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No. 25 of 2016 (General Serial No. 256): The Audit Results of the Assets, Liabilities, Profits and Losses of China Life Insurance (Group) Company for
2017-06-08日   Soure : 【来源:International Cooperation Department】 :

No. 25 of 2016 (General Serial No. 256):

The Audit Results of the Assets, Liabilities, Profits and Losses of China Life Insurance (Group) Company for the Year 2014

In accordance with the stipulations of the Audit Law of the People’s Republic of China, in 2015 the National Audit Office (CNAO) conducted an audit on the assets, liabilities, profits and losses of China Life Insurance (Group) Company (hereinafter referred as China Life) of the year 2014, with the extension and tracing back to relevant items. The audit focused on the headquarters of China Life and 5 subsidiary companies including China Life Insurance Co., Ltd., China Life Property and Casualty Insurance Co., Ltd., China Life Insurance Pension Insurance Co., Ltd., China Life Insurance Assets Management Co., Ltd, China Life Investment Holding Co., Ltd. (hereinafter referred as China Life Insurance, China Life Property Insurance, China Life Pension, China Life Assets Management and China Life Investment Holding respectively).

I. Overview

China Life is a wholly state-owned company with 7 subsidiary companies and one directly affiliated organization. China Life Insurance is listed in markets of New York, Hong Kong, and Shanghai. As reflected in its consolidated financial statement, by the end of 2014, the total assets of China Life amounted to RMB2746.795 billion, total liabilities reached RMB2560.258 billion, and there was RMB186.537 billion worth of owners’ equity. The realized operating revenue of the same year was RMB537.583 billion and a net profit of RMB20.624 billion was earned.

The audit results indicated that China Life implemented the national financial policies and continuously improved the operation and management levels. Many businesses of China Life were on the forefront of the industry. However, some weak links still existed in fields such as financial revenue and expenditure, major decisions making and implementation, risk management and control, and professional ethics.

II. Major Problems Found in the Audit

(I) Financial revenue and expenditure

u By the end of 2014, for the historically accumulated insurance business accepted in stock reforms, the headquarters of China Life had failed to accrue the reserve fund for insurance contracts in accordance with the stipulated methods of the regulations.

u From March 2012 to the end of 2014, the headquarters of China Life and 5 subsidiary companies including China Life Insurance had paid RMB315.1999 million of housing funds for the staff in excess of the state standards, among which the amount of 2014 was RMB115.6422 million. After the audit pointed out the problem, China Life stopped the practice of paying the housing fund in excess of limit in July 2015.

u From 2013 to June 2015, the headquarters of China Life and 3 subsidiary companies including China Life Insurance, China Life Assets Management and China Life Investment Holding and some subunit organizations had disbursed RMB74.6284 million of staff family property insurance expenses and property fees from welfare expenses, which were not accounted into the total salary, among which the amount of 2014 was RMB25.5753 million.

u By the end of 2014, sixty-five houses of the headquarters of China Life had been idled for a long time or been rent to unqualified staffs at a low price.

u From 2012 to 2014, the affiliated provincial subsidiary branches of China Life Insurance in Jiangsu, Shanghai, Guangdong and Shenzhen, through cancelling insurances after insuring, had made RMB1.303 billion of accumulated false insurance premium, among which the amount of 2014 was RMB268 million.

u In 2014, China Life violated the principle of accrual system by disbursing and listing all the advertising expenses in the same year, which should be shared by the year of 2014 and 2015, resulting in an overstatement of the RMB35.8897 million expenditures in 2014.

u In 2013, 2 branches in Hefei and Nanjing of China Life Property Insurance, through reinsuring after cancelling insurance, divided the insurance policies and adjusted accounts of RMB6.3247 million of the insurance premium that should have been included in 2012 into 2013.

u From April 2012 to 2014 end, China Life Property Insurance, China Life Pension, China Life Investment Holding and China Life Insurance E-Commerce Co., Ltd. had irregularly set supplement pension insurance for staffs through purchasing commercial insurances, resulting in an accumulated expenditure of RMB48.3387 million (RMB38.777 million shouldered by the companies), among which 2014 amount of was RMB14.8277 million.

(II) Decision- making and Implementation

u In April 2014, China Life irregularly simplified the approval procedure of bonds investment scheme. By the end of 2014, five bonds plans had been approved directly by concerned leaders without group discussion.

u By the end of 2014, the investments of 4 trust schemes of China Life had not been examined and approved in accordance with the procedures, involving RMB10.782 billion.

u From April 2012 to April 2015, eleven procurement items (each involving more than RMB1 million) of the headquarters of China Life had failed to proceed with the collective decision-making procedures as stipulated, involving RMB29.9996 million, among which the amount of 2014 was RMB8.5 million.

u From 2013 to June 2016, in some of major investment projects of China Life, China Life Insurance, China Life Investment Holding and China Life Assets Management, there were problems such as officials concerned had failed to fulfill their duty in preliminary investigation, some projects were not approved in accordance with regulations, and some investment capitals were used by borrowing units for other uses, involving RMB8.41 billion.

u By the end of 2014, China Life Insurance had failed to formulate the implementation details of three important points and one primary decision in accordance with the requirements of the Group.

(III) Business operation

u China Life had failed to actively develop agricultural insurance and small and micro enterprises loan guarantee insurance and to invest in old-age services strictly in accordance with relevant requirements of policies. The agricultural insurance segment only took 0.97% of the share of national market in 2014. Only 7 of the 33 property insurance branches developed small and micro enterprises loan guarantee insurance business, and the insurance premium income of 2014 was only RMB4.8484 million. Among the four projects aimed to providing cares for the aged initiated and invested in 2013, three had not yet started by June 2015.

u From 2013 to 2014, three central branches of China Life Property Insurance in Zhengzhou, Nanjing and Nantong had irregularly paid RMB233 million of procedural fee through making false intermediary business and listing false expenses etc., among which the amount of 2014 was RMB232 million.

u From 2012 to 2014, two provincial branches of China Life Insurance in Beijing and Guangdong had had acts of sales such as signing documents on behalf of customers and failing to inform customers fully of their obligations, involving 477 insurance policies.

u By the end of 2014, some employees of the three provincial branches of China Life Insurance in Beijing, Guangdong and Shenzhen had irregularly taken RMB8.4598 million commission through individual insurance, bank insurance and telemarketing, among which the amount of 2014 was RMB7.8806 million.

u In 2014, in the 8 team accidental insurances underwritten by the Beijing Branch of China Life Property Insurance, 8,643 of the persons receiving compensations were not in the name list of insurance, involving RMB5.6465 million of compensation (34% of the total compensation).

u In 2014, China Life Pension invested RMB239 million of enterprise annuity in the deposit of property companies, which exceeded the range of investable items stipulated by national regulations.

u From 2013 to 2014, the Shanghai Branch of China Life Stocks falsely listed RMB1.7619 million of conference expenses for sales expenditures, among which the amount of 2014 was RMB836,000.

(IV) Risk management and internal control

u By the end of 2014, the board of directors of China Life Investment Holding had failed to establish the independent directors in accordance with the regulations.

u By the end of 2014, the proportion of the independent directors in the board of directors of China Life Assets Management was less than 1/3 of the stipulated number, and the board of supervisions had only 2 members, which was not in keeping with the requirement that the board of supervisions should have at least 3 members.

u In June 2015, the headquarters of China Life and China Life Assets Management failed to formulate and improve management measures about official reception and overseas traveling in accordance with relevant state requirements.

u By June 2015, the mass procurement projects of China Life had failed to adopt the method of having assessors chose at random from the inventory according to the regulation but instead had had relevant departments appoint names directly based upon the recommended name list submitted by the purchase application department.

u By June 2015, China Life had not established and improved the risk management measures including risk tolerance of insurance funds and quantitative indicators of asset quality etc. in accordance with the requirements of the supervisory department.

u On information system construction, many problems still existed. For instance, some functions of the data center construction did not reach the requirements of supervision, the information system was not fully utilized, and the information system management could not effectively defend against the risk of artificially regulated data.

Besides, China Life has failed to strictly implement the various management systems such as the accountability system made by itself.

(V) Professional ethics

u In 2014, China Life Pension transformed 265 square meters of office space into internal reception dining room, with an total investment of RMB2.7734 million, and the decoration cost standard was RMB8,962 per square meter.

u In 2014, China Life Property Insurance appointed the retired director of Insurance Regulatory Bureau as the independent director and irregularly offered independent director allowance to him.

III. Audit Disposal and Rectification

Regarding the issues discovered through auditing, the CNAO has issued audit reports and released letters of audit decisions. China Life is actively organizing rectification at present and has already established and improved 28 relevant regulations. Concerned persons in charge have been dealt with. China Life will notify the general public of the details of straightening and rectification.

Clues related to issues in violation of laws and disciplines discovered through the audit have been transferred to departments concerned for further investigation.