a CHINA TAPING | 95 2023 ANNUAL 年 REPORT 報 CHINA TAIPING Bock Code HK00966 INVEST FRIEND HEAR Contents 目錄 Contents 目錄 Corporate Information 公司資料 4 Simplified Ownership Structure 簡明公司架構 6 Chairman's Statement 董事長致辭 8 Management Review and Analysis 管理層回顧和分析 18 Independent Actuaries Report on Review of Embedded Value Information 關於內含價值信息的獨立精算師審閱報告 57 Embedded Value 內含價值 59 Biographical Details of Directors, Senior Management and Company Secretary 董事、高級管理層及公司秘書之履歷 69 Report of the Directors 董事會報告書 76 Corporate ...

Investment Rating - The report maintains an "Outperform" rating for the company [5][19]. Core Views - The company achieved a significant increase in net profit, with a year-on-year growth of 44.1%, reaching HKD 6.19 billion [2][6]. - The report highlights the strong performance of the life insurance segment, particularly in the bancassurance channel, which is expected to be a new growth driver [2][12]. - The investment structure has been optimized, with an increased allocation to bonds, contributing to a stable growth in investment assets [2][12]. Financial Performance Summary - **Net Profit**: The company's net profit attributable to shareholders was HKD 6.19 billion, up 44.1% year-on-year [2][6]. - **Net Asset Value**: The net asset value decreased by 5.9% from the beginning of the year, totaling HKD 79 billion [2][10]. - **Return on Equity (ROE)**: The ROE improved to 8.5%, an increase of 1.2 percentage points year-on-year [2][10]. - **Embedded Value (EV)**: The group's EV at the end of 2023 was HKD 203.1 billion, reflecting a year-on-year increase of 2.5% [2][6]. - **New Business Value (NBV)**: The NBV for the life insurance segment was HKD 7.51 billion, with a year-on-year growth of 0.7% [2][11]. Segment Performance Summary - **Life Insurance**: The new individual insurance premium increased by 24.3% year-on-year, with a significant rise in bancassurance premiums [2][12]. - **Property and Casualty Insurance**: All segments maintained underwriting profitability, with a comprehensive cost ratio of 98.4%, up 1.2 percentage points year-on-year [2][12]. - **Investment Performance**: The total investment income rose by 138.8% year-on-year, reaching HKD 33.6 billion, driven by better performance in high-dividend stocks and a decrease in domestic interest rates [2][12]. Future Outlook - The report anticipates that the bancassurance channel will become a key value driver for the company in 2024, with expectations of a significant increase in NBV [2][12]. - The company is expected to continue its focus on high-quality development and structural adjustments to enhance profitability [2][12].

Investment Rating - The report assigns an "Outperform" rating to China Taiping Insurance Holdings with a target price of HK$9.26 [2][20]. Core Insights - China Taiping Insurance Holdings reported a net profit attributable to shareholders of HK$6.19 billion for 2023, representing a year-on-year increase of 44.1%. The second half of 2023 saw a net profit of HK$0.97 billion, marking a return to profitability [3][15]. - The company's net assets stood at HK$79 billion, down 5.9% from the beginning of the year, with a return on equity (ROE) of 8.5%, up 1.2 percentage points year-on-year [3][15]. - The report highlights a strategic adjustment in long-term investment return assumptions and risk discount rates, impacting the embedded value (EV) and new business value (NBV) [16]. Summary by Sections Financial Performance - The group’s EV at the end of 2023 was HK$203.1 billion, a 2.5% increase year-on-year. On a comparable basis, the group and life EVs grew by 9.1% and 8.2% respectively [16]. - Taiping Life's NBV reached HK$7.51 billion, a slight increase of 0.7% year-on-year, but on a comparable basis, it grew by 26.0% [16][17]. - The NBV margin was reported at 15.9%, with individual insurance and bancassurance margins at 22.2% and 5.9% respectively [16]. Life Insurance Segment - New premiums for Taiping Life increased by 24.3% year-on-year, with individual long-term first-year premiums at HK$20 billion, up 13.3% [17]. - Bancassurance long-term first-year premiums surged by 45.5% to HK$16.9 billion, indicating a growing share of this channel [17]. - The report notes a significant reduction in the agent workforce, down 40.0% from the start of the year, but anticipates stabilization and recovery in 2024 [17]. Property & Casualty Segment - All divisions within the property and casualty segment remained profitable, with a combined ratio of 98.4%, an increase of 1.2 percentage points year-on-year [18]. - Original premium income for Taiping P&C was HK$33.4 billion, reflecting a year-on-year growth of 1.4% [18]. Investment Strategy - The group’s investment assets grew to HK$1,349.5 billion, a 14.9% increase from the start of the year, with a focus on optimizing the investment structure by increasing bond allocations [19]. - Total investment profit reached HK$33.6 billion, a significant year-on-year increase of 138.8% [19]. - The report attributes the rise in synthetic fund cost rate to strong performance in high-dividend stocks and a decline in domestic interest rates [19]. Valuation - The current stock price corresponds to just 0.1x the 2024E price-to-embedded value (PEV), indicating potential undervaluation [20]. - The report maintains a target PEV of 0.15x for 2024E, reflecting a cautious outlook on the company's valuation [20].

Investment Rating - The report maintains a "Buy" rating for China Taiping (0966) and lowers the target price to HKD 9.61 per share, corresponding to a 2023 P/EV of 0.16 times [3][4]. Core Views - The company's net profit attributable to shareholders for 2023 increased by 44.1%, primarily due to improved investment income. The NBV (New Business Value) met expectations, and the industry is benefiting from cyclical channel optimization, which supports stable performance [3][4]. - The report highlights a significant improvement in comprehensive investment returns, with a notable increase in the total investment return rate by 2.66 percentage points year-on-year [3][11]. Financial Summary - The 2023 net profit reached HKD 6,190 million, up 44.1% year-on-year, driven by substantial investment income improvements [8][11]. - The NBV for 2023 increased by 26.0% (before adjustments) and 0.7% (after adjustments), indicating a strong performance in the savings insurance product strategy [3][11]. - The company’s dividend for 2023 was HKD 0.3 per share, a 15.4% increase year-on-year, with a dividend payout ratio reduced from 33.4% in 2022 to 17.4% in 2023 [3][11]. Business Performance - The individual insurance NBV increased by 7.2% year-on-year, driven by new business growth that meets residents' savings needs, with new individual insurance policies up by 5.3% [3][11]. - The company experienced a significant decline in the number of individual insurance agents, down 40.0% year-on-year to 235,000, while the productivity per agent improved by 30.6% [3][11]. - The property and casualty insurance segment saw a slow growth rate, with total premium income up by 1.4% year-on-year, while the comprehensive cost ratio increased by 1.2 percentage points to 98.4% [3][11]. Investment Strategy - The report suggests that the ongoing strong demand for insurance savings products and a recovering equity market could act as catalysts for future performance [3][11].

Financial Performance - Shareholders' profit attributable to the company reached HKD 6.19 billion, a year-on-year increase of 44.1%[4] - The company's profit attributable to shareholders reached HKD 6.19 billion, a year-on-year increase of 44.1%[15] - The pre-tax profit increased by 90.7% to HKD 11,658.07 million, while the post-tax profit rose by 23.0% to HKD 10,276.94 million[21] - The net profit for the year represented a growth of approximately 12.5% compared to the previous year, highlighting operational efficiency[109] - The total comprehensive income for the year ended December 31, 2023, was HKD 10,276,941, with a profit attributable to shareholders of HKD 6,189,764[109] Asset Growth - The total assets of the group exceeded HKD 1.5 trillion, an increase of 14.2% compared to the end of 2022[4] - Total assets grew to HKD 1,509.5 billion, representing a 14.2% increase compared to the end of last year[15] - The total assets as of December 31, 2023, reached HKD 1,509,497.49 million, reflecting a growth of 14.2% from HKD 1,321,590.06 million in 2022[22] - Total assets increased by 14.2% to HKD 1,255,876.78 million, and total equity rose by 1.7% to HKD 61,767.89 million[29] Investment Performance - The investment return rate and comprehensive investment return rate showed significant improvement[4] - Investment assets amounted to HKD 1,349.5 billion, up 14.9% from the previous year, with total investment income rising by 138.8% to HKD 33.57 billion[17] - The total investment income increased by 138.8% to HKD 33,565.86 million in 2023, compared to HKD 14,053.29 million in 2022[61] - The company's stock holdings outperformed the Hang Seng Index by 18.47 percentage points, benefiting from a high dividend strategy[17] Insurance Business Highlights - The premium scale of property insurance exceeded RMB 30 billion for the first time[4] - The group signed contracts with 114 strategic clients, contributing a total premium scale of HKD 58.85 billion in 2023[7] - New business value in life insurance increased by 27.8% year-on-year, with new individual insurance premium growth of 24.3%[15] - The reinsurance business saw a revenue increase of 8.6% year-on-year, maintaining an underwriting profit with a combined ratio of 95.6%[17] Risk Management - The group established a negative list for investment trading counterparties to enhance risk management[8] - The company is focused on risk compliance management, implementing a comprehensive risk management mechanism to prevent and mitigate risks effectively[12] - The company has made significant progress in risk prevention and resolution, achieving notable results in addressing challenges and implementing strategic initiatives[14] Digital Transformation and Innovation - In 2023, the company emphasized the importance of digital transformation and the development of a digital financial service model combining insurance, technology, and services[11] - The company launched innovative products such as the Smart Product Assistant and Smart Outbound Call Assistant, enhancing its digital transformation efforts[20] - The financial technology ecosystem was expanded with the establishment of the China Taiping Financial Technology Ecosystem Alliance, now comprising 35 member units[20] Corporate Social Responsibility and Initiatives - The group actively supported the "Belt and Road" initiative, insuring 474 projects along the route[5] - China Taiping is committed to expanding its green insurance offerings and increasing green investments to better serve the real economy[10] - The company is dedicated to supporting the development of the Greater Bay Area and enhancing Hong Kong's position as an international financial center[10] Market Outlook and Strategy - The company is optimistic about the potential of the Chinese insurance market and the resilience of the Chinese economy despite external challenges[9] - The company aims to enhance its core competitiveness by optimizing its business structure and improving capital efficiency, aiming for long-term stable and high returns[11] - The company anticipates a global economic growth rate of 3.1% in 2024, with inflation expected to decrease from 6.8% in 2023 to 5.8%[81] Financial Health and Solvency - The total equity increased by 20.8% to HKD 132,595.65 million, up from HKD 109,797.44 million in the previous year[22] - The solvency ratio for Taiping Life reached 284%, up 90 percentage points from the previous year, indicating strong financial health[31] - The comprehensive solvency ratio improved to 216% in 2023 from 186% in 2022, an increase of 30 percentage points[44] Customer and Market Engagement - The number of elderly residents in the Shanghai Wutong Elderly Community surpassed 1,000, with several new communities opening in 2023[6] - The number of personal customers for Taiping Property Insurance increased by 1,755,151 to 9,853,300[44] - The number of individual customers decreased to 15,174,031 from 15,743,273, a decline of 569,242[38] Employee and Operational Efficiency - The group reduced its employee count to 65,378 as of December 31, 2023, down from 68,386 in 2022, with total employee costs decreasing by 15.3% to HKD 12.762 billion[75] - The company’s customer service capabilities improved significantly, with a complaint total decrease of 19.7% year-on-year[19] Accounting and Financial Reporting - The company has adopted new accounting standards for insurance contracts and financial instruments, which may impact future financial reporting and performance metrics[116] - The company adheres to Hong Kong Financial Reporting Standards in preparing its financial statements, ensuring accuracy and compliance[119] - The company confirmed that reinsurance contracts are accounted for similarly to issued insurance contracts, using consistent assumptions[126]

Financial Performance - Insurance revenue for the six months ended June 30, 2023, was HKD 54,128,830, a decrease of 3.57% from HKD 56,135,352 in the same period of 2022[4] - Profit after taxation increased to HKD 7,521,241, representing a growth of 8.93% compared to HKD 6,904,343 in the previous year[6] - Basic earnings per share attributable to ordinary shareholders rose to HKD 1.365, up from HKD 1.205, reflecting an increase of 13.27%[4] - Total comprehensive income for the period was HKD 558,127, a decline of 71.54% from HKD 1,960,990 in the prior year[6] - Interest revenue for the first half of 2023 was HKD 17,636,649, slightly down from HKD 17,857,812 in 2022, indicating a decrease of 1.23%[4] - Other investment return showed a significant improvement, reaching HKD 5,555,853 compared to a loss of HKD 5,446,702 in the same period last year[4] - The company reported a net investment result of HKD 1,628,789, a recovery from a loss of HKD 2,578,427 in the previous year[4] Assets and Liabilities - As of June 30, 2023, total assets amounted to HKD 1,422,988,843,000, an increase from HKD 1,321,590,064,000 at the end of 2022, representing a growth of approximately 7.6%[8] - Insurance contract liabilities reached HKD 1,111,997,417,000, up from HKD 1,041,941,305,000 at the end of 2022, indicating an increase of about 6.7%[10] - Financial investments at fair value through profit or loss were HKD 445,859,302,000, compared to HKD 351,026,822,000 at the end of 2022, reflecting a significant rise of approximately 27%[8] - Cash and cash equivalents increased to HKD 56,736,544,000 from HKD 42,472,429,000, marking a growth of around 33.6%[10] - The company's net assets stood at HKD 123,914,437,000, an increase from HKD 109,797,436,000 at the end of 2022, representing a growth of about 12.8%[10] - The total liabilities of the company increased to HKD 1,299,074,406,000 from HKD 1,211,792,628,000, representing a growth of approximately 7.2%[10] Equity and Reserves - The total equity of the company rose to HKD 123,914,437,000, compared to HKD 109,797,436,000 at the end of 2022, indicating an increase of approximately 12.8%[10] - The fair value reserve increased significantly to HKD 23,138,925,000, up from HKD 15,011,588,000, showing a positive shift in asset valuations[13] - The balance attributable to owners of the Company as of June 30, 2023, was HKD 82,029,932,000, reflecting a decrease from HKD 83,339,865,000 at the beginning of the year[17] - The balance of non-controlling interests increased to HKD 25,894,491,000, indicating growth in subsidiary ownership stakes[13] Cash Flow - Net cash from operating activities for the six months ended June 30, 2023, was HKD 78,171,202, an increase of 34.7% compared to HKD 58,045,908 in the same period of 2022[21] - Net cash used in investing activities increased to HKD (75,255,300) from HKD (49,458,489), reflecting a significant rise in investment outflows[21] - Net cash from financing activities rose to HKD 14,645,616, compared to HKD 3,291,130 in the previous year, indicating a strong financing position[21] Dividends and Capital Structure - Dividends declared to shareholders amounted to HKD 934,445,000 during the period, reflecting the company's commitment to returning value to shareholders[13] - The company issued perpetual subordinated capital securities totaling HKD 15,674,799,000, enhancing its capital structure[13] Accounting Standards and Compliance - The company has adopted new accounting standards effective from January 1, 2023, which may impact future financial reporting[38] - The financial statements are prepared in accordance with HKFRS, ensuring compliance with applicable disclosure requirements[24] - The Group adopted new accounting standards HKFRS 17 and HKFRS 9 starting from January 1, 2023, with no material impact on financial performance for the current and prior years[44] Insurance Contracts - Insurance contracts are classified based on whether they transfer significant insurance risk, with reinsurance contracts classified separately[44] - The Group's accounting policies now include specific definitions and classifications for insurance and reinsurance contracts[41] - The Group's insurance contracts are grouped based on similar risks and managed uniformly, with annual cohorts established for profitability assessment[65] Measurement and Recognition - The Group recognizes impairment losses in profit or loss to ensure that the carrying amount of the asset does not exceed the expected net cash inflow for the related group[91] - The measurement of insurance contracts includes future cash flows within the contract boundary, which are determined based on substantive rights and obligations[90] - The Group's contractual service margin (CSM) represents the unearned profit that will be recognized as services are provided under insurance contracts[106] Risk and Cash Flow Management - The risk adjustment for non-financial risk is determined separately and compensates for uncertainty regarding cash flow amounts and timing[105] - The Group's ability to reassess risks allows it to set prices that reflect those reassessed risks, impacting the contract boundaries[97] - The Group's cash flows from reinsurance contracts are also measured within the contract boundary based on substantive rights and obligations[94]

[Management Discussion and Analysis](index=2&type=section&id=Management%20Discussion%20and%20Analysis) [Overall Performance Highlights](index=2&type=section&id=Overall%20Performance%20Highlights) In H1 2023, the Group's profit attributable to shareholders grew 20.5% to HK$5.22 billion, with total assets up 7.7% to HK$1.423 trillion Key Financial Indicators for H1 2023 | Indicator | Amount | Change vs. Year-End/Prior Period | | :--- | :--- | :--- | | Profit Attributable to Shareholders | HK$5.22 billion | +20.5% | | Contractual Service Margin | HK$217.79 billion | -1.6% | | Equity Attributable to Ordinary Shareholders | HK$82.03 billion | -2.3% | | Total Assets | HK$1,423.0 billion | +7.7% | - The Group implemented a high-quality development strategy, seizing opportunities in **inclusive finance, pension finance, and green finance**, and promoting the deep integration of "insurance + healthcare and wellness"[3](index=3&type=chunk) - The Group's investment business developed steadily, with **total investment income increasing by 105.9%** year-over-year in the first half, and equity investment performance outperforming market benchmarks[8](index=8&type=chunk) - The Group continued to advance its digital transformation, launching the HKFRS 17-related systems and deepening technological innovation, such as the proprietary **"Auto Insurance Score" and "Health Guardian"** models[13](index=13&type=chunk) [Consolidated Financial Performance](index=6&type=section&id=Consolidated%20Financial%20Performance) The Group's net profit attributable to shareholders rose 20.5% to HK$5.22 billion in H1 2023, driven primarily by the life insurance business Consolidated Financial Summary for H1 2023 | Indicator | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | | Insurance service revenue | HK$54.13 billion | HK$56.14 billion | -3.6% | | Profit before tax | HK$7.84 billion | HK$7.07 billion | +10.9% | | Net profit attributable to shareholders | HK$5.22 billion | HK$4.33 billion | +20.5% | | Basic earnings per share | HK$1.365 | HK$1.205 | +HK$0.160 | Consolidated Balance Sheet Summary as of June 30, 2023 | Indicator | As of June 30, 2023 | As of Dec 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Total Assets | HK$1,422.99 billion | HK$1,321.59 billion | +7.7% | | Contractual Service Margin | HK$217.79 billion | HK$221.41 billion | -1.6% | | Total Equity | HK$123.91 billion | HK$109.80 billion | +12.9% | Net Operating Profit/(Loss) by Business Segment | Business Segment | H1 2023 (HK$ million) | H1 2022 (HK$ million) | Change | | :--- | :--- | :--- | :--- | | Life insurance | 7,477.70 | 6,512.89 | +14.8% | | Domestic property and casualty insurance | 185.36 | 576.70 | -67.9% | | Overseas property and casualty insurance | 174.28 | 158.24 | +10.1% | | Reinsurance | (285.68) | (239.46) | +19.3% | | Asset management business | 92.93 | 654.10 | -85.8% | [Business Segment Analysis](index=9&type=section&id=Business%20Segment%20Analysis) The Group's business segments showed varied performance, with strong new business value growth in life insurance but underwriting losses in reinsurance [Life Insurance Business](index=9&type=section&id=Life%20Insurance%20Business) The life insurance segment saw a 28.5% increase in new business value, though the number of individual agents declined Life Insurance Business Financial Performance | Indicator | H1 2023 (HK$ million) | H1 2022 (HK$ million) | Change | | :--- | :--- | :--- | :--- | | Insurance service revenue | 31,002.11 | 32,944.59 | -5.9% | | Insurance service result | 7,637.31 | 10,316.48 | -26.0% | | Profit after tax | 7,477.70 | 6,512.89 | +14.8% | - Taiping Life's **new business value grew by 28.5%** year-over-year to RMB 3.65 billion, with new business premiums up 42.4%; premiums from the individual agent and bancassurance channels rose by 21.8% and 82.5%, respectively[5](index=5&type=chunk) - The number of individual agents at Taiping Life **decreased by 70,809**, from 391,069 at the end of 2022 to 320,260 as of June 30, 2023[39](index=39&type=chunk) Solvency Adequacy Ratio of Life Insurance Subsidiaries | Subsidiary | As of June 30, 2023 | As of Dec 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Taiping Life | 197% | 194% | +3 ppt | | Taiping Pension | 212% | 224% | -12 ppt | | Taiping Life (HK) | 231% | 204% | +27 ppt | [Domestic Property and Casualty Insurance Business](index=15&type=section&id=Domestic%20Property%20and%20Casualty%20Insurance%20Business) The domestic P&C business reported premium growth, but its combined ratio increased to 97.6% Taiping P&C Financial Performance | Indicator | H1 2023 (HK$ million) | H1 2022 (HK$ million) | Change | | :--- | :--- | :--- | :--- | | Insurance service revenue | 16,101.57 | 16,005.86 | +0.6% | | Profit after tax | 185.36 | 576.70 | -67.9% | | Combined ratio | 97.6% | 95.2% | +2.4 ppt | - Within Taiping P&C's gross written premiums, **non-motor insurance business grew by 14.1%** year-over-year, indicating continuous optimization of the business structure[6](index=6&type=chunk)[45](index=45&type=chunk) - Taiping P&C's **comprehensive solvency adequacy ratio was 200%** as of June 30, 2023, an increase of 14 percentage points from 186% at the end of 2022[46](index=46&type=chunk) [Overseas Property and Casualty Insurance Business](index=17&type=section&id=Overseas%20Property%20and%20Casualty%20Insurance%20Business) The overseas P&C business delivered a strong overall underwriting performance, with most subsidiaries achieving profitability Combined Ratio of Overseas P&C Businesses | Company | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | | Taiping HK | 91.7% | 96.0% | -4.3 ppt | | Taiping Macau | 68.2% | 75.3% | -7.1 ppt | | Taiping UK | 93.5% | 91.4% | +2.1 ppt | | Taiping Singapore | 92.0% | 85.6% | +6.4 ppt | | Taiping Indonesia | 81.7% | 82.9% | -1.2 ppt | Gross Written Premiums of Overseas P&C Businesses | Company | H1 2023 (HK$ million) | H1 2022 (HK$ million) | Change | | :--- | :--- | :--- | :--- | | Taiping HK | 1,372.91 | 1,267.61 | +8.3% | | Taiping Macau | 478.80 | 494.33 | -3.1% | | Taiping UK | 214.14 | 182.05 | +17.6% | | Taiping Singapore | 405.92 | 380.72 | +6.6% | | Taiping Indonesia | 299.24 | 238.36 | +25.5% | [Reinsurance Business](index=19&type=section&id=Reinsurance%20Business) The reinsurance business experienced steady premium growth but recorded an underwriting loss with a combined ratio of 105.8% Reinsurance Business Financial Performance | Indicator | H1 2023 (HK$ million) | H1 2022 (HK$ million) | Change | | :--- | :--- | :--- | :--- | | Insurance service revenue | 4,921.02 | 4,818.03 | +2.1% | | Loss after tax | (285.68) | (239.46) | +19.3% | | Combined ratio | 105.8% | 101.4% | +4.4 ppt | - Total premiums for the reinsurance business grew by 2.3% year-over-year to HK$10.03 billion, with **life reinsurance up 9.2%** and non-life reinsurance up 0.6%[57](index=57&type=chunk)[58](index=58&type=chunk) - The comprehensive solvency adequacy ratios for Taiping Re and Taiping Re (China) were **326% and 220%**, respectively, both showing improvement from year-end 2022[59](index=59&type=chunk) [Asset Management Business](index=21&type=section&id=Asset%20Management%20Business) The asset management business saw significant growth in total investment income, driven by an increased allocation to equity assets Group Investment Income Performance | Indicator | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | | Total investment income | HK$23.70 billion | HK$11.51 billion | +105.9% | | Annualized net investment yield | 3.63% | 3.94% | -0.31 ppt | | Annualized total investment yield | 3.89% | 1.98% | +1.91 ppt | Assets Under Management | Item | As of June 30, 2023 (HK$ million) | As of Dec 31, 2022 (HK$ million) | Change | | :--- | :--- | :--- | :--- | | Insurance funds assets within the Group | 1,262,759.80 | 1,174,666.62 | +7.5% | | Third-party assets under management | 1,121,538.82 | 1,092,814.71 | +2.6% | - In the investment portfolio, the allocation to **fixed-income investments decreased from 75.6% to 74.8%**, while the allocation to **equity investments increased from 17.8% to 18.8%**[68](index=68&type=chunk) - The Group's debt securities portfolio maintained high credit quality, with **99.6% of domestic bond investments rated AAA** or consisting of government and policy bank bonds[69](index=69&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The Group maintained strong liquidity with HK$113.42 billion in cash and issued US$2 billion in perpetual subordinated capital securities - As of June 30, 2023, the Group's **cash and bank deposits amounted to HK$113.42 billion**[73](index=73&type=chunk) - The **comprehensive financial leverage ratio** (interest-bearing debt / (interest-bearing debt + ordinary shareholders' equity + after-tax contractual service margin)) was **27.4%**, a slight increase from 26.0% at the end of 2022[74](index=74&type=chunk) - In March 2023, the Company issued **US$2 billion of perpetual subordinated capital securities** with an initial annual interest rate of 6.4%[75](index=75&type=chunk) [Outlook](index=26&type=section&id=Outlook) The Group will continue its high-quality development strategy, focusing on key areas like inclusive and green finance while managing investment risks - **Overall strategy**: Adhere to the principle of seeking progress while maintaining stability, deepen the high-quality development strategy, and expand in "inclusive finance," "pension finance," and "green finance," while strengthening its presence in the Greater Bay Area[78](index=78&type=chunk) - **Domestic life insurance (Taiping Life)**: Focus on value growth, enhance agent recruitment and productivity, and deepen the development of the healthcare and wellness ecosystem[79](index=79&type=chunk) - **Domestic P&C insurance (Taiping P&C)**: Respond to the comprehensive auto insurance reform, increase market share in new energy vehicle insurance, and accelerate the development of non-auto lines such as agricultural and green insurance[80](index=80&type=chunk) - **Investment outlook**: China's economy is expected to operate smoothly in the second half of the year, with gradual improvement in capital market sentiment; the Group will focus on controlling portfolio volatility, managing credit risk, and enhancing investment returns[85](index=85&type=chunk) [Embedded Value of Taiping Life](index=29&type=section&id=Embedded%20Value%20of%20Taiping%20Life) Taiping Life's embedded value reached HK$254.86 billion, with the value of new business growing 28.5% in RMB terms Embedded Value of Taiping Life | Item | As of June 30, 2023 (HK$ million) | As of Dec 31, 2022 (HK$ million) | | :--- | :--- | :--- | | Adjusted net assets | 128,178 | 116,547 | | Value of in-force business | 126,678 | 126,081 | | **Embedded Value** | **254,856** | **242,627** | Value of New Business of Taiping Life | Item | H1 2023 (HK$ million) | H1 2022 (HK$ million) | | :--- | :--- | :--- | | Value of new business | 3,955 | 3,319 | - In RMB terms, the **value of new business for H1 2023 was RMB 3.65 billion**, an increase of 28.5% from RMB 2.84 billion in H1 2022[90](index=90&type=chunk) - In H1 2023, Taiping Life's overall **new business value margin was 12.2%**, with the margin for the individual agent channel at 18.6% and the bancassurance channel at 3.6%[90](index=90&type=chunk) [Condensed Consolidated Financial Statements](index=31&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Income Statement](index=31&type=section&id=Condensed%20Consolidated%20Income%20Statement) The Group's profit attributable to shareholders increased by 20.5% to HK$5.22 billion, despite a 3.6% decline in insurance service revenue Condensed Consolidated Income Statement Summary | Item (HK$ thousand) | Six months ended June 30, 2023 | Six months ended June 30, 2022 (Restated) | | :--- | :--- | :--- | | Insurance service revenue | 54,128,830 | 56,135,352 | | Insurance service result | 8,149,854 | 10,943,285 | | Investment return | 23,704,554 | 11,510,289 | | Profit before tax | 7,844,453 | 7,071,026 | | Profit after tax | 7,521,241 | 6,904,343 | | Profit attributable to shareholders of the Company | 5,220,365 | 4,332,441 | [Condensed Consolidated Balance Sheet](index=33&type=section&id=Condensed%20Consolidated%20Balance%20Sheet) As of June 30, 2023, the Group's total assets grew by 7.7% to HK$1.423 trillion, with total equity up 12.9% Condensed Consolidated Balance Sheet Summary | Item (HK$ thousand) | As of June 30, 2023 | As of Dec 31, 2022 (Restated) | | :--- | :--- | :--- | | **Assets** | | | | Total assets | 1,422,988,843 | 1,321,590,064 | | **Liabilities** | | | | Insurance contract liabilities | 1,111,997,417 | 1,041,941,305 | | Total liabilities | 1,299,074,406 | 1,211,792,628 | | **Equity** | | | | Equity attributable to shareholders of the Company | 82,029,932 | 83,937,369 | | Total equity | 123,914,437 | 109,797,436 | [Condensed Consolidated Cash Flow Statement](index=37&type=section&id=Condensed%20Consolidated%20Cash%20Flow%20Statement) The Group generated HK$78.17 billion in net cash from operating activities, resulting in a net increase in cash and cash equivalents Condensed Consolidated Cash Flow Statement Summary | Item (HK$ thousand) | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :--- | :--- | :--- | | Net cash generated from operating activities | 78,171,202 | 58,045,908 | | Net cash used in investing activities | (75,255,300) | (49,458,489) | | Net cash generated from financing activities | 14,645,616 | 3,291,130 | | Net increase in cash and cash equivalents | 14,264,115 | 10,329,791 | | Cash and cash equivalents at June 30 | 56,736,544 | 50,467,580 | [Notes to the Financial Statements](index=38&type=section&id=Notes%20to%20the%20Financial%20Statements) [Basis of Preparation and Accounting Policies](index=38&type=section&id=Basis%20of%20Preparation%20and%20Accounting%20Policies) The financial statements were prepared under HKAS 34, with the first-time adoption of HKFRS 17 and HKFRS 9 from January 1, 2023 - The Group implemented **HKFRS 17 Insurance Contracts** and **HKFRS 9 Financial Instruments** (the new standards) effective January 1, 2023[2](index=2&type=chunk)[109](index=109&type=chunk) - Under the new standards, insurance contracts are classified as either having or not having direct participation features and are measured using the **general measurement model or the premium allocation approach**[112](index=112&type=chunk)[125](index=125&type=chunk)[135](index=135&type=chunk) - For financial instruments accounting, the Group applied the **classification overlay approach** for comparative information and classified financial assets as measured at amortized cost, fair value through other comprehensive income (FVTOCI), or fair value through profit or loss (FVTPL)[156](index=156&type=chunk)[159](index=159&type=chunk) [Segment Information](index=77&type=section&id=Segment%20Information) The life insurance segment was the primary profit contributor, while operations in Mainland China accounted for approximately 92% of total revenue Profit After Tax by Segment for H1 2023 | Segment | Profit after tax (HK$ thousand) | | :--- | :--- | | Life insurance | 7,477,704 | | Domestic property and casualty insurance | 185,356 | | Overseas property and casualty insurance | 174,284 | | Reinsurance | (285,679) | | Other businesses | (4,778) | Segment Assets as of June 30, 2023 | Segment | Segment assets (HK$ thousand) | | :--- | :--- | | Life insurance | 1,186,695,413 | | Domestic property and casualty insurance | 42,013,888 | | Overseas property and casualty insurance | 18,071,238 | | Reinsurance | 48,521,067 | | Other businesses | 130,658,097 | - Approximately **92% of the Group's total revenue** was derived from operations in China (excluding Hong Kong and Macau)[194](index=194&type=chunk) [Risk Management](index=109&type=section&id=Risk%20Management) The Group manages insurance and financial risks through strict underwriting, reinsurance, and active asset-liability management - **Underwriting strategy**: The Group has established strict underwriting and claims handling procedures for its life, property & casualty, and reinsurance businesses to control risks[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) - **Asset-liability management**: The objective is to match assets and liabilities on a duration basis; however, a duration mismatch exists in the life insurance business, which the Group mitigates by investing in longer-term fixed-income debt and long-term equity investments[260](index=260&type=chunk) - **Credit risk management**: The Group enforces strict credit rating requirements for its debt security investments, with the majority of domestic debt securities rated BBB or above, and prioritizes investment-grade reinsurers for its reinsurance arrangements[266](index=266&type=chunk) - **Liquidity risk management**: The Group maintains a liquidity management policy to ensure it can meet its financial obligations and holds sufficient reserves of high-quality liquid assets[271](index=271&type=chunk)

Financial Performance - Total premiums written increased by 12% year-on-year to HKD 150 billion[3] - Profit before taxation reached HKD 20 billion, reflecting a 15% increase compared to the previous year[3] - Profit attributable to owners was HK$2.797 billion, with total assets reaching HK$1,409.4 billion, up 2.2% from the previous year-end, and 11.7% in RMB terms[16] - The net operating profit for the life insurance business was HK$8,347 million, a decrease of 27.3% compared to HK$11,475 million in the previous year[104] - The net profit attributable to owners dropped by 62.8% to HK$2,796.61 million in 2022, down from HK$7,513.70 million in 2021[51] Investment Income - Investment income rose by 8% to HKD 30 billion, contributing significantly to overall profitability[3] - Net investment income for the year was HK$48.573 billion, an increase of 8.9% year-over-year[18] - The total investment income decreased by 32.0% to HK$40.024 billion in 2022, down from HK$58.837 billion in 2021[69] - The total investment yield fell by 2.04 percentage points from 5.35% in 2021 to 3.31% in 2022[69] Market Expansion and Strategy - The company plans to expand its market presence in Southeast Asia, targeting a 20% increase in regional revenue by 2025[2] - A strategic acquisition of a regional competitor is anticipated to enhance market share by 15%[2] - New product launches in health insurance are expected to drive a 25% increase in premium income over the next fiscal year[3] Customer Growth and Policyholders - The number of policyholders grew by 10% to 5 million, demonstrating increased market penetration[3] - The number of individual customers increased to 15,743,273, up by 5.7% from 14,886,564 in 2021[100] - The number of individual agents increased to 391,069, representing a growth of 1.6% from 385,038 in 2021[100] Risk Management and Technology - The company has implemented a comprehensive risk management enhancement project, consolidating its risk management capabilities across various fields[30] - The company is investing HKD 1 billion in technology upgrades to enhance customer service and operational efficiency[2] - The Group launched innovative products such as "Taiping Health Guardian" and "Taiping Encyclopedia," contributing to a total of 110 million services provided by the intelligent technology sharing platform[46] Dividend and Financial Health - The company aims for a dividend payout ratio of 40% of net profit, reflecting confidence in future earnings growth[3] - The company reported an embedded value of HKD 200 billion, indicating strong financial health and growth potential[2] - The embedded value per share attributable to owners was HK$55.11, a decrease of 9.0% from the last year-end figure[38] Economic Outlook - In 2023, the company anticipates a stabilization and recovery of the economy, which is expected to drive the development of the insurance industry[31] - China Taiping is optimistic about the long-term sustainability of China's economy and the insurance industry's transformation and upgrading[32] Performance Metrics - The combined ratio for TPI improved by 6.4 percentage points year-over-year, achieving the best level since resuming business in China[17] - The comprehensive solvency ratio decreased to 194% in 2022 from 208% in 2021, with available capital dropping to RMB 166,142 million[130] - The Group's return on equity (ROE) decreased to 5.22% in 2022 from 9.52% in 2021, reflecting a decline of 4.30 percentage points[50]

Financial Performance - Total premium income reached HKD 265 billion, a year-on-year increase of 0.9%, and a growth of 4.6% in RMB terms[4] - Shareholders' profit attributable amounted to HKD 2.797 billion[4] - Total assets increased to HKD 1,409.4 billion, up 2.2% from the end of 2021, with an 11.7% increase in RMB terms[4] - The embedded value per share was HKD 55.11, with a 1.1% increase year-on-year, and the value in RMB terms grew by 10.4%[4] - The net investment income was HKD 48.573 billion, reflecting an 8.9% year-on-year growth[5] - Shareholders' profit attributable decreased by 62.8% to HKD 2.797 billion[13] - Profit before tax decreased by 86.3% to HKD 1,498.27 million, down from HKD 10,913.84 million in the previous year[18] - Net profit attributable to shareholders fell by 62.8% to HKD 2,796.61 million, compared to HKD 7,513.70 million in 2021[18] - Net profit after tax for 2022 was HKD 5,538,356 thousand, down from HKD 10,952,373 thousand in 2021, representing a decrease of approximately 49.5%[122] - The company's basic and diluted earnings per share for 2022 were both HKD 0.778, compared to HKD 2.091 in 2021, indicating a decline of about 62.8%[121] Investment and Asset Management - The group has cumulatively underwritten 424 major projects along the Belt and Road Initiative, providing risk protection exceeding RMB 700 billion[7] - New investments in strategic emerging industries and major livelihood construction projects amounted to RMB 53 billion during the year[7] - Investment assets reached HKD 1,218.2 billion, a year-on-year increase of 1.4%[15] - The proportion of fixed income investments rose from 76.2% in 2021 to 76.7% in 2022, while equity investments decreased from 18.3% to 17.1%[26] - Third-party asset management reached HKD 1,092.8 billion, reflecting a growth of 5.3% compared to the previous year[33] - The asset management business reported a management fee income of HKD 1,882.77 million in 2022, down 18.6% from HKD 2,311.90 million in 2021[82] - The operating profit of the asset management business increased by 29.4% to HKD 961.42 million in 2022, compared to HKD 743.00 million in 2021[83] - The company maintained a stable equity asset allocation ratio while increasing fixed income asset allocation to enhance stable returns[23] Insurance Operations - The life insurance premium income grew by 3.6%, outperforming the market, with the individual insurance premium reaching a historical high[4] - New individual insurance premium increased by 20.0%, with personal insurance new premium up by 28.6%[13] - Life insurance operating profit dropped by 46.4% to HKD 5,958.27 million from HKD 11,115.59 million in 2021[20] - The first-year premium income for individual insurance was HKD 17,633.37 million in 2022, down from HKD 21,730.46 million in 2021, a decrease of 18.7%[46] - The premium income from short-term savings products accounted for 35.0% of total first-year premiums in 2022, up from 25.0% in 2021[47] - The premium income from traditional life insurance increased to HKD 51,389.11 million in 2022, representing 28.7% of total premiums, compared to 19.2% in 2021[49] Solvency and Financial Health - The comprehensive solvency adequacy ratio was 194% as of December 31, 2022, down from 208% in 2021[53] - The solvency ratio for Taiping Pension was 224% as of December 31, 2022, down from 256% in 2021[64] - The comprehensive solvency ratio as of December 31, 2022, was 186%, down from 216% in 2021, with actual capital at RMB 9.521 billion compared to RMB 9.380 billion in 2021[72] - The total liabilities of life insurance contracts, net of reinsurance, decreased by 12.4% to HKD 122,106.06 million in 2022 from HKD 139,425.65 million in 2021[35] Strategic Initiatives and Future Outlook - The company aims for high-quality development in 2023, focusing on risk prevention and innovation[11] - The company plans to actively develop innovative green insurance products and enhance pricing strategies in the property insurance sector[92] - The company aims to enhance digital transformation and improve customer management capabilities in 2023[91] - The group aims to enhance its investment business quality by focusing on healthcare, retirement, and other industry layouts[95] - The global economic growth is projected to slow to 2.2% in 2023, impacting corporate profit growth and asset valuations[95] Changes in Financial Position - The total equity attributable to shareholders decreased to HKD 98,686,180 thousand in 2022 from HKD 113,455,960 thousand in 2021, reflecting a decline of approximately 13.0%[124] - The company's total liabilities were HKD 1,310,679,386 thousand in 2022, up from HKD 1,265,186,014 thousand in 2021, representing an increase of approximately 3.6%[124] - The total cash and cash equivalents as of December 31, 2022, stood at HKD 39,945,905, an increase from HKD 31,306,390 in 2021, indicating a stronger financial position[132] Operational Efficiency - The total employee cost for the year was HKD 15.79 billion, down 12.3% from HKD 18.00 billion in 2021, with a total employee count of 68,386[89] - The company reported a significant increase in financial expenses, which rose to HKD 3,123,440 from HKD 2,381,532 in 2021[129] - The cash generated from operating activities was HKD 95,694,955, compared to HKD 101,149,940 in the previous year, showing a decrease of about 5.4%[130] Accounting and Reporting Standards - The company’s financial statements are prepared in accordance with Hong Kong Financial Reporting Standards, requiring management to make estimates and assumptions[1] - The company recognizes policyholder benefits, including maturity, annuity, and claims, as expenses upon payment or notification[147] - The company conducts liability adequacy tests at each reporting period to ensure that insurance liabilities are sufficient[144]

Financial Performance - Total premiums written and policy fees for the six months ended June 30, 2022, were HKD 160,363,346, a decrease from HKD 156,971,245 in the same period of 2021[10] - Net earned premiums and policy fees amounted to HKD 150,878,007, compared to HKD 146,668,805 in the previous year, reflecting an increase of approximately 2.9%[10] - Profit before taxation was HKD 2,206,840, down from HKD 7,726,625 in the prior year, indicating a decline of approximately 71.5%[10] - Profit after taxation decreased to HKD 4,016,124 from HKD 7,074,257, a reduction of around 43.5%[10] - Earnings per share attributable to the owners of the Company were HKD 0.754, down from HKD 1.423 in the same period last year, reflecting a decline of approximately 47%[10] - Total income for the six months ended June 30, 2022, was HKD 174,441,559, compared to HKD 182,434,992 in the previous year, showing a decrease of about 4.5%[10] - Total comprehensive income for the period attributable to owners of the Company was $(2,346,882), compared to $3,765,437 in the previous year, indicating a significant decline[13] - Profit after taxation for the six months ended June 30, 2022, was $4,016,124, a decrease of 43.5% compared to $7,074,257 for the same period in 2021[13] - For the six months ended June 30, 2022, the profit attributable to owners of the Company was $2,708,661,000, a decrease of 47.1% compared to $5,112,655,000 for the same period in 2021[126] Investment Income - Net investment income increased to HKD 24,285,950 from HKD 21,083,451, representing a growth of about 15.5% year-over-year[10] - The Group reported net unrealized investment gains of HKD 521,271 for the six months ended June 30, 2022, compared to net unrealized investment losses of HKD 13,411,581 for the same period in 2021[92] - The net realized investment gains on debt securities for the six months ended June 30, 2022, were $(187,502), a decrease from $191,524 in 2021, indicating a significant decline[99] - The net unrealized investment losses on debt securities amounted to $(608,969) for the first half of 2022, compared to $(178,205) in the same period of 2021, reflecting a worsening situation[102] - Total dividend income from equity securities for the first half of 2022 reached $3,104,395, compared to $2,609,342 in 2021, marking an increase of about 19%[97] Assets and Liabilities - Total assets amounted to $1,442,711,858 as of June 30, 2022, compared to $1,378,641,974 at December 31, 2021, representing a growth of 4.6%[16] - Life insurance contract liabilities increased to $935,952,918 as of June 30, 2022, up from $887,816,852 at December 31, 2021, reflecting a rise of 5.4%[16] - Net assets decreased to $108,240,356 as of June 30, 2022, from $113,455,960 at December 31, 2021, indicating a decline of 4.0%[18] - The Company’s total equity decreased to $108,240,356 as of June 30, 2022, from $113,455,960 at December 31, 2021, reflecting a decrease of 4.6%[18] - The total liabilities for life insurance contracts were HKD 935,952,918, reflecting the company's commitment to policyholders[65] Cash Flow - Net cash from operating activities decreased to HKD 58,045,908, down 22% from HKD 74,304,397 in the same period last year[40] - Net cash used in investing activities improved to HKD (49,306,006), a reduction of 6% compared to HKD (52,874,962) in the previous year[40] - Net cash from financing activities increased to HKD 3,291,130, contrasting with a net cash outflow of HKD (2,669,637) in the prior period[40] - The total cash and cash equivalents at 30 June 2022 stood at HKD 50,428,179, slightly up from HKD 50,269,986 a year earlier[40] Shareholder Information - Dividends declared to shareholders for the period were HKD 1,437,607,000[29] - A final cash dividend of $0.46 per share was proposed, amounting to $1,653,249,000, an increase from $1,437,607,000 in the previous year[122] - The balance at January 1, 2022, was HKD 40,771,408,000 in share capital[36] - The weighted average number of ordinary shares remained constant at 3,594,018,538 for both periods[126] Operational Highlights - The share of results of associates and joint ventures increased to HKD 323,311 from HKD 77,351, marking a significant improvement[10] - The company is focusing on expanding its market presence and enhancing product offerings to drive future growth[56] - The overall financial performance suggests a strategic focus on expanding both domestic and overseas insurance markets, with a balanced approach to risk management and profitability[113] Accounting and Compliance - The financial statements have been prepared in accordance with the applicable disclosure requirements of the Listing Rules and HKAS 34[44] - The Group continues to apply the temporary exemption from HKFRS 9, allowing the use of HKAS 39 for annual periods beginning before January 1, 2023[52] - The company has not early adopted any new accounting standards, interpretations, or amendments that are effective as of 1 January 2022[48]