# 02328_10042023_1808_Annual Report 2022
> Source: `02328_10042023_1808_Annual Report 2022.pdf`
> Pages: 232
> Converted: 2026-05-06T13:04:34
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# 中国人民财产保险股份有限公司
### PICC PROPERTY AND CASUALTY COMPANY LIMITED
Stock Code: 2328
# 2022
# ANNUAL REPORT
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# Company Profile
The Company, the largest property and casualty insurance company on the Chinese mainland, was established in July 2003 with PICC Group as its sole promoter. The Company became the first domestic financial enterprise listed overseas when the Company was successfully listed on the Main Board of the Hong Kong Stock Exchange on 6 November 2003. The Company currently has a total share capital of 22,242,765,303 shares, of which 68.98% are held by PICC Group and 31.02% by H Shareholders.
## PRINCIPAL ACTIVITIES
Motor vehicle insurance, commercial property insurance, cargo insurance, liability insurance, accidental injury insurance, short-term health insurance, agriculture insurance, credit insurance, surety insurance, household property insurance, marine hull insurance and other insurance businesses, which are denominated in RMB and foreign currencies, and the related reinsurance businesses as well as investment and funds application business permitted under the relevant laws and regulations of the PRC.
---
# Contents
| Page | Section |
| :--- | :--- |
| | **Overview** |
| 2 | Financial Summary |
| 4 | Company Honours |
| 6 | **President’s Statement** |
| | **Discussion and Analysis of Operating Results and Financial Conditions** |
| 9 | Performance Highlights |
| 12 | Principal Activities and Operation Analysis |
| 28 | Specific Analysis |
| 33 | Looking Forward |
| | **Corporate Governance** |
| 34 | Biographical Details of Directors, Supervisors and Other Senior Management |
| 41 | Report of the Board of Directors |
| 61 | Report of the Supervisory Committee |
| 64 | Corporate Governance Report |
| | **Financial Reports** |
| 97 | Independent Auditor’s Report |
| 103 | Consolidated Financial Statements |
| 111 | Notes to the Consolidated Financial Statements |
| 227 | **Definitions** |
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# Financial Summary
Summaries of the results and the assets and liabilities of the Company and its subsidiaries for each of the past five financial years are set out as follows:
## RESULTS
**Year ended 31 December**
| | 2022 | 2021 | Change | 2020 | 2019 | 2018 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| | **RMB million** | **RMB million** | **%** | **RMB million** | **RMB million** | **RMB million** |
| Gross written premiums | 487,533 | 449,533 | 8.5 | 433,187 | 433,175 | 388,769 |
| Underwriting profit | 10,329 | 1,521 | 579.1 | 4,177 | 3,177 | 5,304 |
| Investment income | 20,180 | 17,996 | 12.1 | 17,709 | 16,986 | 16,635 |
| Net realised and unrealised (losses)/gains on investments | (3,706) | 3,634 | – | 1,520 | 733 | (1,226) |
| Share of profits or losses of associates and joint ventures | 4,225 | 4,524 | -6.6 | 3,951 | 4,250 | 4,482 |
| Profit before income tax | 30,919 | 26,028 | 18.8 | 24,676 | 23,783 | 23,428 |
| Income tax (expense)/credit | (4,266) | (3,663) | 16.5 | (3,808) | 496 | (7,942) |
| Net profit for the year | 26,653 | 22,365 | 19.2 | 20,868 | 24,279 | 15,486 |
## ASSETS AND LIABILITIES
**At 31 December**
| | 2022 | 2021 | Change | 2020 | 2019 | 2018 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| | **RMB million** | **RMB million** | **%** | **RMB million** | **RMB million** | **RMB million** |
| Total assets | 751,887 | 682,622 | 10.1 | 646,801 | 596,081 | 550,619 |
| Total liabilities | 539,139 | 476,973 | 13.0 | 456,770 | 426,127 | 409,116 |
| Total equity | 212,748 | 205,649 | 3.5 | 190,031 | 169,954 | 141,503 |
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## Fast growth in business
| Gross written premiums | A year-on-year increase of |
| :--- | :--- |
| RMB487,533 million | 8.5% |
## Great increase in underwriting profit
| Underwriting profit | A year-on-year increase of |
| :--- | :--- |
| RMB10,329 million | RMB8,808 million |
## A year-on-year decrease in total investment income
| Total investment income | A year-on-year decrease of |
| :--- | :--- |
| RMB20,604 million | RMB5,550 million |
## Fast growth in overall profitability
| Net profit for the Year | A year-on-year increase of |
| :--- | :--- |
| RMB26,653 million | 19.2% |
## A year-on-year increase in return on equity
| Return on equity | A year-on-year increase of |
| :--- | :--- |
| 12.7% | 1.4 pp |
## Substantial increase in net cashflows
| Net cash flows generated from operating activities | A year-on-year increase of |
| :--- | :--- |
| RMB42,710 million | RMB26,374 million |
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# Company Honours
## BUSINESS STRENGTHS
21st Century Business Herald
17th Asian Finance Conference
**“BEST PROPERTY INSURANCE COMPANY OF THE YEAR 2022 IN ASIA”**
maintaining the title for 14 consecutive years
Top 100 Hong Kong Listed Companies Research Centre, Finet
**Ranked 35th in the Main List of “Top 100 in Comprehensive Strengths” of “Hong Kong Stocks – Top 100”**
On list for 10 consecutive years
China Times 16th “Golden Cicada Award”
**“Property Insurance Company of the Year 2022”**
Moody’s Investors Service
**A1 insurance financial strength rating (Stable Outlook)**
the highest level among domestic insurance companies
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### CUSTOMER SERVICE
CBIRC
“3•15” consumers’ rights and interests protection promotion week and 2022 comprehensive financial knowledge education and promotion activity
**One of the Top Ten Excellent Organisers of the “3•15” and Comprehensive Financial Knowledge Education and Promotion Activity in the Property Insurance Industry**
maintaining the title for 4 consecutive years
Securities Times
“2022 China Insurance Ark Award”
**“2022 Ark Award for Gold Medal Insurance Services”**
maintaining the title for 5 consecutive years
### INVESTOR RELATIONS
13th “Tianma Award” for Investor Relations of Chinese Listed Companies
**“Best Investor Relations Award for Hong Kong Listed Companies”**
### TECHNOLOGY INNOVATION
World Internet Conference of the Year 2022
“Blockchain-based Intelligent Reinsurance Trading Platform” Project shortlisted as an
**Excellent Case in the “Jointly Build Community with a Shared Future in Cyberspace, Digital Economy Category”**
the only practice case shortlisted in the insurance industry
IDC Financial Insights
“2022 IDC Technology Application Scenario Innovation Award in China Financial Industry”
“City Wanxiang Cloud Platform” awarded as an
**Excellent Case of “Financial Risk Control and Information Security”**
China Digital Inclusive Finance Conference of the Year 2022
“Technology Loan” Project won
**“Technology Innovation in Digital Inclusive Finance Services”**
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# President’s Statement
Mr. Yu Ze
Executive Director,
President
### DEAR SHAREHOLDERS,
Everything revives with fresh prosperity as time goes by. The year 2022 marked an extremely important year in the history of the Communist Party of China (CPC) and our country. The successful convening of the 20th CPC National Congress has drawn up a grand blueprint for building a modern socialist country comprehensively. Marching ahead along with the country under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, the Company deepened the reform and innovation, accelerated the transformation and development, overcame the difficulties and forged ahead, with fruitful and inspiring achievements in high-quality development.
**Striving for steady progress and maintaining a favorable development momentum.** In 2022, the Company actively coped with the macro-economic pressure and changing landscape of industry development. The gross written premiums reached RMB487,533 million, representing a year-on-year increase of 8.5%. The market share steadily ranked first in the industry. The underwriting profit of the Company reached RMB10,329 million, exceeding RMB10 billion for the first time. The net profit for the Year reached RMB26,653 million, representing a year-on-year increase of 19.2%. The return
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on equity was 12.7%. With high recognition of its comprehensive strength and brand influence from the society, the Company maintained the A1 rating by Moody’s, which is the highest rating among insurance companies in Chinese mainland and was awarded the “Best Property Insurance Company in Asia” for 14 consecutive years.
**Adhering to the original mission and demonstrating the responsibility of a central state-owned enterprise.** Carrying forward our “red” legacy from revolutionary times and bearing in mind the “country’s most fundamental interests”, we provided all kinds of risk protection for the whole society in 2022 amounting to approximately RMB1,708 trillion, which was 14 times of the GDP in the same period. We provided high-quality protection for the Beijing 2022 Winter Olympics and Paralympics, insured the world’s first C919 large passenger jet, the Jinshajiang Baihetan Hydropower Station and other national landmark projects as the leading underwriter, and promoted the establishment of the China ASEAN Cross-border Reinsurance Community to serve “the Belt and Road” construction. We improved our catastrophe risk diversification system, successfully issued the earthquake catastrophe bond in Hong Kong, and became the first direct insurer in China to issue catastrophe bond. We actively responded to major disasters and accidents such as the “3·21” China Eastern Airlines airplane accident, the earthquakes in Sichuan province and the droughts in the Yangtze River basin, shouldering our responsibility as a central state-owned enterprise through practical actions.
**Serving the national strategies and protecting people’s better life.** The Company continued to improve the quality and efficiency of its supply by adhering to the original function of insurance. The full-cost and income insurance for the three staple grains were implemented in 13 provinces. The “Rural Insurance” provided risk protection of RMB48 trillion. The Company has strategically developed new energy vehicle insurance. The social medical insurance has served 900 million people, and “Huimin Insurance” has covered 256 cities and regions. The Company innovated green insurance products such as “carbon offset”, “carbon quota” and “carbon capture”. China Integrated Circuit Co-insurance Corporation provided risk protection of over RMB1 trillion for customers in the integrated circuit industry, and the catastrophe insurance covered 240 million people in 13 provinces. The Company launched exclusive products for new citizens, upgraded the warm station and fast claims service, and gave full play to the leading role of people’s insurance.
**Deepening reform and innovation and enhancing development momentum and vitality.** The Company implemented the reform requirements of state-owned enterprises, focused on accelerating the construction of a world-class enterprise, and promoted the organizational reform, with business unit construction at its core, to reach the grassroots. The Company reshaped the operation and management logics with new structure to implement specialized operation and penetrating management. The Company optimized resource allocation, implemented the core system of human resource management, created a sound ecology of selection and appointment of management, improved the performance assessment and salary allocation system, strengthened the refined management of expenses, carried out the operating cost reduction and efficiency improvement, strengthened the control of key aspects of claims, and managed the high loss-making business of commercial non-motor vehicle insurance. The Company’s combined ratio continued to outperform the industry. The Company newly set up a risk research and development center, promoted risk reduction management services and deepened the construction of the ecosystem to build new competitive advantages in the market.
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# President’s Statement
### Strengthening technology leadership and promoting technology self-reliance and self-improvement.
The Company issued a digital operation plan to promote the deep integration of technology and business, and to strengthen the support of sales tools and operation platforms for business units. The Company reconstructed and integrated the claims system and improved the efficiency of operational services. The Company has completed the upgrade of database localization and platform replacement, reshaped the science and technology innovation management system, established a science and technology innovation mechanism with three forms of inter-complementing project constructions, which are “open competition mechanism to select the best candidates” project construction, top-down key innovation project construction and bottom-up innovation project incubation, and promoted the independent research of insurance science and technology. The Company’s animal food traceability safety service platform based on the alliance blockchain was selected as a national blockchain innovation application pilot.
### Proactively preventing risks and ensuring safe and sound operation.
To integrate development and safety, and standardize corporate governance, the Company issued a new version of comprehensive risk management approach and a package of internal control and compliance management system, launched a unified risk management platform, conducted comprehensive risk check, and established a mechanism for reporting and handling important risk issues to strengthen risk prevention in key areas. A business management committee was established to implement collective consultation and decision-making on major underwriting and claim issues. The Company improved the authorization system and promoted the transformation and upgrading of financial and claims internal control to strengthen vertical management and rigid control of the system. The Company made unremitting efforts to improve conduct, enforce discipline, and combat corruption, and integrated anti-corruption in financial sector and financial risk disposal to firmly safeguard the bottom line of no systemic risks.
The world today is confronted with accelerated changes unseen in the last century. Against such complicated and challenging external circumstances with various uncertainties, the Chinese economy performs with strong resilience, tremendous potential and great vitality, with various policies continuously taking effect and the economy showing steady recovery and a trend of rebound. We believe that the PRC insurance industry is still in an important period of strategic opportunity for development, and we are able to realize our own high-quality development while serving the high-quality economic and social development as long as we fully understand and grasp the positive factors and favorable conditions for development.
In the face of the fierce competition, we shall surmount all difficulties and forge ahead courageously. The year 2023 is the first year for implementing the guiding principles of the 20th CPC National Congress in full and a critical year for carrying forward the “14th Five-year Plan” of the Company. Under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, we will commit ourselves to the path of financial development with Chinese characteristics, and deliver people’s insurance in a more politically-oriented, people-centric and professional way. We will adhere to the original function of insurance, uphold fundamental principles and break new ground, seeking progress while maintaining stability. We will continue to deepen the structural reform on the supply-side of insurance, continuously improve the quality and efficiency of serving the real economy, better play the role as the leading goose of the industry, accelerate the construction of a world-class insurance enterprise, and make positive contributions to serving the Chinese path to modernization by giving back to customers, shareholders, employees and society with more excellent results!
**Yu Ze**
*Executive Director, President*
Beijing, the PRC
24 March 2023
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# Discussion and Analysis of Operating Results and Financial Conditions
## I. PERFORMANCE HIGHLIGHTS
In 2022, the Company and its subsidiaries insisted on serving economic development and improving people’s well-being, promoted the “Excellent Insurance Strategy”, and fully implemented the three major tasks of financial work. To “serve the real economy”, the Company further improved its business development capacity by aligning itself with the needs of the national economy and social development in a political-oriented, people-centric and professional way, and enriched and expanded services with great efforts in product development. To implement the “prevention and control of financial risks”, the Company improved the internal control and risk management system, promoted the transformation of financial and claims internal control, and strengthened comprehensive risk management and risk prevention in key areas, with foundation for sound operation being solidified. To “deepen financial reform”, the Company advanced the organizational reform, improved the business model, reshaped the management logic with reforms in terms of human resources, financial resources and technology resources, so that a new management system has been formed. With comprehensive promotion of various reforms and development work, the Company and its subsidiaries have achieved new breakthroughs in business performance and taken solid steps towards the goal of building a world-class property and casualty insurance company.
### SEEKING PROGRESS WHILE MAINTAINING STABILITY IN BUSINESS DEVELOPMENT, ACHIEVED A MORE BALANCED BUSINESS STRUCTURE
In 2022, the Company and its subsidiaries consistently optimized the business operation modes, promoted business integration and product innovation, and proactively controlled business carrying high risks, achieving gross written premiums of RMB487,533 million, representing a year-on-year increase of 8.5%. The Company’s market share was 32.7% (Note) in the property and casualty insurance market of the PRC. Motor vehicle insurance business achieved gross written premiums of RMB271,160 million, representing a year-on-year increase of 6.2%, among which, the share of household automobile insurance business had a year-on-year increase of 1.7 percentage points, with continuous improvement in the structure and quality of motor vehicle insurance business. Non-motor vehicle insurance business achieved gross written premiums of RMB216,373 million, representing a year-on-year increase of 11.4%. The gross written premium of non-motor vehicle insurance accounted for 44.4% of the total, representing a year-on-year increase of 1.2 percentage points. The overall business structure was more balanced.
| Metric | Details |
| :--- | :--- |
| **Gross written premiums** | RMB487,533 million |
| **Growth** | A year-on-year increase of 8.5% |
Note: Calculated based on the data of the PRC insurance industry published on the website of the CBIRC. Beginning from June 2021, the aggregate data of property insurance industry published by the CBIRC was exclusive of certain institutions undergoing settlement of risks in the insurance industry.
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# REMARKABLY ELEVATED OPERATION PROFITABILITY, CONTINUOUSLY ENHANCED COMPREHENSIVE STRENGTH
In 2022, the Company and its subsidiaries comprehensively promoted “quality improvement, cost reduction and efficiency enhancement”, and the high-risk business management gradually took effect. The underwriting profit was RMB10,329 million, representing a year-on-year increase of 579.1%, and the combined ratio was 97.6%, representing a year-on-year decrease of 2.0 percentage points. The underwriting profit recorded fast growth. The net profit was RMB26,653 million, representing a year-on-year increase of 19.2%; the return on equity was 12.7%, representing a year-on-year increase of 1.4 percentage points. The net cash flows generated from operating activities were RMB42,710 million, representing a year-on-year increase of RMB26,374 million (or 161.4%) with a significant improvement in liquidity.
| Key Metric | Value |
| :--- | :--- |
| Combined ratio | 97.6% |
| Return on equity | 12.7% |
As at 31 December 2022, the total assets of the Company and its subsidiaries amounted to RMB751,887 million and the net assets amounted to RMB212,748 million, representing an increase of RMB69,265 million and an increase of RMB7,099 million as compared to the beginning of the Year, respectively. The comprehensive solvency margin ratio was 229.3%, remaining stable. Due to its outstanding industry position and continuous improvement in overall strengths, the Company was awarded the “Best Property Insurance Company in Asia” for 14 consecutive years, and Moody’s Investors Service continued to maintain the Company’s insurance financial strength rating of A1 (Stable Outlook), the highest rating on the Chinese mainland.
# INNOVATING TECHNOLOGY EMPOWERMENT, EFFECTIVELY IMPROVING CUSTOMER SERVICE CAPABILITY
Adhering to the development concept of technology as the first productive force, the Company and its subsidiaries promoted the construction of online and digital transformation, and continued to improve the customer acquisition capability of such channels as WeChat official account, app and official website. In 2022, the online rate of household automobile customers was 95.7%, representing a year-on-year increase of 2.2 percentage points, the online rate of individual non-motor vehicle customers was 84.8%, representing a year-on-year increase of 8.8 percentage points, and the total number of online customers exceeded 114 million, representing a year-on-year increase of 29.4%. Premium income of motor vehicle insurance from “One-click Policy Renewal” amounted to RMB1,696 million, representing a year-on-year increase of 29.6%, and premium income of “PICC e-Tong” app amounted to RMB104,143 million, representing a year-on-year increase of 20.7%.
The Company insisted on the customer-centric approach and promoted customer service efficiency and quality improvement through innovative technology empowerment, strengthened the construction of institutional mechanisms for consumer rights protection, effectively safeguarded customers’ rights and interests, created a more professional and warmer service experience for customers, and further enhanced customers’ loyalty. The Company has a growing customer base, with 118 million individual customers and 3.85 million group customers by the end of 2022.
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# Discussion and Analysis of Operating Results and Financial Conditions
## FULLY SUPPORTING THE REAL ECONOMY, SHOWING THE RESPONSIBILITY OF INSURANCE
In 2022, the Company and its subsidiaries undertook an aggregated insurance liability of RMB1,708 trillion, representing a year-on-year increase of 15.4%. The Company provided high-quality protection for the Beijing 2022 Winter Olympic Games and Paralympic Games, and insured the world’s first C919 large passenger jet, the Jinshajiang Baihetan Hydropower Station and other national landmark projects as the leading underwriter. The Company proactively responded to major disasters and accidents such as the “3·21” China Eastern Airlines airplane accident, the earthquakes in Sichuan province and the droughts in Yangtze River basin, and fully cooperated with local rescue and relief efforts, practicing “people first” with practical actions.
The Company and its subsidiaries focused on the PICC Group’s “Excellent Insurance Strategy” and expanded services. To serve the rural revitalisation, the full cost insurance and income insurance of the three staple grains were fully implemented in pilot provinces, and the “Rural Insurance” product provided risk protection of RMB48 trillion. To serve scientific and technological innovation, the intellectual property insurance solution provided risk protection of RMB70,300 million, and the risk protection provided by China Integrated Circuit Insurance Pool for customers in the IC industry exceeded RMB1 trillion. To serve green environment, we innovated carbon quota and carbon offset insurance, issued the first carbon capture insurance in China, and provided green insurance protection of RMB68 trillion for the Year. To serve smart transportation, we vigorously developed new energy motor vehicle insurance, developed “intelligent network” car insurance business and pioneered the “intelligent network” passenger transportation carrier liability insurance. To serve health and elderly care, the social medical insurance business has served 900 million people and the “Huimin Insurance” has covered 256 cities. To serve social governance, we launched a series of exclusive products for new citizens, provided tailored catastrophe insurance solutions for 34 cities, and provided accident prevention services for 218,000 enterprises through an intelligent risk control service platform for 338,000 times. To serve economy stability, we helped 53,000 small and medium-sized enterprises and individual entrepreneurs to obtain loans or financing with an amount of RMB18,400 million, representing a year-on-year increase of 9.4%. To serve the opening up, we promoted the official establishment of the China ASEAN Cross-border Reinsurance Community, and provided risk protection of RMB20.8 trillion for “the Belt and Road” construction.
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# II. PRINCIPAL ACTIVITIES AND OPERATION ANALYSIS
## (I) INSURANCE BUSINESS
### 1. Business Overview
#### Underwriting results
In 2022, the Company and its subsidiaries achieved gross written premiums of RMB487,533 million, representing a year-on-year increase of RMB38,000 million (or 8.5%). The business growth was largely driven by the increase in the motor vehicle insurance, agriculture insurance, accidental injury and health insurance, etc. The Company and its subsidiaries deeply promoted “quality improvement, cost reduction and efficiency enhancement”, practiced the new logic of “Underwriting+Loss Reduction+Empowerment+Claims”, upgraded the actuarial pricing model, strengthened the control of high-risk business, optimized the expense allocation strategy, continuously enhanced the level of refined claims management, and significantly boosted underwriting performance. The loss ratio was 71.8%, representing a year-on-year decrease of 1.9 percentage points; the expense ratio was 25.8%, representing a year-on-year decrease of 0.1 percentage point; the combined ratio was 97.6%, representing a year-on-year decrease of 2.0 percentage points; the underwriting profit amounted to RMB10,329 million, representing a year-on-year increase of 579.1%.
The following table sets forth the key operating results and selected financial indicators of the insurance business of the Company and its subsidiaries for the relevant periods:
| | Year ended 31 December | | |
| :--- | :--- | :--- | :--- |
| | 2022 | 2021 | Change |
| | RMB million | RMB million | % |
| Gross written premiums | 487,533 | 449,533 | 8.5 |
| Net earned premiums | 425,480 | 396,997 | 7.2 |
| Net claims incurred | (305,634) | (292,588) | 4.5 |
| Total expenses | (109,517) | (102,888) | 6.4 |
| Underwriting profit | 10,329 | 1,521 | 579.1 |
| Loss ratio (%) | (71.8) | (73.7) | Decrease by 1.9 pp |
| Expense ratio (%) | (25.8) | (25.9) | Decrease by 0.1 pp |
| Combined ratio (%) | (97.6) | (99.6) | Decrease by 2.0 pp |
---
### Distribution channels
The following table sets forth the direct written premiums of the Company and its subsidiaries by distribution channels for the relevant periods:
| | Year ended 31 December | | | | |
| :--- | :--- | :--- | :--- | :--- | :--- |
| | 2022 | | | 2021 | |
| | Amount | Percentage | Change | Amount | Percentage |
| | RMB million | % | % | RMB million | % |
| Insurance agents | 301,921 | 62.2 | 7.9 | 279,707 | 62.4 |
| Among which: | | | | | |
| Individual insurance agents | 167,779 | 34.6 | 12.1 | 149,731 | 33.4 |
| Ancillary insurance agents | 33,050 | 6.8 | (14.0) | 38,426 | 8.6 |
| Professional insurance agents | 101,092 | 20.8 | 10.4 | 91,550 | 20.4 |
| Direct sales | 141,930 | 29.2 | 9.2 | 130,017 | 29.0 |
| Insurance brokers | 41,583 | 8.6 | 7.6 | 38,660 | 8.6 |
| Total | 485,434 | 100.0 | 8.3 | 448,384 | 100.0 |
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### Geographical segments
The following table sets forth the direct written premiums of the Company and its subsidiaries by top ten regions for the relevant periods:
| | Year ended 31 December 2022 | Year ended 31 December 2021 | Change |
| :--- | :--- | :--- | :--- |
| | RMB million | RMB million | % |
| Guangdong Province | 50,443 | 44,774 | 12.7 |
| Jiangsu Province | 48,586 | 44,144 | 10.1 |
| Zhejiang Province | 39,813 | 35,849 | 11.1 |
| Shandong Province | 29,788 | 27,410 | 8.7 |
| Hebei Province | 26,696 | 24,205 | 10.3 |
| Sichuan Province | 23,551 | 22,309 | 5.6 |
| Hunan Province | 20,883 | 19,217 | 8.7 |
| Hubei Province | 20,615 | 18,424 | 11.9 |
| Anhui Province | 20,070 | 17,664 | 13.6 |
| Fujian Province | 19,576 | 18,039 | 8.5 |
| Other regions | 185,413 | 176,349 | 5.1 |
| **Total** | **485,434** | **448,384** | **8.3** |
## 2. Operating results by insurance segments
### Composition of gross written premiums
| Insurance Segments | 2022 | 2021 |
| :--- | :--- | :--- |
| Motor vehicle insurance | 55.6% | 56.8% |
| Accidental injury and health insurance | 18.3% | 18.0% |
| Agriculture insurance | 10.7% | 9.5% |
| Liability insurance | 6.9% | 7.4% |
| Commercial property insurance | 3.4% | 3.5% |
| Credit and surety insurance | 1.1% | 0.6% |
| Cargo insurance | 1.0% | 1.1% |
| Other insurances | 3.0% | 3.1% |
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### (1) Motor vehicle insurance
The following table sets forth the key operating results and selected financial indicators of the motor vehicle insurance business of the Company and its subsidiaries for the relevant periods:
| | Year ended 31 December 2022 | Year ended 31 December 2021 | Change |
| :--- | :--- | :--- | :--- |
| | **RMB million** | **RMB million** | **%** |
| Gross written premiums | 271,160 | 255,275 | 6.2 |
| Net earned premiums | 257,059 | 243,833 | 5.4 |
| Net claims incurred | (175,021) | (170,890) | 2.4 |
| Total expenses | (70,733) | (66,271) | 6.7 |
| Underwriting profit | 11,305 | 6,672 | 69.4 |
| Loss ratio (%) | (68.1) | (70.1) | Decrease by 2.0 pp |
| Expense ratio (%) | (27.5) | (27.2) | Increase by 0.3 pp |
| Combined ratio (%) | (95.6) | (97.3) | Decrease by 1.7 pp |
In 2022, the Company and its subsidiaries insisted on “increasing renewed businesses and optimizing the transferred-in insurance businesses”, continued to strengthen the resource integration, and enhanced the customer service capacity building. The renewal rate of auto insurance increased by 1.3 percentage points year-on-year, and the proportion of customers buying both compulsory and commercial auto insurance increased by 0.3 percentage points year-on-year, achieving growth in both the number of autos insured and average premium per car. The gross written premiums of the motor vehicle insurance achieved RMB271,160 million, which increased by RMB15,885 million (or 6.2%) year-on-year.
The Company and its subsidiaries adhered to high-quality development. On the one hand, the Company and its subsidiaries innovatively used technological tools, enhanced risk identification and refined pricing capabilities, and strengthened underwriting risk selection to significantly improve the structure of motor vehicle insurance business. On the other hand, the Company and its subsidiaries deeply promoted cost reduction and efficiency enhancement, strengthened refined management of claims and improved resource allocation efficiency to significantly improve operating profitability. The loss ratio of motor vehicle insurance was 68.1%, representing a year-on-year decrease of 2.0 percentage points; the expense ratio was 27.5%, representing a year-on-year increase of 0.3 percentage points; the combined ratio was 95.6%, representing a year-on-year decrease of 1.7 percentage points; and the underwriting profit amounted to RMB11,305 million, representing a year-on-year increase of RMB4,633 million (or 69.4%).
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### (2) Accidental injury and health insurance
The following table sets forth the key operating results and selected financial indicators of the accidental injury and health insurance business of the Company and its subsidiaries for the relevant periods:
| | Year ended 31 December | | Change |
| :--- | :--- | :--- | :--- |
| | **2022** | 2021 | % |
| | **RMB million** | RMB million | |
| Gross written premiums | **88,999** | 80,692 | 10.3 |
| Net earned premiums | **82,062** | 76,526 | 7.2 |
| Net claims incurred | **(66,985)** | (65,192) | 2.8 |
| Total expenses | **(15,427)** | (13,286) | 16.1 |
| Underwriting loss | **(350)** | (1,952) | — |
| Loss ratio (%) | **(81.6)** | (85.2) | Decrease by 3.6 pp |
| Expense ratio (%) | **(18.8)** | (17.4) | Increase by 1.4 pp |
| Combined ratio (%) | **(100.4)** | (102.6) | Decrease by 2.2 pp |
In 2022, the Company and its subsidiaries actively participated in the construction of the national medical insurance system, proactively facilitated development of “Huimin Insurance” and social security care insurance while steadily developing traditional business, developed exclusive group insurance products based on further detailed customer classification, vigorously developed livelihood business and individual accidental injury and health insurance, and promoted the integrated development of social medical insurance and commercial health insurance. The gross written premiums of accidental injury and health insurance amounted to RMB88,999 million, representing a year-on-year increase of RMB8,307 million (or 10.3%).
The Company and its subsidiaries strengthened underwriting management and control, improved risk identification, and implemented comprehensive business management and hierarchical underwriting authorization, to improve business quality from underwriting side; from claim side, optimized management processes and improved system functions to strengthen claim risk control. The loss ratio of accidental injury and health insurance was 81.6%, representing a year-on-year decrease of 3.6 percentage points; due to the increase in the percentage of commercial business, the expense ratio was 18.8%, representing a year-on-year increase of 1.4 percentage points; the combined ratio was 100.4%, which decreased by 2.2 percentage points year-on-year; and the underwriting loss was RMB350 million, as compared to an underwriting loss of RMB1,952 million for the previous year.
---
### (3) Agriculture Insurance
The following table sets forth the key operating results and selected financial indicators of the agriculture insurance business of the Company and its subsidiaries for the relevant periods:
| | Year ended 31 December 2022 | Year ended 31 December 2021 | Change |
| :--- | :--- | :--- | :--- |
| | **RMB million** | **RMB million** | **%** |
| Gross written premiums | 52,060 | 42,769 | 21.7 |
| Net earned premiums | 37,670 | 30,274 | 24.4 |
| Net claims incurred | (29,843) | (24,694) | 20.9 |
| Total expenses | (5,169) | (6,058) | -14.7 |
| Underwriting profit/(loss) | 2,658 | (478) | — |
| Loss ratio (%) | (79.2) | (81.6) | Decrease by 2.4 pp |
| Expense ratio (%) | (13.7) | (20.0) | Decrease by 6.3 pp |
| Combined ratio (%) | (92.9) | (101.6) | Decrease by 8.7 pp |
In 2022, the Company and its subsidiaries took the initiative to serve the rural revitalization and modernization of agriculture and rural areas, and assisted in the industrial upgrade of the agriculture with local features and advantages as well as the “Vegetable Basket” guarantee project. The full cost insurance and income insurance were fully implemented in pilot provinces, and the business layout of featured livestock insurance was expanded. The gross written premiums of the agriculture insurance reached RMB52,060 million, representing a year-on-year increase of RMB9,291 million (or 21.7%).
The Company and its subsidiaries implemented integrated claim management of agriculture insurance, optimized claim operation mode, strengthened the control of key aspects of claims, and improved risk identification and control. The loss ratio of agriculture insurance was 79.2%, which decreased by 2.4 percentage points year-on-year. The Company and its subsidiaries strengthened expense control and effectively reduced costs, resulting in an expense ratio of the agriculture insurance of 13.7%, which decreased by 6.3 percentage points year-on-year. The combined ratio was 92.9%, representing a year-on-year decrease of 8.7 percentage points, and the underwriting profit reached RMB2,658 million, as compared to an underwriting loss of RMB478 million for the previous year.
---
# PICC Property and Casualty Company Limited
## Discussion and Analysis of Operating Results and Financial Conditions
### (4) Liability Insurance
The following table sets forth the key operating results and selected financial indicators of the liability insurance business of the Company and its subsidiaries for the relevant periods:
| | Year ended 31 December | | |
| :--- | :--- | :--- | :--- |
| | **2022** | **2021** | **Change** |
| | **RMB million** | **RMB million** | **%** |
| Gross written premiums | 33,772 | 33,134 | 1.9 |
| Net earned premiums | 24,684 | 22,436 | 10.0 |
| Net claims incurred | (18,811) | (15,223) | 23.6 |
| Total expenses | (9,026) | (8,856) | 1.9 |
| Underwriting loss | (3,153) | (1,643) | –– |
| Loss ratio (%) | (76.2) | (67.9) | Increase by 8.3 pp |
| Expense ratio (%) | (36.6) | (39.5) | Decrease by 2.9 pp |
| Combined ratio (%) | (112.8) | (107.4) | Increase by 5.4 pp |
In 2022, while tightening management of underwriting quality and carrying out special plan to improve high-risk business, the Company and its subsidiaries took the initiative to respond to market demand, implemented the national deployment of “consolidating and expanding the achievements of poverty eradication” and “improving the institutional mechanism of disaster prevention, mitigation and relief”, and vigorously developed the business of production safety liability insurance and government assistance insurance, etc. The liability insurance achieved gross written premiums of RMB33,772 million, representing a year-on-year increase of RMB638 million (or 1.9%).
Subject to rising claim standard of personal injuries and claim liability of historical high-risk business, the loss ratio of the liability insurance was 76.2%, representing a year-on-year increase of 8.3 percentage points. At the same time, the Company and its subsidiaries enhanced the classified customer management, accurately allocated market expenses and strengthened channel management. The expense ratio of liability insurance was 36.6%, representing a year-on-year decrease of 2.9 percentage points. The combined ratio was 112.8%, representing a year-on-year increase of 5.4 percentage points; and the underwriting loss was RMB3,153 million, as compared to an underwriting loss of RMB1,643 million for the previous year.
---
### (5) Commercial property insurance
The following table sets forth the key operating results and selected financial indicators of the commercial property insurance of the Company and its subsidiaries for the relevant periods:
| | Year ended 31 December | | |
| :--- | :--- | :--- | :--- |
| | **2022** | **2021** | **Change** |
| | **RMB million** | **RMB million** | **%** |
| Gross written premiums | 16,553 | 15,912 | 4.0 |
| Net earned premiums | 8,638 | 8,158 | 5.9 |
| Net claims incurred | (6,118) | (7,396) | -17.3 |
| Total expenses | (3,347) | (3,205) | 4.4 |
| Underwriting loss | (827) | (2,443) | —— |
| Loss ratio (%) | (70.8) | (90.7) | Decrease by 19.9 pp |
| Expense ratio (%) | (38.8) | (39.3) | Decrease by 0.5 pp |
| Combined ratio (%) | (109.6) | (130.0) | Decrease by 20.4 pp |
In 2022, the Company and its subsidiaries actively grasped the market opportunity arising from the stabilization and positive turnaround in domestic economy, strengthened product supply, enhanced policy refinement management, and improved market responsiveness. The commercial property insurance reached gross written premiums of RMB16,553 million, representing a year-on-year increase of RMB641 million (or 4.0%).
The Company and its subsidiaries continuously optimized the business structure, and actively carried out disaster prevention and loss prevention work to effectively reduce underwriting risks. Besides, there was a year-on-year decrease in catastrophe losses. The loss ratio of the commercial property insurance was 70.8%, representing a year-on-year decrease of 19.9 percentage points; the expense ratio was 38.8%, representing a year-on-year decrease of 0.5 percentage points; the combined ratio was 109.6%, representing a year-on-year decrease of 20.4 percentage points. The underwriting loss was RMB827 million, as compared to an underwriting loss of RMB2,443 million for the previous year.
---
### (6) Credit and surety insurance
The following table sets forth the key operating results and selected financial indicators of the credit and surety insurance of the Company and its subsidiaries for the relevant periods:
| | Year ended 31 December | | Change |
| :--- | :---: | :---: | :--- |
| | 2022 | 2021 | |
| | **RMB million** | **RMB million** | **%** |
| Gross written premiums | 5,294 | 2,840 | 86.4 |
| Net earned premiums | 4,913 | 5,289 | -7.1 |
| Net claims incurred | (2,240) | (2,674) | -16.2 |
| Total expenses | (1,515) | (853) | 77.6 |
| Underwriting profit | 1,158 | 1,762 | -34.3 |
| Loss ratio (%) | (45.6) | (50.6) | Decrease by 5.0 pp |
| Expense ratio (%) | (30.8) | (16.1) | Increase by 14.7 pp |
| Combined ratio (%) | (76.4) | (66.7) | Increase by 9.7 pp |
In 2022, the Company and its subsidiaries took advantage of the economic stabilization and the stable growth in domestic and foreign trade, proactively contributed to the national strategy and the real economy, served the financing needs of small and micro enterprises, continuously strengthened the professional team building, expanded new modes and new patterns, and actively developed high-quality customers. The credit and surety insurance achieved gross written premiums of RMB5,294 million, representing a year-on-year increase of RMB2,454 million (or 86.4%).
Through optimising business structure, enhancing sales capacity and strengthening post-underwriting management, the quality of the new credit and surety insurance business in 2022 of the Company and its subsidiaries was on a stable and healthy trend. The loss ratio of the credit and surety insurance was 45.6%, representing a year-on-year decrease of 5.0 percentage points. Subject to the formation rate of net earned premiums, the expense ratio of credit and surety insurance was 30.8%, representing a year-on-year increase of 14.7 percentage points; the combined ratio was 76.4%, which increased by 9.7 percentage points year-on-year; the underwriting profit was RMB1,158 million, representing a year-on-year decrease of RMB604 million (or -34.3%).
---
### (7) Cargo insurance
The following table sets forth the key operating results and selected financial indicators of the cargo insurance of the Company and its subsidiaries for the relevant periods:
| | Year ended 31 December | | Change |
| :--- | :---: | :---: | :---: |
| | **2022** | **2021** | **%** |
| | *RMB million* | *RMB million* | |
| Gross written premiums | 4,831 | 4,814 | 0.4 |
| Net earned premiums | 3,044 | 2,944 | 3.4 |
| Net claims incurred | (1,866) | (1,548) | 20.5 |
| Total expenses | (973) | (1,136) | -14.3 |
| Underwriting profit | 205 | 260 | -21.2 |
| Loss ratio (%) | (61.3) | (52.6) | Increase by 8.7 pp |
| Expense ratio (%) | (32.0) | (38.6) | Decrease by 6.6 pp |
| Combined ratio (%) | (93.3) | (91.2) | Increase by 2.1 pp |
In 2022, the Company and its subsidiaries seized opportunities brought by the growth in import and export trade as well as e-commerce, and vigorously developed import and export and internet cargo insurance. The gross written premiums of cargo insurance were RMB4,831 million, representing a year-on-year increase of RMB17 million (or 0.4%).
The Company and its subsidiaries implemented differentiated expense allocation strategies, highlighting the linkage of expense allocation with business quality. The expense ratio of cargo insurance was 32.0%, representing a year-on-year decrease of 6.6 percentage points. Due to changes in business structure and rise in the claim frequency, the loss ratio of cargo insurance was 61.3%, representing a year-on-year increase of 8.7 percentage points; the combined ratio was 93.3%, representing a year-on-year increase of 2.1 percentage points; the underwriting profit was RMB205 million, representing a year-on-year decrease of RMB55 million (or -21.2%).
---
### (8) Other insurances
The following table sets forth the key operating results and selected financial indicators of other insurances of the Company and its subsidiaries for the relevant periods:
| | Year ended 31 December 2022 | Year ended 31 December 2021 | Change |
| :--- | :---: | :---: | :---: |
| | **RMB million** | **RMB million** | **%** |
| Gross written premiums | 14,864 | 14,097 | 5.4 |
| Net earned premiums | 7,410 | 7,537 | -1.7 |
| Net claims incurred | (4,750) | (4,971) | -4.4 |
| Total expenses | (3,327) | (3,223) | 3.2 |
| Underwriting loss | (667) | (657) | — |
| Loss ratio (%) | (64.1) | (66.0) | Decrease by 1.9 pp |
| Expense ratio (%) | (44.9) | (42.8) | Increase by 2.1 pp |
| Combined ratio (%) | (109.0) | (108.8) | Increase by 0.2 pp |
In 2022, the Company and its subsidiaries deeply served social governance, escorted national significant projects, and continued to increase product innovation and promotion. The gross written premiums of other insurances were RMB14,864 million, representing a year-on-year increase of RMB767 million (or 5.4%).
The Company and its subsidiaries proactively responded to the impacts of disasters such as the “3·21” China Eastern Airlines airplane accident and the earthquakes in Sichuan province, practiced the new logic of “Underwriting+Loss Reduction +Empowerment+Claims”, continuously strengthened risk control and risk reduction management, enhanced pre-underwriting risk investigation and cost control, and the loss ratio of other insurances was 64.1%, representing a year-on-year decrease of 1.9 percentage points. Due to changes in business structure and the formation rate of net earned premiums, the expense ratio of other insurance was 44.9%, representing a year-on-year increase of 2.1 percentage points, the combined ratio was 109.0%, representing a year-on-year increase of 0.2 percentage points, and the underwriting loss was RMB667 million, as compared to an underwriting loss of RMB657 million for the previous year.
---
## Discussion and Analysis of Operating Results and Financial Conditions
### (II) INSURANCE FUNDS INVESTMENT BUSINESS
#### 1. Investment results
| | Year ended 31 December 2022 | Year ended 31 December 2021 | Change |
| :--- | :---: | :---: | :---: |
| | **RMB million** | **RMB million** | **%** |
| Investment income | 20,180 | 17,996 | 12.1 |
| **Net investment income** | **20,180** | **17,996** | **12.1** |
| | | | |
| Net realised and unrealised (losses)/gains on investments | (3,706) | 3,634 | — |
| Share of profits of associates and joint ventures | 4,225 | 4,524 | -6.6 |
| Dilution loss arising on a reduced stake in an associate | (95) | — | — |
| **Total investment income** | **20,604** | **26,154** | **-21.2** |
| | | | |
| Net investment yield* (%) | 3.7 | 3.5 | Increase by 0.2 pp |
| Total investment yield** (%) | 3.7 | 5.0 | Decrease by 1.3 pp |
| Total investment assets*** | 570,736 | 534,072 | 6.9 |
\* Net investment yield = Net investment income/(balance of the total investment assets at the beginning of the year + balance of the total investment assets at the end of the year) *2
\*\* Total investment yield = Total investment income/(balance of the total investment assets at the beginning of the year + balance of the total investment assets at the end of the year) *2
\*\*\* Based on the data as at 31 December 2022 and 31 December 2021.
---
## 2. Investment income
| | Year ended 31 December | | Change |
| :--- | :---: | :---: | :---: |
| | 2022 | 2021 | % |
| | RMB million | RMB million | |
| Operating lease income from investment properties | 325 | 277 | 17.3 |
| Interest income | 13,733 | 14,341 | -4.2 |
| Dividend income | 6,122 | 3,378 | 81.2 |
| | | | |
| Investment income | 20,180 | 17,996 | 12.1 |
In 2022, investment income of the Company and its subsidiaries was RMB20,180 million, representing an increase of RMB2,184 million (or 12.1%) from RMB17,996 million in 2021, mainly due to the increased dividend distribution from funds, perpetual bonds and stocks.
## 3. Net realised and unrealised (losses)/gains on investments
| | Year ended 31 December | | Change |
| :--- | :---: | :---: | :---: |
| | 2022 | 2021 | % |
| | RMB million | RMB million | |
| Realised (losses)/gains on investments | (2,783) | 4,380 | — |
| Unrealised (losses)/gains on investments | (249) | 251 | — |
| Impairment losses | (513) | (928) | — |
| Fair value losses on investment properties | (161) | (69) | — |
| | | | |
| Net realised and unrealised (losses)/gains on investments | (3,706) | 3,634 | — |
In 2022, due to capital market volatility, the net realised and unrealised losses on investments of the Company and its subsidiaries amounted to RMB3,706 million, and the net gains on investments in the previous year were RMB3,634 million.
---
#### 4. Share of profits of associates and joint ventures and dilution loss arising on a reduced stake in an associate
| | Year ended 31 December 2022 RMB million | Year ended 31 December 2021 RMB million | Change % |
| :--- | :---: | :---: | :---: |
| Share of profits of associates and joint ventures | 4,225 | 4,524 | -6.6 |
| Dilution loss arising on a reduced stake in an associate | (95) | — | — |
In 2022, share of profits of associates and joint ventures of the Company and its subsidiaries amounted to RMB4,225 million, representing a year-on-year decrease of RMB299 million (or -6.6%), mainly affected by the operating performance of the associate. In addition, the Company and its subsidiaries' shareholding in the associate was passively diluted due to changes in shareholding structure of the associate, resulting in a loss of RMB95 million.
#### 5. Composition of investment assets
| By category: | 31 December 2022 Balance (RMB million) | 31 December 2022 Percentage (%) | Change (%) | 31 December 2021 Balance (RMB million) | 31 December 2021 Percentage (%) |
| :--- | :---: | :---: | :---: | :---: | :---: |
| Cash and cash equivalents | 21,250 | 3.7 | 22.0 | 17,414 | 3.3 |
| Term deposits | 73,657 | 12.9 | 0.1 | 73,574 | 13.8 |
| Debt securities | 192,970 | 33.8 | 11.6 | 172,851 | 32.3 |
| Equity securities and mutual funds | 140,718 | 24.7 | -2.1 | 143,804 | 26.9 |
| Investments classified as loans and receivables | 71,313 | 12.5 | 21.6 | 58,638 | 11.0 |
| Investment properties | 7,440 | 1.3 | 27.2 | 5,851 | 1.1 |
| Investments in associates and joint ventures | 58,143 | 10.2 | 2.1 | 56,945 | 10.7 |
| Other investment assets (Note) | 5,245 | 0.9 | 5.0 | 4,995 | 0.9 |
| **Total investment assets** | **570,736** | **100.0** | **6.9** | **534,072** | **100.0** |
Note: Other investment assets mainly included capital security fund.
---
As of 31 December 2022, the investment assets of the Company and its subsidiaries were RMB570,736 million, representing an increase of RMB36,664 million (or 6.9%) as compared to the beginning of the Year. The improvement of operational cash flow provided capital support to the steady increase of the investment assets. At the meantime, the Company adhered to a long-term and prudent investment philosophy, strictly controlled risks, and continuously optimized the investment portfolio.
### 6. Investments in associates and joint ventures
As of 31 December 2022, the investments in associates and joint ventures of the Company and its subsidiaries were RMB58,143 million, representing an increase of RMB1,198 million (or 2.1%) as compared to the beginning of the Year, as described in note 24 to the consolidated financial statements.
### 7. Material investment
The Company and its subsidiaries held equity in Hua Xia Bank to facilitate business interaction and obtain stable investment returns. Hua Xia Bank was classified as an associate and accounted using the equity method. On 18 October 2022, Hua Xia Bank completed its private offering of shares. The Company and its subsidiaries didn’t subscribe for the shares in the above private offering, therefore the equity interest held by the Company and its subsidiaries in Hua Xia Bank was diluted from 16.66% to 16.11%. As such, a dilution loss amounting to RMB95 million was recognised in losses arising on a reduced stake in an associate. As at 31 December 2022, the carrying amount of equity held by the Company and its subsidiaries in Hua Xia Bank was RMB42,213 million, accounting for approximately 5.6% of the total assets of the Company and its subsidiaries, and the fair value was RMB13,303 million, accounting for approximately 1.8% of the total assets of the Company and its subsidiaries. Detailed information of investment in such associate was described in note 24 to the consolidated financial statements.
### 8. Asset pledge
The Company conducted repurchase transactions in the market due to the liquidity management need. The securities held by the Company were pledged as collateral during the process of such transactions.
---
### (III) OVERALL RESULTS
The following table sets forth the overall results of the Company and its subsidiaries for the relevant periods or as of the relevant dates:
| | Year ended 31 December 2022 (RMB million) | Year ended 31 December 2021 (RMB million) | Change (%) |
| :--- | :---: | :---: | :---: |
| Profit before income tax | 30,919 | 26,028 | 18.8 |
| Income tax expense | (4,266) | (3,663) | 16.5 |
| Net profit for the year | 26,653 | 22,365 | 19.2 |
| Total assets (*Note*) | 751,887 | 682,622 | 10.1 |
| Net assets (*Note*) | 212,748 | 205,649 | 3.5 |
*Note: Based on the data as at 31 December 2022 and 31 December 2021.*
### Profit before income tax
As a result of the foregoing, the profit before income tax of the Company and its subsidiaries in 2022 was RMB30,919million, representing an increase of RMB4,891 million (or 18.8%) as compared to the profit before income tax of RMB26,028 million in 2021.
### Income tax expense
In 2022, the Company and its subsidiaries recorded an income tax expense of RMB4,266 million, representing a increase of RMB603 million (or 16.5%) as compared to the income tax expense of RMB3,663 million in 2021. The increase in income tax expense was mainly due to the increase in taxable profit.
### Net profit for the year
As a result of the foregoing, the net profit for the Year increased to RMB26,653 million from RMB22,365 million in 2021, representing an increase of RMB4,288 million (or 19.2%), and basic earnings per share was RMB1.201.
---
# III. SPECIFIC ANALYSIS
## (I) ANALYSIS OF LIQUIDITY AND CAPITAL ADEQUACY
### Cash Flow Analysis
The following table sets forth the cash flows of the Company and its subsidiaries for the relevant periods:
| | Year ended 31 December | | |
| :--- | :---: | :---: | :---: |
| | 2022 | 2021 | Change |
| | RMB million | RMB million | RMB million |
| Net cash flows generated from operating activities | 42,710 | 16,336 | 26,374 |
| Net cash flows used in investing activities | (32,188) | (8,158) | -24,030 |
| Net cash flows used in financing activities | (6,997) | (16,845) | 9,848 |
| Net foreign exchange differences | 311 | (111) | 422 |
| Net increase/(decrease) in cash and cash equivalents | 3,836 | (8,778) | 12,614 |
In 2022, the net cash flows generated from operating activities of the Company and its subsidiaries were RMB42,710 million, representing a year-on-year increase of RMB26,374 million (or 161.4%). The significant increase in net cash flows generated from operating activities was mainly owing to the improvement in underwriting profitability and the increase in cash flow from premiums with enlarged scale of underwriting business.
In 2022, the net cash flows used in investing activities of the Company and its subsidiaries were RMB32,188 million, and the net cash flows used in investing activities in 2021 were RMB8,158 million. The increase in net cash flows used in investing activities was mainly due to the fact that the Company and its subsidiaries enlarged the investment scale using working capital generated from operating activities according to the investment strategies of the Company.
In 2022, the net cash flows used in financing activities of the Company and its subsidiaries were RMB6,997 million, and the net cash flows used in financing activities in 2021 were RMB16,845 million. The decrease in net cash flows used in financing activities was mainly due to the fact that the Company redeemed capital supplementary bonds in 2021.
As at 31 December 2022, cash and cash equivalents of the Company and its subsidiaries amounted to RMB21,250 million.
---
### Gearing Ratio
As of 31 December 2022, the gearing ratio (Note) of the Company and its subsidiaries was 70.6%, representing an increase of 1.9 percentage points as compared to the gearing ratio of 68.7% as of 31 December 2021.
*Note: The gearing ratio is represented by total liabilities (excluding bonds payable) divided by total assets under accounting principles generally accepted in Hong Kong.*
### Source of Working Capital
The cash flows of the Company and its subsidiaries are primarily derived from cash generated from operating activities, which are principally insurance premiums received. In addition, sources of liquidity include interest and dividend income, proceeds from matured investments, disposal of assets and financing activities. The liquidity needs of the Company and its subsidiaries consist principally of the payment of claims and performance of other obligations under outstanding insurance policies, capital expenditure, operating expenses, tax payments, dividend payments and investment needs.
The Company issued capital supplementary bonds of RMB8,000 million in March 2020, with a term of 10 years. Save for the capital supplementary bonds mentioned above, the Company and its subsidiaries did not obtain working capital by borrowing.
The Company and its subsidiaries expect that they can meet their working capital needs in the future with cash generated from operating activities. The Company and its subsidiaries have sufficient working capital.
### Capital Expenditure
The capital expenditure of the Company and its subsidiaries primarily includes expenditures for operational properties under construction and acquisition of motor vehicles for operational purposes as well as development of the information system. In 2022, the capital expenditure of the Company and its subsidiaries was RMB5,563 million.
---
### Solvency Margin
| | 31 December | 31 December | |
| :--- | :--- | :--- | :--- |
| | 2022 | 2021 | Change |
| | RMB million | RMB million | % |
| Actual capital | 215,415 | 207,421 | N/A |
| Core capital | 189,730 | 194,361 | N/A |
| Minimum capital | 93,964 | 73,082 | N/A |
| Comprehensive solvency margin ratio (%) | 229.3 | 283.8 | N/A |
| Core solvency margin ratio (%) | 201.9 | 266.0 | N/A |
Note: Since the preparation for solvency margin report for the first quarter of 2022, the Rules for the Supervision of Insurance Company Solvency (II) has been effective. The solvency margin results as at 31 December 2021 were based on the regulation of C-ROSS (I).
### (II) RISK MANAGEMENT
#### Credit Risk
Credit risk is the risk of economic loss incurred by the Company and its subsidiaries resulting from the inability of debtors of the Company and its subsidiaries to make any principal or interest payments when due. The assets of the Company and its subsidiaries which are subject to credit risk are principally concentrated on insurance receivables, reinsurance assets, debt securities and deposits with commercial banks.
The Company and its subsidiaries are only committed to credit sales to corporate customers or individual customers who purchase certain insurance policies through insurance intermediaries. The capability to collect premiums in a timely manner remains one of the key performance indicators of the Company. The Company’s premiums receivable involves a large number of diversified customers, therefore there are no major credit concentration risks in insurance receivables.
Other than the state-owned reinsurance companies, the Company and its subsidiaries purchase reinsurance primarily from reinsurance companies with A- rating or above by Standard & Poor’s (or equivalent ratings granted by other international rating agencies such as A.M. Best, Fitch and Moody’s). The management of the Company and its subsidiaries regularly review the creditworthiness of the reinsurance companies in order to update the reinsurance strategies and determine reasonable impairment provision on reinsurance assets of the Company and its subsidiaries.
---
The Company and its subsidiaries diligently manage credit risk in debt securities mainly by analyzing the creditworthiness of investee companies prior to making investments and by strictly conforming to the relevant regulations issued by the CBIRC on the investment ratings of corporate bonds. The majority of the bonds held by the Company and its subsidiaries have credit ratings of AA or above.
The Company and its subsidiaries manage and lower credit risk affecting their bank deposits mainly by depositing most of their deposits with state-owned banks or state-controlled commercial banks.
### Exchange Rate Risk
The Company and its subsidiaries conduct their business primarily in RMB, which is also their functional and financial reporting currency. Certain businesses of the Company and its subsidiaries (including certain commercial property insurance, international cargo insurance and aviation insurance business) are conducted in foreign currencies (primarily in US dollars). The Company and its subsidiaries are also exposed to exchange rate risks for assets which are valued based on foreign currencies such as parts of their bank deposits and debt securities and certain insurance business liabilities which are denominated in foreign currencies (primarily in US dollars).
Foreign exchange transactions under the capital accounts of the Company and its subsidiaries are subject to foreign exchange control and the approval of the administration authority for foreign exchange. Exchange rate fluctuations may arise as a result of the foreign exchange policy adopted by the PRC government.
### 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 the changes in market interest rates. The Company and its subsidiaries’ interest rate risk policy requires to manage interest rate risk by maintaining an appropriate match of fixed and floating interest rate instruments. The policy also requires to manage the maturity of interest-bearing financial assets and interest-bearing financial liabilities, reprice interest on floating rate instruments at intervals of less than one year and manage floating interest rate risk through interest rate swap and other instruments. Interest on fixed interest rate instruments is priced at inception of the financial instrument and is fixed until maturity.
### Interest Rate Swaps
The Company and its subsidiaries’ financial assets which bear interest at different rates would generate uncertain cash flows. As such, interest rate swap contracts are used by the Company and its subsidiaries to hedge against such interest rate risk whereby fixed interests are received from, and floating interests are paid to, the counterparties.
---
## (III) OTHER SPECIFIC ANALYSIS
### Contingent Events
Owing to the nature of the insurance business, the Company and its subsidiaries are involved in legal proceedings in the ordinary course of business, acting as the plaintiff or the defendant in litigation and arbitration proceedings. Most of such legal proceedings involve claims on the insurance policies of the Company and its subsidiaries, and some losses arising therefrom will be indemnified by reinsurers or other recoveries including salvages and subrogation. While the outcomes of such contingencies, lawsuits or other proceedings cannot be determined at present, the Company and its subsidiaries believe that any liabilities resulted therefrom will not have a material adverse effect on the financial position or operating results of the Company and its subsidiaries.
As of 31 December 2022, there were certain pending legal proceedings of the Company and its subsidiaries. After taking into account professional opinions, the management of the Company believes that such legal proceedings will not induce significant impact on the operation of the Company and its subsidiaries.
### Events after the Reporting Period
On 24 March 2023, the Board of Directors of the Company proposed a final dividend of RMB0.478 per ordinary share in respect of the year ended 31 December 2022, and an amount of RMB10 billion to be appropriated to discretionary surplus reserve.
The above events are subject to the approval of shareholders’ general meeting of the Company.
### Development of New Products
In 2022, the Company focused on hot spots of the market and customers’ demand, and developed and revised a total of 2,253 insurance provisions, among which, 960 national provisions, 1,293 regional provisions, or 1,431 main insurance provisions and 822 rider provisions.
### Employees
As of 31 December 2022, the Company had 166,358 employees. In 2022, the employees’ remuneration paid by the Company and its subsidiaries amounted to RMB35,886 million, mainly including basic salaries, performance related bonuses, and various insurance and welfare contributed in accordance with the relevant PRC laws and regulations. The Company and its subsidiaries enhanced the performance and work efficiency of employees by providing various career development paths, strengthening employee trainings, implementing performance appraisal and other measures. The Company is of the view that the Company and its subsidiaries maintain a good relationship with their employees.
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# IV. LOOKING FORWARD
The year 2023 is the first year for implementing the guiding principles of the 20th CPC National Congress in full. Developments of economy and society will bring new space for property insurance growth and also put forward higher requirements for the improvement in insurance supply capability. Facing both opportunities and challenges, the Company and its subsidiaries will actively serve the overall economic and social development, enhance product and service innovation, accelerate digital transformation and effectively prevent financial risks to promote the high-quality development in the process of serving the Chinese modernization.
(I) In serving the rural revitalization and build-up of strength in agriculture, the Company and its subsidiaries will strengthen cooperations with governments at all levels and focus on creating new product supply and enhancing underwriting risk control and claim service capabilities, deepen the “Insurance +” poverty alleviation mode, and help rural development, rural construction and rural governance, to build new advantages in the development of agriculture insurance business.
(II) In serving the real economy, the Company and its subsidiaries will focus on key areas such as scientific and technological innovation and green environment, innovate insurance supply with new products, new technologies and new models, establish and improve the independent underwriter system, create differentiated underwriting pricing capabilities, deepen the linked management of underwriting and claims, expand risk reduction services, and build new driving forces for the business development of group business. The Company and its subsidiaries will expand product and service supply, strengthen capability building and improve risk management and control to achieve high-quality development of inclusive financing business.
(III) The Company and its subsidiaries will strengthen the refined management of motor vehicle insurance, build a low-cost business model, strengthen channel construction and claims control, and improve risk identification and pricing capabilities; strategically develop new energy vehicle business, innovate products for “intelligent network” risks and create new business models, to promote the stable operation of motor vehicle insurance business.
(IV) The Company and its subsidiaries will grasp the development opportunities of individual insurance business in serving the strategy of expanding domestic demand, integrate service resources, upgrade product supply, and accelerate the development of motor vehicle-related products, health insurance, and service-oriented household property insurance business, to achieve a new leap in individual business.
(V) In serving the Healthy China Strategy, the Company and its subsidiaries will consolidate the advantageous position of critical illness insurance, actively expand long-term care insurance and occupational injury insurance for new industries etc., and innovate health management services to promote the sustainable and healthy development of social medical insurance business.
(VI) The Company and its subsidiaries will enhance scientific and technological empowerment, deepen the digital transformation of insurance services, promote the construction of service ecosystem, and support product and service innovation. We will enhance customer service and protect interests of consumers; improve the comprehensive risk management system, keep the bottom line of no systemic risks, and consolidate the business foundation for sustainable development.
(VII) The Company and its subsidiaries will optimize the asset portfolio and grasp market opportunities. For equity investment, the Company and its subsidiaries will control the overall size, grasp market opportunities in a timely manner, and meanwhile, select equity projects more prudently to increase the stability of returns on equity investment; maintain the proportion of fixed income assets and uphold credit risk standards; flexibly allocate bonds, financial products and bank deposits.
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# Biographical Details of Directors, Supervisors and Other Senior Management
## DIRECTORS
Yu Ze, aged 51, a university graduate, an Executive Director and the President of the Company. Mr. Yu joined the People’s Insurance Company of China (the “PICC”) in July 1994 and worked until July 2003. From July 2003 to October 2006, Mr. Yu served as the Deputy General Manager of the Motor Vehicle Insurance Department of Tianjin Branch of the Company. He worked at The Tai Ping Insurance Company Limited (Taiping General Insurance Co., Ltd.) from October 2006 to December 2019 and served as the General Manager of the Tianjin Branch in February 2007, Marketing Director in May 2009, Assistant General Manager in April 2010, Deputy General Manager in October 2012, Deputy General Manager (in charge) in October 2015, and the General Manager in September 2016. He also served as a Director of Taiping Reinsurance Brokers Limited, the Chairman of the board of directors of Taiping Science and Technology Insurance Co., Ltd., a Director of Taiping-Starr Holdings, LLC and a Director of Taiping-Starr Insurance Agency, Inc. Mr. Yu was appointed as the Vice President of The People’s Insurance Company (Group) of China Limited* since December 2019. Mr. Yu once served as the Responsible Compliance Officer and Chief Risk Officer of The People’s Insurance Company (Group) of China Limited*, the Chairman of the board of directors of PICC Investment Holding Company Limited, a Non-executive Director and the Chairman of the board of directors of PICC Information Technology Co., Ltd. and a Non-executive Director and the Chairman of the board of directors of PICC Financial Services Company Limited. Mr. Yu has been a Vice President of Insurance Association of China since June 2022. Mr. Yu graduated from Nankai University in July 1994 with a bachelor’s degree in economics.
* This company is listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange.
Jiang Caishi, aged 57, Ph.D., a senior economist, an Executive Director and a Vice President of the Company. Mr. Jiang also serves as a Director of PICC Reinsurance Co., Ltd., a Supervisor of Shanghai Insurance Exchange Co., Ltd., the Director Member of Specialised Committee on Non-Motor Vehicle Property Insurance and the Associate Director Member of Specialised Committee on Rural Revitalisation of the Insurance Association of China, the Vice Director Member of the Inclusive Finance Cooperation Committee of the Asian Financial Cooperation Association, the President of China Integrated Circuit Insurance Pool, the Vice President of China Classification Society, the General Conference Chairman of the China Urban and Rural Residential Building Earthquakes Catastrophe Insurance Pool and the President of the “Belt and Road” Reinsurance Community Council of China. Mr. Jiang joined PICC in 1988 and was seconded to New York, U.S.A. for 2 years. Mr. Jiang was previously the General Manager of the International Insurance Department of PICC Tianjin Branch, Deputy General Manager of PICC Tianjin Branch, General Manager of the Property Insurance Department of PICC, General Manager of the Group Insurance Marketing and Management Department and General Manager of the Large-Scale Commercial Risk Insurance Department of the Company, General Manager of Shenzhen Branch of the Company, General Manager of the Agriculture Insurance Department of the Company, a Senior Specialist and concurrently the General Manager of the Business Development Department of The People’s Insurance Company (Group) of China, an Executive Vice President, the Chairman of the Supervisory Committee and a Supervisor of the Company. Mr. Jiang resigned as the Chairman of the Supervisory Committee and a Supervisor of the Company on 12 March 2020. Mr. Jiang has 35 years of substantial experience in operation and management in the PRC insurance industry.
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## Biographical Details of Directors, Supervisors and Other Senior Management
**Zhang Daoming**, aged 47, a postgraduate, a Master of Business Administration, an economist, an Executive Director, a Vice President of the Company. Mr. Zhang also serves as a Director of PICC Life Insurance Company Limited, a Director of PICC Health Insurance Company Limited, a Director of China Aerospace Investment Holdings Ltd., the Director Member of Specialised Committee on Financial Accounting of the Insurance Association of China, the Director Member of Specialised Committee on Motor Vehicle Insurance of the Insurance Association of China, the Vice Director Member of Specialised Committee on Insurance Technology of the Insurance Association of China, the Vice Director Member of Specialised Committee on the Statistics of the Insurance Association of China, the Vice Director Member of Specialised Committee on Group Standards of the Insurance Association of China, the Vice Director Member of Specialised Committee on Anti-insurance Fraud of the Insurance Association of China and an Executive Director of China Society for Finance and Accounting. Mr. Zhang was the Deputy Division Chief of the Comprehensive Planning Division of the Human Resources Department and the Deputy Division Chief of the Market Research Division of the Strategic Development Department of the Company, the Deputy General Manager of the Human Resources Department of Anbang Property & Casualty Insurance Co. Ltd, the Assistant to the General Manager, the Deputy General Manager, the Deputy General Manager (in charge) of the Market Research Department/Channel Management Department of the Company, the Deputy General Manager of Zhejiang Provincial Branch of the Company, the General Manager of Compliance Department/ Risk Management Department of the Company, the General Manager of Jiangxi Provincial Branch of the Company, the General Manager of Guangdong Provincial Branch of the Company, and an Assistant to the President of the Company. Mr.Zhang graduated from the School of Economics and Management of Tsinghua University with a master’s degree in business administration. Mr. Zhang has 25 years of substantial management experience in the PRC insurance industry.
**Hu Wei**, aged 54, a graduate of Party School of the Communist Party of China, a senior economist, an Executive Director, an Assistant to the President of the Company. Mr. Hu joined PICC in September 1990. Since December 1993, he served as Deputy Section Chief and Section Chief of Shizhong sub-branch, the Assistant Manager and Deputy Manager of Department and the Manager of Yanzhou sub-branch of Jining Branch and served as Deputy General Manager of Jining Branch in May 2005, the General Manager of Jining Branch in January 2008, the General Manager of Jinan Branch in February 2008, Deputy General Manager of Shandong Provincial Branch in February 2011, Deputy General Manager (in charge) of Shandong Provincial Branch in February 2019 and the General Manager of Shandong Provincial Branch in May 2020. Mr. Hu graduated from Shandong Provincial Party School and has 32 years of substantial experience in operation and management in the PRC insurance industry.
**Li Tao**, aged 57, Ph.D., a senior economist, a Non-executive Director of the Company. Mr. Li is currently the Chairman of the Supervisory Committee of PICC Life Insurance Company Limited. Mr. Li began his career in 1985 and previously taught at Beijing University of Aeronautics and Astronautics. He joined PICC in 1998 and was previously the Deputy General Manager of the Research and Development Center and the Planning and Statistics Department of PICC, Deputy General Manager and General Manager of the Secretariat of the Board of Directors of the Company, and the General Manager of the Development and Reform Department, General Manager of the Policy Research Office, a Senior Specialist of The People’s Insurance Company (Group) of China and the Secretary of the Board of Directors of The People’s Insurance Company (Group) of China Limited*. Mr. Li graduated from Renmin University of China with a master’s degree in philosophy in 1993 and graduated from the Party School of the Central Committee of the Communist Party of China with a doctorate degree in economics in 1998. He has 38 years of substantial experience in research and management.
\* This company is listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange.
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# Biographical Details of Directors, Supervisors and Other Senior Management
**Lo Chung Hing** (Silver Bauhinia Star), aged 71, an Independent Director of the Company. Mr. Lo was a member of the Selection Committee of the 1st and the 2nd Government of Hong Kong, a member of the Election Meeting of the 9th to the 13th National People’s Congress of Hong Kong, a member of the 9th National People’s Congress of China and a member of the Executive Officer Election Committee of Hong Kong in 2007 and 2012. Mr. Lo was previously an Independent Non-executive Director and the Vice Chairman of the Airport Authority of Hong Kong, an Independent Non-executive Director of Mass Transit Railway Corporation Limited (now known as “MTR Corporation Limited”*) and MTR Corporation Limited* (now known as “MTR Corporation Limited”*), a member of the Hospital Authority of Hong Kong, an Independent Non-executive Director of the Urban Renewal Authority of Hong Kong, a member of the Financial Services Advisory Committee of the Trade Development Council of Hong Kong, the Chairman of the Hospital Governing Committee of Hong Kong Kowloon Hospital and Eye Hospital, and an Independent Non-executive Director of China Shanshui Cement Group Limited*. Mr. Lo was also a Deputy General Manager of the Hong Kong Branch of Bank of China (now known as “Bank of China (Hong Kong) Limited”**) and he worked in Bank of China (Hong Kong) Limited** as the Chief Adviser of the Operation Committee and so on. During his employment in the bank, he was a Rotating Alternate Chairman of the Hong Kong Association of Banks. Mr. Lo graduated from The University of Hong Kong with an MBA degree and has substantial experience in public management and financial industry.
\* These companies are listed on the Hong Kong Stock Exchange.
\*\* This company is the major operating subsidiary of and wholly owned by BOC Hong Kong (Holdings) Limited\*\*\*.
\*\*\* This company is listed on the Hong Kong Stock Exchange and traded in the form of American depositary receipts in U.S.A.
**Qu Xiaohui**, aged 68, Ph.D., an Independent Director of the Company. Ms. Qu is a retired professor and Doctoral Supervisor of Xiamen University, and is currently a professor, a Doctoral Supervisor and the leader of the Accounting Discipline of Harbin Institute of Technology, Shenzhen. Ms. Qu is the first female Ph.D. of Economics (Accounting) and the first female doctoral supervisor in accounting in China, an expert enjoying the special government allowance awarded by the State Council, the promoter of demonstration of the set-up of national Master of Professional Accounting (MPAcc), the main drafting person of the set-up plan and demonstration report of national Doctor of Professional Accounting (DPAcc) and the Founding Editor-in-chief of the Contemporary Accounting Review. Ms. Qu was a Deputy Dean of the Graduate School of Xiamen University, Director of the Center for Accounting Development Studies of Xiamen University, Director of Financial Management and Accounting Research Institute of Xiamen University, a member of the Social Sciences Committee of the Ministry of Education, a consultant to the Accounting Standards Committee of the Ministry of Finance of the PRC, the Chairman of the Accounting Education Committee of the Chinese Accounting Association (Former Chinese Accounting Professors Association) for two terms, the first Director of the Standing Committee of Guangdong-Hong Kong-Macao University Accounting Union and an Independent Non-executive Director of ZTE Corporation\*, Yunnan Baiyao Group Co., Ltd.\*\*, and SDIC Capital Co., Ltd.\*\*\*. Ms. Qu is currently a consultant to the China National Steering Committee of Professional Accounting Degree Education, a Vice Chairman of China Cost Research Society, the Director Member of the Accounting Fundamental Theory Committee of Accounting Society of China and an Independent Non-executive Director of Qingdao Doublestar Co., LTD\*\*. Ms. Qu graduated from Xiamen University with a doctorate degree in economics and has substantial experience in the areas of accounting research and financial management.
\* This company is listed on the Hong Kong Stock Exchange and the Shenzhen Stock Exchange.
\*\* These companies are listed on the Shenzhen Stock Exchange.
\*\*\* This company is listed on the Shanghai Stock Exchange.
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**Cheng Fengchao**, aged 63, Ph.D. in management, an Independent Director of the Company. Mr. Cheng is a researcher of financial science, a Chinese certified public accountant, a Chinese certified public valuator, a senior accountant. Mr. Cheng is currently the Chairman of Zhongguancun Guorui Financial and Industrial Development Research Institute. He also serves as an Independent Director of Minmetals Capital Company Limited\*, an Independent Director of Sinochem International Corporation\* and an External Supervisor of Everbright Securities Co., Ltd.\*\*. Mr. Cheng is now a doctoral supervisor of Hunan University and an adjunct professor of the PBC School of Finance, Tsinghua University, and the Graduate School of the Chinese Academy of Social Sciences. Mr. Cheng was previously a Non-executive Director of Agricultural Bank of China Limited\*\* and Industrial and Commercial Bank of China Limited\*\*, and a Supervisor of China Everbright Group Ltd. Mr. Cheng graduated from Hunan University, majoring in management science and engineering, with a doctorate degree in management. Mr. Cheng has substantial experience in public management and financial industry.
\* These companies are listed on the Shanghai Stock Exchange.
\*\* These companies are listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange.
**Wei Chenyang**, aged 50, Ph.D., an Independent Director of the Company. Mr. Wei is currently a full-time research fellow at PBC School of Finance, Tsinghua University, an Associate Dean of the Institute for Fintech Research, Tsinghua University, Director of China Insurance and Pension Research Center of The National Institute of Financial Research, Tsinghua University, and Secretary General of the Global Real Estate Finance Forum of PBC School of Finance, Tsinghua University, a member of the Editorial Board of Tsinghua Financial Review and the Associate Dean of Beijing Fintech Research Institute. Mr. Wei served as an economist at the Federal Reserve Bank of New York, and a senior economist at the Federal Reserve Bank of Philadelphia, the founding Director of the credit research department of AIG\*, and senior managing Director and chief economist in North America of Zenity Holdings/Zenity Asset Management Limited. Mr. Wei is currently an Independent Director of Waterdrop Holdings (WDH)\* and an Independent Director of HSBC Life Insurance Company Limited. Mr. Wei graduated with a bachelor’s degree in Finance from the School of Economics and Management of Tsinghua University. He also earned his M.S. in Economics and Ph.D. in Finance from McCombs School of Business at the University of Texas at Austin and Stern School of Business at New York University, respectively. Mr. Wei has extensive experience in finance, insurance and elderly care industries.
\* These companies are listed on the New York Stock Exchange.
# SUPERVISORS
**Zhang Xiaoli**, aged 58, a postgraduate, a Master, a Shareholder Supervisor of the Company. Mr. Zhang was a troop leader of the Chinese People’s Liberation Army from 1980 to 2000. He joined PICC in 2000 and was previously the Manager of the Disciplinary and Supervisory Office of PICC, Deputy General Manager of the Monitoring Department of the Company, General Manager of the Office of the Board of Directors and the President Office of PICC Life Insurance Company Limited, and the Chairman of the Supervisory Committee, Secretary of the Commission for Discipline Inspection, an Executive Vice President, Secretary of the Board of Directors, the Responsible Compliance Officer, the Responsible Auditing Officer and General Manager of the Secretariat of the Board of Directors and Office of the Supervisory Committee of the Company. Mr. Zhang graduated from China Europe International Business School with an MBA degree. Mr. Zhang has 23 years of substantial management experience in the PRC insurance industry.
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# Biographical Details of Directors, Supervisors and Other Senior Management
**Wang Yadong**, aged 52, a Master, an economist, a Shareholder Supervisor of the Company since March 2019. Mr. Wang is currently the Vice President of PICC Information Technology Co., Ltd. and an Employee Representative Supervisor of The People’s Insurance Company (Group) of China Limited*. Mr. Wang joined PICC in 1995, and was previously the Deputy Manager of the Property Insurance Division, General Manager of the Underwriting Management Department, General Manager of the Property Insurance Business Department, the Large-scale Commercial Risk Insurance Department, the Marine Hull and Cargo Insurance Business Department and the Reinsurance Department of PICC Hubei Branch, the Senior Manager of the Business Coordination Division of Business Development Department, Senior Manager of the Infrastructure Office, Deputy General Manager of the Infrastructure Office of the South Information Centre (Phase II) and General Manager of the Infrastructure Office of The People’s Insurance Company (Group) of China Limited* and the General Manager of the Audit Department/Audit Center of The People’s Insurance Company (Group) of China Limited*. Mr. Wang graduated from Hunan Institute of Finance with a bachelor’s degree in management and afterwards graduated from Huazhong University of Science and Technology with a master’s degree in business management. Mr. Wang has 28 years of substantial experience in operation and management in the PRC Insurance Industry.
\* This company is listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange.
**Lu Zhengfei**, aged 59, Ph.D., a professor, a doctoral supervisor, an External Supervisor of the Company since January 2011. Mr. Lu is currently a Professor of Accounting and Doctoral Supervisor of Guanghua School of Management of Peking University, the Director of the Research Center for Financial Analysis and Financial Investment of Peking University, a Cheung Kong Chair Professor of the Ministry of Education of the PRC, an Executive Director and concurrently the Deputy Director of the Professional Committee for Financial Management of the Chinese Accounting Association. Mr. Lu is also a member of the Editorial Committees of *Accounting Research* and *Auditing Research*. He is an Independent Non-executive Director of Sino Biopharmaceutical Limited* and Shenwan Hongyuan Securities Co., Ltd and an Independent Director of China Cinda Asset Management Co., Ltd.*, CMB International Capital Corporation Limited, Xinjiang Tianshan Cement Company Limited** and China International Capital Corporation Limited*, and an Independent Supervisor of Zhejiang Tailong Commercial Bank Co., Ltd. Mr. Lu was previously an Independent Non-executive Director of the Company, Bank of China Limited*** and China Nuclear Engineering & Construction Corporation Limited****, Lian Life Insurance Co., Ltd., Beijing Turen Urban Planning and Design Co., Ltd. and Zhejiang Tailong Commercial Bank Co., Ltd. Mr. Lu was elected into the “100 Outstanding Persons’ Research Program” as a man of talent in social science theories in Beijing in 2001, the “New Century Excellent Scholarship Program” of the Ministry of Education of the PRC in 2005, the “Accountant Specialist Training Project” of the Ministry of Finance of the PRC in 2013, and as a Cheung Kong Chair Professor of the Ministry of Education of the PRC in 2014. Mr. Lu graduated from Nanjing University with a doctorate degree in economics and completed the post-doctoral research on economics (accounting) at Renmin University of China.
\* These companies are listed on the Hong Kong Stock Exchange.
\** This company is listed on the Shenzhen Stock Exchange.
\*** This company is listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange.
\**** This company is listed on the Shanghai Stock Exchange.
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# Biographical Details of Directors, Supervisors and Other Senior Management
**Li Shuk Yin Edwina**, aged 60, a Master, a Chartered Accountant, an External Supervisor of the Company since January 2023. Ms. Li is currently an Independent Non-executive Director of China CITIC Bank (International) Co., Ltd., Bank of Zhengzhou Co., Ltd.* and China Everbright Environment Group Limited** and a Director of Elite Beam Limited. Ms. Li is a fellow member of the Institute of Chartered Accountants in England and Wales and the Hong Kong Institute of Certified Public Accountants. Ms. Li has worked for KPMG since 1994 and served as the partner in charge of the Financial Services Assurance team of KPMG China before her retirement in March 2018. Prior to joining KPMG, Ms. Li worked at a large multinational accounting firm in London, the United Kingdom and became a Chartered Accountant, then she served as the financial manager at a real estate group and a financial services group, respectively. Ms. Li holds a bachelor’s degree in Accountancy Studies (with honors) from the University of Exeter in the United Kingdom, a postgraduate diploma in corporate risk management from the School of Professional and Continuing Education of Hong Kong University, and a master’s degree in risk management from the Glasgow Caledonian University in the United Kingdom. Ms. Li has significant experience in accounting, capital market, market entrance, regulatory compliance related internal control and risk management in Hong Kong and China.
\* This Company is listed on the Shenzhen Stock Exchange and the Hong Kong Stock Exchange.
\*\* This Company is listed on the Hong Kong Stock Exchange.
## OTHER SENIOR MANAGEMENT
**Fu Lianghua**, aged 56, a postgraduate, a Master of Military Science, the Secretary of the Discipline Inspection Commission of the Company. Mr. Fu served the People’s Liberation Army from October 1983 to December 2016. He joined China Life Insurance Company Limited* in December 2016, successively serving as the Deputy General Manager of the Audit and Supervision Department, the Secretary of the Discipline Inspection Commission of Jilin Branch, a member of the Party Committee and the Director of the Trade Union (headquarters department general manager level). Mr. Fu joined The People’s Insurance Company (Group) of China Limited* since April 2018, successively serving as the Deputy General Manager of General Office (department manager level), the Deputy Director of the Party Committee Office, the General Manger of General Office and the Director of the Party Committee Office. Mr. Fu graduated successively from China People’s Liberation Army Sports College and China People’s Liberation Army National Defence University. Mr. Fu has 31 years of substantial management experience.
\* These companies are listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange.
**Lv Chen**, aged 51, a university graduate, a Master of Business Administration, a senior economist, an Assistant to the President of the Company, the Secretary of Party Committee and the General Manager of Jilin Provincial Branch of the Company. Mr. Lv served as Secretary of Youth League Committee (Deputy Manager level) of PICC Property Insurance Company, the Manager of Foreign Affairs Division, Assistant to the General Manager of International Affairs Department of PICC, Deputy General Manager of International Affairs Department of PICC Holding Company, General Manager of International Affairs and Policy-oriented Insurance Department of The People’s Insurance Company (Group) of China, General Manager of International Affairs and Training Department, Business Director of The People’s Insurance Company (Group) of China Limited*. Mr. Lv graduated from Guanghua School of Management, Peking University with an MBA degree. Mr. Lv has 29 years of substantial management experience in the PRC insurance industry.
\* This company is listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange.
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**Dong Xiaolang**, aged 57, a postgraduate, a senior economist, an Assistant to the President of the Company. Mr. Dong also serves as a Vice Director Member of Specialised Committee on Motor Vehicle Insurance of the Insurance Association of China and an Executive Director of Insurance Society of China. Mr. Dong served as the Deputy Chief Officer of City Insurance Division, Chief Officer of City Insurance Division, Assistant to the General Manager of Business Management Department and Manager of the second sub-branch of Anhui Provincial Branch, Deputy General Manager of Chuzhou Branch, Deputy General Manager and General Manager of Hefei Branch, Deputy General Manager of Anhui Provincial Branch, General Manager of Ningxia Hui Autonomous Region Branch and General Manager of Anhui Provincial Branch of the Company. Mr. Dong graduated from University of Science and Technology of China with a master’s degree in management. Mr. Dong has 36 years of substantial business management experience in the PRC insurance industry.
**Jin Xin**, aged 55, a postgraduate, a Master of Management, the Responsible Compliance Officer and Chief Risk Officer of the Company. Mr. Jin joined PICC in July 1990 and successively served as the Deputy Chief Officer and Chief Officer of Cargo Insurance Division, Deputy Director of Liquidation Division of Cargo Insurance Department of PICC Property Insurance Company, Assistant to the General Manager, Deputy General Manager of Marine Hull and Cargo Insurance Department of PICC, Deputy General Manager of Underwriting Management Department, Deputy General Manager of Planning and Actuarial Department, General Manager of Actuarial Department, General Manager of Capital Operation Department and Chief Investment Officer of the Company. Mr. Jin graduated from Guanghua School of Management of Peking University with a master’s degree in management. Mr. Jin has 32 years of substantial management experience in the PRC insurance industry.
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# Report of the Board of Directors
The Board of Directors presents its report and the audited financial statements of the Company and its subsidiaries for the Year.
## BUSINESS REVIEW
### PRINCIPAL ACTIVITIES
The Company is engaged in motor vehicle insurance, commercial property insurance, cargo insurance, liability insurance, accidental injury insurance, short-term health insurance, agriculture insurance, credit insurance, surety insurance, homeowners insurance, marine hull insurance and other insurance businesses in Chinese mainland, which are denominated in RMB and foreign currencies, and the related reinsurance business as well as investment and funds application business permitted under the relevant laws and regulations of the PRC. The Company’s subsidiaries are mainly engaged in providing insurance agency services, training services, IT services, property management services, etc. Details of the Company’s subsidiaries are set out in note 25 to the consolidated financial statements.
### OPERATING RESULTS AND FINANCIAL POSITION
Discussion and analysis of operating results and financial conditions using key financial performance indicators by the Company are set out in the “Discussion and Analysis of Operating Results and Financial Conditions” section of this annual report.
### FINANCIAL SUMMARY
A summary of the results and the assets and liabilities of the Company and its subsidiaries for the last five financial years is set out in the “Financial Summary” section of this annual report.
### PRINCIPAL RISKS AND UNCERTAINTIES
In 2022, the Company faced more complex internal and external environments and the insurance industry faced a certain degree of risks and challenges. **Firstly, in terms of insurance risks,** high temperatures, heavy precipitation and other extreme weather events tended to be more frequent and stronger and the effects of climate change were spreading and penetrating into the economic and social systems, putting pressure on the insurance claim settlements in the fields of agricultural production, residents’ health, infrastructure and living environment. **Secondly, in terms of credit risks,** with credit defaults occurring from time to time, the possibility of downgrades in credit ratings of counterparties required attentions on risks of premiums receivable. **Thirdly, in terms of strategic risks,** there existed both development opportunities and challenges in the rapid growth of new energy vehicle insurance.
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In 2023, the Company will continue to adhere to the general keynote of seeking progress while maintaining stability, and focus on PICC Group’s “Excellent Insurance Strategy” and the Company’s 14th Five Year Development Plan. With an aim of building a new digital risk management model, the Company will improve the risk management system and mechanism, optimize and upgrade the risk management information system, and upgrade risk management tools and instruments to continuously improve the Company’s risk management capability. Firstly, we will improve the top-level design of risk management and establish a sound system and mechanism for all aspects of risk management. Taking the implementation of the regulation of “C-ROSS (II)” as an opportunity, we will study the multi-dimensional transmission mechanism of risk appetite, optimize the system of key risk monitoring indicators, and pay close attention to the changes of various risks. Secondly, we will optimize and upgrade the risk management information system, front-load the bottom line and red line control rules, and continuously improve the digital and intelligence level of risk management. Thirdly, we will improve the specification of authority and responsibility and downward authorization system of each department and institution, bring into play “three lines of defense”, strengthen risk prevention and standardized governance in key areas, and promote the punishment of financial corruption and prevention and control of financial risks as a whole.
## PARTICULARS OF IMPORTANT EVENTS AFFECTING THE COMPANY THAT HAVE OCCURRED SINCE THE END OF THE YEAR
Particulars of the important events affecting the Company that have occurred since the end of the Year are set out in the “Discussion and Analysis of Operating Results and Financial Conditions” section of this annual report.
## FUTURE DEVELOPMENT
Description of potential future business development of the Company is set out in the “Discussion and Analysis of Operating Results and Financial Conditions” section of this annual report.
## SOCIAL RESPONSIBILITY REPORT
For details of the implementation of social responsibilities of the Company during the Year, please refer to the 2022 Corporate Social Responsibility Report, the full text of which will be separately disclosed by the Company.
## ENVIRONMENTAL POLICIES AND PERFORMANCE
The Company strictly complied with applicable laws and regulations including the Environmental Protection Law of the PRC, implemented the idea of green development, and upheld the environmental protection and sustainable development goals (SDGs) in its development strategy. The Company developed green finance and reduced environmental costs during the management of daily business operations. In 2022, the Company was not subject to administrative penalties due to environmental issues.
The Company was devoted to promoting green finance business by actively developing green insurance and responsible investment to promote sustainable development by way of risk protection and capital financing.
The Company actively responded to the national goals of carbon peaking and carbon neutrality, deepened green operation work, and strived to realize low-carbon and environmentally friendly operation. As water and papers are the primary resources consumed by the Company, in order to continuously reduce the consumption of resources, the Company continued to improve paperless operation at all levels of the Company through vigorously promoting online office and business digital upgrading, and imposed reasonable control over water consumption. The primary energies consumed by the Company include electricity, gasoline and natural gas. By adopting specific measures such as staggering the operation hours of central air-conditioning, public lighting, elevators and other public energy-consuming facilities, introducing energy conservation targets and increasing employees’ awareness about energy conservation, the Company strived to reduce energy consumption and continued to increase efficiency in order to reduce the emission of greenhouse gases.
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### COMPLIANCE WITH THE RELEVANT LAWS AND REGULATIONS THAT HAVE A SIGNIFICANT IMPACT
The Company has been adhering to the philosophy of carrying out business in accordance with laws and regulations, and complied with the state laws, administrative regulations, and various rules and regulatory documents promulgated by the regulatory authorities.
In 2022, the Company actively adapted to the insurance industry development and reform trends, focused on the newly promulgated policies in the financial sector, comprehensively strengthened internal control, proactively promoted the improvement of corporate governance mechanisms and enhanced its ability to serve society and people’s livelihood. The Company continuously strengthened compliance publicity and education, guided all employees to consciously practice compliance concepts, comply with compliance requirements and receive compliance training, and cultivated a compliance culture with corporate characteristics.
Through formulating and improving internal rules and systems, the Company carried out various legal and regulatory requirements, improved internal control and management of the Company and facilitated the establishment of a long-term mechanism of operation in compliance with laws and regulations, with a view to providing solid support for the high-quality development of the Company.
In 2022, the overall compliance status of the Company’s operation and management was good and the compliance risk management system was in normal operation. There was no material systematic compliance risk.
### RELATIONSHIP BETWEEN THE COMPANY AND EMPLOYEES
The relationship between the Company and employees is set out in the “Discussion and Analysis of Operating Results and Financial Conditions” section of this annual report. The Company is not aware of any significant relationships with its employees, which have a significant impact on the Company and are the basis of its success.
### RELATIONSHIP BETWEEN THE COMPANY AND CUSTOMERS
In 2022, the Company insisted on the “people-centric” development concept, strengthened customer orientation, solidly promoted the ”Excellent Insurance Strategy”, continued to carry out the “Warmth Project 2.0”, performed as the “People’s Insurance Company with Warmth” through practical actions and pragmatic measures, and the customer service capability achieved new enhancements.
The Company values its relationship with all customers and is not aware of any significant relationships with its customers, which have a significant impact on the Company and are the basis of its success.
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## PROPOSED FINAL DIVIDEND AND CLOSURE OF REGISTER OF H SHARE MEMBERS
The Board proposed the distribution of a final dividend of RMB0.478 per share (inclusive of applicable tax) for the year ended 31 December 2022. The total amount of dividend was approximately RMB10,632 million. The above proposal is subject to the approval of the Company’s shareholders at the forthcoming annual general meeting. The specific arrangement regarding announcement and distribution of the final dividend, the closure of registration for H share members, etc. will be disclosed separately in the circular for the annual general meeting. If approved at the annual general meeting, the final dividend will be paid on or around 28 July 2023 by the Company. To the knowledge of the Company, there was no arrangement under which the shareholders waived or agreed to waive any dividend.
The Company did not pay any interim dividend during the Year.
## WITHHOLDING AND PAYMENT OF DIVIDEND INCOME TAX
Pursuant to the regulations of relevant PRC laws and regulations and regulatory documents on taxation, the Company shall, as a withholding agent, withhold and pay income tax on the dividend, including withholding and payment of enterprise income tax on behalf of overseas non-resident enterprise shareholders, individual income tax on behalf of overseas individual shareholders and individual income tax on behalf of domestic individual shareholders investing through China-Hong Kong Stock Connect, in the distribution of the final dividend for the Year. Particulars of withholding and payment of income tax on dividend will be disclosed separately in the circular of the shareholders’ annual general meeting by the Company.
## SHARE CAPITAL
During the Year, there was no change in the share capital of the Company.
## PRE-EMPTIVE RIGHTS
There are no provisions regarding pre-emptive rights in respect of the transfer of shares or issue of new shares of joint stock limited companies under the Company Law.
## PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY
The Company and its subsidiaries did not purchase, sell or redeem any of the Company’s listed securities during the Year.
## DISTRIBUTABLE RESERVES
As at 31 December 2022, according to the PRC Accounting Standards for Business Enterprises, the distributable reserves of the Company and its subsidiaries were RMB71,313 million and the distributable reserves of the Company were RMB71,795 million.
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# INVESTMENT PROPERTIES, PROPERTY AND EQUIPMENT
Details of the investment properties, property and equipment of the Company are set out in notes 26 and 27 to the consolidated financial statements. As at 31 December 2022, the Company did not own any properties for investment purposes or held for development and/or sale where one or more percentage ratios (as defined under Rule 14.07 of the Listing Rules) exceed 5%.
# CHARITABLE AND OTHER DONATIONS
Charitable and other donations made by the Company and its subsidiaries in the Year were RMB62 million, of which RMB23 million were donations for public benefits.
# MAJOR CUSTOMERS
The gross written premiums of the Company and its subsidiaries attributable to their five largest customers did not exceed 1% of the gross written premiums of the Company and its subsidiaries for the Year.
# DIRECTORS AND SUPERVISORS
The Directors and Supervisors in office during the Year, and the changes in the members of the Board of Directors and the members of the Supervisory Committee as well as the reasons for resignation of Directors and Supervisors from 1 January 2022 to the date of this report are set out in the “Corporate Governance Report” section of this annual report.
# BIOGRAPHICAL DETAILS OF DIRECTORS, SUPERVISORS AND OTHER SENIOR MANAGEMENT
Biographical details of the Directors, Supervisors and other senior management of the Company are set out in the “Biographical Details of Directors, Supervisors and Other Senior Management” section of this annual report.
# DIRECTORS’ AND SUPERVISORS’ SERVICE CONTRACTS AND REMUNERATION
The Company did not enter into any service contracts, which are not determinable by the Company within one year without payment of compensation (other than statutory compensation), with any Director or Supervisor.
The Company confirms that none of the Directors or Supervisors have waived or agreed to waive any remuneration, nor has the Company nor the Company’s subsidiaries paid any remuneration to any Director or Supervisor as an inducement to join or upon joining the Company or the Company’s subsidiaries or as compensation for loss of office.
Details of the remuneration of the Directors and Supervisors are set out in note 13 to the consolidated financial statements.
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## HIGHEST PAID INDIVIDUALS
Details of the remuneration of the five highest paid individuals of the Company are set out in note 14 to the consolidated financial statements.
## DIRECTORS’ AND SUPERVISORS’ MATERIAL INTERESTS IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS
None of the Directors and Supervisors had material interest, whether directly or indirectly, in any transaction, arrangement or contract of significance which subsisted at any time during the Year or at the end of the Year.
## DIRECTORS’ INTERESTS IN COMPETING BUSINESS
PICC Life, PICC Health and PICC Pension, subsidiaries of PICC Group, the controlling shareholder of the Company, are also engaged in accidental injury insurance and short-term health insurance businesses. From 1 January 2022 to 16 March 2023, Mr Luo Xi, the Chairman of the Board and a Non-executive Director of the Company in the office at that time, was also the Chairman of the board of directors and a non-executive director of PICC Life. From 1 January 2022 to the date of this report, Mr. Zhang Daoming, an Executive Director of the Company, was also a non-executive director of PICC Life and PICC Health. Mr. Li Tao, a Non-executive Director of the Company, was also the Chairman of the supervisory committee of PICC Life.
Save as disclosed above, none of the Directors is or was interested in any business that competes or competed or is or was likely to compete, either directly or indirectly, with the Company’s business from 1 January 2022 to the date of this report.
## EQUITY-LINKED AGREEMENTS
During the Year, the Company and its subsidiaries did not enter into and did not have any equity-linked agreements.
## PERMITTED INDEMNITY PROVISION
At any time during the Year and up to the date of this report, there was or is no permitted indemnity provision being in force for the benefit of any of the Directors or its associates.
The Company purchased insurance for the Directors which provided appropriate cover for legal liabilities of Directors when performing their duties during the Year. The relevant insurance policies were governed by the PRC laws.
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# DIRECTORS’, SUPERVISORS’ AND CHIEF EXECUTIVE’S INTERESTS IN SHARES
The Directors, Supervisors and President of the Company did not hold any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations as defined in Part XV of the SFO as at 31 December 2022 that were required to be recorded in the register as required to be kept under Section 352 of the SFO or required to be notified to the Company and the Hong Kong Stock Exchange under the Model Code.
During the Year, the Company did not grant any rights to the Directors, Supervisors or President of the Company (including their spouses or children under the age of 18) to subscribe for shares, underlying shares or debentures of the Company or any of its associated corporations as defined in the SFO. As at the end of the Year, none of the abovementioned subscription right existed.
## DISCLOSEABLE INTERESTS AND SHORT POSITIONS OF SHAREHOLDERS UNDER THE SFO
As at 31 December 2022, the following persons held interests or short positions in the shares or underlying shares of the Company that were required to be disclosed pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO and recorded in the register as required to be kept by the Company pursuant to Section 336 of the SFO, or notified to the Company and the Hong Kong Stock Exchange by other means:
| Name of shareholder | Capacity | Number of domestic shares | Nature of interests | Percentage of total number of domestic shares in issue (Note 1) | Percentage of total number of shares in issue (Note 1) |
| :--- | :--- | :--- | :--- | :--- | :--- |
| PICC Group | Beneficial owner | 15,343,471,470 | Long position | 100% | 68.98% |
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## Report of the Board of Directors
| Name of shareholder | Capacity | Number of H shares | Nature of interests | Percentage of total number of H shares in issue (Note 1) | Percentage of total number of shares in issue (Note 1) |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Citigroup Inc. | Interest of controlled corporations, approved lending agent | 474,504,354 (Note 2) | Long position | 6.87% | 2.13% |
| | Interest of controlled corporations | 40,879,852 (Note 2) | Short position | 0.59% | 0.18% |
| | Approved lending agent | 424,600,226 | Lending pool | 6.15% | 1.91% |
| BlackRock, Inc. | Interest of controlled corporations | 438,753,389 (Note 3) | Long position | 6.36% | 1.97% |
| | Interest of controlled corporations | 12,438,000 (Note 3) | Short position | 0.18% | 0.06% |
**Notes:**
1. As of 31 December 2022, the Company has issued a total of 15,343,471,470 domestic shares and 6,899,293,833 H shares. Combined, the Company has issued a total of 22,242,765,303 shares.
2. Among which, 75,450 H shares (Long position) were held through derivatives, categorised as held through physically settled listed derivatives; 2,512,678 H shares (Long position) and 2,555,357 H shares (Short position) were held through derivatives, categorised as held through physically settled unlisted derivatives; and 4,030,000 H shares (Short position) were held through derivatives, categorised as held through cash settled unlisted derivatives.
3. Among which, 5,070,000 H shares (Long position) and 12,438,000 H shares (Short position) were held through derivatives, categorised as held through cash settled unlisted derivatives.
Save as disclosed above, the Company is not aware of any other persons having any interests or short positions in the shares or underlying shares of the Company that were required to be disclosed to the Company and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO and recorded in the register as required to be kept under Section 336 of the SFO, or being substantial shareholders of the Company as at 31 December 2022.
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# PUBLIC FLOAT
For the period from 1 January 2022 to the date of this report, 31.02% of the total number of issued shares of the Company is held by the public and therefore the Company continues to comply with the minimum public float requirement under the Listing Rules.
# MANAGEMENT CONTRACT
Pursuant to the asset management agreement and the supplemental agreement to asset management agreement entered into between the Company and PICC AMC (a subsidiary of PICC Group, the Company’s controlling shareholder) on 28 August 2019, PICC AMC provided the Company with investment management services in respect of certain investment assets entrusted by the Company. The Company paid PICC AMC entrusted asset management fees. Pursuant to the asset management agreement and the supplemental agreement to asset management agreement entered into between the Company and PICC Investment and PICC Capital (both are subsidiaries of PICC Group, the Company’s controlling shareholder), respectively on 28 August 2019, the Company entrusted PICC Investment and PICC Capital to manage certain investment assets, and PICC Investment and PICC Capital used the assets entrusted by the Company to subscribe for the debt financial products and equity financial products sponsored and managed by them. The Company paid PICC Investment and PICC Capital product management fees. The particulars of such agreements are set forth in “Continuing Connected Transactions” below.
Pursuant to the asset management agreement entered into between the Company and PICC AMC and PICC Capital on 8 September 2022, PICC AMC and PICC Capital provides the Company with entrusted asset management services, and the Company pays entrusted management fees to PICC AMC and PICC Capital. In addition, PICC AMC and PICC Capital can subscribe investment products sponsored and managed by PICC AMC, PICC Capital, PICC Equity or China Credit Trust with assets entrusted by the Company, and the Company shall pay product management fees to PICC AMC, PICC Capital, PICC Equity and China Credit Trust. The particulars of such agreements are set forth in “Continuing Connected Transactions” below.
# SIGNIFICANT TRANSACTIONS, ARRANGEMENTS AND CONTRACTS OF THE COMPANY WITH ITS CONTROLLING SHAREHOLDER (AND ITS SUBSIDIARIES)
The particulars of the significant transactions, arrangements and contracts entered into by the Company with its controlling shareholder (and its subsidiaries) during the Year are set out in “Connected Transaction” and “Continuing Connected Transactions” below.
# CONNECTED TRANSACTIONS
The connected transactions of the Company in the Year that were subject to the reporting and announcement requirements under Chapter 14A of the Listing Rules were the South Centre Package Service Agreement with PICC Group and the Property Leasing Extension Agreement with PICC Investment. As PICC Group is the controlling shareholder of the Company and PICC Investment is a subsidiary of PICC Group, PICC Group and PICC Investment are connected persons of the Company according to the Listing Rules.
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### THE SOUTH CENTRE PACKAGE SERVICE AGREEMENT WITH PICC GROUP
On 31 December 2021, the Company entered into the South Centre Package Service Agreement with PICC Group, with a term commencing from 1 January 2022 and expiring on 31 December 2022. Pursuant to the agreement, PICC Group provided the Company with lease service of the office space, conference rooms and server seats of the computer room building of the South Centre, and other services, including network services, operation and maintenance services of the Midea computer room of the South Centre, etc. The lease service fees consisted of the rents of office space, conference rooms and server seats in the computer room building, which were calculated according to the actual areas of rented office space, conference room usage, the actual number of rented server seats and the corresponding rental unit price. Other services fees consisted of network service fees and operation and maintenance service fees of Midea computer room of South Centre, etc. Pursuant to the agreement, the annual cap of lease service fees to be paid by the Company to PICC Group in 2022 was estimated to be RMB96.91 million, and the annual cap of other services fees to be paid by the Company to PICC Group in 2022 was estimated to be RMB89.46 million. In accordance with the Hong Kong Financial Report Standards No.16 – Lease, the Company recognized the right of use of the property of the South Centre under the agreement as a right-of-use asset with an approximate amount of RMB96.13 million. Through the usage of the computer room owned or comprehensively managed by PICC Group, information security of the Company can be effectively protected, the cooperation between the Company and other subsidiaries of PICC Group in operation and maintenance management can be facilitated, the strategic synergy of PICC Group can be further exerted, redundant construction and usage costs can be reduced, the operation and maintenance work can be made more efficiently, and the management can be made more strictly.
On 30 December 2022, the Company renewed the South Centre Package Service Agreement with PICC Group, with a term commencing from 1 January 2023 and expiring on 31 December 2023. For relevant details please refer to the Company’s announcement dated 30 December 2022.
### THE PROPERTY LEASING EXTENSION AGREEMENT WITH PICC INVESTMENT
In 2021, the Company entered into the former Property Leasing Agreement with PICC Investment, with a term commencing from 7 July 2021 and expiring on 6 July 2022. On 5 July 2022, the Company entered into the Property Leasing Extension Agreement with PICC Investment, with a term commencing from 7 July 2022 and expiring on 6 July 2024. Pursuant to the agreement, (i) PICC Investment (as the lessor) leases its property to the Company (as the lessee) and the Company pays rent to PICC Investment; (ii) the Company (as the lessor) leases its property to PICC Investment (as the lessee) and PICC Investment pays rent to the Company. The aggregate rent for two years to be paid by the Company (as the lessee) to PICC Investment (as the lessor) is estimated to be approximately RMB175.40 million. The Company shall recognize the transaction, in which the Company is the lessee, as a right-of-use asset pursuant to the Hong Kong Financial Report Standards No.16 – Lease, with an amount of approximately RMB161.82 million. In accordance with the relevant provisions of the Listing Rules, the leasing transaction, in which the Company is the lessor, constitutes a continuing connected transaction of the Company. Pursuant to the agreement, the aggregate annual amount of rent to be paid by PICC Investment (as the lessee) to the Company (as the lessor) is estimated to be approximately RMB1.17 million. As the highest applicable percentage ratio for the transaction is less than 0.1%, such transaction is exempt from reporting, annual review, announcement requirements and independent shareholders’ approval requirement under Rule 14A.76 of the Listing Rules.
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The Company has leased properties from PICC Investment for years for offices and rural areas’ business outlets of branches of the Company across the country. Such properties have long been used as business outlets by branches of the Company for years and a business layout covering surrounding areas of the business outlets has been formulated, which provides a more efficient reaction to requests of clients. After years of use, decorations and facilities of these properties are in line with the Company’s requirements for business and office as well as the corporate image. Change of such properties may affect the stability and continuity of the Company’s business and may incur additional renovation costs.
# CONTINUING CONNECTED TRANSACTIONS
The continuing connected transactions of the Company in the Year that are subject to the reporting, announcement and annual review requirements under Chapter 14A of the Listing Rules include: (I) the Reinsurance Framework Agreement with PICC HK; (II) the Reinsurance Framework Agreement with PICC Re; (III) the Asset Management Agreement and the Supplemental Agreement to the Asset Management Agreement entered into between the Company and PICC AMC; (IV) the Asset Management Agreements and the Supplemental Agreements to the Asset Management Agreements entered into between the Company and PICC Investment and PICC Capital respectively, as well as the Memorandum on Connected Transaction entered into between the Company and PICC AMC; (V) the Asset Management Agreements with PICC AMC and PICC Capital; (VI) the Mutual Agency Agreements entered into between the Company and PICC Life and PICC Health, respectively; (VII) the Auto Parts Procurement Contract with Bangbang Auto Sales & Services; (VIII) the Business Cooperation Agreement and the Insurance Brokerage Business Cooperation Agreement with PIB; (IX) the Customer Services Cooperation Framework Agreement with Aibao Technology; (X) the South Centre Package Service Agreement with PICC Group; and (XI) the 2022 PICC Technology Service Agreement with PICC Technology. As all of PICC HK, PICC Re, PICC AMC, PICC Investment, PICC Capital, PICC Life, PICC Health, PIB and PICC Technology are subsidiaries of PICC Group, the controlling shareholder of the Company, these companies are connected persons of the Company according to the Listing Rules. As the Company and PICC Financial Services, a wholly-owned subsidiary of PICC Group (the controlling shareholder of the Company) each holds 24.5% of the registered capital in Bangbang Auto Sales & Services, pursuant to the Listing Rules, Bangbang Auto Sales & Services is a connected person of the Company. As PICC Financial Services holds 45.1% of the registered capital in Aibao Techonology, pursuant to the relevant provisions of the Listing Rules, Aibao Technology is an associate of PICC Group and thereby is a connected person of the Company.
## (I) THE REINSURANCE FRAMEWORK AGREEMENT WITH PICC HK
On 17 December 2021, the Company and PICC HK entered into the 2022 Framework Agreement on Reinsurance Business Cooperation, commencing from 1 January 2022 and expiring on 31 December 2022.
PICC HK is one of the reinsurers of the Company and the Company entered into the Framework Agreement on Reinsurance Business Cooperation with PICC HK for the purposes of risk diversification and stabilisation of operation. Pursuant to the framework agreement, the Company agreed to cede insurance premiums to PICC HK from time to time, and PICC HK agreed to cede insurance premiums to the Company from time to time. One party to the agreement who acted as reinsurer accepted the risks of and paid commissions to the other party to the agreement in return for the agreed insurance premiums received from such other party. Under the framework agreement, the parties to the agreement would enter into various types of reinsurance agreements in respect of particular reinsurance business.
Under the framework agreement, the annual caps for the insurance premiums expected to be ceded to PICC HK by the Company and the commissions expected to be received by the Company from PICC HK for the Year were RMB1,100 million and RMB495 million, respectively. Inward Reinsurance Transactions constitute de minimis exempted continuing connected transactions under Rule 14A.76 of the Listing Rules. The actual insurance premiums ceded to PICC HK by the Company and the commissions received by the Company from PICC HK for the Year were RMB838 million and RMB238 million, respectively. The actual insurance premiums ceded to the Company by PICC HK and the commissions received by PICC HK from the Company for the Year were RMB18 million and RMB4 million, respectively.
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On 30 December 2022, the Company and PICC HK entered into the 2023 Framework Agreement on Reinsurance Business Cooperation, commencing from 1 January 2023 and expiring on 31 December 2023. For relevant details please refer to the Company’s announcement dated 30 December 2022.
### (II) THE REINSURANCE FRAMEWORK AGREEMENT WITH PICC RE
On 17 December 2021, the Company and PICC Re entered into the 2022 Framework Agreement on Reinsurance Business Cooperation, commencing from 1 January 2022 and expiring on 31 December 2022. Pursuant to the framework agreement, the Company agreed to cede insurance premiums to PICC Re from time to time, and PICC Re, who acted as reinsurer, accepted the risks of and paid commissions to the Company in return for the agreed insurance premiums received. Under the framework agreement, the parties to the agreement would enter into various types of reinsurance agreements in respect of particular reinsurance business.
Under the framework agreement, the annual caps for the insurance premiums expected to be ceded by the Company to PICC Re and the commissions expected to be received by the Company from PICC Re for the Year were RMB5,500 million and RMB2,475 million, respectively. The actual insurance premiums ceded by the Company to PICC Re and commissions received by the Company from PICC Re for the Year were RMB4,616 million and RMB1,386 million, respectively. PICC Re is the fourth Chinese-funded corporate reinsurance company in the PRC. The Company entered into the Framework Agreement on reinsurance with PICC Re in order to achieve risk diversification and stabilisation of operation.
On 30 December 2022, the Company and PICC Re entered into the 2023 Framework Agreement on Reinsurance Business Cooperation, commencing from 1 January 2023 and expiring on 31 December 2023. For relevant details please refer to the Company’s announcement dated 30 December 2022.
### (III) THE ASSET MANAGEMENT AGREEMENT AND THE SUPPLEMENTAL AGREEMENT TO THE ASSET MANAGEMENT AGREEMENT ENTERED INTO BETWEEN THE COMPANY AND PICC AMC
On 28 August 2019, the Company and PICC AMC entered into the Asset Management Agreement and Supplemental Agreement to the Asset Management Agreement with a term commencing from 1 July 2019 and expiring on 30 June 2022 to continue the original asset management arrangement. PICC AMC, principally engaged in the provision of asset management and asset management consultation services in the PRC, has the experience and expertise in asset management and presents satisfactory investment management capability with management fee rates at comparatively lower level in the asset management industry. PICC AMC has established a good cooperation relationship with the Company. Pursuant to the Asset Management Agreement and Supplemental Agreement to the Asset Management Agreement, the Company entrusted PICC AMC to manage some of its investment assets, and PICC AMC managed the entrusted assets in accordance with the asset management agreement and supplemental agreement, relevant laws and regulations and regulatory rules and the investment guidelines formulated by the Company. The Company paid entrusted asset management fees and performance bonuses or deduction of management fees (if any) to PICC AMC. If the Company subscribed for the financial products sponsored and managed by PICC AMC, it would not make payment for the entrusted asset management fees and only pay PICC AMC product management fees. For the period from 1 January 2022 to 30 June 2022, the annual cap for the entrusted asset management fees (including performance-based bonuses and penalties) expected to be paid by the Company to PICC AMC was RMB150 million, and the actual entrusted asset management fees (including performance-based bonuses and penalties) incurred were RMB134 million.
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In addition, the Company entered into the Marketisation Entrusted Portfolio Asset Management Agreement with PICC AMC on 7 August 2019 with a term from 7 August 2019 to 6 August 2022. As the marketisation agreement differs from the asset management agreement and the supplemental agreement in terms of investment asset scale, investable scope, management fee level and performance benchmark, the Company entered into the marketisation agreement with PICC AMC separately. Pursuant to the marketisation agreement, the Company agreed to entrust PICC AMC to manage some of its assets, and PICC AMC should manage the entrusted assets in accordance with the marketisation agreement, relevant laws and regulations and regulatory rules; the Company would pay entrusted asset management fees to PICC AMC. Under the marketisation agreement, for the period from 1 January 2022 to 6 August 2022, the annual cap for the entrusted asset management fees expected to be paid by the Company to PICC AMC was RMB2.7 million, and the Company didn’t incur any actual entrusted asset management fees.
## (IV) THE ASSET MANAGEMENT AGREEMENTS AND THE SUPPLEMENTAL AGREEMENTS TO THE ASSET MANAGEMENT AGREEMENTS ENTERED INTO BETWEEN THE COMPANY AND PICC INVESTMENT AND PICC CAPITAL RESPECTIVELY, AS WELL AS THE MEMORANDUM ON CONNECTED TRANSACTION ENTERED INTO BETWEEN THE COMPANY AND PICC AMC
On 28 August 2019, the Company entered into the Asset Management Agreements and Supplemental Agreements to Asset Management Agreements with PICC Investment and PICC Capital respectively for a term of three years commencing from 28 August 2019. Pursuant to such agreements, the Company entrusted some investment assets to PICC Investment and PICC Capital for their management, and PICC Investment and PICC Capital managed the entrusted assets in accordance with such agreements, relevant laws and regulations and regulatory provisions and the investment guidelines formulated by the Company, and used the assets entrusted by the Company to subscribe for the debt financial products and equity financial products sponsored and managed by them. Meanwhile, the Company paid product management fees to PICC Investment and PICC Capital.
The Company had previously entrusted some investment assets to PICC AMC for its management, and PICC AMC could utilize the assets entrusted by the Company to subscribe for debt financial products and equity financial products sponsored and managed by PICC AMC, PICC Capital, PICC Investment or PICC Equity(an indirectly wholly-owned subsidiary of PICC Group, the Company’s controlling shareholder), while the Company would pay product management fees to PICC AMC, PICC Capital, PICC Investment and PICC Equity. On 28 August 2019, the Company entered into the Memorandum on Connected Transaction with PICC AMC, which regulates the connected transactions in relation to the subscription of debt financial products, the subscription of equity financial products and the payments of product management fees. The Memorandum took effect on 28 August 2019, with a term of three years.
Debt financial products and equity financial products present relatively good risk-return profile and play an important role in improving the investment return rate of the insurance funds. In recent years, PICC AMC, PICC Capital, PICC Investment and PICC Equity have actively developed such financial products. Their products suit the Company’s risk preference in term of risk profile, deliver a relatively high investment return with a fair pricing, and are beneficial in improving the Company’s capability on allocation of general categories of assets, enhancing its efficiency on allocation of non-standard assets and increasing the investment yield.
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Pursuant to the asset management agreements and supplemental agreements between the Company and PICC Investment and PICC Capital respectively, and the Memorandum on Connected Transaction between the Company and PICC AMC, for each calendar year, the aggregated annual cap of the paid-up amount of the product management fees paid by the Company to PICC AMC, PICC Capital, PICC Investment and PICC Equity shall not exceed RMB450 million. The actual aggregated amount of product management fees incurred for the period from 1 January 2022 to 27 August 2022 was RMB72 million.
Under the asset management agreements and supplemental agreements between the Company and PICC Investment and PICC Capital respectively, and the Memorandum on Connected Transaction between the Company and PICC AMC, PICC AMC, PICC Capital or PICC Investment used the assets entrusted by the Company to subscribe for the debt financial products or the equity financial products individually or jointly sponsored and managed by PICC AMC, PICC Capital, PICC Investment or PICC Equity. If the subscribers of these financial products included connected persons of the Company, then the subscription by the Company in the same financial product constituted a connected transaction of the Company. For each calendar year, each of the annual cap of the aggregated paid-up amount of the debt financial products or the equity financial products subscribed by the Company where connected persons participated in the subscription was RMB8 billion, and none of the applicable percentage ratios would be more than 5% under Chapter 14A of the Listing Rules. The aggregated amount of the debt financial products actually and cumulatively subscribed by the Company where connected persons participated in the subscription for the period from 1 January 2022 to 27 August 2022 was RMB3,300 million. The aggregated amount of the equity financial products actually and cumulatively subscribed by the Company where connected persons participated in the subscription for the period from 1 January 2022 to 27 August 2022 was RMB0 million.
### (V) ASSET MANAGEMENT AGREEMENTS WITH PICC AMC AND PICC CAPITAL
On 8 September 2022, the Company renewed the Asset Management Agreements with PICC AMC, commencing from 1 July 2022 and expiring on 30 June 2025. On 8 September 2022, the Company renewed the Asset Management Agreements with PICC Capital, commencing from 28 August 2022 and expiring on 30 June 2025. Pursuant to the agreements, PICC AMC and PICC Capital provides the Company with entrusted asset management services, and the Company pays entrusted management fees to PICC AMC and PICC Capital. In addition, PICC AMC and PICC Capital can subscribe investment products sponsored and managed by PICC AMC, PICC Capital, PICC Equity or China Credit Trust (approximately 32.9% of its issued share capital is held by PICC Group, the Company’s controlling shareholder) with assets entrusted by the Company, and the Company shall pay product management fees to PICC AMC, PICC Capital, PICC Equity and China Credit Trust.
Pursuant to the relevant provisions of the Listing Rules, continuing connected transactions under the agreements include (1) the payments of entrusted management fees to PICC AMC and PICC Capital by the Company, (2) the payments of product management fees to PICC AMC, PICC Capital, PICC Equity and China Credit Trust by the Company, (3) the subscriptions by PICC AMC and PICC Capital of debt investment products sponsored and managed by PICC AMC, PICC Capital or China Credit Trust with assets entrusted by the Company, of which other subscribers include connected persons of the Company, and (4) the subscriptions by PICC AMC and PICC Capital of equity investment products sponsored and managed by PICC AMC, PICC Capital or PICC Equity with assets entrusted by the Company, of which other subscribers include connected persons of the Company. Under the agreements, (1) the aggregated annual cap of entrusted management fees paid to PICC AMC and PICC Capital by the Company for the Year was RMB420 million, and the entrusted management fees actually paid to PICC AMC and PICC Capital by the Company for the Year was approximately RMB274 million; (2) the aggregated annual cap of product management fees paid to PICC AMC, PICC Capital, PICC Equity and China Credit Trust by the Company for the Year was RMB260 million, and the product management fees actually paid to PICC AMC, PICC Capital, PICC Equity and China Credit Trust by the Company for the Year was approximately RMB183 million; (3) the aggregated annual cap of the amount of the debt investment products subscribed by the Company where connected persons participate in the subscription for the Year was RMB8,500 million, and the amount of the debt investment products actually subscribed by the Company where
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connected persons participate in the subscription for the Year was RMB6,540 million; (4) the aggregated annual cap of the amount of the equity investment products subscribed by the Company where connected persons participate in the subscription for the Year was RMB8,500 million, and the amount of the equity investment products actually subscribed by the Company where connected persons participate in the subscription for the Year was RMB730 million.
PICC AMC is the first asset management company in the PRC insurance industry, mainly provides asset management and asset management consulting services in the PRC, has experience and expertise in asset management and satisfactory capability of investment management; PICC Capital is the first investment institution in the industry with main business in non-standard investment of insurance funds, an insurance asset management company focusing on non-standard investment, has rich experience and excellent teams in the development and investment of non-standard products. The Company has established good cooperation relationship with both PICC AMC and PICC Capital in the early cooperation.
### (VI) THE MUTUAL AGENCY AGREEMENTS ENTERED INTO BETWEEN THE COMPANY AND PICC LIFE AND PICC HEALTH, RESPECTIVELY
On 30 August 2019, in order to lead the strategic synergies into further play and expand the distribution channels of the Company, the Company entered into the Mutual Agency Agreements with PICC Life and PICC Health respectively, commencing from 31 August 2019 and expiring on 30 August 2022. Pursuant to such agreements, the Company and PICC Life and PICC Health mutually acted as an agency for selling insurance products of each other, collecting the premiums on behalf of each other, and engaging in such other businesses or services on a mutual agency basis as authorised in writing. The Company, PICC Life and PICC Health paid commissions to each other, including the business commissions to be paid to the business personnel of the agent party and the management commissions to be paid to the agent party for organising and conducting the mutual agency business. Under the agreements, for the period from 1 January 2022 to 30 August 2022, the estimated annual cap of the commissions to be paid by the Company to PICC Life and PICC Health in aggregate was RMB855 million, and the estimated annual cap of the commissions to be paid by PICC Life and PICC Health to the Company in aggregate was RMB268 million.
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# Report of the Board of Directors
On 30 August 2022, the Company renewed the Mutual Agency Agreements with PICC Life and PICC Health respectively with a term commencing from 31 August 2022 and expiring on 30 August 2025, in order to continue the sales of insurance products of each other on a mutual agency basis. Pursuant to the agreements, PICC Life and PICC Health act as agencies for selling insurance products of the Company, and the Company pays commissions to PICC Life and PICC Health. Meanwhile, the Company acts as an agency for selling insurance products of PICC Life and PICC Health, and PICC Life and PICC Health pay commissions to the Company. Under the agreements, for the period from 31 August 2022 to 31 December 2022, the estimated annual cap of the commissions to be paid by the Company to PICC Life and PICC Health in aggregate was RMB398 million, and the estimated annual cap of the commissions to be paid by PICC Life and PICC Health to the Company in aggregate was RMB156 million. The commissions actually paid by the Company to PICC Life and PICC Health in aggregate for the Year was approximately RMB310 million, and the commissions actually paid by PICC Life and PICC Health to the Company in aggregate for the Year was approximately RMB88 million. PICC Life and PICC Health have their own distribution channels and customer bases, and the Company renewed the mutual agency agreements with PICC Life and PICC Health in order to lead the strategic synergies into further play and expand the sales channels of the Company.
### (VII) THE AUTO PARTS PROCUREMENT CONTRACT ENTERED INTO BETWEEN THE COMPANY AND BANGBANG AUTO SALES & SERVICES
On 29 April 2021, in order to continuously provide quality claim services to customers, share resources and meet the business cooperation needs between the Company and Bangbang Auto Sales & Services, the Company entered into Auto Parts Procurement Contract with Bangbang Auto Sales & Services with a term commencing from 1 April 2021 and expiring on 31 March 2023. Pursuant to the Contract, the Company purchases auto spare parts from Bangbang Auto Sales & Services for the maintenance of insured vehicles damaged in accidents, and Bangbang Auto Sales & Services supplies the goods ordered under the contract, undertakes the responsibility of delivery, installment, adjustment of goods, and provides the Company with services including warranty, maintenance, consultation and training. The Company pays the cost of the auto spare parts to Bangbang Auto Sales & Services. Under the Auto Parts Procurement Contract, the annual cap for the payment for auto spare parts to be paid by the Company to Bangbang Auto Sales & Services for the Year was RMB2,500 million. The actual payment for auto spare parts paid by the Company to Bangbang Auto Sales & Services for the Year was approximately RMB389 million.
### (VIII) THE BUSINESS COOPERATION AGREEMENT AND THE INSURANCE BROKERAGE BUSINESS COOPERATION AGREEMENT WITH PIB
On 21 June 2019, the Company entered into the Business Cooperation Agreement with PIB with a term commencing from 17 June 2019 and expiring on 16 June 2022. Pursuant to the business cooperation agreement, PIB provided insurance brokerage services for the insurance contracts entered into between the insurance purchasers and the Company, and the Company paid brokerage commissions to PIB. The Company and PIB entered into agreements for cooperation in specific projects. The business cooperation agreement between the Company and PIB was beneficial to the respective parties in terms of resources integration and business synergy and, furthermore, to the Company in its building up of distribution channels and promotion of its development capability in the broker business market. Under the business cooperation agreement between the Company and PIB, the annual cap for the brokerage commissions expected to be paid by the Company to PIB for the period from 1 January 2022 to 16 June 2022 was RMB600 million.
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# Report of the Board of Directors
On 15 June 2022, the Company renewed the Insurance Brokerage Business Cooperation Agreement with PIB, commencing on 17 June 2022 and expiring on 16 June 2025. Pursuant to the agreement, the Company continues to cooperate with PIB in insurance business. PIB provides insurance brokerage services for the insurance contracts entered into between the insurance purchasers and the Company, and the Company pays brokerage commissions to PIB. Under the agreement, the annual cap of the brokerage commissions expected to be paid by the Company to PIB for the Year was RMB600 million. The actual brokerage commissions paid by the Company to PIB for the Year was approximately RMB287 million. The Company entered into the agreement with PIB for the benefit of the resource integration and business synergy with PIB. It is also beneficial for the construction of sales channels of the Company and promotion of the development ability of the Company in the brokerage business market. The agreement entered into between the Company and PIB shall not affect the cooperation between the Company and other insurance brokers companies.
### (IX) THE CUSTOMER SERVICES COOPERATION FRAMEWORK AGREEMENT WITH AIBAO TECHNOLOGY
On 28 October 2021, the Company entered into the Customer Services Cooperation Framework Agreement with Aibao Technology with a term commencing from 28 October 2021 and expiring on 31 December 2022. Pursuant to the agreement, Aibao Technology and its subsidiaries provided value-added services for customers’ motor vehicle insurance, value-added services related to online activities, and online advertising services etc. to the Company, and the Company paid service fees to Aibao Technology and its subsidiaries. Through cooperations with Aibao Technology and its subsidiaries, the Company could provide newly added additional service insurance for motor vehicle insurance after the comprehensive reform of motor vehicle insurance to customers more effectively in accordance with the requirements of comprehensive reform of motor vehicle insurance set out by the CBIRC. Under the agreement, the annual cap for the service fees to be paid by the Company to Aibao Technology and its subsidiaries for the Year was RMB700 million. The actual service fees paid by the Company to Aibao Technology and its subsidiaries for the Year was RMB689 million.
On 1 December 2021, the Company disclosed a supplemental announcement in relation to the Customer Services Cooperation Framework Agreement with Aibao Technology providing further information in relation to the underlying arrangements of the Customer Services Cooperation Framework Agreement, including details of services, benefits from the services under the Customer Services Cooperation Framework Agreement to the Company, pricing policy and related internal control measures, basis of annual caps, etc. For relevant details please refer to the Company’s announcement dated 1 December 2021.
On 30 December 2022, the Company entered into the Customer Services Cooperation Framework Agreement with Aibao Technology with a term commencing from 1 January 2023 and expiring on 31 December 2023. For relevant details please refer to the Company’s announcement dated 30 December 2022.
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### (X) THE SOUTH CENTRE PACKAGE SERVICE AGREEMENT WITH PICC GROUP
On 31 December 2021, the Company entered into the South Centre Package Service Agreement with PICC Group, commencing from 1 January 2022 and expiring on 31 December 2022. Pursuant to the agreement, PICC Group provided the Company with lease service of the office space, conference rooms and server seats of the computer room building of the South Centre, and other services, including network services, operation and maintenance services of the Midea computer room of the South Centre, etc. The lease service fees consisted of the rents of office space, conference rooms and server seats in the computer room building, which were calculated according to the actual areas of rented office space, conference room usage, the actual number of rented server seats and the corresponding rental unit price. Other services fees consisted of network service fees and operation and maintenance service fees of Midea computer room of South Centre, etc. Pursuant to the agreement, the annual cap of lease service fees to be paid by the Company to PICC Group for the Year was estimated to be RMB96.91 million, the annual cap of other services fees to be paid by the Company to PICC Group for the Year was estimated to be RMB89.46 million. In accordance with the Hong Kong Financial Report Standards No.16 – Lease, the Company recognized the right of use of the property of the South Centre under the agreement as a right-of-use asset with an approximate amount of RMB96.13 million. The actual payment for other services fees paid by the Company to PICC Group for the Year was approximately RMB69 million. Through the usage of the computer room owned or comprehensively managed by PICC Group, information security of the Company can be effectively protected, the cooperation between the Company and other subsidiaries of PICC Group in operation and maintenance management can be facilitated, the strategic synergy of PICC Group can be further exerted, redundant construction and usage costs can be reduced, the operation and maintenance work can be made more efficiently, and the management can be made more strictly.
On 30 December 2022, the Company renewed the South Centre Package Service Agreement with PICC Group, commencing from 1 January 2023 and expiring on 31 December 2023. For relevant details please refer to the Company’s announcement dated 30 December 2022.
### (XI) THE 2022 PICC TECHNOLOGY SERVICE AGREEMENT WITH PICC TECHNOLOGY
On 28 October 2022, the Company entered into the 2022 PICC Technology Service Agreement with PICC Technology with a term commencing from 28 October 2022 and expiring on 31 December 2022. Pursuant to the agreement, PICC Technology provided the Company with shared projects and services as well as exclusive services and the Company paid technology service fees to PICC Technology. The technology services provided by PICC Technology during the term of the agreement did not include exclusive services but only shared projects and services. Pursuant to the agreement, the Company estimated the annual cap of technology service fees payable by the Company to PICC Technology for the Year to be RMB398.17 million. The actual technology service fees paid by the Company to PICC Technology for the Year was approximately RMB72 million. PICC Technology manages and operates technology infrastructure, software research and development as well as technology innovation in a centralized manner, optimizes resource allocation, in order to promote the Company’s all-round and whole-process transformation with digitalization, expand online insurance, promote intelligent development, and enable the business front line, form the core competitiveness of technology, improve management level and innovation and development ability, and strongly support business development of the Company.
On 30 December 2022, the Company entered into the 2023 PICC Technology Service Agreement with PICC Technology with a term commencing from 1 January 2023 and expiring on 31 December 2023. For relevant details please refer to the Company’s announcement dated 30 December 2022.
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## Report of the Board of Directors
The Independent Directors of the Company have reviewed the continuing connected transactions mentioned above and confirmed that:
1. such transactions were entered into in the ordinary and usual course of business;
2. such transactions were on normal commercial terms or better terms; and
3. such transactions were carried out in accordance with the terms of the agreements governing the transactions, the terms were fair and reasonable and in the interests of the shareholders of the Company as a whole.
The Company has engaged the auditor to report on the Company’s continuing connected transactions in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information”, and with reference to Practice Note 740 “Auditor’s Letter on Continuing Connected Transactions under the Hong Kong Listing Rules” issued by the Hong Kong Institute of Certified Public Accountants. The Board of Directors has received a confirmation letter issued by the auditor in relation to the continuing connected transactions mentioned above, confirming that for the Year:
1. nothing has come to their attention that causes them to believe that the continuing connected transactions abovementioned have not been approved by the Company’s Board of Directors;
2. for transactions involving the provision of goods or services by the Company and its subsidiaries, nothing has come to their attention that causes them to believe that the transactions were not, in all material respects, in accordance with the pricing policies of the Company;
3. nothing has come to their attention that causes them to believe that the transactions were not entered into, in all material respects, in accordance with the relevant agreements governing such transactions; and
4. with respect to the aggregate amount of each of the continuing connected transactions mentioned above, nothing has come to their attention that causes them to believe that the transactions have exceeded the annual caps set by the Company.
The Company complied with the requirements under Chapter 14A of the Listing Rules in the Year.
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# CORPORATE GOVERNANCE
Details of the corporate governance of the Company are set out in the “Corporate Governance Report” section of this annual report.
# AUDIT COMMITTEE
The Audit Committee has reviewed the audited annual results of the Company and its subsidiaries for the Year. The composition and the role of the Audit Committee and a summary of its work performance during the Year are set out in the “Corporate Governance Report” section of this annual report.
# AUDITORS
In accordance with the relevant requirements of the Ministry of Finance of the PRC in relation to the service term of an accounting firm continuously engaged by a financial enterprise, the service terms of the Company’s former international auditor, Deloitte Touche Tohmatsu, and former domestic auditor, Deloitte Touche Tohmatsu Certified Public Accountants LLP, reached the prescribed time limit. At the annual general meeting of the Company on 18 June 2021, PricewaterhouseCoopers was appointed as the international auditor of the Company and PricewaterhouseCoopers Zhong Tian LLP was appointed as the domestic auditor of the Company. Deloitte Touche Tohmatsu retired as the international auditor and Deloitte Touche Tohmatsu Certified Public Accountants LLP retired as the domestic auditor of the Company at the conclusion of the aforesaid annual general meeting. For detailed information please refer to the 2021 annual report released by the Company on 1 April 2022.
PricewaterhouseCoopers, the international auditor of the Company, and PricewaterhouseCoopers Zhong Tian LLP, the domestic auditor of the Company were reappointed at the annual general meeting held on 20 June 2022, and their service terms will end upon the conclusion of the forthcoming annual general meeting.
Save as disclosed above, there was no change of auditors by the Company in the past three years.
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# Report of the Supervisory Committee
In 2022, the Supervisory Committee and all its members demonstrated dedication and diligence, faithfully devoted services, and exercised its supervisory functions and powers in accordance with relevant provisions in the Company Law and the Articles of Association. The Supervisory Committee and all of its members upheld the Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era as the guidance, earnestly studied and implemented the spirits of the 20th National Congress of the Communist Party of China, the 19th Plenary Sessions and the Central Economic Work Conference, contributed to the “Excellent Insurance Strategy”, effectively performed their supervisory functions, urged the Company to carry out its work in accordance with the laws and regulations, and continuously upheld the effective operation of the Company’s corporate governance structure and the legal rights and interests of the Company, shareholders, employees and its stakeholders.
## MEETINGS OF THE SUPERVISORY COMMITTEE
During the Year, according to the operation of the Company and the relevant requirements of the Procedural Rules for the Supervisory Committee, the Supervisory Committee adhered to the regular meeting system, convened seven meetings to consider and review 33 proposals and reports, convened two meetings of the Duty Performance and Fulfillment Supervisory Committee of the Supervisory Committee to consider and review six proposals, convened six meetings of the Financial and Internal Control Supervisory Committee of the Supervisory Committee to consider and review 17 proposals, provided comments and suggestions in respect of certain proposals and provided feedbacks to the Board and the operational management team. Details are set out as follows:
Firstly, the seventeenth meeting of the fifth session of the Supervisory Committee was held on 24 January and the Proposal to Consider the Report on Results of Special Audit of PICC Property and Casualty Working Mechanism for Protecting Consumers’ Rights and Interests was considered and approved.
Secondly, the eighteenth meeting of the fifth session of the Supervisory Committee was held on 25 March. 16 proposals, including the Proposal on the Auditor’s Report and the Audited Financial Statements for 2021, were considered and approved, and 2 proposals, including the Report of PricewaterhouseCoopers on the Findings of the Reviewing Work for 2021 were reviewed.
Thirdly, the nineteenth meeting of the fifth session of the Supervisory Committee was held on 28 April. 2 proposals, including the Proposal on the Financial Statements and Results Announcement for the First Quarter of 2022 was considered and approved, and the Proposal to Consider the Circular of PICC Group’s Audit Center on the audit work of PICC Property and Casualty in 2021 was reviewed.
Fourthly, the twentieth meeting of the fifth session of the Supervisory Committee was held on 2 August and 3 proposals, including the Proposal on Appointment of Mr. Dong Qingxiu as a Supervisor of the Company, were considered and approved.
Fifthly, the twenty-first meeting of the fifth session of the Supervisory Committee was held on 26 August. 2 proposals, including the Proposal on the Interim Financial Report and Results Announcement for 2022, were considered and approved, and 2 proposals, including the Report of PricewaterhouseCoopers on the Findings of the Interim Reviewing Work for 2022, were reviewed.
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Sixthly, the twenty-second meeting of the fifth session of the Supervisory Committee was held on 27 October and 2 proposals, including the Proposal on the Financial Statements and Results Announcement for the Third Quarter of 2022, were considered and approved.
Seventhly, the twenty-third meeting of the fifth session of the Supervisory Committee was held on 29 December and the Proposal on the Notification and Rectification Implementation of the Evaluation of Consumers’ Rights and Interests Protection Supervision for 2021 was considered and approved.
## WORK OF THE SUPERVISORY COMMITTEE
During the Year, the Supervisory Committee attended one shareholders’ general meeting of the Company. The Supervisory Committee attended nine meetings of the Board and eight meetings of the Audit Committee, earnestly reviewed and studied the considerations of the shareholders’ general meetings and the meetings of the Board, fully expressed its opinions and suggestions, and performed supervision over the legality of the agendas and procedures of the meetings while strengthening the supervision over significant issues of the Company, in order to prevent significant operational risks. The Supervisory Committee further urged the Company to regulate its corporate governance structure and operate according to laws and regulations. The Employee Representative Supervisors fully expressed employees’ intentions and requests, and effectively protected employees’ legal rights and interests.
During the Year, the Supervisory Committee continued to improve the supervision work system, promoted the standardization and systematization of supervision, continuously enhanced daily supervision, adopted various ways to understand the Company’s finance, risks, internal control and compliance and strategic development plan and urged and supervised to facilitate the operation of the Company in compliance with laws and regulations. It reinforced the communication and coordination with the external auditor, heard the auditor’s report on the audit plan, the keynote of audit work and the findings of the Company’s annual results audit, obtained an understanding of the audit status and paid special attention to the keynote of audit work. The Supervisory Committee put forward requirements in respect of the auditor’s work and assessed the audit results. It deliberated on the proposals on Company’s development strategic plan, Company’s annual internal control assessment report, compliance report, risk assessment report, internal audit related reports, solvency report and etc. It kept abreast of the status of the establishment, improvement and operation of the Company’s internal control and risk management mechanisms, the implementation of related party transactions, the audit of related party transactions management, the protection of consumer rights, anti-money laundering, anti-terrorist financing and etc., and gave its opinions and suggestions at proper time.
During the Year, the Supervisory Committee carefully performed supervisory duties, heard the reports of relevant departments including the Finance and Accounting Department, the Customer Service Department, the Capital Operation Department/Investment Industry Department, the Risk Management Department, the Legal Compliance Department, had a comprehensive understanding of the Company’s business operation, finance, the protection of insurance consumer rights, funds application, solvency, internal control and compliance and other aspects, promptly obtained the information relating to the Company’s operation and management, business development and financial conditions, and continued to promote the continuous improvement of the Company’s compliance and internal control, and continuous standardization of operational management.
During the Year, the Supervisory Committee continued to improve the corporate governance regulation system, refine the performance evaluation and incentive and restraint mechanism of Directors and Supervisors, formulated and implemented the Duty Performance Evaluation Scheme of the Directors and Supervisors for 2021 and carried out the supervision and evaluation of the performance of Directors and Supervisors for 2021. All Directors and Supervisors performed their duties in accordance with the law in diligence and good faith, and the evaluation results of their annual performance were all “competent”.
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During the Year, while earnestly performing its duties, the Supervisory Committee continued to strengthen its own construction, gain an in-depth understanding of relevant laws and regulations, related party transactions, corporate governance and other regulatory requirements, and members of the Supervisory Committee actively participated in trainings (seminars) organised by external institutions such as Insurance Association of China and internal trainings on corporate governance, anti-money laundering, anti-terrorist financing and etc.
# INDEPENDENT OPINIONS ISSUED BY THE SUPERVISORY COMMITTEE
The Supervisory Committee expressed the following opinions in relation to the supervision and inspection work for the Year:
The compliant operation of the Company. The Directors and senior management of the Company performed their duties in diligence and good faith, and diligently implemented all resolutions of the shareholders’ general meetings and those of the Board. No Director or member of the senior management was found to have committed any breach of laws and regulations or the Articles of Association or to have infringed any rights or interests of the shareholders, the Company or its employees when performing their duties.
Authenticity of financial reports. The Company and its subsidiaries’ auditor’s report and the audited financial statements for 2021 and the interim financial report for 2022 were prepared in accordance with the relevant accounting standards. The financial reports have given a true and fair view of the financial position and operating results of the Company and its subsidiaries.
Related party transactions. The related party transactions of the Company were conducted on an arm’s length basis, on normal commercial terms or better terms and in the interests of the Company’s shareholders as a whole. There was no indication of any infringement of the interests of all the shareholders or the Company.
In 2023, the Supervisory Committee will, in accordance with the Company Law and other laws and regulations as well as relevant provisions in the Articles of Association, continue to perform supervisory duties in compliance with the law, be practical and realistic, be serious and responsible, take the initiative in exploration and innovation, fully exert the important role of the Supervisory Committee in the corporate governance system, urge and supervise the standardized operation of corporate governance, earnestly safeguard the interests of the Company, the shareholders and employees, and contribute to the sustainable, scientific and healthy development of the Company.
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# Corporate Governance Report
## OVERVIEW
The Company believes that maintaining sound corporate governance is in the interests of the Company, its shareholders and stakeholders. The Company has been continuously enhancing its corporate governance in accordance with the Company Law, the Listing Rules, the Code of Corporate Governance and other relevant laws and regulations, and the Articles of Association.
In 2022, the Company continuously strengthened its internal control, supervision and risk management capabilities, refined its management system for related party transactions, and strengthened its compliance construction and management in accordance with the Insurance Law of the PRC, the Measures on the Administration of Information Disclosure of Insurance Companies, the Working Rules for the Internal Audit of Insurance Institutions and the Measures on the Administration of Related Party Transactions of Banks and Insurance Companies issued by the CBIRC and the requirements under the applicable code provisions of the Corporate Governance Code and the SFO.
* **Shareholders’ General Meeting**
* **Board of Directors**
* Audit Committee
* Nomination, Remuneration and Review Committee
* Strategic Planning Committee
* Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision-making Committee)
* Related Party Transaction Control Committee
* President Office
* Secretary of the Board of Directors
* **Supervisory Committee**
* Duty Performance and Fulfillment Supervisory Committee
* Financial and Internal Control Supervisory Committee
Under code provision B.2.2 set out in the Corporate Governance Code, every Director should be subject to retirement by rotation at least once every three years. The term of office of the Directors of the fifth session of the Board expired on 6 March 2022, but in accordance with the provisions of the Company Law, if a Director is not re-elected in a timely manner upon the expiration of the term of office of the Directors, the original Directors shall continue to serve as Directors until the re-elected Directors take office. Due to the progress of selecting candidates for directorships, the Company had not been able to complete re-electing directors in a timely manner. Therefore, the Directors of the fifth session of the Board will continue to serve as Directors until the Directors of the sixth session of the Board take office. As the Directors of the fifth session of the Board did not retire by rotation at the end of their term of office, the Company failed to comply with code provision B.2.2 during the period from 6 March 2022 to the date of the report. The Company complied with all the code provisions of the Corporate Governance Code during the Year except for code provision B.2.2.
## CORPORATE CULTURE
In 2022, in accordance with the New Version of Implementation Plan for the Corporate Culture Advocacy Special Work formulated by the Company, the Company carried out its mission of “People’s insurance serves the People”, vigorously promoted the values of “integrity, professionalism, innovation and excellence” and the corporate spirit of “commitment, synergy, integrity and dedication” and always adhered to customer-centered, protection-based approach to protect the national economic and social development.
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# BOARD OF DIRECTORS
## OVERVIEW
During the Year, the Board convened two shareholders’ general meetings and submitted 15 proposals and reports to the shareholders’ general meetings, held nine Board meetings, at which 95 proposals were considered and approved; the business development plan, financial plan, fixed assets investment plan, strategic allocation plans of and investment guidance on invested assets of the Company were formulated; annual performance appraisals of the senior management were conducted; the Executive Director and Independent Directors were appointed; senior management was employed; the auditors were reappointed, and enhanced the Company’s internal control management, compliance management, and risk management and control capabilities.
The Board holds regular meetings at least four times a year, and convenes extraordinary meetings when necessary. Notices and materials for regular Board meetings shall be given to the Directors at least 14 days and three days prior to the meetings, respectively. All Directors are entitled to propose resolutions to be included as part of the agenda of the Board meetings. Detailed minutes and resolutions of each on-site Board meeting and specialised committees meeting are kept, and resolutions of Board meetings and specialised committees meetings convened by written resolutions are kept, including matters considered and agreed on by the Board and specialised committees, and any related concerns raised by the Directors. Relevant minutes shall be sent to all Directors within a reasonable period, and be available for inspection within a reasonable time after a reasonable notice by the Directors. Five specialised committees are formed under the Board, namely the Strategic Planning Committee, the Audit Committee, the Nomination, Remuneration and Review Committee, the Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision-making Committee), and Related Party Transaction Control Committee. The duties and responsibilities of and the operating procedures for each of the Board committees are clearly defined in writing, among which, the duties and powers of the Audit Committee and the Nomination, Remuneration and Review Committee are published on the websites of the Company and the Hong Kong Stock Exchange. The Board committees submit opinions and proposals to the Board on matters within their respective scope of duties and responsibilities.
The Board comprises, among others, four Independent Directors. Ms. Qu Xiaohui, an Independent Director, is experienced in accounting and financial management, obtained relevant professional accounting qualification, and also serves as the chairman of the Audit Committee. The Company believes that, during the Year, the Board had been in compliance with Rules 3.10(1), 3.10(2), 3.10A and 3.21 of the Listing Rules.
In addition, the list of Independent Directors is disclosed in all of the corporate communications published in accordance with the Listing Rules.
During the Year, in accordance with the applicable principles and code provisions of the Corporate Governance Code, the relevant provisions of the Company Law, the Code of Corporate Governance and the Articles of Association, the Board continued to regulate its operations and enhance its corporate governance. The Company complied with all the code provisions of the Corporate Governance Code with the exception of code provision B.2.2 and adopted recommended best practices where applicable to continuously perfect its corporate governance structure.
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### COMPOSITION
During the Year and up to the date of this report, the Board comprised the following Directors:
| Name | Position | Date of commencement of directorship | Term |
| :--- | :--- | :--- | :--- |
| Mr. Luo Xi (Resigned) (*Note 1*) | Chairman, Non-executive Director | 18 March 2021 | From 18 March 2021 to 16 March 2023 |
| Mr. Yu Ze | Executive Director | 30 December 2021 | From 30 December 2021 to the expiry of the term of the fifth session of the Board |
| Mr. Jiang Caishi | Executive Director | 9 April 2021 | From 9 April 2021 to the expiry of the term of the fifth session of the Board |
| Mr. Zhang Daoming (*Note 2*) | Executive Director | 22 April 2022 | From 22 April 2022 to the expiry of the term of the fifth session of the Board |
| Mr. Hu Wei (*Note 3*) | Executive Director | 16 March 2023 | From 16 March 2023 to the expiry of the term of the fifth session of the Board |
| Mr. Li Tao | Non-executive Director | 18 October 2006 | From 7 March 2019 to the expiry of the term of the fifth session of the Board |
| Mr. Lin Hanchuan (Resigned) (*Note 4*) | Independent Director | 25 March 2013 | From 7 March 2019 to 17 February 2023 |
| Mr. Lo Chung Hing | Independent Director | 26 June 2015 | From 7 March 2019 to the expiry of the term of the fifth session of the Board |
| Mr. Chu Bende (Resigned) (*Note 5*) | Independent Director | 24 June 2016 | From 7 March 2019 to 11 July 2022 |
| Ms. Qu Xiaohui | Independent Director | 31 October 2017 | From 7 March 2019 to the expiry of the term of the fifth session of the Board |
| Mr. Cheng Fengchao (*Note 6*) | Independent Director | 25 November 2022 | From 25 November 2022 to the expiry of the term of the fifth session of the Board |
| Mr. Wei Chenyang (*Note 7*) | Independent Director | 12 January 2023 | From 12 January 2023 to the expiry of the term of the fifth session of the Board |
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Notes:
| | |
| :--- | :--- |
| 1. | Mr. Luo Xi resigned as a Non-executive Director and the Chairman on 16 March 2023 due to age reason. |
| 2. | The qualification of Mr. Zhang Daoming as a Director was approved by the CBIRC on 22 April 2022. |
| 3. | The qualification of Mr. Hu Wei as a Director was approved by the CBIRC on 16 March 2023. |
| 4. | Mr. Lin Hanchuan resigned as an Independent Director on 17 February 2023 due to age reason. |
| 5. | Mr. Chu Bende resigned as an Independent Director on 11 July 2022 due to health reason. |
| 6. | The qualification of Mr. Cheng Fengchao as a Director was approved by the CBIRC on 25 November 2022. |
| 7. | The qualification of Mr. Wei Chenyang as a Director was approved by the CBIRC on 12 January 2023. |
Pursuant to laws and regulations, regulatory provisions and the Articles of Association, the Directors of the fifth session of the Board shall continue to perform their duties as Directors.
At the first extraordinary general meeting in the year of 2022 of the Company on 27 October 2022, Mr. Li Weibin* was appointed as an Independent Director of the fifth session of the Board and has been appointed by the Board as a committee member of the Audit Committee of the Board and a committee member of the Nomination, Remuneration and Review Committee of the Board with the term of office commencing from the date of obtaining approval for his Director qualification from the CBIRC and ending upon the expiry of the term of appointment of the fifth session of the Board of the Company. Mr. Qu Xiaobo* was appointed as an Independent Director of the fifth session of the Board and has been appointed by the Board as a committee member of the Audit Committee of the Board and a committee member of the Related Party Transaction Control Committee of the Board with the term of office commencing from the date of obtaining approval for his Director qualification from the CBIRC and ending upon the expiry of the term of appointment of the fifth session of the Board of the Company.
* Pending the CBIRC’s approval of the qualification of the relevant personnel for serving as a Director.
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### DUTIES AND RESPONSIBILITIES
The Board is responsible for leading and monitoring the operation of the Company, formulating the overall strategies, policies, financial budgets and final accounts, determining the annual operation plans and investment plans, and the organisation of the fundamental management system and internal management structure, assessing the performance of the Company and supervising the work of the management. The Board is also responsible for convening shareholders’ general meetings, reporting to shareholders’ general meetings and implementing resolutions of the shareholders’ general meetings; determining the annual operation plans and annual investment plans; formulating the annual financial budgets and final account; formulating plans for distribution of profits and recovery of losses, proposals for the increase in or reduction of the registered capital, plans for the issuance of bonds or other securities as well as the listing, and plans for material acquisitions, purchase of shares of the Company, or for merger, division, dissolution, change of corporate form of the Company; considering and approving the outbound investments, asset acquisitions, asset disposals and write-offs, asset mortgages, related party transactions or other transactions of the Company within the limit authorised to the Board by the shareholders’ general meeting, data governance and other matters which are required to be submitted to the Board for consideration and approval in accordance with laws and regulations and regulatory provisions; deciding on the establishment of the Company’s internal management structure; appointing or removing the senior management of the Company and determining their remuneration, rewards and disciplinary matters, supervising the senior management to fulfill their duties; formulating proposals for any amendment to the Articles of Association; drawing up the rules of procedures for the shareholders’ general meetings and the Board; considering and approving the working rules of the specialised committees under the Board; electing members of the specialised committees under the Board; proposing to the shareholders’ general meeting on the appointment or removal of the accounting firm which carries out statutory audit on the financial reports of the Company on a regular basis; receiving the work report of, and reviewing the work, of the President of the Company; selecting the external auditor who conducts audit of the Directors and senior management of the Company; formulating the Company’s development strategy and supervise strategic implementation; formulating the Company’s capital planning and the Company’s risk tolerance, risk management and internal control policies, and undertaking the ultimate responsibility for internal control, compliance, comprehensive risk management and capital or solvency management; in charge of the Company’s information disclosure, and undertaking the ultimate responsibility for the authenticity, accuracy, completeness and timeliness of accounting and financial reports; regularly evaluating and improving corporate governance; safeguarding the legitimate rights and interests of financial consumers and other stakeholders, establishing a mechanism for identifying, reviewing and managing conflicts of interest between the Company and shareholders, especially substantial shareholders, and undertake the management responsibility of shareholder affairs.
The Board delegates the management of the daily business operation of the Company to the management. However, the statutory functions and powers of the Board, in principle, shall not be delegated to the Chairman of the Board, any Director or any other individual or organisation. In the case where delegation is required, such authorisation shall be made by way of a resolution of the Board in accordance with laws. Delegation shall be granted on a case-by-case basis, and in no event shall the functions and powers of the Board be generally or permanently delegated to any other organisation or individual of the Company.
The Directors have recourse to seek independent professional advice in performing their duties at the Company’s expense. They are also encouraged to consult with the Company’s senior management independently.
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# SUMMARY OF WORK UNDERTAKEN
During the Year, the Board convened two shareholders’ general meetings and submitted 15 proposals and reports to the shareholders’ general meetings. Nine Board meetings were convened, at which 95 proposals were considered and approved. The attendance record of the Directors at the meetings is as follows:
| Name | Board Meeting: Number of meetings attended/ Number of meetings that require attendance | Board Meeting: Attendance rate | Shareholders’ General Meeting: Number of meetings attended/ Number of meetings that require attendance | Shareholders’ General Meeting: Attendance rate |
| :--- | :--- | :--- | :--- | :--- |
| Luo Xi | 9/9 | 100% | 2/2 | 100% |
| Yu Ze | 9/9 | 100% | 2/2 | 100% |
| Jiang Caishi | 9/9 | 100% | 2/2 | 100% |
| Zhang Daoming | 7/7 | 100% | 2/2 | 100% |
| Hu Wei | 0/0 | – | 0/0 | – |
| Li Tao | 9/9 | 100% | 2/2 | 100% |
| Lin Hanchuan | 9/9 | 100% | 2/2 | 100% |
| Lo Chung Hing | 9/9 | 100% | 2/2 | 100% |
| Chu Bende | 5/5 | 100% | 1/1 | 100% |
| Qu Xiaohui | 9/9 | 100% | 2/2 | 100% |
| Cheng Fengchao | 1/1 | 100% | 0/0 | – |
| Wei Chenyang | 0/0 | – | 0/0 | – |
Notes:
1. During the Year and up to the date of this report, the qualifications of some Directors were approved and certain Directors resigned. The table above lists the numbers of shareholders’ general meetings and Board meetings held and attended by each Director during his/her term of office in the Year.
2. During the Year, the Chairman of the Board held a meeting with the Independent Directors, at which no other Directors attended.
The major work accomplished by the Board during the Year included:
* convened two shareholders’ general meetings and submitted 15 proposals and reports to the shareholders’ general meetings, including the proposals for the appointments of the Directors, the Report of the Board for 2021, the Report of the Supervisory Committee for 2021, the Auditor’s Report and the audited financial statements for 2021, the profit distribution plan for 2021, amendments to the Articles of Association, amendments to the Procedural Rules for Shareholders’ General Meeting, amendments to Procedural Rules for the Board of Directors, and the appointment of the auditors, all of which were approved at the shareholders’ general meetings;
* considered and approved the appointment of the nominated director and the appointments of the chairman and members of the relevant specialised Board committees;
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### Corporate Governance Report
- considered and approved the appointments of Mr. Zhang Daoming as the Responsible Financial Officer, Mr. Hu Wei and Mr. Dong Xiaolang as Assistants to the President, and Ms. Wu Na as the Responsible Audit Officer;
- considered and approved the adjustment to and establishment of the Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision-making Committee);
- considered and approved the business development plan, financial plan, fixed assets investment plan, strategic allocation plans of invested assets of the Company for the Year, 2022 reports on invested assets and the guidance on relevant offshore investment;
- considered and approved the proposal on remuneration plan of Independent Directors and External Supervisors of the Company; considered and approved the annual performance appraisals of leaders of the Company and relevant senior management;
- considered and approved the internal control assessment report for 2021 and the compliance report for 2021 of the Company, considered the report on progress of improvement based on the management recommendation letters of the previous years, reviewed and continuously enhanced the effectiveness of the Company’s internal control;
- considered and approved the risk assessment report for 2021, the solvency report for the fourth quarter of 2021 and the second quarter of 2022, the solvency margin condition and audit report, report on the results of the special audit of the solvency risk management system and the solvency stress test report for the fourth quarter of 2021 of the Company, formulated the risk preference statement and risk tolerance indicators of the Company for 2022, and reviewed and continuously improved the effectiveness of the Company’s risk management;
- considered and approved the information disclosure report for 2021, the financial report on compulsory third party liability motor vehicle insurance for 2021, the report on the implementation of the related party transactions for 2021 and the evaluation report on implementation of the development plan for 2021 and the Capital Plan (2022-2024);
- considered and approved the report of asset and liability management for 2021, and stipulated the overall goals and strategies of the asset and liability management of the Company to meet regulatory requirements;
- considered and approved the 2022 interim results;
- considered and approved the 2021 Corporate Social Responsibility Report of the Company; and
- considered and approved the purchase of fixed assets by branches of the Company, the related party transactions between the Company and its subsidiaries, affiliated branches or related subsidiaries and affiliated branches of PICC Group.
---
# DIRECTORS
## APPOINTMENT AND RE-ELECTION OF DIRECTORS
According to the Articles of Association and the Working Rules of the Nomination, Remuneration and Review Committee of PICC Property and Casualty Company Limited, after considered and nominated by the Nomination, Remuneration and Review Committee, the appointment of Director shall be subject to the consideration and approval of the Board and the general meeting, after which, it shall be submitted and reported to the CBIRC for qualification approval. Upon the approval of the qualification, the candidate will be officially appointed. The procedures of re-election of Directors are the same, except that they are no longer required to be submitted and reported to the CBIRC for qualification approval.
## REMOVAL OF DIRECTORS
According to the Articles of Association, the removal of a Director shall be passed by way of an ordinary resolution and the removal of an Independent Director shall be passed by way of a special resolution at the shareholders’ general meeting.
## RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
The management has provided to the Board such explanation and information as necessary to enable the Board to carry out an informed assessment of the Company’s financial statements.
The Directors are responsible for the preparation of financial statements for every financial year and the interim period thereof which shall give a true and fair view of the business operations of the Company in accordance with the accounting standards issued by the Hong Kong Institute of Certified Public Accountants and through the consistent adoption of appropriate accounting policies and, subject to compliance with the Hong Kong Financial Reporting Standards, the implementation of the regulations on accounting treatment issued by the Ministry of Finance of the PRC and the CBIRC. The Directors acknowledge their responsibilities for preparing the financial statements of the Company for the year ended 31 December 2022, which shall present a true and fair view of the affairs of the Company and its subsidiaries and of the results and cash flows of the Company and its subsidiaries. The Directors are not aware of any event or condition which may cause material adverse impact on the Company’s ability to continue as a going concern.
## SECURITIES TRANSACTIONS
The Company has formulated the Guidelines on Transactions of the Company’s Securities by the Employees (the “Securities Transactions Guidelines”) that are applicable to Directors, Supervisors and all employees. The terms of the Securities Transactions Guidelines are no less exacting than those set out in the Model Code. The Company enquired with all the Directors and Supervisors and they all confirmed that they complied with the requirements under the Model Code and the Securities Transactions Guidelines during the Year.
The biographical details of the Directors are set out in the section headed “Biographical Details of Directors, Supervisors and Senior Management” in this annual report. Save as disclosed in the biographies of the Directors as set out under the section headed “Biographical Details of Directors, Supervisors and Senior Management” of this annual report, none of the Directors has any personal relationship (including financial, business, family or other material/related relationship) with any other Director, Supervisor or chief executive.
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## INDEPENDENCE OF INDEPENDENT DIRECTORS
The Company has received the annual confirmation letters from all the Independent Directors confirming their independence. As at the date of this report, the Company is of the view that all the Independent Directors are independent.
## INDEPENDENCE OF THE BOARD
The Company understands and agrees with the importance of Independent Directors providing independent views and opinions to the Board. While performing its responsibilities, the committee may seek advice from independent advisers at the Company’s expense, which shall include but not limited to legal advice, advice of accountants and advice of other professional financial advisors, as considered necessary to fulfil their responsibilities and in exercising independent judgment when making decisions in furtherance of their Directors’ duties. Through the above measures and procedures, the Company has reviewed and examined the effectiveness of the Board obtaining independent views and opinions during the Year and believes that the above policies and measures can ensure independent views and opinions are available to the Board.
## DIRECTORS’ CONTINUOUS PROFESSIONAL DEVELOPMENT
Based on the experience and background of each of the newly appointed Directors, the Company arranges induction training sessions to help them to have a better understanding of the Company. The induction training sessions usually cover a brief introduction to the Company, the organisational structure, business operation and management and governance practices of the Company, etc. It also includes meetings and exchanges with the Company’s senior management personnel, and visits and inspections of certain branches of the Company. Each newly appointed Director would receive, when joining the Board, a copy of the Directorship Guidelines which contains a brief introduction to the Company, its corporate governance, Directors’ rights, obligations and duties, relevant laws, regulations and rules, internal rules of the Company, etc. The Directorship Guidelines is updated on a regular basis.
During the Year, the Directors regularly received documents, materials and information on the business and operating performance of the Company, relevant laws and regulations, and regulatory and governance matters. In addition, the Company encouraged all Directors to attend related trainings, the costs of which were borne by the Company.
During the Year, all Directors earnestly participated in continuous professional development. All Directors received trainings or conducted research or exchange in areas of corporate governance, corporate finance, information disclosure, related party transactions, directors’ continuous responsibilities and obligations, economic and social situations, relevant laws and regulations, professional knowledge related to the business, professional norms, etc., which continuously enhanced their related knowledge and skills, and they proactively put forward various timely and appropriate advice and suggestions on the Company’s management and development.
Directors’ participations in trainings during the Year are set out in details as below:
Luo Xi: paid continuous attention to and conducted research on reform and transformation of the Company, serving the national strategies and optimising the corporate governance, gained a deeper understanding of applicable domestic and foreign laws and regulations as well as regulatory requirements in respect of related party transactions, directors’ continuous responsibilities, etc., and actively attended trainings in respect of laws and regulations, corporate governance, director’s duties, anti-money laundering and insurance industry knowledge, etc.
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## Corporate Governance Report
Yu Ze: attended various trainings and meetings organised by regulatory authorities, the Company and PICC Group related to the performance of director’s functions and duties, attended military-civilian integration development seminars, and gained a deeper understanding of applicable domestic and foreign laws and regulations as well as regulatory requirements in respect of information disclosure, related party transactions, directors’ continuous responsibilities and obligations, corporate governance, anti-money laundering and anti-terrorism financing, etc.
Jiang Caishi: paid continuous attention to and conducted research on the issues of corporate finance and corporate governance, gained a deeper understanding of applicable domestic and foreign laws and regulations as well as regulatory requirements in respect of related party transactions, directors’ continuous responsibilities, etc., and attended trainings in respect of laws and regulations, corporate governance, director’s duties, insurance industry, anti-money laundering and anti-terrorism financing, etc.
Zhang Daoming: paid continuous attention to and conducted research on the issues of corporate finance and corporate governance, gained a deeper understanding of applicable domestic and foreign laws and regulations as well as regulatory requirements in respect of related party transactions, directors’ continuous responsibilities, etc., and attended trainings in respect of laws and regulations, corporate governance, director’s duties, and insurance industry knowledge, etc., and participated online the anti-money laundering and anti-terrorism financing practice training course on senior managements of the Zhengzhou Training Institute of the People’s Bank of China and the special training sessions on equity management and related party transaction management of insurance Institutions organised by China Banking and Insurance News.
Li Tao: attended trainings on various topics organised by PICC Group, participated in the courses of enhancing the performance of duties of directors, supervisors and senior management in insurance organizations held by Insurance Association of China, and paid attention to the amendments to applicable domestic and foreign laws and regulations as well as regulatory requirements in respect of information disclosure, related party transactions, directors’ continuous responsibilities and obligations, corporate governance, consumers’ rights and interests protection, anti-money laundering and anti-terrorism financing, etc.
Lin Hanchuan: paid continuous attention to and conducted research on the issues of corporate finance and corporate governance, gained a deeper understanding of applicable domestic and foreign laws and regulations as well as regulatory requirements in respect of related party transactions, directors’ continuous responsibilities, etc., and, participated in trainings organised by the Company in relation to laws and regulations, corporate governance, director’s duties and insurance industry, and attended trainings in respect of laws and regulations, corporate governance, director’s duties, insurance industry, anti-money laundering and anti-terrorism financing, etc.
Lo Chung Hing: paid continuous attention to and conducted research on the issues of corporate finance and corporate governance, gained a deeper understanding of applicable domestic and foreign laws and regulations as well as regulatory requirements in respect of related party transactions, directors’ continuous responsibilities, etc., and, participated in trainings organised by the Company in relation to laws and regulations, corporate governance, performance of director’s functions and insurance industry, and attended trainings in respect of laws and regulations, corporate governance, performance of director’s functions and duties, insurance industry, anti-money laundering and anti-terrorism financing, etc.
Chu Bende: paid continuous attention to and conducted research on the issues of corporate finance and corporate governance, gained a deeper understanding of applicable domestic and foreign laws and regulations as well as regulatory requirements in respect of related party transactions, directors’ continuous responsibilities, etc., and, participated in trainings organised by the Company in relation to laws and regulations, corporate governance, director’s duties, insurance industry, anti-money laundering and anti-terrorism financing, etc.
---
Qu Xiaohui: paid continuous attention to and conducted research on the issues of corporate finance and corporate governance, gained a deeper understanding of applicable domestic and foreign laws and regulations as well as regulatory requirements in respect of related party transactions, directors’ continuous responsibilities, etc., and, participated in trainings organised by the Company in relation to laws and regulations, corporate governance, director’s duties and insurance industry, and attended trainings in respect of laws and regulations, corporate governance, director’s duties, insurance industry, anti-money laundering and anti-terrorism financing, etc.
Cheng Fengchao: paid continuous attention to and conducted research on high-quality development of listed company and enhancing the level of the listed company’s corporate governance, participated in trainings organised by the Company in relation to laws and regulations, corporate governance, director’s duties and insurance industry, etc., and attended thematic trainings in respect of laws and regulations, corporate governance, high-quality development and risk management and control, etc.
## CHAIRMAN/PRESIDENT
Mr. Luo Xi serves as the Chairman commencing from 18 March 2021 and resigned as a Non-executive Director and the Chairman on 16 March 2023. As at the date of this report, the Chairman of the Company is vacant, recommended by Directors, Mr. Yu Ze, an Executive Director, shall act as the Chairman until the new Chairman takes office. Mr. Yu Ze serves as the President commencing from 28 June 2021. As at the date of this report, the President of the Company is Mr. Yu Ze. The Board considers that it has no unfavorable impact on the business prospects and operational efficiency of the Company that Mr. Yu Ze, in addition to acting as the President of the Company, acts as the Chairman, and does not undermine the balance of responsibilities and mandates between the Board and the management of the Company, given that: (i) there is sufficient check and balance in the Board as the decision to be made by the Board requires approval by at least a majority of the Directors and our Board has four Independent Directors out of the nine Directors, which is in compliance with the Listing Rules; (ii) Mr. Yu Ze and the other Directors are aware of and undertake to fulfill their fiduciary duties as Directors, which require, among other things, that they act for the benefit and in the best interest of the Company and make decisions for the Company accordingly; (iii) the balance of power and authority is ensured by the operations of the Board which comprises experienced Directors who meet regularly to discuss issues affecting the operations of the Company; and (iv) the overall strategic and other key business, financial, and operational policies of the Company are made collectively after thorough discussion at both Board and senior management levels. The Company will use its best endeavor to identify suitable candidates to fill the vacancy of Chairman.
The Chairman is responsible for leading the Board and ensuring that the Board operates effectively and discharges its responsibilities properly. The President is responsible for taking charge of the operation and management of the Company, organising and implementing the resolutions of the Board, the annual operation plans and investment plans, formulating proposals for organisational structure for internal management and the basic management system, and making proposals to the Board for the appointment or removal of the Vice President(s), the Responsible Compliance Officer, the Responsible Financial Officer and the Assistant(s) to the President, etc.
The duties and responsibilities of the Chairman are as follows:
- to preside over shareholders’ general meetings, and convene and preside over board meetings;
- to prompt and inspect the implementation of board resolutions;
- to sign securities issued by the Company; and
- any other functions and powers authorised by the Board.
---
The duties and responsibilities of the President are as follows:
- to be in charge of the operation and management of the Company and shall organise the implementation of the Board resolutions;
- to organise the implementation of the Company’s annual business plans and annual investment plans;
- to issue general administrative documents of the Company;
- to draw up plans for organisational structure for internal management of the Company and, in accordance with operating needs, and decide on general organisational adjustment plans;
- to draw up the Company’s basic management system;
- to formulate basic rules and regulations for the Company;
- to exercise the authority of the legal representative, enjoy civil rights and perform corresponding civil obligations related to the Company’s business on behalf of the Company;
- to propose to the Board for the appointment or removal of Vice President(s), Responsible Compliance Officer, Responsible Financial Officer and Assistant(s) to the President;
- to appoint or remove responsible management personnel other than those required to be appointed or removed by the Board;
- to formulate policies for the remuneration, welfare benefits, rewards and penalties of the employees of the Company other than the senior management personnel and to determine, or authorise subordinate department heads to determine, the employment and removal of the employees other than the senior management personnel and the responsible management personnel described in the item 9 of the details of the duties and responsibilities of the President above;
- to propose the convening of special meetings of the Board; and
- to exercise any other functions and powers authorised by laws and regulations, regulatory provisions, the Articles of Association and the Board.
# AUDIT COMMITTEE
## OVERVIEW
During the Year, the Audit Committee continued to earnestly perform its duties of supervising and providing guidance on internal and external audits, reviewing financial reports, supervising financial reporting procedures, strengthening internal control management and compliance management, etc., and put forward a number of opinions and suggestions to the Board and the management on financial affairs, internal control, compliance and business operation and management, thereby playing an active role in further improving the management of the Company and enhancing the level of the Company’s corporate governance.
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### COMPOSITION
During the Year and up to the date of this report, the Audit Committee comprised:
**Chairman:** Qu Xiaohui (Independent Director)
**Members:** Lin Hanchuan (Independent Director, resigned), Li Tao (Non-executive Director), Lo Chung Hing (Independent Director), Chu Bende (Independent Director, resigned)
Notes: 1. Mr. Chu Bende resigned as an Independent Director on 11 July 2022, and his position as a committee member of the Audit Committee also ceased simultaneously.
2. Mr. Lin Hanchuan resigned as an Independent Director on 17 February 2023, and his position as a committee member of the Audit Committee also ceased simultaneously.
### DUTIES AND RESPONSIBILITIES
The Audit Committee is responsible for monitoring and inspecting the financial reporting procedures and internal control system of the Company, supervising the design, implementation and monitoring of the internal control system by the management to ensure that the Company has the appropriate and effective internal control system in place, reviewing financial information of the Company, making recommendations in respect of the appointment or removal of the external accounting firm, reviewing the effectiveness of the internal audit function of the Company and supervising and providing guidance on internal and external audits.
### REMUNERATION OF AUDITORS
During the Year, the Company paid RMB12.90 million for audit-related services, including the fees for the audit of the financial statements for 2022 and the review of the interim financial statements for 2022. During the Year, there was no non-audit services. Therefore, no such non-audit services fee was paid.
### SUMMARY OF WORK UNDERTAKEN
During the Year, the Audit Committee held eight meetings and considered 32 proposals. The attendance record of committee members at the meetings is as follows:
| Name | Qu Xiaohui | Lin Hanchuan | Li Tao | Lo Chung Hing | Chu Bende |
| :--- | :---: | :---: | :---: | :---: | :---: |
| Number of meetings attended/Number of meetings that require attendance | 8/8 | 8/8 | 8/8 | 8/8 | 5/5 |
| Attendance rate | 100% | 100% | 100% | 100% | 100% |
Note: During the Year and up to the date of this report, some Directors resigned and ceased to act as committee members of the Audit Committee simultaneously. The table above lists the numbers of meetings held and attended by each member during his/her term of office in the Year.
During the Year, the Audit Committee accomplished the following major work:
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Engagement of and communication with the auditors:
- considered the auditors’ reports on the work plans for and results of the audit work for 2021 and on the interim review work for 2022; and
- considered the proposal for the engagement of auditors for 2022, and obtained approvals from the Board and the shareholders’ general meeting for the engagement proposal.
Reviewing the financial reports, etc.:
- reviewed the financial statements and results announcement, the information disclosure report, the special financial report on compulsory third party liability motor vehicle insurance and the solvency reports of the Company for 2021, the solvency reports for the fourth quarter of 2021 and the second quarter of 2022, the financial statements and results announcement for the interim period of 2022, and the financial statements and results announcement for the first and third quarters of 2022.
Monitoring and inspecting the financial reporting procedures and the internal control system:
- considered and approved the Company’s Corporate Governance Report for 2021, internal control assessment report and the compliance assessment report for 2021;
- considered and approved the report on progress of improvement based on the management recommendation letter for 2020, considered the management recommendation letter for 2021; and
- supervised and provided guidance on the internal audit and financial accounting work, reviewed the working report on internal audit for 2021, the asset and liability management audit results report for 2021, the work report of the Company for 2021 and the first half of 2022 audited by the Group Audit Center, and considered the work summary report for 2021 and the work plans for 2022 of the Finance and Accounting Department of the Company.
# NOMINATION, REMUNERATION AND REVIEW COMMITTEE
## OVERVIEW
During the Year, the Nomination, Remuneration and Review Committee nominated Directors and senior management, elected the chairmen and committee members of relevant special committees, conducted annual appraisals of leaders and relevant company-level senior management of the Company, and reviewed the remuneration of the Independent Directors and External Supervisors.
## COMPOSITION
During the Year and up to the date of this report, the Nomination, Remuneration and Review Committee comprised:
| | |
| :--- | :--- |
| Chairman: | Cheng Fengchao (Independent Director) |
| Members: | Lin Hanchuan (Independent Director, resigned), Lo Chung Hing (Independent Director), Chu Bende (Independent Director, resigned), Qu Xiaohui (Independent Director), Wei Chenyang (Independent Director) |
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Notes:
1. Mr. Chu Bende resigned as an Independent Director on 11 July 2022 and ceased to act as a member of the Nomination, Remuneration and Review Committee simultaneously.
2. Mr. Lin Hanchuan resigned as an Independent Director on 17 February 2023 and ceased to act as a member of the Nomination, Remuneration and Review Committee simultaneously.
3. Mr. Lo Chung Hing and Ms. Qu Xiaohui were appointed by the Board as committee members of the Nomination, Remuneration and Review Committee on 22 July 2022.
4. Mr. Cheng Fengchao was appointed as an Independent Director on 29 December 2021 and was elected as the chairman of the Nomination, Remuneration and Review Committee, his terms of office commencing from 25 November 2022 on which his qualification as an Independent Director was approved by CBIRC.
5. Mr. Wei Chenyang was appointed as an Independent Director on 28 October 2021 and was elected as a committee member of the Nomination, Remuneration and Review Committee, his terms of office commencing from 12 January 2023 on which his qualification as an Independent Director was approved by CBIRC.
## DUTIES AND RESPONSIBILITIES
The Nomination, Remuneration and Review Committee is responsible for assessing the structure and composition of the Board on a regular basis, recommending candidates for directorships, formulating remuneration policies and structures for Directors, the President and other senior management, formulating appraisal standards and conducting annual appraisals, making recommendations in respect of the remuneration packages for the Directors and senior management to the Board, etc.
## NOMINATION OF DIRECTORS AND POLICY ON DIVERSITY OF BOARD MEMBERS
The Nomination, Remuneration and Review Committee shall first discuss the nomination of candidates for directorships, examine the qualifications of these candidates, and then recommend such candidates to the Board. The Board shall determine whether such candidates should be proposed for approval at the shareholders’ general meeting. The major criteria considered by the Nomination, Remuneration and Review Committee and the Board include the candidates’ education background, management and research experience in the financial industry, especially in the insurance sector, their extent of commitment to the Company and should also achieve diversity of the Board members. Regarding the nomination of independent directors, the Nomination, Remuneration and Review Committee will also give special consideration to the independence of the relevant candidates for directorships.
The Company understands and agrees with the diversity of the Board members and regards the achieving of diversity of the Board members as an important factor for enhancing the level of the Company’s corporate governance and achieving sustainable development. The Company has formulated the Policy on Diversity of Board Members, which requires the Nomination, Remuneration and Review Committee to consider a candidate for directorship on a merit basis following objective standards, take into account factors such as gender, age, culture and education background and professional experience of the Board members, and select candidates for directorships in accordance with the business characteristics, specific requirements and future development of the Company.
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The Company currently has nine Directors, consisting of four Executive Directors (including Mr. Yu Ze, Mr. Jiang Caishi, Mr. Zhang Daoming and Mr. Hu Wei), one Non-executive Directors (Mr. Li Tao) and four Independent Directors (including Mr. Lo Chung Hing, Ms. Qu Xiaohui, Mr. Cheng Fengchao and Mr. Wei Chenyang). The four Executive Directors have performed operating and management roles in the insurance sector for many years and have rich experience in the operation management and expertise in insurance institutions; the Non-executive Director comes from shareholder’s entities and has rich experience in the operation management and expertise in insurance institutions; the four Independent Directors (one of whom is from Hong Kong) are experts in finance, accounting research, financial management, public administration and corporate management. They are capable of giving the Company professional advice on various areas. The biographical details of the Directors are set out in the “Biographical Details of Directors, Supervisors and Other Senior Management” section of this annual report.
In view of the above information on the professional background, composition, age and gender of the current Directors of the Company, the Nomination, Remuneration and Review Committee is of the view that the Board is able to meet the diversity requirement (including gender diversity). In addition, the Nomination, Remuneration and Review Committee will review the Board Diversity Policy and the measurable objectives to ensure the effectiveness of the Policy. As of 31 December 2022, the Board of the Company has one female member. In addition, as of 31 December, 2022, the proportion of female employees in the Company’s whole system was 46.92%. In the process of daily personnel management, the Company will continue to strengthen the care of female employees, abide by the requirements of Law on the Protection of Women’s Rights and Interests and Labor Law of the PRC for the protection of women’s rights and interests, and fully protect the rights and interests of female employees such as equal employment, rest and leave, and career development.
## REMUNERATION OF DIRECTORS AND OTHER SENIOR MANAGEMENT
The fixed salaries of the Executive Directors and other senior management are determined in accordance with the market levels and their respective positions and duties. Their performance-related bonuses are subject to various considerations, including the operating results of the Company and the scores in their performance appraisals. The Non-executive Directors shall not receive remuneration from the Company. Independent Directors’ remunerations and External Supervisors’ remunerations are determined with reference to the market levels and the actual circumstances of the Company.
## REMUNERATION POLICY OF THE COMPANY
The remuneration policy of the Company follows the guiding principle of “distribution according to work accomplished, performance-linked, gross controlled, and market-oriented” and implements a job sequence-based, market-oriented and performance-based remuneration incentive system. Based on job sequence, the remuneration will be paid based on the value of the job as well as performance contribution to ensure a fair and reasonable distribution. Through market-orientation, emphasis is placed on determining remuneration according to the market labour price to ensure the external competitiveness of the remuneration package; and by basing on performance, bonuses are linked with and inter-related to business performance, highlighting contribution to business. The Company also implements a welfare plan in accordance with relevant laws and regulations and operating results to provide reasonable protection for the employees.
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## SUMMARY OF WORK UNDERTAKEN
During the Year, the Nomination, Remuneration and Review Committee held six meetings, at which 12 proposals were considered, at which matters related to the nomination of Directors, the chairman and committee members of relevant special committee, senior management, the remuneration of the Independent Directors and the External Supervisors, and the appraisals of the senior management were discussed. The attendance record of committee members at the meetings is as follows:
| Name | Cheng Fengchao | Lin Hanchuan | Lo Chung Hing | Chu Bende | Qu Xiaohui | Wei Chenyang |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: |
| Number of meetings attended/ Number of meetings that require attendance | 1/1 | 6/6 | 3/3 | 2/2 | 3/3 | 0/0 |
| Attendance rate | 100% | 100% | 100% | 100% | 100% | – |
Note: During the Year and up to the date of this report, some Directors were elected as committee members of the Nomination, Remuneration and Review Committee, the terms of office of some newly-elected Directors as chairman and committee member of the Nomination, Remuneration and Review Committee commenced and certain Director resigned and ceased to act as a member of the Nomination, Remuneration and Review Committee simultaneously. The table above lists the numbers of meetings held and attended by each member during his/her term of office in the Year.
The major work accomplished by the Nomination, Remuneration and Review Committee in the Year included:
* nominated Directors, the chairman and committee members of relevant special committee and senior management;
* took into consideration the market salary levels of comparable companies of the same industry and the Company’s actual circumstances, made recommendations to the Board in respect of the remuneration for the Independent Directors and External Supervisors for 2022, and such recommendations were approved by the Board and the shareholders’ general meeting;
* considered the performance appraisal plan for the senior management for 2021 and made recommendations to the Board in respect thereof; carried out annual performance appraisals of the leaders of the Company and relevant company-level senior management, which were approved by the Board; and
* considered the Corporate Management Report for 2021.
---
# STRATEGIC PLANNING COMMITTEE
## OVERVIEW
During the Year, the Strategic Planning Committee considered the annual business development plan, financial plan, major investments, profit distributions, the proposal for delegation of the shareholders’ meeting to the Board and Board to the management, and the evaluation report on the conduct of the substantial shareholders for 2021 of the Company and continued to supervise the corporate governance of the Company.
## COMPOSITION
During the Year and up to the date of this report, the Strategic Planning Committee comprised:
| | |
| :--- | :--- |
| Chairman: | Luo Xi (Non-executive Director, Chairman, resigned) |
| Members: | Yu Ze (Executive Director), Li Tao (Non-executive Director) |
Note: Mr. Luo Xi resigned as a Non-executive Director and the Chairman on 16 March 2023, and ceased to act as the chairman of Strategic Planning Committee simultaneously.
## DUTIES AND RESPONSIBILITIES
The Strategic Planning Committee is responsible for formulating mid-term and long-term development strategies, considering draft plan of development strategies for the Company, plans to promote a company through equity investment or establish a company by participating in the purchase of equity interest, plans for mergers and acquisitions, major investment and financing plans, business plans, annual financial budgets, final accounts, profit distribution plans and loss recovery plans, annual or medium- and long-term investment plans on fixed assets, plans for the disposal of material assets, plans for the issuance of shares and bonds, plans to increase or reduce its registered capital and to repurchase its own shares, plans for mergers, divisions, dissolution, liquidation, etc., proposals for amendment to the Articles of Association, any delegation by the Board to the management, plans for material modification to the organisational structure of the Company, reviewing and supervising the training and continuous professional development for Directors and senior management, the policies and practices in respect of the Company’s compliance with laws and regulatory provisions, formulating, reviewing and supervising the code of conduct and compliance manual for employees and Directors, reviewing the Company’s compliance with the Corporate Governance Code and the disclosures set out in the Corporate Governance Report, formulating and amending the Company’s policies in respect of environmental, social and governance and other corporate social responsibilities, and reporting and proposing to the Board etc.
---
### SUMMARY OF WORK UNDERTAKEN
During the Year, the Strategic Planning Committee held seven meetings and considered 20 proposals. The attendance record of committee members at the meetings is as follows:
| Name | Luo Xi | Yu Ze | Li Tao |
| :--- | :---: | :---: | :---: |
| Number of meetings attended/Number of meetings that require attendance | 7/7 | 7/7 | 7/7 |
| Attendance rate | 100% | 100% | 100% |
Note: During the Year and up to the date of this report, some Directors resigned and ceased to act as committee members of the Strategic Planning Committee simultaneously. The table above lists the numbers of meetings held and attended by each member during his term of office in the Year.
During the Year, the major work accomplished by the Strategic Planning Committee in the Year included:
- considered and approved the business development plan and financial plan, fixed assets investment plan for the Year, purchases of operational properties and the establishment of headquarter management structure;
- considered and approved the Profit Distribution Plan and Evaluation Report on Implementation of the Development Plan for 2021;
- considered and approved the proposal for delegation of the shareholders’ meeting to the Board and Board to the management;
- considered and approved the evaluation report on the conduct of the substantial shareholders for the year 2021;
- considered and approved to establish the Venture Research&Development Center;
- considered and approved the Reinsurance Strategy of the Company and the Capital Plan (2022-2024) of the Company;
- considered and approved the 2021 Corporate Social Responsibility Report of the Company;
- reviewed and supervised the Company’s corporate governance policies and practices;
- reviewed and monitored the training and continuous professional development of Directors, Supervisors and senior management;
- reviewed and monitored the Company’s policies and practices on compliance with legal and regulatory requirements;
- reviewed and supervised the regular update of the Normative Manual on Rights and Duties by the Company; and
- considered the Company’s compliance with the Corporate Governance Code and the Corporate Governance Report and the Corporate Management Report for 2021.
---
# RISK MANAGEMENT AND CONSUMERS’ RIGHTS AND INTERESTS PROTECTION COMMITTEE (ASSETS AND LIABILITIES MANAGEMENT AND INVESTMENT DECISION-MAKING COMMITTEE)
## OVERVIEW
During the Year, the Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision-making Committee) continued to supervise the operation of the risk management system of the Company, and considered the risk assessment report, the risk preference statements and indicators of risk tolerance, the Capital Plan (2022-2024), Revised consumers’ rights and interests protection rules, the assets and liabilities management measures, the asset allocation management measures and various basic rules and investment plans on risk management, consumers’ rights and interests protection, and assets and liabilities management of the Company.
## COMPOSITION
During the Year and up to the date of this report, the Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision-making Committee) comprised:
| | |
| :--- | :--- |
| Chairman: | Yu Ze (Executive Director) |
| Members: | Jiang Caishi (Executive Director), Zhang Daoming (Executive Director), Hu Wei (Executive Director), Cheng Fengchao (Independent Director), Wei Chenyang (Independent Director) |
## Notes:
1. Mr. Zhang Daoming was appointed as an Executive Director on 29 December 2021 and was elected as a member of the Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision- making Committee), his terms of office commencing from 22 April 2022 on which his qualification as a Director of the Board was approved by CBIRC.
2. Mr. Hu Wei was appointed as an Executive Director on 16 January 2023 and was elected as a member of the Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision-making Committee), his terms of office commencing from 16 March 2023 on which his qualification as a Director of the Board was approved by CBIRC.
3. Mr. Cheng Fengchao was appointed as an Independent Director on 29 December 2021 and was elected as a member of the Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision- making Committee), his terms of office commencing from 25 November 2022 on which his qualification as a Director of the Board was approved by CBIRC.
4. Mr. Wei Chenyang was appointed as an Independent Director on 28 October 2021 and was elected as a member of the Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision- making Committee), his terms of office commencing from 12 January 2023 on which his qualification as a Director of the Board was approved by CBIRC.
---
## DUTIES AND RESPONSIBILITIES
The Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision-making Committee) is responsible for promoting full implementation of consumers’ rights and interests protection by the management, evaluating and clearly determining the nature and extent of the risks that the Company is willing to take in achieving the Company’s business objectives, considering the various basic rules of the Company for risk management, considering annual risk assessment reports and the risk assessment reports in respect of major decisions, monitoring the effectiveness and adequacy of the operation of the risk management system, monitoring the design, implementation and supervision of the risk management system by the management, so as to ensure that the Company has and maintains an appropriate and effective risk management system. Meanwhile, it undertakes asset-liability management of the Company by reviewing the asset-liability management system, the annual report of asset-liability management, the management mode of insurance funds utilisation, utilisation strategy and investment strategy of the Company, inspecting the establishment and enforcement of the risk control system for insurance funds utilisation, as well as formulating asset allocation strategic plan for insurance funds utilisation.
## SUMMARY OF WORK UNDERTAKEN
During the Year, the Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision-making Committee) held seven meetings and considered 25 proposals. The attendance record of committee members at the meetings is as follows:
| Name | Yu Ze | Jiang Caishi | Zhang Daoming | Hu Wei | Cheng Fengchao | Wei Chenyang |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: |
| Number of meetings attended/Number of meetings that require attendance | 7/7 | 7/7 | 5/5 | 0/0 | 1/1 | 0/0 |
| Attendance rate | 100% | 100% | 100% | – | 100% | – |
Note: During the Year and up to the date of this report, the terms of office of some newly-elected Directors as committee members of the Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision-making Committee) commenced. The table above lists the numbers of meetings held and attended by each member during his term of office in the Year.
---
The major work accomplished by the Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision-making Committee) in the Year included:
* considered and approved the Risk Assessment Report for 2021, inspected the risk management system of the Company and reviewed the effectiveness of the risk management system of the Company (including subsidiaries of the Company), and gave advice on further development of the comprehensive risk management system; formulated the risk preference statement and risk tolerance indicators for 2022 and the Risk Management Measures for IT Outsourcing (Trial), discussed with the management on ongoing improvement in risk management policies and procedures and ensuring the effectiveness of the risk management system of the Company, revised the insurance risk management measures and other major risk management rules, the comprehensive risk management measures, market risk management measures, liquidity risk management measures, and the work plan of the implementation of the second-phase of the “C-ROSS”, and considered and approved the 2021 annual report on anti-money laundering, the report on the results of the special audit of anti-money laundering compliance, the report on the results of the special audit of anti-insurance fraud for 2021 and the report on the results of the special audit of the Company’s risk management system of solvency margin;
* considered and approved the plan on consumers’ rights and interests protection for 2022, the revised consumers’ rights and interests protection rules, the notification and the implementation of rectification of the evaluation of consumers’ rights and interests protection supervision for 2021, hearing the report on the results of the special audit of the consumers’ rights and interests protection mechanism and the report on insurance consumers’ rights and interests protection for 2021;
* considered and approved the 2021 annual report on assets and liabilities management, the report on special audit results of asset and liability management, the overall objectives and strategies of asset and liability management, the delegation of the Board to the President’s Office to make decisions on major reserve matters and the amendment of the asset and liability management measures and asset allocation management measures; and
* considered and approved the business development plan and finance plan for 2021, the strategic allocation plans of and the reports on invested assets and the guidance on relevant offshore investment for 2022 and the Capital Plan (2022-2024) of the Company, and considered and approved the company to conduct securities lending business.
## RELATED PARTY TRANSACTION CONTROL COMMITTEE
### OVERVIEW
During the Year, the Related Party Transaction Control Committee was responsible for the identification and maintenance of related parties and the management, examination, approval and risk control of related party transactions, so as to put the new regulatory requirements into operation.
---
### COMPOSITION
During the Year and up to the date of this report, the Related Party Transaction Control Committee comprised:
**Chairman:** Chu Bende (Independent Director, resigned), Lo Chung Hing (Independent Director)
**Members:** Jiang Caishi (Executive Director), Lin Hanchuan (Independent Director, resigned), Qu Xiaohui (Independent Director)
*Notes:*
1. Mr. Chu Bende resigned as an Independent Director on 11 July 2022 and ceased to act as the chairman of the Related Party Transaction Control Committee simultaneously.
2. Mr. Lin Hanchuan resigned as an Independent Director on 17 February 2023 and ceased to act as a member of the Related Party Transaction Control Committee simultaneously.
3. Mr. Lo Chung Hing was appointed by the Board as the chairman of the Related Party Transaction Control Committee on 22 July 2022.
### DUTIES AND RESPONSIBILITIES
The Related Party Transaction Control Committee is primarily responsible for examining the related party transaction management system of the Company and the state of its implementation, coordinating and managing the identification and maintenance of related parties, and for the management, examination, filing, approval and risk control of related party transactions, and coordinating and managing information disclosure and reporting in respect of related party transactions, etc.
### SUMMARY OF WORK UNDERTAKEN
During the Year, the Related Party Transaction Control Committee held six meetings and considered 21 proposals. The attendance record of committee members at the meetings is as follows:
| Name | Chu Bende | Jiang Caishi | Lin Hanchuan | Lo Chung Hing | Qu Xiaohui |
| :--- | :---: | :---: | :---: | :---: | :---: |
| Number of meetings attended/Number of meetings that require attendance | 2/2 | 6/6 | 6/6 | 6/6 | 6/6 |
| Attendance rate | 100% | 100% | 100% | 100% | 100% |
*Note: During the Year and up to the date of this report, some Directors resigned and ceased to act as committee members of the Related Party Transaction Control Committee simultaneously. The table above lists the numbers of meetings held and attended by each member during his/her term of office in the Year.*
---
The major work accomplished by the Related Party Transaction Control Committee in the Year included:
* considered and approved the report on special audit results of related party transactions for 2020, the report on the implementation of the related party transactions for 2021, and the on Corporate Management Report for 2021, revised the measures on the administration of related party transactions, the rules of the Related Party Transaction Control Committee of the Board and the report of related party transactions with China Agriculture Reinsurance Co., Ltd for 2022; and
* considered and approved material related party transactions, connected transactions and continuing connected transactions, such as the South Centre Package Service Agreement for 2023 with PICC Group, the renewal of Property Lease Agreement with PICC Investment Holding Company Limited, the Insurance Brokerage Business Cooperation Agreements with Prime Insurance Brokers Company Limited, etc.
# INTERNAL CONTROL
In accordance with the Basic Rules for Internal Control of Enterprises and their supporting guidelines and explanation and the Basic Standards for Internal Control of Insurance Companies and other laws and regulations, the Company conducted a self-assessment of the effectiveness of its internal control as of 31 December 2022 in terms of daily supervision and supervision of particular matters. The Board and the Audit Committee considered and discussed the Internal Control Assessment Report and the Compliance Assessment Report of the Company for 2022 to review and continuously improve the effectiveness of the internal control systems of the Company and its subsidiaries.
The Board of the Company is responsible for establishing, improving and effectively implementing internal control, the Supervisory Committee is responsible for supervising the establishment and implementation of internal control by the Board, and the management is responsible for organising and leading for the daily operation of the Company’s internal control. In internal control assessment, the Board of the Company takes charge of determining major defects in internal control and approving the annual internal control assessment reports. The President Office is responsible for leading and organising internal control assessment as required by the Board, and approving the internal control assessment work plan as authorised by the Board. The Legal Affairs and Compliance Department is responsible for organising and implementing the internal control assessment work, and assessing the business areas and operating units which are included in the scope of assessment. All departments of the head office, direct subordinate units and all provincial branches and subsidiaries participating in the assessment have established internal control assessment work teams to carry out assessment work as required by the work plan.
During the Year, the internal control assessment, in terms of the target entities, covered all departments of the head office and provincial branches. In terms of the target businesses, the internal control assessment covered controls on tiers of the Company, business and information technology without major omissions.
---
The assessment result demonstrated that effective and adequate internal control had been established for all businesses and matters that were within the scope of assessment during the Year, which achieved the internal control objectives of the Company without major defects. No major changes in internal control which would cause fundamental impact on assessment result occurred between the reference date of internal control assessment and the issuance date of the internal control assessment report. The objectives of the Company’s internal control are to reasonably ensure the lawfulness and compliance of its operation and management, security of the assets and the truthfulness and completeness of its financial statements and related information, to improve operating efficiency and performance and to achieve the development strategy. Due to its inherent limitations, internal control can only give reasonable but not absolute assurance for achieving such objectives. According to the Measures on the Administration of Internal Control of the Company, the Company shall establish criteria for identifying defects in internal control, and shall analyze the nature of the defects and the causes of the defects identified in the course of supervision, propose rectification plans, follow up on the rectification and take appropriate forms to report to the Board, the Supervisory Committee or the senior management in a timely manner.
In 2022, the PICC Group continued to strengthen the Party’s leadership in internal audit, promoted the internal centralised audit management thoroughly, and conducted internal audit for its subsidiaries and branches by the Group Audit Center. The Group Audit Center is responsible for the internal audit supervision and inspection of the Company.
## RISK MANAGEMENT
The Company has devoted to implementing effective risk management, adhering to the basic risk management principles of “covering every aspect with focus on key areas, practising division of labour and cooperation, and adopting a closed-loop management system” and upholding the overall risk management objective of “operational compliance, asset safety, sufficient capital and value creation”. The Company has built a comprehensive risk management framework, continued to optimize the risk management system, improved its risk prevention and control ability, managed to contain the operational risk within the scope of its risk preference, tolerance and limit, and vigorously upheld the bottom line of abiding by laws and regulations and avoiding systematic risks.
The Company has established a risk management organization system under the ultimate responsibility of the Board, with the relevant specialised committee of risk management under the Board authorized to manage, the Supervisory Committee responsible for supervision, the senior management directly leading, the Risk Compliance Committee under the senior management responsible for coordinating, and all departments and institutions at all levels performing their respective duties.
The Company revised and improved the relevant risk management system, continued to promote the transmission and implementation of the risk preference system to the business departments and branches, played the role of risk compliance committee in risk decision-making support and overall coordination, and continued to improve the risk management level of insurance, market, credit, operation, liquidity, strategy, reputation and others. The Company continuously optimized the construction of risk management system and improved the intelligence level of risk identification, assessment, monitoring and early warning, strengthened the risk monitoring and prompt of key businesses and key areas, carried out risk assessment and analysis, formed comprehensive risk assessment reports and risk assessment reports of all major categories on a monthly and annual basis and reported to the Board and senior management of the Company, strengthened the identification and prevention of potential risks, continued to follow up with the effectiveness of risk resolution, improved risk management ability and risk control effect, and promoted the development of business to high quality. The Board is ultimately responsible for the completeness and effectiveness of the risk management system of the Company.
---
# Corporate Governance Report
In 2022, the Company continued to thoroughly implement the decision and deployment of the Party’s Central Committee to improve the risk management system and mechanism, upgrade risk management tools and instruments, integrate development and safety, and deeply integrate risk management and business operation, take the establishment of comprehensive risk management platform and new digital risk management model as our goal, and continuously promote the level of risk management in accordance with the “Excellent Insurance Strategy” of PICC Group and the Planning Outline of the “14th Five-year Plan” Development Strategy of the Company.
Firstly, the Company improved the top-level design of risk management and the mechanism of risk management system. Pursuant to the provisions of the second phase of C-ROSS of the CBIRC, the Company revised and improved rules of risk management system, carried out the construction of risk appetite and risk monitoring and investigation mechanism, and continuously strengthened the operation of the risk compliance committee. Secondly, we accelerated the implementation of the constructions of risk management system and strengthened rigid control of information system. The Company created a new model of digital risk management, enhanced the intelligent level of identifying and assessing risk as well as monitoring and the early warning such risk by establishing and upgrading the risk-related information system. Thirdly, the Company accelerated the construction of quantitative risk assessment in line with the new provisions of the second phase of C-ROSS. The Company regularly conducted C-ROSS (II) regulatory capital measurement and various stress tests, built branch risk assessment models, and continuously enhanced the risk monitoring and early warning and assessment reports. Fourthly, the Company optimized the risk management evaluation and assessment, and strengthened the implementation of risk management system. The Company formulated risk management evaluation points and evaluation guidelines, and implemented risk management “system soundness” and “effectiveness of compliance” assessment requirements in accordance with regulatory requirements to raise the awareness of risk prevention and control among institutions and personnel at all levels and to press down the responsibility for prevention and control.
In 2022, the Company has kept adequate solvency, maintained the comprehensive risk rating and the evaluation of solvency risk management at a relatively good level.
In 2022, with a view to reviewing and continuously enhancing the effectiveness of the risk management system of the Company and its subsidiaries, the Board and the Risk Management and Consumers’ Rights and Interests Protection Committee (Assets and Liabilities Management and Investment Decision-making Committee) considered and discussed the Risk Assessment Report of the Company for 2020 and considered that system was effective and sufficient.
## WHISTLEBLOWING AND ANTI-CORRUPTION POLICIES AND SYSTEMS
The Company strictly complies with the policies and regulations to prevent corruption, and encourages employees to report corruption, bribery, fraud, and unethical behaviors. The Company will also include anti-corruption policy advocacy in daily staff training.
## ENVIRONMENTAL POLICIES AND PERFORMANCE
The Board of Directors is responsible for supervising the Company’s commitment and performance on key environmental, social and governance (“ESG”) issues, formulating and revising the Company’s policies on ESG and other corporate social responsibility, reviewing the Company’s ESG management system development plan and disclosure materials of ESG and other corporate social responsibility, studying and evaluating ESG-related factors that may affect the Company’s development and reviewing the planning and implementation of the Company’s ESG work to ensure the compliance with the ESG strategy and reporting requirements. Details of the Company’s ESG performance are set out in the 2022 Corporate Social Responsibility Report of the Company published on the same date as this annual report.
---
# SUPERVISORY COMMITTEE
## OVERVIEW
During the Year, the Supervisory Committee discharged its supervisory duties strictly in accordance with the relevant laws and regulations, such as the Company Law, and the Articles of Association as well as in adherence to the principle of good faith, which effectively protected the interests of the shareholders, the Company and its employees. Two specialised committees are formed under the Supervisory Committee, namely the Duty Performance and Fulfillment Supervisory Committee and the Financial and Internal Control Supervisory Committee, duties and procedural requirements of which have been explicitly stipulated and each specialised committee is obliged to offer proposals and advice to the Supervisory Committee in relation to matters within the scope of its duties.
## COMPOSITION
During the Year and up to the date of this report, the Supervisory Committee comprised:
**Chairman:** Zhang Xiaoli (resigned on 15 July 2022)
**Supervisors:** Wang Yadong (Shareholder Supervisor), Lu Zhengfei (External Supervisor), Li Shuk Yin Edwina (External Supervisor), Gao Hong (Employee Supervisor, resigned), Wang Xiaoli (Employee Supervisor, resigned)
During the period from 1 January 2022 to the date of this report:
The qualification of Ms. Li Shuk Yin Edwina as a Supervisor of the Company was approved by the CBIRC on 31 January 2023.
Mr. Zhang Xiaoli resigned as the chairman of the Supervisory Committee, a Supervisor and the chairman of the special committee of the Supervisory Committee on 15 July 2022. Given that the Supervisory Committee becomes inquorate due to Mr. Zhang Xiaoli’s resignation, pursuant to relevant laws and regulations of the PRC and the Articles of Association, Mr. Zhang Xiaoli shall continue to perform his duties as a Supervisor in accordance with laws and regulations, regulatory provisions and the Articles of Association before a new Supervisor is elected and fills the vacancy caused by his resignation.
Ms. Gao Hong and Ms. Wang Xiaoli no longer serve as Employee Supervisors from 22 July 2022.
Mr. Li Qi and Ms. Li Ling resigned from their proposed positions as Employee Supervisors on 29 July 2022.
At the meeting of representatives of employees of the Company held on 29 July 2022, Mr. Fu Xiaoliang and Mr. Zhou Zhiwen have been elected as Employee Supervisors of the Company with the terms of office, commencing from the date of obtaining approval for their supervisor qualifications from the CBIRC, and expiring after 3 years.
At the first extraordinary general meeting of the Company held on 27 October 2022, Mr. Dong Qingxiu has been appointed as a Supervisor of the fifth session of the Supervisory Committee and elected as the chairman of the Supervisory Committee, the chairman of the Performance and Due Diligence Supervision Committee of the Supervisory Committee with the term of office commencing from the date of obtaining approval for his Supervisor qualification from the CBIRC and ending upon the expiry of the term of appointment of the fifth session of the Supervisory Committee of the Company. Mr. Carson Wen has been appointed as an External Supervisor of the fifth session of the Supervisory Committee and elected as a member of the Financial and Internal Control Supervision Committee of the Supervisory Committee with the term of office commencing from the date of obtaining approval for his Supervisor qualification from the CBIRC and ending upon the expiry of the term of appointment of the fifth session of the Supervisory Committee of the Company.
---
### DUTIES AND RESPONSIBILITIES
In accordance with the Company Law and the Articles of Association, the Supervisory Committee is accountable to the shareholders’ general meeting. It performs duties of supervision over the financial affairs, Directors, President and other senior management of the Company, convenes and presides over shareholders’ general meetings when the Board fails to perform its duties to convene and preside over any shareholders’ general meeting, etc.
### SUMMARY OF WORK UNDERTAKEN
During the Year, the Supervisory Committee carried out its work, performed its supervisory duties and protected the interests of the shareholders, the Company and its employees strictly in accordance with the relevant provisions of the Company Law and the Articles of Association. During the Year, the Supervisory Committee held seven meetings, at which 33 proposals were considered, approved and heard. The attendance record of the Supervisors at the meetings is as follows:
| Name | Zhang Xiaoli | Wang Yadong | Lu Zhengfei | Gao Hong | Wang Xiaoli | Li Shuk Yin Edwina |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: |
| Number of meetings attended/Number of meetings that require attendance | 6/7 | 7/7 | 6/7 | 3/3 | 3/3 | 0/0 |
| Attendance rate | 86% | 100% | 86% | 100% | 100% | – |
Notes:
1. During the Year and up to the date of this report, the qualification of a Supervisor was approved and some Supervisors resigned or ceased to hold the positions. The table above lists the numbers of meetings held and attended by each Supervisor during his/her term of office in the Year.
2. During the Year, Mr. Zhang Xiaoli and Mr. Lu Zhengfei attended six meetings of the Supervisory Committee in person, and entrusted other Supervisors to attend one meeting of the Supervisory Committee.
Details of the work accomplished by the Supervisory Committee in the Year are set out in the “Report of the Supervisory Committee” section of this annual report.
## DUTY PERFORMANCE AND FULFILLMENT SUPERVISORY COMMITTEE
### OVERVIEW
During the Year, the Duty Performance and Fulfillment Supervisory Committee conducted the annual appraisal of the performance of Supervisors, considered the performance report of Directors, the performance report and the performance evaluation results of the Independent Directors, duty performance evaluation scheme of Supervisors and proposals to appoint independent supervisor, etc.
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### COMPOSITION
During the Year, the Duty Performance and Fulfillment Supervisory Committee comprised:
**Chairman:** Zhang Xiaoli (Chairman of the Supervisory Committee, resigned)
**Members:** Gao Hong (Employee Supervisor, resigned), Wang Xiaoli (Employee Supervisor, resigned)
Notes:
1. Mr. Zhang Xiaoli resigned as the chairman of the Supervisory Committee, a Supervisor on 15 July 2022 and ceased to act as the chairman of the Performance and Due Diligence Supervision Committee simultaneously.
2. Mr. Gao Hong resigned as an Employee Supervisor on 22 July 2022 and ceased to act as a member of the Performance and Due Diligence Supervision Committee simultaneously.
3. Ms. Wang Xiaoli resigned as an Employee Supervisor on 22 July 2022 and ceased to act as a member of the Performance and Due Diligence Supervision Committee simultaneously.
### DUTIES AND RESPONSIBILITIES
The Duty Performance and Fulfillment Supervisory Committee is primarily responsible for formulating supervisory rules for the performance and fulfillment of duties of Directors and senior management, making execution plans and enforcing the implementation of such plans, providing supervisory advice on the performance and fulfillment of duties of Directors and senior management, making proposals on the nomination for the Shareholder Representative Supervisors, External Supervisors and members of specialised committees under the Supervisory Committee, and reviewing the work performance of Supervisors.
### SUMMARY OF WORK UNDERTAKEN
During the Year, the Duty Performance and Fulfillment Supervisory Committee held two meetings and considered 6 proposals. The attendance record of committee members at the meetings is as follows:
| Name | Zhang Xiaoli | Gao Hong | Wang Xiaoli |
| :--- | :---: | :---: | :---: |
| Number of meetings attended/Number of meetings that require attendance | 2/2 | 2/2 | 2/2 |
| Attendance rate | 100% | 100% | 100% |
Note: During the Year and up to the date of this report, some Supervisors resigned and ceased to act as the chairman or members of the Duty Performance and Fulfillment Supervisory Committee simultaneously. The table above lists the numbers of meetings held and attended by each member during his/her term of office in the Year.
---
The major work accomplished by the Duty Performance and Fulfillment Supervisory Committee in the Year included:
* reviewed the report on insurance consumers’ rights and interests protection for the first half of 2021;
* considered and approved the 2021 annual report on anti-money laundering and gave suggestions to the Supervisory Committee;
* considered and approved the performance report and the performance evaluation results of the Directors for 2021 and gave suggestions to the Supervisory Committee;
* considered and approved the performance report and the performance evaluation results of the Supervisors for 2021 and gave suggestions to the Supervisory Committee;
* considered and approved the performance report of the Independent Directors and gave suggestions to the Supervisory Committee; and
* considered and approved the report on insurance consumers’ rights and interests protection work for 2021 and gave suggestions to the Supervisory Committee.
## FINANCIAL AND INTERNAL CONTROL SUPERVISORY COMMITTEE
### OVERVIEW
During the Year, the Financial and Internal Control Supervisory Committee mainly supervised corporate financial affairs, internal control, risk management, etc., considered the internal control assessment report, risk assessment report, financial statements and results announcements.
### COMPOSITION
During the Year and up to the date of this report, the Financial and Internal Control Supervisory Committee comprised:
| | |
| :--- | :--- |
| Chairman: | Lu Zhengfei (External Supervisor) |
| Members: | Wang Yadong (Shareholder Supervisor), Wang Xiaoli (Employee Representative Supervisor, resigned), Li Shuk Yin Edwina (External Supervisor) |
Note: Ms. Wang Xiaoli resigned as an Employee Supervisor on 22 July 2022 and ceased to act as a member of the Financial and Internal Control Supervisory Committee simultaneously.
### DUTIES AND RESPONSIBILITIES
The Financial and Internal Control Supervisory Committee is primarily responsible for formulating the supervisory rules for the financial and internal control of the Company, making execution plans and enforcing the implementation of such plans, reviewing the financial and internal control related documents including financial reports, business reports, profit distribution plans and assessment reports on internal control, supervising the compliance of appointment, removal and re-appointment of the external auditor, reviewing the fairness of the terms of appointment and the remuneration of the external auditor, and assessing the independence and effectiveness of the external audit work, etc.
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## SUMMARY OF WORK UNDERTAKEN
During the Year, the Financial and Internal Control Supervisory Committee held six meetings and considered 17 proposals. The attendance record of committee members at the meetings is as follows:
| Name | Lu Zhengfei | Wang Yadong | Wang Xiaoli | Li Shuk Yin Edwina |
| :--- | :---: | :---: | :---: | :---: |
| Number of meetings attended/Number of meetings that require attendance | 6/6 | 6/6 | 3/3 | 0/0 |
| Attendance rate | 100% | 100% | 100% | — |
Note: During the Year and up to the date of this report, a new Supervisor was appointed as a member of the Financial and Internal Control Supervisory Committee and a Supervisor resigned and ceased to act as a member of the Financial and Internal Control Supervisory Committee simultaneously. The table above lists the numbers of meetings held and attended by each member during his/her term of office in the Year.
### The major work accomplished by the Financial and Internal Control Supervisory Committee in the Year included:
- considered and approved the report on special audit results of the consumers’ rights and interests protection work mechanism of the Company, and gave suggestions to the Supervisory Committee;
- considered and approved the Auditor’s Report and the audited financial statements for 2021, and gave suggestions to the Supervisory Committee;
- considered and approved the profit distribution plan for 2021, and gave suggestions to the Supervisory Committee;
- considered and approved the internal control assessment report for 2021, the compliance report for 2021 and the risk assessment report for 2021, and gave suggestions to the Supervisory Committee;
- considered and approved the management recommendation letter for 2021, and gave suggestions to the Supervisory Committee;
- reviewed the report on special audit results of related party transactions for 2020, the work report of the Company audited by the Group Audit Center for 2021 and the first half of 2022;
- considered and approved the Report on the Implementation of Related Party Transactions of the Company for 2021, and gave suggestions to the Supervisory Committee;
- considered and approved the financial statements and results announcement for the first quarter of 2022, the interim financial statements and results announcement for 2022 and the financial statements and results announcement for the third quarter of 2022, and gave suggestions to the Supervisory Committee;
---
- reviewed the Report of PricewaterhouseCoopers on the Findings of the Reviewing Work for the Interim Period of 2022;
- considered and approved the report on progress of improvement based on the management recommendation letter for 2020, and gave suggestions to the Supervisory Committee; and
- considered and approved the report of consumers’ rights and interests protection regulatory evaluation and the rectification and implementation of 2021, and gave suggestions to the Supervisory Committee.
# COMPANY SECRETARY
Ms. Zhang Xiao was appointed as Company Secretary on the 29 December 2021. She is an assistant vice president of SWCS Corporate Services Group (Hong Kong) Limited, a member of The Hong Kong Chartered Governance Institute and The Chartered Governance Institute. She has received no less than 15 hours of relevant professional training during the Year. Mr. Zhu Yuzhen, the general manager of the Administrative Department of the Company, is the primary contact person of Ms. Zhang at the Company.
# RIGHTS OF SHAREHOLDERS
## METHODS OF CONVENING EXTRAORDINARY GENERAL MEETINGS
According to the Articles of Association and the Rules of Procedures for Shareholders’ General Meeting of the Company, any shareholder(s), individually or collectively holding 10% or more of the total voting shares of the proposed meeting, may sign one or more written requests in the same format to request the Board of Directors to convene an extraordinary general meeting and to clarify the topics of the meeting. The Board of Directors shall convene an extraordinary general meeting as soon as possible after the receipt of the aforementioned written request.
## PROCEDURES FOR PROPOSING RESOLUTIONS AT ANNUAL GENERAL MEETINGS
Any shareholder(s), individually or collectively, holding 3% or more of the shares of the Company is entitled to propose resolution(s) to the Company. Any shareholder(s), individually or collectively, holding 3% or more of the total voting shares of the Company is entitled to propose new resolution(s) and submit such proposed resolution(s) in writing to the Board ten days prior to the Annual General Meeting. The Board shall notify other shareholders of such proposed resolution(s) within two days after receipt of such proposal(s) and submit the same to the Annual General Meeting for consideration. The proposed resolution(s) shall be within the scope of the shareholders’ general meeting and shall contain explicit subjects and specific matters to be resolved. The proposed resolution(s) submitted by a shareholder to the Board shall be delivered in person or by registered mail to the Administrative Departments, according to the registered address listed in the inside back cover of this annual report.
# DIVIDEND POLICY
The Company may decide to use cash dividends or stock dividends to distribute profits based on its development plan, production, operation, and capital status. When the Company meets its profit goal for the year, the accumulated amount of undistributed profit is positive, and the relevant regulatory indicators reach the cash dividend standards stipulated by relevant laws and regulations, it shall, in principle, distribute cash dividends once a year.
---
# INVESTOR RELATIONS
The Company focused on the maintenance of sound investor relations and maintained effective communication with investors through various means. After the announcements of the 2021 annual results and the 2022 interim results, the Company by way of results briefings and roadshows, among others, timely communicated its operating results and business development trends with investors which strengthened communication with investors and facilitated the understanding of the Company by investors. The Company also maintained sound communication with investors through accepting investors’ visits, holding telephone conferences, attending major investment forums, by telephone and email, etc., and proactively provided information to investors on the Company’s website, to establish and maintain good relationships with investors. The shareholders’ general meeting of the Company provides an opportunity to communicate directly with the Directors. The Directors of the Company will attend the shareholders’ general meeting to answer shareholders’ questions.
Investors can reach the Company by telephone, e-mail, mail, etc. For contact details, please see the telephone number, e-mail address and registered address of the Company listed in the back cover of this annual report. On the Company’s website (https://property.picc.com), there is a section titled “Investor Relations”, in which the information is updated timely.
Through the above communication measures and procedures with investors and shareholders, the Company has reviewed and examined the effectiveness of the relevant communication policies with investors and Shareholders during the Year and believes that the above policies and measures can ensure effective communication between the Company and investors and Shareholders.
# PARTICULARS OF THE LATEST SHAREHOLDERS’ GENERAL MEETING
The latest shareholders’ general meeting of the Company was the extraordinary general meeting held at PICC Building, No. 88 Xichang’an Street, Xicheng District, Beijing, the PRC on 16 January 2023, at which the appointment of Mr. Hu Wei as an Executive Director of the Company were considered and approved by way of poll. Details are set out in the circular of the Company dated 22 December 2022 and the announcement in relation to the poll results of the extraordinary general meeting dated 16 January 2023.
# AMENDMENTS TO THE ARTICLES OF ASSOCIATION
In 2021, the Company amended the Articles of Association twice to reflect the latest provisions of applicable laws and regulations as well as the requirements of the CBIRC and other relevant authorities. The first amendment was approved at the annual general meeting held on 18 June 2021 and the second amendment was approved at the extraordinary general meeting held on 29 December 2021, which have been approved by the CBIRC on 18 July 2022.
---
# Independent Auditor’s Report
To the Shareholders of PICC Property and Casualty Company Limited
(incorporated in the People’s Republic of China with limited liability)
## OPINION
### What we have audited
The consolidated financial statements of PICC Property and Casualty Company Limited (the “Company”) and its subsidiaries (the “Group”), which are set out on pages 103 to 226, comprise:
* the consolidated statement of financial position as at 31 December 2022;
* the consolidated income statement for the year then ended;
* the consolidated statement of comprehensive income for the year then ended;
* the consolidated statement of changes in equity for the year then ended;
* the consolidated statement of cash flows for the year then ended; and
* the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information.
### Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2022, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.
## BASIS FOR OPINION
We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
### Independence
We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code.
---
# KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matters identified in our audit are summarised as follows:
* Valuation of insurance contract liabilities
* Valuation of level 3 financial assets measured at fair value
| Key Audit Matter | How our audit addressed the Key Audit Matter |
| :--- | :--- |
| **Valuation of insurance contract liabilities** | We (including our actuarial experts) performed the following audit procedures: |
| Refer to note 2.4 (17) Summary of significant accounting policies – Insurance contract liabilities, note 3.2 (1) Estimation uncertainty – Valuation of insurance contract liabilities and note 35 Insurance contract liabilities to the consolidated financial statements. | We obtained an understanding of the management’s assessment processes and internal controls of the liability adequacy test for unearned premium reserves and the valuation of loss and loss adjustment expense reserves and assessed the inherent risk of material misstatement by considering the degree of estimation uncertainty and level of other inherent risk factors such as complexity, subjectivity and susceptibility to management bias or fraud. |
| As at 31 December 2022, the Group’s insurance contract liabilities were RMB384.9 billion, representing 71% of the Group’s total liabilities. | We evaluated and tested the key controls over the liability adequacy test for unearned premium reserves and the valuation of loss and loss adjustment expense reserves including data collection and analysis, and approval process for management’s assumption setting, etc. |
| Insurance contract liabilities comprise unearned premium reserves and loss and loss adjustment expense reserves. We focused on this area because the liability adequacy test for unearned premium reserves and the valuation of loss and loss adjustment expense reserves involved a high degree of judgement by management in selecting models and setting assumptions including claim development factors and expected loss ratios, and the inherent risk in relation to the liability adequacy test for unearned premium reserves and the valuation of loss and loss adjustment expense reserves was considered significant. | We performed independent modelling analysis for the liability adequacy test for unearned premium reserves and the valuation of loss and loss adjustment reserves by performing below procedures.
• For the underlying data used in actuarial models, we compared the data to source systems, such as earned premiums and unearned premiums to accounting records and reported claims to the claims system.
• We set up independent actuarial assumptions including claim development factors, expected loss ratios, etc., by considering both the Group’s historical data and applicable industry experiences.
• We evaluated the overall reasonableness of the Group’s liability adequacy test for unearned premium reserves and valuation of loss and loss adjustment reserves by comparing management’s results to the results from our independent modelling analysis and calculation. |
| | Based on our audit work, we found management judgements in the liability adequacy test for unearned premium reserves and the valuation of loss and loss adjustment expense reserves supportable by the evidence we gathered. |
---
# KEY AUDIT MATTERS (CONTINUED)
| Key Audit Matter | How our audit addressed the Key Audit Matter |
| :--- | :--- |
| **Valuation of level 3 financial assets measured at fair value**
Refer to note 3.2 (3) Estimation uncertainty – Fair values of financial assets determined using valuation techniques and note 41 Classification and fair value of financial instruments to the consolidated financial statements.
As at 31 December 2022, the Group’s financial assets measured at fair value that were classified as level 3 were RMB33.2 billion, representing 4% of the Group’s total assets.
We focused on this area because level 3 financial assets measured at fair value were valued based on models and assumptions and inputs that are not observable. The valuation involved significant management judgement and the inherent risk in relation to the valuation of level 3 financial assets measured at fair value was considered significant. | We obtained an understanding of the management’s assessment processes and internal controls of the valuation of level 3 financial assets measured at fair value and assessed the inherent risk of material misstatement by considering the degree of estimation uncertainty and level of other inherent risk factors such as complexity, subjectivity and susceptibility to management bias or fraud.
We evaluated and tested the key controls over the valuation of level 3 financial assets measured at fair value including management’s determination and approval of internally operated valuation models, methodologies and assumptions used in model-based calculations, controls over data integrity and data choice, and management’s review of valuation inputs provided by data vendors.
We (including our valuation experts) performed the following audit procedures over the valuation of level 3 financial assets measured at fair value:
• We assessed valuation model methodologies and assumptions against industry practice and valuation guidelines.
• We compared the significant unobservable inputs such as discount rates and liquidity discounts used in the valuation models with information available from third party sources or market data.
• We independently developed fair value estimates and compared them to the management’s valuation results on a sample basis.
Based on our audit work, we found that the valuation methodologies applied were acceptable and that the inputs and assumptions used were supportable by the evidence we gathered. |
---
## OTHER INFORMATION
The directors of the Company are responsible for the other information. The other information comprises all of the information included in the annual report other than the consolidated financial statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
## RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
## AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. We report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
---
## AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
* Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
* Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
* Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
* Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
* Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
* Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
---
## AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Chan Kwong Tak.
**PricewaterhouseCoopers**
Certified Public Accountants
Hong Kong,
24 March 2023
---
# Consolidated Income Statement
FOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts expressed in RMB million unless otherwise specified)
| | Notes | 2022 | 2021 |
| :--- | :---: | :--- | :--- |
| **Gross written premiums** | 5 | **487,533** | **449,533** |
| | | | |
| Net earned premiums | 5 | 425,480 | 396,997 |
| Net claims incurred | 6 | (305,634) | (292,588) |
| Net policy acquisition costs | 7 | (60,834) | (60,116) |
| Other underwriting expenses | | (36,718) | (32,564) |
| Administrative expenses | | (11,965) | (10,208) |
| | | | |
| **UNDERWRITING PROFIT** | | **10,329** | **1,521** |
| | | | |
| Investment income | 8 | 20,180 | 17,996 |
| Net realised and unrealised (losses)/gains on investments | 9 | (3,706) | 3,634 |
| Investment related expenses | | (500) | (456) |
| Foreign exchange gains/(losses), net | | 802 | (282) |
| Other income, net | | 689 | 624 |
| Finance costs | 10 | (1,005) | (1,533) |
| Share of profits or losses of associates and joint ventures | | 4,225 | 4,524 |
| Dilution loss arising on a reduced stake in an associate | | (95) | – |
| | | | |
| **PROFIT BEFORE INCOME TAX** | 11 | **30,919** | **26,028** |
| Income tax expense | 12 | (4,266) | (3,663) |
| | | | |
| **NET PROFIT FOR THE YEAR** | | **26,653** | **22,365** |
| | | | |
| Attributable to: | | | |
| – Owners of the parent | | 26,708 | 22,360 |
| – Non-controlling interests | | (55) | 5 |
| | | | |
| | | **26,653** | **22,365** |
| | | | |
| Basic earnings per share | 15 | RMB1.201 | RMB1.005 |
| | | | |
| Diluted earnings per share | 15 | RMB1.201 | RMB1.005 |
The accompanying notes form an integral part of the consolidated financial statements.
---
# Consolidated Statement of Comprehensive Income
### FOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts expressed in RMB million unless otherwise specified)
| | Notes | 2022 | 2021 |
| :--- | :---: | :---: | :---: |
| **NET PROFIT FOR THE YEAR** | | **26,653** | **22,365** |
| | | | |
| **OTHER COMPREHENSIVE INCOME** | | | |
| Items that may be reclassified to profit or loss in subsequent periods: | | | |
| Changes in fair value of available-for-sale financial assets | | | |
| – Fair value (losses)/gains | | (7,893) | 1,679 |
| – Reclassification of gains on disposals to profit or loss | | (5,069) | (1,332) |
| – Impairment losses | | 470 | 440 |
| – Income tax effect | 29 | 3,015 | (196) |
| | | (9,477) | 591 |
| | | | |
| Share of other comprehensive income of associates and joint ventures | | (1,613) | 157 |
| | | | |
| **NET OTHER COMPREHENSIVE INCOME THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS IN SUBSEQUENT PERIODS** | | **(11,090)** | **748** |
| | | | |
| Items that will not be reclassified to profit or loss in subsequent periods: | | | |
| – Gains on revaluation of properties and right-of-use assets upon transfer to investment properties | 26 | 636 | 803 |
| – Income tax effect | 29 | (153) | (195) |
| | | | |
| **NET OTHER COMPREHENSIVE INCOME THAT WILL NOT BE RECLASSIFIED TO PROFIT OR LOSS IN SUBSEQUENT PERIODS** | | **483** | **608** |
| | | | |
| **OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX** | | **(10,607)** | **1,356** |
| | | | |
| **TOTAL COMPREHENSIVE INCOME FOR THE YEAR** | | **16,046** | **23,721** |
| | | | |
| Attributable to | | | |
| – Owners of the parent | | 16,087 | 23,716 |
| – Non-controlling interests | | (41) | 5 |
| | | **16,046** | **23,721** |
The accompanying notes form an integral part of the consolidated financial statements.
---
# Consolidated Statement of Financial Position
AS AT 31 DECEMBER 2022
(All amounts expressed in RMB million unless otherwise specified)
| | Notes | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: | :---: |
| **ASSETS** | | | |
| Cash and cash equivalents | 17 | 21,250 | 17,414 |
| Debt securities | 18 | 192,970 | 172,851 |
| Equity securities and mutual funds | 19 | 140,718 | 143,804 |
| Insurance receivables | 20 | 70,085 | 55,399 |
| Reinsurance assets | 21 | 44,456 | 37,535 |
| Term deposits | 22 | 73,657 | 73,574 |
| Investments classified as loans and receivables | 23 | 71,313 | 58,638 |
| Investments in associates and joint ventures | 24 | 58,143 | 56,945 |
| Investment properties | 26 | 7,440 | 5,851 |
| Property and equipment | 27 | 24,774 | 23,743 |
| Right-of-use assets | 28 | 5,558 | 5,926 |
| Deferred income tax assets | 29 | 15,054 | 7,116 |
| Prepayments and other assets | 30 | 26,469 | 23,826 |
| | | | |
| **TOTAL ASSETS** | | **751,887** | **682,622** |
| | | | |
| **LIABILITIES** | | | |
| Payables to reinsurers | 32 | 24,626 | 22,496 |
| Accrued insurance security fund | 33 | 1,230 | 994 |
| Securities sold under agreements to repurchase | 34 | 41,690 | 37,985 |
| Income tax payable | | 3,435 | 856 |
| Insurance contract liabilities | 35 | 384,879 | 338,781 |
| Policyholders’ deposits | 36 | 1,741 | 1,748 |
| Bonds payable | 37 | 8,097 | 8,058 |
| Lease liabilities | 38 | 1,484 | 1,786 |
| Accruals and other liabilities | 39 | 71,957 | 64,269 |
| | | | |
| **TOTAL LIABILITIES** | | **539,139** | **476,973** |
The accompanying notes form an integral part of the consolidated financial statements.
---
| | Notes | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: | :---: |
| **EQUITY** | | | |
| Issued capital | 40 | 22,242 | 22,242 |
| Reserves | | 187,614 | 180,645 |
| | | | |
| Equity attributable to owners of the parent | | 209,856 | 202,887 |
| Non-controlling interests | | 2,892 | 2,762 |
| | | | |
| **TOTAL EQUITY** | | **212,748** | **205,649** |
| | | | |
| **TOTAL LIABILITIES AND EQUITY** | | **751,887** | **682,622** |
The accompanying notes form an integral part of the consolidated financial statements.
---
# Consolidated Statement of Changes in Equity
### FOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts expressed in RMB million unless otherwise specified)
| | | Attributable to owners of the Company | | | | | | | | | Non-controlling interests | Total equity |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: |
| | | | Reserves* | | | | | | | | | |
| | Issued capital | Share premium and other reserves | Asset revaluation reserve** | Available-for-sale financial assets revaluation reserve | Surplus reserve*** | General risk reserve | Catastrophic loss reserve | Share of other comprehensive income of associates and joint ventures | Retained profits | Sub-total | | |
| **1 January 2022** | 22,242 | 11,412 | 4,269 | 21,355 | 64,100 | 19,823 | 307 | 1,061 | 58,318 | 202,887 | 2,762 | 205,649 |
| **Total comprehensive income** | | | | | | | | | | | | |
| Net profit for the year | – | – | – | – | – | – | – | – | 26,708 | 26,708 | (55) | 26,653 |
| Other comprehensive income | – | – | 469 | (9,477) | – | – | – | (1,613) | – | (10,621) | 14 | (10,607) |
| Appropriations to statutory surplus reserve and general risk reserve | – | – | – | – | 2,655 | 2,655 | – | – | (5,310) | – | – | – |
| Appropriations to catastrophic loss reserve | – | – | – | – | – | – | 428 | – | (428) | – | – | – |
| Utilisation of catastrophic loss reserve | – | – | – | – | – | – | (650) | – | 650 | – | – | – |
| Dividends declared (note 16) | – | – | – | – | – | – | – | – | (9,053) | (9,053) | – | (9,053) |
| Capital invested by non-controlling shareholders (note 25) | – | – | – | – | – | – | – | – | – | – | 171 | 171 |
| Others | – | (65) | – | – | – | – | – | – | – | (65) | – | (65) |
| **31 December 2022** | 22,242 | 11,347 | 4,738 | 11,878 | 66,755 | 22,478 | 85 | (552) | 70,885 | 209,856 | 2,892 | 212,748 |
\* The consolidated reserves of RMB187,614 million in the consolidated statement of financial position at 31 December 2022 comprise these reserve accounts.
\*\* The asset revaluation reserve arose from the change in use from owner-occupied properties to investment properties.
\*\*\* This account contains both statutory and discretionary surplus reserves.
The accompanying notes form an integral part of the consolidated financial statements.
---
### For the year ended 31 December 2021
### Attributable to owners of the Company
| | Issued capital | Share premium | Asset revaluation reserve** | Available-for-sale financial assets revaluation reserve | Surplus reserve*** | General risk reserve | Catastrophic loss reserve | Share of other comprehensive income of associates and joint ventures | Retained profits | Sub-total | Non-controlling interests | Total equity |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: |
| | | | **Reserves\*** | | | | | | | | | |
| 1 January 2021 | 22,242 | 11,412 | 3,661 | 20,764 | 61,814 | 17,537 | 1,149 | 904 | 48,030 | 187,513 | 2,518 | 190,031 |
| Total comprehensive income | | | | | | | | | | | | |
| Net profit for the year | – | – | – | – | – | – | – | – | 22,360 | 22,360 | 5 | 22,365 |
| Other comprehensive income | – | – | 608 | 591 | – | – | – | 157 | – | 1,356 | – | 1,356 |
| Appropriations to statutory surplus reserve and general risk reserve | – | – | – | – | 2,286 | 2,286 | – | – | (4,572) | – | – | – |
| Appropriations to catastrophic loss reserve | – | – | – | – | – | – | 296 | – | (296) | – | – | – |
| Utilisation of catastrophic loss reserve | – | – | – | – | – | – | (1,138) | – | 1,138 | – | – | – |
| Dividends declared (note 16) | – | – | – | – | – | – | – | – | (8,342) | (8,342) | – | (8,342) |
| Capital invested by non-controlling shareholders (note 25) | – | – | – | – | – | – | – | – | – | – | 239 | 239 |
| 31 December 2021 | 22,242 | 11,412 | 4,269 | 21,355 | 64,100 | 19,823 | 307 | 1,061 | 58,318 | 202,887 | 2,762 | 205,649 |
\* The consolidated reserves of RMB180,645 million in the consolidated statement of financial position at 31 December 2021 comprise these reserve accounts.
\** The asset revaluation reserve arose from the change in use from owner-occupied properties to investment properties.
\*** This account contains both statutory and discretionary surplus reserves.
The accompanying notes form an integral part of the consolidated financial statements.
---
# Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 31 DECEMBER 2022
(All amounts expressed in RMB million unless otherwise specified)
| | Notes | 2022 | 2021 |
| :--- | :---: | :---: | :---: |
| **NET CASH FLOWS GENERATED FROM OPERATING ACTIVITIES** | | | |
| Profit before income tax | | 30,919 | 26,028 |
| Adjustments for: | | | |
| Investment income | 8 | (20,180) | (17,996) |
| Net realised and unrealised losses/(gains) on investments | 9 | 3,706 | (3,634) |
| Foreign exchange (gains)/losses, net | | (802) | 282 |
| Share of profits or losses of associates and joint ventures | | (4,225) | (4,524) |
| Depreciation of property and equipment | 11, 27 | 1,968 | 1,850 |
| Depreciation of right-of-use assets | 11, 28 | 1,041 | 1,097 |
| Amortisation of intangible assets | 11 | 708 | 549 |
| Net gains on disposal of property and equipment | 11 | (118) | (111) |
| Finance costs | 10 | 1,005 | 1,533 |
| Investment related expenses | | 500 | 456 |
| Impairment losses on insurance receivables | 11, 20 | 820 | 118 |
| Impairment losses on prepayments and other assets | 11 | 90 | 268 |
| | | | |
| **Operating cash flows before working capital changes** | | **15,432** | **5,916** |
| | | | |
| Changes in working capital: | | | |
| Increase in insurance receivables | | (15,420) | (5,390) |
| Decrease in policyholders' deposits | | (7) | (2) |
| Decrease/(Increase) in other assets | | 625 | (1,016) |
| Increase in payables to reinsurers | | 2,130 | 678 |
| Increase in accrued insurance security fund | | 236 | 157 |
| Increase/(Decrease) in accruals and other liabilities | | 7,267 | (776) |
| Increase in insurance contract liabilities, net | | 39,177 | 21,540 |
| | | | |
| Cash generated from operating activities | | 49,440 | 21,107 |
| Income tax paid | | (6,730) | (4,771) |
| | | | |
| **Subtotal** | | **42,710** | **16,336** |
| | | | |
| **NET CASH FLOWS USED IN INVESTING ACTIVITIES** | | | |
| Interest received | | 12,954 | 19,046 |
| Rental income received from investment properties | | 325 | 277 |
| Dividend income received from equity securities and mutual funds | | 6,124 | 3,380 |
| Payment for capital expenditure | | (5,563) | (2,417) |
| Proceeds from disposal of property and equipment | | 203 | 340 |
| Payment for purchase of debt securities, equity securities and mutual funds | | (181,754) | (160,568) |
| Payment for purchase of investments classified as loans and receivables | | (22,871) | (5,360) |
| Dividend income received from associates and joint ventures | | 1,254 | 1,296 |
| Proceeds from sale of debt securities, equity securities and mutual funds | | 146,927 | 124,301 |
| Proceeds from maturities of investments classified as loans and receivables | | 10,296 | 14,178 |
| Increase in term deposits, net | | (83) | (2,631) |
| | | | |
| **Subtotal** | | **(32,188)** | **(8,158)** |
The accompanying notes form an integral part of the consolidated financial statements.
---
| | Notes | 2022 | 2021 |
| :--- | :---: | :---: | :---: |
| **NET CASH FLOWS USED IN FINANCING ACTIVITIES** | | | |
| Payment for redemption of capital supplementary bonds | 45 | – | (15,000) |
| Increase in securities sold under agreements to repurchase, net | 45 | 3,705 | 8,957 |
| Interest paid | 45 | (893) | (1,775) |
| Dividends paid | | (9,053) | (8,342) |
| Payments of lease liabilities | 45 | (927) | (924) |
| Funds from capital invested by non-controlling shareholders | 25 | 171 | 239 |
| **Subtotal** | | **(6,997)** | **(16,845)** |
| | | | |
| Effect of exchange rate changes on cash and cash equivalents | | 311 | (111) |
| | | | |
| **NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS** | | **3,836** | **(8,778)** |
| Cash and cash equivalents at beginning of the year | | 17,414 | 26,192 |
| | | | |
| **CASH AND CASH EQUIVALENTS AT END OF THE YEAR** | 17 | **21,250** | **17,414** |
| | | | |
| **ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS** | | | |
| Demand deposits | 17 | 10,848 | 13,309 |
| Securities purchased under resale agreements with | | | |
| original maturity of no more than three months | 17 | 10,397 | 4,105 |
| Term deposits with original maturity of no more than three months | 17 | 5 | – |
| | | | |
| **CASH AND CASH EQUIVALENTS AT END OF THE YEAR** | | **21,250** | **17,414** |
---
# Notes to the Consolidated Financial Statements
**FOR THE YEAR ENDED 31 DECEMBER 2022**
*(All amounts expressed in RMB million unless otherwise specified)*
## 1. CORPORATE INFORMATION
PICC Property and Casualty Company Limited (the “Company”) is a joint stock company with limited liability incorporated in the People’s Republic of China (the “PRC”). The registered office of the Company is located at Tower 2, No.2 Jianguomenwai Avenue, Chaoyang District, Beijing 100022, the PRC. The Company is listed on The Stock Exchange of Hong Kong Limited. The parent and the ultimate holding company of the Company is The People’s Insurance Company (Group) of China Limited (the “PICC Group”), which is incorporated in the PRC and listed on the Stock Exchange of Hong Kong Limited and the Shanghai Stock Exchange.
The Company and its subsidiaries (collectively referred to as the “Group”) are mainly engaged in property and casualty insurance business. Details of the operating segments are set out in note 4 to the consolidated financial statements.
The consolidated financial statements are presented in Renminbi (“RMB”), which is also the functional currency of the Company, and all values are rounded to the nearest million except when otherwise indicated.
## 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
### 2.1 Basis of preparation
The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance and applicable disclosure requirements of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”). For the purpose of preparation of the consolidated financial statements, information is considered material if such information is reasonably expected to influence decisions made by primary users.
The directors of the Company have, at the time of approving the consolidated financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus the Group continue to adopt the going concern basis of accounting in preparing the consolidated financial statements.
The consolidated financial statements have been prepared on the historical cost basis, except for investment properties, certain financial instruments and insurance contract liabilities.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services and certain financial instruments.
---
## 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
### 2.2 Application of amendments to HKFRSs
In current year, the Group has applied, for the first time, the following amendments to HKFRSs issued by the HKICPA which are mandatory effective for the annual period beginning on or after 1 January 2022 for the preparation of the Group’s consolidated financial statements:
* Property, Plant and Equipment: Proceeds before Intended Use – Amendments to HKAS 16
* Onerous Contracts – Cost of Fulfilling a Contract – Amendments to HKAS 37
* Annual Improvements to HKFRS Standards 2018-2020, and
* Reference to the Conceptual Framework – Amendments to HKFRS 3.
The application of the amendments to HKFRSs in current year has had no material effect on the Group’s financial performance and positions for the current and prior year and/or on the disclosures set out in the consolidated financial statements.
### 2.3 New and revised standards not yet adopted
All HKFRSs that remain in effect which are relevant to the Group have been applied except HKFRS 9, as the Group qualifies for a temporary exemption from HKFRS 9 which was set out in HKFRS 4 Amendments.
The Group has not applied the following key new and revised HKFRSs that have been issued but are not yet effective, in the consolidated financial statements:
| | |
| :--- | :--- |
| HKFRS 17 | Insurance Contracts¹ |
| Amendments to HKAS 1 | Classification of Liabilities as Current or Non-current¹ |
| Amendments to HKAS 1 HKFRS Practice Statement 2 | Disclosure of Accounting Policies¹ |
| Amendments to HKAS 12 | Deferred Tax related to Assets and Liabilities arising from a Single Transaction¹ |
| Amendments to HKAS 8 | Definition of Accounting Estimates¹ |
| Amendments to HKFRS 10 and HKAS 28 | Sale or Contribution of Assets between an Investor and its Associated or Joint Venture² |
1 Effective for annual periods beginning on or after 1 January 2023
2 Effective for annual periods beginning on or after a date to be determined
---
# 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.3 New and revised standards not yet adopted (continued)
None of these HKFRSs is expected to have a significant effect on the consolidated financial statement of the Group, except for HKFRS 9 and HKFRS 17.
Except for the new and amendments to HKFRSs mentioned below, the directors of the Company anticipate that the application of all other new and amendments to HKFRSs will have no material impact on the consolidated financial statements in the foreseeable future.
### HKFRS 9 – Financial Instruments
HKFRS 9 introduces new requirements for the classification and measurement of financial assets, financial liabilities, general hedge accounting and impairment requirements for financial assets.
Key requirements of HKFRS 9:
- All recognised financial assets that are within the scope of HKFRS 9 are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are generally measured at fair value through other comprehensive income (“FVTOCI”). All other financial assets are generally measured at their fair value at subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
- With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under HKAS 39 Financial Instruments: Recognition and Measurement, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss is presented in profit or loss.
- In relation to the impairment of financial assets, HKFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under HKAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.
---
## 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
### 2.3 New and revised standards not yet adopted (continued)
#### HKFRS 9 – Financial Instruments (continued)
Based on the Group’s financial instruments and risk management policies at 31 December 2022, the following principal impacts to the consolidated financial statements on initial application of HKFRS 9 are expected:
**Classification and measurement**
* Debt instruments classified as held-to-maturity as disclosed in note 18 and investments classified as loans and receivables carried at amortised cost as disclosed in note 23: a significant portion of these financial assets are held within a business model whose objective is to collect contractual cash flows that are solely payments of principal and interest on the principal outstanding (“contractual cash flow characteristics test”). Accordingly, most of them will continue to be subsequently measured at amortised cost upon the application of HKFRS 9. Some debt instruments will be subsequently measured at fair value according to the judgement of business model, and the gains or losses arising from changes in fair value will be included in the investment revaluation reserve. For the remaining financial assets that fail the contractual cash flow characteristics test, they will be measured subsequently at fair value through profit or loss under HKFRS 9. On initial application of HKFRS 9, the difference between the fair value and the amortised cost will be adjusted to investment revaluation reserve or retained profits at 1 January 2023.
* Debt instruments classified as available-for-sale financial assets carried at fair value as disclosed in note 18: a significant portion of these financial assets satisfy the contractual cash flow characteristics tests, and are held within a business model whose objective is achieved by both collecting contractual cash flows and selling these debt instruments in the open market. Accordingly, these financial assets will continue to be subsequently measured at FVTOCI upon the application of HKFRS 9, and the fair value gains or losses accumulated in the investment revaluation reserve will continue to be subsequently reclassified to profit or loss when the debt instruments are derecognised. For the remaining financial assets that fail the contractual cash flow characteristics test, they will be measured subsequently at fair value with fair value gains or losses to be recognised in profit or loss instead of other comprehensive income under HKFRS 9. On initial application of HKFRS 9, investment revaluation reserve relating to these financial assets will be transferred to retained profits at 1 January 2023.
* Debt instruments classified as financial assets at fair value through profit or loss disclosed in note 18: these financial assets are held within a business model whose objective is to sell these debt instruments in the open market. Accordingly, the gains or losses arising from changes in fair value will be presented in profit or loss upon the application of HKFRS 9.
* Equity instruments classified as available-for-sale financial assets carried at fair value as disclosed in note 19: the Group will not elect the option to designate as at FVTOCI for some equity available-for-sale financial assets carried at fair value. These equity available-for-sale financial instruments will be measured at fair value with subsequent fair value gains or losses to be recognised in profit or loss. Upon initial application of HKFRS 9, investment revaluation reserve relating to these financial assets will be transferred to retained profits at 1 January 2023.
---
# 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.3 New and revised standards not yet adopted (continued)
### HKFRS 9 – Financial Instruments (continued)
#### Classification and measurement (continued)
* Equity instruments classified as financial assets at fair value through profit or loss disclosed in Notes 19 are classified as financial assets at fair value through profit or loss by the Group under HKFRS 9.
#### Impairment
The Group is developing and testing key models required by HKFRS 9 and analysing the quantitative impact of impairment allowance.
#### Hedge Accounting
The Group does not apply the hedge accounting currently, so the Group expects that the new hedge accounting model under HKFRS 9 will have no impact on the Group’s consolidated financial statements.
The Group will adopt HKFRS 9 on 1 January 2023. HKFRS 9 requires that the classification and measurement and expected credit loss impairment shall be applied retrospectively by adjusting the opening balance sheet at the date of initial application, with no requirement to restate figures in comparative periods. The Group does not intend to restate figures in comparative periods.
In order to assess the potential impact on the Group’s consolidated financial statements upon the application of HKFRS 9, the Group establishes the expected credit loss impairment model and analyzes the changes in the credit risk of financial assets, and completes the classification of existing financial assets by analyzing the relevant business models and contractual cash flow characteristics of bond securities and other financial instruments.
---
## 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
### 2.3 New and revised standards not yet adopted (continued)
#### HKFRS 17 – Insurance Contracts and the related Amendments
HKFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes HKFRS 4 Insurance Contracts.
Measurement methods of HKFRS 17 include the general model, the variable fee approach, and the premium allocation approach by the nature of insurance contracts. The variable fee approach applies to insurance contracts with direct participation features; the general model applies to other insurance contracts; and if certain criteria are met by measuring the liability, the premium allocation approach applies to insurance contracts.
The general model will use current assumptions to estimate the amount, timing and uncertainty of future cash flows and it takes into account market interest rates and the impact of policyholders’ options and guarantees. The measurement is based on the building blocks of discounted, probability-weighted cash flows, a risk adjustment and a contractual service margin (“CSM”) representing the unearned profit of the contract.
For the insurance contracts applying the variable fee approach, the entity’s share of the fair value changes of the underlying items is included in the CSM. The measurement results of insurers using this model are therefore likely to be less volatile than under the general model.
An entity may simplify the measurement of a group of insurance contracts using the premium allocation approach if and only if the entity reasonably expects that such simplification would produce a measurement of the liability for remaining coverage for the group that would not differ materially from the one that would be produced applying the general model or the coverage period of each contract in the group is one year or less at the inception of the group.
HKFRS 17 is applied retrospectively unless impracticable, in which case the modified retrospective approach or the fair value approach is applied.
---
## 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
### 2.3 New and revised standards not yet adopted (continued)
#### HKFRS 17 – Insurance Contracts and the related Amendments (continued)
For the purpose of the transition requirements, the date of initial application is the start of the annual reporting period in which the entity first applies the standard, and the transition date is the beginning of the annual reporting period immediately preceding the date of initial application.
The Group will adopt HKFRS 17 on 1 January 2023 and the transition date will be 1 January 2022. The Group anticipates that HKFRS 17 will result in significant changes to the accounting policies for insurance contracts and is likely to have a material impact on the Group's performance and financial position, together with significant changes in presentation and disclosure. In order to adopt HKFRS 17 in the consolidated financial statements, an HKFRS 17 implementation workgroup comprised of various functions (Finance, Actuarial, Risk, IT and Operations) has been operating since 2018.
The Group is in the process of assessing the impact of transition to HKFRS 9 and HKFRS 17, including determination of transition methodology, selection of accounting policies, setting of assumptions, determination of judgements and models.
### 2.4 Summary of significant accounting policies
A summary of the significant accounting policies adopted and consistently applied by the Group in the preparation of these consolidated financial statements is set out below.
#### (1) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:
* has power over the investee;
* is exposed, or has rights, to variable returns from its involvement with the investee; and
* has the ability to use its power to affect its returns.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
When the Group has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group's voting rights in an investee are sufficient to give it power, including:
---
## 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
### 2.4 Summary of significant accounting policies (continued)
#### (1) Basis of consolidation (continued)
* the size of the Group’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
* potential voting rights held by the Group, other vote holders or other parties;
* rights arising from other contractual arrangements; and
* any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated income statement and consolidated statement of comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein, which represent present ownership interests entitling their holders to a proportionate share of net assets of the relevant subsidiaries upon liquidation.
---
## 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
### 2.4 Summary of significant accounting policies (continued)
#### (1) Basis of consolidation (continued)
**Changes in the Group’s ownership interests in existing subsidiaries**
Changes in the Group’s ownership interests in existing subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s relevant components of equity and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries, including re-attribution of relevant reserves between the Group and the non-controlling interests according to the Group’s and the non-controlling interests’ proportionate interests.
Any difference between the amount by which the non-controlling interests are adjusted, and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, the assets and liabilities of that subsidiary and non-controlling interests (if any) are derecognised. A gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the carrying amount of the assets (including goodwill), and liabilities of the subsidiary attributable to the owners of the Company. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e., reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable HKFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKAS 39 or, when applicable, the cost on initial recognition of an investment in an associate.
---
# BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (2) Investments in associates and joint ventures
An associate is an entity over which the Group has significant influence. 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.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting. The financial statements of associates and joint ventures used for equity accounting purposes are prepared using uniform accounting policies as those of the Group like transactions and events in similar circumstances, unless allowed by other standards. Under the equity method, an investment in an associate or a joint venture is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.
An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.
The Group assesses whether there is an objective evidence that the interest in an associate or a joint venture may be impaired. When any objective evidence exists, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised is not allocated to any asset, including goodwill that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.
---
# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (2) Investments in associates and joint ventures (continued)
When the Group ceases to have significant influence over an associate or joint control, it is accounted for as a disposal of the entire interest in the investee with a resulting gain or loss being recognised in profit or loss. When the Group retains an interest in the former associate or joint venture and the retained interest is a financial asset within the scope of HKAS 39, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition. The difference between the carrying amount of the associate or joint venture and the fair value of any retained interest and any proceeds from disposing the relevant interest in the associate or joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) upon disposal/partial disposal of the relevant associate or joint venture.
The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests.
When the Group reduces its ownership interests in an associate or a joint venture but the Group continues to use the equity method (including situations that change of ownership interest in an associate or a joint venture due to capital increase of other shareholders to the associate or the joint venture), the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interests if that gain or loss would have been reclassified to profit or loss on the disposal of the related assets or liabilities.
When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group.
The investments in associates and joint ventures are stated at cost less impairment in the Company’s statement of financial position. The results of associates and joint ventures are accounted for by the Company on the basis of dividends received and receivable.
### (3) Foreign currencies
These financial statements are presented in RMB, which is the Group’s functional and presentation currency. RMB is used by each entity in the Group as its functional and presentation currency in its financial statements. Foreign currency transactions recorded by the entities in the Group are initially recorded in their respective functional currency using the exchange rates prevailing at the dates of the transactions.
---
# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (3) Foreign currencies (continued)
At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise, except for exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the Group’s interests in associates/joint ventures.
### (4) Cash and cash equivalents
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired.
### (5) Financial assets
#### Initial recognition and measurement
Financial assets within the scope of HKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition. When financial assets are recognised initially, they are measured at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss.
All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.
---
# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (5) Financial assets (continued)
#### Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
**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 financial assets designated upon initial recognition as at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Derivatives, including separated embedded derivatives, are always measured at fair value through profit or loss unless they are designated as effective hedging instruments as defined by HKAS 39.
Financial assets at fair value through profit or loss are measured in the consolidated statement of financial position at fair value with net changes in fair value presented as net realised and unrealised gains/(losses) on investments in the income statement. These net fair value changes do not include any dividends or interest earned on these financial assets, which are recognised in accordance with the policies set out for “Revenue recognition” below.
Financial assets designated at fair value through profit or loss are designated at the date of initial recognition and only if the criteria under HKAS 39 are satisfied.
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Reassessment only occurs if there is a change in terms of the contract that significantly modifies the cash flows that would otherwise be required.
**Loans and receivables**
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Group’s loans and receivables include cash equivalents, term deposits, insurance receivables and investments classified as loans and receivables. After initial measurement, such assets are subsequently measured at amortised cost, using the effective interest method, less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and includes fees or costs that are an integral part of the effective interest method. The effective interest amortisation is included in investment income in the income statement.
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# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (5) Financial assets (continued)
#### Subsequent measurement (continued)
**Held-to-maturity investments**
Non-derivative financial assets with fixed or determinable payments and fixed maturities dates that are quoted in an active market are classified as held-to-maturity when the Group has the positive intention and ability to hold them to maturity, other than those the entity designates as at financial assets at fair value through profit or loss, available-for-sale financial assets or those meeting the definition of loans and receivables. Held-to-maturity investments are subsequently measured at amortised cost using the effective interest method less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest amortisation and the losses arising from impairment are both included and recognised in the income statement.
**Available-for-sale financial assets**
Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.
After initial recognition, available-for-sale financial assets are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale investment revaluation reserve until the asset is derecognised or impaired, at which time the cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss. Interest and dividends earned whilst holding the available-for-sale financial assets are reported as investment income, respectively and are recognised in the income statement in accordance with the policies set out for "Revenue recognition" below.
When the fair value of unlisted equity investments cannot be reliably measured because (a) the variability in the range of reasonable fair value estimates is significant for that investment or (b) the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such investments are stated at cost less any impairment losses.
**Effective interest method**
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest income is recognised on an effective interest basis for debt instruments.
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# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (6) Impairment of financial assets
The Group assesses at the end of each reporting period whether there is an objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is an objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as arrears arising from defaults.
#### Financial assets measured at amortised cost
If financial assets measured at amortised cost are impaired, the carrying amount of the financial assets is reduced to the present value of estimated future cash flows (excluding future credit losses that have not been incurred) and the reduction is recognised as an impairment loss in the income statement. The present value of estimated future cash flows shall be calculated with the financial asset’s original effective interest rate and the related collateral value shall also be taken into account. For financial assets with floating interest rate, the present value of estimated future cash flows shall be calculated with the effective interest rate stipulated by the contract.
For a financial asset that is individually significant, the Group assesses the asset individually for impairment, and recognises the amount of impairment in profit or loss. For a financial asset that is not individually significant, the Group assesses the asset individually for impairment or includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. If the Group determines 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 assesses them for impairment. Financial assets for which an impairment loss is individually recognised are not included in a collective assessment of impairment.
After the Group recognises an impairment loss of financial assets measured at amortised cost, if there is an objective evidence that the financial assets’ value restores and the restoration can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss shall be reversed and recognised in profit or loss. However, the reversal shall not result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised at the date the impairment was reversed.
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# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (6) Impairment of financial assets (continued)
#### Financial assets measured at cost
If there is an objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not measured at fair value because its fair value cannot be reliably measured, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses on these assets are not reversed.
#### Available-for-sale financial assets
For available-for-sale financial assets, the Group assesses at the end of each reporting period whether there is objective evidence that an investment or a group of investments is impaired.
If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is removed from other comprehensive income and recognised in the income statement.
In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of an investment below its cost. The determination of what is “significant” or “prolonged” requires judgement. “Significant” is evaluated against the original cost of the investment and “prolonged” against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement – is reclassified from other comprehensive income and recognised in the income statement. Impairment losses on equity instruments classified as available-for-sale are not reversed through the income statement. Increases in their fair value after impairment are recognised directly in other comprehensive income.
In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets measured at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement. Future interest income continues to be accrued based on the reduced carrying amount of the asset and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as investment income. Impairment losses on debt instruments are reversed through the income statement if the increase in fair value of the instruments can be objectively related to an event occurring after the impairment loss was recognised in the income statement.
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# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (7) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:
- the rights to receive cash flows from the asset have expired; or
- the Group has transferred its rights to receive cash flows from the asset, or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the assets, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.
### (8) Financial liabilities
#### Initial recognition and measurement
Financial liabilities within the scope of HKAS 39 are classified as financial liabilities at fair value through profit or loss, or other financial liabilities at amortised cost as appropriate. The Group determines the classification of its financial liabilities at initial recognition.
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are deducted from the fair value of the financial liabilities on initial recognition. Transaction costs directly attributable to the acquisition of financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
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# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (8) Financial liabilities (continued)
#### Subsequent measurement
The subsequent measurement of financial liabilities depends on their classification as follows:
##### Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by HKAS 39. Separated embedded derivatives are always measured at fair value through profit or loss unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the income statement. The net fair value gain or loss recognised in the income statement does not include any interest charged on these financial liabilities.
Financial liabilities designated as at fair value through profit or loss are designated at the date of initial recognition and only if the criteria in HKAS 39 are satisfied.
##### Financial liabilities at amortised cost (including interest-bearing borrowings)
Financial liabilities including securities sold under agreements to repurchase, miscellaneous payables and accruals, policyholders’ deposits and bonds payable are initially stated at fair value less directly attributable transaction costs and are subsequently measured at amortised cost, using the effective interest method unless the effect of discounting would be insignificant, in which case they are stated at cost. The related interest expense is recognised in the income statement. Amounts due to reinsurers are accounted for as if they were other financial liabilities.
Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process.
##### Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest expense is recognised on an effective interest basis.
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# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (8) Financial liabilities (continued)
#### Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled, or have 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 an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the income statement.
#### Offsetting a financial asset and a financial liability
A financial asset and a financial liability are offset and the net amount presented in the consolidated statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the recognised amounts; and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
### (9) Derivative financial instruments
Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are measured as assets when the fair value is positive and as liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value of derivatives are taken directly to the income statement, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income.
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## 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
### 2.4 Summary of significant accounting policies (continued)
#### (10) Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for leasing transactions that are within the scope of HKFRS 16 (since 1 January 2019) or HKAS 17 (before applications of HKFRS 16) Leases, and measurements that have some similarities to fair value but are not fair value, such as value in use in HKAS 36 Impairment of Assets.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
For financial instruments and investment properties which are transferred at fair value and a valuation technique that unobservable inputs are to be used to measure fair value in subsequent periods, the valuation technique is calibrated so that the results of the valuation technique equal the transaction price.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
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# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (11) Investment properties
Investment properties are properties held to earn rentals and/or for capital appreciation (including properties under construction for such purposes). Investment properties include land held for undetermined future use, which is regarded as held for capital appreciation purpose.
Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at fair value, adjusted to exclude any prepaid or accrued operating lease income. Gains or losses arising from changes in the fair value of investment properties are included in profit or loss for the period in which they arise.
Gains or losses arising from the retirement or disposal of investment property shall be determined as the difference between the net disposal proceeds and the carrying amount of the asset and shall be recognised in profit or loss (unless HKFRS 16 requires otherwise on a sale and leaseback) in the period of the retirement or disposal.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.
For a transfer from investment properties to owner-occupied properties, the deemed cost of a property for subsequent accounting is its fair value at the date of change in use. If a property and land occupied by the Group as an owner-occupied property and land becomes an investment property, the Group accounts for such property in accordance with the policy stated under “Property and equipment and depreciation” and “Leases” for land held by a lessee as a right-of-use asset up to the date of change in use, and any difference at that date between the carrying amount and the fair value of the property and leasehold land is accounted for as an asset revaluation reserve. On disposal of the investment property, the asset revaluation reserve included in equity is transferred to retained profits as a movement in reserves.
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# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (12) Property and equipment and depreciation
Property and equipment are tangible assets that are held for use in the production or supply of goods or services, or for administrative purposes, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.
Expenditure incurred after items of property and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.
Depreciation is calculated on the straight-line basis to write off the cost of each item of property and equipment, other than construction in progress, to its residual value over its estimated useful life. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The principal annual rates used for this purpose are as follows:
| | |
| :--- | :--- |
| Lands and buildings | 1.62% to 19.40% |
| Motor vehicles | 16.17% to 24.25% |
| Office equipment, furniture and fixtures | 9.70% to 32.33% |
Where parts of an item of property and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end.
An item of property and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the income statement in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.
Construction in progress mainly represents buildings under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate category of property and equipment when completed and ready for use.
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# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (13) Impairment of non-financial assets
Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than financial assets and goodwill), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the income statement in the period in which it arises or treated as a revaluation decrease, as appropriate.
An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the income statement in the period in which it arises or treated as a revaluation increase, as appropriate.
### (14) Insurance contracts
Insurance contracts are those contracts under which the Group has accepted significant insurance risk from the policyholders by agreeing to compensate the policyholders if a specified uncertain future event (the insured event) adversely affects the policyholders. Insurance contracts are classified as direct insurance contracts and reinsurance contracts. The significance of insurance risk as assessed by the Group is based on the additional amount that the Group needs to compensate policyholders upon the occurrence of the insurance events.
Some contracts issued by the Group may contain both an insurance component and a deposit component. If these two components are distinct and can be measured reliably, the underlying amounts are unbundled. The unbundled insurance component is accounted for according to HKFRS 4 and the unbundled deposit component is accounted for as financial liabilities. If the insurance component and the deposit component are not distinct and separately measurable, the entire contract will be accounted for as an insurance contract.
Once a contract has been classified as an insurance contract, it remains an insurance contract up to derecognition, even if the insurance risk subsequently reduces significantly. Investment contracts can, however, be reclassified as insurance contracts after initial recognition if insurance risk becomes significant.
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# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (15) Significant insurance risk testing
For insurance contracts issued by the Group, tests are performed to determine if the contracts contain significant insurance risk, and contracts of a similar nature are grouped together for this purpose. When performing the significant insurance risk testing, the Group makes judgements in sequence as to whether the contract transfers insurance risk, whether the contract has commercial substance, and whether the transferred insurance risk is significant.
### (16) Insurance receivables
Insurance receivables are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. Subsequent to initial recognition, insurance receivables are measured at amortised cost, using the effective interest method. The carrying value of insurance receivables is reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be receivable, with the impairment loss recorded in the income statement.
Insurance receivables are derecognised when financial assets derecognition criteria have been met.
### (17) Insurance contract liabilities
When measuring insurance contract liabilities, the Group uses a group of insurance contracts whose insurance risks are of a similar nature as a measurement unit. The Group’s insurance contracts are classified into certain measurement units by type of insurance.
The Group’s insurance contract liabilities comprise mainly unearned premium reserves and loss and loss adjustment expense reserves.
The unearned premium reserves represent premiums received for risks that have not yet expired. At inception of the contract, it represents premiums received or receivable minus relevant acquisition costs. Acquisition costs in relation to the sale of new insurance contracts such as commission expenses, underwriting personnel expenses, tax and other surcharges, insurance security fund and other acquisition costs are recorded as expenses in profit or loss against an equal and opposite amount of premium being recognised as revenue. Subsequent to the initial recognition, the unearned premium reserves are released over the term of the contract and are primarily earned on a 365-day basis. The liability is discounted to present value using a risk-free rate, plus an appropriate premium to fully reflect the characteristics of the cash flow being discounted, when the impact of time value of money is significant. When any deficiency arises from performing the liability adequacy tests as described below, unearned premium reserves have to be adjusted to reflect the deficiency.
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## 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
### 2.4 Summary of significant accounting policies (continued)
#### (17) Insurance contract liabilities (continued)
At the end of each reporting period, liability adequacy tests are performed to ensure the adequacy of the unearned premium reserves. If current estimates of the present value of the expected future claims and loss adjustment expenses in respect of the relevant insurance contracts, plus an additional risk margin to reflect the inherent uncertainty associated with the future net cash flows, exceed the unearned premium reserves, then the unearned premium reserves are deemed to be deficient. The resulting deficiency is recognised immediately through profit or loss. The risk margin for the tests described above is determined using the cost of capital approach and the confidence interval approach and based on the most recent experience of the Group as well as by reference to the industry benchmark.
Loss and loss adjustment expense reserves include incurred and reported reserves, incurred but not reported (“IBNR”) reserves and loss adjustment expense reserves.
Loss and loss adjustment expense reserves are established for the estimated ultimate cost of all claims incurred but not settled at the end of each reporting period, whether reported or not, together with related claims handling costs and reduction for the expected value of salvage and other recoveries, plus a risk margin. Delays can be experienced in notification and settlement of certain types of claims, and therefore the ultimate cost of these claims cannot be known with certainty at the end of each reporting period. The liability is calculated at the reporting date using a range of standard actuarial projection techniques, based on empirical data and current assumptions. Risk margin is determined using the cost of capital approach and the confidence interval approach and based on the most recent experience of the Group as well as by reference to the industry benchmark. The liability is discounted to present value using a risk-free rate, plus an appropriate premium to fully reflect the characteristics of the cash flow being discounted, when the impact of time value of money is significant. Adjustments to the liabilities at the end of each reporting period are recorded in profit or loss.
#### Derecognition of insurance contract liabilities
Insurance contract liabilities are derecognised when they are discharged, cancelled, or have expired.
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# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (18) Reinsurance
The Group cedes insurance risk in the normal course of business for part of its businesses. Reinsurance assets represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the insurance contract liabilities or settled claims associated with the reinsured policies and are in accordance with the related reinsurance contracts.
Commissions receivable on outward reinsurance contracts are recorded as income in the income statement. The reinsurers’ share of unearned premium reserves is reduced by commissions receivable on outward reinsurance contracts at inception and subsequently the reduced balance is released over the term of the contract in the same manner as the related unearned premium reserves. Reinsurers’ share of loss and loss adjustment expense reserves also includes its share of risk margin to the gross balance of loss and loss adjustment expense reserves.
Reinsurance assets are reviewed for impairment at each reporting date or more frequently when an indication of impairment arises during the reporting year. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the reinsurance asset that the Group may not receive all outstanding amounts due under the terms of the contract and the effect has a reliably measurable impact on the amounts that it will receive from the reinsurer. The impairment loss is recorded in the income statement.
Ceded reinsurance arrangements do not relieve the Group from its obligations to policyholders.
The Group also assumes reinsurance risk in the normal course of business for insurance contracts where applicable. Premiums and claims on assumed reinsurance are recognised as revenue and expenses in the same manner as they would be if the reinsurance were considered direct business, taking into account the product classification of the reinsured business. Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable to reinsurers are estimated in a manner consistent with the related reinsurance contracts. Receivables and payables arising from reinsurance contracts are measured at amortised costs and not offset for presentation purposes.
Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance.
Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire or when the contract is transferred to another party.
Reinsurance contracts that do not transfer significant insurance risk are accounted for as financial instruments. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any explicit identified premiums or fees to be retained by the cedant. Investment income or expense on these contracts is accounted for using the effective interest method when accrued.
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# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (19) Revenue recognition
Revenue is recognised when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the Group and when specific criteria have been met for each of the Group’s activities, as described below:
#### Gross premiums
Premium income and reinsurance premium income are recognised when the insurance contracts are issued, related insurance risk is undertaken by the Group, it is probable that the related economic benefits will flow to the Group and the related income can be reliably measured.
#### Investment income
Interest income is recognised in the income statement as it accrues and is calculated by using the effective interest method. Fees and commissions that are an integral part of the effective yield of the financial asset or liability are recognised as an adjustment to the effective interest rate of the instrument.
Investment income also includes dividends when the right to receive payment is established. For listed securities, this is the date the security is listed as ex-dividend.
### (20) Claims
Claims incurred include all claim losses occurring during the year, whether reported or not, including the related loss adjustment expenses, a reduction for the value of salvage and other recoveries and any adjustments to claims outstanding from previous years.
Loss adjustment expenses include internal and external costs incurred in connection with the negotiation and settlement of claims. Internal costs include all general administrative costs directly attributable to the claims function.
Reinsurance claims are recognised when the related gross insurance claims are recognised according to the terms of the relevant contract.
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# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (21) Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit/loss before tax because of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflect the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amounts of its assets and liabilities.
For the purposes of measuring deferred tax liabilities or deferred tax assets for investment properties that are measured using the fair value model, the carrying amounts of such properties are presumed to be recovered entirely through sale, unless the presumption is rebutted by facts and circumstances. The presumption is rebutted when the investment properties are depreciable and are held within the context of a business model whose objective is to substantially consume over time the economic benefits embodied in the investment properties, rather than through sale, except for freehold land, which is always presumed to be recovered entirely through sale.
---
# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (21) Taxation (continued)
For the purposes of measuring deferred tax for leasing transactions in which the Group recognises the right-of-use assets and the related lease liabilities, the Group first determines whether the tax deductions are attributable to the right-of-use assets or the lease liabilities.
For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group applies HKAS 12 Income Taxes requirements to right-of-use assets and lease liabilities separately. Temporary differences on initial recognition of the relevant right-of-use assets and lease liabilities are not recognised due to application of the initial recognition exemption. Temporary differences arising from subsequent revision to the carrying amounts of right-of-use assets and lease liabilities, resulting from remeasurement of lease liabilities and lease modification, that are not subject to initial recognition exemption are recognised on the date of remeasurement or modification.
Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right exists to set off current tax assets against current tax liabilities and when they relate to income taxes levied to the same taxable entity by the same taxation authority.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
In assessing any uncertainty over income tax treatments, the Group considers whether it is probable that the relevant tax authority will accept the uncertain tax treatment used, or proposed to be use by individual group entities in their income tax filings. If it is probable, the current and deferred taxes are determined consistently with the tax treatment in the income tax filings. If it is not probable that the relevant taxation authority will accept an uncertain tax treatment, the effect of each uncertainty is reflected by using either the most likely amount or the expected value.
### (22) Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred income in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
---
# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (22) Government grants (continued)
Government grants related to income that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. Government grants relating to compensation of expenses are deducted from the related expenses, other government grants are presented under “other income”.
The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
### (23) Provisions
Except for contingent considerations deriving from or contingent liabilities assumed in business combinations, contingent liabilities are recognised as provisions if the following conditions are met:
- an entity has a present obligation as a result of a past event;
- it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
- a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision shall be the best estimate of the expenditure required to settle the present obligation at the end of the reporting period with the consideration of risks, uncertainties and the present value. Provisions shall be reviewed at the end of the reporting period and adjusted to reflect the current best estimate.
---
# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (24) Employee benefits
#### Retirement benefit costs
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. For defined contribution plans, the Group pays contributions to basic retirement insurance, annuity scheme and unemployment insurance. The Group has made annuity contributions in proportion to its employees’ wages. Employees who leave the scheme prior to vesting fully in the annuity scheme shall return part of the interests (the “forfeited contributions”). The forfeited contributions cannot be used by the Group to reduce the existing level of the annuity scheme contributions. The purpose of the forfeited contributions will be determined in due course.
#### Termination benefits
A liability for a termination benefit is recognised at the earlier of when the Group can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.
#### Short-term and other long-term employee benefits
Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as and when employees rendered the services. All short-term employee benefits are recognised as an expense unless another HKFRS requires or permits the inclusion of the benefits in the cost of an asset.
Short-term employee benefits refer to employee wages, bonuses, social security contributions such as medical insurance, work injury insurance, maternity insurance and housing fund, measured at the amount incurred or at the applicable benchmarks and rates.
A liability is recognised for benefits accruing to employees (such as wages and salaries, annual leave and sick leave) after deducting any amount already paid.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Group in respect of services provided by employees up to the reporting date. Any changes in the liabilities’ carrying amounts resulting from service cost, interest and remeasurements are recognised in profit or loss except to the extent that another HKFRS requires or permits their inclusions in the cost of an asset.
---
# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (24) Employee benefits (continued)
**Share-based payments**
Employees working in the Group are granted share appreciation rights (“SARs”), which can be settled only in cash (“cash-settled transactions”). The cost of cash-settled share-based payment transactions is measured initially at fair value using the Black-Scholes model at the grant date taking into account the terms and conditions upon which the instruments were granted. This fair value is expensed over the period until vesting with the recognition of a corresponding liability. The liability is remeasured at the end of each reporting date up to and including the settlement date, with changes in fair value recognised in the income statement.
### (25) Leases
**Definition of a lease**
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
For contracts entered into or modified on or after the date of initial application or arising from business combinations, the Group assesses whether a contract is or contains a lease based on the definition under HKFRS 16 at inception or modification date. Such contract will not be reassessed unless the terms and conditions of the contract are subsequently changed.
**The Group as a lessee**
As a practical expedient, leases with similar characteristics are accounted on a portfolio basis when the Group reasonably expects that the effects on the financial statements would not differ materially from individual leases within the portfolio.
**Short-term leases and leases of low-value assets**
The Group applies the short-term lease recognition exemption to leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. It also applies the recognition exemption for lease of low-value assets. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
---
# 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
## 2.4 Summary of significant accounting policies (continued)
### (25) Leases (continued)
#### The Group as a lessee (continued)
##### Right-of-use assets
The cost of right-of-use asset includes:
* the amount of the initial measurement of the lease liability;
* any lease payments made at or before the commencement date, less any lease incentives received;
* any initial direct costs incurred by the Group; and
* an estimate of costs to be incurred by the Group in dismantling and removing the underlying assets, 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.
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.
Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying leased assets at the end of the lease term are depreciated from commencement date to the end of the useful life. Otherwise, right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.
The Group presents right-of-use assets as a separate line item on the consolidated statement of financial position.
For payments of a property interest which includes both leasehold land and building elements, the entire property is presented as property and equipment of the Group when the payments cannot be allocated reliably between the leasehold land and building elements, except for those that are classified and accounted for as investment properties.
Land leases are also in the scope of HKFRS 16. The Group recognises any prepaid premium for leasehold lands as right-of-use assets which are depreciated over the relevant lease terms.
##### Lease liabilities
At the commencement date of a lease, the Group recognises and measures the lease liability at the present value of lease payments that are unpaid at that date. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.
---
## 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
### 2.4 Summary of significant accounting policies (continued)
#### (25) Leases (continued)
**The Group as a lessee (continued)**
**Lease liabilities (continued)**
Lease payments include fixed payments, variable lease payment based on an index or a rate, the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, payments of penalties for terminating the lease, and others.
After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.
The Group presents lease liabilities as a separate line item in the consolidated statement of financial position.
**The Group as a lessor**
Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset, and such costs are recognised as an expense on a straight-line basis over the lease term except for investment properties measured under fair value model.
#### (26) Profit appropriation
In accordance with the PRC Company Law and the Company and each of its subsidiary’ articles of association, the Company and each of its subsidiary are required to make appropriations to the statutory surplus reserve based on their respective annual profit (after offsetting any prior years’ losses) as determined in accordance with PRC generally accepted accounting principles (“PRC GAAP”). When the balance of such reserve fund reaches 50% of the capital, any further appropriation is optional. The Company and each of its subsidiary may also make appropriations to the discretionary surplus reserve provided that the appropriation is approved by a resolution of the shareholders. Subject to resolutions passed in general meetings, the statutory and discretionary surplus reserves can be transferred to the capital. The balance of the statutory surplus reserve fund after transfers to the capital should not be less than 25% of capital.
According to the relevant regulations of the PRC, the Company has to set aside 10% of its net profit determined in accordance with PRC GAAP to the general risk reserve for catastrophic losses. This general risk reserve cannot be used for dividend distribution or conversion into capital.
According to the relevant regulations of the PRC, the Company is required to make appropriations to catastrophic loss reserves when the agriculture and nuclear insurance businesses achieve annual or accumulated excessive underwriting profits determined in accordance with PRC GAAP. These catastrophic loss reserves cannot be used for dividend distribution or conversion into capital.
---
## 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
### 2.4 Summary of significant accounting policies (continued)
**(27) Dividends**
Dividends proposed by the directors are classified as a separate allocation of retained profits. When these dividends are approved by the shareholders and declared, they are recognised as a liability.
## 3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
In the application of the Group’s accounting policies, which are described in note 2.4, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
### 3.1 Significant judgements
The following are the significant judgements, apart from those involving estimations (see below), that the directors of the Company have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements.
**(1) Product classification**
The Group makes significant judgements on classification of insurance contracts by assessing whether significant insurance risk exists. Contracts that do not transfer significant insurance risk are classified as investment contracts and accounted for in accordance with HKAS 39.
**(2) Significant influence on an investee when less than 20 per cent of voting power is held**
The Group determines whether it can exercise influence over an investee when it holds, directly or indirectly through subsidiaries, less than 20 per cent of the voting power of the investee, when one or more of the following indicators are present:
---
## 3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONTINUED)
### 3.1 Significant judgements (continued)
#### (2) Significant influence on an investee when less than 20 per cent of voting power is held (continued)
- Representation on the Board of Directors or equivalent governing body of the investee;
- Participation in policy-making processes, including participation in decisions about dividends or other distributions;
- Material transactions between the investor and the investee;
- Interchange of managerial personnel; or
- Provision of essential technical information.
An investee is accounted for as an associate if it is concluded that the Group exercises significant influence over that investee; otherwise, it is accounted for as a financial asset in accordance with HKAS 39.
The reasons for existence of significant influence over some investees, even though the voting rights held by the Group is less than 20%, are disclosed in note 24 to these consolidated financial statements.
#### (3) Consolidations of structured entities
The Group has interest in a range of structured entities in its daily operations for investment purposes. These entities vary in legal forms and investors’ rights on removals of the managers, changing underlying assets and liquidations. Certain fellow subsidiaries of the Company are also engaged in launching and managing these structured entities. The Group has to assess whether it has control over these entities. The decision mainly depends on whether the Group is the investment manager, whether or not the Group has powers over changing any investment decisions and investment managers, and how the returns can be affected by these powers. Details of these structured entities are disclosed in note 49.
#### (4) Impairment assessment on investments in associates
The Group assesses whether there are any indicators of impairment for investments in associates at the end of each reporting period. Investments in associates are tested for impairment when there are indicators that the carrying amounts may not be recoverable. An impairment exists when the carrying value of investments in associates exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. When value in use calculations is undertaken, the Group must estimate the present values of cash flows expected to arise from continuing to hold the investments and choose a suitable discount rate in order to calculate the present value of those cash flows.
---
# 3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONTINUED)
## 3.2 Estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
### (1) Valuation of insurance contract liabilities
At the end of the reporting period, when measuring the insurance contract liabilities, the Group needs to make reasonable estimates in payments that the Group is required to make in fulfilling the obligations under the insurance contracts, based on information currently available at the end of the reporting period.
The main assumptions made in measuring these liabilities are as follows:
* For insurance contracts under which the future insurance benefits are not affected by investment income of the underlying asset portfolio, the discount rates are determined based on the 750-day moving average of yield curve of China's treasury bonds published by China Central Depository and Clearing Co., Ltd., with consideration of tax effect and illiquidity premiums. In consideration of the different duration of each line of business, the Group used premiums of 65 – 85 basis points at 31 December 2022 (31 December 2021: 71 – 90 basis points). The discount rates of the different duration used at 31 December 2022 were 2.6% – 3.4% (31 December 2021: 2.9% – 3.6%).
* The Group determines the risk margin assumptions for unearned premium reserves based on currently available information at the end of the reporting period. When carrying out the liability adequacy test on the unearned premium reserves, the Group uses the discounted cash flow method to judge whether there is inadequacy. The main assumptions for measuring discounted cash flow include expected loss ratio, risk margin, etc. The Group determines the risk margin assumptions (as a percentage of discounted net cash flows) for the liability adequacy test over unearned premium reserves as follows:
| Type | 2022 | 2021 |
| :--- | :--- | :--- |
| Agriculture insurance | 24.5% | 28.5% |
| Motor vehicle insurance | 3% | 3% |
| Health insurance | 3% | 3% |
| Other insurance | 6% | 6% |
* The Group determines the risk margin assumptions for loss and loss adjustment expense reserves based on currently available information at the end of the reporting period, details are described below:
| Type | 2022 | 2021 |
| :--- | :--- | :--- |
| Agriculture insurance | 24.0% | 28.0% |
| Motor vehicle insurance | 2.5% | 2.5% |
| Health insurance | 2.5% | 2.5% |
| Other insurance | 5.5% | 5.5% |
---
# 3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONTINUED)
## 3.2 Estimation uncertainty (continued)
### (1) Valuation of insurance contract liabilities (continued)
The major assumptions needed in measuring insurance contract liabilities include claim development factors and expected loss ratios, which can be used to forecast trends of future claims so as to estimate the ultimate claim expenses. The claim development factors and the expected loss ratios for various measurement units are based on the Group’s past claims development experience and loss ratios, taking into consideration changes in company policies such as the underwriting policy, expenses and claims handling processes, and changing trends in external environment such as economic conditions, regulations and legislation.
Management is of the opinion that as at the end of the reporting period, insurance contract liabilities are sufficient to cover the relevant liabilities to date but cannot guarantee there is no under-provision or over-provision of the reserve, which is an estimate of the ultimate losses. The term and assumptions of insurance contract liabilities and development of claims are set out in note 44(a).
### (2) Impairment of financial assets
#### Financial assets measured at amortised cost
When there is an objective evidence that indicates impairment in loans and receivables and held-to-maturity investments, the Group assesses the degree of risk and collectability of each item. The Group needs to recognise an impairment loss in the income statement if the present value of expected future cash flows is less than the carrying amount of a financial asset measured at amortised cost. The Group mainly considers the financial situation, credit rating, and collaterals of the debtors in estimating the future cash flows.
Other than impairment for individual financial assets measured at amortised cost, the Group also collectively assesses impairment for financial assets measured at amortised cost. Such collective assessment is carried out for a group of financial assets with similar credit risk characteristics. The degree of impairment depends on the timing and amount of future cash flows.
Financial assets measured at amortised cost include cash equivalents, insurance receivables, term deposits, held-to-maturity investments, investments classified as loans and receivable and miscellaneous receivables. The carrying values of these assets are disclosed in the consolidated statement of financial position and respective notes.
---
# 3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONTINUED)
## 3.2 Estimation uncertainty (continued)
### (2) Impairment of financial assets (continued)
**Available-for-sale financial assets**
The Group considers whether impairment provision is needed for an available-for-sale financial asset investment if fair value of an available-for-sale financial instrument is below its carrying amount. The Group determines whether impairment exists by: for equity instruments, judging whether this decline below cost is “significant” or “prolonged” as explained in note 2.4; for debt instruments, whether the decline in fair value is due to market interest rates or interest rates specific to the issuers of the financial instruments, or presence of other objective evidence of impairment.
### (3) Fair values of financial assets determined using valuation techniques
The Group uses valuation technique for financial instruments which are not quoted in an active market. Valuation techniques include the use of discounted cash flows analysis, option pricing models or other valuation methods as appropriate 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.
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. Areas such as discount rates and liquidity discounts require management to make estimates.
Fair values of financial assets, their hierarchy, valuation techniques and key inputs are disclosed in note 41 to these consolidated financial statements.
---
## 4. OPERATING SEGMENT INFORMATION
The Group’s operating segments are presented in a manner consistent with the internal management reporting provided to the chief operating decision maker for deciding how to allocate resources and for assessing performance.
For management purposes, the Group is organised into business units based on their products and services and has nine operating and reportable segments as follows:
(a) the motor vehicle segment provides insurance products covering motor vehicles;
(b) the commercial property segment provides insurance products covering commercial properties;
(c) the cargo segment provides insurance products covering transport of goods, crafts or conveyances;
(d) the liability segment provides insurance products covering policyholders’ liabilities;
(e) the accidental injury and health segment provides insurance products covering accidental injuries and medical expenses;
(f) the agriculture segment provides insurance products covering agriculture business;
(g) the credit and surety segment provides insurance products covering credit and surety business;
(h) the others segment mainly represents insurance products related to homeowners, special risks, marine hull and construction; and
(i) the corporate and other segment includes the income and expenses from investment activities, share of results of associates and joint ventures, other net income, unallocated income and expense of the Group.
Management monitors the results of the Group’s operating segments separately for the purpose of performance assessment. Segment performance is evaluated based on reportable segment result, in which insurance business income and expense (for segments (a) to (h)) is a measure of underwriting profit/loss and corporate business income and expense (for segment (i)), primarily investment related income and expense, is a measure of profit/(loss) for the year excluding underwriting profit/loss. Income tax expense is not further allocated but assigned to corporate and other business segment.
Insurance business assets and liabilities directly attributable to operating segments of insurance business will be allocated to each segment. Investment assets and liabilities managed on a group basis will be allocated to the corporate and other business segment together with property and equipment, investment properties, prepaid land premiums, other assets, bonds payable, income tax payable, deferred tax assets and other payables, which are not allocated further.
Geographical information is not presented as the Group’s customers, business, assets and liabilities are mainly located and operations are mainly carried out in the PRC for relevant entities. No inter-segment transactions occurred in 2022 and 2021.
In 2022 and 2021, no direct written premiums from transactions with a single external customer amounted to 10% or more of the Group’s total direct written premiums.
---
# 4. OPERATING SEGMENT INFORMATION (CONTINUED)
### The segment income statements for the years ended 31 December 2022 are as follows:
| | Insurance | Insurance | Insurance | Insurance | Insurance | Insurance | Insurance | Insurance | | |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: |
| | **Motor vehicle** | **Commercial property** | **Cargo** | **Liability** | **Accidental injury and health** | **Agriculture** | **Credit and surety** | **Others** | **Corporate & other** | **Total** |
| Gross written premiums | 271,160 | 16,553 | 4,831 | 33,772 | 88,999 | 52,060 | 5,294 | 14,864 | - | 487,533 |
| Net earned premiums | 257,059 | 8,638 | 3,044 | 24,684 | 82,062 | 37,670 | 4,913 | 7,410 | - | 425,480 |
| Net claims incurred | (175,021) | (6,118) | (1,866) | (18,811) | (66,985) | (29,843) | (2,240) | (4,750) | - | (305,634) |
| Net policy acquisition costs | (38,022) | (2,204) | (569) | (5,821) | (11,263) | (169) | (864) | (1,922) | - | (60,834) |
| Other underwriting expenses | (26,391) | (729) | (221) | (2,067) | (2,384) | (3,843) | (327) | (756) | - | (36,718) |
| Administrative expenses | (6,320) | (414) | (183) | (1,138) | (1,780) | (1,157) | (324) | (649) | - | (11,965) |
| **Underwriting profit/(loss)** | **11,305** | **(827)** | **205** | **(3,153)** | **(350)** | **2,658** | **1,158** | **(667)** | **-** | **10,329** |
| Investment income | - | - | - | - | - | - | - | - | 20,180 | 20,180 |
| Net realised and unrealised losses on investments | - | - | - | - | - | - | - | - | (3,706) | (3,706) |
| Investment related expenses | - | - | - | - | - | - | - | - | (500) | (500) |
| Foreign exchange gains, net | - | - | - | - | - | - | - | - | 802 | 802 |
| Other income, net | - | - | - | - | - | - | - | - | 689 | 689 |
| Finance costs | - | - | - | - | - | - | - | - | (1,005) | (1,005) |
| Share of profits or losses of associates and joint ventures | - | - | - | - | - | - | - | - | 4,225 | 4,225 |
| Dilution loss arising on a reduced stake in an associate | - | - | - | - | - | - | - | - | (95) | (95) |
| **Profit/(Loss) before income tax** | **11,305** | **(827)** | **205** | **(3,153)** | **(350)** | **2,658** | **1,158** | **(667)** | **20,590** | **30,919** |
| Income tax expense | - | - | - | - | - | - | - | - | (4,266) | (4,266) |
| Net profit/(loss) for the year – segment results | 11,305 | (827) | 205 | (3,153) | (350) | 2,658 | 1,158 | (667) | 16,324 | 26,653 |
---
# 4. OPERATING SEGMENT INFORMATION (CONTINUED)
The segment income statements for the years ended 31 December 2021 are as follows:
| | Insurance | Insurance | Insurance | Insurance | Insurance | Insurance | Insurance | Insurance | Corporate & | |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: |
| | **Motor vehicle** | **Commercial property** | **Cargo** | **Liability** | **Accidental injury and health** | **Agriculture** | **Credit and surety** | **Others** | **other** | **Total** |
| Gross written premiums | 255,275 | 15,912 | 4,814 | 33,134 | 80,692 | 42,769 | 2,840 | 14,097 | – | 449,533 |
| | | | | | | | | | | |
| Net earned premiums | 243,833 | 8,158 | 2,944 | 22,436 | 76,526 | 30,274 | 5,289 | 7,537 | – | 396,997 |
| | | | | | | | | | | |
| Net claims incurred | (170,890) | (7,396) | (1,548) | (15,223) | (65,192) | (24,694) | (2,674) | (4,971) | – | (292,588) |
| Net policy acquisition costs | (37,448) | (2,129) | (731) | (5,901) | (9,911) | (1,197) | (908) | (1,891) | – | (60,116) |
| Other underwriting expenses | (22,963) | (801) | (254) | (2,186) | (2,251) | (3,634) | 492 | (967) | – | (32,564) |
| Administrative expenses | (5,860) | (275) | (151) | (769) | (1,124) | (1,227) | (437) | (365) | – | (10,208) |
| | | | | | | | | | | |
| **Underwriting profit/(loss)** | 6,672 | (2,443) | 260 | (1,643) | (1,952) | (478) | 1,762 | (657) | – | 1,521 |
| | | | | | | | | | | |
| Investment income | – | – | – | – | – | – | – | – | 17,996 | 17,996 |
| Net realised and unrealised gains | | | | | | | | | | |
| on investments | – | – | – | – | – | – | – | – | 3,634 | 3,634 |
| Investment related expenses | – | – | – | – | – | – | – | – | (456) | (456) |
| Foreign exchange losses, net | – | – | – | – | – | – | – | – | (282) | (282) |
| Other income, net | – | – | – | – | – | – | – | – | 624 | 624 |
| Finance costs | – | – | – | – | – | – | – | – | (1,533) | (1,533) |
| Share of profits or losses of | | | | | | | | | | |
| associates and joint ventures | – | – | – | – | – | – | – | – | 4,524 | 4,524 |
| | | | | | | | | | | |
| **Profit/(Loss) before income tax** | 6,672 | (2,443) | 260 | (1,643) | (1,952) | (478) | 1,762 | (657) | 24,507 | 26,028 |
| | | | | | | | | | | |
| Income tax expense | – | – | – | – | – | – | – | – | (3,663) | (3,663) |
| | | | | | | | | | | |
| **Net profit/(loss) for the year** | | | | | | | | | | |
| **- segment results** | 6,672 | (2,443) | 260 | (1,643) | (1,952) | (478) | 1,762 | (657) | 20,844 | 22,365 |
---
# 4. OPERATING SEGMENT INFORMATION (CONTINUED)
The segment assets and liabilities of the Group at 31 December 2022 and other segment information for the year ended 31 December 2022 are as follows:
| | Insurance | | | | | | | | | |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: |
| | **Motor vehicle** | **Commercial property** | **Cargo** | **Liability** | **Accidental injury and health** | **Agriculture** | **Credit and surety** | **Others** | **Corporate & other** | **Total** |
| **31 December 2022** | | | | | | | | | | |
| Segment assets | 8,233 | 12,719 | 2,872 | 18,553 | 18,599 | 29,312 | 5,313 | 22,781 | 633,505 | 751,887 |
| Segment liabilities | 244,335 | 25,142 | 5,130 | 49,404 | 55,395 | 23,586 | 9,990 | 32,813 | 93,344 | 539,139 |
| **For the year ended 31 December 2022** | | | | | | | | | | |
| Other segment information: | | | | | | | | | | |
| Capital expenditures | 3,056 | 175 | 50 | 355 | 1,089 | 634 | 55 | 149 | – | 5,563 |
| Depreciation and amortisation | 2,043 | 116 | 33 | 237 | 727 | 424 | 36 | 101 | – | 3,717 |
| Provision for/(Reversal of) impairment losses on insurance receivables, prepayments and other assets | 28 | 84 | 18 | 304 | 199 | (101) | 162 | 216 | – | 910 |
| Interest income | – | – | – | – | – | – | – | – | 13,733 | 13,733 |
The segment assets and liabilities of the Group at 31 December 2021 and other segment information for the year ended 31 December 2021 are as follows:
| | Insurance | | | | | | | | | |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: |
| | **Motor vehicle** | **Commercial property** | **Cargo** | **Liability** | **Accidental injury and health** | **Agriculture** | **Credit and surety** | **Others** | **Corporate & other** | **Total** |
| **31 December 2021** | | | | | | | | | | |
| Segment assets | 8,176 | 11,456 | 2,457 | 15,019 | 12,908 | 18,163 | 6,209 | 19,893 | 588,341 | 682,622 |
| Segment liabilities | 221,025 | 23,169 | 4,583 | 40,902 | 43,748 | 18,411 | 10,992 | 28,970 | 85,173 | 476,973 |
| **For the year ended 31 December 2021** | | | | | | | | | | |
| Other segment information: | | | | | | | | | | |
| Capital expenditures | 1,372 | 86 | 26 | 178 | 434 | 230 | 15 | 76 | – | 2,417 |
| Depreciation and amortisation | 1,985 | 124 | 37 | 258 | 627 | 332 | 22 | 111 | – | 3,496 |
| Provision for/(Reversal of) impairment losses on insurance receivables, prepayments and other assets | 115 | (40) | (8) | 73 | (61) | 201 | 188 | (82) | – | 386 |
| Interest income | – | – | – | – | – | – | – | – | 14,341 | 14,341 |
---
### 5. GROSS WRITTEN PREMIUMS AND NET EARNED PREMIUMS
| | 2022 | 2021 |
| :--- | :--- | :--- |
| Direct written premiums | 485,434 | 448,384 |
| Reinsurance premiums assumed | 2,099 | 1,149 |
| Gross written premiums | 487,533 | 449,533 |
| Reinsurance premiums ceded | (51,536) | (44,292) |
| Net written premiums | 435,997 | 405,241 |
| Gross change in unearned premium reserves | (12,621) | (10,082) |
| Reinsurer’s share of change in unearned premium reserves | 2,104 | 1,838 |
| Net change in unearned premium reserves | (10,517) | (8,244) |
| Net earned premiums | 425,480 | 396,997 |
### 6. NET CLAIMS INCURRED
| | 2022 | 2021 |
| :--- | :--- | :--- |
| Gross claims paid | 305,888 | 305,253 |
| Paid losses recoverable from reinsurers | (28,914) | (25,960) |
| Net claims paid | 276,974 | 279,293 |
| Gross change in loss and loss adjustment expense reserves | 33,477 | 15,826 |
| Reinsurer’s share of change in loss and loss adjustment expense reserves | (4,817) | (2,531) |
| Net change in loss and loss adjustment expense reserves | 28,660 | 13,295 |
| Net claims incurred | 305,634 | 292,588 |
---
## 7. NET POLICY ACQUISITION COSTS
| | 2022 | 2021 |
| :--- | :--- | :--- |
| Commission expenses | 38,297 | 37,674 |
| Less: Reinsurance commission income | (11,896) | (10,805) |
| Underwriting personnel expenses | 30,506 | 27,881 |
| Contributions to insurance security fund (note 33) | 2,415 | 3,158 |
| Taxes and other surcharges | 1,147 | 965 |
| Others | 365 | 1,243 |
| **Total** | **60,834** | **60,116** |
## 8. INVESTMENT INCOME
| | 2022 | 2021 |
| :--- | :--- | :--- |
| Operating lease income from investment properties | 325 | 277 |
| Interest income from: | | |
| Current and term deposits | 3,375 | 3,551 |
| Debt securities | | |
| – Available-for-sale financial assets | 4,893 | 4,794 |
| – Held-to-maturity financial assets | 1,698 | 2,121 |
| – Financial assets at fair value through profit or loss | 439 | 369 |
| Investments classified as loans and receivables | 3,328 | 3,506 |
| **Subtotal** | **13,733** | **14,341** |
| Dividend income from equity securities and mutual funds: | | |
| – Available-for-sale financial assets | 6,082 | 3,331 |
| – Financial assets at fair value through profit or loss | 40 | 47 |
| **Subtotal** | **6,122** | **3,378** |
| **Total** | **20,180** | **17,996** |
---
# 9. NET REALISED AND UNREALISED (LOSSES)/GAINS ON INVESTMENTS
| | 2022 | 2021 |
| :--- | :---: | :---: |
| Realised (losses)/gains from: | | |
| Debt securities | | |
| – Available-for-sale financial assets | 704 | 217 |
| – Financial assets at fair value through profit or loss | (27) | 72 |
| Equity securities and mutual funds and mutual funds | | |
| – Available-for-sale financial assets | (3,328) | 4,084 |
| – Financial assets at fair value through profit or loss | (132) | 7 |
| Subtotal | (2,783) | 4,380 |
| | | |
| Unrealised (losses)/gains from: | | |
| Debt securities at fair value through profit or loss | (237) | 206 |
| Equity securities and mutual funds at fair value through profit or loss | (12) | 45 |
| Subtotal | (249) | 251 |
| | | |
| Impairment (losses)/reversals on: | | |
| Debt securities classified as available-for-sale financial assets and held-to-maturity financial assets (note 18) | (175) | – |
| Investments classified as loans and receivables (note 23) | 100 | (488) |
| Equity securities and mutual funds classified as available-for-sale financial assets (note 19) | (438) | (440) |
| Subtotal | (513) | (928) |
| | | |
| Fair value losses on investment properties (note 26) | (161) | (69) |
| | | |
| Total | (3,706) | 3,634 |
---
## 10. FINANCE COSTS
| | 2022 | 2021 |
| :--- | :---: | :---: |
| Interest on securities sold under agreements to repurchase | 591 | 775 |
| Interest on bonds payable | 327 | 536 |
| Interest on lease liabilities | 66 | 75 |
| Others | 21 | 147 |
| | | |
| Total | 1,005 | 1,533 |
## 11. PROFIT BEFORE INCOME TAX
The Group's profit before income tax has been arrived at after charging/(crediting):
| | Notes | 2022 | 2021 |
| :--- | :---: | :---: | :---: |
| Employee expenses (including directors’, supervisors’ and senior management’s remunerations) | | 51,508 | 46,019 |
| – Salaries, allowances and performance related bonuses | | 47,534 | 41,845 |
| – Pension scheme contributions | | 3,974 | 4,174 |
| Depreciation of property and equipment | 27 | 1,968 | 1,850 |
| Depreciation of right-of-use assets | 28 | 1,041 | 1,097 |
| Impairment losses on insurance receivables | 20 | 820 | 118 |
| Amortisation of intangible assets | | 708 | 549 |
| Provision for impairment losses on prepayments and other assets | | 90 | 268 |
| Auditors’ remuneration | | 13 | 15 |
| Net gains on disposal of property and equipment | | (118) | (111) |
---
## 12. INCOME TAX EXPENSE
The provision for PRC income tax is calculated based on the statutory rate of 25% (2021: 25%) in accordance with the relevant PRC income tax rules and regulations during each period. Starting in 2020, the Company’s branches in some western provinces and Hainan Province enjoy the preferential tax rate of 15% for eligible taxable income. According to relevant tax regulations, the preferential tax rate of some western provinces and Hainan Province are applicable until 2030 and 2024, respectively.
| | 2022 | 2021 |
| :--- | :--- | :--- |
| Current tax | 9,342 | 6,115 |
| Deferred tax | (5,076) | (2,452) |
| | | |
| Total | 4,266 | 3,663 |
A reconciliation of the tax expense applicable to profit before income tax at the statutory tax rate of the PRC, in which the Group is domiciled, to the income tax at the effective tax rate is as follows:
| | 2022 | 2021 |
| :--- | :--- | :--- |
| Profit before income tax | 30,919 | 26,028 |
| | | |
| Income tax at the statutory tax rate of 25% (2021:25%) | 7,730 | 6,507 |
| Income not subject to tax | (3,259) | (2,831) |
| Expenses not deductible for tax | 105 | 190 |
| Impact from preferential tax treatment | (310) | (203) |
| | | |
| Income tax at the Group’s effective tax rate | 4,266 | 3,663 |
---
# 13. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS
## (a) Directors and supervisors
Directors’ and supervisors’ remuneration for the year, disclosed pursuant to the applicable Listing Rules and the Hong Kong Companies Ordinance, is as follows:
| 2022 | Fees RMB’000 | Salaries and allowances RMB’000 | Performance related bonuses RMB’000 | Retirement benefits RMB’000 | Housing fund and other benefits RMB’000 | Total remuneration before tax RMB’000 |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: |
| Non-executive directors: | | | | | | |
| Mr.Luo Xi (i)(Chairman of the Board) (appointed as non-executive director and Chairman of the Board on 18 Mar 2021 and resigned on 16 Mar 2023) | - | - | - | - | - | - |
| Mr.Li Tao (i) | - | - | - | - | - | - |
| Executive directors: | | | | | | |
| Mr.Yu Ze (i)(President)(appointed as president on 28 June 2021, executive director on 30 December 2021) | - | - | - | - | - | - |
| Mr.Jiang Caishi | - | 599 | 457 | 230 | 113 | 1,399 |
| Mr.Zhang Daoming (appointed as executive director on 22 April 2022) | - | 599 | 457 | 223 | 108 | 1,387 |
| Independent directors: | | | | | | |
| Mr.Lin Hanchuan (resigned on 17 Feb 2023) | 200 | - | - | - | - | 200 |
| Mr.Lo Chung Hing | 225 | - | - | - | - | 225 |
| Mr.Chu Bende (resigned on 11 July 2022) | - | - | - | - | - | - |
| Ms.Qu Xiaohui | 250 | - | - | - | - | 250 |
| Mr.Cheng Fengchao (appointed as independent director on 25 November 2022) | 42 | - | - | - | - | 42 |
| Supervisors: | | | | | | |
| Mr.Zhang Xiaoli (ii)(Chairman of the Supervisory Committee)(resigned on 15 July 2022) | - | 300 | 228 | 113 | 60 | 701 |
| Mr. Wang Yadong (i) | - | - | - | - | - | - |
| Ms. Gao Hong (iii) | - | - | - | - | - | - |
| Ms.Wang Xiaoli (iii) | - | - | - | - | - | - |
| Independent supervisors: | | | | | | |
| Mr.Lu Zhengfei | 250 | - | - | - | - | 250 |
| Total | 967 | 1,498 | 1,142 | 566 | 281 | 4,454 |
(i) These executive directors, non-executive directors and supervisors did not receive any remuneration from the Company.
---
# 13. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS (CONTINUED)
## (a) Directors and supervisors (continued)
(ii) Mr.Zhang Xiaoli resigned as the Chairman of the Supervisory Committee, a supervisor and the Chairman of the special committee of the Supervisory Committee on 15 July 2022. Given that the Supervisory Committee becomes inquorate due to Mr.Zhang Xiaoli’s resignation, pursuant to relevant laws and regulations of the PRC and the Articles of Association, Mr.Zhang Xiaoli shall continue to perform his duties as a supervisor in accordance with laws and regulations, regulatory provisions and the Articles of Association before a new supervisor is elected and fills the vacancy caused by his resignation.
(iii) Ms.Gao Hong and Ms.Wang Xiaoli, supervisory employees of the Company, have completed their retirement procedures in 2021.
In accordance with the policies of the relevant authorities in the PRC, the Company did not pay any compensation to Mr.Luo Xi for his service as the Chairman of the Board.
The remunerations of executive directors, Mr.Jiang Caishi and Mr.Zhang Daoming were mainly for their services as directors of the Company.
The remuneration of independent directors and external supervisors consists of two parts: basic remuneration and floating remuneration, according to the proposal on remuneration plan of independent directors and external supervisors of the Company. The basic remuneration is a fixed amount, among which, independent directors and external supervisors who are the chairman of the committees of the Board of Directors or the Supervisory Committee are proposed to be paid RMB250,000 per person per year before tax, and other independent directors and external supervisors are proposed to be paid RMB200,000 per person per year before tax. The floating remuneration is RMB50,000 per person per year before tax, which is linked to the annual performance evaluation results. Those rated as “competent” will be paid at 100%; those rated as “basically competent” will be paid at 60%; those rated as “incompetent” will not be paid for floating remuneration. The remuneration of independent directors and external supervisors shall be charged and paid by the Company in accordance with the relevant policies each year during their terms of office. The remuneration shall be calculated according to the actual length of service of such directors and supervisors during the year if their actual length of service are less than a year. In addition, according to the relevant requirements, Mr.Chu Bende did not receive any remuneration in 2022.
Mr.Zhang Xiaoli, the shareholder supervisor, his remunerations shown above were mainly for their services in connection with the management of the affairs of the Company.
The supervisors’ remunerations shown above were mainly for their services as employees of the Company.
Pursuant to the PRC relevant regulations, a portion of the performance related bonuses for certain executive directors and supervisors are deferred for a minimum of 3 years.
In respect of the Share Appreciation Rights (“SARs”) granted to senior executives, in compliance with the relevant laws and regulations issued by the Ministry of Finance of the PRC and the China Banking and Insurance Regulatory Commission (the “CBIRC”), the Company decided to suspend the scheme in 2008 except for SAR granted to any person who is not a Chinese mainland resident (please refer to note 43).
The total compensation packages of Mr.Jiang Caishi, Mr.Zhang Daoming and Mr.Zhang Xiaoli for the year ended 31 December 2022 including performance related bonuses have not yet been finalised in accordance with regulations of the relevant authorities in the PRC. Management of the Company believes that the difference between the final remunerations and that disclosed above will not have significant impact on the consolidated financial statements.
---
# 13. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS (CONTINUED)
## (a) Directors and supervisors (continued)
| 2021 (Restated) | Fees RMB'000 | Salaries and allowances RMB'000 | Performance related bonuses RMB'000 | Retirement benefits RMB'000 | Housing fund and other benefits RMB'000 | Total remuneration before tax RMB'000 |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: |
| **Non-executive directors:** | | | | | | |
| Mr.Luo Xi (i)(Chairman of the Board) (appointed as non-executive director and Chairman of the Board on 18 March 2021) | – | – | – | – | – | – |
| Mr.Li Tao (i) | – | – | – | – | – | – |
| **Executive directors:** | | | | | | |
| Mr.Yu Ze (i)(President)(appointed as president on 28 June 2021, executive director on 30 December 2021) | – | – | – | – | – | – |
| Mr.Xie Yiqun (i)(resigned as President on 23 March 2021, Vice Chairman on 26 March 2021, executive director on 25 June 2021) | – | – | – | – | – | – |
| Ms.Xie Xiaoyu (resigned on 22 February 2021) | – | 50 | 95 | 17 | 19 | 181 |
| Mr.Jiang Caishi (appointed as executive director on 9 April 2021) | – | 599 | 1,157 | 224 | 110 | 2,090 |
| **Independent directors:** | | | | | | |
| Mr.Lin Hanchuan | 234 | – | – | – | – | 234 |
| Mr.Lo Chung Hing | 230 | – | – | – | – | 230 |
| Mr.Ma Yusheng (resigned on 31 May 2021) | 91 | – | – | – | – | 91 |
| Mr.Chu Bende | 234 | – | – | – | – | 234 |
| Ms.Qu Xiaohui | 234 | – | – | – | – | 234 |
| **Supervisors:** | | | | | | |
| Mr.Zhang Xiaoli (Chairman of the Supervisory Committee) | – | 599 | 1,141 | 224 | 110 | 2,074 |
| Mr.Wang Yadong (i) | – | – | – | – | – | – |
| Ms.Gao Hong | – | 315 | 1,135 | 131 | 82 | 1,663 |
| Ms.Wang Xiaoli | – | 281 | 1,015 | 118 | 81 | 1,495 |
| **Independent supervisors:** | | | | | | |
| Mr.Lu Zhengfei | 234 | – | – | – | – | 234 |
| **Total** | 1,257 | 1,844 | 4,543 | 714 | 402 | 8,760 |
(ii) These executive directors, non-executive directors and supervisors did not receive any remuneration from the Company.
The compensation amounts for certain executive directors and supervisors during their appointment were stated above, in which the compensation amounts for the year ended 31 December 2021 were restated after finalisation in year 2022.
---
# 13. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS (CONTINUED)
### (b) Senior management
Remuneration of senior management other than directors and supervisors is as follows:
| | 2022 | 2021 |
| :--- | :---: | :---: |
| | | (Restated) |
| | **RMB’000** | **RMB’000** |
| | | |
| Salaries, allowances | 1,473 | 3,494 |
| Performance related bonuses | 1,042 | 7,618 |
| Retirement benefits | 577 | 1,286 |
| Housing fund and other benefits | 296 | 654 |
| | | |
| **Total** | **3,388** | **13,052** |
Pursuant to the PRC relevant regulations, a portion of the performance related bonuses for certain members of senior management are deferred for a minimum of 3 years contingent upon the future performance.
The total compensation packages for senior management for the year ended 31 December 2022 including performance related bonuses have not yet been finalised in accordance with regulations of the relevant authorities in the PRC. Management of the Company believes that the difference between the final remunerations and that disclosed above will not have significant impact on the consolidated financial statements.
The number of senior management other than directors and supervisors whose remuneration fell within the following bands is as follows:
| | 2022 | 2021 |
| :--- | :---: | :---: |
| | | (Restated) |
| | | |
| HKD1,000,001 to HKD1,500,000 | 1 | 1 |
| HKD1,500,001 to HKD2,000,000 | 1 | 2 |
| HKD2,000,001 to HKD2,500,000 | – | 5 |
| | | |
| **Total** | **2** | **8** |
The compensation amounts for certain members of senior management during their appointment were stated above, in which the compensation amounts for the year ended 31 December 2021 were restated after finalisation in year 2022. Pursuant to the PRC relevant regulations, a portion of the performance related bonuses for the year ended 31 December 2021 amounting to approximately RMB3 million for senior management had been deferred.
---
## 14. FIVE HIGHEST PAID INDIVIDUALS
The five highest paid individuals of the Group during the year included two directors and one supervisor (2021: one director and three supervisors), details of whose remunerations are set out in note 13 above. Details of the remuneration for the year of the remaining two (2021: one) highest paid individuals are set out below:
| | 2022 | 2021 (Restated) |
| :--- | :---: | :---: |
| | **RMB’000** | **RMB’000** |
| Salaries, allowances | 1,080 | 549 |
| Performance related bonuses | 778 | 419 |
| Retirement benefits | 428 | 205 |
| Housing fund and other benefits | 206 | 104 |
| **Total** | **2,492** | **1,277** |
The number of the highest paid individuals who are not directors/supervisors of the Company whose remunerations fell within the following band is as follows:
| | 2022 | 2021 (Restated) |
| :--- | :---: | :---: |
| HKD1,000,001 to HKD1,500,000 | 1 | – |
| HKD1,500,001 to HKD2,000,000 | 1 | 1 |
| **Total** | **2** | **1** |
The compensation amounts for highest paid individuals for the year ended 31 December 2021 were restated based on the finalised amounts determined during 2022.
---
## 15. EARNINGS PER SHARE
### (a) Basic earnings per share
The calculation of basic earnings per share is based on the following:
| | 2022 | 2021 |
| :--- | :--- | :--- |
| **Earnings:** | | |
| Net profit attributable to owners of the parent (RMB million) | 26,708 | 22,360 |
| **Shares:** | | |
| Weighted average number of ordinary shares in issue (in million shares) (note 40) | 22,242 | 22,242 |
| | | |
| Basic earnings per share | **RMB1.201** | **RMB1.005** |
Basic earnings per share was calculated as the net profit attributable to owners of the parent divided by the weighted average number of ordinary shares in issue for the year ended 31 December 2022 and 2021.
### (b) Diluted earnings per share
For the year ended 31 December 2022 and 2021, the Group holds no dilutive potential ordinary shares, therefore diluted earnings per share is the same as basic earnings per share.
## 16. DIVIDENDS
| | 2022 | 2021 |
| :--- | :--- | :--- |
| Dividends recognised as distribution during the year: | | |
| Year 2020 Final – RMB0.375 per ordinary share | – | 8,342 |
| Year 2021 Final – RMB0.407 per ordinary share | 9,053 | – |
No interim dividend was proposed by the Board of Directors in 2022 and 2021.
Pursuant to the shareholders’ approval at the general meeting on 20 June 2022, a final dividend of RMB0.407 per ordinary share totaling RMB9,053 million in respect of the year ended 31 December 2021 was declared.
Pursuant to the shareholders’ approval at the general meeting on 18 June 2021, a final dividend of RMB0.375 per ordinary share totaling RMB8,342 million in respect of the year ended 31 December 2020 was declared.
---
# 17. CASH AND CASH EQUIVALENTS
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Demand deposits and cash on hand | 10,848 | 13,309 |
| Securities purchased under resale agreements with original maturity of no more than three months | 10,397 | 4,105 |
| Deposits with banks with original maturity of no more than three months | 5 | – |
| **Total** | **21,250** | **17,414** |
| | | |
| Classification of cash and cash equivalents: | | |
| Loans and receivables | 21,250 | 17,414 |
For securities purchased under resale agreements, counterparties are required to pledge certain bonds as collaterals. The securities purchased are not recognised on the consolidated statement of financial position. The carrying amounts disclosed above reasonably approximate to the fair values of those collaterals at 31 December 2022 and 2021.
# 18. DEBT SECURITIES
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Classification of debt securities: | | |
| **At fair value through profit or loss** | | |
| – Government bonds | – | 182 |
| – Financial bonds | 1,988 | 5,639 |
| – Corporate bonds | 6,155 | 8,463 |
| **Subtotal** | **8,143** | **14,284** |
| | | |
| **Available-for-sale, at fair value** | | |
| – Government bonds | 29,718 | 33,809 |
| – Financial bonds | 69,589 | 41,590 |
| – Corporate bonds | 45,968 | 46,341 |
| **Subtotal** | **145,275** | **121,740** |
| | | |
| **Held-to-maturity, at amortised cost** | | |
| – Government bonds | 12,858 | 10,971 |
| – Financial bonds | 10,916 | 14,052 |
| – Corporate bonds | 15,778 | 11,804 |
| **Subtotal** | **39,552** | **36,827** |
| | | |
| **Total** | **192,970** | **172,851** |
During the year, an impairment loss of RMB143 million was provided by the Group on held-to-maturity debt securities and RMB32 million was provided on available-for-sale debt securities (2021: Nil).
---
## 19. EQUITY SECURITIES AND MUTUAL FUNDS
| | 31 December 2022 | 31 December 2021 |
| :--- | :--- | :--- |
| **Investments, at fair value:** | | |
| Mutual funds | 40,586 | 41,950 |
| Listed shares | 39,296 | 39,442 |
| Perpetual bonds (i) | 22,418 | 25,416 |
| Equity schemes (ii) | 14,275 | 12,473 |
| Perpetual trust plans and perpetual debt plans (i) | 13,632 | 12,528 |
| Preferred shares | 7,377 | 8,853 |
| Unlisted shares | 3,134 | 3,142 |
| | | |
| **Total** | **140,718** | **143,804** |
(i) These perpetual financial instruments have no maturity date, and the issuer does not have a contractual obligation to make distributions or to redeem them by cash or other financial assets.
(ii) Equity schemes are structured entities which are set up for investing in one or more equity investments. The underlying equity investments of these equity schemes are usually determined at inception of these schemes.
The Group did not guarantee or provide any financing support for these equity schemes, perpetual trust plans and perpetual debt plans, and considers that the carrying amount of these equity schemes, perpetual trust plans and perpetual debt plans represents the Group’s maximum risk exposure.
| | 31 December 2022 | 31 December 2021 |
| :--- | :--- | :--- |
| **Classification of equity securities and mutual funds:** | | |
| Available-for-sale, at fair value | 137,688 | 138,269 |
| At fair value through profit or loss | 3,030 | 5,535 |
| | | |
| **Total** | **140,718** | **143,804** |
During the year, an impairment loss of RMB438 million was provided by the Group on equity securities and mutual funds (2021: RMB440 million).
---
# 20. INSURANCE RECEIVABLES
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Premiums receivable and agents’ balances | 55,576 | 42,138 |
| Receivables from reinsurers | 18,749 | 16,767 |
| | | |
| Total | 74,325 | 58,905 |
| | | |
| Less: Impairment provisions on | | |
| – Premiums receivable and agents’ balances | (4,073) | (3,346) |
| – Receivables from reinsurers | (167) | (160) |
| | | |
| Net value | 70,085 | 55,399 |
## (a) Analysis of insurance receivables, based on the payment past due date and net of provision, is as follows:
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Not yet due | 39,829 | 34,859 |
| Within 3 months | 18,008 | 11,130 |
| 3 to 6 months | 4,990 | 3,576 |
| 6 to 12 months | 4,978 | 4,443 |
| 1 to 2 years | 2,094 | 1,244 |
| Over 2 years | 186 | 147 |
| | | |
| Total | 70,085 | 55,399 |
## (b) The movements of provision for impairment of insurance receivables are as follows:
| | 2022 | 2021 |
| :--- | :---: | :---: |
| At the beginning of the year | 3,506 | 3,412 |
| Impairment losses recognised (note 11) | 820 | 118 |
| Amount written off as uncollectible | (86) | (24) |
| | | |
| At the end of the year | 4,240 | 3,506 |
---
## 20. INSURANCE RECEIVABLES (CONTINUED)
(b) The movements of provision for impairment of insurance receivables are as follows (Continued):
Included in the Group’s insurance receivables are amounts due from a fellow subsidiary under PICC Group of RMB365 million (31 December 2021: RMB180 million) and an associate of RMB988 million (31 December 2021: RMB1,047 million), respectively. Please refer to note 47(d) for details.
The Group only issues insurance policies on credit to corporate customers or to individuals who purchase certain policies through insurance intermediaries. A policyholder usually has a maximum credit period of three months but a longer period can be granted on a discretionary basis. For large corporate customers and certain multi-year policies, payments by instalments are usually arranged. One of the major performance indicators is the ability to collect premiums receivable on a timely basis. The Group’s premiums receivable relates to a large number of diversified customers and therefore there is no significant concentration of credit risk.
Reinsurance of the Group is mainly placed with reinsurers with Standard & Poor’s ratings of A- (or ratings of an equal level given by other international rating institutions such as A.M. Best, Fitch and Moody’s) or above except for state-owned reinsurance companies. Management of the Company performs regular assessment of creditworthiness of reinsurers to update reinsurance purchase strategies and appropriate allowances to be provided for impairment of reinsurance assets.
## 21. REINSURANCE ASSETS
| | 31 December 2022 | 31 December 2021 |
| :--- | :--- | :--- |
| Reinsurers’ share of: | | |
| Loss and loss adjustment expense reserves (note 35) | 27,202 | 22,385 |
| Unearned premium reserves (note 35) | 17,254 | 15,150 |
| | | |
| **Total** | **44,456** | **37,535** |
## 22. TERM DEPOSITS
The original maturities of the term deposits are as follows:
| | 31 December 2022 | 31 December 2021 |
| :--- | :--- | :--- |
| More than 3 months to 1 year | 2,228 | 1,696 |
| More than 1 year to 2 years | 25 | 1 |
| More than 2 years to 3 years | 9,394 | 7,381 |
| More than 3 years | 62,010 | 64,496 |
| | | |
| **Total** | **73,657** | **73,574** |
---
## 23. INVESTMENTS CLASSIFIED AS LOANS AND RECEIVABLES
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Long-term debt investment schemes | 33,209 | 26,110 |
| Trust plans | 30,419 | 24,627 |
| Asset management products | 8,095 | 8,063 |
| Others | 588 | 936 |
| | | |
| Total | 72,311 | 59,736 |
| | | |
| Less: impairment provision (note 9) | (998) | (1,098) |
| | | |
| Net carrying value | 71,313 | 58,638 |
Long-term debt investment schemes (“Debt Schemes”) are structured entities and offer either fixed or variable interests to their investors. The Group has invested in a number of Debt Schemes over time. These Debt Schemes were created to raise funds from investors for lending onto various borrowers. The Group’s investments in Debt Schemes are entirely lending transactions in nature and the Group’s interests in these Debt Schemes range from 1% to 100% at 31 December 2022 (31 December 2021: 2% to 100%). The interest rates of these Debt Schemes range from 3.68% to 6.52% (31 December 2021: 4.15% to 6.52%) per annum at 31 December 2022.
The Group assessed it has no control on any of these Debt Schemes. The Group’s voting rights as lenders to these Debt Schemes are protective of the Group’s interests in the Debt Schemes and mainly comprise early termination or extension of the Debt Schemes’ term and, when certain conditions exist, change of the Debt Schemes’ managers. All loans originated by the Debt Schemes with the funds received from their investors are guaranteed by third parties and these guarantees are always joint, irrevocable and unconditional. Guarantors of Debt Schemes are banks of high credit rating or state-owned enterprises. The Group did not guarantee or provide any financing support for these Debt Schemes, and considers that the carrying amount of the loans to these Debt Schemes represents the Group’s maximum risk exposure.
Trust plans invest in predominantly debt instruments and offer the Group interest rates ranging from 3.65% to 6.12% (31 December 2021: 4.25% to 6.12%) per annum at December 2022. The actual returns and eventual repayment of initial investments, however, depend on the performance of the underlying investments, which are predominantly debts in nature. The Group’s maximum loss is limited to the investments and has no contractual obligations or intention to provide any financial support for these trust plans.
Asset management products are various financial products which offer fixed or determinable payments and are not quoted in an active market. These financial products include creditor’s right of return and asset-backed security offered by asset management companies. The interest rates of these products range from 3.77% to 6.08% (31 December 2021: 4.30% to 6.08%) per annum at 31 December 2022.
---
# 24. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| **Associates** | | |
| Cost of investments in associates (i) | 38,765 | 38,860 |
| Share of post-acquisition profit and other comprehensive income, net of dividend received | 19,340 | 18,047 |
| **Subtotal** | 58,105 | 56,907 |
| | | |
| **Joint venture** | | |
| Cost of investment in joint venture | 98 | 98 |
| Share of post-acquisition profit and other comprehensive income, net of dividend received | (60) | (60) |
| **Subtotal** | 38 | 38 |
| | | |
| **Total** | 58,143 | 56,945 |
(i) A dilution loss arising on a reduced stake in an associate amounting to RMB95 million was included in this item for the year ended 31 December 2022.
Movement of investments in associates and joint ventures is as follows:
| Associates and joint ventures | 1 January 2022 | Share of profit | Share of other comprehensive income | Others | Dividend received | 31 December 2022 |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: |
| Hua Xia Bank Co., Limited (“Hua Xia Bank”) | 39,972 | 3,696 | (431) | (158) | (866) | 42,213 |
| Others | 16,973 | 529 | (1,182) | (2) | (388) | 15,930 |
| | 56,945 | 4,225 | (1,613) | (160) | (1,254) | 58,143 |
---
# 24. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (CONTINUED)
## Particulars of a material associate
Particulars of a material associate at 31 December 2022 and 2021 are as follows:
| Name | Place of registration and operations | Paid up/ registered | Proportion of ownership interest and voting right at 31 December 2022 | Proportion of ownership interest and voting right at 31 December 2021 | Principal activities |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Hua Xia Bank | Beijing, PRC | 15,915 | 16.106% | 16.660% | Commercial banking |
On 28 December 2015, the Company entered into a share transfer agreement with Deutsche Bank Aktiengesellschaft (“Deutsche Bank”), Sal. Oppenheim jr. & Cie. AG & Co. Kommanditgesellschaft auf Aktien (“Sal. Oppenheim”) and Deutsche Bank Luxembourg S.A. (“Deutsche Bank Luxembourg”), pursuant to which each of Deutsche Bank, Sal. Oppenheim and Deutsche Bank Luxembourg conditionally agreed to transfer to the Company 877 million shares, 267 million shares and 992 million shares of Hua Xia Bank, respectively, held by them (amounting to a total of 2,136 million shares, representing approximately 19.99% of the total issued shares of Hua Xia Bank) and the Company conditionally agreed to purchase these shares with total amount of RMB22,444 million. This transaction was completed on 17 November 2016. Management has assessed the level of influence that the Group has on Hua Xia Bank, and determined that it has significant influence even though the respective shareholding is below 20% because of the board representation and other arrangements made. Consequently, this investment has been classified as an associate. It is accounted for using equity method.
On 28 December 2018, Hua Xia Bank completed its private offering. The Group did not subscribe for the shares proportionately, therefore, its total equity interest in Hua Xia Bank was diluted from 19.99% to 16.66%. As such, a dilution loss amounting to RMB737 million was recognised in investments in associates and joint ventures and reserves.
On 18 October 2022, Hua Xia Bank completed its private offering of shares, issued 527,704,485 new shares, raising net proceeds of RMB7,994 million. The PICC P&C, a subsidiary of the Group, did not subscribe for the shares proportionately, therefore its total equity interest in Hua Xia Bank was diluted from 16.66% to 16.11%. As such, a dilution loss amounting to RMB95 million was recognised in losses arising on a reduced stake in an associate.
Management has assessed the level of influence that the Group has on Hua Xia Bank, and determined that it has significant influence even though the respective shareholding is below 20% because of the board representation and other arrangements made. Consequently, this investment has been classified as an associate. It is accounted for using equity method.
At 31 December 2022, the carrying amount of Hua Xia Bank exceeded its fair value for more than five years. Management performed impairment test accordingly considering such impairment indicator exists. The recoverable amount of the interest in Hua Xia Bank is determined by value-in-use approach. The calculation used pre-tax cash flow projections for the five years ending 31 December 2027 with subsequent extrapolation to perpetuity. The discount rate used was based on a cost of capital used to evaluate investments in Mainland China. Management judgement is required in estimating the future cash flows of Hua Xia Bank. The key assumptions are determined with reference to external sources of information. Based on management’s assessment results, there was no impairment at 31 December 2022. Reasonably possible changes in key assumptions will not lead to impairment loss.
---
# 24. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (CONTINUED)
## Summarised financial information of a material associate
Summarised financial information in respect of the Group’s material associate is set out below.
### Hua Xia Bank
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Total assets | 3,900,167 | 3,676,287 |
| Net assets attributable to equity holders of Hua Xia Bank | 320,457 | 298,292 |
| | 2022 | 2021 |
| :--- | :---: | :---: |
| Revenue | 93,808 | 95,870 |
| Profit attributable to equity holders of Hua Xia Bank | 25,035 | 23,535 |
| Dividends received from the associate during the year | 866 | 771 |
Reconciliation of the carrying amount of the interest in Hua Xia Bank recognised in the consolidated financial statements:
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Net assets attributable to equity holders of Hua Xia Bank | 320,457 | 298,292 |
| Total preference shares issued by Hua Xia Bank | (19,978) | (19,978) |
| Total perpetual bonds issued by Hua Xia Bank | (39,993) | (39,993) |
| | | |
| Net assets attributable to ordinary shareholders of Hua Xia Bank | 260,486 | 238,321 |
| | | |
| Proportion of the Group’s ownership interest in Hua Xia Bank | 16.106% | 16.660% |
| | | |
| The Group’s ownership interest in net assets of Hua Xia Bank | 41,954 | 39,704 |
| Net fair value adjustment to the investee’s identifiable assets and liabilities | (63) | (65) |
| Amortisation of intangible assets and financial instruments recognised in fair value adjustments | 322 | 333 |
| | | |
| Carrying amount of the Group’s interest in Hua Xia Bank | 42,213 | 39,972 |
| | | |
| Fair value of shares listed in Mainland China | 13,303 | 14,354 |
---
# 24. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (CONTINUED)
#### Aggregate information of associates and joint ventures that are not individually material:
At 31 December 2022 apart from an associate disclosed above, the Group has in aggregate 8 (31 December 2021: 8) immaterial associates and joint ventures and their aggregate information is presented as below:
| | 2022 | 2021 |
| :--- | :---: | :---: |
| The Group’s share of profit | 529 | 1,019 |
| The Group’s share of other comprehensive income | (1,182) | (115) |
| The Group’s share of total comprehensive income | (653) | 904 |
| Aggregate carrying amount of the Group’s interests in these associates and joint ventures | 15,930 | 16,973 |
# 25. SUBSIDIARIES
#### Particulars of the subsidiaries at 31 December 2022 and 2021 are as follows:
| Name of subsidiary | Place of incorporation and type of legal entity | Share capital registered/ paid-up capital in million | Equity interest and voting right held by the Company as at 31 December 2022 | Equity interest and voting right held by the Company as at 31 December 2021 | Principal activities |
| :--- | :--- | :--- | :---: | :---: | :--- |
| PICC Minhe Holding (Beijing) Company Limited (Formerly known as PICC Community Sales Service Company Limited) | Shenzhen, PRC Limited Liability | RMB250 | 100% | 100% | Provision of insurance agency services |
| PICC Haikou Training Center Company Limited | Hainan, PRC Limited Liability | RMB0.1 | 100% | 100% | Provision of training services |
| PICC North Information Center Management Co., Ltd. (“PICC North Center”)(i) | Hebei, PRC Limited Liability | RMB1,551 | 70% | 70% | Provision of IT services and business services |
| PICC Services (Europe) Ltd. | London, UK Limited Liability | GBP0.5 | 100% | 100% | Claim handling agency |
| PICC Real Estate (Shenzhen) Company Limited (“PICC Real Estate”)(ii) | Shenzhen, PRC Limited Liability | RMB4,940 | 50% | 50% | Property management |
(i) In current year, the paid-up capital of PICC North Center increased by RMB570 million, of which RMB171 million were contributed by non-controlling equity holder.
(ii) The Group assesses it has control over PICC Real Estate as the Group has the power to appoint or remove a majority of the Board of Directors of PICC Real Estate to have the majority voting rights on the board meetings.
---
## 26. INVESTMENT PROPERTIES
| | 2022 | 2021 |
| :--- | :---: | :---: |
| At 1 January | 5,851 | 4,603 |
| Transferred from property and equipment and right-of-use assets | 1,589 | 945 |
| Fair value gain on revaluation of investment properties transferred from property and equipment and right-of-use assets | 636 | 803 |
| Decrease in fair value of investment properties (note 9) | (161) | (69) |
| Transferred to property and equipment and right-of-use assets | (475) | (431) |
| | | |
| **At 31 December** | **7,440** | **5,851** |
| | | |
| **Hierarchy of fair value:** | | |
| Level 3 | 7,440 | 5,851 |
The Group is still in the process of applying for the title certificates of certain investment properties with a total carrying value of RMB302 million at 31 December 2022 (31 December 2021: RMB252 million). The directors of the Company do not expect this to have any impacts on the operation of the Group.
At 31 December 2022 and 2021, the Group's investment properties were not pledged as collateral.
At 31 December 2022 and 2021, the fair values were determined based on the valuation carried out by an external independent valuer, Cushman & Wakefield Shenzhen Valuation Co., Ltd. And Jones Lang LaSalle IP, Inc. Valuations were carried out by the following two approaches:
(i) The income approach determining the fair value at the evaluation point by discounting the target properties' rental income derived from existing lease agreements and the potential rental income projected by reference to the current market rental status, at an appropriate capitalisation rate; or
(ii) The direct comparison approach comparing the target properties with the recent similar transaction cases, using the recent similar transaction price adjusting for difference of status, date, region and other specific factors between the target properties and the recent similar transaction cases.
---
## 26. INVESTMENT PROPERTIES (CONTINUED)
The independent valuers usually determine the fair value of the investment properties by one of these approaches according to their professional judgement. Therefore, these fair values are categorised as Level 3.
There has been no change in the valuation technique used from the prior years. In estimating the fair value of the properties, the highest and best use of the properties are their current use.
One of the key inputs used in valuing these investment properties was the capitalisation rate used, which ranges from 4% to 7.5% at 31 December 2022 (31 December 2021: 4% to 7.5%). A slight increase in the capitalisation rate used would result in significant decrease in fair value measurement of investment properties, and vice versa.
There was no transfer in or out of Level 3 during the year.
For investment properties measured at fair value categorised as Level 3, their valuations are performed by the independent valuer at 30 June and 31 December of each year, as well as on the dates of transfers in and out of investment properties. The finance department reviews the overall reasonableness of these valuations and reports the results of valuations to management.
Operating lease income from investment properties amounting to RMB325 million (2021: RMB277 million) was recognised in the consolidated income statement for the year.
## 27. PROPERTY AND EQUIPMENT
| | Lands and buildings | Motor vehicles | Office equipment, furniture and fixtures | Construction in progress | Total |
| :--- | :---: | :---: | :---: | :---: | :---: |
| **Cost** | | | | | |
| At 31 December 2021 | 25,813 | 1,842 | 9,017 | 3,676 | 40,348 |
| Additions | 300 | 82 | 452 | 3,450 | 4,284 |
| Transfers to/(from) | 736 | - | - | (736) | - |
| Transfers from investment properties | 289 | - | - | - | 289 |
| Transfers to investment properties and others | (1,765) | - | - | - | (1,765) |
| Disposals | (116) | (186) | (405) | - | (707) |
| At 31 December 2022 | 25,257 | 1,738 | 9,064 | 6,390 | 42,449 |
| | | | | | |
| **Accumulated depreciation** | | | | | |
| At 31 December 2021 | (8,037) | (1,230) | (7,338) | - | (16,605) |
| Depreciation charge (note 11) | (1,042) | (210) | (716) | - | (1,968) |
| Transfers to investment properties and others | 239 | - | - | - | 239 |
| Disposals | 88 | 179 | 392 | - | 659 |
| At 31 December 2022 | (8,752) | (1,261) | (7,662) | - | (17,675) |
| | | | | | |
| **Net book value** | | | | | |
| At 31 December 2022 | 16,505 | 477 | 1,402 | 6,390 | 24,774 |
| At 31 December 2021 | 17,776 | 612 | 1,679 | 3,676 | 23,743 |
---
## 27. PROPERTY AND EQUIPMENT (CONTINUED)
At 31 December 2022, certain acquired buildings of the Group with a net book value of RMB484 million (31 December 2021: RMB435 million) were still in the process of title registration. The directors of the Company do not expect this to have any impacts on the operation of the Group.
## 28. RIGHT-OF-USE ASSETS
| | Leasehold lands | Leased properties | Others | Total |
| :--- | :---: | :---: | :---: | :---: |
| **Cost** | | | | |
| At 31 December 2021 | 6,139 | 3,418 | 19 | 9,576 |
| Additions | 13 | 576 | 10 | 599 |
| Transfers from investment properties | 186 | – | – | 186 |
| Transfers to investment properties | (125) | – | – | (125) |
| Disposals/terminations | (32) | (809) | (9) | (850) |
| At 31 December 2022 | 6,181 | 3,185 | 20 | 9,386 |
| | | | | |
| **Accumulated depreciation** | | | | |
| At 31 December 2021 | (1,998) | (1,636) | (16) | (3,650) |
| Provided for the year | (188) | (843) | (10) | (1,041) |
| Transfers to investment properties | 62 | – | – | 62 |
| Disposals/terminations | 31 | 761 | 9 | 801 |
| At 31 December 2022 | (2,093) | (1,718) | (17) | (3,828) |
| | | | | |
| **Net book value** | | | | |
| At 31 December 2022 | 4,088 | 1,467 | 3 | 5,558 |
| At 31 December 2021 | 4,141 | 1,782 | 3 | 5,926 |
The above items of leasehold lands are depreciated on a straight-line basis over 30-70 years. For the year ended 31 December 2022, expense relating to leases of low-value assets and short-term leases that applied the simplified approach is approximately RMB82 million (2021: RMB153 million).
The Group has obtained the land use right certificates for all leasehold lands except for leasehold lands with carrying amount of RMB44 million (2021: RMB46 million) in which the Group is in the process of obtaining.
---
## 29. DEFERRED TAX
The movements in deferred tax assets and liabilities are as follows:
| | Impairment losses on financial assets | Fair value changes of available-for-sale financial assets | Insurance contract liabilities | Salaries and staff welfare payables | Revaluation of investment properties | Others | Total |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: |
| **Deferred tax assets** | | | | | | | |
| At 1 January 2022 | 1,973 | – | 11,233 | 1,183 | – | 1,415 | 15,804 |
| Credited to income statement (note 12) | 255 | – | 3,998 | 619 | – | 110 | 4,982 |
| **Gross deferred tax assets at 31 December 2022** | 2,228 | – | 15,231 | 1,802 | – | 1,525 | 20,786 |
| | | | | | | | |
| **Deferred tax liabilities** | | | | | | | |
| At 1 January 2022 | – | (6,782) | – | – | (1,713) | (193) | (8,688) |
| Credited to income statement (note 12) | – | – | – | – | 39 | 55 | 94 |
| Credit to/(charged to) other comprehensive income | – | 3,015 | – | – | (153) | – | 2,862 |
| **Gross deferred tax liabilities at 31 December 2022** | – | (3,767) | – | – | (1,827) | (138) | (5,732) |
| | | | | | | | |
| **Net deferred tax assets at 31 December 2022** | | | | | | | 15,054 |
---
## 29. DEFERRED TAX (CONTINUED)
The movements in deferred tax assets and liabilities are as follows (continued):
| | Impairment losses on financial assets | Fair value changes of available-for-sale financial assets | Insurance contract liabilities | Salaries and staff welfare payables | Revaluation of investment properties | Others | Total |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: |
| **Deferred tax assets** | | | | | | | |
| At 1 January 2021 | 1,785 | – | 9,617 | 534 | – | 1,401 | 13,337 |
| Credited to income statement (note 12) | 188 | – | 1,616 | 649 | – | 14 | 2,467 |
| **Gross deferred tax assets at 31 December 2021** | 1,973 | – | 11,233 | 1,183 | – | 1,415 | 15,804 |
| | | | | | | | |
| **Deferred tax liabilities** | | | | | | | |
| At 1 January 2021 | – | (6,586) | – | – | (1,534) | (162) | (8,282) |
| Credit to/(Charged to) income statement (note 12) | – | – | – | – | 16 | (31) | (15) |
| Charged to other comprehensive income | – | (196) | – | – | (195) | – | (391) |
| **Gross deferred tax liabilities at 31 December 2021** | – | (6,782) | – | – | (1,713) | (193) | (8,688) |
| | | | | | | | |
| **Net deferred tax assets at 31 December 2021** | | | | | | | 7,116 |
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities as they relate to the same tax authority.
---
## 30. PREPAYMENTS AND OTHER ASSETS
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Interest receivables | 5,185 | 4,730 |
| Restricted statutory deposits (i) | 4,449 | 4,449 |
| Deductible input value-added tax | 4,263 | 4,192 |
| Receivables from co-insurers for amounts paid on their behalf | 2,818 | 2,630 |
| Intangible assets | 2,765 | 2,676 |
| Securities settlement receivables | 2,415 | 468 |
| Deposits | 1,338 | 1,438 |
| Prepaid insurance underwriting commission | 483 | 461 |
| Receivable for recovery | 447 | 442 |
| Trade receivables | 446 | 377 |
| Reinsurance deposit | 241 | 607 |
| Prepayments for assets and services | 157 | 362 |
| Amounts due from PICC Group (note 47(d)) | 106 | 109 |
| Amounts due from associates (note 47(d)) | 49 | 13 |
| Amounts due from fellow subsidiaries under PICC Group (note 47(d)) | 13 | 22 |
| Others | 2,344 | 1,811 |
| **Subtotal** | **27,519** | **24,787** |
| | | |
| Less: Impairment provision | (1,050) | (961) |
| | | |
| **Net value** | **26,469** | **23,826** |
(i) In accordance with the PRC Insurance Law, the Company is required to maintain a deposit equivalent to 20% of its registered capital with banks designated by the CBIRC as a security fund. The use of the security fund is subject to the approval of the CBIRC.
## 31. RESTRICTED DEPOSITS
At 31 December 2022, term deposits contained an amount of RMB2,212 million (31 December 2021: RMB2,181 million) that were subject to various restrictions. These deposits are mainly managed in specific bank accounts according to requirements of certain local governments and can only be used to settle for catastrophic losses from agriculture insurance business.
## 32. PAYABLES TO REINSURERS
Payables to reinsurers are analysed as follows:
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Reinsurance payables | 24,626 | 22,496 |
---
## 32. PAYABLES TO REINSURERS (CONTINUED)
The reinsurance payables are non-interest-bearing and are mainly due within three months from the bill dates or are repayable on demand.
Included in the Group’s reinsurance payables are amounts due to a fellow subsidiary under PICC Group of RMB389 million (31 December 2021: RMB244 million) and an associate of RMB2,554 million (31 December 2021: RMB2,477 million), respectively. Please refer to note 47(d) for details.
## 33. ACCRUED INSURANCE SECURITY FUND
| | 2022 | 2021 |
| :--- | :---: | :---: |
| | | |
| At 1 January | 994 | 837 |
| Accrued during the year (note 7) | 2,415 | 3,158 |
| Paid during the year | (2,179) | (3,001) |
| | | |
| At 31 December | 1,230 | 994 |
The Group is required to make regular contributions to China Insurance Security Fund (“CISF”) according to the types and premiums of products sold during the year. No further contribution is required once the accumulated balance has reached 6% of the industry’s total assets as determined in accordance with the relevant regulations. CISF was established to provide protection for policyholders when an insurance company in China is in financial troubles.
Insurance companies are required to deposit their insurance security fund in bank accounts designated by the CBIRC.
## 34. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| | | |
| Transactions by market places: | | |
| Stock exchange | 20,977 | 23,791 |
| Inter-bank market | 20,713 | 14,194 |
| | | |
| Total | 41,690 | 37,985 |
---
## 34. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (CONTINUED)
For debt repurchase transactions through stock exchange, the Group is required to deposit certain exchange-traded bonds into a collateral pool with fair value converted at a standard rate pursuant to the stock exchange’s regulation which should be no less than the balance of related repurchase transaction. At 31 December 2022, the carrying amount and fair value of securities deposited in the collateral pool were RMB32,678 million and RMB33,197 million(31 December 2021: RMB35,283 million and RMB36,051 million) respectively. The collateral is restricted from trading during the period of the repurchase transaction. The Group can withdraw the exchange-traded bonds from the collateral pool provided that the value of the remaining exchange-traded bonds within the collateral pool is no less than the balance of related repurchase transactions.
At 31 December 2022, bonds with carrying amount and fair value of RMB21,802 million and RMB23,494 million(31 December 2021: RMB15,060 million and RMB16,484 million) respectively were pledged as collateral for securities sold under agreements to repurchase resulted from repurchase transactions entered into by the Group in the inter-bank market. The collateral is restricted from trading during the period of the repurchase transactions.
## 35. INSURANCE CONTRACT LIABILITIES
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Unearned premium reserves | 181,796 | 169,175 |
| Loss and loss adjustment expense reserves | 203,083 | 169,606 |
| | **384,879** | **338,781** |
---
## 35. INSURANCE CONTRACT LIABILITIES (CONTINUED)
An analysis of insurance contract liabilities and their corresponding reinsurance assets is set out as follows:
### 2022
| | Gross amount | Reinsurers’ share (note 21) | Net amount |
| :--- | :--- | :--- | :--- |
| **Unearned premium reserves** | | | |
| 1 January 2022 | 169,175 | (15,150) | 154,025 |
| Increase during the year | 414,536 | (39,044) | 375,492 |
| Decrease during the year | (401,915) | 36,940 | (364,975) |
| 31 December 2022 | 181,796 | (17,254) | 164,542 |
| | | | |
| **Loss and loss adjustment expense reserves** | | | |
| 1 January 2022 | 169,606 | (22,385) | 147,221 |
| Increase during the year | 339,286 | (33,731) | 305,555 |
| Decrease during the year | (305,809) | 28,914 | (276,895) |
| 31 December 2022 | 203,083 | (27,202) | 175,881 |
| | | | |
| **Total** | **384,879** | **(44,456)** | **340,423** |
### 2021
| | Gross amount | Reinsurers’ share (note 21) | Net amount |
| :--- | :--- | :--- | :--- |
| **Unearned premium reserves** | | | |
| 1 January 2021 | 159,093 | (13,313) | 145,780 |
| Increase during the year | 379,711 | (33,000) | 346,711 |
| Decrease during the year | (369,629) | 31,163 | (338,466) |
| 31 December 2021 | 169,175 | (15,150) | 154,025 |
| | | | |
| **Loss and loss adjustment expense reserves** | | | |
| 1 January 2021 | 153,780 | (19,854) | 133,926 |
| Increase during the year | 321,003 | (28,491) | 292,512 |
| Decrease during the year | (305,177) | 25,960 | (279,217) |
| 31 December 2021 | 169,606 | (22,385) | 147,221 |
| | | | |
| **Total** | **338,781** | **(37,535)** | **301,246** |
---
## 36. POLICYHOLDERS’ DEPOSITS
Policyholders’ deposits consist of interest-bearing and non-interest-bearing deposits placed by policyholders.
An analysis of interest-bearing and non-interest-bearing deposits is set out below:
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Interest-bearing deposits | – | 7 |
| Non-interest-bearing deposits | 1,741 | 1,741 |
| **Total** | **1,741** | **1,748** |
For the years ended 31 December 2022 and 2021, the Group has underwritten policies in homeowners’ and accidental insurance products containing both insurance and investment features. Policyholders deposit a fixed principal amount which is only refundable upon the maturity of the policy, and the policyholders receive a fixed rate of interest or bear no interest. Penalties on early termination are charged according to the terms stated in the policy.
## 37. BONDS PAYABLE
Bonds payable comprised one capital supplementary bonds.
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Carrying amount repayable in More than five years | 8,097 | 8,058 |
On 23 March 2020, the Company issued another capital supplementary bonds of RMB8,000 million. Terms of the capital supplementary bonds issued in 2020 are ten years. With proper notice to the counterparties, the Company has an option to redeem the capital supplementary bonds at par values at the end of the fifth year from the date of issue. The interest rate of the capital supplementary bonds is 3.59% per annum in the first five years and 4.59% per annum in the following five years.
## 38. LEASE LIABILITIES
| Lease liabilities payable: | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Within one year | 484 | 614 |
| Within a period of more than one year but not more than two years | 394 | 421 |
| Within a period of more than two years but not more than five years | 510 | 557 |
| Within a period of more than five years | 96 | 194 |
| **Total** | **1,484** | **1,786** |
The incremental borrowing rates applied to lease liabilities range from 2.93% to 3.66% (2021: 3.40% to 4.48%) for different lease terms.
---
## 39. ACCRUALS AND OTHER LIABILITIES
| | 31 December 2022 | 31 December 2021 |
| :--- | :--- | :--- |
| Premiums received in advance (i) | 21,978 | 19,847 |
| Salaries and staff welfare payables | 17,281 | 13,665 |
| Commission payable | 8,684 | 7,542 |
| Other taxes payable | 7,506 | 7,464 |
| Premiums payable (ii) | 4,694 | 4,037 |
| Claims payable | 3,715 | 3,457 |
| Insurance deposit received | 648 | 839 |
| Accrued capital expenditures | 255 | 268 |
| Interest payable | 247 | 240 |
| Amounts due to fellow subsidiaries under PICC Group (note 47(d)) | 168 | 159 |
| Payables to interest holders of consolidated structured entities | – | 39 |
| Others | 6,781 | 6,712 |
| **Total** | **71,957** | **64,269** |
(i) Premiums received in advance represent amounts collected from policies not yet effective at 31 December 2022 and 2021, and will be recognised as premium income with corresponding unearned premium reserves when the relevant policies become effective.
(ii) Premiums payable mainly includes premium refundable to policyholders and premium payable to co-insurers in co-insurance business.
## 40. ISSUED CAPITAL
| | 31 December 2022 | 31 December 2021 |
| :--- | :--- | :--- |
| **Issued and fully paid:** | | |
| Domestic shares of RMB1.00 each | 15,343 | 15,343 |
| H shares of RMB1.00 each | 6,899 | 6,899 |
| **Total** | **22,242** | **22,242** |
---
# 41. CLASSIFICATION AND FAIR VALUE OF FINANCIAL INSTRUMENTS
## (1) Classification of financial instruments
The Group's financial instruments mainly consist of cash and cash equivalents, term deposits, debt securities, equity securities and mutual funds, investments classified as loans and receivables, securities sold under agreements to repurchase and bonds payable, etc. The Group holds various other financial assets and liabilities which directly arose from insurance operations, such as insurance receivables and payables to reinsurers. The following table sets out the carrying values and fair values of the Group's major financial instruments by classification:
| | Carrying amount | Carrying amount | Fair value | Fair value |
| :--- | :---: | :---: | :---: | :---: |
| | **31 December 2022** | **31 December 2021** | **31 December 2022** | **31 December 2021** |
| **Financial assets** | | | | |
| Financial assets at fair value through profit or loss | | | | |
| – Equity securities and mutual funds | 3,030 | 5,535 | 3,030 | 5,535 |
| – Debt securities | 8,143 | 14,284 | 8,143 | 14,284 |
| Available-for-sale financial assets | | | | |
| – Equity securities and mutual funds | 137,688 | 138,269 | 137,688 | 138,269 |
| – Debt securities | 145,275 | 121,740 | 145,275 | 121,740 |
| Held-to-maturity financial assets | | | | |
| – Debt securities | 39,552 | 36,827 | 42,920 | 40,280 |
| Loans and receivables | | | | |
| – Cash and cash equivalents | 21,250 | 17,414 | 21,250 | 17,414 |
| – Term deposits | 73,657 | 73,574 | 73,657 | 73,574 |
| – Investments classified as loans and receivables | 71,313 | 58,638 | 72,788 | 61,443 |
| – Insurance receivables | 70,085 | 55,399 | 70,085 | 55,399 |
| – Other financial assets | 18,175 | 15,539 | 18,175 | 15,539 |
| | | | | |
| **Total financial assets** | **588,168** | **537,219** | **593,011** | **543,477** |
| | | | | |
| **Financial liabilities** | | | | |
| Other financial liabilities, at amortised cost | | | | |
| – Payables to reinsurers | 24,626 | 22,496 | 24,626 | 22,496 |
| – Securities sold under agreements to repurchase | 41,690 | 37,985 | 41,690 | 37,985 |
| – Policyholders' deposits | 1,741 | 1,748 | 1,741 | 1,748 |
| – Bonds payable | 8,097 | 8,058 | 8,062 | 8,142 |
| – Other financial liabilities | 26,041 | 23,227 | 26,041 | 23,227 |
| | | | | |
| **Total financial liabilities** | **102,195** | **93,514** | **102,160** | **93,598** |
---
# 41. CLASSIFICATION AND FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
## (2) Determination of fair value and the fair value hierarchy of financial instruments
This note provides information on how the Group determines the fair values of various financial assets and liabilities. Details of fair value measurements of investment properties are disclosed in note 26 to these consolidated financial statements.
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
### (a) Fair value of financial assets that are measured at fair value on a recurring basis
Some of the Group’s financial assets are measured at fair value at the end of the reporting periods. The following table gives information about how the fair values of these financial assets are determined (in particular, their fair value hierarchy, valuation technique(s) and key input(s) used).
---
# 41. CLASSIFICATION AND FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
## (2) Determination of fair value and the fair value hierarchy of financial instruments (continued)
### (a) Fair value of financial assets that are measured at fair value on a recurring basis (continued)
| Items | Fair value 31 December 2022 | Fair value 31 December 2021 | Fair value hierarchy | Valuation technique(s) and key input(s) |
| :--- | :--- | :--- | :--- | :--- |
| Debt securities at fair value through profit or loss | 1,147 | 1,328 | Level 1 | Quoted bid prices in an active market. |
| Debt securities at fair value through profit or loss | 6,996 | 12,956 | Level 2 | 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. |
| Available-for-sale debt securities | 5,619 | 8,672 | Level 1 | Quoted bid prices in an active market. |
| Available-for-sale debt securities | 139,656 | 113,068 | Level 2 | 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. |
| Equity securities and mutual funds at fair value through profit or loss | 53 | 953 | Level 1 | Quoted bid prices in an active market. |
| Equity securities and mutual funds at fair value through profit or loss | 2,977 | 4,582 | Level 2 | Quoted bid prices for identical or comparable assets in an inactive market or obtained from third party pricing services or recent quoted market prices. |
| Available-for-sale equity securities and mutual funds | 65,224 | 55,948 | Level 1 | Quoted bid prices in an active market. |
| Available-for-sale equity securities and mutual funds | 39,249 | 53,827 | Level 2 | 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. |
| Available-for-sale equity securities and mutual funds | 14,916 | 9,167 | Level 3 | Valuation techniques with non-observable input value are used to determine fair value, such as comparable company method, net asset value method and recent financing price. |
| Available-for-sale equity securities and mutual funds | 2,621 | 4,757 | Level 3 | Relative value that are assessed based on average price-to-earnings/price to sales ratio from comparative companies and earnings per share of target company or latest financing price. |
| Available-for-sale equity securities and mutual funds | 15,678 | 14,570 | Level 3 | Fair value of the investments is based on the use of internal discounted cash flow valuation models. |
---
# 41. CLASSIFICATION AND FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
## (2) Determination of fair value and the fair value hierarchy of financial instruments (continued)
### (a) Fair value of financial assets that are measured at fair value on a recurring basis (continued)
| 31 December 2022 | Level 1 | Level 2 | Level 3 | Total |
| :--- | :--- | :--- | :--- | :--- |
| Financial assets at fair value through profit or loss | | | | |
| – Equity securities and mutual funds | 53 | 2,977 | – | 3,030 |
| – Debt securities | 1,147 | 6,996 | – | 8,143 |
| Available-for-sale financial assets | | | | |
| – Equity securities and mutual funds | 65,224 | 39,249 | 33,215 | 137,688 |
| – Debt securities | 5,619 | 139,656 | – | 145,275 |
| **Total** | **72,043** | **188,878** | **33,215** | **294,136** |
| 31 December 2021 | Level 1 | Level 2 | Level 3 | Total |
| :--- | :--- | :--- | :--- | :--- |
| Financial assets at fair value through profit or loss | | | | |
| – Equity securities and mutual funds | 953 | 4,582 | – | 5,535 |
| – Debt securities | 1,328 | 12,956 | – | 14,284 |
| Available-for-sale financial assets | | | | |
| – Equity securities and mutual funds | 55,948 | 53,827 | 28,494 | 138,269 |
| – Debt securities | 8,672 | 113,068 | – | 121,740 |
| **Total** | **66,901** | **184,433** | **28,494** | **279,828** |
For the year ended 31 December 2022, debt securities with a carrying amount of RMB4,973 million (2021: RMB3,765 million) were transferred from Level 1 to Level 2 because the quoted prices in the market for such investments were no longer regularly available. Conversely, debt securities with a carrying amount of RMB1,784 million (2021: RMB4,882 million) were transferred from Level 2 to Level 1 because the quoted prices in active markets were available at 31 December 2022.
---
# 41. CLASSIFICATION AND FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
## (2) Determination of fair value and the fair value hierarchy of financial instruments (continued)
### (b) Fair value of financial assets and financial liabilities not measured at fair value
The carrying amounts of the Group’s financial assets and financial liabilities not measured at fair value approximate their fair values at 31 December 2022 except for the following financial instruments, for which fair value and the level of fair value hierarchy are disclosed below:
| 31 December 2022 | Fair value hierarchy | | | |
| :--- | :---: | :---: | :---: | :---: |
| | **Level 1** | **Level 2** | **Level 3** | **Total** |
| **Financial assets** | | | | |
| – Held-to-maturity financial assets | 1,347 | 41,573 | – | 42,920 |
| – Investments classified as loans and receivables | – | – | 72,788 | 72,788 |
| **Financial liabilities** | | | | |
| – Bonds payable | – | 8,062 | – | 8,062 |
The fair values of the financial assets and financial liabilities classified under Level 3 were determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most significant input being the discount rate that reflects the risk of counterparties and the Group.
### (c) Reconciliation of Level 3 fair value measurements
| | 2022 | 2021 |
| :--- | :---: | :---: |
| At 1 January | 28,494 | 13,203 |
| Addition | 5,776 | 13,862 |
| Losses recognised in profit or loss | (215) | (100) |
| Unrealised gains recognised in other comprehensive income | 30 | 1,684 |
| Disposals | (870) | (155) |
| At 31 December | 33,215 | 28,494 |
---
## 42. CAPITAL MANAGEMENT
The primary objective of the Company’s capital management is to ensure that the Company meets all obligations arising from the insurance contracts and the applicable laws and regulations in the PRC so as to support the growth of business and maximise the shareholders’ value.
The comprehensive and core solvency margin ratios of the Company are listed below:
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Actual capital | 215,415 | 207,421 |
| Core capital | 189,730 | 194,361 |
| Minimum capital | 93,964 | 73,082 |
| Comprehensive solvency margin ratio (%) | 229% | 284% |
| Core solvency margin ratio (%) | 202% | 266% |
Insurance companies carrying out business in China are required to comply with capital requirements imposed by the CBIRC. These capital requirements are generally known as solvency requirements in the insurance industry.
Insurance companies comply with requirements on both the core capital and actual capital (sum of core and supplementary capital). Under China Risk Oriented Solvency System, the minimum capital is calculated by formula prescribed by the CBIRC. The minimum capital requirement is a result of quantifications of underwriting risks, market risks, credit risks and results of an internal control assessment. For the Company, core capital is principally net assets, while supplementary capital is mainly capital supplementary bonds issued by the Company.
Comprehensive and core solvency margin ratios are defined as actual capital and core capital divided by the minimum capital requirements, respectively. Comprehensive and core solvency margin ratio have to be higher than 100% and 50% respectively for compliance with the solvency requirements.
The CBIRC can take a number of regulatory measures against any insurance company non-compliant with the solvency requirements. These regulatory measures include restriction on business scope, dividend distributions, investment strategy; order to transfer business or place reinsurance; removal of senior executives of the insurance companies.
---
## 43. SHARE APPRECIATION RIGHTS (“SARS”)
The shareholders of the Company approved the adoption of a scheme of SARs for senior management on 30 July 2003. The Board of Directors of the Company is responsible for making decisions under the scheme and administering the scheme. No shares will be issued under the scheme. Therefore, the shareholdings of shareholders will not be diluted as a result of the issuance of SARs.
Under the SARs scheme, the Board of Directors (excluding independent directors) and the Supervisory Committee (excluding independent supervisors), president, vice presidents, chief financial officer, department managers of the Company, general managers of the provincial/municipal level branch offices, employees with special contribution to the Company as determined by the Company’s Nomination, Remuneration and Review Committee, and other senior management at equivalent levels are eligible to receive SARs.
In compliance with the relevant laws and regulations issued by the Ministry of Finance of the PRC and the CBIRC, the Company decided to suspend the scheme in 2008 except for SARs that had been granted to anyone who is not a Chinese mainland resident.
## 44. RISK MANAGEMENT
The Group’s activities are exposed to insurance risk and varieties of financial risks. The Group issues contracts that transfer insurance risk or financial risk or both. The key financial risk is that proceeds from the sale of financial assets will not be sufficient to fund the obligations arising from the Group’s insurance and investment contracts. The most important components of financial risk are credit risk, liquidity risk and market risk.
---
# 44. RISK MANAGEMENT (CONTINUED)
## (a) Insurance risk
### (1) Insurance contract liabilities
The risk under an insurance contract arises from the possibility of occurrence of an insured event and the uncertainty of the amount and timing of any resulting claim. The principal risk the Group faces under such contract is that the actual claim payments and the costs of claim settlements exceed the carrying amount of insurance liabilities. This could occur due to any of the following factors:
Occurrence risk – the possibility that the number of insured events will differ from those expected
Severity risk – the possibility that the costs of the events will differ from those expected
Development risk – the possibility that changes may occur in the amount of an insurer’s obligation at the end of the contract period
The Group has the objective to control and minimise insurance risk so as to reduce the volatility of the operating profits. The Group manages insurance risk through the following mechanism:
- The launch of any new product has to be approved by appropriate authorities;
- Underwriting and claims-handling authorities at different levels are properly established;
- Treaty reinsurance and most facultative reinsurance arrangements are centrally managed at the head office level; and
- Catastrophe reinsurance is used to limit the Group’s exposure to flooding, earthquakes and typhoons.
Claims in certain provinces in the PRC are often affected by natural disasters including flooding, earthquakes and typhoons. Therefore, an undue concentration of risk units in these areas may have an impact on the severity of claim payments on a portfolio basis. The Group has achieved geographical diversification by accepting risks in different provinces of the PRC.
The Group’s concentration of insurance risk before and after reinsurance, measured by geographical gross written premiums and net written premiums, is as follows:
| | 2022 | 2022 | 2021 | 2021 |
| :--- | :---: | :---: | :---: | :---: |
| | **Gross written premiums** | **Net written premiums** | **Gross written premiums** | **Net written premiums** |
| Coastal and developed provinces/cities | 223,030 | 197,749 | 202,653 | 181,374 |
| Western China | 97,038 | 87,436 | 92,217 | 83,754 |
| Northern China | 57,411 | 50,594 | 52,873 | 46,477 |
| Central China | 81,949 | 75,491 | 75,373 | 70,120 |
| North-eastern China | 28,105 | 24,727 | 26,417 | 23,516 |
| **Total** | **487,533** | **435,997** | **449,533** | **405,241** |
---
# 44. RISK MANAGEMENT (CONTINUED)
## (a) Insurance risk (continued)
### (1) Insurance contract liabilities (continued)
#### Terms
Loss and loss adjustment expense reserves are refined on a monthly basis as part of a regular ongoing process as claims develop, certain claims are settled and further claims are reported. The reserves are discounted for the time value of money if the impact is material.
The measurement process primarily includes projection of future claim costs through a combination of actuarial and statistical projection techniques.
Estimates of gross loss and loss adjustment expense reserves of all lines of business are based on the following selected methods:
* Paid and incurred loss development method
* Paid and incurred Bornhuetter-Ferguson method
* Expected loss ratio method
The loss and loss adjustment expense reserves were projected with the actuarial methods mentioned above and the loss triangle data on gross and net of reinsurance basis. The reinsurers’ share of loss and loss adjustment expense reserves equal to gross minus net claim reserves, which is the amount expected to be reimbursed from reinsurers.
#### Assumptions and sensitivities
The principal assumption underlying the estimates is the Group’s past claims development experience. Judgement is used to assess the extent to which external factors such as judicial decisions and government legislation affecting the estimates. The rates used for discounting long-tailed liabilities were in the range of 2.9%-3.4% and 3.2%-3.6% for 2022 and 2021, respectively.
The range of reasonable estimates of loss and loss adjustment expense reserves, projected by different statistical techniques and various key assumptions, represents different views on the speed of settlements, changes in premium rates and the underwriting controls over ultimate losses.
It is not possible to quantify the sensitivity of certain variables like legislative change and uncertainty in the estimation process with any degree of confidence. Furthermore, because of delays that arise between the occurrence of a claim and its subsequent notification and eventual settlement, the claim reserve is not quantifiable with certainty at the end of 2022 and 2021.
---
# 44. RISK MANAGEMENT (CONTINUED)
## (a) Insurance risk (continued)
### (1) Insurance contract liabilities (continued)
#### Assumptions and sensitivities (continued)
Reproduced below is an analysis that shows the development of claims over a period of time on a gross basis:
| | | | Accident year-Gross | | | |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| | 2018 | 2019 | 2020 | 2021 | 2022 | Total |
| Estimated cumulative claims paid as of: | | | | | | |
| End of current year | 234,325 | 268,651 | 279,884 | 315,563 | 331,070 | |
| One year later | 235,121 | 269,007 | 278,261 | 315,081 | | |
| Two years later | 234,952 | 269,206 | 277,899 | | | |
| Three years later | 234,578 | 269,483 | | | | |
| Four years later | 233,920 | | | | | |
| Estimated cumulative claims | 233,920 | 269,483 | 277,899 | 315,081 | 331,070 | 1,427,453 |
| Less: cumulative claims paid | (229,774) | (263,365) | (265,540) | (281,608) | (204,206) | (1,244,493) |
| Sub-total | | | | | | 182,960 |
| Prior year adjustments, unallocated loss adjustment expenses, discount and risk margin | | | | | | 20,123 |
| Loss and loss adjustment expense reserves | | | | | | 203,083 |
---
# 44. RISK MANAGEMENT (CONTINUED)
## (a) Insurance risk (continued)
### (1) Insurance contract liabilities (continued)
#### Assumptions and sensitivities (continued)
Reproduced below is an analysis that shows the development of claims over a period of time on a net basis:
| | Accident year-net | | | | | |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| | **2018** | **2019** | **2020** | **2021** | **2022** | **Total** |
| **Estimated cumulative claims paid as of:** | | | | | | |
| End of current year | 215,471 | 245,536 | 255,114 | 287,366 | **299,423** | |
| One year later | 215,830 | 245,671 | 253,738 | 285,476 | | |
| Two years later | 215,577 | 245,782 | 253,116 | | | |
| Three years later | 215,287 | 245,732 | | | | |
| Four years later | 214,570 | | | | | |
| Estimated cumulative claims | 214,570 | 245,732 | 253,116 | 285,476 | **299,423** | 1,298,317 |
| Less: cumulative claims paid | (211,347) | (241,416) | (243,257) | (258,236) | **(185,557)** | (1,139,813) |
| Sub-total | | | | | | 158,504 |
| Prior year adjustments, unallocated loss adjustment expenses, discount and risk margin | | | | | | 17,377 |
| Loss and loss adjustment expense reserves | | | | | | 175,881 |
The ultimate liabilities will vary as a result of subsequent developments. Differences resulting from the re-assessment of the ultimate liabilities are recognised in subsequent years' financial statements.
---
# 44. RISK MANAGEMENT (CONTINUED)
## (a) Insurance risk (continued)
### (2) Reinsurance assets – terms, assumptions and methods
The Group limits its exposure to loss within insurance operations through participation in reinsurance arrangements. The majority of the businesses ceded are placed on a quota share basis or surplus line basis with retention limits varying by product line. There are profit commission, sliding scale commission and loss participation limit clauses in various proportional reinsurance contracts. Excess of loss catastrophe reinsurance is also arranged to limit the Group’s exposure to certain catastrophic events.
Even though the Group may have reinsurance arrangements, it is not relieved of its direct obligations to its policyholders. During the year, the Group’s premiums ceded to the top three reinsurance companies amounted to RMB23,787 million in total (2021: RMB19,184 million) and thus a credit exposure exists with respect to the businesses ceded, to the extent that these reinsurers are unable to meet their obligations assumed under such reinsurance agreements.
## (b) Financial risks
### (1) Credit risk
Credit risk is the risk that one party to a financial instrument fails to discharge an obligation and causes the other party to incur a financial loss.
The Group is exposed to credit risks primarily associated with its deposit arrangements with commercial banks, investments in debt securities, insurance receivables and reinsurance arrangements with reinsurers. Majority of the Group’s financial assets are bond investments which include government bonds, financial bonds, and corporate bonds with high credit ratings and term deposits with state-owned commercial banks. Therefore, the Group is exposed to relatively low credit risks for these financial assets.
The Group evaluates its credit risks in investments by both qualitative and quantitative analysis, including studying the relevant industry, enterprise management, financial factors, company prospects, as well as the use of internal credit models. The Group mitigates credit risk by using a variety of methods including impositions of aggregate counterparty exposure limits and increasing the diversification of fixed income investment portfolios.
The Group only issues insurance policies on credit to corporate customers or to individuals who purchase certain policies through insurance intermediaries. A policyholder usually has a maximum credit period of three months but a longer period can be granted on a discretionary basis. For large corporate customers and certain multi-year policies, payments by instalments are usually arranged. One of the major performance indicators is the ability to collect premiums receivable on a timely basis. The Group’s premium receivables relate to a large number of diversified customers and therefore there is no significant concentration in credit risk.
---
# 44. RISK MANAGEMENT (CONTINUED)
## (b) Financial risks (continued)
### (1) Credit risk (continued)
Reinsurance of the Group is mainly placed with reinsurers with Standard & Poor’s ratings of A- (or ratings of an equal level given by other international rating institutions such as A.M. Best, Fitch or Moody’s) or above except for state-owned reinsurance companies. Management of the Group performs regular assessment of creditworthiness of reinsurers to update reinsurance purchase strategies and ascertain suitable allowances for impairment of reinsurance assets. At 31 December 2022, receivables from the top three reinsurance companies amounted to RMB8,413 million in total (31 December 2021: RMB5,547 million).
The carrying amounts of financial assets included in the consolidated statement of financial position best represent the maximum credit risk exposure at the reporting date without taking into account any collaterals held or other credit enhancements.
An aging analysis of the financial assets past due but not impaired and impaired financial assets is shown as follows:
| | | Past due but not impaired | | | | Past due and | |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| | | Less than 30 | | More than | | impaired | |
| 31 December 2022 | Not past due | days | 31 to 90 days | 90 days | Sub-total | | Total |
| Cash and cash equivalents | 21,250 | – | – | – | – | – | 21,250 |
| Term deposits | 73,657 | – | – | – | – | – | 73,657 |
| Debt securities | 193,106 | – | – | – | – | – | 193,106 |
| Insurance receivables | 39,844 | 9,062 | 8,417 | 11,302 | 28,781 | 5,700 | 74,325 |
| Reinsurance assets | 44,456 | – | – | – | – | – | 44,456 |
| Investments classified as loans and receivables | 71,727 | – | – | – | – | 584 | 72,311 |
| Other financial assets | 14,478 | 1,734 | 635 | 961 | 3,330 | 1,296 | 19,104 |
| Gross Amount | 458,518 | 10,796 | 9,052 | 12,263 | 32,111 | 7,580 | 498,209 |
| Less: Impairment provision | (690) | – | – | – | – | (5,738) | (6,428) |
| Net Amount | 457,828 | 10,796 | 9,052 | 12,263 | 32,111 | 1,842 | 491,781 |
---
## 44. RISK MANAGEMENT (CONTINUED)
### (b) Financial risks (continued)
#### (1) Credit risk (continued)
| | | Past due but not impaired | | | | | |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| | | Less than 30 | | More than | | Past due and | |
| 31 December 2021 | Not past due | days | 31 to 90 days | 90 days | Sub-total | impaired | Total |
| Cash and cash equivalents | 17,414 | – | – | – | – | – | 17,414 |
| Term deposits | 73,574 | – | – | – | – | – | 73,574 |
| Debt securities | 172,854 | – | – | – | – | – | 172,854 |
| Insurance receivables | 34,263 | 7,044 | 4,022 | 8,612 | 19,678 | 4,964 | 58,905 |
| Reinsurance assets | 37,535 | – | – | – | – | – | 37,535 |
| Investments classified as loans and receivables | 59,059 | – | – | – | – | 677 | 59,736 |
| Other financial assets | 11,852 | 1,986 | 598 | 1,049 | 3,633 | 891 | 16,376 |
| Gross Amount | 406,551 | 9,030 | 4,620 | 9,661 | 23,311 | 6,532 | 436,394 |
| Less: Impairment provision | (643) | – | – | – | – | (4,801) | (5,444) |
| Net Amount | 405,908 | 9,030 | 4,620 | 9,661 | 23,311 | 1,731 | 430,950 |
### Credit quality
The Group’s debt securities investment mainly includes government bonds, financial bonds and corporate bonds. The government bonds and financial bonds are issued by either the Chinese government or Chinese government controlled financial institutions. At 31 December 2022, 99.84% (31 December 2021: 98.62%) of the corporate bonds held by the Group had credit rating of AA/A-2 or above. The bond’s credit rating is assigned by a qualified appraisal institution in the PRC at the time of its issuance and updated at each reporting date.
At 31 December 2022, 99.55% (31 December 2021: 99.50%) of the Group’s bank deposits are with the four largest state-owned commercial banks, other national commercial banks and China Securities Depository and Clearing Corporation Limited (“CSDCC”) in the PRC. The Group believes these commercial banks and CSDCC have a high credit quality.
The credit risk associated with securities purchased under resale agreements included in cash equivalent will not cause a material impact on the Group’s consolidated financial statements taking into consideration of their collateral held and maturity term of no more than one year at 31 December 2022 and 2021.
---
# 44. RISK MANAGEMENT (CONTINUED)
## (b) Financial risks (continued)
### (1) Credit risk (continued)
#### Collateral and other credit enhancements
The amount and type of collateral required depend on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collaterals and the valuation parameters.
Securities purchased under resale agreements are pledged by counterparts’ debt securities of which the Group could take the ownership should the owner of the collateral defaults.
The Group’s long-term debt investment schemes, asset management products and asset-backed securities, included in investments classified as loans and receivables, are supported by third party guarantee or with pledge.
Management monitors the market value of the collateral, requests additional collaterals when needed and performs impairment testing when applicable.
### (2) Liquidity or funding risk
Liquidity or funding risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from either the inability to sell financial assets quickly at their fair values; or a counterparty failing to repay a contractual obligation; or an insurance liability falling due for payment earlier than expected; or the inability to generate cash inflows as anticipated.
The major liquidity risk the Group confronts is the daily calls on its available cash resources in respect of claims arising from insurance contracts and maturities of policyholders’ deposits.
It is unusual for an enterprise primarily transacting insurance business to predict the requirements of funding with absolute certainty, as the theory of probability is applied on insurance contracts to ascertain the likely provision and the period when such liabilities will require settlement. The amounts and maturity periods of these insurance liabilities are thus based on management’s best estimate according to statistical techniques and past experience.
At 31 December 2022, the Group maintained demand deposits at 2% of total assets (31 December 2021: 2%) to ensure sufficient liquid assets are available to meet its payment obligations. Management closely monitors the increase of non-current assets.
#### Maturity profiles of financial assets and financial liabilities
The table below summarises maturity profiles of financial assets and financial liabilities of the Group. Maturity profiles of financial assets and financial liabilities are prepared, using the contractual collection or repayment dates.
All amounts are based on undiscounted contractual cash flows.
---
# 44. RISK MANAGEMENT (CONTINUED)
## (b) Financial risks (continued)
### (2) Liquidity or funding risk (continued)
Maturity profiles of financial assets and financial liabilities (continued)
| 31 December 2022 | On demand/ past due | Within 3 months | 3 to 12 months | 1 to 5 years | More than 5 years | No maturity date | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| **Financial assets:** | | | | | | | |
| Cash and cash equivalents | 10,849 | 10,411 | – | – | – | – | 21,260 |
| Debt securities | | | | | | | |
| – Available-for-sale | – | 5,941 | 9,562 | 50,943 | 129,571 | – | 196,017 |
| – At fair value through profit or loss | – | 565 | 1,756 | 4,616 | 2,207 | – | 9,144 |
| – Held-to-maturity | – | 1,930 | 1,075 | 15,841 | 45,532 | – | 64,378 |
| Equity securities and mutual funds | – | – | – | – | – | 140,718 | 140,718 |
| Insurance receivables | 30,147 | 16,085 | 17,073 | 6,551 | 229 | – | 70,085 |
| Term deposits | – | 58 | 24,980 | 54,888 | – | – | 79,926 |
| Investments classified as loans and receivables | 584 | 3,129 | 7,037 | 61,827 | 13,030 | – | 85,607 |
| Other financial assets | 6,424 | 2,928 | 3,717 | 5,081 | 264 | – | 18,414 |
| | | | | | | | |
| **Total financial assets** | **48,004** | **41,047** | **65,200** | **199,747** | **190,833** | **140,718** | **685,549** |
| | | | | | | | |
| **Financial liabilities:** | | | | | | | |
| Payables to reinsurers | 6,820 | 12,665 | 4,647 | 466 | 28 | – | 24,626 |
| Securities sold under agreements to repurchase | – | 41,718 | – | – | – | – | 41,718 |
| Policyholders’ deposits | 1,741 | – | – | – | – | – | 1,741 |
| Bonds payable | – | 72 | 215 | 1,289 | 8,826 | – | 10,402 |
| Lease liabilities | – | 187 | 338 | 965 | 115 | – | 1,605 |
| Other financial liabilities | 5,811 | 16,282 | 2,698 | 1,130 | 120 | – | 26,041 |
| | | | | | | | |
| **Total financial liabilities** | **14,372** | **70,924** | **7,898** | **3,850** | **9,089** | **–** | **106,133** |
| | | | | | | | |
| **Net liquidity gap** | **33,632** | **(29,877)** | **57,302** | **195,897** | **181,744** | **140,718** | **579,416** |
---
## 44. RISK MANAGEMENT (CONTINUED)
### (b) Financial risks (continued)
#### (2) Liquidity or funding risk (continued)
**Maturity profiles of financial assets and financial liabilities (continued)**
| 31 December 2021 | On demand/ past due | Within 3 months | 3 to 12 months | 1 to 5 years | More than 5 years | No maturity date | Total |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: |
| **Financial assets:** | | | | | | | |
| Cash and cash equivalents | 13,309 | 4,107 | – | – | – | – | 17,416 |
| Debt securities | | | | | | | |
| – Available-for-sale | – | 4,331 | 7,563 | 49,947 | 107,020 | – | 168,861 |
| – At fair value through profit or loss | – | 1,346 | 2,839 | 7,345 | 4,432 | – | 15,962 |
| – Held-to-maturity | – | 542 | 1,137 | 13,605 | 46,421 | – | 61,705 |
| Equity securities and mutual funds | – | – | – | – | – | 143,804 | 143,804 |
| Insurance receivables | 20,737 | 17,225 | 12,580 | 4,706 | 151 | – | 55,399 |
| Term deposits | – | 15,845 | 3,037 | 61,203 | 27 | – | 80,112 |
| Investments classified as loans and receivables | 34 | 1,569 | 4,406 | 47,772 | 18,427 | – | 72,208 |
| Other financial assets | 3,659 | 2,393 | 4,382 | 5,106 | 345 | – | 15,885 |
| **Total financial assets** | 37,739 | 47,358 | 35,944 | 189,684 | 176,823 | 143,804 | 631,352 |
| | | | | | | | |
| **Financial liabilities:** | | | | | | | |
| Payables to reinsurers | 5,326 | 11,370 | 5,076 | 703 | 21 | – | 22,496 |
| Securities sold under agreements to repurchase | – | 38,013 | – | – | – | – | 38,013 |
| Policyholders’ deposits | 1,748 | – | – | – | – | – | 1,748 |
| Bonds payable | – | 72 | 215 | 1,209 | 9,193 | – | 10,689 |
| Other financial liabilities | 6,832 | 11,071 | 3,198 | 2,094 | 32 | – | 23,227 |
| **Total financial liabilities** | 13,906 | 60,526 | 8,489 | 4,006 | 9,246 | – | 96,173 |
| | | | | | | | |
| **Net liquidity gap** | 23,833 | (13,168) | 27,455 | 185,678 | 167,577 | 143,804 | 535,179 |
---
# 44. RISK MANAGEMENT (CONTINUED)
## (b) Financial risks (continued)
### (2) Liquidity or funding risk (continued)
**Maturity profiles of reinsurance assets and insurance contract liabilities**
For reinsurance assets and insurance contract liabilities, the liquidity analysis presented below is prepared on the basis of expected timing of settlements of claims. These expected timing is made on various assumptions, including settlement speed of claims. Therefore, actual timing may deviate from the analysis presented below.
The table below summarises maturity profiles of reinsurance assets and insurance contract liabilities of the Group.
All amounts are based on undiscounted estimated cash flows.
| 31 December 2022 | On demand/ past due | Within 3 months | 3 to 12 months | 1 to 5 years | More than 5 years | No maturity date | Total |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: |
| Reinsurance assets | – | 7,015 | 18,113 | 12,410 | 3,556 | – | 41,094 |
| Insurance contract liabilities | – | 67,726 | 215,241 | 60,209 | 25,899 | – | 369,075 |
| 31 December 2021 | On demand/ past due | Within 3 months | 3 to 12 months | 1 to 5 years | More than 5 years | No maturity date | Total |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: |
| Reinsurance assets | – | 6,214 | 17,610 | 11,095 | 2,789 | – | 37,708 |
| Insurance contract liabilities | – | 58,504 | 202,770 | 54,404 | 23,767 | – | 339,445 |
---
# 44. RISK MANAGEMENT (CONTINUED)
## (b) Financial risks (continued)
### (3) 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 foreign exchange rates (currency risk), market interest rates (interest rate risk) or market prices (price risk).
The Group uses multiple methods to manage market risk, including using sensitivity analysis, Value-at-Risk (“VaR”), stress test, scenario analysis and other quantitative models to analyse market risks; mitigating market risk through a diversified investment portfolio; implementing investment risk budget management, setting an acceptable risk tolerance level according to development goals, making investment risk budget and tracking the risk control results dynamically to maintain market risk exposure within an acceptable level.
The Group mitigates its market risk through proper diversification of its investment portfolio. Investment mandate is also approved by an investment committee to direct investment decisions.
#### (i) Currency risk
Currency risk is the risk that the future cash flow of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s principal transactions are carried out in RMB. Certain insurance policies issued by the Group, however, in particular in respect of cargo, commercial properties and aviation insurance, were denominated in United States Dollars (“USD”). Therefore, premiums received, reinsurance premiums ceded, claims paid and paid losses recovered from reinsurers in respect of these policies are transacted in USD.
---
# 44. RISK MANAGEMENT (CONTINUED)
## (b) Financial risks (continued)
### (3) Market risk (continued)
#### (i) Currency risk (continued)
The table below summarises the Group’s assets and liabilities by major currency, expressed in the RMB equivalent:
| 31 December 2022 | RMB | USD in RMB equivalent | HKD in RMB equivalent | Others in RMB equivalent | Total in RMB equivalent |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Cash and cash equivalents | 19,663 | 1,465 | 98 | 24 | 21,250 |
| Debt securities | 192,514 | 456 | – | – | 192,970 |
| Equity securities and mutual funds | 135,780 | 3,855 | 1,083 | – | 140,718 |
| Insurance receivables | 63,570 | 6,279 | 36 | 200 | 70,085 |
| Reinsurance assets | 42,552 | 1,867 | 4 | 33 | 44,456 |
| Term deposits | 71,979 | 1,678 | – | – | 73,657 |
| Investments classified as loans and receivables | 71,313 | – | – | – | 71,313 |
| Other financial assets | 17,960 | 57 | 70 | 89 | 18,176 |
| **Total assets** | **615,331** | **15,657** | **1,291** | **346** | **632,625** |
| | | | | | |
| Payables to reinsurers | 21,793 | 2,717 | 13 | 103 | 24,626 |
| Accrued insurance security fund | 1,230 | – | – | – | 1,230 |
| Securities sold under agreements to repurchase | 41,690 | – | – | – | 41,690 |
| Insurance contract liabilities | 380,883 | 3,750 | 38 | 208 | 384,879 |
| Policyholders' deposits | 1,741 | – | – | – | 1,741 |
| Bonds payable | 8,097 | – | – | – | 8,097 |
| Other financial liabilities | 23,972 | 1,709 | 48 | 312 | 26,041 |
| **Total liabilities** | **479,406** | **8,176** | **99** | **623** | **488,304** |
| | | | | | |
| **Net exposure** | **135,925** | **7,481** | **1,192** | **(277)** | **144,321** |
---
# 44. RISK MANAGEMENT (CONTINUED)
## (b) Financial risks (continued)
### (3) Market risk (continued)
#### (i) Currency risk (continued)
31 December 2021
| | RMB | USD in RMB equivalent | HKD in RMB equivalent | Others in RMB equivalent | Total in RMB equivalent |
| :--- | ---: | ---: | ---: | ---: | ---: |
| Cash and cash equivalents | 14,833 | 2,227 | 156 | 198 | 17,414 |
| Debt securities | 172,102 | 749 | – | – | 172,851 |
| Equity securities and mutual funds | 139,284 | 3,910 | 610 | – | 143,804 |
| Insurance receivables | 49,498 | 5,684 | 33 | 184 | 55,399 |
| Reinsurance assets | 34,203 | 1,633 | 6 | 1,693 | 37,535 |
| Term deposits | 72,427 | 1,142 | – | 5 | 73,574 |
| Investments classified as loans and receivables | 58,638 | – | – | – | 58,638 |
| Other financial assets | 15,430 | 108 | 1 | – | 15,539 |
| Total assets | 556,415 | 15,453 | 806 | 2,080 | 574,754 |
| | | | | | |
| Payables to reinsurers | 19,731 | 2,706 | 23 | 36 | 22,496 |
| Accrued insurance security fund | 994 | – | – | – | 994 |
| Securities sold under agreements to repurchase | 37,985 | – | – | – | 37,985 |
| Insurance contract liabilities | 332,097 | 3,136 | 37 | 3,511 | 338,781 |
| Policyholders’ deposits | 1,748 | – | – | – | 1,748 |
| Bonds payable | 8,058 | – | – | – | 8,058 |
| Other financial liabilities | 21,555 | 1,560 | 74 | 38 | 23,227 |
| Total liabilities | 422,168 | 7,402 | 134 | 3,585 | 433,289 |
| | | | | | |
| Net exposure | 134,247 | 8,051 | 672 | (1,505) | 141,465 |
---
# 44. RISK MANAGEMENT (CONTINUED)
## (b) Financial risks (continued)
### (3) Market risk (continued)
#### (i) Currency risk (continued)
**Sensitivity analysis**
The analysis below is performed for reasonably possible movements in exchange rate with all other variables held constant, showing the pre-tax impact on profit (due to changes in fair value of currency-sensitive monetary assets and liabilities) and equity. The correlation of variables will have a significant effect in determining the ultimate impact on currency risk, but to demonstrate the impact due to changes in foreign currency exchange rate, the correlations of these variables are ignored.
| Appreciation/(depreciation) against RMB | 31 December 2022 Pre-tax impact on profit | 31 December 2022 Pre-tax impact on equity | 31 December 2021 Pre-tax impact on profit | 31 December 2021 Pre-tax impact on equity |
| :--- | :---: | :---: | :---: | :---: |
| 5% | 173 | 420 | 135 | 361 |
| (5%) | (173) | (420) | (135) | (361) |
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. The pre-tax impact on equity of RMB247 million arising from the available-for-sale equity securities was included in the table above.
#### (ii) 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.
The Group’s interest rate risk policy requires it to manage interest rate risk by maintaining an appropriate match of fixed and variable rate instruments. The policy also requires it to manage the maturity of interest-bearing financial assets and interest-bearing financial liabilities, reprice interest on floating rate instruments at intervals of less than one year, and manage variable interest rate risk through interest rate swap instruments. Interest on fixed interest rate instruments is priced at inception of the financial instrument and is fixed until maturity.
---
# 44. RISK MANAGEMENT (CONTINUED)
## (b) Financial risks (continued)
### (3) Market risk (continued)
#### (ii) Interest rate risk (continued)
The Group uses the VaR methodology to measure the expected maximum loss in respect of interest rate risk over a holding period of 10 trading days (2021: 10 trading days) at a confidence level of 99% (2021: 99%) for bond investments measured at fair value. Delta-Normal method is used in measuring VaR.
The VaR methodology quantifies the potential maximum loss under the assumption of normal market conditions only, and therefore when extreme market events occur, the potential maximum loss could be underestimated. VaR also uses historical data to forecast future price behavior, which could differ substantially from the past behavior. Moreover, the use of a 10-day holding period assumes that all positions in the portfolio can be liquidated or hedged within 10 trading days. The said assumption may not be correct in reality, especially in a market which lacks liquidity.
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Interest rate VaR | 2,087 | 1,918 |
#### (iii) Price risk
Price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to individual financial instruments or their issuers, or factors affecting all similar financial instruments traded in the market.
The Group’s price risk exposure relates to listed equity securities and mutual funds whose values will fluctuate as a result of changes in market prices.
---
## 44. RISK MANAGEMENT (CONTINUED)
### (b) Financial risks (continued)
#### (3) Market risk (continued)
##### (iii) Price risk (continued)
The Group holds a diversified portfolio of equity instruments and therefore does not have significant concentration risk in any particular individual instrument. However, the Group principally invests in the stock markets in Hong Kong and Mainland China and is subject to price risk arising from volatilities of these two markets.
The Group’s price risk policy requires it to manage such risks by setting and monitoring objectives and constraints on investments, diversification plans, limits on investments in each country, sector and market and carefully plan the use of derivative financial instruments.
The Group uses VaR methodology to measure the expected maximum loss in respect of equity price risk for stock and mutual fund investments measured at fair value (other than those measured at level 3 fair value) over a holding period of 10 trading days (2021: 10 trading days) at a confidence level of 99% (2021: 99%). Delta-Normal method is used in measuring VaR.
The VaR methodology quantifies the potential maximum loss under the assumption of normal market conditions only, and therefore when extreme market events occur, the potential maximum loss could be underestimated. VaR also uses historical data to forecast future price behaviour, which could differ substantially from past behaviour. Moreover, the use of a 10-day holding period assumes that all positions in the portfolio can be liquidated or hedged within 10 days. The said assumption may not be correct in reality, especially in a market which lacks liquidity.
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Equity price VaR | 5,193 | 4,767 |
---
# 45. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statement of cash flows as cash flows from financing activities.
| | Securities sold under agreements to repurchase (note 34) | Interest payable (note 39) | Bonds payable (note 37) | Lease liabilities (note 38) | Total |
| :--- | :---: | :---: | :---: | :---: | :---: |
| At 31 December 2021 | 37,985 | 240 | 8,058 | 1,786 | 48,069 |
| | | | | | |
| Financing cash flows | 3,705 | (893) | – | (927) | 1,885 |
| Finance costs | – | 900 | 39 | 66 | 1,005 |
| New leases entered/lease modified | – | – | – | 559 | 559 |
| | | | | | |
| At 31 December 2022 | 41,690 | 247 | 8,097 | 1,484 | 51,518 |
| | Securities sold under agreements to repurchase (note 34) | Interest payable (note 39) | Bonds payable (note 37) | Lease liabilities (note 38) | Total |
| :--- | :---: | :---: | :---: | :---: | :---: |
| At 31 December 2020 | 29,028 | 318 | 23,297 | 1,668 | 54,311 |
| | | | | | |
| Financing cash flows | 8,957 | (1,775) | (15,000) | (924) | (8,742) |
| Finance costs | – | 1,697 | (239) | 75 | 1,533 |
| New leases entered/lease modified | – | – | – | 967 | 967 |
| | | | | | |
| At 31 December 2021 | 37,985 | 240 | 8,058 | 1,786 | 48,069 |
# 46. CONTINGENCIES AND COMMITMENTS
### (1) Contingencies
Due to the nature of the insurance business, the Group is subject to legal proceedings in the ordinary course of business, including being the plaintiff or the defendant in litigation and arbitration. Such legal proceedings mostly involve claims on the Group’s insurance policies, and some losses arising therefrom will be partly indemnified by reinsurers or other recoveries including salvages and subrogation. During the current year, the Group was involved in similar legal proceedings on certain insurance businesses. The legal claim amounts for certain cases are significant and the legal proceedings are still in progress. While the outcomes of such contingencies, lawsuits or other proceedings cannot be determined at present, the Group believes that any resulting liabilities, if any, will not have a material adverse effect on the financial position at 31 December 2022 and 31 December 2021 or operating results of the Group for the years ended 31 December 2022 and 2021.
---
## 46. CONTINGENCIES AND COMMITMENTS (CONTINUED)
### (2) Capital commitments
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Property and equipment commitments: | | |
| Contracted, but not provided for | 655 | 2,554 |
| Authorised, but not contracted | 353 | 441 |
| Investment commitments: | | |
| contracted, but not provided for | 1,664 | 2,167 |
| | | |
| **Total** | **2,672** | **5,162** |
## 47. RELATED PARTY TRANSACTIONS
A party is considered to be related to the Group if:
(a) the party is a person or a close member of that person’s family and that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group;
(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;
(vi) the entity is controlled or jointly controlled by a person identified in (a); and
(vii) a person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
### (a) Related parties with control relationship
The Company is a state-owned enterprise and its controlling shareholder is PICC Group.
---
## 47. RELATED PARTY TRANSACTIONS (CONTINUED)
### (b) Other related parties without controlling relationship with the Company:
| Related parties’ name | Relationship |
| :--- | :--- |
| PICC Asset Management Company Limited (“PICC AMC”) | Fellow subsidiary |
| The People’s Insurance Company of China (Hong Kong) Limited (“PICC HK”) | Fellow subsidiary |
| PICC Capital Insurance Asset Management Company Limited (Former PICC Capital Investment Management Company Limited, “PICC Capital”) | Fellow subsidiary |
| PICC Investment Holding Company Limited (“PICC Investment”) | Fellow subsidiary |
| PICC Pension Company Limited (“PICC Pension”) | Fellow subsidiary |
| PICC Information Technology Company Limited (“PICC Technology”) | Fellow subsidiary |
| PICC Capital Equity Investment Company Limited (“PICC Equity”) | A subsidiary of a fellow subsidiary |
| PICC Life Insurance Company Limited (“PICC Life”) | An associate of the Company and fellow subsidiary |
| PICC Health Insurance Company Limited (“PICC Health”) | An associate of the Company and fellow subsidiary |
| PICC Reinsurance Company Limited (“PICC Re”) | An associate of the Company and fellow subsidiary |
| PICC Financial Services Company Limited (“PICC Financial Services”) | An associate of the Company and fellow subsidiary |
| Prime Insurance Brokers Company Limited (“PIB”) | A subsidiary of a fellow subsidiary |
| Hua Xia Bank | An associate of the Company |
| Industrial Bank Co., Ltd. (“IBC”) | An associate of the controlling shareholder |
| China Merchants Securities Co. Ltd. (“China Merchant Securities”) | An associate of the controlling shareholder |
| Bangbang Auto Sales Service (Beijing) Co., Ltd. (“Bangbang”) | A joint venture of the Company |
| Aibao Technology Co., Ltd. (“Aibao Technology”) | An associate of a fellow subsidiary |
---
# 47. RELATED PARTY TRANSACTIONS (CONTINUED)
## (c) Material transactions with related parties
| | Notes | 2022 | 2021 |
| :--- | :---: | :---: | :---: |
| **Transactions with PICC Group:** | | | |
| 2021 final dividend distribution | (i) | 6,245 | – |
| 2020 final dividend distribution | (i) | – | 5,754 |
| Addition to right-of-use assets | (ii) | 78 | – |
| Addition to lease liabilities | (ii) | 78 | – |
| Payment of lease liabilities | (ii) | 79 | 83 |
| Interest on lease liabilities | (ii) | 1 | 3 |
| Service fees | (ii) | 69 | 7 |
| **Transactions with fellow subsidiaries under PICC Group:** | | | |
| Management fee | (iii) | 458 | 313 |
| Subscription amount of financial products set up and managed by fellow subsidiaries under PICC Group | (iii) | 7,270 | 224 |
| Premiums ceded | (iv) | 838 | 705 |
| Reinsurance commission income | (iv) | 238 | 216 |
| Paid losses recoverable from reinsurers | (iv) | 394 | 363 |
| Reinsurance premiums assumed | (iv) | 18 | 13 |
| Commission expenses – reinsurance | (iv) | 4 | 3 |
| Gross claims paid – reinsurance | (iv) | 6 | 7 |
| Brokerage commission expense | (v) | 287 | 216 |
| Technology service fees | (xiv) | 72 | – |
| Rental income | | 8 | 11 |
| Rental expense | (xv) | 103 | 133 |
| Addition to right-of-use assets | (xv) | 82 | 21 |
| Addition to lease liabilities | (xv) | 82 | 21 |
| Payment of lease liabilities | (xv) | 84 | 32 |
| Interest on lease liabilities | (xv) | 5 | 1 |
| **Transactions with associates of the Company:** | | | |
| Agency services commission income | (vi), (vii) | 88 | 113 |
| Agency services commission expense | (vi), (vii) | 310 | 553 |
| Premiums paid | (viii) | 43 | 14 |
| Interest income | (x) | 1 | – |
| Gross written premiums | (x) | 10 | 12 |
| Gross claim paid | (x) | 2 | 5 |
| Dividend received | (x) | 866 | 771 |
| Premiums ceded | (xi) | 4,616 | 4,457 |
| Reinsurance commission income | (xi) | 1,386 | 1,421 |
| Paid losses recoverable from reinsurers | (xi) | 2,341 | 2,544 |
| Rental income | | 25 | 15 |
| Addition to right-of-use assets | | 3 | 13 |
| Addition to lease liabilities | | 3 | 13 |
| Payment of lease liabilities | | 15 | 6 |
| Interest on lease liabilities | | 2 | 1 |
| Service fees | | 48 | 102 |
---
# 47. RELATED PARTY TRANSACTIONS (CONTINUED)
## (c) Material transactions with related parties (continued)
| | Notes | 2022 | 2021 |
| :--- | :---: | :---: | :---: |
| **Transactions with associates of PICC Group:** | | | |
| Interest income | (ix) | 563 | 884 |
| Dividend income | (ix) | 1,306 | 1,020 |
| Gross written premiums | (ix) | 61 | 107 |
| Gross claim paid | (ix) | 30 | 75 |
| Commission expense | (ix) | 1 | – |
| **Transactions with joint ventures of the Company:** | | | |
| Purchase of spare parts | (xii) | 389 | 496 |
| Service fee | | 24 | 57 |
| **Transactions with associates of fellow subsidiaries:** | | | |
| Service fee | (xiii) | 689 | 335 |
Notes:
(i) As PICC Group held 68.98% of the share capital of the Company, the Company distributed 2021 dividend amounting to RMB6,245 million to PICC Group during the year of 2022.
The Company distributed 2020 dividend amounting to RMB5,754 million to PICC Group during the year of 2021.
(ii) On 18 March 2020, the Company entered into the South Information Center Package Service Agreement with PICC Group for two years effective from 1 January 2020. On 31 December 2021, the Company renewed the South Centre Package Service Agreement with PICC Group for one year effective from 1 January 2022. Pursuant to the agreement, PICC Group shall provide the Company with, among others, the service of leasing workplaces, meeting rooms and server installation positions in the server building.
The Company paid the rent and service fees to PICC Group. The rental transaction was accounted for as right-of-use assets and lease liabilities.
---
# 47. RELATED PARTY TRANSACTIONS (CONTINUED)
## (c) Material transactions with related parties (continued)
Notes (continued):
(iii) On 28 August 2019, the Company and PICC AMC entered into the asset management agreement and supplemental agreements for another 3 years, effective from 1 July 2019. Pursuant to the asset management agreement, PICC AMC provided investment and management services in respect of certain financial assets of the Company. The Company paid management fee to PICC AMC, which was calculated based on the daily net asset value of the entrusted assets and the applicable rates. Other than management fees, performance bonuses were also paid to PICC AMC when the investment performance has satisfied certain conditions. On 8 September 2022, the Company and PICC AMC further renewed the asset management agreement and supplemental agreements for another 3 years, effective from 1 July 2022.
On 7 August 2019, the Company and PICC AMC entered into a Marketisation Entrusted Portfolio Asset Management Agreement for 3 years, effective from 7 August 2019. Pursuant to the Marketisation Agreement, the Company agrees to entrust PICC AMC to manage some of its assets, and PICC AMC shall manage the entrusted assets in accordance with the Marketisation Agreement, relevant laws and regulations and regulatory rules in consideration of the entrusted asset management fees to be paid by the Company to PICC AMC.
On 28 August 2019, the Company entered into asset management agreements and supplemental agreements with PICC Investment and PICC Capital respectively for 3 years, effective from 28 August 2019. Pursuant to the asset management agreements and supplemental agreements, the Company entrusts some investment assets to PICC Investment and PICC Capital for their management, and PICC Investment and PICC Capital manage the entrusted assets in accordance with the asset management agreements and supplemental agreements, relevant laws and regulations and regulatory provisions and the investment guidelines formulated by the Company, and use the assets entrusted by the Company to subscribe for the debt financial products and equity financial products sponsored and managed by them. Meanwhile, the Company pays product management fees to PICC Investment and PICC Capital. On 8 September 2022, the Company further renewed asset management agreements and supplemental agreements with PICC Capital for 3 years, effective from 28 August 2022.
On 28 August 2019, the Company and PICC AMC entered into a memorandum on connected transaction (the "memorandum") for a term of three years effective from 28 August 2019. Pursuant to the memorandum, in respect of the Company's subscription of the debt financial products and the equity financial products set up and managed, either solely or jointly, by PICC AMC, PICC Capital, PICC Investment and PICC Equity, and when there are connected person(s) of the Company also subscribing for the same financial products, the aggregated annual subscription amount for the debt financial products and the equity products should not exceed RMB8,000 million, respectively.
---
# 47. RELATED PARTY TRANSACTIONS (CONTINUED)
## (c) Material transactions with related parties (continued)
Notes (continued):
(iv) On 20 January 2021, the Company and PICC HK entered into the Framework Agreement for one year, effective from 1 January 2021. On 17 December 2021, the Company and PICC HK renewed the Framework Agreement for one year, effective from 1 January 2022. Pursuant to the Framework Agreement, the Company agreed to cede insurance premiums to and receive commissions from PICC HK, and PICC HK agreed to cede insurance premiums to and receive commissions from the Company.
(v) On 21 June 2019, the Company entered into business cooperation agreements with PIB with a term of 3 years, effective from 17 June 2019. On 15 June 2022, the Company further renewed business cooperation agreements with PIB with a term of 3 years, effective from 17 June 2022. Pursuant to the agreement, PIB provided insurance brokerage services for the insurance contracts entered into between the insurance purchasers and the Company, and the Company paid brokerage commissions to PIB.
(vi) On 30 August 2019, the Company and PICC Health entered into the mutual insurance agency agreement for a term of three years, effective from 31 August 2019. On 30 August 2022, the Company and PICC Health renewed the mutual insurance agency agreement for a term of three years, effective from 31 August 2022. Pursuant to the mutual insurance agency agreement, the Company and PICC Health mutually acted as the agent for selling the insurance products and receiving agency premiums on behalf of each other. The Company would pay an agency fee to PICC Health in consideration of the agency services provided by PICC Health on the Company’s insurance products. The Company would receive an agency fee from PICC Health in consideration of the agency services provided by the Company on PICC Health’s insurance products. The agency fees were calculated by the actual agency premiums received multiplied by the agreed commission rates. The commission rates were negotiated between the Company and PICC Health on normal commercial terms.
PICC Health is both an associate of the Company and a fellow subsidiary of the Company. In the above note, PICC Health is included in “associates” and excluded from “fellow subsidiaries”.
(vii) On 30 August 2019, the Company and PICC Life entered into a mutual insurance agency agreement for a term of three years, effective from 31 August 2019. On 30 August 2022, the Company and PICC Life renewed the mutual insurance agency agreement for a term of three years, effective from 31 August 2022. Pursuant to the mutual insurance agency agreement, the Company and PICC Life mutually acted as the agent for selling the insurance products and receiving agency premiums on behalf of each other. The Company would pay an agency fee to PICC Life in consideration of the agency services provided by PICC Life on the Company’s insurance products. The Company would receive an agency fee from PICC Life in consideration of the agency services provided by the Company on PICC Life’s insurance products. The agency fees were calculated by the actual agency premiums received multiplied by the agreed commission rates. The commission rates were negotiated between the Company and PICC Life on normal commercial terms.
PICC Life is both an associate of the Company and a fellow subsidiary of the Company. In the above note, PICC Life is included in “associates” and excluded from “fellow subsidiaries”.
(viii) The Company purchased life or health insurance products from PICC Life and PICC Health for the employees of the Company.
(ix) The transactions with IBC are related party transactions as IBC is an associate of PICC Group since 2013. The transactions with China Merchant Securities are related party transactions as China Merchant Securities is an associate of PICC Group since 2017.
---
# 47. RELATED PARTY TRANSACTIONS (CONTINUED)
## (c) Material transactions with related parties (continued)
Notes (continued):
(x) The transactions with Hua Xia Bank are related party transactions as Hua Xia Bank is an associate of the Company since 2016.
(xi) On 20 January 2021, the Company and PICC Re entered into the Framework Agreement on Reinsurance Business Cooperation for a term of one year, effective from 1 January 2021. On 17 December 2021, the Company and PICC Re renewed the Framework Agreement on Reinsurance Business Cooperation for a term of one year, effective from 1 January 2022. Pursuant to the agreement, the Company agreed to cede insurance premiums to PICC Re and PICC Re agreed to pay commissions to the Company.
PICC Re is both an associate of the Company and a fellow subsidiary of the Company. In the above note, PICC Re is included in "associates" and excluded from "fellow subsidiaries".
(xii) On 29 May 2019, the Company and Bangbang signed a Goods Procurement Contract for a term of two years, effective from 1 April 2019. Pursuant to the contract, the Company shall purchase spare parts for the maintenance of insured accident-damaged vehicles from BangBang, and BangBang shall supply spare parts for accident-damaged vehicles and provide services on development, operation and maintenance of relevant systems to the Company. The Company shall pay the cost of the auto spare parts to BangBang.
On 29 April 2021, the Company entered into an Auto Parts Procurement Contract with Bangbang for a term of two years, effective from 1 April 2021. Pursuant to the contract, the Company shall purchase auto spare parts from Bangbang for the maintenance of insured vehicles damaged in accidents, and Bangbang shall supply the goods ordered under the Contract, undertake the responsibility of delivery, installment, adjustment of goods, and provide the Company with services including warranty, maintenance, consultation and training. The Company shall pay the cost of the auto spare parts to Bangbang.
(xiii) On 28 October 2021, the Company entered into a Customer Services Cooperation Framework Agreement with Aibao Technology, with a term commencing from 28 October 2021 and expiring on 31 December 2022. Pursuant to the agreement, Aibao Technology and its subsidiaries shall provide value-added services for customers' motor vehicle insurance, value-added services related to online activities, and online advertising services etc. to the Company, and the Company shall pay service fees to Aibao Technology and its subsidiaries.
(xiv) On 28 October 2022, the Company entered into the 2022 PICC Technology Service Agreement with PICC Technology. The agreement is valid from 28 October 2022 to 31 December 2022. Pursuant to the Agreement, PICC Technology will provide the Company with shared projects and services as well as exclusive services and the Company will pay technology service fees to PICC Technology.
(xv) In 2021, the Company entered into the former Property Leasing Agreement with PICC Investment, commencing on 7 July 2021 and expiring on 6 July 2022. On 5 July 2022, the Company entered into the Property Leasing Extension Agreement with PICC Investment. Pursuant to the Agreement, PICC Investment (as the lessor) leases its property to the Company (as the lessee) and the Company pays rent to PICC Investment; the Company (as the lessor) leases its property to PICC Investment (as the lessee) and PICC Investment pays rent to the Company.
Under the Listing Rules, items (ii) and (xv) above constitute connected transactions, and the items (ii), (iii), (iv), (v), (vi), (vii), (viii), (xi), (xii), (xiii) and (xiv) above constitute continuing connected transactions.
---
# 47. RELATED PARTY TRANSACTIONS (CONTINUED)
## (d) Outstanding balances with related parties
| | 31 December 2022 | 31 December 2021 |
| :--- | :--- | :--- |
| Cash and cash equivalents: | | |
| An associate of PICC Group | 2,480 | 2,112 |
| An associate | 5 | 9 |
| Term deposits: | | |
| An associate of PICC Group | 11,120 | 19,600 |
| An associate | 35 | 10 |
| Debt securities: | | |
| An associate of PICC Group | 760 | 760 |
| Equity securities: | | |
| An associate of PICC Group | 22,284 | 24,220 |
| Receivables from reinsurers: | | |
| An associate (note 20) | 988 | 1,047 |
| A fellow subsidiary under PICC Group (note 20) | 365 | 180 |
| Due from related parties: | | |
| PICC Group (note 30) | 106 | 109 |
| Associates (note 30) | 49 | 13 |
| Fellow subsidiaries under PICC Group (note 30) | 13 | 22 |
| Payables to reinsurers: | | |
| An associate (note 32) | 2,554 | 2,477 |
| A fellow subsidiary under PICC Group (note 32) | 389 | 244 |
| Due to related parties: | | |
| Fellow subsidiaries under PICC Group (note 39) | 168 | 159 |
| An associate of PICC Group | 21 | 2 |
| Lease liabilities: | | |
| A fellow subsidiary under PICC Group | 87 | 46 |
| PICC Group | – | 83 |
| An associate | – | 20 |
---
# 47. RELATED PARTY TRANSACTIONS (CONTINUED)
### (d) Outstanding balances with related parties (continued)
PICC Life, PICC Health, PICC Re and PICC Financial Services are all associates of the Company and fellow subsidiaries of the Company. In the above note, PICC Life, PICC Health, PICC Re and PICC Financial Services are included in “associates” and excluded from “fellow subsidiaries”.
The balances with PICC Group, fellow subsidiaries, associates and an associate of PICC Group are settled according to respective arrangements between the Company and the related parties.
### (e) Transactions with other government-related entities in the PRC
The Company is a state-owned enterprise which is subject to the indirect control of the State Council of the PRC government. The Group operates in an economic environment predominated by enterprises directly or indirectly controlled, jointly controlled or significantly influenced by the government through its authorities, affiliates or other organisations (collectively the “government-related entities”).
Transactions with other government-related entities include insurance policies sold, reinsurance purchased, deposits placed with banks, investments in debts or bonds and commissions paid to banks for insurance policies distributed.
The directors consider that transactions with government-related entities are activities conducted in the ordinary course of business, and that the dealings of the Group have not been significantly or unduly affected by the fact that the Group and those government-related entities are ultimately controlled or owned by the PRC government. The Group has also established pricing policies for products and services and such pricing policies do not depend on whether or not the customers are government-related entities.
Due to the complex ownership structure, the PRC government may hold indirect interests in many companies. Some of these interests may, in themselves or when combined with other indirect interests, be controlling interests which may not be known to the Group.
### (f) Compensation of key management personnel
| | 2022 | 2021 |
| :--- | :--- | :--- |
| | | (Restated) |
| | **RMB’000** | **RMB’000** |
| Fees, salaries and allowances | 2,970 | 5,339 |
| Performance related bonuses | 2,183 | 12,162 |
| Retirement benefits | 1,144 | 2,000 |
| Housing fund and other benefits | 578 | 1,056 |
| | **6,875** | **20,557** |
---
# 47. RELATED PARTY TRANSACTIONS (CONTINUED)
## (f) Compensation of key management personnel (continued)
Key management personnel are those persons having authorities and responsibilities for planning, directing and controlling the activities of the Group, directly or indirectly, including directors, supervisors and other members of senior management.
The total compensation packages for key management personnel for the year ended 31 December 2022 including performance related bonuses have not yet been finalised in accordance with regulations of the PRC relevant authorities. Management of the Group believes that the difference between the final remunerations and that disclosed above will not have significant impact on the consolidated financial statements.
The compensation amounts for certain key management personnel for the year ended 31 December 2021 were restated based on the finalised amounts determined in 2022. Additionally, pursuant to the PRC relevant regulations, a portion of the performance related bonuses for the year ended 31 December 2021 amounting to RMB4 million for key management personnel had been deferred.
# 48. OPERATING LEASING ARRANGEMENTS
## As lessor
The Group leases its investment properties (note 26) under lease arrangements, with lease terms ranging from one to twenty three years. The terms of the leases generally require the tenants to pay security deposits and provide for periodic rental adjustments according to the then prevailing market conditions.
At 31 December 2022 and 2021, the undiscounted lease payments to be received under leases are as follows:
| | 31 December 2022 | 31 December 2021 |
| :--- | :---: | :---: |
| Within one year, inclusive 1 year | 206 | 224 |
| One to two years, inclusive 2 years | 136 | 144 |
| Two to three years, inclusive 3 years | 82 | 95 |
| Three to four years, inclusive 4 years | 55 | 58 |
| Four to five years, inclusive 5 years | 38 | 38 |
| After five years | 107 | 111 |
| | | |
| **Total** | **624** | **670** |
---
## 49. STRUCTURED ENTITIES
### (a) Interests in consolidated structured entities
To determine whether control exists in a structured entity, the Group uses the judgements as described in note 3.
The Group had consolidated certain structured entities during the year which are debt or equity schemes. At 31 December 2022, interests in these consolidated structured entities held by the Group represented by their investment cost amounted to RMB1,591 million (31 December 2021: RMB904 million).
The financial impact of these debt schemes on the Group’s financial position at 31 December 2022, and results and cash flows for the year then ended, though consolidated, are not significant individually and therefore not disclosed separately.
Interests held by other interest holders in consolidated structured entities are presented as finance costs in the consolidated income statement and as accruals and other liabilities in the consolidated statement of financial position respectively. The Group had no payables to interest holders of consolidated structured entities at 31 December 2022 (31 December 2021: RMB39 million). The finance costs amounted to RMB1 million for the year ended 31 December 2022(2021: RMB2 million).
### (b) Interests in unconsolidated structured entities
The Group invested in a variety of structured entities including asset management products sponsored by asset management companies, securities companies or insurance asset management companies, mutual funds sponsored by mutual fund management companies, trusts sponsored by trust companies and wealth management products sponsored by banks. Investments in these unconsolidated structured entities are disclosed in respective notes of “Equity securities and mutual funds” and “Investments classified as loans and receivables”. The corresponding investment income is recorded in profit or loss as changes in fair values, realised gains/ (losses), dividend or interest income, net of any impairment loss.
The Group is not the investment manager, and has no power over changing any investment decisions and investment managers, as such, the Group does not control any of these structured entities and does not consolidate these structured entities.
---
## 49. STRUCTURED ENTITIES (CONTINUED)
### (b) Interests in unconsolidated structured entities (continued)
The following table shows the Groups’ interests in unconsolidated structured entities. It also shows the Group’s maximum exposure to these unconsolidated structured entities, representing the Group’s maximum possible risk exposure that could occur. The Group does not provide any financial support to these unconsolidated structured entities.
**31 December 2022**
| | Funding provided by the Group and carrying amount of the investment | The Group’s maximum exposure | Interest held by the Group |
| :--- | :---: | :---: | :--- |
| Products managed by related parties | 47,678 | 47,678 | Investment income |
| Products managed by third parties | 91,123 | 91,123 | Investment income |
| **Total** | **138,801** | **138,801** | |
**31 December 2021**
| | Funding provided by the Group and carrying amount of the investment | The Group’s maximum exposure | Interest held by the Group |
| :--- | :---: | :---: | :--- |
| Products managed by related parties | 40,549 | 40,549 | Investment income |
| Products managed by third parties | 84,748 | 84,748 | Investment income |
| **Total** | **125,297** | **125,297** | |
---
# 50. DISCLOSURES ABOUT THE TEMPORARY EXEMPTION FROM HKFRS 9
According to Amendments to HKFRS 4, the Group and the Company performed an assessment during the year ended 31 December 2016. The carrying amount of the Group’s liabilities connected with insurance exceeded 90% of the carrying amount of the Group’s total liabilities and, as such, the Group concluded that its activities were predominantly connected with insurance as at 31 December 2015, and is eligible to apply the temporary exemption from HKFRS 9. There had been no significant change in the activities of the Group and the Company since then that requires reassessment. The Group and the Company have decided to apply the temporary exemption in its reporting period commencing on 1 January 2018.
As permitted by Amendments to HKFRS 4, the Group elects not to apply uniform accounting policies when using the equity method for associates and joint ventures.
The additional disclosures about the temporary exemption from HKFRS 9 are as follows:
## (i) Fair value of financial assets
The table below presents the fair value of the following groups of financial assets (Note) under HKFRS 9 at 31 December 2022 and 2021 and fair value changes for the years ended 31 December 2022 and 2021:
| | | Fair value | | Fair value |
| :--- | :---: | :---: | :---: | :---: |
| | | **changes for** | | **changes for** |
| | **Fair value at** | **the year ended** | **Fair value at** | **the year ended** |
| | **31 December** | **31 December** | **31 December** | **31 December** |
| | **2022** | **2022** | **2021** | **2021** |
| Held for trading financial assets (A) | 11,174 | (250) | 19,820 | 251 |
| Financial assets that are managed and whose performance are evaluated on a fair value basis (B) | – | – | – | – |
| Financial assets other than A and B | | | | |
| – Financial assets with contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (“SPPI”) (C) | 202,972 | (2,165) | 197,730 | 2,340 |
| – Financial assets with contractual terms that do not meet SPPI terms (D) | 195,699 | (11,923) | 164,002 | (2,078) |
| **Total** | **409,845** | **(14,338)** | **381,552** | **513** |
---
# 50. DISCLOSURES ABOUT THE TEMPORARY EXEMPTION FROM HKFRS 9 (CONTINUED)
## (i) Fair value of financial assets (continued)
Note: The table above includes only debt securities, equity securities and mutual funds and investments classified as loans and receivables. As all other financial assets (including cash, term deposits, insurance receivables and other assets) held by the Group are financial assets that meet SPPI criterion, and their carrying amounts approximate their fair values. Accordingly, they have not been included in the table above.
## (ii) Credit risk exposure
For the financial assets that meet SPPI criterion (included in C above), the credit rating of financial assets is assessed by qualified rating agencies in the PRC except for overseas bonds. The credit risk exposure is listed below:
### Credit rating of financial assets that meet SPPI criterion (other than overseas bonds)
| | Carrying amount (Note 1) | Carrying amount (Note 1) |
| :--- | :--- | :--- |
| | **31 December 2022** | **31 December 2021** |
| AAA | 164,508 | 151,847 |
| AA+ | 20 | 78 |
| AA | – | – |
| A-1 | – | 103 |
| Not rated* | 34,491 | 40,155 |
| Total | 199,019 | 192,183 |
\* Included in the not rated category, there is an aggregate carrying amount of RMB33,903 million (31 December 2021: RMB38,989 million) of government bonds and certain financial bonds issued by policy banks with low credit risks, and the remaining financial assets with carrying amount of RMB588 million (31 December 2021: RMB1,166 million) without any credit rating do not have low credit risk.
---
# 50. DISCLOSURES ABOUT THE TEMPORARY EXEMPTION FROM HKFRS 9 (CONTINUED)
## (ii) Credit risk exposure (continued)
For the overseas bonds that meet SPPI criterion (included in C above), Moody’s credit rating is used. The credit risk exposure is listed below:
### Credit rating of overseas bonds that meet SPPI criterion
| | Carrying amount (Note 1) | Carrying amount (Note 1) |
| :--- | :---: | :---: |
| | **31 December 2022** | **31 December 2021** |
| Aaa | 66 | 63 |
| Aa1 | 240 | 213 |
| Aa2 | 4 | 4 |
| Aa3 | 13 | 11 |
| A1 | 14 | 197 |
| A2 | 8 | 8 |
| A3 | 33 | 46 |
| Baa1 | 36 | 60 |
| Baa2 | 27 | 26 |
| Baa3 | 11 | 10 |
| P-1 | – | – |
| Not rated | – | 109 |
| **Total** | **452** | **747** |
| | Carrying amount | Carrying amount | Fair value | Fair value |
| :--- | :---: | :---: | :---: | :---: |
| | **31 December 2022** | **31 December 2021** | **31 December 2022** | **31 December 2021** |
| Financial assets that do not have low credit risk (those that meet SPPI criterion (included in C above)) (Note 2) | 608 | 1,456 | 35 | 813 |
Note 1: For financial assets measured at amortised cost, carrying amount before adjusting impairment allowance is disclosed here.
Note 2: Financial assets that do not have low credit risk refer to financial assets with either credit rating for those assets rated by qualified rating agencies in the PRC below AAA or Moody’s credit rating below Baa3.
---
# 51. EVENTS AFTER THE REPORTING PERIOD
On 24 March 2023, the Board of Directors of the Company proposed a final dividend of RMB0.478 per ordinary share in respect of the year ended 31 December 2022, and an amount of RMB10 billion to be appropriated to discretionary surplus reserve.
The above events are subject to the approval of shareholders’ general meeting of the Company.
# 52. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY
## (a) The Company’s statement of financial position
| | 31 December 2022 | 31 December 2021 |
| :--- | :--- | :--- |
| **ASSETS** | | |
| Cash and cash equivalents | 20,320 | 16,824 |
| Debt securities | 192,970 | 172,848 |
| Equity securities and mutual funds | 140,698 | 143,804 |
| Insurance receivables | 70,085 | 55,399 |
| Reinsurance assets | 44,456 | 37,535 |
| Term deposits | 73,448 | 73,427 |
| Investments classified as loans and receivables | 71,883 | 59,243 |
| Investments in associates and joint ventures | 38,798 | 38,958 |
| Investments in subsidiaries | 3,752 | 3,353 |
| Investment properties | 5,826 | 5,477 |
| Property and equipment | 20,877 | 19,342 |
| Right-of-use assets | 5,481 | 5,730 |
| Deferred income tax assets | 14,898 | 6,926 |
| Prepayments and other assets | 26,317 | 23,338 |
| | | |
| **TOTAL ASSETS** | **729,809** | **662,204** |
| | | |
| **LIABILITIES** | | |
| Payables to reinsurers | 24,626 | 22,496 |
| Accrued insurance security fund | 1,230 | 994 |
| Securities sold under agreements to repurchase | 41,690 | 37,985 |
| Income tax payable | 3,446 | 856 |
| Insurance contract liabilities | 384,831 | 338,734 |
| Policyholders’ deposits | 1,741 | 1,748 |
| Bonds payable | 8,097 | 8,058 |
| Lease liabilities | 1,600 | 1,786 |
| Accruals and other liabilities | 71,540 | 64,036 |
| | | |
| **TOTAL LIABILITIES** | **538,801** | **476,693** |
| | | |
| **EQUITY** | | |
| Issued capital | 22,242 | 22,242 |
| Reserves | 168,766 | 163,269 |
| | | |
| **TOTAL EQUITY** | **191,008** | **185,511** |
| | | |
| **TOTAL LIABILITIES AND EQUITY** | **729,809** | **662,204** |
---
# 52 STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY (CONTINUED)
## (b) Movement in the Company’s reserves
Movements in the Company’s reserves are as follows:
| For the year ended 31 December 2022 | Share premium and other reserves | Asset revaluation reserve | Available-for-sale financial assets revaluation reserve | Surplus reserve | General risk reserve | Catastrophic loss reserve | Retained profits | Total |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: |
| 1 January 2022 | 11,432 | 4,332 | 21,355 | 64,100 | 19,823 | 307 | 41,920 | 163,269 |
| Total comprehensive income | – | 407 | (9,481) | – | – | – | 23,689 | 14,615 |
| Appropriations to statutory surplus reserve and general risk reserve | – | – | – | 2,655 | 2,655 | – | (5,310) | – |
| Appropriations to catastrophic loss reserve | – | – | – | – | – | 428 | (428) | – |
| Utilisation of catastrophic loss reserve | – | – | – | – | – | (650) | 650 | – |
| 2021 final dividend | – | – | – | – | – | – | (9,053) | (9,053) |
| Share of other equity movement | (65) | – | – | – | – | – | – | (65) |
| 31 December 2022 | 11,367 | 4,739 | 11,874 | 66,755 | 22,478 | 85 | 51,468 | 168,766 |
| For the year ended 31 December 2021 | Share premium and other reserves | Asset revaluation reserve | Available-for-sale financial assets revaluation reserve | Surplus reserve | General risk reserve | Catastrophic loss reserve | Retained profits | Total |
| :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: |
| 1 January 2021 | 11,432 | 3,725 | 20,764 | 61,814 | 17,537 | 1,149 | 34,580 | 151,001 |
| Total comprehensive income | – | 607 | 591 | – | – | – | 19,412 | 20,610 |
| Appropriations to statutory surplus reserve and general risk reserve | – | – | – | 2,286 | 2,286 | – | (4,572) | – |
| Appropriations to catastrophic loss reserve | – | – | – | – | – | 296 | (296) | – |
| Utilisation of catastrophic loss reserve | – | – | – | – | – | (1,138) | 1,138 | – |
| 2020 final dividend | – | – | – | – | – | – | (8,342) | (8,342) |
| 31 December 2021 | 11,432 | 4,332 | 21,355 | 64,100 | 19,823 | 307 | 41,920 | 163,269 |
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# Definitions
In this annual report, the following expressions shall have the following meanings unless the context otherwise requires:
| | |
| :--- | :--- |
| “Aibao Technology” | Aibao Technology Co., Ltd. |
| “Articles of Association” | the articles of association of the Company |
| “Bangbang Auto Sales & Services” | Bangbang Auto Sales & Service (Beijing) Co., Ltd. |
| “Board” or “Board of Directors” | the board of directors of the Company |
| “CBIRC” | China Banking and Insurance Regulatory Commission |
| “China Credit Trust” | China Credit Trust Company Limited |
| “Code of Corporate Governance” | Code of Corporate Governance for Banking and Insurance Institutions |
| “Company” “We” or “PICC Property and Casualty” | PICC Property and Casualty Company Limited |
| “Company Law” | the Company Law of the People’s Republic of China |
| “Corporate Governance Code” | the Corporate Governance Code as set out in Appendix 14 of the Listing Rules |
| “C-ROSS” | China Risk-oriented Solvency System |
| “Director(s)” | the director(s) of the Company |
| “Hong Kong Stock Exchange” | The Stock Exchange of Hong Kong Limited |
| “Hua Xia Bank” | Hua Xia Bank Co., Limited |
| “Listing Rules” | the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited |
| “Model Code” | the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules |
| “PIB” | Prime Insurance Brokers Company Limited |
| “PICC AMC” | PICC Asset Management Company Limited |
| “PICC Capital” | PICC Capital Insurance Asset Management Co., Ltd. |
| “PICC Equity” | PICC Capital Equity Investment Company Limited |
| “PICC Financial Services” | PICC Financial Services Company Limited |
---
# Definitions
| | |
| :--- | :--- |
| “PICC Group” | The People’s Insurance Company (Group) of China Limited |
| “PICC Health” | PICC Health Insurance Company Limited |
| “PICC HK” | The People’s Insurance Company of China (Hong Kong), Limited |
| “PICC Investment” | PICC Investment Holding Company Limited |
| “PICC Life” | PICC Life Insurance Company Limited |
| “PICC Pension” | PICC Pension Company Limited |
| “PICC Re” | PICC Reinsurance Company Limited |
| “PICC Technology” | PICC Information Technology Co., Ltd. |
| “PRC” or “China” | the People’s Republic of China |
| “RMB” | Renminbi, the lawful currency of the PRC |
| “SFO” | the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) |
| “Supervisor(s)” | the supervisor(s) of the Company |
| “Supervisory Committee” | the supervisory committee of the Company |
| “Year” | the year ended 31 December 2022 |
| “%” | per cent |
---
# Corporate Information
## REGISTERED NAME
**Chinese name:** 中國人民財產保險股份有限公司
(Abbreviation of Chinese name: 人保財險)
**English name:** PICC Property and Casualty Company Limited
(Abbreviation of English name: PICC P&C)
## REGISTERED OFFICE
Tower 2, No. 2 Jianguomenwai Avenue, Chaoyang District, Beijing 100022, the PRC
## WEBSITE
property.picc.com
## STOCK NAME
PICC P&C
## STOCK CODE
2328
## TYPE OF STOCK
H Share
## PLACE OF LISTING OF H SHARES
The Stock Exchange of Hong Kong Limited
## LEGAL REPRESENTATIVE
Yu Ze
## H SHARE REGISTRAR AND TRANSFER OFFICE
Computershare Hong Kong Investor Services Limited
## COMPANY SECRETARY
Zhang Xiao
## INVESTOR RELATIONS CONTACT
Tel: (8610) 85176084
E-mail: ir@picc.com.cn
## AUDITORS
*International Auditor*
PricewaterhouseCoopers
Certified Public Accountants and Registered Public Interest Entity Auditor
*Domestic Auditor*
PricewaterhouseCoopers Zhong Tian LLP
---
# PICC
# 中国人民保险
### 人民保险 服务人民