in accordance with regulations of the PRC relevant authorities. The final compensation will be disclosed in a separate announcement when determined. The compensation of 2011 has been approved by relevant authorities. The total compensation of 2011 was RMB25 million, including deferral payment about RMB5 million.
(h) The total compensation package for the Company’s key managements for the year ended 31 December 2010 has not yet been finalised in accordance with regulations of the PRC relevant authorities. The final compensation will be disclosed in a separate announcement when determined. The compensation of 2009 has been approved by relevant authorities which includes delay in payment about RMB 4 million.
~~(h)~~
Transactions with state-owned enterprises
Under IAS 24 (Revised), business transactions between state-owned enterprises controlled by the PRC government are within the scope of related party transactions. CLIC, the ultimate holding company of the Group, is a state-owned enterprise. The Group’s key business is insurance relevant and therefore the business transactions with other state-owned enterprises are primarily related to insurance and investment activities. The related party transactions with other state-owned enterprises were conducted in the ordinary course of business. Due to the complex ownership structure, the PRC government may hold indirect interests in many companies. Some of these interests may, in themselves or when combined with other indirect interests, be controlling interests which may not be known to the Group. Nevertheless, the Group believes that the following captures the material related parties and applied IAS 24 (Revised) exemption and disclose only qualitative information.
As at and during the year ended 31 December 2012, most of bank deposits of the Group were with state-owned banks; the issuers of corporate bonds and subordinated bonds held by the Group were mainly state-owned enterprises. For the year ended 31 December 2012, a large portion of its group insurance business of the Group were with state-owned enterprises; the majority of bancassurance brokerage charges were paid to state-owned banks and postal office; almost all of the reinsurance agreements of the Group were entered into with a state-owned reinsurance company.
31 Under IAS 24 (Amendment), business transactions between state-owned enterprises controlled by the PRC government are within the scope of related party transactions. CLIC, the ultimate holding company of the Group, is a state-owned enterprise. The Group’s key business is insurance relevant and therefore the business transactions with other state-owned enterprises are primarily related to insurance and investment activities. The related party transactions with other state-owned enterprises were conducted in the ordinary course of business. Due to the complex ownership structure, the PRC government may hold indirect interests in many companies. Some of these interests may, in themselves or when combined with other indirect interests, be controlling interests which may not be known to the Group. Nevertheless, the Group believes that the following captures the material related parties and applied IAS 24 (Amendment) exemption and disclose only qualitative information.
As at 31 December 2010 and 2009, most of bank deposits were with state-owned banks; the issuers of corporate bonds and subordinated bonds held by the Group were mainly state-owned enterprises. For the year ended 31 December 2010, a large portion of its group insurance business of the Group were with state-owned enterprises; the majority of bancassurance brokerage charges were paid to state-owned banks and postal office; almost all of the reinsurance agreements of the Group were entered into with a state-owned reinsurance company; most of bank deposit interest income were from state-owned banks.
29
SHARE CAPITAL
   As at 31 December 2012    As at 31 December 2011
   No. of shares    RMB
million    No. of shares    RMB
million
Registered, authorized, issued and fully paid

Ordinary shares of RMB1 each
   28,264,705,000       28,265       28,264,705,000       28,265








As at 31 As at 31
December 2010 December 2009
No. of shares RMB million No. of shares RMB million

Registered, authorized, issued and fully paid Ordinary shares of RMB1 each 28,264,705,000 28,265 28,264,705,000 28,265

As at 31 December ~~2010,~~2012, the Company’s share capital was as follows:
   As at 31 December 2012
   No. of shares    RMB million
Owned by CLIC (i)
   19,323,530,000       19,324
Owned by other equity holders
   8,941,175,000       8,941




Including: Domestic listed
   1,500,000,000       1,500
Overseas listed (ii)
   7,441,175,000       7,441




Total
   28,264,705,000       28,265




As at 31 December 2010
No. of shares RMB million

Owned by CLIC (i) 19,323,530,000 19,324
Owned by other equity holders 8,941,175,000 8,941

Including: Domestic listed 1,500,000,000 1,500
Overseas listed 7,441,175,000 7,441

Total
28,264,705,000 28,265

(i)
All shares owned by CLIC are A shares.
(ii)
Overseas listed shares are traded on the Stock Exchange of Hong Kong and the New York Stock Exchange.
~~(i)~~ ~~All shares owned by CLIC are A shares.~~

~~F-75~~
F-81
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
3032
RESERVES
   Additional
paid in
capital
RMB
million    Unrealised
gains/
(losses)
from
available-
for-sale
securities
RMB
million Statutory
reserve
fund
RMB
million
(a)    Discretionary
reserve fund
RMB million
(b)    General
reserve
RMB
million
(c)    Exchange
differences
on
translating
foreign
operations
RMB
million Total
RMB
million
As at 1 January 2010
   53,860       20,802    12,848       5,642       9,636       (1 ) 102,787
Other comprehensive income for the year
   —         (16,202 ) —         —         —         (1 ) (16,203 )
Appropriation to reserves
   —         —      3,368       7,192       3,368       —      13,928










As at 31 December 2010
   53,860       4,600    16,216       12,834       13,004       (2 ) 100,512










Other comprehensive income for the year
   —         (24,204 ) —         —         —         (1 ) (24,205 )
Appropriation to reserves
   —         —      1,848       3,368       1,848       —      7,064










As at 31 December 2011
   53,860       (19,604 ) 18,064       16,202       14,852       (3 ) 83,371










Other comprehensive income for the year
   —         24,995    —         —         —         —      24,995
Appropriation to reserves
   —         —      1,107       1,848       1,107       —      4,062










As at 31 December 2012
   53,860       5,391    19,171       18,050       15,959       (3 ) 112,428










Unrealised
gains/ Exchange
(losses) differences
from Statutory on
Additional available- reserve Discretionary General translating
paid in for-sale fund reserve fund reserve foreign
capital securities RMB million RMB million RMB million operations Total
RMB million RMB million (a) (b) (c) RMB million RMB million

As at 1 January 2008
53,860 43,509 7,639 1,841 4,427 — 111,276
Other comprehensive loss for the year — (33,452 ) — — — (1 ) (33,453 )
Appropriation to reserve — — 1,916 2,792 1,916 — 6,624

As at 31 December 2008
53,860 10,057 9,555 4,633 6,343 (1 ) 84,447

Other comprehensive income for the year — 10,745 — — — — 10,745
Appropriation to reserves — — 3,293 1,009 3,293 — 7,595

As at 31 December 2009
53,860 20,802 12,848 5,642 9,636 (1 ) 102,787

Other comprehensive loss for the year — (16,202 ) — — — (1 ) (16,203 )
Appropriation to reserves — — 3,368 7,192 3,368 — 13,928

As at 31 December 2010
53,860 4,600 16,216 12,834 13,004 (2 ) 100,512

F-82
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
32
RESERVES (continued)

(a) ~~Under the relevant PRC law, the~~
The Company ~~is required to appropriate~~appropriated 10% of its net profit under ~~CAS~~Chinese Accounting Standards (“CAS”) to ~~statutory reserve fund. The Company appropriated 10% of net profit to the~~ statutory reserve for the year ended 31 December ~~2010 and 2009~~2012 amounting to ~~RMB 3,368~~RMB1,107 million, ~~and RMB 3,293 million respectively.~~under the relevant PRC laws (2011: RMB1,848 million).

(b)
Approved by the Annual General Meeting Inin June ~~2010,~~2012, the Company appropriated ~~RMB 3,293~~RMB1,848 million to discretionary reserve fund for the year ended 31 December ~~2009~~2011 based on ~~the~~ net profit under ~~A share financial statement and RMB 3,899 million to discretionary reserve fund retrospectively reflected at 31 December 2008 due to change of accounting policy. (2009: RMB 1,009~~CAS (2011: RMB3,368 million).

(c)
Pursuant to “Financial Standards of Financial ~~Enterprises —~~ Enterprises—Implementation Guide” issued by Ministry of Finance of People’s Republic of China on 30 March 2007, for the year ended 31 December ~~2010 and 2009,~~2012, the Company appropriated 10% of net profit under CAS which ~~is RMB 3,368~~amounts to RMB1,107 million ~~and RMB 3,293 million respectively~~ to general reserve for future uncertain disasters, which cannot be used for dividend distribution or share capital ~~increment.~~
Under related PRC law, dividends may be paid only out of distributable profits. Distributable profits generally means the Company’s after-tax profits as determined under accounting standards generally accepted in PRC or IFRS, whichever is lower, less any accumulated losses and allocations to statutory reserve that the Company is required to make, subject to further regulatory restrictions. Any distributable profits that are not distributed in a given year are retained and available for distribution in subsequent years. The amount of distributable retained earnings based on the above wasincrement (2011: RMB ~~76,832 million as at 31 December 2010 (as at 31 December 2009: RMB 78,491~~1,848 million).
Under related PRC law, dividends may be paid only out of distributable profits. Any distributable profits that are not distributed in a given year are retained and available for distribution in subsequent years.
~~F-76~~
33
PROVISIONS AND CONTINGENCIES
The following is a summary of the significant contingent liabilities:

As at 31
December 2012

As at 31
December 2011

   RMB million    RMB million
Pending lawsuits
   183       168




The Group involves in certain lawsuits arising from ordinary course of businesses. In order to accurately disclose the contingent liabilities for pending lawsuits, the Group analyzed all pending lawsuits at the end of each reporting period. A provision will only be recognized if the management determines, based on third-party legal advice, that the Group has present obligations and the settlement of which is expected to result in an outflow of the Group’s resources embodying economic benefits, and the amount of such obligations could be reasonably estimated. Otherwise, the Group will disclose the pending lawsuits as contingent liabilities. As at 31 December 2012 and 2011, the Group has other contingent liabilities but disclosure of such was not practical because the amount of liabilities could not be reliably estimated.
F-83
CHINA LIFE INSURANCE COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ~~2010~~
2012
3134
~~PROVISIONS AND CONTINGENCIES~~
~~The following is a summary of the significant contingent liabilities:~~
COMMITMENTS

As at 31 December 2010 As at 31 December 2009
RMB million RMB million

Pending lawsuits 139 113

(a) The Group has been involved in certain lawsuits arising from ordinary course of businesses. In order to accurately disclose the contingent liabilities for pending lawsuits, the Group analyzed all pending lawsuits at the end of each fiscal year. A provision will only be recognized if the management determines, based on third-party legal advice, that we have present obligations and the settlement of which is expected to result in an outflow of the Group’s resources embodying economic benefits, and the amount of such obligations could be reasonably estimated. Otherwise, the Group will disclose the pending lawsuits as contingent liabilities if the amount of the obligation could be reliably estimated. As at December 31, 2010 and 2009, the Company had additional contingent liabilities the disclosure of which was not practicable, since the amount of the obligations could not be reliably estimated. As at 31 December 2010, the Group didn’t recognize any provision for such certain lawsuits.
32
~~COMMITMENTS~~
~~(a)~~
Capital commitments
Capital commitments contracted for at the end of the reporting period but not yet paid/provided for are as follows:

As at 31
December
2012

As at 31
December
2011

   RMB million    RMB million
Investment
   3,327       3,543
Property, plant and equipment
   8,685       3,562
Others
   48       42




Total
   12,060       7,147




(b) i) ~~Capital commitments for property, plant and equipment~~

As at 31 December 2010 As at 31 December 2009
RMB million RMB million

Contracted but not provided for 5,082 488

~~ii)~~ ~~Capital commitments to acquire Bohai Venture Capital Fund~~
~~The Group committed to contribute RMB 500 million to Bohai Venture Capital Fund of which RMB 374 million had been paid at 31 December 2010. The remaining RMB 126 million will be paid when called.~~
~~iiii)~~ ~~Capital commitments in relation to the China South to North Water Diversion Project~~
The Group committed to contribute RMB 380 million to the China South to North Water Diversion Project RMB 76 million of the amount had been paid at 31 December 2010 with the remaining RMB 304 million payable when called.
~~(b)~~
Operating lease commitments
~~The future minimum lease payments under non-cancellable operating leases are as follows :~~
The future minimum lease payments under non-cancellable operating leases are as follows:

As at 31
December
2012

As at 31
December
2011

   RMB million    RMB million
Land and buildings

Not later than one year
   394       403
Later than one year but not later than five years
   477       509
Later than five years
   17       29




Total
   888       941




As at 31 December As at 31 December
2010 2009
RMB million RMB million

Land and buildings
Not later than one year 338 297
Later than one year but not later than five years 453 478
Later than five years 42 49

Total
833 824

~~The operating lease payments charged to profit before income tax for the year ended 31 December 2010 was RMB 606 million (for the year ended 31 December 2009: RMB 593 million).~~
The operating lease payments charged to profit before income tax for the year ended 31 December 2012 were RMB690 million (for the year ended 31 December 2011: RMB644 million, for the year ended 31 December 2010: RMB606 million).

~~F-77~~
F-84


Title of each class		Name of each exchange on which registered

American depositary shares		New York Stock Exchange
H shares, par value RMB1.00 per share		New York Stock Exchange*


FORWARD-LOOKING STATEMENTS			1

~~FORWARD-LOOKING STATEMENTS~~CERTAIN TERMS AND CONVENTIONS			12

PRESENTATION OF FINANCIAL INFORMATION			4

~~CERTAIN TERMS AND CONVENTIONS~~PART I			25

~~PRESENTATION OF FINANCIAL INFORMATION~~			4

~~PART I~~			5

Item 1. Identity Of Directors, Senior Management and Advisers			5

Item 2. Offer Statistics and Expected Timetable			5

Item 3. Key Information			5

A. Selected Financial Data			5

B. Capitalization and Indebtedness			9

C. Reasons for the Offer and Use of Proceeds			9

D. Risk Factors			9

Item 4. Information on the Company			2527

A. History and Development of the Company			2527
B. Business Overview			30
~~B. Business Overview~~C. Organizational Structure			2876

~~C. Organizational Structure~~			69

D. Property, Plants and Equipment			7178

Item 4A. Unresolved Staff Comments			7178

Item 5. Operating and Financial Review and Prospects			7178
A. Operating Results			93
~~A. Operating Results~~			86

B. Liquidity and Capital Resources			~~101~~108

C. Research and Development, Patents and Licenses			~~104~~111
D. Trend Information			111
~~D. Trend Information~~			~~104~~

E. Off-Balance Sheet Arrangements			~~104~~

~~F. Tabular Disclosure of Contractual Obligations~~			~~104~~

~~Item 6. Directors, Senior Management and Employees~~			~~105~~

~~A. Directors and Senior Management~~			~~105~~

~~B. Compensation~~			~~110~~

~~C. Board Practices~~			112
F. Tabular Disclosure of Contractual Obligations			112
D.Item 6. Directors, Senior Management and Employees			~~113~~112
A. Directors and Senior Management			112
~~E. Share Ownership~~B. Compensation			~~113~~117
C. Board Practices			119
D. Employees			121
E. Share Ownership			121
Item 7. Major Shareholders and Related Party Transactions			~~113~~121
A. Major Shareholders			121
~~A. Major Shareholders~~			~~113~~

B. Related Party Transactions			~~114~~122

C. Interests of Experts and Counsel			~~118~~129

Item 8. Financial Information			~~118~~129

A. Consolidated Financial Statements and Other Financial Information			~~118~~129
B. Significant Changes			131
~~B. Significant Changes~~C. Embedded Value			~~120~~131

~~C. Embedded Value~~			~~120~~

Item 9. The Offer and Listing			~~125~~136

Item 10. Additional Information			~~126~~137
A. Share Capital			137
~~A. Share Capital~~			~~126~~

B. Articles of Association			~~126~~137
C. Material Contracts			153


~~D. Exchange Controls~~	~~142~~154

~~E. Taxation~~	~~142~~

F. Dividends and Paying Agents	~~150~~162

G. Statement by Experts	~~150~~162

H. Documents on Display	~~150~~162
I. Subsidiary Information	162
~~I. Subsidiary Information~~	~~151~~

Item 11. Quantitative and Qualitative Disclosures about Market Risk	~~151~~162

Item 12. Description of Securities Other Than Equity Securities	~~158~~171
A. Debt Securities	171
~~A. Debt Securities~~	~~158~~

B. Warrants and Rights	~~158~~171
C. Other Securities	171
~~C. Other Securities~~	~~158~~

D. American Depositary Shares	~~158~~171

PART II	172
~~PART II~~		~~160~~

Item 13. Defaults, Dividend Arrearages and Delinquencies	~~160~~172

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds	~~160~~172

A. Material Modification To The Rights Of Security Holders	~~160~~172

B. Use of Proceeds	~~160~~173

Item 15. Controls and Procedures	~~160~~174

Item 16A. Audit Committee Financial Expert	~~161~~174

Item 16B. Code of Ethics	~~161~~174

Item 16C. Principal Accountant Fees and Services	~~162~~174

Item 16D. Exemptions from the Listing Standards for Audit Committees	~~162~~174

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers	~~162~~175

Item 16F. Change in Registrant’s Certifying Accountant	~~162~~175

Item 16G. Corporate Governance	~~162~~175
Item 16H. Mine Safety Disclosure	178

PART III	~~165~~178

Item 17. Financial Statements	~~165~~178

Item 18. Financial Statements	~~165~~178
Item 19. Exhibits	178
~~Item 19. Exhibits~~	~~165~~

~~Exhibit 1.1~~
~~Exhibit 4.4~~
~~Exhibit 8.1~~
~~Exhibit 12.1~~
~~Exhibit 12.2~~
~~Exhibit 13.1~~


	RMB per US$				HK$ per US$
	High		Low		High		Low
October 2010		6.6912		6.6397		7.7648		7.7515
November 2010		6.6892		6.6330		7.7656		7.7501
December 2010		6.6745		6.6000		7.7833		7.7612
January 2011		6.6364		6.5814		7.7978		7.7683
February 2011		6.5965		6.5520		7.7957		7.7823
March 2011		6.5743		6.5510		7.8012		7.7858
April 2011 (through April 15, 2011)		6.5477		6.5310		7.7784		7.7671


	RMB per US$				HK$ per US$
	High		Low		High		Low
October 2012		6.2877		6.2372		7.7549		7.7494
November 2012		6.2454		6.2221		7.7518		7.7493
December 2012		6.2502		6.2251		7.7518		7.7493
January 2013		6.2303		6.2134		7.7585		7.7503
February 2013		6.2438		6.2213		7.7580		7.7531
March 2013		6.2246		6.2105		7.7640		7.7551
April 2013 (through April 19, 2013 )		6.2078		6.1772		7.7652		7.7618

¨
o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

x
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

¨
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

¨
o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


*		Not for trading, but only in connection with the listing on the New York Stock Exchange of American depositary shares, each representing 15 H shares.


Large accelerated filerþx				Accelerated filero¨				Non-accelerated filero¨


~~C. Material Contracts~~D. Exchange Controls			~~141~~153
E. Taxation


ITEM 1.		IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.


IFRS	For the year ended December 31,
	2008			2009			2010			2011			2012			2012
	RMB			RMB			RMB			RMB			RMB			US$
Consolidated Statement of Comprehensive Income	(in millions except for per share data)
Revenues
Gross written premiums		265,656			275,970			318,229			318,252			322,742			51,804
Less: premiums ceded to reinsurers		(156	)		(158	)		(177	)		(232	)		(384	)		(62	)

Net written premiums		265,500			275,812			318,052			318,020			322,358			51,742
Net change in unearned premium reserves		(323	)		(735	)		36			256			(232	)		(37	)

Net premiums earned		265,177			275,077			318,088			318,276			322,126			51,705

Investment income		44,946			38,890			48,872			60,722			73,243			11,756
Net realized gains/(losses) and impairment on financial assets		(5,964	)		21,244			15,841			(11,208	)		(26,876	)		(4,314	)
Net fair value gains/(losses) through profit or loss		(7,194	)		1,449			280			337			(313	)		(50	)
Other income		3,420			2,630			2,757			2,772			3,305			530

Total revenues		300,385			339,290			385,838			370,899			371,485			59,627

Benefits, claims and expenses
Insurance benefits and claims expenses
Life insurance death and other benefits		(89,659	)		(74,858	)		(71,237	)		(101,349	)		(107,674	)		(17,283	)
Accident and health claims and claim adjustment expenses		(7,641	)		(7,808	)		(8,740	)		(7,789	)		(7,898	)		(1,268	)
Increase in insurance contracts liabilities		(134,649	)		(154,372	)		(199,655	)		(181,579	)		(184,990	)		(29,693	)
Investment contract benefits		(1,931	)		(2,142	)		(1,950	)		(2,031	)		(2,032	)		(326	)
Policyholder dividends resulting from participation in profits		(1,671	)		(14,487	)		(13,224	)		(6,125	)		(3,435	)		(551	)
Underwriting and policy acquisition costs		(24,200	)		(22,936	)		(27,256	)		(27,434	)		(27,754	)		(4,455	)
Finance costs		(438	)		(111	)		(304	)		(873	)		(2,575	)		(413	)
Administrative expenses		(16,652	)		(18,719	)		(20,285	)		(21,549	)		(23,283	)		(3,737	)
Other operating expenses		(2,971	)		(2,279	)		(3,351	)		(3,275	)		(3,304	)		(530	)
Statutory insurance fund contribution		(558	)		(537	)		(599	)		(595	)		(609	)		(98	)

Total benefits, claims and expenses		(280,370	)		(298,249	)		(346,601	)		(352,599	)		(363,554	)		(58,354	)

Share of profit of associates		(56	)		704			1,771			2,213			3,037			487
Profit before income tax		19,959			41,745			41,008			20,513			10,968			1,760
Income tax		(685	)		(8,709	)		(7,197	)		(2,022	)		304			49

Net profit		19,274			33,036			33,811			18,491			11,272			1,809

Attributable to:
- Equity holders of the Company		19,137			32,881			33,626			18,331			11,061			1,775
- Non-controlling interests		137			155			185			160			211			34
Basic and diluted earnings per share⁽¹⁾		0.68			1.16			1.19			0.65			0.39			0.06

Other comprehensive income
Fair value (losses)/gains on available-for-sale securities		(61,622	)		39,470			(13,666	)		(45,576	)		8,864			1,423

Amount transferred to net profit from other comprehensive income		4,878			(21,040	)		(15,763	)		11,054			26,876			4,314
Portion of fair value (losses)/gains on available-for-sale securities attributable to participating policyholders		11,702			(3,999	)		7,983			2,521			(2,635	)		(423	)
Share of other comprehensive income of associates		291			(70	)		(131	)		(201	)		167			27
Others		(3	)		—			(1	)		(1	)		—			—
Income tax relating to components of other comprehensive income		11,260			(3,607	)		5,362			7,989			(8,265	)		(1,327	)

Other comprehensive income for the year		(33,494	)		10,754			(16,216	)		(24,214	)		25,007			4,014

Total comprehensive income for the year		(14,220	)		43,790			17,595			(5,723	)		36,279			5,823

Attributable to
- Equity holders of the Company		(14,316	)		43,626			17,423			(5,874	)		36,056			5,787
- Non-controlling interests		96			164			172			151			223			36


⁽¹⁾		Numbers ~~for the years ended December 31, 2008, December 31, 2009 and December 31, 2010~~ are based on the weighted average number of 28,264,705,000 shares in ~~issue during such years.~~issue.


ITEM 2.		OFFER STATISTICS AND EXPECTED TIMETABLE.


ITEM 3.		KEY INFORMATION.


IFRS	As of December 31,
	2008		2009		2010		2011		2012		2012
	RMB		RMB		RMB		RMB		RMB		US$
Consolidated Statement of Financial Position	(in millions)
Assets
Property, plant and equipment		16,720		17,467		18,946		20,231		22,335		3,585
Investments in associates		7,891		8,470		20,892		24,448		28,991		4,653
Held-to-maturity securities		211,929		235,099		246,227		261,933		452,389		72,613
Loans		17,926		23,081		36,543		61,104		80,419		12,908
Term deposits		228,272		344,983		441,585		520,793		641,080		102,901
Statutory deposits-restricted		6,153		6,153		6,153		6,153		6,153		988
Available-for-sale securities		424,939		517,499		548,121		562,948		506,416		81,285
Securities at fair value through profit or loss		14,099		9,133		9,762		23,683		34,035		5,463
Securities purchased under agreements to resell		—		—		—		2,370		894		143
Accrued investment income		13,149		14,208		18,193		22,946		28,926		4,643
Premiums receivable		6,433		6,818		7,274		8,253		8,738		1,403
Reinsurance assets		940		832		830		878		948		152
Other assets		4,957		6,317		8,199		12,182		18,140		2,912
Cash and cash equivalents		34,085		36,197		47,854		55,985		69,452		11,148

Total assets		987,493		1,226,257		1,410,579		1,583,907		1,898,916		304,797

Liabilities and equity
Liabilities
Insurance contracts		662,865		818,164		1,018,135		1,199,373		1,384,537		222,234
Investment contracts		65,063		67,326		70,171		69,797		66,639		10,696
Policyholder dividends payable		43,178		54,587		52,828		46,368		44,240		7,101
Bonds payable		—		—		—		29,990		67,981		10,912
Securities sold under agreements to repurchase		11,390		33,553		23,065		13,000		68,499		10,995
Annuity and other insurance balances payable		4,980		5,721		8,275		11,954		16,890		2,711
Premiums received in advance		1,811		1,804		1,880		3,719		2,576		413
Other liabilities		11,057		11,978		13,746		13,968		16,435		2,638
Deferred tax liabilities		10,344		16,361		11,776		1,454		7,834		1,257
Current income tax liabilities		1,668		3,850		34		750		22		4
Statutory insurance fund		266		137		194		146		162		26

Total liabilities		812,622		1,013,481		1,200,104		1,390,519		1,675,815		268,987

Equity
Share capital		28,265		28,265		28,265		28,265		28,265		4,537
Reserves		84,447		102,787		100,512		83,371		112,428		18,046
Retained earnings		61,235		80,020		79,933		79,894		80,392		12,903

Attributable to equity holders of the Company		173,947		211,072		208,710		191,530		221,085		35,486

Non-controlling interests		924		1,704		1,765		1,858		2,016		324

Total equity		174,871		212,776		210,475		193,388		223,101		35,810

Total liabilities and equity		987,493		1,226,257		1,410,579		1,583,907		1,898,916		304,797


	Period-end rate				Average rate
	RMB per				RMB per
	US$		HK$ per US$		US$		HK$ per US$
2006		7.8041		7.7771		7.9579		7.7685
2007		7.2946		7.7984		7.6072		7.8008
2008		6.8225		7.7499		6.9477		7.7814
2009		6.8259		7.7536		6.8295		7.7513
2010		6.6000		7.7810		6.7603		7.7692
2011 (through April 15, 2011)		6.5317		7.7733		6.5654		7.7868


	Period-end rate				Average rate
	RMB per US$		HK$ per US$		RMB per US$		HK$ per US$
2008		6.8225		7.7499		6.9477		7.7814
2009		6.8259		7.7536		6.8295		7.7513
2010		6.6000		7.7810		6.7603		7.7692
2011		6.2939		7.7663		6.4475		7.7793
2012		6.2301		7.7507		6.2990		7.7556
2013 (through April 19, 2013)		6.1772		7.7637		6.2070		7.7593


	As of or for the year ended								Annual
	December 31,								growth rate
	2008		2009		2010		2010		(2008-2010)
	RMB		RMB		RMB		US$
	*(in millions, except as otherwise indicated)*
Individual life gross written premiums		252,130		261,715		302,781		45,876		9.6	%
Individual life liabilities of insurance contracts		654,037		808,591		1,008,201		152,758		24.2	%
Individual life liabilities of investment contracts		10,928		14,579		15,664		2,373		19.7	%


	As of or for the year ended December 31,								Annual growth rate
	2010		2011		2012		2012		(2010-2012)
	RMB		RMB		RMB		US$
	*(in millions, except as otherwise indicated)*
Individual life gross written premiums		302,781		302,012		305,841		49,091		0.50	%
Individual life liabilities of insurance contracts		1,008,201		1,189,777		1,374,777		220,667		16.77	%
Individual life liabilities of investment contracts		15,664		13,349		11,646		1,869		(13.77	)%


	For the year ended December 31
	2008		2009		2010		2010
	RMB		RMB		RMB		US$
	*(in millions)*
Gross written premiums:
Group annuities		41		18		21		3
Group whole life and term life insurance		299		172		452		68


	Individual
	Life			Group life			Accident			Health			Total
	Premiums			Premiums			Premiums			Premiums			Premiums
	market share			market share			market share			market share			market share
China Life		38	%		39	%		45	%		22	%		38	%
Ping An Insurance Company of China, Ltd.		16	%		16	%		9	%		29	%		17	%
China Pacific Life Insurance Co. Ltd.		9	%		6	%		17	%		7	%		8	%
New China Life Insurance Co. Ltd.		8	%		0	%		4	%		7	%		8	%
Tai Kang Life Insurance Co. Ltd.		8	%		16	%		4	%		6	%		9	%
Others⁽¹⁾		20	%		23	%		21	%		29	%		20	%
Total		100	%		100	%		100	%		100	%		100	%


	Individual life premiums market share			Group life premiums market share⁽¹⁾			Accident premiums market share			Health premiums market share			Total premiums market share
China Life		35	%		4	%		38	%		22	%		34	%
Ping An Life Insurance Company of China, Ltd.⁽²⁾		12	%		51	%		15	%		31	%		13	%
China Pacific Life Insurance Co. Ltd.		10	%		13	%		16	%		9	%		10	%
New China Life Insurance Co. Ltd.		10	%		1	%		4	%		9	%		10	%
Tai Kang Life Insurance Co. Ltd.		7	%		1	%		5	%		4	%		7	%
Others⁽³⁾		26	%		30	%		22	%		25	%		26	%

Total		100	%		100	%		100	%		100	%		100	%


(1)	The statistics in the China Insurance Year Book 2012 do not include long-term accident and health insurance products.


	As of or for the years ended December 31,
	2008						2009						2010
	Yield⁽¹⁾			Amount			Yield⁽¹⁾			Amount			Yield⁽¹⁾			Amount
	*(RMB in millions, except as otherwise indicated*)
Cash, cash equivalents and term deposits:
Investment income		4.9	%		11,378			3.3	%		10,805			3.7	%		16,363
Ending assets: cash and cash equivalents					34,085						36,197						47,854
Ending assets: statutory deposits—restricted					6,153						6,153						6,153
Ending assets: term deposits					228,272						344,983						441,585

Ending assets					268,510						387,333						495,592
Debt securities:
Investment income		4.5	%		22,690			4.1	%		23,759			4.3	%		25,586
Net realized gains/(losses)					2,445						3,346						584
Net fair value gains/(losses) through income					300						(277	)					403

Total					25,435						26,828						26,573
Ending assets					575,885						582,315						608,192
Loans:
Investment income		5.6	%		696			5.7	%		1,172			5.3	%		1,583
Ending assets					17,926						23,081						36,543
Equity securities:
Investment income		7.5	%		10,093			2.5	%		3,146			2.8	%		5,251
Net realized gains/(losses)					(8,409	)					17,898						15,257
Net fair value gains/(losses) through income					(7,494	)					1,726						(486	)

Total					(5,810	)					22,770						20,022
Ending assets					75,082						179,405						195,918
Resale and repurchase agreements:
Resale agreements:
Investment income		3.0	%		89			N/A			8			N/A			89
Total					89						8						89
Ending assets					—						—						—
Repurchase agreements:
Investment expense					(438	)					(111	)					(304	)
Ending assets					11,390						33,553						23,065
Investments in associates:
Investment income/(losses)		(0.8	%)		(56	)		8.6	%		704			12.1	%		1,771
Ending assets					7,891						8,470						20,892


(1)		Yields for ~~2008 2009~~2012, 2011 and 2010 are calculated by dividing the investment income for that year by the average of the ending balances of that year and the previous year.

	•		~~Chinese government bonds;~~

	•		~~government agency bonds (including local government bonds issued and repaid by the Ministry of Finance~~government agency bonds (including local government bonds issued and repaid by the MOF as agent, central bank notes, financial bonds issued by state-owned policy banks of the Chinese government, and RMB-denominated bonds issued by international development institutions);

	•		~~corporate bonds (including financial bonds issued by commercial banks, corporate bonds, convertible corporate bonds, short-term financing bonds and medium-term notes); and~~

	•		subordinated bonds and debt (including subordinated bonds issued by state-owned policy banks of the Chinese government, subordinated bonds issued by commercial banks, subordinated debt with fixed terms issued by commercial banks and subordinated debt with fixed terms issued by insurance companies).

	•		~~bank deposits;~~

	•		Chinese government bonds;

	•		~~government agency bonds;~~

	•		~~corporate bonds;~~

	•		~~stocks;~~

	•		~~securities investment funds;~~

	•		~~real property;~~

	•		~~equity interests of non-listed enterprises;~~

	•		~~interest rate swaps;~~

	•		~~overseas investments; and~~

	•		~~other investment channels as approved by the State Council.~~

	•		~~currency market products such as commercial paper, negotiable deposits, repurchase and resale agreements and currency market funds;~~

	•		fixed income instruments such as bank deposits, structured deposits, bonds, convertible bonds, bond funds, securitization products and trust products, among which, the varieties of bonds in Hong Kong market are limited to bonds publicly issued in Hong Kong by companies listed on Main Board and large state-owned enterprises;

	•		~~equity investments such as stocks, stock investment funds, equity and equity-type products, which, in Hong Kong, are limited to stocks publicly offered and listed on Main Board; and~~

	•		~~other investments permitted by the PRC Insurance Law and the State Council.~~

	•		Individual life insurance, which offers participating and non-participating life insurance and annuities to individuals. The financial results of our individual long-term health and long-term accident insurance business are also reflected in our individual life insurance business segment. Our individual life insurance business comprises long-term products, including long-term health and long-term accident insurance products, meaning products having a term of more than one year at the date of their issuance.

	•		Group life insurance, which offers participating and non-participating life insurance and annuities products to companies and institutions. The financial results of our group long-term health and long-term accident insurance business are also reflected in our group life insurance business segment. Our group life insurance business comprises long-term products.

	•		Individual life insurancehad total gross written premiums of RMB ~~302,781~~305,841 million (US$~~45,876~~49,091 million) in ~~2010.~~2012.

	•		Group life insurancehad total gross written premiums of RMB ~~473~~469 million (US$7275 million) in ~~2010.~~2012.

	•		insurance premiums from the sale of life insurance policies and annuity contracts, including participating and non-participating policies and annuity contracts with life contingencies, as well as accident and health insurance products. Net premiums earned accounted for 82.4% of total revenues in 2010.

	•		investment income and realized and, in some cases, unrealized gains and losses from our investment assets. Investment income and net realized and unrealized gains and losses accounted for 16.8% of total revenues in 2010.

	•		~~increase in insurance contracts liabilities;~~

	•		~~investment contract benefits;~~

	•		~~policyholder dividends resulting from participation in profits;~~

	•		~~underwriting and policy acquisition costs; and~~

	•		~~administrative and other expenses.~~