Certain statements included in this report, including future plans and development strategies, are not historical facts and are "forward-looking". Forward-looking statements are based upon various assumptions, including, without limitation, the management锟斤拷s examination of historical operating trends, data contained in its records and other data available from third parties. Although the Company believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and which are beyond its control, and the Company may not achieve or accomplish these expectations, beliefs or projections. The occurrence or non-occurrence of an assumption could cause the Company锟斤拷s actual financial condition and results to differ from or fail to meet expectations expressed or implied by, such forward-looking statements. None of the Company or its management can guarantee or give any assurance to investors regarding the future accuracy of the opinions set forth herein or as to the actual occurrence of any predicted developments. Investors and other related parties are advised to be mindful of the risk, and be aware of the difference between the Company锟斤拷s plans or projections and its commitments.

Such forward-looking statements speak only as at the date on which they are made and are not intended to give any assurances as to future results. You are advised to exercise caution and should not rely on the forward-looking statements in this report.

Important information

I. The board of directors, the board of supervisors, the directors, the supervisors and the senior management of the Company warrant that the contents of this annual report are true, accurate and complete and that there is no false representation, misleading statement or material omission in this report; and they severally and jointly accept responsibility for the contents of this report.

II. The Company's 2021 Annual Report was considered and approved at the 15th session of the 9th board of directors on 25 March 2022, which 15 directors were required to attend and all of them attended in person. For the purposes of the United Kingdom锟斤拷s Financial Conduct Authority锟斤拷s Disclosure Guidance and Transparency Rule 4.1.12(3), each of the directors of the Company named in 锟斤拷Directors, supervisors and senior management锟斤拷 of this report, to the best of his or her knowledge, confirm that: (1) the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and (2) the annual report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

III. PricewaterhouseCoopers Zhong Tian LLP audited the 2021 financial statements of the company and issued the standard unqualified auditor锟斤拷s report.

IV. Mr. KONG Qingwei (person in charge of the Company), Mr. ZHANG Yuanhan (principal in charge of accounting and chief actuary) and Ms. XU Zhen (head of the Accounting Department) warrant the truthfulness, accuracy and completeness of the financial statements contained in this annual report.

V. The profit distribution for 2021 is made based on the audited financial statements of the parent company. The Company intends to declare annual cash dividend of RMB1.0 per share (tax included). Based on the total share capital of 9,620,341,455 shares, the amount of dividend in aggregate will be RMB9,620,341,455. The remaining retained profits will be carried forward to 2022. No capital reserve was transferred to the share capital during the year. The above-said profit distribution plan is to be approved at the shareholders锟斤拷 general meeting.

VI. The Company was exposed to various risks, including insurance risk, market risk, credit risk, liquidity risk, operational risk, reputational risk, strategy risk, capital management risk and other Group specific risks. For details, please refer to the Section "Corporate governance" of this report.

VII. There were no funds misappropriated by major shareholders or related parties of the Company.

VIII. The Company did not provide external guarantees in violation of the prescribed decision-making procedures.

CHINA PACIFIC INSURANCE (GROUP) CO., LTD.

BOARD OF DIRECTORS

Corporate information and definitions

Legal Name in Chinese:

锟叫癸拷太平锟斤拷锟秸ｏ拷锟斤拷锟脚ｏ拷锟缴凤拷锟斤拷锟睫癸拷司 (锟斤拷锟斤拷锟斤拷太锟斤拷锟斤拷)

Legal Name in English:

CHINA PACIFIC INSURANCE (GROUP) CO., LTD. (锟斤拷CPIC锟斤拷)

Legal Representative: KONG Qingwei

Board Secretary: SU Shaojun

Securities Representative: PAN Feng

Contact for Shareholder Inquiries: Investor Relations Dept. of the Company

Tel: +86-21-58767282

Fax: +86-21-68870791

Email: [email protected]

Address: 1 South Zhongshan Road, Huangpu, Shanghai, PR China

Registered Office: 1 South Zhongshan Road, Huangpu, Shanghai, PR China

Office Address: 1 South Zhongshan Road, Huangpu, Shanghai, PR China

Postal Code: 200010

Website: http://www.cpic.com.cn

Email: [email protected]

Selected Newspapers for Disclosure (A Share):

China Securities, Shanghai Securities and Securities Times

Announcements for A Share Published at: http://www.sse.com.cn

Announcements for H Share Published at: http://www.hkexnews.hk

Announcements for GDR Published at: http://www.londonstockexchange.com

Report Available at: Investor Relations Dept. of the Company

Stock Exchange for A Share Listing: The Shanghai Stock Exchange

Stock Name for A Share: 锟斤拷锟斤拷太锟斤拷

Stock Code for A Share: 601601

Stock Exchange for H Share Listing: The Stock Exchange of Hong Kong Limited

Stock Name for H Share: 锟斤拷??太锟斤拷

Stock Code for H Share: 02601

Stock Exchange for GDR Listing: London Stock Exchange

Stock Name for GDR: China Pacific Insurance (Group) Co., Ltd.

Trading symbol for GDR: CPIC

Accountant (A Share): PricewaterhouseCoopers Zhong Tian LLP

Office of Domestic Accountant: 42/F, New Bund Center, 588 Dongyu Road, Pudong New Area, Shanghai, PR China

Signing Certified Public Accountants: PENG Runguo, ZHANG Jiong

Accountant (H Share): PricewaterhouseCoopers (Certified Public Accountants and Registered PIE Auditor)

Office address: 22/F, Prince锟斤拷s Building, Central, Hong Kong

Accountant (GDR): PricewaterhouseCoopers Zhong Tian LLP

Office of Domestic Accountant: 42/F, New Bund Center, 588 Dongyu Road, Pudong New Area, Shanghai, PR China

Signing Certified Public Accountants: PENG Runguo, ZHANG Jiong

Definitions

In this report, unless the context otherwise requires, the following terms shall have the meanings set out below:

锟斤拷The Company锟斤拷, 锟斤拷the Group锟斤拷, 锟斤拷CPIC锟斤拷 or 锟斤拷CPIC Group锟斤拷

China Pacific Insurance (Group) Co., Ltd.

锟斤拷CPIC Life锟斤拷

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

锟斤拷CPIC P/C锟斤拷

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

锟斤拷CPIC AMC锟斤拷

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

锟斤拷CPIC HK锟斤拷

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

锟斤拷Changjiang Pension锟斤拷

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

锟斤拷CPIC Fund锟斤拷

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

锟斤拷CPIC Anxin Agricultural锟斤拷

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

锟斤拷CPIC Health锟斤拷

Pacific Health Insurance Co., Ltd. (former CPIC Allianz Health Insurance Co., Ltd., renamed in March 2021), a subsidiary of China Pacific Insurance (Group) Co., Ltd.

锟斤拷CPIC Capital锟斤拷

CPIC Capital Company Limited, a subsidiary of China Pacific Insurance (Group) Co., Ltd.

锟斤拷CPIC Technology锟斤拷

Pacific Insurance Technology Co., Ltd, a wholly-owned subsidiary of China Pacific Insurance (Group) Co., Ltd.

锟斤拷C-ROSS II锟斤拷

China Risk Oriented Solvency System Phase II

锟斤拷CBIRC锟斤拷

China Banking and Insurance Regulatory Commission

锟斤拷CSRC锟斤拷

China Securities Regulatory Commission

锟斤拷SSE锟斤拷

Shanghai Stock Exchange

锟斤拷SEHK锟斤拷

The Stock Exchange of Hong Kong Limited

锟斤拷LSE锟斤拷

London Stock Exchange

锟斤拷PRC GAAP锟斤拷

China Accounting Standards for Business Enterprises issued by Ministry of Finance of the People's Republic of China, and the application guide, interpretation and other related regulations issued afterwards

锟斤拷HKFRS锟斤拷

Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by the Hong Kong Institute of Certified Public Accountants

锟斤拷Articles of Association锟斤拷

The articles of association of China Pacific Insurance (Group) Co., Ltd.

锟斤拷Hong Kong Listing Rules锟斤拷

The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

锟斤拷Model Code for Securities Transactions锟斤拷

Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited

锟斤拷SFO锟斤拷

The Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

锟斤拷Substantial Shareholder锟斤拷

Has the meaning given to it under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), being a person who has an interest in the relevant share capital of the Company, the nominal value of which is equal to or more than 5% of the nominal value of the relevant share capital of the Company

锟斤拷GDR锟斤拷

Global depositary receipts

锟斤拷ESG锟斤拷

Environmental, Social and Governance

锟斤拷RMB锟斤拷

Renminbi

锟斤拷pt锟斤拷

Percentage point

Business overview

Group Operating Results

Unit: RMB million

Between January and December in 2021

/as at 31 December 2021

Between January and December in 2020

/as at 31 December 2020

Between January and December in 2019

/as at 31 December 2019

2021vs 2020锟斤拷%锟斤拷

2020vs2019锟斤拷%锟斤拷

Group operating income

440,643

422,182

385,489

4.4

9.5

Group OPAT^{notes 1,2}

35,346

31,140

27,878

13.5

11.7

Group EV

498,309

459,320

395,987

8.5

16.0

Group AuM

2,601,537

2,436,080

2,043,078

6.8

19.2

Total investment yield锟斤拷%锟斤拷

5.7

5.9

5.4

(0.2pt)

0.5pt

Dividend per share (RMB yuan)^{note 3}

1.0

1.3

1.2

(23.1)

8.3

Net assets per share (RMB yuan)^{note 1}

23.57

22.37

19.69

5.4

13.6

Number of Group customers (锟斤拷000)^{notes 4}^,5

168,393

148,938

139,976

13.1

6.4

Notes:

1. Attributable to shareholders of the parent.

2. OPAT is based on net profit on the financial statements, while excluding certain P/L items with short-term volatility and material one-off items which management does not consider to be part of the Company锟斤拷s day-to-day business operation.

3. Subject to SGM approval. Dividends for 2020 included an annual dividend of RMB1.2 per share and a 30th Anniversary special dividend of RMB0.1 per share.

4. Number of Group customers refers to the number of applicants and insureds who hold at least one insurance policy within the insurance period issued by one or any of CPIC subsidiaries as at the end of the reporting period. In the event that the applicants and insureds are the same person, they shall be deemed as one customer.

5. Figures as of the end of 2019 and 2020 have been restated.

Key indicators

Unit: RMB million

GWPs - CPIC Life 211,685 -0.1%

GWPs - CPIC P/C 152,643 +3.3%

Group operating income

440,643 +4.4%

Group embedded value

498,309 +8.5%

NBV margin of life business 23.5% -15.4pt

NBV of life business

13,412 -24.8%

Combined ratio of

P/C business^note³

99.1% +0.1pt

Group total investment yield 5.7% -0.2pt

Group net investment yield 4.5% -0.2pt

Growth rate of Group investments锟斤拷 net assetvalue^note¹ 5.4% -2.0pt

Group OPAT attributable to shareholders of the parent 35,346 +13.5%

Group net profit attributable to shareholders of the parent

26,834 +9.2%

CPIC Life 218%

CPIC P/C 288%

Group comprehensive solvency margin ratio

266% -22pt

Group number of customers^note²(锟斤拷000)

168,393 +19,455

Annual cash dividend^note⁴

RMB1.0 /share (tax included)

Notes:

1.Figures for the same period of the previous year have been restated.

2.Figures as at the end of the previous year have been restated.

3.Consolidated data of CPIC P/C, CPIC Anxin Agricultural and CPIC HK.

4.Subject to SGM approval.

Core Competitiveness

We are a leading integrated insurance group in China, and the first insurer simultaneously listed in Shanghai, Hong Kong and London, ranking 158th among Fortune Global 500 released in 2021. We are committed to long-term value growth, stay focused on the core business of insurance, pursue reform and transformation especially in key areas and levers, and strive for continued progress in high-quality development. We boast steady growth of business results, secure market standings, sustained improvement of overall strength, and increased contribution to China锟斤拷s social and economic development.

Focus

We persist in the focus on insurance, and have obtained a full range of insurance-related licences covering life insurance, property and casualty insurance, pension, health insurance, agricultural insurance and asset management. With balanced development of business segments along the insurance value chain, we have fostered top-notch competitiveness in specialised insurance business operation. Our life/health insurance business centres on protection, launches the Changhang Action Programme, undertakes to transition toward a career-based agency force, optimises channel mix, deepens customer resource management (CRM), and diversifies the 锟斤拷product + service锟斤拷 system. The property and casualty insurance persists in enhancement of capabilities for underwriting profitability, proactively adapts to the automobile insurance comprehensive reform, deepens individual customer relations management, seize strategic development opportunities of non-auto business, enhances risk selection, and improves capabilities to serve national initiatives and the real economy in an all-around way. As for investment, we continue to optimise the system of asset liability management (ALM) through economic cycles, adhere to prudent, value and long-term investing, with sustained improvement in industry-leading, liability-based strategic asset allocation (SAA) capabilities and specialised investment expertise. CPIC P/C and CPIC Life were awarded the top A rating at the Business Management Evaluation of Insurance Institutions by China Insurance Association for 6 years on end.

Prudence

We are committed to prudent business operation, upholding 锟斤拷protection for people锟斤拷 as the central insurance value proposition. We boast a professional and competent board of directors, an experienced management team and a group-centralised platform of management, with modernised corporate governance featuring a clear definition of responsibilities, checks and balances and well-coordinated mechanisms. Leveraging the advantage of a diversified, international and professional board of directors, we put in place a modern, international corporate governance system which is market-oriented and rule-based. We have also put in place industry-leading risk, compliance and internal control systems, with a smart risk control platform, which ensures sustained and healthy development of the Company.

Innovation

We persist in customer orientation and forge ahead with transformation in a bid to foster new drivers for high-quality development. In response to industry trends and dynamics, we deploy in health care and retirement sectors, with substantial progress in tele-medicine, rehabilitation care and high-end care through systematic equity industrial investments, marking initial success in the establishment of a full life-cycle health care and insurance ecosystem. We build long-term technology capabilities: established a multi-tiered data governance structure and governance system and set up CPIC Technology to explore market-based mechanisms of operation and conduct forwarding-looking research into frontier technologies and incubation of new technology applications. We accelerated infrastructure building such as the data centre in Luojing and CPIC Cloud. We focus on synergistic development of key regions, putting in place and optimising relevant mechanisms, and help key regions to play an exemplary, supportive and enabling role in high-quality development. We deepen human resources reform, optimise talent mix, recruit leading professionals in new business areas, improve the training and development system for young employees to foster the talent 锟斤拷high ground锟斤拷.

Responsibility

Committed to our responsibility to employees, customers, shareholders and society, we vigorously participate in national initiatives, serve the needs of the real economy and peoples锟斤拷 aspirations for a better life. We make full use of insurance to fulfil our social responsibilities, pioneering in the fight against the pandemic, in boosting rural invigoration and the relief effort during flooding. We promote the brand image of 锟斤拷Responsible, Smart and Caring锟斤拷 CPIC Service, established the 4-level 锟斤拷Service Officers锟斤拷 institution, and deepened the closed-loop management of customer experience. We implement ESG philosophies, improve the ESG governance system, promote sustainable insurance, responsible investment and green operation to contribute to the low-carbon social and economic development. We care for people锟斤拷s well-being, vigourously participating in the building of China锟斤拷s social security system. We conduct charitable activities as part of our branding, showing care for the vulnerable and underprivileged communities. At the same time, we strive to generate sound returns to our shareholders so that they can benefit from the growth of the Company.

Honours and awards

l CPIC Group was listed among Fortune Global 500 for the 11th consecutive year, ranking 158th, up 35 places from 2020.

l CPIC Group ranked 119th among the World's 500 Most Valuable Brands in 2021, and 5th among the World's 100 Most Valuable Insurance Brands in 2021 released by Brand Finance, with a brand value of USD15.389 billion, an increase of 9.6% from the previous year.

l CPIC Group won the 锟斤拷Company of the Year Award in Corporate Social Responsibility锟斤拷 granted by China Business News for the 12th consecutive year.

l The 9th Board of Directors of CPIC Group and Group Chairman Mr. KONG Qingwei won the 锟斤拷Board of the Year锟斤拷 award and the 锟斤拷Executive Director of the Year锟斤拷 award respectively in the 锟斤拷2021 Directors of the Year Awards锟斤拷 granted by the Hong Kong Institute of Directors.

l CPIC's project of 锟斤拷Issuing and listing GDRs on the London Stock Exchange锟斤拷 won the top award in the 锟斤拷Shanghai Financial Innovation Awards锟斤拷 granted by the Shanghai Municipal People's Government.

l CPIC P/C, CPIC Life, and CPIC Health scored the highest mark in the H1 2021 Insurance Service Quality Index released by CBIT for P/C, life, and health insurance respectively.

l CPIC P/C's 锟斤拷Guangxi Sugar Cane Price Index Insurance锟斤拷 product was named the Best Poverty Reduction Case and included in the second Global Poverty Reduction Case Series jointly released by the International Poverty Reduction Center in China, China Internet Information Center, World Bank, Asian Development Bank, Food and Agricultural Organisation of the United Nations, International Fund for Agricultural Development, and the Food and Agriculture Organization of the United Nations.

l Tai Hui Bao, a city-specific customised inclusive insurance product of CPIC Life, won the 锟斤拷2021 China Insurance Ark Award for Innovation锟斤拷 in the 锟斤拷2021 China Insurance Ark Awards锟斤拷 sponsored by the People's Daily and the Securities Times.

l CPIC AMC won the 锟斤拷Insurance Asset Management Company Golden Bull Award锟斤拷, 锟斤拷Insurance Asset Management Product Portfolio Golden Bull Award (Fixed Income)锟斤拷, and 锟斤拷Insurance Assets Management Product Portfolio Golden Bull Award (Equity)锟斤拷 in the first 锟斤拷China Insurance Industry Investment Golden Bull Awards锟斤拷 sponsored by China Securities Journal.

l For its excellent health management service, CPIC Health won the 锟斤拷Guardian Star锟斤拷 Excellent Service Case Award in the 3rd People's Good Insurance Case Awards sponsored by the People's Daily Online.

l Changjiang Pension was designated as the 锟斤拷2021 Outstanding Pension Insurance Company in Asia锟斤拷 in the 锟斤拷Asian Financial Competitiveness in the 21st Century Awards锟斤拷 organized by the 21st Century Business Herald.

l Gengdi Weishi, an insurance programme of CPIC Anxin Agricultural, won the 锟斤拷2021 Excellent Insurance Product Ark Award锟斤拷 jointly granted by the People's Daily and the Securities Times.

Chairman锟斤拷s statement

Dear shareholders:

The past year was a milestone in many ways for China and CPIC. The international political and economic environment became increasingly complicated and challenging, with profound changes of the world intertwined with a once-in-a-century pandemic. China embarked on a new journey of development under the 14^th Five-year Development Programme, with socio-economic stability on an upward trend. The insurance industry entered a critical stage of transformation, facing an uphill struggle in the reshaping of its value chain. In the face of increasing uncertainties of the market, we persisted in high-quality development, focused on key areas and levers, pressed ahead with reform, strived to stabilise the fundamentals of our business whilst focussing upon emerging high-potential areas, and achieved both stability and progress in our business operation.

Life insurance initiated the Changhang Action Programme in an all-around way. CPIC Life took the lead in launching the reform of its agency channel in a bid to build a career-based, professional and digitalised agency force. The restructuring of sales team seeks to shift away from short-termism towards long-term development; we undertook to put in place a new mode of value-oriented bancassurance, forging new partnerships with banks, optimising resource allocation and upgrading customer services; we deepened integration of products and services, promoted deployment in health care and retirement, launched a health management programme of our own proprietary brand, rolled out 10 retirement community projects, with those in Chengdu and Dali opening for business, lending strong support to the core business of insurance.

P/C insurance continued to enhance capabilities for sustainable development. In the face of multiple challenges of automobile insurance comprehensive reform, reshaping of the supply chain, and rising risk of climate change, we deepened the closed-loop business management based on customer segmentation, further enhanced capabilities of direct customer engagement and acquisition, and boosted differentiated business management, with continued improvement in on-line ratio of individual customers and auto insurance renewal rate; for corporate clients, we made further progress in professional capacity-building specific to industries and areas, leading in industry. We responded to the flooding in He锟斤拷nan in a timely manner, and offered professional and efficient claims service, winning recognition of the society.

We demonstrated professionalism in asset management. Based on characteristics of insurance liabilities, we continued to optimise Strategic Asset Allocation (SAA) across macro-economic cycles, effectively controlled credit risk, seized market opportunities, and delivered solid investment results.

CPIC Service fully played an enabling role. We established the institution of Service Officers, which enabled 800 of our employees from all levels to reach out to customers, so as to present a more tangible and accessible CPIC Service. In 2021, Group total customers increased by nearly 20 million in one year, with over 10 million individual customers holding policies from multiple subsidiaries of the Group, more than 4 times that of 5 years ago. CPIC Cloud entered the stage of large-scale production, providing high-level computing support for technological innovations, which in turn will lead to better customer experience in targeted customer acquisition, underwriting & pricing, and smart claims management.

Corporate governance paved way for long-term development. We fully leveraged the advantage of the board of directors in diversity, professionalism and international vision, enhanced capabilities in making strategic and forward-looking decisions, and solidified prudence and stability in corporate governance, winning recognition from many communities. We introduced ESG philosophies, completed the ESG top-level design and management structure, signed into UNEP FI Principles for Sustainable Insurance (PSI) and UN Supported Principles of Responsible Investment (PRI), marking a new chapter in sustainable development.

On this occasion, I锟斤拷d like to extend my sincere gratitude to all CPIC employees who have worked hard, side by side, to make these accomplishments possible. I particularly want to say thank you to all our customers, investors and the general public for their unstinting support.

Looking ahead into 2022, the international environment will be fraught with even greater uncertainties, compounded by China锟斤拷s demographic shift and cyclical factors such as economic re-balancing and industrial upgrading. People锟斤拷s needs for a healthier and better life will continue to grow; customers expect more personalised and diversified insurance service. Technological innovation changes the traditional risk landscape, with a lot of emerging issues to be addressed. Financial regulation also requires enhanced business management and increased compliance on the part of insurers.

We believe that drastic changes of the environment more than before test the resolve of transformation. We launched Transformation 2.0 5 years ago, instilled new elements of 锟斤拷embracing changes锟斤拷 into our DNA. While adhering to the basics of insurance and staying true to our original aspirations, we sought changes for the better in response to trends and dynamics of the industry and the market in a new era, so as to drive sustainable development. We are glad to see that the effort in the past 5 years has translated into increased dynamism, innovation and tenacity, which will inject new vitality into our long-term development.

The next 30 years mark a new stretch of journey, which will continue to centre on customer needs, and this will elevate us onto a new level of high-quality development.

Strengthening organisational health. In compliance with government policies and regulatory requirements, we will improve the modern enterprise system with Chinese characteristics, continue to enhance market-based mechanisms of business operation, put in place a scientific and effective corporate governance; plan for talent strategy under new circumstances, deepen reform of the system of professional managers, expanding its coverage, and optimise the long-term incentive system to stimulate organisational vitality; improve the training system for high-end professionals and young talent, and optimise people mix.

Enhancing the core insurance business. Life insurance will respond to the upgrading of insurance consumption, diversify product supply, and improve customer protection; accelerate diversification of distribution channels, focusing on building a career-based agency force which grows with the Company in long-term partnerships; roll out new models of bancassurance and group channel to reshape our core competitiveness. P/C insurance will enhance underwriting profitability, and secure the business fundamentals; seize opportunities arising from the Dual Circulation, and strive for more breakthroughs in low carbon, clean energy, rural invigoration, and social administration. Asset management will step up alignment and coordination with liabilities, further improve ALM, strengthen SAA and professional investment capabilities under the new regulatory regime, seize opportunities in new energy, new infrastructure, integrated regional development, green financing, so as to contribute more to our earnings.

Deepening collaboration. We will proceed with the building of the self-sustained health and retirement ecosystem, step up service capability covering the entire life cycle of customers, and push for more in-depth integration of insurance products and health management services, achieving their 锟斤拷seamless connection锟斤拷 with life scenarios; broaden the vision for collaboration with strategic clients, realising effective alignment of various value chains and cementing the relationship of cooperation and mutual existence; seize structural opportunities in the country锟斤拷s implementation of key regional development initiatives and its pursuit of balanced development across regions, and foster regionally differentiated development patterns.

More breakthroughs in innovation along the right direction. We will improve the technology governance system encapsulating 锟斤拷management, research and use锟斤拷 to unleash the productivity of technology, and nurture the ecosystem for competitive insurance technology applications; enhance professional capacity-building for core R & D of insurance frontier technologies, further leverage our strengths in institutions and talent attraction via the establishment of CPIC Technology, in a bid to improve timely response to customer needs and agile upgrading, and formulate integrated solutions in key application areas; optimise deployment of the R & D centres in Shanghai, Chengdu and Wuhan, and the Technology Innovation Centre in the Greater Bay Area, push for in-depth integration of technology innovation and front-line business development and local characteristics, so as to enhance digital empowerment in an all-around way.

Enhancing integrated governance. The risk management system and tools under the new circumstances will be strengthened. In particular, on the occasion of implementation of C-ROSS II, we will improve risk management so that it could be more professional, differentiated and smarter; utilise the Finance Sharing Platform in centralised management, and enhance integrated control of finance risk in an all-around way; incorporate ESG into business management, establish industry-leading sustainable financial services system and capabilities, and continuously improve the supply of environmental-friendly financial services that are conducive to people锟斤拷s well-being and public administration.

Now is early spring, a season of hope. In spite of COVID resurgence, and the many challenges facing the international community and global economic recovery, we still believe that over time, the pursuit of peace and development will remain the common aspirations of all mankind. In the recently-concluded Winter Olympics, we watched the fireworks display with a theme of 锟斤拷One World, One Family锟斤拷, which sent a resonating message around the world about building a human community with a shared future and the power of unity. As the official partner of the 2022 Hangzhou Asian Games, CPIC will always stand side by side with our customers, 锟斤拷Heart to heart, @future锟斤拷, work up courage and strive for new breakthroughs in high-quality development.

KONG Qingwei

Chairman of the Board of Directors

CPIC Group

Operating results

Highlights of accounting and operation data

I. Key accounting data and financial indicators of the Company as at period ends

Unit: RMB million

Key accounting data

2021

2020

Changes (%)

2019

Operating income

440,643

422,182

4.4

385,489

Profit before tax

30,796

29,238

5.3

27,966

Net profit^note

26,834

24,584

9.2

27,741

Net profit net of non-recurring profit or loss^note

26,699

24,569

8.7

22,915

Net cash flows from operating activities

108,407

108,063

0.3

111,795

31 December 2021

31 December 2020

Changes (%)

31 December 2019

Total assets

1,946,164

1,771,004

9.9

1,528,333

Equity^note

226,741

215,224

5.4

178,427

Note: Attributable to shareholders of the parent.

Unit: RMB

Key accounting indicators

2021

2020

Changes (%)

2019

Basic earnings per share^note¹

2.79

2.63

6.1

3.06

Basic earnings per share net of non-recurring profit or loss^{note 1}

2.78

2.63

5.7

2.53

Diluted earnings per share^note¹

2.79

2.63

6.1

3.06

Weighted average return on equity (%)^{note 1}

12.2

12.6

(0.4pt)

16.9

Weighted average return on equity net of non-recurring profit or loss (%)^{note 1}

12.1

12.5

(0.4pt)

14.0

Net cash flows per share from operating activities^note²

11.27

11.55

(2.4)

12.34

31 December 2021

31 December 2020

Changes (%)

31 December 2019

Net assets per share^note¹

23.57

22.37

5.4

19.69

Notes:

1.Attributable to shareholders of the parent.

2.Calculated by the weighted average number of ordinary shares in issue.

Unit: RMB million

Key accounting data by quarter

For the three months from

1 January to 31 March 2021

For the three months from

1 April to 30 June 2021

For the three months from

1 July to 30 September 2021

For the three months from

1 October to 31 December 2021

Operating income

151,263

101,249

98,422

89,709

Net profit^note

8,547

8,757

5,382

4,148

Net profit net of non-recurring profit or loss^note

8,483

8,701

5,387

4,128

Net cash flows from operating activities

36,055

23,049

15,642

33,661

Note: Attributable to shareholders of the parent.

II. Non-recurring items

Unit: RMB million

Non-recurring items

2021

Gains on disposal of non-current assets

Government grants recognised in current profit or loss

206

Custody fees of entrusted operation

Other net non-operating income and expenses other than aforesaid items

(94)

Effect of income tax relating to non-recurring profit or loss

(57)

Net non-recurring profit or loss attributable to non-controlling interests

(1)

Total

135

Note: As an integrated insurance group, investment is one of the major businesses of the Group. Therefore, the non-recurring items do not include fair value gains/(losses) from financial assets at fair value through profit or loss and financial liabilities at fair value through profit or loss, etc., as well as investment income from the disposal of financial assets at fair value through profit or loss and financial liabilities at fair value through profit or loss and available-for-sale financial assets, etc.

III. Other key financial and regulatory indicators

Unit: RMB million

Indicators

31 December 2021/

31 December 2020/

2021

2020

The Group

锟斤拷Investment assets^note¹

1,812,069

1,648,007

锟斤拷Investment yield (%)^note²

5.7

5.9

CPIC Life

Net premiums earned

203,447

203,848

Growth rate of net premiums earned (%)

(0.2)

锟斤拷Net claims

49,413

55,934

锟斤拷Surrender rate (%)^note³

1.7

1.2

CPIC P/C

锟斤拷Net premiums earned

128,803

121,835

锟斤拷Growth rate of net premiums earned (%)

5.7

16.5

锟斤拷Net claims

81,959

71,894

锟斤拷Unearned premium reserves

67,328

63,706

锟斤拷Claim reserves

50,724

40,772

锟斤拷Combined ratio (%)^{note 4}

99.0

锟斤拷Loss ratio (%)^note⁵

69.6

61.4

Notes:

1. Investment assets include cash at bank and on hand, etc.

2. Total investment yield = (investment income + gains / (losses) arising from changes in fair value + rental income from investment properties - charge of impairment losses on investment assets - interest expenses from securities sold under agreements to repurchase) / average investment assets, excluding foreign exchange gain or loss. Average investment assets used as the denominator are computed based on Modified Dietz method in principle.

3. Surrender rate= surrenders for the period / (opening balance of life insurance reserves + opening balance of long-term health insurance reserves + gross written premiums for long-term insurance).

4. Combined ratio = (claims-claims recoveries from reinsurers + changes in insurance contract reserves - insurance contract reserves recovered from reinsurers + expenses for reinsurance assumed + taxes and surcharges for insurance business + commission and brokerage expenses + operating and administrative expenses for insurance business - expenses recoveries from reinsurers + changes in insurance premium reserves + asset impairment losses of receivables) / net premiums earned.

5. Loss ratio = (claims-claims recoveries from reinsurers + changes in insurance contract reserves - insurance contract reserves recovered from reinsurers + changes in insurance premium reserves) / net premiums earned.

IV. Discrepancy between the financial results prepared under PRC GAAP and HKFRS

There is no difference on the equity of the Group as at 31 December 2021 and 31 December 2020 and the net profit of the Group for the years then ended as stated in accordance with PRC GAAP and HKFRS.

Review and analysis of operating results

Business overview

I. Key businesses

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

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

In 2021, China锟斤拷s insurance market realised a primary premium income of RMB4.49 trillion, up by 4.0% from 2020. Of this, premiums from life/health insurance companies amounted to RMB3.12 trillion, a growth of 5.0%, and that from property and casualty insurance companies RMB1.37 trillion, up by 1.9%. Measured by primary insurance premiums, CPIC Life and CPIC P/C are both China锟斤拷s 3rd largest insurers for life and property and casualty insurance, respectively.

II. Main items on consolidated financial statements with change of over 30% and reasons

Unit: RMB million

Balance sheet items

31 December 2021

31 December 2020

Changes (%)

Main reason for the changes

Cash at bank and on hand

32,545

20,878

55.9

Timing difference

Reinsurance receivables

11,091

8,180

35.6

Growth in insurance business and timing difference

Deferred income tax assets

1,998

845

136.4

Increase in deductible temporary differences

Reinsurance payables

7,638

5,501

38.8

Change in insurance business and timing difference

Income statement items

2021

2020

Changes (%)

Main reason for the changes

Premiums from reinsurance assumed

3,398

4,890

(30.5)

Change in insurance business

Net change in unearned premium reserves

(2,313)

(5,684)

(59.3)

Change in insurance business

Share of profits of associates and joint ventures

799

512

56.1

Increase in investment income

Gains arising from changes in fair value

1,163

1,335.8

Change in market value of financial assets held for trading

Exchange losses

(417)

(1,428)

(70.8)

Fluctuation of exchange rate

Surrenders

(22,330)

(14,421)

54.8

Growth in insurance business and increase in surrender

Insurance contract reserves recovered from reinsurers

2,737

1,021

168.1

Change in insurance business

Expenses for reinsurance assumed

(239)

(1,336)

(82.1)

Change in insurance business

Other comprehensive income/(loss)

(2,727)

9,616

(128.4)

Change in fair value for available-for-sale financial assets due to capital market fluctuation

Performance overview

We focused on the core business of insurance, persisted in value growth, believed in the long term, deepened the customer-oriented strategic transformation, accelerated deployment in health care and retirement sectors, pursued high-quality development and delivered solid business results and sustained increase in overall strength.

I. Performance highlights

During the reporting period, Group operating incomeamounted to RMB440.643 billion, of which, gross written premiums (GWPs) reached RMB366.782 billion, a growth of 1.3% compared with that of 2020. Group net profit^note¹reached RMB26.834 billion, up by 9.2%, with Group OPAT^notes^1,2 of RMB35.346 billion, a growth of 13.5%. Group EV amounted to RMB498.309 billion, an increase of 8.5% from the end of 2020. Of this, value of in-force business^note³ reached RMB211.096 billion, up by 4.5%. Life insurance business delivered RMB13.412 billion in new business value (NBV), down by 24.8% compared with that of 2020, with an NBV margin of 23.5%, down by 15.4pt. Property and casualty insurance business^{note 4} recorded a combined ratio of 99.1%, up by 0.1pt. Growth rate of Group investments锟斤拷 net asset value^{note 5} went down by 2.0pt to 5.4%. As of the end of the reporting period, Group total number of customers^{note 6} amounted to 168.39 million, an increase of 19.45 million from the end of 2020.

Steady growth of OPAT, with NBV growth under prolonged pressure.

l CPIC Life GWPs amounted to RMB211.685 billion, down by 0.1%. Of this, regular-pay new business from the agency channel grew by 11.6%.

l CPIC Life realised RMB13.412 billion in NBV, down by 24.8%, with an NBV margin of 23.5%, down by 15.4pt.

l OPAT of life insurance reached RMB28.265 billion, up by 9.2%; the residual margin of life insurance amounted to RMB348.272 billion, down by 0.8% from the end of 2020.

Property and casualty business^{note 4}reported a largely stable combined ratio, with improved business quality and rapid top-line growth of non-auto business.

l The combined ratio was 99.1%, up by 0.1pt. Of this, expense ratio stood at 29.3%, down by 8.2pt, and loss ratio 69.8%, up by 8.3pt.

l GWPs amounted to RMB154.611 billion, an increase of 3.3%. Of this, non-auto business grew by 16.8% and accounted for 40.6% of total property and casualty insurance GWPs, up by 4.7pt.

l Automobile insurance enhanced customer retention to push for a shift of growth drivers. Non-auto business achieved underwriting profitability, with emerging business lines such as health, agricultural and liability insurance maintaining rapid development.

Persisted in asset allocation through economic cycles and based on profiles of liabilities, with solid investment results.

l The share of fixed income investments stood at 75.7%, down by 2.6pt from the end of 2020; that of equity investments 21.2%, up by 2.4pt, and of this, core equity investments^{note 7} accounted for 11.1% of total investment assets, an increase of 0.9pt from the end of 2020.

l Growth rate of Group investments锟斤拷 net asset value^{note 5} reached 5.4%, down by 2.0pt from 2020. Total investment yield was 5.7%, down by 0.2pt, with net investment yield of 4.5%, down by 0.2pt.

l Group AuM amounted to RMB2,601.537 billion, an increase of 6.8% from the end of 2020. Of this, third-party AuM amounted to RMB789.468 billion, an increase of 0.2%.

Notes:

1. Attributable to shareholders of the parent.

3. Based on the Group锟斤拷s share of CPIC Life锟斤拷s value of in-force business after solvency.

4. Consolidated data of CPIC P/C, CPIC Anxin Agricultural and CPIC HK.

5. Figures for the same period of the previous year have been restated.

6. Figures as at the end of the previous year have been restated.

7. Stocks and equity funds included.

II. Key performance indicators

Unit: RMB million

Indicators

As at 31 December 2021

/for the period between January and December in 2021

As at 31 December 2020

/for the period between January and December in 2020

Changes (%)

Key value indicators

Group embedded value

498,309

459,320

8.5

Value of in-force business^{note 1}

211,096

201,942

4.5

Group net assets^{note 2}

226,741

215,224

5.4

NBV of CPIC Life

13,412

17,841

(24.8)

NBV margin of CPIC Life (%)

23.5

38.9

(15.4pt)

Combined ratio of CPIC P/C (%)

99.0

Growth rate of Group investments锟斤拷 net asset value (%)^{note 3}

5.4

7.4

(2.0pt)

Key operating indicators

GWPs

366,782

362,064

1.3

CPIC Life

211,685

211,952

(0.1)

CPIC P/C

152,643

147,734

3.3

Group number of customers (锟斤拷000)^{notes 4}^,5

168,393

148,938

13.1

Average number of insurance policies per customer^{note 5}

2.28

2.13

7.0

Monthly average agent number (锟斤拷000)

525

749

(29.9)

Surrender rate of CPIC Life (%)

1.7

1.2

0.5pt

Total investment yield (%)

5.7

5.9

(0.2pt)

Net investment yield (%)

4.5

4.7

(0.2pt)

Third-party AuM

789,468

788,073

0.2

CPIC AMC

267,120

253,227

5.5

Changjiang Pension

452,191

483,060

(6.4)

Key financial indicators

Net profit attributable to shareholders of the parent

26,834

24,584

9.2

CPIC Life

18,905

18,642

1.4

CPIC P/C

6,352

5,209

21.9

Basic earnings per share (RMB yuan)^{note 2}

2.79

2.63

6.1

Net assets per share (RMB yuan)^{note 2}

23.57

22.37

5.4

Comprehensive solvency margin ratio (%)

CPIC Group

266

288

(22pt)

CPIC Life

218

242

(24pt)

CPIC P/C

288

276

12pt

Notes:

1. Based on the Group锟斤拷s share of CPIC Life锟斤拷s value of in-force business after solvency.

2. Attributable to shareholders of the parent.

3. Figures for the same period of the previous year have been restated.

4. The Group number of customers refers to the number of applicants and insureds who hold at least one insurance policy within the insurance period issued by one or any of CPIC subsidiaries as at the end of the reporting period. In the event that the applicants and insureds are the same person, they shall be deemed as one customer.

5. Figures as at the end of the previous year have been restated.

Life/health insurance business

CPIC Life delivered stable top-line growth, with NBV growth under prolonged pressure. It pushed forward the Changhang Action Programme in an all-around way, seeking to establish a more diversified channel mix with the agency channel at the core, and provide comprehensive insurance solutions with in-depth integration of products and services. CPIC Health vigourously pursued transformation, explored new business model, focused on core capability-building to enhance foundation of development.

I. CPIC Life

(I) Business analysis

In 2021, in the face of the resurgence of COVID-19 around the world, complicated economic environment and profound adjustments of the domestic insurance industry, CPIC Life met the challenges head-on, adhered to high-quality development, and maintained stable business performance. It reported RMB211.685 billion in GWPs, a decrease of 0.1% compared with that of 2020. Of this, primary insurance premiums grew by 0.6% to RMB209.610 billion; OPAT amounted to RMB28.265 billion, a growth of 9.2%, and net profit RMB18.905 billion, an increase of 1.4%, pointing to resilience in spite of the headwinds.

Due to a challenging market environment and the shift of business mix, NBV fell by 24.8% to RMB13.412 billion, with NBV margin of 23.5%, down by 15.4pt from 2020. In the face of formidable challenges, we took actions based on trends and dynamics of the life insurance business, persisted in customer-oriented strategies, and strived for healthy, sustainable development through transformation and reform. In 2021, we launched the Changhang Action Programme, which set out the vision of 锟斤拷becoming a life insurer focusing on the long term and offering the best customer experience锟斤拷. To deepen its implementation, we formulated the Road-map for Phase I of the Changhang Action Programme, which encompassed a series of projects such as Career Agency Force, Service-based Marketing, Value-oriented Bancassurance, and Products + Services Systems, in a bid to push for the paradigm shift of development.

1. Analysis by channels

CPIC Life seeks to build a more diversified channel mix with the agency force at the core, in order to expand the avenues of value growth.

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

Gross written premiums

211,685

211,952

(0.1)

Agency channel

188,629

194,831

(3.2)

New policies

29,227

29,294

(0.2)

Regular premium business

24,761

22,190

11.6

Renewed policies

159,402

165,537

(3.7)

Bancassurance channel

7,457

2,305

223.5

New policies

6,668

1,546

331.3

Renewed policies

789

759

4.0

Group channel

13,514

11,323

19.3

New policies

13,011

10,933

19.0

Renewed policies

503

390

29.0

Other channels^note

2,085

3,493

(40.3)

Note: Other channels include telemarketing & internet sales, and inward reinsurance business.

(1) Agency channel

CPIC Life continued to nurture an enabling culture for high performance, enhanced succession plans for high-performing agents, diversified platforms for CRM, adopted accommodating product promotion strategies, rolled out basic training and basic management. These efforts effectively helped to raise agent income and boost agency force restructuring. In 2021, CG (equivalent of MDRT) headcount grew by 170.1% from the level in 2020; monthly average FYP per agent reached RMB4,638, up by 42.3%; monthly average FYC per agent RMB791, up by 16.3%; regular-pay new business from the agency channel amounted to RMB24.761 billion, a growth of 11.6% versus that of 2020.

Under the guidance of the Changhang Action Programme, the company undertakes to build an agency force with 锟斤拷3 Directions and 5 Mosts锟斤拷. The former refers to career-based development, professionalism and digitalisation; while the latter means space for the most generous income, the most powerful entrepreneurial platform, the most caring CPIC Service, the most professional career advancement system, and the most comfortable work environment. In October 2021, we completed design of the new Basic Law (rules on compensation and management of agents) and professional sales supportive platforms based on the Career Agency Force Project, introduced world-leading training courses so as to empower agents in a systematic manner. The amended Basic Law and supportive platforms were officially launched in January 2022. We will leverage the new Basic Law to drive core manpower growth and productivity gains, enhance business quality control, and upgrade the agency force in an all-around way.

For 12 months ended 31 December

2021

2020

Changes (%)

Monthly average agent number (锟斤拷000)

525

749

(29.9)

Monthly average performing ratio of agents (%)

52.1

57.8

(5.7pt)

Monthly average FYP per agent (RMB)

4,638

3,259

42.3

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

1.38

1.58

(12.7)

(2) Bancassurance channel

We continued to build the value-oriented bancassurance channel underpinned by banking outlets, products and personnel, boosted strategic co-operation with key partners, deployed resources in key areas, and accelerated the building of underlying supportive capabilities and systems. As a result, we reported rapid premium growth from bancassurance during the reporting period, with RMB7.457 billion in GWPs from the channel, up by 223.5%, and of this, new business premiums amounted to RMB6.668 billion, a growth of 331.3%.

(3) Group channel

In 2021, GWPs from the channel reached RMB13.514 billion, up by 19.3%.

CPIC Life vigourously contributed to China锟斤拷s social security system by engaging in government-sponsored business such as city-specific customised commercial insurance programmes, long-term care, medical insurance for major diseases programmes, third-party administration of social insurance and supplementary medical insurance. As of the end of the reporting period, programmes in operation covered over 150 million people, which cumulatively responded to nearly 30 million service requests since its establishment, and paid out a total of RMB29 billion in claims; the subsidiary was the lead underwriter of Huiminbao in Shanghai, a city-specific customised commercial insurance programme, with participation of over 7 million people, accounting for 38% of eligible applicants in the city, setting the record for the number of first-year participants for programme of the kind. At the same time, it stepped up effort to explore new models such as Work-site Marketing, with further improvement in CRM capabilities.

2. Analysis by product types

CPIC Life is committed to build a Golden Triangle system of products and services centring on 3 core needs of customers: health protection, wealth management and retirement.

In 2021, we further diversified product offering, launched 锟斤拷Jindian Rensheng锟斤拷, an upgraded whole-life CI product under the New CI Definitions with comprehensive cover against multiple illnesses, through the entire treatment cycle and during the full lifetime of customers; there was also the debut of 锟斤拷Haoshi Chengshuang锟斤拷, a whole-life CI product integrating health management and elderly care, balancing between retirement savings and health protection. These new products acquired more than 500,000 individual customers, with over RMB90 billion in total SA. In the meantime, we continued to deepen deployment in health management and elderly care, rolling out 10 retirement communities in 9 cities, and of them, those in Chengdu and Dali already went operational. CPIC Blue Passports, a health management programme, covered nearly 18 million customers cumulatively.

We focus on both traditional and participating products. For the reporting period, traditional business generated RMB107.062 billion in GWPs, up by 11.7%. Of this, long-term health insurance contributed RMB48.134 billion, up by 4.4%. Participating business delivered RMB86.737 billion in GWPs, down by 10.9%, due to lower guaranteed interest rates in the context of market-oriented pricing.

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

GWPs

211,685

211,952

(0.1)

Traditional

107,062

95,864

11.7

Long-term health

48,134

46,106

4.4

Participating

86,737

97,318

(10.9)

Universal

101

(3.0)

Tax-deferred pension

Short-term accident and health

17,713

18,594

(4.7)

Information of the top five products in 2021

Unit: RMB million

For 12 months ended 31 December

Ranking

Name

Type

GWPs

Main channel

Jin You Ren Sheng Whole Life A (2014)

锟斤拷锟斤拷锟斤拷锟斤拷锟斤拷锟斤拷锟斤拷锟秸ｏ拷锟街猴拷锟酵ｏ拷A锟筋（2014锟芥）

Participating

15,531

Agency channel

Xin Xiang Shi Cheng (anniversary celebration) Endowment

锟斤拷锟斤拷锟铰诚ｏ拷锟斤拷锟芥）锟斤拷全锟斤拷锟秸诧拷品

Traditional

7,200

Agency channel

Jin Nuo Ren Sheng Critical Illness (2018)

锟斤拷诺锟斤拷锟斤拷锟截大疾诧拷锟斤拷锟秸ｏ拷2018锟芥）

Traditional

7,199

Agency channel

Group medical insurance for major disease of rural and urban residents (A)

锟斤拷锟斤拷锟斤拷锟斤拷锟斤拷锟斤拷医锟狡憋拷锟秸ｏ拷A锟酵ｏ拷

Traditional

6,113

Group channel

Jin You Ren Sheng Whole Life A (2017)

锟斤拷锟斤拷锟斤拷锟斤拷锟斤拷锟斤拷锟斤拷锟秸ｏ拷锟街猴拷锟酵ｏ拷A锟筋（2017锟芥）

Participating

6,101

Agency channel

3. Policy persistency ratio

The 13-month and 25-month policy persistency ratios of individual life insurance customers both declined, due to the higher agent turnover and the impact of the pandemic.

For 12 months ended 31 December

2021

2020

Changes

Individual customers 13-month persistency ratio (%)^{note 1}

80.3

85.7

(5.4pt)

Individual customers 25-month persistency ratio (%)^{note 2}

78.7

85.1

(6.4pt)

Notes:

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

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

4. Top 10 regions for GWPs

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

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

GWPs

211,685

211,952

(0.1)

Henan

22,332

24,118

(7.4)

Jiangsu

21,795

21,301

2.3

Shandong

17,746

17,616

0.7

Zhejiang

16,090

14,953

7.6

Hebei

12,649

13,087

(3.3)

Guangdong

11,321

11,759

(3.7)

Heilongjiang

9,144

8,962

2.0

Hubei

8,759

8,971

(2.4)

Shanxi

8,165

8,500

(3.9)

Shanghai

7,139

6,416

11.3

Subtotal

135,140

135,683

(0.4)

Others

76,545

76,269

0.4

(II) Financial analysis

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

Net premiums earned

203,446

203,848

(0.2)

Investment income^note¹

82,418

75,548

9.1

Exchange losses

(50)

(89)

(43.8)

Other operating income

1,852

2,283

(18.9)

Gains on disposal of assets

125.0

Other income

(44.4)

Operating income

287,700

281,639

2.2

Surrenders

(22,330)

(14,421)

54.8

Claims

(54,190)

(59,577)

(9.0)

Less: claims recoveries from reinsurers

4,777

3,644

31.1

Net change in insurance contract reserves

(143,123)

(132,775)

7.8

Commission and brokerage expenses

(17,174)

(21,359)

(19.6)

Operating and administrative expenses

(14,780)

(15,037)

(1.7)

Other expenses^note2

(21,586)

(21,743)

(0.7)

Operating expenses

(268,406)

(261,268)

2.7

Operating profit

19,294

20,371

(5.3)

Net of non-operating income and expenses

(34)

(72)

(52.8)

Income tax

(355)

(1,657)

(78.6)

Net profit

18,905

18,642

1.4

Notes:

1. Investment income includes investment income and gains/(losses) arising from change in fair value on financial statements.

2. Other expenses include policyholder dividends, expenses for reinsurance assumed, expenses recoveries from reinsurers, interest expenses, other operating expenses, asset impairment losses and taxes and surcharges, etc.

Investment income for the reporting period was RMB82.418 billion, up by 9.1%, mainly because of increase in gains from securities trading and interest income on bond investments.

Claims amounted to RMB54.190 billion, down by 9.0%, mainly as a result of reduced maturity benefit payment.

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

Claims

54,190

59,577

(9.0)

Traditional

18,359

15,627

17.5

Long-term health

10,363

7,902

31.1

Participating

23,675

34,071

(30.5)

Universal

18.3

Tax-deferred pension

Short-term accident and health

12,085

9,819

23.1

Claims

54,190

59,577

(9.0)

Indemnity

12,085

9,819

23.1

Payment upon maturity and survival

14,294

24,745

(42.2)

Payment of annuity

14,642

14,530

0.8

Payment upon death, injury or medical treatment

13,169

10,483

25.6

Commission and brokerage expenses for the reporting period amounted to RMB17.174 billion, down by 19.6%, mainly due to the change to new business mix.

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

Commission and brokerage expenses

17,174

21,359

(19.6)

Traditional

13,346

15,843

(15.8)

Long-term health

6,941

8,353

(16.9)

Participating

1,916

3,054

(37.3)

Universal

Tax-deferred pension

Short-term accident and health

1,912

2,462

(22.3)

Income tax for the reporting period was RMB355 million, down by 78.6%, mainly due to increase in tax deductible income and decrease in pre-tax profits.

As a result, CPIC Life recorded a net profit of RMB18.905 billion, up by 1.4%.

II. CPIC Health

In 2021, CPIC Health completed its shareholding restructuring and renaming. With the new vision of 锟斤拷building an open, high-tech health insurance company锟斤拷, the subsidiary re-calibrated its development objectives, vigourously explored 锟斤拷new channels, new products and new technology锟斤拷, and initiated transformation on all fronts. For the reporting period, it realised RMB6.263 billion in GWPs and health management fee income, and net profit of RMB125 million. As of the end of the reporting period, its core and comprehensive solvency margin ratios both stood at 138%.

Going forward, CPIC Health will continue to boost core capacity-building as a specialised health insurance company, extend the service network nationwide, and enhance capabilities for sustainable development. It will deepen collaboration with CPIC Life and CPIC P/C to better empower their business development; establish a closed-loop model for Internet business to drive its high-quality development, underpinned by channel roll-out, product launches, brand promotion, system development and model integration; continuously expand in-depth co-operation with care providers, drug manufacturers and medical professionals, so as to provide multi-levelled, personalised health management services; put in place a product R & D centre for innovative health insurance products catering for those with prior conditions to narrow their protection gap; strengthen cooperation with the health ecosystem, focus on disease prevention and health service for the juvenile to foster competitive edge in health management.

Property and casualty insurance

CPIC P/C^notedeepened transformation, enhanced business quality control, and delivered steady premium growth and a stable combined ratio. Automobile insurance, in the face of the comprehensive reform, stepped up capabilities of customer acquisition and retention and maintained underwriting profitability; non-auto business maintained rapid growth of emerging business lines, with improved business quality and turnaround in underwriting profits.

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

I. CPIC P/C

(I) Business analysis

In the face of the resurgence of the pandemic, the comprehensive reform of automobile insurance and severe natural disasters such as the flooding in He锟斤拷nan Province, CPIC P/C persisted in high-quality development, seized development opportunities, deepened transformation, continuously enhanced business quality control and customer acquisition & retention, and further consolidated the foundation of high-quality development. During the reporting period, it recorded GWPs of RMB152.643 billion, up by 3.3%, with a combined ratio of 99.0%, the same as that for 2020. Of this, loss ratio stood at 69.6%, up by 8.2pt, and expense ratio 29.4%, down by 8.2pt.

1. Analysis by lines of business

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

GWPs

152,643

147,734

3.3

Automobile insurance

91,799

95,670

(4.0)

Compulsory automobile insurance

25,268

23,906

5.7

Commercial automobile insurance

66,531

71,764

(7.3)

Non-automobile insurance

60,844

52,064

16.9

Health insurance

12,198

8,886

37.3

Liability insurance

10,948

8,784

24.6

Agricultural insurance

10,363

8,649

19.8

Guarantee insurance

7,253

6,682

8.5

Others

20,082

19,063

5.3

(1) Automobile insurance

CPIC P/C proactively adapted to challenges of the comprehensive reform of automobile insurance and major natural disasters, persisted in high-quality development, deepened customer acquisition & retention and building of platforms, enhanced risk screening and risk management, improved business quality, and recorded underwriting profitability for the business line.

In 2021, CPIC P/C reported GWPs of RMB91.799 billion from automobile business, a decline of 4.0%, due to the impact of the comprehensive reform. The combined ratio was 98.7%, up by 0.8pt from 2020. Of this, loss ratio stood at 71.1%, up by 10.6pt and expense ratio fell by 9.8pt to 27.6%. The subsidiary made further progress in customer penetration, renewal ratio and on-line ratio.

Going forward, it will continue to consolidate the progress of its transformation and strengthen customer acquisition & retention; closely follow the developments of the automobile market to explore new operational mode for automobile insurance; increase the use of technology, improve claims management to enhance customer experience.

(2) Non-automobile insurance

In 2021, CPIC P/C seized opportunities arising from the Dual Circulation national strategy, optimised business mix, continuously enhanced business management, and recorded GWPs of RMB60.844 billion, up by 16.9%, with a combined ratio of 99.5%, down by 2.4pt. Of the major business lines, emerging business such as health insurance, liability insurance and agricultural insurance maintained strong momentum of growth, with improved business quality.

Health insurance accelerated innovation of personal lines products and services, continued to diversify the ecosystem of niche products; while stabilising the current platform of cooperation for government-sponsored insurance, it particularly expanded the geographical coverage of the business, promoted the development of existing business in medical insurance for major diseases , accident medical and poverty reduction, and strived to tap the potential of emerging business such as long-term care, chronic illness insurance and third-party administration of basic medical insurance. In 2021, health insurance reported RMB12.198 billion in GWPs, a growth of 37.3%.

Liability insurance stepped up support for the modernisation of China锟斤拷s governance, carried out strategic cooperation with local governments, deepened its first-mover advantage in serving social well-being and administration, supporting industrial chain upgrading and promoting local economic development, strived for rapid development of liability insurance business in work-place safety, environmental protection, food safety, social welfare and life sciences. The business line delivered RMB10.948 billion in GWPs for 2021, up by 24.6%.

Agricultural insurance seized opportunities of the Rural Invigoration Strategy, continuously pushed for 锟斤拷expansion of coverage, diversification of product offering and improvement of standards锟斤拷, vigourously participated in the trials of full cost indemnity insurance and income protection insurance of the 3 staple food crops to safeguard national food security. It enhanced innovation in products, technology and service, supported the development of local speciality agriculture to contribute to the modernisation of the countryside and agriculture and higher income of farmers. In 2021, the business line delivered RMB10.363 billion in GWPs, up by 19.8%, with a combined ratio of 99.6%, maintaining stable business operation.

Guarantee insurance realised high-quality development while ensuring effective control of risks. In 2021, it reported GWPs of RMB7.253 billion, up by 8.5%, with a combined ratio of 95.1%, pointing to improved underwriting profitability.

Going forward, CPIC P/C will increase deployment toward green and low-carbon insurance, step up support for the Rural Invigoration Strategy, enhance risk management capacity-building, deepen digital empowerment in a bid to further strengthen its capabilities for high-quality development.

(3) Key financials of major business lines

Unit: RMB million

For 12 months ended 31 December 2021

Name of insurance

GWPs

Amounts insured

Claims

Reserves

Underwriting profit

Combined ratio (%)

Automobile insurance

91,799

58,300,724

61,406

67,144

1,077

98.7

Health insurance

12,198

74,008,501

7,251

6,598

(199)

101.9

Liability insurance

10,948

150,753,042

4,779

9,137

104

98.5

Agricultural insurance

10,363

370,703

7,106

4,004

99.6

Guarantee insurance

7,253

148,110

2,151

11,627

266

95.1

2. Top 10 regions for GWPs

CPIC P/C is committed to improving capabilities for integrated regional development, and pursues upgrading along the line.

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

GWPs

152,643

147,734

3.3

Guangdong

19,110

17,539

9.0

Jiangsu

16,629

15,940

4.3

Zhejiang

14,507

13,764

5.4

Shanghai

11,754

10,945

7.4

Shandong

8,734

8,313

5.1

Beijing

6,388

6,928

(7.8)

Hubei

5,771

5,236

10.2

Hunan

5,496

5,303

3.6

Hebei

5,415

5,505

(1.6)

Henan

5,306

Subtotal

99,110

94,779

4.6

Others

53,533

52,955

1.1

(II) Financial analysis

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

Net premiums earned

128,803

121,835

5.7

Investment income^note¹

7,793

6,834

14.0

Exchange losses

(54)

(249)

(78.3)

Other operating income

289

225

28.4

Gains on disposal of assets

Other income

45.2

Operating income

136,878

128,678

6.4

Claims

(92,721)

(81,908)

13.2

Less: claims recoveries from reinsurers

10,762

10,014

7.5

Net change in insurance contract reserves

(7,683)

(3,010)

155.2

Changes in insurance premium reserves

(18)

105

(117.1)

Commission and brokerage expenses

(13,509)

(18,277)

(26.1)

Operating and administrative expenses

(29,750)

(33,689)

(11.7)

Other expenses^note²

4,205

5,004

(16.0)

Operating expenses

(128,714)

(121,761)

5.7

Operating profit

8,164

6,917

18.0

Net of non-operating income and expenses

(29)

(231.0)

Income tax

(1,850)

(1,679)

10.2

Net profit

6,352

5,209

21.9

Notes:

1. Investment income includes investment income and gains/(losses) arising from changes in fair value on financial statements.

2. Other expenses include expenses for reinsurance assumed, expense recoveries from reinsurers, interest expense, other operating expenses, asset impairment losses and taxes and surcharges, etc.

Investment income for the reporting period amounted to RMB7.793 billion, up by 14.0%, mainly as a result of seizing equity market opportunities while improving asset-liability matching.

Claims reached RMB92.721 billion, up by 13.2%, mainly as a result of business growth, higher loss ratio due to the impact of automobile insurance comprehensive reform and a low base in claims frequency from last year at the height of the pandemic.

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

Claims

92,721

81,908

13.2

Automobile insurance

61,406

56,071

9.5

Non-automobile insurance

31,315

25,837

21.2

Commission and brokerage expenses amounted to RMB13.509 billion, down by 26.1% and representing 8.9% of total GWPs, down by 3.5pt, largely due to decrease in commission rates of automobile insurance after the comprehensive reform.

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

Commission and brokerage expenses

13,509

18,277

(26.1)

Automobile insurance

7,278

12,384

(41.2)

Non-automobile insurance

6,231

5,893

5.7

Operating and administrative expenses amounted to RMB29.750 billion, a decrease of 11.7%, and accounting for 19.5% of GWPs, down by 3.3pt from 2020.

In balance, the subsidiary posted a net profit of RMB6.352 billion in 2021, an increase of 21.9% from 2020.

II. CPIC Anxin Agricultural

In 2021, under the guidelines of 锟斤拷one agricultural insurance firm within the Group, boosting development via full integration锟斤拷, CPIC Anxin Agricultural stayed focused on the core business of agricultural insurance, pursued strategies of 锟斤拷improving existing business, expanding incremental business and optimising business quality锟斤拷, to promote healthy and steady development. It delivered RMB1.651 billion in GWPs, up by 12.1%. Of this, agricultural insurance reported GWPs of RMB1.082 billion, a growth of 17.0%, with a combined ratio of 106.9%, rising by 10.7pt, due to the impact of natural disasters such as typhoons. Net profit amounted to RMB84 million, down by 44.4%.

III. CPIC HK

We conduct overseas business via CPIC HK, a wholly-owned subsidiary. As at 31 December 2021, its total assets stood at RMB1.530 billion, with net assets of RMB425 million. GWPs for the reporting period amounted to RMB523 million, with a combined ratio of 114.3%, and a net loss of RMB35 million.

Asset management

We persisted in long-term, value and prudent investing and further optimised the ALM system. Within the SAA framework, we continued to extend the duration of assets, while seizing market opportunities and dynamically adjusting Tactical Asset Allocation (TAA). As a result, we delivered solid investment performance, with Group AuM on steady increase.

I. Group AuM

As of the end of 2021, Group AuM totalled RMB2,601.537 billion, rising 6.8% from the end of 2020. Of this, Group in-house investment assets amounted to RMB1,812.069 billion, a growth of 10.0%, and third-party AuM RMB789.468 billion, an increase of 0.2%, with a management fee income of RMB2.673 billion, up by 12.1% from 2020.

Unit: RMB million

31 December 2021

31 December 2020

Changes (%)

Group AuM

2,601,537

2,436,080

6.8

Group in-house investment assets

1,812,069

1,648,007

10.0

Third-party AuM

789,468

788,073

0.2

CPIC AMC

267,120

253,227

5.5

Changjiang Pension

452,191

483,060

(6.4)

II. Group in-house investment assets

During the reporting period, China锟斤拷s economic recovery remained on track, with overall stable employment and rapid growth of imports and exports, demonstrating sound resilience. However, the economy also faced the pressure of demand contraction, supply disruption and weakening expectations. As for the capital markets, the stock market experienced volatility within a narrow range, interest rates fell sharply, and credit risk rose considerably.

With the guidance of SAA, we conducted TAA with flexibility, seized market opportunities and achieved investment results which were higher than the cost of liabilities. In the face of lower interest rates and rising defaults, we persisted in the 锟斤拷dumb-bell shaped锟斤拷 asset allocation strategy, increasing allocation into long-term T-bonds and local government bonds to extend asset duration and control reinvestment risk, and on the other hand moderately increasing investments in equity assets including private equity to increase long-term returns. We maintained prudence in credit risk exposure, enhanced credit risk control and took effective steps to mitigate the risk.

In investment concentration, our investments are concentrated in financial services, communications & transport, real estate, infrastructure, and the energy sector like power, thermos and gas, with relatively strong resilience in the face of risks. Our equity investments spread across a wide range of instruments; as for fixed income assets, the debt issuers boasted strong overall strength, and our main counter-parties included China State Railway Group Co., Ltd., large state-owned commercial banks and State Grid Corporation of China.

(I) Group consolidated investment portfolios

Unit: RMB million

31 December 2021

Share (%)

Share change from the end of 2020 (pt)

Changes (%)

Group investment assets (total)

1,812,069

100.0

10.0

By investment category

Fixed income investments

1,370,861

75.7

(2.6)

6.2

锟斤拷Debt securities

691,369

38.2

(1.1)

6.6

锟斤拷Term deposits

196,519

10.8

(0.9)

1.8

锟斤拷Debt investment plans

230,829

12.7

1.3

23.1

锟斤拷Wealth management products^note¹

142,312

7.9

(1.7)

(9.8)

锟斤拷Preferred shares

32,000

1.8

(0.1)

锟斤拷Other fixed income investments^note²

77,832

4.3

(0.1)

8.1

Equity investments

384,506

21.2

2.4

23.9

锟斤拷Equity funds

46,218

2.6

0.1

12.9

锟斤拷Bond funds

23,743

1.3

0.1

24.1

锟斤拷Stocks

154,355

8.5

0.8

21.3

锟斤拷Wealth management products^note¹

2,470

0.1

70.8

锟斤拷Preferred shares

12,519

0.7

(0.1)

(4.7)

锟斤拷Other equity investments^note³

145,201

8.0

1.5

34.1

Investment properties

7,514

0.4

(0.1)

(4.5)

Cash, cash equivalents and others

49,188

2.7

0.3

25.3

By investment purpose

Financial assets at fair value through profit or loss^note⁴

12,612

0.7

Available-for-sale financial assets

645,381

35.6

(0.6)

8.3

Held-to-maturity financial assets

396,428

21.9

1.9

20.4

Long-term equity investments

26,984

1.5

10.4

Loans and other investments^note⁵

730,664

40.3

(1.3)

6.6

Notes锟斤拷

1. Wealth management products include wealth management products issued by commercial banks, collective trust plans by trust firms, special asset management plans by securities firms and credit assets backed securities by banking institutions, etc.

2. Other fixed income investments include restricted statutory deposits and policy loans, etc.

3. Other equity investments include unlisted equities and derivative financial assets, etc.

4. Financial assets at fair value through profit or loss include financial assets at fair value through profit or loss, and derivative financial assets on financial statements.

5. Loans and other investments include term deposits, cash at bank and on hand, securities purchased under agreements to resell, policy loans, restricted statutory deposits, investments classified as loans and receivables, and investment properties, etc.

1. By investment category

As of the end of the reporting period, the share of debt securities was 38.2%, a drop of 1.1pt from the end of 2020. Of this, treasury bonds, local government bonds and financial bonds issued by government-sponsored banks made up 22.1% of total investment assets, up by 4.6pt from the end of 2020. With this, the average duration on fixed income assets reached 7.1 years, extended by 0.9 years versus the end of 2020. Moreover, 99.1% of enterprise bonds and financial bonds issued by non-government-sponsored banks had an issuer/debt rating of AA/A-1 or above. Of this, the share of AAA reached 93.4%. We boasted a professional internal credit-rating team and sound credit risk management systems covering the entire debt securities investment process, namely, before, during and after the investment. We continued to improve the Group-wise integrated credit-rating management system, evaluated the credit-ratings of both the debt and debt issuers and identified the credit risk based on our internal credit-rating systems, while considering other factors such as macroeconomic conditions, and external credit-ratings in order to make well-informed investment decisions. At the same time, to pro-actively control the credit risk of the stock of bond holdings, we followed a uniform and standardised set of regulations and procedures, combining both regular and unscheduled follow-up tracking post the investment. Our corporate/enterprise bond holdings spread over a wide range of sectors with good diversification effect; we set great store by credit risk management, strictly controlling the exposure to the real estate sector, and carefully select targets to ensure that the risk is manageable. Overall, the debt issuers of our investments all reported sound financial strength, with credit risk under control.

The share of equity investments stood at 21.2%, up by 2.4pt from the end of 2020. Of this, stocks and equity funds accounted for 11.1% of total investment assets, up by 0.9pt from the end of 2020. On the back of disciplined TAA processes and outstanding market research capabilities, we realised solid investment performance amid market volatility.

As of the end of the reporting period, non-public financing instruments (NPFIs) totalled RMB392.840billion, accounting for 21.7% of total investment assets, rising 0.1pt from the end of 2020. While ensuring full compliance with regulatory requirements and internal risk control policies, we persisted in prudent management as is inherently required of insurance companies, stayed highly selective about debt issuers and projects. The underlying projects spread across sectors like infrastructure, real estate, communications & transport and non-bank financial institutions, which were geographically concentrated in China锟斤拷s prosperous areas such as Beijing, Sichuan, Shandong, Hubei and Jiangsu.

Overall, the credit risk of our NPFI holdings is in the comfort zone. 98.8% of NPFIs had external credit-ratings, and of these, the share of AAA reached 94.7%, and that of AA+ and above 98.8%. 55.4% of NPFIs were exempt from debt issuer external credit-ratings, with the rest secured with credit-enhancing measures such as guarantee or pledge of collateral, with the overall credit risk under control.

Mix and distribution of yields of non-public financing instruments

Sectors

Share of investments (%)

Nominal yield (%)

Average duration (year)

Average remaining duration (year)

Infrastructure

39.6

5.1

7.6

5.4

Real estate

19.3

5.1

6.5

4.2

Communications & transport

14.5

5.2

9.1

6.1

Non-bank financial institutions

13.4

5.0

4.9

3.0

Energy and manufacturing

5.5

5.3

6.9

4.0

Others

7.7

5.3

8.4

6.1

Total

100.0

5.1

7.3

4.9

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

2. By investment purpose

By investment purpose, our in-house investment assets are mainly in three categories, namely, available-for-sale (AFS) financial assets, held-to-maturity (HTM) financial assets as well as loans and other investments. Of this, AFS financial assets increased by 8.3% from the end of 2020, mainly as a result of increased investments in listed and private stocks. HTM financial assets grew by 20.4%, mainly due to increased investments in government bonds. Long-term equity investments grew by 10.4% from the end of 2020, mainly due to increased investments in associates and structured entities. Loans and other investments rose by 6.6%, largely attributable to increased allocation in debt investment plans.

(II) Group consolidated investment income

For the reporting period, net investment income totalled RMB73.061 billion, up by 8.8%. This stemmed mainly from increased interest income on fixed income investments. Net investment yield reached 4.5%, down by 0.2pt compared with that of 2020.

Total investment income amounted to RMB93.184 billion, up by 10.9%, mainly attributable to increase in gains from securities trading and interest income on fixed income investments, with total investment yield at 5.7%, down by 0.2pt.

Growth rate of investments锟斤拷 net asset value fell by 2.0pt to 5.4%, largely due to decrease in net of fair value movement of AFS assets booked as other comprehensive income.

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

Interest income from fixed income investments

63,259

59,624

6.1

Dividend income from equity investments

9,060

6,790

33.4

Rental income from investment properties

742

745

(0.4)

Net investment income

73,061

67,159

8.8

Gains from securities trading

21,899

19,462

12.5

Gains arising from changes in fair value

1,163

1,335.8

Charge of impairment losses on investment assets

(4,178)

(4,242)

(1.5)

Other income^note¹

1,239

1,537

(19.4)

Total investment income

93,184

83,997

10.9

Net investment yield (%)^note²

4.5

4.7

(0.2pt)

Total investment yield (%)^note²

5.7

5.9

(0.2pt)

Growth rate of investments锟斤拷 net asset value (%)^note^s^2,3^,4

5.4

7.4

(2.0pt)

Notes锟斤拷

1. Other income includes interest income on cash at bank and on hand and securities purchased under agreements to resell, share of profit/(loss) of associates and joint ventures, and investment income through the step acquisition of a subsidiary, etc.

2. The impact of securities sold under agreements to repurchase was considered in the calculation of net investment yield. Average investment assets as the denominator in the calculation of net/total investment yield and growth rate of investments' net asset value are computed based on the Modified Dietz method.

3. Growth rate of investments' net asset value = total investment yield + net of fair value changes of AFS booked as other comprehensive income/(loss) / average investment assets.

4. Figures for the same period of the previous year have been restated.

(III) Total investment yield on a consolidated basis

Unit: %

For 12 months ended 31 December

2021

2020

Changes

Total investment yield

5.7

5.9

(0.2pt)

Fixed income investments^note¹

4.9

Equity investments^note¹

8.6

10.1

(1.5pt)

Investment properties^note^{s 1,2}

7.3

Cash, cash equivalents and others^note¹

1.1

1.3

(0.2pt)

Notes:

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

2. Figures for the same period of the previous year have been restated.

III. Third-party AuM

(I) CPIC AMC

In 2021, CPIC AMC pursued 锟斤拷market-based, product-based and systematic development锟斤拷, vigourously stepped up professional investment capacity-building, and made steady progress in third-party asset management business. As of the end of the reporting period, its third-party AuM amounted to RMB267.120 billion, an increase of 5.5% from the end of 2020.

In alternative investments, while stepping up credit risk control, it continued to support key national initiatives and the development of the real economy. It adopted a business strategy focusing on enhancing credit-worthiness while pro-actively adjusting business mix, with new debt investment schemes boasting higher credit-ratings. New projects were mainly in infrastructure-related sectors such as communications & transport, energy, and urban construction, with reduced exposure to commercial property. In 2021, the company provided RMB8.4 billion in financing to major infrastructural projects including the subway systems in Ji锟斤拷nan, Wuhan, Zhengzhou, the Yellow River Bridge in Ji锟斤拷nan, and the Highway between Shanghai and Shaanxi. To promote the development of Central and Western China, and in response to the national strategy of 锟斤拷closing gaps in infrastructure锟斤拷, it registered 10 debt investment schemes in He锟斤拷nan, Hubei and Sichuan, raising a total of RMB32.9 billion. In 2021, it registered a total of 29 alternative investment products involving an amount of RMB72.3 billion.

As for portfolio asset management products, the company focused on institutional clients, enhanced its current product line-up with insurance asset management characteristics to promote its brand-name. To secure its advantage, it improved existing product offering based on traditional strategies. The scale of both fixed income and liquidity management business increased steadily, with stable investment performance which was leading among comparable products. On the other hand, the subsidiary steadily built its own FOF product suite across the gamut of risks and reward ratios, and achieved initial success in market branding. As of the end of the reporting period, CPIC AMC reported RMB209.694 billion in third-party asset management products and AuM combined, an increase of 9.6% from the end of 2020.

(II) Changjiang Pension

Changjiang Pension stayed focused on the core business of pension fund management. As at 31 December 2021, its third-party assets under trustee management amounted to RMB307.713 billion, up by 26.6% from the end of 2020; third-party assets under investment management reached RMB452.191 billion, down by 6.4%.

Committed to serving the national retirement provision system, the company vigourously participated in the building of the 锟斤拷insurance + health + retirement锟斤拷 ecosystem of CPIC Group, and continued to deepen its presence in the pension fund management business. It continued to deliver solid results in investment management of social security pension fund, maintaining leadership in both scale and investment performance among pension firms. As for the second pillar, the company was selected as trustee of occupational annuity schemes of government agencies and not-for-profit institutions of the Tibetan Autonomous Region, setting the record of 锟斤拷all success锟斤拷 in the bid for the trustee qualifications of the 33 occupational annuity coordinated areas. It also passed the first industry-wise, standardised review of qualifications for enterprise annuity fund management, with renewal of qualifications in trustee, investment management and account management. At the same time, it strived for further development of group collective retirement provision business.

Customer resource management

We persisted in customer-centric business philosophies, deepened CPIC Service, forged differentiating edge, fully leveraged our advantage as an insurer with a full range of insurance-related licenses and deployment in asset management, health and retirement business, continued to enhance customer experience and strived for steady growth of customer value contribution with the vision of 锟斤拷integrated service to one customer via one interface锟斤拷.

I. Individual customer

We are committed to building premier service capabilities so as to provide convenient, efficient and tailor-made product/service solutions to our customers. The width and depth of service provided to individual customers have been continuously improving in recent years. CPIC Life enhanced CRM capacity-building, with tangible results in up-selling, which covered 8.7% of existing customers, rising 2.7pt from 2020. It continued to optimise CRM through customer segmentation. While securing the platform of mass market customers, it strengthened penetration of mid and high-end customers via services of health management, elderly care, and wealth management, with growing numbers of customers with FYP of over RMB15,000 and increased premium contribution from such customers. CPIC Life also pushed for upgrading of the sales model through CRM programmes, with rapid growth of customers using health management service. Of this, the CPIC Blue Passports Programme cumulatively covered nearly 18 million people. CPIC P/C deepened customer segmentation to facilitate the transition from a product-driven towards a customer-driven paradigm. As of the end of 2021, 93.5% of policy holders of compulsory automobile insurance for family private vehicles took out commercial insurance, the average SA on Third-party Liability (TPL) reached RMB1.711 million, and of this, the number of customers with SA of RMB1 million and above stood at 21.99 million, up by 28.2% from the end of 2020. The company focused on typical life scenarios of customers like staying at home, travelling, going to the doctor or doing shopping, vigourously promoted cross-sell of auto and non-auto insurance, with a marked growth of the share of individual auto insurance customers who also purchased non-auto insurance.

2021

2020

Change (%)

Number of customers with SA exceeding RMB300,000 on CI products of CPIC Life (million)

4.71

4.73

(0.4)

Number of customers with SA of a million yuan and above on TPL of automobile insurance of CPIC P/C (million)

21.99

17.15

28.2

We persisted in a data-driven mode, deepened insights into customers锟斤拷 diverse needs, and recommended personalised solutions based on customer segmentation, innovated integrated off-line and on-line services, with steady growth of average number of insurance policies per customer and number of customers with multiple insurance policies, pointing to enhanced customer value contribution. As of the end of 2021, Group average number of insurance policies per individual customer reached 2.28, an increase of 7.0% from the end of 2020; the number of customers with 2 insurance policies and above stood at 32.57 million, up by 2.9%. We pushed for innovation of the collaboration mode, shifting from product-based collaboration to more comprehensive service-driven collaboration, while promoting business development through branding events. This helped to increase value contribution from collaboration. In recent years, cross-sell across different business segments within the Group made continued progress, and as of the end of 2021, the number of individual customers holding insurance policies of multiple Group subsidiaries amounted to 10.32 million, up by 0.8% from the end of 2020.

2021

2020

Change (%)

Average number of insurance policies per individual customer^note

2.28

2.13

7.0

Number of individual customers holding 2 insurance policies and above^note (million)

32.57

31.66

2.9

Number of individual customers holding insurance policies of multiple Group subsidiaries^note(million)

10.32

10.24

0.8

Note: Based on applicants of in-force insurance policies of one year or above.

We continued to improve the supportive system for CPIC Service, and put in place a 4-tiered institution of 锟斤拷Service Officers锟斤拷 from Group headquarters to key sub-branches. We set up the Department of Consumer Rights Protection at the Group level, optimised the supply of services that are 锟斤拷by your side, throughout your life-time and in response to your needs锟斤拷, so as to enhance customer experience. At the same time, we sought to enhance service efficiency by way of digitalisation and smart operation. CPIC P/C established a smart operational platform for individual customers, and as of the end of the reporting period, the on-line ratio of individual automobile insurance customers reached 90.3%, up by 29.5pt; CPIC Life built the platform for smart underwriting and claims management, with the average turnaround of insurance application reduced by 12%; CPIC Health achieved full on-line operational coverage, with claims handling turnaround improving by 15.2%. A service quality rating of insurance companies for the 1st half of 2021 conducted by China Banking and Insurance Information Technology Management Co. Ltd., an independent outfit, CPIC Life and CPIC P/C ranked No.1 respectively among life/health and P/C insurance companies.

II. Group customer

We continuously pushed forward comprehensive CRM of group customers, adopted an integrated and collaborative mode of market development based on segmentation between strategic accounts and key accounts, and strived to enhance capabilities to provide needs-based solutions for them. In line with national initiatives, we formed partnership with strategic clients and formulated joint action plans. We promoted full on-line processes for group customers, and tailor-made dedicated 锟斤拷channels锟斤拷 for strategic clients based on sharing and application of in-house customer data, developed mobile apps for business cooperation between strategic clients, building a community like the WeChat Moments.

At the Group level, we set up the cluster of key accounts, including government agencies like central government ministries and commissions, provincial/municipal governments, companies such as enterprises under the direct administration of central government, SOEs, firms listed among China锟斤拷s Top 500, industry champions, and financial institutions like major state-owned banks, exchanges, joint-stock banks with nationwide business, securities firms, urban and rural commercial banks. The list continued to grow in 2021, with expanded industry and geographical coverage. As of the end of 2021, in-force agreements of strategic cooperation covered 121 clients, up by 17.5% from the end of 2020; we entered into strategic partnerships with 78% of provinces/municipalities (provinces, autonomous regions, municipalities under the central government, cities with vice-provincial status), an increase of 3pt from the end of 2020.

ESG

I. ESG vision

We are committed to leveraging our professional insurance and asset management expertise, building a green and low-carbon operational mode, enhancing capabilities for sustainable development, fostering a favourable culture for sustainable development, establishing a win-win development pattern between the Company and all stakeholders such as the environment, society and economy, and improving sustained value-creation capabilities for customers, employees, shareholders and society.

We persist in high-quality development, adopt a systematic approach, uphold opening-up and collaboration and set great store by the prevention of major risks. We establish and improve the ESG governance system and enhance capabilities to serve the national initiatives, the real economy and people锟斤拷s aspiration for a better life.

II. ESG governance

We incorporated ESG philosophies into business management, set up ESG top-level design and governance structure. With the Board as the top decision-making body, we pushed for the integration of ESG philosophies into day-to-day business operation by functional departments and subsidiaries, to ensure the effectiveness of ESG management.

III. ESG practice

In September 2015, the United Nations passed the 2030 Sustainable Development Agenda, floating 17 sustainable development goals (SDGs), which mapped out the blueprint for a better and more sustainable future for mankind. Guided by SDGs, we rolled out actions along multiple dimensions such as society, economy and environment.

Sustainable insurance

We officially signed into PSI in 2021, becoming the second enterprise in mainland China to sign PSI. We made progress in innovation of insurance products and services to support the building of a clean and efficient energy system, reduce energy consumption and pollution, and mitigate climate change risks. We developed multiple weather-index insurance and catastrophe insurance products, built scientific modelling for evaluation of catastrophe risk; offered cover against environmental pollution worth over RMB9.6 billion in SA to more than 6,000 companies; underwrote over RMB50 billion in SA for hydro-power, nearly RMB100 billion for photovoltaic, and participated in 8 domestic offshore wind power projects; wrote water quality liability insurance for the Taipu River and conducted, on a regular basis, water quality analysis; carried out cooperation of 锟斤拷carbon quotas + pledge as collateral + insurance锟斤拷 and launched China锟斤拷s first guarantee insurance product for loans against pledge of carbon quotas; underwrote wildlife liability insurance in Yunnan, with CPIC P/C Yunnan Branch becoming the only insurance partner of the 15th Conference of the Parties (COP) of the UN Convention on Biological Diversity.

Responsible investment

We acceded into the PRI in 2021 as both an asset owner and an investment manager, becoming the 4th domestic asset owner signing the PRI. In January 2022, CPIC P/C signed the Green Investment Principles (GIP) under the Belt & Road Initiative. We were directly involved in investments of green projects spanning clean transport, clean energy, energy conservation, recycling and pollution treatment via channels of debt investment schemes, equity investment schemes, asset-backed plans and industry equity funds. As of the end of 2021, our cumulative investments in green areas amounted to RMB23.3 billion. Of this, we raised a total of nearly RMB15 billion through green debt and equity investment schemes since 2018.

Green operation

We strictly implemented the Work Programme on Control of Green-house Gases (GHG) during the 13th 5-Year Plan Period issued by the State Council, stepped up management of exhaust gases, GHG and waste disposal; vigourously boosted green operation and upgraded full-process on-line capabilities, with online substitution rate of life insurance contract endorsement exceeding 90%; promoted paperless operation via electronic endorsement, insurance policies, and letters, with subscription rate of electronic letters reaching 83%; vigourously advocated the use of energy-efficient technologies and products, and phased out energy-intensive equipment or facilities; advocated green travelling and a low-carbon lifestyle; promoted green buildings such as the construction of green data centres and green retirement communities.

Supporting national initiatives

We supported the China International Import Expo (CIIE) for 4 years on end, and cumulatively provided comprehensive risk solutions and full life-cycle risk management services with SA totalling RMB2.6 trillion, and in particular, contributed to a carbon-zero 4th CIIE; provided integrated risk solutions to China International Fair for Trade in Services (CIFTIS) for 2 years in a row, involving SA of more than RMB260 billion; customised insurance package with SA exceeding RMB350 billion for the 10th China Flower Expo; cumulatively offered a risk cover involving nearly RMB1 trillion in SA to Chinese firms going overseas, underwriting nearly 700 milestone projects in over 100 countries .

Social medical and pension insurance

We vigourously implemented the blueprint of the development of health business. In April 2021, we set up Guangci CPIC On-line Hospital, launched 锟斤拷CPIC Family Doctor锟斤拷, an independently developed tele-medicine brand, and established a dedicated off-line team of 400 medical professionals. As of the end of 2021, we were involved in 35 Huiminbao programmes, covering over 21 million people, accounting for nearly 1/5 of total participants nationwide; took on 61 medical insurance for major diseases, covering more than 100 million people in 54 cities of 15 provinces (or provincial-level cities and autonomous regions), with SA totalling RMB6.1 billion; participated in the national pilot programmes of long-term care in 21 cities designated for national-level trials and 18 cities for local trials, benefitting over 48 million people, with more than 2.9 million claims payments; 锟斤拷CPIC Blue Passports锟斤拷, a health management programme, cumulatively covered nearly 18 million customers; 10 projects of retirement communities under 锟斤拷CPIC Home锟斤拷 were up and running in 9 cities, with a total of 12,000 beds.

Rural invigoration

In response to China锟斤拷s rural invigoration strategy, we are committed to reducing disparity in economic development between urban and rural areas, and deepening the supply-side reform of agricultural insurance. As of the end of 2021, we developed a total of 3,355 agricultural insurance products, covering more than 240 crops, deployed 3,750 CPIC 锟斤拷San Nong锟斤拷 (i.e., farmers, agriculture and the rural areas) service stations in 31 provinces, autonomous regions and provincial-level cities, with a team of about 10,000 part-time assistants providing service across the year; innovated 619 products catering for local needs under the principle of 锟斤拷One county, one product锟斤拷; launched e-Agriculture system and introduced the model of 锟斤拷insurance + futures + order-based agriculture锟斤拷; conducted an all-around upgrading of the Anti-Poverty Insurance, which covered nearly 400,000 vulnerable people in more than 1,000 counties, with cumulative SA exceeding RMB23 trillion, and cumulative pay-out of RMB1.339 billion.

Donations

We established a charity platform to mobilise charitable activities by employees, customers, and other stakeholders; formulated Policies on Donations to better help areas affected by natural disasters, poverty-stricken areas, regions receiving assistance, and under-privileged communities. In 2021, we donated a total of RMB78.2134 million. CPIC Blue, a charitable foundation, launched its first flag-ship project 锟斤拷Protecting your memory锟斤拷, conducted a series of dementia-related charitable activities, and issued the initiative for recruitment of volunteers; lent help to more than 60 primary schools and focused public attention on the education of children in impoverished areas; donated to the Shanghai Orphanage for 26 years in a row; initiated Phase II of the Sanjiangyuan Ecological Park, which in total covered 100 hectares, with areas earmarked for employees and business partners.

Consumer rights protection

We fully implemented laws and regulations such as The Guiding Opinions on Enhancement of Consumer Rights Protection by Banking and Insurance Institutions and Administration Rules on Handling of Customer Complaints by Banking and Insurance Institutions issued by CBIRC; have established a sound consumer rights protection system including Management Rules on Consumer Rights Protection, Policies on Customer Complaints Handling, and Provisional Regulations on Operational Processes on the Review of Documentation relating to Consumer Rights Protection. We value customer voices, and put in place efficient complaints-handling mechanisms to ensure timely response to customer comments or suggestions; set up a system for open and transparent information disclosure on product responsibilities, deepened advocacy of financial risks, and performed our primary responsibility in consumer rights protection. In 2021, the Department of Consumer Rights Protection was established to coordinate the protection of consumer rights and interests.

Corporate governance

As per relevant laws and regulations such as The Company Law of the PRC, The Securities Law of the PRC and The Insurance Law of the PRC, we put in place a governance system consisting of the shareholders锟斤拷 general meeting (SGM), the board of directors, the board of supervisors and senior management, with co-operation, co-ordination and checks and balances between the top authority, the decision-making body, the body responsible for oversight and that of execution. We have formed a relatively sound governance structure through deepening of Group-centralised management framework, optimised in-house resources allocation and enhanced communications with the capital market.

We drafted policies on board diversity, and as of the end of 2021, the board consisted of 15 members, with the share of non-executive directors of 87% and that of women directors 27%. We offer effective protection to shareholder, and particularly minor shareholder interests via insititutionalised arrangements and procedures; fully comply with rules and regulations on information disclosure and steadily improve its quality.

For details please refer to the section 锟斤拷Corporate Governance锟斤拷 of this report.

Employee rights and development

We are committed to harmonious and stable labour relations. As per relevant Chinese laws and regulations such as The Labour Law, The Labour Contracts Law, The Workers锟斤拷 Unions Law and Rules on Collective Contracts, we enter into Collective Contracts and Collective Contracts on Special Protection of Female Workers on a regular basis based on consultation with the Workers锟斤拷 Union, covering 100% of our employees. We strictly follow national labour laws and regulations and pay monthly salaries in full; provide mandatory annual leave and voluntary leave for employees; oppose discrimination based on sex, and provide equal opportunities in recruitment, training, compensation, career development and promotion.

We strive to provide a comfortable work-place environment for employees. We formulated Rules on Management of Work-places, Provisional Regulations on Ban of Smoking and other policies relating to work-place safety, work-place hygiene and smoking control; conducted inspection of work-place safety and environment to identify and resolve gaps; provided caring and insurance programmes, and employees and their family members may access 锟斤拷CPIC Family Doctor锟斤拷, a health management platform, for family doctors service, live-stream medical consulting, health management and outpatient appointment booking.

We give priority to career development of young talent, organising on-the-job training and tutor coaching of management trainees, drawing up a learning road-map for management trainees at headquarters, and putting in place a closed loop of management covering oversight, training and learning. We set up an innovative learning centre, organised training camps for top-notch young talent, and established an integrated training system encompassing the company, functions/departments and voluntary study by employees.

Risk management

We identify and assess risks in climate change, retirement & health care, insurance and investment in light of risk management requirements concerning climate and environment, and formulate risk management measures. While incorporating climate risk into our corporate governance framework, we further integrated it into risk management and internal control processes. In management of climate risk, we not only identified challenges from climate change, but also paid attention to potential impact of physical risks and transitioning risk.

Anti-corruption

We strictly abide by national laws and regulations, and adopt 锟斤拷zero-tolerance锟斤拷 of corruption and frauds. We formulated Provisional Regulations on Anti-fraud Work, setting out priority areas, key levers, duties and responsibilities of relevant institutions and departments, and processes for whistle-blowing, investigation, handling, reporting and accountability assignment of frauds. We obtain leads of frauds through multiple channels, such as whistle-blowing, daily risk monitoring, internal auditing and self-review, so that such leads can be pursued in a timely manner. We also conducted compliance training and publicity, with 17,131 enrollments for anti-corruption training in 2021.

Data security

We drafted a series of policies on data security, including Provisional Regulations on Data Security, Rules on Management of Customer Information, Negative List of Cyber-security, Negative List of Customer Data, Rules on Management of Data Leakage, and Operational Standards on Graded Protection of IT Systems, which set out explicit stipulations on confidentiality, completeness and usability of customer information. We adopted targeted measures in data collection, storage, transmission, use and destruction. In 2021, we received no administrative penalty due to breaches of customer information policies.

Supply chain management

We stepped up purchase and supplier management, formulating Policies on Centralised Purchases; continued to improve work processes for procurement and supplier management, pushed for digitalisation, and put in place an integrated supplier management system covering access, evaluation and use. In supplier access, we collect candidates through advertisements, referrals or self-recommendation by suppliers, and all interested parties shall register information via the Procurement Department and sign the ESG Letter of Commitments. In selection, we strictly abide by national laws and regulations and our own policies, persist in principles of Openness, Fairness, Equity, Competition and Profitability, choosing appropriate selection mechanisms based on concrete circumstances of the project and in compliance with laws and regulations.

Analysis of specific items

I. Consolidated income statement

Unit: RMB million

For 12 months ended 31 December

2021

2020

Main reasons for the changes

CPIC Life

18,905

18,642

Increase in investment income

CPIC P/C

6,352

5,209

Increase in investment income

CPIC Group and eliminations, etc.

1,577

733

Effect of exchange (losses)/gains

Net profit attributable to shareholders of the parent

26,834

24,584

Increase in investment income

II. Liquidity analysis

(I) Cash flow statement

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

Net cash flows from operating activities

108,407

108,063

0.3

Net cash flows used in investing activities

(66,094)

(136,068)

(51.4)

Net cash flows (used in)/from financing activities

(31,371)

21,448

(246.3)

Effects of exchange rate changes on cash and cash equivalents

(82)

(1,222)

(93.3)

Net increase/(decrease) in cash and cash equivalents

10,860

(7,779)

(239.6)

Net cash flows from operating activities increased by 0.3% for the year ended 31 December 2021, amounted to RMB108.407 billion, mainly attributable to rise in net increase in policyholders锟斤拷 deposits and investments contract liabilities.

Net cash flows used in investing activities decreased by 51.4% for the year ended 31 December 2021, amounted to RMB66.094 billion, mainly attributable to increase in cash received from disposal of investments.

Net cash flows of financing activities changed from inflows for the year ended 31 December 2020 to outflows during the same period of 2021, mainly attributable to decrease in cash received from capital contributions and rise in decrease in securities sold under agreements to repurchase, net.

(II) Gearing ratio

31 December 2021

31 December 2020

Changes

Gearing ratio (%)

88.3

87.8

0.5pt

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

(III) Liquidity analysis

We centralise liquidity management including that of our subsidiaries at the Group level. As the parent company, our cash flows mainly stem from dividends from our subsidiaries and gains from our own investment activities.

Our liquidity mainly comes from premiums, net investment income, sales or maturity of financial assets and cash from financing activities. The demand for liquidity primarily arises from surrenders, reduction in sum assured or other forms of earlier termination of insurance contracts, insurance claims or benefit pay-outs, payment of dividends to shareholders and cash required for daily operation.

We normally record net cash inflows from our operating activities due to growing premium income. Meanwhile, adhering to ALM, and in line with our SAA, we would maintain an appropriate level of allocation in highly liquid assets to meet liquidity requirement.

Financing abilities also form a major part of our liquidity management. We have access to additional liquidity through securities repurchase arrangement and other financing arrangements.

We believe that our current liquidity level is sufficient for our needs in the foreseeable future.

III. Items concerning fair value accounting

Unit: RMB million

31 December 2021

31 December 2020

Changes

Impact of fair value changes on profits^note

Financial assets at fair value through profit or loss

12,353

12,473

(120)

1,045

Available-for-sale financial assets

645,381

596,158

49,223

(4,195)

Derivative financial assets

259

140

119

Sub-total of financial assets

657,993

608,771

49,222

(3,031)

Derivative financial liabilities

(1)

Sub-total of financial liabilities

(1)

Net value

657,992

608,771

49,221

(3,032)

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

The financial instruments measured at fair value are detailed in notes XV and XVI of financial statements.

IV. Structured entities controlled by the Group

The structured entities controlled by the Group are detailed in note VI-2 to the financial statements.

V. Significant changes of key financial indicators and reasons for such changes

Unit: RMB million

31 December 2021/ 2021

31 December 2020/ 2020

Changes (%)

Main reasons

Total assets

1,946,164

1,771,004

9.9

Business expansion

Total liabilities

1,713,759

1,550,169

10.6

Business expansion

Total equity

232,405

220,835

5.2

Profit for the period and fair value change on AFS financial assets

Operating profit

30,794

29,377

4.8

Business expansion

Net profit attributable to shareholders of the parent

26,834

24,584

9.2

Increase in investment income

VI. Solvency

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

Unit: RMB million

31 December 2021

31 December 2020

Reasons for change

CPIC Group

Core capital

496,620

500,766

Profit for the period, profit distribution to shareholders, and change of fair value of investment assets

Actual capital

506,620

510,766

Profit for the period, profit distribution to shareholders, and change of fair value of investment assets

Minimum required capital

190,794

177,288

Growth of insurance business and changes to asset allocation

Core solvency margin ratio (%)

260

282

Comprehensive solvency margin ratio (%)

266

288

CPIC Life

Core capital

368,570

377,203

Profit for the period, profit distribution to shareholders, and change of fair value of investment assets

Actual capital

368,570

377,203

Profit for the period, profit distribution to shareholders, and change of fair value of investment assets

Minimum required capital

168,912

155,860

Growth of insurance business and changes to asset allocation

Core solvency margin ratio (%)

218

242

Comprehensive solvency margin ratio (%)

218

242

CPIC P/C

Core capital

47,808

44,208

Profit for the period, profit distribution to shareholders, and change of fair value of investment assets

Actual capital

57,808

54,208

Profit for the period, profit distribution to shareholders, and change of fair value of investment assets

Minimum required capital

20,072

19,672

Growth of insurance business and changes to asset allocation

Core solvency margin ratio (%)

238

225

Comprehensive solvency margin ratio (%)

288

276

CPIC Health

Core capital

1,286

1,294

Profit for the period and change of fair value of investment assets

Actual capital

1,286

1,294

Profit for the period and change of fair value of investment assets

Minimum required capital

934

949

Growth of insurance business and changes to asset allocation

Core solvency margin ratio (%)

138

136

Comprehensive solvency margin ratio (%)

138

136

CPIC Anxin Agricultural

Core capital

2,863

1,821

Profit for the period, capital increase, profit distribution to shareholders, and change of fair value of investment assets

Actual capital

2,863

1,821

Profit for the period, capital increase, profit distribution to shareholders, and change of fair value of investment assets

Minimum required capital

673

614

Growth of insurance business and changes to asset allocation

Core solvency margin ratio (%)

425

297

Comprehensive solvency margin ratio (%)

425

297

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

VII. Sensitivity analysis

Sensitivity analysis of price risk

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

Unit: RMB million

2021 / 31 December 2021

Market value

Impact on profit before tax

Impact on equity

+10%

13,637

-10%

(4)

(13,637)

Notes:

1. After policyholder participation.

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

VIII. Insurance contract reserves

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

As at 31 December 2021, insurance contract reserves of CPIC Life amounted to RMB1,264.597 billion, representing an increase of 13.1% from the end of 2020. Those of CPIC P/C amounted to RMB118.052 billion, up by 13.0% from the end of 2020. The rise in insurance contract reserves was mainly caused by business growth and accumulation of insurance liabilities.

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

Unit: RMB million

31 December 2020

Increase in

the period

Decrease in the period

31 December 2021

Claims

Early

termination

Others

CPIC Life

Unearned premium reserves

4,100

17,713

(18,638)

3,175

Claim reserves

5,287

12,811

(12,086)

6,012

Life insurance reserves

1,010,194

171,401

(31,609)

(20,364)

1,129,622

Long-term health insurance reserves

98,789

39,461

(10,496)

(1,966)

125,788

CPIC P/C

Unearned premium reserves

63,706

152,643

(149,021)

67,328

Claim reserves

40,772

102,673

(92,721)

50,724

IX. Reinsurance business

In 2021, premiums ceded to reinsurers are shown below:

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

CPIC Life

8,822

8,643

2.1

Traditional

5,229

3,481

50.2

Long-term health

4,446

2,583

72.1

Participating

284

332

(14.5)

Universal

(10.2)

Tax-deferred pension

Short-term accident and health

3,256

4,771

(31.8)

CPIC P/C

20,347

20,244

0.5

Automobile

5,295

6,315

(16.2)

Non-automobile

15,052

13,929

8.1

In 2021, premiums from reinsurance assumed are set out below:

Unit: RMB million

For 12 months ended 31 December

2021

2020

Changes (%)

CPIC Life

2,076

3,493

(40.6)

Traditional

2,076

3,493

(40.6)

Long-term health

Participating

Universal

Tax-deferred pension

Short-term accident and health

CPIC P/C

1,173

1,017

15.3

Automobile

Non-automobile

1,173

1,017

15.3

As at the end of 2021, reinsurers锟斤拷 share of insurance contract reserves are set out below:

Unit: RMB million

31 December 2021

31 December 2020

Changes (%)

CPIC Life

Reinsurers锟斤拷 share of unearned premium reserves

864

1,206

(28.4)

Reinsurers锟斤拷 share of claim reserves

495

379

30.6

Reinsurers锟斤拷 share of life insurance reserves

1,910

1,812

5.4

Reinsurers锟斤拷 share of long-term health insurance reserves

12,120

11,126

8.9

CPIC P/C

Reinsurers锟斤拷 share of unearned premium reserves

7,821

7,692

1.7

Reinsurers锟斤拷 share of claim reserves

9,123

6,853

33.1

We determine retained insured amounts and reinsurance ratio according to insurance regulations and our business development and risk management needs. To lower the concentration risk of reinsurance, we also entered into reinsurance agreements with various industry-leading reinsurance companies. The criteria for the selection of reinsurance companies include their financial strength, professional expertise, service level, claims settlement efficiency and price. Generally speaking, we prefer domestic and overseas reinsurance/insurance companies with proven records and in compliance with regulatory regulations, including international reinsurance companies with ratings of A- or above. Our reinsurance partners mainly include China Reinsurance (Group) Corporation and its subsidiaries, i.e., China Life Reinsurance Company Ltd., and China Property & Casualty Reinsurance Company Ltd., Swiss Reinsurance Company Ltd and Munich Reinsurance Company (慕锟斤拷锟斤拷俦锟斤拷展锟剿�).

X. Main subsidiaries & associates and equity participation

As of the end of 2021, the Company锟斤拷s main subsidiaries, associates and equity participation are set out as below:

Unit: RMB million

Company

Main business scope

Registered capital

Group shareholding^note²

Total assets

Net assets

Net profit

China Pacific Property Insurance Co., Ltd.

Property indemnity insurance; liability insurance; credit and guarantee insurance; short-term health and accident insurance; reinsurance of the above said insurance; insurance funds investment as approved by relevant laws and regulations; other business as approved by CBIRC.

19,470

98.5%

207,598

48,929

6,352

China Pacific Life Insurance Co., Ltd.

Personal lines insurance including life insurance, health insurance, accident insurance, etc. denominated in RMB or foreign currencies; reinsurance of the above said insurance; statutory life/health insurance; agency and business relationships with domestic and overseas insurers and organisations, loss adjustment, claims and other business entrusted from overseas insurance organisations; insurance funds investment as prescribed by Insurance Law of the PRC and relevant laws and regulations; international insurance activities as approved; other business as approved by CBIRC.

8,420

98.3%

1,631,054

101,100

18,905

Changjiang Pension Insurance Co., Ltd.^note³

Group pension and annuity business; individual pension and annuity business; short-term health insurance; accident insurance; reinsurance of the aforementioned business; outsourced money management business denominated in RMB or foreign currencies for the purpose of elderly provisions; pension insurance asset management business; advisory business pertaining to asset management; insurance fund management as allowed by the PRC laws and regulations; other business as approved by CBIRC.

3,000

61.1%

6,312

4,175

765

Pacific Asset Management Co., Ltd.^note³

Asset management of capital and insurance funds; outsourcing of fund management; advisory services relating to asset management; other asset management business as allowed by the PRC laws and regulations.

2,100

99.7%

4,660

3,914

532

Pacific Health Insurance Co., Ltd.

Health and accident insurance denominated in RMB yuan or foreign currencies; health insurance sponsored by the government or supplementary to state medical insurance policies; reinsurance of the above said insurance; health insurance-related advisory and agency business; insurance funds investment as approved by relevant laws and regulations; other business as approved by CBIRC.

1,700

99.7%

10,356

1,410

125

China Pacific Anxin Agricultural Insurance Co., Ltd.

Agricultural insurance; property indemnity insurance; liability insurance; statutory liability insurance; credit and guarantee insurance; short-term health insurance and accident insurance; property insurance relating to rural areas and farmers; reinsurance of the above said insurance; insurance agency business.

1,080

66.8%

5,241

2,740

CPIC Fund Management Co., Ltd.^note⁴

Fund management business; the launch of mutual funds and other business as approved by competent authorities of the PRC.

150

50.8%

771

609

Notes:

1. Figures for companies in the table are on an unconsolidated basis. For other information pertaining to the Company锟斤拷s main subsidiaries, associates or invested entities, please refer to 锟斤拷Review and analysis of operating results锟斤拷 of this report, and 锟斤拷Scope of consolidation锟斤拷 and 锟斤拷Long-term Equity Investments锟斤拷 in Notes to the Financial Statements.

2. Figures for Group shareholding include direct and indirect shareholdings.

3. As per Circular on Implementing New Accounting Standards on Financial Instruments by the Ministry of Finance and CBIRC (Caikuai [2020] No.22), Changjiang Pension and CPIC AMC began to implement new accounting standards pertaining to financial instruments as set out in Chinese Enterprises Accounting Standards No.22 - Recognition and Measurement of Financial Instruments (Caikuai [2017] No.7) and other new accounting standards on financial instruments on 1 January 2021. Figures listed in the table are based on the new accounting standards.

4. As per Circular on Implementing Chinese Enterprises Accounting Standards No.22 - Recognition and Measurement of Financial Instruments (2017) and Other Related New Accounting Standards by Fund Management Firms issued by the Accounting Department and the Department of Securities and Fund Supervision of CSRC, CPIC Fund began to implement new accounting standards pertaining to financial instruments on 1 January 2020. Figures listed in the table are based on the new accounting standards.

XI. Top five customers

During the reporting period, the top 5 customers accounted for approximately 0.6% of the Company锟斤拷s GWPs, and none of them constituted Related Parties of the Company.

Given its business nature, the Company does not have any supplier that is directly related to its business.

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

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

Outlook

I. Market environment and business plan

The world has seen profound changes and the spread of a pandemic never seen before in the past century, which will remain so in the foreseeable future. So the market environment will be fraught with formidable challenges and even greater uncertainties going forward. Looking ahead into 2022, in spite of resurgence of COVID-19, escalation of geo-political conflicts and pressures from demand contraction, supply disruption and weakening expectation, China锟斤拷s economic development will overall stay on track, and its social development will be stable. In the long term, economic development, rising per capita income, demographic shifts, change of government roles, innovation in public administration and the reform of the capital market will continue to drive sustainable development of China锟斤拷s insurance industry. China remains one of the most dynamic and fastest-growing insurance markets of the world.

Going forward, with a vision of 锟斤拷leadership in healthy and steady development of the insurance industry锟斤拷, and the targets of 锟斤拷being the best in customer experience, business quality and risk control capabilities锟斤拷, the Company will abide by high-quality development, strive for breakthroughs in the 3 priority areas of health business, regional integration and big data; continue to strengthen talent development, improve capabilities of CPIC Service, incorporate ESG sustainable development philosophies, enhance core competitiveness; ensure the prevention of major risks to safeguard long-term development.

II. Major risks and mitigating measures

Firstly, in terms of macroeconomic environment, COVID-19 will remain a challenge for global economic recovery, which has been patchy across economies. Inflation stays elevated in developed economies, which means higher risk of stagflation. The ultra-loose monetary policies of many countries may soon stage a reversal, which may stoke turmoil in financial markets. Global economic development still faces a grave and complicated situation. On the domestic front, economic slow-down is aggravated by mounting pressure from economic restructuring and the uncertainty arising from the pandemic. The secular decline of interest rate, rising credit defaults will materially impact insurance and asset management business.

Secondly, in terms of industry development, China锟斤拷s insurance market is in a critical stage of development with shifting cycles and reshaping of growth engines, posing challenges to premium growth and profitability of both P/C and life insurance business. Economic restructuring and upgrading would press the industry to accelerate supply-side reform, which requires higher supply efficiency and quality. The asset management sector is increasingly de-regulated, fuelling intense domestic competitions. With the implementation of Corporate Governance Standards, C-ROSS II, Administration Rules on Supervision of Insurance Group Companies, and a series of major laws and regulations at the national level, regulation will continue to tighten, seeking to discipline marker order and prevent business risk. As such, insurance companies will face more stringent regulatory requirements and need to do more to ensure compliance in their business operation.

Thirdly, in respect of business operation, the Company is facing the catastrophe risk and risk of large claims arising from extreme weather events, severe natural disasters and major accidents, with emerging risks starting to have potential impact on the stability of its business performance. Demographic shift, the deepening transformation of life insurance, the promotion of reform in auto insurance, digitalisation and insurance technology have brought more uncertainties to traditional insurance operations. The Company is implementing strategies in 3 key areas, i.e., health business, regional integration and big data. Business transformation and the pursuit of high-quality development require optimisation of Risk Appetite and 锟斤拷look-through锟斤拷 management, and enhancement of capabilities in monitoring, early warning and mitigation of major risks. All these would increase requirements for sound corporate governance, risk management and investment capabilities.

To cope with these risks, we will persist in compliance in business operation, stay focused on the core business of insurance, uphold value-oriented strategies and press ahead with innovation and transformation. In particular, we will step up analysis of macroeconomic trends, enhance early-warning and mitigation of major risks, promote deployment in key business segments in line with key national strategies in a new stage of development; strengthen customer insights and risk screening capability via technology; accelerate product & service innovation and continuously optimise resource-allocation; improve ALM and counter-party credit risk management in an all-around way, strengthen investment research capabilities and the matching of assets and liabilities; continuously optimise mechanisms for risk identification, assessment, early warning and mitigation, enhance cumulative risk exposure control so as to forestall major risks and ensure stable business operation and healthy solvency levels. Ultimately, risk management will become a binding requirement, playing a more important part throughout business operation and striking the balance between business growth and risk control.

Embedded value

To: China Pacific Insurance (Group) Company Limited

Board of Directors

Independent Actuarial Review Opinion on Embedded Value

Towers Watson Management (Shenzhen) Consulting Co. Ltd Beijing Branch (锟斤拷WTW锟斤拷 or 锟斤拷we锟斤拷) has been engaged by China Pacific Insurance (Group) Company Limited (锟斤拷CPIC Group锟斤拷) to review the embedded value information of CPIC Group as of 31 December 2021.

This review opinion is addressed solely to CPIC Group 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 CPIC Group for or in connection with our review work, the opinions we have formed, or for any statement set forth in this report.

Scope of work

WTW锟斤拷s scope of work comprised:

n a review of the methodology used to develop the embedded value of CPIC Group and the value of one year锟斤拷s sales of China Pacific Life Insurance Co. Ltd. ("CPIC Life") as of 31 December 2021, in the light of the requirements of the "CAA Standards of Actuarial Practice: Appraisal of Embedded Value" issued by the China Association of Actuaries ("CAA") in November 2016;

n a review of the economic and operating assumptions used to develop CPIC Group锟斤拷s embedded value and the value of one year锟斤拷s sales of CPIC Life as of 31 December 2021;

n a review of the results of CPIC Group's calculation of the value of in-force business, the value of one year锟斤拷s sales of CPIC Life, the results of the analysis of movement of embedded value of CPIC Group, and the sensitivity results of the value of in-force business and value of one year锟斤拷s sales of CPIC Life.

Opinion

As a result of our review of the embedded value of CPIC Group as of 31 December 2021 and the value of one year锟斤拷s sales of CPIC Life prepared by CPIC Group, WTW has concluded that:

n The methodology used is consistent with a traditional deterministic discounted cash flow approach, and is consistent with the requirements of the "Appraisal of Embedded Value锟斤拷 standard issued by the CAA;

n The operating assumptions have been set with appropriate regard to past, current and expected future experience;

n The economic assumptions have been set with regard to current market information.

WTW has performed reasonableness checks and analysis of CPIC Group锟斤拷s embedded value and value of one year锟斤拷s sales of CPIC Life as of 31 December 2021, and WTW has concluded that these results have been determined in a manner consistent with the methodology and assumptions described in the Embedded Value Section of CPIC Group锟斤拷s 2021 annual report and that the aggregate results are reasonable in this context.

WTW confirms that the results shown in the Embedded Value section of CPIC Group锟斤拷s 2021 annual report are consistent with those reviewed by WTW.

In carrying out our review we have relied on the accuracy of audited and unaudited data and information provided by CPIC Group.

For and on behalf of WTW

Lingde Hong, FSA, CCA

February 25^th,2022

2021 Embedded Value Annual Report of CPIC Group

I Background

In order to provide investors with an additional tool to understand our economic value and business results, we have prepared CPIC Group Embedded Value as at 31 December 2021 in accordance with the disclosure rules set by the China Securities Regulatory Commission (锟斤拷CSRC锟斤拷) for publicly listed insurer and the 锟斤拷CAA Standard of Actuarial Practice: Appraisal of Embedded Value锟斤拷 issued by the China Association of Actuaries (锟斤拷CAA锟斤拷) in 2016 (thereafter referred to as 锟斤拷Appraisal of Embedded Value锟斤拷 standard) and have disclosed information relating to our group embedded value in this section. We have engaged Willis Towers Watson, an independent firm of consultants, to review the reasonableness of the valuation methodology, the valuation assumptions as well as the valuation results, and to issue their independent embedded value review report, which is contained in our 2021 annual report.

The Group Embedded Value is defined as the sum of the Group Adjusted Net Worth and the value of in force business of CPIC Life attributable to the shareholders of CPIC Group. The value of in force business and the value of one year锟斤拷s sales of CPIC Life are defined as the discounted value of the projected stream of future after-tax distributable shareholder profits for existing business in force at the valuation date and for one year's sales in the 12 months immediately preceding the valuation date, where distributable shareholder profits are determined based on policy liability, required capital in excess of policy liability and minimum capital requirement quantification standards prescribed by the CBIRC. Embedded value does not allow for any value attributable to future new business sales.

The value of in force business and the value of one year锟斤拷s sales of CPIC Life are determined by using a traditional deterministic discounted cash flow methodology. This methodology makes implicit allowance for the risk of investment guarantees and policyholder options, asset/liability mismatch risk, credit risk and the economic cost of capital through the use of a risk-adjusted discount rate.

The embedded value and the value of one year锟斤拷s sales provide valuable information to investors in two aspects. First, the value of in force business of CPIC Life represents the total amount of after-tax distributable shareholder profits in present value terms, which can be expected to emerge over time, in accordance with the assumptions used. Second, the value of one year锟斤拷s sales of CPIC Life provides an indication of the value created for investors by current new business activity and hence the potential value of the business. However, the information on embedded value and the value of one year锟斤拷s sales should not be viewed as a substitute of other financial measures on the Company. Investors should not make investment decisions based solely on embedded value and the value of one year锟斤拷s sales information.

The embedded value is an estimation of a component of an insurance company锟斤拷s economic value using actuarial techniques, based on a series of assumptions. As there is uncertainty in selecting assumptions, estimates of embedded value could vary materially as key assumptions are changed, and future actual experience would differ from assumed valuation assumption. Therefore, special care is advised when interpreting embedded value results.

Ⅱ Summary of Embedded Value and Value of One Year锟斤拷s Sales

The table below shows the Group Embedded Value of CPIC Group as at 31 December 2021, and the value of one year锟斤拷s sales of CPIC Life in the 12 months to 31 December 2021 at a risk discount rate of 11%.

Unit: RMB million

Valuation Date

31 December 2021

31 December 2020

Group Adjusted Net Worth

287,213

257,378

Adjusted Net Worth of CPIC Life

161,880

135,898

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

227,624

217,617

Cost of Required Capital Held for CPIC Life

(12,861)

(12,167)

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

214,763

205,451

CPIC Group锟斤拷s Equity Interest in CPIC Life

98.29%

Value of In Force Business of CPIC Life After Cost of Required Capital Held attributable to the shareholders of CPIC Group

211,096

201,942

Group Embedded Value

498,309

459,320

CPIC Life Embedded Value

376,643

341,348

Valuation Date

31 December 2021

31 December 2020

Value of One Year锟斤拷s Sales of CPIC Life Before Cost of Required Capital Held

15,518

20,058

Cost of Required Capital Held

(2,107)

(2,217)

Value of One Year锟斤拷s Sales of CPIC Life After Cost of Required Capital Held

13,412

17,841

Notes:

1: Figures may not be additive due to rounding

2: Results in column 锟斤拷31 December 2020锟斤拷 are those reported in the 2020 annual report

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

Ⅲ Key Valuation Assumptions

In determining the embedded value as at 31 December 2021, we have assumed the Company continues to operate on a going concern basis under the current economic and regulatory environment. Policy liability and required capital have been calculated according to relevant requirements described in 锟斤拷Appraisal of Embedded Value锟斤拷 standard published by the CAA. The various operational assumptions are mainly based on the results of experience analyses, together with reference to the overall experience of the Chinese insurance industry, as well as with regard to expected future operating experience. As such, these assumptions represent our best estimate of the future based on information currently available at the valuation date.

The following describes the key assumptions used in determining the value of in force business and the value of one year锟斤拷s sales of CPIC Life as at 31 December 2021:

1. Risk Discount Rate

The risk discount rate used to determine the value of in force business and the value of one year锟斤拷s sales of CPIC Life is 11%.

2. Investment Returns

The investment returns for long term business are assumed to be 5.0% in 2021 and 5.0% thereafter. The investment return for short term business is based on the recent one-year bank deposit benchmark interest rate as published by the People锟斤拷s Bank of China before the valuation date. These assumptions have been derived based on the current capital market environment, our current and expected future asset mix and the assumed investment returns for each major class of assets.

3. Mortality

Mortality assumptions have been developed based on China Life Insurance Mortality Table (2010-2013), considering CPIC Life锟斤拷s mortality experience analysis and expectation of future mortality trends, and varies by product.

4. Morbidity

Morbidity assumptions have been developed based on China Life Insurance Morbidity Table, considering CPIC Life锟斤拷s morbidity experience analysis and expectation of future morbidity trends, taking into considering deterioration of morbidity rates in the long term, and varies by product.

5. Lapse and Surrender Rates

Assumptions have been developed based on CPIC Life锟斤拷s lapse and surrender experience analysis, and expectation of future trends, and assumptions vary by pricing interest rates, product type, policy duration and distribution channel.

6. Expense

Unit cost assumptions have been developed based on the results of an analysis of CPIC Life锟斤拷s 2021 non-commission related expenses and future expectation. Future inflation of 2.5% pa in respect of per policy expenses is also assumed.

7. Policyholder Dividend

l Group participating annuity business: 80 % of interest surplus;

l Bancassurance participating business: No less than 70% of interest and mortality surplus;

l Other participating business: 70% of interest and mortality surplus.

8. Tax

Tax has been assumed to be payable at 25% of profits. The proportion of investment income assumed to be exempt from income tax is 20% for all future years. The tax exemption assumptions are based on our current and expected future asset mix and assumed investment returns for each major class of assets.

In addition, the tax of the accident business is based on related tax regulation.

Ⅳ New Business Volumes and Value of One Year锟斤拷s Sales

The table below shows the volume of new business sold in terms of first year annual premium and value of one year锟斤拷s sales of CPIC Life after cost of required capital held at a risk discount rate of 11% for year 2021.

Unit: RMB million

First Year Annual Premium

Value of One Year锟斤拷s Sales After Cost of Required Capital Held

2021

2020

2021

2020

Total

57,119

45,903

13,412

17,841

Of which: Agency channel

30,657

28,892

13,074

17,661

Bancassurance channel

9,398

2,758

313

117

V Analysis of change in embedded value

The following table shows the change in the Group Embedded Value from 31 December 2020 to 31 December 2021.

Unit: RMB million

No.

Item

Value

Comments

Embedded Value of the life business at 31 December 2020

341,348

Expected Return on Embedded Value

31,253

Expected returns on the 2020 embedded value of CPIC Life

and the value of one year锟斤拷s sales of CPIC Life in 2021

Value of One Year锟斤拷s Sales

13,412

Value of one year锟斤拷s sales in respect of new business

written in the 12 months prior to 31 December 2021

Investment Experience Variance

(1,535)

Reflects the difference between actual and assumed

investment return in 2021

Operating Experience Variance

(4,918)

Reflects the difference between actual and assumed

operating experience

Change in methodology, assumptions and models

3,361

Reflects assumption and methodology changes, together

with model enhancements

Diversification effects

1,387

Changes in diversification benefits on cost of required capital from new business and different business mix

Change in market value adjustment

2,419

Reflects the change in value of certain assets not valued

on a market value basis

Shareholder Dividends

(10,104)

Shareholder dividends distributed to shareholders of

CPIC Life

Others

Embedded Value of the life business at 31 December 2021

376,643

Adjusted net worth of businesses other than CPIC Life as at

31 December 2020

127,820

Change in Adjusted Net Worth before payment of

shareholder dividends to shareholders of CPIC Group

16,710

Shareholder dividends

(12,506)

Dividend distributed to shareholders of CPIC Group

Change in market value adjustment

Reflects the change in value of assets not valued on a market value basis

Adjusted net worth of businesses other than CPIC Life as at

31 December 2021

132,080

Minority interests relating to equity and market value adjustments

(10,415)

Minority interests on Embedded Value as at 31 December

2021

Group Embedded Value as at 31 December 2021

498,309

Embedded Value as at 31 December 2021 per share (RMB)

51.80

Note: Figures may not be additive due to rounding

VI Sensitivity Analysis

In consideration of the uncertainties as to future experience, we have evaluated the sensitivity of the value of in force business and the value of one year锟斤拷s sales of CPIC Life as at 31 December 2021 to changes in key assumptions. In determining the sensitivity results, only the relevant cashflow assumption and risk discount rate assumption has been changed, while all other assumptions have been left unchanged.

Alternative sensitivity scenarios are shown for the following:

- Risk discount rate 锟斤拷+ / - 50 basis points锟斤拷

- Investment return 锟斤拷+ / - 50 basis points锟斤拷

- Mortality 锟斤拷+ / - 10%锟斤拷

- Morbidity 锟斤拷+10%锟斤拷

- Lapse and surrender rates 锟斤拷+ / - 10%锟斤拷

- Expenses 锟斤拷+10%锟斤拷

The following table shows the sensitivity results of the value of in force business and the value of one year锟斤拷s sales after cost of required capital held.

Unit: RMB million

Value of In Force Business After Cost of Required Capital Held

Value of One Year锟斤拷s Sales After Cost of Required Capital Held

Base

214,763

13,412

Risk discount rate 锟斤拷+50 basis points锟斤拷

207,038

12,874

Risk discount rate 锟斤拷-50 basis points锟斤拷

223,120

13,987

Investment return 锟斤拷+50 basis points锟斤拷

249,930

15,445

Investment return 锟斤拷-50 basis points锟斤拷

179,188

11,371

Mortality 锟斤拷+10%锟斤拷

213,660

13,326

Mortality 锟斤拷-10%锟斤拷

215,864

13,497

Morbidity 锟斤拷+10%锟斤拷

207,752

12,459

Lapse and surrender rates 锟斤拷+10%锟斤拷

216,067

13,104

Lapse and surrender rates 锟斤拷-10%锟斤拷

213,354

13,723

Expenses 锟斤拷+10%锟斤拷

211,689

12,560

Corporate governance

Report of the Board of Directors and significant events

I. Results and distributions

The net profit attributable to shareholders of the parent for the year 2021 included in the audited consolidated financial statements, prepared in accordance with the PRC GAAP, was RMB26.834 billion. The net profit for the year 2021 included in the audited financial statements of parent company, prepared in accordance with the PRC GAAP, was RMB13.579 billion. According to the Articles of Association and other applicable regulations, if the cumulative amount of statutory surplus reserves reaches 50% and above of the Company锟斤拷s registered capital, no net profit shall be set aside as surplus reserves for the following years. The retained profits at the end of 2021 included in the financial statements of the parent company, prepared in accordance with the PRC GAAP, were RMB41.396 billion.

Therefore, the profit distribution for 2021 is made based on the audited financial statements of the parent company. The Company intends to declare annual cash dividend of RMB1.0 per share (tax included). Based on the total share capital of 9,620,341,455 shares, the amount of dividend in aggregate will be RMB9,620,341,455. The remaining retained profits will be carried forward to 2022. No capital reserve was transferred to the share capital during the year.

After cash dividend distribution, there will be no significant impact on the Group锟斤拷s solvency ratio, and still meeting the requirements under C-ROSS II.

No capital reserve was transferred to the share capital during any of the last three years.

The above profit distribution proposal is subject to shareholders锟斤拷 approval at the general meeting.

Dividend distributions for the past three years are as follows:

Unit: RMB million

Year of dividend distribution

Cash dividend (including tax)^note(1)

Net profit attributable to the dividend distribution year^note(2)

Payout ratio (%)

(3) = (1)/(2)

2021

9,620

26,834

35.9

2020

12,506

24,584

50.9

2019

10,874

27,741

39.2

Note: Total dividend per share for 2020 including annual cash dividend and the 30th Anniversary Special Dividend; attributable to shareholders of the parent.

Under the Articles of Association, the Company is committed to providing reasonable returns to its shareholders. Its profit distribution policy should be consistent and stable. The Company may make interim profit distribution, and gives first priority to cash dividend.

The Articles of Association also stipulates that the accumulated cash dividend pay-outs in the recent 3 years shall not be less than 30% of the accumulated profits of the Company during the same period except when 1) the Company锟斤拷s solvency adequacy ratio fails to meet CBIRC minimum requirement, 2) wars or natural catastrophes have a major impact on its business performance and financial results, 3) there are major changes in its operating environment which have a major impact on its business performance and financial results, 4) there are significant adverse developments in the Company锟斤拷s operation, or 5) laws, regulations and ordinances stipulate otherwise.

The Company may adjust its profit distribution policy. Any such adjustment shall be proposed as a resolution of the board of directors on the basis of prudent studies and deliberations, with the issuance of opinions by independent directors, before being submitted as a special resolution to the general meeting for approval. The board of directors and the general meeting should hear and give full consideration of the opinions of the Company锟斤拷s independent directors and investors, ensuring diverse channels of communication with them and readily subject themselves to their oversight on this matter.

The Company锟斤拷s cash dividend policy complies with the Articles of Association, contains clear and specific standards and pay-out ratios, and was formulated on the basis of proper decision-making procedures and mechanisms, considering opinions of the Company锟斤拷s independent directors and offering protection of the legitimate rights and interests of its minority shareholders. The conditions for and the procedures of the amendments to the Company锟斤拷s profits distribution policy are also transparent and compliant.

Pursuant to the applicable provisions of the Enterprise Income Tax Law of the People锟斤拷s Republic of China (PRC), in respect of the dividends received by eligible investors who invest in the Company锟斤拷s GDRs listed on LSE, the Company will withhold and pay income tax at the rate of 10%. Citibank and National Association, as the nominal holders of domestic underlying A Shares corresponding to GDRs, receive the cash dividends distributed by the Company. If the dividend incomes obtained by GDR Investors are entitled to the treatment as stipulated/agreed in relevant tax treaties, applications for tax credit can be submitted on their own to the competent tax authorities according to regulations.

II. Fulfillment of the undertakings

During the reporting period, there were no undertakings the Company was required to disclose.

III. Appointment of auditors

Pursuant to the resolution of the 2020 annual general meeting, PricewaterhouseCoopers Zhong Tian LLP was engaged by the Company as the auditor of financial statements under PRC GAAP and the auditor for the internal control for 2021. PricewaterhouseCoopers was engaged by the Company as the auditor of financial statements under HKFRS of the Company for the year 2021.

The year 2021 was the 8th consecutive year when PricewaterhouseCoopers Zhong Tian LLP and PricewaterhouseCoopers (collectively 锟斤拷PwC锟斤拷) served as the Company锟斤拷s auditors.

The financial statements prepared in accordance with PRC GAAP have been audited by Pricewaterhousecoopers Zhong Tian LLP and the certified public accountants signing the report are Mr. PENG Runguo and Mr. ZHANG Jiong.

The remuneration paid to the auditors for provision of annual financial statements auditing service and internal control auditing service for 2021 was RMB25.7549 million and RMB3.0900 million, respectively.

According to the requirement of the 锟斤拷Administrative Measures for State owned Financial Enterprises to Select and Appoint Accounting Firms锟斤拷 (锟斤拷锟斤拷锟叫斤拷锟斤拷锟斤拷业选聘锟斤拷锟绞︼拷锟斤拷锟斤拷锟斤拷锟斤拷锟斤拷旆拷锟�) (Cai Jin [2020] No.6) issued by the Ministry of Finance of the PRC in relation to the service term of auditors continuously engaged by a financial institution, after the completion of audit work for the year 2021, the service term of the current external auditors of the Company had reached the prescribed time limit. In this regard, the Company conducted a bidding process for the selection of auditors for the year 2022. The 12th session of the 9th board of directors (the Board) held on 29 October 2021 considered and approved the Proposed Engagement of Auditor for the Year 2022, the Board proposed to engage Ernst&Young Hua Ming LLP as the auditor of the Company锟斤拷s financial statements for the year ended 31 December 2022 and the auditor for the internal control, whilst undertaking duties required of auditors in accordance with Hong Kong Listing Rules. The engagement of Ernst&Young Hua Ming LLP is subject to the approval by SGM of the Company.

IV. Change in accounting estimates

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

As at 31 December 2021, the Group used information currently available to determine the above assumptions. Mainly due to change of the benchmark yield curve of discount rate for life and long-term health insurance reserves, life and long-term health insurance reserves after reinsurance increased by approximately RMB14,621 million as at 31 December 2021 and profit before tax decreased by approximately RMB14,621 million for 2021.

V. Material litigations and arbitrations

During the reporting period, the Company did not engage in any material litigation or arbitration which was required to be disclosed.

VI . Penalties and subsequent rectification

During the reporting period, there were no penalties or subsequent rectification the Company was required to disclose.

VII. Fulfilment of obligations

During the reporting period, the Company had no outstanding obligations such as unfulfilled obligations under rulings by courts of laws or payment in arrears involving large amounts.

VIII. Capital occupation

During the reporting period, there was no non-operating occupation of capital of the Company by controlling shareholders or other related parties.

IX. Guarantee contracts

During the reporting period, the Company did not enter into any guarantee contract that violated laws, administrative regulations or the external guarantee resolution procedures prescribed by the CSRC.

X. Share option scheme

During the reporting period, the Company did not have any share option scheme, employee stock ownership plan, or other employee incentive measure which required disclosure.

XI. Related party Transactions

Daily related party transactions

In the ordinary course of business, at fair market price, the Company and its holding subsidiaries conducted daily transactions, including bond trading, securities investment funds, bond pledge-style repo, trust products, asset management products and other daily transactions related to fund utilisation and financial products business with multiple counterparties, and daily related party transactions related to reinsurance business with Swiss Reinsurance Company Ltd (锟斤拷Swiss Re锟斤拷). The 8th and 11th sessions of the Board respectively approved daily related party transactions related to fund utilisation and financial products sales business under the annual estimated cap of 2021 and the daily related party transactions related to reinsurance business under the estimated cap of the second half of 2021 of the Company and its holding subsidiaries, and each single transaction was not required to be submitted separately to the board of directors or the shareholders锟斤拷 general meeting for consideration and approval any more. The categorized summary of the daily related party transactions related to fund utilisation, financial products sales business, and reinsurance business for the year of 2021 is as follows:

Unit: RMB million

No.

Related Parties

Content of Transaction

Estimated Cap of Daily Related Party Transactions in 2021

Actual Amount as of 31 December 2021

Percentage (%) of the Amount of Transactions of the Same Type

Hwabao WP Fund Management Co., Ltd.

Transaction of Fund Subscription and Redemption

3,000

819

0.14%

Haitong Securities Company Limited

Bond Trading

6,000

0.00%

Swiss Re

Reinsurance business

5,700^{note 1}

1,900^{note 2}

7.62%

Notes:

1. It is the estimated cap of daily related party transactions between CPIC P/C, CPIC Life, CPIC Anxin Agricultural, CPIC Health and Swiss Re of the second half of 2021 (from 1 July 2021 to 31 December 2021).

2. It is the actual amount of daily related party transactions between CPIC P/C, CPIC Life, CPIC Anxin Agricultural, CPIC Health and Swiss Re from 1 July 2021 to 31 December 2021.

The above-mentioned related party transactions related to daily operations were settled in cash, which were carried out by the Company in the ordinary course of business in accordance with normal commercial terms, and would not affect the independence of the Company. The above-mentioned daily related party transactions did not exceed the amount approved by the board of directors and the shareholders锟斤拷 general meeting, and were summarized in categories and disclosed in the annual report of the Company pursuant to the Listing Rules of the SSE and other regulatory provisions.

XII. Material contracts

Entrusted investment management. Investment is one of the main businesses of the Company, and the Company adopts a model of entrusted investment management. At present, a diversified entrusted investment management structure has been developed which is based on the internal managers within CPIC and supplemented by external managers. The internal investment managers include CPIC AMC, Changjiang Pension and CPIC Capital; external investment managers include professional investment management agencies such as fund companies and securities firms and asset management companies. The Company selects investment managers based on the investment objectives and risk characteristics of a specific account or asset class, as well as investment manager's capabilities, and appropriately mitigates risks through the diversification and decentralization of asset types, investment strategies, and investment managers. The Company would sign an entrusted investment management agreement with the investment managers, and guide their investment behaviour through investment guidelines, dynamic tracking communication, performance evaluation and other measures, and take targeted risk management measures based on the profile of investment assets.

Save as disclosed above, during the reporting period, the Company did not have any material contracts which were required to be disclosed.

XIII. Performance of duties by the Board of Directors

Details of the performance of duties by the board of directors and its special committees during the reporting period are set out in the Section 锟斤拷Corporate governance锟斤拷 of this report.

XIV. Principal business

We are a leading comprehensive insurance group in the PRC, providing, through our subsidiaries, a broad range of life insurance, property and casualty insurance, specialised health insurance and pension products and services to individual and institutional customers throughout the country. We also manage and deploy our insurance funds as well as third party assets through our subsidiaries.

XV. Reserves

Details for reserves (including general reserves, other comprehensive income and retained profits) are shown in notes VII-35,36,37,38 and 60 to the financial statements.

XVI. Property and equipment and investment properties

Details for property and equipment and investment properties are shown in notes VII-15, 16 and 14 to the financial statements.

XVII. Financial summary

Summary of financial information is shown in the Section 锟斤拷Highlights of accounting and operation data锟斤拷 of this report.

XVIII. Use of Proceeds Received from Issuance of GDRs

The GDRs issued by the Company were listed on the London Stock Exchange plc (the "Initial Offering") on 22 June 2020, and additional GDRs were issued due to the exercise of over-allotment option (the 锟斤拷Over-allotment锟斤拷) on 9 July 2020. A total of 111,668,291 GDRs were issued through the Initial Offering and Over-allotment at USD17.60 per GDR, raising a total proceeds of USD1,965,361,921.60. The differences between the beginning and ending balance of proceeds unused are mainly the proceeds used during the reporting period and the interest income generated by the raised funds. As of the end of the reporting period, the use of proceeds was as stated in the prospectus. As of the end of the reporting period, details of use of the above-said proceeds are as follows:

Total proceeds

raised

Proceeds

unused as at the

beginning of the

reporting period

The intended use of proceeds raised

Proceeds

used during

the reporting

period

Proceeds

unused at the end of

the reporting

period

Plan for

use of the

unused

funds

USD 1,965,361,921.60

USD 1,945,356,114.87

(1) 70% or more of the net proceeds will be used for

gradually developing the Group锟斤拷s businesses overseas,

in the form of equity investments, partnerships

and alliances, and mergers and acquisitions in both

developed and emerging markets, supporting core

insurance business growth;

USD 1,704,570,965.27

(i) Approximately USD50.4 million will be used to invest in CICFH New Dynamics Investment SPC and further participate in the privatization of New Frontier Health Corporation(锟铰凤拷医锟狡硷拷锟斤拷)in New York Stock Exchange^{note 1}锟斤拷

(ii) Approximately USD125 million will be used to subscribe the newly issued preferred A shares of New Frontier Vitality Limited (锟铰风健锟斤拷锟斤拷锟斤拷)^{note 1};

(iii) Less than USD150 million will be used to subscribe the fund interests of HTCP CAPITAL LPF (泰锟斤拷锟铰撅拷锟斤拷锟斤拷锟睫合伙拷锟斤拷锟�)^{note 2}锟斤拷

(iv) The remaining will be used in

line with the

Company's

business

development

and market

situation.

(2) Up to 30%, or the remainder of the net proceeds,

will be used for developing an overseas investment

platform to invest in innovative businesses, such as

healthcare, elderly care, and technology, leveraging

CPIC's offshore investment capabilities;

If the Company deems that the plan in any particular

areas described above to be unachievable, the

corresponding intended portion of the proceeds

will be used to replenish its capital and for general

corporate purposes.

Approximately USD 253,258,736.88 (RMB 1,615,969,000, 12.9% of the total net proceeds

) was used as capital increase in CPIC health.

Notes锟斤拷

1. In January 2022, the Company participated in the privatization of New Frontier Health Corporation (锟铰凤拷医锟狡硷拷锟斤拷) at New York Stock Exchange and subscribed the newly issued preferred A shares of New Frontier Vitality Limited (锟铰风健锟斤拷锟斤拷锟斤拷). Relevant payment has been made for this transaction.

2. In December 2021, the Board considered and approved the fund interest subscription of HTCP CAPITAL LPF (泰锟斤拷锟铰撅拷锟斤拷锟斤拷锟睫合伙拷锟斤拷锟�). Up to the date of this report, the Company has not signed any legally binding agreements.

XIX. Events after the balance sheet date

Events after the balance sheet date are shown in note XVII to the financial statements.

XX. Bank borrowings

The Company had no bank borrowings other than the bond issued by CPIC P/C, and securities sold under agreements to repurchases of its investment business. For details of the bond issuance, please refer to note VII-32 to the financial statements.

XXI. Charitable and other donations

During the reporting period, the Company made charitable and other donations totalling approximately RMB74.0451 million.

XXII. Share capital and sufficient public float

The changes in the Company锟斤拷s share capital are shown in the Section 锟斤拷Changes in the share capital and shareholders锟斤拷 profile锟斤拷 of this report.

Based on the information that is publicly available and within the knowledge of the directors as at the latest practicable date prior to the printing of this report, since 12 January 2011, not less than 25% of the total issued share capital of the Company was held in public hands and not less than 15% of the H share capital of the Company was held in public hands, which is consistent with the requirements under Hong Kong Listing Rules to maintain a minimum public float.

XXIII. Management contract

During the reporting period, the Company did not enter into any management contract by which a person or entity undertakes the management and administration of the whole or any substantial part of any business of the Company.

XXIV. Directors, supervisors and senior management

Biographies of the Company锟斤拷s current directors, supervisors and senior management are shown in the Section 锟斤拷Directors, supervisors, senior management and employees锟斤拷 of this report.

XXV. Directors锟斤拷 and supervisors锟斤拷 interests in competing business

So far as the Company is aware, during the reporting period, none of the Company锟斤拷s directors or supervisors has any interests in businesses which, directly or indirectly, compete with the Company锟斤拷s businesses.

XXVI. Directors锟斤拷 and supervisors锟斤拷 service contracts and remunerations

None of the Company锟斤拷s directors or supervisors has entered into any service contract with the Company or its subsidiaries which is not terminable within one year, or terminable only when receiving compensation other than the statutory compensation.

Details for the directors锟斤拷 and supervisors锟斤拷 remunerations are shown in the Section 锟斤拷Directors, supervisors, senior management and employees锟斤拷 of this report.

XXVII. Special committees of the board of directors

The board of directors of the Company established five special committees, namely the Strategic and Investment Decision-Making & ESG Committee, the Audit Committee, the Nomination and Remuneration Committee, the Risk Management and Related Party Transactions Control Committee, and the Technological Innovation and Consumer Rights Protection Committee. See the Section 锟斤拷Corporate governance锟斤拷 of this report for details of the special committees of the board of directors.

XXVIII. Directors锟斤拷 and supervisors锟斤拷 interests in material transactions, arrangements or contracts

So far as the Company is aware, during the reporting period, the Directors and Supervisors of the Company did not have any material interest, whether directly or indirectly, in any transaction, arrangement or contract which was significant to the Company锟斤拷s business and which was entered into by the Company or any of its subsidiaries. None of the Directors or Supervisors of the Company has entered into any service contract which is not terminable by the Company within one year without payment of compensation (other than statutory compensation).

XXIX. Directors锟斤拷 and supervisors锟斤拷 rights to subscribe for shares or bonds

The Company did not grant to any directors, supervisors or their respective spouses or children under 18 years of age any rights to subscribe for or to acquire shares or bonds of the Company or its subsidiaries.

XXX. Interests and short positions of directors, supervisors and senior management in shares, underlying shares or debentures

So far as the directors of the Company are aware, as at 31 December 2021, none of the directors, supervisors or senior management of the Company had any interest or short position in shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which was required, pursuant to Section 352 of the SFO, to be entered in the register maintained by the Company or which was required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions.

The shareholdings of directors, supervisors and senior management in A Shares are set out in the Section 锟斤拷Directors, Supervisors and Senior Management锟斤拷 of this report.

XXXI. Interests and short positions of substantial shareholders and other persons in the shares and underlying shares

So far as the directors of the Company are aware, as at 31 December 2021, the following persons (excluding the directors, supervisors or senior management of the Company) had an interest or short position in the shares or underlying shares of the Company which shall be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which, pursuant to Section 336 of the SFO, shall be entered in the register maintained by the Company:

Name of substantial shareholders

Capacity

Type of shares

Number of shares

Percentage of shareholdings in the class of shares issued (%)^{note 1}

Percentage of the total shares issued (%)^{note 1}

Schroders Plc^{note 2}

Investment manager

H shares

359,115,992 (L)

12.94 (L)

3.73 (L)

锟叫癸拷锟斤拷锟劫憋拷锟秸ｏ拷锟斤拷锟脚ｏ拷锟斤拷司^{note 3}

Beneficial owner

H shares

5,228,000 (L)

0.19 (L)

0.05 (L)

Interest of corporation controlled by锟叫癸拷锟斤拷锟劫憋拷锟秸ｏ拷锟斤拷锟脚ｏ拷锟斤拷司

H shares

242,560,800 (L)

8.74 (L)

2.52 (L)

锟叫癸拷锟斤拷锟劫憋拷锟秸股凤拷锟斤拷锟睫癸拷司

Beneficial owner

H shares

250,110,800 (L)

9.01 (L)

2.60 (L)

锟较猴拷锟斤拷锟绞硷拷锟斤拷锟斤拷锟睫癸拷司^{note 4}

Beneficial owner

H shares

192,068,400 (L)

6.92 (L)

2.00 (L)

Interest of corporation controlled by锟较猴拷锟斤拷锟绞硷拷锟斤拷锟斤拷锟睫癸拷司

H shares

6,428,400 (L)

0.23 (L)

0.07(L)

BlackRock, Inc.^{note 5}

Interest of corporation controlled by BlackRock, Inc.

H shares

140,002,114 (L)

992,200 (S)

5.04 (L)

0.04 (S)

1.46 (L)

0.01 (S)

(L) denotes a long position; (S) denotes a short position; (P) denotes a lending pool

Notes:

1. As at December 31, 2021, the Company issued a total of 9,620,341,455 shares, including 6,845,041,455 A shares and 2,775,300,000 H shares.

2. Pursuant to Part XV of the SFO, as at 31 December 2021, Schroders Plc is deemed or taken to be interested in a total of 359,115,992 H shares (long position) of the Company. The details of the shareholding interests of the subsidiaries directly or indirectly controlled by Schroders Plc are set out below:

Name of controlled subsidiary

Number of shares

Schroder Administration Limited

359,115,992 (L)

Schroder International Holdings Limited

358,755,592 (L)

Schroder Investment Management (Hong Kong) Limited

165,039,618 (L)

Schroder Investment Management (Singapore) Ltd.

77,720,411 (L)

Schroder Investment Management Limited

69,869,200 (L)

Schroder Investment Management Limited

46,126,363 (L)

Schroder Investment Management North America Limited

46,126,363 (L)

Schroder Wealth Holdings Limited

360,400 (L)

Schroder & Co. Limited

360,400 (L)

(L) denotes a long position

3. Pursuant to Part XV of the SFO, as at 31 December 2021, 锟叫癸拷锟斤拷锟劫憋拷锟秸ｏ拷锟斤拷锟脚ｏ拷锟斤拷司 is deemed or taken to be interested in a total of 247,788,800 H shares (long position) of the Company. The details of the shareholding interests of the subsidiaries directly or indirectly controlled by 锟叫癸拷锟斤拷锟劫憋拷锟秸ｏ拷锟斤拷锟脚ｏ拷锟斤拷司 are set out below:

Name of controlled subsidiary

Number of shares

锟叫癸拷锟斤拷锟劫憋拷锟秸股凤拷锟斤拷锟睫癸拷司

242,410,800 (L)

锟叫癸拷锟斤拷锟劫憋拷锟秸ｏ拷锟斤拷锟解）锟缴凤拷锟斤拷锟睫癸拷司

150,000 (L)

(L) denotes a long position

4. Pursuant to Part XV of the SFO, as at 31 December 2021, 锟较猴拷锟斤拷锟绞硷拷锟斤拷锟斤拷锟睫癸拷司 is deemed or taken to be interested in a total of 198,496,800 H shares (long position) of the Company. The details of the shareholding interests of the subsidiary directly or indirectly controlled by 锟较猴拷锟斤拷锟绞硷拷锟斤拷锟斤拷锟睫癸拷司 are set out below:

Name of controlled subsidiary

Number of shares

锟较猴拷锟斤拷锟绞硷拷锟脚ｏ拷锟斤拷郏锟斤拷锟斤拷薰锟剿�

6,428,400 (L)

(L) denotes a long position

5. Pursuant to Part XV of the SFO, as at 31 December 2021, BlackRock, Inc. is deemed or taken to be interested in a total of 140,002,114 H shares (long position) and 992,200 H shares (short position) of the Company. The details of the shareholding interests of the subsidiaries directly or indirectly controlled by BlackRock, Inc. are set out below:

Name of controlled subsidiary

Number of shares

Trident Merger, LLC

1,339,562 (L)

BlackRock Investment Management, LLC

636,762 (L)

BlackRock Investment Management, LLC

702,800 (L)

BlackRock Holdco 2, Inc.

138,662,552 (L)

992,200 (S)

BlackRock Financial Management, Inc.

136,361,386 (L)

795,600 (S)

BlackRock Financial Management, Inc.

2,301,166 (L)

196,600 (S)

BlackRock Holdco 4, LLC

85,188,005 (L)

775,800 (S)

BlackRock Holdco 6, LLC

85,188,005 (L)

775,800 (S)

BlackRock Delaware Holdings Inc.

85,188,005 (L)

775,800 (S)

BlackRock Institutional Trust Company, National Association

28,157,005 (L)

775,800 (S)

BlackRock Fund Advisors

57,031,000 (L)

BlackRock Capital Holdings, Inc.

308,600 (L)

BlackRock Advisors, LLC

308,600 (L)

BlackRock International Holdings, Inc.

50,864,781 (L)

19,800 (S)

BR Jersey International Holdings L.P.

50,864,781 (L)

19,800 (S)

BlackRock Lux Finco S.à r.l.

8,471,538 (L)

BlackRock Japan Holdings GK

8,471,538 (L)

BlackRock Japan Co., Ltd.

8,471,538 (L)

BlackRock Holdco 3, LLC

38,634,759 (L)

19,800 (S)

BlackRock Canada Holdings LP

2,102,800 (L)

BlackRock Canada Holdings ULC

2,102,800 (L)

BlackRock Asset Management Canada Limited

2,102,800 (L)

BlackRock Australia Holdco Pty. Ltd.

1,417,200 (L)

BlackRock Investment Management (Australia) Limited

1,417,200 (L)

BlackRock (Singapore) Holdco Pte. Ltd.

10,812,822 (L)

BlackRock HK Holdco Limited

10,495,422 (L)

BlackRock Asset Management North Asia Limited

2,023,884 (L)

BlackRock Cayman 1 LP

36,531,959 (L)

19,800 (S)

BlackRock Cayman West Bay Finco Limited

36,531,959 (L)

19,800 (S)

BlackRock Cayman West Bay IV Limitied

36,531,959 (L)

19,800 (S)

BlackRock Group Limited

36,531,959 (L)

19,800 (S)

BlackRock Finance Europe Limited

17,501,993 (L)

BlackRock (Netherlands) B.V.

154,600 (L)

BlackRock (Netherlands) B.V.

10,081,033 (L)

BlackRock Advisors (UK) Limited

343,000 (L)

BlackRock International Limited

570,907 (L)

BlackRock Group Limited-Luxembourg Branch

18,459,059 (L)

19,800 (S)

BlackRock Luxembourg Holdco S.à r.l.

18,459,059 (L)

19,800 (S)

BlackRock Investment Management Ireland Holdings Limited

18,098,859 (L)

BlackRock Asset Management Ireland Limited

18,098,859 (L)

BLACKROCK (Luxembourg) S.A.

347,000 (L)

19,800 (S)

BlackRock Investment Management (UK) Limited

2,249,600 (L)

BlackRock Investment Management (UK) Limited

4,673,760 (L)

BlackRock (Netherlands) B.V. - German Branch - Frankfurt BlackRock

154,600 (L)

BlackRock Asset Management Deutschland AG

154,600 (L)

BlackRock Fund Managers Limited

2,249,600 (L)

BlackRock Life Limited

570,907 (L)

BlackRock (Singapore) Limited

317,400 (L)

BlackRock UK Holdco Limited

13,200 (L)

BlackRock Asset Management Schweiz AG

13,200 (L)

EG Holdings Blocker, LLC

636,762 (L)

Amethyst Intermediate, LLC

636,762 (L)

Aperio Holdings, LLC

636,762 (L)

Aperio Holdings, LLC

636,762 (L)

Aperio Group, LLC

636,762 (L)

(L) denotes a long position; (S) denotes a short position

Save as disclosed above, as at 31 December 2021, the directors of the Company were not aware that there was any other person (other than the directors, supervisors or senior management of the Company) who had interests or short positions in the shares or underlying shares of the Company which were required, pursuant to Section 336 of the SFO, to be entered in the register maintained by the Company.

Specifics on the shareholdings by the Company锟斤拷s top ten shareholders are set out in the Section 锟斤拷Changes in the Share Capital and Shareholders锟斤拷 Profile锟斤拷 of this report.

XXXII. Purchase, redemption or sale of the Company锟斤拷s listed securities

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

XXXIII. Pre-emptive rights

According to the relevant PRC laws and under the Articles of Association, none of the Company锟斤拷s shareholders have any pre-emptive rights, and the Company does not have any arrangement in respect of share options.

XXXIV. Permitted indemnity provisions

During the reporting period and up to the date of this annual report, the Company has undertaken and maintained a collective liability insurance policy covering, among others, all directors of the Company.

XXXV. Business View

A fair review of the business of the Company, the principal risks and uncertainties facing the Company, particulars of important events affecting the Company and the outlook of the Company锟斤拷s business are provided in Sections 锟斤拷Chairman锟斤拷s statement锟斤拷, 锟斤拷Operation overview锟斤拷, 锟斤拷Review and analysis of operating results锟斤拷 and the relevant notes to financial statements in the Section 锟斤拷Financial report锟斤拷 of this report. In addition, more details regarding the Company锟斤拷s performance by reference to financial key performance indicators, compliance with relevant laws and regulations which have a significant impact on the Company, as well as relationships with major stakeholders are provided in Sections 锟斤拷Chairman锟斤拷s statement锟斤拷, 锟斤拷Operation overview锟斤拷, 锟斤拷Review and analysis of operating results锟斤拷, 锟斤拷Directors, supervisors, senior management and employees锟斤拷 and 锟斤拷Corporate governance锟斤拷 of this report.

Changes in the share capital and shareholders锟斤拷 profile

I. Changes in share capital

The table below shows the Company锟斤拷s share capital as at the end of the reporting period:

Unit: share

Before change

Increase or decrease (+ or -)

After change

Amount

Percentage (%)

New shares issued

Bonus shares

Transfer from reserves

Others

Sub-total

Amount

Percentage (%)

1. Shares with selling restrictions

(1) State-owned shares

(2) State-owned enterprises shares

(3) Other domestic shares

held by

legal entities

natural persons

(4) Foreign shares

held by

legal entities

natural persons

Total

2. Shares without selling restrictions

(1) Ordinary shares denominated in RMB

6,845,041,455

71.15

6,845,041,455

71.15

(2) Domestically listed foreign shares

(3) Overseas listed foreign shares (H share)

2,775,300,000

28.85

2,775,300,000

28.85

(4) Others

Total

9,620,341,455

100.00

9,620,341,455

100.00

3. Total number of shares

9,620,341,455

100.00

9,620,341,455

100.00

II. Shareholders

(I) Number of shareholders and their shareholdings

As at the end of the reporting period, the Company had no shares with selling restrictions.

Unit: share

Total number of shareholders as at the end of the reporting period: 175,593 (including 171,402 A share holders and 4,191 H shareholders)

Total number of shareholders as at the end of Feb. 2022: 171,442 (including 167,264 A share holders and 4,178 H shareholders)

Shares held by top 10 shareholders as at the end of the reporting period

Name of shareholders

Nature of shareholders

Percentage of the shareholding

Total number of shares held

Increase or decrease (+ or -) of shareholding during the reporting period

Number of shares held with selling restriction

Number of shares subject to pledge or lock-up period

Type of shares

HKSCC Nominees Limited

Overseas legal entity

28.82%

2,772,680,029

-44,600

H Share

Shenergy (Group) Co., Ltd.

Domestic legal entity

13.79%

1,326,776,782

A Share

Hwabao Investment Co., Ltd.

Domestic legal entity

13.35%

1,284,277,846

A Share

Shanghai State-Owned Assets

Operation Co., Ltd.

Domestic legal entity

6.07%

584,112,339

+93,979,256

A Share

Shanghai Haiyan Investment

Management Company Limited

Domestic legal entity

4.87%

468,828,104

A Share

China Securities Finance Co., Ltd.

Others

2.82%

271,089,843

-79

A Share

HKSCC

Others

2.06%

197,728,541

+54,992,054

A Share

Shanghai International Group

Domestic legal entity

1.66%

160,000,000

+160,000,000

A Share

Citibank, National Association

Others

1.56%

150,040,905

-159,823,220

A Share

China Structural Reform Fund Corporation Limited

Domestic legal entity

1.20%

115,181,140

+115,181,140

A Share

Description of the stock repurchase accounts of the top 10 shareholders

None

Description of the aforesaid shareholders' proxy voting rights, entrusted voting rights, and waiver of voting rights

Entrusted by its parent company, China Baowu Steel Group, Hwabao Investment Co., Ltd. exercises the voting rights corresponding to 68,818,407 ordinary shares (A share) of China Baowu Steel Group. Apart from this, the Company is not aware of any other proxy voting rights, entrusted voting rights, and waiver of voting rights of the aforesaid shareholder.

Description of related relations or concerted actions among the aforesaid shareholders

HKSCC Nominees Limited and HKSCC are connected, as the former is a wholly-owned subsidiary of the latter. Shanghai State-Owned Assets Operation Co., Ltd. is a wholly-owned subsidiary of Shanghai International Group, they act in concert. As is confirmed by relevant shareholders regarding the Company锟斤拷s inquiry, the Company is not aware of any other connected relations or concerted actions among the above-mentioned shareholders.

Notes:

1. As at the end of the reporting period, the Company did not issue any preferred shares.

2. The shareholding of the top 10 shareholders is based on the lists of registered shareholders provided by China Securities Depository and Clearing Corporation Limited Shanghai Branch (A share) and Computershare Hong Kong Investor Services Limited (H share) respectively. The nature of A shareholders is the same as the nature of their accounts registered with China Securities Depository and Clearing Corporation Limited Shanghai Branch.

3. The shares held by HKSCC Nominees Limited are held on behalf of its clients. As SEHK does not require such shareholders to disclose to HKSCC Nominees Limited whether the shares held by them are subject to pledge or lock-up period, HKSCC Nominees Limited is unable to calculate, or make available such data. Pursuant to Part XV of the SFO, a Substantial Shareholder is required to give notice to SEHK and the Company on the occurrence of certain events including a change in the nature of its interest in shares such as the pledging of its shares. As at the end of the reporting period, the Company is not aware of any such notices from Substantial Shareholders under Part XV of the SFO.

4. HKSCC is the nominal holder of shares traded through Shanghai-Hong Kong Connect Programme.

5. Citibank, National Association is the depository of the Company锟斤拷s GDRs, and the underlying A shares of the Company represented by the GDRs have been registered under it; according to Citibank, National Association, as of the end of the reporting period, the remaining number of the GDRs is 30,008,181, which is 26.87% of the number of GDRs issued under approval by the China Securities Regulatory Commission.

6. As at the end of the reporting period, Shanghai International Group obtained 207,938,200 H shares of the Company through Shanghai-Hong Kong Stock Connect which were registered under the name of HKSCC Nominees Limited. During the reporting period, with the approval of State-owned Assets Supervision and Administration Commission of Shanghai, Shanghai Jiushi (Group) Co., Ltd. transferred 160,000,000 A shares of the Company to Shanghai International Group free of charge, and completed the transfer on 8 April 2021.

(II) Controlling shareholders or de facto controllers

The ownership structure of the Company is diversified. The ultimate controllers of the Company锟斤拷s major shareholders do not exercise control over the Company and the Company has no controlling shareholder, nor de facto controllers.

(III) Particulars of shareholders with a shareholding percentage higher than 5%

As at the end of the reporting period, the following are the shareholders with a shareholding percentage higher than 5%:

1. Shenergy (Group) Co., Ltd.

Shenergy Group Co., Ltd. was established on 18 November 1996 with a registered capital of RMB20 billion. Its legal representative is HUANG Dinan. Its main businesses include investment in, development and management of electricity and energy industries, investment in natural gas resources, investment in urban gas pipeline networks, investment and management of high-tech industries, real industry investment, asset operation, and domestic trade (excluding special provisions).

2. Hwabao Investment Co., Ltd.

Hwabao Investment Co., Ltd. was established on 21 November 1994 and has a registered capital of RMB9.369 billion, with HU Aimin as its legal representative. Its main businesses include investment and investment management in the metallurgy industry and relevant industries, investment consulting, business consulting service (excluding brokerage) and property title brokerage. Hwabao Investment Co., Ltd. is a wholly owned subsidiary of China Baowu Steel Group Corporation.

3. Shanghai State-Owned Assets Operation Co., Ltd.

Shanghai State-Owned Assets Operation Co., Ltd. was established on 24 September 1999 with a registered capital of RMB5.5 billion. Its legal representative is GUAN Wei. Its main businesses include entrepreneurial investments, capital operations, acquisition, enhancement and transfer of assets, enterprise and asset custody, debt restructuring, property title brokerage, real estate agency, financial consultancy, investment consultancy, and consulting services related to its scope of businesses, as well as the provision of guarantee related to its asset management and capital operation businesses.

The following chart sets forth the connection between the Company and the ultimate controllers of our substantial shareholders as at the end of the reporting period:

Notes:

1. China Baowu Steel Group Corporation and its subsidiary, Hwabao Investment Co., Ltd., hold in aggregate 1,353,096,253 A Shares in the Company, representing 14.06% of the entire share capital of the Company.

2. Shanghai State-Owned Assets Operation Co., Ltd. and its subsidiary, Shanghai Guoxin Investment and Development Co., Ltd., both under control of Shanghai International Group Co., Ltd., hold in aggregate 777,136,490 A Shares in the Company, representing 8.08% of the entire share capital of the Company.

Directors, supervisors, senior management and employees

I. Directors, supervisors and senior management

(I) Summary

Unit: RMB 10,000

Name

Position

Gender

Date of birth

Term of office

Total Remuneration payable from the Company (before tax) during the reporting period

Incumbent Directors, Supervisors and Senior Management

KONG Qingwei

Chairman and executive director

Jun. 1960

Since Jun. 2017

117.4

FU Fan

Executive director

Oct. 1964

Since Jun. 2020

150.3

President

Since Mar. 2020

HUANG Dinan

Non-executive director and vice chairman

Dec. 1966

Since Jun. 2019

Note 5

WANG Tayu

Non-executive director

Oct. 1970

Since Jun. 2017

WU Junhao

Non-executive director

Jun. 1965

Since Jul. 2012

Note 5

CHEN Ran

Non-executive director

Jan. 1984

Since Jan. 2021

27.5

ZHOU Donghui

Non-executive director

Apr. 1969

Since Jan. 2021

Note 5

LIANG Hong

Non-executive director

Oct. 1968

Since Feb. 2021

Note 5

LU Qiaoling

Non-executive director

Mar. 1966

Since Mar. 2021

22.5

John Robert

Dacey

Non-executive director

May 1960

Since Mar. 2021

Note 5

LIU Xiaodan

Independent non-executive director

Jun. 1972

Since Jan. 2021

31.25

CHEN Jizhong

Independent non-executive director

Apr. 1956

Since Jul. 2019

Note 5

LAM Tyng Yih, Elizabeth

Independent non-executive director

Oct. 1964

Since Jul. 2019

WOO

Ka Biu, Jackson

Independent Non-executive Director

Sept.1962

Since Mar. 2021

22.5

JIANG Xuping

Independent non-executive director

May 1955

Since Aug. 2019

ZHU Yonghong

Chairman of board of supervisors and shareholder representative supervisor

Jan. 1969

Since Jul. 2018

Note 5

JI Zhengrong

Shareholder representative supervisor

Dec. 1963

Since Apr. 2019

103.7

Vice chairman of board of supervisors

Since Aug. 2019

LU Ning

Shareholder representative supervisor

Sept. 1968

Since Jul. 2018

Note 5

GU Qiang

Employee representative supervisor

Jan. 1967

Since Jan. 2021

224.1

YU Bin

Vice president

Aug. 1969

Since Oct. 2018

145.4

MA Xin

Vice president

Apr. 1973

Since Dec. 2018

143.0

Board secretary

Jul. 2015 - Mar. 2021

SUN Peijian

Chief risk officer

Sept.1963

Since Mar.2021

252.2

ZHANG Yuanhan

Finance responsible person

Nov. 1967

Since Jun. 2019

529.5

Chief actuary

Since Jan. 2013

ZHANG Weidong

Chief compliance officer

Oct. 1970

Since Jun.2016

292.8

General counsel

Since Oct. 2018

Chief risk officer

Jun.2016 - Mar. 2021

QIAN Zhonghua

Chief internal auditor and internal auditing responsible person

Jul. 1962

Since Oct. 2019

351.1

SHENG Yafeng

Director of Greater Bay Area development

Jul. 1965

Since May 2021

251.8

CHEN Wei

Chief administrative officer

Apr. 1967

Since Nov. 2021

25.1

SU Shaojun

Board secretary

Feb.1968

Since Mar.2021

214.6

SU Gang

Chief investment officer

Sept.1973

Since Jan. 2022

Departed Directors, Supervisors and Senior Management

ZHAO Yonggang

Vice president

Nov. 1972

Dec. 2018 - May 2021

60.7

Benjamin DENG

Chief investment officer

Nov. 1969

Dec. 2018 -Sept. 2021

323.8

Total

3389.1

Notes:

1. Total remuneration payable (before tax) listed in this table includes basic salaries, bonuses, allowances, subsidies, employee welfare and various insurance premiums, provident funds, annuities, and other forms of remuneration received from the Company payable in 2021. According to Provisional Guidelines on Compensation Management of Insurance Companies (Bao Jian Fa (2012) No. 63) and relevant policies and rules of the Company, performance-related remuneration of the Company锟斤拷s senior management takes the form of deferred payment, which is included in total remuneration payable (before tax) listed in this table.

2. Each director and supervisor of the Company is appointed for a term of 3 years and is eligible for re-election and re-appointment. Each independent non-executive director is not allowed to serve a consecutive term of more than 6 years.

3. According to relevant policies, the final amounts of remunerations of the chairman, president, vice chairman of the board of supervisors, and vice presidents are yet to be reviewed and approved. The final remuneration will be disclosed when confirmed.

4. The compensation for the Company's directors, supervisors and senior management was calculated based on their actual term of office during the reporting period.

5. Mr. HUANG Dinan, Mr. WU Junhao, Mr. ZHOU Donghui, Ms. LIANG Hong, Mr. John Robert Dacey, Mr. ZHU Yonghong, and Mr. LU Ning do not take any allowances. Mr. CHEN Jizhong does not take any allowances temporarily.

6. During the reporting period, as per the definition for related parties under the Listing Rules of the SSE, Mr. HUANG Dinan and Mr. WU Junhao received remuneration from Shenergy (Group) Co., Ltd.; Mr. WANG Tayu received remuneration from Shanghai International Group Co., Ltd. and Hwabao Investment Co., Ltd.; Mr. CHEN Ran received remuneration successively from Shanghai Ouyeel Financial Information Service Co., Ltd.; Ms. LIU Xiaodan received remuneration from Chenyi Investment (Beijing) Co., Ltd.; Mr. WOO Ka Biu, Jackson received remuneration from Kailey Enterprises Limited; Mr. ZHU Yonghong received remuneration from China Baowu Steel Group Corporation Limited.

7. The appointment qualification of Mr. SU Gang was approved by CBIRC in January 2022.

8. In May 2021, Mr. ZHAO Yonggang ceased to serve as vice president of the Company; in Sept. 2021, due to personal reasons, Mr. Benjamin DENG resigned as chief investment officer of the Company.

(II) Shareholdings

Unit: share

Name

Position

Type of shares

Shareholding at the beginning of the reporting period

Increase in shareholding during the reporting period

Decrease in shareholding during the reporting period

Shareholding at the end of the reporting period

Reason for the change

Vice President

5,900

26,600

Vice President

4,300

H share

16,400

42,000

58,400

Secondary market transaction

SUN Peijian

Chief Risk Officer

A share

36,125

16,000

20,125

Secondary market transaction

SHENG Yafeng

Director of Greater Bay Area development

A share

11,300

500

10,800

Secondary market transaction

CHEN Wei

Chief administrative officer

A share

40,000

Secondary market transaction

ZHAO Yonggang

Vice President

A share

17,200

Notes:

1. With the appointment at the 8th meeting of the 9th Board of Directors of the Company and the qualification approval from CBIRC, the term of office of Mr. SUN Peijian became effective in March 2021. The changes of Mr. SUN's shareholding shown in the table above all occurred before his term of office.

2. With the appointment at the 9th meeting of 9th Board of Directors of the Company and the qualification approval from CBIRC, the term of office of Mr. SHENG Yafeng became effective in May 2021. The changes of Mr. SHENG Yafeng's shareholding shown in the table above all occurred before his term of office.

3. With the appointment at the 11th meeting of 9th Board of Directors of the Company and the qualification approval from CBIRC, the term of office of Mr. CHEN Wei became effective in November 2021. The changes of Mr. CHEN Wei's shareholding shown in the table above all occurred before his term of office.

4. In May 2021, due to job changes, Mr. ZHAO Yonggang ceased to serve as Vice President of the Company.

(III) Professional background and biographies

1. Directors

The biographies of the incumbent directors of the Company are as follows:

Mr. KONG Qingwei currently serves as Chairman and an executive director of the Company. Previously, Mr. KONG served as deputy general manager of Shanghai Bund House Exchange Co., Ltd., general manager of the Housing Exchange Headquarter of Shanghai Jiushi Corporation, executive deputy director of Shanghai Provident Fund Management Centre, deputy general manager of Shanghai Urban Construction Investment Development Corporation, vice chairman of Shanghai Minhong (Group) Co., Ltd., director of Shanghai World Expo Land Reserve Centre, president of Shanghai World Expo Land Holding Co., Ltd., general manager of Shanghai Urban Construction Investment and Development Corporation, Party secretary of the Financial Working Committee of the CPC of the city of Shanghai, chairmen of Shanghai Guosheng (Group) Co., Ltd and CPIC Life. Mr. KONG holds a master锟斤拷s degree.

Mr. FU Fan currently serves as executive director and president of the Company, director of CPIC AMC. Previously, Mr. FU served as deputy general manager of Shanghai Investment Corporation, deputy general manager of China International Fund Management Co., Ltd., general manager and vice chairman of Shanghai International Trust Co., Ltd., chairman of Shanghai State-owned Assets Operation Co., Ltd., and director and general manager of Shanghai International Group Co., Ltd. Mr. FU holds a master锟斤拷s degree.

Mr. HUANG Dinan currently serves as vice chairman and non-executive director of the Company, chairman of Shenergy Group Co., Ltd. and president of Shanghai Society for Electrical Engineering. Previously, Mr. HUANG was consecutively research fellow, deputy head of the No.3 Research Team, assistant director and vice director of the Research Institute of Shanghai Turbine Plant; assistant general manager, deputy general manager and general manager of Shanghai Turbine Plant; Assistant president, head of the President锟斤拷s Office, vice chairman and chairman of Shanghai Turbine Company Limited; vice president, president, and vice chairman of Shanghai Electric (Group) Corporation; president, vice chairman and chairman of Shanghai Electric Group Company Limited, a company listed on SSE and SEHK (SSE stock code: 601727, SEHK stock code: 02727), and president of China Society of Power Engineering. Mr. HUANG holds a master锟斤拷s degree and a title of Senior Engineer (professor level).

Mr. WANG Tayu currently serves as non-executive director of the Company, investment director of Shanghai International Group Co., Ltd., chairman of Shanghai International Group Asset Management Co., Ltd., chairman of GP Capital, chairman of Shanghai Guohe Modern Service Industry Equity Investment Management Co., Ltd., chairman of Shanghai Guofang Private Equity Fund Management Co., Ltd., director and general manager of Shanghai Xieyi Asset Management Co., Ltd., director of AVIC Investment Holdings Co., Ltd, director of Shanghai Fintech Co., Ltd. and director of Shanghai Data Exchange Co., Ltd. Previously, Mr. WANG served as assistant president and vice president of Shanghai State-owned Assets Operation Co., Ltd., chairman of Shanghai Guoxin Investment and Development Co., Ltd., vice chairman of Shanghai Guotai Junan Investment Management Co., Ltd. and director of Shanghai Rural Commercial Bank Co., Ltd. Mr. WANG has a master's degree.

Mr. WU Junhao currently serves as non-executive director of the Company, director of CPIC Life and CPIC P/C, and general manager of the Financial Management Department of Shenergy (Group) Co., Ltd. Mr. WU is also a director of Shanghai Chengyi New Energy Venture Capital Co., Ltd., director of Chengdu Xinshen Venture Capital Co., Ltd., supervisor of Orient Securities Company Limited, a company listed on SSE and SEHK (SSE stock code: 600958, SEHK stock code: 03958), supervisor of Everbright Banking Co., Ltd., a company listed on both SSE and SEHK (SSE stock code: 601818, SEHK stock code: 06818), chairman of the Supervisory Board of Shanghai ICY Capital Co., Ltd., and chairman of the Supervisory Board of Shanghai Shenergy Chengyi Equity Investment Co., Ltd. Mr. WU formerly worked as head of the Teaching Research Department of the School of Business Management of Changzhou University, executive deputy general manager of Shanghai New Resources Investment Consulting Company, deputy general manager of Shanghai Bailitong Investment Company, deputy chief of Shanghai Shenergy Assets Management Co., Ltd., deputy chief, chief and senior chief of the Assets Management Department, deputy manager of the Financial Management Department of Shenergy (Group) Co., Ltd. and director of Shanghai Jiulian Group Co., Ltd. Mr. WU was also supervisor of Shanghai Pharmaceuticals Holding Co., Ltd., a company listed on SSE and SEHK (SSE stock code: 601607, SEHK stock code: 02607), and director of Orient Securities Company Limited (SSE stock code:600958, SEHK stock code: 03958). Mr. WU has a master锟斤拷s degree.

Mr. CHEN Ran currently serves as non-executive director of the Company, deputy general manager of Hwabao Investment Co., Ltd., and chairman of Shanghai Ouyeel Financial Information Service Co., Ltd. Mr. CHEN also serves as executive director of Easternpay Information & Technology Co., Ltd. and director of China United SME Guarantee Corporation. Previously, Mr. CHEN served as the sales representative and marketing director of No. 1 Division of Marketing Department of Shanghai Baosteel Steel Products Trading Co., Ltd., leadership development manager of the Human Resources Department and senior secretary of the Administration Office of China Baowu Steel Group Corporation Ltd., deputy general manager of Shanghai Ouyeel Financial Information Service Co., Ltd., chairman of Shanghai Ouyeel Pawn Co., Ltd., and president of Shanghai Ouyeel Financial Information Service Co., Ltd. Mr. CHEN holds a bachelor锟斤拷s degree.

Mr. ZHOU Donghui currently serves as non-executive director of the Company, general manager of Shanghai Haiyan Investment Management Co., Ltd., non-executive director of Orient Securities Company Limited listed on both SSE and SEHK (SSE stock code: 600958, SEHK stock code: 03958), non-executive director of Haitong Securities Co., Ltd. listed on both SSE and SEHK (SSE stock code: 600837, SEHK stock code:06837), and vice chairman and director of Shanghai Jieqiang Tobacco Sugar & Liquor (Group) Chain Co., Ltd., vice chairman and director of Shanghai Deqiang Industrial Co., Ltd., and supervisor of China Aviation Development Commercial Aviation Engine Co., Ltd. Previously, Mr. ZHOU was deputy manager and manager of the Financial Department of Shanghai Import and Export of China Tobacco Co., Ltd., deputy director of the Investment Management Department of Shanghai Tobacco Group Co., Ltd., deputy director of the Financial Department, deputy head of the Fund Management Centre, deputy director and director of the Investment Management Department of Shanghai Tobacco Group Co., Ltd., and deputy general manager and executive deputy general manager of Shanghai Haiyan Investment Management Co., Ltd. Mr. ZHOU holds a bachelor锟斤拷s degree and the title of Senior Accountant.

Ms. LIANG Hong currently serves as non-executive director of the Company and president of the Institute of Innovation and Industry Studies of Hillhouse Group. Previously, Ms. LIANG served as an economist with the International Monetary Fund; chief economist of China, managing director and co-head of Asia-Pacific Economic Research Department of Goldman Sachs; member of the Management Committee, head of the Research Department, chief economist, co-head of the Sales and Trading Department and head of the Capital Market Department of China International Capital Corporation Limited. Ms. LIANG holds a doctor锟斤拷s degree.

Ms. LU Qiaoling currently serves as non-executive director of the Company, general manager of the Industry and Finance Development Centre and the Capital Operation Department of China Baowu Steel Group Corporation Limited, director of Hwabao Trust Co., Ltd., director of Baowu Group Zhongnan Iron and Steel Co., Ltd., and director of Hwabao (Shanghai) Equity Investment Fund Management Co., Ltd. Previously, Ms. LU was chief accountant of Hebei Petrochemical Supply and Marketing Corporation, deputy director of the Industry Guidance Department and deputy director of the Administration Office of the Audit Bureau of the Ministry of Chemical Industry, assistant inspector of the State Council 锟斤拷s Audit Commissioner, and full-time supervisor for state-owned medium and large-sized enterprises under the CPC Central Enterprise Working Committee, deputy director and director of the Internal Audit Department of Baosteel Group Co., Ltd., director of the Internal Audit Department of Baoshan Iron and Steel Co., Ltd., deputy general manager of Baosteel Engineering Technology Group Co., Ltd, director of Baosteel Group Finance Co., Ltd., general manager of the Financial Department of China Baowu Steel Group Corporation Limited, and chairman of the Board of Supervisors of Baowu Group Zhongnan Iron and Steel Co., Ltd., Ouye Yunshang Co., Ltd., Baowu Equipment Intelligent Technology Co., Ltd. and Huabao Investment Co., Ltd. Ms. LU holds a master锟斤拷s degree, and has the title of senior accountant, certified public accountant, and auditor.

Mr. John Robert DACEY, American, currently serves as non-executive Director of the Company, and chief financial officer and a member of the Executive Committee of Swiss Re. Mr. DACEY was a consulting partner of McKinsey & Company, chief strategy officer and a member of the Executive Committee of Winterthur Insurance as well as vice chairman and a member of the Executive Committee of the Asia-Pacific Regional Office of AXA and chief executive officer of AXA Japan and Asia-Pacific Regional Headquarters. Mr. DACEY also served as a non-executive director of New China Life Insurance Company Limited (SSE stock code: 601336, SEHK stock code:01336). Mr. DACEY holds a master锟斤拷s degree.

Ms. LIU Xiaodan currently serves as independent non-executive director of the Company, general manager of Chenyi Investment (Beijing) Co., Ltd. and chairman of Chenyi Fund Management (Beijing) Co., Ltd. Previously, Ms. LIU was president and chairman of Huatai United Securities Co., Ltd. and chairman of Asset Mark Financial Holdings, Inc., a company listed on the New York Stock Exchange (stock code: AMK). Previously, Ms. LIU worked at Peking University. She also served as a member of the 4th and 5th Committees for Mergers, Acquisitions, and Restructuring of China Securities Regulatory Commission. Ms. LIU holds a master锟斤拷s degree.

Mr. CHEN Jizhong currently serves as independent non-executive director of the Company. Previously, Mr. CHEN served as head of the Personnel Department for Entities under Direct Administration of the Personnel Division of the State Planning Commission, deputy director of the Human Resources Department of China Development Bank, director of the Executive Office of China Development Bank, successively general manager of Xi锟斤拷an Branch, Shaanxi Branch, and Shanghai Branch of China Development Bank, and chief internal auditor of China Development Bank. Mr. CHEN holds a master锟斤拷s degree.

Ms. LAM Tyng Yih, Elizabeth currently serves as independent non-executive director of the Company, executive director of Fobon Bank (Hong Kong), and director and honorary treasurer of HK Agency for Volunteer Service. Previously, Ms. LAM served as consultant and partner of Ernst & Young. Ms. Lam holds a bachelor锟斤拷s degree in business administration and a master锟斤拷s degree in accounting and is a member of the Hong Kong Institute of Certified Public Accountants.

Mr. WOO Ka Biu, Jackson, currently serves as independent non-executive director of the Company, CEO of Challenge Capital Management Limited, consultant of Guantao Law Firm (Hong Kong), director of Kailey Enterprises Limited and Fong Fun Enterprises Limited and independent non-executive director of Henderson Land Development Company Limited listed on the SEHK (stock code: 00012), honorary member of the Board of Trustees of Tsinghua University, notary public entrusted by the Ministry of Justice of the People锟斤拷s Republic of China, a practising solicitor member on the panel of the Solicitors锟斤拷 Disciplinary Tribunal in the Hong Kong Special Administrative Region, member of the Takeovers and Mergers Panel and the Takeovers Appeals Committee of Securities and Futures Commission of Hong Kong, member of the Main Board and GEM Listing Review Committee of the Stock Exchange of Hong Kong Limited, honorary advisor of the Hong Kong Financial Reporting Council and member of the Oversight, Policy and Governance Committee. Mr. WOO was a member of the Public Shareholders锟斤拷 Rights Group of Securities and Futures Commission of Hong Kong, a member of the Investigation Committee of the Hong Kong Financial Reporting Council, chairman of Beijing Guantao Zhongmao Law Firm (International), a partner of Ashurst Law Firm, founding partner of Woo Ka Biu Law Firm, director and co-head of Investment Banking of Great China of N.M. Rothschild & Sons (Hong Kong) Limited, partner of Messrs. Woo, Kwan, Lee & Lo of Hong Kong, independent non-executive director of Ping An Insurance (Group) Co., Ltd., a company listed on both SSE and SEHK (SSE stock code: 601318, SEHK stock code: 02318), non-executive director of Sun Hung Kai Properties Limited (stock code: 00016) and Henderson Investment Limited listed on SEHK (stock code: 00097), and alternative director of Sir Po-shing Woo. Mr. WOO holds a master's degree, and is a Qualified Solicitor in the Supreme Courts of Hong Kong, England and Wales and the Australian Capital Territory, and a licensee of the Securities and Futures Commission of Hong Kong.

Mr. JIANG Xuping currently serves as independent non-executive director of the Company, professor with the Department of Marketing of the School of Economics and Management, Tsinghua University, research fellow at the Research Centre for Contemporary Management, Tsinghua University, and research fellow at the Centre for Corporate Governance of Tsinghua University. Mr. JIANG also serves pro bono as dean of the School of Internet Marketing and Management of Guizhou Forerunner College. Previously, Mr. JIANG served as lecturer, associate professor, professor of School of Economics and Management of Tsinghua University, and head of Internet Marketing and Management of the Software School of Beihang University. Mr. JIANG holds a master锟斤拷s degree and the title of professor.

2. Supervisors

The biographies of the incumbent supervisors of the Company are as follows:

Mr. ZHU Yonghong currently serves as chairman of the board of supervisors of the Company and chief accountant and board secretary of China Baowu Steel Group Corporation Limited. Mr. ZHU also is chairman of Baowu Group Finance Co., Ltd., and chairman of the Board of Supervisors of Baoshan Iron and Steel Co., Ltd., a company listed on SSE (stock code: 600019). Mr. ZHU previously worked as chairman of Wuhan Iron and Steel (Group) Finance Co., Ltd., CFO and head of the Planning and Finance Department, deputy chief accountant and chief accountant of Wuhan Iron and Steel (Group) Company, director of Wuhan Iron and Steel Company Limited, a company listed on SSE (stock code: 600005), vice chairman of Hebi Fuyuan Refined Coal Co., Ltd., director of Hankou Banking Co., Ltd., director of Beibu Gulf Property & Casualty Insurance Co., Ltd., chairman of the Board of Supervisors of Changjiang Property & Casualty Insurance Co., Ltd., director of Hubei United Development & Investment Co., Ltd, chairman of Hwabao Trust Co., Ltd., chairman of Hwabao Investment Co., Ltd., chairman of Wuhan Iron and Steel (Group) Kunming Iron and Steel Co., Ltd., chairman of Hwabao WP Fund Management Co., Ltd., and director of Hwabao Trust Co., Ltd. Mr. ZHU holds a doctor锟斤拷s degree and the title of senior accountant.

Mr. JI Zhengrong currently serves as vice chairman of the board of supervisors, employee representative supervisor, and chairman of the Trade Union of the Company. Previously, Mr. JI served as vice chairman of the Board of Supervisors and chairman of the Trade Union of Shanghai New Union Textra Import and Export Co., Ltd., vice chairman of the Board of Supervisors of Shanghai New Union Textra Joint Company, and vice chairman of the Board of Supervisors of Shanghai Textile (Group) Co., Ltd. Mr. JI received university education.

Mr. LU Ning currently serves as shareholder representative supervisor of the Company, and head of the Financial Assets Department of Yunnan Hehe (Group) Co., Ltd. Mr. LU is also director of Yunnan Horticulture Industrial Investment Management Co., Ltd., director of Yunnan Tourism Co., Ltd., and chairman of Jiangsu Tobacco Jinsili Leasehold Co., Ltd. Mr. LU previously worked as chairman of Shanghai Hongta Hotel Co., Ltd., chairman of Yunnan Hongta Hotel Co., Ltd., chairman of Yunnan Honghe Investment Co., Ltd., chairman of Kunming Hongta Building Co., Ltd., chairman of Kunming Hongta Building Property Management Co., Ltd., and director of Yunnan Hongta Sports Centre Co., Ltd., director of Yunnan Zhongwei Hotel Management Co., Ltd., director of Kunming Wanxing Real Estate Development Co., Ltd., deputy general manager of Yunnan Tobacco Group Xingyun Co., Ltd., general manager of Kunming Wanxing Real Estate Development Co., Ltd., head of the Hotel Property Department of Yunnan Hehe (Group) Co., Ltd., director of Yunnan Tobacco Xingyun Investment Co., Ltd., chairman of Yunnan Hongta Real Estate Development Company, chairman of Zhongshan Hongta Property Development Co., Ltd., and director of Hongta Innovation Investment Co., Ltd. Mr. LU holds a bachelor锟斤拷s degree.

Mr. GU Qiang currently serves as employee representative supervisor of the Company, chairman of the board of supervisors of CPIC AMC, chairman of the board of supervisors of Changjiang Pension and chairman of the board of supervisors of CPIC Health. Mr. GU formerly served as deputy chief accountant, CFO, finance responsible person and deputy general manager of CPIC P/C, director of CPIC AMC, director of China Pacific Insurance Co., (H.K.) Limited, director, vice president and CFO of CPIC Anxin Agricultural. Prior to joining the Company, Mr. GU was a lecturer at the Department of Finance and Insurance of Shanghai University of Finance and Economics, senior auditor of Pricewaterhouse Da Hua Certified Public Accountants, deputy manager of Integrated Planning Department and manager of the International Business Department of Wanguo Securities Co., Ltd., vice president and CFO of Shanghai Branch of American International Underwriters. Mr.GU holds a master锟斤拷s degree and the title of Senior Accountant.

3. Senior management

Mr. KONG Qingwei currently serves as Chairman of the Company. Please refer to the Section headed 锟斤拷1. Directors锟斤拷 above for the details of his biography.

Mr. FU Fan currently serves as President of the Company. Please refer to the Section headed 锟斤拷1. Directors锟斤拷 above for the details of his biography.

The biographies of the rest senior managements of the Company are as follows:

Mr. YU Bin currently serves as vice president of the Company, chairman of CPIC Technology and a director of CPIC P/C. Mr. YU previously served consecutively as deputy general managers of the Non-marine Insurance Department and Underwriting & Claims Department of CPIC P/C, general managers of the Market R&D Centre and the Market Department of CPIC P/C, chief marketing officer and deputy general manager of CPIC P/C, and assistant vice president of the Company. Mr. YU has a master锟斤拷s degree.

Mr. MA Xin currently serves as vice president of the Company, chairman of CPIC Health, and directors of CPIC P/C, CPIC Life and Changjiang Pension respectively. Mr. MA previously worked as general manager of CPIC Life Shaanxi Branch, director of the Strategic Transformation Office, general manager of Strategic Planning Department and the director on transformation matters of the Company. Mr. MA has a master锟斤拷s degree.

Mr. SUN Peijian currently serves as chief risk officer of the Company, chairman of board of supervisors of CPIC Life and CPIC P/C. Previously, he served as assistant general manager, deputy general manager, general manager of Reinsurance Department of the Company, assistant general manager, deputy general manager, compliance responsible person, chief compliance officer and vice president of the Company, and directors of CPIC P/C, CPIC Life and CPIC AMC, general manager and chairman of CPIC Health. Mr. SUN has a master锟斤拷s degree.

Mr. ZHANG Yuanhan is chief actuary and CFO of the Company, director and chief actuary of CPIC Health, directors of CPIC P/C, CPIC Life and CPIC AMC respectively. Mr. ZHANG previously served as the chief actuary, deputy general manager and vice president of MetLife Insurance Company Limited, chief actuary of Sino Life Insurance Co., Ltd., deputy general manager, CFO and chief actuary of Sun Life Everbright Life Insurance Co., Ltd., and director of Sun Life Everbright Asset Management Co., Ltd. Mr. ZHANG has a master锟斤拷s degree and is a director of China Association of Actuaries and a member of The Society of Actuaries and American Academy of Actuaries.

Mr. ZHANG Weidong currently serves as compliance responsible person and chief legal councilor of the Company and director of CPIC P/C, CPIC Life, CPIC AMC, CPIC Health and Changjiang Pension. Mr. ZHANG previously served as general manager of the Legal & Compliance Department, head of the Board Office of the Company, concurrently board secretaries of CPIC P/C, CPIC Life and CPIC AMC, risk & compliance officer, general manager of the Risk Management Department and chief risk officer of the Company. Mr. ZHANG holds a bachelor锟斤拷s degree.

Mr. QIAN Zhonghua currently serves as chief internal auditor and internal auditing responsible person of the Company. Previously, Mr. QIAN served as general manager of Suzhou Central Sub-branch, deputy general manager of Jiangsu Branch, general managers of Shenzhen Branch and Guangdong Branch of CPIC Life, deputy general manager, general manager and director of CPIC Life. Mr. QIAN holds a master锟斤拷s degree and the title of senior accountant.

Mr. SHENG Yafeng currently serves as director of Greater Bay Area development of the Company. Previously, Mr. SHENG served as deputy general manager of the Auto Insurance Department of the Company, deputy general manager of CPIC P/C Chengdu Branch, deputy general manager, general manager of the Market Department, general manager of the Sales Management Department of CPIC P/C, general manager of the Product Business Centre and general manager of the Accident and Health Insurance Department of CPIC P/C, head of claims, and deputy general manager, executive deputy general manager, director and general manager of CPIC P/C. Mr. SHENG holds a PhD degree.

Mr. CHEN Wei currently serves as chief administrative officer of the Company. Previously, Mr. CHEN served as chief representative of the Company's London Representative Office, director and general manager of CPIC HK, board secretary and general manager of the Strategic Planning Department of the Company, head of auditing, internal auditing responsible person, chief internal auditor, board secretary of CPIC Life, chairman of the board of supervisors of CPIC AMC, and general manager and director of CPIC Health. Mr. CHEN holds a master's degree and the title of senior engineer, and is a member of the ACII.

Mr. SU Shaojun currently serves as board secretary and deputy director on transformation matters of the Company, and director of CPIC P/C, CPIC Life. Previously, he served as assistant general manager and deputy general manager of the Underwriting Department, deputy general manager and general manager of Beijing branch, general manager of Development Planning Department, head of the Board office, head of the Board of Supervisors锟斤拷 Office, general manager of the Telemarketing Department of CPIC P/C, and head of the Strategic Research Department of the Company. Mr. SU holds a PhD degree and title of senior engineer.

Mr. SU Gang currently serves as chief investment officer of the Company. Previously, Mr. SU served as head of the Investor Relations Department of the Company, head of project investment of CPIC AMC, deputy general manager of CPIC AMC and general manager of the Alternative Investment Management Centre of CPIC AMC, deputy general manager of CPIC Life, general manager and chairman of Changjiang Pension. Before joining the Company, Mr. SU served as general manager of the Fixed Income Department and deputy general manager of the Investment Banking Headquarters of Shenyin Wanguo Securities Company. Mr. SU holds a PhD degree.

(IV) Positions in corporate shareholders

Name

Shareholder

Position held

Term

HUANG Dinan

Shenergy (Group) Co., Ltd.

Chairman

Since 2018

WU Junhao

Shenergy (Group) Co., Ltd.

General manager of the Financial Management Department

Since 2020

CHEN Ran

Hwabao Investment Co., Ltd.

Vice president

Since2021

ZHOU Donghui

Shanghai Haiyan Investment Management Co., Ltd.

General manager

Since 2015

LIANG Hong

Hillhouse Group

President of the Institute of Innovation and Industry Studies

Since 2020

LU Qiaoling

China Baowu Steel Group Corporation

General manager of the Financial Department

2018-2021

China Baowu Steel Group Corporation

General manager of the Industry and Finance Development Centre and the Capital Operation Department

Since 2021

Hwabao Investment Co., Ltd.

Chairman of the board of supervisors

2019-2021

ZHU Yonghong

China Baowu Steel Group Corporation

Chief accountant

Since 2016

China Baowu Steel Group Corporation

Board secretary

Since 2018

LU Ning

Yunnan Hehe(Group) Co., Ltd.

Head of the Financial Assets Department

Since 2017

(V) Positions in other entities

Name

Other entities

Position held

Term

HUANG Dinan

Shanghai Society for Electric Engineering

Chairman

Since 2004

WANG Tayu

Shanghai International Group Co., Ltd.

Investment director

Since 2021

Shanghai International Group Co., Ltd.

General

manager of No. 1 Division of Investment Management Department

2017-2021

Shanghai Xieyi Asset Management Co., Ltd.

Director, gengeral manager

Since 2017

GP Capital

Chairman

Since 2021

Shanghai Guohe Modern Service Industry Equity Investment Management Co., Ltd

Chairman

Since 2021

Shanghai Guofang Private Equity Fund Management Co., Ltd.,

Chairman

Since 2021

AVIC Capital Co., Ltd.

Director

Since 2019

Shanghai Fintech Co., Ltd.

Director

Since 2021

Shanghai Data Exchange Co., Ltd.

Director

Since 2021

WU Junhao

China Everbright Bank Co., Ltd.

Supervisor

Since 2009

Shanghai ICY Capital Co., Ltd.

Chairman of the board of supervisors

Since 2021

Shanghai Chenyi New Energy Venture Capital Co., Ltd.

Director

Since 2011

Orient Securities Company Limited

Director

2011-2021

Orient Securities Company Limited

Supervisor

Since 2021

Chengdu Xinshen Venture Company

Director

Since 2011

Shanghai Shenery Chengyi Equity Investment Co., Ltd.

Chairman of the board of supervisors

Since 2016

CHEN Ran

Shanghai Ouyeel Financial Information Service Co., Ltd.

President

2019-2021

Shanghai Ouyeel Financial Information Service Co., Ltd.

Chairman

Since 2021

Shanghai Ouyeel Financial Information Service Co., Ltd.

Director

Since 2018

Shanghai Ouyeel Pawn Co., Ltd.

Chairman

2019-2022

Easternpay Information & Technology Co., Ltd.

Executive Director

Since 2019

China United SME Guarantee Corporation

Director

Since 2018

ZHOU Donghui

Orient Securities Company Limited

Non-executive Director

Since 2020

Haitong Securities Co., Ltd.

Non-executive Director

Since 2020

Shanghai Tobacco Machinery Co. , Ltd.

Vice Chairman, Director

Since 2015

Shanghai Jieqiang Tobacco Sugar & Liquor (Group) Chain Co., Ltd.

Vice Chairman, Director

Since 2015

Shanghai Deqiang Industrial Co., Ltd.

Vice Chairman, Director

Since 2015

China Aviation Development Commercial Aviation Engine Co., Ltd.

Supervisor

Since 2015

LU Qiaoling

Hwabao Trust Co., Ltd.

Director

Since 2021

Baowu Group Guangdong Shaoguan Iron and Steel Co., Ltd.

Chairman of the board of supervisors

2017-2021

Baowu Group Zhongnan Iron and Steel Co., Ltd.

Director

Since 2021

Ouye Yunshang Co., Ltd.

Chairman of the board of supervisors

2017-2021

Magang (Group) Holding Co., Ltd.

Supervisor

2019-2021

Baowu Equipment Intelligent Technology Co., Ltd.

Chairman of the board of supervisors

2019-2021

Hwabao (Shanghai) Equity Investment Fund Management Co., Ltd.

Director

Since 2021

John Robert Dacey

Swiss Reinsurance Company Ltd

Chief financial officer

Since 2021

Swiss Reinsurance Company Ltd

Member of the Executive Committee

Since 2017

LIU Xiaodan

Chenyi Investment (Beijing) Co., Ltd.

General manager

Since 2019

Chenyi Fund Management (Beijing) Co., Ltd.

Chairman

Since 2019

LAM Tyng Yih, Elizabeth

HK Agency for Volunteer Service

Director, Honorary Treasurer

Since 2012

Fobon Bank (Hong Kong)

Executive director

Since 2021

WOO Ka Biu, Jackson

Challenge Capital Management Limited

CEO

Since 2015

Guantao Law Firm (Hong Kong)

Consultant

Since 2014

Kailey Enterprises Limited

Director

Since 1992

Fong Fun Company Limited

Director

Since 1991

Henderson Land Development Company Limited

Independent Non-executive Director

Since 2012

Po Leung Kuk Hong Kong

Member of the Selection Committee

Since 2014

Shun Tak Faternal Association

Director

Since 2013

Shun Tak Fraternal Association Seaward Woo College

Member of the board of trustees

Since 2000

The Hong Kong Jockey Club

Member of the Selection Committee

Since 2004

Lok Sin Tong Hong Kong

Committee member

Since 2007

Riding for the Disabled Association Ltd.

Chairman of the Rehabilitation Committee, member of the Selection Committee

Since 2015

Hong Kong Riding for the Disabled Association Equestrian Academy Limited

Vice chairman and director

Since 2014

UNICEF Hong Kong

Member of the audit committee

Since 2018

HKJC Racing Club Co., Ltd.

Chairman of the Horse Management Board

Since 2019

Zhuoyi Horse Racing Management Co., Ltd.

Director

Since 2019

Tsinghua University

Honorary member of the board of trustees

Since 2012

Ministry of Justice of the People's Republic of China

Entrusted Notary Public

Since 2012

Panel of the Solicitors锟斤拷 Disciplinary Tribunal in the Hong Kong Special Administrative Region

Member (Practising Solicitor)

Since 2011

Securities and Futures Commission of Hong Kong

Member of the Takeovers and Mergers Committee and Takeover Appeals Committee

Since 2019

The Stock Exchange of Hong Kong Limited

Member of the Main Board and GEM Listing Review Committee

Since 2019

Hong Kong Financial Reporting Council

Honorary advisor

Since 2019

Hong Kong Financial Reporting Council

Member of the Oversight, Policy and Governance Committee

Since 2020

Mr. JIANG Xuping

Tsinghua University

Professor, Department of Marketing, School of Economics and management

Since 2002

Researcher at the Research Centre for Contemporary Management

Since 2003

Researcher at the Centre for Corporate Governance

Since 2007

Guizhou Forerunner College

Dean of the School of Internet Marketing and Management (volunteer)

Since 2012

ZHU Yonghong

Hwabao WP Fund Management Co., Ltd.

Chairman

2020-2022

Hwabao Trust Co., Ltd.

Director

2018-2021

Baosteel Group Finance Co., Ltd.

Chairman

Since 2018

Baoshan Iron and Steel Co., Ltd.

Chairman of the board of supervisors

Since 2017

LU Ning

Jiangsu Tobacco Jinsili Leasehold Co., Ltd.

Chairman

Since 2021

Hongta Innovation Investment Co., Ltd.

Director

2018-2022

Yunnan Flower Industry Investment Management Co., Ltd.

Director

Since 2018

Yunnan Tourism Co., Ltd.

Director

Since 2019

(VI) Determination and basis for determination of remuneration

The remuneration of directors and supervisors is determined by the SGM, while the remuneration of the senior management is determined by the Nomination and Remuneration Committee of the Board and submitted to the board of directors for approval.

The Company determines the remuneration of directors, supervisors and senior management based on factors such as the Company锟斤拷s business results, the line-up of positions, risk management and performance appraisal results while considering market remuneration benchmarks provided by human resources consulting service.

II. Employees

As at the end of the reporting period, the basic information on the employees of the Company and its major subsidiaries is summarized as below:

Headcount of employees of the Company

2,771

Headcount of employees of its major subsidiaries

104,229

Total number of employees

107,000

Headcount of retirees for whom the Company or its major subsidiaries bear expenses

5,433

Their expertise and educational background are set out below:

(I) Expertise

Expertise

Head count

Percentage

Management

8,015

7.49%

Professional

38,029

35.54%

Marketing

60,956

56.97%

Total

107,000

100.00%

(II) Education background

Education background

Head count

Percentage

Master锟斤拷s degree or above

5,561

5.20%

Bachelor锟斤拷s degree

62,976

58.86%

Other

38,463

35.95%

Total

107,000

100.00%

(III) Remuneration policies and training programs for employees

The Company has established a remuneration mechanism that is position-specific, performance and market-oriented and risk-linked, based on specific positions and performance of the employees with reference to the market conditions. The basic remuneration of our employees is determined based on their positions, duty performances and working experience. The performance-related remuneration of our employees is linked to the results performance of the Company and is determined and paid according to the results of operation of the Company and their individual performance. The Company also provides its employees with benefits and allowance according to applicable regulations of China and industry standards.

Positioned as a learning organization, the Company stepped up development of AI-enabled 锟斤拷CPIC Learning锟斤拷 online training platforms to better serve its strategic transformation, business development and organizational health, in a bid to turn learning into productivity.

Corporate governance

I. Corporate governance

In 2021, in strict compliance with Company Law of the PRC, Securities Law of the PRC, Insurance Law of the PRC and other applicable laws of the PRC, relevant government ordinances and regulations, and drawing on international best practices, the Company continued to improve the centralised management structure based on realignment of resources and enhanced interaction with the capital market, and strengthen internal and external supervision to improve the soundness, effectiveness and transparency of management, putting in place a sound corporate governance with effective coordination and a sound system of checks and balances.

The board of directors is committed to continuous improvement of the Company锟斤拷s corporate governance by enhancing the integrated management mechanisms and systems. While maintaining the right of self-management of its subsidiaries as independent legal entities, the Group also promoted the centralisation of governance of the Company锟斤拷s subsidiaries at the group level, given the fact that the Company was listed as a group. The subsidiaries of the Company have also established a system structure that satisfies the requirements of the Company's operation and has formulated unified and consistent governance systems that meet all kinds of needs. Through the classification of subsidiaries, the Company has adopted differentiated management of its subsidiaries, fully covering the corporate governance structure under the Group.

The SGM, board of directors, board of supervisors and the senior management fulfilled their functions independent of one another, exercised their rights respectively in accordance with the Articles of Association, coordinating and balancing among each other to ensure the smooth operation of the Company. The SGM is composed of all shareholders. The board of directors implements the resolutions made by the SGM and exercises the decision-making power of the Company, responsible for the overall leadership of the Group; while the senior management, under the leadership of the president, is responsible for the day-to-day management of the Company锟斤拷s businesses and implementation of the strategies approved by the board of directors. The board of supervisors is responsible to the SGM, and exercises the duties of supervising the directors and senior executives and reviewing the financials of the Company. The Company also put in place mechanisms to ensure smooth communication between the board of directors, the supervisory board and the management, creating an enabling environment for the board of directors and the board of supervisors to perform their duties and keep abreast of the Company锟斤拷s situation.

During the reporting period, the Company has fully complied with CSRC Code of Governance for Listed Companies (http://www.csrc.gov.cn/csrc/c101864/c1024585/content.shtml), CBIRC Code of Corporate Governance for Banking and Insurance Institutions (http://www.cbirc.gov.cn/cn/view/pages/ItemDetail.html?docId=989061&itemId=928) and all code provisions of the Corporate Governance Code contained in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (https://en-rules.hkex.com.hk/sites/default/files/net_file_store/HKEX4476_3828_VER10.pdf) (and substantially all of the recommended governance best practices applied over and above that code).

(I) Shareholders and the SGM

Shareholders are the investors of the Company. To equally safeguard shareholder锟斤拷s rights, the Company sets out detailed provisions on shareholder锟斤拷s rights and how to realise them in the Articles of Association, and takes seriously the dividend policy, shareholders锟斤拷 investment return and their right to earnings. The Company also focused on communication with shareholders to help them make informed decisions.

Under the Articles of Association, the main responsibilities of the SGM are, among others, to formulate the Company锟斤拷s strategic direction and investment plans, elect and replace directors and supervisors other than those who are also the Company锟斤拷s employees and decide their remuneration, consider and approve the annual budgets and accounts, profit distribution plans and loss compensation plans of the Company, adopt proposals regarding any increase or decrease in the registered capital of the Company and any merger, separation, dissolution or liquidation or change of corporate form of the Company, consider and approve the listing of all or any part of the shares on any stock exchange as well as any proposed issuance of bonds or other securities of the Company, adopt proposals regarding the appointment and dismissal of the accountant of the Company, which conduct statutory audit of the Company锟斤拷s financial reports on a regular basis, and amend the Articles of Association.

The Articles of Association and the Procedural Rules for the SGM also contain detailed rules for convening extraordinary sessions and specific procedures for putting forward proposals at such meetings. Under Article 98(1) of the Articles of Association and Article 6(3) and Article 7 of the Procedural Rules for SGM, shareholders holding 10% or above of total voting shares issued by the Company individually or jointly may sign and submit a request in writing to the Board of Directors for an extraordinary general meeting or a classified SGM. Upon receipt of such a request, the Board of Directors shall decide whether to convene a general meeting or a classified SGM based on the actual situation according to the laws, administrative regulations and the Articles of Association. Pursuant to Articles 68(12) and 73 of the Articles of Association and Articles 12 and 13 of the Procedural Rules for SGMs, shareholders holding 3% or above (including 3%) of the total voting shares issued by the Company individually or jointly may put forward temporary proposals, but they must submit the proposal to the convener in writing ten days prior to the holding of general meeting. If the shareholder entitled to submit proposals has any objection towards the decision of the Board for not including his/her proposal in the agenda of the general meeting, he/she may request a separate extraordinary general meeting according to the procedures as set out in the Procedural Rules for SGMs. The contact information for shareholders锟斤拷 enquiry regarding the affairs of Company is set out in the Section 锟斤拷Corporate information and definitions锟斤拷 of this report.

In 2021, the Company held 1 shareholders锟斤拷 general meeting:

On 28 May 2021, the Company held the 2020 annual general meeting in Shanghai, at which resolutions including The Resolution in Relation to the Report the Board of Directors of China Pacific Insurance (Group) Co., Ltd. for 2020 were considered and approved (for details, please refer to the announcements published on the websites of SSE, SEHK, LSE and the Company). The shareholders attending the meeting held a total of 5,822,097,650 voting shares, accounting for 60.52% of the Company's total voting shares. All the resolutions of this meeting were passed.

The attendance of directors was as follows:

Name of directors

No. of general meetings convened

Attendance in person

Percentage of attendance (%)

Remarks

Executive Directors

Non-executive Directors

HUANG Dinan

Unable to attend the 2020 SGM for work reasons.

Unable to attend the 2020 SGM for work reasons.

Independent Non-executive Directors

LAM Tyng Yih, Elizabeth

Note: The appointment qualifications of Mr. CHEN Ran, Mr. ZHOU Donghui and Ms. LIU Xiaodan were approved by the CBIRC in January 2021. The appointment qualification of Ms. LIANG Hong was approved by the CBIRC in February 2021. The appointment qualifications of Ms. LU Qiaoling, Mr. WOO Ka Biu, Jackson and Mr. John Robert DACEY were approved by the CBIRC in March 2021.

The notification, convening, and proceeding of the general meetings and the procedures followed for voting were in compliance with the Company Law of the PRC, the Articles of Association and applicable regulations.

The SGM has set up an effective communication channel with the shareholders so that their voices can be heard and their advice heeded, ensuring shareholders锟斤拷 rights to information,

participation and voting in respect of any significant issues of the Company. This created a positive atmosphere for the shareholders to take part in the decision-making process of the Company and exercise their rights equally.

In strict compliance with regulatory rules and requirements on corporate governance and the protection of retail investors, the Company continued to improve its corporate governance and investor communication mechanisms to fulfil its responsibilities to shareholders. To better protect the interests of retail investors, we added stipulations on voting rights to select independent directors to the Articles of Association, and fully adopted measures such as online voting in shareholders锟斤拷 general meetings, and the separate vote counting and public disclosure for retail investors.

(II) Directors, board of directors and committees of the board of directors

At present, the Board consists of 15 directors. Among them, there are 2 executive directors: Mr. KONG Qingwei and Mr. FU Fan; 8 non-executive directors: Mr. HUANG Dinan, Mr. WANG Tayu, Mr. WU Junhao, Mr. CHEN Ran, Mr. ZHOU Donghui, Ms. LIANG Hong, Ms. LU Qiaoling, and Mr. John Robert DACEY; 5 independent non-executive directors: Ms. LIU Xiaodan, Mr. CHEN Jizhong, Ms. LAM Tyng Yih, Elizabeth, Mr. WOO Ka Biu, Jackson, and Mr. JIANG Xuping. The number of independent non-executive directors on the Board exceeds one-third of the number of all directors. The number of directors and composition of the Board comply with applicable regulatory requirements as well as requirements of the Articles of Association of the Company.

Under the Articles of Association, the board of directors shall be accountable to the SGM and exercise, among others, the following powers: to convene SGMs, implement their resolutions, determine the business and operation plans and investment plans of the Company, formulate annual financial budget and final accounting plans, formulate profit distribution and loss compensation plans, formulate the proposals for increases or decreases in the registered share capital and issue and listing of other securities of the Company, appointment or dismissal of president, appointment or dismissal of board secretary based on chairman锟斤拷s nomination, appointment or dismissal of chief internal auditor and head of audit based on chairman or Audit Committee锟斤拷s nomination, appointment, dismissal and remuneration of vice president, chief actuary, chief legal councillor, chief risk officer, chief technology officer, chief investment officer, CFO, chief compliance officer and other senior executives based on president锟斤拷s nomination and develop the basic policies and systems of the Company.

So far as the Company is aware, no financial, business, family or other material/relevant relationship exists among its board members. In particular, there are none between chairman and president. Currently, Mr. KONG Qingwei serves as chairman of the Board, and Mr. FU Fan serves as president of the Company. The chairman is responsible for presiding over the general meeting of shareholders and the board of directors and performing other duties as delegated by the board of directors, while the president is responsible to the board of directors, and preside over the management of the company. The division of responsibilities between the chairman and president of the Company is stated in the Articles of Association.

1. Attendance of board meetings

In 2021, the Board held 6 meetings. All directors duly performed their duties and attended the meetings in person or by proxy. They made informed decisions to safeguard the interests of the Company and their shareholders as a whole. The attendance of directors is as follows:

Names of directors

No. of board meetings convened

Attendance in person

Attendance by proxy

Absence

Remarks

Executive Director

KONG Qingwei

Unable to attend the 12th session of the 9th Board of Directors for other business engagement and Director HUANG Dinan was appointed to attend and vote at the meeting on his behalf.

Fu Fan

Non-executive Directors

HUANG Dinan

Unable to attend the 13th session of the 9th Board of Directors for other business engagement and Director WU Junhao was appointed to attend and vote at the meeting on his behalf.

WANG Tayu

Unable to attend the 14th session of the 9th Board of Directors for other business engagement and Director FU Fan was appointed to attend and vote at the meeting on his behalf.

WU Junhao

CHEN Ran

Unable to attend the 13th session of the 9th Board of Directors for other business engagement and Director ZHOU Donghui was appointed to attend and vote at the meeting on his behalf.

ZHOU Donghui

Unable to attend the 10th session of the 9th Board of Directors for other business engagement and Chairman KONG Qingwei was appointed to attend and vote at the meeting on his behalf.

LIANG Hong

LU Qiaoling

Unable to attend the 13th session of the 9th Board of Directors for other business engagement and Chairman KONG Qingwei was appointed to attend and vote at the meeting on her behalf.

John Robert Dacey

Unable to attend the 11th session of the 9th Board of Directors for other business engagement and Chairman KONG Qingwei was appointed to attend and vote at the meeting on his behalf.

Independent Non-executive Directors

LIU Xiaodan

Unable to attend the 11th session of the 9th Board of Directors for other business engagement and Director CHEN Jizhong was appointed to attend and vote at the meeting on her behalf.

CHEN Jizhong

LAM Tyng Yih, Elizabeth

WOO Ka Biu, Jackson

JIANG Xuping

2. Board meetings and resolutions

The Board held 6 meetings in 2021 (for details please refer to the announcements published on the websites of SSE, SEHK and the Company):

(1) On 26 March 2021, the Company held the 9th session of the 9th Board of Directors in Shanghai, at which resolutions including The Resolution in Relation to the Report the Board of Directors of China Pacific Insurance (Group) Co., Ltd. for 2020 were considered and approved.

(2) On 28 April 2021, the Company held the 10th session of the 9th Board of Directors in Shanghai, at which resolutions including The Resolution on the First Quarter Report for 2021 of China Pacific Insurance (Group) Co., Ltd. were considered and approved.

(3) On 27 August 2021, the Company held the 11th session of the 9th Board of Directors in Shanghai, at which The Resolution on the 2021 Interim Report of China Pacific Insurance (Group) Co., Ltd. was considered and approved.

(4) On 29 October 2021, the Company held the 12th session of the 9th Board of Directors in Shanghai, at which resolutions including The Resolution on the Third Quarter Report for 2021 of China Pacific Insurance (Group) Co., Ltd. were considered and approved.

(5) On 24 November 2021, the Company held the 13th session of the 9th Board of Directors in Shanghai, at which resolutions including The Resolution on the Capital Injection of China Pacific Insurance (Group) Co., Ltd. to Pacific Health Insurance Co., Ltd. and Major Related Transactions were considered and approved.

(6) On 29 December 2021, the Company held the 14th session of the 9th Board of Directors in Shanghai, at which resolutions including The Resolution on the 2021 Recovery Plan Report and the 2021 Disposal Plan Recommendation Report of China Pacific Insurance (Group) Co., Ltd. were considered and approved.

3. Implementation of the resolutions of the SGM by the board of directors

In 2021, all the Company锟斤拷s board members fully implemented the resolutions passed by the SGM including those on profit distribution plan for 2020, and the engagement of auditors for 2021, accomplishing all the tasks delegated and assigned by the SGM with due diligence and in compliance with relevant laws and regulations and the provisions under the Articles of Association.

The Company distributed a cash dividend of RMB 1.20 per share (including tax) and a special 30th anniversary cash dividend of RMB 0.10 per share (including tax) in accordance with the Resolution on Profit Distribution Plan for the year 2020 approved at the 2020 SGM. The implementation of this distribution plan was completed in June 2021.

4. Corporate governance functions of the board of directors

The board of directors is responsible for determining the policy for the corporate governance of the Company and performing the corporate governance duties as below:

(1) To develop and review the Company锟斤拷s policies and practices on corporate governance and make recommendations;

(2) To review and monitor the training and continuous professional development of directors and senior management;

(3) To review and monitor the Company锟斤拷s policies and practices on compliance with all legal and regulatory requirements;

(4) To develop, review and monitor the code of conduct applicable to the employees and directors of the Company;

(5) To review the Company锟斤拷s compliance with Corporate Governance Code and disclosure requirements in the Corporate Governance Report; and

(6) To review and monitor the Company锟斤拷s risk management and internal control systems.

During the reporting period, the Board fulfilled the above corporate governance functions. In accordance with the regulatory requirements of the SEHK and taking into consideration events such as the Company锟斤拷s GDR issuance and registered capital changes, the Company revised relevant documents including the Articles of Association and the Rules of Procedures for Shareholders锟斤拷 Meeting, changed the former Strategic and Investment Decision-Making Committee under the Board to the Strategic and Investment Decision-Making & ESG Committee, adjusted the Company's registered capital and share structure, etc., and added information on the attendance of GDR shareholders at the SGM. We also formulated the Measures for the Performance Evaluation and Accountability of Directors and Supervisors as per the Measures for the Performance Evaluation of Directors and Supervisors of Banking and Insurance Institutions (Trial) issued by the China Banking and Insurance Regulatory Commission.

The Board has completed the annual review of the effectiveness of the Company's risk management and internal control systems for the year ended 31 December, 2021 (including those of the Company锟斤拷s key subsidiaries), and continuously oversees the issuers锟斤拷 risk management and internal control systems, including financial monitoring, operational monitoring and compliance monitoring. In this regard, the board of directors has obtained confirmation from the management on the effectiveness and completeness of the Company锟斤拷s risk management and internal control systems and procedures. (For details of the risk management & internal control and inside information control of the Company, please refer to the corresponding sections of this chapter.)

The Board had reviewed the Company锟斤拷s risk management and internal control systems, and considered them to be effective and sufficient.

5. Performance of duties by the special committees under the board of directors

In 2021, the Company changed the former Strategic and Investment Decision-Making Committee under its Board to the Strategic and Investment Decision-Making & ESG Committee to help the Board with ESG related work. The Strategic and Investment Decision-Making & ESG Committee emulates best practices of ESG in China and overseas and incorporates philosophies of sustainable development into business operation to boost high-quality development in environment, society and governance. At the end of the reporting period, the Board had 5 special committees, namely, the Strategic and Investment Decision-Making & ESG Committee, the Audit Committee, the Nomination and Remuneration Committee, the Risk Management and Related Party Transactions Control Committee, and the Technological Innovation and Consumer Rights Protection Committee, which conduct in-depth studies on specific issues and submit their recommendations to the Board for consideration.

(1) Performance of duties by the Strategic and Investment Decision-Making & ESG Committee of the Board of Directors

The primary duties of the Strategic and Investment Decision-Making & ESG Committee are, among others, to study and advise on the long-term development strategies of the Company and its subsidiaries; review the investment decision-making procedures and delegation mechanism as well as the management of insurance funds; study and advise on material investments decisions or proposals, material capital management projects and asset management projects; identify the Company's ESG risks, study and plan the Company's ESG strategy, set out the Company's ESG goals, plans, management policies, performance appraisals, etc., and supervise their implementation.

In 2021, the Strategic and Investment Decision-Making & ESG Committee held 7 meetings as follows:

Time of the meeting

Name of the meeting

Reports heard or resolutions reviewed

1 February 2021

The 1st meeting of the Strategic and Investment Decision-Making Committee of the 9th Board of Directors in 2021

Heard the Report on the 2021 Annual Financial Budget Plan of China Pacific Insurance (Group) Co., Ltd.

25 March 2021

The 2nd meeting of the Strategic and Investment Decision-Making Committee of the 9th Board of Directors in 2021

Reviewed resolutions including The Resolution on the 2020 Annual Profit Distribution Plan of China Pacific Insurance (Group) Co., Ltd.

23 April 2021

The 3rd meeting of the Strategic and Investment Decision-Making & ESG Committee of the 9th Board of Directors in 2021

Reviewed resolutions including The Resolution on the 2021-2023 Development Plan for Subsidiaries

27 April 2021

The 4th meeting of the Strategic and Investment Decision-Making & ESG Committee of the 9th Board of Directors in 2021

Reviewed resolutions including The Resolution on the 2021-2023 Capital Plan of China Pacific Insurance (Group) Co., Ltd.

28 October 2021

The 5th meeting of the Strategic and Investment Decision-Making & ESG Committee of the 9th Board of Directors in 2021

Reviewed resolutions including The Resolution on The Investment in CPIC Capital by China Pacific Insurance (Group) Co., Ltd.- Xinyi Yihao Private Equity Fund.

24 November 2021

The 6th meeting of the Strategic and Investment Decision-Making & ESG Committee of the 9th Board of Directors in 2021

Reviewed resolutions including The Resolution on the Capital Injection of China Pacific Insurance (Group) Co., Ltd. to Pacific Health Insurance Co., Ltd. and Major Related Transactions

28 December 2021

The 7th meeting of the Strategic and Investment Decision-Making & ESG Committee of the 9th Board of Directors in 2021

Reviewed resolutions including The Resolution on the Capital Injection of CPIC Life to Pacific Health Insurance Co., Ltd.

Note: On March 25, 2021, the 2nd meeting of the Strategy and Investment Decision-Making Committee of the 9th Board of Directors reviewed and passed a resolution to change the former 锟斤拷Strategic and Investment Decision-Making Committee锟斤拷 of the Board of Directors to the 锟斤拷Strategic and Investment Decision-Making & ESG Committee锟斤拷.

The composition and attendance of the members of the Strategic and Investment Decision-Making & ESG Committee are as follows:

Name of members

Position

No. of committee meetings convened

Attendance in person

Attendance by proxy

Absence

Incumbent members

KONG Qingwei (chairman)

Chairman and executive director

HUANG Dinan

Non-executive director

LIANG Hong

Non-executive director

LU Qiaoling

Non-executive director

LIU Xiaodan

Independent non-executive director

Outgoing members

CHEN Jizhong

Independent non-executive director

Note: On 26 March 2021, at the 9th session of the Board, Ms. LIANG Hong, Ms. LU Qiaoling, and Ms. LIU Xiaodan were elected as members of the Strategic and Investment Decision-Making & ESG Committee under the Board, and Mr. CHEN Jizhong was no longer a member of the committee.

(2) Performance of duties by the Audit Committee of the Board of Directors

The primary duties of the Audit Committee are, among other things, to nominate external auditors; review the Company锟斤拷s basic internal audit systems and to make recommendations to the board; approve the Company锟斤拷s annual audit plan and budget; supervise the independence of the Company锟斤拷s internal audit department; review the financial information of the Company and its disclosure; evaluate the completeness and effectiveness of the Company锟斤拷s internal control system on a regular basis; hear the reports and assess the performance of the Internal Audit Responsible Person regularly and make recommendations to the board of directors; and review accounting policies and practices of the Company and its subsidiaries.

The primary duties of the Audit Committee are, among other things, to evaluate the completeness and effectiveness of the Company锟斤拷s internal control system on a regular basis to ensure the effective operation of the internal control system. The Audit Committee hears the annual internal control assessment report from the chief internal auditor every year, obtains assurance from the management on the effectiveness and completeness of the Company's internal control system, and reviews the effectiveness of the internal control system. Meanwhile, members of the Audit Committee, from time to time, communicate with the chief Internal Auditor and other senior managers on the internal control situation, and through participation in relevant meetings of the audit centre, keep close contact with the audit centre, to continuously monitor the completeness and effectiveness of the internal control system.

In 2021, the Audit Committee held 10 meetings as follows:

Time of the meeting

Name of the meeting

Reports heard or resolutions reviewed

29 January 2021

The 1st meeting of the Audit Committee of the 9h Board of Directors and Independent Directors on the Preparation of the 2020 Annual Report

Made a preliminary review of the Company's unaudited 2020 Financial Statements

5 March 2021

The 2nd meeting of the Audit Committee of the 9h Board of Directors and Independent Directors on the Preparation of the 2020 Annual Report

Communicated with the external auditors of the Company on the preliminary audit opinions of the annual audit

5 March 2021

The 1st meeting of the Audit Committee of the 9th Board of Directors in 2021

Reviewed resolutions including The Resolution on the 2020 Internal Audit Work Summary Report of China Pacific Insurance (Group) Co., Ltd.

26 March 2021

The 2nd meeting of the Audit Committee of the 9th Board of Directors in 2021

Reviewed resolutions including The Resolution on the Changes in Accounting Estimates for 2020 of China Pacific Insurance (Group) Co., Ltd.

23 April 2021

The 3rd meeting of the Audit Committee of the 9th Board of Directors in 2021

Reviewed resolutions including The Resolution on the First Quarter Report for 2021 of China Pacific Insurance (Group) Co., Ltd.

27 July 2021

The 4th meeting of the Audit Committee of the 9th Board of Directors in 2021

Heard The Report on the Work Arrangement for the Selection and Engagement of Auditing Firm for the 2022 Annual Audit of China Pacific Insurance (Group) Co., Ltd.

26 August 2021

The 5th meeting of the Audit Committee of the 9th Board of Directors in 2021

Reviewed resolutions including The Resolution relating to the Changes in Accounting Estimates in the First Half of 2021 of China Pacific Insurance (Group) Co., Ltd.

30 September 2021

The 6th meeting of the Audit Committee of the 9th Board of Directors in 2021

Heard The Report on the Selection and Engagement of Auditing Firm for the 2022 Annual Audit of China Pacific Insurance (Group) Co., Ltd.

29 October 2021

The 7th meeting of the Audit Committee of the 9th Board of Directors in 2021

Reviewed resolutions including The Resolution of China Pacific Insurance (Group) Co., Ltd. on Adopting China锟斤拷s Accounting Standards for Enterprises to Prepare Financial Statements.

28 December 2021

The 8th meeting of the Audit Committee of the 9th Board of Directors in 2021

Reviewed resolutions including The Resolution on the Exit Audit Report on Former Board Secretary MA Xin of China Pacific Insurance (Group) Co., Ltd.

The composition and the attendance of the members of the Audit Committee are as follows:

Name of members

Position

No. of Committee meetings convened

Attendance in person

Attendance by proxy

Absence

Incumbent members

LAM Tyng Yih, Elizabeth

(Chairman)

Independent Non-executive Director

WU Junhao

Non-executive Director

JIANG Xuping

Independent Non-executive Director

ZHOU Donghui

Non-executive Director

WOO Ka Biu, Jackson

Independent Non-executive Director

Note: On 26 March 2021, at the 9th session of the Board, Mr. ZHOU Donghui and Mr. WOO Ka Biu, Jackson were elected as members of the Audit Committee of the Board.

The Audit Committee discussed with the external auditors and agreed on the schedule for the auditing of the Company锟斤拷s financial statements based on the plan for the preparation of the Company锟斤拷s annual report. It held a meeting to review the financial statements prepared by the Company and issued its opinions in writing prior to the commencement of the audit by the external auditors, and maintained adequate and timely communication with the auditors during the process. The committee also convened to review the financial statements of the Company after the external auditors issued their preliminary opinions, and issued its opinions in writing. At its 2nd meeting of the year, it formed a resolution on the submission of the Company锟斤拷s annual report to the board of directors for approval.

In 2021, the Audit Committee submitted a report on the overview of auditing by external auditors for the year 2020 to the Board of Directors. In this report, it expressed satisfaction with the overall performance of the auditors. At its 1st meeting in 2021, the Committee formed a resolution to submit a resolution regarding the engagement of external auditors to the Board of Directors for consideration and approval.

Moreover, according to the requirements on engaging accounting firms issued by the Ministry of Finance, an accounting firm can continuously provide audit services to a state-owned financial enterprise for a maximum of 8 consecutive years. After the completion of audit work for the year 2021, the Company had engaged PwC for 8 consecutive years, and had to change auditors. The Audit Committee has gained a full understanding of and reviewed the professional competence, investor protection capability, integrity and independence of Ernst & Young Hua Ming LLP, and believes that it possesses rich experience in the securities industry, sound professional ethics and practice, enough qualifications and capabilities to engage in financial audit and internal control audit, thus, can meet the requirements for providing audit services for the Company. The committee proposed to the Board to appoint it as the auditor for the Company锟斤拷s financial statements and internal control audit of 2022.

The committee pays close attention to the internal control of the Company and objectively assesses the Company's financial position and internal control procedures through two independent communications with external auditors each year. It also provides guidance in relation to the Company锟斤拷s internal audit and takes part in the appraisal and evaluation of the annual performance of the internal audit department.

(3) Performance of duties by the Nomination and Remuneration Committee of the Board of Directors

The primary duties of the Nomination and Remuneration Committee are, among others, to provide recommendations to the board with respect to the remuneration and performance management policy and structures for directors and senior management; conduct examination and evaluation of the performance of duties and annual performance of the directors and the senior management; review the selection and appointment system for the directors and senior management and provide recommendations to the board; evaluate candidates of senior management positions nominated by the president; and review the policy on diversity of board members.

In the Articles of Association, the Company has clarified the nomination policy for board directors: the board of directors of the Company, the Nomination and Remuneration Committee, and the shareholders who hold more than 3% of the Company's shares individually or collectively are entitled to nominating candidates for directors. Among them, the independent directors may be nominated by the Nomination and Remuneration Committee, the board of supervisors, and shareholders who hold more than 1% of the Company's shares individually or collectively, or by other means as determined by CBIRC. According to the Work Rules of the Nomination and Remuneration Committee, the procedures for nominating board directors mainly include: the Nomination and Remuneration Committee consolidates a list of candidates for directors, collects detailed information including their occupation, education, title, work experience and part-time jobs and creates written documents based on that; the committee solicits the nominee锟斤拷s consent to the nomination, convenes a committee meeting, and conducts qualification review of relevant candidates based on director锟斤拷s appointment requirements; the committee submits its appointment recommendations and other relevant materials to the Board of Directors, and follows up on it as per the Board锟斤拷s resolutions and feedback. The Company has complied with the above policy during the nomination process for directors.

The Company also focuses on the diversity of board members. The Company believes that diversity of board members has brought a broad vision and rich and high-level professional experience to the Company, which is conducive to promoting decision-making and improving corporate governance. For that, the Company has incorporated the diversity policy into the terms of reference of the Nomination and Remuneration Committee. In assessing the Board composition, the Nomination and Remuneration Committee and the Board would take into account various aspects, including but not limited to gender, age, cultural and educational background, professional qualifications, skills, knowledge and industry and regional experience. The Nomination and Remuneration Committee would discuss and agree on measurable objectives for achieving diversity on the Board, and where necessary recommend them to the Board for adoption.

The Company has complied with requirement set out in the Corporate Governance Code regarding the diversity of board members and is focused on building a professional, diversified and balanced high-quality Board of Directors team to further improve the Board's decision-making capabilities in different professional fields. At present, the Company's board of directors is diversified in terms of gender, region, and professional background: there are 11 male directors and 4 female directors; there are 12 directors from mainland China and 3 from Hong Kong or overseas; there are 3 directors with accounting background, 1 with legal background, and 11 with professional backgrounds in finance, management, and new technologies, etc.

In 2021, the Nomination and Remuneration Committee held 5 meetings as follows:

Time of the meeting

Name of the meeting

Reports heard or resolutions reviewed

25 March 2021

The 1^st meeting of the Nomination and Remuneration Committee of the 9^th Board of Directors in 2021

Reviewed resolutions including The Resolution on the 2020 Annual Performance Appraisal Results of China Pacific Insurance (Group) Co., Ltd.

27 April 2021

The 2^nd meeting of the Nomination and Remuneration Committee of the 9^th Board of Directors in 2021

Reviewed The Resolution on the Appointment and Renewal of Joint Company Secretary of China Pacific Insurance (Group) Co., Ltd.

26 August 2021

The 3^rdmeeting of the Nomination and Remuneration Committee of the 9^th Board of Directors in 2021

Reviewed The Resolution on the Appointment of Mr. CHEN Wei as Head of Administration of China Pacific Insurance (Group) Co., Ltd.

24 November 2021

The 4^th meeting of the Nomination and Remuneration Committee of the 9^th Board of Directors in 2021

Reviewed resolutions including The Resolution on the Implementation plan for Further Deepening the Reform of the Remuneration System for Professional Managers of China Pacific Insurance (Group) Co., Ltd.

28 December 2021

The 5^th meeting of the Nomination and Remuneration Committee of the 9^th Board of Directors in 2021

Heard The Report on the 2021 Budget Adjustment Plan and Performance Appraisal Form of China Pacific Insurance (Group) Co., Ltd.

The composition and attendance of the members of the Nomination and Remuneration Committee are as follows:

Name of members

Position

No. of committee meetings convened

Attendance in person

Attendance by proxy

Absence

Incumbent members

LIU Xiaodan (Chairman)

Independent non-executive director

JIANG Xuping

Independent non-executive director

CHEN Jizhong

Independent non-executive director

John Robert Dacey

Non-executive Director

Outgoing members

LAM Tyng Yih, Elizabeth

Independent Non-executive Director

Note: On 26 March 2021, at the 9th session of the 9th Board of Directors, Ms. LIU Xiaodan was elected as Chairman of the Nomination and Remuneration Committee, and Mr. John Robert Dacey was elected as a member of the committee. Ms. LAM Tyng Yih, Elizabeth ceased to serve as a member of the committee.

(4) Performance of duties by the Risk Management and Related Party Transactions Control Committee of the Board of Directors

The primary duties of the Risk Management and Related Party Transactions Control Committee are, among others, to make recommendations to the board with respect to the overall objective, basic policies and work rules of risk management; make recommendations to the board of directors with respect to the risk evaluation for major decisions and solutions for significant risks; review the management system for insurance funds management; advise the board of directors on the SAA plan, annual investment plan and investment guidelines and their adjustments; make recommendations to the board of directors with respect to the coordination mechanisms for product design, sales and investment and their performance; discuss risk management system with the management to ensure that effective risk management system is established; conduct research on important findings of risk management issues; conduct solvency management; conduct risk management for subsidiaries; identify and maintain relations with related parties; manage, review, approve related party transactions; conduct risk control of related party transactions; verify material related party transactions; and carry out regular filing of general related party transactions, etc.

The Company's Risk Management and Related Party Transactions Control Committee hears a quarterly risk assessment report by the chief risk officer each quarter, obtains assurance at the time of annual reporting from the management on the effectiveness and completeness of the Company's risk management system, and reviews the effectiveness of the risk management system. Meanwhile, the committee, from time to time, communicates with the chief risk officer and other senior managers on the major risks of the Company and its subsidiaries to monitor the effectiveness of the risk management system. In addition, the Company has established a mechanism for reporting to the Board's Risk Management and Related Party Transactions Control Committee major risk events such as solvency early warning. In case of significant risk, the Risk Management and Related Party Transactions Control Committee of the Board will be notified in a timely manner.

In 2021, the Risk Management and Related Party Transactions Control Committee held 6 meetings as follows:

Time of the meeting

Name of the meeting

Reports heard or resolutions reviewed

25 March 2021

The 1^st Meeting of the Risk Management and Related Party Transactions Control Committee of the 9^th Board of Directors in 2021

Reviewed resolutions including The Resolution on the 2020 Solvency Report of China Pacific Insurance (Group) Co., Ltd.

23 April 2021

The 2^nd Meeting of the Risk Management and Related Party Transactions Control Committee of the 9^th Board of Directors in 2021

Reviewed resolutions including The Resolution on the 2020 Risk Appetite System Assessment and Update Report of China Pacific Insurance (Group) Co., Ltd.

23 August 2021

The 3^rd Meeting of the Risk Management and Related Party Transactions Control Committee of the 9^th Board of Directors in 2021

Reviewed resolutions including The Resolution on the Mistake Correction and Accountability Policy of China Pacific Insurance (Group) Co., Ltd.

27 October 2021

The 4^th Meeting of the Risk Management and Related Party Transactions Control Committee of the 9^th Board of Directors in 2021

Heard reports including The Compliance Report for the Third Quarter of 2021 of China Pacific Insurance (Group) Co., Ltd.

24 November 2021

The 5^th Meeting of the Risk Management and Related Party Transactions Control Committee of the 9^th Board of Directors in 2021

Reviewed resolutions including The Resolution on the Reinsurance Strategy of China Pacific Insurance (Group) Co., Ltd.

28 December 2021

The 6^th Meeting of the Risk Management and Related Party Transactions Control Committee of the 9^th Board of Directors in 2021

Reviewed resolutions including The Resolution on the 2021 Fraud Risk Management Work Report of China Pacific Insurance (Group) Co., Ltd.

The composition of the Risk Management and Related Party Transactions Control Committee and attendance of its members are as follows:

Name of members

Position

No. of committee meetings convened

Attendance in person

Attendance by proxy

Absence

Incumbent members

CHEN Jizhong (chairman)

Independent Non-executive Director

FU Fan

Executive Director

WANG Tayu

Non-executive Director

LAM Tyng Yih, Elizabeth

Independent Non-executive Director

WOO Ka Biu, Jackson

Independent Non-executive Director

Outgoing members

JIANG Xuping

Independent Non-executive Director

Note: On 26 March 2021, Mr. WOO Ka Biu, Jackson was elected as a member of the Risk Management and Related Party Transactions Control Committee of the Board of Directors at the 9th session of the 9th Board of Directors, and Mr. JIANG Xuping was no longer member of the committee.

(5) Performance of duties by the Technological Innovation and Consumer Rights Protection Committee of the Board of Directors

The primary duties of the Technological Innovation and Consumer Rights Protection Committee are, among others, to review the Company锟斤拷s technological innovation and data management strategy and plans, and overall work objectives; urge the Company锟斤拷s management to establish an effective technological innovation operation system; guide and supervise the establishment and improvement of the consumer rights protection work management system; carry out research on major issues in the field of technological innovation and consumer rights protection.

In 2021, the committee held 3 meetings as follows:

Time of the meeting

Name of the meeting

Reports heard or resolutions reviewed

25 March2021

The 1^st meeting of the Technological Innovation and Consumer Rights Protection Committee of the 9^th Board of Directors inn 2021

Heard reports including The 2020 Recap Report on the Implementation of the Science and Technology Plan of China Pacific Insurance (Group) Co., Ltd.

26 August 2021

The 2^nd meeting of the Technological Innovation and Consumer Rights Protection Committee of the 9^th Board of Directors inn 2021

Reviewed resolutions including The Resolution on the Insurance Consumer Rights Protection Work Report for the First Half of 2021 of China Pacific Insurance (Group) Co., Ltd.

28 December 2021

The 3^rd meeting of the Technological Innovation and Consumer Rights Protection Committee of the 9^th Board of Directors inn 2021

Reviewed resolutions including The Resolution on the Consumer Rights Protection Management Policy of China Pacific Insurance (Group) Co., Ltd.

The composition of the committee and attendance of its members are as follows:

Name of members

Position

No. of committee meetings convened

Attendance in person

Attendance by proxy

Absence

JIANG Xuping (Chairman)

Independent Non-executive Director

FU Fan

Executive Director

WU Junhao

Non-executive Director

CHEN Ran

Non-executive Director

LIANG Hong

Non-executive Director

Note: On 26 March 2021, Mr. CHEN Ran and Ms. LIANG Hong were elected as members of the Technological Innovation and Consumer Rights Protection Committee of the Board of Directors at the 9th session of the 9th Board of Directors.

(III) Supervisors and the Board of Supervisors

Currently, the Company has 4 supervisors, including 2 shareholder representative supervisors (Mr. ZHU Yonghong and Mr. LU Ning) and 2 employee representative supervisors (Mr. JI Zhengrong and Mr. GU Qiang). Their biographies are set out in the section 锟斤拷Directors, supervisors, senior management and employees锟斤拷 of this report.

Under the Articles of Association, the board of supervisors is vested by law to exercise the following rights and powers: examine the finances of the Company; monitor the behaviors of directors, president, vice presidents and other senior management during their performance of duties; review the financial information including financial reports, operation reports and profit distribution plans to be submitted to the SGM; propose to convene extraordinary session of the SGM and propose resolutions to it; and conduct investigation when there is any major abnormality in the Company锟斤拷s operation.

1. Attendance of supervisors

In 2021, the board of supervisors held 5 meetings. Their attendance is as follows:

Supervisors

No. of meetings convened

Attendance in person

Attendance by proxy

Absence

Remarks

ZHU Yonghong

Due to other business engagements, ZHU Yonghong did not attend the 8th session of the 9th Board of Supervisors and appointed in writing Director JI Zhengrong to attend the meeting and vote on his behalf.

JI Zhengrong

GU Qiang

LU Ning

2. Meetings of the Board of Supervisors and resolutions

The board of supervisors held 5 meetings in 2021 (please refer to announcements published on the websites of SSE, SEHK and the Company for details).

(1) On 26 March 2021, the Company held the 5th session of the 9th Board of Supervisors in Shanghai, at which resolutions including The Resolution in Relation to the Report of the Board of Supervisors for 2020 of China Pacific Insurance (Group) Co., Ltd. were considered and approved.

(2) On 28 April 2021, the Company held the 6th session of the 9th Board of Supervisors in Shanghai, at which resolutions including The Resolution in Relation to the First Quarter Report for 2021 of China Pacific Insurance (Group) Co., Ltd. were considered and approved.

(3) On 27 August 2021, the Company held the 7th session of the 9th Board of Supervisors in Shanghai, at which resolutions including The Resolution on the 2021 Interim Report of China Pacific Insurance (Group) Co., Ltd. were considered and approved.

(4) On 29 October 2021, the Company held the 8th session of the 9th Board of Supervisors in Shanghai, at which resolutions including The Resolution in Relation to the Third Quarter Report for 2021 of China Pacific Insurance (Group) Co., Ltd. were considered and approved.

(5) On 29 December 2021, the Company held the 9th session of the 9th Board of Supervisors by way of written correspondence, at which resolutions including The Resolution in Relation to the Measures on the Performance Evaluation and Accountability of Directors and Supervisors of China Pacific Insurance (Group) Co., Ltd. were considered and approved.

(IV) Discussions held and research made by directors and supervisors

In 2021, given the changes in the internal and external business environment, regulatory policies, customer behaviour and new technology, the Company锟斤拷s Board of Directors and Board of Supervisors continued to adhere to long-termism and the goal of becoming 锟斤拷a leader in the healthy and stable development of the insurance industry锟斤拷 with 锟斤拷best customer experience, business quality, and risk control锟斤拷, thus giving full play to their role in strategic decision-making and supervision. To boost high-quality development, we continued to focus on the insurance business and long-term talent incentives, investment management, platform-based health-related services, technology innovation and corporate governance modernization. The two boards familiarized themselves with and discussed the Company锟斤拷s operating performance and key issues by convening board meetings, listening to special reports to the boards and holding seminars, so as to strengthen the guidance for operation, accelerate the shift of growth drivers and boost service capabilities. In 2021, the Board of Directors continued to strengthen its strategic guidance and help the management improve performance. On the one hand, it focused on value creation, long-term development, kept a close eye on the business goals for the year, and promoted the implementation of major business decisions to ensure the stability of our performance and market position; on the other hand, it pushed forward the Company锟斤拷s transformation by focusing on new drivers of value growth, 锟斤拷CPIC Service锟斤拷 brand building, development of the Group锟斤拷s centralised investment and research platform, talent mechanism innovation, technology marketization, and health-related business development.

In 2021, the Company held two seminars for directors and supervisors, at which they were briefed on the Company锟斤拷s health care business development, new regulatory rules from the C-ROSS II, and the Company锟斤拷s ESG-related strategic planning, etc., and discussed solutions to key issues in the Company锟斤拷s operation based on our current situation and future plans. The directors and supervisors endorsed the Company锟斤拷s continuous progress and practices in system and mechanism reform, product and service innovation, adaptation to new regulatory policies, fulfilling social responsibilities, and serving national strategies.

(V) Training for directors and supervisor

To improve their performance of duties, professional skills and knowledge of insurance policies and regulations, the directors and supervisors of the Company participated in various online training and lectures held by the regulators as well as by the Company. Due to the pandemic, most of the external training sessions this year were held online. Ms. LAM Tyng Yih, Elizabeth, Mr. CHEN Jizhong and Mr. JIANG Xuping, all Independent Directors, attended the follow-up training of the second independent director qualification training session organized by the SSE in 2021; all directors and supervisors of the Company participated in online training sessions held by the SSE on subjects such as the Code of Corporate Governance for Banking and Insurance Institutions, the responsibilities and legal positioning of directors, supervisors and senior management in insurance institutions, the identification and prevention of corporate governance risks in insurance institutions, and the performance risks and self-protection of directors, supervisors and senior management in insurance institutions. Moreover, the Company held special training for all its directors and supervisors in response to new regulations issued by the CSRC, CBIRC, SSE, and SEHK, such as the Interim Measures on the Performance Evaluation of Directors and Supervisors of Banking and Insurance Institutions, and the first annual survey report of HK锟斤拷s Financial Reporting Council, etc. Directors and supervisors also carefully studied the latest laws, regulations and regulatory rules released from time to time by the regulators through other means. All of that helped with their performance of duties.

The Company also encouraged all its directors and supervisors to attend training, at the cost of the Company. Since 2012, all the directors have been required to provide their records of training to the Company.

(VI) Auditors锟斤拷 remuneration

Information on auditors锟斤拷 remuneration is set out in the 锟斤拷Report of the Board of Directors and significant events锟斤拷.

(VII) Investor relations

The Company has formulated and implemented relevant regulations such as the Shareholder Communication Regulations and the Investor Relations Management Measures. While complying with the above-mentioned regulations, the investor relations (IR) programme of the Company focuses on market value management and seeks to establish a comprehensive and investor-oriented platform with diversified channels of effective communication to improve the reach and effectiveness of investor communication.

This year, the Company held its 2021 Interim/2020 Annual Results Announcements, 2021 Q3 Results Release, and global road show by means such as live video broadcast and conference call. In 2021, the Company hosted over 60+ conference calls and visits from analysts and investors, participated in 20 global investor strategy meetings, forums and summits, and timely and effectively communicated the Company锟斤拷s business performance and strategies to the capital market; continued to compile monthly Investor Newsletters in both Chinese and English and publish them in the investor relations column on the Company's official website with a total of 13 issues published in 2021; and also employed other means of communications with investors/analysts including official WeChat account, WeChat version of regular reports, etc. Those initiatives were well received by the capital market.

Actively responding to the call of the securities regulators to strengthen the protection of retail investors, the Company issued announcements and publicly solicits questions from investors before holding such results releases, and answered those questions at the conference. Meanwhile, it provides retail investors with video links to participate in those events and they can raise questions through the live broadcast platform and get a reply within the same day. Moreover, the Company assigned personnel for the investor relations hotline to promptly respond to investor questions on the E-communication platform of the SSE, objectively and comprehensively conveying information to the market to help investors correctly understand the Company's investment value.

Moreover, fully using the two-way communication role of investor relations, the Company actively transmits the voice of the capital market inward by forms of capital market flash reports and special reports to provide a basis for management decision-making.

(VIII) Information disclosure and inside information management

Regarding information disclosure, the Company attaches great importance to the regulatory rules of the places where its securities are listed, strictly abides by the principle of 锟斤拷truthfulness, accuracy, completeness, timeliness and fairness锟斤拷. During the reporting period, regular reports and a number of provisional announcements were released in strict accordance with regulatory requirements; and as an insurance company simultaneously listed in Shanghai, Hong Kong and London, the Company, focusing on investor锟斤拷s needs and fairly treating all types of investors, continued to expand the scope of information disclosure, benchmarked with industry-leading domestic and international insurers and adopted innovative ways of disclosing non-financial information to fully, concisely, and effectively communicate its major business development strategies and results and its corporate social responsibility efforts and results to investors and other stakeholders in a comprehensive manner, greatly improving the relevance and effectiveness of information disclosure. During the reporting period, to ensure the efficiency and standardization of inside information disclosure management within the Group, the Company continuously improved the Group-wide compliance management. It also paid close attention to new industry policies and regulatory developments, and based on the latest corporate governance and information disclosure requirements for the insurance industry, enriched the information disclosure content. During the reporting period, the Company effectively performed its information disclosure obligations with zero punishment from the regulators and zero major error or omission in information disclosure. The Company was rated A by SSE for its information disclosure in 8 consecutive years.

II. Performance of duties by independent non-executive directors

The Company锟斤拷s 9th Board of Directors consists of 5 independent non-executive directors comprising professionals in accounting, finance, auditing and legal affairs, and independent non-executive directors exceed one-third of all the board members, in compliance with applicable regulatory requirements and the provisions of the Articles of Association.

The Company锟斤拷s independent non-executive directors have the required expertise and experience and are able to perform their duties strictly in accordance with the requirements of applicable laws and regulations, regulatory documents, the Articles of Association and Provisions on Performance of Duties by Independent Non-executive Directors. They have provided comments and suggestions on, among other things, corporate governance, business operation, risk management and internal control. Independent non-executive directors have played a meaningful role in the Company锟斤拷s decision making process, offering an independent and impartial perspective and safeguarding the interests of the Company and of the shareholders as a whole, and in doing so, the interests of minority shareholders as well.

In 2021, all the independent non-executive directors attended meetings of the Board as scheduled. They took the initiative to better understand the operating situation of the Company, doing research, making inquiries, and obtaining necessary materials and information for decision-making. They provided independent and unqualified opinions on matters of the Company such as changes of significant accounting estimates, election of board members, appointment of senior management members, related party transactions, and remuneration policy for and the performance appraisal of senior management.

In 2021, all independent non-executive directors and the chairman held separate communication meetings in Shanghai without the participation of other directors and executives, and conducted in-depth communication on the optimization of corporate governance, assessment of professional managers, innovation of products and services, risk and compliance management, and corporate culture development, etc.

(I) Attendance of independent non-executive directors at the SGM

In 2021, the Company锟斤拷s independent non-executive directors actively attended the SGM, details of which are as follows:

Names of independent non-executive directors

No. of SGMs convened

Attendance in person

Absence

LIU Xiaodan

CHEN Jizhong

LAM Tyng Yih, Elizabeth

WOO Ka Biu, Jackson

JIANG Xuping

(II) Attendance by independent non-executive directors of board meetings

In 2021, independent non-executive directors actively attended the meetings of the Board of Directors and the attendance of each of the independent non-executive directors is as follows:

Names of independent non-executive directors

No. of board meetings convened

Attendance in person

Attendance by proxy

Absence

LIU Xiaodan

CHEN Jizhong

LAM Tyng Yih, Elizabeth

WOO Ka Biu, Jackson

JIANG Xuping

(III) Objections by the independent non-executive directors on relevant matters of the Company

No objections were raised by independent non-executive directors on relevant matters of the Company and there were no such cases where proposals by the independent non-executive directors were not adopted.

III. Independence of the Company from its controlling shareholders in asset, personnel, finance, organisation and business

The ownership structure of the Company is diversified and there is no controlling shareholder or de facto controller.

As a wholly-listed comprehensive insurance group company, the Company is fully independent in the following five aspects: assets, personnel, finance, organisation and business.

IV. Appraisal and incentive programs for the senior management

The performance management of the Company锟斤拷s senior management primarily comprises formulation of performance appraisal plan, performance tracking, appraisal of performance and application of the appraisal results. The annual performance appraisal plan will be determined by the Board based on the long-term and medium-term development strategies and the operation plan for the year. The Company will take follow-up actions on the fulfillment of various appraisal indicators regularly. At the end of the year, the Board will assess the performance based on the fulfillment of the operational objectives for the entire year. The results of appraisal are linked to the compensation for the senior management.

The Company has put in place a remuneration policy based on the position and performance of the employee and market conditions. It also adopts measures such as deferred bonus and compensation recovery and clawback mechanisms for the senior management as an incentive to create long-term value for the Company. In the event of violations of discipline or regulations or abnormal exposure of risk losses within duties, the Company will re-assess the performance remuneration of the person in question for the relevant year, and deduct, recover and stop payment of the performance remuneration for the corresponding period and deferred payment based on the severity of the consequence.

V. Risk management

Risk management is a core element of the Company锟斤拷s operation and management. The Company takes a centralized approach to risk management - set up one overarching risk management framework covering the whole Group, with one set of risk language, risk policies and important systems, core tools and indicators, and risk management information system shared across the Group to guide and supervise the Group's risk management work. While maintaining their independent risk governance and setting up necessary firewalls, each subsidiary is responsible for managing various categories of business risks in accordance with the basic goals and policies, systems and processes, methods and tools of the Group's risk management.

The Company has always maintained a high level of risk awareness to strictly guard against risks, optimized risk limit constraints and penetrating control mechanisms, and continued to improve solvency risk management to achieve the strategic goal of "developing the best risk control capabilities".

(I) Risk governance structure

The Company has established an overarching risk management framework that covers all organizations and positions in which the Board of Directors bears the ultimate responsibility, the management provides direct leadership, the risk management departments conduct specific implementation, and the relevant functional departments offer close cooperation. The board of directors of the Group and its subsidiaries is the supreme authority for the risk management of the organization, and bears ultimate responsibility for their respective risk management systems and status.

In 2021, for subsidiaries that have been approved by the regulators to do without a risk management committee under its board of directors, the Company锟斤拷s Risk Management and Related Party Transactions Control Committee of the Board of Directors performs substantive control of their risk management and provides decision-making support to their board of directors. The Committee shall obtain a comprehensive understanding of the major exposures and their management status, and make recommendations to the Board of Directors over matters such as the review of the overall objectives, risk preferences and tolerances, and policies of risk management; the review of risk management institutions and the definition of their responsibilities; the review of risk assessment reports and special risk reports to better understand the risk management status; the review of the risk assessment of major decisions and solutions for the mitigation of major risks; assessing the effectiveness of the operation of the risk management system; the review of resolutions on related party transactions; and completing other tasks assigned to it by the Board of the Company.

The Company submits annual and quarterly risk evaluation reports to the Board Risk Management and Related Party Transactions Control Committee on the Company锟斤拷s risk positions and management measures. And the annual reports will be submitted to CBIRC after being reviewed by the Board. The Company has also established a mechanism for timely reporting to the Board Risk Management Related Party Transactions Control Committee on major risk events such as solvency early warning. In 2021, the committee convened 6 meetings to review related risk matters and reports.

The Company锟斤拷s Management Committee is mandated to organize and execute the Company锟斤拷s risk management activities, appoint the Chief Risk Officer, report to the Board锟斤拷s Risk Management and Related Party Transactions Control Committee on the Company锟斤拷s risk positions and management measures quarterly. The Management Committee has under it a Working Group of Risk Management and Audit, headed by the Company's President, with the Chief Risk Officer, the compliance responsible person, and the Chief Auditor serving as deputy heads. Other members of the Working Group include senior management members of related fields, responsible persons in legal compliance, risk monitoring, internal audit and human resources, etc., as well as senior managers of the Company锟斤拷s subsidiaries in charge of risk management and compliance. The Working Group is responsible for the formulation of risk management plans, co-ordination, execution and oversight.

The Company headquarters and its major insurance or asset management subsidiaries have all set up Risk Management Departments. These departments coordinate and implement the various decisions made by the management in the field of risk management, and organize, direct and supervise other departments to execute the daily risk management tasks determined by management. Risk management departments are composed of highly-educated people with risk management, accounting, actuarial, investment or other related professional background and years of relevant work experience. The Company has developed career planning and training programs for risk management personnel to improve their professional competence and quality.

As the first line of defence for risk management, all functional departments, subsidiaries and branches have appointed responsible persons for risk management and set up corresponding positions, who are responsible for the risk management work within his/her scope of responsibility and communication with the risk management department.

(II) Risk management strategy and procedure

The Company has established scientific and effective risk management strategies based on its development strategy, organizational structure and operating characteristics. Under the constraints of reasonable risk management objectives, the Company uses appropriate risk management tools to manage insurance risk, market risk, credit risk, operational risk, strategy risk, reputational risk, liquidity risk and Group-specific risks, implement the management of the transmission and penetration of risk objectives of the Group, subsidiaries and branches, and to improve the closed-loop management mechanism.

The Company锟斤拷s key risk management procedure includes: the setting of objectives, collection of information, risk identification & assessment, risk management control, risk reporting and supervision and rectification. The Company has established an early warning system to monitor the Group's major risks. The Company has also established a crisis management mechanism and contingency plans to enhance our capability to prevent and tackle emergencies, and we also regularly reviewed them and performed contingency drills.

(III) Risk appetite

The Company adopts a 锟斤拷prudent锟斤拷 risk appetite, and cautiously manages various risks in business operation. The Company and its insurance subsidiaries maintain a sufficient level of solvency, and pursue stable profitability and sustainable value growth while maintaining appropriate liquidity, maintain a sound risk management status and market image, and continuously upgrade its risk control system to better match its listing in SSE, SEHK, and LSE, thus becoming a leader in healthy and stable development of the industry.

The Company's risk appetite system includes five core dimensions: maintaining adequate capital, pursuing stable profitability, achieving sustained value growth, maintaining appropriate liquidity, and establishing a good market image.

In terms of risk limits, the Company has established overall risk limits and cascaded them to its subsidiaries. Based on their own business characteristics and needs, each subsidiary further breaks down the limits for various risks and applies them to daily business decisions, risk monitoring and early warning to achieve healthy interaction and balance between risk management and business development.

(IV) Risk management performance

2021 was a year of complex and evolving external environment, and the China Banking and Insurance Regulatory Commission stepped up efforts in regulating the market to prevent operational risks and promote the high-quality development of the insurance industry with a range of new regulations. In response to the changing market conditions and regulatory requirements, the Company kept upgrading and improving its risk management system, expanding the role of its three lines of defence in whole-process risk management, in a bid to develop an integrated risk management system. It also tightened control of key risks and strictly implemented regular pandemic control measures while seeking high-quality development through transformation and innovation. It maintained a balance between stable operation and rapid growth, supporting stable business operation with solid risk control.

(V) Key risks

In 2021, the Company was exposed to various risks, including insurance risk, market risk, credit risk, liquidity risk, operational risk, reputational risk, strategy risk, capital management risk and group specific risks. For details of the insurance risk, market risk, credit risk, liquidity risk, operational risk, and capital management risk, please refer to note XIII Risk management to the financial statements. Profiles of reputational risk, strategy risk, and group specific risks are as follows:

1. Reputational risk

Reputational risk is caused by the actions of insurance institutions, practitioners, or external events, which may bring insurance institutions negative judgement by stakeholders, the public, the media, etc., thereby damaging their brand value. It is detrimental to their operations, and can even affect market and social stability.

In 2021, in accordance with the requirements of the 锟斤拷Rules on Reputational Risk Management of Banking and Insurance Institutions (Provisional)锟斤拷 (CBIRC [2021] No. 4) issued by the China Banking and Insurance Regulatory Commission, the Company revised the Measures for Reputational Risk Management of China Pacific Insurance (Group) Co., Ltd. to further strengthen its reputational risk management and control, improve its reputational risk management mechanism, and enhance its reputational risk management capability. The reputational risk management process includes pre-assessment, risk monitoring, risk rating, response and disposal, information reporting, performance assessment and accountability, and full-process assessment. The Company conducts annual evaluation on its operation of reputational risk management mechanism and reputational risk management, and regular reports on the assessment and management of reputational risks are sent to the senior management and board of directors. In 2021, the reputational risk management mechanism was under smooth operation and no major reputational risk incident occurred.

2. Strategy risk

Strategy risk refers to the risk that the strategy does not match the market environment and the Company锟斤拷s reality due to an invalid process of strategy formulation and implementation or changes in the business environment.

The Company has established an organizational structure and working procedures for strategy risk management and bases its strategic plans on factors such as the Company锟斤拷s market environment, risk appetite, and capital status. The strategy risk management process includes the identification, analysis, monitoring and reporting of strategy risks. The Company has set up an internal strategy risk management reporting mechanism, and reports on the evaluation and management of strategy risks are sent to the senior management on a regular basis. In 2021, focusing on "health-related business", "big data" and "regional integration" to boost new growth drivers and pursue high-quality development, the Company promoted the implementation of strategic projects, fostered new growth drivers, and strengthened risk assessment and prevention in key areas.

3. Group specific risks

Group specific risks faced by the Company include risk contagion, risk of opaque organizational structure, concentration risk, and non-insurance risks.

(1) Risk contagion

Risk contagion means that the risk of a member company may extend to other member companies of the group through internal transactions or other means, thus causing losses to them.

In accordance with regulatory requirements, the Company continuously improves the management and prevention of related party transactions and has established a strong risk firewall for areas such as fund management, business operations, information system management and personnel management, etc., to standardize internal transaction behaviour, thus effectively reducing the occurrence and extent of major risk contagions.

CPIC strictly regulates its member companies in terms of providing guarantees to each other to prevent the accumulation and transmission of risks among member companies, and implements centralized management or coordination of the branding, publicity, and information disclosure of member companies to effectively prevent the spread and amplification of related risks within the Group.

(2) Risk of opaque organizational structure

It refers to the risk that the insurance group锟斤拷s shareholding structure, management structure, operation process, business type, etc. are excessively complex and opaque, which may cause losses to the Group.

CPIC maintains a clear shareholding structure and eliminates cross-shareholding and illegal subscription of capital instruments to ensure a clear and transparent organizational structure. CPIC has a sound collectivized management structure and has formed a working mechanism whereby the Group and its members each performs its duties, assumes its responsibilities, and coordinates with each other.

(3) Concentration risk

It refers to the risk that when individual risks or risk portfolios of member companies concentrates at the group level, it may directly or indirectly threaten the solvency of the Group.

In accordance with relevant regulatory requirements, CPIC regularly identifies, evaluates, monitors and reports on different types of concentration risks of the Group and its major insurance member companies, including the concentration risk of investment and reinsurance counterparties, the concentration risk of insurance and non-insurance businesses, and the concentration risk of investment assets, etc., thus effectively preventing the concentration of individual risks or risk combinations at the group level and minimizing the adverse effects on the solvency or liquidity of the Group.

(4) Non-insurance risk

It refers to risk that the operating activities of non-insurance member companies may bring adverse effects on the solvency of CPIC and its insurance member companies.

CPIC has determined its strategic positioning with insurance as its main business, which helps contain the scale and impact of non-insurance risks at the source. For the investment decision-making and management of its non-insurance business, CPIC has established internal investment policies and risk appetites to fully evaluate the risks and returns of investment and select investment objects. It also evaluates the risk exposure of non-insurance investments regularly, and conducts risk control of its non-insurance member companies based on the risk management system of its insurance member companies. It has also set up asset and liquidity isolation mechanisms between its insurance and non-insurance member companies to protect the interests of policyholders.

VI. Internal control

The Company has always been committed to improving its internal control and adopted sound internal control systems as per regulatory requirements to help achieve sustainable growth and fulfil internal control objectives such as reasonable assurance of the compliance and legality of the Company锟斤拷s operation, the safety of assets, the truthfulness and completeness of financial reports and relevant information, improved business efficiency and performance, and successful execution of business strategies. The Board of the Company is responsible for establishing and improving internal control and its effective implementation, reviewing the organizational structure and important policies of internal control, reviewing the handling of major risk events, as well as regularly assessing the soundness, rationality and effectiveness of the Company锟斤拷s internal control. The Supervisory Board is responsible for supervising the establishment and implementation of the Company锟斤拷s internal control. The Management Committee is responsible for establishing and improving the Company锟斤拷s organizational structure, improving the Company锟斤拷s internal control system, as well as for managing the daily operation of the Company锟斤拷s internal system as per decisions of the Board of Directors.

In 2021, the Company continued to optimize its internal control system by focusing on the key projects and key tasks of internal control construction, promoted the full integration of internal control into business management to ensure that the internal control system is complete, fully controlled, and implemented effectively. In 2021, it organized a Company-wide special operation, the "Internal Control and Compliance Management Construction Year", to complete various internal control self-inspection and construction work. Responding to the new changes and trends for regulations on listing, financial markets and state-owned assets, the Company formed a precision internal control mechanism where risks are differentiated and categorized, so that all key risk areas are covered by internal control. Following up on the implementation of major changes and new regulatory requirements, we have realized effective early warning in key risk areas. As for digitalization of risk management system, we promoted dynamic and agile risk control as well as transformation and empowerment, turning risk information into digital signals to form a new pattern of smart work application and risk data sharing.

In 2022, the Company will further upgrade Group-wide integrated internal control and compliance system, improve accountability of legal persons, open up paths for downward penetration and upward reporting, and strengthen substantive control of important matters. We will also establish and improve a Group-wide internal control system to improve overall operational efficiency and risk prevention capabilities.

Pursuant to the Code of Corporate Governance for Banking and Insurance Institutions (CBIRC [2021] No. 14), the Internal Audit Working Rules for Insurance Institutions (CRIC[2015] No. 113), the Regulations on Internal Audit of the National Audit Office of the Republic of China (CNAO[2018] No. 11), and the Articles of Association of the Company, the Company implements an internal audit system under the direct leadership of the Group锟斤拷s Party Committee and Board of Directors of and under the guidance and supervision of the Audit Committee of the Group锟斤拷s Board of Directors. The Company adopts centralized management of internal audit and has set up an Internal Audit Centre at its headquarters with full-time internal personnel carrying out internal audit work of the Group in a unified manner and entrusted to perform the internal audit duties of subsidiaries. Each subsidiary no longer has internal audit departments or positions. Secretary of the Group锟斤拷s CPC Party Committee and the Group锟斤拷s Chairman are in charge of internal audit; and Chief Auditor of the Group is also the Group锟斤拷s Internal Auditing Responsible Person, responsible for organizing the internal audit work of the Group. In 2021, focusing on high-quality development and technological empowerment of internal audit, the Group's Internal Audit Centre developed a healthy development index for the Company锟斤拷s branches and a digital internal audit evaluation system to further digitalize relevant work; timely revised the Company's internal audit-related policies, optimized and improved the internal audit mechanism, and further consolidated the basic management of internal audit; overcame multiple challenges such as the pandemic, innovated internal audit models and technical methods, improved internal audit efficiency, carried out special research and put forward targeted management recommendations, and solidified the Company锟斤拷s third line of defence. The Centre successfully completed all the tasks from the annual internal audit plan for 2021, making due contribution to the Company's high-quality development.

In accordance with the Basic Standards for Enterprise Internal Control and the supplementary guidelines as well as other applicable rules and regulations, and the Company锟斤拷s internal control system and evaluation methods, and based on the daily supervision and special supervision of the Company锟斤拷s internal control, the Company锟斤拷s internal audit department led the assessment of the effectiveness of the Company锟斤拷s internal control as at 31 December 2021 (the baseline date for internal control assessment report). Based on the conclusions relating to the major deficiencies of the Company锟斤拷s internal control for financial reporting, on the baseline date there were no such deficiencies. The board of directors believes that the Company maintained effective internal control for financial reporting in all major aspects. Based on the conclusions relating to the major deficiencies of the Company锟斤拷s internal control for areas other than financial reporting, on the baseline date there was no such deficiencies. There were no factors which may affect these conclusions regarding the internal control effectiveness between the baseline date and the date of the issuance of the internal control assessment report.

The Company锟斤拷s auditors also issued an audit report on the Company锟斤拷s internal control, which is of the opinion that as of 31 December 2021 the Company has maintained effective internal control in all major aspects for financial reporting in compliance with the Basic Standards for Enterprise Internal Control and the supplementary guidelines as well as other applicable rules and regulations.

VII. Management and control of subsidiaries

Guided by the overall strategic goals of the Group, we strengthened the strategic management and control of each subsidiary and established and kept improving relevant policies and working mechanisms.

In 2021, we further clarified the positioning and responsibilities of the Group and each subsidiary and enhanced the Group锟斤拷s coordination for those forward-looking, platform-based and shared functions to create a synergy-generating headquarters. Our insurance subsidiaries put more focus on insurance protection, risk management and capital utilisation to achieve business goals, enhance professional capabilities and competitiveness in the market while non-insurance subsidiaries gave more priority to optimising resource allocation of the Group, creating synergies and promoting the development of the Group锟斤拷s insurance business.

Adhering to the idea of "Group-coordinated development", the Company attaches great importance to overall strategic planning and development. We optimised strategic planning and management, and clarified the key tasks of and paths for realising the Group's strategic management and control; strengthened the cascading of Group strategies to subsidiaries by setting forth market strategies and key tasks and broke them down for each subsidiary with regular tracking and analysis of performance and progress by the Group. We established a strategic budget assessment system with properly balanced core indicators for current operation and long-term development to ensure the realisation of the Group's overall strategic goals and subsidiaries锟斤拷 targets.

Guided by regulatory policies, we continued to maintain the Group's substantial control over key areas and major issues, and stepped up efforts in building a closed-loop corporate governance management mechanism with clearly-defined rights and responsibilities, effective checks and balances, coordinated operations, and process penetration. We also further regulated the equity management and improved the governance structure of subsidiaries, strengthened the implementation of the responsibilities of legal persons for governance, and optimised the decision-making process for board resolutions, following principles such as 锟斤拷synergy and efficiency锟斤拷, 锟斤拷scientific and rational锟斤拷, and 锟斤拷matching of powers and responsibilities锟斤拷. The Company constantly improves its integrated risk management and control system to boost its risk management and control capabilities.

In April 2021, via the Shanghai United Assets and Equity Exchange, Pacific Insurance Senior Living Investment Management Co., Ltd., a subsidiary of the Company, acquired 100% shares of Shanghai Fankun Real Estate Development Co., Ltd. held by Shanghai Industrial Pension Development Co., Ltd., as well as the creditor锟斤拷s rights of Shanghai Fankun Real Estate Development Co., Ltd. As of the reporting date, the business registration of the transfer and capital increase, and the establishment of management teams had been completed, and the construction of CPIC Home Chongming Retirement Community Project was fully operational. This acquisition will boost the development of the Company's elderly care communities by increasing the supply of elderly care services.

In June 2021, CPIC Life acquired 100% shares of Beijing Borui Heming Insurance Agency Co., Ltd. held by Beijing Newbanker Technology Consulting Co., Ltd. via the Shanghai United Assets and Equity Exchange. As of the reporting date, the business registration of the transfer had been completed, and the construction and integration of personnel, business and information systems was under way. This acquisition will further expand the Company's business areas and contribute to the coordinated development of multi-channel business.

VIII. Changes to Articles of Association

In accordance with the regulatory requirements of the SEHK and taking into consideration events such as the Company锟斤拷s GDR issuance and registered capital changes, the Company revised relevant documents including the Articles of Association and the Rules of Procedures for Shareholders锟斤拷 Meeting, changed the former Strategic and Investment Decision-Making Committee under the Board to the Strategic and Investment Decision-Making & ESG Committee, adjusted the Company's registered capital and share structure, etc., and added information on the attendance of GDR shareholders at the SGM (for details, please refer to the announcements published on the websites of SSE, SEHK, and the Company). On 28 May 2021, the Company held the 2020 SGM, at which the afore-mentioned amendments were considered and approved. In September 2021, CBIRC approved those amendments respectively.

Please refer to 2021 Sustainability Report of the Company (English version) to be published on the websites of SEHK, LSE and the Company for detailed ESG information.

Documents available for inspection

I. Sealed financial statements signed by the legal representative, principal in charge of accounting and head of accounting department

II. Original auditor's report signed by the auditors

III. Annual reports disclosed in other security markets.

I. GENERAL INFORMATION

China Pacific Insurance (Group) Co., Ltd. (the 锟斤拷Company锟斤拷) was restructured from China Pacific Insurance Co., Ltd. in October 2001 pursuant to the approval of the State Council of the People锟斤拷s Republic of China (the PRC) and Circular [2001] No. 239 issued by the former China Insurance Regulatory Commission (the 锟斤拷CIRC锟斤拷). After the restructuring, the Company obtained a business license (No. 1000001001110) on 24 October 2001 newly issued by the former State Administration for Industry and Commerce of the PRC, and had an original issued capital of RMB 2,006.39 million, with its registered address and headquarters in Shanghai. The Company increased its issued capital to RMB 6,700 million through issuance of new shares to its then existing shareholders and new shareholders in 2002 and from February to April 2007.

In December 2007, the Company conducted a public offering of 1,000 million A shares on the Shanghai Stock Exchange to increase its issued capital to RMB 7,700 million. On 25 December 2007, the Company锟斤拷s A shares were listed and traded on the Shanghai Stock Exchange.

In December 2009, the Company conducted a global offering of overseas listed foreign shares (锟斤拷H shares锟斤拷). Upon the completion of the H share offering, the issued capital was increased to RMB 8,600 million. On 23 December 2009, the Company锟斤拷s H shares were listed and traded on the Hong Kong Stock Exchange.

In November 2012, the Company conducted a non-public offering of 462 million H shares. Upon completion of the H share offering, the issued capital was increased to RMB 9,062 million, and the Company received the approval from the former CIRC in December 2012 for the change of its registered capital. The Company obtained the business license (registration No. 100000000011107) on 5 February 2013. The Company renewed its business license on 15 December 2015, and its unified social credit code is No. 91310000132211707B.

In June 2020, the Company issued 102,873,300 Global Depositary Receipts (锟斤拷GDRs锟斤拷) on the London Stock Exchange (the 锟斤拷LSE锟斤拷) and listed on the LSE. In July 2020, the Company further issued 8,794,991 GDRs. Each GDR represents five A shares of the Company. After GDR issuance, the issued capital of the Company was increased to approximately RMB 9,620 million.

The authorised business scope of the Company includes investing in insurance enterprises; supervising and managing the domestic and overseas reinsurance businesses of subsidiaries and their utilisation of funds; and participating in approved international insurance activities. The principal activities of the Company and its subsidiaries (the 锟斤拷Group锟斤拷 or 锟斤拷CPIC Group锟斤拷) are property and casualty insurance businesses, life and health insurance businesses, pension and annuity insurance businesses, as well as investments with insurance funds, etc.

Major subsidiaries included in the consolidation scope in the current year are detailed in Note VI.

II. BASIS OF PREPARATION

The financial statements have been prepared in accordance with the Accounting Standard for Business Enterprises - Basic Standard, and the specific accounting standards and other relevant regulations issued by the Ministry of Finance on 15 February 2006 and in subsequent periods (hereafter collectively referred to as 锟斤拷the Accounting Standards for Business Enterprises锟斤拷 or 锟斤拷CASs锟斤拷), and in accordance with the disclosure requirements set out in the Preparation Convention of Information Disclosure by Companies Offering Securities to the Public No. 15 - General Rules on Financial Reporting issued by the China Securities Regulatory Commission (the 锟斤拷CSRC锟斤拷).

Standards effective but not yet adopted for the current year

In 2017, the Ministry of Finance released the revised Accounting Standard for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments, Accounting Standard for Business Enterprises No. 23 - Transfer of Financial Assets, Accounting Standard for Business Enterprises No. 24 - Hedge Accounting (collectively hereinafter referred to as the 锟斤拷new financial instruments standards锟斤拷) and the Circular on the Transitional Measures Related to the Implementation of the New Financial Instruments Standards (Cai Kuai [2017] No. 20) (锟斤拷the Circular锟斤拷). In 2020, the Ministry of Finance released the Circular on the Further Implementation of the New Financial Instruments Standards (Cai Kuai [2020] No. 22) (锟斤拷the Supplementary Circular锟斤拷).The new financial instruments standards came into effect on 1 January 2018. As an insurance company listed in A and H share markets, the Group锟斤拷s principal activities mainly relate to insurance business where:

(1) the carrying amounts of liabilities arising from insurance contracts (including deposits of hybrid contracts and embedded derivatives) are significant compared to the total carrying amounts of all liabilities; and

(2) the carrying amounts of insurance-related liabilities account for more than 90% of the total carrying amounts of all liabilities.

As it meets the 锟斤拷conditions for insurance companies to postpone the adoption of the new financial instruments standards锟斤拷 as stipulated in the second part of the Circular, the Group shall postpone its adoption of new financial instruments standards until 1 January 2023 according to the Supplementary Circular, and shall instead provide additional disclosures in accordance with the requirements set out in the third part of the Circular.

II. BASIS OF PREPARATION (continued)

Standards effective but not yet adopted for the current year (continued)

With respect to financial assets included in financial assets at fair value through profit or loss, available-for-sale financial assets, held-to-maturity financial assets, investments classified as loans and receivables, additional disclosures are as follows:

As at 31 December 2021

Fair value

2021

Changes in fair value

Financial assets held for trading (A)

2,255

114

Financial assets managed and assessed

for performance on a fair value basis (B)

10,098

931

Financial assets other than A or B

- Financial assets that meet SPPI (C)

1,105,758

24,999

- Financial assets that do not meet SPPI

379,349

(12,444)

Total

1,497,460

13,600

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

As at 31 December 2021

Carrying amount

Domestic

Exempt from rating^N^ote

400,437

AAA

633,839

A-1

101

AA+

31,478

AA (inclusive) or below

2,186

Overseas

A- (inclusive) or above

504

BBB+

BBB

113

BB+ (inclusive) or below

Total

1,068,778

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

Financial assets that meet SPPI are those which generate contractual cash flows on a specific date that are solely payments of principal and interest on the principal amount.

II. BASIS OF PREPARATION (continued)

Standards effective but not yet adopted for the current year (continued)

As at 31 December 2021

Financial assets not having low credit risks

Carrying amount

Fair value

Domestic

2,186

Overseas

Total

2,263

2,242

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

The financial statements are prepared on a going concern basis.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

Statement of compliance with the Accounting Standards for Business Enterprises

The financial statements are in compliance with the Accounting Standards for Business Enterprises, and truly and completely present the financial position of the Group and the Company as at 31 December 2021 and their financial performance, cash flows and other information for the year then ended.

Financial information in the financial statements of the Company and the Group for the year ended 31 December 2021 are prepared in accordance with the following significant accounting policies and accounting estimates as determined under the Accounting Standards for Business Enterprises.

The Group determines its accounting policies and accounting estimates that best reflect its operating characteristics, mainly in relation to the recognition and measurement of financial instruments (Note III 16), testing of significant insurance risks (Note III 21), measurement of insurance contract reserves (Notes III 22), and recognition of revenue (Note III 27).

Details of the Group's critical judgements used in determining significant accounting policies are set forth in Note III 35.

1. Accounting year

The Group adopts the calendar year as its accounting year, i.e. from 1 January to 31 December.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

2. Reporting currency

The Company, its subsidiaries, joint ventures and associates in Mainland China use RMB as their reporting currency. The subsidiaries of the Company incorporated in other countries or regions outside Mainland China select their reporting currencies based on the primary economic environment where they operate, and convert their presentation currencies into RMB for the preparation of the Group锟斤拷s financial statements.

The presentation currency of the Group is RMB. All amounts are expressed in RMB million unless otherwise specified.

3. Basis of accounting and measurement bases

The financial statements have been prepared on an accrual basis using the historical cost as the basis of measurement, except for certain financial instruments and insurance contract reserves. If assets are impaired, provisions for asset impairments are accrued in accordance with relevant requirements.

When the Company锟斤拷s subsidiaries China Pacific Property Insurance Co., Ltd. (锟斤拷CPIC Property锟斤拷) and China Pacific Life Insurance Co., Ltd. (锟斤拷CPIC Life锟斤拷) were established, the assets and liabilities invested into these subsidiaries by the Company and those they acquired from the Company were recorded at amounts determined by the state-owned asset administration authority. For the purpose of the consolidated financial statements, the Group has adjusted with the valuation amounts of these assets to their historical costs.

4. Business combinations

A business combination is a transaction or event that brings together two or more separate entities into one reporting entity. Business combinations include those involving enterprises under common control and those involving enterprises not under common control.

Business combinations involving enterprises under common control

Business combinations are classified as business combinations involving enterprises under common control when the enterprises involved are ultimately controlled by the same party or parties both prior and subsequent to the combination and the control is not temporary. For a business combination involving entities under common control, the party that, on the combination date, obtains control of another entity participating in the combination is the acquirer, while that other entity participating in the combination is the acquiree. The 锟斤拷combination date锟斤拷 refers to the date on which the acquirer actually obtains control over the acquiree.

Assets and liabilities that are obtained by the acquirer in a business combination are measured at their carrying amounts at the combination date as recorded by the acquiree. The difference between the carrying amount of the net assets obtained and the carrying amount of the consideration paid for the combination (or the aggregate face value of shares issued as consideration) is applied to the capital reserves to adjust the share premium, or applied to retained earnings if the capital reserves is not sufficient to absorb the difference.

Direct costs incurred by the acquirer for the purpose of the business combination are expensed as incurred in the current period.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

4. Business combinations (continued)

Business combinations involving enterprises not under common control

Business combinations involving enterprises not under common control is a business combination in which all combining enterprises are not ultimately controlled by the same party or same parties both prior and subsequent to the business combination. In a business combination involving enterprises not under common control, the enterprise which obtains control over the other enterprise on the acquisition date is the acquirer, and the other enterprise is the acquiree. The 锟斤拷acquisition date锟斤拷 refers to the date on which the acquirer obtains effective control over the acquiree.

For a business combination involving enterprises not under common control, the cost of combination refers to the assets paid, liabilities incurred or assumed and the fair value of the equity securities issued by the acquirer to acquire the control over the acquiree at the acquisition date. The expenses of audit, legal services, valuation consulting and other administration fees incurred by acquirer for the purpose of business combination are expensed as incurred. The fee and commission expenses of equity securities or debt securities issued as the consideration for business combination are included in the initial recognition of the equity or debt securities.

Where business combinations are accomplished through multiple transactions in phases, they are accounted for differently in the separate financial statements and the consolidated financial statements:

(1) For the purpose of the separate financial statements, the initial investment cost is the sum of the carrying amount of the equity investment in the acquiree before the acquisition date and the additional investment cost incurred on the acquisition date; where the equity interest in the acquiree before the acquisition date involves other comprehensive income components, the relevant other comprehensive income components shall be transferred to investment income for the current period upon disposal of such investment.

(2) For the purpose of the consolidated financial statements, the equity interest in the acquiree held before the date of acquisition should be remeasured at fair value at the acquisition date, with the difference between the fair value and its carrying amount included in the investment income for the current period. Where the equity interest in the acquiree before the acquisition date involves other comprehensive income components, the relevant other comprehensive income components shall be recycled to current investment income arising on the acquisition date.

The acquirer shall consider the contingent consideration as agreed in the combination agreement as part of the consideration for the business combination, and include it at its fair value on the acquisition date in the combination cost of the business combination. If, within 12 months of the acquisition date, there is any new or further evidence in connection with a condition existing on the acquisition date that requires adjustments to the contingent consideration, the adjustments shall be recognised, and the amount included in the consolidated goodwill shall be adjusted accordingly. With respect to changes and adjustments to the contingent consideration under other circumstances, if the contingent consideration is recognised as an asset or a liability, the subsequent changes in fair value are recorded in profit or loss for the current period or other comprehensive income; if the contingent consideration is classified as equity, it is not required to be subsequently measured at fair value, and its subsequent settlement is recorded in equity.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

4. Business combinations (continued)

Business combinations involving enterprises not under common control (continued)

The acquiree锟斤拷s identifiable assets, liabilities and contingent liabilities acquired in a business combination are measured at their fair values at the acquisition date. Identifiable assets and liabilities acquired by the acquirer on the acquisition date shall be classified and designated in light of the contract terms, business policies, M&A policies and other related factors existing on the acquisition date, mainly including the classification of acquiree锟斤拷s financial assets and financial liabilities, designation of a hedging relationship, and the separation of embedded derivatives, among others. However, where the combination involves a lease contract or an insurance contract and the contract terms are modified at the acquisition date, the contract shall be reclassified in light of the modified terms and other factors.

The difference by which the combination cost exceeds the fair value of the net identifiable assets acquired from the acquiree is recognised as goodwill. If the combination cost is lower than the fair value of the net identifiable assets acquired from the acquiree, the acquirer shall first review the fair value of the individual identifiable assets, liabilities and contingent liabilities acquired from the acquiree and the measurement of the combination cost, and if the reviewed combination cost is still lower than the fair value of the net identifiable assets acquired from the acquiree, the difference is recorded in profit or loss for the current period.

In a business combination, the deductible temporary differences acquired by the acquirer are not recognised as deferred income tax assets if they do not meet the recognition criteria on the acquisition date. If, within 12 months after the acquisition date, there is new or further information to indicate the existence of relevant circumstances at the acquisition date that the economic benefits is expected to be realised by the deductible temporary differences of the acquiree on the acquisition date, the relevant deferred income tax assets shall be recognised with goodwill being reduced by the same amount; and if goodwill is lower than the recognised amount, the difference shall be recognised in profit or loss in the current period. In all other circumstances, the deferred income tax assets related to business combination are recognised in profit or loss in the current period.

5. Consolidated financial statements

The scope of consolidated financial statements is determined based on control and the consolidated financial statements comprise the financial statements of the Company and its subsidiaries for the year ended 31 December 2021. A subsidiary is an entity (including structured entities) over which the Company has control. Structured entities are entities where voting rights or other similar rights are not used as factors to determine the controlling party, such as when voting rights only relate to administrative tasks while related operation activities are arranged according to contractual agreements.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

5. Consolidated financial statements (continued)

Structured entities include trust products, debt investment plans, equity investment plans, project asset-backed plans, and wealth management products issued by financial institutions. Trust products, equity investment plans and project asset-backed plans are managed by related or unrelated trust companies or asset managers, and the funds raised are invested in loans to or equity interests in other companies. Wealth management products issued by financial institutions are managed by related or unrelated asset managers, and the funds raised are invested in agreement deposits, funds, stocks, and bonds, among others. Debt investment plans are managed by related or unrelated asset managers, and are mainly invested in infrastructure projects and real estate fund backed projects. To finance their operations, the relevant trust products, debt investment plans, equity investment plans, project asset-backed plans, and wealth management products issued by institutions enter into product contracts with and grant product holders the right to receive profits, as agreed, from the trust products, debt investment plans, equity investment plans, project asset-backed plans, and wealth management products issued by financial institutions. The Group has entered into product contracts for all its trust products, debt investment plans, equity investment plans, project asset-backed plans, and wealth management products issued by financial institutions.

All trust products, debt investment plans, equity investment plans, project asset-backed plans, and wealth management products issued by institutions are not consolidated structured entities if they are not under the control of the Group.

For the purpose of preparing consolidated financial statements, the subsidiaries adopt the same accounting period and accounting policies as the Company.

All significant intra-group balances, transactions and unrealised profits are eliminated in the consolidated financial statements. The subsidiaries锟斤拷 shareholders锟斤拷 equity, net profit or loss of the period, and the portion in their comprehensive income not attributable to the Company are presented separately as non-controlling interests, net profit attributable to non-controlling interests, and total comprehensive income attributable to non-controlling interests in the consolidated financial statements under equity, net profits and total comprehensive income respectively. But a liability is recognised to reflect the corresponding shares of net assets in the consolidated entity when non-controlling interests arise from the structured entities they have invested in. Unrealised profits and losses resulting from the sale of assets by the Company to its subsidiaries are fully eliminated against net profit attributable to owners of the parent. Unrealised profits and losses on internal transactions resulting from the sale of assets by a subsidiary to the Company are allocated and offset between net profit attributable to shareholders of the parent and the net profit or loss attributable to non-controlling interests in accordance with the allocation ratio between the parent and the subsidiary. Unrealised profits and losses resulting from the sale of assets by one subsidiary to another are allocated and offset between the net profit attributable to shareholders of the parent and net profit or loss attributable to non-controlling interests in accordance with the allocation ratio between the parent and the selling subsidiary.

If the accounting treatments of a transaction are inconsistent in the financial statements at the Group level and at the Company or its subsidiary level, adjustments regarding the transaction will be made from the perspective of the Group.

For a subsidiary acquired through a business combination involving an enterprise not under common control, the financial performance and cash flows of the acquiree are included in the scope of the consolidated financial statements from the day the Group obtains control over the subsidiary until the Group ceases to control the subsidiary. In preparing the consolidated financial statements, the financial statements of the subsidiaries are adjusted based on the fair value of the identifiable assets, liabilities and contingent liabilities on the acquisition dates.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

5. Consolidated financial statements (continued)

For a subsidiary acquired through a business combination involving an enterprise under common control, the financial performance and cash flows of the acquiree are included in the scope of the consolidated financial statements from the beginning of the period in which the combination takes place. In preparing the comparative consolidated financial statements, the related items on the financial statements of prior periods are adjusted as if the reporting entity formed after combination had existed since the ultimate controlling party started to exert control.

When changes in relevant facts and circumstances cause changes to one or more of the control elements, the Group reassesses whether it still controls the investee.

In the consolidated financial statements, when the amount of loss in the current period attributable to the non-controlling interests of a subsidiary exceeds their share of equity in the subsidiary at the beginning of the period, the excess shall be still allocated against the non-controlling interests.

Purchases of equity interests by the Group from the non-controlling interests of a subsidiary are accounted for using the following methods:

(1) Long-term equity investments arising from the purchases of non-controlling interests by the parent from the subsidiary are accounted for in accordance with the accounting policies applicable to long-term equity investments.

(2) For the purpose of the consolidated financial statements, the difference between the long-term equity investments newly acquired from the non-controlling interests and the parent锟斤拷s share, as per additional shareholding, of the net assets of the subsidiary calculated on an ongoing basis from the acquisition date (or combination date) is applied to adjust the shareholders锟斤拷 equity (capital reserves), and if the capital reserves is lower than the difference, the remaining balance is applied against retained earnings.

Subsidiaries included in the consolidation scope are detailed in Note VI.

If control over a subsidiary is lost due to partial disposal of equity investment or other reasons, relevant accounting treatments are applied differently in the separate financial statements and consolidated financial statements:

(1) In the separate financial statements, the remaining equity is recognised as long-term equity investments or other related financial assets at the carrying amount; if, after partial disposal of equity investment, the remaining equity interest enables the Group to exercise joint control or significant influence over the original subsidiary, the equity investment is accounted for using the equity method in accordance with the relevant requirements for change of the accounting method from the cost method;

(2) In the consolidated financial statements, the remaining equity is remeasured at the fair value at the date when the control is lost; the difference between the sum of the consideration obtained from the disposal of equity and the fair value of the remaining equity and the portion of net assets calculated continuously from the acquisition date of the original subsidiaries based on the original shareholding proportion is recognised as investment income for the current period in which the control is lost; and other comprehensive income related to the original subsidiaries锟斤拷 equity investment is transferred into investment income for the period in which the control is lost.

6. Cash equivalents

Cash equivalents comprise short-term, highly liquid investments, which are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

7. Foreign currency transactions

Foreign currency transactions are converted into the reporting currency.

Foreign currency transactions are translated into the reporting currency on initial recognition using the spot exchange rates prevailing at the dates of the transactions. At the balance sheet date, monetary items denominated in foreign currencies are translated into the reporting currency using the spot exchange rates on the balance sheet date, which creates exchange differences. For a debt instrument investment, exchange differences are broken down into those arising from changes in the amortised cost and those arising from other changes in the carrying amount. Exchange differences arising from changes in the amortised cost are included in profit or loss for the current period, while those arising from other changes in the carrying amount are recorded in other comprehensive income. Monetary items denominated in foreign currencies are recorded in the profit or loss for the current period, except for those attributable to foreign currency borrowings that have been taken out specifically for the acquisition or construction of qualifying assets, which are capitalised as part of the cost of those assets. Non-monetary items denominated in foreign currencies that are measured at historical costs are translated using the spot exchange rates prevailing at the dates of the transactions, without changing their amounts in the reporting currency. Non-monetary items denominated in foreign currencies at fair value are translated using the spot exchange rates at the dates on which their fair values are determined, and the exchange differences arising therefrom are included into profit or loss for the current period or other comprehensive income.

For foreign operations, the Group translates its functional currency into RMB for the purpose of the financial statements: assets and liabilities on the balance sheet are translated using the spot exchange rates at the balance sheet date; the equity items, excluding 锟斤拷retained profits锟斤拷, are translated using the spot exchange rates at the dates the transactions take place; and the income and expense items on the income statement are translated using the average exchange rates on the transaction dates. Exchange differences arising from translation of foreign currency financial statements as described above are recognised as other comprehensive income. In accounting for the disposal of a foreign operation, the exchange difference arising from the translation of foreign currency financial statements in connection with the foreign operation is recognised in the profit or loss for the period in which the disposal takes place, and in the case of partial disposals, the exchange difference is calculated proportionately.

Foreign currency cash flows and cash flows of overseas operations are translated using the average exchange rates of the period when the cash flows occur. The effect of exchange rate changes on cash is separately presented as a reconciling item on the cash flow statement.

8. Securities purchased under agreements to resell and securities sold under agreements to repurchase

Securities purchased under agreements to resell refer to funds duly lent to finance repurchase transactions, and are recorded at the actual cost of the securities purchased, with income from securities purchased under agreements to resell accrued using the effective interest method over the period from the acquisition date to the maturity date and recognised in profit or loss for the current period.

Securities sold under agreements to repurchase refer to funds duly borrowed to enter into repurchase transactions, and are recorded at the actual amount received from the sale of the securities, with an expense for securities sold under agreements to repurchase accrued using the effective interest method over the period from the selling date to the maturity date and recognised in profit or loss for the current period.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

9. Policy loans

A policy loan refers to a loan provided by the Group to its policyholder within the life of the insurance policy against the cash value of the policy and for an amount that does not exceed a certain percentage of the cash value of the insurance policy at the time when the policyholder applies for the loan. According to the terms of the insurance products that vary from one to another, the maximum amount of a policy loan may range from 70% to 98% of the cash value of an insurance policy. The loan period begins from the day of drawdown by the policyholder, with a maximum length of 6 months or 1 year.

During the loan period, if termination of a policy, decrease in coverage, claim, maturity or annuity payment results in a refund or payment to a policyholder, the amount shall be first used to repay the interest and principal on the loan before any payment is made to the policyholder.

10. Long-term equity investments

Long-term equity investments include equity investments where an investor has control of, or significant influence over, an investee, as well as equity investments in joint ventures. Long-term equity investments are measured at initial investment cost on acquisition.

Long-term equity investments with which the Company is able to exercise control over the investee shall be accounted using the cost method in the individual financial statement. Control means having power over an investee, enjoying variable returns through involvement in relevant activities of the investee, and being able to impact the amount of such variable returns by using the power over the investee.

Long-term equity investments are measured at initial investment cost, and cash dividends or profits distribution declared by the investee are recognised as investment income for the current period. The Group recognises the cash dividends or profits distributed to the investee in accordance with the above provisions, and considers whether the long-term equity investments are impaired. Considering whether the long-term equity investments are impaired, the Group shall pay attention to whether the carrying amount of the long-term equity investment is higher than the share of the carrying amount of the net assets (including relevant goodwill) of the investee and other situations.

Long-term equity investments are accounted under the equity method as the investee over which the Group has joint control or significant influence. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. In determining whether to exercise joint control or significant influence over the investee, based on the voting shares of the investee hold directly or indirectly by the Group, the Group takes into account of the impact of assuming that conversion of the current executable potential voting rights held by the Group and other parties to equity in the investee.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

10. Long-term equity investments (continued)

For long-term equity investments accounted for using the equity method, where the initial investment cost of a long-term equity investment exceeds the Group锟斤拷s share of the fair value of the investee's identifiable net assets at the acquisition date, the long-term equity investment is measured at the initial investment cost; where the initial investment cost is less than the Group锟斤拷s share of the fair value of the investee's identifiable net assets at the acquisition date, the difference is included in profit or loss and the cost of the long-term equity investment is adjusted upwards accordingly.

Under the equity method, after the Company has acquired a long-term equity investment, it will recognise its share of the investee锟斤拷s net profits or losses as investment income or losses, and adjust the carrying amount of the long-term investment accordingly. The Group recognises its share of the investee锟斤拷s net profits or losses after making appropriate adjustments to the investee锟斤拷s net profits or losses based on the fair value of the investee锟斤拷s identifiable assets at the acquisition date, using the Group锟斤拷s accounting policies and periods, and eliminating the portion of the profits or losses arising from internal transactions with its associates and joint ventures, attributable to the investing entity according to its share ratio (but impairment losses for assets arising from internal transactions are recognised in full). The carrying amount of the long-term equity investment is reduced by the Group锟斤拷s share of the profit distribution or cash dividends declared by the investees. The Group does not recognise further losses when the carrying amounts of the long-term equity investment together with any long-term interests that, in substance, form part of the Group锟斤拷s net investment in investees are reduced to zero. However, the Group锟斤拷s obligations for additional losses are not included. The changes of the equity other than those arising from the net profit or loss, other comprehensive income and profit distribution, are recognised in equity with a corresponding adjustment to the carrying amounts of the long-term equity investment, and are transferred to profit or loss for the current period on pro rata basis when disposing of this investment.

For disposed long-term equity investment, the difference between its carrying amount and the actual proceeds received is recognised in profit or loss for the current period. For disposal of long-term equity investment accounted for using the equity method, the portion previously included in other comprehensive income is accounted for on pro rata basis using the same basis as that used by the investee for disposal of relevant assets or liabilities.

11. Investment properties

An investment property is real estate property held with the intention of earning a return on the investment either through rental income or capital appreciation, or both, including buildings that have been leased.

Investment properties are initially measured at cost. Subsequent expenditures incurred in relation to an investment property are included in the cost of the investment property when it is probable that the associated economic benefits will flow to the Group and their costs can be reliably measured. Otherwise, the expenditures are recognised in profit or loss for the current period in which they are incurred.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

11. Investment properties (continued)

Investment properties are subsequently measured using the cost model. Investment properties are depreciated using the straight-line method. The useful lives, the estimated net residual values and the annual depreciation rates of investment properties are as follows:

Category

Useful lives

Land use rights

30-50 years

Software use rights

3-10 years

License

Uncertain

The land use rights acquired by the Group are generally accounted for as intangible assets. If the costs paid for the land use rights and the buildings located thereon cannot be reasonably allocated between the land use rights and the buildings, all of the costs are recognised as fixed assets.

Intangible assets with finite useful lives are amortised on a straight-line basis over the useful period. The useful lives and amortisation method of the intangible assets with finite useful lives are reviewed by the Group at least at each financial year-end, and adjusted as appropriate. Intangible assets with an indefinite useful life are not amortised and need to be tested annually for impairment.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

14. Intangible assets (continued)

The internal research and development expenses are classified as research phase expense and development phase expense. Expenditure on research phase is recognised in profit or loss in the period in which it is incurred. Development phase expense can be capitalised only when an entity can demonstrate all of the following:

(a) The technical feasibility of completing the intangible asset so that it will be available for use or for sale;

(b) Its intention to complete the intangible asset and use or sell it;

(c) How the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or for the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset;

(d) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset;

(e) Its ability to measure reliably the expenditure attributable to the intangible asset during its development.

The development phase expenses that do not meet above conditions are recognised in profit or loss when incurred.

15. Debt assets

Debt assets refer to the physical possession of a borrower, a guarantor or a third party that compensate the Group in the exercise of creditor's rights or security interests.

Debt assets are accounted for at the fair value at the time of acquisition. The difference between the carrying amount of the restructured debts and the fair value of the acquired debt assets is offset against the provision for impairment of the restructured debts with the net change recognised in profit or loss for the current period. The debt assets are not depreciated or amortised. The recoverable amount of debt assets is assessed at the balance sheet date, tested for impairment, and adjusted as appropriate. The recoverable amount of a debt asset is the higher of an asset's fair value less costs of disposal and the present value of the estimated future cash flow expected to be derived from the asset.

16. Financial instruments

Financial instruments are contracts which become one enterprise锟斤拷s financial assets, and at the same time become other undertaking锟斤拷s financial liabilities or equity instruments.

Recognition and derecognition of financial instruments

The Group recognises a financial asset or a financial liability when it becomes a party to the contractual provisions of the financial instrument.

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised, when:

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

16. Financial instruments (continued)

Recognition and derecognition of financial instruments (continued)

(1) the contractual rights to receive the cash flows from the financial assets have expired;

(2) the financial asset has been transferred and (a) the Group transfers substantially all the risks and rewards of ownership of the financial asset to the transferee; or (b) the Group has not retained control of the financial asset, although the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset.

A financial liability is derecognised when the contractual obligation under the financial liability is fulfilled, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such a replacement or modification is treated as a derecognition of the original liability and the recognition of a new liability and the difference is recognised in profit or loss for the current period.

All purchases or sales of financial assets in regular ways are recognised and derecognised using trade date accounting. Purchases or sales of financial assets in regular ways refer to receipt or delivery of financial assets within the period generally established by regulation or convention in the marketplace in accordance with contractual terms. Trade date is the date that the Group is committed to purchasing or selling the financial assets.

Classification and measurement of financial assets

The Group classifies its financial assets into four categories at initial recognition: financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets. The Group determines the classification of its financial assets at initial recognition. The financial assets are measured at fair value at initial recognition. In the case of financial assets at fair value through profit or loss, the related transaction costs are recognised in profit or loss for the current period. For other financial assets, transaction costs are included in their initially recognised amounts.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and those designated at fair value through profit or loss at initial recognition. Financial assets held for trading refer to financial assets satisfying one of the following conditions: the financial assets are acquired with the intention to sell in the near future; they belong to a part of identifiable financial instruments group under the centralised management, and there is objective evidence that the Group has recently managed the financial instruments group using short-term profit method; they belong to derivative instruments, excluding the derivative instruments that are designated with effective hedging, and those belong to financial guarantee contract, as well as the derivative instruments that are linked to equity instrument investments that are not quoted in an active market and whose fair value cannot be reliably measured, and has to be settled by delivery of such equity instruments. These financial assets are subsequently measured using fair value, and all realised (such as dividends or interest income, etc.) and unrealised profit or loss are recorded in profit or loss for the current period.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

16. Financial instruments (continued)

Classification and measurement of financial assets (continued)

Held-to-maturity financial assets

Held-to-maturity financial assets are non-derivative financial assets with fixed maturity and fixed or determinable payments that the Group has the positive intention and ability to hold to maturity. These financial assets are subsequently measured at amortised cost using the effective interest method, with gains or losses arising from derecognition, impairment or amortisation recognised in profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables mainly include various types of receivables, policy loans, term deposits, refundable capital deposits, securities purchased under agreements to resell, and investments classified as loans and receivables, etc. These financial assets are subsequently measured at amortised cost using the effective interest method, with gains or losses arising from derecognition, impairment or amortisation recognised in profit or loss.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories at initial recognition. This type of financial assets is subsequently measured at fair value. The discount or premium on available-for-sale investments in debt instruments is amortised using the effective interest method and included in interest income. Gains or losses arising from change in fair value of available-for-sale financial assets are recognised as other comprehensive income, except for impairment losses and foreign exchange differences arising from translation of monetary financial assets. When such financial assets are derecognised or impaired, the cumulative gains or losses previously recognised in other comprehensive income are recycled into profit or loss for the current period. Interests on available-for-sale debt investments calculated using the effective interest method during the period in which such investments are held and cash dividends declared by the investee on available-for-sale investments in equity instruments are recognised in profit or loss for the current period as investment income.

Classification and measurement of financial liabilities

The Group锟斤拷s financial liabilities are classified into two categories at initial recognition: financial liabilities at fair value through profit or loss and other financial liabilities. The Group determines the classification of its financial liabilities at initial recognition. In the case of financial liabilities at fair value through profit or loss, the related transaction costs are recognised directly in profit or loss for the current period. For other financial liabilities, the related transaction costs are included in their initially recognised amounts.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

16. Financial instruments (continued)

Classification and measurement of financial liabilities (continued)

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss consist of financial liabilities held for trading and those designated at fair value through profit or loss. Financial liabilities held for trading refer to financial liabilities satisfying one of the following conditions: the financial liabilities are assumed with the intention to repurchase in the near future; they belong to a part of identifiable financial instruments group under the centralised management, and there is objective evidence that the Group has recently managed the financial instruments group using short-term profit method; they belong to derivative instruments, excluding the derivative instruments that are designated with effective hedging, and those belong to financial guarantee contract, as well as the derivative instruments that are linked to equity instrument investments that are not quoted in an active market and whose fair value cannot be reliably measured and has to be settled by delivery of such equity instruments. These financial liabilities are subsequently measured at fair value, and all realised and unrealised profit or loss are recorded in profit or loss for the current period.

Other financial liabilities

Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Charges, transaction costs and premiums or discounts that are paid or collected by parties to the financial liability contracts and attributable to effective interest rate are considered when determining effective interest rate. Transaction costs refer to incremental expenses that are directly attributable to the purchase, issuance, or disposal of financial instruments, that is, expenses that would otherwise not occur.

Derivative financial instruments

Derivative financial instruments are initially measured at fair value on the date when a derivative contract is entered into and are subsequently measured at their fair value. Gains or losses arising from changes in fair value that do not meet the hedge accounting requirements are recognised directly in profit or loss. The derivative financial instrument with a positive fair value is recognised as an asset, otherwise, it is recognised as a liability. However, derivative financial instruments are measured at cost if they are linked to and should be settled through the delivery of equity instruments, of which quoted price is not available in an active market and fair value cannot be reliably measured.

Impairment of financial assets

The carrying amounts of financial assets (other than those at fair value through profit or loss) are reviewed at balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists, an impairment loss is recognised. Objective evidence indicating impairment of financial assets refers to the matter that actually occurs after the initial recognition of financial assets and will affect estimated future cash flows of financial assets, and whose impact can be reliably measured.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

16. Financial instruments (continued)

Impairment of financial assets (continued)

The objective evidences used to determine whether impairment exists are as follows:

· significant financial difficulty of the issuer or debtor;

· a breach of contract by the debtor, such as a default or delinquency in interest or principal payments;

· the creditor, for economic or legal reasons relating to the debtor's financial difficulty, grants to the debtor a concession;

· the debtor is likely to go bankrupt or face other financial restructuring;

· the disappearance of an active market for that financial asset because of financial difficulties faced by the issuer;

· it cannot be identified or confirmed if the cash flow of an asset in a group of financial assets has decreased. However, after the overall assessment based on the data on the market, the estimated future cash flow of the group of the financial assets, subsequent to its initial recognition, has decreased and can be measured, for example, the debtor's ability to pay gradually deteriorates, or the unemployment rate of the country or region where the debtor locates at increases, the price of the collateral in its region drops rapidly and the industry is depressed, etc.;

· the equity instrument investors may not be able to recover investment cost due to material adverse changes in technological, market, economic or legal environment where the equity instrument issuer operates;

· significant or prolonged decline in fair value of equity investment; and

· other objective evidences indicating financial assets are impaired.

Financial assets at amortised cost

If there is objective evidence that an impairment loss on financial assets has been incurred, the carrying amount of the financial asset is reduced to the present value of estimated future cash flows (excluding future credit losses that have not been incurred). The amount of reduction is recognised in profit or loss for the current period. The present value of estimated future cash flows shall be calculated with the financial asset锟斤拷s original effective interest rate (i.e., the prevailing effective interest rate calculated at initial recognition or prescribed in the contract in case of floating rate) and the related collateral value shall also be taken into account.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

16. Financial instruments (continued)

Impairment of financial assets (continued)

Financial assets at amortised cost (continued)

For a financial asset that is individually significant, the Group assesses the asset individually for objective evidence of impairment. For a financial asset that is not individually significant, the Group assesses the asset individually or collectively for objective evidence of impairment. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether the financial asset is individually significant or not, the financial asset is included in a group of financial assets with similar credit risk characteristics and collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a group of financial assets with similar credit risk characteristics and collectively assessed for impairment.

If, subsequent to the recognition of impairment loss of financial assets measured at amortised cost, there is objective evidence that the value of the financial asset is recovered and the recovery is related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed and the amount of reversal is recognised in profit or loss. However, the carrying amount of the financial asset after reversal shall not exceed what the amortised cost would have been had the impairment not been recognised at the date when the impairment was reversed.

Available-for-sale financial assets

If objective evidence of impairment exists for available-for-sale financial assets, the cumulative loss arising from the decrease in fair value and previously recognised in other comprehensive income is reclassified to profit or loss and is measured at the initiation acquisition cost (net of any principal repayment and amortisation, the current fair value, and any impairment loss on that financial asset previously recognised in profit or loss). The Group uses the weighted average method to calculate the initial investment cost of available-for-sale equity investments.

A provision for impairment is made for available-for-sale equity investments when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is 锟斤拷significant锟斤拷 or 锟斤拷prolonged锟斤拷 requires judgement. The Group collectively considers the magnitude of the decline in fair value relative to the cost, volatility, and the duration of the decline in evaluating whether a decline in fair value is significant. The Group considers the period and consistency of the decline in evaluating whether a decline in fair value is prolonged. The Group usually considers a significant decline to be one in which the fair value is below the weighted average cost by more than 50% or a prolonged decline to be one in which fair value is below the weighted average cost for a continuous period of more than twelve months.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

16. Financial instruments (continued)

Impairment of financial assets (continued)

Available-for-sale financial assets (continued)

For available-for-sale debt instrument on which the impairment loss has been recognised, if, in a subsequent accounting period, its fair value increases and the increase can be objectively related to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss for the current period. Impairment losses of available-for-sale equity investment are not reversed through profit or loss. Increases in their fair value subsequent to impairment losses are recognised directly in other comprehensive income.

Transfer of financial assets

The financial assets are derecognised when the Group transfers substantially all the risks and rewards of ownership of the financial asset to the transferee; the financial assets are not derecognised when the Group retains substantially all the risks and rewards of ownership of the financial asset.

If the Group neither transfers nor retains substantially all risks and rewards of ownership of the financial asset, the Group will account for the following situations in different ways: (i) if the Group does not retain the control over the financial asset, the financial asset is derecognised and related assets and liabilities occurred hereby are recognised; or (ii) if the Group retains the control over the financial asset, related financial assets and liabilities are recognised to the extent of the Group锟斤拷s continuing involvement in the transferred financial asset.

Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount is presented in the consolidated balance sheet if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

17. Asset impairment

The Group determines the impairment of assets (except for deferred income tax assets and financial assets which have been described in their respective accounting policies) in the following methods:

The Group assesses at each balance sheet date whether there is objective evidence that assets are impaired. Where there is objective evidence, the Group estimates the recoverable amount and tests for impairment. For goodwill acquired from business combination and intangible assets with indefinite useful life not ready for intended use, no matter there is objective evidence of impairment or not, impairment should be tested at each year-end.

The recoverable amount is the higher of an asset's fair value less costs of disposal and the present value of the estimated future cash flow expected to be derived from the asset. The Group estimates the recoverable amount on the basis of individual asset. When it is difficult to estimate the recoverable amount individually, the recoverable value of the cash generating units which the asset belongs to will be estimated. The recognition of an asset group is based on whether the main cash flow generated by the asset group is independent from those generated by other assets or groups of assets.

When recoverable amounts of assets or groups of assets are lower than their carrying amounts, the Group decreases the carrying amount to recoverable amount. The decreased amounts are recognised in profit or loss and corresponding provisions are made.

For impairment test of goodwill, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units, or groups of cash-generating units when being unable to be allocated to each of the cash-generating units. Cash-generating units or groups of cash-generating units refer to those that can benefit from the synergies of the combination and are not larger than the reportable segment determined by the Group.

When performing impairment test for the (groups of) cash-generating unit to which goodwill is allocated, if there is indication of impairment, the Group firstly tests the (groups of) cash-generating unit excluding goodwill, calculates the recoverable amount and recognises relevant impairment losses. The Group then tests the (groups of) cash-generating units including goodwill, and compares the carrying amount and recoverable amount. If the carrying amount exceeds the recoverable amount, the amount of impairment loss is firstly deducted from the carrying amount of goodwill allocated to the (groups of) cash-generating unit, and then from the carrying amount of each of other assets (other than goodwill) within the (groups of) cash-generating unit, on pro rata basis.

Once the above asset impairment loss is recognised, it will not be reversed in the subsequent periods.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

18. Insurance security fund

The Group draws insurance security funds in accordance with the Administrative Measures for Insurance security funds (Bao Jian Hui Ling [2008] No. 2) in the following proportions:

0.8% of the premium income for non-investment property and casualty insurances, 0.08% (if return is guaranteed) or 0.05% (if return is not guaranteed) of the business income for investment property and casualty insurances;

0.15% of the business income for life insurances with guaranteed return, and 0.05% of the business income for life insurances without guaranteed return;

0.8% of the premium income for short-term health insurances, and 0.15% of the premium income for long-term health insurances;

0.8% of the premium income for non-investment accident insurances, 0.08% (if return is guaranteed) or 0.05% (if no return is guaranteed) of the business income for investment accident insurances;

Simultaneously, in accordance with the "Notice by the General Office of the China Banking and Insurance Regulatory Commission (the 锟斤拷CBIRC锟斤拷) on Clarifying the Implementation Standards for the Suspension and Resumption of the Payment of insurance security fund by Insurance Companies" (No. 129 [2018] issued by the General Office of the CBIRC) , if the balance of insurance security fund of a property and casualty insurance company on April 30 per annum reaches 6% of the average amount of the total assets at the beginning and the end of the previous full fiscal year or if the balance of insurance security fund of a life insurance company on April 30 per annum reaches 1% of the counterpart, the payment of insurance security fund can be suspended.

19. Policyholders锟斤拷 deposits and investments

Policyholders锟斤拷 deposits business refers to the business in which the Group charges a portion of the added value of the deposits received from the policyholders as premium and returns the deposit principal and pays the added value (non-premium portion) as agreed in the contract to the policyholders when the contract expires.

Policyholders锟斤拷 investments are mainly corresponding liabilities to the portion of the insurance hybrid contract that can be separately measured after being unbundled and assumes other risks, and the policies that do not transfer significant insurance risk. For changes in the fair value of available-for-sale financial assets in accounts related to policyholder investments, the Group uses a reasonable method to recognise the portion attributable to the policyholders as policyholders锟斤拷 investments and recognise the portion attributable to the shareholders of the Group as other comprehensive income.

20. Definition of insurance contract

Insurance contracts are those contracts signed with the policyholders under which the Group has accepted significant insurance risks. If the Group signs contracts with policyholders which transfer insurance risks as well as other risks, the contracts should be unbundled as follows:

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

20. Definition of insurance contract (continued)

(1) If the insurance risk portion and other risk portion are distinct and separately measurable, the insurance risk portion and other risk portion should be unbundled. The portion with insurance risk should be treated as an insurance contract, while the portion with other risks should not be treated as an insurance contract.

(2) If the insurance risk portion and other risk portion cannot be distinct, or if they are distinct but cannot be separately measurable, the Group would test the significance of insurance risk at the initial recognition of such contracts. The whole contract should be treated as an insurance contract if the insurance risk is significant; and the whole contract should not be treated as an insurance contract if the insurance risk is insignificant.

21. Significant insurance risk test

The Group tests the significance of insurance risk at the initial recognition of such contracts signed with policyholders based on a group of contracts with a similar nature, and conducts necessary review in the subsequent financial reporting date.

When conducting the significant insurance risk test, the Group makes judgements in this sequence: whether the contract transfers insurance risk; whether the insurance risk transfer has commercial substance; whether the insurance risk transferred is significant.

When determining whether the contracts transfer significant insurance risk, the Group considers: (i) annuity contracts that transfer longevity risk are treated as insurance contracts; (ii) for non-annuity contracts, if the insurance risk ratio is greater than or equal to 5% at any points of time during the duration of the contracts, they are treated as insurance contracts. The insurance risk ratio of direct insurance contracts = (the amount paid by the insurance company when the insurance accident occurs / the amount paid by the insurance company in the absence of the insurance accident - 1) 锟斤拷 100%. For non-life insurance contracts that obviously transfer significant risk, the Group recognises them as insurance contracts directly.

When determining whether reinsurance contracts transfer significant insurance risk, the Group considers thoroughly the commercial substance and other relevant contracts and agreements, and if the insurance risk ratio of reinsurance policies is greater than 1%, they are treated as reinsurance contracts. The risk ratio of reinsurance contracts = [(∑the present value of the loss amount in the case of the net loss of the reinsurer 锟斤拷 the probability of occurrence) / the present value of the reinsurer's expected premium income] 锟斤拷 100%. If the reinsurance contracts obviously transfer significant insurance risk, the Group directly recognises them as reinsurance contracts.

For the purpose of testing the significance of insurance risk, contracts of a similar nature are grouped together. Through considering the risk distribution and characteristics, the Group selects sufficient representative samples to test the significance of insurance risk. If most samples transfer significant insurance risk, all contracts in the group are treated as insurance contracts.

The assumptions used for testing the significance of insurance risk mainly include loss ratio, mortality and morbidity, loss distribution, etc. The Group determines a reasonable estimate based on historical experiences and the estimation on future development trends so as to reflect the Group锟斤拷s product characters and actual claim payments.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

22. Insurance contract reserves

Insurance contract reserves could be divided into life insurance contract reserves and non-life insurance contract reserves. Life insurance contract reserves comprise unearned premium reserves and claim reserves, and could be divided into life insurance reserves and long term health insurance reserves; non-life insurance contract reserves comprise unearned premium reserves and claim reserves.

When measuring life insurance contract reserves, the Group classifies insurance contracts whose insurance risks are of a similar nature as a measurement unit. The Group mainly considers product characteristics, effective year and risk profile of contracts in this regard.

When measuring non-life insurance contract reserves, the Group uses a group of insurance contracts whose insurance risks are of a similar nature as a measurement unit, including commercial property insurance, family insurance, engineering insurance, liability insurance, credit insurance, guarantee insurance, compulsory automobile insurance, commercial automobile insurance, hull insurance, cargo transportation insurance, speciality insurance, agricultural insurance, accident insurance, short-term health insurance and other insurances.

Insurance contract reserves as at the balance sheet date are measured based on a reasonable estimate of the amount of payments when the Group fulfils relevant obligations under the insurance contracts, which represents the difference between expected future cash outflows and inflows under such contracts, that is, expected future net cash flow including:

n Expected future cash outflows represent reasonable cash outflows which are necessary for the Group to fulfil relevant obligations under the insurance contracts, and mainly include: (1) guaranteed benefits or claims under the insurance contracts, including mortality benefits, disability benefits, morbidity benefits, survival benefits, maturity benefits and claims payments, etc.; (2) non-guaranteed benefits under the insurance contracts in respect of constructive obligations, including policyholder dividends, etc.; (3) reasonable expenses necessary for maintaining and serving the insurance contracts, claims handling, including policy maintenance expenses, claim expenses, etc.

n Expected future cash inflows represent cash inflows from assuming insurance contractual obligations, including premiums and other charges.

Reasonable estimate of expected net future cash flows is determined based on information currently available at the balance sheet date.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

22. Insurance contract reserves (continued)

Margin is considered and separately measured when determining insurance contract reserves as at the balance sheet date. Margins are released to profit or loss over the coverage period using systematic and reasonable approach. Initial recognition of an insurance contract issued should not result in the recognition of a day-one gain. However, a day-one loss should be recorded in profit or loss at inception when it occurs.

Margins for life insurance contract reserves include a risk adjustment and a residual margin. The risk adjustment represents provision for the uncertainty associated with the future cash flows. The residual margin is provided to eliminate any gain at inception of the contract and is amortised over the life of the contract in a certain way. Upon initial recognition, the residual margin is separately measured from reasonably estimated reserve and the risk adjustment reserve, and will not be adjusted for future changes in assumptions.

The risk adjustment for non-life insurance contract reserves is determined by reference to the industry benchmark and the Group锟斤拷s experience.

When measuring insurance contract reserves as at the balance sheet date, time value of money is considered. The related future cash flows should be discounted when the impact of time value of money is significant. The discount rate used in the measurement of time value of money should be determined with reference to information currently available as at the balance sheet date.

The Group uses information currently available as at the balance sheet date to derive the following assumptions used for measuring unearned premium reserves:

n For insurance contracts whose future insurance benefits will not be affected by investment income of the corresponding investment portfolio, the discount rates are determined based on the market interest rate which is in line with the period and risk of liability cash outflows. For insurance contracts whose future insurance benefits will be affected by investment income of the corresponding investment portfolio, the discount rates are determined based on expected investment return rates of the underlying investment portfolios.

n The Group reasonably estimates the insurance incident occurrence rate, surrender rate and expense rate based on actual experience and future development trends.

n Policy dividend assumption is determined based on expected investment return rates of participating accounts, the Group锟斤拷s participating dividend policy, reasonable expectations of policyholders, etc.

When measuring unearned premium reserves, expected future net cash flows should cover the entire insurance period.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

22. Insurance contract reserves (continued)

Unearned premium reserves for non-life insurance contracts are also measured by using the unearned premium approach. At inception of the contract, unearned premium reserves are measured based on premiums received minus relevant acquisition costs. After initial recognition, the reserve is released over the term of the contract using the 365ths method, risk distribution method, etc.

Outstanding claim reserves include incurred and reported outstanding claim reserves, incurred but not reported (锟斤拷IBNR锟斤拷) reserves and claim expense reserves.

Incurred and reported outstanding claim reserves represent insurance contract provisions for the outstanding claims incurred and reported to the Group. The Group uses case-by-case estimate method, average claim per case method, etc., to measure incurred and reported outstanding claim reserves based on a reasonable estimate of the ultimate claim amount and the margin factor.

IBNR reserves represent insurance contract provisions for the claims incurred but not reported to the Group. The Group considers factors including nature and distribution of insurance risks, claims developments, experience data, etc. and uses chain ladder method, average claim per case method, loss ratio method, Bornhuetter-Ferguson method, etc., to measure IBNR reserves based on a reasonable estimate of the ultimate claim amount and the margin factor.

Claim expense reserves represent provisions for the legal service fees, litigation fees, loss inspection fees, and compensations for related claims adjustors that may occur in the case of an outstanding insurance accident. The Group uses case-by-case estimate method and ratio allocation method to measure claim expense reserves.

When evaluating insurance contract reserves, the Group performs liability adequacy tests based on information currently available as at the balance sheet date. Additional insurance contract reserves should be made and recognised in profit or loss if any deficiency exists.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

23. Reinsurance

The Group cedes the insurance risk in the normal course of business. Reinsurance agreements that transfer significant insurance risk are treated as reinsurance contracts; reinsurance agreements that do not transfer significant insurance risk are treated as non-reinsurance contracts.

Ceded reinsurance

The ceded reinsurance arrangements do not relieve the Group from liability to policyholders. For ceded reinsurances treated as reinsurance contracts, reinsurance premiums, reinsurance commissions and reinsurance claims that should be recovered from reinsurers are calculated and determined separately by the Group in accordance with relevant reinsurance contracts in the period in which related direct insurance premium income and claims are recognised, with a corresponding charge to profit or loss for the current period. When evaluating insurance contract reserves, the Group estimates the cash flows related to the reinsurance contracts in accordance with agreements in relevant reinsurance contracts. And the insurance contract reserves that would be recovered from reinsurers will be recognised as corresponding reinsurers锟斤拷 share of reserves as assets.

As a reinsured, the Group lists the assets formed by the reinsurance contract and relevant direct insurance contract reserves separately in the balance sheet so they are not offset against each other; and lists the income or expenses formed by the reinsurance contract and relevant direct insurance contract income or expenses separately in the income statement so they are not offset against each other.

Reinsurance assumed

Reinsurance expenses are calculated, determined and charged to profit and loss by the Group in accordance with relevant reinsurance contracts in the period in which related premium from reinsurance assumed and reinsurance claims are recognised.

The Group will adjust relevant reinsurance income and expenses according to the amount indicated on the reinsurance slip once it is received, and the adjustment amount is included in profit or loss for the current period.

24. Non-insurance contract

The other risk portions unbundled from the insurance contracts and contracts that do not transfer significant insurance risk are determined by the Group as non-insurance contracts. The fees charged by the Group for these non-insurance contracts management, including policy management fees, are recognised as other operating income for the period in which the Group provides such management service.

Relevant liabilities under the non-insurance contracts are included in the policyholders锟斤拷 deposits and investments, and are initially recognised at fair value and subsequently measured at amortised cost, except for other risk portions unbundled from investment-linked contracts. Relevant liabilities under the non-insurance contracts that are unbundled from investment-linked contracts are included in separate account liabilities and initially recognised at fair value, relevant transaction expenses are included in profit or loss for the current period and subsequently measured at fair value.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

25. Provisions

The obligations pertinent to contingencies are recognised as provisions when the following conditions are satisfied concurrently:

(1) it is a present obligation of the Group;

(2) it is probable that an outflow of economic benefits will be required to settle the obligation; and

(3) the amount of the obligation can be measured reliably.

A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation. Factors surrounding a contingency, such as the risks, uncertainties and the time value of money, are taken into account as a whole in reaching the best estimate of a provision. The Group reviews the carrying amount of the provisions at the end of the reporting period. If there is substantial evidence that the carrying amount cannot actually reflect the current best estimate, the Group will adjust the carrying amount in accordance with the current best estimate.

26. Dividend distribution

The loss compensation and dividend distribution approved by the shareholders锟斤拷 meeting are recognised in the current period of approval.

27. Revenue

Premium income

Premium income and reinsurance premium income are recognised when all of the following criteria are met: (1) the insurance contracts have become effective and relevant insurance liabilities have been assumed; (2) it is probable that the economic benefits associated with the contracts will flow to the Group; and (3) the income associated with the contracts can be reliably measured.

With respect to life insurance contracts and long-term health insurance contracts where premiums are paid in instalments, premium income is recognised by the premiums receivable for the current period; with respect to single premium policies, premium income is recognised by the one-off premiums receivable. With respect to property and casualty insurance, short-term health insurance and accident insurance contracts, premium income is recognised by the amounts of total premiums as agreed in the contracts.

Reinsurance premium income assumed is calculated in accordance with the terms agreed in the reinsurance contracts.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

27. Revenue (continued)

Initial policy fee and account management fee

The initial policy fee and account management fee include policy management fee, investment management fee, surrender income and other charges, which are collected at a fixed amount or as a certain percentage of the balance of the contract account; they are calculated as per the time and methods stated in relevant contracts or agreements and are recognised as revenue in the current period when they occur. Charges relating to rendering of future services which should be deferred and be recognised at the time of rendering are not included. The Group's initial charges, for the initial fees charged on contracts measured at amortised cost, are amortised to profit or loss using the effective interest method.

Initial policy fee and account management fee are presented in other operating income.

Interest income

Interest income is determined by using the effective interest method, based on the length of time for which the Group锟斤拷s cash is used by others.

Management fee income

Management fee income is calculated in accordance with the calculation method specified in the contracts on an accrual basis. Management fees are recognised at agreed contractual basis rates if revenue recognition principles and fee accrual criteria are met.

28. Policy dividends expenditure

The policy dividends expenditure is the dividends payable by the Group to the policyholders based on the dividend distribution method for participating insurance products.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

29. Leases

A contract is, or contains, a lease if it conveys the right to control the use of an asset for a period of time in exchange for consideration.

As the lessee, the Group shall recognise right-of-use assets and lease liabilities at the commencement date. The only exceptions are short-term leases and leases of low-value assets. Right-of-use assets are the assets that represent the Group锟斤拷s rights to use an underlying asset for the lease term. The commencement date is the date on which a lessor makes an underlying asset available for use by the Group.

The right-of-use assets of the Group are initially measured at cost. The cost of right-of-use asset shall comprise:

(1) the amount of the initial measurement of the lease liability;

(2) any lease payments made at or before the commencement date, less any lease incentives received;

(3) any initial direct costs incurred by the lessee; and

(4) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

The Group depreciates the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.

The Group measures the lease liabilities at the present value of the lease payments that are not paid at the commencement date. Lease payments includes fixed payments and the payments for terminating the lease with an option to terminate the lease, etc. Lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Group use the incremental borrowing rate. Interest on the lease liability in each period during the lease term shall be the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability, and is recognised in profit or loss.

Payments related to short-term leases and low-value asset leases are recognised in related asset costs or profit or loss on a straight-line basis over each lease term. Short-term lease is the lease that, at the commencement date, has a lease term of 12 months or less. Lease of low-value asset is the lease for which the individual underlying asset is of low value when it is new.

As the lessor, the income from operating lease is recognised as rental income on a straight-line basis over each lease period.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

30. Government grants

Government grants are recognised when the grants can be received and the Group can comply with all attached conditions. If a government grant is a monetary asset, it will be measured at the amount received or receivable. If a government grant is a non-monetary asset, it will be measured at its fair value. If it is unable to obtain its fair value reliably, it will be measured at its nominal amount.

Government grants for purchasing, building or forming long-term assets in other methods regulated in government documents are recognised as government grants related to assets. Judgements should be made based on the necessary basic conditions for obtaining the government grants when government documents are unclearly stated. Government grants with purchasing, building or forming long-term assets in other methods as basic condition, are recognised, as government grants related to assets, whereas the rest as government grants related to income.

Government grants related to income that compensate the future costs, expenses or losses are recorded as deferred income and recognised in profit or loss, or deducted costs against related costs, expenses or losses in the period of recognising the related expenses or costs; government grants related to income that compensate the incurred costs, expenses or losses are recognised in profit or loss, or deducted against related costs directly in the current period. Government grants related to assets are either deducted against the carrying amount of the assets, or recorded as deferred income. Government grants related to assets and recorded as deferred income are recognised in profit or loss on a systemic basis over the useful lives of the assets. Government grants measured at their nominal amounts are directly recognised in profit or loss for the current period. Where the related assets are sold, transferred, scraped or destroyed before the end of their useful lives, the undistributed deferred revenue shall be transferred to profit or loss for the period in which the assets are disposed. Government grants comprising of both assets-related portion and income-related portion are accounted separately, and those hard to distinguish are classified as income-related as a whole.

Government grants related to daily activities of the Group are included in other income or deducted against related costs or expenses in accordance with business nature. Government grants not related to daily activities of the Group are included in non-operating income or expenses.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

31. Income tax

Income tax comprises current and deferred income tax. Except to the extent that the tax arises from a transaction or event which is recognised directly in equity, all the income tax should be expensed or credited to profit or loss as appropriate.

The Group measures the current income tax liabilities or assets formed in the current period and previous periods according to the income tax amount which is required to pay or return expectedly under the regulations of tax law.

The Group measures deferred income tax using the statement of balance sheet liability method according to the temporary difference between the carrying amount of an asset or liability at the end of the reporting period and its tax base, and the temporary difference between the carrying amount of an item not recognised as an asset or liability at the end of the reporting period and its tax base.

Deferred income tax liabilities are recognised for all taxable temporary differences, except:

(1) The taxable temporary differences arise from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affect neither the accounting profit nor taxable income or deductible expenses.

(2) In respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not be reversed in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, the carry-forward of unused tax credits and any unused tax losses. Deferred income tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, the carry forward of unused tax credits and unused tax losses can be utilised, except:

(1) Where the deductible temporary differences arise from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affect neither the accounting profit nor taxable profit or loss.

(2) In respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred income tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

At the balance sheet date, the Group measures the deferred income tax assets and deferred income tax liabilities according to tax laws and regulations and based on applicable tax rate occurred in the period when the assets are repossessed or the liabilities are liquidated expectedly, which reflects the influence of the income tax on expectedly repossessed assets or liquidated liabilities at the balance sheet date.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

31. Income tax (continued)

At the balance sheet date, the Group reviews the carrying amount of the deferred income tax assets. The carrying amount of deferred income tax assets is reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred income tax asset to be utilised. At the balance sheet date, the Group reassesses the unrecognised deferred income tax assets and recognises deferred income tax assets within the limit that the amount of income tax payable is sufficient to reverse all of or part of deferred income tax assets.

If the Group has the legal right to settle current income tax assets and current income tax liabilities through net amount, and the deferred income tax is relevant to the same taxpayer and the same tax collection and administration department, the net amount, obtained after the deferred income tax assets and the deferred income tax liabilities are offset, is presented.

32. Employee benefits

Employee benefits refer to all forms of consideration or compensation given by the Group in exchange for service rendered by employees or for termination of employment relationship. Employee benefits include short-term employee benefits, post-employment benefits, termination benefits and other long-term employee benefits.

According to relevant Chinese laws and regulations, all employees of the Group within the territory of China must participate in employee social security plans, including pension schemes, medical insurance, housing fund and other welfare benefits, organised and administered by the governmental authorities. For Hong Kong employees of the Group, the Group participates in the Mandatory Provident Fund Scheme in accordance with the contribution ratio required by corresponding regulations.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

32. Employee benefits (continued)

The Group's obligation to the above social securities is to pay social pooling insurance fees to social insurance authorities in accordance with the prescribed percentage of total wages. The contribution shall be managed and paid to retired employees through labor and social welfare authorities in accordance with the provisions. There are no forfeited contributions in the social security plans.

The Group锟斤拷s employees in some regions of China have also participate in the employer-sponsored enterprise annuity fund (the 锟斤拷Annuity Fund锟斤拷). The Group shall contribute to the Annuity Fund in accordance with agreed bases and percentages. Forfeited contributions by those employees who leave the Annuity Fund prior to the full vesting of their contributions are not used to reduce the existing level of contributions and are recorded in the public account of the Annuity Fund to be attributed to the members of the Annuity Fund after fulfilling the approval procedures. In addition, the Group is not liable for any significant legal obligation or constructive obligation to further pay employee retirement benefits. Above expenses are recognised in profit or loss in the period in which they occur.

The Group pays various benefits expenses for employees who accept voluntary retirement before the normal retirement date in line with China锟斤拷s national standard as approved by the Group from the month after the early retirement through the normal retirement date, including the retirement pensions, and various insurance coordination fees to local social insurance authorities, etc. For early retirement benefits qualified for recognition, the salaries and social security contributions to be paid to and for the early retired employees

from the off-duty date to the normal retirement date are recognised by the Group as liabilities with a corresponding charge to the profit or loss for the current period.

The Group also operates deferred bonus plans for senior management and some of the key employees, which are accrued during the periods when employees provide services and are recognised as liabilities. The bonus is awarded based on the Group's annual performance appraisal indicators for the employees and the enterprises, and the payment is deferred.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

33. Measured at fair value

Fair value is the price obtained from selling an asset or paid for transferring a liability in an orderly transaction among market participants on the measurement date. The Group measures relevant assets or liabilities at fair value. It is assumed that the sale of the assets or the transfer of liabilities is carried out in the principal market for the assets or liabilities. In case of no principal market, the Group assumes that the transaction is carried out in the most advantageous market for the assets or liabilities. The principal market (or the most advantageous market) is the trade market that the Group can enter on the measurement date. The Group adopts the assumptions that market participants use to maximise their economic benefits when pricing the assets or liabilities.

To measure non-financial assets at fair value, consider the ability of market participants to generate economic benefits by using the asset for optimal purpose, or to sell the asset to other market participants who are able to use it for optimal purpose.

The Group adopts the valuation technique that is applicable in the current circumstances and contains sufficient available data and other information supports, choosing inputs with features of assets or liabilities that are consistent with those market participants consider in related transactions of assets or liabilities, and should give priority to relevant observable inputs. Only when relevant observable inputs are not available or feasible, unobservable inputs are adopted.

34. Contingent liabilities

Contingent liabilities are obligations arising from past events that may require the Group to assume. The Group does not recognise such obligations as they arise from events that cannot be fully controlled by the Group, or the outflow of economic benefits resulted from such obligations cannot be reliably measured. They are recognised as contingent liabilities when the above events that cannot be fully controlled by the Group occur or the outflow of economic benefits of such obligations can be reliably measured.

35. Summary of significant accounting judgements and accounting estimates

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the balance sheet date. However, the uncertainty of these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets and liabilities affected in the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

35. Summary of significant accounting judgements and accounting estimates (continued)

Significant judgements

In the process of applying the Group锟斤拷s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

(1) Classification of financial assets

The Group classifies its financial assets as financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets. These classifications require judgements of the management. In making these judgements, the Group considers the intention of holding these financial assets, the requirements of the Accounting Standards for Business Enterprises and their implications to the presentation in the financial statements.

(2) Unbundling and classification of hybrid contracts

The Group makes significant judgements on whether a written policy contains both insurance risk and other risks and whether the insurance risk and other risks are distinct and separately measurable. The result of such judgement affects the unbundling of insurance contracts.

In addition, the Group makes significant judgements on whether a written policy transfers insurance risk, whether transfer of insurance risk has commercial substance, and whether the transferred insurance risk is significant when performing significant insurance risk tests. The result of such judgement affects the classification of insurance contracts. Whether to unbundle a contract and different contract classifications would affect the accounting treatment and the Group锟斤拷s financial position and operating results.

(3) Measurement unit for insurance contracts

The Group shall make judgements on whether a group of insurance contracts锟斤拷 insurance risks are of the same nature. The result of such judgements affects the measurement results of insurance contract reserves.

(4) Provision for impairment of available-for-sale financial assets

The Group determines that provision for impairment of available-for-sale financial assets should be made when there has been a significant or prolonged decline in the fair value. The determination of what is significant or prolonged requires judgement of the management. When making such judgement, the Group considers the normal volatility of the security price, the length of the period over which the fair value is lower than cost, the magnitude of the decline in fair value and the financial position of the investee, etc.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

35. Summary of significant accounting judgements and accounting estimates (continued)

Significant judgements (continued)

(5) Determination of control over structured entities

When determining whether the Group controls the structured entities in which it acts as an asset manager, the Group considers all relevant facts and circumstances in assessing whether it is acting as an agent or as a principal to make decisions. If the Group is acting as a principal, it controls the structured entities. In assessing whether the Group is acting as a principal, the Group considers factors such as scope of the asset manager锟斤拷s decision-making authority in structured entities; substantial rights held by other parties, remuneration to which it is entitled and exposure to variability of returns by holding interest in the structured entities. Once the factors change because of the changes of relevant facts and circumstances, the Group will reassess.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial years, are detailed below:

(1) Measurement of insurance contract reserves

As at the balance sheet date, when measuring the insurance contract reserves, the Group needs to make a reasonable estimate of the amounts that the Group is required to pay in fulfilling the obligations under the insurance contracts. Such estimates are determined by calculating various possible outcomes and relevant probabilities based on information currently available as at the balance sheet date.

At the balance sheet date, the Group makes estimates of the assumptions used in the measurement of insurance contract reserves. The Group determines reasonable estimates of such assumptions based on information currently available as at the balance sheet date and certain risk margin is considered.

Unearned premium reserves

The main assumptions used in measuring unearned premium reserves include discount rates, insurance incident occurrence rates (mainly including mortality and morbidity), loss ratios, surrender rates, expense and policy dividend assumptions, etc.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

35. Summary of significant accounting judgements and accounting estimates (continued)

Estimation uncertainty (continued)

(1) Measurement of insurance contract reserves (continued)

Unearned premium reserves (continued)

(a) Discount rates

For insurance contracts whose future insurance benefits will not be affected by investment income of the corresponding investment portfolio, the discount rates are determined by base rate curve with comprehensive premium in consideration of the time value of money. The comprehensive premium is added by considering taxation impacts, the liquidity, conversion period, and other relevant factors. The ranges of discount rates used as at 31 December 2020 were from 3.05% to 4.80% and as at 31 December 2021 were from 2.84% to 4.80%.

For insurance contracts whose future insurance benefits will be affected by investment income of the corresponding investment portfolio, the discount rates are determined based on expected investment return rates of the corresponding investment portfolio in consideration of the time value of money. Discount rates used as at 31 December 2020 and 2021 were both 5.00%.

The discount rate assumption is affected by uncertain factors, such as future macro-economy, capital market, availability of investment channel of insurance funds, investment strategy and other factors. The Group determines discount rate assumption based on the information available as at the balance sheet date.

(b) Mortality and morbidity

Mortality assumption is determined based on the Group锟斤拷s historical mortality experiences as well as current and expected future development trends, etc. The Group presents its mortality assumptions using appropriate percentages of China Life Insurance Mortality Table (2010-2013).

Morbidity assumption is determined based on the industry锟斤拷s morbidity or the Group锟斤拷s products pricing assumption, analysis of historical morbidity experiences and expectations of current and future developments.

Mortality and morbidity assumptions are uncertain as they are affected by uncertain factors, such as national lifestyle changes in the future, future development of medical technologies, continuing advancements in social conditions and other factors. The risk margin is considered in the Group锟斤拷s mortality and morbidity assumptions.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

35. Summary of significant accounting judgements and accounting estimates (continued)

Estimation uncertainty (continued)

(1) Measurement of insurance contract reserves (continued)

Unearned premium reserves (continued)

The Group determines a reasonable estimate as its loss ratio assumptions based on analysis of its historical claim experience and future development trends.

(d) Surrender rates

Surrender rate assumptions are determined based on product types, the Group锟斤拷s historical experiences, and estimates on current and future expectations, and vary by interest rate, product type and sale channel.

The surrender rate assumption is affected by uncertain factors, such as future macro-economy and market competition. The Group determines surrender rate assumptions based on the information available as at the balance sheet date and risk margin is considered.

(e) Expense

The Group develops its expense assumptions based on its expense analysis and future expectation, including assumptions of acquisition costs, maintenance expenses and claim expenses.

The Group锟斤拷s expense assumption is affected by uncertain factors, such as inflation, and market competition. The Group uses information currently available as at the balance sheet date to determine expense assumptions and a risk adjustment is considered.

(f) Policy dividend

Policy dividend assumption is determined based on expected investment return rates of participating accounts, the Group锟斤拷s dividend policy, reasonable expectations of policyholders, etc.

The Group锟斤拷s policy dividend assumption is affected by the above factors. The Group uses information available as at the balance sheet date to determine policy dividend assumption and risk margin is considered.

III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)

35. Summary of significant accounting judgements and accounting estimates (continued)

Estimation uncertainty (continued)

(1) Measurement of insurance contract reserves (continued)

Claim reserves

The main assumption in measuring claim reserves is that the Group锟斤拷s past claims development experience can be used to project future claims development and hence ultimate claims costs. As such, these methods extrapolate the development of paid and incurred losses (Note XIII 1), average costs per claim and claim numbers based on the observed development of earlier years and expected loss ratios. Historical claims development is mainly analysed by accident period, but can also be further analysed by geographical area, as well as by significant business line and claim type. Large claims are usually separately addressed, either by being reserved at the face value of loss claim specialists estimated or separately projected in order to reflect their future development. In most cases, the assumptions used are those implicit in the historical claims development data on which the projections are based. Additional qualitative judgement is used to assess the extent to which past trends may not apply in the future (for example, changes in external factors such as one-off events, public attitudes to claims, market factors such as economic conditions, judicial decisions and government legislation, as well as changes in internal factors such as portfolio mix, policy conditions and claims handling procedures). And a reasonable estimate on the ultimate cost of claims will be made after considering all uncertainties involved.

(2) Fair values of financial assets determined using valuation techniques

Fair value, in the absence of an active market, is estimated by using valuation techniques, such as reference to prices used in the most recent market transactions between knowledgeable and willing parties, reference to the current fair value of another instrument which is substantially the same, a discounted cash flow analysis and option pricing models. For reference to other financial instruments, the instruments must have similar credit ratings.

For a discounted cash flow analysis, estimated future cash flows and discount rates are the best estimations made based on current market information and rates applicable to financial instruments with similar yields, credit quality and maturity characteristics. Estimated future cash flows are influenced by factors such as economic conditions, concentrations in specific industries, types of instruments or currencies, market liquidity and financial conditions of counterparties. Discount rates are influenced by risk-free interest rates and credit risk.

IV. CHANGE IN ACCOUNTING ESTIMATES

As at 31 December 2021, the Group used information currently available to determine above assumptions. Mainly due to change of the benchmark yield curve of discount rate for life and long-term health insurance reserves, life and long-term health insurance reserves after reinsurance increased by approximately RMB 14,621 million as at 31 December 2021 and profit before tax decreased by approximately RMB 14,621 million for 2021.

V. TAXES

The main types of taxes and tax rates applicable to the Group in China are set out below:

Corporate income tax

25% on its taxable income under current tax laws and relevant regulations

Value-added tax (锟斤拷VAT锟斤拷)

The taxable value-added amount (Tax payable is calculated using the taxable sales amount multiplied by the applicable tax rate less deductible VAT input of the current period) determined under current tax laws and relevant regulations, applicable tax rates: 3%, 5%, 6%, 9% or 13%

City maintenance and construction tax

1%, 5% or 7% of the VAT actually paid

Educational supplementary tax

3% of the VAT actually paid

Local educational supplementary tax

2% of the VAT actually paid

The main types of taxes and tax rates of payable by the Group with regard to its overseas businesses are paid in accordance with relevant regulations of local tax laws.

The taxes to be paid by the Group will be verified by relevant tax authorities.

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

13. Restricted statutory deposits (continued)

31 December 2020

Amount

Storage

Period

CPIC Property

China Minsheng Bank

1,162

Term deposits

5 years

China Zheshang Bank

1,100

Term deposits

5 years

Industrial Bank

440

Term deposits

5 years and 1 month

Bank of Communications

368

Term deposits

5 years

China Minsheng Bank

274

Term deposits

5 years and 1 month

Bank of Communications

250

Term deposits

5 years and 1 month

Bank of Shanghai

200

Term deposits

5 years

China CITIC Bank

100

Term deposits

5 years

Sub-total

3,894

CPIC Life

China Guangfa Bank

500

Term deposits

5 years

China Construction Bank

364

Term deposits

3 years

Agricultural Bank of China

320

Term deposits

3 years

Bank of Nanjing

260

Term deposits

5 years and 1 month

China Minsheng Bank

240

Term deposits

5 years and 1 month

Sub-total

1,684

Changjiang Pension

Bank of Hangzhou

300

Term deposits

5 years and 1 month

Bank of Communications

200

Term deposits

5 years and 1 month

Bank of Nanjing

200

Term deposits

5 years and 1 month

China CITIC Bank

100

Term deposits

5 years and 1 month

Sub-total

800

CPIC Health

China Zheshang Bank

200

Term deposits

5 years

Bank of Communications

140

Term deposits

5 years

Sub-total

340

PAAIC

China CITIC Bank

Term deposits

3 years

Agricultural Bank of China

Term deposits

3 years

Shanghai Pudong Development Bank

Term deposits

3 years

Bank of Communications

Term deposits

3 years

Sub-total

140

Total

6,858

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

14. Investment properties

Buildings

Cost:

1 January 2020

10,638

Additions

Transfer to fixed assets, net

(102)

31 December 2020

10,558

Additions

Transfer to fixed assets, net

(41)

31 December 2021

10,543

Accumulated depreciation:

1 January 2020

(2,355)

Charge for the year

(335)

Transfer from fixed assets, net

(2)

31 December 2020

(2,692)

Charge for the year

(329)

Transfer from fixed assets, net

(8)

31 December 2021

(3,029)

Carrying amount:

31 December 2021

7,514

31 December 2020

7,866

The fair values of investment properties of the Group as at 31 December 2021 amounted to approximately RMB 11,538 million, which were estimated by the Group based on the independent appraisers锟斤拷 valuations (31 December 2020: RMB 11,470 million).

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

15. Fixed assets

Buildings

Motor vehicles

Other equipment

Total

Cost:

1 January 2020

18,143

1,147

5,632

24,922

Procurement

616

749

Transfer from construction in progress

863

Transfer from investment properties, net

102

Decrease

(131)

(75)

(521)

(727)

31 December 2020

19,049

1,133

5,727

25,909

Procurement

433

526

Transfer from construction in progress

1,880

Transfer from investment properties, net

Decrease

(5)

(47)

(347)

(399)

31 December 2021

21,032

1,112

5,813

27,957

Accumulated depreciation:

1 January 2020

(4,148)

(810)

(3,577)

(8,535)

Depreciation charge

(589)

(97)

(734)

(1,420)

Transfer to investment properties, net

Decrease

495

569

31 December 2020

(4,733)

(835)

(3,816)

(9,384)

Depreciation charge

(643)

(90)

(721)

(1,454)

Transfer to investment properties, net

Decrease

336

386

31 December 2021

(5,363)

(880)

(4,201)

(10,444)

Provision for impairment loss:

1 January 2020, 31 December 2020,

and 31 December 2021

(9)

Carrying amount:

31 December 2021

15,660

232

1,612

17,504

31 December 2020

14,307

298

1,911

16,516

As at 31 December 2021, the Group锟斤拷s motor vehicles and other equipment with a cost of approximately RMB 3,281 million (31 December 2020: RMB 2,771 million) are fully depreciated but still in use.

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

16. Construction in progress

The Group锟斤拷s construction in progress mainly comprises office building construction projects, and the movements are detailed as follows:

31 December 2021

Item

Budget

Opening balance

Increase in current year

Transfer to fixed assets in current year

Transfer to intangible assets in current year

Transfer to long-term prepaid expenses in current year

Disposal

Ending balance

% of project investment in budget

Zhejiang

699

223

347

(3)

567

82%

Shanghai

1,083

494

(1)

(62)

466

49%

Fujian

816

261

268

33%

Liaoning

166

158

(1)

157

95%

Jiangsu

312

(12)

36%

Guangdong

984

868

(814)

89%

Guizhou

37%

Yunnan

462

107

(178)

41%

Sichuan

1,363

353

392

(745)

55%

Chengdu

(42)

74%

Others

966

167

(84)

(47)

21%

1,822

1,881

(1,880)

(47)

(62)

1,714

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

16. Construction in progress (continued)

31 December 2020

Item

Budget

Opening balance

Increase in current year

Transfer to fixed assets in current year

Transfer to intangible assets in current year

Transfer to long-term prepaid expenses in current year

Disposal

Ending balance

% of project investment in budget

Guangdong

944

853

868

92%

Sichuan

587

119

234

353

60%

Zhejiang

637

206

223

35%

Liaoning

349

320

(164)

158

92%

Yunnan

125

66%

Shanghai

(3)

66%

Chengdu

47%

Jiangsu

166

(78)

64%

Guizhou

(53)

68%

Hubei

298

256

(282)

95%

Jilin

145

115

(129)

89%

Hebei

(39)

89%

Hunan

(26)

96%

Others

1,391

(89)

(34)

12%

1,987

732

(863)

(34)

1,822

The capital sources of the Group锟斤拷s construction in progress are all self-owned funds, and there is no capitalised interest expenses in the balance of construction in progress.

There was no such case as the recoverable amount was lower than the carrying amount of the construction in progress at the end of the year, thus no provision for impairment of construction in progress was required.

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

17. Right-of-use assets

Buildings

Motor vehicles

Other equipment

Total

Cost:

1 January 2020

5,386

5,407

Increase

1,295

1,300

Decrease

(582)

(1)

(2)

(585)

31 December 2020

6,099

6,122

Increase

1,182

1,190

Decrease

(938)

(2)

(5)

(945)

31 December 2021

6,343

6,367

Accumulated depreciation:

1 January 2020

(1,273)

(1)

(3)

(1,277)

Depreciation charge

(1,504)

(2)

(3)

(1,509)

Decrease

460

462

31 December 2020

(2,317)

(3)

(4)

(2,324)

Depreciation charge

(1,479)

(3)

(1,485)

Decrease

914

917

31 December 2021

(2,882)

(4)

(6)

(2,892)

Carrying amount:

31 December 2021

3,461

3,475

31 December 2020

3,782

3,798

There was no such case as the recoverable amount was lower than the carrying amount of the right-of-use assets at the end of the year, thus no provision for impairment of right-of-use assets was required.

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

18. Intangible assets

Land use rights

Software use rights

License

Total

Cost:

1 January 2020

705

6,254

646

7,605

Increase

715

1,046

1,761

Transfers from construction in progress

Decrease

(5)

31 December 2020

1,420

7,329

646

9,395

Increase

707

928

1,635

Transfers from construction in progress

Decrease

(6)

31 December 2021

2,127

8,298

646

11,071

Accumulated Amortisation:

1 January 2020

(25)

(3,928)

(3,953)

Amortisation

(25)

(725)

(750)

Decrease

31 December 2020

(50)

(4,652)

(4,702)

Amortisation

(47)

(819)

(866)

Decrease

31 December 2021

(97)

(5,465)

(5,562)

Carrying amount:

31 December 2021

2,030

2,833

646

5,509

31 December 2020

1,370

2,677

646

4,693

There was no such case as the recoverable amount was lower than the carrying amount of the intangible assets at the end of the year, thus no provision for impairment of intangible assets was required.

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

19. Goodwill

31 December 2021

Opening balance

Increase

Decrease

Ending balance

Changjiang Pension

149

City Island

813

CPIC Funds

395

Borui Heming

Sub-total

1,357

1,372

Less: Provision for impairment

Net value

1,357

1,372

31 December 2020

Opening balance

Increase

Decrease

Ending balance

Changjiang Pension

149

City Island

813

CPIC Funds

395

Sub-total

1,357

Less: Provision for impairment

Net value

1,357

The Group tests annually whether goodwill has suffered any impairment. The recoverable amount of asset groups and groups of asset groups is the present value of the future cash flows expected to be derived from them. As at 31 December 2021, the result of the test indicates that the recoverable amount of an asset group or a group of asset groups, including the allocated goodwill, is greater than its carrying amount, thus no impairment provision is recognised.

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

20. Deferred income tax assets and liabilities

31 December 2021

31 December 2020

Deferred income tax assets

Deferred

income tax

Temporary

differences

Deferred

income tax

Temporary

differences

Insurance contract reserves

1,989

7,956

418

1,672

Changes in fair value of financial instruments

(974)

(3,896)

Provision for asset impairment

275

1,100

Others

708

2,832

399

1,596

Sub-total

1,998

7,992

845

3,380

Deferred income tax liabilities

Deferred

income tax

Temporary

differences

Deferred

income tax

Temporary

differences

Insurance contract reserves

1,038

4,152

1,266

5,064

Changes in fair value of financial instruments

(5,867)

(23,468)

(7,482)

(29,928)

Commission and brokerage expenses

360

1,440

402

1,608

Provision for asset impairment

2,014

8,056

1,477

5,908

Adjustment in fair value arising from acquisition of subsidiaries

(858)

(3,432)

(892)

(3,568)

Others

(288)

(1,152)

174

696

Sub-total

(3,601)

(14,404)

(5,055)

(20,220)

Net value

(1,603)

(6,412)

(4,210)

(16,840)

Deferred income tax assets and liabilities of the Group presented above reflect the net amount after each taxpayer锟斤拷s offsetting within their entity level.

Details of movements in deferred income tax assets and liabilities are as follows:

Insurance contract

reserves

Fair

value

Commission

and brokerage expenses

Provision for asset impairments

Deductible losses

Adjustment in fair value arising from acquisition of subsidiaries

Others

Total

1 January 2020

1,267

(4,216)

473

787

(921)

559

(2,051)

Recognised in

profit or loss

417

(71)

704

1,100

Recognised in

equity

(3,259)

31 December 2020

1,684

(7,468)

402

1,491

(892)

573

(4,210)

Recognised in

profit or loss

1,343

(263)

(42)

798

(153)

1,717

Recognised in

equity

890

31 December 2021

3,027

(6,841)

360

2,289

(858)

420

(1,603)

As at 31 December 2021, there was no significant deductible temporary differences and deductible losses that were not recognised as deferred income tax assets.

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

21. Other assets

31 December

2021

31 December 2020

Other receivables

(1)

11,413

13,411

Improvements of right-of-use assets

924

955

Others

1,993

1,446

Total

14,330

15,812

(1) Other receivables

31 December

2021

31 December 2020

Receivable from securities sold but not settled

2,469

5,133

Due from external undertakings

1,976

1,373

Due from related parties*

1,774

1,614

Prepaid tax

779

1,292

Due from agents

205

278

Deposits

186

173

Co-insurance receivables

101

Others

4,114

3,624

Sub-total

11,596

13,588

Less: Provision for bad debts

(183)

(177)

Net value

11,413

13,411

* As at 31 December 2021, the payments made by the Group on behalf of Binjiang-Xiangrui for the purchase of land and related taxes and expenses amounted to approximately RMB 1,774 million (31 December 2020: RMB 1,614 million), which accounting for 15% (31 December 2020: 12%) of the total other receivables.

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

21. Other assets (continued)

(1) Other receivables (continued)

The category of other receivables is analysed below:

31 December 2021

Ending balance

% of total balance

Provision for bad debts

Provision

Percentage

Amounts that are not individually

significant and provisions for

impairment considered on the

grouping basis

4,809

41%

(157)

Amounts that are not individually

significant but provisions for

impairment considered on the

individual basis

6,787

59%

(26)

Total

11,596

100%

(183)

31 December 2020

Ending balance

% of total balance

Provision for bad debts

Provision

Percentage

Amounts that are not individually

significant and provisions for

impairment considered on the

grouping basis

4,872

36%

(167)

Amounts that are not individually

significant but provisions for

impairment considered on the

individual basis

8,716

64%

(10)

Total

13,588

100%

(177)

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

21. Other assets (continued)

(1) Other receivables (continued)

The aging of other receivables and related provisions for bad debts are analysed as follows:

Aging

31 December 2021

Ending balance

% of total balance

Provision for bad debts

Net value

Within 3 months (inclusive)

8,087

70%

8,087

3 months to 1 year (inclusive)

1,337

12%

(15)

1,322

1 to 3 years (inclusive)

403

(36)

367

Over 3 years

1,769

15%

(132)

1,637

Total

11,596

100%

(183)

11,413

Aging

31 December 2020

Ending balance

% of total balance

Provision for bad debts

Net value

Within 3 months (inclusive)

10,782

79%

10,782

3 months to 1 year (inclusive)

681

(7)

674

1 to 3 years (inclusive)

536

(34)

502

Over 3 years

1,589

12%

(136)

1,453

Total

13,588

100%

(177)

13,411

The top five other receivables of the Group are as follows:

31 December

2021

31 December 2020

Total amount of the top five other receivables

2,168

1,868

Total provision for bad debts

(4)

(3)

% of total other receivables

19%

14%

The account balance does not include any amount attributable to shareholders holding 5% or more of the voting rights of the Company.

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

22. Provision for impairment of assets

31 December 2021

Opening balance

Charge for the year

Reversal

Written-off and others

Ending balance

Provision for bad debts

1,041

293

(30)

(17)

1,287

- Premium receivables

655

242

(18)

(17)

862

- Reinsurance receivables

165

198

- Interest receivables

- Other receivables

177

(12)

183

Provision for impairment of available-for-sale financial assets

5,134

4,396

(201)

(924)

8,405

- Debt instruments

1,895

285

(201)

(75)

1,904

- Equity instruments

3,239

4,111

(849)

6,501

Provision for impairment of held-to-maturity financial assets

191

217

Provision for impairment of investments classified as loans and receivables

323

(43)

280

Provision for losses on loans

Provision for impairment of fixed assets

Provision for impairment of debt assets

Provision for impairment of other long-term assets

(16)

Total

6,764

4,715

(274)

(957)

10,248

31 December 2020

Opening balance

Charge for the year

Reversal

Written-off and others

Ending balance

Provision for bad debts

931

212

(60)

(42)

1,041

- Premium receivables

523

202

(29)

(41)

655

- Reinsurance receivables

167

(2)

165

- Interest receivables

- Other receivables

202

(29)

(1)

177

Provision for impairment of available-for-sale financial assets

2,669

3,942

(17)

(1,460)

5,134

- Debt instruments

621

1,244

(17)

1,895

- Equity instruments

2,048

2,698

(1,507)

3,239

Provision for impairment of held-to-maturity financial assets

191

(47)

191

Provision for impairment of investments classified as loans and receivables

197

126

323

Provision for losses on loans

(2)

Provision for impairment of fixed assets

Provision for impairment of debt assets

Provision for impairment of other long-term assets

Total

3,921

4,471

(77)

(1,551)

6,764

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

32. Bonds payable

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

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

Issuer

31 December 2020

Issuance

Amortisation of bond premium or discount

Redemption in current year

31 December

2021

CPIC Property

9,991

9,995

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

33. Other liabilities

31 December

2021

31 December 2020

Other payables

(1)

35,713

29,374

Accrued expenses

2,238

2,839

Insurance security fund

1,138

632

Others

1,914

1,335

Total

41,003

34,180

(1) Other payables

31 December

2021

31 December 2020

Payables to third-party investors of consolidated structured entities

13,033

4,411

Payables related to asset-backed securities

11,775

13,140

Payables for securities purchased but not settled

2,699

4,182

Payables to be claimed by customers

1,957

1,652

Payables for purchases

1,311

1,281

Deposits

922

1,021

Co-insurance payable

875

520

Payables for construction and purchasing office building

674

Compulsory automobile insurance rescue fund

377

304

Reimbursement payables

300

785

Others

1,790

2,042

Total

35,713

29,374

The account balance does not include any amount attributable to shareholders holding 5% or more of the voting rights of the Company.

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

34. Issued capital

Shares of the Company as well as the percentages of shareholding are shown below.

1 January 2021

Increase of number of shares

31 December 2021

Number of shares

Percentage of shareholding

Newly issued

Others

Number of shares

Percentage of shareholding

I. Shares with trading restrictions

Shares held by domestic non-state-owned legal persons

Sub-total

II. Shares without trading restrictions

Ordinary shares denominated in RMB

6,844

71%

6,844

71%

Foreign shares listed overseas

2,776

29%

2,776

29%

Sub-total

9,620

100%

9,620

100%

III. Total

9,620

100%

9,620

100%

35. Capital reserves

31 December 2021

31 December 2020

Capital premium

79,008

Impact of capital injection to subsidiaries, etc.

2,110

2,127

Impact of equity transactions with non-controlling interests

(131)

Impact of other changes in the equity of investees

accounted for using the equity method

Transaction with non-controlling interests

(1,413)

Impact of phased business combinations

Others

Total

79,662

79,788

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

36. Surplus reserves

Statutory surplus reserve (the 锟斤拷SSR锟斤拷)

1 January 2020

4,835

Appropriations in 2020

279

31 December 2020 and 31 December 2021

5,114

37. General reserves

In accordance with relevant regulations, general risk provisions should be made to cover catastrophic risks or losses as incurred by companies engaged in the insurance, banking, trust, securities, futures, fund management, leasing and financial guarantee businesses. Companies undertaking insurance activities are required to set aside 10% of their net profit to general reserves, while companies undertaking asset management activities are required to set aside 10% of their management fee income to the risk reserves until the balance reaches 1% of the balance of products under management.

In accordance with relevant regulations, as part of the profit distribution and as presented in their annual financial statements, the Group锟斤拷s subsidiaries engaged in the above-mentioned businesses make appropriations to their general reserves on the basis of their annual net profit, year-end risk assets or management fee income from products under management where appropriate. Such general reserves cannot be used for dividends distribution or conversion to capital.

General reserves

1 January 2020

14,329

Appropriations

2,500

31 December 2020

16,829

Appropriations

2,692

31 December 2021

19,521

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

38. Profit distribution and retained profits

According to the Articles of Association of the Company, the amount of retained profits available for distribution of the Company should be the lower of the amount determined under CASs and the amount determined under Hong Kong Financial Reporting Standards, or determined under CASs if permissible by local rules where the Company is listed. According to the Articles of Association of the Company and applicable laws and regulations, the Company锟斤拷s profit distribution is made the following order:

(1) Making up for losses brought forward from prior years;

(2) Appropriating to SSR at 10% of the net profit;

(3) Making appropriation to the discretionary surplus reserve (锟斤拷DSR锟斤拷) in accordance with the resolution of the general shareholders锟斤拷 meeting; and

(4) Paying dividends to shareholders.

The Company can cease the appropriation to SSR when SSR accumulates to more than 50% of the registered capital. The SSR may be used to make up for losses, if any, and, subject to the approval of the general shareholders锟斤拷 meeting, may also be converted into capital to make to fund an issue of new shares to shareholders on a proportionate basis. However, the conversion of SSR to capital should not bring the retained SSR to below 25% of the registered capital.

The balance of SSR reached 50% of the respective registered capital. The Company does not set aside SSR in 2021.

Pursuant to the resolution of the 15th meeting of the 9th Board of Directors of the Company held on 25 March 2022, a final dividend of approximately RMB 9,620 million (equivalent to annual cash dividend of RMB 1.0 per share (including tax)) was proposed. The profit distribution plan is subject to the approval of the general shareholders锟斤拷 meeting.

Of the Group锟斤拷s retained profits in the consolidated financial statements, RMB 16,388 million as at 31 December 2021 (31 December 2020: RMB 15,647 million) represents the Company锟斤拷s share of its subsidiaries锟斤拷 surplus reserve fund. The Company锟斤拷s share of surplus reserve fund appropriated by subsidiaries in the year of 2021 amounted to RMB 741 million (2020: RMB 3,071 million).

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

39. Non-controlling interests

31 December

2021

31 December 2020

CPIC Property

737

681

CPIC Life

1,735

1,608

Changjiang Pension

1,580

1,459

CPIC Funds

539

523

CPIC Health

322

PAAIC

931

873

Pacific Care Home at Dali

142

145

Total

5,664

5,611

40. Gross written premiums

(1) The breakdown of the Group's insurance business income by line of products is as follows:

2021

2020

Property and casualty insurance:

Automobile insurance

91,800

95,919

Health insurance

13,283

8,893

Liability insurance

11,032

9,002

Agricultural insurance

10,551

9,574

Guarantee insurance

7,334

6,690

Other insurances

20,611

19,644

Sub-total

154,611

149,722

Life insurance:

Individual insurance

- Life insurance

106,629

95,467

- Participating insurance

86,737

97,318

- Universal insurance

101

- Short-term accident and health insurance

6,094

9,120

Group insurance

- Life insurance

528

475

- Short-term accident and health insurance

12,085

9,861

Sub-total

212,171

212,342

Total

366,782

362,064

(2) The Group锟斤拷s gross written premiums with the top five customers is listed below:

2021

2020

Gross written premiums of the top five customers

2,066

2,144

% of gross written premiums

0.56%

0.59%

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

41. Net change in unearned premium reserves

2021

2020

Unearned premium reserves

- Direct insurance contracts

2,679

6,671

- Assumed reinsurance contracts

165

Sub-total

2,690

6,836

Unearned premium reserves recovered from reinsurers

- Direct insurance contracts

(434)

(1,108)

- Assumed reinsurance contracts

(44)

Sub-total

(377)

(1,152)

Net

2,313

5,684

42. Investment income

2021

2020

Net gains on disposal of stock investments

17,778

16,646

Net gains on disposal of fund investments

3,581

1,833

Net gains on disposal of bond investments

454

463

Interest on securities purchased under agreements to resell

191

288

Interest income from debt investments

50,680

47,816

Interest income from other fixed-interest investments

12,760

11,982

Fund dividend income

1,570

1,452

Stock dividend income

3,163

2,769

Income from other equity investments

4,433

3,124

Share of profits of associates and joint ventures

799

512

Others

528

Total

95,457

87,413

As at the balance sheet date, there was no significant restriction on the repatriation of the

Group's investment income.

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

43. Gains arising from changes in fair value

2021

2020

Bond investments

(144)

Fund investments

Derivatives

118

140

Stock investments

Wealth management products and other equity instruments

931

Total

1,163

44. Other operating income

2021

2020

Income from assets management fee

2,673

2,385

Rental income from investment properties

742

745

Amortisation of initial policy fee and account management fee

382

262

Others

917

911

Total

4,714

4,303

45. Gains on disposal of assets

2021

2020

Gains on disposal of fixed assets

46. Surrenders

2021

2020

Individual life insurance

- Direct insurance contracts

20,349

12,913

- Reinsurance contracts

1,944

1,484

Group life insurance

- Direct insurance contracts

Total

22,330

14,421

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

47. Claims

2021

2020

Indemnity

- Direct insurance contracts

106,034

92,712

- Assumed reinsurance contracts

607

381

Sub-total

106,641

93,093

Payment upon maturity - direct insurance contracts

14,291

24,746

Payment upon maturity - reinsurance contracts

Payment of annuity - direct insurance contracts

14,641

14,530

Payment upon death, injury or medical treatment - direct insurance contracts

13,169

10,480

Payment upon death, injury or medical treatment - reinsurance contracts

Total

148,749

142,851

The breakdown of the Group's claims by types of insurance is as follows:

2021

2020

Property and casualty insurance:

Automobile insurance

61,453

56,100

Agricultural insurance

8,086

7,085

Health insurance

7,293

5,228

Liability insurance

4,837

3,840

Commercial property insurance

4,198

3,187

Other insurances

8,296

7,571

Sub-total

94,163

83,011

Life insurance:

Individual insurance

- Life insurance

18,172

15,570

- Participating insurance

23,216

33,523

- Universal insurance

- Short-term accident and health insurance

2,980

2,679

Group insurance

- Life insurance

562

520

- Participating insurance

- Universal insurance

- Short-term accident and health insurance

9,498

7,403

Sub-total

54,586

59,840

Total

148,749

142,851

VII. NOTES TO THE FINANCIAL STATEMENTS (continued)

48. Changes in insurance contract reserves

2021

2020

Changes in claim reserves

- Direct insurance contracts

10,983

4,616

- Assumed reinsurance contracts

295

Sub-total

11,008

4,911

Changes in life insurance reserves

- Direct insurance contracts

116,902

104,943

- Assumed reinsurance contracts

184

1,881

Sub-total

117,086

106,824

Changes in long-term health insurance reserves

- Direct insurance contracts

27,002

26,449

Total

155,096

138,184

The particulars of changes in claim reserves under direct insurance contracts are as follows:

2021

2020

Incurred and reported claim reserves

2,093

2,361

IBNR reserves

8,941

1,596

Claim expense reserves

(51)

659

Total

10,983

4,616

49. Insurance contract reserves recovered from reinsurers

2021

2020

Recovery of claim reserves

- Direct insurance contracts

2,137

381

- Assumed reinsurance contracts

(265)

Recovery of life insurance reserves

- Direct insurance contracts

(69)

Recovery of long-term health insurance reserves

- Direct insurance contracts

767

664

Total

2,737

1,021

X. RELATED PARTIES AND RELATED PARTY TRANSACTIONS (continued)

2. Related party relationships (continued)

(3) Other major related parties (continued)

Name of entity

Relationship with the Company

Taijiashan

Associate of the Company

Sci-Tech Innovation II

Associate of the Company

China Insurance Rongxin

Associate of the Company

The Company锟斤拷s enterprise annuity plan

Enterprise annuity fund established by the Group

CPIC Property锟斤拷s enterprise annuity plan

Enterprise annuity fund established by the Group

CPIC Life锟斤拷s enterprise annuity plan

Enterprise annuity fund established by the Group

CPIC Asset Management锟斤拷s enterprise annuity plan

Enterprise annuity fund established by the Group

CPIC Online Services锟斤拷s enterprise annuity plan

Enterprise annuity fund established by the Group

CPIC Health锟斤拷s enterprise annuity plan

Enterprise annuity fund established by the Group

CPIC Senior Living Investment锟斤拷s enterprise annuity plan

Enterprise annuity fund established by the Group

PAAIC锟斤拷s enterprise annuity plan

Enterprise annuity fund established by the Group

CPIC Real Estate锟斤拷s enterprise annuity plan

Enterprise annuity fund established by the Group

Pacific Medical & Healthcare锟斤拷s enterprise annuity plan

Enterprise annuity fund established by the Group

CPIC Fund锟斤拷s enterprise annuity plan

Enterprise annuity fund established by the Group

Pacific Insurance Agency enterprise annuity plan

Enterprise annuity fund established by the Group

Hwabao WP Fund Management Co., Ltd.

Company of which the Group锟斤拷s related natural persons serve as directors or senior management personnel

Orient Securities Company Limited

Company of which the Group锟斤拷s related natural persons serve as directors or senior management personnel

Haitong Securities Co., Ltd.

Company of which the Group锟斤拷s related natural persons serve as directors or senior management personnel

Shanghai Haiyan Investment Management Co., Ltd.

Company of which the Group锟斤拷s related natural persons serve as directors or senior management personnel

Swiss Reinsurance Company Ltd

Company of which the Group锟斤拷s related natural persons serve as directors or senior management personnel

X. RELATED PARTIES AND RELATED PARTY TRANSACTIONS (continued)

3. Major transactions with related parties

3.1 Major transactions between the Group and related parties

(1) Sale of insurance contracts

2021

2020

Shanghai Tobacco Group Co., Ltd.

Shanghai Rural Commercial Bank Co., Ltd.^Note

Shanghai State-Owned Assets Operation Co., Ltd.

Shanghai International Group Co., Ltd.

Haitong Securities Co., Ltd.

China Baowu Steel Group Corporation Limited

Orient Securities Company Limited

Total

The Group锟斤拷s above related party transactions were entered into based on normal commercial terms during the normal course of insurance business. In 2021, premiums from related parties accounted for 0.01% (in 2020: 0.01 %).

(2) Fund subscription and redemption transactions

2021

2020

Hwabao WP Fund Management Co., Ltd.

819

1,289

(3) Bond trading

2021

2020

Haitong Securities Co., Ltd.

910

Shanghai Rural Commercial Bank Co., Ltd.^Note

Total

1,009

(4) Pledged repo transactions

2021

2020

Shanghai Rural Commercial Bank Co., Ltd.^Note

2,362

Taikang Insurance Group Co., Ltd.^Note

Total

2,402

X. RELATED PARTIES AND RELATED PARTY TRANSACTIONS (continued)

3. Major transactions with related parties (continued)

3.1 Major transactions between the Group and related parties (continued)

(5) Transaction of asset management products

2021

2020

Orient Securities Company Limited

(6) Distribution of cash dividends

2021

2020

Shenergy (Group) Company Limited

1,792

1,693

Hwabao Investments Co., Ltd.

1,670

1,541

Shanghai State-Owned Assets Operation Co., Ltd.

699

703

Shanghai Haiyan Investment Management Co., Ltd.

659

634

Total

4,820

4,571

(7) Deposits

2021

2020

Shanghai Rural Commercial Bank Co., Ltd.^Note

105

(8) Premiums ceded to reinsurers

2021

2020

Swiss Reinsurance Company Ltd ^Note

1,900

(9) Expense recoveries from reinsurers

2021

2020

Swiss Reinsurance Company Ltd ^Note

775

(10) Claim recoveries from reinsurers

2021

2020

Swiss Reinsurance Company Ltd ^Note

1,217

X. RELATED PARTIES AND RELATED PARTY TRANSACTIONS (continued)

3. Major transactions with related parties (continued)

3.1 Major transactions between the Group and related parties (continued)

(11) Remuneration of key management

2021

2020

Salary and other benefits

(12) The related transactions between the Group and the established enterprise annuity fund during the years are as follows:

2021

2020

Contribution to the enterprise annuity plan

477

404

(13) The major related transactions between the Group and joint ventures during the years are as follows:

2021

2020

Binjiang-Xiangrui

Rental fees for leasing office buildings of Binjiang

Xiangrui

Payments made on behalf of Binjiang-Xiangrui for the purchase of land, construction cost and related taxes

160

Total

239

Ruiyongjing Real Estate

Grant loans

837

2,381

Note: The transaction amount is based on the period during which the entity was identified as a related party of the Group during the reporting period.

X. RELATED PARTIES AND RELATED PARTY TRANSACTIONS (continued)

3. Major transactions with related parties (continued)

3.2 Major transactions between the Company and related parties

(1) The major related transactions between the Company and subsidiaries during the years are as follows:

2021

2020

Purchase of insurance contracts

CPIC Property

Rental income from office building

CPIC Property

CPIC Life

Changjiang Pension

CPIC Senior Living Investment

CPIC Health

Pacific Insurance Agency

Total

Shared service centre fee

CPIC Property

262

221

CPIC Life

258

181

CPIC Health

CPIC Asset Management

Changjiang Pension

CPIC Senior Living Investment

CPIC Online Services

PAAIC

Total

561

426

X. RELATED PARTIES AND RELATED PARTY TRANSACTIONS (continued)

3. Major transactions with related parties (continued)

3.2 Major transactions between the Company and related parties (continued)

(1) The major related transactions between the Company and subsidiaries during the years

are as follows (continued):

2021

2020

Asset management fee

CPIC Asset Management

Medical examination fee

CPIC Health

Rental fee

CPIC Real Estate

CPIC Property

CPIC Life

Total

Cash dividends received

CPIC Life

9,932

16,552

CPIC Property

2,493

1,918

CPIC Asset Management

200

213

Total

12,625

18,683

Capital injection to subsidiaries

CPIC Health

1,616

The rent of the office building charged by the Company from CPIC Property, CPIC Life, Changjiang Pension, CPIC Senior Living Investment, CPIC Health and Pacific Insurance Agency is determined at the price negotiated by both parties. The shared service centre fee charged by the Company from CPIC Life, CPIC Property, CPIC Asset Management, CPIC Health, CPIC Senior Living Investment, CPIC Online Services, Changjiang Pension and PAAIC is based on the cost of the service provider and distributed in the proportion mutually agreed by both parties. The rent of the office building paid by the Company to CPIC Real Estate, CPIC Property and CPIC Life is determined at the price negotiated by both parties. The asset management fee charged by CPIC Asset Management to the Company shall be determined by considering the type of entrusted assets, the size of the entrusted assets and the actual operating costs. The medical examination fee paid by the Company to CPIC Health is determined at the price negotiated by both parties. The Company's capital injection to CPIC Health is subject to approval from the CBIRC, and is currently accounted for as other receivables.

X. RELATED PARTIES AND RELATED PARTY TRANSACTIONS (continued)

3. Major transactions with related parties (continued)

3.2 Major transactions between the Company and related parties (continued)

(2) The major related transactions between the Company and other related parties of the

Group during the years are as follows:

2021

2020

Fund subscription and redemption transactions

Hwabao WP Fund Management Co., Ltd.

Bond trading

Haitong Securities Co., Ltd.

500

Rental fees for leasing office buildings

Binjiang Xiangrui

Total

560

4. Receivables from and payables to related parties

(1) Receivables and payables between the Company and its subsidiaries are as follows:

31 December

2021

31 December 2020

Dividends receivable

CPIC H.K.

Other receivables

CPIC Health

1,630

CPIC Life

358

CPIC Property

310

136

CPIC Asset Management

Changjiang Pension

CPIC Senior Living Investment

Total

2,325

227

Other payables

CPIC Asset Management

Changjiang Pension

Total

X. RELATED PARTIES AND RELATED PARTY TRANSACTIONS (continued)

4. Receivables from and payables to related parties (continued)

(2) Receivables between the Group and its joint ventures are as follows:

31 December

2021

31 December 2020

Other receivables

Binjiang-Xiangrui

1,774

1,614

Investments classified as loans and receivables

Ruiyongjing Real Estate

3,454

2,617

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

(3) Receivables and payables between the Group and other related parties are as follows:

31 December

2021

31 December 2020

Reinsurance receivables

Swiss Reinsurance Company Ltd

1,024

819

Reinsurance payables

Swiss Reinsurance Company Ltd

788

507

XI. CONTINGENCIES

In light of the nature of the insurance business, the Group makes estimates for contingencies and legal proceedings in the ordinary course of business, both in the capacity as plaintiff or defendant in litigation and as claimant or respondent in arbitration proceedings. Legal proceedings mostly involve claims on the Group锟斤拷s insurance policies. Provisions have been made for the probable losses to the Group, including those claims where directors can reasonably estimate the outcome of the litigations taking into account legal advice, if any. No provision is made for contingencies and legal proceedings when the outcome cannot be reasonably estimated or the probability of loss is extremely low.

In addition to the legal proceedings of the above natures, as at 31 December 2021, the Group was the defendant in certain pending litigations. Provisions were made for the possible losses based on best estimate by the directors and the Group would only be contingently liable for any claim that is in excess of what had been provided. No provision was made for contingencies and legal proceedings when the outcome cannot be reasonably estimated or the probability of loss is extremely low.

XII. COMMITMENTS

31 December

2021

31 December 2020

Capital commitments

Contracted, but not provided for

(1)(2)

7,756

9,508

Authorised, but not contracted for

(1)(2)

6,149

7,872

13,905

17,380

As at 31 December 2021, major projects with capital commitments are as follows:

(1) CPIC Life and other two parties joined together to bid for the use right of the land located at Huangpu District, Shanghai. All parties set up a project company named Ruiyongjing Real Estate as the owner of the land use right to this parcel of land and construction development subject. The estimated total investment of Ruiyongjing Real Estate is approximately RMB 21,400 million, CPIC Life agreed to provide additional loan of no more than RMB 250 million for Ruiyongjing Real Estate. The registered capital of Ruiyongjing Real Estate is RMB 14,050 million, of which CPIC Life shall make a contribution of RMB 9,835 million, representing 70% of the registered capital. In addition, CPIC Life will provide shareholder锟斤拷s loans to Ruiyongjing Real Estate, which are estimated to be approximately RMB 7,600 million. The total amount of the above two contributions to be made by CPIC Life is estimated to be RMB 17,435 million. As at 31 December 2021, the cumulative amount incurred by CPIC Life amounted to approximately RMB 13,289 million. Of the balance, approximately RMB 1,996 million was disclosed as a capital commitment contracted but not provided for and approximately RMB 2,150 million was disclosed as a capital commitment authorised but not contracted for.

(2) CPIC Life and CPIC Senior Living Investment obtained the use rights of eight parcels of land located at Wenjiang District in Chengdu, Sichuan, etc., and set up eight project companies named Chengdu Project Company, etc., accordingly as the owners of the land use rights to parcels of land and construction development subjects for the construction project 锟斤拷CPIC Home锟斤拷. The estimated total investment of the above eight projects is approximately RMB 9,617 million. As at 31 December 2021, the cumulative amount incurred amounted to approximately RMB 3,558 million. Of the balance, approximately RMB 2,726 million was disclosed as a capital commitment contracted but not provided for and approximately RMB 3,333 million was disclosed as a capital commitment authorised but not contracted for.

XIII. RISK MANAGEMENT

1. Insurance risk

(1) Category of insurance risks

The risk under an insurance contract arises from the possibility of occurrence of an insured event and the uncertainty of the amount as well as time of any resulting claim. The major risk the Group faces under such contracts is that the actual claims payments and the costs of claims settlement exceed the carrying amount of insurance contract reserves, which are affected by factors such as claim frequency, severity of claim, actual benefits paid and subsequent development of long-term claims. Therefore, the objective of the Group is to ensure that sufficient reserves are available to cover these liabilities.

Insurance risk could occur due to any of the following factors:

Occurrence risk - the possibility that the number of insured events will differ from that expected;

Severity risk - the possibility that the cost of the events will differ from those expected;

Development risk - the possibility that changes may occur in the amount of an insurer锟斤拷s obligation at the end of the contract period.

The above risk exposure is mitigated by the diversification across a large portfolio of insurance contracts. The variability of risks is also reduced by careful selection and implementation of underwriting strategy and guidelines, as well as the use of reinsurance arrangements.

The businesses of the Group mainly comprise long-term life insurance contracts (mainly including life insurance and long-term health insurance), short-term life insurance contracts (mainly including short-term health insurance and accident insurance) and property and casualty insurance contracts. For contracts where death is the insured risk, the significant factors that could increase the overall frequency of claims are epidemics, widespread changes in lifestyle and natural disasters, resulting in earlier or more claims than expected. For contracts where survival is the insured risk, the most significant factor is continued improvement in medical science and social conditions that would increase longevity. For property and casualty insurance contracts, claims are often affected by natural disasters, calamities, terrorist attacks, etc.

XIII. RISK MANAGEMENT (continued)

1. Insurance risk (continued)

(1) Category of insurance risks (continued)

Currently, the Group锟斤拷s insurance risk does not vary significantly in relation to the locations of the risks insured by the Group whilst undue concentration by amounts could have an impact on the severity of benefit payments on a portfolio basis.

There would be no significant mitigating terms and conditions that reduce the insured risk accepted for contracts with fixed and guaranteed benefits and fixed future premiums. Meanwhile, insurance risk is also affected by the policyholders锟斤拷 rights to terminate the contract, to pay reduced premiums, to refuse to pay premiums or to avail the guaranteed annuity option. Thus, the resultant insurance risk is subject to the policyholders锟斤拷 behavior and decisions.

In order to manage insurance risks more effectively, the Group manages insurance risks through reinsurance to reduce the effect of potential losses to the Group. Two major types of reinsurance agreements, ceding on a quota share basis or a surplus basis, are usually used to cover insurance liability risk, with retention limits varying by product line and territory. The reinsurance contract basically covers all insurance contracts with risk liability. Although the Group has reinsurance arrangements, it is not relieved of its direct obligations to its policyholders. The Group锟斤拷s placement of reinsurance is diversified such that neither it is dependent on a single reinsurer nor are the operations of the Group substantially dependent upon any single reinsurance contract.

(2) Concentration of insurance risks

The Group锟斤拷s concentration of insurance risk is reflected by its major lines of business as analysed by premium income in Note VII 40.

XIII. RISK MANAGEMENT (continued)

1. Insurance risk (continued)

(3) Assumptions and sensitivities

Long-term life insurance contracts

Assumptions

Material judgement is required in determining insurance contract reserves and in choosing discount rate assumption, insurance incident occurrence rate assumption (mainly including mortality and morbidity), surrender rate assumption, expense assumptions and policy dividend assumption relating to long-term life insurance contracts. These measurement assumptions are based on current information available at the balance sheet date.

Sensitivities

As the relationship between the various assumptions cannot be reliably measured, the Group has measured the impact on insurance contract reserves of long-term life insurance contract reserves using sensitivity analysis, of varying independently certain assumptions under reasonable and possible circumstances.

31 December 2021

Changes in assumptions

Impact on long-term life insurance reserves

Increase/

(Decrease)

Impact on long-term life insurance reserves (percentage)

Impact on

long-term

health

insurance

reserves

Increase/

(Decrease)

Impact on

long-term

health

insurance

reserves

(percentage)

Discount rates

+ 25 basis points

(17,152)

-1.55%

(8,850)

-7.04%

- 25 basis points

18,497

1.67%

9,539

7.58%

Mortality rate

+10%

1,985

0.18%

(186)

-0.15%

-10%

(1,985)

-0.18%

203

0.16%

Morbidity rate

+10%

501

0.05%

19,640

15.61%

-10%

(538)

-0.05%

(20,139)

-16.01%

Surrender rate

+10%

(3,302)

-0.30%

446

0.35%

-10%

3,518

0.32%

(376)

-0.30%

Expense

+10%

5,914

0.53%

1,332

1.06%

-10%

(5,914)

-0.53%

(1,332)

-1.06%

Policy dividend

+5%

18,006

1.63%

(124)

-0.10%

XIII. RISK MANAGEMENT (continued)

1. Insurance risk (continued)

(3) Assumptions and sensitivities (continued)

Long-term life insurance contracts (continued)

Sensitivities (continued)

31 December 2020

Changes in assumptions

Impact on long-term life insurance reserves

(Decrease)/ Increase

Impact on long-term life insurance reserves (percentage)

Impact on

long-term

health

insurance

reserves

(Decrease)/

Increase

Impact on

long-term

health

insurance

reserves

(percentage)

Discount rates

+ 25 basis points

(15,939)

-1.61%

(7,962)

-8.06%

- 25 basis points

17,240

1.75%

8,604

8.71%

Mortality rate

+10%

2,338

0.24%

(196)

-0.20%

-10%

(2,342)

-0.24%

212

0.21%

Morbidity rate

+10%

608

0.06%

17,894

18.11%

-10%

(649)

-0.07%

(18,368)

-18.59%

Surrender rate

+10%

(2,731)

-0.28%

701

0.71%

-10%

2,979

0.30%

(631)

-0.64%

Expense

+10%

6,074

0.62%

1,102

1.12%

-10%

(6,074)

-0.62%

(1,102)

-1.12%

Policy dividend

+5%

17,733

1.80%

(116)

-0.12%

XIII. RISK MANAGEMENT (continued)

1. Insurance risk (continued)

(3) Assumptions and sensitivities (continued)

Property and casualty and short-term life insurance contracts

Assumptions

The calculation for claim reserves is based on the Group锟斤拷s past claim development experience, including assumptions in respect of average claim costs, claim expenses, inflation factors and number of claims for each accident period. Additional qualitative judgement is used to assess the extent to which past trends may not apply in the future (for example, changes in external factors such as one-off events, public attitudes to claims, market factors such as economic conditions, judicial decisions and government legislation, as well as changes in internal factors such as portfolio mix, policy conditions and claims handling procedures).

Other key assumptions include risk margin, delays in settlement, etc.

Sensitivities

Changes in above key assumptions will affect the claim reserves for property and casualty and short-term life insurance. The sensitivity of certain variables including legislative change, uncertainty in the estimation process, etc., is not possible to quantify.

A respective percentage change in average claim costs or claim numbers alone results in a similar percentage change in claim reserves. When other assumptions remain unchanged, a 5% increase in average claim costs will result in an increase of approximately RMB 2,174 million and RMB 289 million in net outstanding claim reserves for property and casualty and short-term life insurance as at 31 December 2021 (31 December 2020: approximately RMB 1,768 million and RMB 239 million).

XIII.

RISK MANAGEMENT (continued)

1锟斤拷 Insurance risk (continued)

(3) Assumptions and sensitivities (continued)

Property and casualty and short-term life insurance contracts (continued)

As at 31 December 2021, the development table of gross claim reserves for the property and casualty insurance of the Group:

Property and casualty insurance (Accident year)

2017

2018

2019

2020

2021

Total

Estimate of ultimate claim

cost as of:

End of current year

59,974

64,450

71,637

81,244

101,908

One year later

57,147

64,051

71,010

80,052

Two years later

55,300

63,170

70,608

Three years later

54,609

62,484

Four years later

54,566

Current estimate of

cumulative claims

54,566

62,484

70,608

80,052

101,908

369,618

Cumulative payments

to date

(53,645)

(61,496)

(67,907)

(72,218)

(65,261)

(320,527)

Prior year adjustment,

unallocated loss

adjustment expenses,

assumed business,

discount and risk margin

3,108

Outstanding claim

reserves

52,199

As at 31 December 2021, the development table of net claim reserves for the property and casualty insurance of the Group:

Property and casualty insurance (Accident year)

2017

2018

2019

2020

2021

Total

Estimate of ultimate claim

cost as of:

End of current year

52,415

56,073

62,405

71,681

89,762

One year later

50,539

55,809

61,783

70,520

Two years later

48,720

55,001

61,350

Three years later

48,058

54,379

Four years later

48,030

Current estimate of

cumulative claims

48,030

54,379

61,350

70,520

89,762

324,041

Cumulative payments

to date

(47,398)

(53,871)

(59,426)

(63,962)

(58,651)

(283,308)

Prior year adjustment, unallocated loss adjustment expenses, assumed business, discount and risk margin

2,746

Outstanding claim

reserves

43,479

XIII.

RISK MANAGEMENT (continued)

1. Insurance risk (continued)

(3) Assumptions and sensitivities (continued)

Property and casualty and short-term life insurance contracts (continued)

As at 31 December 2021, the development table of gross claim reserves for the short-term life insurance of the Group:

Short-term life insurance (Accident year)

2017

2018

2019

2020

2021

Total

Estimate of ultimate claim

cost as of:

End of current year

3,301

4,112

4,628

4,696

4,913

One year later

3,189

3,796

4,307

4,266

Two years later

3,231

3,798

4,358

Three years later

3,250

3,829

Four years later

3,255

Current estimate of

cumulative claims

3,255

3,829

4,358

4,266

4,913

20,621

Cumulative payments

to date

(3,255)

(3,817)

(4,297)

(3,983)

(3,267)

(18,619)

Prior year adjustment,

unallocated loss

adjustment expenses,

assumed business,

discount and risk margin

4,219

Outstanding claim

reserves

6,221

As at 31 December 2021, the development table of net claim reserves for the short-term life insurance of the Group:

Short-term life insurance (Accident year)

2017

2018

2019

2020

2021

Total

Estimate of ultimate claim

cost as of:

End of current year

3,068

3,355

3,058

3,440

3,967

One year later

2,960

3,210

3,163

3,339

Two years later

2,993

3,216

3,222

Three years later

2,999

3,241

Four years later

3,004

Current estimate of

cumulative claims

3,004

3,241

3,222

3,339

3,967

16,773

Cumulative payments

to date

(3,003)

(3,231)

(3,170)

(3,099)

(2,702)

(15,205)

Prior year adjustment,

unallocated loss

adjustment expenses,

assumed business,

discount and risk margin

4,209

Outstanding claim

reserves

5,777

XIII.

RISK MANAGEMENT (continued)

2. Financial instrument risk

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk principally comprises three types of risks, namely interest rate risk arising from market interest rates, price risk arising from market prices and currency risk arising from foreign exchange rates.

The following policies and procedures are in place to mitigate the Group锟斤拷s exposure to market risk:

· A market risk policy of the Group setting out the assessment and determination of what constitutes market risk for the Group. Compliance with the policy is monitored and exposures and breaches are reported to the risk management committee of the Group. The policy is reviewed regularly by the management of the Group for pertinence and for changes in the risk environment.

· With proper asset allocation and risk limits on portfolio level, the Group ensures both that assets are sufficient for specific policyholder liabilities and that assets are held to deliver income and gains expected by policyholders.

(1) Currency risk

Currency risk is the risk that the fair value or future cash flow of a financial instrument will fluctuate because of changes in foreign exchange rates.

Since the Group operates principally in Mainland China, the Group has only limited exposure to currency risk, which arises primarily from certain insurance policies denominated in foreign currencies, bank deposits and securities denominated in the US Dollars or the HK Dollars. The Group manages currency risk by keeping foreign exchange positions under control.

XIII.

RISK MANAGEMENT (continued)

2. Financial instrument risk (continued)

Market risk (continued)

(1) Currency risk (continued)

The following tables summarise the Group锟斤拷s financial assets and financial liabilities by major currency:

31 December 2021

RMB

USD

(in RMB)

HKD

(in RMB)

Other currencies

(in RMB)

Total

Financial assets:

Cash at bank and on hand

24,726

6,873

946

32,545

Financial assets at fair value

through profit or loss

11,755

598

12,353

Derivative financial assets

254

259

Securities purchased under agreements to resell

13,432

Premium receivables

25,299

460

25,803

Reinsurance receivables

10,024

862

205

11,091

Interest receivables

20,420

20,427

Policy loans

66,950

Term deposits

189,893

6,626

196,519

Available-for-sale

financial assets

633,745

8,069

2,508

1,059

645,381

Held-to-maturity financial assets

396,242

186

396,428

Investments classified as loans and receivables

406,276

Restricted statutory deposits

7,428

Others

12,255

102

239

12,596

Sub-total

1,818,445

24,035

3,944

1,064

1,847,488

Financial liabilities:

Derivative financial liabilities

Securities sold under agreements to repurchase

73,441

Commission and brokerage

payable

3,695

Reinsurance payables

7,060

307

271

7,638

Interest payable

517

Claims payable

21,526

Policyholder dividend payable

24,176

Policyholders锟斤拷 deposits and investment contract

liabilities

102,843

Bonds payable

9,995

Lease liabilities

3,102

3,105

Others

35,972

250

36,264

Sub-total

282,327

558

316

283,201

Net amount

1,536,118

23,477

3,628

1,064

1,564,287

XIII.

RISK MANAGEMENT (continued)

2. Financial instrument risk (continued)

Market risk (continued)

(1) Currency risk (continued)

31 December 2020

RMB

USD

(in RMB)

HKD

(in RMB)

Other currencies

(in RMB)

Total

Financial assets:

Cash at bank and on hand

18,708

1,194

961

20,878

Financial assets at fair value

through profit or loss

11,850

600

12,473

Derivative financial assets

140

Securities purchased under agreements to resell

14,327

Premium receivables

21,147

527

21,692

Reinsurance receivables

7,039

780

361

8,180

Interest receivables

20,542

20,563

Policy loans

62,364

Term deposits

179,295

13,671

192,966

Available-for-sale

financial assets

585,627

7,032

2,638

861

596,158

Held-to-maturity financial assets

329,119

241

329,360

Investments classified as loans and receivables

380,174

Restricted statutory deposits

6,858

Others

14,073

116

14,276

Sub-total

1,651,123

24,317

4,093

876

1,680,409

Financial liabilities:

Securities sold under agreements to repurchase

90,825

Commission and brokerage

payable

4,003

Reinsurance payables

4,999

231

271

5,501

Interest payable

594

Claims payable

21,825

Policyholder dividend payable

24,351

Policyholders锟斤拷 deposits and investment contract

liabilities

87,126

Bonds payable

9,991

Lease liabilities

3,420

3,430

Others

29,049

287

29,378

Sub-total

276,183

518

323

277,024

Net amount

1,374,940

23,799

3,770

876

1,403,385

XIII.

RISK MANAGEMENT (continued)

2. Financial instrument risk (continued)

Market risk (continued)

(1) Currency risk (continued)

Exchange rates used by the Group by major currencies:

31 December 2021

31 December 2020

USD

HKD

USD

HKD

Exchange rate

6.37570

0.81760

6.52490

0.84164

Sensitivities

The analysis below is performed for reasonably possible movements in foreign exchange rate with all other variables held constant, for the following financial instruments, showing the pre-tax impact on profit before tax and equity.

Sensitivity analysis below shows changes in spot and forward exchange rates, and reflects the pre-tax impact on profit before tax and equity arising from monetary financial assets and liabilities denominated in foreign currency as at the dates indicated.

31 December 2021

USD,HKD and other currencies to RMB exchange rate

Impact on profit

before tax

Impact on equity

+5%

650

1,203

-5%

(650)

(1,203)

31 December 2020

USD,HKD and other currencies to RMB exchange rate

Impact on profit

before tax

Impact on equity

+5%

774

1,270

-5%

(774)

(1,270)

The impact on equity arising from monetary financial assets and liabilities denominated in foreign currency shown above is the total impact from both profit before tax and fair value change.

XIII.

RISK MANAGEMENT (continued)

2. Financial instrument risk (continued)

Market risk (continued)

(2) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Floating rate instruments expose the Group to cash flow interest risk, whereas fixed interest rate instruments expose the Group to fair value interest risk.

The Group锟斤拷s interest risk policy requires it to manage interest rate risk by maintaining an appropriate mix of fixed and floating rate instruments. The policy also requires it to manage the maturity of interest-bearing financial assets and interest-bearing financial liabilities. Interest on floating rate instruments is generally repriced once a year. Interest on fixed rate instruments is priced on initial recognition of related financial instruments and remains constant until maturity date.

The Group is not exposed to significant concentration risks arising from interest rate risk on interest-bearing financial instruments.

The tables below summarise major interest-bearing financial instruments of the Group by contractual/estimated re-pricing date or maturity date. Other financial instruments not included in the following tables are interest free and not exposed to interest rate risk:

31 December 2021

Within 1 year

1 to 3 years

3 to 5 years

Over 5 years

Floating rate

Total

Financial assets:

Deposits with original

maturity of no more

than three months

2,487

30,058

32,545

Debt investments at fair

value through profit

or loss

1,308

659

1,996

Securities purchased

under agreements

to resell

13,432

Policy loans

66,950

Term deposits

23,837

123,577

49,105

196,519

Available-for-sale

debt investments

64,347

45,692

39,459

145,766

295,264

Held-to-maturity financial

assets

10,109

27,483

14,282

344,554

396,428

Investments classified as

loans and receivables

29,910

77,456

115,181

183,729

406,276

Restricted statutory

deposits

1,758

4,900

770

7,428

Financial liabilities:

Securities sold under

agreements to

repurchase

73,441

Policyholders锟斤拷 deposits

and investment

contract liabilities

2,562

1,467

5,748

93,066

102,843

Bonds payable

9,995

XIII.

RISK MANAGEMENT (continued)

2. Financial instrument risk (continued)

Market risk (continued)

(2) Interest rate risk (continued)

31 December 2020

Within 1 year

1 to 3 years

3 to 5 years

Over 5 years

Floating rate

Total

Financial assets:

Deposits with original

maturity of no more

than three months

1,132

19,746

20,878

Debt investments at fair

value through profit

or loss

1,930

1,026

159

3,119

Securities purchased

under agreements

to resell

14,327

Policy loans

62,364

Term deposits

30,391

92,070

70,355

150

192,966

Available-for-sale

debt investments

68,626

57,600

38,438

151,124

315,788

Held-to-maturity financial

assets

9,619

22,194

25,396

272,151

329,360

Investments classified as

loans and receivables

27,238

55,098

135,163

162,675

380,174

Restricted statutory

deposits

880

3,216

2,762

6,858

Financial liabilities:

Securities sold under

agreements to

repurchase

90,825

Policyholders锟斤拷 deposits

and investment

contract liabilities

1,454

2,110

3,019

80,543

87,126

Bonds payable

9,991

Interest rates on floating rate bonds/liabilities are re-priced when the benchmark interest rates are adjusted.

XIII.

RISK MANAGEMENT (continued)

2. Financial instrument risk (continued)

Market risk (continued)

(2) Interest rate risk (continued)

Sensitivities

The analysis below is performed for reasonably possible movements in interest rate with all other variables held constant, for the following financial instruments, showing the pre-tax impact on profit before tax and equity. Since almost all financial instruments of the Group that bear interest rate risks are financial instruments denominated in RMB, the sensitivity analysis below only shows the pre-tax impact of RMB financial instruments on the Group锟斤拷s profit before tax and equity when RMB interest rate changes.

Sensitivities on fixed-rate financial instruments

As at the balance sheet dates, the Group锟斤拷s fixed-rate financial instruments exposed to interest rate risk mainly include financial assets at fair value through profit or loss and available-for-sale financial assets. The following tables show the pre-tax impact on profit before tax (fair value change on held-for-trading bonds) and equity (fair value change on held-for-trading bonds combined with fair value change on available-for-sale bonds).

31 December 2021

Change in RMB

interest rate

Impact on profit before tax

Impact on equity

+50 basis points

(12)

(6,314)

-50 basis points

7,002

31 December 2020

Change in RMB

interest rate

Impact on profit before tax

Impact on equity

+50 basis points

(18)

(6,273)

-50 basis points

6,916

The above impact on equity represents adjustments to profit before tax and changes in fair value of fixed-rate financial instruments.

XIII.

RISK MANAGEMENT (continued)

2. Financial instrument risk (continued)

Market risk (continued)

(2) Interest rate risk (continued)

Sensitivities (continued)

Sensitivities on floating-rate financial instruments

The following tables show the pre-tax impact that floating-rate financial assets and liabilities have on the Group锟斤拷s profit before tax and equity due to changes in interest rate as at the balance sheet dates.

31 December 2021

Change in RMB

interest rate

Impact on profit before tax

Impact on equity

+50 basis points

112

-50 basis points

(112)

31 December 2020

Change in RMB

interest rate

Impact on profit before tax

Impact on equity

+50 basis points

-50 basis points

(88)

The above impact on equity represents adjustments of floating-rate financial assets and liabilities to profit before tax.

(3) Price risk

Price risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), regardless of whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Group锟斤拷s price risk policy requires it to manage such risk by setting and monitoring investment objectives, adopting related strategies and managing fluctuations arising from price risk in operating performance.

XIII.

RISK MANAGEMENT (continued)

2. Financial instrument risk (continued)

Market risk (continued)

(3) Price risk (continued)

Equity investments exposed to market price risk mainly consist of stocks and equity investment funds. The Group applies the five-day market price value-at-risk (锟斤拷VAR锟斤拷) technique to estimate its risk exposure to listed stocks and equity investment funds. VAR calculation is made based on the normal market condition and a 95% confidence level.

As at 31 December 2021, the estimated impact on equity investment for listed stocks and equity investment funds, using the VAR technique, was RMB 5,586 million (31 December 2020: RMB 5,394 million).

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation.

The Group is exposed to credit risks primarily associated with deposit arrangements with commercial banks, investments in bonds, premium receivables, reinsurance arrangements with reinsurers, securities purchased under agreements to resell, policy loans, and investments classified as loans and receivables.

Due to the restriction of the CBIRC, majority of the Group锟斤拷s financial assets are government bonds, agency bonds, corporate bonds, term deposits, debt investment plans and wealth management products. Term deposits are saved in national commercial banks or comparatively sound financial institutions, and most of corporate bonds, debt investment plans and wealth management products are guaranteed by qualified institutions. Hence, the related credit risk of the investment should be regarded as relatively low. Meanwhile, the Group will perform credit assessments and risk appraisals for each investment before signing contracts, and determine to invest in those programs released by highly rated issuers and project initiators.

For securities purchased under agreements to resell and policy loans, there is a security pledge and the maturity period is less than one year. Premium receivables from life insurance are mainly renew premium within grace period. Hence, the related credit risk should not have significant impact on the Group锟斤拷s consolidated financial statements as at 31 December 2021 and 31 December 2020. The credit risk associated with the premium receivables from property and casualty insurance mainly arises from corporate customers. The Group grants a short credit period and arranges instalment payment to reduce the credit risk. The Group performs regular credit assessment of the reinsurance companies. Reinsurance of the Group is mainly placed with highly rated reinsurance companies.

XIII.

RISK MANAGEMENT (continued)

2. Financial instrument risk (continued)

Credit risk (continued)

The Group mitigates credit risk by utilising credit control policies, undertaking credit analysis on potential investments, and imposing aggregate counterparty exposure limits.

The carrying amount of financial assets included on the consolidated balance sheet represents the maximum credit risk exposure at the reporting date without taking account of the effect of mitigation through any collateral held or other credit enhancements.

31 December 2021

Past due but not impaired

Not due

and not
impaired

Less than
30 days

31 to 90
days

More than
90 days

Total past due but not impaired

Financial assets with impairment considered

Total

Cash at bank and on hand

32,545

Debt investments at fair value

through profit or loss

1,996

Securities purchased under

agreements to resell

13,432

Premium receivables

22,839

2,964

25,803

Reinsurance receivables

10,909

182

11,091

Interest receivables

20,427

Policy loans

66,950

Term deposits

196,519

Available-for-sale debt

investments

289,559

5,705

295,264

Held-to-maturity financial

assets

396,135

293

396,428

Investments classified as

loans and receivables

406,110

166

406,276

Restricted statutory deposits

7,428

Others

12,428

168

12,596

Total

1,477,277

9,478

1,486,755

31 December 2020

Past due but not impaired

Not due

and not
impaired

Less than
30 days

31 to 90
days

More than
90 days

Total past due but not impaired

Financial assets with impairment considered

Total

Cash at bank and on hand

20,878

Debt investments at fair value

through profit or loss

3,119

Securities purchased under

agreements to resell

14,327

Premium receivables

19,470

2,222

21,692

Reinsurance receivables

8,068

112

8,180

Interest receivables

20,563

Policy loans

62,364

Term deposits

192,966

Available-for-sale debt

investments

312,546

3,242

315,788

Held-to-maturity financial

assets

329,129

231

329,360

Investments classified as

loans and receivables

380,033

141

380,174

Restricted statutory deposits

6,858

Others

14,011

265

14,276

Total

1,384,332

6,213

1,390,545

XIII.

RISK MANAGEMENT (continued)

2. Financial instrument risk (continued)

Liquidity risk

Liquidity risk is the risk of capital shortage in the performance of obligations associated with financial liabilities.

Liquidity risk may result from the surrender, reduction or early termination of insurance contracts in other forms, the indemnity and payment, and the daily expenses of the Group. Where permitted by the regulatory framework and market environment, the Group seeks to manage the liquidity risk mainly by matching the term of investment assets with the maturity of corresponding insurance liabilities and maintaining sufficient liquidity of investment assets, so as to repay debts and provide funds for investment activities in a timely manner.

The following policies and procedures are in place to mitigate the Group锟斤拷s exposure to liquidity risk:

· Setting up a liquidity risk policy for the assessment and determination of what constitutes liquidity risk for the Group. Compliance with the policy is monitored, and exposures and breaches of the policy are reported to the Company锟斤拷s risk management committee. The policy is regularly reviewed by the management of the Group for pertinence and for changes in the risk environment;

· Setting out guidelines on asset allocation, portfolio limit structures and the maturity profiles of assets, in order to ensure that sufficient funding is available for the Group to meet insurance and investment contract obligations;

· Setting up emergency funding plans which specify the sources of emergency funds, the minimum amount of daily reserve funds, and the specific events that would trigger such plans.

The tables below summarise the maturity profiles of the main financial assets and financial liabilities of the Group based on undiscounted contractual cash flows and remaining maturity of expected cash flows:

31 December 2021

On demand/

Overdue

Within 1 year

1 to 5 years

Over 5 years

Undated

Total

Financial assets:

Cash at bank and on hand

30,053

2,492

32,545

Financial assets at fair value through profit or loss

798

1,215

1,989

8,441

12,504

Derivative financial assets

237

261

Securities purchased under

agreements to resell

13,443

Premium receivables

7,045

6,996

11,818

806

26,665

Reinsurance receivables

11,289

Policy loans

68,780

Term deposits

31,930

187,531

219,461

Available-for-sale

financial assets

330

45,814

145,309

282,073

322,163

795,689

Held-to-maturity financial

assets

25,745

105,092

630,695

761,532

Investments classified as

loans and receivables

42,878

255,655

219,533

518,066

Restricted statutory deposits

2,062

6,087

8,149

Others

3,885

7,151

1,785

12,821

Sub-total

41,374

259,402

714,729

1,135,096

330,604

2,481,205

XIII.

RISK MANAGEMENT (continued)

2. Financial instrument risk (continued)

Liquidity risk (continued)

31 December 2021

On demand

Within 1 year

1 to 5 years

Over 5 years

Undated

Total

Financial liabilities:

Derivative financial liabilities

Securities sold under

agreements to repurchase

73,546

Commission and brokerage

payable

733

1,665

1,213

3,695

Reinsurance payables

7,213

425

7,638

Claims payable

21,526

Policyholder dividend payable

24,176

Policyholders锟斤拷 deposits

and investment contract liabilities

11,739

35,945

122,785

170,469

Bonds payable

505

2,376

10,855

13,736

Lease liabilities

1,244

1,964

187

3,395

Others

1,472

34,792

36,264

Sub-total

47,907

130,705

41,923

133,911

354,446

Net amount

(6,533)

128,697

672,806

1,001,185

330,604

2,126,759

31 December 2020

On demand/

Overdue

Within 1 year

1 to 5 years

Over 5 years

Undated

Total

Financial assets:

Cash at bank and on hand

19,742

1,136

20,878

Financial assets at fair value through profit or loss

542

2,854

1,396

7,846

12,699

Derivative financial assets

136

140

Securities purchased under

agreements to resell

14,334

Premium receivables

5,111

6,129

10,382

725

22,347

Reinsurance receivables

8,345

Policy loans

63,980

Term deposits

42,809

173,326

156

216,291

Available-for-sale

financial assets

241

40,927

167,704

285,804

258,720

753,396

Held-to-maturity financial

assets

23,717

104,517

483,906

612,140

Investments classified as

loans and receivables

38,025

255,852

198,146

492,023

Restricted statutory deposits

1,201

6,525

7,726

Others

1,711

11,198

1,619

14,528

Sub-total

26,866

252,347

722,915

970,133

266,566

2,238,827

XIII.

RISK MANAGEMENT (continued)

2. Financial instrument risk (continued)

Liquidity risk (continued)

31 December 2020

On demand

Within 1 year

1 to 5 years

Over 5 years

Undated

Total

Financial liabilities:

Securities sold under

agreements to repurchase

91,024

Commission and brokerage

payable

697

1,823

1,385

4,003

Reinsurance payables

5,201

300

5,501

Claims payable

21,825

Policyholder dividend payable

24,351

Policyholders锟斤拷 deposits

and investment contract liabilities

10,116

29,173

107,421

146,710

Bonds payable

505

2,276

11,460

14,241

Lease liabilities

1,434

2,206

285

3,925

Others

1,348

28,030

29,378

Sub-total

48,221

138,133

35,340

119,264

340,958

Net amount

(21,355)

114,214

687,575

850,869

266,566

1,897,869

As at the balance sheet date, the cash flows of lease contracts that have been signed by the Group but have not yet been executed are listed below by maturity date:

As at 31 December 2021

Within 1 year

1 to 2 years

2 to 5 years

Over 5 years

Total

Future contractual cash

flows not included in

lease liabilities

113

327

690

1,142

3. Operational risk

Operational risk is the risk of loss arising from inadequacy or failure on business processes, human error, information system failure. When controls fail to perform, operational risks can cause damage to reputation, give rise to legal or regulatory matters, or lead to financial loss to the Group.

The Group is exposed to many types of operational risks, including inadequate, or failure to obtain, proper authorisations or supporting documentation to comply with operational and informational security procedures that prevent frauds or errors by employees.

Through the establishment and implementation of internal control manuals, continuous optimisation of information systems, and monitoring and response to potential risks, the Group has established a long-term internal control mechanism to mitigate the impact of operational risks on the Group.

XIII.

RISK MANAGEMENT (continued)

3. Operational risk (continued)

The following internal control measures are in place to mitigate the Group锟斤拷s exposure to operational risk:

l Setting up effective segregation of duties, access controls, authorisation and reconciliation procedures and user and authority controls for information system;

l Adopting supervisory measures such as compliance checks, risk investigations and internal audits;

l Regularly carrying out risk and internal control self-assessment and implementing rectification of defects;

l Implementing staff education and appraisals.

4. Mismatching risk of assets and liabilities

Mismatching risk of assets and liabilities is the risk due to the Group锟斤拷s inability to match its assets with its liabilities on the basis of duration, cash flow and investment return. Under the current regulatory and market environment, the Group is unable to invest in assets with a duration of sufficient length to match the duration of its medium and long term life insurance liabilities. When the current regulatory and market environment permits, the Group will increase the profile of securities with fixed investment returns and lengthen the duration of its assets to narrow the gap of duration and investment returns of the existing assets and liabilities.

In order to further enhance the management of matching of assets and liabilities, the Group has the Asset-Liability Management Committee to make significant decisions on asset-liability management. The committee has an asset-liability working group which analyses the extent of assets and liabilities matching.

5. Capital management risks

Capital management risk primarily refers to the risk of insufficient solvency as a result of the operation and administration of the Company or certain external events. The CBIRC monitors capital management risks primarily through a set of solvency regulatory rules to ensure insurance companies can maintain sufficient solvency margins.

It is the Group锟斤拷s objective to maintain a strong credit rating and adequate solvency in order to support its business objectives and to maximise shareholders value. The specific measures are as follows:

l Managing its capital requirements by assessing shortfalls between reported and targeted capital levels on a regular basis;

l Stepping up efforts to maintain multiple sources of financing in order to meet solvency margin needs arising from future expansion in business activities;

l Continuously and proactively adjusting the portfolio of insurance business, optimising asset allocation and improving asset quality to enhance operating performance and the profitability.

XIII.

RISK MANAGEMENT (continued)

5. Capital management risks (continued)

The table below summarises the core capital, actual capital and minimum required capital of the Group and its major insurance subsidiaries determined according to solvency supervision rules:

Group

31 December

2021

31 December 2020

Core capital

496,620

500,766

Actual capital

506,620

510,766

Minimum required capital

190,794

177,288

Core solvency margin ratio

260%

282%

Comprehensive solvency margin ratio

266%

288%

CPIC Property

31 December

2021

31 December 2020

Core capital

47,808

44,208

Actual capital

57,808

54,208

Minimum required capital

20,072

19,672

Core solvency margin ratio

238%

225%

Comprehensive solvency margin ratio

288%

276%

CPIC Life

31 December

2021

31 December 2020

Core capital

368,570

377,203

Actual capital

368,570

377,203

Minimum required capital

168,912

155,860

Core solvency margin ratio

218%

242%

Comprehensive solvency margin ratio

218%

242%

XIII.

RISK MANAGEMENT (continued)

5. Capital management risk (continued)

CPIC Health

31 December

2021

31 December 2020

Core capital

1,286

1,294

Actual capital

1,286

1,294

Minimum required capital

934

949

Core solvency margin ratio

138%

136%

Comprehensive solvency margin ratio

138%

136%

PAAIC

Price risk

31 December

2021

31 December 2020

Core capital

2,863

1,821

Actual capital

2,863

1,821

Minimum required capital

673

614

Core solvency margin ratio

425%

297%

Comprehensive solvency margin ratio

425%

297%

XIV.

STRUCTURED ENTITIES

The Group uses structured entities in the normal course of business for a number of purposes, for example, structured transactions for institutions, to provide finance to public and private section infrastructure projects, and to generate fees for managing assets on behalf of third-party investors. These structured entities are operated based on the contracts. Refer to Note III 5 for the Group锟斤拷s consolidation consideration related to structured entities.

The following table shows the total assets of various types of unconsolidated structured entities and the amount of funding provided by the Group to these unconsolidated structured entities. The table also shows the Group锟斤拷s maximum exposure to the unconsolidated structured entities representing the Group锟斤拷s maximum possible risk exposure that could occur as a result of the Group锟斤拷s arrangements with structured entities. The maximum exposure is contingent in nature and approximates the sum of funding provided by the Group.

XIV.

STRUCTURED ENTITIES (continued)

As at 31 December 2021, the size of unconsolidated structured entities and the Group锟斤拷s funding and maximum exposure are shown below:

31 December 2021

Size

Funding
provided by the Group

The Group锟斤拷s
maximum
exposure

Carrying amount of the Group锟斤拷s

investment

Interest held by the Group

Pension funds and endowment insurance products managed by related parties

299,019

Management fee

Insurance asset management products managed by related parties

348,109

136,452

137,204

136,542

Investment income and management fee

Securities investment funds managed by related parties

72,530

9,999

10,231

Investment income and management fee

Insurance asset management products managed by third parties

Note 1

127,920

128,897

128,547

Investment income

Trust products managed by third parties

Note 1

134,531

134,599

134,289

Investment income

Bank wealth management products and asset management products managed by third parties

Note 1

4,604

4,812

4,811

Investment income

Securities investment funds managed by third parties

Note 1

52,218

58,906

Investment income

Total

465,724

474,649

473,326

Note 1: These structured entities are sponsored by third party financial institutions and the information related to size of these structured entities were not publicly available.

The Group锟斤拷s interests in unconsolidated structured entities are included in wealth management products, funds, debt investment plans and other equity investments under financial assets at fair value through profit or loss, wealth management products, funds and other equity investments under available-for-sale financial assets, debt investment plans and wealth management products under investments classified as loans and receivables, and long-term equity investments.

XV.

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Fair value estimates are made at a specific point in time based on relevant market information and information about financial instruments. When an active market exists, such as an authorised securities exchange, the market value is the best reflection of the fair values of financial instruments. For financial instruments where there is no active market, fair value is determined using valuation techniques (Note III 33).

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

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

Fair value of financial assets and liabilities not carried at fair value

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

31 December 2021

31 December 2020

Carrying amount

Fair value

Carrying amount

Fair

value

Financial assets:

Held-to-maturity financial assets

396,428

433,415

329,360

348,481

Investments classified as loans and receivables

406,276

406,311

380,174

380,235

Financial liabilities:

Bonds payable

9,995

11,037

9,991

10,571

The Group has not disclosed fair values for certain policyholders锟斤拷 deposits and investment contract liabilities with discretionary participation features (锟斤拷DPF锟斤拷) because fair values or fair value ranges for the DPF cannot be reliably estimated. There is no active market for these instruments which will be settled with policyholders in the normal course of business.

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

XVI.

FAIR VALUE MEASUREMENT

Determination of fair value and fair value hierarchy

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

The levels of the fair value hierarchy are as follows:

(1) Fair value is based on quoted prices (unadjusted) in active markets for identical assets or liabilities (锟斤拷Level 1锟斤拷);

(2) Fair value is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) (锟斤拷Level 2锟斤拷); and

(3) Fair value is based on inputs for the asset or liability that are not based on observable market data (unobservable inputs) (锟斤拷Level 3锟斤拷).

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

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

XVI.

FAIR VALUE MEASUREMENT (continued)

Determination of fair value and fair value hierarchy (continued)

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

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

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

31 December 2021

Level 1

Level 2

Level 3

Total fair value

Assets measured at fair value

Financial assets at fair value through profit or loss

- Stocks

- Funds

210

271

- Bonds

1,536

429

1,965

- Others

404

9,694

10,098

1,765

894

9,694

12,353

Available-for-sale financial assets

- Stocks

149,050

5,286

154,336

- Funds

41,739

31,162

72,901

- Bonds

21,477

267,473

2,076

291,026

- Others

16,884

110,234

127,118

212,266

315,519

117,596

645,381

Derivative financial assets

259

Liabilities measured at fair value

Derivative financial liabilities

Assets for which fair values are disclosed

Held-to-maturity financial assets

(Note XV)

5,988

427,427

433,415

Investments classified as loans and receivables (Note XV)

2,034

404,277

406,311

Investment properties (Note VII 14)

11,538

Liabilities for which fair values are disclosed (Note XV)

Bonds payable

11,037

XVI.

FAIR VALUE MEASUREMENT (continued)

Determination of fair value and fair value hierarchy (continued)

31 December 2020

Level 1

Level 2

Level 3

Total fair value

Assets measured at fair value

Financial assets at fair value through profit or loss

- Stocks

- Funds

307

108

415

- Bonds

2,596

502

3,098

- Others

228

8,662

8,890

2,973

838

8,662

12,473

Available-for-sale financial assets

- Stocks

120,263

6,953

127,216

- Funds

37,688

26,046

63,734

- Bonds

16,661

295,319

2,038

314,018

- Others

9,752

81,438

91,190

174,612

338,070

83,476

596,158

Derivative financial assets

140

Assets for which fair values are disclosed

Held-to-maturity financial assets

(Note XV)

6,452

342,029

348,481

Investments classified as loans and receivables (Note XV)

2,110

378,125

380,235

Investment properties (Note VII 14)

11,470

Liabilities for which fair values are disclosed (Note XV)

Bonds payable

10,571

In 2021, due to changes in availability of quoted prices (unadjusted) in active markets, the Group transferred certain bonds between Level 1 and Level 2. In 2021, the Group transferred the bonds with a carrying amount of approximately RMB 3,871 million from Level 1 to Level 2 and approximately RMB 10,867 million from Level 2 to Level 1. In 2020, the Group transferred the bonds with a carrying amount of approximately RMB 14,263 million from Level 1 to Level 2 and approximately RMB 9,139 million from Level 2 to Level 1.

XVI.

FAIR VALUE MEASUREMENT (continued)

Determination of fair value and fair value hierarchy (continued)

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

2021

Beginning of year

Increase

Decrease

Transferred to Level 3

Gains or losses recognised in profit

or loss

Net unrealised gains/(losses)

recognised in other comprehensive income/(loss)

End of year

Financial assets at fair value through profit or loss

- Wealth management
products

(3)

- Debt investment plans

- Other equity investments

8,641

931

9,663

Available-for-sale financial assets

- Stocks

3,658

1,628

5,286

- Preferred shares

13,131

(600)

(25)

12,519

- Other equity investments

68,307

29,147

(2,516)

(9)

839

95,768

- Finance bonds

2,038

2,076

- Wealth management products

1,947

2020

Beginning of year

Increase

Decrease

Transferred to Level 3

Gains or losses recognised in profit

or loss

Net unrealised gains recognised

in other comprehensive income/(loss)

End of year

Financial assets at fair value through profit or loss

- Wealth management
products

- Debt investment plans

- Other equity investments

595

8,034

8,641

Available-for-sale financial assets

- Preferred shares

13,621

(499)

13,131

- Other equity investments

49,181

25,271

(7,870)

(157)

1,882

68,307

- Finance bonds

1,974

252

(197)

2,038

XVI.

FAIR VALUE MEASUREMENT (continued)

Valuation techniques

The fair value of the unquoted debt investments is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities, with appropriate adjustment where applicable.

The fair value of the unquoted equity investments has been determined using valuation techniques such as discounted cash flow method, comparison method of listed companies, recent transaction prices of the same or similar instruments etc., with appropriate adjustments have been made where applicable, for example, for lack of liquidity using option pricing models. The valuation requires management to use major assumptions and parameters as unobservable inputs to the model. The major assumptions include estimated time period prior to the listing of the unquoted equity instruments, and the major parameters include discount rate from 3.13% to 7.22%, etc.

The fair value of investment properties is determined using discounted cash flow method with unobservable inputs including estimated rental value per square metre per month and discount rate, etc. This method involves the projection of a series of cash flows from valuation date to economic life maturity date. To this projected cash flow series, a market-derived discount rate is applied to establish the present value of the income stream associated with the asset.

XVII.

EVENTS AFTER THE BALANCE SHEET DATE

Pursuant to the resolution of the 11th extraordinary board meeting of the 7th Board of Directors of CPIC Life, CPIC Senior Living Development (Zhengzhou) Co., Ltd. and CPIC Senior Living Development (Beijing) Co., Ltd. were set up with estimated capital contributions of RMB 1,060 million and RMB 1,330 million respectively. CPIC Life had made the capital contribution of RMB 184 million and RMB 117 million respectively as at the date of approving these financial statements.

Pursuant to the resolution of the 16th extraordinary board meeting of the 7th Board of Directors and the 1st general meeting of shareholders of CPIC Life held in 2022, CPIC Life injected capital in the amount of RMB 2,000 million into CPIC Senior Living Investment. The capital injection is subject to approval from the CBIRC.

Pacific Insurance Technology Co., Ltd., a wholly-owned subsidiary set up by the Company, obtained the business license of legal entity in March 2022. The registered capital is RMB 700 million.

The Group does not have other significant post balance sheet events.

XVIII.

APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS

These consolidated financial statements have been approved for issue by the board of directors of the Company on 25 March 2022.

According to the Articles of Association of the Company, these consolidated financial statements will be submitted for the approval of the general shareholders锟斤拷 meeting.