February 26, 2009

Ladies and Gentlemen,

Good morning! First of all, I would like to take this opportunity to thank you for your continued interest in and support to the insurance industry of China. Here, I would like to give you a brief introduction to some information concerning the prospect of the development of China's insurance market.

First, some basic information about the insurance industry.

Insisting on reform, innovation and opening up in recent years, China' insurance industry has enhanced its level of scientific development and its capacity of service.

Firstly, the insurance business has maintained steady growth. In the year of 2008, the national premium income amounted to 978.41 billion yuan, an increase of 39.1 percent on a year-on-year basis. Specifically, property premiums were 233.67 billion yuan, an increase of 20 percent compared with the same period in the previous year. Life premiums stood at 665.84 billion yuan, an increase of 49.2 percent compared with 2007. Health premiums grew to 58.55 billion yuan, an increase of 52.4 percent on a year-on-year basis. Personal accident premiums amounted to 20.35 billion yuan, an increase of 7.1 percent on a year-on-year basis.

Secondly, protection type products have a larger proportion in the product mix. CIRC actively pushes forward the adjustment of insurance business structure and underline the development of protection type business. By the end of 2008, ordinary life insurance that have stronger protection function accounted for 14.8 percent of life premium income, 1.4 points more than the end of September, 2008. In January this year, CIRC promulgated Guiding Opinions on Pushing Forward Business Structure Adjustment to Further Exert the Protection Function of Insurance. In the first month of 2009, unit-linked products and universal life products accounted for 15.1 percent of life business, 19.7 points less than the same period last year.

Thirdly, the structure of insurance asset management has been further adjusted. As of the end of January, 2009, the total insurance assets were 3.38 trillion yuan and insurance assets under management were 3.06 trillion yuan. Bank deposits and bond investments accounted for 83.9 percent of all the asset classes, stocks and funds accounted for 13.9 percent and other investments, 2.2 percent.

Since the beginning of this year, the insurance industry has speeded up the structural adjustment and transition of development mode. Through active risk prevention and mitigation and great efforts to maintained steady and healthy, it has achieved a good beginning for the year 2009. In the first month of this year, the national premium income amounted to 114.76 billion yuan, an increase of 8.6 percent compared to the same period last year. Specifically, property premiums were 29.7 billion yuan, an increase of 5.3 percent compared to the same period last year. Life premiums stood at 78.35 billion yuan, an increase of 10.6 percent. Health premiums grew to 4.88 billion yuan, an increase of 4.3 percent. Personal accident premiums amounted to 1.8 billion yuan, 4.9 points less on a year-on-year basis.

Second, the prospect of the development of insurance market in 2009

The negative impacts of international financial crisis on China's insurance industry are unveiling themselves, creating certain difficulties and challenges to the development of the insurance market. However, there are still a lot of beneficial factors to facilitate the growth of this industry. Therefore, we still foresee broad prospects and huge potential for the development of this industry.

The insurance industry has the necessary conditions in place to achieve steady and healthy development. The achievements of the reform and development of this industry have laid a solid foundation for its steady and healthy development. If you look at the insurance market, you will see that the market system has been improving and the industry as a whole has become much stronger than before. At present, there are 120 insurance companies in the market. With the opening up moving forward steadily, up to now, 51 foreign insurance companies from 15 countries and regions have established 195 operational institutions in China. Look at the insurance companies themselves and you will find that their systems and mechanisms have changed profoundly as reform deepens. The transition of state-owned insurance enterprises into joint-stock companies have basically completed and 6 insurance companies are now listed in overseas stock markets. Coming with these reforms were better cooperate governance, more scientific operation and management and greater competitiveness. In terms of insurance regulation, we basically have established a modern regulatory system and improved the long-term mechanism of risk prevention. The regulator's abilities to control the market and to prevent risks have been continuously enhanced.

The insurance industry has the confidence to achieve steady and healthy development. The confidence is based on three facts. The first fact is that the economic and social foundation for the growth of insurance remains unchanged. The rapid industrialization and urbanization has created an increasing demand for employment, medical services, old-age care and education. The insurance industry has an expanding role to play in serving the construction of the new countryside, improving social security system and participating in social risk management. The second fact is that the central government has adopted a series of macro-control policies to expand domestic demand and boost the economy. The implementation of these policies will create large needs for insurance and a broad stage to play on for this industry. The third fact is that the public's awareness and the external environment have been improving. Since the issuance of Several Opinions of the State Council on the Reform and Development of the Insurance Industry, the public's awareness of risk and insurance has been growing and the legal, policy and social environment have all been improving.

In 2009, there are four priorities for the insurance industry, namely, to strengthen regulation, to control risks, to adjust structure and to push forward growth.

First, to implement the decisions of the central government and better serve economic growth and social progress. The first thing is to actively develop insurance related to rural areas, agriculture and farmers and further increase the participation ratio of agricultural insurance. At the same time, housing and car-consumption related insurance will be developed steadily. Insurance for construction projects and other types of projects will be developed actively to provide protection for major infrastructure projects. The second thing is to actively develop personal and group pension business and to push forward the growth of health insurance. In so doing, relevant insurance institutions will be given support to invest in medical institutions and old-age care entities. The third thing is to make some adjustments in its insurance asset regulatory policies to increase investment instruments, expand investment channels and improve asset allocation.

Second, to prevent and mitigate risks so as to maintain the safe and stable operation of the insurance market. The first thing we pay great attention to is transition of risks from the international financial market to domestic insurance market. As a countermeasure, we are going to strengthen the information exchange and cooperation with insurance regulators in other parts of the world. We are also precautious of unusual tides of policy surrender and will improve the emergency response mechanism with regard to such surrenders in life insurance. Besides, we pay great attention to asset management risks and will strengthen asset liability management to address this risk. In addition, we will keep in mind the insolvency risks of some insurance companies, pay more attention to early-warning and strengthen intervention of those companies whose solvency ratios are declining.

Third, to press ahead with structural adjustment so as to improve the quality of development. The first thing to do is to put more energy in the main business of insurance and to promote the growth of protection type insurance. The second is to establish or improve sales qualification and sales conduct management systems with regard to unit-linked and universal life products and lead insurance companies to putting more effort in long-term business and installment premium business. The third thing to do is to push forward the adjustment of sales channels so that the advantages of different sales channels such as individual agents, group insurance, bancassurance and the post will be set into full play.

Fourth, to improve insurance regulation so as to better protect the interest of the insured. Differentiated regulation, which means insurance institutions of different risk levels will be regulated differently, will be treated as a priority to increase the efficiency of insurance regulation. The amendment of Insurance Law will be taken as the opportunity to abolish or change outdated regulations, and formulate new regulation to perfect the legal framework. Besides, to restore market order will be taken as an important task. All kinds of irregularities and illegal activities will be cracked down to create a good market environment. Consumer education will also be strengthened to improve the mechanism to protect interests of the insured. Last but not least, the mechanism for insurance protection fund will be improved so as to facilitate the lawful operation of the insurance protection corporation.

Now, my colleague, Yuan Li, Assistant Chairman of CIRC and I are willing to answer your questions.