Ping An Life's Value Inside Out 终稿英文版

1 1 Ping An life s ValueInside OutJason YaoDecember 9 Important NotesTo the extent any statements made in this presentation containing information that is not historical are essentially forward-looking. These forward-looking statements include but are not limited to projections, targets, estimates and business plans thatthe Company expects or anticipates will or may occur in the future. These forward-looking statements are subject to known andunknown risks and uncertainties that may be general or specific.

2 Certain statements, such as those including the words orphrases "potential", "estimates", "expects","anticipates", "objective", "intends", "plans", "believes", "will", "may", "should", andsimilar expressions or variations on such expressions may be considered forward-looking should be cautioned that a variety of factors, many of which may be beyond the Company's control, affect theperformance, operations, and results of the Company, and could cause actual results to differ materially from the expectationsexpressed in any of the Company's forward-looking statements.

3 These factors include but are not limited to exchange ratefluctuations, market shares, competition, environmental risks, changes in legal, financial and regulatory frameworks,international economic and financial market conditions, and other risks and factors beyond our control. These and other factorsshould be considered carefully, and readers should not place undue reliance on the Company's forward-looking statements. Inaddition, the Company undertakes no obligation to publicly update or revise any forward-looking statement that is contained inthis presentation as a result of new information, future events, or otherwise.

4 Noneof the Company, or any of its employees oraffiliates is responsible for, or is making, any representation concerning the future performance of the StatementsDisclosure NotesEV = Embedded Value ; NBEV = New Business Embedded ValueAll disclosures on EV and NBEV include Ping An life , Ping An Annuity and Ping An HealthAll other figures cover Ping An life onlyAll 2016HY NBEV are based on the new business generated over 12 months preceding June 30, 20163847,954 1,632,254 20112015 Robust Business Growth144,400 326,814 2011201510,628 20,699 2011201516,822 30,838 20112015 Net profit attributable to shareholdersof the parent companyNet profit attributable to shareholdersof the parent.

5 (1) Assets and net profit attributable to shareholders of the parent are on a consolidated basis of Ping An life , while EV and NBEV are from Ping An Life's business results.(2) "Ping An life " herein excludes the business of Ping An Annuity and Ping An Health (the same on following pages).(3) " life insurance business" herein includes the operations of Ping An life , Ping An Annuity and Ping An Health (the same on following pages).(in million RMB)4Is Ping An life steady growth sustainable during the economic downturn?44 How does C-ROSS affect the company's solvency and EV?

6 33 Are EV assumptions prudent and reasonable?22 Will lasting low interest rate environment significantly impair its profitability?11 Main Concerns on Ping An Life5 Reflect a policy's long-term attributes and capital cost Structure and growth of potential new business Complex model; Verify the soundness of assumptions3 Key Indicators on life Insurers Value AnalysisValue of life InsuranceEV + NBEVS olvencyCurrent-year profit C-ROSS reflects riskexposures Protection products are more favorably treated under C-ROSS Stable profitsemerged from existing policies Fluctuation due to capital market6 ContentsI.

7 Basic ConceptII. High Quality Embedded ValueIII. Sustainable ProfitabilityIV. Resilient Solvency Position7 Aggregation of all the historical business to dateLinkage among the 3 IndicatorsY1Y2Y3Y4Y5Y1Y2Y3Y4Y5 Solvency-adjustmentNBEV EV is based on solvency-adjusted distributable profits, rather than on simple discounting of accounting profits Solvency-based adjustments changed the timing of profit emergence, although total amount of profits remain unchanged In general, the more profitable an insurance policy is, the higher its EV will beDiscount and sumAccounting ProfitsSolvency-AdjustedDistributable ProfitsIllustration of a Newly-Issued life Insurance PolicyEV8 Take the sale of a long-term policy for example.

8 At issuance, a profitable policy generatedresidual margin- the discounted Value of its expected future profitsResidual margin = discounted Value of total premiums - discounted Value of total expenses and claims In line with the prudence principle, the surplus of premiums over expenses and claims, residual margin cannot be recognized as one-off profit when a new policy is issued. Instead, The amortization of the residual margin, with its pattern locked when a new policy is issued, is a major source of accounting profit residual margin is a major source of the accounting profit (other factors include changes in best estimates, investment deviation and so on) residual Margin: Stable Long-term Future Profit to EmergeY1Y2Y3Y4Y5 residual mrgin amortized as accounting profitWhen a new policy is issuedDiscounted valueof premiumsDiscounted Value of expenses and claimsResidualmargin9 residual Margin.

9 A Major Source of Solvency CapitalAssetsBestEstimated Liabilities + Risk MarginNet AssetsResidualMarginBestEstimated Liabilities + Risk MarginFree SurplusRequired Capital AssetsAccounting LiabilitiesSolvency LiabilitiesActual capitalNote: (1) Assets as per accounting standards and assets under C-ROSS are slightly different. We ignored such difference in above for simplicity. (2) Apart from insurance liabilities, Ping An life has other liabilities, which were ignored in above for simplicity. residual margin, per PRC GAAP, is classified as liabilities instead of net assets residual margin, under C-ROSS, is recognized as actual capital Profitable new business, with sizable amount of residual margin,is a major contributor of the solvency capital under C-ROSSR esidualmargin recognized as capital under C-ROSS10 ContentsI.

10 Basic ConceptII. High Quality Embedded ValueIII. Sustainable ProfitabilityIV. Resilient Solvency Position11 Embedded Value : a Better Reflection of Long-term ValueValue of In-force Business (VIF) life InsuranceValueAdjusted Net AssetEmbedded Value (EV) Value of Future New BusinessYear1 Growth in EV and NBEV38,34773,40769,643100,704121,086144, 400177,460203,038264,223326,814200620072 0082009201020112012201320142015EV5,1327, 1878,54111,80515,50716,82215,91518,16321 ,96630, : (1) A decline in EV in 2008 mainly resulted from Ageas investment loss and the overall stock market slump.